Ladies and gentlemen, thank you very much for gathering despite your busy schedules. This is Ishiguro from IR Group at Tokio Marine Holdings. We are pleased to present Tokio Marine Insights, a series in which members of our frontline team provide real-life explanations on topics of interest to analysts and institutional investors. Just one year ago, we held a session on growth strategies in the renewable energy market, and this March, we had one regarding DE&I. This time, we will focus on PHLY and Kiln, our profit drivers in our overseas business, and talk about our power to overcome a challenge, which is really about transformation and execution. The presenters for today will be President and Chief Executive Officer from PHLY, John Glomb, and Chief Executive Officer of TMK, Brad Irick. These two will be the presenters for today.
We would like to share the features and strengths of both companies, as well as the initiatives currently underway to provide you with first-hand feedback from the field. The way we like to proceed today is, first of all, we will have a presentation from the two speakers I just introduced using the slides that we have uploaded onto our home page today, and then we would like to take questions. Regarding your Q&A, we would like you to type your questions in the chat box at the bottom of the page that you are looking at. Either in English or Japanese is fine. Today, we would like to end in an hour or 90 minutes. Depending on how many questions we get, we will continue until 9:00 P.M. or 9:30 P.M. JST. Without further ado, John, you are on. Over to you.
Thank you. First of all, let me start by sharing that it is great to be here today with you to share the current state of PHLY, our financial results, key initiatives, and actions taken by our team in recent years, which have required significant coordination, communication, and support from our loyal distribution partners. Can we advance to slide three? We at PHLY have taken full advantage of a hard market that preceded the pandemic and has continued throughout the pandemic and shows signs of continuing for the foreseeable future. We establish our rate goals to exceed what we see to be true claims inflation costs. That is the sum of both loss costs and social inflation. Over the past five years, we have focused on taking aggressive action on products and specific accounts that have historically been marginally profitable or even marginally unprofitable.
Looking to the top right side of slide three, you will see that we have had exceptionally high execution in 2020. In 2020, we missed top-line plan by $132 million. That was intentional to some extent. Roughly half of that miss came as a result of the pandemic, state-mandated refunds to insureds, automobile layups, and exposure decreases while our insureds were closed for business. The other half was as a result of PHLY actively managing our portfolio of what I refer to as marginal products or accounts with full knowledge that less premium would yield higher profit margins through a lower combined ratio. Our claims team was extraordinarily creative and devised a claims settlement strategy early on in the pandemic in the second quarter of 2020, which I will speak more about in a future slide.
PHLY has been very much in tune with the reality that loss cost inflation plus social inflation was driving claims settlements and jury nuclear verdicts significantly higher. Again, looking to the lower right-hand corner of slide three, I will draw your attention to the 2019 accident year. In that year, we acknowledged the impact of social inflation and took aggressive action to increase reserves on primarily accident years 2016 through 2019 by boosting reserves by a total of $273 million pre-tax over that period of time. Let's advance to slide four, please. Our view is that loss cost plus social inflation is 6%. In 2021 accident year, PHLY achieved 10.8% rate overall while achieving 20.5% rate when we offered umbrella capacity. That's very important, when we offered, because we offered umbrella capacity a lot less frequently. The rate we achieved compares favorably to the U.S. P&C market average.
We were also focused on reducing overall capacity offered and had great success here. 90%-95% of all in-force policies have $5 million or less in total umbrella. Almost all of the umbrella limits we offer are $10 million or less. In fact, we reduced total capacity by over $15 billion or close to 13% of total capacity, and due to the rate achieved, have more premium in force on the umbrella line, despite that $15 billion reduction, along with a corresponding reduction in exposures. Regarding sexual abuse and molestation, we took similar aggressive action to reduce capacity. While only 100 policies exceeded $10 million in 2018, that number dropped to fewer than 10 policies by 2019. Let's advance to slide five, please. This slide details the creative work of our claims team.
Early during the pandemic, the claims team categorized claims into three groups while the courthouses were closed due to the pandemic. One category, those claims in number of claims with a particular plaintiff firm representing greater than 50 in total claims. The second category, those claims that had been reserved for $1 million or greater. Finally, a third category, those claims reserved between $500,000 and $1 million. As you can see from the slide, of the 1,360 subject claims from all three phases, 803 or close to 60% were settled for a net benefit of over $70 million pre-tax on final settlement versus carried reserves. That is a benefit that will pay off for years to come. Let's advance to slide six. This slide details another way of looking at our in-force book of business and our categorizing products into three distinct tiers.
Tier one and two being the most profitable, and tier three representing products that needed significant changes in either terms and conditions or pricing to achieve the targeted profitability, or that they would simply be non-renewed. Tier three products today represent less than 7% of our in-force book of business. This strategy allowed for clear direction and alignment between underwriting and marketing, and allowed us to communicate to our agent partners well ahead of renewal dates to ensure no surprises, which helped to maintain the strength of these key trading relationships. Two other noteworthy underwriting strategies adopted in 2021 relate to Texas property following Winter Storm Uri in February 2021. That was followed by a targeted 25% rate increase on Texas property and a second strategy tied to Florida condominium business following the devastating collapse of the Surfside condo in June of 2021.
Following that collapse, PHLY quickly moved to non-renew any condo business that had property that was built more than 20 years ago, which compares to a zoning referendum passed in Florida that required renovations and upgrades on all condo property built 30 years or more ago. This resulted in PHLY non-renewing $26 million of condo premium. Let's advance to slide seven, please. This slide details the strength that PHLY enjoys, the relationship that PHLY enjoys with our preferred agents and national retail distribution partners who place 60% of PHLY's total new business in 2021, which is a typical year and does highlight the strength of this relationship. Let's advance to slide eight. This slide highlights several key operational initiatives for 2021 that continue in 2022 and beyond.
The pandemic caused us to reprioritize several large dollar transformational IT investments in favor of projects that enhance ease of doing business for agents who trade with PHLY. PHLY's culture is one of continuous improvement and high execution. Diversity, equity, inclusion, and development of our future leaders continues to be a key priority for PHLY. Growth will come most likely organically in the segments we are currently offering specialty niche products, as well as through bolt-on acquisitions, which likely will be MGAs who we currently compete against. We have a track record of successfully integrating such bolt-on acquisitions.
We have intense focus on striking the appropriate balance of embracing the hybrid work model that was a product of the pandemic, a deliberate and well-thought-out commitment to continuing our DE&I strategy, which includes senior management and investment and buy-in from senior management, a diversity council, and partnering with external vendors and employee sourcing associations. Success in the war on talent, which requires us to remain vigilant in our connectivity with employees who are seeking a purpose-driven career that provides upward mobility, flexibility, balance with competitive pay, maintaining our unique and vibrant culture, and finally, a keen focus on succession planning with 15% of our employees reaching retirement age in the next five to seven years. We also, in close collaboration with Tokio Marine Home Office, have increased the prominence of ESG matters with a similar emphasis on continuous improvement in this area.
Let's advance to the next slide nine. This last slide, before I pass it to Brad, highlights our net promoter score, which despite the pandemic and what was well over 95% full-time remote workforce in 2021, we achieved our highest net promoter score ever since we began tracking this metric over a decade ago. This underscores the success we had with improved communication, partnership with our agent partners, and the benefits of our enhanced focus on ease of doing business. With that, I will pass it to Brad and look forward to answering any questions at the end. Thank you.
Thanks, John. It's a great story, and I hope to share a little bit about TMK. TMK is a company that I joined in 2018. At the time, there were some issues around deteriorating results. There were some regulatory cultural challenges the company was encountering, and it was my honor to come here to London from Texas and work with the company. What I found was a company with really great people and a real strong legacy. As you see, we're celebrating 60 years this year. You found a company with really great bones that was something to work with, and people that really cared about the company. I could see that early on, and I could see that this company had some great things in its future. What was needed most was some focus, some prioritization, and honestly, some confidence to build back on that strong legacy.
On the focus side, we really focus on a, we all call laser-focused on consistent bottom-line profitability and diversification. A lot of companies talk about that. It's easy to say, not that easy to get right. I will say that our underwriting teams that have been in place for many years went right to that. I didn't have to explain to them what that meant or anything. In fact, they had been working behind the scenes to do things like within the property business, to move away from the coast in a rising rate environment and de-risk in ways that we found really enhanced the profitability of the company even before we started going deep into some other areas and everything. You had a company and underwriters that really got it and understood and had the expertise to move forward.
The other thing I'll talk about today is we do have a stable performing portfolio at this time that we're excited about, and we also have a favorable market in most of our lines, which is not a situation that you find yourself in that often. We're excited about the rest of this year and into 2023, really having the opportunity to grow. You'll see that we've managed that growth over the last several years for good reasons. It feels good to be in a position to grow the company, but grow the right way, profitably, and furthering those diversification goals that I'll cover a little further as we go along. Culture and governance. As I said, there were some challenges in the past. Honestly, the culture of the company was really strong underneath. What it really needed was a refocusing.
I think people that very much embraced change and wanted to hear about diversity and inclusion and be part of that so organically. It's really become a strength for us, and I think from a regulatory side, we feel really good about where we are and from a culture side, we feel good about that. Today I want to spend a little more time about who Tokio Marine Kiln is, our purpose, vision, and values. Then I'll talk a little bit about the change initiatives that we've had over the past 24 months. If we can advance to slide number 12, please. I won't spend too much time here. I expect you probably know some of this, but we're the fourth largest in premium size in Lloyd's. I think that might change. We will be somewhere in that top four pretty much any year.
A meaningful player within the Lloyd's environment. We operate under three syndicates, Syndicate 510, Syndicate 1880, and Syndicate 557. Some of you may have read that we are in the process of merging 557 with 510. 557 was a special purpose reinsurance syndicate that we are discontinuing and merging. We have 800 employees in London, Singapore, and the U.S., and that is primarily through our 100% owned MGA, which is Tokio Marine Highland. I mentioned this a minute ago, well-known and experienced underwriters with a profitable portfolio. The underwriting teams within TMK really have not changed through this. When I talk about changes over 24 months and so forth, this really is with an existing team of underwriters and other support people within the company. We started with some strong people, and that has really been the story of how we have been able to improve things.
We are recognized for our market leading claim services. One that I wanted to touch on was robust actuarial functions, which maybe does not sound that exciting when you say it, but we really punch above our weight from an analytics perspective and ability to make decisions using data and analytics. That has been a big part of the success that we have found is really working together collaboratively with underwriters and our actuarial and data analytics teams to really improve the results over time. We have a strong and experienced leadership team. Matthew Shaw joined us in 2020 during the pandemic as our COO. He has been a real game changer for us. Nick Hutton-Penman joined us from Tokio Marine HCC in 2019. Reeken Patel, our CFO, joined us in 2018, about the time I showed up. Vivek Syal, who is our Chief Underwriting Officer, joined in early 2018.
Anna McNamara has been with the company for a long time and actually balances out that a lot of us are new to the company. Anna has got a long background and love for this company and has been a great support to us as we have moved forward. Elisabeth Ibeson, who joined as our Chief People Officer back in 2020 as well. If we can move to slide 13. Again, I will not spend a lot of time on this slide, but really when I took over as CEO and I wanted to focus on the culture, we really had to go back to basics and really remind ourselves of why we exist, what we are trying to accomplish. Some simple messages around low 90s combined ratio and a return on capital of 10% or better, and our values and what do we stand for.
These values really are unchanged from over the last 60 years. We have made some tweaks to them. We have made them, I think, more relevant to some of the realities of today. We have tried to bring them alive a little bit more in what we do, so they are not just up on the wall. They basically underpin everything that we do. That was really the importance of that, is to get back to basics and remind ourselves who we are and what we stand for and really drive the company that way. If you can move to slide number 14, please. Some of the change initiatives since 2019. I mentioned the laser focus on profitability, that low 90s combined ratio focus and breaking that down into the attritional loss ratio, the CAT loss ratio, and the various components of expenses, and really talking about what was driving performance.
What we found was the attritional loss ratio was really the challenge. In a soft market environment, the company had grown pretty significantly and didn't have the line of sight to what was happening to the attritional loss ratio that we needed to. The MI and analytics that we were able to pull together really were able to focus us on those parts of the portfolio that were performing well and move away from those areas that were not performing well. At the same time, rebalancing the portfolio and the easiest way to describe that is when I showed up in 2018, the U.S. property book for this business was 65%, we'll call it, of the premium of the company.
While we like the business and it was performing underlying all that, it just was a higher percentage of the overall portfolio than we thought was healthy from a sustainable basis going forward. We said, we like that business. We want to continue to build it and sustain it, but we also want to build other lines of business around that. We had some really strong lines of business to look at initially. The liability line is one that's very diversifying for us and that we've had a favorable market by environment that we were able to grow in. Aviation is another one of those lines that really underpinned early on where we were able to grow and diversify.
As we look at diversification, we looked for that property book to continue to grow, but to be less of a percentage, so more like 40% of the portfolio. If you look at our plans in 2023, we're right at that 40%. Somewhere between 35% and 40% going forward, but still growing, but other lines of business growing alongside that is our focus. From an operational foundation perspective, people and culture has been a primary focus. I said it as the number one focus of the company early on. I think the success that we've had as a company coming along with success in our culture and improving culture is no coincidence. I think they're intrinsically related, and the better we are with our people and our culture, the better odds are that we're going to have good results.
Governance, good governance in place and functioning. An operating model that we're still working on, but like a lot of companies, we want to have a simpler fit-for-purpose operating model, greater efficiency, greater timeliness of information, and so forth. We're well two years into a targeted operating model process that's been successful as well. Like John said, ESG has been a major focus for us over the last several years, and especially since 2019. I'd say beyond a company, there's a top-down where we want to focus on that, but there's a real bottom-up focus in this company with people who want to see us focus on things like the climate and things like people issues, diversity and inclusion. The grassroots efforts from diversity and inclusion have really been amazing to me. That's something where we really want to be leaders here.
We don't want to wait for regulators to tell us what we need to do. We want to define what we want to do as a company, and I think we're well on our way to being recognized for that. Innovation was something that if you were to go back in time to the acquisition of Tokio Marine Kiln, Tokio Marine was focused on the access to new innovative products that naturally made their way into Lloyd's market. We're proud to continue that tradition and have that as one of our values to be innovative, but also be looking for those new innovative ideas to bring to both Tokio Marine Kiln, but also to the group. That's something that we'll continue to be focused on. Can you please advance to slide 15?
These are the results, and as you see, in 2020 is really where it was unfortunate with COVID that the underlying results were hard to see because of the losses with regard to COVID. We do show you the ex-COVID numbers. We could see this happening in the underlying portfolio in a movement towards the low 90s combined ratio. We had quite a bit of confidence that we were making the right decisions and so forth. Then you can see that in 2021, we really put a strong result in an 88% combined ratio. 2022 and 2023 targeted right at 91%, 90%. I expect that we'll be able to be in that range for both of those years. Obviously, we're not through the CAT season, but we prided ourselves in building a company that performs even when there are catastrophes.
We are a catastrophe exposed business, so it was important that we did build that into the company and our strategy. Again, people really dedicated. The best thing I can say about this company and our people is that when you provide a clear direction to what we're trying to accomplish, people really go for it and come up with new, interesting, exciting ideas for how we're going to get to those areas. If you can provide some guidance, people can really run to those targets. Again, really the core of the success we've had in these numbers is really managing and improving the attritional loss ratio. When I showed up, I think people focused on CATs and everything, which certainly is an issue, but really that with a strong attritional loss ratio, you can handle some CATs, and that's what we've built over time.
If you can go to slide 16, please. Again, this just shows you the numbers and builds on what I've talked to you about the portfolio diversification away from that CAT exposure, getting into and building on existing lines, liability, aviation, and other lines that were strong for us. As you can see on the table on the top right-hand side, from 2018, 2019, and 2020, there's very little growth. There's a lot of remediation going on there. Within our U.S. property business, we were actually growing it during that time, and offsetting some of the remediation of other lines of business. In 2020 and 2021, you see a drop-off in premium, which is primarily impacted by construction, refocusing our cyber business, and also reductions in our reinsurance business. Those are really the drivers within that.
2021, you see the drop-off, and then in 2022 with a portfolio that we had felt like we had remediated to a level that we needed to, we see return to growth and expect to see that in 2023 and forward as well. I've talked about in the combined ratio, you see the impact. This is exactly what we were hoping to do, which was bring the combined ratio down into the low 90s, and 88% was obviously a great performance for us in 2021. But most importantly, we feel like we built a portfolio and we'll be able to have a sustainable portfolio that can perform in that low 90s range going forward. If you can go to slide number 17. Just quickly on the cultural transformation, and importantly, I think we look at this really as BAU.
It was really a lot about regular, consistent communication, transparency, coming at that communication from multiple formats, but also from across the executive team and also our senior management team. Where I think if you were to talk to really across certainly our executive team and our senior managers and our people, and you ask them, "What are we about? What are we trying to accomplish? What are our goals?" You'd get a consistent answer, and that was a real focus of ours, to have that consistency and really bring that comfort to people that there really is a strategy and a focus. And if they will help us with that, then good things will come from that. And slide 18. I'll finish here. This one I'm excited about because each year I develop what are going to be our priorities for the next year.
What you see is kind of in the middle there are the key areas that we're going to be most focused in. Obviously, there's other areas of the company, but these are the ones that are the most impactful to the company. And what I'm excited about with this is that it's really people and culture stays at the top. As I said, more of a BAU kind of constant improvement deal. But the underwriting portfolio of the future and combined with our underwriting analytics, was very future-focused. For TMK, we've been really focused on getting to a point where we were ready to grow and really think about the future in an exciting way, and just happy to say that beginning in 2022, that's where we felt like we were, and that's really what those areas were focused on.
Really proud of the company and what we've been able to achieve, and more importantly, what we have to achieve in our future. With that, I'll hand it back over.
Thank you very much, John, Brad. We appreciate your presentations. Now we would like to move on to Q&A. If you can just type your questions into the box on the bottom. We would like to take them, and I will read them. If you would like to cancel your question, just let us know. We already have many questions in the list. I would like to start from Mitsubishi UFJ Morgan Stanley, Ms. Tsujino. This is a question to John at PHLY. We announced on May 20th the top line for FY 2022. In this, PHLY, on local currency base, is going to have 3.7% top-line growth, as we understand. On the other hand, when it comes to your peers in America, they all announced their first quarter results, and for example, W. R. Berkley have announced 15% increase in top line, roughly.
I am wondering if PHLY, in the full year, you have a 3.7% projection. Could you comment on this? What is the trend that you already see in the first quarter, please?
Sure. Thank you for that question. I am acutely aware of where our competitors stand in terms of exceeding the growth that PHLY has achieved. One of the growth drivers was the integration of an acquisition of an MGA that closed on 12/31 of 2020. That resulted in an additional $85 million of premium, which is roughly 2+ points of growth. That will be reflected in the full year numbers. But the continued re-underwriting of some of the portfolio
While we have the benefit of a hard market and when we can get rate is something that we continue to be focused on. Some of the items that both Brad and I have spoken to, where there are certain products that we just don't believe over the long term are going to year in and year out achieve the profit targets that we need, we have taken aggressive action to dehydrate or to non-renew that business. If that ends up sacrificing a little bit of top-line growth versus our peers, it is no doubt helping our bottom line and the bottom line growth over the last two. We too, I was remiss in not highlighting, but Brad and I both happen to be leaders of two companies that are celebrating our 60th anniversaries here in this year.
It is 13 years since we have been a part of the Tokio Marine Group. I would expect that after we get through 2022, we will be back in growth mode, whether that is through bolt-on M&A or growth in our core segment, the nine core segments that we currently trade in.
Thank you very much. So moving on to SMBC Nikko, Mr. Muraki. Again, this is a question to John at PHLY. Currently the inflation continues to go up. When it comes to the long-tail liability management, which is going to be very important, I would like to ask, regarding the case reserve, the actual dollar amount and IBNR actual dollar amount, could you please let us know? Also in the past accident years, how much is the figures and case and IBNR, what is the duration for each of them? Finally, regarding these figures that I ask to you about, you will give us an answer, and I would like you to also comment whether you are comfortable with those figures or not, please.
Sure. The actions that we took in 2019 that I was referring to by boosting our reserves in the 2015, 2016, 2017, 2018, and 2019 accident years was something that we felt at the time was sufficient to get that behind us. We also had a benefit while the pandemic was ongoing that claims frequency in really all of our lines of business dropped dramatically. 30%-40%, we recognized 30%-40% reductions. We witnessed 30%-40% reductions in claims frequency in the GL, the professional, the auto liability, and the auto physical damage, which in aggregate make up about 80% of the premium that we write. Our carried reserves, total carried reserves are about $3 billion in case and about $3 billion in IBNR. As we sit here today, I feel very confident with where our reserves are.
I do not have on that one slide, which I know part of your question is targeting the total carried reserves of those 1,360 claims that we were attacking and trying to settle. I do not have the actual reserves, but they are a significant reduction, and because they are settled and closed, those are claims that will no longer be developing. Again, with the claims frequency in 2021, to a lesser extent in 2022, with the actions that we took in 2019, that I believe we were ahead of many of our peers in addressing social inflation. I feel very strongly today that we are in a, and our audit partners would concur, that we are in as strong a position reserve-wise as we have ever been.
From Morgan Stanley MUFG Securities, we have Ms. Nagasaka. This is a question to Brad. A week ago, June 20th, you announced that you will sell Highland, your subsidiary. If you can please give us a little color on the background to this event. I would like to add that Tokio Marine does not just buy. We actually do divestitures to manage our portfolio. If you can talk about the background to this, and also what is the result that you expect from the optimization of your portfolio, Brad?
Thank you. Yes, we did announce the sale of the construction business in the U.S. Going back, over time, it had been a business that was a challenging business to make a hurdle rate return in consistently over time in which you need to be very committed to the line of business. What we found was that, from a return perspective, we had other lines of business that we thought we would rather put our capital towards. Given that, it was going to limit our support for that business to a point where we thought that the team in the U.S., because it's a hard market environment for that construction business, and it's a great team that's running it.
We were going to be constraining them, and we didn't feel like that was sustainable as a good thing for the people running that business and for us to be holding them back from what they could accomplish. That was really the decision that we made, is that from an appetite perspective, we just didn't have the level of appetite needed to keep up with the growth of that business over time. We also saw that there was quite a bit of interest in the market for this business, and we just thought that there could be a better home for that business to allow it to grow the way that it wanted to and could, and that we wouldn't be able to support to the level that they wanted.
I'm really pleased to have announced that Intact is the buyer, a great home, a great company, a great home for that business, and I think they'll allow them to build the business and maximize it over time.
Yes. Thank you very much, Brad. Now we'd like to move on to Robert Wydenbach at Wellington. This is a question to John at PHLY. In FY 2019, you basically increased $ 273 million of reserves. For this one, what percentage of reserves is this to your total reserve, and what is the tail risk? What kind of tail risks do you foresee for these reserves? As you added these reserves, what was your assumptions regarding the claims inflation?
The assumption is the total loss cost inflation plus social inflation is a sum of both the Consumer Price Index, which obviously has been going up, as well as social inflation. In 2019, 2020, that was a consistent number. That was approximately 3% for each, for a total of 6%. The $273 million represents roughly 9% of total carried reserves. It was really based on historically what we had been seeing as a spike in settlement court settlements with these nuclear verdicts that we had been seeing in some of the areas that we compete. So human service in some of the sports and recreation business, in some of the real estate business. We had been seeing some nuclear verdicts that were larger than anything PHLY had seen before. Those were heavily reinsured. They did impact the price of our reinsurance treaties on renewal in 2020 and in 2021.
However, the aggressive action that we took in 2019, followed by the conservative action that we took in 2020 and 2021 by not recognizing all the good news that was tied to the reduced frequency in GL claims, in professional liability, in auto liability, and in auto physical damage, in addition to the claim settlement initiative that I referred to, that our claims team had undergone. The combination of all of those are going to be a benefit. But we are not going to be in a hurry to reduce or to release, I'll say, prior year reserves until that proves to be true.
Thank you very much, John. Now moving on to Mr. Watanabe from Daiwa Securities. We have a question for Brad at Kiln. Basically it's two things here. One is when you think about the diversification of your products, I understand that you're focusing on the stability of the volatility for each company. But how about the diversification effect at Tokio Marine Group as a total? Do you think about that as well when you think about the diversification of your business lines? Do you have any directions from the headquarter as well? The other thing is currently we have the conflict in Ukraine, and regarding this, what is the impact to Kiln? How do you measure the impact, and what kind of business lines are you concerned about? Maybe you cannot disclose the amount of impact, but basically these two are the questions, please.
Thank you. I will take the first, take them in order. Diversification. Again, I think the focus has been bringing U.S. property down as a percentage of the overall portfolio, bringing the other lines up with that and everything. With regard to the Tokio Marine Group, the short answer is yes. Given our size, we are not going to move the ship a lot from a Tokio Marine perspective. We are in constant communication with the Tokio Marine Group and understanding what we are doing.
I do not get, and I think John would say the same thing, is one of the beautiful things I think of Tokio Marine Group is they really want you to focus on doing the business and doing the best for your company, and that is what we are hired to do, providing an understanding and guidance and certainly thoughts on that through our board if something happens, but not specific guidance on what to do. I think what I found is the group has been incredibly supportive of everything that we have tried to do here at Tokio Marine Kiln and been really important to the success that we have had. I hope that helps some.
On the Ukraine conflict, we have had the main areas that we would have exposure are some of our political violence business, our trade and credit business, and then also you have heard a lot about aviation business not only in Ukraine but in Russia. Those are the main areas that we are focused on. As you said, I am not going to be able to share specific numbers with you. I would say that my comments about what our results are expected to be for the year, which is the low 90s combined ratio, would include any reserving for the Ukraine conflict.
Thank you very much. Moving on to Mr. Oishi from Aberdeen. Again, this is a question to John at PHLY. Basically two points. One is about the bolt-on M&A. Today, John, you touched upon M&A, the bolt-on M&A in your presentation. My impression is that when you execute M&As, you are looking at these short list of candidates, and you are looking at those who have what? Strong business models or high growth potential. What kind of companies are you looking at in terms of M&A appetite? This is the first question. The second question is regarding regulations in America, are there any kind of regulatory environment change that you are concerned about today?
Thank you for the question. I too will take it in order. As far as bolt-on M&A, we pride ourselves, we are a niche specialty insurer. We aim to be a top three player in all the products that we write. When we look at M&A, we do not look to acquire a property that needs to be turned around. We look for a best-in-class. The acquisition of Worldwide that closed on 12/31 of 2020 was an MGA that has been around for 55 years. They were the largest in temporary staffing. We were the second largest. They had, at the time of the acquisition, as I said, roughly $80 million in enforced premium, and then they placed through outside third parties about another $30 million of workers' comp, where we get risk-free fee income.
As being the best in class, being known as the best in class is very typical of acquisitions that we've made in the past. Our acquisition of A. J. Flood in the mid-teens, our acquisition of Gillingham in 2008, and our acquisition of Grundy Worldwide, a collector vehicle book, in 2006, have very similar characteristics. It's best in class, but it's also a cultural fit where there's a desire to do right by the employees, that they want to out-service any of the competition, and there's a very entrepreneurial spirit and a will to win. Those are MGAs that would fall into targets. You're right, the list is not long. It's very rare that we will talk to or actually execute on an acquisition on an MGA that we have not already spoken to 20 times over the years.
Our dialogue with Worldwide, that was not our first time, our first rodeo. That was not the first time we'd actually engaged with them. We had engaged with them for years, and for various reasons of the seller, the time was right for them to engage with us, and it worked out beautifully. So far, that has been an outstanding integration. The second part was any regulation that I'm concerned of. While this does not go back six months, it goes now back a couple of years. One of the issues that we have faced, we do insure sexual abuse and molestation.
With the revival laws in many states where essentially the statute of limitations was thrown away and various windows for people to report that had already exhausted or passed the statute of limitations moved the goalpost, and therefore the reserves and the pricing at the time of the policies was moot and was null and void. So a part of that strengthening of reserves that took place in 2019 was tied to those revival laws and some of the change in statutes. But those are a specific example. That's probably the most tangible, specific example. Generally speaking, the desire for the juries to award these, and the appetite for them to award these nuclear verdicts, is something like we've never seen before in the insurance market. While that is not regulatory per se, it's something that has a systemic impact, widespread impact on the insurance industry.
We will continue to be very cautious in the way that we look at reserve releases. I hope that answers both of your questions.
Thank you very much. Next, we would like to move on to Ms. Tsujino from Mitsubishi UFJ. This is a question to Brad at Kiln. In Lloyd's agents, there is a culture of product mix and underwriting. Who are the peers who have good cultures as you do? Ms. Tsujino is saying maybe Hiscox is probably not similar in terms of product mix, and Beazley is big, but it looks kind of similar to you. What do you think is a good, respectable competitor for you? Next is Kiln's top line growth. Last fiscal year, compared to your competitor, your top line growth seems to be a little bit lower. Could you explain to us why it was relatively modest? That was two questions for Brad.
Okay. Happy to take that. I think when you look at, we said that we are one of the top four Lloyd's companies. So Beazley and Hiscox are in there. They are companies that we respect. I think the biggest difference, I would say, between us and both of those entities are that we are a pure Lloyd's play at the moment. We do not have a U.S. insurance company. John is nice enough, in some areas, to provide access to U.S. paper for some of our products, and we have some other good partners within the U.S. group of companies that do that as well. But we do not compete on that basis. We are really a Lloyd's platform, and that is what we are focused on.
I would say Beazley would probably be the company that I would say is probably most like us from a culture perspective, from what I can tell in the market. I think Hiscox is a good company. I think it had some missteps through the COVID crisis that I think cost it from a culture perspective and so forth. But I would say those around there was really what I would say. I might have said Atrium a few months back, but that is going to change a little bit here. But I am most focused on doing what we can do to make this company the best that it can be, and I do believe that being recognized as a very strong player within the Lloyd's market, both on a cultural and a performance perspective, which we are proud of. The lower premium growth is similar to what John had to say.
First of all, I would say that we are not a top-line focused company, so we will take as much top line as we can that is consistent with our bottom-line goals and that low 90s combined ratio focus that we had. We still had, in 2021, some remediation to do. While we had growth that was probably similar to our peers in some lines of business, we were also pulling back in some areas. I touched on cyber earlier. Cyber has been an area, and we talked about innovation earlier. TMK was an early leader in cyber and continues to be an important part of the business, but it did need some work to reposition the portfolio, move up a little bit in towers, and be a little more focused on where we thought the profitability really was over time.
Also raise rates, which the market is cooperating with now, thankfully. Hopefully it is enough rate, but we are happy to see that business. As you look at it in 2022 and 2023, returning to some really good growth, which again, is also diversifying for the overall portfolio. I hope I have answered your question.
Thank you very much. It is now 9:00 P.M., but we have some more questions, so we would like to continue. We have Mr. Muraki from SMBC Nikko regarding ROE. Also another question from Ms. Tsujino about ROE from Mitsubishi UFJ. This is for both John and Brad. The question regarding ROE is the following. At Tokio Marine Holdings total, we are currently looking at 12% + tangible ROE, and pulling it up a little bit further. This is something that we have announced on May 26th. When we break this down to the group companies, how do you position the ROEs at your entity? Basically, that is the question.
For example, in America, we have our peer, Chubb, who is trying to achieve tangible ROE 20% by 2023, and PHLY currently is pursuing your own ROE, but what is the actual numerical goal here? How do you position ROE as your management KPI? How important is it, and how do you position ROE? Same question to Brad at Kiln as well. Again, first John, and then Brad, please. Over to you, John.
Thank you. Pleasure. I will start by reminding everyone of the actions that I have spoken about a couple times in 2019 that we took, and the $273 million pre-tax that we added to boost reserves over that roughly four or five-year period. As a result of that, we are very proud, and there is not a possibility that we would be one of nine companies that had an A++ AM Best rating had we not been acquired by Tokio Marine Group over 13 years ago. We look very closely at our BCAR and our buffer capital. When we ended up boosting reserves, we ended up deferring, we ended up delaying and not dividend-ing in 2020, 2021, and again in 2022.
While we had an opportunity to chase ROE in those years, it was more important that from a rating agency perspective, we maintained our ratings and our financial strength, and there was absolutely no concern from both S&P as well as from AM Best. I would tell you that even in 2019, with that $273 million charge, our ROE was 8%. In 2020 and 2021, we were closer to 12.5% and 13%. In 2023, it is our expectation that we will go back to paying a dividend. That dividend is tied to 80% of our business unit profit. As a result, I would expect our ROE to be closer to the mid-teens, and that would be our goal.
That metric has not been as important post-2019 until this year because of the actions that we took in 2019, and its prominence will again move up the priority list after we go through the 2022 year.
Thank you. Yes, it is your turn.
Yeah. Thanks for the question. I think my philosophy is that return on equity and building book value is what this business is all about. It is incredibly important, and I am really proud of where Tokio Marine Kiln sits in relation to that. It is a little bit more complicated a question for Kiln in our capital situation, and I will try to explain that to you. If you look at it from a pure capital requirement within the syndicate and what we are required to be able to demonstrate we hold, the return on capital that we had in 2021 was 12%+ That is there now. Half of that capital historically has been funded by Tokio Marine through a letter of credit. You can really look at that as almost double that from a return perspective.
We have introduced something called a third-party deposit trust, which allows Tokio Marine for its interest in the syndicate to fund virtually all of the capital into Tokio Marine Kiln through a trust with Japanese government bonds that are already held on the balance sheet of TMNF. Virtually no capital in that situation is there. We have been returning capital and replacing that capital with the third-party deposit trust. Then you get to return on capital numbers or return on equity numbers that are really very high, and that is going to be our focus. But it is difficult when you are running a company, it is difficult to tell your people to go out and generate a return on capital of X percent. The focus has been on where we need the combined ratio to be.
I happen to know that if we have a low 90s combined ratio, then on a fully loaded capital basis, we will be somewhere between 12% and 15% return on capital. That is an underlying focus. That is the goal, is to deliver that return on capital. But when we are running the company and we are trying to motivate our people to deliver, it is really focused on the components of that combined ratio and how they can influence that will then drive that return on capital.
Yes. Thank you, John. Thank you, Brad. I would like to add some information on this. ROE by group company is also very important. But as the holdings, we have the risk diversification effect across all group companies. It is half, about 50%, is the diversification effect. Again, if you focus on the capital allocation of Tokio Marine Holdings, you will understand how we are focused on lean company management. That is the strategy that the holdings company is also considering. At the same time, we are also looking at the group level ROE as well, trying to pull it up from the 12%+ area to even further higher levels. The next question is from Citigroup Securities, Mr. Niwa. This is a question to John at PHLY. This is about the long-term PHLY's combined ratio. What is your forecast?
How will it proceed in the future? A more detailed question regarding this. He's saying that, "I understand in the early 2000s, you were at a level of below 60% and currently it seems to be going up a little bit. Why is it going up a little bit, the loss and LAE ratio? As for the expense ratio, currently we have inflation going up. What is your forecast regarding the expense ratio and ultimately the combined ratio? What is the level that you're going to aim for in the future?" John?
I will answer this question in reverse order. Our goal on the combined ratio is a 92% or lower. The increase in our loss in LAE ratio since the acquisition 13 years ago has been a number of things. It's been loss cost inflation. When a building burns down today, it is much more expensive to replace that building. The same holds true with automobiles and physical damage and really does get exacerbated with the situation of social inflation, which was not even a topic of discussion seven to 10 years ago. The combination, the confluence of those three influences have put upward pressure on the loss in LAE ratio. But the actions that we've taken in dehydrating the tier three products that I referred to will no doubt pay dividends, also coupled with the rate increases that we've gotten.
Our long-term goal is to be 62% loss ratio or lower, and our goal is to start approaching a 30% expense ratio over the next three, four years. Now, there's a couple things that we're doing, couple actions that we are taking to help us in that endeavor. One, is we've had a very deliberate focus on reducing the total administrative staff and using business process optimization and partnering with an offshore partner as we've taken administrative tasks and moved them onshore to offshore. That has cumulatively saved $41 million over the last eight years. We only intend to increase that partnership going forward.
In addition, while we've had offices that have largely been unoccupied or occupied by fewer than 5% of our staff, as leases have come up on expiration, we have handed in the keys and terminated those leases, knowing that once we actually are welcoming our employees back to the office, that we will be doing so in a hybrid model that will require less square footage. That will have a significant savings on the expense ratio. Offsetting that is our very aggressive attempt in the war on talent. Many of our competitors are out taking aggressive action and offering 30% increases to some of our employees that have only been employed in the insurance market for three to five years.
This is something that we have got to keep an eye on that and make sure that, one, we are providing through our culture that Brad and I think have both hit home, is very, very important to our business model. Our company, our corporate is free to core. We have a purpose-driven mission, and people that work at PHLY understand everything that goes into that. But there is also an element of making sure that we are paying competitively to help attract and retain talent. The cost savings on the business process optimization, the efficiencies that we are gaining, the investment in technology that are gaining additional efficiencies, are well exceeding any of the cost increases that we have to incur in the war on talent.
92% is our baseline, and I would expect that to continue to decrease as we exceed whatever loss cost inflation plus social inflation is, as the market continues to be hard.
Yes. Thank you very much, John. Now moving on. This is from Mr. Watanabe at Daiwa Securities. This question is for both Brad and John. First of all to you, Brad, if I may. It is one question. When you operate as a group company under Tokio Marine Holdings umbrella, when is the moment that you feel the biggest synergy with other group companies? Brad, and then John, please.
It is probably good to start with me. I mean, I am sitting here, I guess as a living, breathing example. I was with a group company at TMHCC, and then had the opportunity to come here to Tokio Marine Kiln. I also brought over with me Nick Hutton-Penman, who was here in London working with Tokio Marine HCC. I think that is incredibly powerful, not only things that we do from a product perspective, but also leveraging talent around the group. I mean, it is a very tangible thing. For me, it is a very empowering, exciting thing because it says that there is, for our people, we can talk about career opportunities that go well beyond where you may be sitting at that moment. That is not for everyone, but there is a lot of people that are out there that that is a real motivating thing for them.
Plus, we have regular meetings and I spent time with John last summer, and we've talked several times over various initiatives. What I find is that the group companies and the CEOs on down are when you come with a problem, they're really looking to help. How do I help you? You really can understand that we're all trying to accomplish similar things and where we can work together, we're happy to do that. Even if there's not a great benefit to one company versus the next, if it helps the group, then you have a kind ear to listen and to hopefully do something that's interesting. I'll turn it back over to John.
Great. Thanks, Brad. I think on the synergy front, there's really a way to look at it pre- and post-pandemic. The way that many of us have been able to take advantage of Delphi's investment expertise. Philadelphia's investment portfolio has grown to $ 10 billion. 40% of our invested assets are managed by our sister company, Delphi. Cyber, Brad has talked about a number of times. This is the first time I've mentioned cyber, but Brad, Kiln, and PHLY have a more than 10-year relationship on cyber where Kiln, to Brad's point earlier about trying to have increased distribution in the United States, PHLY holds very dear to us our distribution, especially with our preferred agent partners. We have for years had a reinsurance quota share that's been in place with Tokio Marine Kiln.
Tokio Marine home office has now for more than five years, reinsured roughly 80% of our CAT reinsurance treaty. We purchased to the 1-in- 250, and 80% of that is reinsured to home office and then reinsured to the market through a retro, as are many of our other sister companies. At the beginning of COVID, the group company CEOs, so Brad, myself, other group company CEOs in the U.S. were a part of a McKinsey engagement that was focused on ease of doing business. I think that was really, in many ways, this pandemic has been a way to bring us together even more than we had been previously. We have a quarterly call that is the It's referred to as the , its official title is the U.S. CEO call, but yes, Brad does participate in that call.
We also have our colleague from Canada, our newer colleague and teammate from Canada, that's a part of that call, and other European colleagues and many of our Japanese team members that join that call. Just the level of collaboration, the way that we are counsel to each other on how to communicate during these very difficult times that the last 28 months have represented, and making sure that we're in touch and transparent with our employees. That level of engagement has really strengthened and deepened the bond that we, the group company CEOs all have. Synergies have taken on a little bit of a different meaning, but they're all very, very important and very essential to us maintaining the culture that Brad and I continue to talk about each of our organizations enjoying.
Yes. Thank you, Brad. Thank you, John. We would like to take two more questions, and then we would like to close. The second one from the last is from Mr. Robert Wydenbach at Wellington. This is for Brad at Kiln. What did Kiln do to improve the attritional loss ratio? Because it has improved to a great degree. What specifically did you do? What kind of initiatives have you undertaken, please? Brad?
Thank you. I would say some of it is just good nuts and bolts underwriting and the focus on that being an objective. We happened to be in a number of our lines of business over the last 2.5 years in a favorable market environment. I mentioned the U.S. property business. Within that business, they were able to move away from the coast while still improving rates. Also look at where their exposures are and bring some aggregates down while still maintaining the book of business. Some of it was that, but I think probably the most transformational thing for us has been the collaboration of our underwriting teams with our analytics team.
Being able to really drill into the portfolio and identify those areas of the portfolio that were performing within, not just in broad lines of business, but within lines of business and focus on stated simply, doing more in those areas that were performing and less in those areas that were not. We did some exiting of classes. Some of you have heard of Decile 10 within Lloyd's. Most of our marine lines, the whole liability and cargo, we exited. U.K. EL/PL, we exited. U.K. motor and the bodily injury part of that, we exited. Mentioned construction earlier. All those were designed to not only give some benefit, diversification, and things like that, but also to improve the performance of the portfolio as a whole.
If you look at that, the charts and everything, it is a good 3.5 year process of just being focused on the attritional as something that we needed to impact. Then also at the same time, hopefully growing and have the opportunity to grow diversifying lines to balance out the portfolio, make the CAT risk a smaller piece of the performance in a given year. Again, I really credit the underwriting teams that, again, are the same people as when I showed up. But hopefully we provided a little focus and also provided some expertise from the analytics side to, again, increase the odds of focusing in the right areas.
Thank you very much, Brad. The very last question here is from Ms. Nagasaka. This is a question to John. Regarding PHLY, you are able to realize rate up, increasing your rates that is higher than the market average. Can you explain to us a little bit more why you can do that? Because usually when you raise your rates, usually your customers would go away to other peers, and customers would want a higher ceiling, right? If you make the limits smaller, you would usually lose some customers. Why are you able to retain them, John?
I think that is key to PHLY insurance's distribution partners in the way that we are set up. As Brad said, it really is nuts and bolts underwriting. This is when I referred to earlier the tiering of our products. We have very clear target rate goals that factor in the loss ratio since we started insuring a particular account, the type of account product it is, the particular location it is, to the extent it is exposed to nat cat perils, whether it be hail, tornado, brush fire, hurricane, unit flood, you name it. So very specific rate targets by line of business, by product.
One of the things that we do at PHLY is we pride ourselves on being very far out in front of the renewal date to communicate our intentions on a particular renewal so that our agent partners are not caught off guard and can work with us to communicate that message. If it requires us to get on the phone with a client, to meet with a client in person, and to convey why we need the rate that we need and why we need to cut the capacity. One of the things when it comes to capacity is that in this litigious environment that we find ourselves in, the U.S. generally is a more litigious environment than most countries. That is why the U.S. market is the largest insurance market.
With social inflation and these nuclear verdicts, one of the very simple messages that many of our insureds and agent partners can grasp is that when you have a larger limit of liability, you become an easier target for the plaintiff's attorneys. In combination with rate and limit reduction, we end up saving them the pain of having increased insurance premiums in the future. We also end up increasing the profitability to us. It is something that over time, roughly 65% of our premium comes from roughly 250 of our trading partners. We do business with over 10,000 independent agents, but 250 of them are our preferred agents.
It is that relationship with our preferred agents who are loyal, who understand our message, who we meet with frequently, we convey any changes in our message, so there are never any surprises. That is what they have come to expect from us, that is the way that we have traded with them for now for years and years. That is why we are successful. I have no reason to believe that success will not continue.
Yes. Thank you very much, John. With this, we would like to close Tokio Marine Insights. The key point of today's webinar is that we wanted to focus on our overseas business entities and the strengths that they have. We wanted to just help you so that you can reduce your analytics cost as much as possible. That is why we held this webinar today. At the very end, we would like to ask you to continue to give us your support and also your feedback about today's webinar. Also, if you have any ideas about topics that we should present in the future, please share us your ideas. Thank you very much for today.