T&D Holdings, Inc.

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.