T&D Holdings Inc Ord

I'm Moriyama of T&D Holdings. Thank you very much for joining us at today's IR meeting. In my presentation, I will cover the achievements under the group's long-term vision to date and the direction of the next long-term vision starting next April. Please turn to page 4. The financial KPIs are generally progressing steadily. Adjusted ROE and group adjusted profit targets set under the group long-term vision were achieved in the previous fiscal year ahead of schedule. Furthermore, the four-year average ROEV through the previous fiscal year has exceeded the medium to long-term target of 7.5%. On the other hand, new business value did not reach the initial target of 200 billion yen. This is our challenge in our next group long-term vision. Please turn to page 5. Supporting these solid financial KPIs is the robust performance of the three life insurers. Each leverages its specialized business model tailored to its respective market, delivering strong new policy sales results and steadily expanding its in-force policies. The rising interest rates create an environment where the accumulation of enforced business can more readily lead to profit growth through the expansion of positive spread. We take pride in our robust policy performance as a major strength of our group. Phase turn to page 6. This page summarizes various capital management initiatives in a timeline format. Under the current group's long-term vision, we are significantly enhancing shareholder returns while executing investments in closed-book businesses which we position as growth investments. We are also enhancing efforts to reduce asset management risks and utilize reinsurances. Please proceed to page 7. Risk reduction measures resulted in a reduction of approximately 160 billion yen. Combined with solid insurance sales results and investments, the group's MCEP increased by approximately 890 billion yen. Please turn to page 8. In response to rising interest rates, we will increase the ratio of yen-denominated interest-bearing assets to approximately 70% to ensure stable projected interest income. Meanwhile, from a risk diversification perspective, we will continue holding risk assets such as equities, but reduce the weight of domestic and foreign equities to around 5%. On the reduction of domestic interest rate risks and domestic and foreign equity risks, it is closed in May 2024, while the domestic interest rate risk reduction target was achieved ahead of schedule for equity risks. Despite progress made, only 11% reduction was achieved against the 20% target due to market value increases. The reduction of equities for the current period is explained on page 9. Against the full-year sale plan of 180 billion yen, approximately 143 billion yen was sold in the first half. In the second half, we plan to sell additional 100 billion under pure investments. Regarding strategic shareholdings, the ratio to net assets rose to 18.6% due to market value increases. However, approximately 100 billion yen of the 282.7 billion yen in strategic holdings has already been agreed for sale. We will continue to steadily reduce holdings by setting interim targets, aiming for a zero balance by the end of March 2031, excluding stocks held for business alliances and collaborations. Page 10 shows the status of cash flows for assets and liabilities. We will continue to promote cash flow matching going forward while avoiding overmatching during periods of increased policy surrenders. The title life durations are 22 years for liabilities and 13.1 years for assets. Entire life, they are 12.3 years and 10.5 years respectively. Page 11 shows the yield trend. Due to portfolio rebalancing and rising interest rates, the yield on yen-denominated bonds have begun to increase from the previous year. Additionally, strong performance in alternative investments have significantly improved the yield on core profit. The assumed interest coverage ratio from yen assets has risen to 80% range. Our policy is to be able to cover 100% with yen interest assets by the fiscal year end March 31. Page 12 details dividends from subsidiaries and capital allocation. Over four years, we received 466.4 billion yen in dividends from subsidiaries and concentrated our capital to the holdings. The total amount returned to shareholders was 395.5 billion yen, resulting in a total payout ratio of the group such as the profit of 106%. Furthermore, in addition to internal funds, external financing was utilized, allocating $221.5 billion to growth investments, including planned investments. Page 13 and 14 cover the status of the closed-book business to diversify our business portfolio and establish a new revenue pillar. In addition to our core life insurance businesses, we have been making investments in the closed-book businesses since 2020. Forty-two's cumulative adjusted profit since investment reached approximately ¥72 billion by the end of the previous fiscal period, accounting for about 16% of the group's adjusted profit. Starting in the fourth quarter, we will also begin recognizing profits from Viridium. Fortitude and Viridium differ in geographic focus as well as their approach to value enhancement, and we believe that we have successfully achieved the portfolio expansion and risk diversification we have been aiming for in the closed-book business. I will also explain our investment in our reinsurance sidecar announced in October. As part of our support for Fortitude's growth as a strategic investor, we have made a commitment to invest in its reinsurance sidecar. Specifically, we committed up to $250 million equivalent to 37.5 billion yen at the exchange rate of 150 yen per dollar to this reinsurance sidecar specializing in Japanese and Asian insurance liabilities. By reinsuring a portion of the liabilities underwritten by Fortitude, the underwriting capacity of Fortitude will be further enhanced. Through these initiatives, we will further strengthen our collaboration with Fortitude and pursue sustainable growth for both parties. We would like to report the preliminary third quarter results for Fortitude. Some of you may be concerned about the performance of the company up to the second quarter. The 8.9 billion yen in adjusted profit will be recognized by T&D Holdings in the third quarter for the three-month period of July to September. The impact from the reserve valuation method for universal life insurance, which was a negative factor in the second quarter, has been resolved in the third quarter. Under our current group long-term vision, we have implemented a significant increase in shareholder returns. Regarding cash dividends, we are projecting our 11th consecutive annual dividend increase, with a dividend per share of ¥124 for the current fiscal year. Alongside dividend increases, we have also continued to carry out share repurchases. As shown on page 17, the number of shares outstanding decreased to 490 million shares as of the end of October, completely eliminating the dilution caused by the two capital increases in 2009 through the combined effect of the reduction in the number of shares and the increase in adjusted profit, adjusted EPS has grown dramatically, approximately 2.3 times from 130 yen to 295 yen during the period of our group's long-term vision. We believe that these enhancements to shareholder returns and EPS growth have significantly improved our evaluation in the stock market. Please turn to page 18. As a result of our efforts to date, the PBR, which stood at 0.54 times as of the end of March 2021, has risen significantly to 1.18 times as of the end of September 2025. In addition to improving capital efficiency, our stock's beta has declined for all periods 1, 3, and 5 years, and PER has also increased, and capital cost is gradually declining. From the start of the current group long-term vision to the most recent period, TSR has expanded to over 2.5 times. Although the trend has been soft since September, our fundamentals remain solid. We will pursue further improvement of capital efficiency and profit growth and enhance our stock valuation through the next group long-term vision. Please turn to page 21.

Let me now explain the direction of our next group long-term vision. First, our recognition of the business environment surrounding the group. The business environment is currently at a major turning point. From the medium-term perspective, we now operate in a world with interest rates, and as an insurance company, we can expect increase in positive spread and stable and sustainable profit growth. The environment is highly favorable. This also serves as a tailwind for insurance sales. On the other hand, from an extremely long-term perspective, there is a progression of irreversible megatrends such as low birth rate and longevity, demographic shifts, and climate change. We must view these as opportunities, leveraging them to make growing demand in products for seniors and health management services, or to enhance customer satisfaction through AI. Simultaneously, we must respond appropriately to risks, such as a shrinking workforce and intensifying competition. Based on this understanding, we have formulated our next vision. Next, I will explain the positioning of the next Group Long-Term Vision. As explained thus far, the current Group Long-Term Vision has delivered results centered on improving capital efficiency. The next Group Long-Term Vision spanning from 2026 to 2030 aims to achieve stable profit growth through core business expansion. Building on this foundation, we position this five-year period as five years to solidify the next growth phase, addressing future challenges while accelerating capital circulation and creation through group synergies. As a corporate group contributing to people and society, we will respond to these continuous environmental changes and continuously enhance corporate value. The next group long-term vision will be a crucial period for stepping up our efforts to achieve this. On page 22, I would like to talk about the three key pillars of the next group long-term vision. The first is for us to further strengthen the existing businesses. By expanding our portfolio of contracts, we will maximize the tailwind of a world with positive interest rates. Leveraging the strength of our market-focused strategy, we will provide products and services that contribute to solving societal challenges, thereby further solidifying our customer base and revenue foundation. The second is new value creation and growth investment driving this continuous growth. While the domestic market will mature over the long term, societal challenges will diversify. We will achieve this continuous growth through investments in growth sectors domestically and internationally and by creating new value in non-insurance areas. Third is to make management base more resilient. to support these initiatives. Beyond advanced capital management that combines stable shareholder returns with growth investments, we will thoroughly advance growth synergies to leverage scale advantages. This includes capital regeneration through reinsurance, consolidation of asset management, standardization of administrative processes and systems, and data utilization. We will build a solid management foundation. By organically integrating these initiatives, we will establish a framework that maximizes the power of all capital held by the group, thereby maximizing the corporate value. Generating stable profits by strengthening our core business is fundamental to our group. We can now enjoy stable growth in positive spread as well as profit, thanks to rising interest rates. The key here is the enforced policies, the source of future profits. The group's greatest strength is steady sales results of new policies. The three life insurance companies will strengthen their unique business models, thereby steadily increasing the in-force policies. We recognize improving title life profitability as paramount. and I will give you more details on the next page. Furthermore, in asset management, we'll continue portfolio improvements in light of rising interest rates to steadily expand positive spread while continuing to reduce asset management risks. Page 25 illustrates the revenue structure reform at Tire Your Life. While our revenue and profit levels are trending toward recovery thanks to our past efforts, challenges as outlined on the left-hand side of the slide remain. Improving insurance earnings takes time, but to sustain continuous growth in response to environmental changes, we will tackle revenue structure reform as a key theme in our next group's long-term vision. Specific details will be presented in the next group, Long-Term Vision, but the key point is to decompose the reopening structure by element, set measures corresponding to each element, and implement a transformation process that quantitatively links these measures to their effects. By implementing and monitoring this transformation process with Style of Life and T&D Holdings, fulfilling their respective roles, we aim to steadily advance the process and achieve visible transformation. Page 26 explains capital allocation under the next group long-term vision. The pie chart illustrates the capital allocation concept. Our dividend payout ratio target is set at 60% of the average adjusted profit over five years, returning more than half of the profit as cash dividends. With highly reliable profit growth, we'll achieve sustainable dividend growth. The remaining portion will be prioritized for growth investments, but executed with discipline by setting a hurdle rate. As the ROE is now above capital cost, we will make sure that the investment is done with discipline with hurdle rate. And also, as needed for capital efficiency, we will be looking at the capital level to consider additional shareholder return, including share buybacks. In the last few years, we have announced the share buybacks at the fiscal year end, but we intend to conduct share buybacks more flexibly and effectively going forward. Specifically, we will not fix the timing. Instead, we will comprehensively assess our financial position, the growth investment considerations, financial market conditions, and stock price levels. We intend to execute share buybacks flexibly and effectively when we judge the impact to be significant. By executing share buybacks at effective timing, we can absorb a larger number of shares from the market, enabling us to deliver higher quality shareholder returns. Fundamentally, the group's asset management involves each life insurance company managing ALM assets according to liability characteristics. For liquid traditional assets, T&D asset management serves as a platform. For overseas credit and alternative assets and others, T&D investment management, established in September, serves as a platform. This completes the group's asset management framework. Under this framework, we will advance the strengthening and streamlining of the group's asset management structure as well as the development and enhancement of asset management personnel. Furthermore, in July of this year, we transferred Tayo Life's domestic stocks excluding strategically held shares to TDAM. We have signed an MOU with Coral in the area of reinsurance and related areas. To further enhance capital efficiency, we will explore optimizing risk and improving capital fungibility through the utilization of intra-group reinsurance. Furthermore, we will consider having TVIM manage the assets of capital insurance subsidiaries, leveraging CoreLoyal's asset management capabilities in areas such as overseas credit and alternative assets. Regarding the standardization of system processes for policy and management operations, we are proceeding with the feasibility verification as planned. Currently, we are formulating a concrete plan based on the verification results. While this plan was scheduled for development after fiscal 29 following the completion of digitalized migration, we are now also considering the possibility of accelerating the implementation of contract management efficiency improvements. This could be achieved by leveraging rapidly developing new technologies such as AI during the verification period. Doing so may enable earlier realization of benefits and greater efficiency in the standardization efforts. Furthermore, from a similar perspective, we aim to advance the enhancement of management control through data utilization across the entire group and the establishment of efficient operation frameworks by leveraging AI technology on a group-wide basis. We consider these technologies to be crucial as a future foundation for group management and plan to incorporate action plans into the next group long-term vision. Next, let me share our initiative on corporate governance enhancement, the cornerstone of the management base supporting our long-term vision. Please note the initiatives to date on this slide. And please turn to the next page. During the next group long-term vision period, we'll further evolve governance to support proactive management. Specifically, there are two points. The first is strengthening the Board of Directors' functions. To enhance its role as a monitoring board, we'll further separate oversight and execution, including a securing of board composition where maturity is independent outside directors. The second point is revising the executive compensation system. Page 32 shows the compensation breakdown. We are revising the system to be more aligned with our shareholders and strengthen sound incentives for the management. Last but not least, our approach to achieve further increase in share price. Basically, EPS growth and PER improvement are key factors for stock price appreciation. We aim to enhance EPS for profit growth and improve PER by boosting market expectations and confidence through disciplined growth investments and strengthening the group's resilience. Furthermore, our revised dividend policy has strengthened dividends while significantly increasing predictability. We believe this provides strong underlying support for our stock price. We ask for your continued support for our group. Thank you for your attention.

We would like to move on to Q&A session. If you would like to ask a question, please press raise hand button. We will send a request to unmute, so when you receive the request, please unmute and ask your question. I would like to introduce the first person, Muraki-san of SMBC NICCO Securities. Please unmute and ask your question. I have two questions. Both of my questions are related to the next group, long-term vision. First question is related to the investment. $116 billion was invested in Veridium. Next fiscal year, how much profit contribution are you expecting? And also on page 23, there was a hint. very dim sidecar investments will be made and what will be the next aim and what is the scale you are expecting? That is my first question. My second question. You referred to in your presentation the integrated group synergy, sharing the synergy. The reinsurance subsidiary was mentioned. I think it was page 28 from Taiyo and Daido. So there will be a large volume of seeding to be done. And through that, how much Japan's regulatory capital release is going to be possible in this scheme. The investment is done separately by TAIO and DAIDO, but one of the points you raised is to commission to Carlyle on integrated manner. So what will be the credit alternative investment overseas? Are you going to have your asset management company do that, or are you going to ask Carlyle to do? What will be the ultimate form? first question I will reply and the scale I will answer first May I? Muraki-san, thank you for your question. Your first question on the profit contribution by Viridium. In the past, I already explained Viridium already. has operational structure, including a system and back office. It's an established platform by acquiring run of life insurance. They are going to raise the So their business model is very stable. In the past three years, what was the profit contribution? Hypothetically calculating based on our holdings ratio, on average, it's going to be around 100 million euro. And this year, October end forex was 178 yen to the euro, so the profit contribution was 17.8 billion yen, and stable profit at this level is expected, but the management cost and the borrowing interest expense will be deducted from here. So that would be the final amount. Investment amount is 120 billion yen. So from that perspective, the capital cost and interest rate gap, well, the profit beyond 10% can be expected. So the investment scale of Viridium, Currently, we have not set any concrete target in our long-term vision in the framework of the long-term investment. We would like to consider investment into Veridium, additional investment. The second question. This is Nagai. I will answer the second question on the reinsurance and investment asset management. First on reinsurance, concrete objective and the liability block to be transferred and the impact. And after transfer, what will be the investment style or portfolio? Those are the things we are currently reviewing. once we have the concrete plan on these points we intend to disclose. Also, the investment overseas, the relationship with Carlisle for reinsurance, the joint operation with Carlyle is considered. But the other asset management in the U.S. with asset management companies, we will choose the optimum partner to aim at improving the investment impact. Thank you very much. On page 27, 2.7 trillion yen is mentioned related to investment. What about the schedule and content of this? Any additional information you can share? Joint investment, 2.7 trillion yen. As was explained previously, out of the total asset, ALM asset that is linked to liabilities, that part will be handled by each entity according to the characteristics of each liability. For other assets, the traditional Japanese and foreign equities and bonds for them. Mostly D&D asset management will do the investment. Overseas credit and alternative investment, we are looking at using the subsidiary in the U.S. Other than ALM asset, the amount will be 2.7 trillion yen. For this fund in stages, the capital transfer or commissioning of the investment will take place.

Understood. Thank you very much.

Now we would like to move on to the next question. Mr. Juno from BOB Securities, please. Yes, thank you. I have three questions. So in the second half, you have increased the sales plan of the strategic shareholdings by ¥100 billion. And also in Q3, the 42, the profit is recovering. So that said, there's a potential for upside. Is that the right understanding? That's my first question. My second question is, For reinsurance, the sidecar issue, you're committed to the book that's focused on Japan and Asia. Did you create this vehicle because you already have some visibility for potential deal? And within this scope? would you be sitting at your own book? My third question is, earlier you talked about improving Taiyo's life and reviewing. It doesn't include reviewing the bank assurance channel. And I think the annualized new premium from the new policies, I believe more than half of that It's coming from the bank assurance channel. So I think you need to do a decisive reform. And also maybe you need to include the MBA clauses. So what are the considerations for those and what is the progress that you're making? Yes, thank you for your question. As you said, for the sales of the strategic shares in the second half, compared to the first half, we can expect a higher sales gain. And also for fortitude in Q3, the profit is recovering to a certain extent. So we have those positives, but with the rate rising, we have some unrealized losses that are increasing. So for the right-hand of those, the unrealized losses of the bond holdings, we would like to improve the investment profit. But at this point, for your guidance, we have decided not to change the guidance. But as we monitor the actual profit level and also watching the financial market, we will continue to consider if we need to revise up the guidance. Yes, thank you for the question. Regarding the sidecar reinsurance scheme, First, as you pointed out, for this sidecar vehicle, it's going to focus on Asia, mainly Japan. So that is how the vehicle is designed. Fortitude from the past has been focused on North American business. And as a next step, they were looking at Asia, including Japan. So they have been pursuing this strategy from the past. So now the preparation has been completed and there are potential deals which has become more visible and that's the reason why this sidecar reinsurance scheme was set up this time. Thank you, Sujino-san. And regarding the third question, regarding the bank assurance channel for Taiyo Life, on page 25, bottom right, we do show that we are going to review the bank assurance channel strategy at bottom right. And I will make some additional comments. Earlier, as I said, By the current progress structure, we are going to decompose the elements of the profit, and that's now underway. And the measures that's underway by Tie Your Life and initiatives that we plan to implement going forward. We are now setting up the KPIs to measure the benefit, and we are planning to monitor those progress. Also, regarding the bank assurance channel, on the page 25 but this is just a part of how we have decomposed the earning structure so we have their product portfolio and sales channel so for product portfolio or within taiyo we are trying to figure out what is the best product mix for taiyo life including the risk tolerance, and we are trying to consider how the portfolio should be designed. So that will be incorporated in the product portfolio strategy. And in addition to that, we will look at the bank assurance channel as we think about the optimal sales channel structure. So in the group long-term vision that we will unveil next spring, we will offer you more details then. Thank you. Thank you very much.

Moving on to the next person, Watanabe-san from Daiwa Securities. Please go ahead. This is Watanabe of Daiwa Securities. I have two questions. First is on page 22, the adjustment of the capital level, the timing will become flexible. What is the guide on the scale? Under the current long-term vision, you have aimed at the improvement of capital efficiency and the total return was higher than 100%. And on page 17, you have progressed with eliminating the negative impact of the dilution and buyback of 80 billion yen or more shall be possible. So I would like to confirm the scale. And the second question is the definition of the adjusted profit, the fortitude. and is creating the volatility and large PNCs and life insurance companies have announced their adjusted Adjusted Profit and Daiichi Life excluded the valuation profit and loss of proactive from the adjusted profit and it is only a T&D that includes the valuation gains and losses in the profit. Why do you not exclude? Thank you for your question. Firstly, the scale, basically, net profit, 60% is returned through dividend, and remaining 40% is allocated to the growth investment. That is the primary allocation. But in such a case, basically, EPS growth which contributes more to eps growth we consider that element when it comes to the scale the it is a balance with the growth investment if we do not have in investment opportunities then additional return will be made naturally the capital level will be taken into account from that perspective it's going to be a case by case this concludes my answer on the second question let me answer at tnd group on adjusted profit as the profit to be returned and the uh it links to the profit to be returned to the uh shareholders ultimately uh in the valuation gains and losses uh Domestically, if valuation profit or loss is a tentative one, then that will not be included. And through final adjusted profit, it will link to the reduction of the dividend and So only the substantial valuation and profit and losses will be included in the adjusted profit. One additional question. you referred to EPS growth rate. Other companies say that 2% or 3% of the growth will be realized by buyback. Do you have any quantitative guide on your buyback? Is it possible that you're going to set a quantitative target? Thank you for that. the kpi of next fiscal year is under review right now so that is also taken into consideration basically eps growth is very important so we need to continue to monitor them but first of all we need to expand the profit and that in the medium to long term i can be returned to the investors so from the medium to long term perspective and the profit growth from the core business is to be aimed at and in addition non-linear growth is pursued through the growth investment on the other hand we need to continue to strongly monitor the quality of the capital efficiency and we will conduct buyback from such perspective next fiscal is a long-term vision When we announce the vision, we will include a KPI in the announcement, and also we would like to be able to present the growth, including capital efficiency.

Thank you very much.

Next question is from Sato-san from J.P. Morgan Securities, please. Yes, this is Sato from JP Morgan. My first question is, as you mentioned, that the KPI for the next group long-term vision is subject to future consideration. But in your presentation today, the adjusted profit, EPS, Those are highlighted. That's my impression. In the current group long-term vision, when you announced that, you were more focused on economic value-based EV and value of new business and aiming for 0.5 times EV multiple. So the KPIs are more focused on the economic value-based figures. So regarding the KPIs that you're going to be focusing on, what is the reason behind the changes in the KPIs? On a related note, regarding ESR, regarding the optimal level of ESR, regarding the range of the target, you had tried many things in the past, but looking at some of the P&C companies, some have decided to lift the upper limit. So you have 225% as target right now. So would you consider just presenting the minimum that you'd like to achieve and not set the target or the range. And my second question is regarding the governance enhancement initiative in the next group, long-term vision. On page 31, you talk about the further separation of oversight and execution. Right now, the subsidiaries' CEO are also serving as a director of the holdings. And when activists mentioned that, I think a few months ago, the sharing of the IT system in order to integrate the management structure, it's optimal for the president of Tayo and Daito to also serve as the directors of T&D Holdings. Have this remained unchanged? Yes, Sato-san, thank you for your questions. First, regarding the KPIs that we are now working on, We are looking at both the financial accounting basis and also the economic value basis, especially for the economic value-based figures. Especially for Daido, we sell many long-duration products. So steady profit will be generated from there. So it's going to be the big pillar of the future stable profit. But on the other hand, for EV, for the share price to look at the EV, it cannot incorporate the long-term future profit for the next 30 years or so. But expanding our EV, assures the longevity of our business. So the KPIs on economic value basis and financial accounting basis will both be important. But we are now discussing what is the best KPI for us to target. And regarding the level of ESR, as insurance company. This is the yardstick of soundness and we believe ESR is important in that sense. So at this point, we will keep 225% considering the default probability of AAA rating company and we have no intention to change this. And regarding the governance structure, First, the separation of oversight and execution. What we show here is just part of what we are trying to do. And regarding the organizational structure, we will be considering many different options. And for one, we are going to focus on things that we show on this slide. For example, constitute the majority of the BOD with independent outside directors. And also the subsidiaries of presidents serving as the directors. On that point, right now, as we discussed, in the next long-term vision, These two companies which has the biggest chunk of the managerial resources, the whole thing has an important role to optimally allocate those resources. But we need to also act with speed for executing the strategies. So we still believe that having the president serve as the directors of the holdings still is important, but that will not be the case forever. So as we try to enhance the governance structure, there is a possibility for us to change this. But at this point, we have not made any change to this structure where the presidents are serving as the directors of the holdings. I say thank you.

Next, moving on to the next question, Sasaki-san of Nomura Securities. Please go ahead. This is Sasaki of Nomura. I have two questions. First question is that this time, listening to your presentation, you talked about domestic non-existing business. overseas wholesale or closed book, overseas insurance risk is to be incorporated. That is the message I received. On the other hand, Western countries closed book businesses, there are comments saying that there are various issues. The credit assessment of the insurance companies holding private equity, some say that it's too lenient. So in next five years and next ten years, do we need to consider any risk in investing capital? That is my first question. My second question is, The message in the past was to sell the equity and reduce the interest rate risk, and you will not take investment risk. On the other hand, overseas, the foreign currency denominated investment asset is to be increased. Generally speaking, for asset management of an insurance company, in addition to asset side, you need to consider liability. In your case, mostly the yen-based liabilities are the core. So such an insurance company to utilize overseas assets, how do you consider? Why did you come to such a judgment? The first question. Sasaki-san, thank you for your question. The comment was raised on closed book. Our company's understanding is that in the beginning, as it was referred to in the presentation, the investment to Fortitude we have made, in addition to that investment to Viridium and also to the sidecar, By investing in these, we have come to a certain level when it comes to closed book investment for Veridium. the geographical properties and business model is different from fortitude. So we were able to diversify the risks of the closed book business. So through these two investments, we can expect a stable profit contribution in the future. For other growth investments, this time we discussed on next group long-term vision, and currently we are reviewing various angles. basically we have not determined the region but rather we are pursuing high growth domain and also areas where we can leverage the life insurance business and other capabilities and track records and we are currently reviewing concrete policies that is the current situation On the second question, please turn to page 8 of the presentation material. Here we show the investment policy in the future. The numbers are presented here as you pointed out. based liabilities for this we match with yen capital and through ALM we cover the liability cost safely that is the first target and excess capital is to be utilized to aim at higher return and that is the basic concept so as you pointed out The equity rate risk is reduced and the interest rate risks are also to be reduced. And on top of that, utilize the capital we hold to aim at further higher return. That is the policy in focusing on the overseas investments.

Understood. Thank you very much. Next question is from Mr. Sakamaki from Mizuho Securities, please.

Yes, this is Sakamaki from Mizuho Securities. I have two questions. My first question is regarding page 26. Regarding the KPI, you have not really made any update, but for March 2031, 200 billion yen and higher for this target. are you going to be revisiting this target as you make of the long-term vision in the last six months or so uh you have uh benefited from the higher equity price that you reach out for the point portfolio and set up the sidecar so environment is changing So if you could refer to a potential vision of this target. And my second question is regarding the growth investment. Could you elaborate on what you intend to do? On the closed book, I think you have one full cycle. But regarding the future investment, is it going to be a small-scale investment, like I said, investment overseas? Or... Are you also considering large-scale investment? So those are my questions. Yes, thank you for the question. This target, over 200 billion yen, this was a rough concept when we were considering the plan. So when we make the long-term vision, we probably should be able to show you more specific vision. Also compared to when we started to consider our plan, the interest rate is increasing and the share price or equity holdings is increasing. So the unrealized gain is going up and inflation is also persistent. So we will be looking at those factors and also the sales results of the policies so that in March or April next year, they will be able to offer you a more specific picture. Yes. And regarding the growth investment, as we presented, the investment for closed book has run its course. So going forward, basically, as we look into the future, in order to achieve the future profit target. As a part of external growth, the new investment will have to make sufficient contribution for us to achieve future profit growth. So we are looking at the investment where we can enjoy a certain level of return. But basically, we will look at the objectives and the intentions of the investment and also the terms and conditions of the counterpart. So scale is not the only factor we will be looking at. So it will be considered on a case-by-case basis. And also for the profit and the return, the investment may be seeking for short-term return, or as you have said, we may be making some seed type of investment for a longer-term return. We would also have to start looking to see if there are opportunities that could be included in our pipeline. So going forward, we will have a further deeper discussion to consider what can be done. And if I may add, regarding the first question, As Nagai-san explained, going forward we will be more specific about our target. But this 200 billion yen just reflects the existing business. So any new investment that we are planning to make are not reflected in this figure. So with the existing business we want to achieve 200 billion yen or higher. And regarding the growth investment, we are looking at opportunities overseas, and the size will depend on the opportunity. We may consider raising funds. And also in the domestic market for the non-insurance areas, the size of the investment may not be huge, but they will be looking at opportunities. And we would also consider how to create a new value proposition by complementing our core business. So that means the option is not limited to investment, but we can also consider alliances.

Thank you. That's very clear.

Moving on to the next question, Morgan Stanley, MUFG Security. Sakemura-san, please ask your question. Thank you for the opportunity. I have two questions. First question is related to page 8, domestic risk and equity risk outlook. I would like to form an image of the risks for domestic interest rate risk for the current period. reduction pace will be 10 billion yen or so and going forward vital life duration matching will be done and cash flow matching will be done. So shall we have the similar pace image in terms of interest rate risk reduction. On the right hand side there is equity risk, 17.8 billion yen risk reduction is planned for the current period. Shall we expect a similar pace going forward? If that is the case, when the share price goes up and risk increases, then are you going to accelerate the sale? Are you going to look at the risk amount to consider the sale of equities? My second question is, The share price evaluation or assessment in the future, how are you going to evaluate in the discussion? You talked about embedded value. That is important in the long term. And looking at the share price, that will be an indicator, and financial indicators are also important. Price to embedded value of 0.5 times was mentioned from before. But that indicator is less important going forward, or are you going to fill this embedded value part using reinsurance? I thought that this relates to share buyback. So those are my two questions. Thank you for the question. The first point, the risk amount, the outlook going forward, the interest rate risk, the absolute amount lies when the policy enforce increases. Well, considering that will increase, the absolute risk will not significantly go down, but the ratio can be reduced. For domestic equities, 20% is the target. Market value-based sale was actually 20% because of the stock price increase of the shares held. This is the number right now. And for equity in the portfolio, we are going to reduce to roughly 5% on market value-based. So absolute amount-wise, we will further reduce. On the second question, I think I've mentioned before EV. The ultra-long future profit, the value of the base in force is included. So there's uncertainty due to the fluctuation of the assumptions used for calculation. So partially the share price is discounted due to that. For share price valuation indicator, one indicator is PER. On page 18, right-hand side bottom, there's a mentioning based on the period's net income. EPS is 295 yen. And PER is 11 to 12 times based on the current share price. So in the medium to long term, sustainably, we are to increase EPS and DPS. And also the growth of investment with discipline and strengthening the group's resilience. Through these measures, we are to foster the expectation from the market and increase the trust. So that is how we want to increase the share price and PER. As I mentioned, under the topic of KPI, future source of the profit is the enforced policies. So we, at the same time, would like to aim at increasing GDP. Share price EV ratio through the measures I just mentioned, the share price and the value of the company shall be raised. And through that, we would like to increase the ratio as well. I understood very clearly. Thank you very much.

Next question is from Mr. Majima from Tokai Techco Intelligence Lab. Yes, this is Majima. First on page 8, there were a number of questions on this page. For March 2030, are you going to reduce the equity portfolio to 5%? If we can achieve that, The risk will be reduced, but you will also be losing the unrealized gains on the equities, although that will be subject to the equity market situation at that point. So beyond this, you will have to manage your business, not relying on these unrealized gains. Of course, there is a risk with the equity holdings, but looking at the history of the life insurance companies, you are able to utilize the unrealized gains on the equity holdings to deal with the issues. You use that benefit this year to reshuffle your bond portfolio. Considering that in March 2032 you will not have a huge realized gains, what kind of business model are you going to pursue? Or are there not going to be a material change? My second question is on page 25 regarding the sales reps for Taiyo Life. You talked about that. Also, because they have performance-based pay, so they don't need a lot of fixed cost. But recently, given the current labor market situation, I think the other companies are also seeing an increase in the fixed cost for their sales representatives. So I think you also have to follow suit, which means that how are you going to maintain the profitability of your sales representatives? Because if they continue to sell the same product, this channel may not be as profitable. or you may have to conduct some reform for the employees that are working in the office of Taiyo Life. So how would you address these concerns? Yes, thank you for your question. So as we have been explaining, So the goal of investment for the insurance liabilities, we will cover the liability cost with the yen interest asset. And we will try to achieve excess return with that. So in order to cover for the assumed investment rate, It's going to be stable, so we will not have to rely on the unrealized gains on equity holdings. In the past, when we had negative spread, we had to use the unrealized gains to cover for that. That is true. But going forward, we will be able to cover for the cost of liability by the yen interest asset. So we will not have to rely on the unrealized gains on equity holdings anymore. Also, we will not have those unrealized gains, but that risk will have to be considered on a market-to-market basis. So if the exposure is 10% like today, then the volatility will be bigger. But by reducing that exposure to 5%, then the volatility risk will be mitigated, and the risk on the portfolio will be smaller compared to today. Thank you, Mashima-san. And regarding the sales representatives, the biggest strength of this channel is the hospitality as a face-to-face channel, and also they only sell their captive products. So this is a unique sales structure in Japan, and I believe this is one of our strengths. With that said, the performance-based compensation exists, but we also have the fixed salary base. So given what we're seeing in the market, we expect the fixed cost to go up. In a style of life, what are the countermeasures? For one, As we said earlier, we will be changing the product portfolio to enhance profitability. And for that, how do we incorporate more profitable products? And we also are looking at the assumed business expenses, which is reflected in the policies. So we will raise that so that the policy design will be more profitable. And that's how we try to deal with the rising wages. And on page 25, we have not been able to present the details, but when we decompose the zoning structure, we are doing this at a very granular level. And one thing that we are trying to do is to enhance the productivity of the sales representatives. So those KPIs will be monitored to respond to the rising cost. Of course, it takes a while to train the sales representatives, but after the training is completed, then the sales rep will be quite productive. So transforming the training structure is also something that will be considered to implement.

Thank you. Moving on to the next question.

This will be the last person to ask question. Thank you for your understanding. Sujino-san of BOVA Securities, please. I have two questions. First, interest rate risk, the absolute amount will not decline on page 10. On the left-hand side, there's a blue bar. That is large, quite large. It may take long. The unrealized loss that you have here to write off ore and change to long-duration vehicles, through that you can reduce interest rate risks. But will this not go down significantly? and another point selling japanese and overseas equities right now you have large hedge position and that will also decline am i correct right now hedge cost is quite high looking at the macro perspective for a certain time, hedge costs will likely to go down. But if you continue to hold the hedge position, at some point, costs will go up again. When you look at the U.S. interest rate level, then that can happen. If the profit is $100 billion, then the volatility may be minor. but there will be some impact. So hedge position, what are you going to do with this? First, on interest rate risk of Daido, page 10, upper part, shows the cash flow from assets and liabilities of Daido. As you say, 10 years or less direction the asset is bigger and after that the liability is bigger this is intentional position for 40 years or longer then the cash flow for the years later will largely differ depending on the current trend and currently there is no cash government bond for a 40-year duration. In this area, we have not allocated the assets for 10 years or shorter. in this area by taking uh more credit risk we are to expand our profit and so uh so uh 10 year where we can take credit we have larger position versus liability currently at tayo Rather than conventional interest rate matching, we are recreating based on cash flow matching. From that perspective, for 10-year period to 40-year period, we have made progress. And this area is where we are to proceed with cash flow matching. 40-year and longer and 10-year and longer, we are to look into a review. On case-by-case basis, the second point on hedge, utilization of the hedge, depending on the market condition as the optimum method, we will be using hedging to reduce the position on page 8 towards 2030, the concept of portfolio. By using hedge, This is not the perspective to use hedge, but the cash position is what this is talking about. But depending on the market environment, we will utilize hedge position, but it's not that we're going to constantly use the hedging in developing the portfolio. So absolute hedge position will not decline. or will it be kept at the similar level, just some increase or decrease? Let me repeat, depending on the market environment, if it is more efficient to utilize a hedge position, we will do so, and also we will use our market outlook to make the judgment, and we may increase the hedge balance, but in the major investment policy, we do not assume that we are going to use hedge to reduce the position. Understood. Thank you very much.

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