Hello, everyone. My name is Komiya. I thank you very much for attending Tokio Marine Group's business strategy briefing today. We would also like to express our gratitude for your ongoing support to Tokyo Marine Group. The details of our financial results are, as I discussed with you during earnings conference call last week on May 20. Specifically, our adjusted net income for fiscal '24 stands at JPY 1.2 trillion, helped by gains from the sales of business-related equities. And we have consistently revised our projections upwards at the time of our earnings announcement. For fiscal '25, we are guiding for adjusted net income to exceed JPY 1 trillion. We are indeed standing in a place clearly different from where we were before. Yet we still consider us to be in the middle of our growth journey.
While the current global environment is challenging, with various issues arising, it is indeed not an easy environment to be doing business in. However, we will continue to demonstrate resilience. And even in such circumstances, we will accelerate our transformational efforts to achieve further growth. To this end, we will also ensure a smooth transition to the next generation. We have incorporated this determination into the cover of this presentation material.
Today, I would like to give the new CEO, Mr. Koike, a few words at the end.
Let's move on to the contents. Please turn on to Page 2 of the material. As indicated in the table of contents, I will first provide a 30-minute overview of Tokio Marine's management and business operations. Following that, we will open the floor for questions and comments from the audience as time permit. We hope this briefing session will serve as an opportunity for you to gain a deeper conviction over ongoing expansion of our corporate value.
Please turn to Page 3. Here are 3 key messages I would like to share with you today. First is the upper box. Our EPS growth has achieved a CAGR of 19.9% over the past 5 years, placing us at the top tier in the world. Additionally, our DPS growth is also top tier in line with strong EPS growth. For fiscal '25, we plan to set the DPS at JPY 210, which will be 22% increase compared to fiscal '24, marking 14 consecutive years of dividend increase. Furthermore, we will adopt IFRS starting from fiscal '26. There will be no change to the policy of continuously raising DPS growth with both angle of growth and level of confidence at high levels, backed by strong EPS growth even after the introduction of IFRS.
Next, in the middle box, the middle section is raise ROE to the level of global peers. Our current ROE stands at 12.6% and at 19.8%, including gains from the sales of business-related equities. We are among the top in Japan's financial sector. However, we recognize that there is still a gap between us and global peers. In addition to continuing to achieve world-class EPS growth, we will be releasing capital held in business-related equities and reinvesting it into the core business. We will be doing the low capital-intensive solutions business to further narrow the gap with our peers. We are determined to do this, and we believe this is a unique growth opportunity that we have this capital gains from equity sales and starting this solutions business that will set us apart from global peers.
Regarding share buyback, as previously announced, taking into account the positive impact of EPS growth, M&A pipeline and other factors, we will execute JPY 220 billion this year. As a first step, we have already voted to spend JPY 110 billion initially.
The final key message is strengthening group governance. We had established group Audit Committee in April last year and have been implementing various initiatives that leverages external perspectives. Additionally, Tokio Marine and digital fire following the receipt of business improvement order in December 2 years ago, we have been advancing reforms to break away from industry rooted practices such as holding of shares, core business corporations, secondment of employees to agents under the new initiative.
Quantitative results are already emerging, positively contributing to our corporate value. We will continue to strive for further enhancement of corporate value by maintaining a balance between profit growth and governance at a high level. That much are the key messages. We will now move on to details. Please refer to Pages 4 and 5. Page 4 shows the progress of EPS growth under the current midterm plan and Page 5 shows the track record for the past 5 years, including comparison with peers. Our EPS growth is world top class in terms of both target and progress. And as shown on Page 5, you can see that this is driven by our robust organic growth.
Please turn to Page 6. Our goal is to grow EPS at a high angle while managing volatility. The horizontal axis of this slide shows the growth rate of EPS and the vertical axis shows its volatility. The upper right quadrant represents the ideal state. As shown in the track record, we have high chance of replicating this in the future. And as we put more focus on solutions business centered on fee-based services in the future, we believe that our position will shift further towards the upper right, enabling further reduction in volatility.
From here, we will delve deeper into the international business and Japan P&C business, which form the backbone of achieving world-class EPS growth. Please turn to Page 7. First, let's evaluate the progress of the current medium-term plan for the international business. The overall progress rate is low due to a conservative upward revision of expected capital loss related to CRE loans. But insurance underwriting is performing well on the right in brown, it's growing by 10.2% in profit with prior year loss reserves adjusted on an apple-to-apple basis.
Now please refer to Page 8 for the organic growth potential of North American business, which accounts for approximately 80% of international business profit. As shown on the left side of the slide, our North American business continues to achieve high profit growth through the 2 pillars of insurance underwriting in orange and asset management in green. In insurance underwriting, we have 2 lines of business, Specialty P&C and employee benefits. As shown in the upper right, we have a top-tier presence in the U.S. We are completely bottom line focused, and our combined ratio is, as you can see on the bottom of the bar chart, it is currently slightly over 90%. In asset management, shown on the lower right of the slide, we have consistently achieved returns significantly exceeding the market by leveraging Delphi's strength in credit management.
For fiscal '25, we anticipate a slight decline in returns due to current market conditions and uncertainties. But we will continue to deliver performance that significantly outperforms the market. Let's take a closer look at our North American business. Please turn to Page 9. As mentioned earlier, one of the 2 lines is Specialty P&C line. As you can see on the lower right at the very bottom, it consists over 100 products, including excess workers' comp and surety, all with low-risk correlations to each other, thus enabling us to achieve insurance underwriting portfolio that is less impacted by market cycles. We have established a price leaders position and a strong sales network across all product lines, achieving profit growth outperforming the peers as shown on the left side of the slide. It's below CAGR of 14%.
Peers, as you can see, is 5%, but we are outperforming the peers in terms of profit growth. The source of that is the disciplined underwriting strategy that is bottom line focused. As you can see on the lower right, the combined ratio is slightly over 90%, and it is stable at a low level. Please turn to Page 10. For the employee benefit line, this refers to the employee welfare business line such as disability insurance offered by Delphi and medical stop loss offered by HCC. By offering highly specialized absence management service and employee benefits, as you can see on the upper right, in a bundle with the insurance policy, we are able to leverage our competitive advantage and maintain high top line growth of positive 10% growth.
Additionally, by setting rates and selecting risks based on loss costs, we have stabilized the combined ratio at around 95% despite fierce competition and have achieved steady profit growth. To steadily increase insurance underwriting profit in these 2 lines, it is essential to control the impact of inflation, and we still remain resilient. Please turn to Page 11. The slide shows the reserve ratio by inflation type for our North American business.
First, regarding inflation related to goods and services. Our North American business is centered on specialty insurance. Thus, proportion of property and auto insurance has always been low, making the business structure relatively less susceptible to the impact of inflation. Regarding social inflation in the middle, we have been closely monitoring this area and taking proactive measures for some time. Specifically, we proactively increased reserves in 2019, advanced settlements and over 90% of high limit policies that easily become the target of litigation had their limits reduced to $5 million or less. As a result, we have been taking down reserves for the past few years, attesting that the current reserve level is sufficient and appropriate.
Finally, the medical and wages category on the right, which accounts for more than half of our reserves is related to medical stop loss and excess workers' comp. We are controlling the impact through proactive rate increases and raising the self-insured retention by policyholders. Please go to Page 12. Page 12 shows the impact of L.A. wildfire that occurred in January this year. We have already strictly controlled our exposure to natural catastrophes and leveraged our risk selection expertise, meaning that we do not accept risks that do not offer commensurate return. As a result, you can see that we have been able to keep the impact on combined ratio low compared to other players.
Please turn to Page 13. This section discusses our unique strength in asset management at North American operations. First, regarding AUM, as shown in the upper right, it has grown in line with the expansion of insurance underwriting and is expected to exceed $71.1 billion. It's expected to exceed $70 billion this fiscal year in AUM. The source of this capital is sticky insurance liability, enabling us to invest without being swayed by short-term market fluctuations and allows us to execute hold till maturity investment strategy.
As a result, our track record in terms of yield shown in the bottom right demonstrates that we consistently achieve high yields relative to the market and that these yields are highly reproducible. Left of the slide shows trend in income gains, demonstrating our conviction that we can achieve steady growth also in asset management. Please turn to Page 14. Our international business is not limited to North America. Brazil is a prime example of how we can capture high growth in emerging markets and achieving strong profit growth. Our Brazilian business has gained strong support from customers and brokers. Market share of our flagship product, automobile insurance has more than doubled over the past 10 years and size has grown significantly to be in excess of JPY 300 billion with premium income. We are also continuing to reform our processes using DX and IT technologies, achieving industry-leading cost efficiency and profitability.
Please turn to Page 15. So far, we have explained our overseas organic growth strategy. Now I would like to touch on our M&A strategy. Since the acquisition of Kiln in 2008, we have continued a virtuous cycle in which one successful M&A attracts the next high-quality opportunity, resulting in ROI of over 20%, as indicated on the upper right. This significantly exceeds our cost of capital, and this also contributes in pushing up the ROE of entire business portfolio. We are always searching for opportunities. We are well prepared and have sufficient capital for acquisitions. While valuations remain high, if the market softens, then I'm sure more prime opportunities will rise. Bolt-on type of acquisitions will continue to happen, but I'm sure larger M&A opportunities will emerge not so far away in the future. That is my gut feeling.
Sales of business-related equities will generate excess capital, but we will not rush into acquisitions just because of that. Instead, we have been perseverance so far, and we will continue to adhere to the acquisition discipline outlined on the left of the slide as we have always done in the past, and we will constantly look for opportunities. Next, I will explain about Japan P&C business. Please turn to Page 16.
First is the progress of profit to current MTP in Japan P&C business. Due to the deterioration of loss ratio in the automobile insurance business, we are behind the plan. But as I have always said, we will take measures such as rate increases. So we expect to achieve the profit target of the current medium-term plan. I will give a more detailed explanation. Please turn to Page 17. As shown in the lower left of the slide, the combined ratio of the 3 companies are trending downwards, but our profitability is favorable compared to peers.
We will maintain this relatively advantageous profitability while we are aiming for double-digit percentage growth in the current midterm plan. The source of the organic growth that formed the basis for this growth are the 3 points shown on the lower right of the slide. If the traditional noninsurance competition such as holding of stocks, business cooperation and human resource support is eliminated and competition becomes a true test of insurance strength, we believe that the renew initiative will allow us to advance and accelerate profit improvement and strengthen also the foundation of growth even further. So please turn to Page 18.
First is the advantage we have in underwriting. Upper left of this slide shows the trend in loss ratio for fire insurance where the differences in underwriting capability show up clearly. As you can see, our loss ratio is approximately 10 percentage points lower than that of the peers. As promised, in the last midterm plan, we achieved a combined ratio of below 100%. And within the current midterm plan or rather within even this fiscal year, we will be able to beat the cost of capital. This strong underwriting capability stems from our global standard underwriting strategy, where domestic and international personnel with extensive expertise and experience collaborate to ensure global coordination in underwriting operations, reinsurance arrangements and product supply.
Additionally, the field level underwriting capability or the judgment skills of the frontline staff is crucial for strategic execution. Our underwriters are disciplined in their approach while leveraging the insights from overseas group companies. The lower left of the slide shows one of the initiatives under the renew project we presented last November, namely efforts to improve profitability. The approach of tiering policies according to profitability and implementing measures tailored to each tier, for example, Tier 2, Tier 3 is a method that PHLY has traditionally used, and we have adopted it at Tokio Marine & Nichido Fire. By thoroughly implementing this initiative, we aim to achieve even lower loss ratios. Going forward, we will continue to raise underwriting excellence through group integrated management.
Please turn to Page 19. Looking at the global rate cycle, while some lines are beginning to show signs of softening, Japan is moving in the opposite direction with its main lines continuing to harden. First, on the left of the slide for auto insurance, the combined ratio has risen to nearly 100% due primarily to inflation, marking the worst performance in the past decade or even longer. Despite continuous rate increases over the past 2 years, we have not caught up yet at all, and we will implement a significant rate increase in 2025 in an advanced manner. This will enable us to achieve the target combined ratio for auto insurance of below 95% level by fiscal '26 as promised.
On the right side, for fire insurance, as you know, we have implemented rate increases almost every year since I became the CEO in 2019. We have also done product revisions. As a result, the combined ratio for fiscal '24 improved to 80% range. We expect to achieve ROR of 7% or higher equivalent to cost of capital in fiscal '25. However, this is not the end of the journey. This is still insufficient when compared to company-wide ROR. So we will continue to work on this in an unwavering manner.
We are also constantly working to transform our insurance underwriting portfolio. This is Page 20. On the left-hand side, there are 5 markets in Japan with much opportunity for growth. While Japan is a leading country in addressing societal challenges, the penetration rate of specialty insurance is by no means high. As shown on the right, on Page 20, our specialty insurance has been showing top line growth every year as planned, and we believe that there are large untapped opportunities.
Going forward, we will continue to provide products by fully introducing and leveraging the knowledge of our overseas group companies, which have strengths in highly specialized insurance products and will grow Japanese style specialty insurance with low and stable combined ratios, mainly in the SME market. Please turn to Page 21. Through the implementation of renew, we will realize a customer-oriented, high-quality and independent distribution channel. As shown on the right, we have recently formulated a quality evaluation system for agents and have already started to review the agency commission system from a quality-based perspective to make it more balanced based on quality. For agents that struggle to operate independently, we are taking measures such as division of operations and are leading the industry in structural reform.
As shown on the left-hand side in the graph, our expense ratio has consistently been 2 to 3 points lower than peers. By carrying out our structural reforms of distribution from customers' perspective, both admin expenses and agency commissions will be reduced. After completion, agency commissions will be in the 18% range and expense ratio will be below 30%. We are committed to executing the reform. Let me now turn to the solution business that will drive new growth and take our company's growth to the next level. Please refer to Pages 22 and 23. Page 22, as shown in the pie chart on the slide, the world's economic losses are expanding dramatically. And I think it is fair to say that our core business, the insurance business is a growth industry in this context. Coupled with the widening protection gap, there are huge growth opportunities for the solutions business that reduces loss and risk.
Tokio Marine has been preparing for this for some time. I believe that our group's attempt to capture growth opportunities in both the insurance and solutions businesses is unique to us and rarely found amongst our global peers. Page 23 shows an example of the unique values we offer in disaster resilience, measures to be taken when the risk of flood damage caused by a typhoon occurs. This year, ID&E, which includes Nippon Koei, the #1 engineering consulting firm in Japan, joined our group. By combining their high-level engineering technology with our vast risk information and insurance payment data, we can offer highly effective recurrence prevention measures. This means that if a similar typhoon hits again, the chances of suffering the same kind of damage will be reduced or eliminated, meaning that our business and services will enable us in the society to build back better.
Please turn to Pages 24 and 25. Page 24 illustrates the world we aim to create through Build Back Better. Unfortunately, the reality is that there are not many customers and business partners who are fully prepared with disaster prevention and mitigation measures. Therefore, in the model case, we start from the point where a disaster occurs and our customer is affected. If a customer policyholder is affected by a disaster, we will pay claims. And if we use a portion of this insurance claim for disaster prevention and mitigation solutions and implement measures to build back better and improve resilience, we will be able to mitigate and prevent the next damage in addition to restoration.
If we can create such a world, our insurance underwriting portfolio will also become more resilient, and we will be able to keep the insurance premiums we receive from customers at stable and relatively low level. We will, as a group, work hard to achieve this. Let me briefly touch on the future growth potential in disaster resilience. So please turn to Page 25. Disaster prevention and mitigation is a very broad concept, but the current market size for the engineering consulting market alone is JPY 0.8 trillion.
Breakdown in the diagram on the left shows public works accounting for the majority. This is where ID&E has the largest share in Japan. And since Japan is a country prone to natural disasters, the need for engineering consulting related to disaster prevention and mitigation is expected to continue to increase. But as shown in green in the diagram in the middle, there is room for growth in private disaster prevention in particular. Total market size is expected to soon reach JPY 1.5 trillion. In order to capture this private sector's potential growth, contact with customers as well as opportunities to stimulate needs are necessary. Previously, ID&E has hardly engaged in private sector disaster prevention and mitigation. But in a sense, Tokio Marine has a great opportunity in the form of insurance claim payment. And therefore, now that ID&E has joined our group, has become an important member of our group, we will be able to capture a wide range of restoration demand. And I believe that is our role.
Please refer to Page 26. The foundation to ensure we deliver our business strategies I have discussed so far is our globally integrated group management, which is now in its 10th year. Quality of our management and business has been improving over time by placing the excellent talent acquired through M&A in the right positions across countries and regions. Important management issues, challenges are decided through discussion by gathering highly specialized talent and wisdom. This means that we have established a system that allows us to always take good risks. For example, Don Sherman, shown in the upper right corner, has extensive experience in asset management, having served as CEO of one of the largest unlisted mortgage companies in the United States and has made a significant contribution to the expansion of the group's investment income since joining the group in 2012.
Next to him, Susan Rivera has won the Insurance Women of the Year Award this year that recognized outstanding women in the insurance industry. She is making contribution on a global basis to the sophistication of underwriting, which is the foundation of our business by leveraging her extensive network of contacts. Please turn to Page 27. These results are actually having a positive impact on our business performance. As you see on the left, in the 4 areas of revenue, investment, capital and cost, we are currently generating annual synergies of $604 million. Direct premiums written through revenue synergies are approaching $1 billion. If we were to realize the $604 million in profits through an acquisition, the necessary acquisition price would be $8.8 billion. Without having to make a large-scale acquisition exceeding JPY 1 trillion, group companies are able to generate synergies at no additional cost through spontaneous discussions between one another. This is one of our unique strengths.
Please turn to Page 28. Our current ROE of 19.8% is among the best in the Japanese financial sector. But as shown in the slide, we recognize that we have not yet caught up with our global peers. In addition to continuing our world-class EPS growth, we will steadily bring our ROE closer to the level of global peers through our current business portfolio transformation, which is to say redirecting surplus capital created by selling business-related equities to the insurance business with higher ROR and expanding the solutions business with lower capital requirement. These are 2 unique drivers that global peers do not have. Let me give some color on business portfolio transformation.
Please go to Page 29. The slide shows our progress towards achieving 0 business-related equities. The amount sold in FY '24 was JPY 922 billion, well above the initial plan of JPY 600 billion. In fiscal 2025, sales of business-related equities are set at JPY 600 billion, but we are now more likely than ever to achieve our goal of reducing business-related equities to 0 by the end of FY '29 as well as our target of achieving approximately 20% of IFRS net assets by the end of fiscal '26.
Please turn to Page 30, ROE. ROE is calculated by dividing ROR and ESR and business-related equities are a major factor in raising ROE. Currently, our ROR, excluding gains on sales of business-related equities, is 17.9%, which is composed of 20.4% ROR from our main business and 6% ROR from business-related equities. In other words, it is clear that business-related equities are a drag factor for our ROR. So as I mentioned earlier, we will advance sales as much as possible and reallocate the surplus capital generated to our main business with a higher ROR. And if we are not blessed with opportunities for good M&A or risk taking, we will buy back our own shares. This is the market-based governance, which is also our true value, and we will raise our overall ROE through disciplined capital management.
Next is on dividend. Please turn to Page 31. Once again, the basis of our shareholder return is dividends, and we will continue to increase DPS in line with profit growth. As our profits for fiscal '24, JPY 1.2 trillion have exceeded our forecast, we will increase dividends by JPY 10 compared to the figure announced in November last year. As our profit target for fiscal '25 will also exceed JPY 1 trillion, the 5-year average of adjusted net income, which is our source of dividend will also increase. Taking this into account, we have forecasted a DPS of JPY 210 for fiscal '25, an increase of JPY 38 and a DPS growth of 22%. This will be the 14th consecutive year of dividend increase.
As you all know, we will introduce IFRS and ICS from fiscal '26 and will review our KPIs accordingly. We are currently considering this, including studying European peers who have already produced -- introduced the standards and plan to provide an update in November of this year. Regardless of the circumstances, our intention to achieve world-class EPS growth and consistent DPS growth remains unchanged. Next, please turn to Page 32 for information on share buyback. Our current ESR is at a satisfactory level of 149%. In light of this, we have decided to execute share buyback for fiscal 2025 and at level that will boost EPS growth by 2%, taking into consideration the M&A pipeline, business environment and other factors. The current plan for FY '25 share buyback is JPY 220 billion for the full year. And as a first step, JPY 110 billion share buyback has been approved.
Please turn to Page 33. Our efforts to strengthen governance in light of the series of incidents are progressing steadily. The slide at the top half shows the activities of the Group Audit Committee, which was established in April last year. By making full use of external perspectives, we will strengthen governance, increase corporate value and ensure we realize high-quality management. That is all for me. We will continue to seek a healthy balance between growth and governance and manage our business in a way that directly links our business purpose and strategy with the resulting profits and contribution to stakeholders. I look forward to your continued support. Thank you very much for your kind attention.
