T&D Aktie

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?

0

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.

So this is Ito, IR Department from the T&D Holdings. Thank you very much for coming to the conference call for the financial results for the three months ended June 30, 2025. Please refer to our website, Investor Relations, IR News and the materials. So from my end, I would like to make a presentation about 10 minutes, after which we would like to move on to the Q&A session. Please turn to Page 3.

I would like to present the key highlights of the financial results for the first quarter. Group adjusted profit amounted to JPY 39.4 billion, favorably progressing toward the full year forecast of JPY 146 billion, progress rate, 27%. Sales results of new policies of all three life insurance companies showed growth year-on-year and performed well compared to the plan. Surrender and lapse rate has decreased across all three companies.

Value of new business, combined total of the three life insurance companies amounted to JPY 47.2 billion, while the full year forecast is JPY 168 billion. Progress rate, 28.1%. Group MCEV amounted to JPY 4.1216 trillion. ESR was 237%. There is no change in full year earnings forecast. Please turn to the next page. Before moving on to the detailed explanation of the Q1 financial results, I would like to briefly provide supplementary information regarding the completion of minority investment into Viridium, which was announced on August 4.

The deemed acquisition date is set as September 30, 2025, and the group's adjusted profit will begin to reflect Viridium's financial results starting from the Q4 of FY 2025 based on Viridium's December quarter of 2025 performance. In the current fiscal year, initial investment-related expenses are expected to be recorded and the contribution to consolidated profit for the year is anticipated to be limited. In addition, we have decided to include goodwill-related income and expenses as items to be excluded from the group adjusted profit. Please refer to Page 53 for the revised calculation formula of group adjusted profit.

Please turn to the next page. The breakdown of key income and expenditure by company for Q1 is as shown. Taiyo Life and Daido Life recorded increased profits, while T&D Financial Life and T&D United Capital posted lower profits compared to the same period of the previous year. Although group adjusted profit declined year-on-year, adjusted EPS increased due to a reduction in the number of shares outstanding following the share buyback.

Please turn to the next page. This page presents the breakdown of changes in group adjusted profit and the reconciliation with quarterly net income. A gain on negative goodwill was recorded in connection with the consolidation of AllRight Small Amount and Short Term Insurance, formerly Aflac Pet Small-amount and short-term insurance. This item has been excluded from the group adjusted profit.

Please turn to the next page. This page presents the key performance indicators of the three life insurance companies. Taiyo Life recorded higher earnings due to an increase in core profit, while Daido Life saw profit growth driven by an increase in capital gains. Both Taiyo Life and Daido Life recorded gains from the sale of domestic and foreign equities. On the other hand, Taiyo Life posted losses due to the reduction of foreign bonds, resulting in a slightly year-on-year decline in capital gains. Daido Life's capital gains increased, reflecting a rebound from the bond replacement losses recorded in the previous fiscal year as part of this cash flow matching strategy as well as gains from the redemption of domestic equity investment trust.

T&D Financial Life recorded a decline in profit due to reactionary downturn from the increase in surrender-related gains in the same period of the previous year. Please turn to the next page. The factors contributing to changes in core profit are as described. For both Taiyo and Daido, a decline in currency hedge costs contributed to an increase in core profit, although this effect was partially offset by an increase in operating expenses.

Interest and dividend income is generally on an upward trend due to an increased holdings of yen-denominated bonds and improved yields. However, at Daido, it has decreased due to a reactionary downturn from strong alternative investment returns in the same period last year. Please turn to the next page. At Taiyo Life and Daido Life, average assumed investment yield was 1.33% and 1.22%, respectively. Please turn to the next page. T&D United Capital's adjusted profit decreased by JPY 6 billion year-on-year to JPY 1.3 billion, mainly due to reactionary downturn from the increase in variable annuity block earnings recorded in the same period of the previous year.

Please turn to the next page. Fortitude has adopted the U.S. accounting standard update for long-duration insurance contracts, LDTI, starting in fiscal year 2025. For details, please refer to Page 45. Please turn to the next page. Sales results of Taiyo Life are shown in this page. Annualized premiums of new protection-type policies increased year-on-year, driven by the promotion of hybrid sales, combining face-to-face and non-face-to-face approaches in the sales representative channel as well as higher sales volume in the agency channel.

In addition, the surrender and lapse rate declined year-on-year. Please turn to the next page. New policy amount at Daido Life continued to be strong, supported by thorough consulting-based sales that effectively addressed a wide range of customer protection needs, resulting in year-on-year growth. Sales of the new product, advanced cancer coverage J-Type launched in June have been steadily strong. The surrender and lapse rate declined and the amount of policies in force increased compared to 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, driven by strong sales of single premium individual annuity products. In addition, the surrender and lapse rate declined due to a decrease in contracts reaching target values for foreign currency-linked products, resulting in an increase in policies in force compared to the end of the previous fiscal year. Please turn to the next page. Group MCEV increased by JPY 175.9 billion from the end of the previous fiscal year to JPY 4.1216 trillion, driven by the accumulation of new business value, rising domestic interest rates and equity markets and adoption of LDTI at Fortitude.

The combined new business value of the three life companies increased by JPY 4.3 billion year-on-year to JPY 47.2 billion. The new business margin was 7.8%. Until the end of the previous fiscal year, group MCEV was calculated after reflecting adjustments related to Fortitude. However, due to the adoption of LDTI at Fortitude, this calculation is no longer performed from this fiscal year onward.

A breakdown of three life companies is provided on Page 16 and the factors contributing to changes in group MCEV are shown on Page 17. Please turn to Page 18. This page presents the investment status of Taiyo Life and Daido Life. The combined amount of domestic and foreign equity sales by two life companies, Taiyo and Daido totals approximately JPY 100 billion against the full year sales plan of JPY 180 billion.

Daido Life interest rate matching ratio rose by approximately 4 percentage points from the end of the previous fiscal year to 83.9%. Taiyo Life interest rate matching ratio stood at 99%. Please go to the next page. Status of foreign currency denominated bonds is as shown on this page. The reduction of hedged foreign bonds continues, primarily at Taiyo Life. Please turn to Page 21. This page presents 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 this disclosure, figures for strategic shareholdings include not only those held by Taiyo Life and Daido Life, but also shares held by other consolidated subsidiaries. As of the end of June 2025, the ratio of strategic shareholdings to net assets stood at 17%, reflecting an increase in the market value of the holdings. We will continue to reduce strategic shareholdings aiming to achieve a balance of 0 strategic shareholdings by the end of March 2031, excluding those of business partners and collaborators.

Please turn to the next page. Stocks reclassified from strategic shareholdings to pure investment purpose are being sold as part of efforts to reduce equity risk. As of the end of June 2025, cumulative sales have reached 45%. Please turn to the next page. As of the end of June 2025, the ESR ratio declined to 237%, reflecting an increase in surplus on one hand and the rise in mass surrender risk due to higher domestic interest rates on the other.

Please turn to the next page. There are no changes to the full year forecast -- earnings forecast for the fiscal year ended March 31, 2026. A breakdown of the forecast by each life insurance company is provided on Page 26. For the remaining nine months of the fiscal year, the group's adjusted profit is expected to decrease by approximately JPY 0.67 billion for every JPY 1 appreciation in the yen. This concludes the briefing of financial results for the three months ended June 30, 2025. Now we'd like to start the Q&A session.

So please Muraki-san from SMBC Nikko Securities, please.

So this is Muraki from SMBC Nikko Securities. I have two questions. First of all, this relates to Page 5 of the materials. When we look at the progress rate for T&D Financials and also T&D United Capital, the progress rate is somewhat low. I would like to know the reasons behind that. And also the outlook for Q2 onwards. Also for Fortitude, the interest, the dividend, the payment is on the decline. I would also like to hear the reason behind that. That is the first question.

So I'd like to talk about T&D Financials. -- why the progress rate is low vis-a-vis budget. So T&D Financials, they are considering seeding of the in-force policies partially. So of course, that would generate profit. But in terms of the timing, it has been pushed out in Q2 onwards. So if we were to exclude this factor, actually, T&D Financial is pretty much in line with our expectation. Next is about T&D United Capital. So the Fortitude's alternative assets, the performance has been sluggish.

This is centered on the PE funds. and some of the factors behind that, that the interest rate continues to hover at the higher end. However, in terms of the acquisition and IPO execution, it's been sluggish and the exit has been prolonged. Also in terms of U.S. GAAP, the mark-to-market value is conducted. But in terms of the stock market multiples, that has also pushed down the performance. Now the expectations going forward, if you look at Q1 only, it has been quite challenging, but we still have nine months to go.

So we're hoping that we can actually achieve the guidance number. So the second quarter onwards, we shall see subsiding of the tariffs issues. And likewise, the equity market is somewhat favorable. So we are expecting some recovery. But we don't have the most up-to-date information in Q2. So we'd like to refrain from actually making a clear response at this moment. That is all in terms of my explanation.

Second question relates to the asset management. So for Taiyo and Daido's holding of JGBs, I'd like to hear about this. So of course, the pricing has come down by more than 50%. How much has there been an increase in terms of the volume? If you look at Page 34, you haven't really booked on loss on sales and securities or devaluation losses on securities.

So I believe you are holding those without making a decision of the loss -- the impairment loss. So if you can give us the magnitude, that would be helpful. Also, the Nippon Life, they mentioned JPY 200 billion in terms of loss on sales. Dai-ichi Life, more than JPY 40 billion of the loss on sales of JGB has been connected in Q1. So the second quarter onwards, through the rebalancing of JGBs, how should we look at the loss on sales given the most up-to-date interest rate situation?

So as of June end, the unrealized loss situation, given the current interest rate level, the 40-year bonds, some of the names, we are seeing more than 50% of the evaluation loss, but we would not disclose the actual number. In terms of whether we will conduct impairment or not, first of all, in terms of the standard for impairment for the policy reserve matching bonds, it has not been clearly stated by the accounting standard. So we are actually consulting the auditors in that sense.

So in our case, first of all, whether we have the capability to fully hold on to the bonds and also whether we have the intent to hold on to these bonds until they recover. By satisfying these two levels, we would actually make the decision on the impairment loss. So whether we will conduct the asset replacement or not for Daido Life, cash flow matching has been conducted. So accordingly, we are looking into the asset replacement.

Having said that, in terms of the asset replacement, there are some requirements that we need to fulfill as part of the policy reserve matching bonds. So it is not likely that we would conduct any large-scale asset replacement within the same term. So at this moment, we cannot clearly state how much we will conduct the asset replacement. But as we conduct the cash flow matching, accordingly, we will do so. That is all.

Natsumu Tsujino from BofA Securities.

My first question is on Viridium. Is the goodwill negative or positive? That's my first question. And also, would you please indicate the image of the amount of the goodwill to the extent you can disclose, please? My second question is on the movement analysis of EV. There's a negative figure coming from variances in assumption and the result.

And also, there's a negative impact from assumption changes coming from the increase in the mortality rate. So for those factors, why is it so negative from the increase in the mortality rate from the assumption changes? That's my first question. And also, surrenders are down, but there are variances in assumption and the result coming from the surrender. So are we not going to see those negative factors anytime soon?

First, goodwill from the Viridium. It depends on the balance sheet at the end of September. So we don't know at this point the amount, but is it positive or negative? Probably it's going to be positive.

And as I explained in the presentation, it's going to be excluded from the adjusted profit. To your second question, variances in the assumption of EV, variances in assumption and result, mainly this is due to the increase in the surrender, as you mentioned. And mortality and expense ratio are the reasons for the assumption changes. And this is not coming really from Taiyo, but mostly from Daido and TD Financial, mostly Daido. And the biggest factor is the expense ratio factor due to the base salary increase, therefore, the human resource cost increase.

And also second largest one is the mortality rate increase and factor from the surrender ratio is not so large. Now going forward, with regards to the expense ratio, our assumption of the inflation ratio is 1.2% for the expense ratio. So in the future, if the wage increases over 1.2%, it's going to worsen the EV. Next, mortality rate. For Daido, they take the mortality average over the past three years. However, after the end of the pandemic, mortality rate has been flat, but there's always a fluctuation in every quarter.

And they use the moving average over three years. So the quarter with low mortality has been removed from the calculation. That is the reason for the deterioration of the mortality rate. In Q2, there is going to be one more quarter with low mortality rate to be removed from the calculation. But in Q3 and Q4, quarters with high mortality are going to be removed. So for the full year basis, in total, we are not anticipating any major deterioration.

However, we are going to see how the actual result trends. For Daido, they assume surrender is going to be converged into the 10-year average. That is the assumption. Surrender now compared to surrender 10 years ago, surrender now is worse. So we expect surrender to gradually deteriorate over time. And about variance in assumption and result for the surrender ratio for Taiyo, the surrender at the bancassurance channel is staying at a high level. So there is a possibility that there may be some variances in assumption and result. Depending upon the result, it may lead to the assumption changes. This completes my answer.

My next question may relate to the mortality rate. But for Daido, profitability from the insurance business for the past three months, it's been low. Is it because of the impact on the wage increase, but still profitability decline is large? And is this simply the quarterly fluctuation and the mortality rate was high, but it does not concern us or compared to the full year projection, your progress is 25%. So are there any one-off or swing factors?

The reasons are all the factors that you mentioned, expense deterioration. And in this quarter, mortality rate deteriorated, but this is within the regular swing or regular fluctuation. So it does not concern us so much.

Watanabe-san from Daiwa Securities.

So this is Watanabe. I have two questions. First question relates to the performance of Fortitude. You mentioned about you have not -- you do not have the most up-to-date number. So going forward, will you not be doing those disclosure on a preliminary basis? Also for Page 45, as I look at the LDTI adoption, you mentioned about the number of volatility may go up, but the impact of LDTI on distributable cash flow is limited. You mentioned that. So is there a chance that you may change the definition of group adjusted profit?

So normally, so we would normally give the preliminary -- the results for the Q2. But of course, LDTI adoption, it is taking some time for the calculation. So we cannot actually meet the deadline for the disclosure. So going forward, we will not be able to give you the preliminary results for Fortitude. Next about the LDTI. So whether we will change the definition of group adjusted profit? No, we do not intend to do so.

But I'm pretty sure you understand this point. But with the LDTI adoption, the main changes are how we evaluate the liabilities. So in terms of the interest rate discount rate related changes, it will not actually hit the PL, but actually, it would hit the OCI. Therefore, in terms of the interest rate changes, it will not impact the adjusted profit and others. So that is my explanation.

Understood. Understood. And the second question relates to ESR. So Viridium investment and buybacks impact. So on a pro forma basis, what is the most -- the recent outlook in terms of ESR?

In terms of Viridium's investment as well as the share buybacks, if you were to take those into consideration, it's just slightly below 225%.

Even with the increase in the mass surrender risk, you're still near the top end of the target range then.

That is correct.

Next questions are from JPMorgan Securities, Mr. Sato.

Sato from JPMorgan Securities. I have two questions. My first question is what you mentioned three months ago when you announced your full year results for the year just ended, you talked about upside factors to offset the downside factor from the exchange rate. You gave us your expectation towards upside factors to offset the exchange rate factor. Is there any change to your view? Specifically speaking, in the previous presentation, you mentioned upside factors such as for Daido, return from the alternative assets and also JGB yield improvement on the back of higher interest rates and also upside from capital gains from equity sales.

You talked about those upside potential factors. And for Fortitude and Daido, probably situation is different. But for alternative assets, in particular, for PE assets, there are probably more uncertainties compared to three months ago. So judging from the current environment compared to what you said three months ago, is there any change to the upside potential factors you mentioned to offset the negative impact from the exchange rate?

No, there is no change to our view of upside factors that we explained in May. For Q1, for Taiyo and Daido for both, return from alternative assets has outperformed compared to the assumption in the budget. And we expect the strong momentum to continue in the first half of this year. In addition, this is something that we didn't mention in May, but dividends are increasing. In general, Japanese companies are paying more dividends. So we now see the upside factor from the higher dividends.

Other than that, due to the higher interest rates, yield from JGB is increasing. And for Taiyo, they are replacing lower yield foreign bonds by JGBs, higher-yielding JGBs. So those are the positive factors, upside factors, which could offset the negative impact from the stronger yen. That completes my answer.

Understood. My second question, you may have probably explained this already in your presentation, but I'd like to get more color on the risk amount for ESR. For three months, risk amount has increased by a little bit more than JPY 100 billion. Would you please give me more color, breakdown, please?

First, as I mentioned in the presentation, the biggest factor is the mass surrender. The value of policies in force has increased on the back of higher interest rates. So mass surrender has increased. That's the biggest factor. And the second factor is a technical reason, but for Fortitude, because of the adoption of LDTI, net assets of Fortitude that we account for as the risk amount have increased. As a result, risk amount has increased.

So those are the major two reasons why the amount of risks have increased. You are selling down stocks. So including that, would you please give me the indication of the size of those factors, in particular, for the mass surrender, which is probably the largest factor. So would you please give me the indication of the image of the amount?

Mass surrender risk has increased by about JPY 100 billion, but there's diversification effect. So not the whole JPY 100 billion is going to impact. But if you take out the risk increase by the surrender -- mass surrender risk increase alone, it's JPY 100 billion or so.

Next, Sakamaki-san from Mizuho Securities, please.

So I have two questions. The first question relates to the progress of profit. So I'd like to hear more about the positive spread. So you mentioned about the alternatives vis-a-vis guidance, it is trending well. So how well is it in terms of the alternatives? Especially the progress is well for Taiyo Life. I'd also like to hear about the progress for Daido Life as well. What are some of the reasons for the upside?

So in terms of alternatives, for Taiyo Life, it's about JPY 1.8 billion that is above the budget right now. That is the current state. And also in terms of the equity, that is the dividend, just short of JPY 1 billion of an upside that we are seeing. And for Daido Life, for alternatives, similar magnitude as Taiyo Life in terms of the upside. So those are the two major factors behind the stronger trend.

So my second question relates to Daido Life's, the surrender situation. So year-on-year basis, you are seeing an improvement. But given the changes in the macro environment, are you seeing some signs of deterioration in terms of the surrender lapse? If you can give us the most recent situation in the field.

In terms of Daido Life surrender, since the second half of last year onwards, it has been on the decline, and that is still ongoing for the first quarter. So within that, back in 2017 to 2018, we sold the nursing care term insurance. There has been a rise in the surrender, but we have been able to absorb that. And at this moment, the surrender rate has been on the decline.

So it's pretty much subsided right now. However, the economic sentiment within the SMEs, we are seeing a dichotomy. So the new business has been favorable. But at the same time, we are not expecting a significant decline in surrender either. So unless there is a significant change in the external environment, the surrender for this year, it will be somewhat similar to last year. That is all.

My name is Sasaki from Nomura Securities. Two questions. First, because of the increase in the interest rates, are there any policyholders surrendering their policies? That's number one. And because of the increase in the interest rates, there are some voices who are saying that it is the opportune timing for you to increase your investment in super long-dated JGBs. But because of the higher interest rates in the near future, are you going to change your investment plans?

First, relating to the surrender ratio, the only channel where we see the increase in the surrender ratio is the bancassurance channel. For sales reps channel, agency channel, no, we are not really witnessing any increase in surrenders. Next, are we going to change our investment actions on the back of higher interest rates? No, not at this moment. For Daido Life, there's always new money coming in. So in the planned manner for the increase of the new money coming in, they buy super long-dated JGBs. That completes my answer.

My next question is on the mass surrender risk, how you are going to disclose, how you're going to incorporate in your disclosure. So now this is becoming the discussion point. So in your company, are you discussing on the potential change, how you disclose the mass surrender risk? Do you have any plan to change your disclosure?

First, for the mass surrender risk, we disclosed mass surrender based upon the regulated ESR. So for us, there is no track record of the increase of the mass surrender. Therefore, it's difficult for us to change the assumption for the regulated ESR for the mass surrender.

If that's the case, then you're not discussing to potentially change how you disclose excluding that? Or are you going to disclose 2 levels, like surrender ratio based upon the regulated ESR and also IR disclose the type of ESR?

At the moment, no, we don't have any plan to change, but we are going to see how the surrender ratio trends, and we are going to review appropriately.

Next, Mashima-san from Tokai Tokyo Intelligence Lab, please.

So this is Mashima. My first question relates to equity investment. So at the Annual Shareholders' Meeting, Farallon had a number of shareholders' proposal about high risk and the worsening of the return and so forth. So based on that proposal, this fiscal term. In Page 23, you stated that you are increasing at the net investment names. So this year, based on the shareholders' proposal, of course, that was rejected.

But what are some of the initiatives you have in mind in terms of equity investment? That is the first question. And the second question relates to Taiyo Life's nursing care products with the assumed the yield of 2%, which is fairly high. I believe you are selling these sort of products. Are they selling well? So the higher they assume the interest rate, is it selling? Or is there not much of a relationship? So that is the second question.

In terms of the equity, in the IR meeting back in May, we have made an explanation. So the equity risk will be reduced. So right now, it accounts for 9% of the portfolio, but we intend to lower that to 5%. So that is currently ongoing. Also in terms of equity, T&D Asset Management will conduct the group joint investment of the equity. So as of July of 2025, since last month, Taiyo Life also started to join this -- the joint investment management.

So now we have the Taiyo and Daido both being invested within the T&D Asset Management. So by consolidating within the TDAM, we can improve the return and also make the operation more efficient and also develop the talent. So we intend to strengthen our group-wide investment. The second point related to Taiyo's, the nursing care products, the Q1, we were able to generate a certain amount of sales.

But you mentioned about over 2% in terms of the assumed investment yields. But back in August, it has actually come down to 1.7% or so.

So for these particular products, we would like to control the assumed investment yields, so we can also control the sales. That is our intention. That is all.

Just an additional question then. About the Farallon, you mentioned about the -- you are lagging behind TOPIX index performance. Do you believe starting this year, you can beat it?

So in terms of the strategic shareholdings, we are transferring those into net investments, and we are divesting those shares. So with the improvement of the portfolio, we would like to generate the excess return above the TOPIX.

Next questions are from Ms. Tsujino from BofA Securities.

I'm sorry, my next question is not related to Q1, but you have just published a disclosure report, and I read it, and I looked at policy reserve for March 2025 by contract year. I actually discovered something surprising. For policies underwritten in March 2021, policy reserve for March 2024 was JPY 330 billion, but that got reduced by as much as 80% to JPY 77.9 billion. Policies underwritten in March 2022, policy reserve was JPY 320 billion in the previous year. But in March 2025, policy reserve was reduced to JPY 75 billion or so. For later contract year policies, policy reserve got almost halved.

That's probably due to the surrenders from bancassurance channel products and also surrenders from pandemic-related medical policies, which means the surrender has increased already so much. So we will not see so much increase in surrenders in coming years. Probably the surrender risk from those policies is now lower. I wonder, on the other hand, it makes me wonder why are you selling those policies at the bancassurance channel? For what purpose, if the policy reserve is reduced by this amount like policies underwritten in 2020, in that year, policy reserve was as much as JPY 350 billion, but now it's down to JPY 77.9 billion.

For what purpose are you underwriting those policies at the bancassurance channel? And I'm sure you are going to review strategies for the bancassurance policies in the next medium-term management plan. So I look forward to sharing from you the details about the future strategies.

First, about the disclosure report. Policy reserve is down. That's because of the reinsurance. At Taiyo last year, they have reinsurance back bancassurance channel products out to reinsurance companies.

Thank God. That was the reason. Thank you so much for giving me that reason. However, we are reviewing and studying strategies -- business strategies for bancassurance products.

Okay. So at the appropriate timing in the future, we are going to announce our strategies for the bancassurance channel.

Then policies underwritten in 2022, policy reserve is reduced so much. That's because of the impact of the reinsurance?

Exactly. That's right.

For these three contract, understood.

I'm Tamura of Taiyo Life. Thank you very much for giving us your precious time today. I would like to explain the management strategy of Taiyo Life.

Please turn to Page 2. As shown on the slide, this is the Taiyo Life's business model. Left-hand side is the chart depicting our business model. In explaining our business model, the foundation that supports include the -- that the sales activities are done in pairs. The sales reps form a pair in visiting households to conduct the sales activities. That is the foundation.

And the market shows the assumptions. This reflects the change of the Japan overall, the declining birth rate and aging population is progressing and the household market ratio of senior citizens have increased in the household market. This is the market where Taiyo Life does our sales activities and sales method, the conventional way is our sales rep to visit the households in pairs.

In addition, under the COVID-19 pandemic, we integrated the digital and face-to-face. So we have been switching our sales method to this hybrid type. The product, it says the industry-leading product, we are selling life insurance products to households, and there are changes to the household market. One element is the increase in elderly population. While the Japanese population decreased for the next 20 years, the number of elderly population will continue to increase. How to cater to this market will be equal to the enterprise value of Taiyo Life.

The right-hand side shows the product development. And in 2008, we developed a product called Hoken Kumikyoku Best, and this is in response to the change in the environment. In the past, our main product was Term Life, but we recognize that this product alone cannot cater to the needs. And the third sector product needs have heightened such as medical and nursing care. So this product is customizable, and that is the reason for launching this product.

And another typical disease related to the aging population is the dementia. So we have launched dementia treatment and prevention products. And also, we have developed products with relaxed underwriting type.

Next page, please. This page describes the hybrid style sales by combining the information and the face-to-face sales. Left-hand side shows the evolvement of information sharing. In 2016, we started to test in commercial utilization. It was started as a trial, but then we created Sma-Hoken. And in April of 2020, under COVID-19 pandemic, we -- it was not possible under the pandemic for a pair of sales rep to visit the households. So we started to utilize the data from infomercials. The information or data is provided to sales rep and the sales rep will utilize that data to do sales activities. And that process has been evolved. And currently, we are promoting hybrid style sales activities.

And the right-hand side shows the trend of number of information sharing and the number of lead information shared has increased steadily, and the contract ratio have risen to a certain level.

Page 4, please. This is improvement of productivity and increase in number of in-house sales representatives. We rely on sales rep to sell our insurance products. So the most important sales challenge is to increase the quality and quantity of the sales reps. The number of sales reps and productivity is depicted on this page.

The right-hand side shows the number of in-house sales representatives. The dark red is less than 3 years. The light red is 3 to 9 years and the top part is 10 years and over. The quality and quantity of sales reps need to be enhanced. And to achieve that, we need to have them build up their careers and build up their experience and increase the number of customers. The starting point is people with less than 3 years of experience.

How can we expand this level of sales rep and lead to sales expansion? In 2019, there were 3,200 people with less than 3 years. But last year, it increased to 4,400 people. So there was an increase of more than 1,000 people and the layer above or layer people with 10 years and over also increased.

And on the quality, please refer to the table to the left. Less than 3 years. In 2019, under pandemic, per person ANP of protection type new policies, this is a very important indicator at Taiyo Life, it was JPY 1.13 million, which is up to JPY 1.53 million. And also 3 to 9 years, JPY 1.5 million rose to JPY 1.74 million. In addition to expansion of the quantity, the productivity has steadily improved.

The table or chart below shows a peer comparison of third sector ANP of new policies per person. And this includes medical and nursing care. In tile, it is JPY 1.82 million. We are focusing on third sector products and per person, third sector sales in our case, is higher than our peers.

Moving on to Page 5. Based on these factors, what about our sales results? The graph to the left shows ANP of protection type policies. The line graph shows in-force and also bar graph shows new policies.

The new policies through the COVID pandemic period increased. During the COVID, it was JPY 15.7 billion, but it grew to JPY 21.9 billion. The number of new policies have also increased, but there is a challenge. The policies purchased during the COVID-19 period started to show some lapse from 2 years ago. Currently, this trend has calmed down. And the blue line chart shows the bancassurance channel and the assumed interest rate was lower for these products sold during the pandemic, but this is one area we need to focus, although we have switched to different products.

Next page, please. Page 6. In promoting these initiatives, we feel the importance of the capability of people. If you look at the left-hand side, this is about promoting operational innovation. The branches, which is the sales branches, we have done the reform. There are various roles such as clerical work and sales support and customer service, and we are shifting the allocation of human capital more to sales support and customer service. In March of 2026, all of the reform will be completed and the 70% of the clerical work can be reduced by then. Currently, this initiative is progressing well.

The lower part of the slide shows personnel system revision. The role or the job description will shift from the clerical one to sales focus and the job definitions and the work type will also be shifted. That is described here.

Right-hand side shows reform of branch office management. Currently, in FY '25, we have started this reform, and this continues to be our challenge. The branch, which used to have comprehensive functions -- used to have comprehensive functions and that was for all branches. But now we created branches dedicated to sales so that we can strengthen our sales activities and the management of our sales initiatives. We have just started this.

And moving on to the next page, Page 7. This was launched in August last year, what we call T-AI-Face. This is a mobile device that sales rep will carry. We have expanded this in order to expand the market, even if it's non-face-to-face, the solicitation can be done, which is the same as the face-to-face. We can shorten the distance and time by using these devices, therefore, aiming to achieve the market. Under the enhancement of sales capabilities, AI will analyze customer attributes to propose the best plan for the customers and also enhance sales efficiency. The nearby customer location is shown by the device when a sales rep makes the visit.

So Page 8, I've been talking about hybrid style sales. The most important theme here is quickness. That means that if we receive information from a customer through smartphones and telephones, how can we link that and connect that and share that to the salespeople. And I think that is a great factor to decide whether we can do the business or not. So we are providing a seamless connection so that the information would be shared to the salespeople in operation-wise as well as the organization-wise, we have made some revisions.

As you can see on the right-hand side, the volume and the quality of the information has been in high. Group pension enrollment information has been now related to the sales representative in-house. We have just started that.

Moving on to Page 9, expansion of market. As was mentioned earlier, Taiyo Life, our sales reps go visit plants households one-by-one. So we were not able to open stores with less populated area. 20,000 people per square meter was -- per square kilometer was measurement that we have been doing. So we have been now expanding the market by enhancing proposal method regardless of face-to-face or non-face-to-face sales channels. By doing so, we have been expanding our market. We cannot visit, but using T-AI-Face -- T-AI-Face, we have been making proposals. These types of sales activities have started from last year.

And using this, we are able to expand the market with less populated areas. So this is going to be another step. Moving on to Page 10. This is enhancing profitability. What are we doing? On the left-hand side, it says improved product margin for the past few years. So to speak, assumed expense ratio by different types of products, we have been increasing this, increasing the margin and profitability, hence.

On the left-hand side, you can see the figures. This is the result on the bottom, and it says here assumed or forecast. These are the effects that we will be seeing from the future. On the right-hand side, you can see underwriting capabilities. This is claims and contract assessment. We want to increase this and improve this. And on the bottom, I mentioned to you that some of -- how do we improve surrender and lapse ratio. This was a challenge for us. I think we are seeing a coming down of this increase.

Moving on to Page 11 and 12. Those are the profits and sales indicators and forecast that is based on what we have been doing. That's all from me. Thank you very much.

Thank you for the presentation. Moving on to the management strategy of Daido Life. Mr. Kitahara, please.

I'm Kitahara. Thank you very much for your time today. First, I will explain last fiscal year sales performance and current trends, followed by the latest topics related to our management strategy.

Please turn to the next page. This is the sales performance for fiscal 2024. New policy amounts increased by JPY 400 billion year-on-year to JPY 5.1 trillion, since the bubble economy, this is the highest.

New policy amounts, which had declined due to the COVID-19 pandemic, recovered strongly from the low point of JPY 3.5 trillion in 2020. This was achieved through our diligent consulting sales efforts to address the diverse protection needs of our customers and the expansion of our total protection proposal, which promotes the bundling of life insurance and disability income insurance and also the new corporate clients total reached 17,000.

Next is the in-force policy amount. The increase on net basis was JPY 300 billion. And to the right-hand side, the lapse and surrender rate is bottoming out in the middle of the page to the right, quarterly lapse and surrender is shown. And especially it declined quite rapidly in the fourth quarter, and it is roughly 90% right now. And there is comparison of the total set of policies, client and corporate clients with single coverage and the trend of surrender and lapse amount is lower for the corporate clients with total set of policies. This is the new business EV, and it has been growing steadily.

One of the major factor is that the ratio of total coverage is expanding. MCEV has grown by 2.5x in the 10-year period and reached JPY 2.7 trillion.

Next, I would like to cover the most recent trends. Due to Trump administration's tariff, there is a concern that there is an impact to SMEs. Left-hand side shows the current level of new policy amount for April to May period, and it has grown 103% year-on-year. And June number, although it's not in here, it is 109%, and we were able to achieve major progress in June. As of now, we are relieved to see this performance.

In the future, it's not possible to anticipate what happens to the Trump tariffs. So we should not be complacent. We will continue to be careful. The surrender and lapse amount is declining 90% year-on-year, as shown to the right.

Next page, please. This is on three Cs: customers, competitors and companies. First, on customers at SMEs, there is a structural issue, which is to take care of the business succession and labor shortage. And currently, the management issue has become complex, also partially due to Trump tariff and unclear situation will continue. The competition, this has been moderate at one point, thanks to the tax saving insurance, the market has been active, but -- and rather overheated, but that situation has calmed down. And in our company, we expect the unclear situation surrounding SMEs will continue.

But basically, the needs of the insurance will not be impacted by the economic condition, and we have experienced various challenges in the past, and we will be taking measures appropriately, and we have confidence that we will be able to overcome.

Next page, including Trump tariff, we have been doing market survey. The 64% of the companies are having concerns and especially the ratio of manufacturing industry and also our retail is rising. And also the concrete measures include the -- sorry, specific impact includes deteriorating earnings, a decrease in margin, review of sales pricing.

And in terms of the measures against the impact, 48% said that they have no feasible countermeasures. The negotiation with the U.S. is still continuing and the unclear market environment surrounding SMEs will likely to continue. More than 90% of our agents are tax accountants, and they are providing management guidance by using -- on the use of insurance. And that is one of the major characteristics of our sales structure.

The independent agent ratio remains the same. So we don't see any major changes in the competitive landscape. And also, there are new products launched by competitors, but we are able to maintain our superiority.

Moving on to Page 9. Latest topics. First is the growth of our existing channels, including sales rep channels and the tax accounting channels. Both as written here is increasing.

And moving on to the next page, please. Next is the steady capture of inheritance and business succession needs. The age of SME owners remains high. According to the 2025 edition of the white paper on SMEs, the majority of owners are 60 years or older. In order for SMEs to pass on their valuable management resources to the next generation and continue their business, it is necessary for owners themselves to make preparations from an early stage. For smooth business succession, the support of external experts is essential.

For us, in order to further strengthen our support in dealing with inheritance and business construction, we are expanding our team of FPs and inheritance consultants and have completed the nationwide deployment of them in FY '24. Attentive consulting starting from stock valuation promotes a deep understanding of customers on protection and coverage. As evidence of this, the average contract value of cases supported by FPs and inheritance consultants is much higher than the company-wide average. We are also providing comprehensive support through introducing other partners such as financial institutions and M&A intermediary companies to our customers.

Next, the development of the disability income protection in 2010, we launched J-Type product that can provide coverage for the risk of the business owners contracting a serious illness and being forced to leave the company for an extended period of time or retire, while also ensuring the high level of coverage necessary to manage the company. 15 years have gone since the launch of this J-Type, and we have updated them.

Particularly for cancer early detection technology is advancing rapidly. And if the cancer is not serious, it is possible to return to management and business operation at an early stage without having to leave the company for a long time or retire. And we also have launched a new product in June to meet this demand. As a result of these efforts to evolve J-Type in line with advances in medical technology and changes in customer needs, the number of J-Type policy enforced at the end of FY '24 is 204,000 and the policy amount in force is JPY 4.1 trillion.

Next page, please. Next is development of midsized business segment through financial institution channel. In addition to the in-house sales reps channel and tax accountant channel, I mentioned earlier, we are strengthening our financial institution channel.

Currently, the majority of our business comes from mega banks, leasing companies and leading regional banks. However, from the perspective of developing new markets and reducing concentration risk, we are also working to develop other regional banks and securities companies. As of the end of FY '24, the number of financial institution agents reached 79, up 12% from FY '22.

On the other hand, the new policy amount trend in financial institution channel shows a decrease of 93% from the previous year. Originally, the financial institutions were selling our business owners insurance for protection, not an asset-based single payment product. However, with the recent turnaround in asset management environment, we've seen a series of sales of single payment variable insurance and foreign currency-denominated insurance. We believe that such diversification of product promoted the financial institution agents may have been the factor behind.

Although the financial institution channel is more competitive than other channels, we intend to continue to differentiate ourselves by not just our product lineup, but also leveraging our strengths on experiences and service.

Next is about Dodai?, touchpoint with new customers. Dodai? released in 2022 has grown into one of the largest web-based community for business owners in Japan with shortly exceeding 100,000 members. In particular, the number of people registering as a member through advertisement and organic search is expanding. And at the end of FY '24, 38% of members registered not through existing channel. As a result, Dodai? contributed to creating touchpoints with a customer base that has previously been inadequately assessed such as customers and information telecommunication and young executives in their 20s and 30s. Dodai? has been launched with the aim of increasing the number of prospective customers who will become a future customer base in insurance business.

Also, we will continue to contribute to the resolution of management issues of SMEs, and expansion of exchanges among owners through Dodai?, so that we will be able to have greater social impact such as growth and development of SMEs, regional revitalization and creation of new businesses.

Next, moving on to Page 14. Next is create an employee market through contributions to human capital management. As labor shortages become more serious, the practice of health and productivity management to keep employee active and energetic for a long time is an important management issue for SMEs. As a tool to support the practice of health and productivity management of SMEs, we have released KENCO SUPPORT PROGRAM in 2017. The number of companies and users of this tool has been steadily increasing.

As end of FY '24, the tool has been introduced to 45,000 people. The number of user is 157,000. Through the KENCO SUPPORT PROGRAM, we contribute to the human capital management of SMEs. We are also committed to creating and expanding the employee market to help SMEs prepare for the risk of their employees who are their most important capital.

In addition, Ministry of Economic Trade and Industry has been doing the health and productivity management, and they have provided certification. We are supporting SMEs that they get the certification and also providing some awards in this regard. As mentioned, we will further differentiate ourselves from our competitors by enhancing our presence as a partner that supports the growth of SMEs by providing a variety of support to them. This is the last page.

This is the full year forecast, same forecast we announced at the beginning of the fiscal year. But I will explain a bit more. The core profit -- profit indicator is expected to decrease due to an increase in wages and an increase in business expenses associated with the cost of opening our core system.

Regarding sales performance, we will continue to implement the total coverage proposal, which is one of our strengths and expect to expand the number of new customers and deepen relationship with existing customers. We expect both new policy amount and policy amount in force to increase. Please note that there are some uncertainties due to U.S. reciprocal tariffs and so forth. So this trend may fluctuate our results. That's all for me. Thank you very much.

Next, we will move on to questions and answers. I would like to introduce the first person, SMBC Nikko, Mr. Muraki.

I'm Muraki of SMBC Nikko. I have two questions. First, Taiyo Life profitability. On Page 5, you have a chart that shows that the policy amount is growing quite steadily. The bottom line of the insurance product in the past surpassed JPY 25 billion in the past. But on Page 11, it says it's lower JPY 10 billion. And this fiscal year's plan was JPY 18 billion. What is the forecast of the bottom line of your insurance business in the future? If the bancassurance has the capital efficiency issue, if you discontinue completely, then in the short term, what would be the downward pressure to this profit? So that is my first question.

I'm Tamura of Taiyo Life. Thank you for your question. I would like to reply to your question. The insurance profit and loss, last year -- in the same time last year, we have presented a certain amount, and now it is lower than that amount.

Major factors include: first is the wage increase, the internal in-house staff and sales staff, we increased the compensation for those people. Another factor is system investment. As I have said, we are -- we have developed the AI phase, and this investment has increased.

And in addition to that, the sales rep channel, I said that, there is some improvement, but due to deterioration of the surrender, the content of the protection has changed. So those are the factors influencing the profit and loss.

In case we discontinue completely the bancassurance, what would be the impact? I don't have a specific number at hand. But at bancassurance, the gap, there is a certain contribution. And if we discontinue, then we will have an impact on this bottom line on the gap. And if we have another opportunity, I would like to share with you a specific number.

My second question is to Daido Life. Sony Life will likely to go public in the near future. So corporate market is the topic of my question.

On Page 13, you are explaining the age of the people accessing Dodai? and your clients tend to be young CEOs. I have the impression that they are younger. And what is the age breakdown? And also what is the status of the contracts? And with regards to the demand, relatively young generation, are you going to continue to make a proposal to that generation related to retirement needs? And as Sony Life does, the variable investment type of products, is it more appealing if you propose such products? What is your judgment at the moment?

Thank you for the question. Within Dodai?, the access is done by relatively younger corporate customers. So our overall customer age group is relatively higher compared to Dodai?. And Sony Life is scheduled to go public, and they have announced that their target will be corporate market. But I would like to refrain from commenting on other companies' strategy. I don't have the full picture.

But in any case, variable products will not be fixed benefit for the death and some people are preparing for the future benefit and the corporate protection is a certain need that we do see. And for younger management, if they join the insurance at younger age, the premium will be lower. So that is preferred.

But when they start a company, then their focus tends to be more on the business profit. And protection for the corporate customers, if they have something or someone to protect such as more employees or increase of loans, then there is no strong motivation. So I believe it is rather difficult to motivate them to purchase coverage when they are young.

When we look at insurance cash flow, you have 30 years or longer or 40 years or longer, is it because you have a relatively large portion of young policies? People in their 30s or 40s.

Of course, there are a certain number of people who buys coverage in their 30s and 40s. And in our case, the LTIP is 100 years old when it matures, but majority of the policyholders join the insurance program when they are in their 40s or 50s.

We would like to move on to the next question. Bank of America, Tsujino-san.

I have two questions to Taiyo Life. First, in the previous IR meeting that was in May, you talked about infomercial and you have to review its efficiency and effectiveness. At this point of time, have you found out something? And is there any room of improvement and new measures to be taken, anything? And the second question is per person new policy, ANP. That's on Page 4. You mentioned that sales reps are visiting customers and payers, right, in most of the cases, right? And then, -- and per person and you get divided by per person, right? So that is a result of that. Is it per person actually, in that case, if so, I think your visit -- customer visit is very efficient, very, very efficient, pairing and visiting your customers, the touch point.

So my question is that, could you clarify on this point? In reality, and do you think the situation is viable? Could you elaborate on your customer visits?

This is Tamura speaking. Thank you for your question. The first question about infomercial. As for infomercial, as is written here, we use TV CM, we get phone calls. And based on that, we visit customers. And was mentioned earlier, the infomercial is the information that we got through phone calls, can we smoothly relay that to the sales reps. That is the most important part where which leads to the result.

In our case, Taiyo Life, I think in our case, when we get the phone call, this is going to be most quickest time that we relay these information shared to our sales reps and the sales reps instantly visit the customers. I think, this has shown up the effect. That is the current status.

What are the challenges? Yes, naturally, the phone call that we get would not necessarily lead to 100% contract or policy. If you could look at the right-hand side on Page 3, the graph, the contract ratio is about 30% -- less than 30% or so. So the remaining 70% or so has not led to the contract.

Of course, we do have the information accumulated in Taiyo Life. So repeatedly, we need to use this information. And based on that, we have to visit the customers and relay that to the sales reps and lead to the contract. So I think we have to think about the next, so that we can have higher contract ratio.

And here, as I have mentioned to you earlier, I've mentioned LC, Life Counselor in branches. Those clerical workers who was working in clerical things are now transferred to sales, and those are sales reps, and we do have shared information. And of course, in advance, we get customers' approval to visit them, and they would get this and visit the customers. And in this graph, you can see on the right-hand side, very right-hand side, the shaded 2024 bar chart. This is a portion where LCs had started the support sales activities and life counselor, LCs, I think this job has started from last October, and they have been supporting the sales reps.

How can we enhance and improve these capabilities, I think, would be important. That's the first part.

Second one, if you could turn to Page 4, per person new policies, ANP. This is per person, yes. As you have mentioned, Ms. Tsujino, yes, if it's visiting in pairs, if you compare with 2019, yes, JPY 800,000 is another positive vis-a-vis 2019. So that shows the higher quality of sales reps as well as the effectiveness of Sma-Hoken and Infomercial.

I think, on a daily basis, those information are actively used in the sales reps' daily activities, and that has led to the result. Naturally, the sales reps in order to increase their compensation, they're working. If they get the contract, I think that would be high motivation, high motivation for those people to work more. So I think one word of thank you and getting the contract makes -- motivates them. So I think from the hire perspective -- hiring people perspective, this has been a good thing.

So on Page 4, right-hand side, we have this -- the less than 3 years reps, we have more and more people joining us. So the next stage is that those people, we want them to retain with us and have more higher quality so that they can stay longer with us. Thank you very much.

If there are challenges, that is on Page 3, the graph. The red one is a number of information sharing peaked out in 2022. So I think maybe in 2022, it was a special factor there, but this is unfortunate that the information sharing is becoming less and less. So you're investing in this infomercial, the information sharing volume seems to be declining. What are you going to do with here is the challenge for you. So I think you must think about it. And are you doing various measures for this?

Yes. Ms. Tsujino, thank you. Yes, as you say, yes, here, so to speak, the information sharing, how much can we increase this? This is the challenge. Yes, 2022 in that sense, we had pandemic demand, so to speak. Of course, we had COVID-19. I think people watching TV have increased. But recently, the numbers are declining. So during the COVID-19, people stayed home and were watching TVs. So they were watching TV longer hours. So this is shown in other statistics as well.

So having higher viewing rate is difficult compared to the past. But of course, we have to invest more and control more about investment into the TV advertisement. We have more than 3 years of sales reps now with us. And for them, I think information, the volume and the quality is important. It is not just investing into TV CM makes a difference. I think the difference here or importance here is in what type of program are we going to invest into TV ads.

So we have to be selective in programs so that it could be more efficient. So yes, as you say, this is going to be a challenge, and we will keep on going and controlling this as well. Thank you.

We would like to move on to the next person, Watanabe-san of Daiwa Securities.

I'm Watanabe of Daiwa Securities. I have two questions. First is on Taiyo Life, Page 3. You have -- my question is the number of life counselors in branches right now. And the chart to the right shows that you are already enjoying the impact of LCs. And also, what is the additional benefit of the new policies by establishing branches dedicated to sales? Can you expect additional incremental benefit?

Thank you very much, Watanabe-san. First, the number of LCs currently at Taiyo Life, as explained, using this material, we are continuing with our operational reform from 10 to 20 years ago. There are massive volume of clerical work, and we have introduced automation in order to reduce the workload. And the initial benefit of that was reflected in the reduction of the labor cost. We reduced headcount and reduced the cost and contribute to the profit.

How we did this is that, the new recruiting after somebody retires of the new grads, we stopped them for a certain period in order to reduce the number of general staff and thus reducing the total headcount. This time, the business operational reform is focused on the quality rather than the number of people. We are changing the quality and productivity. We have 600 or so LCs across Japan and their job description is changed from clerical ones to sales support.

And Page 3 bar chart shows the fruits of that. This is a completely new challenge. And little by little, we are asking LCs to make more challenges. And among sales reps, there are reps who have a certain number of customers, but not fully leveraging we -- there is a gap between the number of customers held by rep and the performance. And the approach that rep should make to the customer is not fully done. So without fully proposing the full possible coverage, their contracts are being made. And that part is supported by LCs.

And when we compare the sales rep with LC support and without LC support, we are starting to see the difference in the productivity. So these are the methods that we can further pursue.

The second point -- on this point, you are exactly right. The reform of the branch structure, this is on Page 6. For Taiyo Life, when we look back at our history, this is the first attempt to do that. Until now, all branches had uniform same functionalities. But this time, we are challenging to make those changes. We currently have 150 branches categorized into 20 blocks. And this challenge is made in one block.

The dedicated sales branch offices focusing on sales promotion. Well, conventionally, certain amount of management resource was allocated to clerical part. But June is a campaign month for Daido Life and -- sorry, Taiyo Life, and we are now seeing the expected results now.

Of course, we have various issues since this is the first attempt. But by resolving each issue one by one and deploying the structure across Japan and also introducing layers to the sales organization, we can achieve the strengthening of the sales management and improvement of the productivity. This is a challenge for Taiyo Life, and we would like to proceed carefully, but in a speedy manner.

I understood quite well. My second question is on product development of Daido Life. I'm looking at Page 11, the new product launched in June. What was the reaction from the customers and new business in June, can you expect an impact from launching new product?

Thank you for your question. The new product this time, it's easy to explain to the market, especially at Nikkei Newspaper, there is Professor Nakagawa or Dr. Nakagawa of Tokyo University Hospital who writes a column about cancer on Nikkei Newspaper. And he gave us advice on the need of the protection and guarantee for cancer patients. So this is easy to appeal and easy to sell. So new business in June, especially the growth of J-Type is quite strong. That is it.

Next question, Sasaki-san from Nomura Securities, please.

This is Sasaki from Nomura Securities. The first question is for Taiyo Life. Sales channel and your sales strategy. First is about you're going -- I'm interested in doing insurance business in BS -- BS coverage. The cost is reduced. And this is BS means broadcasting. You have a lot of company, Japanese Takata and so forth coming into this market. So as a broadcasting companies, do you have any intention to have a coordination with Japanese Takata or any broadcasting companies?

Product, I have one question. And short interest rate is higher now. So in the past, we had savings and insurance, we had a product in between that type. So close to savings and selling those products, you have a lot of asset now. Do you intend to go into those products more?

Yes. Thank you for your question. Thank you for your two questions. First one is, so to speak, is information sharing, I believe. What you have mentioned, the activities that you have mentioned, we have not been not part of the business yet. But when you talk with the people in the forefront, TV broadcasting companies, they are concerned about the lower viewing rates. And we do -- and we do have some involvement in that. We do have the same concern.

So the information source. How are we going to expand that? That is a very important theme for us. It is not infomercial, but as was mentioned to you earlier, for group life insurance, the customers' information shared to our sales reps maybe in the future. And those -- we have Shinyo Kumiai or corporate Kumiai financial institution and maybe we can tie up with them, and maybe sell similar product with them and acquire some information. So this is not just accumulating our own and collecting our own information, but maybe tying up with others and sharing information may be sought in the future.

The second question is about the interest rate in the new world for us. Currently, when you look at the sales performance, sales-wise, I think we're not putting strength on, but the lump sum type of product compared to the previous year is selling well. So single payment, I think this shows the needs of our customers. We do have -- majority of our customers are seniors. So after retirement, of course, they stay home more. So as a customer, we have a lot of senior customers, and they do have some amount at hand. And in a sense, they have nowhere to put the money.

So that kind of money, we visit to those households and probably we get more contract. I think that percentage is higher now for us. So the household market, we see some changing needs. We would have to address this and cope with this. But as you say, it is not the simple way of selling the product, as you say, visiting households and carefully selling to senior customers. Yes, that's a very important way of selling our products.

And I think that is going to be another factor for us for next growth. So in the related department, we are now discussing how to do that business.

And the second question is to Daido Life. This time, it was not mentioned by your explanation. After COVID-19, for example, corporations, accounting, corporate benefits and human personnel evaluation. I think this has been changed before and after COVID-19, using more of the clouds and apps related to cloud now. So those systems, if you have your product on those clouds and systems and apps, maybe it would be easier for customers to buy your product. Are you considering this type of relay with other system integrators and so forth? Do you have any idea of that?

Well, this is rather technical, and we need to consider that in coming years. But what I can say is that after COVID-19 and the current situation is that our corporate clients, SMEs, their major challenges that they cannot hire people. And I think human resource-based management are now doing -- actively done by large corporations, and they are hiring more young people now. For SMEs, in some cases, they are not able to hire new people, and that is another factor leading them to bankruptcy. So I think human capital management is most important. Of course, having better benefits and so forth and wages is important for SMEs.

So in that sense, we are providing them health and productivity management, they are not being penetrating in the SME market yet. In order to solve social issues, I think in our plan next year, we are incorporating this idea. How are we going to do this? I'm not able to provide you specific things, but these are a very important theme for us, and we are fully aware of that.

Moving on to the next question. JPMorgan Securities, Sato-san.

I'm Sato of JPMorgan. I have two questions. First question is to Taiyo Life, Page 10 of your material. The product margin improvement, various measures are shown here, especially the left-hand side bottom shows expense margin improvement effect and how much can you realize -- utilize this? Up to FY '24, the impact that you expected didn't materialize. That is my first question.

And the realization of the impact in the future, the pace, I think, will be faster than the impact felt in the past. So what is your assumption? Why you are not realizing as of today, but why this is the measure -- these are measures for the future? That is my first (sic) [ second ] question.

Thank you very much for your question. On Page 10, left-hand side bottom, the expense margin improvement effect image. The first point, the actuals, the numbers in actual how probable or trust reliable these are. For these, this is quite -- quite accurate, and we have built up these effects. And in the right -- to the right, these are assumed for the calculation in the rates for the insurance products, and we have a certain number in the background.

The red bar graph, unless there's a major decline in the sales volume or unless there's a major increase in surrender and lapse assuming the current trend of the sales volume and also surrender and lapse, then these bar graphs will steadily increase. That is for the red part.

The blue part, you say that the impact may be too early. It says 4 -- in 2020, 0.4. And these are the impact of the products sold in April or November in 2019. And blue bar shows the impact after this fiscal year. So we do not expect that these timings are too early, but rather correct.

The volume of new business, the budgeted business performance and also surrender and lapse ratio. If the -- if the assumptions and the actual vary significantly, then this may not be the result. But given the current budget, these are the impacts that we do expect.

I may not have communicated the intent of my question clearly. The red bars -- in the future, the improvement measures will accelerate. That is how it is shown. In the past, JPY 2.2 billion for 2024, that is the extent of the effect. And the final year, the bar shows nearly JPY 10 billion. And this is -- are you progressing in line with this forecast. The blue part after 2025 -- the impact of 2025 is shown as JPY 3 billion in 2027. But in the 2025, the impact is only JPY 3 billion. So it seems to be very fast.

And if there is any measures with a stronger result, then you should prioritize that. So what kind of menu do you expect to generate this result?

Thank you very much for the question. The question you raised, how the effect has been built up or will be built up. From 2019 to 2025, there are various measures to increase business expense margin assumed business expense. It is not 1 year worth of the measure, but it's a buildup of the numbers, and it accumulates. So the measures in April 2019 and November 2019, each measure is building up. So it is not contributing to just a single year result.

So please look at these numbers in such a way. And from 2019 to 2025, all of the measures impact or effect will build up. And as we progress into 2025, '26, '27, the impact of past measures will accumulate. The blue part shows the results of the measures from this fiscal year onward. And you say that this is rather large and product revision impact, we expect to be larger in the future than in the past. So from that perspective, the improvement effect will be larger in the future.

In terms of the actual amount, monetary amount, the height of the bar, whether that is accurately reflecting the forecast or not, that may not be precise, but there is a major product revision, which is to relax the underwriting and that assumed expense is heightened.

The second point, I'm asking similar question to Daido. This time, there was no mention on the non -- but this fiscal year, the P&L related to the insurance will be rather negative due to the increase of the expense. And also, there's inflation and other macro environment. So it is better to improve the resilience. Is there any measures to improve the profitability at Daido or any planned measures?

One is disability protection product. The volatility is high. So the company is incorporating a buffer, but as compared to the past -- well, based on the past experience, the profitability of this type of product is high. So if that portion expands, then the profit margin will increase. We are a equity company, and there is no distribution to the policyholders. So basically, we need to set our sense of value to total revenue.

The assumed rate -- interest rate of our products is right now far below 1%. If we increase the assumed rate, then that will not contribute to the revenue. And based on the fact that we are steadily continuously winning new business, we should look at the expense -- assumed expense rate on a total basis. And the digital cost is rising, we need to move away from host computer.

Otherwise, we will not have flexibility and the maintenance cost of the host computer will rise and capable human resources will be short in the future. So labor cost will increase. So the assumed business expense will need to be raised in order to compensate for the -- for such increase of the cost. So on total basis, it is important to secure new business margin. If the assumed expense rate is a concern, then we will raise the assumed rate increase. And for customers' perspective, the premium will not change. So that does not have a significant meaning in implementing.

Tsujino-san of BofA Securities.

Because of the time, yes, I'm again asking questions. Last September, last year September, you were trying to launch a new system, core related and Taiyo and Daido, respectively, you were able to reduce the cost and the effect will come up. I think that's what you have explained. That was an explanation made by the President, I guess.

Since then, some time have passed, is there any effect that you saw the timeline as well as the actual amount and so forth?

Thank you very much, Tsujino-san. This is going to be answered from Moriya. I think your question was Taiyo and Daido Life shared operational system, and that is considered at the holdings level. As was mentioned, earlier, Daido Life, they have made the core system open. And toward 2029, they are progressing with that. And that is going to be a group core system, and that is going to be shared by Taiyo Life. So including Taiyo and Daido, I think we are still considering that so that we can reduce the operational cost. For the time line, the target is the function of policy and contracts.

And -- if you take just clerical works, the process, we have so many processes. And up to what level, how much can we share and how much cost will be reduced, we are now evaluating these effects at this point of time. Within this fiscal year, we will be evaluating and we have that time schedule. And based on that, that is going to be -- we will decide whether that will be incorporated in our long-term plan. So in that sense, according to the plan, in line with the plan, we are working on that.

So if we are clear with that, we will make another announcement. Thank you very much. Thank you.

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