8795.T

• Group adjusted profit amounted to JPY 122.5 billion against the full year forecast of JPY 146 billion with a progress rate of 83.9%. Sales results of new policies of all 3 life insurance companies progressed smoothly against the plan. - The 3 life insurance companies recorded increase adjusted profits, but T&D United Capital decreased. - Taiyo Life and Daido Life recorded capital gains on sale of domestic and foreign equities. Taiyo Life recorded mainly losses on sales associated with the reduction of its foreign bond holdings. Daido Life posted losses on sale of bonds, mainly due to replacement as part of its cash flow matching strategy. T&D Financial Life recorded a profit increase mainly due to an improved insurance margins resulting from growth in policies in force. - Average assumed investment yields of Taiyo Life and Daido Life were 1.35% and 1.21%, respectively. - T&D United Capital's adjusted profit decreased by JPY 5 billion year-on-year to JPY 5.4 billion. - The company recorded approximately JPY 8.9 billion as adjusted profit in its consolidated results for the third quarter related to closed book business. - Viridium's fourth quarter results will be incorporated into the company's Q4 financial results. - Due to the acquisition of Viridium, JPY 75 billion of goodwill was recognized under financial accounting, but it has no impact on adjusted profit. - At Taiyo Life, annualized premiums of new protection-type policies remained at the same level as the same period of the previous year, while surrender and lapse rate increased mainly due to increased surrender and lapse in the agency channel, annualized premiums of in-force protection-type policies increased from the end of the previous fiscal year. - New policy amount of Daido Life continue to be strong and achieved a year-on-year growth. Surrender and loss rate was broadly in line with the same period last year and policy amount in-force increased from the end of the previous fiscal year. - Annualized premiums of new policies at T&D Financial Life declined year-on-year mainly due to the lower sales of foreign currency linked products. In addition, the surrender and lapse rate declined due to a decrease in policies reaching their target values for foreign currency-linked products, resulting in an increase in annualized premiums of policies in force compared to the end of the previous fiscal year. - Group MCEV increased by JPY 451.7 billion from the end of the previous fiscal year to JPY 4,397.4 billion, driven by the accumulation of new business value, the rise in domestic/foreign stock prices and the adoption of LDTI at Fortitude Re. - The combined amount of the domestic and foreign equity sales by Taiyo Life and Daido Life was approximately JPY 209 billion, exceeding the full year sales plan of JPY 180 billion. Daido Life's interest rate matching ratio reached 86.4% and Taiyo Life's reached 96.6%. - Unrealized foreign and domestic bonds have increased due to rising domestic interest rates. - As of the end of December 2025, the ratio of strategic equity holdings to net assets stood at 19%, reflecting an increase in the market value of the holdings. The ratio of strategic shareholdings to net assets, adjusting for roughly JPY 100 billion already agreed for sale is around 13%. We'll continue to work on reducing the strategic shareholdings to 0 by the end of March 2031. - Sale of stock reclassified from strategic shareholding to pure investment is in process as part of our effort to reduce equity risk. As of the end of December 2025, 57% of such shareholdings was divested on an accumulative basis. - As of the end of December '25, ESR declined to 225% from the end of the previous fiscal year. - There are no changes to the full year earnings forecast for the fiscal year ending March 31, 2026. For the remaining 3 months of the fiscal year, the group adjusted profit is expected to decrease by approximately JPY 0.2 billion for every JPY 1 of appreciation.

• There are no changes to the full year earnings forecast for the fiscal year ending March 31, 2026. - For the remaining 3 months of the fiscal year, the group adjusted profit is expected to decrease by approximately JPY 0.2 billion for every JPY 1 of appreciation.

The 3 life insurance companies recorded increased adjusted profits. T&D United Capital's adjusted profit decreased by JPY 5 billion year-on-year to JPY 5.4 billion. The 3 life insurance companies saw an increase in their core profits. Taiyo Life and Daido Life recorded capital gains on sale of domestic and foreign equities, while Taiyo Life had losses on sales associated with reduction of foreign bond holdings and Daido Life posted losses on sale of bonds due to cash flow matching strategy. T&D Financial Life recorded a profit increase mainly due to improved insurance margins from growth in policies in force. Group MCEV amounted to JPY 4.3974 trillion. ESR was 225%. Value of new business as a combined total of the 3 life insurance companies amounted to JPY 144.3 billion, with full year forecast is JPY 168 billion and a progress rate of 85.9%. Average assumed investment yields of Taiyo Life and Daido Life were 1.35% and 1.21%, respectively.

• The adjusted profit related to Fortitude's fourth quarter, October to December, earning is under calculation. - The Q4 results of Viridium will be incorporated into the company's Q4 financial results, but it's not finalized yet. - Taiyo and Daido's sales of equities and bond replacement for asset liability cash flow matching are impacted by the market. - Taiyo Life's surrender and lapse rate increased more than initially anticipated. - Long-term high interest rates may bring risks such as mass surrender and impact on asset impairment.

Q: So this is Muraki from SMBC Nikko Securities. I'd like to post two questions. The first question relates to Page 4 of the materials. The progress rate is 84%, slightly high as of this moment. If you can give us an update on the full year forecast. So I'm pretty sure you have some loss in the sales of JGB and also gains from the sales of equities in Q4. So what are your assumptions right now? The second question relates to Page 12 about Taiyo Life's surrender. So the third quarter appears to be high. So in comparison to the initial assumption, how do you assess the current state of surrender? Also what sort of impact would it pose on EV at the end of the fiscal year. If you have the calculation, please let us know.

A: Mr. Muraki, thank you very much for the question. I would like to answer that question. So in terms of the performance up until Q3, it has been quite brisk vis-a-vis the full year guidance. So the group adjusted profit of JPY 146 billion, we are confident that we can achieve this. However, there are certain factors we'd like to confirm as of this moment. The first point relates to Fortitude and Viridium. So the Q4 results has not been closed right now. So we'd like to confirm the results for Q4. And next is Taiyo and Daido. So in order to improve the investment portfolio, we are selling the equities and conducting the bond replacement for the asset liability cash flow matching. So we'd like to see the progress. Because in terms of the loss in the sales and also the gains from the sales will be impacted by the market. So we'd like to assess this correctly. So of course, in terms of bond replacement that will contribute to reduction in the interest rate risk and also enhancement of the portfolio yield. But as of the current interest rate level, we will incur some loss in the sales. So in terms of group adjusted profit of JPY 146 billion, it is not likely that we may see a significant upside given the current situation. To summarize, we'd like to confirm the Q4 results for Fortitude and Viridium; and also, we like to see the progress of the sales of the equities and bond. So within the fiscal year, we'd like to have a highly probable forecast and try to assess whether revision is necessary. And if it's necessary, we'd like to disclose that at the earliest stage possible. That is all. Thank you for that question. In terms of Taiyo surrender, we've seen an increase in the bancassurance OTC channel. With the rate hike, the surrender is actually increasing more so than initially anticipated. Now in terms of the surrender, so we've actually conducted some risk transfer with the feeding. So the risk on the financial basis, the risk is limited. But in terms of EV, if you look at Page 17, we have as one of the various factors. So the variance between assumptions and results, you can see the number here, JPY 33.1 billion, and Taiyo accounts for minus JPY 17 billion or so. So in terms of the assumptions, we intend to update and review that at the end of this fiscal term. But in terms of its magnitude, we haven't conducted the calculation yet, so we don't know that. But on the 3-quarter cumulative basis, it's JPY 17 billion. And this product has been on sales for 3 years up until the year 2022. So that should give you some idea. Now in terms of the investment, given the current state of surrender and also the anticipation of the interest rate hike as a way to conduct ALM on a forward-looking basis, we have been shortening the duration on the asset side. Specifically, we are selling the 10-year or longer bond sales and replacing those with short-term bonds or cash. So basically, that is how we're addressing the surrender situation. That is all.

Q: I have one question. To date, by reshuffling your JGB portfolio, how much benefit did you read in terms of the increase in positive spread? What will be the impact for this fiscal year and the subsequent impact for next fiscal year. Can you share your view?

A: Yes. Thank you for your question, Tsujino-san. The impact on positive spread stemming from reshuffling the JGB portfolio is projected to be JPY 3.1 billion for next fiscal year. The final yield on EM bond on book value basis is improving significantly, and this is supporting the growth in positive spread.

Q: Looking at your results, you are enjoying a very good progress on booking the investment gains. Strong distribution from the alternative investment, good dividend stream on equity holdings, lower hedging costs and growing positive spread. So there are multiple positive factors. And I think this will make it difficult to project for next fiscal year. My impression is that the actual investment gain driven mainly by our alternative investment was much stronger than expected. May I ask the magnitude of that impact?

A: Thank you, Tsujino-san. That is actually a tough question to answer, but I can comment on how much upside we had against the plan for this fiscal year. At the end of Q3, we see alternative investment. The upside was roughly JPY 20 billion. And I will not be able to reveal much more than that. We don't have the projection for next fiscal year. But the upside from our alternative exposure for this fiscal year was JPY 20 billion pretax.

Q: This is Watanabe from Daiwa Securities. I also have two questions. The first is related to Page 30, Taiyo Life, the transfer of the loan receivables and credit guarantee company. So what is the impact on Q4?

A: Mr. Watanabe, thank you very much for the question. So in terms of the transfer of loan receivables, this has already been factored into the budget at the beginning of the year. So if you look at the question, if you look at the recurrent -- the profit and the net profit, there is a variance. So that is because we anticipated this transfer. So we don't know the actual amount as of this moment, so we cannot comment on that. In terms of the transfer of loan receivables, in terms of the economic impact, it is quite similar to the sales of bonds. So we may see some recurrence of bonds. But beyond that, we shall see improvement in the yield. And of course, Daido Life will continuously sell the equities after. So in terms of the loss incurred from the transfer of loan receivables, we should be able to offset that with the gains from the sales of equities.

Q: I'd like to move on to the second question. This is Page 11 related to Viridium. So Luxembourg GAAP will be included for the group adjusted profit. So what sort of impact would it pose, any difference in the definition with the Japanese GAAP, for instance, related to fair value measurement due to market fluctuations.

A: Mr. Watanabe, thank you very much for the question. First of all, as related to Luxembourg GAAP method. Basically, it is very similar to J-GAAP. So the bonds, it will be treated under amortized cost method and the policy reserve is under lock-in method. In comparison to J-GAAP, it is somewhat more prudent. So first point in terms of the unrealized gains from securities, it would not be recognized on the balance sheet. However, the loss for the lower [indiscernible] cost method, it will be recognized. Also at the time of rate decline, there will be a mandatory provisioning of policy reserve required. So in comparison to J-GAAP, it is somewhat more prudent. However, in terms of the fluctuation in economic value, that will not be reflected on the profit. So in comparison to IFRS, there's not much less variance in comparison to IFRS. So in other words, it's quite similar to the J-GAAP method.

Q: Yes. This is Sakamaki from Mizuho Securities. I have one question. And it is something that happened during the quarter. With a significant rate spike in January, how much was your ESR push down? And under a scenario where the long-term rate remains high, what are the things that you are paying attention to. Can you update me on your risk management framework.

A: Thank you for your question. We don't have the impact on our ESR stemming from the yen rate spike in January. So I will have to point to the sensitivity disclosure we made in November at the IR meeting. So with every 50 basis increase in domestic rate, the ESR goes down by 7 points. And to elaborate on the rate impact, basically, for the bond exposure matched against the policy reserve, as long as we maintain level and ability to hold, there is no need for asset impairment and hence, we intend to hold. That said, as long as we are not confronted by mass surrender, which would force us to sell our bond holdings, the impact will be minimal. On the other hand, we would benefit more by capturing higher yield by reshuffling the portfolio and making new investments. So that's all for me.

Q: I see. So just to confirm, the rate spike in January and that level would not require you to do asset impairment. Is that correct?

A: Yes, your understanding is correct.

Q: This is Takemura from Morgan Stanley MUFG. I have two questions. I also would like to understand the impact of the rising ultra-long rate. I understand that the bancassurance products offered by T&D Financial come with [ MBA ] clause. Do that mean that even under the environment where the ultra-long end rate goes up, the MBA will be effective to prevent a surrender rate to rise. What are your thoughts around the surrender risk for your bancassurance channel when the ultra-long rate is rising. So that's my first question. My second question is also related to your investment activities, namely your PE exposure. I understand that for Taiyo and Daido, the PE exposure is 2.9% or slightly less than 3%. And nowadays on the media reports on the [ death ] of the SaaS business model, and that seems to be dampening the performance of the overseas PE fund. What is the exposure to SaaS companies or IT sector in general? And how do you manage that risk. So those are my two questions.

A: So thank you, Takemura-san, for your question. For the products with MBA clause, basically, there will not be impact on the earnings, but there are some risk of surrenders in a rising rate environment. And regarding our exposure to SaaS companies, for foreign equities, we basically invest in ETFs, so it's part of index investment. So our exposure will be similar to market rating. As for the private equity exposure, to the extent that we can confirm, there is no concentration to a specific sector, and we have a diversified portfolio that would assure the impact to be limited. At this point, we have not been reported on any major loss.

Q: I have a follow-up to my first question. And apologies for the lack of my understanding, but is there a cap on the MBA coverage regarding the magnitude of the bond value decline? So if it crosses that threshold, the quality for the policy holders would be limited and we may see a rise in surrender. Is that the case?

A: Thank you for the question again. Basically, MBA defines the change in surrender amount subject to the right movement. And there is no concept of a cap in the coverage.