I'm Ito, from T&D Holdings IR division. Thank you very much for attending this conference call for our earnings results announcement. The materials are posted on our website in IR section. At the outset, I will provide a 10-minute explanation following the materials, then we will have a Q&A. Without further ado, let me begin my explanation. Please turn to page 3. First of all, I would like to present the key highlights of the financial results. For the fiscal year ended March 2026, group adjusted profit exceeded the full year forecast of JPY 146 billion, reaching a record high of JPY 158.5 billion, with adjusted ROE at 10.5%.
The full year forecast for the fiscal year ending March 2027 is JPY 172 billion, which is up JPY 13.4 billion year-on-year, which is JPY 131 million up. Our sales results of new policies exceeded the plan at Taiyo and TDF, while at Daido fell short of the plan. It exceeded year-on-year levels. Surrender and lapse rates increased at Taiyo and Daido, while declined at TDF. Value of new business as the combined total of the three life insurance companies amounted to JPY 169 billion. Group EV increased by JPY 292.9 billion from the previous fiscal year to JPY 4,238.6 billion, with ROEV at 12.1%. ESR was 222%.
Domestic and foreign equities totaling approximately JPY 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 2026 was approximately JPY 6.5 billion on an annual basis. Dividend per share forecast for the fiscal year ending March 2027 is JPY 164, an increase of JPY 34 from JPY 130 for the fiscal year ended March 2026, making the 12th consecutive year of expected dividend increase. Next page, please. Financial KPIs are shown in this page. Adjusted EPS increased by 19.1% year-on-year, exceeding the growth in adjusted profit, supported in part by the reduction in the number of shares outstanding due to share buybacks. Next page, please.
The key revenue and profit items of each company are shown in the table. The three life insurance companies recorded a 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 are presented. Taiyo and Daido, the positive spread increased year-on-year, mainly due to higher in-interest and dividend income. Although Daido recorded a capital loss, this was attributable to realized 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 as driven by growth in in-force policies. The factors behind the changes in core profit are shown on page 8.
Notably for both Taiyo 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 Taiyo and Daido are 1.36% and 1.2% respectively. Next page, please. T&D United Capital's adjusted profit decreased by JPY 1.8 billion year-on-year to JPY 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 JPY 89 billion. In addition, dividends received for the fiscal year ended March 2026 amounted to approximately JPY 22 billion, bringing the total cumulative dividends received to date to approximately JPY 30 billion. Next page, please.
At Taiyo Life, annualized premiums of new protection-type policies increased from the previous fiscal year, while surrender and lapse rate increased mainly due to increased surrender in the agency channel. Annualized premiums of in-force protection-type policies increased from the end of the previous fiscal year. Next page, please. New policy amount at Daido continued to be strong and achieved a year-on-year growth. 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. 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. In light of the introduction of economic value-based solvency regulations, we disclose Group EV from the results for the fiscal year ended March 2026, reflecting calculation methodologies aligned with the new regulatory framework. The impact of this change in methodology amounted to a decrease of JPY 136 billion.
Group EV increased by JPY 292.9 billion 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 JPY 4,238.6 billion. The value of new business for the three life insurance companies increased by JPY 2.9 billion from the previous fiscal year, mainly due to a stronger new business performance and rising domestic interest rates reaching JPY 169.0 billion. 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 17-18, and sensitivities are provided on page 19. Please move to page 20.
This page shows the status of investment at Taiyo and Daido. The combined amount of domestic and foreign equity sales by the two companies was approximately JPY 296 billion. The increase in interest income associated with the replacement of yen-denominated bonds in the fiscal year ended March 2026 amounted to approximately JPY 6.5 billion 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 0% by the end of March 2031, except those for our 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 forecast for the fiscal year ending March 31, 2027 are stated on this slide. Group adjusted profit is expected to increase by JPY 13.4 billion-J PY 172 billion, 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 Taiyo 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. I will explain shareholder returns. The dividend per share for the fiscal year ended March 2026 remains unchanged at JPY 130, as announced on March 17th. The forecast dividend per share for the fiscal year ending March 2027 is JPY 164, an increase of JPY 34 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 Nikko Securities. Please go ahead.
This is Muraki from SMBC Nikko Securities. I have two questions. The first one is on page 31, the Taiyo and Daido adjusted profit that revised the guidance. It's mostly flattish, I understand, but the proceed from sale of New York Belger and retirement allowance and Daido's business expenses are increasing, but there seems to be rather huge variance. Can you explain to me the factors behind the variances? That is my first question.
Thank you, Mr. Muraki, for your question. Regarding this fiscal year and last year, I would like to explain about the variances. Probably, it's easy to understand if you look at page 32. The profit and the dividend...
...income. First of all, alternative assets have performed extremely well last year. Because of the absence of such exceptional performance, there is a reduction of JPY 20 billion. Also because we sold the equities, the income related to equity reduced JPY 6 billion. On the other hand, the replacement of yen-denominated bonds, the increase of JPY 11 billion and the hedging cost. Next, increased expenses. JPY 20 billion. The factors behind the increase in business expenses. The figures for three companies co-combined. First of all, system expenses, JPY 8 billion, and then the personnel cost, JPY 4 billion. New policy acquisition cost, JPY 3 billion. These are our assumptions. Other than that, capital. Going back to page 31.
JPY 64 billion just about, and the loss from sale of yen-denominated bonds is about JPY 60 billion. The remaining JPY 20 billion is mostly a reduction in equities. Viridium Group, EUR 12 billion sale proceed, or the proceed that will be EUR 24 billion. In May of 2026, when we obtain the approval from the authority, the deal will be completed. Taiyo, extraordinary loss of JPY 20 billion or more, occurred last year. This year, we don't have this. Taiyo, I forgot to mention. Taiyo, last year, they performed well, incremental profit of JPY 10.
This year, JPY 10 billion down because of the absence of that. Daido, JPY 4 billion. We took a conservative view towards this. Page 32, Taiyo bancassurance, difference of JPY 2 billion down and increase in business expenses. Taiyo, JPY 2 billion reduction will come from a downsizing of bancassurance, plus increased business expenses. That is my explanation. Thank you. My second question is about surrender. Page 17, EV. Impact of surrender, what is the amount of impact and what is your assumption about this year's surrender? Page 18. First, insurance related assumption and variance. The 3 companies, these are mostly related to surrender.
Taiyo of JPY 77 billion, JPY 54 billion is the impact of a surrender. Daido out of JPY 87 billion, JPY 61 billion is the impact of a surrender. 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. The factors behind this is J-type product, which was launched in June and a review of the protection. This is sort of a one-off increase. Excluding that, it'll be below the previous year. Regarding March 2027, we are expecting slight improvement. EV, because we use a 10-year average, 10 years ago and this year's surrender level, this year's surrender level is higher. For EV, we are starting to see some negative impact.
Next is Taiyo. Taiyo, page 12. Below a bar graph, as you can see, the surrender is increasing. Bancassurance related surrender is increasing because of a rate hike, surrenders are increasing. One-time payment products are seeing surrenders. Bancassurance. The after five years, the cash surrender value will not increase, and therefore, we are expecting surrender will be leveled off on a plateau going forward.
Our impact on EV moving forward, if the surrender situation deteriorates, it will certainly have an impact on EV. We will review this. 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. BofA Securities, Tsujino-san, please.
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 JPY 34 billion. Out of that, JPY 24 billion is, I think, about new business. That is a one-off. Next, next fiscal year-ended March 28, that impact will be absent.
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 is the increase in system-related expense and personal expense, over JPY 20 billion or so. If that system-related expense increase is not a one-off, I'm wondering about the year ended March 2028. How do you maintain the profit and make sure that it doesn't go down?
Thank you very much for your question. Daido, basically, it is a positive spread increase. For Daido, new money, about JPY 200 billion inflow, will be allocated to the assets, and that will lead to positive spread. We will conduct the yen bond replacement, new money plus the bond replacement should improve the positive spread and the interest and dividend income.
Replacement, really? I see.
With the replacement of yen bond last fiscal year, you worked really hard and you achieved JPY 11 billion 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 company combined, the replacement of yen bond impact is JPY 6.5 billion, the rest is the impact from the new money. There is also the sales of the equity, capital gains can be expected to some extent. We are also conducting the replacement of yen bonds, on a net basis, it's hard to say. That is the improvement.
I see. You will work very hard to not decrease profits for the year ended March 2028?
Yes, of course.
Consolidated adjusted profit of JPY 230 billion, we will work hard to make sure that this is realized.
Thank you. In terms of the surrender impact, which significantly lowers EV, this kind of assumption change, for Daido Life's moving 10-year average, given the current trajectory, the March 2027 revision, will that also be negative? For Taiyo, what do you think will happen?
I'm sorry I'm talking about further into the future again. Tsujino-san, your understanding is correct. We're taking a 10-year moving average and the surrender rate, today is higher than 10 years ago. In that sense, EV will be slightly negatively impacted. For Taiyo, the current surrender and lapse are reflected. If the situation worsens, that will also be reflected into the future numbers.
Do you think that you have responded sufficiently on this?
Thank you for the question. It's very hard to say because for the bancas surance products, there are products that haven't yet reached the surrender point. Going forward, there will be the break-even period and that if the surrender rate goes up, then that will negatively impact EV. We don't yet have the actual track record, so we're not able to reflect that into numbers yet. For the banc assurance, once the interest rate reaches a certain level and after a period of five years, the bank staff will no doubt promote the surrender and lapse for the customers. 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.
Where we have the results, we have already reflected that into the forecast. When we don't have the forecast, we're not able to reflect that. I think that's wrong since the character of the products allow you to forecast.
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. For the products, there are products that have been introduced where the surrender value does go up even after reaching a break-even period. 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. Taiyo, the two years ago, the surrender trend of our contracts other than the ceded contracts, I would like to understand the current trend. Also, if the impact of a J-type is excluded, how would it look like?
Thank you, Mr. Watanabe. Regarding Taiyo, we are seeing an increased surrender for one-off payment type. 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? You also decided not to buy back shares. Based upon what criteria would you decide to go ahead and buy back our shares?
First of all, thank you, Watanabe-san. First of all, the reason why we did not increase the dividend. JPY 130, this is appropriate level because it satisfies 60% of five-year average profit. 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 the buyback. On page 53, you can see our dividend payout policy. The left shows returns from periodic profit, and the right shows the additional returns are based upon a capital level. 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 a agile way. That is our policy.
Thank you. 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 result. 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? 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? Since it is a savings-type product, perhaps there is impact on the investment income. Can you talk about that as well?
Sasaki-san, 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. 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. 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 26 budget, there was some reduction. Against the previous year, the sales results grew. The performance for Daido is solid. Daido's total protection, the meticulous consulting sales to respond to the customer's protection type needs is going well.
Its performance is not weak at all. It is quite solid. 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 year-end 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%-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. We will also monitor our competitor situation, so perhaps we will keep it on the higher level of the 185%-225% range. Basically, we will control within this range, 185%-225%.
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 JPMorgan Securities. I have two questions, both of them are simple confirmation. The first point is a JPY 172 billion figure for this fiscal year. Is this the better-than-real number or taking into account the proceed of sale of New York Belger and replacement of yen-denominated bond offsetting, is this close to your real ability? 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, an upside and downside of factors. First of all, alternative investment, we are expecting JPY 20 billion decrease year-on-year. As you rightly pointed out, the improvement of a yen-denominated bond is very important in order to reduce interest rate risk and to improve investment yield. We would like to replace a yen-denominated bond. That is my explanation.
Understood. Thank you. My second question is about Taiyo Life bancassurance channel. I think you used the expression that you will control it. Does it mean, apart from whether it means withdrawing from the bancassurance, if in fact you decide to stop doing bancassurance, will it induce surrenders? Is there such risk? This year as well as beyond this year, what is your assumption?
Regarding bancassurance, at this point in time, we have no plan to withdraw. Regarding the bancassurance, 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. This is hypothetical, but if in fact, you decide to stop doing bancassurance, so would it induce surrenders? Am I right?
Yes, I think, your understanding is correct.
Understood. Thank you.
Next question, please. Mizuho 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. For the alternative investment, what is the assumption for your forecast of decline of JPY 20 billion year-on-year?
Thank you for your question, Sakamaki-san. In terms of the economic assumptions, please turn to page 29. Sorry for that. January end is the standard that we're using. Exchange rate and rate of currency hedge cost impact the P&L. The exchange rate impacts a loss from the foreign bonds and the rate of currency hedge cost as well, which is the actual or hedge balance is shown in another page. For the alternative assets, forecast is quite difficult. Since last year we had a big upside, we are subtracting that this fiscal year.
Thank you. Understood. My second question is regarding ESR. You talked about a range of 185%-225%. In the midterm 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. Even with investment, we believe that we can control it within a certain range, namely 185%-225%. Cash flow-wise, 60% shareholder returns and 40% for investment for growth. If there is no such opportunity, then we could further expand the return. We will also have external financing. It is not that ESR will worsen as a result of increase in investment.
Understood. In your materials, you usually talk about 225%, so I was thinking that's your line of defense. Today you explained a range from 185%-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.
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. New policy margin is 8.7%, of which is down from 9.3% by Q3. I would like to understand the factors behind this. This year's new policy value, I think the plan, your plan is that this is going to be flat. 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. The major factor was the review of insurance assumption and also the review of expense ratio. We changed the model this time around. In other words, we tried to match the regulatory model, the impact of reviewing the calculation method of the risks of not being able to hedge. This is another factor behind why margin did not grow. This is my explanation for your first question.
Thank you. 172 billion JPY, I think your plan is to be flat. Are there any special factors? For example, the decline in the new policies for Taiyo?
Yes. We are expecting decline in the bancassurance business. Also the Taiyo, it's a protection type products, and therefore the rate hike has a negative impact on its business. 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 JPY 172 billion, and vis-à-vis the midterm plan. The midterm plan target is JPY 900 billion for five years. If the adjusted profit remains flat and if last year has JPY 210 billion, this is a rather high number. 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. External funding, it depends on the external environment, so I cannot say for sure.