T&D Holdings Inc Ord

I'm Ito from T&D Holdings IR Division. Thank you very much for attending this conference call for earnings results announcement. And the materials are posted on our website in the IR section. And at the outset, I will provide a 10-minute explanation following the materials, and then we will have a Q&A. Without further ado, Let me begin my explanation. Please turn to page three. First of all, I would like to present the key highlights of the financial results. For the fiscal year ended March 2026, a group adjusted profit exceeded the full year forecast of 146 billion yen, reaching a record high of 158.5 billion with adjusted ROE at 10.5%. The full year forecast for the fiscal year Ending March 2027 is 172 billion yen, which is up 13.4 billion yen year-on-year, which is 131 billion yen up. Sales results of new policies exceeded the plan at TAIO and TDF. While DAIDO fell short of the plan, it exceeded year-on-year levels. Surrender under LAPS. Laps rates increased at Tayo and Dido while declined at TDF. Value of new business as the combined total of the three life insurance companies amounted to $169 billion. Group EV increased by $292.9 billion from the previous fiscal year to $4. 1,238.6 billion with ROEV at 12.1%, ESR was 222%. Domestic and foreign equities totaling approximately 296 billion were sold during the fiscal year by Taiyo and Daido combined. In addition, the increase in interest income resulting from the replacement of yen-denominated bonds In the fiscal year ended March 26, was approximately 6.5 billion yen on an annual basis. Dividend per share forecast for the fiscal year ending March 27 is 164 yen, an increase of 34 yen from 130 for the fiscal year ended. Thank you very much. The three life insurance companies recorded profit growth, while T&D United Capital posted a decline in profit. Next page, please. The key performance indicators of the three life insurance companies presented, Tayo and Dido, the positive spread increased mainly due to higher interest and dividend income. Although Dido recorded a capital loss, this was attributable to realize the losses incurred from bond replacement, which was undertaken with the intention of achieving cash flow matching. TDF recorded a profit increase mainly due to improvements in insurance margins driven by growth in imports policies. The factors behind the changes in core profit are shown on page 8, notably for both TAIO and DAIDO, an increase in the reversal of the reserve for retirement benefits contributed to higher core profit. Please move to page 9. Average assumed investment yields of TAIO and DAIDO were 1.36% and 1.2% respectively. Next page, please. T&D United Capital's adjusted profit decreased by 1.8 billion year-on-year, to 10.7 billion. Profit contributions from Viridium commenced from the fourth quarter. Next page, please. Cumulative adjusted profit from investments in the closed book business amounts to approximately 89 billion. In addition, dividends received for the fiscal year ended March 26th. Next page, please.

New policy amount at Daido continued to be strong and achieved a year-on-year growth. Although the surrender and lapse rate rose, in-force business volumes increased compared with the end of the previous fiscal year. Please turn to the next page. Annualized premiums of new policies at TDF declined year-on-year, mainly due to 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. Please turn to the next page. We have previously disclosed market consistent embedded value, MCEV, in accordance with the MCEV principles. However, in light of the introduction of economic value-based solvency regulations, we disclosed Group EV from the results for the fiscal year ended March 2026, reflecting calculation methodologies aligned with a new regulatory framework. The impact of this change in methodology amounted to a decrease of 136 billion yen. Group EV increased by 292.9 billion yen from the end of the previous fiscal year, primarily driven by the accumulation of the value of new business and higher domestic and overseas equity markets reaching 4,238.6 billion yen. The value of new business for the three life insurance companies increased by 2.9 billion yen from the previous fiscal year, mainly due to a stronger new business performance and rising domestic interest rates reaching 169.0 billion yen. The new business margin was 8.7%. The breakdown of EV for the three life insurance companies is presented on page 16. The drivers of change in Group EV are shown on page 17 to 18, and sensitivities are provided on page 19. Please move to page 20. This page shows the status of investment at Tayo and Daido. the combined amount of domestic and foreign equity sales by the two companies was approximately 296 billion yen. The increase in interest income associated with the replacement of yen-denominated bonds in the fiscal year ended March 2026 amounted to approximately 6.5 billion yen on an annual basis. The interest rate matching ratio stood at 88.3% for Daido and 96.7% for Taiyo. Page 21 shows you the status of foreign currency-denominated bonds. Please turn to page 24. This page shows the status of net valuation gains on losses on general account assets. While unrealized losses on public bonds increased due to the rise in domestic interest rates, unrealized gains on equities increased, reflecting higher domestic and foreign equity prices. Please turn to page 26. As of end of March 2026, the ratio of strategic shareholdings to net assets stood at 19.1%, reflecting an increase in the market value of the holdings. We will continue to work on reducing our strategic shareholdings to zero by the end of March 2031, except those for business partners and collaborators with an interim target to reduce strategic shareholdings by 40% by the end of March 2028 compared to end of March 2026. Please turn to the next page. Stocks that have been reclassified from strategic shareholdings to pure investment holdings are being sold off as part of the process of reducing equity risk. As of end of March 2026, 59% of such shareholdings were divested on a cumulative basis. Please go to the next page. While surplus increased from the end of previous fiscal year, economic capital increased and ESR declined due to increased mass surrender risks driven by rising domestic interest rates as well as investment into viridium. The ESR under the new regulatory framework is currently being calculated and preliminary figures are scheduled to be disclosed at the IR meeting planned for June 5th. Please move to the next page. Consolidated full-year earnings forecasts for the fiscal year ending March 31, 2027 are stated on this slide. Group adjusted profit is expected to increase by 13.4 billion to 172 billion yen, and adjusted ROE is expected to be 11%. Please turn to page 31. The breakdown of the earnings forecast for the three life insurance companies is as shown. At Tayo Life, beginning with the fiscal year ending March 27, the key performance indicator will be changed from annualized premiums of protection-type policies to key performance annualized premiums. This change reflects the introduction of products that respond to changes in the business environment, including rising interest rates, and incorporates the protection component of savings-type products in addition to the conventional protection-type annualized premiums. The outlook for the core profit and spread is presented on page 32. Please turn to page 33. Finally, I will explain shareholder returns. The dividend per share for the fiscal year ended March 2026 remains unchanged at 130 yen as announced on March 17th. The forecast dividend per share for the fiscal year ending March 2027 is 164 yen, an increase of 34 yen year-on-year. This concludes our presentation of our financial results for the fiscal year ending March 2026.

Next, we would like to move on to the Q&A session. The first questioner is Mr. Muraki from SMBC NICO Securities. Please. Go ahead. This is Muraki from S&P Cineco Securities. I have two questions. The first one is on page 31, the TAIO and DAIDO adjusted profit, the revised guidance. So it's mostly flattish, I understand, but the proceed from a sale of Neuron Belgar and retirement allowance and Dido's business expenses increasing, but there seems to be rather huge variance. And can you explain to me the factors behind the variances? That is my first question. Thank you, Mr. Muraki, for your question. So regarding this fiscal year and last year, I would like to explain about variances. Probably it's easy to understand if you look at page 32. So the profit and dividend income. First of all, alternative assets performed extremely well last year. And because of the absence of such... exceptional performance. There is a reduction of about 20 billion yen. And also, because we saw the equities, the income related to equity reduced 6 billion yen. On the other hand, the replacement of yen-denominated bonds, the increase of 11 billion yen, and the hedging costs Next, increased expenses, 20 billion yen. So the factors behind the increase in business expenses, so the figures for three companies combined, first of all, system expenses, 8 billion yen, and then the personnel cost, 4 billion yen. And new policy acquisition cost, 3 billion yen. So these are our assumptions. Other than that, capital gains. So going back to page 31, so $64 billion, just about. And the loss from Marcelo Bayen-denominated bonds is about $60 billion. And then the remaining $20 billion is mostly a reduction in equities. And Nubin Bilgar said, So 12 billion euro sale proceed or the proceed will be 24 billion. And in May of 2026, when we obtain the approval from the authority, the deal will be completed. Extraordinary loss of 20 billion or more. occurred last year but this year we don't have this and Taiyo I forgot to mention Taiyo so last year it performed well incremental profit of 10 and this year 10 billion yen down because of the absence of that and died of 4 billion yen And we took a conservative view towards this. And page 32, and Taiyo Bank Assurance, a difference of 2 billion yen down and an increase in business expenses. And TAIO, the 2 billion yen reduction will come from downsizing of bank assurance plus increased business expenses. That is my explanation. Thank you. My second question is about surrender. Page 17, EV. So impact of surrender, what is the amount of impact, and what is your assumption about this year's surrender? Page 18, first. So insurance-related assumption and variance, the three companies, these are mostly related to surrender. Tayo of $77 billion, $54 billion is the impact of surrender. Dido out of $87 billion, $61 billion is the impact of surrender. And the surrender trend, it's difficult to say, but regarding daido life, last year we saw an increase in surrenders, which is shown on page 13. But the factors behind this is J-type surrender. product, which was launched in June, and review of the protection. So this is sort of a one-off increase, excluding that it will be below the previous year. And regarding March 2027, we are expecting slight improvement. However, EV, because we use a 10-year average, so 10 years ago and this year's surrender level is higher. So for EV, we are starting to see some negative impact. Next is Tayo. Tayo, page 12. So below a bar graph, as you can see, the surrender is increasing. So bank assurance-related surrender is increasing because of rate hike surrenders are increasing. And one-time payment products are seeing surrenders. So bank assurance-related So after five years, the cash surrender value will not increase, and therefore we are expecting surrender will be leveled off on the PLATO going forward. And impact on EV moving forward. If the surrender situation deteriorates, it will certainly have an impact on EV. So we will review this. And this year's impact is already included, but moving forward, the additional impact will be reviewed. That is my explanation. Understood very well.

Thank you very much. We will now take the next question.

Biobay Securities. Thank you for taking my question. My question is related to the answer to the previous question. For Daido, I'd like to ask about the capital gain. of 34 billion yen. Out of that, 24 billion is, I think, about new burgers. That is a one-off. So next fiscal year, year ended March 28, that impact will be absent. So you might think that I'm talking about too much in the future. But insurance-related deterioration was seen for this fiscal year, especially for Daido. There's the increase in system-related expense and personal expense over 20 billion yen or so. And if that system-related expense increase is not a one-off, then I'm wondering about the year ended March 2028. How do you maintain the profit and make sure that it doesn't go down? Oh, thank you very much for your question. DAIDO, basically, it's a positive spread increase. For DAIDO, new money, about 200 billion inflow will be allocated to the assets, and that will lead to positive spread. And also, we will conduct the yen bond replacement. So new money plus the bond replacement should improve the positive spread. and the interest and dividend income. Replacement? Really? I see. So with the replacement of yen bond last fiscal year, you worked really hard, and so you achieved 11 billion yen positive for this fiscal year as a result of the replacement of yen bond last year, right? No, that is not the number. For two companies combined, the replacement of yen bond impact is 6.5 billion yen, and the rest is the impact from the new money. And there is also the sales of the equity, and so capital gains can be expected to some extent. And we are also conducting the replacement of yen bonds. So on a net basis, it's hard to say, but that is the improvement. I see. So you will work very hard to not decrease profits for the year ended March 2028. Yes, of course. Consolidated adjusted profit of 230 billion. We will work hard to make sure that this is realized. Thank you. And in terms of the surrender impact, which significantly lowers EV, this kind of assumption change So for Dido's moving 10-year average, given the current trajectory, the March 2027 revision, will that also be negative? And for Taiyo, what do you think will happen? So I'm sorry, I'm talking about further into the future again. Ujino-san, your understanding is correct. because we're taking a 10-year moving average, and the surrender rate today is higher than 10 years ago. So in that sense, EV will be slightly negatively impacted. And for Taiyo, the current surrender and lapse are reflected. But if the situation worsens, then that will also be reflected into the future numbers. Do you think that you have responded sufficiently? Thank you for the question. Well, it's very hard to say, because for the bank insurance products, there are products that haven't yet reached the surrender point, but going forward, there will be the break-even period. And if the surrender rate goes up, then that will negatively impact EV. But we don't yet have the actual track record, so we're not able to reflect that into numbers yet. But for the bank assurance, once the interest rate reaches a certain level, and after a period of five years, then the... Bank staff will no doubt promote the surrender and lapse for the customers. So I think you can forecast the amount of surrender in the next one or two years, but you have not reflected that yet. Thank you for your question. So for where we have the results, we have already reflected that into the forecast. But when we don't have the forecast, we're not able to reflect that. But I think that's wrong, since the character of the products allow you to forecast. Well, let me supplement that explanation a little bit. For the products that... have been surrendered, there is a five-year period. And then since then, the surrender value doesn't go up after the break-even point is reached. But for the products, there are products that have been introduced where the surrender value does go up even after reaching the break-even period.

So product-wise, there are some differences. Let us move on to the next question.

From Daiwa Securities, Mr. Watanabe, please go ahead. Watanabe from Daiwa Securities. I have two questions. One about the surrender rate. I would like to understand the impact of a rate hike. Two years ago, the surrender trend of contracts, other than the seeded contracts, I would like to understand the current trend. And also, if the impact of J-Type is excluded, how would it look like? Thank you, Mr. Watanabe. Regarding TAIO, so we are seeing an increased surrender for one of payment type, but excluding the impact of J-type protection review, it's not increasing. That is all. Thank you. My second question is about the shareholder return in fiscal 2025 DPS. Although the adjusted profit increased significantly, you decided not to... increase the dividend. What is the reason? And you also decided not to buy back shares. And based upon what criteria would you decide to go ahead and buy back shares? First of all, thank you, Watanabe-san. First of all, the reason why we did not increase the dividend So 130 yen, this is appropriate level because it satisfies 60% of five-year average profit. So because we are using five-year average, even when we see an upside in profit, it will be reflected upon the dividend hike gradually. Next is about buyback. So on page 53, you can see our dividend payout policy. The left shows returns from periodic profit, and the right shows the additional returns based upon capital level. So we are aiming to return 60% of the profit based upon this return policy, as I explained at November IR session. We would like to be agile. Rather than fixing the timing, we are contemplating the possibility to buy back shares in an agile way. So that is our policy. Thank you. So DPS, even five-year average is used. I think it should go up one or two, but you have rounded the number. Am I right? Yes, you are right.

Thank you. Please go ahead.

This is Sasaki from Nomura Securities. I have two questions. First is regarding new policy sales results. In terms of Daido, you said that new policy sales results underperformed. Was that... Due to some changes in the customers, why do you think that there was some downturn in the new policy sales results for Daido? And for Taiyo, you talked about change in the KPI to incorporate the protection component of savings-type products. Is that product being sold by in-house sales reps? And since it is a savings-type product, Perhaps there is impact on the investment income. Can you talk about that as well? Thank you for your question. I'd like to respond to the second question first. Your understanding is correct. Yes, these are the savings type products that are being sold by in-house sales reps. And in terms of the impact on the investment income, yes, there is a cash inflow. So with the current environment, this should contribute to positive spread. That is the second question. And then first question, you said that the new policy sales results for Daido underperformed, but that is not against the previous year. That is against the budget, against the March 26th budget. There was some reduction, but against the previous year, the sales results grew. So the performance for Daido is solid. And Daido's total... protection, the meticulous consulting sales to respond to the customer's protection type needs is going well. And so its performance is not weak at all. It is quite solid. And the reason why there was some gap from the budget is because we had set a very challenging target. I understand. I have one more question. The ear and ESR of 222%, is that high or is that low for you? Just one word, do you think it's high or low? Thank you for your question. In terms of ESR, We haven't talked about this much recently, but we have a range of 185 to 225, which we deem as the appropriate level, and we'd like to control ESR within this range going forward. The value of new business. contributes to higher ESR, and then we will allocate that appropriately through investment and shareholder returns. And we will also monitor our competitor situation. So perhaps we will keep it on the higher level of the 185 to 225 range, but basically we will control within this range, 185 to 225. So what you're saying is that you're currently in range. That's your conclusion. Yes, that is correct.

Understood. Thank you very much. Sato from JP Morgan.

Secretary-General, I have two questions. Both of them are simple confirmation. The first point is 172 billion yen figure for this fiscal year. Is this the better than real number? Or taking into account the proceed of sale of Neuron Velgar and replacement of yen denominated bond offsetting, is this close to your real ability? And at the same time, the plan for this fiscal year, I think the same applies to every fiscal year. I think you are taking a conservative view for alternative and replacement. You are putting the replacement of yen-denominated bond to have an upside. Thank you, Sato-san, for your question. Your first question, as your understanding is correct, this is a real ability and upside and downside factors. But first of all, alternative investment, we are expecting 20 billion yen decrease year on year. And as you rightly pointed out, the improvement of yen-denominated bond is very important in order to reduce interest rate risk and to improve investment yield. We would like to replace yen-denominated bond. That is my explanation. Understood. Thank you. My second question is about Tayo Life Bank Assurance Channel. So I think you used the expression that you will control it. Does it mean, apart from whether it means withdrawing from the bank assurance, if in fact you decide to stop doing bank assurance, Will it induce surrenders? Is there such risk? So this year as well as beyond this year, what is your assumption? Regarding bank assurance, at this point in time, we have no plan to withdraw. But regarding the bank assurance, we will look at the surrender trend and make a decision. That is all. Some investors are talking about withdrawing from this line of business, and they are pressuring you. But this is hypothetical, but if, in fact, you decide to stop doing bank assurance, would it induce surrenders? Am I right? Yes, I think your understanding is correct. Understood.

Thank you. Next question, please.

Misuho Securities, Sakamaki-san, please go ahead. This is Sakamaki from Mizuho Securities. Thank you. First question is a simple confirmation. I'd like to ask about the economic assumptions for the plan, whether it's equities or interest rate or FX, there's a lot of movements. And for the alternative investment, what is the assumption for your forecast of decline of 20 billion year on year? Thank you for your question, Sakamaki-san. In terms of the economic assumptions, please turn to page 29. Oh, sorry for that. So January end is the standard that we're using. So exchange rate and rate of currency hedge cost impact the P&L. The exchange rate impacts the loss from the foreign bonds and the rate of currency hedge cost as well, which is the actual hedge balance is shown in another page. For the alternative assets, forecast is quite difficult to And since last year we had a big upside, we are subtracting that this fiscal year. Thank you. Understood. And my second question is regarding ESR. You talked about a range of 185 to 225. In the mid-term plan, you are going to do a lot of investments. Do you think that you have enough investment capacity with the current level or... Do you plan to keep a high level of the range of the ESR? Is there room to lower that range? Thank you for your question. In terms of ESR, as I explained earlier, basically it goes up with the value of new business. So even with investment, we believe that we can control it within a certain range, namely 185 to 225%. And cash flow-wise... 60% shareholder returns and 40% for investment for growth. And if there is no such opportunity, then we could further expand the return. And we will also have external financing. So it is not that ESR will worsen as a result of increase in investment. Understood. So in your materials, you usually talk about 225%. So I was thinking that's your line of defense. But today you explained a range from 185 to 225. So you're not expanding the lower range at this time. No, your understanding is correct. We will monitor the competitive situation and we will control it within this range.

Thank you very much.

So we are running out of time and therefore we would like to take the last question. Morgan Stanley, MUFG Securities, Takemura-san, over to you. Thank you. I have two questions, two simple questions. One is about new policy value. So new policy margin is 8.7% of which is down from 9.3% of Q3. I would like to understand the factors behind this. And this year's new policy value. I think the plan, your plan is that this is going to be flat, but for Taiyo, you are expecting a decline, and I would like to understand the factors behind that as well. Takemura-san, thank you for your question. First of all, the reason why margin declined in Q4, margin did not grow in The major factor was the review of insurance assumption and also the review of expense ratio. And we changed the model this time around. In other words, we tried to match the regulatory model, the impact of reviewing the calculation method for the risks of not being able to hedge. So this is another factor behind why margin did not grow. This is my explanation for your first question. Thank you. So 172 billion yen, I think your plan is to be flat. But are there any special factors? For example, the decline in the new policies for Taiyo? Yes, we are expecting decline in the bank assurance business, and also the TAIO, it's a protection-type product, and therefore the rate hike has a negative impact on its business performance. And that is the reason why we lowered the expectation for new policy value. Thank you. I would like to confirm another point regarding adjusted profit for this fiscal year. It's $172 billion vis-à-vis the midterm plan. So the midterm plan target... is 900 billion yen for five years. So if the adjusted profit remains flat, and if last year has 210 billion, so... This is a rather high number. And if, in fact, there's an upside in adjusted profit, how do you plan to use that? Do you plan to reduce external funding or to increase shareholder return? Thank you. It depends on the circumstances, but one thing I can say is based upon the shareholder return policy, if profit increases, we will increase shareholder returns such as dividend and external funding. It depends on the external environment, so I cannot say for sure. Understood. Thank you very much.