As it is time, we would like to start the session. Thank you very much for joining us today for the IR briefing for the second half of fiscal year 2021, in spite of your busy schedules. I will be serving as the moderator today. I am Ishiguro of the IR group. As for the format of today's briefing, to prevent the spread of COVID-19 infection, we have limited on-site attendance to sell-side analysts to basically hold the event online live. Our apologies for the inconvenience, but your understanding is greatly appreciated. We are operating the venue with limited number of staff, and we have made sure to have thorough infection control in place. The speakers will speak without mask for the sake of clarity of voice. Let me introduce today's participants. Starting with Tokio Marine Holdings, Group CEO, Mr. Satoru Komiya. Executive Vice President, Mr. Takayuki Yuasa.
Senior Managing Director, Mr. Akira Harashima. Managing Director, Mr. Kenji Okada. Managing Director, Mr. Yoshinari Endo. Managing Director, Mr. Yoichi Moriwaki. Managing Executive Officer, Mr. Kichiichiro Yamamoto. Managing Executive Officer, Mr. Masashi Namatame. Next is from TMNF, President and Chief Executive Officer, Mr. Shinichi Hirose. Senior Managing Director, Mr. Tadashi Handa. Senior Managing Director, Mr. Shingo Kawaguchi. From TMNL, President and Chief Executive Officer, Mr. Katsumi Nakazato is joining. We will start with a presentation using the materials that were uploaded onto our homepage today by Mr. Komiya, Group CEO, followed by questions from the floor. We are scheduled to conclude by 5:00 Japan time. However, we may extend it by about 15 minutes to take your questions. Mr. Komiya, over to you.
Good afternoon, ladies and gentlemen. I am Komiya. As was mentioned by the moderator, the COVID-19 has somewhat subsided. Therefore, we have combined online and offline today, and I am very happy that we are blessed with this opportunity to speak to you and meet with you in person today. I want to thank you very much for joining us today for the business strategy briefing. I also want to take this opportunity to thank you for your support and understanding in our business operations. The company embarked on the new midterm management plan from this fiscal year. Today, I will share with you our progress to date, as well as how the company intends to grow profit and extend shareholder return from here. Management's thinking, or should I say management's determination, will be shared with you today. Without further ado, let me get into the substance.
Please turn to page two of the handout. My presentation will be covering these three parts, and I will be speaking for a little more than 30 minutes. After which, as usual, we will open the floor for questions as much as time allows. Please turn to page four. These are the three key messages I want to convey to you today. First is sustainable profit growth. The target EPS growth in the current midterm plan announced in May this year is, +5% or more with organic growth alone, which I believe is top class among global peers. Our progress to date is that the business strategy of the company, focusing on global risk diversification, has paid back in terms of achieving new record-high profits with further growth expected. This is not something that turned out as a coincidence. We are finally seeing our initiatives beginning to bear fruit.
Increased business capabilities, should I say, has led to an adjusted net income for fiscal year 2023, the final year of the midterm plan, to reach what we referred to in the past as bringing JPY 500 billion into perspective to, how should I say it? Far exceed JPY 500 billion. As management, we will continue to brace ourselves and stay vigilant to dedicate all our strengths this fiscal year and during the midterm plan and beyond. As for beyond adjusted net income of JPY 500 billion, the company will seek growth not only in profit from the insurance business, but also by addressing societal challenges for which we have a role to play. By expanding our business domain into before and after claims payment, we will do our job and sustainably raise profits and ROE. Next is sustainable increase of shareholder return.
As I said during the earnings briefing last week, profit growth through business and shareholder return should be aligned. That is why the company decided to bring forward the timeline for raising dividend payout ratio to 50% to fiscal year 2023. Therefore, during the current midterm plan, strong profit growth and increase in payout ratio will be the drivers to raise shareholder return. As for capital level adjustment, in view of ESR, M&A pipeline, and ROE targets, among others, share buyback will be executed in a flexible manner. This stance remains unchanged. The new method introduced in fiscal year 2021, JPY 100 billion minus alpha, was meant as a show of intent of the company that capital level adjustment is not a question of whether we do it or not, but what will be implemented. That was our intention.
However, it turned out to draw many feedbacks from the equity market. We will drop this method in 2022. Lastly, on high-quality management, that will form a foundation to enable sustainable profit growth and sustainable increase of shareholder return. By delivering our unique, incomparable management of bringing aligned group management and power-driven, hardcore sustainability management together, and by sustainably raising, upgrading management quality, we strive to continue to grow 100 years and beyond. Details are covered in the following slides. Let me start with sustainable profit growth in chapter one on pages six and seven. On the left side of page six, we have our track record of EPS growth. You can see that high EPS growth was achieved through profit growth and disciplined capital policy. The key is whether this is sustainable going forward.
On the right, we have our EPS growth plan, achieving 5% or more with organic growth alone and taking a disciplined capital policy compare favorably with global peers. Such high EPS growth results in TSR, as shown on page seven. By raising the underlying management and business capabilities and continuing efforts to be supported by the market and our stakeholders, we intend to realize shareholder return that is unbeatable, that will put us on an equal footing with global top players. Please turn to pages eight and nine. As shown on page eight, in fiscal year 2023, the final year of the midterm plan, we will surpass JPY 500 billion in adjusted net income. Insurers of the world will likely improve their capabilities, but the company will realize an even higher growth and aim to become world's top-class P&C company.
Towards realizing our 2023 plan, profit growth close to +JPY 30 billion in domestic non-life and around JPY 50 billion in international business is planned. Our strategy to get there is shown on page nine. First, in domestic non-life, rate cut in auto scheduled for January next year and increase in investment for digital to drive productivity will be offset, for one, by profitability improvements in fire. More specifically, we will turn the business around by revising rates and profitability improvement in corporate fire and expansion of specialty insurance through market creation linked to addressing societal challenges. CAGR of +6% or more will be achieved.
In the international business, achieving rate hike exceeding loss cost, combined with a more sophisticated underwriting structure, strategy, and ability to execute growth of PURE's P business and profit generating from bolt-ons, as well as improvement in underwriting, such as through turnaround of TMK, which took us close to three years, income growth in investment, coupled with emerging market strategies as represented in our joint venture with CaixaBank in Brazil. All in all, CAGR of about +9% will be achieved. Details of the key drivers I just referred to are found in the appendix. Please find them later. Our midterm plan is traditionally compiled through careful deliberations over time, taking a bottom-up approach. Therefore, it is down to earth with high probability of success. We are making good progress to date. Please open page 10. This slide shows our revised projections for fiscal year 2021.
Last week, during the earnings briefing, I said that fiscal year 2021 Q2 earnings is 75% against plan, which is very high and in good shape compared to the five-year average of 42%. That based on the current business trend, full year forecast will be revised up by JPY 66 billion - JPY 490 billion. Looking back on this fiscal year, while large natural catastrophes such as windstorm in Texas and Hurricane Ida was experienced overseas, there were relatively few compared to previous years in Japan. Global risk diversification and profitability improvements in each group companies, as well as group-wide initiatives to create new markets are offsetting factors. These are intended outcomes.
The JPY 490 billion takes into account what could be called transient effects from realized gains and losses from investments in North America, as well as drop in loss ratio due to COVID, although we have not done any accurate calculation, should push up profit by about JPY 10 billion. Adjusted net income after deducting such factors will be about JPY 470 billion. But I believe our performance is steadily improving. As a result, fiscal year 2023 projections for adjusted net income is far surpassing JPY 500 billion instead of within reach, as we have referred to in the past. Please turn to pages 12 and 13. Page 12 shows an image for growth beyond fiscal year 2023. The company in November 2017 announced a future group vision of achieving above JPY 500 billion in adjusted net income and adjusted ROE about 12%.
In May 2020 last year, this became our midterm goal, and in May this year was within reach. Now we have come to a point where we believe to far exceed. Under these circumstances, we are more and more asked by analysts and investors, what's your plan after JPY 500 billion and 12%? We are living in a rapidly changing time. Specific KPIs will be announced by taking into account the landscape when we achieve our goals and our performance. On the slide, you can see on the right-hand side a very active vision. There is one thing that is certain. That is that our business is not only about paying claims. We will be covering before and after claims payment in order to increase our profit and ROE. By that, we hope to be able to deliver growth that is expected from a world top-class P&C company.
The important point is that we steadily address issues at hand, and if we achieve JPY 500 billion, JPY 530 billion, JPY 550 billion, we should steadily address issues at hand and continue to challenge our goals. Let me expand a little bit more on room for growth, and this is on page 13. We are in the age of VUCA, and there are mounting social issues growing in number and getting more complex. Risk is continuing to increase. Such an environmental change is a threat for us underwriting risks, but it is also a growth opportunity for the company. We must recognize that the role of the company and the room for growth is expanding. The company will seek growth as shown in the arrows going up and down on the slide representing growth of the insurance business.
Arrow to the left is prevention, and arrow to the right is early recovery and prevention of recurrence. These are areas into which before and after into which we will expand. These businesses will include less capital-intensive fee business. By growing these areas of business, we are able to better support our customers by always being by their side to support them in times of need. In July this year, Tokio Marine dR was launched as a data hub by bringing the group's digital capabilities together. Such knowledge and expertise combined with AlgoNaut, an algorithm center and joint venture set up with PKSHA Technology and external partners. We are seeing numerous initiatives underway in the areas of disaster prevention and reduction, healthcare, and mobility. In disaster risk reduction, healthcare, and energy, business pillars will be developed. There are many others that could transform into something.
We are committed to the business. Please find details in the appendix. Let me move to chapter two, sustainable increase of shareholders. Please turn to page 15. Sustainable increase of shareholder return. We have always said that our primary means of shareholder return is ordinary dividends, which will be sustainably increased along with profit growth. The company has so far said that once the company is able to stably deliver above JPY 500 billion in adjusted net income and approximately 12% in adjusted ROE, payout ratio shall be increased to levels on par with global peers. The timing, however, was not clearly set out. Management is confident of future profit growth. As shown in chapter one, adjusted net income for fiscal year 2023 is expected to far surpass JPY 500 billion.
With this recognition, we have decided to bring forward the timing of realizing 50% in payout ratio to in fiscal year 2023 at the latest, bringing forward to fiscal year 2023 to make the level of our shareholder return policy a little more transparent. Based on this decision, dividend payout ratio for fiscal year 2021 will be raised from the original forecast of 43% - 47%, and DPS up by JPY 30 from original forecast, or +JPY 45 year-over-year to JPY 245. Thus far, the company has raised DPS with sustainable profit growth as the driver. During the current midterm, rise in payout ratio will be added as a driver. The company basically will not decrease dividend. That is the kind of management the company aspires for. Please turn to page 16.
As I have already mentioned, shareholder return based off profit growth will be through higher dividends, but we will also use capital in a disciplined manner without question. On page 16, we show the track record of how we have been utilizing the capital we have generated in the past. On the left shows the past five-year average and on the right, the past 10 years. The timeline on the right, therefore goes from right to left. We have been disciplined in our use of capital for business investment and shareholder returns. As a result, as you can see at the bottom, ROE has been steadily increasing. Going forward, we will continue to pursue a disciplined capital policy and achieve targeted profits and increase ROE. Please turn to page 18 for an explanation of our approach to capital level adjustment.
Please skip a few pages. Our capital level adjustments are to be executed via share buybacks, et cetera, comprehensively taking into account ESR, M&A pipeline, business environment, financial markets, and ROE targets. In this context, like I mentioned earlier, we would like to revise from fiscal 2022 the JPY 100 billion budget method, which was newly introduced in fiscal 2021. Finally, I would like to walk you through chapter three, realization of high-quality management. In order to achieve sustainable growth and profits and increase shareholder returns, it is essential to realize and continue to implement high-quality management, which is at the base. Therefore, I would like to explain some of the points that we consider particularly important. Next, please refer to pages 20 and 21 together. As an insurance company, we are in the business of taking risks, so controlling them are crucial.
Therefore, we have been implementing strategies to realize advanced ERM management with speed. From the past 20 years, we have been reducing risk through the sale of business-related equities and using the capital funds generated to execute overseas M&As, and replace them with overseas insurance risks that have a low correlation with the domestic P&C business. We have been working to reduce interest rate risk where we do not have an appetite for, by stopping the sale of savings products ahead of the market and increasing the hedge ratio. Through these initiatives, we have been trying to increase corporate value while limiting the volatility of profits and capital. The results were seen when we had the large-scale natural disasters in Japan in 2018 and 2019, or COVID-19 in 2020. Even in such severe conditions, the impact on our profits have been limited to about 20%-30%.
I also believe that with these natural disasters risks relatively under control, we can finally see our underlying potential this fiscal year. However, as I have mentioned several times before, I believe that this level of 20%-30% is still too high. I also believe that there is still room for global risk diversification and risk reduction. Going forward, we will strive to accelerate growth whilst controlling volatility as well. As a result, we will pursue higher ROE on a actual amount, as you can see on page 22. ROE on an actual amount and level basis, which is the horizontal axis of the table, and we will do this while further reducing volatility on the vertical axis. Next, please turn to page 23. We have been involved in a number of major acquisitions, starting with acquisition of Tokio Marine Kiln in 2008.
What we have maintained throughout the process is that we will only engage in M&As that contribute to risk diversification, profit growth, and corporate value enhancement. We will execute them with strict discipline. Last week and this week, Mr. Sumi from our company looked back at past M&As and was featured in the media. In any case, in executing acquisitions, we have a strict criteria, such as the three principles with culture fit as one of the core elements and a hurdle rate that takes into account the cost of capital, which we consistently adhere to. In other words, if there is a good acquisition that diversifies risk and contributes to increasing shareholder value, we will execute on it. If there is nothing available that meets our standards, we will give funds back in a disciplined manner.
Regarding the current view of the environment around M&As, our company constantly monitors the environment using long and short lists, and we are making every effort to be prepared, as we always say. However, due to COVID-19, it is still difficult to have physical meetings with potential candidates. In other words, it is hard to have good communication between top management. I am sure that the situation will be resolved gradually. What about the market for M&As itself? My view is that the M&A market is active as companies are trying to survive, transform their business structure, and furthermore, select and focus. In this context, I believe that there is a possibility that various chemical reactions and so-called cosmic collisions will occur in the future, and that there will be themes and subjects that need to be considered.
However, there is also the question of how many large acquisitions are capable of going beyond with COVID and post-COVID, continuing to expand intrinsic value, and if they are a good fit with our company. Even if there was a good opportunity, I think that valuations are too high at this moment. Therefore, it is safe to say that we do not have any major M&A deals that we can announce right away. In addition to buying or acquiring, we have also been making disciplined decisions on executing portfolio reviews or divestments based on forward-looking assessments of future potential of our businesses. This will continue to be an important issue for us, and we will continue to work on this.
Based off disciplined standards, large-scale M&As have been executed in the past, and not only has this enabled us to diversify risks globally, as I have explained earlier, they have also made a significant contribution to profit growth and driven up the ROE of the entire group. In fact, the cumulative profit of the five major acquisitions has surpassed JPY 1 trillion by a wide margin, and the standalone ROI is 9.2%, far exceeding the cost of capital. In addition, we are also leveraging the expertise and networks of our group companies, as shown on page 25, to realize synergies in a variety of areas. On the left, you can see the annual contribution of $336 million, as you can see in the circle. I would like to reiterate that not many companies in the world disclose quantitative figures in this way.
This is a minimal figure, though. My point was that this is an indication of the importance we place on PMI and synergy. In particular, I personally am looking forward to the revenue synergies shown on the right. The realization of these synergies is truly the result of our unique management style, which is group integrated management, which I would like to explain about here. Please refer to pages 26 and 27 together. Since the insurance business underwrites risk, it must be global in order to be stable. This means that management must also be global to make the right decisions and implement them. We have taken the time to build global group integrated management. As a group, Tokio Marine is now a fully diversified group. In fact, our company places talented personnel acquired through overseas M&As and other means in the right places.
They have a wealth of diversity, sharp expertise, and management skills. Important management matters are decided and executed based on collective global knowledge. We believe that this style of management, which is neither exclusively Western nor exclusively Japanese, but strikes a fine balance of incorporating positive aspects cumulatively, is the value of our unique integrated group management, which cannot be easily imitated by other companies or peers. We will continue to develop and refine this value. Next, turning to page 27. The more diversity progresses, culture that connects people together into one team becomes important. From the actions of each individual to management decisions, we want purpose to be rooted in the foundation of all standards.
Towards the realization of this goal, I would like to create a company that is second to none in terms of enthusiasm and sense of unity, as I have happened to have stated when I took office two and a half years ago. To achieve this goal, as Chief Culture Officer, I am leading the way in asking employees around the world, both physically and remotely, what is your business for? In Japan, we call this maji rikai, and even in overseas, we use the word maji rikai, which is short for a meeting to talk about serious matters in a relaxed manner. Of course, it's not just being held at my level, but at every workplace and level in Japan and abroad. We also have a culture and value survey. Recently, because of COVID, we conducted this survey, but in all regions.
Group attachment, meaning the affinity to the group, as well as attachment to the group, as well as culture and look beyond profit, corporate culture, as well as wanting to be of help to others. The scores around these items became higher. Because of COVID, they felt more or less that globally, all the people around the people felt hurt. Therefore, people felt higher awareness towards group integration, and I think this was one of the greatest news I've been able to hear. Please refer to pages 28 and 29 now. It says, sustainability management for the next century. That's how this slide is entitled. Since our company's founding 142 years ago, although the words and expressions used may have changed from time to time, we had been working off our purpose, which is to protect people in times of need.
Based off this purpose, we have consistently worked to create a value creation spiral through our business activities on the left, and by solving social issues on the right. By contributing to the creation of a sustainable society, we have been recognized by our customers and the market, and have been able to achieve sustainable growth. Of course, this way of thinking will remain unchanged in the future. As the times change, so do the challenges, and as the challenges change, so do the ways we solve them. In fact, we have been saying that there is nothing sacred that should not be changed except the purpose. It goes without saying that we will invest in digital technology as a means to solve problems, but we will also accelerate our investment in human resources who can master it.
Attempt to make bold changes in our company, enhance our ability to solve problems, and aim to become a global insurance group that will continue to grow and be truly needed by everyone 100 years from now. The sustainability committee will be held next week. I look forward to the discussions that are going to be held. Finally, on page 29, I would like to discuss climate change, which is a particularly important issue for the insurance industry. What's important here is to mitigate the risk of natural disasters becoming more severe, while at the same time capturing the needs and opportunities of society, the market, and our customers, such as heightened awareness towards natural disasters and movements toward carbon neutrality. We would like to be able to support the transition to a globally sustainable society.
For the past 20 years, we have accelerated our global risk diversification and avoided over-reliance on reinsurance. In addition to increasing our fire insurance rates, we will continue to expand our pre- and post-incident fee businesses, developing new businesses, and capture market opportunities regarding the promotion of renewable energy. We will strive to leverage global trends to enhance our corporate value. This will be the end of my explanation. We will ensure that we execute on promoting measures to realize sustainable profit growth and sustainably increase shareholder returns based off high-quality management. By doing so, we would like to respond to the expectations and trust of the people in the equity market. I have the conviction that we will be able to do so with our globally integrated management as well as this management team. I look forward to your continued support. Thank you very much for your attention.
Thank you very much. We would like to take questions. We would like to take as much as two questions. For those who are participating online, please forward your questions through the chat box. If you would like to delete your question, please let us know that you would like to take back your chat box as well. Because of time constraints, we might not be able to take your questions. In that case, we will have our investor relations group take your questions on a later date. We hope you understand. Any questions, please. Muraki, please.
From SMBC Nikko Securities, I am Muraki. Thank you very much for the presentation. I have two questions. My first question is on page 16, business investment. As you show here, in the recent five years, you've had no opportunities for a major M&A, so that weight has dropped compared to the briefing held six months ago. In terms of opportunities for a large deal, maybe your outlook has changed. That is my impression. Share prices have gone up quite significantly throughout the world. Should I interpret that that being the reason? What kind of study have you done in the past six months? As you commented today, you are likely not insistent on large deals. If you are not able to do any major M&A during the midterm plan, what is your plan B?
At the end of the day, I think you can make good capital level adjustments, but the profitability improvement measures in your group companies in Europe and the U.S. has made a lot of improvements. I think you've come to a point where you can seek organic growth. Before resorting to the final means, what other means can be implemented? That's my first question. My second question is about domestic P&C business. On page eight, domestic non-life profit alone could bring you to within top three of global peers. When you compare with other international companies, the concern is that TMNF business expense is about 32%, which is quite high compared to global peers. Expense ratio is quite high. If you look at page 20, about 4/3 of 3/4, 3/4 of the business of expenses allocated to business-related equities for P&C.
Diversification of international business cannot be sought through M&A. Reducing the concentration from that perspective, maybe there is some more that you can do from the domestic P&C business. Maybe you can bring the performance forward from what you have announced in May. Is there anything that you can do in domestic P&C? That is my second question.
Thank you very much for your questions. I would like to first respond to your questions, and then I want to ask Harashima as well as Handa to follow up with the details. If I may share with you what I am thinking very briefly. In terms of large M&A in the international business, as I said, we have a long list and short list, but because of COVID, various companies are looking for their values and how they can seek sustainable growth. Being a low valuation does not necessarily mean a poor quality, but valuation is something that we need to be looking into. If it is a good company, we will be interested in a deal. But those are some points that we are carefully watching. It is a question of whether it will match our appetite.
We need to use all our five senses in dealing with communication and also matching of our business portfolio. There may be good opportunities out there, but does that company have a good fit with us? M&A is just a means to an end. It is not our goal. Taking that perspective, well, you have suggested six months, but we have gone through a lot in the past six months. It could be one aspect of growing organically, and there could be rivals to us that we may be dealing with them in business. Bolt-on type M&A is something that HCC has been very experienced. HCC, Delphi, and also PHLY, and TM Kiln, more on the offensive or Brazil.
These are certain areas that we will be focusing on, where holdings could be involved in bolt-ons and seek a way to develop the DC's business, expanding their business and further strengthening their businesses. These are some things that we are thinking of. The definition of insurance could be changed. It is not only about paying claims. We are talking about before and after, and we are embarking on new initiatives. I think calling it a new business area is a simple way to put it. In 10 years' time or 20 years' time, we are planting the seeds for new business, and we are nurturing them. We need to invest into that, and making commitments into those areas are also required. As for domestic business, the expense ratio has to be used in efficient manner. This is very important.
In the Mirai Project that we are currently working on, by about 2026, within the business, 20%-30% of the operating cost is to be removed, will be reduced. By the end of the current midterm plan, we intend to reach 15%. That is the kind of investment that we are making. By the end of the first half, we are calling for 15% in the midterm, which will mean 2.5% in one year. About 3%, JPY 4 billion-JPY 5 billion in impact is gradually being seen. As for businesses related equities, more than JPY 100 billion for this fiscal year is to be sold, as we have been saying.
There are a lot of different thinking on the part of the issuers, but we are being persistent in trying to deliver this, of achieving more than JPY 100 billion, and we continue along the same path during the midterm plan, of course. It is a question of to what extent we are able to achieve within the midterm plan, and we will continue to take this approach. Also for the profitability improvement in fire, looking at the past six months, we have made progress for corporate fire as well. Efficiency and growth for domestic P&C, we need to pave the way. May I ask Harashima to talk about international business?
This is Harashima speaking. I think Komiya has covered almost everything. Part of what I will be talking about may overlap with what Komiya just mentioned, but I would like to supplement briefly. As for large M&A, it is all about timing. Looking at past deals, the timing was right when we embarked on large M&As. For preparation, appetite has to be clearly defined and be active in identifying potential deals, potential opportunities. Enhancing market intelligence is something that we have been working on. Today, under the current circumstances, we are not finding large number of opportunities that fit our appetite level. The second point is that we have the three principles for M&A, including cultural fit. From the cultural fit perspective, we are unable to have face-to-face discussions, as Komiya alluded to earlier. The third point is the hurdle rate, including capital cost.
We have a very disciplined approach looking at the market today. As Komiya explained earlier, from a valuation perspective, it is very high. Therefore, anything that fits our strict and disciplined criteria is not found. If there is an opportunity and counterpart that fits our criteria, we will be aggressively seeking such an opportunity. Therefore, we are continuing to look for such opportunities. As Komiya briefly alluded to earlier, bolt-ons is something which is quite a promising option for us. Involvement of holdings will be increased, and we will revamp our effort for sourcing. This is something that we have started from this fiscal year, and we are looking forward to our initiatives bearing fruit.
Thank you very much. Handa, can you also complement for domestic P&C?
Yes. Komiya has talked about expense ratio, and also business-related equities. I would like to complement on that. On the expense ratio, our basic thinking is that top line growth should lead us to reducing expenses. We want to maintain our advantage over our peers. Over the long term, we want to bring it to less than 30% over the long term in terms of expense ratio. In terms of how we are doing so far, I think Komiya has already covered this. Today, we have a DX project in-house during the midterm plan. Fiscal year 2023, and 15% of internal business will be reduced, which will be converted to about JPY 20 billion -JPY 25 billion for the full year. In terms of our progress, we have various KPIs within the company.
In the first half of this year, 2.5% to 3% reduction has been achieved in the first half of this year alone. I think it is fair to say that we are on track. In terms of structural changes in expense ratio, if you could please turn to page 13 of the handout, which describes the direction of the company going forward. We have the insurance business, and we also have the fee business before and after claims payment. We will expand into those areas. In terms of reduction expense ratio, we had to grow top line, but as you see on page 13, by expanding the fee business and also by creating riders for our services, that would transform the expense ratio structure itself. As for business-related equities, JPY 100 billion or more to be sold every year.
If I may briefly comment on this, is that from the perspective of capital efficiency and also in terms of reducing the risk associated to business-related equities, we've been selling these equities over the years. This is something that we have always been aware of. As you see on page 13, we want to grow by addressing social issues and offer a sense of security during ordinary times. We also need to address natural disasters and also newly emerging risks. From these perspectives, the risk associated to business-related equities should be reduced so that our capital can be used in order to realize our purposes. That is the kind of mindset that we have in us making effort to reduce business-related equities.
Hirose will also make a comment, who is the President of TMNF.
Yes, this is Hirose speaking. On expense ratio, this year we had Olympic and Paralympic Games, and costs associated to that, and also some system investments were also involved. Also the rebuilding of the main building, the head office. Going forward, we will strive to improve the expense ratio significantly going forward. We are making steady progress as was mentioned earlier in the Mirai Project, which is a project using digital. I think we've shared this idea using our IR materials, and we are making steady progress towards implementation. For example, in terms of utilizing AI is being used across many fronts. Not just recommending auto insurance, but also the super insurance, which is a unique insurance combining both life and non-life. AI is coming up with recommendations and coverage, and unit cost price has also improved as a result of that.
As we've been saying, detecting of fraudulent claims, and also quotations for minor accidents. When there are exchanges with customers, it will be done in text form, making it easier. Actually the AI would come up with a summary report of those exchanges. AI is utilized in a very effective manner. Our in-house staff has gone through a learning process and developed proprietary AI, and therefore we are able to train our own people. Those are some examples in which we are implementing AI and DX, and we are feeling that it is delivering fruit. There are some that are currently being developed. The agency system has been released in October, which is also bearing fruit. We are expecting that we will be able to see more coming up from the years beyond.
For the group as a whole, we will seek to improve efficiency going forward, and we will play our role in resolving social challenges, domestic, international, digital, or new businesses. We will make sure to catch any new opportunities that we may have.
Your overall performance is quite good, but for the domestic P&C business, we hope you can try to improve the domestic P&C business at an earlier stage.
Next is Ms. Tsujino, please.
I have two questions. My first question, from the beginning of the year, related to shareholder return, you have been going through trials and errors. I would like to thank you for your efforts. From next fiscal year, you were saying that you are going to drop the JPY 100 billion budget. Then from next fiscal year, what is going to happen? That is my question. From what I am observing, ESR is 135%, and it is about to reach 140%. For this fiscal year, as of September, you still had some budgets available, so I do believe you are going to do some buybacks. For adjusted profit, when you account for that, it might not reach 140% as of end of March, but it will continue to increase, I think, in a good way, which means that next fiscal year, maybe ESR is going to exceed 140%.
In that case, how are you going to handle it, and how are you going to communicate that, I think is the next steps. The next phase you will be entering. That is my view. If that is the case, are you going to give it back right away once you hit 140%? I think you are going to leave it alone for a while, which is what you said back at the beginning of the year. How are you going to communicate that to us will be key. It depends on the scale of adjusted profit as well as the scale of dividends. The sizes will probably be at least the minimum of what we have been seeing from the past. You can imagine all of these options. Regarding your future communication, I think you could try to communicate to us little by little, hopefully.
The other question may be a smaller topic, but for cyber insurance, it is growing this year all around the world, and you are growing your cyber insurance business too. Overall, it accounts for a small portion of your overall business. It might be single companies that are being targeted by cyber attacks right now. But it may turn out to be somewhat like a natural catastrophe in the future. How are you managing the risk around cyber attacks?
Thank you for your questions. The CFO, Mr. Yuasa, will explain hereafter. But for capital level adjustment or for stock shareholder returns. First of all, for profits, we will be mindful about payout ratios of 50% as we decide on our policies. For capital level adjustment, our overarching way of thinking has not changed. It's not going to be automatic based off ESR levels, but it is an important KPI, of course. We will think about other elements and factors as well, such as the M&A pipeline, as well as the investment pipeline, as well as the conditions in the market, and so forth. However, we would like to do it in a flexible manner. Therefore, we are going to be making growth investments in Japan overseas, as well as new businesses and digital. We will proceed on our investments.
If we don't come across good opportunities, we talked about the purpose as well as the means. If there are no opportunities available, if we are able to accumulate ESR, we are not going to leave it alone forever. Like I mentioned in the presentation, therefore, as you know, we don't adopt the total payout ratio or total shareholder return. Depending on whether there are investment opportunities available or not, total shareholder return is a consequence of our activities. When you think about all the things I've just mentioned, we don't have the correct answer yet, but we are right in the middle of thinking about how we should communicate. Mr. Yuasa, our CFO, will follow up on my remarks.
As Mr. Komiya said, he pretty much explained what I was about to explain, but if ESR were to exceed 140%, we will either make business investments or return it back, and we would like to do it in a disciplined manner as we have already communicated. For ESR, apart from the M&A pipeline, we will look at the business environment as well as the economic environment, especially in the equities market, as well as where credit spreads are, because we were impacted by those factors too. By looking at this, overall, if ESR exceeds 140%, we would like to act in a flexible manner and disciplined manner. For the details, this is something we would like to flesh out going forward. That's all from me. In any case, we would like to be flexible in our actions.
Furthermore, for cybersecurity, as you rightly pointed out, it is a risk that you cannot run away from, so we would like to ensure that we handle them well, whether it be in Japan. It is growing by double digit. There are risks associated with cyber insurance, and the question around whether we have an entire grasp on it is a question mark. Also when it comes to data integrity, that is also a challenge we're facing. If it spreads in a concentrated manner all across the world, that's another thing we need to think about. In London, we do have a center of excellence around cyber, and we do align together with people that are in charge of cyber around the world, and we conduct cyber summits too.
We are not going to run away from the risks, but we are going to be cautious in engaging in this business. Mr. Kawaguchi, who is in charge of our product, will also make some comments.
This is Kawaguchi speaking. As you pointed out, when it comes to cyber risks, concentration risk is the way we see it. It does require risk management, like we need to manage the risks of natural catastrophes. On a group like this is, we do manage our underwriting risk. Specifically in London, we have a cyber center of excellence, which is a team. Daljitt Barn, who is an expert on this topic, has been headhunted, and his team is engaged in the quantification of risk. At each group company, we underwrite cybersecurity. So all the data is aggregated together, and there are two types of risk. One is risk as cyber insurance, which is cyber risk, meaning the area where we pay claims payments, and the other is called silent cyber for BI insurance, for profit guarantee that might occur due to cyber-related incidents.
We are collecting information from the market so that the risk amount in the group is quantified. On top of that, we look at how much we should retain, as well as how much we should cede. By doing so, we are able to manage the total amount of risk amount within the group. We continue to look at the appropriate level of risk amount to ensure that is under control as well as to hedge.
Watanabe from Daiwa Securities.
I have two questions. First question is on page 16 of the handout about the use of capital. On a single year basis, I think there are some fluctuations, but over a medium and long term, if you could share with us the breakdown image. I guess half will be paid for ordinary dividend, about buyback and business investment. If you could share with us what image you have. Second is on M&A. You have been talking about high valuation, but the M&A market itself is quite active. Your short list in case of selling your business, when you are in the position of selling your business, what kind of inquiries are you getting, or is there a risk that you can carve out? If there is anything that you could comment on that.
Thank you very much for your questions. With regards to capital utilization, the breakdown into business investment, capital level adjustment, and ordinary dividend. When there is an objective, we will make a few business investments, but if there are no opportunities, we will return to shareholders. If you look at it over a long period of time, like five years or 10 years, we can say something in retrospect. But this two to one has changed to one to two, but this is sort of a consequence of what we have been doing. In terms of use of capital, is there a yardstick? Is there a guideline that we have? I do not have that, personally speaking, but I would like to ask our CFO to complement.
Yes. Thank you. M&A is a means to an end. It is not our goal. We think that it is necessary for our growth, but we do not want to use our money when there is no good opportunity. I think it is a matter of consequence for us. In terms of our appetite, we want to invest in a good opportunity so that we can grow through M&A. It would depend on the business environment, depending on when it comes to how much we can invest in that area. We do not have any guideline as to what the percentage is that we will be spending in terms of business investment. We want to resolve social issues across the group. We are an insurance company, and we have businesses in and outside of Japan, and we want to also be exploring new businesses and new products.
We want to continue to grow, which is quite critical, which is the most important and top priority for the company. With regards to capital use, we want to pursue it in a way that it is not inefficient. I am terribly sorry that we are not able to respond to you in any other way, but that is our stance. As for a strategic option, I think it is like an in-out strategy, and your question was about out strategy. We will be taking forward-looking approach and with discipline. TMR, I guess, is what you have in mind that we did three years ago. At this point in time, talking about any particular company is I think very difficult.
I wonder if Harashima could supplement on that.
Yes. Thank you very much. If you could please turn to page 23. It talks about a disciplined M&A approach, and this is in and out. What is common across our in and out approach is that we will take a disciplined approach, not just in, but also out strategy. We will be revising our portfolio in a disciplined manner. Always, we are considering any candidates for a possible divestiture, but I would like to refrain from making any specific comments on any specific companies. With high valuation, you might think that this is a great opportunity. Of course, that is taken into account when we consider our out strategy. We are always seeking for opportunities. My apologies that I will not be able to share with you any specific details. Within the group, there are areas that is proceeding well, and there are also other areas with challenges.
Identifying the root cause of those challenges and being able to address those challenges, we will be able to recover. For example, Kiln is a great example. It took a little less than three years to recover, but from the perspective of increasing shareholder value, if there is anything that is performing poorly and how the business will adapt to environmental changes, each group companies are doing what they can, and sustainable growth and contributing to shareholder return. If there is areas that are poor on that front, we will consider that as possibilities for a divestment, but I will not be able to share with you in more detail than that.
Mr. Sato from Mizuho Securities.
This is Sato from Mizuho Securities. I have two questions. First is about capital level adjustments. You are saying that you do not have the final decision yet, but some ideas will be welcome. Confident people decided on one solution, but it was not accepted that well. It was not well-received by the investors, and you got a lot of feedback from people like ourselves, the analysts. You decided on revising it, but what was a critical piece of feedback that you got that led to this decision to revise it? What was the motivation? If you give us some more specific ideas, we will be able to kind of guess what your next revised policy is going to look like. Can you share with us some of the feedback you got?
Secondly, I have a question on page 13 where you talk about other parts of the value chain other than underwriting upstream and downstream. For other insurance group companies, roughly speaking, they are pretty much looking to develop their businesses into the same kind of direction. In the case of Sompo, that would be nursing care as well as Palantir related efforts. The other day, risk solution platformer, MS&AD, talked about that. RiskTech was one of the pieces of their business that they wanted to set as core. From that perspective, in your organizational capabilities, in which area do you think you can exert your uniqueness, and which area do you think you could strive to achieve high market share?
Thank you. After I speak a little, because it is capital level adjustment related, Mr. Yuasa will take your question. For the latter half of your question, it is talking about upstream and downstream or before and after, and business expansion opportunities. Because it is also associated with digital strategies, Mr. Namatame will take that question. For new businesses, our CSO and the CSUO, Mr. Moriwaki, will add some comments. First of all, for this fiscal year, the JPY 100 billion plus or minus alpha, we wanted to be able to communicate our goal. It did not communicate well, so that is why we would like to drop it. For the kind of feedback we got, they were saying it is hard to understand. They were also saying that it makes you look a little bit passive when it comes to returns.
Actually, we got feedback that was contrasting to what our true intent was. We thought by communicating it would be easier to understand, and we can commit to doing it instead of trying to have the market guess whether we were going to do it or not. It did not communicate well. JPY 100 billion plus or minus alpha. It gave the image that we were going to definitely be JPY 100 billion or less. The definition of alpha was vague as well. How much was that going to be? We did have a lot of extensive internal discussions, and we did talk with our analysts as well as our investors around this topic. That was my impression. I would like to hand over to Mr. Yuasa.
Yes. It is exactly as Mr. Komiya explained. We wanted to ensure that transparency was high initially. We wanted to control the volatility of our stock prices, but it became volatile in May. We thought we did enhance our transparency, but people gave us the feedback that it was hard to understand. Those were the two main points that drove us to change this policy. Our intent and the reception by the market was somewhat different. That is all from me.
For the second question, I think I may have touched upon this earlier, but for disaster prevention and mitigation and businesses related to that, as well as businesses related to healthcare products and services associated with that, as well as renewable energy, for the penetration of it, we may be interested in business areas apart from insurance and also cyber. That was mentioned in the earlier question, including our experiences. Sometimes cyber insurance does not come in convenient if you just take out the policy. It is a matter of what happens and what do you do when the actual incident occurs. We do have experience and global exposure in this arena. Based off our experiences as well as the capabilities need to be high internally, and if you bring all of them together, we believe we will be able to exert our capabilities into peripheral areas.
It is a matter of our talent expertise within the group and the extensive network we have, as well as collaboration possibilities. We have the power to develop our business globally, which I believe is one of our strengths. When we want to do something new, you need to have a multiplier effect. Because of the trust we receive from the market, as well as the communication capabilities we have, as well as our networking, as well as the high level of expertise we have, those would be the strengths we have. Specifically, Mr. Namatame, our CDO, will explain. Your mic is not on.
This is Namatame speaking. Thank you very much for your question. As you have pointed out, with insurance business at the core, we would like to extend our businesses out into pre and post areas and to add more value that we provide to our customers. We hope that could be part of our core of our business growth in the future. Other companies in the industry are exerting their strengths in the areas that they are targeting. I do understand that they are making hard efforts there. For our company, focused areas would be on page 13, as you have seen, which will give six areas. We believe it has a future potential. For those areas, market sizes have been estimated based off a certain degree of hypothesis. This is where we are currently.
With regards to how the markets are going to develop, we would like to continue to deepen our understanding to develop our business as well as develop our services. Our strength as well as our aims and the direction of our aims, Mr. Komiya talked about this. For example, in the area of disaster prevention and mitigation, natural catastrophes are becoming more severe, and the impact is becoming a social issue increasingly. With that as a backdrop, through our insurance business, we could offer values by offering assurance, but in the area prior to that, we will be able to offer services related to the prevention and so forth. We believe the need for that is going to become higher in an accelerated manner. Also reconstruction efforts, which is post-incident, we do believe we have some strength to add further value.
We would like to create an overall ecosystem and constructing our services around it. That is our aim. However, in order to develop that business, we would not be able to do it alone with our capabilities, because we do have some personnel data experience that needs to be complemented. For this, we would like to look out to do co-creation with various business partners to commercialize these businesses. This week, we made an announcement that with 13 companies, we have set up a consortium related to disaster prevention and mitigation called CORE. From an end-to-end basis, we will be able to develop a business and offer value added under the mentality of co-creation. This business model in the future may be able to help opportunities overseas in preventing and mitigating natural disasters.
For these six businesses, we will view them as CORE, and of course, we might come up with other areas too. For each business domain, we would like to clarify the challenges we face and ensure that we are able to form a good business model around it so that we can realize higher added value. That is all for me.
On November 18th, we have declared that we are going to become an insurance tech company with EDSP. In order to reduce the number of accidents, we would like to thoroughly consider how we should handle insurance. We are going to update our business model in that regard. That might be another example. For new businesses, Mr. Moriwaki, our CSO, you might be able to comment on some things and may not be able to comment on some things, but where are we?
Yes. Taking this opportunity, I would like to explain the approach we are adopting. For new businesses, other companies are talking about it, and we wonder how. We also believe that we need to clarify where we stand when it comes to new businesses, too. Just to simply give you an understanding, we have three approaches. One is insurance-associated services that are commercialized. Our primary aim is to expand the insurance business. This service or this will be covered by TMNL and TMNF, because it is insurance-associated services that can be turned into a fee business or commercialized or monetized in another way. The second approach will be insurance derived, meaning it does have a connection with insurance business, but it is peripheral services, basically, that can be monetized as well.
As mentioned on page 13, insurance will be in the middle, and services that are connected and have derived from there can be monetized. As Mr. Namatame explained, those are the areas we would like to address. It is R&D related aspects are entailed in. We will need to incubate new businesses too. It will happen over a medium to long-term range. Thirdly, our approach will be what I am working on right now as we speak, which are areas that are not necessarily linked with insurance. Of course, it can be linked, but it is more about exerting our strengths to see if there are any areas that we can monetize. We do not indicate it in the presentation, but when we had the briefing the last time, Mr. Komiya verbally spoke to this topic, I recall.
It might be the area of asset management or healthcare, which is somewhat different from the healthcare that we show here, as well as renewable energies. Those are some other areas that we are looking into. Why are we looking into these areas? It is because we would like to leverage our competitive advantage in setting up new businesses. It might be the formula of winning. Basically, we do not want to go into areas where we do not have an advantage or else we do not have chances of winning. We would like to look at our advantages, to see the areas that we can monetize. For example, in the area of healthcare, it might be medical total health consulting. In our group companies, we have Tokio Marine Medical Service as a subsidiary.
In the area of renewable energy, Tokio Marine Asset Management has a solar fund and has been engaged in this area from long ago and already has track records around this area. Also, for renewable energy risk underwriting, GCube has strength in this area. We could leverage their expertise in building a renewable energy related business model. In the area of asset management, on the other hand, for example, Tokio Marine Asset Management does alternative management and has a really good track record even in Japan. Also Delphi. When it comes to credit risk management, they have good capabilities. It is a matter of how we can connect that to new business opportunities. In this context, we are currently looking into new business opportunities. We are exploring. For TMNL, profits are around JPY 50 billion.
Until they are able to generate profits worth about JPY 50 billion, it will take until 2025. When you think about new businesses, it may be hard to create a new business that can contribute to profit in a substantial manner right away. But during this medium-term plan, around the question around are we going to be able to set up a new business that can be one of the pillars? Of course, we will strive to do so, but I would like to also say, it will probably take a longer time. Because earnings is relatively stable now, I do believe now is the time when we should make advanced investments into new business opportunities, and hopefully that should start to contribute to profits by a certain degree in the next 5-10 years. That is our thinking. Thank you.
I think we were able to share where we stand right now. Thank you.
Majima.
Tokai Tokyo, I am Majima. With regards to the timeline of starting new businesses and talent for DX, those are my two questions. You said that it will take five or 10 years in order for new businesses to be launched. That means that three midterm plans ahead, that is the kind of timeframe I think that you have in mind. [DX tech] for MS and Palantir from Sompo or Foundry software. From what I heard, under the current midterm plan, these new businesses are not going to take off, but in the next or the next mid-term plan, Foundry of [mystic] or [DX tech] from MS, [fintech], RiskTech, it may take off. So when you say 5 - 10 years for your company, that sounds like it is a bit slow, delayed compared to other companies.
In your company, you will need to be able to generate a lot of profit in other businesses. Otherwise, it will not stand out because your profit level is so high. Whereas the situation is a bit different in other peers. If the stock market, if the capital market assesses your company in that way, it will not be good news for your company. If it is going to take five or 10 years for your new businesses to take off, do you have to bear with other companies' new businesses that are taking root? My second question is about the talent in DX. People with STEM capabilities as college graduates, I guess, will be your approach. How about mid-careers? I guess it will be difficult to hire such mid-careers with a background in STEM.
You have a very strong support in terms of college graduates, but how do you intend to hire mid-careers? Those are my two questions. Thank you very much.
For new businesses, the earlier, the better in terms of taking off. The last part that Moriwaki talked about, which is purely new businesses, domestic life, domestic non-life, and international non-life, we want to build the fourth pillar. That is what Moriwaki was talking about. So timeline and profitability and the size of value that the business could create. It might be difficult to say about this today. We might be able to include it in the next mid-term plan. I do not think this is a place for us to share with you that kind of a determination. Over the mid-term, for us to come up with a fourth pillar that would support our business, that is what Moriwaki was talking about in the last part of this.
When it comes to new businesses or when it comes to evolution of our businesses, like introducing fee business, for example, I think we can bring the timeline considerably forward. Maybe Moriwaki, do you have anything to add to that?
Yes, thank you. When you say launch or take off, I think it is a question of how you define that, what you mean by that. Commercialization, starting of commercialization, it could start small to grow big. If we are going to commercialize in the next mid-term plan, that will be too late, and this is not something that I can commit to. But in terms of creating opportunities for commercialization, that I think is something that we should be able to start under the current mid-term plan. Whether that business will grow big, that could be under the next term plan or next mid-term plan or in five or 10 years' time. That kind of timeframe, I think is necessary. I guess the next part is related to the second part of your question, which is what I feel when I am considering commercialization of new businesses.
Trying to commercialize and coming up with plans for commercialization using the talent that we have, that is quite challenging for insurance business because we have good track record, and we have the talents who have delivered so far. But when it comes to new business, which is different from the track record, we will need to be tapping into outside capabilities, including companies outside of Japan, international GCs, group companies. We need to take these steps, otherwise commercialization will be very difficult. So outside talent, we need to look attractive to outside talent. That is something that I am strongly feeling today.
Mr. Namatame, maybe you could comment on talent and training of our talent. Data scientists with expertise in insurance, that has been the focus so far, but in relation to that, if there is anything about the product development, in the peripheral of product development, timeline, rollout, and size, if there is anything you could add from that perspective, please.
Thank you very much for your questions. This is Namatame speaking. I also want to make a brief comment on the first part of your question on new business. That is not something that we can commit to in terms of timeline. I think it would require a considerable amount of time in order to make sure that a new business is rolling out successfully. But in terms of acceleration of new businesses, so at TMNF, it is important for new businesses to take root, but our existing business is going to create a lot of leverage. For example, by conducting POCs outside of Japan, there are initiatives that can accelerate. For example, drive recorder POC has been conducted in Hawaii ahead of others.
Myself, in September and October, I went to the United States for two weeks and looked at the group company's initiatives myself, and I also spoke with the CEOs locally and found areas that are overlapping. I was able to confirm that during this visit. A lot of the assets that we have in Japan could be rolled out in other parts of the world, and initiatives that are conducted amongst our global companies could be implemented in Japan. Global digital synergy that we have been talking about for the past two years has been seeing some developments. So we believe that this is an advantage for us. The second point on DX talent.
I myself, I was hired as a mid-career, and I am not exactly sure if people could refer to me as a DX talent, but that is an area that we want to work very hard on. Dozens of mid-careers have entered the company, and who are quite active on the digital front. In terms of job description, they are not solely associated with insurance, data scientists, engineers, marketers, designers, business planners, consultants. These are professionals in these fields. Once they enter the company, once they come on board, they are able to work across different business areas, planning, designing, execution, and so forth. Programming and designing or marketing are areas in which they are quite active. More recently, business investment, including venture capital. We have invested in more than 30 companies or more than 50 companies, including venture companies.
We have invested in these businesses, which could offer an advantage going forward, and it would help us strengthen our capabilities, and also starting of CVCs. Professionals in these areas are also beginning to come on board. In that sense, we have individuals with diverse experiences and background, which should help us to accelerate our initiatives. Recently, EDSP new product, &e, has been launched, as Mr. Komiya talked about earlier. It is not only our staff, but also a major business company chief digital officer, a former digital officer, has joined the company, and we have been accelerating the process. We are also supporting people have side jobs. That is also beginning to bear fruit. The mid-career hires that you have asked in your question, we will be quite active on that front, and I hope that answers your question.
We are drawing close to the end of today's briefing. From Citigroup Securities, Mr. Niwa, you will be the last person to ask a question.
I am sorry, I am asking over the phone, but can you hear me?
Yes, we can.
On page eight, I would like you to share with us two points. One is for P&C. When a business is skewed towards P&C because the risk-return is good and it is an area of strength, and you are evolving the business as well. I do not think there is any problems regarding strategy. But when you look at the U.S. players, they are diverse funding through life and asset management. Centered around P&C, how about strengthening your business strategy? If there were to be a risk there, what should we be mindful about? Secondly, profits are high, and from a global peers point of view, I was wondering if they view you as a top-tier competitor. I am sure Mr. Komiya has opportunity of speaking with top-level global peers, but I was wondering that when it comes to global peers, do they view you as global peers as well?
Or if you think you are lacking something, what would that be? So maybe a question from a different angle, but I hope you can answer them.
Thank you for your question. I will speak a little, and then it is international business focus, so Mr. Harashima, or it may be investor relations question, and we will be going to Europe as well as the U.S., so Mr. Yuasa might be following up. First of all, in the international business, are not we skewed towards U.S. P&C? That is one question, and it might be related to the second question, but from our peers in Europe as well as in U.S., we are seen as a specialty business franchise and that we are strong. I think that is how our global peers view us.
On the other hand, for risk diversification in the Europe and U.S. markets and for other markets, which is a different topic, for example, A&H in other markets, of course, each of the group companies or Mr. Harashima or Chris Williams have strategies respectively. For the challenges we face, when you look at global peers, in order to become at par with them, we need to increase our ROE. That is how I feel. When it comes to soundness or capital efficiency, including returns and profitability and growth prospects, these are very important aspects. Out of which, ROE or capital efficiency is important as well. We have been emphasizing that in our explanations today, but I do believe those would be our challenges. For the business, Mr. Harashima, can you speak to the question?
Mr. Niwa, thank you for your question. From global peers, is our group viewed as a global peer? First of all, in the U.S., in the commercial area, we are in the top 10. To that end, we do have a high presence. At Lloyd's, or former Tokio Marine Kiln, we are a top player, and I think we are recognized that way. From an M&A standpoint, as mentioned in the presentation, we have been investing quite a lot into M&As, and we do have a track record too. In the M&A arena, from global peers, Tokio Marine is viewed as a company that is proactive in M&As and has a good track record. I think that is how we are recognized. Also in Asia, from the size of our business, especially in Southeast Asia, we are in the top class.
I have never asked the global peers how they view us, so it is hard to answer that question directly. From objective facts, for example, in Japan, we are a top player, and also in the global market, we do recognize that we are developing our business in a large scale.
Mr. Yuasa, how about you?
For myself, for the overall portfolio and the skew towards P&C, which is the point you indicated, to your point, we would like to add on fee-based businesses, and that is why we are eager to develop new businesses going forward. On the other hand, for the international business and life insurance, for example, when you think about the current circumstances, that might be hard to do. Therefore, we would like to leverage our expertise rather. And that's where we would like to focus on, such as asset management capabilities and so forth. But it's the results of what we've been doing from the past. The current portfolio is not that bad from our view. In the past, it was all about growing and catching up with our global peers. But if we once exceed JPY 500 billion, I think that will be a big development for us.
Then after, it's going to be more about better efficiency, and we will feel the need to raise ROE even further. As you pointed out, capital allocation to the domestic business is quite high, so making that part efficient is another need we are feeling. I guess you can identify it as one of the risks we face.
Thank you very much.
In which case, as it is time, I would like to conclude the IR briefing for the second half fiscal year 2021. Komiya, if you could give closing remarks.
I want to thank everyone for today. Received a lot of feedback in the form of questions and received a lot of insights. I appreciate that very much. We will continue to regularly engage in dialogue with you so that we can learn from your feedbacks. We are very grateful for that. Your continued support and understanding for our business is greatly appreciated. Be able to report to you on our results for the full year. We want to leave an impression that we are firmly on a path for growth. That is something that we want to demonstrate to you as soon as possible, and we're working on it.
I am looking forward to be able to report back to you on such positive reports, and we're accelerating our initiatives. Once again, I want to thank you very much for joining us today.
With this, we will conclude today's session. Thank you very much for joining us today.