T&D Holdings, Inc. Q4 FY2026 earnings call

• **Group Strategy and Positioning • T&D Holdings is a holding company for a Japanese insurance group centered on domestic life insurance, with three core life insurance subsidiaries each focused on distinct niche markets, positioning the group as a "major player in niche markets". • The group allocates stable recurring profit from core domestic life insurance to growth and new businesses to expand overall group profit. Since the launch of the current long-term vision (March 2021), T&D's Total Shareholder Return (TSR) has significantly outperformed TOPIX.

• Core Domestic Life Insurance Business Model Strengths • Daido Life: Specialized in the small and medium-sized enterprise (SME) market, offering executive life insurance via partnerships with SME associations and tax accountant associations. It builds a triple-win efficient sales base, with products structured to provide tax benefits for SMEs and address sudden capital needs if an executive passes away. • Taiyo Life: Specialized in the household market, focused on underserved segments like housewives and seniors. It has strong product development capabilities for trend-forward products (e.g., dementia prevention insurance, critical illness coverage) and invests in high-quality post-sales service; it currently operates a hybrid sales model combining in-person agent visits and digital online offerings. • T&D Financial Life: Specialized in the independent agency market, offering a full product line (yen-denominated annuities, whole life, foreign exchange-linked, variable insurance) to meet diverse wealth building needs, with a focus on channel-aligned product development and customer/agent support combining offline and online services.

• Profit Structure and Asset Portfolio • Life insurance is a stock business where long-term in-force policies generate stable annual profit; initial years of a new policy produce negative cash flow, but profit accumulates steadily from year two onward, so even small fluctuations in annual new business do not cause large profit volatility. • Core group profit comes from three sources: mortality gains, expense gains, and interest spreads; mortality gains from protection-focused products are consistently stable for T&D. Rising domestic interest rates are a strong tailwind: as low-interest legacy government bonds are replaced with higher-interest new bonds, interest spreads will widen over the medium to long term. • 70-80% of domestic bonds held are classified as liability-matching reserve bonds, carried at book value, so interest-rate-driven price volatility does not impact annual accounting results.

• Growth and New Business Development • Closed-book business (acquiring and consolidating closed legacy blocks from other insurers, a growing trend in North America and Europe) is positioned as a key growth area, with the U.S. and European business foundation now largely completed after two major investments. • Pet insurance is growing steadily, with expansion focused on strengthening web and e-commerce channels alongside the core pet shop channel, plus cross-selling via Taiyo Life's agent network. • Digital initiatives are focused on capturing younger consumers via new digital customer touchpoints, leveraging partnerships with small enterprises to build an new customer base. • The group is pursuing group-wide synergies via shared systems/administration, human capital development, and strengthened governance to build a more efficient, resilient organization amid declining labor supply.

• Shareholder Return Policy Update • The group updated its return policy to directly link profit growth to higher cash dividends, raising the payout ratio to 60% based on 5-year average adjusted profit, starting from the FY2026 March dividend. The new policy states that dividend cuts will not be implemented as a general rule. • Cash dividends are prioritized over share buybacks, though buybacks will still be considered for capital adjustment if needed. The 60% payout ratio is a high level among Japanese financial institutions, chosen to meet individual investor preferences for cash dividends, while 40% of retained profit is allocated to growth investment and capital policy.

1. Domestic Life Insurance (Core Business, 3 specialized subsidiaries): This is the group's core profit-generating segment. New business performance has remained solid, with protection-focused products steadily growing to expand in-force policies (the core source of stable recurring profit for the life insurance stock business model). Total group investment assets under management are 15 trillion yen, with over 60% held in yen interest-rate assets, mostly long-term Japanese government bonds. Reported group adjusted profit grew from 77.9 billion yen (FY2021 March) to a projected 140 billion yen (FY2026 March), exceeding the original target of 130 billion yen one year early.
2. Closed-Book Business (Growth Segment): Managed via T&D United Capital, this segment has built a geographically and operationally diversified portfolio via consortium investments in U.S. reinsurer Fortitude (2020) and German firm Viridium (March 2025), with strategic partners including The Carlyle Group, Allianz SE, and BlackRock. It is positioned to diversify group revenue.
3. Pet Insurance (Growth Segment): Operated by Pet&Family, the segment has surpassed 220,000 in-force policies, making it one of the larger players in the Japanese pet insurance market. It launched distribution via the PayPay Insurance mini-program in March 2024.
4. New Digital Customer Touchpoint Business (New Segment): Operated via All Right, the segment runs the digital "Piaconne" platform that has exceeded 100,000 members, and launched All Right Small Amount Short-Term Insurance in April 2025 to develop new customer acquisition.

• The group targets group adjusted profit of 200 billion yen or higher for FY2031 March (the end of the next 5-year long-term vision starting April 2026). This target is achievable even if domestic interest rates remain flat at current levels.
• The FY2026 March cash dividend is projected to be 120 yen per share, a 40 yen increase from the FY2025 March 80 yen per share dividend. Cash dividends are expected to rise further from FY2027 March onward, as the 5-year average profit base will exclude the temporary 39.2 billion yen profit decline in FY2022 March and include higher post-2023 profit.
• The original FY2026 March target of 130 billion yen group adjusted profit and 8% adjusted ROE has already been achieved one year ahead of schedule.

• Long-term domestic population decline will gradually shrink the overall Japanese life insurance market over time, including the core SME market segment. While there is still remaining market share penetration room for Daido Life in the large 350 trillion yen SME insurance market, long-term sustainable growth will require new growth initiatives outside of the core domestic life business.
• During the extended low interest rate period, some negative interest spreads occurred, and the group had to pursue alternative investments within controlled risk limits to maintain investment returns, though these gaps were fully covered by mortality gains and other profit sources.
• Market uncertainty (e.g., U.S. tariff policy volatility) has kept the stock price under short-term pressure even as operational performance has improved.

Q: Will the rise of new NISA divert household funds away from life insurance and hurt sales performance? / A: Management notes that while some younger households have shifted discretionary spending from insurance to NISA investments, T&D's focus on in-depth needs-based consulting for protection products means there has been no material impact on core protection product sales. For wealth-building products sold by T&D Financial Life, the overall savings market is growing, and insurance's unique protection benefits mean NISA has not stolen market share, so performance remains solid.

Q: Why are you partnering in a consortium for closed-book investments rather than investing alone, and will you continue this strategy going forward? / A: T&D initially partnered with Carlyle for the U.S. Fortitude investment because it lacked in-house closed-book business experience, allowing it to learn while building its expertise. After building a track record as one of the first Japanese life insurers pursuing this segment, it was invited to join the European Viridium consortium by Allianz. T&D has now established sufficient footholds in both the U.S. and European markets, completing the initial phase of base building for this business.

Q: Why did you raise the payout ratio to 60%, which is very high for a Japanese financial institution, and does this mean you prioritize dividends over buybacks? / A: Management confirms that dividends are prioritized, with all period return allocated to cash dividends. The high 60% payout ratio reflects confidence that stable profit growth will continue, and addresses strong demand for cash dividends from individual investors, which the group sees as an important shareholder base. The remaining 40% of profit is still clearly allocated to growth investment and capital policy, so the balance is sustainable. Management confirms this means dividends come before share buybacks, though buybacks are still an option for capital adjustment when needed.

Q: Is the SME market shrinking amid business closures and labor cost pressures, and what is your outlook for growth in this segment? / A: Management agrees that the total number of SMEs is declining over the medium to long term, but notes that the total SME life insurance market by sum assured is around 350 trillion yen, and Daido Life's current share is just over 50 trillion yen, leaving substantial room for further penetration. Daido will continue to grow by leveraging its unique tax partner channel and consulting sales model to capture untapped demand.