T&D Aktie

Good afternoon. Thank you very much for joining us in spite of a tight schedule to join the IR Day for T&D Holdings. My name is Tamura from Taiyo Life, and let me talk about the Taiyo Life's sales strategy. In thinking our strategy, improvement of profitability comes first. Productivity has to be improved to achieve that. That is the sales strategy base.

Please turn to Page 1. This is the table of contents. And let me go right into the main business, Page 2. Taiyo Life's business model and product development. On the left-hand side, you see the business model. Conventionally, the sales staff in pairs visit households and the household market is the main market that we focus on. Traditionally, the household customers, usually senior people, elderly people are the ones, and we need to focus on the livelihood protection for protection type products. On the right-hand side, for example, customizable products for the core coverage or the dementia protection type of insurance. Well, back in those days, it was not so much discussed, but we launched this. And those with the feeling the health concerns, we try to meet their needs of the elderly people to develop our products.

For this fiscal year for -- starting in April, we have embarked in the age of the positive interest rate.

So let's go to Page 3, Taiyo Life, how have we evolved the business model and how are we going to change that? On the lower left, as I said earlier, we -- our sales staff visited the door-to-door the households in pairs. And more recently, we try to shift toward hybrid sales, TV commercials and online commercials or advertisement. We get the customer information from these media to reflect in our sales approach. And based on that, our sales staff visit the household. The direct lead information that we utilize for our sales staff to use when they visit the households. So this is what we call hybrid sales. That's the face-to-face plus non-face-to-face.

On the upper left, you see the enhanced sales support by life counselors, LCs. It used to be that those people who were in clerical works, administrative work, we try to reduce the administrative work on the branch side and the saved time can be diverted to the sales support. So with the appointment with the customers and that kind of information, customer information can be delivered to the sales staff from LCs and the staff visit the customers based on that information. And then the transformation of the branch management. There are 150 branches. It used to be in the 150 branches, all of them have the similar approaches in responding to the calls and do the administrative work was uniform, where we try to transform that. More recently, as I said, we get the direct customer information to be utilized by the sales staff invested in the households. But going forward, PayPay app can be used for selling our products. That means the information strategy is getting more and more advanced, which is going to be a main pillar of sales strategy.

Lower right, strengthening of the management base. In the call center, it's manually operated. People respond. We try to utilize AI here. Operational efficiency means that AI is used again for improved efficiency. AI advanced companies, there are so many AI advanced companies, SoftBank -- together mainly with SoftBank, we collaborate. And from the next page onwards, I would like to go into each theme one by one. Page 4, please.

Hybrid style sales to be promoted, as I said, TV commercials, online advertising. These are the media from which we get the information about the customers and then the sales staff can benefit from that. On the left, you see the evolution. Information started in 2016 before COVID-19. And through the COVID-19 days, utilizing that kind of information was used for sales activities and LC, life counselors, those in at the branch offices with the administrative work, they use the saved time for sales support to give information to the sales staff. Last year, we take the group insurance and the members when they retire, life individual insurance can be offered. So that kind of information for the sales staff is being -- that scope is being expanded.

On the right-hand side, you see the bar graphs. The dark red bars shows the information or Suma-Hoken information, giving the direct information. The pink bars are the lead information from LCs or group market information. So the volume of information is getting larger and larger. And the customer -- contracts from the customers, you see the gray broken line graphs. With the increase of the volume of information, the contract successful cases is increasing as well.

Page 5, please. T-AI-Face is the terminal that the sales staff use on a daily basis. With this use, the productivity can be improved. For example, market to be expanded and the market ability can be strengthened and the sales efficiency can be improved through T-AI-Face. Market expansion. But this is the online consultation can be made possible. The customers use the smartphones for that type of communication. When they are living in the remote areas, that make it difficult for them to visit the branch offices or they can shorten the time of trouble to the branch offices through the non-face-to-face sales through the terminal or devices. And digitally, our proposal can be transmitted to the smartphones of our customers. So this non-face-to-face sales, 137% increase of productivity was achieved because of this.

In the middle, consulting tailored to customer needs of the planning of the products. AI analyze the past historical data, the family information, family member information of the customers, the information can be imported and entered that those accumulated planning or information in Taiyo can be utilized. Compared to the time before, the T-AI-Face average premium per policy has increased by 13%. And then the efficiency -- improvement of efficiency, looking at the logging of the history of the sales activities, we can analyze the strength and weaknesses of that sales staff for improvement, possible improvements. And there's an AI customer list, let's say, the sales staff when they try to visit a household in adjacent areas, there may be powerful prospects. And then T-AI-Face can display that on the screen. So the number of proposals of the life insurance increased by 20%. So this is one of the ammunition we can use for the improved efficiency or productivity.

Page 6, please. Transformation of branch management and expansion of sales support service through LC. LC support the sales, as I said earlier. Those who used to support the administrative work of the branch, but they were eliminated by 70%, and that can be diverted to the sales support. Education of the sales staff and the sales support in terms of quantity and quality, there has been a support. You see the broken line graph on the lower right, 150 minutes by this fiscal year that the sales support has. And the lead referrals started to increase and the number of contracts have been gradually increasing.

And then on the left, transformation of branch management Taiyo Life for several decades. All branches have the similar or the same administrative system or sales system, but we try to find the branch office dedicated to the sales promotion. This is a sales branch, but the head of the block branch office can supervise the sales activities for the enhanced operational efficiency. Per sales staff the new contract ANP increased by 16%. LC support before and after the management change, there has been an improvement by 30% or so. The sales branch LCs support hours increased by 30%.

Page 7. As has been mentioned, in addition to direct leads, we collaborate with PayPay. Through PayPay app, we try to sell products and the customer information use can be more advanced. The prospect information can be expanded through this app.

Page 8. The strengthening of the management foundation, mainly we collaborate with SoftBank. AI-operated call center is 1 example. And through AI, we try to eliminate the manual operation of the call center and the saved human resources can be diverted to sales support. On the right-hand side, improving headquarters operational efficiency, the system which, under which the human and AI can collaborate can be materialized to reduce the human part. And then the strengthening of the sales promotion frameworks and infrastructures. T-AI-Face can be improved through the use of AI even further.

On Page 9, increase in sales staff and productivity improvement. Hybrid-style sales approach is something we are trying to pursue. Under COVID-19, sales staff number increased. On the left, you see the graph. Per sales staff ANP of new business, 1.1 million to 1.5 million. The coverage amount increased before and after the introduction with those people with a tenure of 3 years or less. At the end of last year, the number went to 9,700, and now it is more than 9,900.

Page 10. This is on the sales performance. Pre-COVID, it was JPY 15.7 billion, but it is JPY 22 billion in fiscal 2025. The protection type in-force ANP is JPY 171.1 billion. This is the progress compared to pre-COVID. The customer acquisition channel shown to the right, we utilize direct information and that portion is increasing. On the right-hand side bottom, there's a challenge in this surrender and lapse rate, the sales rep channel, there is an increase in the surrender for contracts from the days of COVID-19. And also the agency channel, the contract that were made during the interest rate level was 0 is now -- the surrender is increasing.

Next page. Now on Page 11. We, from 2022, the single premium -- product premium is increasing. The JGB yield is declining. We have not done sales promotion, but the sales is increasing. So from this fiscal year, we will based on the needs of the customers to promote the savings type of product. We are going to restart the sales of the single premium products. We have been focusing on the third sector per person balance of the third sector, it's larger compared to the peers. And in addition to that, we're going to start to sell the savings type of product. For the savings type, the business expense margin will contribute to the A&P.

Page 12, please. As I have said, and this is on bancassurance. The products sold when the interest rate is 0 is being switched by customers and the surrender is increasing. So we have changed the products that we sell through this channel. The conventional products surrender continues to stay at high level. In 2024 and 2025, the sales was roughly JPY 30 billion, but we have switched to the product with very low assumed interest rate and suppressing the volume sales. We have been focusing on product that is dedicated to the nursing care needs. The principal is recovering for other product before the switch of the product lineup. And right now, the surrender is less than 1%, and we believe this is sustainable. And now the surrender risk has been suppressed.

The low-cost operation, this is very easy to explain because there is no MVA. The bancassurance has roughly 30 staff that promotes the sales. The initiative from this fiscal year is to focus on the customers of credit unions. The information is to be shared to the sales rep. We have been suppressing the bancassurance channel so the in-force balance will decline, and we expect that the risk of surrender will go down.

Next is the trends in profit indicators. Group KPI is adjusted ROE and core profit. As shown to the left, in 2021, we ceded block policy. And under each measures, these indicators are on the rise. Right-hand side, core profit. In 2022, the claims payment related to COVID-19 increased. So the core profit declined. But otherwise, it is on an increasing trend. Especially last fiscal year, interest rate growth and the reversal of the reserve for the retirement allowance, that was a special factor related to the core profit. Through ceding, the positive spread is on the increasing trend.

Page 14, please. This is the topic that we are working on to improve the profitability. We have been repeating 11x increase in the business expense margin over the past 7 years. And to the right, advanced underwriting, we are to reduce the moral risk from the underwriting to the assessment so that the claims payment will be at the appropriate level. The right-hand side, improvement of investment yield, the reduction of equity exposure, the shift of asset to alternative assets and others. The bottom, this is group collaboration, outsourcing of domestic equity management to TDAM and alternative asset management to TDIM.

Page 15, structural change in the policies in-force. Taiyo Life's structure includes a large amount of individual annuity sold in the past. It still makes up more than 40% of the in-force ANP. This does not contribute much to the insurance bottom line. And also, it's rather difficult to generate positive spread. In the future, the payment of the annuity will be completed and it will run off. Roughly, the proportion will go down to 30% by 2030. The structure will change. And to replace that, we will increase the protection type of the product and savings type of product, which will generate positive spread. As shown to the right-hand side bottom, within the industry, some peers have nearly 10%, but ours is half of that. And through structural change of the in-force policy structures, this will be improved.

Page 16. The core profit is broken down into these elements and one is the insurance bottom line and mortality margin and business expense margin are the components. We analyze them and the Holdings is monitoring. And to identify what measures are working and what are not in order to constantly improve the measures and strategy.

Last page, and this is full year earnings outlook. So please have a look. Thank you very much.

Thank you, Mr. Tamura. Next, we would like to proceed to the Daido Life's sales strategy. Mr. Fujita, please.

Good afternoon. My name is Fujita from Daido Life. I'd like to present Daido Life's sales strategy. Page 1, table of contents. I will follow this table of content. Page 2, please. First, I will explain our sales performance. During, on the left-hand side, as you can see on the bar graph, the new contract or new insurance. During the previous medium-term management plan, new policy amount increased slightly reaching JPY 5.3 trillion in fiscal '25, up approximately JPY 170 billion from the previous fiscal year. This growth was driven by our consultative sales approach, which carefully address the customers' diverse protection needs and by the expansion of a total coverage proposal, which promotes death coverage and disability benefit as a combined solution. The total coverage proposal has helped strengthen relationship with existing customers while also expanding our customer base. As a result, the number of new corporate clients increased by approximately 300. Well, our customers have the business succession issues or so, they discontinue their business or because of the funding shortage they may surrender. As a result, the lost corporate clients increased. So the overall number of corporate clients remains almost flat.

Page 3, please. On the left, the policy amount in-force increased for the second consecutive year, supported by strong new policy amount. It's an increase of approximately JPY 360 billion, reaching JPY 47 trillion from the end of the previous fiscal year, and it is the highest year-end level. Meanwhile, the surrender and lapse amount increased by approximately JPY 60 billion from the previous year, the lapse and surrender rate remained largely unchanged year-on-year. The increase in the surrender and lapse amount was mainly attributable to policy reviews associated with the launch of severe cancer coverage J-type in June 2025. This has a wider scope of coverage, and there was a review of the existing contract. But the result was broadly in line with our plan.

Page 4, please. In line with the growth in the new policy amount, the value of new business, which represents profitability on the economic value basis has continued to expand steadily. In addition as a result of the continued efforts to protect SMEs through total coverage, embedded value, which represent corporate value on an economic value basis has also grown steadily. On a financial accounting basis, the profit increased by JPY 9.6 billion year-on-year, reaching a record high level as was the case with the policy amount in force.

Page 5, please. Next, let me turn to the performance by sales channel. Our traditional sales channel, the sales staff channel and the tax accounting channel have strong advantage in activities conducted in collaboration with our partner organizations. As a result, both organizational indicators such as the number of sales staff and agencies and the new policy amount have continued to grow steadily. In the sales staff channel, we have strengthened initiatives related to personnel systems, recruitment, training and development. As a result, retention rates have shown a steady improvement and the number of sales staff returned to growth during the previous medium-term management plan, or MTMP.

The tax accountant channel has also continued to perform well with steady growth in both the number of agencies and new policy amounts. We expect this channel to remain a key driver of our future growth. The financial institutional institution channel, which has a strong advantage in accessing midsized companies, has steadily expanded its agency network. However, new policy amounts declined year-on-year for the second consecutive year, affected by factors such as the diversification of products promoted by agencies driven by the growing popularity of variable life insurance and the foreign currency denominated insured products. But this remains the main driver. So in addition to the protection type, protection -- we will fully leverage our strength in providing solution related to inheritance and business succession measures.

Page 6, please. Next, I'd like to discuss our FP and inheritance consultants and channel mix strategy. The FP and inheritance consultants are dedicated organization that provide support to branch sales staff in order to steadily capture customers' inheritance and business succession needs. The organization has expanded steadily and deployment across all regions in Japan was completed in fiscal '24. In addition, both number of company stock valuation consultations and the number of successful sales cases supported by the sales staff have increased steadily, making a significant contribution to improve productivity. Looking ahead, we believe that the need to address inheritance and business succession needs will continue to increase. Accordingly, we'll remain committed to further enhancing our wealth management business, including building relationships that span generations.

Our channel mix initiative brings together tax contract agencies and sales staff to provide protection proposals. Both the number of agencies and new policy amounts have shown consistent growth. In addition, the proportion of new corporate clients is higher than in solicitations conducted solely by sales staff. The initiative has also contributed to expanding our reach to customers who have not previously had access to our protection solutions. We will continue to strengthen our efforts in this area.

Page 7, please. Next, I'd like to discuss Dodai and KENCO SUPPORT PROGRAM, or KSP. Since its launch in 2022, Dodai has continued to expand its membership base, has grown into Japan's largest online communities of business owners with more than 130,000 members. In particular, the number of members registering through advertisement and organic search has increased in recent years. As of the end of fiscal '25, 47% of all members have joined without going through the sales staff channel.

Next, KSP was launched in 2017 as a tool to support SMEs in implementing health management initiatives. As of the end of fiscal '25, it had been adopted by approximately 51,000 companies and was used by around 184,000 individuals. Adoption by companies that do not currently hold Daido Life insurance policies has also been increasing gradually. As labor shortage become increasingly severe, we recognize that implementing health management initiatives to help employees remain healthy and productive for longer is a critical management issue for SMEs. By expanding our range of support services and solutions, we aim to contribute even more to addressing these challenges. In addition, the number of companies that have taken our insurance policies after engaging with Dodai and KSP has been increasing. We believe that both initiatives are increasingly translating into concrete business results in the form of new insurance contracts.

Page 8, please. Next, I'd like to discuss the current performance trends. Looking back on the first quarter, we believe that the uncertainty surrounding SME management increased further due to factors such as the volatile situation in the Middle East, broader global developments and changes in the interest rates and foreign exchange markets. Turning to our performance trends. Disability benefit products recorded lower sales than in previous year. In June, there was this severe cancer type J product was introduced, reflecting the absence of positive impact from the launch of that product. However, death product -- death coverage products outperformed the previous year. As a result, the total new policy amount remained broadly in line with the strong level of the previous year.

While the lapse and surrender amount increased, policy amount in force has recorded net growth since the beginning of the fiscal year. Although there were concerns about the impact of changes in the business environment of the management, the effect of our policy sales results has been limited so far, reflecting the strength in promoting protection type products. At the same time, we recognize that this is by no means a situation that warrants optimism as the impact of rising prices and others is expected to persist. We will, therefore, continue to provide tailored consulting services to each individual company and remain committed to proposing the protection solutions that best meet their needs.

Page 9, please. Here, I'd like to explain the policy of the medium-term management plan, MTMP, that commenced this fiscal year. On this page, we have organized our view of the business environment, which formed the basis of the MTMP using the 3C framework. With regard to customers and competitors, as mentioned earlier, we believe that uncertainties surrounding SME management will continue to increase amid ongoing changes in the business environment, and that the economic outlook will remain unclear. In addition, the social challenges facing SMEs are becoming increasingly complex, including a shrinking working age population and increasing frequency and severity of natural disasters.

As for the competitive environment, while we continue to closely monitor developments in the corporate insurance market, we do not currently see any significant changes in the competitive landscape. Leveraging our long-standing strength in promoting protection type products, which are less susceptible to economic fluctuations, we aim to achieve further growth by enhancing the value we provide to SMEs and by developing new customer base. In addition, by delivering value beyond insurance, we will diversify our sources of profits while building multifaceted and long-term relationship with our customers.

Please turn to Page 10. Here, I will provide a little more detail on business sentiment among SMEs and the competitive landscape. Business sentiment among SMEs remain weak against the backdrop of persistent inflation, labor shortages and an unstable international environment. The majority of SMEs are concerned about the impact of rising prices on their businesses. As for the competitive landscape, we recognize the need to continue to closely monitor other insurers given the ongoing launch of corporate insurance products by competitors and their stated intentions to strengthen initiatives targeting the SME market. At this point, however, we have not seen any significant change in how frequently we encounter competitors when making proposals. There has also been no major change in the proportion of independent agents and new business volume is growing at both exclusive and multi-tied agencies.

Please turn to the next page. This slide provides an overview of the medium-term management plan that began this fiscal year. The key point is that we will create value through both our insurance and noninsurance businesses. By steadily executing all of these strategies, we aim to maximize the value generated by both the insurance and noninsurance businesses, enhance our brand value and achieve our vision for the future.

Please turn to Page 12. Here, I would like to share how we envision expanding our insurance business. As I mentioned earlier, under the previous medium-term management plan, we were able to achieve growth in in-force business. We believe this was driven by a steady increase in the number of companies which we have built strong relationships through initiatives such as the consistent implementation of our total protection proposal and efforts by our FP and inheritance consultants to address inheritance and business succession needs. It was also supported by growth in the number of newly insured companies resulting from initiatives such as the development of the financial institution channel and channel mix.

Under the new medium-term management plan, we aim to further evolve our total protection approach to increase the amount of insurance coverage per company while also expanding the number of insured companies by developing our customer segments, thereby driving further growth in our insurance business. We will also evolve our customer data platform, which serves as the foundation for data utilization into a data and AI platform, enabling us to deepen our understanding of customers and achieve a significant improvement in productivity.

Please turn to Page 13. From here, I will explain our initiatives under the sales strategy. As part of the development of our next-generation system, including system migration, there will be certain periods during which we will be unable to launch new products or revise underwriting standards. However, this was already factored into the medium-term management plan when it was formulated and will not affect our ability to achieve the plan. We will continue to systematically advance our initiatives towards realizing our target vision. Let me first discuss the direction of our efforts to evolve the value we provide to SMEs or further evolve our total protection approach. As the initiatives shown here are still at the stage of being developed in greater detail, I will refrain from going into specifics.

One of our strategic direction is to offer value to everyone working at SMEs, which includes expanding our value proposition beyond business owners. As the first step, we have renewed Kaisha Minnade KENCO+, a health promotion insurance product that integrates KSP with the insurance coverage, including by increasing the maximum coverage amount. We believe the corporate employee market still offers significant room for further development since the renewal performance has been significantly higher than in the same period of the previous year.

Please turn to Page 14. Next, I will discuss the development of new customer segments. I will refrain from going into the details of each initiative. But as one example, let me explain how we plan to further evolve Dodai. We will strengthen both its community function, which helps address the isolation and concerns faced by business owners and its solutions function, which supports problem solving and value creation by creating connections among business owners across regions and industries and accelerating growth in both membership and active users, we aim to create touch points with an even broader range of SMEs and monetize Dodai.

Please turn to Page 15. From here, I will explain approach to initiatives in noninsurance areas. As mentioned before, the business environment and the social and management challenges facing SMEs are becoming increasingly complex. So we would like to contribute to the SMEs in various aspects. We hope that we can reduce the gap between large enterprises and SMEs as such as possible.

Please turn to Page 16. These are still under consideration. If you could confirm what are to be released in the current fiscal year. The services will be based on the solutions that will resolve the challenges that SMEs are facing in terms of the social challenges and management challenges. We will develop a long-term and multifaceted relationship with customers.

Lastly, Page 17, this is our full year outlook. There's no change from the figures we have already announced. This concludes the presentation on the sales strategy of Daido Life. Thank you very much.

Thank you, Mr. Fujita. We would like to proceed to the Q&A session.

[Operator Instructions] The first question is from JPMorgan Securities, Sato-san.

My name is Sato from JPMorgan Securities. I have 2 questions. First, about PayPay's collaboration, SoftBank's collaboration. That's Taiyo Life's business tie-up. On Page 8, you have shown us some examples. But if you can give us the time frame and the granularity of the initiative, your intent is that on a short-term basis, this can be achieved in your view? I think these initiatives have already started and the approval of the products and system has to be improved. Maybe it will take more time. There are 2 separate ways to look at this. If you could elucidate me on this. That's my first question.

The second question, well, this may concern both lives. For individual government bond NISA, if it materializes, what would be the effect or impact on your business environment if they come through? Or do you say that you don't have to worry too much about this? If you could give me a food for thought, I would appreciate it very much.

My name is Moriya from T&D Holdings. Thank you, Sato-san. And Mr. Tamura will answer your question, but PayPay collaboration or partnership. For individuals, they have the client base and then with Taiyo Life, they were studying various possibilities. But Group and PayPay's comprehensive partnership is the way to go. So the Holdings group as a whole is considering this partnership. So having said that, I will ask Tamura-san.

Thank you for your question, Tamura speaking. PayPay or SoftBank's collaboration with them. First about PayPay, the insurance product sales through their app. The product lineup of Taiyo Life or new products of Taiyo Life, we are studying various possibilities at this moment with PayPay. PayPay handles various insurance products, but the kind of products they never handled that is being sold by Taiyo Life for the senior citizens or the third sector products, unique, the products with unique features are the ones we are thinking of. And PayPay app is used for sales, but system has to be built on the side of PayPay and on the side of Taiyo Life, for example, collection of the premium or the payment of the claims. So those are the technical specs that we have to cover going forward. But for new policy, in sense of the new policy, on the PayPay side, system-related subsidiaries, they have the system related companies. So we are working with them.

The sales, we have to agree on the sales timing. On the second half of next fiscal year is our target, and we are deepening the discussion, technical discussion.

Now collaboration with SoftBank. The major theme is the call center, AI-operated call center. But we have to look at the cost performance, cost benefits. The call center operation, we break down the various segments of call center operations. How can AI improve the efficiency? The SoftBank has a high level of expertise, and we use their expertise. But when we discuss with them, in the life insurance industry, call center operation is very complicated to them. And for the credit card companies, the SoftBank operates a call center. But compared to them, the life insurance companies call center operation is more complex. So the SoftBank, in order to improve their own call center productivity and efficiency, they have a very positive attitude on this. In November, there was a verification of the cost performance. And then after looking at that results, we will proceed. So that's my answer to your first question.

About the advertisement and marketing area, well, we have also embarked on the discussion of the collaborations. But in due time or due course of time, when the time comes, we would like to announce that to you.

The second question, for your second question about the government bond. Now Taiyo Life, the single premium whole life is being sold by us. Our market is for elderly people. That's the main market. So the products which merely increase the return is not the 1. Protection has to be there in our products to the elderly. So Taiyo Life alone, well, we don't say that we are not affected, but our products are different in objective from government bonds in our efforts to meet the needs of our elderly customers. So we are not squarely facing their direct competition.

For Daido Life, individual sales to the individuals by the [indiscernible], allow me to answer that. Our core business, the corporate market, no, almost no effect on the corporate market. But as Tamura-san said earlier, the single premium whole life insurance for the business owners, for individual business owners, that's our proposal. So this, there may be a little bit of competition, but insurance products is not the product to merely increase the asset amount. We need to have the objective of the managed assets different from the products, which really looks at the return.

This is Tamura of Taiyo Life. Another point on life insurance, the inheritance tax is one of the purpose to utilize. And this is an additional benefit that is completely different from government bond. From that perspective, rather than head-on competition with the government bond, the inheritance measures will be a major topic for the customers. So that is the value.

The intent of my second question was related to the needs of inheritance. There are discussions -- careful discussions, but I think LDP is coming up with a proposal to reduce the inheritance tax. The protection is important. That part I understand. So is it all right to consider that there is no risk of competition?

This is Tamura of Taiyo Life. As you mentioned, from tax perspective, various discussions are underway. If government bond can be used for the inheritance, as I have said in the beginning, the needs is very different in terms of the product nature. I'm not saying that there is 0 impact, but our market is senior market. And in that market, protection is an attractive characteristic whereby we can capture customers. I [ risk ] this quite well. Thank you very much.

Moving on to the next question. SMBC Nikko Securities, Muraki-san, please.

This is Muraki of SMBC Nikko Securities. I have 2 questions to Mr. Tamura of Taiyo Life. First question is single premium whole life. How are you managing this product? Any ingenuity in there? You talked about the inheritance. There are many customers who are intending to use that. The average age through the sales staff channel for single premium, what would be the average age of the male consumers? And what about the compensation to the sales staff or the executives? Any creative element in that? In your presentation, you talked about bancassurance. Since there is no MVA, there's less burden of explanation in the sales staff channel. Is the hurdle very high to attach MVA? Is it realistically difficult? Is that your judgment? That's my first question about the single premium whole life.

This is Tamura of Taiyo Life. On your first question, single premium whole life sales management, the current business promotion-wise, number-wise, compared to our intended number, it is relatively low. In the past, when we were selling such a product, we had very seasoned staff. And those staff were capable of selling such product in addition to protection type. But mid-career or younger staff, their focus had been protection. The protection to decline is what we want to avoid from the insurance bottom line perspective as mid-level staff, they're not really used to selling both protection type and single premium. But when we look at the monthly performance, the sales departments are sharing the successful sales cases across Japan. So every month, the sales volume is increasing. The average age is 65 years old. Taiyo Life's market, main market is a senior segment. So average is 65 years old. This is quite normal. But actually, 80, people in their 80s, they can also purchase the product. And such needs is very strong. That is what we hear from the front line. So we expanded to people in their 80s.

Last month, there were 15% to 16% of people in their 80s. So in that age segment, there's strong needs to purchase such product. That is the first point. What was the second question?

On the commission.

As I have said in the presentation, we have not done any sales promotion during the past decade. So the compensation to the sales staff is very low. But still, as I have explained, from around 2022, the sales volume started to increase. The sales staff did not focus on the compensation, but, well, rather than compensation of the sales staff, it's more of a customers' demand. And from this year, as a company, we started to promote the sales. And we raised the compensation for insurance product with a certain level of premium. And the productivity will be higher if we can sell the high amount product. We do not provide a special incentive to branch manager. Under the ordinary performance management, we manage the branch managers. We have not added any additional incentive to promote the sale of this product.

And whether MVA is difficult for sales staff. Speaking of difficulty in bancassurance product with MVA is rampant. So even when Taiyo Life introduced this product with MVA, banks will not be motivated to add. And in the past, we have not done so through the sales rep -- sales staff channel. Other companies are, have invested so much resources to try to sell products with MVA. That means such product is very difficult to sell. Another element is that without MVA, can we not differentiate for bancassurance channel. MVA will become differentiation, but for our sales staff channel, it's rather difficult to think that MVA will determine the success of the sales.

The second point is about Page 16, the restriction on the business administrative expenses. I think the priority is to improve the profitability, maintenance cost of the policy. Do you have any metric you're using or you are going to use or to be disclosed outside?

Tamura speaking. About the business expenses management, most recently, we tried to break it down to subsections. More recently, system investment is incurred, the investment in human resources, those inside the house and the sales staff included the personnel cost will, is most likely to increase. So the business expense is going to go up to a certain extent going forward. But then those contract management work when I talked about the management foundation, I said that those are a huge amount of work that belongs to each individual worker. And with the introduction of AI, the workload can be eliminated or lightened and that the operation based on AI is the way to go.

In the past, the operation is based on manual work. But going forward, we can reduce the workload or eliminate the workload with the introduction of AI. So because if we do this, whether this works or not, we need to manage that properly. And there will be an opportunity for me to explain in more details about this for you.

May I. Moriya from T&D Holdings. About Muraki-san's second question, Daido Life is improving the earnings structure, which is very important. And with Daido Life too, going forward, there will be a cost increase coming from inflation. This is a challenge for the group as a whole. AI and digital transformation, it can reduce the operational cost or improve the profitability. That's the challenge on the whole group, and we are working on it. About the business expense, well, we need to reduce cost and improve our productivity. And each company has a different business. It's difficult to have a uniform comparison, but how to look at the unit cost, the Holdings on a regular basis confirming with each company. And then in the briefing session of the T&D Holdings, there will be more disclosures and our explanation from us to you going forward. Thank you.

Moving on to the next question, Daiwa Securities, Watanabe-san.

This is Watanabe of Daiwa Securities. I have 2 questions. First is related to Taiyo Life, the partnership with PayPay to buy from PayPay app. There are 15 types already. And in the third sector, you talked about the middle age segment. Just by putting your product on the PayPay's shelf, do you think you can sell? What is the sales strategy? Second is Daido Life. On Page 8, you show surrender and lapse rate. What is the reason for deterioration in April? And what is the outlook from July and onward?

This is Tamura of Taiyo Life. Thank you for the question. On PayPay's app, just to list the product will not generate sales on app. PayPay offers various types of products already. Through discussion with PayPay, we are discussing -- based on the past track record on PayPay, we have been discussing on the product that we are going to offer on PayPay, although we cannot communicate today on this particular product, the target is pre-senior. Taiyo Life core customer is senior, but the pre-senior is a little bit younger. To that segment, there is a strong need, and we are targeting that. So PayPay users, in their daily life, there are things that they wish to be prepared for and the product is to cater to such needs. It's going to be sold through PayPay.

So it's not a planning-based product that the sales staff channel sales, but a product that focuses directly on the needs on PayPay's users. Can we sell just by tearing on PayPay? Well, it's going to be on PayPay. We cannot do anything on that. So once we start the sale, if we cannot generate track record just by listing, we would like to consult with PayPay for additional measures. On day 1, it may be just a listing, but we are focusing all our efforts to get started. So once it's up and running, we will look at the sales record and consider additional measures. Looking forward to the new product.

About the second question about the surrender and lapse of the Daido Life, allow me to answer. As you already said in April, 109%, which remained relatively high. There are a unique situation. There was several cases of surrender on a large scale. So that means a 9% increase over the previous year. But it's getting better and 106% in June. And August and September, it's less than average. So at this moment, it has subsided.

The next question from Mizuho Securities, Sakamaki-san.

Sakamaki of Mizuho Securities. I have 2 questions. About the Taiyo Life first, hybrid sales approach and the advancement of information strategy. I would like to ask your future on Page 4, compared to the referral or lead referral, it seems that the numbers here looks rather low. And maybe the first year is for the permeation and probably you are not very much concerned about the number of successful contracts to be concluded? Or do you have any challenges in the operations with the analysis, the current situation? Please give us the explanation about the future of this information collaboration?

Thank you for your question. Tamura of Taiyo Life. On Page 4, the type of information, the volume of information, it's been increasing. The number of contracts have not increased accordingly. As you rightly said, as you can see here, in 2022, 81,000 of contracts. This is exactly the effects of COVID-19 and the customers' needs heightened during that period and the COVID-19 pushed up the needs for 68,000, 69,000 and 86,000. So it seems that it dropped and a little bit increased in last year.

But in commercial and Suma-hoken, those are the direct information, which gave us the contract, 68,000, 69,000. 2025, but there was a slight increase because of the information from LCs, but from group insurance gave us more information. In terms of the rate of successful case, from the group insurance, contracts from the group insurance is not so large. We have just started those members of the group insurance and they, when they retire, we give us -- they give us the information. The information itself is compared to Suma-hoken, those with certain needs, that's the kind of information we want, but the group insurance doesn't give us that kind of information. It's only they retired or not.

But how can we incite the needs and entice them to purchase from our side, it's important, the type of insurance policy and planning is important. And T-AI-Face I discussed earlier, using the T-AI-Face, we try to find a product which engages mostly certain types of customers. Looking at the group market and from the LC's information, we would like to increase the contract rate.

PayPay. Well, taking out the insurance from app, through app, that's an important theme. And these people, they are existing policyholders. And how can we propose something extra to the existing policyholders, that's our challenge. The amount of information increased, but the contract, successful contract has not increased accordingly correspondingly. And we have room for improvement, and we would like to take measures to increase the contract acquisition rate.

I was able to understand clearly. Second point is related to Daido Life. The keyword is to generate profit both from insurance and noninsurance domain. In the noninsurance domain, there are various companies working on this domain and profit generation and scaling is yet to be visible and the equity market is not valuing based on such expectation. What are the time frame in expecting the noninsurance domain to contribute to the bottom line? And what are the challenges that you foresee in expanding this domain? Can you explain?

Thank you for the question. In terms of the time frame, we need to review and discuss further. In the first stage, we believe it's going to be difficult to monetize. At least it's going to take 5 years to reach profitability. That is what we are thinking. The basic concept was mentioned in the presentation. SMEs are faced with various social environment and management environment and SMEs need to resolve various challenges. And within our domain, we are to provide solutions, and that is the main purpose in developing our business.

In a way, the profit is to be generated from such business on a stand-alone basis. But through such initiative, SMEs can last longer. And through that, the profit base of our insurance business can be, can survive longer. And we would like to work on the expansion of our business base.

Next question, Nomura Securities, Sasaki-san.

This is Sasaki of Nomura Securities. My first question is on Daido Life. On Page 2, on the right-hand side, there is a graph. On Page 2, the number of customers. Clients are flat or slightly declining. In order to overcome this situation, what kind of measures do you have in mind? And right now, basically to owners of corporates are the main target. And from before, you have been talking about the former business owners were the main target before, but is there a possibility on the employees of such companies? That is the first question.

Thank you for your question. You are exactly right. The number of corporate clients is flat, and that is a management challenge that Daido Life needs to resolve. I briefly touched upon this point in my presentation. SMEs, unfortunately, may not be able to survive perhaps due to cash flow or lack of successor or through environment business from the supply chain, they are eliminated from the business. So unfortunately, some SMEs cannot continue its business. And as a result, they need to cancel the insurance policy that cannot be controllable by our company. So what we need to do is to increase the customer base. That is the biggest point.

From that perspective, through sales staff channel, we need to expand new customer and we are offering various support measures. For example, using customer data platform, we deepen understanding of customers to expand. And also tax accountant channel, there we are developing new tax accountant office who have not been doing insurance business. That will generate a major additional business, and we would like to focus strongly in these areas. And the insurance coverage for people other than owners in the area of expansion of the protection, I mentioned the KENCO+ for the whole company. This is not just for the owner, but for the employees of the companies. It is a health support program for them and insurance is added and offered as part of the health and welfare of the company. And we are promoting that companies adopt this as the health and welfare to their employees. And this has started to grow from this fiscal year. We would like to further focus on the promotion to the employees of SMEs.

My second question is for Taiyo Life, Page 7. I have a question. That is the partnership with PayPay. If you have any idea that you would like to achieve with them like through smartphones, existing policies, certificate can be entered and AI can give the consultations to inside the demand. And then after that, Taiyo Life's group can approach those people in the sales effort. I think if that's possible, that will be quite interesting. It's just -- not just listing those products on the shelf, but by adding the consulting services to give a higher added value, that may help. So that's my second question.

Thank you for the question. I talked about, there was a discussion about just merely listing showing on the shelf of PayPay would it sell or not. Rather than PayPay, LY Corporation -- SoftBank Group has a wide range of network. [indiscernible] Influencers Group, there are so many of them. And these influencers give much information for the consumption trend. And then at the Taiyo Life's customer information can be combined so that we can propose the products which meet the needs of the customers. More recently, through the insurance policy sales of the [indiscernible] app and the partnership in the ad advertisement is another topic.

Well, Taiyo Life has developed the findings and expertise in the senior market and LINE, Yahoo! and SoftBank has their data, a huge amount of data. So if we can combine these 2, that can help improve the productivity of the sales staff and come up with the products which meet the needs of the customers. So the people in charge in different departments are discussing things with SoftBank and PayPay. They have different ideas, which were never thought of by life insurers. Those ideas we can, with this, we can go beyond the envelope and then think outside the box. So that, what you said gives me an idea. And with that, I would like to proceed forward.

Sorry to announce that we have to close and the next one will be the last question. From Morgan Stanley MUFG Securities, Takemura-san.

Morgan Stanley MUFG Securities, Takemura. I have 2 questions as well. First, for Tamura-san, about the demand, forecast. Page 6, life counselors, the lead referrals numbers is listed showing strong growth. And these kind of things, am I right in saying that this has run its course? Or is it just at the beginning with the room for growth going forward? And also, in that case, on Page 9, the sales staff number is showing upward slope. Do you think that this trend will continue going forward? Or with the increase of the lead referrals, would that affect the number of sales staff going forward? That's my first question.

Thank you for your question. Your first question about the ranks, the lead refers on LC on Page 6, I explained this. Recently, LCs use 150 minutes to, for sale support, and it's increasing still. So with the increase in the hours, will that lead to the increase of the lead referral? In order to have that kind of information, life counselors have to make an appointment by making a phone call. That's the basis which is needed, but it is not infinite. We need to grow this. But in order for their efforts to grow, one of the things we do is that, in the past, we made the appointment, but it didn't materialize in contract. And those customers, LCs will revisit them because the needs will change with time.

Back in that time, probably this customer would not listen to us, but with the change of the needs, maybe they come to us this time. So the information from the existing customers is something that we are collecting. LCs and sales staff, their hours increase. They use these hours to access those that they could not access before to increase the lead referrals. Not only the volume of the sales support, but the quality counts, those with less experience is not good in planning the products to make, to meet the needs of the customers. T-AI-Face can be used, but customers' planning support can be done by LCs. Well, this is something where we have already started. Those sales staff with less than 3 years of experience can be greatly helped by life counselors.

The amount of information is increasing. And at the same time, the quality is also improving with the planning, improved planning. Those sales staff with the experience of less than 3 years, the retention rate, their retention rate has to be secured. That will lead the way of the veteran sales staff going forward.

On Page 9, on the right-hand side, you can see 8,000 before COVID-19 and last year's year-end 9,700. So during COVID, the sales staff increased because thanks to the hybrid type of sales approach. During COVID, difficult for the sales staff, almost impossible for them to visit door-to-door, they need to make the appointments targeting certain clientele. And because of this, during COVID-19, they could acquire the contracts. This kind of trend is increased, continuing, as I said in the presentation, most recent number for the first half is 9,900 or more and 250 addition this year alone. And every month, the number is increasing. When I assumed the office of the President, I talked about 10,000 sales staff. This fiscal year, by the end of this year, we would like to increase the sales staff to 10,000 to increase the touch point with the customers for expanded sales.

I understood very clearly. My second question is to Mr. Fujita. This is a follow-up question to the previous question. Right now, the number of our corporate members is flat, trending flatly. From the market environment perspective, what is your view? This market for business owners, shall we understand that the market itself is growing continuously. And from a product perspective, what are the promising areas with large growth potential? You talked about Minnade KENCO+, which is for employees, insurance products. Is that the area with large growth potential? What is your view on the market?

Thank you for your question. The number of SMEs itself is declining overall in the society. So the SME market, whether we can say it's a growing market from the society's perspective, the environment is tough. On the other hand, according to various statistics, the number of SMEs is set to be 2 million or 3 million. Our corporate clients is slightly above 360,000. So there are so many SMEs yet to purchase the corporate insurance. So from Daido Life's SME market perspective, there are many corporate prospects that we are yet to do business with, and we would like to establish touch points with them.

I introduced Dodai or KENCO SUPPORT PROGRAM. The customers who do not purchase the insurance can also use these services. That is an additional touch point that is growing. The members of Dodai registered members, their company history can be rather short for some of the corporate clients. And through the conventional touch points like sales staff and others or tax accountants, we are yet to reach them. So this is leading to a relationship building, and we are hoping to lead this to insurance product -- product angle was another question.

The disability insurance, as you know, the aging of the corporate managers is progressing. To put it conversely, the period of one person managing the company is longer from the time of becoming the President and then until the retirement, that is becoming longer. In the past, after retirement, once they fell ill, they received treatment as an individual. But right now, while they are still serving as the President, there's a higher probability that they fall ill and cannot work. So the insurance to cover the revenue or income because of that is a need that we recognize in the market, and we would like to strongly promote those needs.

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 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.

Sales results of new policies exceeded the plan at Taiyo and TDF, while 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 3 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 ROE 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 '26 was approximately JPY 6.5 billion on an annual basis.

Dividend per share forecast for the fiscal year ending March '27 is JPY 164, an increase of JPY 34 from JPY 130 for the fiscal year ended March '26, making the 12th consecutive year of expected dividend increase.

Next page, please. Financial KPIs are shown on 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 3 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 3 life insurance companies presented. For Taiyo and Daido, the positive spread increased year-on-year, mainly due to higher 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 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 were 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 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 for 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 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 3 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 3 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 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 and 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 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 5. 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 to JPY 172 billion, and adjusted ROE is expected to be 11%. Please turn to Page 31. The breakdown of the earnings forecast for the 3 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. Finally, 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 17.

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 the presentation of our financial results for the fiscal year ended March 2026.

Next, we would like to move on to the Q&A session.

The first questioner is Mr. Muraki from SMBC Nikko Securities.

[Interpreted]

This is Muraki from SMBC Nikko Securities. I have 2 questions. The first one is on Page 31, the Taiyo and Daido adjusted profit the revised guidance. So, it's mostly flattish. I understand, but the proceeds from sale of NÜRNBERGER and retirement allowance and Daido business expenses are 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.

[Interpreted]

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 the 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 JPY 20 billion. And also, because we sold 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. So, the factors behind the increase in business expenses. So, the figures for 3 companies combined. First of all, system expenses, JPY 8 billion. And then the personnel cost JPY 4 billion. And new policy acquisition cost, JPY 3 billion. So, these are our assumptions. Other than that, capital -- so going back to Page 31, so JPY 64 billion, just about.

And the loss from sale of yen-denominated bonds is about JPY 60 billion. And then the remaining JPY 20 billion is mostly a reduction in equities. And new NÜRNBERGER, so JPY 12 billion sale proceed or the proceed will be JPY 24 billion. And 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, but this year, we don't have this.

And Taiyo, I forgot to mention. Taiyo -- so last year, it performed well, incremental profit of JPY 10 billion. And this year, JPY 10 billion is down because of the absence of that and Daido JPY 4 billion. And we took a conservative view towards this. And Page 32 and Taiyo bancassurance difference, JPY 2 billion down and increase in business expenses. And Taiyo, the JPY 2 billion reduction will come from downsizing of bancassurance plus increased business expenses. That is my explanation.

[Interpreted]

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 3 companies, these are mostly related to surrender. Taiyo of JPY 77 billion, JPY 54 billion is the impact of surrender. Daido out of JPY 87 billion, JPY 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 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 -- this year's surrender level is higher. So, for EV, we are starting to see some negative impact.

Next is Taiyo. Taiyo, Page 12. So, below a bar graph, as you can see, the surrender is increasing. So, bancassurance-related surrender is increasing because of rate hike, surrenders are increasing. And onetime payment products are seeing surrenders. So, bancassurance -- so the -- after 5 years, the cash surrender value will not increase. And therefore, we are expecting surrender will be leveled off on a plateau 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.

We will now take the next question. BofA Securities, Tsujino-san, please.

[Interpreted]

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 NÜRNBERGER, 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 is the increase in system-related expense and personnel expense over JPY 20 billion 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?

[Interpreted]

Thank you very much for your question. Daido, basically, it's 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. And also, we will conduct a yen bond replacement. So, new money plus the bond replacement should improve the positive spread. And the interest and dividend income.

[Interpreted]

Replacement really. I see. So, with the replacement of yen bond last fiscal year, you worked really hard, and so 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 2 companies combined, the replacement of yen bond impact is JPY 6.5 billion, 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.

[Interpreted]

I see. So, you will work very hard to not decrease profit 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.

[Interpreted]

And in terms of the surrender impact, which significantly lowers EV, this kind of assumption changes. So, for Daido'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.

[Interpreted]

Tsujino-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 on this? Thank you for the question. Well, it's very hard to say. Because for the bancassurance products, there are products that haven't yet reached the surrender point. But going forward, there will be the breakeven period. And that -- 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 bancassurance, once the interest rate reaches a certain level and after a period of 5 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 1 or 2 years, but you have not reflected that yet. Thank you for your question. So, for the -- 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 5-year period. And then since then, the surrender value doesn't go up after the breakeven 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 breakeven period. So, product-wise, there are some differences.

Let us move on to the next question from Daiwa Securities, Mr. Watanabe.

[Interpreted]

I have 2 questions. One, about the surrender rate. I would like to understand the impact of rate hike. Taiyo, 2 years ago, the surrender trend of contracts other than the ceded 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 Taiyo, -- so we are seeing an increased surrender for one-off payment type but excluding the impact of J-type protection review, it's not increasing. That is all.

[Interpreted]

My second question is about 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 what -- 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 JPY 130, this is appropriate level because it satisfies 60% of 5-year average profit. So, because we are using 5-year average, even when we see an upside in profit, it will be reflected upon the dividend hike gradually.

Next is about the buy back. So, on Page 53, you can see our dividend payout policy. The left shows return 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 the November IR session, we would like to be agile rather than fixing the timing. We will we are contemplating the possibility to buy back shares in an agile way. So, that is our policy.

[Interpreted]

So, DPS, even 5-year average is used, I think it should go up 1 or 2, but you have rounded the number. Am I right?

Yes, you are right.

[Audio Gap]

[Interpreted]

This is Sasaki from Nomura Securities. I have 2 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 for the -- 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?

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. 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 '26 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 customers' 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.

[Interpreted]

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 to 225, which we deem as the appropriate level, and we would 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's 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.

[Interpreted]

So, what you're saying is that you're currently in range. That's your conclusion.

Yes, that is correct.

Next question is from Sato from JPMorgan.

[Interpreted]

I have 2 questions. Both of them are simple confirmation. The first point is JPY 172 billion figure for this fiscal year. Is this the better than real number or taking into account the proceed of sale of NÜRNBERGER 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 JPY 20 billion decrease year-on-year. And as you rightly pointed out, the improvement of yen-denominated bonds 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.

[Interpreted]

Understood. My second question is about Taiyo Life bancassurance channel. So, 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? So, 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. But regarding the bancassurance, we will look at the surrender trend and make a decision. That is all.

[Interpreted]

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 bancassurance, would it induce surrenders? Am I right?

Yes, I think your understanding is correct.

Next question, please. Mizuho Securities, Sakamaki-san.

[Interpreted]

This is Sakamaki from Mizuho Securities. 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 is a lot of movements. And 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. So, January end is the standard that we're using. So, exchange rate and rate of currency hedge cost impact on 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 on another page. For the alternative assets, forecast are quite difficult. And since last year, we had a big upside, we are subtracting that this fiscal year.

[Interpreted]

Understood. And my second question is regarding ESR. You talked about the range of 185 to 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. 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.

[Interpreted]

Understood. So, in your materials, you usually talk about 225%. So, I was thinking that's your line of defense. But today, you explained the 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.

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.

[Interpreted]

I have 2 questions, 2 simple questions. One is about the new policy value. So, new policy margin is 8.7%, 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. 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 try 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.

[Interpreted]

So, JPY 172 billion, 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 bancassurance business. And also the Taiyo, it's a protection type product. And therefore, the rate hike has a negative impact on its business. And that is the reason why we lowered the expectation for new policy value.

I would like to confirm another point. Regarding adjusted profit for this fiscal year, it's JPY 172 billion vis-a-vis the midterm plan. So, the midterm plan target is JPY 900 billion for 5 years. So, if the adjusted profit remains flat and if last year has JPY 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?

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.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

This is Moriyama from T&D Holdings. Thank you very much for taking the time out of your busy schedules to attend our group's long-term vision briefing today.

Today, I will first review our previous group long-term vision and then explain our new group long-term vision. The content I will cover today includes the KPIs and an overview of the key initiatives. Details of specific initiatives by each subsidiary will be explained at the IR briefing scheduled for June 5.

Now I will begin with a review of our previous group long-term vision. Please turn to Page 4. The financial KPIs under the previous long-term vision have been progressing generally in line with the plan. Adjusted ROE and group adjusted profit achieved the targets 1 year ahead of schedule in the fiscal year ended March 2025. We expect further progress in the fiscal year ending March 2026.

As for ROEV, although there are year-to-year fluctuations, the average up to the third quarter of the fiscal year ended March 2026 exceeds our medium- to long-term target of 7.5%. On the other hand, for new business value, due to factors such as changes in insurance assumptions, revisions to the ultimate forward rate and the introduction of mass surrender risk, achieving the initial target of JPY 200 billion will be difficult. Progress on nonfinancial KPIs will be explained at the IR briefing scheduled for June.

Please turn to the next page. Supporting the steady progress of our financial KPIs are the solid performances of our 3 life insurance companies. Although the first half of the previous long-term vision period was affected by COVID-19, each company has fully leveraged its strength through business models tailored to its respective market. As a result, new business performance has remained solid, and our in-force business has steadily expanded.

In addition, amid the recent rise in interest rates, the buildup of in-force policies is creating an environment where positive spread expansion is more likely to drive profit growth. These solid policy results are evidence of our group's strong competitive advantage and represent a key strength.

Please turn to the next page. Under the previous long-term vision, we have worked to enhance capital efficiency by reducing investment risk, including promoting ALM. Specifically, over approximately 4 years and 9 months from the end of March 2021 to the end of December 2025, Daido Life purchased JPY 1.3 trillion of ultra long-term bonds. In addition, Taiyo Life and Daido Life combined have reduced domestic and foreign equities by JPY 760 billion and reduced hedged foreign bonds by JPY 2.3 trillion.

Regarding the risk reduction targets disclosed in May 2024, domestic interest rate risk has been reduced by approximately JPY 135 billion more than the target. On the other hand, for domestic and foreign equity risk, partly due to rising stock prices, the reduction fell short of the target by approximately JPY 65 billion. Under the new long-term vision, we will continue to work on reducing investment risk to enhance capital efficiency.

Please turn to the next page. The effects of our efforts to reduce investment risk are steadily emerging in the form of lower EV sensitivity and a decline in equity beta, as shown on this page. On the other hand, amid the recent rise in interest rates, the cost of equity based on CAPM is around 9%, and we recognize that our cost of equity remains in the range of approximately 8% to 10%. Under the new long-term vision, we will continue to pursue further improvements in capital efficiency and reductions in the cost of equity.

Please turn to the next page. Next, I will explain capital allocation and shareholder returns under the previous long-term vision. Under the previous long-term vision, we positioned improving capital efficiency as a top priority. Profits generated by the domestic life insurance business and capital released through the reduction of investment risk were upstreamed to the holding company and allocated to growth investments and shareholder returns. Cash dividends have been increased from JPY 46 in the fiscal year ended March 2021, just before the start of the previous long-term vision, to JPY 130, approximately 2.8x higher. In addition, regarding share buybacks, we executed a total of JPY 250 billion over the 4 years through profits for the fiscal year ended March 2025. As for growth investments, over 5 years, we have made total investments of JPY 198 billion, mainly in the closed book business.

Please turn to the next page. Next, I will explain the diversification of our business portfolio under the previous long-term vision. Under the previous long-term vision, we promoted investment in the closed book business with the aim of building a new earnings pillar alongside the life insurance business. Specifically, we executed investments in 2 companies with different regions and business models, Fortitude and Viridium.

Equity method income from these investments totals approximately JPY 93 billion on an adjusted profit basis, and we have also received approximately JPY 30 billion in dividends to date. As outlined, alongside the diversification of our business portfolio, we believe the establishment of new earnings base next to the life insurance business has been steadily progressing.

Please turn to the next page. The results of the various initiatives under the previous long-term vision, as explained so far, are clearly reflected in our share price and TSR. TSR expanded to approximately 3.3x over the 5 years of the previous long-term vision period. In addition, PBR has recovered from 0.54x at the end of March 2021 to a level above 1x. We recognize that our efforts to improve capital efficiency and reduce the cost of equity have led to a certain level of positive evaluation from the market. On the other hand, although the P/EV multiple has improved, it remains at around 0.4x. Under the new long-term vision, we will continue to improve capital efficiency and advance initiatives for growth. This concludes the review of the previous long-term vision.

And next, I will explain the new long-term vision. Please turn to Page 12. First, I will explain our thoughts behind the formulation of the group long-term vision. Under the group long-term vision, Try & Discover 2030, our group management philosophy to contribute to people and society through value creation under the spirit of Try & Discover remains unchanged, a principle we have upheld since our founding. On the other hand, against the backdrop of megatrends such as a declining birth rate and aging population and a shrinking workforce, the market will contract over the very long term. To remain competitive in this environment, the group must act as one and transform into a more efficient and highly productive organization.

While the life insurance business will remain our core, to build a foundation for sustainable growth beyond 2030, we must view the diversification of social challenges as an opportunity and take on new business domains. In light of these environmental changes, our direction and our group's purpose, we have revised our management vision. Our new management vision is: one, Try & Discover for sustainable growth. Centered on the spirit of try and discover, which we have upheld since our founding, we are more clearly articulating our direction of advancing value creation as one unified group.

Please turn to the next page. Next, let me explain the positioning of Try & Discover 2030. In our previous long-term vision, we successfully improved capital efficiency by strengthening capital management, guided by our corporate philosophy, which remains the unchanging purpose of the group. Try & Discover 2030 will build on these achievements to transition into a new stage of growth.

Try & Discover 2030 is our new long-term vision, which encompasses the group management vision, our target state for the next 5 years, as well as the group growth strategy and group KPIs, which are based on the 3 basic principles designed to achieve this vision. The 3 basic principles will be explained on the following page.

To achieve the to-be state after 5 years outlined in the group's management vision, the group's long-term vision sets forth 3 basic principles. The first basic principle is to further strengthen our core life insurance business. By enhancing our sales and investment capabilities, steadily growing in-force policies and advancing our ALM initiatives, we will achieve a stable profit growth in an environment with higher interest rate.

The second basic principle is growth through the creation of new value. We will focus on areas where we can leverage the group's strength and make disciplined growth investments while paying attention to the cost of equity.

The third basic principle is enhancing group resilience. To ensure we remain a winning company even amid disruptive environmental changes, we will transform ourselves into a strong and resilient group. Building on our DX strategy, we will promote more integrated group-wide management than ever before, circulating not only financial capital, but also human capital and other resources to generate group synergies.

Please turn to the next page. This outlines our overall group growth strategy for enhancing corporate value centered on 3 basic principles. Guided by these 3 principles, we will strengthen our management foundation, starting with our DX strategy and promote integrated group management. We will enhance corporate value by creating value through the circulation of financial, human and intellectual capital. By doing so, we will not only enhance shareholder value, but also deliver value to a wide range of stakeholders, including our customers, employees and society.

Please go to the next page. Next, I will explain the KPIs for our new long-term vision. Regarding the group's adjusted profit for the fiscal year ended March 2031, which is the final year of the new long-term vision, we have revised our forecast upward from the JPY 200 billion disclosed at the end of March last year to JPY 230 billion, up by JPY 30 billion. This revision takes into account the current economic environment and the effects of the portfolio improvements we have been implementing while also factoring in the profit building effect of future growth investments.

Similarly, regarding the adjusted ROE for the fiscal year ending March 2031, we have set a target of 15%, which clearly exceeds the 8% to 10% range we recognize as the cost of equity, as explained on Page 7. We aim to achieve a new business value of JPY 200 billion. Additionally, as 5-year targets under the new long-term vision, we have set an annual EPS growth rate of 10% or more and an annual ROEV of at least 8%. Please note that these figures do not represent targets to be achieved in each individual fiscal year, but rather targets we aim to achieve over the entire 5-year period. As for the nonfinancial KPIs, they are listed on the slide. However, due to time constraints, I will refrain from providing a detailed explanation today.

Please go to the next page. Next, I will explain the capital management cycle outlined in our new long-term vision. As shown in the circular diagram on the left side, the core of our capital management lies in a cycle where we allocate the stable profits generated by our core domestic life insurance business to growth investments and shareholder returns, thereby further improving capital efficiency. The driving force behind this cycle is the cash allocation shown on the right side of the slide. Under our new 5-year vision, we plan to generate cumulative adjusted profits of over JPY 900 billion, approximately 1.7x the target under our previous long-term vision. Backed by this robust cash inflow, we will accelerate both growth and shareholder returns.

There are 2 policies guiding our approach to cash usage. First is disciplined growth investment. Instead of simply pursuing scale, we strictly set a hurdle rate based on factors such as the cost of equity and the international interest spread. Furthermore, we invest capital only after determining whether a project will contribute to EPS growth over the medium to long term as compared to share buybacks. Disciplined growth investment contributes to increased future returns through profit growth.

Second is the shareholder returns in line with profit growth. Our basic policy is to return 60% of adjusted profit on 5-year average as cash dividends. We will steadily increase the dividend payout level in line with profit growth. Furthermore, we will conduct flexible and efficient share buybacks, taking into account the ESR and other factors.

Please go to the next page. This page describes the first basic principle, strengthening of core businesses. For Taiyo Life, we have set the theme of transforming our revenue structure through measures such as improving productivity. For Daido Life, the theme is expanding corporate insurance coverage and venturing into new business areas. And for TDF, the theme is the rapid expansion of products and agency channels. We will provide details on the specific initiatives of each subsidiary at the IR briefing session scheduled for June 5.

Please turn to the next page. This page explains the second basic principle, growth through new value creation. In addition to strengthening our core business, we have positioned external growth as the second pillar of value creation with the goal of raising the ratio of adjusted profit from nondomestic life insurance operations to 20% or more by fiscal 2030. We have established a new investment capacity of JPY 500 billion. Our investment strategy prioritizes quality over quantity and is based on disciplined capital allocation.

To achieve external growth, we will focus our efforts on the following areas: one, life insurance business in developed markets to generate stable cash flow; two, life insurance business in emerging markets that contribute to capturing medium- to long-term growth potential; and three, investment opportunities in sectors related to life insurance and the broader financial industry that contribute to strengthening the group's business. Through these initiatives focused on external growth, we aim to diversify and stabilize our revenue base and achieve sustainable growth in corporate value.

Please go to the next page. Next, I will explain the third basic principle, enhancing group resilience. Prior to formulating the group's long-term vision, we have been conducting studies aimed at sharing systems and standardizing administrative processes among the 3 life insurance companies with the goal of improving efficiency and enhancing workforce mobility. The feasibility study confirmed that standardization is achievable. But since this is contingent on the shared use of Daido Life's next-generation system scheduled to go live in 2029, its implementation will not take place for several more years.

Meanwhile, digital technologies, including AI, are evolving at a pace beyond expectations, and the adoption of AI is advancing across all industries and business sectors. Consequently, we updated our initiative to standardize systems and administrative processes across 3 life insurance companies and incorporated it into our DX strategy as full-scale AI utilization across the entire group, which is an approach expected to yield significant results sooner. This is placed at the heart of our efforts to enhance group resilience. We will rapidly advance AI adoption tailored to each company's operations while also leveraging synergies by building a shared group-wide platform that serves as the foundation for AI and data.

Please go to the next page. Earlier, I explained how we have positioned our DX strategy as the cornerstone of our efforts to strengthen the group with the theme of full-scale AI utilization across the group. As shown in this diagram, our DX strategy will first improve profitability by reducing operational costs and strengthening our sales capabilities. In other words, we will enhance our ability to generate financial capital and further promote the circulation of financial capital through the capital management we have strengthened over the previous long term.

In addition, the adoption of AI will significantly transform the roles of employees in the group's talent portfolio. We will review our organizational structure to maximize human capital and strengthen the allocation of resources toward areas that create value for the group. Furthermore, by leveraging data across the group, we will make management decisions in a way that optimizes outcomes for the entire group and ensures speed.

In this way, by organically integrating the various effects stemming from our DX strategy with our ERM and asset management strategies as well as our organizational and human resources strategies, we aim to maximize not only financial capital, but also the group's intellectual and human capital, thereby accelerating the flow of value across the entire group and maximizing group synergies.

Next, I will outline our DX strategy. Please turn to the next page. To date, our companies have been actively leveraging digital technologies such as AI in areas such as claim assessment to maximize the strength of our respective business models. Under this long-term vision, we have established a group DX strategy aimed at fully leveraging increasingly advanced technologies such as AI agents across all business operations throughout the group. By building a common group-wide AI and data infrastructure, we will achieve enhanced customer value, the establishment of efficient operational systems and the advancement of group management. In addition, regarding frameworks such as AI governance, which are critical to advancing AI adoption, we will work collaboratively across the group to establish a governance infrastructure that supports the sustainable use of AI while keeping future regulatory trends in mind.

Please go to the next page. Also, as we try to fully leverage AI through our DX strategy, business operations will become more automated and unmanned. We believe that the roles expected of people will shift greatly in the future, and we view this as a key management issue for the group. In light of these changes, we will proceed with restructuring our organizational framework and talent portfolio, including transforming the quality of our workforce to accommodate AI adoption and formulating long-term staffing plans while aligning our DX strategy with our organizational and talent strategies to foster employees' willingness to take on challenges and pursue growth, thereby promoting group-wide optimization. Please go to the next page.

Next, I will explain the risk profile outlook. While focusing on the growth of the domestic life insurance business, we will clearly distinguish between areas for appropriate risk taking and continued risk control.

Specifically, for underwriting risk, we anticipate a certain increase in line with the growth of our policy and in force. However, we'll continue to reduce the investment risk through measures such as a further sophistication of our ALM. As a result, while increasing the proportion of risks that contribute to growth, we will maintain the group's overall risk profile at a controlled level in total. Moving forward, we will continue to manage the business by always paying attention to the balance between risk and return, achieving both the softness and growth.

Next page, please. Next is asset management strategy. Our group's investment strategy is fundamentally centered on yen interest assets. Our top priority is to aim for covering 100% of projected interest costs with yen interest assets alone, thereby solidifying the foundation of our insurance business. Risk assets such as domestic and foreign equities and alternative assets are intended for risk diversification and inflation hedge, as well as complementary strategy for profit generation to achieve sustainable growth. We will conduct prudent and disciplined investment management with a focus on risk return efficiency.

Next page, please. Next, our efforts to strengthen the group's asset management framework. TDAM and TDIM serve as the core asset management platforms in the group, and we will promote collaborative management across the group. By integrating management expertise and resources across the entire group, we aim to enhance and streamline our asset management framework while striving to improve investment returns. To drive these initiatives, we've established the group Asset Management Strategy Committee starting this fiscal year. Under the leadership of this committee, we'll set up the integrated asset management across the group.

Please proceed to the next page. Next, our policy on reduction of the strategic shareholdings. The group has established a reduction policy aiming to eliminate strategic shareholdings, excluding those related to business alliances and partners by the end of March 2031. As an interim target, we have set a new goal to reduce the holdings by 40% by the end of March 2028 compared to the end of March 2026. This 40% figure is merely a guideline. Taking market conditions into account, we intend to further reduce holdings where no business partnership and no strategic rationale is recognized.

Next, the group governance. Effective April 1, we changed the Chair of the Board of Directors from the President to the Non-Executive Chairman. Furthermore, during the early part of the new long-term vision, we aim to have the majority of the Board represented by outside directors. By enhancing the functions in the 3 areas, namely the Board structure, nomination and compensation, we will further improve the effectiveness of group governance. In addition, we plan to revise the overseas compensation structure intended to augment sales incentive and further align the value with stakeholders. We will also expand capital management to cover human and intellectual capital from simply focusing on the financial capital and build a management foundation to ensure the solid execution of our growth strategy.

Next page, please. For the formation and disclosure of the new group long-term vision, we allocated significant time during Board meetings and established discussion forums outside of the Board meetings to thoroughly deliberate on management strategies from a medium- to long-term perspective. In addition, we have engaged a more frequent dialog with the market than ever before, including having outside directors attend one-on-one investor meetings, and conducted discussions from a shareholders' perspective. We will continue our efforts to further enhance our governance structure to ensure the Board effectively fulfills its supervisory role with the aim of further increasing corporate value.

Last but not least, our thoughts on enhancing the stock price. We conduct dual-track business management by monitoring both the economic value and financial accounting. EV is a source of the future profits, and we believe that EV growth leads to the mid- to long-term and sustainable improvement of financial accounting profits. As illustrated in the slide, the accumulation of new business value and improvements to our asset management portfolio leads to higher EV, and in-force policies in the asset management portfolio generates stable accounting-based profits.

The value of our in-force business within EV is the present value based on best estimate assumptions, and its value fluctuates with changes in these assumptions. We believe this uncertainty is one of the major factors causing the stock price to trade at a discount to EV. Therefore, to achieve share price appreciation, we believe that it is crucial to enhance the quality of EV so that we can steadily realize financial accounting profits.

Please proceed to the next page. This slide outlines how we regard share price appreciation and TSR improvement. This may be stating the obvious to investors and analysts, but the stock price is essentially determined by EPS and PER. EPS growth is part of the equation that can be achieved by company initiatives. As a group, we will strive to grow EPS primarily through steady profit growth in our existing businesses, coupled with accumulating profit through growth investments and flexible and effective share buybacks.

As we cannot expect high multiple with short-term EPS growth alone, medium- to long-term sustainable EPS growth is essential in our view.

While price to earnings is determined by the market, we intend to take actions to raise the growth outlook and lower the cost of shareholders' capital, thereby enhancing market expectations and trust to improve the PER. We also believe that initiatives aimed at improving the PER will lead to sustainable EPS growth over the mid- to long term. Furthermore, with the revised dividend policy introduced last year, the profit growth will directly translate into dividend growth. Under the new long-term vision, we will also strive to improve TSR by achieving steady dividend hikes underpinned by medium- to long-term sustainable profit growth.

Please turn to the next page. Next, our thoughts on EPS growth. As shown on Page 16, under the 5-year period of the new group long-term vision, we are targeting annual EPS growth of 10% or more. Of this EPS growth, we anticipate approximately 8% to be achieved from profit growth in our domestic life insurance business and our existing closed book business, among others. In addition, we plan to achieve approximately 2% through new growth investments and the execution of capital policies. While building on steady profit growth of our existing businesses, we will strive to deliver more than 10% EPS growth by combining strategic growth investments with capital policies.

Please proceed to the next page. This page illustrates the concept of share price appreciation driven by EPS growth and an improved PER. Our price-to-EV ratio stood at 0.4x at the end of December 2025. Given the current profit levels, achieving a price-to-EV ratio of 1x require a price-to-earnings ratio of roughly 30x. Therefore, it is not easy to achieve 1x price-to-EV at this point.

Based on this understanding, by executing the measures outlined today, we aim to achieve annual EPS growth of 10% or more, driven by an increase in adjusted earnings. At the same time, we will seek to further improve our price-to-EV by enhancing market valuation by fostering growth expectations and reducing the cost of shareholders' capital, thereby boosting the price-to-earnings ratio.

Next page, please. Lastly, I'd like to share our shareholder return policy. We have clarified our approach to total shareholder returns, which includes share buybacks in addition to traditional cash dividend as a form of returning the annual profit. We set the total shareholder returns against adjusted profit during the long-term vision period at approximately 60% over the medium to long term, taking into account opportunities for growth investment and the level of ESR. Please note that Page 37 contains slides regarding credit investments for your reference. Thank you very much for your attention today.

We will now move on to the Q&A session. We will now introduce the first person to ask a question from SMBC Nikko Securities, Mr. Muraki.

This is Muraki of SMBC Nikko Securities. I have 2 questions. First, regarding investments on Page 19, you show investments of JPY 500 billion allocation. I would like to understand the background to setting this allocation. Fortitude and Viridium, I believe cumulative investment was about JPY 260 billion. So it will be almost double that. And also, for the emerging markets, I believe you mean emerging countries, these are included. So what has been the discussion that took place to come to this allocation and target? So that's my first question.

And the second question is on Page 18. It's mostly for Taiyo Life. You talk about profitability structural reform and the specifics to be shared in the next vision. So that was what we heard before. So if you have any updates that you can give us at this time, we would appreciate it. And also for the 5-year period, what kind of KPIs were set at Taiyo Life? How was the progress managed? And how will this be used for executive compensation, if there's any plan for the KPIs and performance to be used for executive compensation?

Thank you, Mr. Muraki. This is Moriya of T&D Holdings speaking. Regarding your first question about growth investments, the JPY 500 billion allocation and also the target domains, how we discussed to determine those, I believe, was the question.

At the Board of Directors' meetings, there were discussions about the aspiration for the group mainly focused on the domestic life insurance business and the need for developing a new earnings pillar. That was a challenge identified through the discussions. And based on the previous long-term vision, we are now entering a phase where we can expect sustainable growth. And we determined that it will be necessary for us to discuss the new areas for investments.

And of course, looking at the previous growth -- previous long-term vision levels, and we target JPY 500 billion allocation for growth investments as we pursue higher growth than the previous period. And as you can see, number 1, 2 and 3, the advanced markets, the other domains as well as the emerging markets. So we have a certain expertise. We have strengths in certain areas, and we believe it's necessary for us to focus on those domains to further achieve growth. And that is why we have identified the 3 areas.

For the developed markets, advanced market life insurance business, we will leverage the closed book business and demonstrate our strengths. Based on our experience and expertise, we will also work with our partners and utilize the network in order to further pursue optimization.

For the emerging markets, for the closed book, this is a business domain where we expect a high growth potential going forward. But due to the characteristics of the business, because it is the closed book, we expect this to continue to eventually decline. So we determined that it will be necessary for us to also make investments into the growing markets, growing areas.

As for the others category, we would like to leverage the strength held by the operating companies within the group, and we will look to other possible areas for investment. So these are the areas that we've identified for future growth investments. As to the priority and the size of -- and the allocation priority, we will refrain from making comments on that at this time. So that's my response to the first question.

Mr. Muraki, thank you for your question. I would like to give additional information on the first question. Regarding the background to setting the allocation of JPY 500 billion. In the previous long-term vision, we have worked to enhance the capital efficiency to a degree. And over the next 5 years, profits to be generated cumulative, we expect over JPY 900 billion of profits to be generated over the 5-year period, including the total payout ratio. We are targeting 60%, as was mentioned before.

So as the next growth stage, we need to consider investments to achieve growth. That's our primary objective. So calculating this, of course, this does not add up to JPY 500 billion, but including external funding, that's the level of investments that we would like to execute. And also over the past several years, we have executed several growth investments, and we have now been able to consider various projects and opportunities.

So in the previous long-term vision, we set a certain size. And now we are pursuing even bigger growth, and that's the basis of our thoughts behind the growth strategy. We would like to have growth even beyond the 5-year period under this new long-term vision. So that's the background to setting this.

And as for the domains in which investments will be made, basically, for the advanced market, currently, we are making investments into the closed book business. We have the existing platform. And of course, investments and reinvestments are possible options for us. Having said that, whether we will make new investments into new closed book, that would not be the case. We have decided not to make any new investments into the closed book, as was explained previously.

As for the emerging markets, we look to areas with sound population growth. These are contributing to economic growth, income level enhancements and in the future, where we can expect the life insurance needs or protection type asset formation needs to expand. So these are areas that we are targeting. Thank you. And as to the second question.

Regarding the profit structural reform at Taiyo Life, do you have any updates? How will KPIs be set? Will performance be considered for compensation?

As for Taiyo Life, as we have been mentioning, we've identified the challenge of transforming the profit structure, the earnings structure. More than anything, Taiyo Life is very much focused on recovering the sales agent channel and improving profitability. That is the challenge that we've identified for the Taiyo Life.

And as was mentioned this time, products and productivity improvement and enhancing underwriting, these are the areas of focus. Especially for products, of course, we need to review the mix going forward more so than ever. Even up to this, the assumed business expense ratio has been increased, and this contributed to improved profitability. But with more in-force policies accumulating, we should see positive results in terms of profitability. So it does take time.

On the other hand, responding to customer needs is another area. And also based on changes in the financial environment, we are now reviewing or considering the review of product portfolio. In addition to the third sector, including death protection, we hope to develop a more balanced portfolio so that we can get more stable mortality gains and improve profitability going forward. And with higher interest rates in the environment, through the sales agent channel, we would like to have more of savings type products, hope to have the balance of managed assets in order to expand a positive spread.

And also as for the organization or structural reform, we have been implementing reform of the branch organizations and sales organizations, particularly at the branches. They were more focused on sales administrative work, and we are shifting to sales support. With the improvement seen in productivity and better performance, we would like to roll this reform to other organizations throughout the nation.

As for underwriting, we hope to establish a sound policy base or customer base. After the COVID-19, there was an increase in payment of insurance claims, and we hope to strongly link this to benefits and policies and enhance our underwriting operations. And through comprehensive measures, we will not see immediate results, but we hope to steadily improve insurance profitability and earnings going forward. That is the kind of structure that we hope to develop.

And as for the business expenses, it's not just Taiyo Life on a stand-alone basis, but as a group, we hope to promote the DX strategy that was covered today.

As for the earnings structural reform, as is covered in the presentation, as for the bancassurance channel, in the future, there is a latent surrender risk. So from expansion focus to risk control, that is the shift that we are making. We have clarified that policy shifting from that. And we will closely monitor the policies and their situation and exert control properly.

As for KPIs, as product mix will shift going forward, protection type A&P has been the focus before. But as I said, this protection and also through the sales agent channel, asset formation type of products, savings type of products will also be offered through that channel.

As for executive compensation, this is currently being considered. But as part of the performance evaluation, given the characteristics of the Taiyo Life sales agent channel, whether it's growing or not will be key. And also profits, whether core profits are increasing or not will be something that will be evaluated on. That concludes my response. Thank you very much.

This is Moriyama. I would like to give a brief additional comment. Regarding growth investments, I hope to come back to that. Of course, the investments will be made with discipline, as we have done so in the past. This is needless to say, but we will follow that approach.

And as for Taiyo Life, improving profitability. For KPIs, after June, we hope to provide a more detailed explanation on that. At present, as I mentioned before previously, we need to have more scrutiny and detailed analysis of the current profit structure. The sales department and the actuaries at Taiyo Life will need to be deeply involved, and we need to do a factor analysis to identify how these variables, factors will be improved. So we are implementing very detailed analysis as we speak. And by setting each KPI and indicator, this will help us do more monitoring in a scientific manner. So some areas may take longer, but we are following through with these initiatives, and I hope to share more at a later date. Thank you.

Now let us move on to the next question. BofA Securities, Tsujino-san.

First of all, JPY 230 billion by March 2031, you said that 20% or more is supposed to come from nondomestic life insurance business, that is JPY 4.6 billion. For example, DDAC was JPY 16 billion for this fiscal year. And that means you already have about JPY 16 billion of nondomestic life insurance business and JPY 30 billion increase to come.

You have made investments into Viridium. So nondomestic life insurance operations is expected to increase from there as well, 20% or more. So it should be more than JPY 46 billion. So maybe 20% of JPY 130 billion is not so large.

And on the other hand, if you are to invest JPY 500 billion, the core business needs to grow more. So this JPY 500 billion, maybe I wasn't being attentive, but does this include investments related to domestic life insurance business? Otherwise, this JPY 500 billion doesn't sound like you're contributing to the growth. That's my first question.

And my second question is medium- to long-term total payout. Did you say it's supposed to be 60%? I think it doesn't make sense. 3-year average, 60% of group's adjusted profit, that's to be used for the dividend. And you said that -- well, even if you do agile buybacks, it's not going to be zero. Based on the profit target, if you are to achieve 15% ROE, if you do a simple math, in the back, I can kind of assume what kind of capital there is in the back. JPY 190 billion is the expected capital growth behind all these calculations. And group's adjusted profit, you said is expected to grow more in the latter half of the long term. So total return, isn't it supposed to be close to 80%? Or am I missing something?

This is Honda speaking. I would like to respond to the question. First of all, profit from overseas, which is basically from the closed book business. On Page 19, we are showing 20% or more. That is the total figure, and this is roughly correct. But there are profits from new businesses and profits from existing businesses altogether included in this number. To be more specific, JPY 210 billion and JPY 230 billion. So we are showing the breakdown on this slide. And in order to achieve this JPY 30 billion, full contribution from Viridium and growth of Fortitude and sidecar investments are included.

The total amount, JPY 500 billion new investment budget, this includes domestic and overseas investments. This is the total figure. And profits will not be recognized from the moment we invest. So that needs to be taken into account. And JPY 20 billion growth investment is something we would like to achieve as a minimum. That is my response to your first question.

To your first question, maybe I am going to repeat him, but profits from -- returns from investments, well, there is some uncertainty as to the timing of when those returns will start coming in. So we are taking a conservative view in forecasting the return, and it really depends on the timing of the investment. So this JPY 500 billion, this is our outlook as of today.

Now let me answer your second question. This is Honda speaking again. Regarding shareholder returns, on Page 35, we are outlining our policy. So I may be repeating some of the explanations given already. But in last March, we made an announcement. We are going to use the 5-year average of group adjusted profit to calculate the 60% dividend payout ratio. That is what we announced last March. And this is the cash dividend we're planning to pay out.

Additionally, we added a new policy here. The profit, if it is to grow, the total return concept will give us a lower amount. Taking that into account, during the new long term, we will look at the total amount of profit for 5 years, and then 60% total return -- total shareholder return will be achieved. And that includes the cash dividend that I explained earlier.

However, on a cumulative basis, we will be taking a medium- to long-term approach. And we are planning to allocate some cash flow to the JPY 500 billion growth investment that we explained earlier. So from a holistic point of view, cash flow for the growth is going to be taken into account whenever we will execute shareholder returns.

So JPY 900 billion on Page 17, that is adjusted profit, right? Cash, is it equal to the adjusted profit? And this JPY 900 billion, are you talking about 60% of this JPY 900 billion? Or is this a different concept from the group's adjusted profit? What is it?

Yes. Regarding this JPY 900 billion, this is adjusted profit. And the concept is the same as the group's adjusted profit. And there is a portion of cash dividend that is going to become cash flow, definitely. And the portion to be allocated for growth investments, it is recognized as capital. But as we execute this, there will be a portion to be paid from profit, which will then be recognized as cash flow. That is it. Thank you.

Yes. Then ROE is expected to improve, but capital is only going to grow by JPY 200 billion. That means, are you expecting acquisitions with substantial goodwill? But the denominator, is it tangible?

Yes. In our investments, we -- in terms of the amount of goodwill based on the value of the counterpart, that is not factored into our forecast. So if you just can calculate based on the amount of capital, that will be great.

But the capital is only going to grow by JPY 200 billion. Is that the right assumption? The adjusted ROE is going to be 15% and capital is expected to grow only by JPY 200 billion. Is that fair to say? Is that the right calculation?

Yes. Well, there are various factors used for the calculation of capital. But as you said in the background, capital is expected to grow by JPY 200 billion. That is the right assumption.

Understood. Thank you.

So we'd like to take the next question. Watanabe-san from Daiwa Securities, please.

Yes. This is Watanabe from Daiwa Securities. I have 2 questions. The first point is the target for adjusted profit for FY '30. So you have raised the target by JPY 30 billion compared to a year ago. Can you give me the breakdown? On Page 33, you have JPY 46 billion for the domestic life business. CB, JPY 16 billion. And new investment of about JPY 20 billion. Compared to a year ago, what increased by JPY 30 billion as your target?

And my second question is regarding share buybacks. I want to confirm the source of the share buyback. I believe there are 3. One is the annual profit and losses that you just explained, the average 5-year dividend payout and also the total shareholder return ratio of 60% per year, so the gap on a cumulative basis. Under the 5-year long-term vision, are you committed to conducting share buybacks that's associated with the annual profit? And for the growth investment, if you are not going to be using JPY 500 billion, when would you decide to use that amount to share buybacks?

And the third point is the what's in excess of the ESR. The Japan Post Insurance showed the ESR that was broken down by different surrender rate. The nominal ESR may be coming down, but the negative impact may not be as severe as how it seems. So would you also consider that as a potential source of share buybacks?

Yes. Thank you for your questions. First, on adjusted profit, the new target is JPY 230 billion as the new KPI. Previously, we were stating JPY 200 billion as the target. And as you point out, on Page 33, these are the figures that we have in our mind. The first one is JPY 20 billion coming from the growth investment. So that's a big boost. The remaining JPY 10 billion is mostly coming from the life insurance business. With the rate increasing and the environment changing and also further matching of the cash flow, we are able to project a steady dividend and interest income. So that's why we have reset and revised up the guidance for the target.

So in the last year or so, the original loan rate has increased significantly, and you have also repositioned your portfolio. So that impact is JPY 10 billion as positive spread. Is that correct?

On a net basis, I would say that we do have a positive impact of JPY 10 billion. And on the other hand, we do have higher earnings, but with inflation and higher wages, the business expenses are also going up. So considering those factors, we have projected a positive net impact of JPY 10 billion.

I see. So can you respond to my second question, please?

Yes. Regarding share buybacks -- yes, thank you. Regarding the share buybacks, you pointed out the 3 sources of the buybacks. The first one is from the annual profit. And this time, the TSR is 60%, and that was communicated from us. So I think that's what you're referring to. So I may be repeating myself, but for the average 5-year adjusted profit, we'll be using that to make the calculation. And also, we have newly presented, the TSR target of 60%.

But as I mentioned earlier, we're not just looking at a single annual year. Under the current 5-year period or the long-term vision, this is the comprehensive payout that we'd like to achieve. So it's not like we are going to pay out 60% each year. We will be looking at the level of the growth investment to be agile in achieving that target.

And you also mentioned the growth investment budget of JPY 500 billion. If this was not fully executed, this could be reallocated for share buybacks. And I think that was what you were referring to.

For the JPY 900 billion of cash flow, which I mentioned earlier, within this JPY 900 billion of cash flow, we have the shareholder return, and the rest will be growth investment.

And for JPY 500 billion, we are also looking into external funding, and that is also included in this investment budget. So it's not that we're just subtracting JPY 500 billion from the profit. So that is the meaning behind this JPY 500 billion budget. But if the growth investment is not fully used as budgeted, then we will be looking at the capital level and the ESR at that point to reconsider how we would like to use the capital for shareholder returns.

And for anything that's in excess of ESR that's related to the mass surrender, we understand the other companies' activities. But basically, for our case, the surrender cancellation risk is reflected as it's been stipulated by the regulation in our internal model. So at this point, we are not making any changes to that policy. So going forward, for anything that's in excess of the appropriate ESR, we will be looking at that excess magnitude to consider the share buybacks.

If I may confirm, for those 3 sources of the share buybacks, if you reflect back the share buybacks of 5 years, can we assume these sources to be independent sources for share buybacks? Or should it be regarded in aggregate? And when you do the buybacks, would you be able to indicate for what reason you will be doing the share buybacks for using different buckets of the sources?

Yes. For the first 2 buckets, the annual profit and also the JPY 500 billion growth investment that will be coming from the profit, that is a little bit of duplication there. And for the unused portion of the JPY 500 billion that will accumulate on the capital base, that would also impact the surplus capital. So it's not as if they are standing independently, but they are linked. So there's a link to the capital and the cash and the cash flow. So I would say that these factors are related and correlated.

So if we were to announce a buyback, we will try to, of course, consider or we would like to specify the reasons behind the share buybacks because that will be discussed under the consideration. But looking at the 5-year TSR target for -- if we are not able to make the growth investment in the 5 years, but immediately after that period, there could be an opportunity. So we would also consider that factor to determine the shareholder return and explain our commitment. Thank you very much.

We will now move on to the next question from JPMorgan Securities, Sato-san.

This is Sato of JPMorgan Securities. My first question, I apologize to still be on this topic, 15% adjusted ROE. This was mentioned by Tsujino-san's question. If you break this down on a single year basis, interim average, JPY 1.5 trillion will be the figure if we calculate. And you said forecast, 10.9%. So this is a forecast as of the beginning of the year. The net assets, I believe, is already exceeding JPY 1.5 trillion. So if the numbers are solid, then the assumption is that the net assets would not increase further. Otherwise, 15% would not be achieved. Is my understanding correct?

And also more simply, on a 5-year period, how much buybacks have been incorporated as per the simulation? If you can disclose that information, of course, we will basically take it as an assumption. But if you can share with us the assumptions, that would be helpful. So that's my first question.

The second question is -- this is not related to the midterm plan. But on Page 37, there is a page on credit investment. And you've included this slide once again, perhaps assuming that there will be questions on this topic. So regarding the latest status of credit investments, if you see any concentration in terms of industry or anything at all, any updates, any new developments with respect to credit investment, particularly -- not necessarily on this table, but credit investment exposure at Fortitude and Viridium, if you have any updates from the previous earnings briefing, please share. That's all for me.

Thank you for your questions. Going back to the adjusted ROE of 15%, the assumptions of the net assets, we talked about how we expect about JPY 200 billion increase in net assets. I will skip the details. But during this vision period, of course, we will have a sale of stockholding as part of reducing exposure. So realizing the unrealized gains and gains will be returned as a part of cash flow. So all these factors have been considered in our assumptions. That's my response to your first question.

Pardon me. So you said JPY 200 billion increase in net assets. Where will that come from? What's the baseline? So as of December end, you have about JPY 1.6 trillion. Is this net assets without adjustments? That's my understanding. But I apologize if I misunderstood the definition.

Thank you. At present, as of the forecast at the end of March, net asset assumptions are as follows. Basically, interest rate situation as of the end of December. And given the economic conditions back then, those are the assumptions. So of course, those are different from March end, and those are different slightly from what we have at present. As for the differences from the end of December, that explains the differences, I hope.

So with that difference intact, the level of commitment to the 15%, this is my last part of the first question. I would like to know the level of commitment with the difference intact, will that require additional capital adjustments? Will such a decision be made?

As for future capital, of course, due to various factors, given the current economic environment and how profits will be generated, of course, these will all have a bearing on the future capital. Inclusive of these factors, even with the changes in the economic environment, our KPI, ROE, 15% remains our target as per our plan. That remains our target.

This is Moriyama speaking, if I may. Basically, 5 years from now, we have our targets as well as forecast and to what level we can take on this challenge. Of course, these are all considered. And of course, there have been some calculations, simulations to back those numbers. But in more detailed areas, there may be some differences arising.

Of course, for share buybacks, there's nothing planned, nothing decided at this point in time. So I cannot say about the future. But of course, needless to say, we will look at the overall capital efficiency. And there may be some portions that will be executed beyond the basic part as part of the management decision. That's all I can say at this point in time.

Thank you. Please respond to my second question.

I believe the question was about credit investment. This is certainly, I believe, is an area of interest for you, and that is why we've included Page 37. From the figures shared in IR briefings, we have updated the numbers. Currently, credit investment by Taiyo and Daido Life is shown on Page 37. Basically, these are the investments. And at present, IT-related sectors has been very much talked about in the credit investment context. But generally, 10% to 20% of the total comes from that sector. So through asset management, of course, we are implementing monitoring measures.

As for the content, we try to diversify through seniority and setting covenants, we manage the risks. So even if losses are incurred from credit investment, they should be within a manageable range.

And as for Fortitude and Viridium, the situation of exposures, I believe, was another part of your question. As for Fortitude, 11% or so of the total assets are private investment, and direct lending to SMEs only account for about 1% of the total assets. So -- of course, we will continue to make these investments to use excess capital, but diversification, stress testing is, of course, being executed by Fortitude, and this investment is properly managed.

As for Viridium, due to our arrangement for information management, I will refrain from making comments on details. But compared to Fortitude, as for credit rating and other areas, Viridium is taking more risk relative to Fortitude. But of course, the borrowers, diversification setting default ratio, they are all within the expected range. So for both companies, we do not have any specific risk at this time.

Now let us move on to the next question. Nomura Securities, Sasaki-san.

This is Sasaki speaking. I'm from Nomura Securities. I have 2 questions. First of all, regarding new investments, you talked about external procurement. Does that mean increasing the leverage on balance sheet as for debt? That is my first question.

And my second question is the new midterm plan have been formulated, 225% ESR. Was there any opportunity to discuss this level, whether to increase it or decrease it? Was there any discussion on this point? Those are my 2 questions.

Yes. Thank you. Regarding new investments, external procurement, I think the question was on our policy. As we said earlier, well, there are certain numbers, but rather than calculating based on those, we have discussed whether we should use profits from our new businesses or should we rely on debt by taking into account risk factors. That is to be decided based on a holistic point of view to decide the -- how we use the cash. But at least as for now, we believe corporate bonds and simple borrowings will be the main channels. I believe that is my response to your first question. Thank you for the question.

The level of ESR, continuously, such topics are being discussed. As of now, 225% level is based on our policy, which has remained unchanged. And we are also looking at industrial standards, and we will continue to pay attention to that aspect. Regarding this discussion, we will continue to consider. We believe that is necessary, but our policy has remained unchanged as of today. That is it.

This 225%, so as you explained this plan, the stability of profit is going to improve, and you will have better visibility and you will be reducing asset-related risks. So it sounded like there are many factors, but you do not have to increase the level of ESR. Why does it have to be 225% given such circumstances? That is it.

Yes. 225% is based on what we have explained, actually. The soundness of the rating, the AAA is our assumption. So as we operate this life insurance business, we need to meet the high demand from our clients regarding soundness. So that is behind this level.

And regarding the development during this long term, we need to reduce the risk and increase profits. But it is not leading to excessive capital. That is because we are formulating this plan based on JPY 500 billion investments. This is considered as the equity risk of affiliate companies with -- so ESR as a result is not expected to increase as much. That is it for my response.

Understood. I have one follow-up question. In this plan, you are emphasizing new investments. I believe there is much focus on new investments in overseas investments. Do you think there is a good chance of winning? If so, can you please tell us why? If I look at the track record, well, in the closed book business, I believe there are much profits generated, but I think there are struggles in other areas. So investing capital in new areas, what is the winning scenario you have in your mind? If possible, I would appreciate any comments and information. Thank you. That will be my last question.

Yes, thank you. As of this time, it is difficult to describe a specific winning scenario since we've been considering different opportunities. But as I said, we're being conservative, and we would like to make disciplined investments. And when we execute these investments, as we mentioned earlier, the equity cost and the international interest spread will be set as hurdle rate and compared to buyback, which option will lead to further EPS growth. That is another thing we will consider in deciding the risk and growth potential of the opportunity, and then we will decide whether to execute that investment.

As we said previously, regarding Viridium, at the Board meeting, we had more than 10x discussion on this topic. So going forward, we will continue to be cautious, and we will consider from multiple aspects before making any decisions. Therefore, if we believe that it is not feasible or viable, we will not make those investments, and we will definitely consider opportunities with high probability.

We'd like to proceed to the next question. Sakamaki-san from Mizuho Securities, please.

Yes. This is Sakamaki from Mizuho Securities. I have 2 questions. The first one is, it's a bit repetitive of the previous questions, but I want to better understand your ROE target of 15%. So at this point, why did you set this new target? It's a big boost in the next 5 years. And looking at the peers in the life industry, it is a very strong target. It seems a little bit bullish, but what is your intention behind this 15% target?

And also regarding investment, we have been discussing about the investment opportunities. And in regards to this 15% target, when you think about the investment going forward, you will look at the cost of capital plus the rate difference of hurdle rate. On top of that, would you also set 15% as a hurdle rate? So how do you think about the discipline of investment in regards to this 15% ROE target?

And the second point is regarding the new long-term vision. I want to ask about the changes. The JPY 200 billion of new business value, you're going to challenge yourself once again for this target. So what is the pathway for you to achieve this? And you are trying to reduce the market-related risk. But going forward, would you expect any changes to the risk reduction of the market-related risks? Those are my 2 questions.

Yes. Thank you for the questions. Regarding the 15% ROE target, in principle, we want to steadily expand the adjusted profit. That's going to be the prerequisite for achieving that. So we've been discussing about the JPY 230 billion target, and there's been questions around that number. So we want to make sure that we generate profit that overachieves that target. So that's the basis of ROE.

And of course, for ROE, we need to manage the denominator. So for the numerator, which is adjusted profit, we aim to steadily expand the adjusted profit so that we can deliver this target. And of course, as we have been discussing on the numerator, we have to manage that as well. So in the next 5 years, we will also look into the numerator factor as well. So that's my response to your first question.

And regarding your second question, let me respond. Regarding the business performance, the JPY 200 billion of new business value, how do we achieve that, I think, was your question.

So under the new long-term vision, we are going to utilize AI to acquire new businesses. And at each of the business entities in June, we will be discussing more about the insurance business strategy and also growing the new businesses. So the target for the in-force A&P and the target for the new businesses, I think will be raised for each of the subsidiaries, and that's in the plan. And the sustainable policy growth is what we are trying to achieve in order to deliver new business value of JPY 200 billion in FY 2030.

You also asked about reducing the market-related risks. So with the rate increasing, we are now being able to make attractive investment. So first, looking at the cash flow liabilities, we want to accurately assess that so that we can match the cash flow and reduce the overmatching to reduce the interest rate risk.

And from a risk perspective, we're not just matching from the risk perspective. But as we have presented for the liabilities, the interest -- assumed interest cost will be covered by the ALM assets, 100%. So that will also be matched under the accounting basis. So that is also something that we would like to achieve, and that's stipulated in the plan.

This is Moriyama speaking. Regarding the JPY 200 billion of new business value, in principle for Daido Life, it will increase the new businesses. And for Taiyo, the portfolio in the next 5 years will be improved. And that's how we aim to achieve JPY 200 billion in new business value.

We are nearing the end time, so next question will be the last question. I will introduce from Morgan Stanley MUFG, Takemura-san.

This is Takemura from Morgan Stanley MUFG. I have 2 questions. First, which was also mentioned regarding new business value. First part of the question is that the term just ended, we see that the new business value already exceeded JPY 140 billion as of the end of March. So perhaps as you mentioned, the various measures, we should see higher new business value than that. So are you considering any downside risks? I would like to know more about them. Or is it simply, you have a conservative outlook? So that's my question.

And also on Page 16, return on embedded value of 8% or more is the target that you set here. For 8% or more, what was the background to coming up with this number? What is the thought behind setting at this level? If you can give more color, I would appreciate that. Because already, embedded value already are reaching JPY 4.4 trillion. So 8% means at least JPY 350 billion with JPY 200 billion of new business value. It may not be so easy to reach this. So why you set this target to be 8% or more? What was the thought behind this? That's my first question.

And as for the second question, I would simply just have a quick answer to that, if I may. On Page 24, on the left-hand side, if I look at the diagram or graph on the left-hand side, so JPY 500 billion to be invested, that was the decision made for the new midterm plan. And for the affiliated -- affiliates risk, from 9% to 19%. So this is a significant increase in the plan. And based on this, as you control the ESR, as for asset management risk compared to the previous plan, perhaps this has been slightly declined or decreased in the new plan. That's the point I would like to confirm. Those are my questions.

Thank you. So for the new business value, up to the third quarter, the results already exceeding JPY 190 billion. As for the forecast for the fourth quarter, you were asking whether there is any downside risk.

Looking back the past results, there is a seasonality to this. The fourth quarter compared to the other quarters tend to have lower new business value. That has been the trend since before. And for FY 2025 as well, we expect the quarter to finish in line with that.

As for the ROEV of 8% or more, for this target, in a sense, there was a comment that this could be challenging. But as life insurance, we hope to continue to accumulate new policies going forward. And taking that into account, if we are to achieve the planned targets, then we should also be able to achieve this level for the ROEV. So as a medium- to long-term target or goal, ROEV of 8% or more is what we are aiming to achieve. That's my response to the first question.

I understand. Thank you.

And moving on to the second question on Page 24, regarding risk volume. For this JPY 500 billion investment made as per the assumption and on the left-hand side, the bar charts indicate an increase in the subsidiaries and affiliates risk, and this was covered in the previous question and also in the presentation. So how are we going to manage the ESR overall?

There is no change to the basic approach to this. But one thing is promoting matching that was covered before. And by doing so, we will reduce interest rate risks. And also, as we've been saying from before, for equity risk, on Page 25, 5% or so for domestic and foreign equities. So this remains unchanged from before. But from the current balance, we hope to continue to reduce risk. And by doing so, we will have a better control of ESR overall. This is my response to your questions. Thank you.

I understand. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Hello. This is Ito from IR Department of T&D Holdings. Thank you very much for coming to the Telephone Conference of our financial results. Our materials are under our website on the Investor Relations under IR Events tab. First of all, I will be making approximately 10 minutes of presentation, after which we would like to move on to the Q&A session. So we'd like to move on with the presentation.

Please turn to Slide 3. First of all, I would like to present the key highlights of the financial results for the third quarter. Group adjusted profit amounted to JPY 122.5 billion against the full year forecast of JPY 146 billion with a progress rate of 83.9%, demonstrating a steady progress. Sales results of new policies of all 3 life insurance companies progressed smoothly against the plan. Surrender and lapse rate increase in Taiyo Life remained at the same level year-on-year in Daido Life and a decline in T&D Financial Life. Value of new business as a combined total of the 3 life insurance companies amounted to JPY 144.3 billion, with full year forecast is JPY 168 billion and a progress rate of 85.9%. Group MCEV amounted to JPY 4.3974 trillion. ESR was 225%. There is no change in full year earnings forecast as well as for dividends.

Please turn to the next page. The key revenue and profit items of each company are shown in the table. The 3 life insurance companies recorded increase adjusted profits, but T&D United Capital decreased.

Page 5 shows you the breakdown of group adjusted profit and difference from net income.

Please turn to the next page. This page shows the key performance indicators of the 3 life insurance companies. The 3 life insurance companies saw an increase in their core profits. Taiyo Life and Daido Life recorded capital gains on sale of domestic and foreign equities. Meanwhile, Taiyo Life recorded mainly losses on sales associated with the reduction of its foreign bond holdings. Daido Life posted losses on sale of bonds, mainly due to replacement as part of its cash flow matching strategy. T&D Financial Life recorded a profit increase mainly due to an improved insurance margins resulting from growth in policies in force.

Please turn to the next page. The charts describe factors contributing to changes in core profit for both Taiyo Life and Daido Life, decreased currency hedge costs and increased interest dividend income contributed to an increase in core profit. This effect was partially offset by an increase in operating expenses.

Please turn to the next page. Average assumed investment yields of Taiyo Life and Daido Life were 1.35% and 1.21%, respectively.

Please turn to the next page. T&D United Capital's adjusted profit decreased by JPY 5 billion year-on-year to JPY 5.4 billion.

Please turn to the next page. This page describes the quarterly trends in the profit and loss of closed book business. In its consolidated results for the third quarter, the company recorded approximately JPY 8.9 billion as adjusted profit, equity and gains and losses of affiliate related to Fortitude Re's financial results for the third quarter, July to September. The adjusted profit related to Fortitude's fourth quarter, October to December, earning is under calculation.

Please turn to the next page. Viridium's fourth quarter results, October to December will be incorporated into the company's Q4 financial results. In our consolidated financial results, profit and loss based on IFRS will be recognized for financial accounting purposes. While for group adjusted profit and loss equivalent to Luxembourg GAAP will be included.

Due to the acquisition of Viridium, JPY 75 billion of goodwill was recognized under financial accounting. However, as an amortization of goodwill is excluded from the group adjusted profit, it has no impact on adjusted profit.

Next page, please. At Taiyo Life, annualized premiums of new protection-type policies remained at the same level as the same period of the previous year, while surrender and lapse rate increased mainly due to increased surrender and lapse in the agency channel, annualized premiums of in-force protection-type policies increased from the end of the previous fiscal year.

Please turn to the next page. New policy amount of Daido Life continue to be strong and achieved a year-on-year growth. Surrender and loss rate was broadly in line with the same period last year and policy amount in-force increased from the end of the previous fiscal year.

Please turn to the next page. Annualized premiums of new policies at T&D Financial Life declined year-on-year mainly due to the lower sales of foreign currency linked products. In addition, the surrender and lapse rate declined due to a decrease in policies reaching their target values for foreign currency-linked products, resulting in an increase in annualized premiums of policies in force compared to the end of the previous fiscal year.

Next page, please. Group MCEV increased by JPY 451.7 billion from the end of the previous fiscal year to JPY 4,397.4 billion, driven by the accumulation of new business value, the rise in domestic/foreign stock prices and the adoption of LDTI at Fortitude Re. The combined new business value of the 3 life companies increased by JPY 5.3 billion year-on-year to JPY 144.3 billion, mainly due to higher new policy amount and rising domestic interest rates. The new business margin was 9.3%.

A breakdown of MCEV by company is provided on Page 16. The factors impacting the group MCEV is on Page 17.

Next page, please. This page shows you the status of investment at Taiyo and Daido Life. The combined amount of the domestic and foreign equity sales by the 2 companies was approximately JPY 209 billion, exceeding the full year sales plan of JPY 180 billion that was set at the beginning of the fiscal year. We intend to continue making progress on sales in the fourth quarter as well. Daido Life's interest rate matching ratio reached 86.4%. And for Taiyo Life, it reached 96.6%.

And Page 19 shows you the status of foreign currency denominated bonds.

Please turn to Page 22. This page is the status of net valuation gains and losses on general account assets. Unrealized foreign and domestic bonds have increased due to rising domestic interest rates.

Page 24, please. As of the end of December 2025, the ratio of strategic equity holdings to net assets stood at 19%, reflecting an increase in the market value of the holdings. The ratio of strategic shareholdings to net assets, adjusting for roughly JPY 100 billion already agreed for sale is around 13%. We'll continue to work on reducing the strategic shareholdings to 0 by the end of March 2031, setting aside those for business partners and collaborators.

Please turn to the next page. Sale of stock reclassified from strategic shareholding to pure investment is in process as part of our effort to reduce equity risk. As of the end of December 2025, 57% of such shareholdings was divested on an accumulative basis.

Next page, please. As of the end of December '25, ESR declined to 225% from the end of the previous fiscal year. While surplus increased, this reflects the investment in Viridium along with increased mass surrender risks due to higher domestic interest rates.

Next page, please. There are no changes to the full year earnings forecast for the fiscal year ending March 31, 2026. For the remaining 3 months of the fiscal year, the group adjusted profit is expected to decrease by approximately JPY 0.2 billion for every JPY 1 of appreciation. A breakdown of each life insurance company is provided on Page 28, significant subsequent events on Page 30 and change in presentation of financial data on Page 31. This concludes the briefing of financial results for the 9 months ended December 31, 2025.

I would now like to move on to the Q&A session. We would like to introduce the first question from SMBC Nikko Securities, Mr. Muraki.

So this is Muraki from SMBC Nikko Securities. I'd like to post two questions. The first question relates to Page 4 of the materials. The progress rate is 84%, slightly high as of this moment. If you can give us an update on the full year forecast. So I'm pretty sure you have some loss in the sales of JGB and also gains from the sales of equities in Q4. So what are your assumptions right now? That is the first question.

Mr. Muraki, thank you very much for the question. I would like to answer that question. So in terms of the performance up until Q3, it has been quite brisk vis-a-vis the full year guidance. So the group adjusted profit of JPY 146 billion, we are confident that we can achieve this. However, there are certain factors we'd like to confirm as of this moment. The first point relates to Fortitude and Viridium. So the Q4 results has not been closed right now. So we'd like to confirm the results for Q4.

And next is Taiyo and Daido. So in order to improve the investment portfolio, we are selling the equities and conducting the bond replacement for the asset liability cash flow matching. So we'd like to see the progress. Because in terms of the loss in the sales and also the gains from the sales will be impacted by the market. So we'd like to assess this correctly. So of course, in terms of bond replacement that will contribute to reduction in the interest rate risk and also enhancement of the portfolio yield. But as of the current interest rate level, we will incur some loss in the sales.

So in terms of group adjusted profit of JPY 146 billion, it is not likely that we may see a significant upside given the current situation. To summarize, we'd like to confirm the Q4 results for Fortitude and Viridium; and also, we like to see the progress of the sales of the equities and bond.

So within the fiscal year, we'd like to have a highly probable forecast and try to assess whether revision is necessary. And if it's necessary, we'd like to disclose that at the earliest stage possible. That is all.

And the second question relates to Page 12 about Taiyo Life's surrender. So the third quarter appears to be high. So in comparison to the initial assumption, how do you assess the current state of surrender? Also what sort of impact would it pose on EV at the end of the fiscal year. If you have the calculation, please let us know.

Thank you for that question. In terms of Taiyo surrender, we've seen an increase in the bancassurance OTC channel. With the rate hike, the surrender is actually increasing more so than initially anticipated. Now in terms of the surrender, so we've actually conducted some risk transfer with the feeding. So the risk on the financial basis, the risk is limited. But in terms of EV, if you look at Page 17, we have as one of the various factors. So the variance between assumptions and results, you can see the number here, JPY 33.1 billion, and Taiyo accounts for minus JPY 17 billion or so.

So in terms of the assumptions, we intend to update and review that at the end of this fiscal term. But in terms of its magnitude, we haven't conducted the calculation yet, so we don't know that. But on the 3-quarter cumulative basis, it's JPY 17 billion. And this product has been on sales for 3 years up until the year 2022. So that should give you some idea.

Now in terms of the investment, given the current state of surrender and also the anticipation of the interest rate hike as a way to conduct ALM on a forward-looking basis, we have been shortening the duration on the asset side. Specifically, we are selling the 10-year or longer bond sales and replacing those with short-term bonds or cash. So basically, that is how we're addressing the surrender situation. That is all.

So next question is from Ms. Tsujino of BLA Securities, please.

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

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

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

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

We'd like to move on to the next question. From Daiwa Securities, Mr. Watanabe.

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

Mr. Watanabe, thank you very much for the question. So in terms of the transfer of loan receivables, this has already been factored into the budget at the beginning of the year. So if you look at the question, if you look at the recurrent -- the profit and the net profit, there is a variance. So that is because we anticipated this transfer. So we don't know the actual amount as of this moment, so we cannot comment on that.

In terms of the transfer of loan receivables, in terms of the economic impact, it is quite similar to the sales of bonds. So we may see some recurrence of bonds. But beyond that, we shall see improvement in the yield. And of course, Daido Life will continuously sell the equities after. So in terms of the loss incurred from the transfer of loan receivables, we should be able to offset that with the gains from the sales of equities.

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

Mr. Watanabe, thank you very much for the question. First of all, as related to Luxembourg GAAP method. Basically, it is very similar to J-GAAP. So the bonds, it will be treated under amortized cost method and the policy reserve is under lock-in method. In comparison to J-GAAP, it is somewhat more prudent. So first point in terms of the unrealized gains from securities, it would not be recognized on the balance sheet.

However, the loss for the lower [indiscernible] cost method, it will be recognized. Also at the time of rate decline, there will be a mandatory provisioning of policy reserve required. So in comparison to J-GAAP, it is somewhat more prudent. However, in terms of the fluctuation in economic value, that will not be reflected on the profit. So in comparison to IFRS, there's not much less variance in comparison to IFRS. So in other words, it's quite similar to the J-GAAP method.

We'd like to move on to the next question. Mr. Sakamaki from Mizuho Securities.

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

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

On the other hand, we would benefit more by capturing higher yield by reshuffling the portfolio and making new investments. So that's all for me.

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

Yes, your understanding is correct.

Next, I would like to move on to the next question. Mr. Takemura from Morgan Stanley MUFG.

This is Takemura from Morgan Stanley MUFG. I have two questions. I also would like to understand the impact of the rising ultra-long rate. I understand that the bancassurance products offered by T&D Financial come with [ MBA ] clause. Do that mean that even under the environment where the ultra-long end rate goes up, the MBA will be effective to prevent a surrender rate to rise. What are your thoughts around the surrender risk for your bancassurance channel when the ultra-long rate is rising. So that's my first question.

My second question is also related to your investment activities, namely your PE exposure. I understand that for Taiyo and Daido, the PE exposure is 2.9% or slightly less than 3%. And nowadays on the media reports on the [ death ] of the SaaS business model, and that seems to be dampening the performance of the overseas PE fund. What is the exposure to SaaS companies or IT sector in general? And how do you manage that risk. So those are my two questions.

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

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

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

I see. Thank you very much.

Thanks so much, Ito-san, and thank you to the T&D team and all of the participants.

If I may ask that we briefly turn to Slides 2 and 3 to read through a few important notices and disclaimers. This presentation may contain forward-looking statements within the meaning of applicable securities laws and other estimates and projections, which are not guarantees of future performance or outcomes and may differ materially from actual results. Fortitude assumes no obligation to update any such statements, except as required by law.

This presentation also includes certain non-GAAP financial measures, which may not be directly comparable to similar measures used by other companies in Fortitude's industry. A reconciliation of certain -- of such non-GAAP measures may be found on Fortitude's website.

Finally, please note that unless otherwise indicated, the information in this presentation is as of September 30, 2025, and that for the avoidance of doubt, when we use financial metrics such as adjusted net income, these metrics are defined by Fortitude Re and are different from the adjusted profit and other measures as defined by T&D Holdings.

If we could kick off the presentation on Slide 6. Fortitude Re is one of the world's leading asset-intensive reinsurers. We provide tailored reinsurance solutions addressing our clients' most meaningful issues and opportunities. Our firm is supported by several of the world's largest and most sophisticated insurance investors, including T&D, global alternative asset manager, Carlyle and several sovereign wealth funds. They have entrusted us with $6.9 billion of their capital to provide our capabilities and solution sets to the clients who see the value and how we can help them manage their strategic risk and capital positions. That value proposition has resonated strongly from $37 billion in liability in 2020, we have grown to over a $100 billion balance sheet today, of which over $75 billion are general account reserves.

As you can see on the bottom left of the page, we have built our business prudently and done so while maintaining a strong balance sheet, robust regulatory capital and healthy earnings. This performance has not only earned us the recognition of clients and investors, but also the rating agencies, where we have an A- equivalent or better from Moody's, Fitch and A.M. Best.

If we quickly flip to Slide 7, our growth and our performance are all based upon our ability to deliver for our clients. As you can see on this page, we have done so with success in both Asia and North America. In Asia, which in our business is dominated by clients from Japan, we have achieved a little over 25% market share of reserves ceded to our market since 2020. Similarly, in North America, where the business is largely accounted for by U.S.-based clients, we have achieved approximately 10% market share. As Kai will expand upon later in the presentation, our success in delivering solutions that clients find valuable is the result of a deliberate and thoughtful business origination capability that is focused on a partnership, the clients who value our capabilities.

On Slide 8, you can see that our core strategy is to be a reinsurer of choice across every liability origination channel where our capabilities can provide value to our clients and to our shareholders. In 2025, we executed on that strategy across multiple dimensions. As you can see on the left side of the page, we completed several block and flow reinsurance transactions that added nearly $10 billion in high-quality reserves to our balance sheet. We also established our presence in the capital markets with an issuance of senior notes that receive regulatory capital credit as well as our inaugural issue of funding agreement-backed notes or FABN, which Kai will expand upon later in this presentation. Finally, we launched our first sidecar, FCA Re, with over $700 million of capital dedicated to supporting clients in Japan and throughout Asia.

In Japan specifically, we have now completed 8 transactions and continue our focus on supporting our clients here. We have already achieved approximately $14 billion in total reserves and $1.5 billion in flow premium. As you can see in the third column on this slide, one of the reasons our clients choose us is because of the strength of our balance sheet as well as our robust approach to risk management, including our comprehensive and disciplined hedging of market risk. These efforts come together to generate significant earnings for our investors. We, of course, aspire to significantly grow both our client franchise and our earnings and are making significant investments to achieve our goals.

Speaking of earnings, on Slide 9, you can see that our financial results reflect the fact that our value proposition to both clients and investors continues to resonate. On the left side of this page, you can see that we have made steady progress in responsibly growing our business, achieving $83 billion in general account reserves at September 30, 2025. That growth has come, thanks to the milestones I described earlier across reinsurance, FABN issuance, the launch of our sidecar FCA Re. Our earnings have also grown. In the 9 months ended September 30, 2025, our core operating earnings were $674 million, and our adjusted net income was $669 million.

At a high level, core operating earnings can be thought of as our earnings power and adjusted net income as an operating earnings metric comparable to how U.S. listed insurers report their operating income. As noted previously, for the avoidance of doubt, adjusted net income is defined by Fortune Re and different from the adjusted profit defined by T&D Holdings. Also, for investors who would like detail regarding the metrics on this page, detailed definitions are available on Slide 39 of this presentation. These earnings figures are supported by our continued ability to generate an attractive spread on our assets relative to our expenses, which we refer to as core return on assets. You can see this metric remains generally consistent across time and varies only slightly as we receive assets from clients and then rotate them into optimized investment portfolios that deliver better risk-adjusted yields as our Chief Investment Officer, Jeff Mauro, will expand upon later in this presentation.

Turning to Slide 10. Capital and liquidity are managed dynamically through the use of defined targets based on our firm's risk appetite. Regulatory capital is managed to greater than 175% ECR at our Bermuda entities and greater than 500% CAL RBC at our U.S. regulated entity. As shown on the page, as of the third quarter of 2025, Fortitude is well above target at each. We enjoy 186% ECR in Bermuda and 645% RBC in the U.S. Based on these capital ratios, we know we have ample excess capital to support our clients.

Financial leverage as of the third quarter of 2025 is just below 24%, well within our target. As shown on the right-hand side, we also maintain a strong liquidity profile with cash and cash equivalents of $2.3 billion, a committed credit and repo facility totaling just over $1 billion and approximately $1.9 billion of liquid government bonds, providing our firm approximately $5.3 billion of total liquidity.

Moving to Slide 11. You can see that we have built our rating agency relationships through transparency, frequent dialogue with our lead analysts, periodic reporting and detailed annual reviews. Thanks to these efforts and our performance, we have achieved an A3 for Moody's, an A- from Fitch and are rated A at AM Best. Across agencies, the consistent themes you will see in the comments focus on our market presence, diversification, earnings, capital strength and of course, the support of our investors.

Moving to Slide 12. Fortitude's risk management function is embedded in our operating platform, and it is a part of our DNA. The risk management culture is displayed in the collaborative analysis we do on in-force business and importantly, evaluation of new business opportunities. Our pricing actuaries, reserving actuaries, investment team, finance, treasury, capital, trading, legal, compliance, operations and IT are each involved in ensuring our risks are managed prudently and consistently with our risk appetite.

As you can see on this slide, key areas of focus include maintaining our diversification, liability valuation, asset liability management, investment management and ensuring that we're providing the right transparency and analytics to support Board oversight that is enhanced by our internal model team.

Continuing on this theme on Slide 13. Our approach to risk management is built on the foundation of our risk infrastructure and stress testing, all of which aligns with our risk appetite. We focus on an economic balance sheet view with added lenses for rating agencies, U.S. statutory CAL RBC, Bermuda regulatory, liquidity and stress testing results. This framework is supported and monitored by robust governance by our Executive Committee, our Board of Directors and of course, the Bermuda Monetary Authority, Fortitude's Group Regulatory supervisor. We regularly test our balance sheet resilience against several standard and tail stress scenarios across multiple risk factors, both individually and in combination. These factors include interest rates, credit spreads, credit default and migration and, of course, alternative returns. We manage the balance sheet to remain above tolerable limits in each scenario and evaluate the results of our stress tests in detail as well as management actions we take in each scenario to ensure our continued strength and resilience.

Moving to Slide 14. Our $76 billion in net reserve liabilities are diversified, seasoned and long dated. They are also exceptionally stable. We expect an average runoff of approximately $2 billion per year over the next 10 years, which is more than offset by annual inflows from existing flow arrangements. This allows us to be both measured and selective with the blocks that we add to our portfolio. Thanks to our robust underwriting and the seasoned nature of our liabilities, the actual experience we have seen from our reserves is closely tied to our expectations. When we compare our underwritten funding costs across our portfolio versus actual performance data, we see minimal deviation in that funding cost relative to our expectations.

Our reserves are also sticky with approximately 2/3 either contractually locked in through their maturity or not economic to surrender. We further manage the performance of our liabilities through tight asset liability matching or ALM. Our average duration in the liability portfolio is approximately 10 years, and we hedge interest rates to stay within 0.25 years or 1/4 of that duration target. Finally, diversification you see on this page is not just across the lines of business. 18% of our reserves are from outside the United States, and this geographic diversification further enhances the quality of our [indiscernible].

Moving quickly to 15 to support all of this. You can see that the attractive nature of our diversified, long-dated and sticky liabilities extends over many years. Across our lines of business, the profile of our liabilities provides us the resilience to continue providing differentiated solutions for our clients for many decades to come. In turn, our clients and investors know that when they entrust Fortitude with their reserves and their capital, they're entrusting it to a firm that is built from the ground up to be a long-term leader in the asset-intensive reinsurance sector.

I'd like to wrap up on Slide 16 and 17 by talking about FLIAC. FLIAC is an Arizona-domiciled insurance company housing Fortitude's variable annuity portfolio. It is also Fortitude Re's core U.S. platform for reinsurance transactions where clients prefer a U.S. counterparty. As a member of the Fortitude Group, FLIAC also enjoys the same ratings as our other insurance entities, as you can see on the top left of the page. FLIAC's $575 million in total adjusted capital supports strong regulatory capital of 645% RBC, as we mentioned previously. On a net basis, FLIAC's business includes $24 billion of statutory reserves, of which approximately 85% or $20 billion are separate account reserves and 15% or nearly $4 billion are general account reserves. Like the rest of our business, FLIAC's investment portfolio is responsibly managed and consists largely of public credit and high-quality investment-grade private credit.

Importantly, Fortitude and FLIAC as a part of Fortitude does not take directional market risk in equities or interest rates. Consistent with our risk appetite, we target a 100% hedge of both equity and interest rate risk in FLIAC, which is more comprehensive than many VA writers. We hedge the equity risk in both the living benefit guarantees and the base contracts of FLIAC's policyholders. Since acquisition, our hedge effectiveness has consistently exceeded 95% and is often with only --within 1 or 2 points of our 100% hedge target.

As a management team, we recognize that even with that hedging discipline, GAAP results can show quarter-to-quarter volatility. When you see GAAP volatility in FLIAC's results, it usually stems from only a handful of drivers, and these do not impact the quality, durability or ongoing economics of the business. For example, when policyholder experience differs from assumptions, reserves are updated through a formal review process typically in the third quarter. That can sometimes drive that volatility. We also report FLIAC on what we call fair value option, which reflects a quarterly mark-to-market of the entire business and is impacted by something called Fortitude's own credit curve, or OCR. The OCR can sometimes create nonintuitive mark-to-market outcomes, such as FLIAC's earnings being lower when Fortitude Re's credit spreads are tighter because tighter spreads imply a lower discount rate for valuing our liabilities, a lower discount rate increases the value of liabilities on a mark-to-market basis and reduce earnings.

We appreciate there is some complexity to that. But it is important to note that this GAAP volatility does not impact the intrinsic value of FLIAC. The true economic outcomes of FLIAC remain very robust. In fact, it bears noting that FLIAC consistently generates strong statutory capital results. FLIAC paid $300 million of dividends to the parent company in 2024 and a more modest dividend to the parent in 2025. These dividends have been paid while maintaining strong capitalization that allows FLIAC to continue serving clients who prefer transacting through a U.S. entity.

I'll wrap up on Slide 17 to note that FLIAC also provides Fortitude an important presence in the United States and capabilities that help drive our broader business forward. It's scaled seasoned portfolios of liabilities make FLIAC a robust entity to support several of our key strategic growth initiatives, including providing an attractive U.S. legal entity for clients who seek to reinsure via domestic insurer, providing an attractive issuer for our funding agreement-backed notes, or FABN program, of which we already issued $500 million in 2025 and expect to return to the market in 2026.

And of course, FLIAC is an advantaged reinsurance counterparty for lines of business with equity market risk exposure such as registered index-linked annuities, or RILA, which are growing very quickly in the United States and for which our clients are actively seeking trustworthy reinsurance partners such as Fortitude Re. These capabilities are all supported by our approach to hedging, which, as I mentioned earlier, sets a 100% hedge target for both the living benefit guarantees and the contract writers and base contract, resulting in no equity market risk exposure for FLIAC. Because of these capabilities and our approach to hedging equity market risk and interest rate risk, we are excited about FLIAC's business outgrow as a member of the Fortitude Re family.

With that, I'd like to turn it over to our Chief Investment Officer, Jeff Mauro, to walk through our investment portfolio.

Thank you, Alon. Turning to Slide 19. We have a simple business model that plays through to how we generate returns. It starts with disciplined liability selection so that we can source funding at an attractive cost of funds with an insurance risk profile that we understand and can quantify. Through careful structuring and thoughtful underwriting, we develop tight asset portfolio construction. We keep the risks that we want at levels we want and hedge our ALM match away risks that we don't want. We have built sophisticated hedging capabilities and take stress monitoring seriously. Our in-house portfolio management team crafts the strategic asset allocation and sources assets through our strategic partnerships and through our diversified open architecture asset management model.

Turning to Slide 20. Our in-house investment team, led by seasoned investment professionals, constructs our asset allocation that is appropriate for the liabilities we're matching and optimizes the return on capital. Our partnership with Carlyle is a key competitive advantage. We have worked closely with Carlyle as they have built private credit businesses focused on the direct origination of assets with insurance-friendly risk profiles. These assets are -- the assets where we have the most specific expertise include asset-based lending, direct lending and infrastructure debt.

At the same time, we maintain an open architecture approach to asset management and hire best-in-class managers to diversify and scale our asset sourcing. This results in a highly scalable asset origination capability that we think is on par or better than any of our industry peers. We have demonstrated the ability to quickly rotate and optimize a $25 billion block like we did in the reinsurance transaction with Lincoln Financial without maintaining the fixed cost and origination platform needed to do so every single year.

On Slide 21, we present an overview of our investment portfolio. The $82 billion investment portfolio is very high quality. 93% of it is fixed income, of which only 4% is rated below investment grade. The overall average rating is A- and the duration is 7.3. As Alon mentioned, we have -- this duration of 7.3 plus the duration contribution from our interest rate derivatives matches that of our liabilities such that we don't have directional interest rate risk. Our 47% allocation to public credit is high compared to the relative stability and predictability of our liability cash flows, but this facilitates ALM matching because we can hold long-duration assets to match the relatively long-duration liabilities.

On Slide 22, we go through our private credit portfolio. At $17.3 billion, it's about 21% of our assets. It's primarily investment grade with an average rating of BBB+. Our internal team maintains active engagement with our managers regarding the private credit pipeline and performance surveillance of the portfolio. Our credit performance has been very strong with no material losses or impairments. The largest asset class in here is asset-backed finance, which includes a diversified mix of consumer and commercial collateral types. We focus on understanding the risk and return profile of the underlying collateral before we invest. We then decide where in the capital structure to invest.

As evidenced by the average rating of A-, we are primarily investing in the senior part of the capital stack backed by high-quality collateral. The corporate exposure at about $8 billion is rated BBB+ overall and primarily consists of investment-grade private placements. The infrastructure portfolio at $1.1 billion is -- primarily consists of project finance and investment-grade rated debt obligations.

On Slide 23, we describe our real estate exposure. It's $13.6 billion overall or 16.5% of our assets. The largest category is residential mortgages, which we have originated over the past few years at an LTV of approximately 70%. At 3.9% of assets, our commercial mortgage loan exposure is well below industry averages. This has allowed us to be opportunistic and add exposure over the past few years, while the industry has faced credit problems, which have been manageable for us given our relatively low allocation.

On Slide 24, we describe our commercial mortgage loan portfolio in more detail. The average LTV is approximately 60%. The majority of the exposure is managed by Corebridge as part of the funds withheld accounts from our original reinsurance transaction with AIG. This means that the portfolio is highly seasoned, and we are very familiar with it. Our internal team remains actively engaged with frequent and in-depth portfolio surveillance. We have also engaged a third party to independently value the portfolio. The watch list has been stable over the past couple of years. We don't see new issues emerging and remained focused on optimizing our recoveries in a handful of workout situations.

On Slide 25, we summarize our exposure to structured products, which is about $18 billion or 22% of the portfolio. They are primarily investment grade with a weighted average rating of single A. The ABS portfolio at $9 billion primarily consists of the private asset-backed finance investments that I described earlier. We take exposures where we and our asset managers can underwrite and price the underlying collateral and diversify that exposure across collateral types that are exposed to different risk factors. Our CLO allocation is relatively high quality with an average rating of AA-. Only 4% of that portfolio is below investment grade.

On Slide 26, we summarize the recent returns of our alternative asset portfolio. Our alternative asset portfolio is diversified across asset classes, including private equity buyout, credit funds, real estate, infrastructure, real assets and hedge funds. Our returns over the past few years have been below historical averages as private equity and real estate valuations have faced pressure due to the rise in U.S. interest rates and a slowdown in exit activity. Importantly, our returns have remained at or above industry benchmarks and insurance peer averages. We have a more optimistic outlook going into 2026, given the strength in the global economy, improved financial conditions in the U.S. with the Fed cutting rates and credit spreads remaining near all-time lows and increased deal activity in both the M&A and capital markets, leading to a more active exit activity in the private equity portfolio.

Now with that, I will turn it to Kai Talarek, our Chief Growth and Optimization Officer.

Thank you, Jeff. If you can turn to Slide 28, Alon pointed out the slow runoff of our book. That slow runoff and sticky liabilities enables us to be selective in choosing the markets in which we operate and the specific transaction opportunities we pursue.

On this slide, you see an assessment prepared by an independent industry consultant, Oliver Wyman, of 6 key market segments. Fortitude today operates in 3 of the 6 segments shown. While the U.S. closed block market peaked in 2022, we continue to see opportunities for underwriting complex transactions with above-market returns in transactions that create a true win-win for our clients and our investors. The Unum long-term care transaction in 2025 was a great example of that. We have continued to expand our flow footprint with 3 transactions in 2025 alone. U.S. retail annuity is the most competed over market segment where even the largest player has seen stagnant volumes and where returns can be challenging. For now, we'll continue to access this market only through partnerships and flow reinsurance.

U.S. pension risk transfer has faced some legal headwinds in recent years, and the market for U.S. in-plan annuities has yet to materialize in a meaningful way. Japan and Asia, the market with, according to Oliver Wyman, the most significant growth is where we, Fortitude, have been the most successful with an impressive market share, the launch of a new sidecar in 2025 and 3 transactions last year alone.

If we turn to Slide 29, we can see how these transactions fit into the broader time line of our evolution. We have a time line of steady accomplishment in growing our book, further diversifying our business, building a deep roster of clients and partners and earning the respect and recognition of regulators and rating agencies.

If we turn to Slide 30. Having access to multiple liability origination channels, block, flow, institutional markets enables us to be selective in gauging on the right transactions. So we may opportunistically shift when where we originate more growth and where less. What doesn't change, though, is what drives our success in each individual transaction no matter the origination channel. Our clients value our disciplined economic underwriting, our first-class asset selections in our investments and our creative structuring. The 2025 transactions, all 5 of them or including FABN, all 6 of them are a testament to the lasting resonance these capabilities find in the marketplace.

Turning to Slide 31 and assessing our competitive situation. Fortitude is competitive with leading players across all core dimensions. We have committed long-term investors. We have access to capital markets. We have multiple liability origination channels. We have leading asset access through an open architecture model and our partnership with Carlyle. We have a responsibly managed strong balance sheet, a focused business model and low expenses and effective taxes. The resulting economics not only attract first-class clients, but also very importantly, some of the best and brightest minds in the industry is our employees.

Moving to Slide 32. Our underwriting approach and process rests on 3 major pillars. The first one is disciplined pricing. Our disciplined pricing is tied to capital markets price levels, consistent and comprehensive in considering all risks and based on realistic best estimate liability cash flows, as Alon touched upon earlier already. This pricing approach is complemented by multifunctional due diligence with stakeholder involvement across all functional areas, conducted in a culture of transparency and accountability.

And lastly, we have active involvement and oversight from ERM at every step of the way and a rigorous decision governance that escalates as we go from our first round proposal to closing on -- signing and closing on a transaction.

On Slide 33, you can see what risk appetite guides our underwriting. Our risk appetite is clearly defined and comprises risks whenever and wherever we believe our capabilities and insights allow us to create value. Generic market risks, as described earlier by Jeff and Alon, such as interest rates, public equity valuation levels or foreign exchange rates are rigorously and comprehensively hedged. But even in the areas where we do actively seek risks to create value, we do so selectively and on a case-by-case basis. As an example, in 2025, we underwrote the Unum transaction, which had significant amounts of long-term care biometric risk. We chose to work with a large, highly rated global biometric reinsurance specialist to retrocede this biometric risk completely for a 0 net retained exposure so we could focus on what we do best, which is to create gainful ALM positions.

Let me, on Slide 34, review what we've done in 2025. I've talked about the many successful transactions. The diverse composition, U.S. and Asia, block and flow, speaks to both the diverse balance sheet we are continuing to grow as well as to the selectiveness and the bespoke transaction origination and structuring that gave rise to these transactions.

Turning to Slide 35. Our FABN program was 1 of the 6 transactions of 2025. It is essentially an institutional accumulation product, similar in cash flow profile and risk to retail annuities, but with better persistence because it is noncallable and having it adds further optionality to our liability origination. FABN allows us to deploy capital and fund investments on relatively short notice. And thus, we can manage our capital more efficiently, and we can be a better strategic partner for our investment asset originators.

Moving to Slide 36. Our sidecar in Asia and its successful completion is important in a number of ways. First of all, our success strongly signals the quality of our business underwriting process. Why is that? Because the investors in the sidecar were won over by our track record of success of underwriting attractive returns in past transactions. Their decision to invest followed a detailed, thorough due diligence effort on the Asia business originated by Fortitude so far. The investment decision that speaks to the quality of that business. Having the sidecar gives us access to fresh capital in a key growth market. Its explicit focus on Asia mirrors our commitment to and continued focus on that market.

Moving to Slide 37. We've spent the first 5 years building Fortitude Re into a respected leading top 5 asset-intensive reinsurer with a broad capability spectrum and a global footprint. As we look forward, we will continue to seek responsible growth by being selective in our underwriting in the markets in which we operate today, while expanding the roster of markets we will serve in the future as we further evolve our capabilities. We'll continue to expand and deepen client relationships to build out and build on our first-class reputation among clients. And we will maintain our pricing investments and risk management discipline at the heart of our strong balance sheet to preserve our compelling value proposition as we continue to grow the company responsibly.

Thank you. May I now invite your questions.

[Interpreted] Thank you very much. We would like to move on to Q&A session. [Operator Instructions] I would like to introduce the first person from SMBC Nikko, Muraki-san.

I'm Muraki of SMBC Nikko Securities. I have 2 questions. First question is on relative competitive strength. This business competitiveness is the return of the investment and low insurance liability acquisition cost and operation efficiency. On Page 26, you have shown 4 peers as a benchmark for your asset management. Can you tell us the names of these 4 companies? And similarly, the cost of acquiring insurance liability and operational efficiency from those perspectives versus your benchmark, are you superior or inferior? That is my first question.

Maybe I'll start, and I'll ask my colleagues to add. First and foremost, Muraki-san, great to hear from you. Thank you for the question.

The first part of it, we deliberately anonymized the names on Slide 26. We're not at liberty to share them specifically. In terms of the second part of that question, we think that our client-centric approach allows us to originate liabilities at very competitive funding costs. And I think that's worth expanding on for -- across 2 dimensions.

First, our focus within sticky liabilities and sometimes lines of business that have some complexity to them, by definition, means those are situations that don't have the same competitive features as you heard Kai say retail and other more vanilla liabilities. And that does translate into a superior cost of funding for us. And then as you saw on the prior slide, yes, we do have a competitive operating cost, and we think a market-leading tax rate.

On the operating cost, I think there's a little bit sometimes of apples and oranges between companies because certainly to operate certain types of portfolios requires a different cost base. But when we do apples-to-apples comparisons across companies that have our lines of business, we view ourselves as either competitive or better than competitive across those dimensions. I'd invite Kai and Jeff to perhaps add in any other comments.

On the asset yield competitiveness, we spend a lot of time with our industry partners benchmarking our fixed income, private credit, asset origination volumes and spreads relative to peers. And we do think that our expected asset returns are at the high end of the industry. One of the benefits of our open architecture approach to asset management is that we can go talk to all different asset managers that are working with our various peers across the industry and get insight into what others in the industry are doing. And we think that the capabilities we've built with Carlyle supplemented with the handful of external asset manager relationships we have creates a very compelling asset origination capability that is at the high end of the industry.

And maybe just to expand a little bit on Alon's comments on your question on the cost of funds. I'd like to, first of all, observe that cost of funds in many cases are not directly observable. In other cases, they are, such as an FABN or if we're talking about simple single price parameter line insurance products like retail annuities, you can compare relatively accurately what others are underwriting to versus what you're underwriting to.

In general, we are a price taker. So in order to be successful in the marketplace, we have to be competitive with others, which means we have to pay similar rates. Having a lower cost of fund on average then boils down to 2 things. It boils down to choosing in which markets to participate, and we measure our cost of funds very, very diligently and choose not to participate in markets that we feel offer only uneconomically high cost of funds. And second, we focus on markets where our specific capabilities in terms of service levels, structuring of complex transactions and design of involved ALM positions are of value to the clients and therefore, mitigate some of the competitive pressures in terms of the cost of funds.

[Interpreted] My second question on regulations. Recently, several concerns have been raised about this business. The ratings based on private letters, so liabilities surrender or refinance risk, regulation and supervisions by NAIC, Bermuda and Cayman authorities. So please tell us about any anticipated regulatory changes and how they will affect Fortitude's competitive position?

Great question. I think for purposes of this conversation, the best answer we can give you is that what we see is global convergence of regulatory regimes across the U.S., Europe and certainly Japan. And so while it's probably outside of the scope of this conversation to speak to specific initiatives within each of the markets in which we operate. In general, I would say what we should expect is that while the terms may be different, the capital calculation ratios may be different. The reality is that in some substance, there will be convergence across regulatory regimes, and we think that plays actually to our advantage because our business model has never been about regulatory arbitrage. It's always been about bring value to our clients through efficient capital, investment optimization, as you mentioned earlier, competitive operational cost.

[Interpreted] So let's move on to the next question. Tsujino-san from BofA.

[Interpreted] I have 2 questions. First, for LTV and having a low LTV, as mentioned in the presentation. Recently, at prices is -- are the numbers based off recent prices and valuations?

My second question is a little bit complicated. For private debt, your exposure is relatively low. But last year, there was a lot of apprehension amongst investors. And with that as a backdrop, can you talk about areas that you are paying attention to increasingly? What kind of rating institutions are you working with? What ratings institutions are not as credible exposure per transaction or sectors that you're being mindful of or any other areas that you're paying attention to? And the first question was about if you're marking to market or not for the low LTV.

Yes. So the LTVs do reflect relatively recent appraisals. For the most part, they are within the past year. And so the portfolio has been revalued since the commercial real estate stress and the rise in interest rates. So for private debt, that is a good question. And we are very focused on how we are underwriting and selecting assets within the private credit space. A lot of times, when you read news articles about private credit, it's really referring to the direct lending market, which is lending to below investment-grade private borrowers.

That is the segment of the private credit market that has seen the most growth and the most convergence with liquid markets and tightening of spreads and terms. We have relatively small exposure to that space. It's only about 1% of our assets. Where we are investing most of our money today is in investment-grade rated private credit debt, mostly in asset-backed finance, but also in lending to private corporate investment-grade issuers as well.

We are very careful about which rating agencies we use. We don't do rating agency shopping. We're not going out to the rating agencies that are going to give us the most attractive ratings. We do not use Egan-Jones at all in our capital. And we do have -- we do use private letter ratings from places like Kroll and DBRS in addition to using ratings from the big 3 rating agencies, S&P, Moody's and Fitch. Our use of private letter ratings is in line with the overall industry. And again, we're not rating shopping. We are going to the rating agencies that can understand the types of private credit asset classes in which we are investing and move at the speed of transactions so that we can offer compelling borrowing to -- compelling lending to our borrowers.

In terms of where we are being careful today, we are -- there's obviously a lot of investment in the AI build-out and the infrastructure associated with the AI build-out. We are taking a cautious stance there as a private credit investor given the fact that there is obsolescence risk and downside if the technology does not play out as anticipated.

[Interpreted] Moving on to the next person, Watanabe-san of Daiwa Securities.

[Interpreted] I'm Watanabe of Daiwa Securities. I have 2 questions. First is private credit-related SME direct lending exposure. How much do you have in actual amount? And more than 80% of your investment is non-Carlyle. And what is the competitive advantage in your investment area? That is my first question.

The second question is the outlook for the future profit until 2030. Can you share the prospect of the profitability?

Sure. So about 1% of our assets are in direct lending. So that's about $800 million to $900 million. And so Carlyle manages about 20% of our assets, but they are focused on the highest relative value, highest spread assets in private credit and alternative assets. A large part of our externally managed assets are in liquid fixed income, where there is not a lot of excess value add. And there, we have outsourced to low-cost but high-quality providers.

And Jeff, if I may pick up on forward profitability. While we can't share specific forecasts on this call, certainly very optimistic about our pipeline. It is as -- I would say, as big as it has ever been from a size perspective, but I think perhaps more importantly, as high quality as it has ever been and is diversified across geographies and lines of business. And we certainly continue to provide to our investors within our core burn that same optimism in a more specific way with forecast that we share with them.

[Interpreted] So let's move on to the next question from Morgan Stanley MUFG, Takemura-san.

[Interpreted] Takemura from Morgan Stanley MUFG. I have 2 quick questions. The first question is about -- it's a follow-up on Mr. Watanabe's question. Going back to Page 9 in the presentation where you talk about growth rates, I'd like to ask you your view on the growth rates. For 13.1% core operating earnings growth, do you think this is a level that's sustainable going forward? You said that you have a robust pipeline. But in Japan, as interest rates increase, there may be some hesitance around seeding, which is a concern of mine. On top of that, for core operating earnings, for sale value changes, I think you said that you aren't reflecting it. But I do understand that does hit T&D's P&L, mainly around alternatives and fair value fluctuation. How will you be able to well control it?

My second question is about Page 12. For Bermuda ECR, 186%, how is it likely to change due to macro factors? Interest rates FX impact should be neutralized, and the alternative asset fluctuation should impact this number. That's my understanding. But is that right, which means 186%, I believe, is as of end of September, but are there any big changes that you've been experiencing lately? So those are my 2 questions.

Maybe I address the capital question first since that falls into my area of responsibility. Thank you for the question. You're exactly right. Our Bermuda ECR solvency ratio as well as our U.S. NAIC solvency ratio in our FLIAC entity are numbers that reside on a balance sheet or express and measure a balance sheet that is extensively hedged against all generic market risk factors. While the -- there is some basis differential between our hedging targets and the items that are measured. For example, Bermuda has some noncash liabilities that are also measured as part of their solvency framework. For the most part, our number is pretty impervious to moves in the major market factors. And indeed, we've actually seen and demonstrated that when you look at our ECR performance over the longer cycle of 2020 when we separated from AIG to today 5 years, rates went from 2.5% on the 10-year in the U.S. to near 0, 50 basis points at the bottom and then back up to 4.1%. So we've seen very significant swings, but because our balance sheet is so closely matched and residual exposure is hedged, it has barely impacted our capital ratios.

We are exposed to the valuation levels of alternatives, but we have a finite amount of alternatives in our portfolio. And we regulatory -- regularly, Alon alluded to it, stress test the sensitivity of our capital ratios to ensure that even in strange -- very severe scenarios, we remain comfortably above our minimum solvency levels. So I think you have it right. These numbers are pretty stable. Yes, they are sensitive to alts, but the sensitivity is limited and very tightly managed as it is to credit risk and investment risk more generally.

Thank you, Kai. And Takemura-san, thank you for both questions. On the first one, relating to Slide 9, perhaps a few things. Definitionally, you're right, core operating earnings includes our long-term assumption for alternatives returns as well as our budgeted assumptions on liability performance. However, adjusted net income includes actual results of alternatives and actual results on liabilities. I shouldn't comment on how that flows through to T&D metrics. But to your threshold question around how our pipeline translates into growth, while I can't provide specific numbers, I understand where you're going directionally. And I do expect that in 2026, you'll see healthy growth from both core operating earnings and adjusted net income perspective in our financial results.

[Interpreted] Moving on to the next person, Sasaki-san of Nomura Securities.

[Interpreted] I'm Sasaki of Nomura Securities. I have just one question to Alon. This meeting, I think this is a third or fourth time. And every time the impression I get is that the asset and liabilities are diversified, risks are managed and a stable business model is being created. That is the impression I get. So my question, the world is changing very rapidly. So in your mind, I'm sure you have upsides and downsides. So what are the big items for the upside and downside that you have in mind?

Sasaki-san, thank you so much for the question. If you don't mind, I'll answer with upsides. I'll invite my colleagues to add their thoughts, and then we'll give you our most direct responses on downsides as well.

I think on upsides, frankly, I think our competitors also deserve a lot of credit. When we started this business, this entire industry was a niche industry within the broader global insurance ecosystem. Today, there are over $1 trillion of liabilities in Bermuda. And the value proposition of what companies like ours provide into the broader ecosystem is not only well understood but also well accepted.

And going back to Muraki-san's earlier question on regulatory, I think regulators are more up to speed on why we're relevant, how we provide value and frankly, how we provide capital to drive innovation and close protection gaps in many developed markets. So I think the upside is the efficiency of our model continues to gain traction globally and significantly more supply of reserves come to market and drives our profitable growth in a more accelerated fashion. I'll pause there. Kai, Jeff, you may have other views on other upsides.

I think you're right. Yes. There's still market upside. Go ahead, Jeff.

I agree with your answer, Alon.

Thank you, guys. By the way, Sasaki-san, this is a rare occasion. We don't usually -- all 3 of us agree quite this easily. I think the downside is the same one and you might wonder why -- why an equity investor presentation that these guys include 2 pages on risk management and stress testing. It's because we take it that seriously. And if I was to give you my best answer around what we all worry about, it's credit stress, right? We have many geopolitical events that if you were witnessing these geopolitical events 20 years ago, 30 years ago, you would have predicted a more significant market consequence to spread tightening. Instead, spreads are at all-time types.

You might have thought it would have been disruptive to interest rates, certainly in the U.S., in Japan, yes, interest rates are up a little bit from where they have been. But by historical standards, you don't see the type of volatility you might have expected for these types of events. And so the -- I think the most proximate near-term risk is we have something in financial markets that is globally disruptive to credit.

I should note for our company, and frankly, I think for others like us who are responsibly managed, that's not necessarily a credit spread shock as much as it is true credit impairment that is the risk. Because thanks to our robust balance sheet, thanks to our hedging, thanks to our stress testing, we feel quite confident that in pointed market factor stress scenarios, we might have a bad day at the office, but our company is going to be fine. What we should all be worried about as people who deploy capital into this space is a proper credit stress that leads to defaults and losses on default that we haven't seen in a long time. I think that's the risk. But again, Jeff, Kai, may have others.

I think I'll add to Alon's comments on risk management. One of the key instruments that we use, earlier, somebody asked about our cost of funds and whether it's better or whether it's lower or higher than our peers. We try very hard to make it a little bit lower despite the fact that we are a price taker. And the reason that we try to make it lower is because when we start off with lower cost funding, Jeff's team can be more selective in choosing which risk to accept and which risks not to accept. That's the principal basis in addition to the selection care that we exhibit when we put together our SAs that drives our overall risk position and drives the fact that it is a contained risk position.

I'd also just add that because we are so careful in how we manage this risk and how -- we do take that into account when we are considering our growth. And when we're pricing new reinsurance transactions, we're taking into account the current low spread environment and where we think we can construct portfolios that are adequately diversified and reflect our risk appetite. And we do lose out on some transactions because of that risk stats. And so there are risks to our growth in the near term because we are so focused on managing the credit risk of our balance sheet and doing what we think will create a portfolio that can generate stable profits over varied economic cycles.

Thank you for those comments because I think it's very important to have perspective on not only what those risks are, but how we are managing through those potential risks.

[Interpreted] Let's move on to the next question. Tsujino-san of BofA, over to you.

[Interpreted] Regarding the credit market, your feedback would be valuable because you've been in the market for a long, long time. So it's a general question. But in the U.S., there's a lot of macro statistics available. When you look at current levels, it goes back to the pre-pandemic 2019 levels for interest rates that is. And for the credit spreads in the bond market for non-investment grades and investment grades compared to pre-pandemic days, it's substantially lower. So you can call this a credit bubble or the investors have become broader-based globally, and that's why we're seeing the situation. So the credit spread shock is not likely to happen compared to the past, like you said earlier. So is that the way you look at the current circumstances?

Yes. I think overall, the economy is performing relatively strongly. We do have an outlook for pretty benign and stable growth, which is favorable for credit performance. I think that is a big driver between -- behind why we see spreads at relatively tight levels. And -- but we are in an outlook with -- we are in an environment with increased geopolitical uncertainty. And we know that eventually at some point that there is going to be a recession. And so there is tail risk. And so we think it's important to maintain underwriting discipline when we are sourcing credit.

We see the liquid credit markets are very tight, but we think we are able to find incremental spread for the risk we're taking in some of the structured credit and private credit markets. But we have to do that very carefully. And we work -- we hire in-house experts to really understand the markets in which we're investing, and then we work with best-in-class asset managers to underwrite that risk and construct the portfolio because we do think that we will start to see some performance dispersion when there is a market downturn eventually, and we construct our portfolio and stress test our overall balance sheet such that we think that we will be positioned to withstand that environment.

[Interpreted] And just to ask you maybe a follow-up or a relevant question. But for your private debt and the yields you're getting in general, when you look at private debt funds, the dividend income you get from funds, for example, in the latter half of last year has been declining. So for private debt funds, its yield used to be far over double digit, but nowadays, it's declining as a trend. But for your private debt fund portfolio, are you expecting similar yield decline? Or in your portfolio, are defaults not really happening in the first place? So can you give me an idea of that?

So we have very low default activity. I think that low double-digit private debt yield is primarily -- that's primarily below investment-grade private debt where we saw those yields, which is not the majority of our portfolio. We are more focused on an investment-grade private credit, about 200 basis points spread over risk-free. And we are more spread-based investors. So if the private debt yield is coming down because risk-free rates are coming down or because liquid credit spreads are coming down, then we see offsetting impacts in our cost of funds and the spread over our cost of funds is actually remaining constant as that's happening. So it's not impacting the overall profitability of our business in a material way.

[Interpreted] Thank you very much.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

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 full year average ROEV to 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 JPY 200 billion. 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 3 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 in-force business can more readily lead to profit growth through the expansion of positive spread. We take pride in our robust policy performance as the major strength of our group.

Please turn to Page 6. This page summarizes various capital management initiatives in a timeline format. Under the current group long-term vision, we are significantly enhancing shareholder returns while executing investments including 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 JPY 160 billion. Combined with solid insurance sales results and investments, the group's MCEV increased by approximately JPY 890 billion.

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 disclosed 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 sales plan of JPY 180 billion, approximately JPY 143 billion was sold in the first half. In the second half, we plan to sell additional JPY 100 billion under pure investments. Regarding strategic shareholdings, the ratio to net assets rose to 18.6% due to market value increases. However, approximately JPY 100 billion of the JPY 282.7 billion in strategic holdings has already been agreed for sale. We will continue to steadily reduce holdings by setting interim targets, aiming for 0 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 Daido Life durations are 22 years for liabilities and 13.1 years. For assets in Taiyo 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 has 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 4 years, we received JPY 466.4 billion in dividends from subsidiaries and concentrated our capital to the holdings. The total amount returned to shareholders was JPY 395.5 billion, resulting in a total payout ratio of the group's adjusted profit of 106%. Furthermore, in addition to internal funds, external financing was utilized, allocating JPY 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, 42 cumulative adjusted profit since investment reached approximately JPY 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 side car 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 at JPY 37.5 billion at the exchange rate of JPY 150 per dollar to this reinsurance sidecar, specializing in Japanese and agent 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 JPY 8.9 billion in adjusted profit will be recognized by T&D Holdings in the third quarter for the 3-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 JPY 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 2.3x, from JPY 130 to JPY 295 during the period of our group long-term vision. We believe that these enhancements to shareholder returns and EPS growth have significantly improved our valuation in the stock market.

Please turn to Page 18. As a result of our efforts to date, the PBR, which stood at 0.54x as of the end of March 2021, has risen significantly to 1.18x as of the end of September 2025. In addition to improving capital efficiency, our stock 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, the TSR has expanded to offer 2.5x. Although the trend has been soft as in 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 are 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 rates and longevity, demographic shifts and climate change. We must view these as opportunities, leveraging them to meet 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 its 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 5-year period as 5 years to fortify the next growth base, 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 transition. The first is for us to further strengthen existing businesses. By expanding our portfolio of contracts, we will maximize the tailwinds of both the 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 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 noninsurance 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 group synergies to leverage scale advantages. This includes capital generation 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 in-force policies, the source of future profits. The group's greatest strength is steady sales results of new policies. The 3 life insurance companies will strengthen their unique business models, thereby steadily increasing the in-force policies. We recognize improving Taiyo 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 spreads while continuing to reduce asset management risks.

Page 25 illustrates the revenue structural reform at Taiyo Life. While our revenue and profit levels are trending towards 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 long-term vision.

Specific details will be presented in the next group long-term vision, but the key point is to decompose the revenue 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 Taiyo 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 5 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 our 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 your 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, 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 Taiyo Life's domestic stocks, excluding strategically held shares to TDAM. We have signed an MOU with Carlyle 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 TDIM manage the assets of captive insurance subsidiaries, leveraging Carlyle's asset management capabilities in areas such as overseas credit and alternative assets.

Regarding the standardization of system processes for policy management operations, we are pursuing with 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 Daido Life's 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 their utilization across the entire group and the establishment of efficient operation frameworks by leveraging AI technology on a group-wide basis. We consider these AI strategies to be crucial as the future foundation for group management and plan to incur production 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 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, but we are revising the system to be more aligned with our shareholders and strengthen some incentives for the management.

Last but not least, our approach to achieve further increase in share price. Well, basically, EPS growth and PER improvement are key factors for stock price appreciation. We aim to enhance EPS through profit growth and improved 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.

[Operator Instructions] I would like to introduce the first person, Muraki-san of SMBC Nikko Securities.

I'm Muraki of SMBC Nikko Securities. I have two questions. Both of my questions are related to the next group long-term vision. First question is related to the investment. JPY 116 billion was invested in Viridium. Next fiscal year, how much profit contribution are you expecting? And also on Page 23, there was a hint, Viridium 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, there will be a large 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 Taiyo and Daido, but one of the point you raised is 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. 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 opportunities. So their business model is very stable.

In the past 3 years, what was the profit contribution? Hypothetically calculating based on our holdings ratio, on average, it's going to be around EUR 100 million. And this year, October end ForEx was JPY 178 to the euro, so the profit contribution was JPY 17.8 billion. And stable profit at this level is expected, but the management cost and the borrowings, interest will be deducted from here. So that will be the final amount. Investment amount is JPY 120 billion.

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 Viridium an 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 Carlyle 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.

On Page 27, two points. JPY 2.7 trillion is mentioned related to investment. What about the schedule and content of this? Any additional information you can share?

Joint investment, JPY 2.7 trillion, as was explained previously, out of the total ALM asset, that link is linked to liabilities. That part will be handled by each entity according to the characteristics each liability. For other assets, the traditional Japanese and foreign equities and bonds, for them, mostly T&D Asset Management will do the investment. Overseas credit and alternative investments, we are looking at using the subsidiary in the U.S. Other than ALM asset, the amount will be JPY 2.7 trillion. For this fund in stages, the capital transfer or commissioning of the investment will take place.

Now we would like to move on to the next question. Ms. Tsujino from BofA Securities.

Yes. I have three questions. Also in the second half, you have increased the sales plan of the strategic shareholdings by JPY 100 billion, and also in Q3, the profit is recovering. Also 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 are committed to the book that's focused on Japan and Asia. Did you create this equal because you already have some visibility for a potential deal? And within this scope, would you be seeding your own book?

My third question is earlier, you talked about improving Taiyo Life and reviewing -- it doesn't include reviewing the bancassurance channel. And I think the annualized new premium from the new policies, I believe more than half of that is coming from the bancassurance channel. So I think you need to do a decisive reform and also maybe you need to include the [ NBA ] clauses. So what are the considerations for those? And what are 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's increasing.

So for the write-down of those unrealized losses on the bond holdings, we would like to improve the investment profit. But at this point, our full year 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 the 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 that 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 the sidecar reinsurance scheme was set up this time.

Thank you, Tsujino-san. And regarding the third question, regarding the bancassurance channel for Taiyo Life. On Page 25 on bottom right, we do show that we are going to review the bancassurance channel strategy at the bottom right. And I will make some additional comments. Earlier, as I said, the current profit structure, we are going to decompose the elements of the profit. And that's now underway. And the [ majority ] starts underway by Taiyo Life and initiatives that we plan to implement going forward. We are not setting up the KPIs to measure the benefit, and we are planning to monitor those progress.

Also regarding the bancassurance channel, on the Page 25, this is just a part of how we have decomposed the earnings structure. So we have the product portfolio and sales channels. So for product portfolio 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 bancassurance channel as we think about the optimal sales channel structure. So in the group long-term vision that we will unveil next spring, we'll offer you more details then. Thank you.

Moving on to the next person, Watanabe-san from Daiwa Securities.

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 this 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 a buyback of JPY 80 billion or more shall be possible. So I would like to confirm the scale.

And second question is the definition of the adjusted profit. Fortitude is creating the volatility and large P&Cs. And life insurance companies have announced their adjusted profits. And Daiichi Life excluded the valuation profit and loss of proactive from the adjusted profit, and it is the only T&D that includes the valuation gains and losses in the profit. Why do you not exclude?

Watanabe-san, 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, it is balanced with the growth investment. If we do not have 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 case by case. This concludes my answer.

On the second question, let me answer. At T&D Group, on adjusted profit, as the profit to be returned, it links to the profit to be returned to the shareholders ultimately in the valuation gains and losses. 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, can be returned to the investors. So from the medium- to long-term perspective, the profit growth from the core business is to be aimed at. And in addition, nonlinear growth is pursued through growth investment.

On the other hand, we need to continue to strongly monitor 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.

Next question is from Sato-san from JPMorgan Securities.

This is Sato from JPMorgan. 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 deck today, the adjusted profit, EPS, those are highlighted. That's my impression. In the current growth long-term vision, when you announced that, you were more focused on economic value-based EV and value of new business and aiming for 0.5x 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 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. Also you have 225% 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 the Director of the holdings. When [indiscernible] 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 Taiyo and Daido 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, well, we are looking at both the financial accounting basis and also the economic value basis, especially for the economic of value-based figures. Especially for Daido, we sell many long duration products. So steady profit will be generated from there. Also 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. Also the KPIs on an economic value basis and the 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 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 BoD with independent outside directors.

And also, the subsidiaries of President serving as directors, on that point, right now, as we discussed in the next long-term vision. These are two companies which has the biggest chunk of the managerial resources. The holding has an important role to optimally allocate those resources. But we need to also act with speed for executing the strategies. Also, we still believe that having the President serve as directors of the holdings still is important. But that will not be the case forever.

Also, 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.

Next, moving on to the next question. Sasaki-san of Nomura Securities.

This is Sasaki of Nomura. I have two questions. First question is that this time, listening to your presentation, you talked about domestic nonexisting 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, they are commenting 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 5 years and the next 10 years, do we need to consider any risk in investing capital? That is my first question.

My second question, 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 for the insurance company in addition to asset side, you need to consider liability. In your case, mostly the yen-based liabilities are the core, As such an insurance company to utilize overseas assets, how do you consider? Why did you come to such a judgment?

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The first question -- Sasaki-san. Thank you for your question. The comments 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 Viridium, the geographical properties and business model is different from Fortitude. So we were able to diversify the risk of the closed book business.

So through these two investments, we can expect a stable profit contribution in the future. So for other growth investments, in 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, yen-based liabilities, for this, we match with yen capital. And through ALM, we cover the liability costs stably. That is the first target. Excess capital is to be utilized to aim at higher return. That is the basic concept. So as you pointed out, the equity risk is reduced and interest rate risks are also to be reduced. And on top of that, you utilize the capital we hold to aim at further higher return. That is the policy in focusing on the overseas investments.

Next question is from Mr. Sakamaki from Mizuho Securities.

This is Sakamaki from Mizuho Securities. I have two questions. My first question is regarding Page 26. Also regarding the KPI, you have not really made any update. But for March 2031, JPY 200 billion and higher for this target. Are you going to be revisiting this target as you make the long-term vision? In the last 6 months or so, you have benefited from the higher equity price to reach out for the bond portfolio and set up the sidecar. So environment is changing. So if you could refer to a potential revision 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 there going to be a small scale investment? We can see the investment overseas. Or are you also considering large-scale investment? So those are my questions.

Yes, thank you for the question. This target over JPY 200 billion, this was a rough concept when we are 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 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, we will be able to offer you more specific picture.

Yes. And regarding the growth investment, as we presented, the investment for closed book has on its course. So going forward, basically, as we look into the future, in order to achieve the future profit target, as part of external growth, the new investment, we 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. And 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 JPY 200 billion, it 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 JPY 200 billion 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 noninsurance areas, the size of the investment may not be huge but we 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.

Moving on to the next question, Morgan Stanley MUFG Securities, Takemura-san.

I'm Takemura of Morgan Stanley MUFG Securities. 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, the reduction pace will be JPY 10 billion or so. And going forward, Daido Life's duration matching will be done and the 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. JPY 17.8 billion 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. 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 indicator, and financial indicators are also important. Price to embedded value of 0.5x was mentioned from before. But that indicator is less important going forward, or are you going to fill embedded value part using reinsurance? I thought that this relates to share buybacks. 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 wise, when the policy in-force increases, well, considering that will increase the absolute -- the 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%, but 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 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 in-force is included. So there is uncertainty due to the fluctuation of assumptions used for calculation. So partially, the share price is discounted due to that. For a share price valuation indicator, one indicator is PER. On Page 18, right-hand side bottom, there's a mentioning. Based on the period, net income EPS is JPY 295 and PER is 11 to 12x based on the current share price. So in the medium to long, sustainably we are to increase EPS and DPS and also the growth 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 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 in-force policies. So at the same time, we would like to aim at increasing EV, 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.

Next question is from Mr. Majima from Tokai Tokyo Intelligence Lab.

Yes. This is Majima. First, on Page 8. 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 would 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 were able to utilize the unrealized gains and the equity holdings to deal with the issues. You use that benefit this year to reshuffle your bond portfolio. And considering that in March 2032, you will not have a huge unrealized gains, what kind of business model are you going to pursue? Or are there not going to be 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 are seeing an increase in the fixed cost for their sales representatives. So I think you will 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's 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, as 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 our excess return with that. So in order to cover for the investment rate, it's going to be stable. So we will not have to rely on the unrealized gains on the 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 volatility by the yen interest asset. Also, we will not have to rely on the unrealized gains on equity holdings anymore.

While we will not have those unrealized gains, but the risk will have to be considered on a mark-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, Majima-san. Regarding the sales representatives, the biggest strength of the channel is the hospitality as 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.

And at Taiyo 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 this earnings 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 we will consider to implement. Thank you.

Moving on to the next question. This will be the last person to ask a question, Tsujino-san of BofA Securities.

I have two questions. First, interest rate risk, the absolute amount will not decline. On Page 10, Daido, on the left-hand side, there's blue bar. That is large, quite large. It may take long. And the unrealized loss that you have here to write off and change to long-duration vehicles, through that, you can reduce interest rate risks but this will not go down significantly.

And another point, selling Japanese and overseas equities. Right now, you have a 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, cost will go up again. When you look at the U.S. interest rate level, then that can happen.

If the profit is JPY 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 duration, the asset is bigger. And after that, liability is bigger. This is an intentional position for 40 years or longer. Then the cash flow 40 years later will largely differ depending on the current trend. And currently, there is no cash government bond for the year duration. So in this area, we have not allocated the asset for 10-year or shorter.

In this area, by taking more credit risk, we are to expand our profit. And so also 10 year where we can take credit, we have larger position versus liability. Currently, at Taiyo, rather than conventional interest rate matching, we are recreating based on cash flow matching. From that perspective, for a 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 in to 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 that 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 our hedge position, we will do so. And also, we will use our market outlook to make a 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.

So now we would like to end the Q&A session and IR meeting. If you have any further questions, please feel free to contact the IR office. And in order for us to improve our IR activities, we ask for your cooperation to respond to our surveys. It can be completed within 2 or 3 minutes. We understand that you are very busy, but we ask for your generous cooperation. Thank you very much for joining us today.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

First of all, I would like to present the key highlights of the financial results for the second quarter. Group adjusted profit amounted to JPY 70.1 billion versus the full year forecast of JPY 146 billion, with a progress rate of 48.1%. Sales results of new policies of all three life insurance companies increased year-on-year, showing good progress against the plan. Surrender and lapse rate increased year-on-year in Taiyo and Daido and decreased in TDF.

Value of new business as the combined total of the three life insurance companies amounted to JPY 97.9 billion, with full year forecast of JPY 168 billion, in the progress of 58.3%. Group MCEV amounted to JPY 4,269.5 billion. ESR was 228%. There is no change in full year earnings forecast.

Please turn to the next page. The key revenue and profit items of each company for the second quarter are shown in the table. Taiyo Life and Daido Life recorded increased adjusted profits, while T&D Financial Life and T&D United Capital posted lower profit compared to the same period of the previous year.

Please turn to the next page. This page shows the breakdown of group adjusted profit and difference from net income. As I explained in the first quarter, the gain on negative goodwill was recorded in connection with the consolidation of All Right Small Amount & Short Term Insurance, this item has been excluded from group adjusted profit.

Next page, please. This page shows key performance indicators of the 3 life insurance companies, both Taiyo Life and Daido Life saw an increase in their core profit. Both companies recorded capital gains on sale of domestic and foreign equities. However, Taiyo Life recorded losses on sale of bonds due to reduction of foreign holding -- foreign bond holdings. Daido Life posted losses on sale of bonds mainly due to switching of bond holdings as part of its cash flow matching strategy. T&D Financial Life posted lower earnings due to a decline in surrender and lapse games, which resulted from a decrease in policies achieving their target amount.

Please turn to the next page. The charts describe factors contributing to changes in core profit, both for Taiyo and Daido decreased currency hedge costs and increased interest dividend income contributed to an increase in core profit. This effect was partially offset by an increase in operating expenses.

Next page, please. Average assumed investment yields of Taiyo Life and Daido Life were 1.34% and 1.22%, respectively. Please turn to the next page.

T&D United Capital's adjusted profit decreased by JPY 15.9 billion year-on-year to JPY 0.6 billion. Please turn to the next page.

This page describes the quarterly trends in the profit and loss of closed-book business. The main factors behind the decrease in profits in the second quarter include: firstly, underperformed in the variable annuity block due to unhedgeable basis risks; and secondly, the universal insurance block recorded losses due to the valuation method of additional policy reserve.

In the third quarter, losses due to the valuation method of policy reserves are expected to be eliminated. Adjusted profit of Fortitude in the third quarter is being calculated, and the preliminary number will be presented in the November 28 IR meeting.

In September, T&D United Capital received a dividend of JPY 11.7 billion from Fortitude.

Please turn to the next page. At Taiyo Life, annualized premiums of new protection-type policies increased year-on-year. While surrender and lapse rate increased mainly due to the increase in the agency channel, the annualized premiums of in-force protection-type policies increased from the end of the previous fiscal year.

Please turn to the next page. New policy amount of Daido Life continued to be strong and achieved a year-on-year growth. While surrender and lapse rate rose. Most of the increase in surrender and lapse was attributable to a temporary uptick in policy replacement following the June launch of the new product, the Advanced Cancer Coverage J-Type. Due to strong new business performance, policy amount in force increased from the end of the previous fiscal year.

Please turn to the next page. Annualized premiums of new policies at T&D Financial Life increased year-on-year. Also, 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. Group MCEV increased by JPY 323.8 billion from the end of the previous fiscal year to JPY 4,269.5 billion, mainly driven by the accumulation of new business value, rise in domestic and overseas stock prices and domestic interest rates and the adoption of LDTI at Fortitude.

The combined new business value of the three life insurance companies increased by JPY 10.2 billion year-on-year to JPY 97.9 billion, mainly due to higher new policy amount and rising domestic interest rates. The new business margin was 9%. A breakdown of MCEV by company is provided on Page 15, the factors contributing to changes in Group MCEV on Page 16, and sensitivities on Page 17.

Please turn to Page 18. This page presents the status of the investment at Taiyo Life and Daido Life. The combined amount of domestic and foreign equity sales by the two companies was approximately JPY 143 billion against a full year plan of JPY 180 billion. Daido Life's interest rate matching ratio increased to 85%. Taiyo Life's interest rate matching ratio reached 100%.

Please turn to the next page. This page shows the status of foreign currency denominated bonds. The reduction of hedged foreign bonds is still in progress primarily by Taiyo Life.

Please turn to Page 21. This page describes the status of net valuation gains and losses on general account assets. Unrealized losses on domestic bonds have increased due to rising domestic interest rates.

Please turn to the next page. Starting from fiscal year 2025, the disclosure on strategic shareholdings include not only those held by Taiyo and Daido, but also shares held by other consolidated subsidiaries. As of the end of September 2025, the ratio of strategic shareholdings to net assets stood at 18.6%, reflecting an increase in the market value of the holdings. We will continue to work on reducing our strategic share holdings to 0 by the end of March 2031, except those related to business partners and collaborators.

Please turn to the next page. Sale of stocks reclassified from strategic shareholdings to peer investment purposes is in process as part of efforts to reduce equity risks. As of the end of September 2025, 49% of such shareholdings was digested on a cumulative basis.

Next page, please. From the current quarter, some factors in the investment in Viridium is shown. As of the end of September 2025, the ESR declined to 228% from the end of the previous fiscal year. While surplus increased, this reflects investment in Viridium, along with increased mass surrender due to higher domestic interest rates.

Here, there are no changes in the full year earnings forecast for the fiscal year ended March 31, 2026. For the remaining 6 months of the fiscal year, the group adjusted profit is expected to decrease by approximately JPY 0.47 billion for every JPY 1 appreciation. A break down the focus of each life insurance company is provided on Page 26, other major topics on Page 28 and overseas credit assets on Page 29.

This concludes the briefing of financial results for the 6 months ended September 30, 2025. And from here on, we would like to start the Q&A session.

First like to take question from Muraki-san of SMBC Nikko Securities.

This is Muraki of SMBC Nikko Securities. I have two questions. First question is related to the progress of the performance on Page 4 to the right-hand side, you have shown progress rate. Fortitude United, the progress rate has deteriorated and universal insurance-related P&L, I think it will come back in the third quarter. But still, I believe there is a distance to the full year plan, where do you think you can absorb this underperformance? And also conversely, the profit from the sale of Nuernberger, if you can book them in the current year, then I believe you have JPY 15 billion after-tax profit, so that will be an outperformance. So can you talk about the outlook, whether you can book this profit in the current fiscal year? That is my first question.

Muraki-san, thank you for your question. First, in the first half, the slowness of the progress, how are we going to compensate for that going forward. Firstly, it's positive spread. On Page 26, we have shown the information, both Taiyo and Daido's positive spread is strong, and this will continue into the second half. Alternative P&L, there are variances, but interest rate increase and the portfolio rebalancing will contribute to the yield improvement. And the equity dividend, there are increasing number of companies increasing their dividend.

So in the second half as well, we believe the positive will continue to be strong and possible for outperformance. The sale of the equity, we will continue -- and we expect that the profit coming from the equity sale will continue to be recorded.

For others, T&D United Capital, as Muraki-san pointed out, the impact of universal insurance will be eliminated in the third quarter. And in the second half, we expect gradual recovery. And in the first half, the factor for negative performance was alternative P&L, it was rather not good in the first quarter. In the second quarter, there is some recovery, but in -- compared to the medium- to long-term expected return, it is still lower. So we believe it may take some time for full-fledged recovery. But compared to the first half in the second half, T&D United Capital will clearly start to recover.

On Nuernberger, first -- once TOB is successful, then the approval by the authority will be necessary, and we are not certain whether that will happen within this fiscal year, it may be brought forward to next fiscal year. And your question on the profit outperformance once that happens in the current fiscal year, basically, we are focused on risk reduction in the future, and we are to rebalance our portfolio. So we are selling yen bonds along with cash flow matching, we are to reduce interest rate risk. So even when Nuernberger's sale, our profit is booked. It's not going to create a major outperformance for the current year. This concludes my explanation.

My second point is surrender and labs. Daido had a positive effect from a new product? And what is the status versus the plan?

Thank you for your question. Versus the plan, how is a surrender and lapse trending. First, both Daido and Taiyo, it is higher, meaning deteriorating for Daido Life, as Muraki-san pointed out, there is a switchover to J-type new products, that is the major factor. But on this point, this was launched in June. And so currently, there is a switch increasing, but that will stabilize gradually. In the second half, we expect surrender and lapse to decline. This switch over although there are labs and surrender, the in-force balance is increasing from economic value-based perspective, this is a positive impact we do not consider this to be a major issue.

On the other hand, Taiyo Life, so-called over-the-counter cancellation lapse is increasing. It is due to the interest rate increase, and this trend will likely to continue into the second half. The sales staff channel in line with last year versus the plan, it is slightly higher, but the budget was a little bit ambitious, so or year basis, it's flat.

In Taiyo, matching rate 100%, you mentioned that about the surrender ratio is staying at a high level the JGB sales, do you think that is necessary to control the matching ratio?

Thank you for the question. On that point, the matching ratio is increasing, but the -- due to interest rate rise, calculation, the duration of the liability has shortened, and there is some impact from that. From a cash flow perspective to prepare for rate increase we have a certain cash position converted to short-term bonds, so we can accommodate.

We will now move on to the next question. Tsujino-san from BofA Securities.

First, regarding TDUC. Under closed-book business that is measured at fair value, I have a question. You mentioned that the performance of alternatives has been weak. And I believe part of that is due to fair value adjustments. If you have any numbers showing, for example, how much of a positive impact you had last year? And how much of a negative impact you have this year? I would appreciate it if you can share that with us.

And second while EV for new businesses are performing well, we have also seen an increase in surrenders. Looking only at the second quarter, the variance between assumptions and results resulted in a loss of roughly JPY 16 billion. a decrease in EV split between Taiyo and Daido, as you explained earlier. If possible, I would like to understand the breakdown for Daido, part of the impact is due to policy replacements from J-type. But even if new business increases, the replacement effect reduces the net figure, meaning the overall net contribution is smaller. I would like to know how much of this impact is attributable to replacements.

Also surrenders at Taiyo are increasing. Given the high interest rate environment, you should have assumed a certain level of surrender rates. And for bancassurance in particular, you revised the assumptions last year. Even so, surrenders are coming in above assumptions. Does this mean the assumptions themselves were not quite appropriate. Do they need to be reviewed? Any thoughts on this matter?

Thank you, Tsujino-san. Regarding your first question, we added some new disclosure material this time. On Page 44, in the third line from the top, we added a section showing the profit loss for alternatives I hope that will be helpful. As you can see, performance was quite poor in the first quarter, but has improved somewhat in the second quarter.

As for your second question regarding the variance between the assumption and the actual surrender rates. The deviation increased in the second quarter. The breakdown is a little less JPY 7 billion negative for Taiyo. A little over JPY 7 billion negative for Daido and just under JPY 2 billion negative for TDF.

For Taiyo, about JPY 1 billion of the negative impact came from a policy replacement involving J-type. The remainder stems mainly from the L-type products. The surrender assumptions are designed to cover designed to coverage to a 10-year average and the current surrender levels are worse than that average, resulting in negative deviations.

For Taiyo, senders have exceeded the assumptions reviewed last year due largely to higher interest rates. We plan to review the assumptions again at fiscal year-end after observing trends through the second half. That is all from my side.

So just to confirm, it's not the type, but you said that the impact of replacements for Daido was JPY 1 billion, correct?

Yes, that is correct. There was a JPY 1 billion negative deviation related to that.

And the rest is due to the gap versus the 10-year average, right? Regarding Taiyo and Daido, when you review the assumptions at year-end, could this lead to additional negative impacts in the order of tens of billions of yen?

Thank you for your question, Tsujino-san. As I mentioned earlier, Taiyo recorded a negative deviation of just under JPY 7 billion in the second quarter. And for the first half, it is around JPY 10 billion. So as you pointed out, reflecting this in the assumptions, you indeed have a certain impact. That concludes my answer.

Regarding Page 44, which you mentioned, which I am looking at now, which part corresponds to the fair value gains and losses. All of this reflects a fair value measurement. In this case, a market value fluctuations flow through the P&L. So the changes in fair value are recorded there. So the interest and dividend income and the mark-to-market losses are both included under other. And essentially, we should focus on the net figure. Is that correct?

Yes, exactly. The market value fluctuations are included here as well. And the figures like JPY 5.6 billion or JPY 10.4 billion for alternatives, they include market fluctuations. Ultimately, it's all aggregated together.

Next, we would like to take questions from Watanabe-san of Daiwa Securities.

This is Watanabe of Daiwa. I have two questions. First is on the judgment of guidance adjustment. In the last year, you made a judgment to make upward revision in the third quarter in the current fiscal year, do you also judge in the third quarter, including the profit of from sale of Nuernberger. And on Daido Life in the second quarter, there is a loss booked from the sale of the bonds even if Nuernberger is not booked in the current year, can you achieve the plan?

Second question on Page 29, you have private credit information. Taiyo and Daido amounts to JPY 217 billion and Fortitude also invest 11%. Given the recent environmental changes, do you intend to strengthen the provision through collaboration with Carlyle, you're going to expand the underwriting can discipline and maintain and can you take good risk?

On the guidance, we can say that we should monitor the situation. It's possible that we will review, but as of today, there is nothing definitive.

Next is on the loss on sale. It's not that it is to match the profit from Nuernberger sale, but it is due to cash flow matching in the second half as well. We will continue with cash flow matching the capital level will depend on the market environment and other earnings. So as of today, I cannot comment on the capital.

On the credit investment, we do not believe that there is a need to build up provisions in the future with Carlyle, we invest jointly on Fortitude, and we have been collaborating in exchanging views during the past 5 years. Carlyle is very prudent when it comes to investment, and it has a history of overcoming market crisis and abundant experience and very careful in investing.

So in the credit market environment, we have been views, and we are not excessively optimistic what high-quality portfolio is maintained. We believe we can maintain a strong discipline. And I believe that we can further enhance the investment performance.

Just one point to confirm the capital loss in Daido. This is not related to Nuernberger, and it's possible in the second half as well. Full year JPY 31 billion capital profit and loss. Is it possible that this will not be achieved.

Watanabe-san, thank you for your question. This will depend on the market status. So it's possible that this will not be achieved. In that case, do you plan to offset with other factors such as positive spread to maintain the planned adjusted profit. the positive spread is growing. So even without capital gain bottom line profit is achievable.

We will now move on to the next question. Sato-san from JPMorgan Securities.

This is Sato from JPMorgan Securities. My first question concerns the reduction of equity risk. At the beginning of the fiscal year, the combined domestic and foreign equity exposure was around JPY 410 billion, roughly 5%, and there was a plan to reduce it to JPY 400 billion during the fiscal year. Could you tell us where the equity risk stands as of now? And if we were to bring it down to JPY 400 billion, how much additional selling would be required. If you have any such estimates, please share them.

My second question is not directly tied to this quarter's results. But recently, Fortitude's profit volatility has been quite high. Regarding this, have there been any discussions about taking more active measures such as hedging or portfolio adjustments or like some other companies, broadening the scope of market-related adjustments to create a more stable and visible profit KPI? I would appreciate it if you can provide way with some insight into this matter.

Thank you for your questions, Sato-san. First, regarding the JPY 400 billion equity risk. I do not have the exact number with me today, so we will provide a follow-up later. For this fiscal year, the annual equity sales plan for Taiyo and Daido combined was originally JPY 180 billion, but we executed most of it ahead of schedule in the first half. As stated on Page 18, we sold JPY 243 billion, meaning we have already achieved the plan ahead of schedule. Given that market valuations have risen. We believe we are steadily approaching the JPY 400 billion level when factoring in these early disposals.

Regarding Fortitude's volatility, as you rightly pointed out, the main drivers are fluctuations in alternative investments and variable annuities. For the latter, the balance in the separate account has been steadily declining and is already below the level at acquisition. It will take time but we expect volatility from variable annuities to gradually subside. As for volatility in alternatives, we evaluate these investments based on medium- to long-term returns. So short-term volatility is unavoidable. We do not intend to suppress short-term volatility at the expense of long-term returns. Likewise, we have no car plans to revise the scope of adjusted profit. That is all from my side.

Regarding the equities, you mentioned earlier, some companies that reported after your results, significantly revised earnings upward on the assumption of further reductions in equity risk. In your case, depending on market conditions, is there a possibility that you might also judge that additional reductions are necessary for example, to bring the year-end risk level below JPY 40 billion? Or will you maintain your traditional policy of determining capital gain realization with the focus of achieving this fiscal year's profit target. So that's the way in which you have been conducting this. So please give us your thoughts on this matter.

Thank you for the follow-up questions, Sato-san. Regarding equity sales, although we executed a large push ahead of schedule in the first half, we plan to continue in the second half as well. So that's a possibility. Depending on market conditions, sales above the annual plan are possible. But given current uncertainty, we cannot say definitely at this stage. As for profit, we accept capital gains from equity sales. However, reducing interest rate risk through continued cash flow matching is also an important priority. And depending on circumstances, this may involve realizing losses.

Therefore, we cannot state with certainty how much profit will be secured for the full year. And whether it would deviate upwards. We also frontloaded loss realization for foreign bonds in the first half. So in principle, we do not plan further reductions in the second half, although there may be minor adjustments by individual security. That is all.

Next, we would like to take questions from Sakamaki-san of Mizuho Securities.

This is Sakamaki of Mizuho Securities. I have two questions. First, in the current fiscal year, the equity market is overshooting. And I do understand that you are rebalancing the portfolio to prepare for the next fiscal year, what would be the expected outperformance next fiscal year and beyond on the recurring earnings or profit. In the current fiscal year's actual in the positive spread, how much of it is onetime interest and dividends and how much can be maintained into next fiscal year?

The second question is related to Sato-san's question. The sale of the foreign bonds by Taiyo Life. Did you complete this year's plan or did you also complete the sale for next year's plan?

Thank you for your question. I would like to reply first from your second question. For foreign bonds, we already completed the sale in the current fiscal year, including next year's plan.

Going back to the first question, how much yield improvement is progressing on this, in the IR briefing material, we disclosed final yield on book value. And in the first half, both for Taiyo and Daido, there is an improvement by 7 basis points. I expect further improvement in the second half. But currently, that is the level. So when you multiply 7 basis points to the balance of yen-denominated bonds, then you can arrive at the profit improvement for the future. This concludes my explanation.

Understood. The profit plan, you have not adjusted the breakdown and the progress of the positive spread is quite high at Daido Life. How much can you expect as a cruising speed?

Sorry, I forgot to answer part of the first question. What is the outperformance of PE, Daido's PE. This is the second quarter result and it overshot by JPY 3 billion. That is thanks to a large exit. And the cruising speed of Daido alternatives assets, they tend to be volatile, so it's difficult to judge, but there's an improvement of final yield on book value. So we are seeing gradual increase it's difficult to provide concrete number because of the volatility of alternatives.

We will now proceed to the next question. Sasaki-san from Nomura Securities.

This is Sasaki from Nomura Securities. I have two questions, if I may. First, based on the first half results, both discussions are currently taking place regarding next fiscal year's performance? And how confident are you in the outlook for adjusted profit? Please share what you can at this stage.

Second, several new sites have been added this time. This includes the detailed disclosure on overseas credit assets. Was this added because the market has become increasingly concerned? Could you explain the background behind this disclosure? These are my two questions.

Thank you for your questions, Sasaki-san. There's not much we can say at this point regarding next year's performance. However, we have set a target of JPY 200 billion in group adjusted profit for 2030, and we aim to steadily build up profit towards that goal. At present, it is difficult to provide any concrete indication of the next year's performance.

Regarding the reason for or the additional disclosure included in Page 29, concerns have a reason regarding overseas credit assets, and we felt it necessary to present the current situation. What we want to show with the slide is that, although we have invested to a certain extent in overseas credit assets, we maintain broad issuer diversification.

In addition, our yield settings are based on expected loss rates, ensuring that the yield levels are appropriate, including [ tenor ] management. Since expected loss rates are already reflected in the yield assumptions, some defaults are expected. And we do not view this as a significant issue. Furthermore, even if a default occurs recovery is possible, and we enhance recoverability by securing collateral and imposing strict covenants. Market statistics showed that loss ratios are generally low compared with default rates. Our group takes an even more conservative approach and we believe our loss ratio are lower than market averages. That concludes my explanation.

Next, we would like to take questions from Mashima-san of Tokai Tokyo Intelligence Lab.

I'm Mashima. On Page 39, you have net valuation gains on general account assets. Looking at these numbers, the unrealized gains as of the end of March and September for Daido Life and Taiyo Life are shown the public and corporate bonds and equities. When I compare the two, the unrealized loss of the public and corporate bonds is much faster than the unrealized gains from equity. So if things remain the same, as of the end of December, there's a concern that you will lose the unrealized gains. On this point, on the unrealized losses of policy reserve matching bonds, you will not be concerned about. That is my first point.

Thank you for the question. whether we don't mind or not? Well, as you pointed out, on policy reserve matching bonds, these are assets that match liabilities and we will hold them to maturity. So the current increase of the unrealized losses is not a significant issue.

I have one more point. cumulatively in the second quarter, were there bonds that hit the impairment criteria.

Thank you very much for your question, Mashima-san. I think you are referring to 50% threshold for impairment. As you see, our 40-year bonds prices, naturally, there are some below 50% as we usually explained these are matching the liabilities. And so long as we have will and ability to hold to maturity, we will not impair.

Can you tell us how many names or amount that falls under that category?

I'm sorry, we do not disclose.

We will now proceed to the next question. Takemura-san from Morgan Stanley MUFG Securities.

This is Takemura from Morgan Stanley MUFG Securities. I have two quick questions. First, regarding the outlook for new business margins shown on Page 14. The margin was flat at 1.8% in Q1, but has risen to 9% this quarter. I assume this improvement may be partly due to Daido Life's expense factors. Looking ahead, should we expect the margin to decline somewhat as new product sales come down, or could it increase further driven by benefits from the rising interest rates? Any color would be greatly appreciated.

Second, on Page 18, a regarding Daido Life interest rate matching ratio, which has now reached 85%. So it's making progress. Should we understand that you will continue in the same direction going forward? In that case, EV interest rate sensitivity currently appears negative, should we assume that the negative sensitivity will expand further? Again, any color on the outlook would be helpful.

Thank you for your questions, Takemura-san. Regarding your first question on new business margins, the improvement this quarter is driven by two factors. For Daido and TDF, margins improved due to rising interest rates. For Taiyo Life, the effect of gradually increasing the assumed expense rate as part of product revisions contributed to the improvement. While dependent on interest rate conditions, we believe this level can be maintained going forward.

Regarding your second question on the matching ratio, where as we previously used the matching ratio as a target, we now focus on cash flow matching itself as the main objective. Therefore, the interest rate matching ratio is simply an outcome. We expect the ratio to continue rising.

As for interest rate sensitivity, looking at each of the three companies, TDF and Daido show positive sensitivity as you can see on Page 17, while Taiyo shows negative sensitivity. Taiyo's negative sensitivity is not due to overhedging, but is inherent to in its protection type products which have little or no cash value. When interest rates rise, the higher discount rate reduces the value of in-force business. So that is why.

Going forward, as [indiscernible] progresses, we expect sensitivity for Daido and TDF to decrease. And we do not foresee the negative sensitivity broadening. However, for Taiyo's protection products, higher rates will continue to increase the negative sensitivity. That concludes my response.

We will now take questions from Tsujino-san of BofA Securities.

I have just one point on Page 24, you show ESR. I understand that you spent money for buyback. So I understand that it is decreasing. But from the end of March, the risk is increasing. And in the first quarter, rates rose significantly. So that may be the factor. But I would like to understand the factors. Are you going to keep it as is? Or are you going to take other measures to reduce interest rate risks or equity risks? Are you going to accelerate the risk reduction?

Thank you for your questions. Tsujino-san. First, the factors for increasing risk is the biggest one is mass surrender risk due to interest rate rise and also the market value of the equities is rising and the equity risk is rising, including alternatives, as that is a slight increase. Going forward, we will continue to reduce interest rate risk and reduce equities as well.

There is another factor is that is related to Viridium. From September, this will be reflected in ESR. So this investment amount is another factor for risk increase the entire investment amount will be the risk amount, it's equity method affiliate?

Tsujino-san you for asking that question. I wanted to explain another factor, Fortitude introduced LDTI and risk amount is -- and that is another factor for risk increase and Viridium investment as this pointed out, it will be adjusted to -- after tax, but it will be pushed down ESR by 10 points. Thank you.