FP Partner Inc. Q4 FY2025 earnings call

• Overall 2025 November Term Performance
  • All top-line and bottom-line metrics exceeded the revised full-year guidance: revenue achieved 100.5% of target, operating profit achieved 121.4% of target, ordinary profit achieved 120.4% of target, net income achieved 122.3% of target. The year-over-year decline was driven by two main factors: sluggish protection-type insurance sales, and temporary suspension of customer acquisition from key partner companies following the August 2025 business improvement order, which led to a net decrease in sales employees and lower new policy volumes.
  • The company maintained its dividend at 94 yen per share, and kept the cumulative dividend policy and shareholder benefit program.
  • Business quality support income decreased significantly due to low quantitative assessment from the sluggish new policy growth, which was a major contributor to the overall profit decline. Protection-type insurance sales have shown an improving trend quarter-over-quarter, which is expected to drive recovery in future periods.
  • The top partner company resumed customer acquisition in October 2025, and volumes have already returned to peak levels.
• Organizational & Human Resource Initiatives
  • Sales employee count decreased by 185 net year-over-year, with 97 net decrease in Q4 alone, and hiring missed the full-year target. Referral hiring maintained its historical 70% share, and showed a recovery trend in Q4.
  • For 2026 November term, the company has added block leaders for each regional area, who will be directly involved in hiring and turnover reduction alongside the human resources department. The company will expand the successful operating model from high-performing branches, focus on hiring new leadership roles and hiring in undeveloped regions, and implement strict screening including clear expectation-setting for the insurance industry to reduce early turnover.
  • The company expanded to 192 locations nationwide by the end of 2025 November term, and plans to continue adding locations to cover the whole country, leveraging the Yamada Denki partnership to strengthen local focus.
• Strategic Partnership & Customer Acquisition
  • The company launched a business partnership with Yamada Denki starting December 1, 2025, offering household financial consultation at 975 Yamada Denki locations nationwide. The partnership is expected to drive strong customer acquisition in regional areas, with an early target of 50,000 annual appointments. As of 1.5 months after launch, appointment acquisition is progressing on track. Total partner customer acquisition was 101,591 in 2025 November term, and hitting the 50,000 target from Yamada Denki will bring total volumes close to the all-time high.
• Governance & Regulatory Response
  • The company received a business improvement order from regulators in August 2025, and submitted a business improvement plan to the Kanto Local Finance Bureau in October 2025. It is implementing improvements beyond the required scope to enhance customer trust and service quality. The company has also prioritized compliance with the upcoming amendment to the Insurance Business Act.
  • The company launched cross-functional improvement bodies (business improvement meetings, committees, working groups) in December 2025, and will submit progress reports to regulators every 6 months starting from the first cutoff at the end of April 2026.
  • The company's 5 core commitments under its

1. Core Insurance Agency Business:

• Total net sales: 32.104 billion yen (down 3.513 billion yen, -9.9% year-over-year)
• Operating profit: 2.984 billion yen (down 2.345 billion yen, -44.0% year-over-year)
• Ordinary profit: 3.153 billion yen (down 2.339 billion yen, -42.6% year-over-year)
• Net income: 2.042 billion yen (down 1.86 billion yen, -47.7% year-over-year)
• Continuing commission (stock revenue): 5.559 billion yen, grew steadily year-over-year
• Total new policies: 228,111 (down 22,285 year-over-year)
• In-force policies: 1,994,554 (up 258,821 year-over-year, +14.9% YoY)
• In-force customers: 746,867 (up 69,941 year-over-year, +10.3% YoY)

1. Contract Transfer Business:

• Total agreed transferred policies: 142,744 in 2025 November term, including 128,124 from non-consolidated Prestige Inc. This is the first time the business has exceeded 100,000 transferred policies in a single term. The business performed strongly with a large agreed share transfer deal closed.
• Contribution from new policies from transferred contract customers: ~1.45 billion yen ANP in 2025 November term.

• 2026 November term (next fiscal year) overall guidance:
  • Target net sales: 36.261 billion yen, target operating profit: 3.326 billion yen, target ordinary profit: 3.467 billion yen, target net income: 2.222 billion yen. Guidance is set conservatively to prioritize building a robust operating foundation to comply with the Insurance Business Act amendment, with a goal of full recovery in subsequent fiscal years.
• Strategic guidance:
  • Contract transfer business will be the core growth pillar for 2026 November term. The company targets 150,000 total transferred policies (an all-time high), and 1.5 billion yen in new policy revenue from transferred contract customers. The company will expand the integrated branch model at 3 locations that received large transferred contract volumes to strengthen cross-selling between non-life and life insurance, and enhance internal control and service quality.
  • The company targets 500 new sales employee hires, and aims to improve productivity and reduce turnover through standardized employee skill training. It will prioritize investment in education and DX as key infrastructure and growth spending.
  • The company expects to achieve all-time high customer acquisition volume in 2026 November term, driven by the resumption of acquisition from the top partner and the new Yamada Denki partnership.
  • Business quality support income rates are expected to start recovering from Q4 2025 to Q1 2026, with full recovery driven growth starting from Q2 2026.
• Capital allocation and shareholder return guidance:
  • The company will continue its cumulative dividend policy to enhance shareholder return. It will implement a share repurchase program from January 15 to February 27, 2026, with an upper limit of 350,000 shares or 0.7 billion yen.
  • Starting from May 2026, the 3,000 yen per half-year shareholder benefit will be converted from physical QUO cards to digital gift options (including Amazon gift card, QUO card Pay, PayPay Money Light) for better convenience, with no change to the benefit amount.
  • ROE remains at 17.27%, which is well above the company's estimated shareholder cost of capital of 11.33%. The company will maintain ROE above the cost of capital going forward. After ensuring working capital and liquidity, the company will allocate capital to growth investments including contract transfers, DX, and human capital, and use free cash flow for stable dividend-focused shareholder return. The company maintains sufficient borrowing capacity for large strategic investments and retains strong financial flexibility.
  • The new headquarters building will be completed in March 2026, which will support further strengthening of headquarters functions and governance.

• The company received a business improvement order from regulators in August 2025 related to contract transfer practices, which caused a temporary suspension of customer acquisition from key partner companies, leading to lower new policy volumes, increased sales employee turnover, and reduced hiring, which negatively impacted 2025 November term revenue and profit.
  • The business improvement plan implementation is slightly behind the original schedule, and requires continued full-company focus to complete, which requires additional compliance and personnel costs that are partially uncertain.
  • Sales employee count decreased for the first time in company history in 2025 November term, driven by negative sentiment from the regulatory order and the impact of customer acquisition suspension. The recovery of sales employee count to net growth is not expected until Q2 2026, and there is uncertainty around the speed and extent of recovery.
  • Protection-type insurance sales remain below normal levels, and a full recovery is expected to take time, which may pressure near-term profitability.
  • The upcoming Insurance Business Act amendment requires significant operational and compliance overhauls, which creates near-term implementation uncertainty and cost requirements.

Q: What drove Q4 2025 operating profit to outperform the revised guidance issued in October 2025?

A: Protection-type insurance sales performed strongly in Q4, leading revenue to exceed the revised forecast. Additionally, the company advanced cost cutting, which reduced cost of goods sold and SG&A below forecast levels. These two factors combined drove operating profit above guidance.

Q: What are the plans for non-consolidated Prestige Inc., which was acquired via M&A in September 2025? Will it become a consolidated subsidiary or merge with FP Partner?

A: Prestige was classified as non-consolidated for the 2025 November term based on its size at closing, but it is an unprecedentedly large business for FP Partner with over 100,000 existing customers. A merger with FP Partner is planned, though no specific timeline has been announced. Consolidating it as a subsidiary before the merger is also a possible path depending on future circumstances.

Q: What is the current progress of the business improvement plan?

A: Implementing the business improvement plan is the company's top priority this fiscal year. While there is a slight delay compared to the original schedule, the entire company is working together on the effort. The company established cross-functional improvement bodies (business improvement meetings, committees, working groups) in December 2025. Progress reports will be submitted to the Kanto Local Finance Bureau every 6 months starting from the first reporting cutoff at the end of April 2026, and any material updates will be disclosed via IR channels as they arise.

Q: Can you share more details on the business partnership with Yamada Denki?

A: The partnership launched customer acquisition at Yamada Denki's stores starting December 1, 2025, allowing FP Partner's financial planners to offer household financial consultation at all 975 Yamada Denki locations nationwide. The partnership has gotten off to a strong start, and the company is working toward the early achievement of the 50,000 annual customer acquisition target, and ultimately reaching an all-time high for total partner customer acquisition volumes.

Q: What is your outlook for performance from this term onward?

A: The 2026 November term business plan was built after revising targets based on 2025 November term actual results. First-year commission and business quality support income projections are set conservatively. This term is focused on building a solid foundation, including complying with the Insurance Business Act amendment and executing the business improvement plan, and is considered a preparation period for future growth. By completing this foundation work, the company expects to return to its historical growth trajectory from the next term onward.

Q: What caused the decrease in sales employee count, and what are your plans to reverse the trend?

A: 2025 November term marked the first year-over-year net decrease in sales employees in company history. The main causes are media coverage impacts, revisions to the compensation system, and employee anxiety caused by the temporary suspension of partner customer acquisition after the administrative order in Q4. The company plans to conduct a company-wide employee survey to identify root causes. Going forward, the company expects stable appointment acquisition to resume starting this term, driven by the restart of partner customer acquisition and the new Yamada Denki partnership. Hiring and turnover reduction are prioritized as urgent issues, and the company is strengthening internal structures to support recovery.

Q: Has the business improvement order impacted the contract transfer business, and what is the current status?

A: The business improvement order has had almost no impact on the contract transfer business. In fact, strengthened internal control, management and oversight from the regulatory compliance improvements has led to increased inquiries from large-scale agencies. The contract transfer business is now in its 5th year of operation, has accumulated significant know-how, and is benefiting from favorable industry trends. This term is expected to be the first year where contract transfer becomes the company's core business.

Q: What is your approach to product mix, and when do you expect business quality support income to stop declining and start increasing? What is the supporting rationale?

A: The projected 4 billion yen revenue increase this term is primarily driven by the resumption of customer acquisition from large partner companies and the new addition of the Yamada Denki partnership, which are the two main growth drivers. While a full rapid recovery of protection-type insurance sales is not expected, sales are already improving gradually quarter-over-quarter, and higher profit contribution is expected going forward. Additionally, a large increase in maturing single-premium products is expected due to current economic conditions, which will add a small positive boost to the 4 billion yen revenue growth target. The company is working to increase the sales share of protection-type products, and has steadily built capability to sell protection-type products to customers from transferred contracts, so it expects to secure solid profit this term. Business quality support income rates are expected to recover from Q4 2025 through Q1 2026, with full material growth starting from Q2 2026, which will drive overall profit growth.

Q: Why is projected profit not higher despite the projected 4 billion yen revenue increase? Are there cost factors suppressing profit, such as headquarters relocation or compliance costs?

A: The company expects that a 4 billion yen revenue increase will bring profit back to historical levels. All headquarters relocation costs have already been paid, and only depreciation expense will be recognized going forward, which is not large enough to be a material overall cost factor. For compliance costs, the company has included budget for all uncertain expenses required to comply with the new regulation, including costs for hiring additional personnel such as operations managers at each location and other new expenses to meet all new legal requirements.

Q: When do you expect sales employee count to return to net growth, and what is the rationale?

A: The company expects net growth in sales employee count starting from Q2 2026, after implementing all the new response initiatives. The upcoming merger with Prestige Inc. will add 100 existing sales employees, but the core foundation for net growth remains successful in-house hiring and turnover reduction, which the company is focused on building out.

Q: Is customer acquisition the key driver of future profit growth, given that adequate customer allocation to sales employees improves profitability?

A: A stable flow of 8-10 prospective customer contacts per month is a key draw for new hires to join the company. After the 2025 November term decline in customer acquisition volumes, the ongoing restructuring of the customer acquisition system is expected to not only drive business growth but also increase new hiring from candidates who had previously held off joining the company.

Q: Can you confirm that contract transfer business is performing relatively well despite the challenging operating environment, and share details on new policy generation from transferred contracts?

A: Contract transfer business is profitable from year one in accounting terms even without additional new policies or cross-selling, and additional new policies or cross-selling generate incremental higher profit. ANP from new policies on transferred contracts was approximately 1.45 billion yen last term, and the company set a slightly conservative target of 1.5 billion yen this term. Meeting with transferred customers and providing thorough consultation creates high potential to generate new policies, so the company plans to grow the number of transferred contracts and add incremental new policies to improve overall profit margin.

Q: Is it correct that protection-type insurance sales depend primarily on sales employee mind-set rather than external factors like interest rates? What is your outlook for recovery?

A: Protection-type (typically term) insurance fulfills the critical role of protecting families if the primary earner passes away, so sales depend on identifying customer latent needs and making appropriate proposals, which relies on sales employee effort. While current sales have not recovered to normal levels, this is expected to be temporary. The company will implement new systems to more accurately identify customer needs, fulfill the core role of insurance, and drive a full recovery.