FP Partner Inc. Q3 FY2025 earnings call

• Regulator Response and Organizational Transformation

  • Received a business improvement order from the Kanto Local Finance Bureau in August 2025 citing insufficient management and sales compliance frameworks, and submitted a formal improvement plan in October 2025 with progress reports required every 6 months. The Life Insurance Association of Japan also terminated the company's business quality certification, with management targeting early re-certification.
  • Launched the "NEXT! Declaration" to commit to rebuilding trust, reforming organizational structure, strengthening compliance, and focusing on customer-centric operations; core priorities include establishing sales management aligned with the company's business model, strengthening governance, and improving information disclosure credibility.

• Key Operational KPIs

  • Q3 company-led customer acquisition hit 28,960 cases, down 11,020 year-over-year due to lower volume from major partner companies, but high-margin in-house acquisition exceeded year-ago levels, and recovery has been seen after the improvement plan submission.
  • Total new policies through Q3 were 169,757, down 17,770 year-over-year; Q3 new customers hit 35,632, bringing cumulative new customers to 107,386, down 6.5% year-over-year.
  • Q3 total sales staff stood at 2,430, down 92 quarter-over-quarter, driven by departures due to negative press, performance issues, and uncertainty, plus delayed new hires. Departure volumes have fallen after the improvement plan announcement, and the Prestige M&A will add 100 sales staff.
  • The company currently operates 189 locations nationwide, with long-term targets of 200 then 300 locations to expand access to financial planning services.

• Strategic Growth Initiatives

  • Contract transfer business: Targeted 100,000 transferred policies this fiscal year, and has already reached 942.435 million yen in annualized new premium from new policies alone through Q3, nearing the full-year target of 1 billion yen. The Prestige acquisition adds 128,000 policies, marking a major milestone for this growing business line.
  • Money Doctor Premier business: Currently operates 36 locations, targeting 50 locations and 230 staff by the 2026 November fiscal year, with a full-year new policy target of 2.5 billion yen.
  • Capital and shareholder strategy: Maintained the full-year annual dividend at 94 yen per share to continue progressive dividend policy, and retained the existing shareholder preference program of 3,000 yen QUO cards for interim and year-end periods. The company targets maintaining ROE above the 12.49% cost of equity, will pursue growth investment in contract transfers, DX, and human capital, and introduced stock compensation and employee stock ownership to align management and staff incentives with shareholder value.
  • Listing compliance: As of May 2025, the circulating share ratio was 35.36%, and September stock option grants are expected to improve this metric to meet Tokyo Stock Exchange listing maintenance requirements.

The company's main business segments are life insurance brokerage, non-life insurance brokerage, IFA investment business, and new financial literacy education. For the cumulative first three quarters of 2025:

• Total revenue: 24.358 billion yen, down 2.624 billion yen year-over-year; operating profit: 2.228 billion yen, down 2.209 billion yen year-over-year; net profit: 1.528 billion yen, down 1.598 billion yen year-over-year.
• Life insurance: Handled 40,136 level-payment product sales in Q3, down 13.5% year-over-year, but the share of higher-margin protection-focused products increased. Stock-type recurring commission revenue reached 5.355 billion yen in the full 2024 November fiscal year. Total in-force policies reached 1,943,259, up 16.1% year-over-year, with growth driven by portfolio transfers and M&A.
• Non-life insurance: 47,221 customer policies were transferred in the 2024 November fiscal year, and the Prestige M&A adds an additional 128,000 combined life and non-life policies, with strong growth expected going forward.
• IFA business: Custodial asset balance has reached 33.7 billion yen, driven by the launch of the new NISA system, with consistent annual growth targeted.
• Financial literacy education: 8 corporate clients have already adopted the new "Manesuku" program.

• Management upwardly revised full-year 2025 November fiscal year profit guidance: operating profit is now guided at 2.457 billion yen, 405 million yen higher than the prior forecast; ordinary profit is guided at 2.62 billion yen, an increase of 518 million yen; net profit is guided at 1.67 billion yen, an increase of 333 million yen.
  • After the Q3 cumulative result, operating profit has already reached 90.7% of the revised full-year target, ordinary profit 91.2%, and net profit 91.5%.
  • Q4 business quality support fund rates are set at a lower level due to prior weak new sales volume, but management expects sales volume to improve in Q4, with rates expected to return to normal levels in Q1 of next fiscal year once sales recover.
  • The company will prioritize boosting new policy volume in Q4 to drive revenue growth, and targets full achievement of the revised full-year guidance despite expected headwinds in the quarter.

• The company received a business improvement order from Japanese financial regulators citing insufficient compliance and governance frameworks, requiring ongoing investment to rebuild internal controls that will generate incremental operating costs.
  • Lower new sales volume in prior months pushed business quality support fund rates down to tier 3 from the prior tier 1/2 range for major insurance company partners, reducing operating margin until sales recover.
  • Customer acquisition from major partner companies declined temporarily after the business improvement order announcement, pressuring near-term revenue.
  • Q3 saw a net decline in sales staff due to elevated departures and delayed new hires, creating near-term pressure on sales capacity.
  • New policy and customer acquisition volumes are still below pre-event levels, with full recovery of sales volumes yet to be achieved.

Q: Why did Q3 operating profit outperform the July revised forecast, and what is the background for the full-year upward guidance revision? / A: The stronger-than-expected result comes from a recovery in sales of protection-focused life insurance products. A nationwide training session for sales staff in June re-emphasized customer-first values and the importance of protection products, driving the improved sales mix. The clarity provided by the published business improvement plan also boosted staff confidence and awareness, contributing to the better performance. Management expects this positive trend to continue, leading to the upward profit revision.

Q: What are your expectations for the large Prestige M&A, and why is it significant? / A: This is the largest M&A in FP Partner's history, adding 128,000 existing policies that exceed the company's annual organic new policy volume of 130,000 to 140,000. Prestige has a long track record of steady growth, and the acquisition adds 100 experienced sales staff. Management expects to drive new policy and profit growth through enhanced customer follow-up and cross-selling of life and non-life products, marking a major milestone for the company's growth.

Q: Why did sales staff decline, and how will you reverse this trend? / A: Q3 only saw 97 new hires, with departure volumes remaining elevated, leading to the net decline driven by uncertainty after the business improvement order, performance-related departures, and delayed new hire onboarding. After publishing the improvement plan and clarifying the company's strategy and direction, the decline in departures has already been seen, and new hiring is expected to gradually recover. Recruiting and training sales staff will remain the top priority to rebuild the sales base going forward.

Q: What is the outlook for Q4, and why is a decline in revenue and profit expected? / A: A Q4 decline is expected due to two main factors: lower business quality support fund rates set based on Q3 lower new sales volumes, and a temporary drop in partner-led customer acquisition after the August business improvement order. Management is taking a conservative approach to guidance, but the incremental cost from the Prestige M&A is limited and will not materially impact full-year profit, with recovery targeted starting next fiscal year.