T&D Life Group Corporate Strategy Meeting

Transcription

1 T&D Life Group Corporate Strategy Meeting T&D Holdings, Inc. (Code Number: 8795, TSE First Section ) May 25, 2018

2 Contents I. Progress of the Medium-Term Management Plan P Key Performance Indicators P Major Initiatives for the Second Year of the Medium-Term Management Plan 1 P Shareholder Return P. 19 II. Positioning of FY2018 and Initiatives for the Accomplishment of the Medium-Term Management Plan P. 22 III. Management Policy Going Forward P. 26 [Reference] Marketing Strategies of the Three Life Insurance Companies, Asset Management Strategy, Corporate Governance, etc. [Reference] Financial Results for the Year Ended March 2018 (Conference Call Material) P. 32 P. 56

3 Today s Highlights Key performance indicators of the medium-term management plan progressed favorably, such as a steady accumulation of value of new business, due to the advance on the expansion to third sector/disability benefits and the development and cultivation of the senior market Fiscal year 2018 will be a year to start and implement various measures which will lead to the results of the next medium-term management plan, along with the accomplishment of the current medium-term management plan Looking ahead to the next medium-term management plan, in addition to strengthening the core business of the three life insurance companies, take initiatives to diversify the revenue sources for the aim to expand Group s profits. Promote organically and integrally together with the Group financial strategy and management platform strategy 2

4 I. Progress of the Medium-Term Management Plan 1. Key Performance Indicators 2. Major Initiatives for the Second Year of the Medium-Term Management Plan 3. Shareholder Return II. Positioning of FY2018 and Initiatives for the Accomplishment of the Medium-Term Management Plan III. Management Policy Going Forward [Reference] Marketing Strategies of the Three Life Insurance Companies, Asset Management Strategy, Corporate Governance, etc. [Reference] Financial Results for the Year Ended March 2018 (Conference Call Material) 3

5 1. Key Performance Indicators (1) Summary As a result of steadily carrying out the medium-term management plan, which sets the domestic life insurance business at its core, key performance indicators continued to progress solidly. Key Performance Indicators Medium-Term Management Plan Targets 2016/03 Reference: Previous Medium-Term Management Plan Period 2017/ /03 (Previous Fiscal Year-end/Year-on year Comparison) Corporate Value (EV) Profit (financial accounting) Group MCEV Value of New Business Adjusted Net Income * March 31, trillion 1,893.7 billion 2,290.5 billion 2,406.7 billion [+5.1%] FY billion 56.3 billion billion billion [+8.3%] FY2016 to FY2018 Around 85.0 billion 83.3 billion 91.7 billion 83.3 billion [(9.2%)] * Adjusted net income is calculated by adding net income and additional internal reserves in excess of the legal standard requirements related to reserves for contingency and price fluctuations (after taxes). 4

6 1. (2) Corporate Value (EV) 1 Group MCEV Increased corporate value steadily and sustainably amid a continuing low interest rate environment by promoting Group unified ERM EV Results *1 (billions of yen) 2, , , , , , , , , % 2.19% 20-yr JGB yield *2 1.91% 1.57% 1.68% 1.20% 0.45% 0.66% 0.54% 2010/ / / / / / / / /03 Current Medium-Term Management Plan *1 EEV from fiscal year ended March 2010 to March MCEV (Group MCEV) from fiscal year ended March 2012 onwards. *2 Spot Rate 5

7 1. (2) Corporate Value (EV) 2 Value of New Business Steadily accumulated value of new business through the transformation of the product portfolio (expanding to third sector/disability benefit products, premium rate revision), etc. Value of New Business (billions of yen) [Increase Factor of Value of New Business (Image)] % 20-yr JGB yield * 1.20% % 0.66% 0.54% 2014/ / / / /03 Current Medium-Term Management Plan * Spot Rate 1 Products for sale Expanding to third sector/disability benefit products Discontinuing/suppressing sales of savings-type products Implementation of premium rate revision and introduction of new products 2 Insurance assumptions Improvement in mortality rate, surrender rate and operating expense rate 3 Economic assumptions Rise in domestic interest rates, etc. 6

8 1. (2) Corporate Value (EV) 3 ROEV Maintained high capital efficiency and realized a sustainable growth, which exceeded the mid- to long-term target level, by promoting the growth strategy of the medium-term management plan 17.9% 5-year simple average: 9.1% 5-year simple average: 5.8% 16.7% Mid- to long-term target level: 7.5% ROEV *1 Core ROEV *2 21.5% 6.7% 6.4% 5.6% Mid- to long-term target level: 5.0% 3.9% 6.9% 6.5% 2014/ / / / /03 Current Medium-Term Management Plan (17.3%) Current Medium-Term Management Plan 2014/ / / / /03 *1 ROEV = Annual increase in EV (less capital movements) / Annual average of EV *2 Core ROEV = (Embedded value of new business + Expected existing business contribution from risk free rate) / Annual average of EV 7

9 1. (3) Adjusted Net Income Target level of the current medium-term management plan is around 85.0 billion through three years. The result exceeded the earnings forecast ( 79.0 billion) for the year ended March Adjusted Net Profits (billions of yen) [Target level of the mediumterm management plan] Around bn through three years 85.0 Recovery period from the financial crisis [Target level of the previous medium-term management plan] 77.0 bn and above 2010/ / / / / / / / / /03 (Earnings Forecasts*) Current Medium-Term Management Plan 8 * Earnings forecast of adjusted net income is for reference.

10 [Reference] Strategic Target for the Utilization of ERM Minimum level of ESR *1 Ensure Capital Adequacy 133% *2 and above *1 ESR is the economic value based solvency ratio measured at VaR 99.5% *2 ESR 133% represents the capital level needed to cover VaR 99.93% assuming the current risk profile Achieve both Enhance Capital Efficiency Neutral level of ESR Around 185% *3 ROEV *4 7.5% and above (in the medium- to long-term) Core ROEV *5 5.0% and above (in the medium- to long-term) *3 ESR 185% represents the capital level needed to cover VaR 99.97% assuming the current risk profile. *4 Annual increase in EV (less capital movements) / Annual average of EV. *5 (Embedded value of new business + Expected existing business contribution from risk free rate) / Annual average of EV. 9

11 [Reference] Status of ESR ESR (Surplus EC) 200% 196% 217% 162% 175% 175% 180% 182% 168% *4 150% ESR Required level: 133% *3 100% 50% Surplus *1 (Economic value based net assets) 2, , , ,029.3 EC (Economic value based capital = risk amount *2 ) 2, , , , , , , , , , % 2014/ / / / / / / /3 *1 The difference between assets and liabilities evaluated based on economic value. The evaluation of both assets and liabilities are calculated basically based on the same assumptions of MCEV. The cost of capital for risk margin is 5% from the end of March It has been set referring to the Insurance Capital Standard (ICS) which the International Association of Insurance Supervisors (IAIS) is considering. The cost of capital for risk margin was 6% on and before the end of March *2 Risk amount is based on an internal model (99.5% VaR, 1-year) after diversification effects. Required capital for MCEV is calculated using the same internal model. *3 Represents the capital level needed to cover VaR 99.93%, assuming the current risk profile. *4 ESR as of end of March 2018 applying UFR was approximately 183%. 10

12 I. Progress of the Medium-Term Management Plan 1. Key Performance Indicators 2. Major Initiatives for the Second Year of the Medium-Term Management Plan 3. Shareholder Return II. Positioning of FY2018 and Initiatives for the Accomplishment of the Medium-Term Management Plan III. Management Policy Going Forward [Reference] Marketing Strategies of the Three Life Insurance Companies, Asset Management Strategy, Corporate Governance, etc. [Reference] Financial Results for the Year Ended March 2018 (Conference Call Material) 11

13 [Reference] Positioning of the Medium-Term Management Plan 12

14 2. (1) Image of the Marketing Strategy of Domestic Life Insurance Business Image of the domestic life insurance business strategy in the 1st stage Strategic Strengthening of T&D Financial Life Expand growth areas foreseeing the next 10 years Strengthen Initiatives for the Senior Market Transformation of Product Portfolio Increase in corporate value based on the strengthened business platform Next Measures Steady Accumulation of New Business Value 13

15 2. (1) 1 Transformation of the Product Portfolio Steady accumulation of death protection at Taiyo Life and Daido Life Environmental changes such as continuation of low interest rate environment and a possible revision of standard life table Expanding to third sector/disability benefits, etc. responding to the diversification of customer needs [Major initiatives for FY2017] External environment Apr Revision of standard yield rate Apr Revision of standard life table Continuation of low interest rate environment Changes in competitive environment Flexible and adaptable product development/revision Increased value of new business and EV even under a low interest rate environment 14

16 2. (1) 2 Strengthen Initiatives for the Senior Market Sales/ Products Services Taiyo Life Launched Himawari Dementia Treatment Insurance as the first round of the Centenarian Age series and Centenarian Age Annuity as the second round Expanded sales of whole life nursingcare annuity products through OTC sales at banks Kaketsuke-tai service/senior homevisit service Renewal of dementia prevention app Paperless benefit claim procedure Daido Life Strengthening the promotion of nursing-care products to SME owners + individual business owners market Enhancement/development of human resources towards strengthening initiatives on inheritance and business succession Expansion of Kaigo Concierge service Promotion of M&A support service Offer higher quality services as a Best Senior Service Health Promotion Support disease prevention and health promotion towards the realization of fulfilling longevity society Taiyo s GENKI Project DAIDO KENCO Action 15

17 2. (1) 3 Strategic Strengthening of T&D Financial Life Enhancement of a product development system: New policy amount of single-premium products expanded following a renewal of single-premium whole life insurance Enhancement of agent development/support: New policy amount of level-premium products continued an increasing trend following a scale-up in sales of income protection insurance Enhancement of asset management skills: Enhanced the asset management system by cooperating with T&D Asset Management [New Policy Amount (billions of yen)] [Value of New Business (billions of yen)] Single premium / / / Level premium / / / / / /03 New policy amount expanded steadily and the value of new business recovered. Aim for further improvement 16

18 2. (1) 4 Results of Domestic Life Insurance Business (Marketing Strategy) New policy sales results decreased year on year following a discontinuation/suppression of savingstype products, a reaction to the concentration in sign-ups in the previous fiscal year-end, etc. [Annualized Premiums of New Policies] / / /03 [Trends in Third Sector Annualized Premiums of New Policies] Percentage in the parenthesis is the ratio against the total annualized premiums of new policies 16.5 (13%) 20.8 (13%) / / / (19%) [New Policy Amount*] (Trillions of yen) * Including Daido Life s "J-type product, T-type product, Kaigo Relief and Kaigo Teiki Hoken. On the other hand, transformation of product portfolio progressed Expanding to third sector/disability benefit products Discontinued/suppressed sales of savings-type products Implementation of premium rate revision and introduction of new products 38.3 (21%) (32%) [New Business Value (restatement)] % 1.20% 20-yr JGB yield % % 0.54% 2014/ / / / /03 [New Business Margin*] Total of all products 3.5% 6.3% 8.5% * New Business Margin = Value of New Business / Present Value of New Business Premiums 2014/ / / / /03 17

19 2. (2) Aiming for a Corporate Group which Contributes to People and Society [Major Initiatives for FY2017] Providing Better Products and Services Centenarian Age series Kaketsuke-tai Private nursing home referral service Global Environmental Protection Initiatives for Group s common environmental goals Light-Down Campaign Taiyo Life s forest conservation activities Contribute to Communities and Society Sports/Para-Sports Kurort Health Walking Ishinomaki Marche, Cooperation with Osaka Prefecture HAL Plus Rider KENCO SUPPORT PROGRAM Kaigo Teiki Hoken for corporate customers Best Senior Service Respect for Human Rights Universal Manners Test Work-style Reforms IkuBoss Declaration Project Communication Dialogue with customers and society Investors/analysts (IR) Shareholders (SR) Construction and thorough implementation of effective governance Improvement of External Evaluation Award/Commendation Universal Manners Award 2017 UCDA Award 2017 Inquiry Counter Ratings: Highest (Three Stars) Good Career Company Awards 2017 Telework Pioneer 100: Minister for Internal Affairs and Communications Award Smart Life Project Award (Let's extend healthy life expectancy!): Director-General of Health Service Bureau Excellence Award Health & Productivity Management Outstanding Organizations White 500 Commendation for Lifelong Learning Support Activities for the Disabled by the Minister of Education, Culture, Sports, Science and Technology etc. Inclusion in ESG Indexes FTSE Blossom Japan Index MSCI Japan ESG Select Leaders Index MSCI Japan Empowering Women Index FTSE4Good Index Series Morningstar SRI Index MSCI ESG Leaders Indexes etc. 18

20 I. Progress of the Medium-Term Management Plan 1. Key Performance Indicators 2. Major Initiatives for the Second Year of the Medium-Term Management Plan 3. Shareholder Return II. Positioning of FY2018 and Initiatives for the Accomplishment of the Medium-Term Management Plan III. Management Policy Going Forward [Reference] Marketing Strategies of the Three Life Insurance Companies, Asset Management Strategy, Corporate Governance, etc. [Reference] Financial Results for the Year Ended March 2018 (Conference Call Material) 19

21 3. (1) Shareholder Return Policy Based on the shareholder return policy of the medium-term management plan, continued implementing total payout of stable cash dividends and flexible share buybacks. Shareholder Return Policy for the Current Medium-Term Management Plan Implement shareholder return of 40% and above of adjusted net income every fiscal year Stable cash dividend Interim dividend Flexible share buybacks 20

22 3. (2) Results of Shareholder Return Increased the level of shareholder return in the shareholder return policy of the current medium-term management plan from the previous plan. Based on the policy, implemented initiatives aiming to expand the return. Shareholder Return Policy Total payout ratio Share Buyback (billions of yen * ) Cash Dividends (billions of yen) Annual Dividends per Share * The amount of Share Buyback is an approximate amount. 23.3% % 49.5% 21 Increase Around 30% of adjusted net Income over the medium- and long-term 46.1% (Additional buyback) Return 40% and above of adjusted net income every fiscal year (Applied ahead of schedule from the year ended March 31, 2016) 41.0% (Interim) 15.0 (Year-end) % (Interim) 17.5 (Year-end) 20.0 (Increase in dividends for four consecutive terms) 2013/ / / / / / /03 (Schedule) (Forecast) Previous Medium-Term Current Medium-Term Management Plan Management Plan 40 (Interim) 20.0 (Year-end) 20.0

23 I. Progress of the Medium-Term Management Plan 1. Key Performance Indicators 2. Major Initiatives for the Second Year of the Medium-Term Management Plan 3. Shareholder Return II. Positioning of FY2018 and Initiatives for the Accomplishment of the Medium-Term Management Plan III. Management Policy Going Forward [Reference] Marketing Strategies of the Three Life Insurance Companies, Asset Management Strategy, Corporate Governance, etc. [Reference] Financial Results for the Year Ended March 2018 (Conference Call Material) 22

24 II-1. Positioning of FY2018 FY2018 is a year to accomplish the current medium-term management plan, and at the same time, start and implement various measures which will lead to the results of the next medium-term management plan Accomplish the strategies of the current mediumterm management plan by achieving the plan targets and steadily increase corporate value Looking ahead to the next medium-term management plan, start and implement various measures aimed for diversification and expansion of Group profits Three-year Period for Expanding Growth Areas Business Platform Strengthening Period Previous Medium-Term Management Plan Current Medium-Term Management Plan Next Medium-Term Management Plan

25 II-2. Initiatives for Achieving the Medium-Term Management Plan Aiming for the achievement of the medium-term management plan, the three life insurance companies implemented a flexible product development and revision according to the needs of their specialized market Development and cultivation of the senior market turned into a firm business platform through offering distinctive products and services integrally Continue injecting Group s management resources into T&D Financial Life and aim for a substantial increase in new policy amount 24

26 II-3. Key Performance Indicator Forecasts Continuously realize high level of value of new business through the accomplishment of the medium-term management plan. EV is expected to exceed the target and increase further. Secure high and stable profit level. Key Performance Indicators Medium-Term Management Plan Targets 2017/03 [First Year of the Medium-Term Management Plan] 2018/03 [Second Year of the Medium-Term Management Plan] 2019/03 [Final Year of the Medium-Term Management Plan] Forecasts Corporate Value (EV) Group MCEV Value of New Business March 31, trillion 2,290.5 billion 2,406.7 billion FY billion billion billion An increase over 2.4 trillion Around billion Profit (financial accounting) Adjusted Net Income * FY2016 to FY2018 Around 85.0 billion 91.7 billion 83.3 billion 85.0 billion 3-year average of Medium-Term Management Plan is approximately 86.5 billion * Adjusted net income is calculated by adding net income and additional internal reserves in excess of the legal standard requirements related to reserves for contingency and price fluctuations (after taxes). 25

27 I. Progress of the Medium-Term Management Plan 1. Key Performance Indicators 2. Major Initiatives for the Second Year of the Medium-Term Management Plan 3. Shareholder Return II. Positioning of FY2018 and Initiatives for the Accomplishment of the Medium-Term Management Plan III. Management Policy Going Forward [Reference] Marketing Strategies of the Three Life Insurance Companies, Asset Management Strategy, Corporate Governance, etc. [Reference] Financial Results for the Year Ended March 2018 (Conference Call Material) 26

28 (Blank) 27

29 III-1. Management Policy Going Forward (1) Basic Approach 1 Enterprise Capable of Achieving Mid- to Long-term Growth Contribute to the development of society through its business (an enterprise necessary for the society) An enterprise which generates appropriate profit through its business (an enterprise which generates value to the society) Future Vision A life insurance group which shares the value with society and grows sustainably Creation of Shared Value The ever-changing issues of the people and the society (social issues) are a business chance the Group should tackle with From the view point of solving social issues, create both 1) value for the society and, 2) value for the enterprise through its business Through the practice of T&D Life Group's Corporate Philosophy, ensure the Group s sustainable growth T&D Life Group's Corporate Philosophy With our "Try & Discover" motto for creating value, we aim to be a group that contributes to all people and societies. 28

30 III-1. Management Policy Going Forward (1) Basic Approach 2 Pursuit of Growth Group Growth Strategy In addition to strengthening the core business of the three life insurance companies, take initiatives to diversify the revenue sources for the aim to expand Group s profits Improvement of Financial Soundness and Capital Efficiency Group Financial Strategy Efficiently secure sufficient capital necessary for the growth strategy Enhancement of Management Platform Group Management Platform Strategy Enhance management platform for the realization of growth and financial strategy 29

31 III-2. Policies of Initiatives for the Fiscal Year 2018 (Image) Group Growth Strategy Diversification of revenue sources New business (acquire new revenue sources) Enhance profitability of existing peripheral businesses (T&D Asset Management, Pet & Family Small-amount Short-term Insurance) Initiatives for the sophistication of life insurance business from the Group s point of view Stable and sustainable growth by strengthening the core business of the three life insurance companies Group Management Platform Strategy Promote organically and integrally Group Financial Strategy 30

32 III-2. Policies of Initiatives for the Fiscal Year 2018 (Details) Group Growth Strategy -Diversification of revenue sources- New business (acquire new revenue sources) Enhance profitability of existing peripheral businesses Initiatives for the sophistication of life insurance business from the Group s point of view Domestic life insurance M&A, developing promising peripheral business (partnership, M&A, etc.) Investments in/building relations with foreign life insurance, etc. Increase profits of T&D Asset Management and Pet & Family Small-amount Short-term Insurance Take initiatives in areas such as senior, healthcare, digital, which lead to strengthening domestic life insurance business Group Financial Strategy Improve capital efficiency while securing financial soundness ( Consider the KPIs for the next mediumterm management plan) Group Management Platform Strategy Capital management supporting the diversification of revenue sources Practice of T&D Life Group's Corporate Philosophy aiming to realize the Group s sustainable growth (creation of shared value) 31 Improvement of brand power, active participation and development of versatile talent, sophistication of business and risk management

33 I. Progress of the Medium-Term Management Plan 1. Key Performance Indicators 2. Major Initiatives for the Second Year of the Medium-Term Management Plan 3. Shareholder Return II. Positioning of FY2018 and Initiatives for the Accomplishment of the Medium-Term Management Plan III. Management Policy Going Forward [Reference] Marketing Strategies of the Three Life Insurance Companies, Asset Management Strategy, Corporate Governance, etc. [Reference] Financial Results for the Year Ended March 2018 (Conference Call Material) 32

34 (Blank) 33

35 [Reference] Taiyo Life 1 Marketing Strategy 34

36 [Reference] Taiyo Life 2 Summary Promote triune marketing of strengthening sales, service improvement and product enhancement Protection-type annualized premiums of new policies trended solidly June onwards and exceeded the full-year forecast, despite a reaction to the launch of Himawari Dementia Treatment Insurance seen at the beginning of the fiscal year. As the final stage of the three-year medium-term management plan, further leap the triune strategy and strive for more expansion on business results 35

37 [Reference] Taiyo Life 3 Results of Primary Measures Salesforce Enhancement Enhancement of Sales Representatives Channel Revision of sales Representative remuneration Improvement in the retention rate of sales representatives [Number of sales representatives] 8,631 8,902 8, / / /03 Service Improvement Kaketsuke-tai Staffs with specialized knowledge directly visit customers and support insurance claims procedure, etc. Number of service usage exceeded 45,000 since the implementation in April 2016 Senior visit service Visiting senior customers for insurance contract coverage confirmation, prevention of unclaimed insurance claims, etc. Cooperating with YAMATO TRANSPORT CO., LTD. from July 2017 to enhance the visiting service to customers in remote areas Product Enhancement Launch and sales promotion of Himawari Dementia Treatment Insurance [Cumulative number of sold policies of dementia treatment insurance * ] Surpassed 320,000 (as of Mar. 31) Product launch 2016 / / / / / / / / / /03 * Total of Himawari Dementia Treatment Insurance and Dementia Treatment Insurance. 36

38 [Reference] Taiyo Life 4 Major Sales Results Indicators Protection-type Annualized Premiums of New Policies * (billions of yen) Protection-type Annualized Premiums of Total Policies * (billions of yen) Forecast 16.0 bn Third sector Third sector 2016/ / / / / /03 * Performance indicators of Taiyo Life which are the sum of protection portion of the annualized premiums mainly excluding savings-type products. 37

39 [Reference] Daido Life 1 Marketing Strategy 38

40 [Reference] Daido Life 2 Summary Promoted the development of disability benefits for corporate customers, and SME owners + individual business owners which is positioned as priority areas New policy amount increased year on year and exceeded the full-year forecast due to disability benefits products and Kaigo Teiki Hoken launched last October, despite the decrease in individual term insurance caused by the impact of premium revision, etc. Further secure the position as the leading company of the SME market by expanding business results through the proposal of total protection integrating both corporations and individuals 39

41 [Reference] Daido Life 3 Results of Primary Measures New Policy Amount (Products/Markets)* [Individual term life insurance] [Disability/nursing care] [SME owners and individual business owners, etc.] (trillions of yen) (billions of yen) (billions of yen) , , Disability/nursing care 2017/ / / / / /03 * There are overlaps in part of the amount of new policies in each area stated above. 40

42 [Reference] Daido Life 4 Major Sales Results Indicators New Policy Amount * Policy Amount in Force * (trillions of yen) (trillions of yen) Forecast 4.35 tn Disability/nursing care 2.64 Disability/nursing care / / / / / /03 * Total amount of individual insurance, individual annuities,and Daido Life s J-type product, T-type product, Kaigo Relief and Kaigo Teiki Hoken.

43 [Reference] T&D Financial Life 1 Marketing Strategy 42

44 [Reference] T&D Financial Life 2 Summary Promoted the diversification of product lineup, expansion of sales network of insurance agents and improvement of customer service New policy amount increased significantly year on year due to sales of single-premium products launched last May in the OTC market, and a steady sales of level-premium products at insurance shops Further aim for substantial expansion of new policy amount through enhancing the product lineup by prioritizing the development of single-premium products, and strengthening the salesforce including the use of Group s management resources 43

45 [Reference] T&D Financial Life 3 Results of Primary Measures Number of sales agents selling multi-line of products (agents) Cumulative total number of sales agents selling products (agents) / / / / / /03 44

46 [Reference] T&D Financial Life 4 Major Sales Results Indicators New Policy Amount (billions of yen) Policy Amount in Force (billions of yen) Single premium Forecast bn 1, , , Level premium* 83.8 Level premium / / / / / /03 * Level-premium products handled by insurance agents including financial institutions

47 [Reference] Taiyo Life and Daido Life s Collaboration, etc., with External Organizations MCBI Inc. Co-investment with SHIMADZU CORPORATION. Co-development of customer service in dementia prevention medical care area InfoDeliver Corporation, Neos Corporation Development of dementia prevention app and full-scale renewal Benesse Style Care Co., Ltd. Operation of nursing home Thuriya Ace Technology Company Limited Joint corporation of system development in Myanmar Value HR Co., Ltd. Health & Productivity Management practice support tool KENCO SUPPORT PROGRAM CYBERDYNE INC. Development of HAL Plus Rider Strike Co., Ltd. M&A support service internet infinity Inc. Kaigo Concierge service [Overseas business development, etc.] Initiatives for the development /dissemination of the insurance business in Myanmar Initiatives for the collaboration based on investment/business alliance with the German Nürnberger Beteiligungs AG 46

48 (Blank) 47

49 [Reference] Asset Management Strategy 1 Basic Policy Expanded investment income by appropriate risk taking against the backdrop of high financial soundness, amid a continuing low interest rate environment (%) 2.5 Source: Bloomberg 10-yr JGB yield (0.5) Background: continuation of low interest rate environment Secure stable income Investment centered on yen-interest assets such as public and corporate bonds considering the long-term insurance liabilities S t r a t e g i c U t i l i z a t i o n o f E R M Expansion of investment income by effective utilization of capital Diversify risk and gain excess profit Allocate certain amount to risk assets Promote diversification of revenue sources Continue investment in growth areas such as environment/infrastructure and ESG areas, etc. 48

50 [Reference] Asset Management Strategy 2 Taiyo Life Worked on maintaining and improving investment income even under a low interest rate environment by increasing the allocation to risk assets such as foreign securities Increased foreign bonds centered on highly rated countries in North America and Europe. Further, invested in supranational bonds, etc. 2013/ /03 [Changes in Allocation of General Account Assets] 21.6% 27.2% 6.4% 6.8% 20.9% 16.1% 40.1% 37.6% Others Real Estate Foreign Securities Domestic Stocks Loans Domestic Bonds Cash and Deposits/Call Loans [Foreign Securities] 1, ,963.5 [Foreign Bonds *] 1, ,690.5 [Foreign Corporate Bond Funds *] / / / / / /03 * Item of Foreign Securities 49

51 [Reference] Asset Management Strategy 3 Daido Life Worked on maintaining and improving investment income even under a low interest rate environment by increasing the allocation to risk assets such as foreign securities Increased the balance of foreign bonds. Further, invested mainly in U.S. corporate bonds through investment funds 2013/ /03 [Changes in Allocation of General Account Assets] 17.0% 4.3% 29.4% 9.2% 5.2% 7.6% 56.5% 47.2% Others Real Estate Foreign Securities Domestic Stocks Loans Domestic Bonds Cash and Deposits/Call Loans [Foreign Securities] 1,926.1 [Foreign Bonds *] [Foreign Corporate Bond Funds *] , / / / / / /03 * Item of Foreign Securities 50

52 [Reference] Asset Management Strategy 4 ESG Investments Taiyo Life, Daido Life and T&D Asset Management have signed the Principles for Responsible Investment (PRI) which is supported by the United Nations. ESG Investments of the Group life insurance companies as of end of March 2018 were over billion. Continue investing as part of growth area investments aiming for the contribution in solving social issues through investment activities. Investment Examples Taiyo Life Daido Life Investments and lending which can contribute to the environment, such as investments in Green Bonds Real estate investments considering the environment and the senior society, including the construction of nursing homes utilizing its real estate holdings Investments which can contribute to the realization of a sustainable society, including investment in EYE Bonds and Japan Healthy Society Support Fund Investments and lending in infrastructure businesses, including investment in funds aimed at solar business Investments in funds supporting the growth and development of the SMEs underpinning the Japanese economy Investments and lending which can contribute to the local communities at home and overseas, such as investments in Social Bonds [Major investment example in fiscal year 2017] Investment in Japan Healthy Society Support Fund Investment in a fund supporting the management of small and medium-sized enterprises 51

53 [Reference] IT Strategy (Streamlining/Marketing and Service Innovation) The three life insurance companies have been promoting efficiency through operational reform, etc., utilizing information technology (IT). At the same time, innovated and improved their sales and services including the shift of management resources by streamlining office work. By continuously utilizing IT actively, improve productivity and customer satisfaction which will lead to the increase in Group s corporate value. Utilization of IT Operational Reform (Streamlining Office Work) Paperless enrollment procedures Automation/laborsaving/unmanned policy administrative procedures Automation of routine tasks introducing RPA (Taiyo Life: since 2015, Daido Life: since 2017) Shifted management resources generated from streamlining Innovation and Improvement of Sales and Services Enhanced sales and services by people such as Kaketsuke-tai Development and version upgrade of sales mobile terminal Service expansion towards health promotion and disease prevention such as dementia prevention app and KENCO SUPPORT PROGRAM Improvement of productivity and customer satisfaction Increase in Group s corporate value Enhanced preparation for utilizing Big Data, AI, etc. 52

54 [Reference] Strategies for Other Businesses (Existing Businesses) Asset Management Business Pet Insurance Business Pet & Family Small-amount Short-term Insurance Company The mainstay investment trust business maintained a positive trend. AUM for investment trust expanded to 1.18 trillion. (Roughly doubled before the start of the medium-term management plan) [Investment Trust AUM] New policy trended solidly and the number of policy in force expanded. Net premium increased to 4.45 billion for the fiscal year ended March 31, (Roughly 1.5 times in amount before the start of the mediumterm management plan) [Number of Policy in Force] (Thousand) [Net Premium] 1, , / / / / / / / / /03

55 [Reference] Corporate Governance Basic Approach Aim for an efficient and highly transparent management system which enables the implementation of flexible and cohesive Group management Promoting Group Management Directly owned subsidiaries, which own distinctive management strategies, increase the Group's corporate value by exerting their uniqueness and specialization to the fullest extent through determining marketing strategies and operating businesses T&D Holdings, in addition to determining Group strategy, appropriately allocating Group s management resources, formulating capital policy, etc., has organized a Group business management system which accurately assesses management risks concerning its affiliated companies and thoroughly manages profit and risk management and so forth of the entire Group 54 Pet & Family Small-amount Short-term Insurance Company

56 [Reference] Corporate Governance Governance System * * T&D Holdings is a "Company with Board of Auditors" which the Audit & Supervisory Board and Audit & Supervisory Board Members independent of the Board of Directors audit the management. Established a Nomination and Compensation Committee as an advisory body to the Board of Directors for the purpose of discussing the fairness and appropriateness of the appointment and compensation of executives, among other related issues, as well as for ensuring the transparency of management and enhancing accountability. Established Executive Committee to mainly discuss the management administration of the whole Group such as the monitoring of the subsidiaries, and Group Management Committee to discuss Group s cross-sectional strategies including new business strategies. * Added one outside director to further strengthen and enhance corporate governance in June 2017 Established various committees to make more specialized discussions and considerations. 55

57 I. Progress of the Medium-Term Management Plan 1. Key Performance Indicators 2. Major Initiatives for the Second Year of the Medium-Term Management Plan 3. Shareholder Return II. Positioning of FY2018 and Initiatives for the Accomplishment of the Medium-Term Management Plan III. Management Policy Going Forward [Reference] Marketing Strategies of the Three Life Insurance Companies, Asset Management Strategy, Corporate Governance, etc. [Reference] Financial Results for the Year Ended March 2018 (Conference Call Material) 56

58 Contents Consolidated Results of Operation P. 58 Consolidated Statement of Operation P. 59 Core Profit and Positive Spread P. 60 Consolidated Balance Sheet P. 62 MCEV (Results, Movement Analysis) P. 64 Status of ESR P. 66 [Reference] Trial Calculation Value Applying UFR P. 67 Financial Soundness P. 68 Daido Life (Sale Results, EV) P. 70 Taiyo Life (Sale Results, EV) P. 74 T&D Financial Life (Sale Results, EV) P. 78 Status of Investments P. 82 Net Unrealized Gains/Losses on General Account Assets P. 84 Return to Shareholders P. 86 Earnings Forecasts (Consolidated/Three Life Insurance Companies) Balance Sheet and Statement of Operation of the Three Life Insurance Companies P. 87 P. 90 General Account Assets Composition P. 96 Breakdown of Foreign Securities and Other Securities P. 98 Breakdown of Foreign Securities (Foreign Bonds) P. 99 Net Unrealized Gains/Losses on General Account assets (Daido Life and Taiyo Life) Core Profit, Positive Spread and Average Assumed Investment Yield P.100 P.102 Policy Amount in Force by Dividend Type P.104 Breakdown of Financial Indicator P.106 MCEV* (Consolidated/Three Life Insurance Companies) (Results, Movement Analysis, Sensitivities)* P.110 Business Results P.124 Results of Shareholder Return P.128 * Additional item added to the conference call material held on May 15,

59 Consolidated Results of Operation Ordinary Revenues Ordinary Profit Achievement rate 101.5% Forecast Achievement rate 104.3% 1,900.0 *1 Forecast *1 2, , , / / /03 Profit *2 2016/ / /03 Adjusted Net Income *3 Achievement rate 104.8% Achievement rate 105.5% Forecast Forecast 74.0 * * / / /03 *1 Announced on May 15, 2017 (adjusted net income is for reference) *2 Profit Attributable to Owners of Parent / / /03 *3 Calculated by adding net income and additional internal reserves in excess of the legal standard requirements related to reserves for contingency and price fluctuations (after taxes).

60 Consolidated Statement of Operation FY2016 FY2017 Changes Ordinary revenues 1, ,928.3 (47.4) Income from insurance premiums 1, ,483.7 (21.5) Investment income (29.9) Interest, dividends and income from real estate for rent Gains on sale of securities (32.5) Other investment income Gains on separate accounts, net Other ordinary income Ordinary expenses 1, ,771.8 (46.6) Insurance claims and other payments 1, ,146.1 (14.1) Provision for policy and other reserves Investment expenses (33.9) Losses on sale of securities (39.6) Devaluation losses on securities Losses from derivatives, net (4.0) Other investment expenses Operating expenses Other ordinary expenses (7.0) Ordinary profit (0.7) Net extraordinary gains (losses) (35.0) (16.4) Provision for reserve for policyholder dividends Income before income taxes Total income taxes Profit attributable to owners of parent Daido: increase of 24.5 bn -Taiyo: decrease of bn -T&D Financial: increase of 95.5 bn -Daido: increase of 9.4 bn Foreign securities: increase of 6.9 bn Other securities: increase of 2.6 bn -Taiyo: decrease of 0.4 bn Provision for reserve for price fluctuations: 14.8 bn -Daido: 11.0 bn (yoy increase of 0.2 bn) including excess reserves of 8.0 bn (yoy ± 0 bn) -Taiyo: 3.2 bn (yoy decrease of 14.7 bn) with no excess reserves (yoy decrease of 15.0 bn) Comprehensive Income (69.5)

61 Core Profit and Positive Spread Core Profit Positive Spread * Sum of Three Companies Taiyo Life Daido Life T&D Financial Life (5.5) (0.8) *1 (3.1) (2.9) (2.5) 2016/ / / / / /03 (Supplement) Core Profit of T&D Financial Life (1) From fiscal year ended March 31, 2017, T&D Financial Life changed the recording method of recognizing gains (losses) due to market exchange rate fluctuation pertaining to liabilities of foreign-exchange-rate-linked whole life insurance to capital gains (losses). In addition, from the fiscal year ended March 31, 2018, recording method of recognizing gains (losses) due to cash surrender value fluctuation pertaining to market value adjustment was changed to capital gains (losses). (2) If the core profit for the fiscal year ended March 31, 2017, was calculated the same way as the fiscal year ended March 31, 2018, the amount would have been 0.1 billion yen, a decrease of 1.0 billion yen year on year. If the core profit of sum of three companies for the fiscal year ended March 31, 2017, was calculated the same way as the fiscal year ended March 31, 2018, the amount would have been billion yen, a decrease of 10.8 billion yen year on year.

62 Factors of Increase/Decrease in Core Profit Daido Life Taiyo Life 8.6 Decrease in assumed interests 4.9 Increase in assumed interests Other factors Total 0.4 Other factors Total Net investment income factor such as increase in interest and dividend income (0.3) (0.5) Increase in operating expenses (4.8) (1.0) Net investment income factor such as decrease in interest and dividend income Decrease in operating expenses (9.2) (4.9) (12.6) 61

63 Consolidated Balance Sheet As of March 31, 2017 As of March 31, 2018 Changes As of March 31, 2017 As of March 31, 2018 Changes Assets: Liabilities: Cash and deposits, call loans (86.6) Total policy reserves 13, , Monetary claims purchased (23.6) Reserve for outstanding claims (2.3) Monetary trusts Policy reserve 12, , Securities 11, , Contingency reserve Loans 1, ,648.6 (36.5) Bonds Tangible fixed assets Other liabilities Intangible fixed assets Borrowings Other assets (1.7) Reserve for price fluctuations Deferred tax assets (4.3) Total liabilities 13, , Reserve for possible loan losses (1.7) (1.5) +0.1 Net assets: Total assets 14, , Total shareholders' equity Capital stock Capital surplus (37.7) Retained earnings Treasury shares (67.7) (46.7) Total accumulated other comprehensive income Valuation difference on availablefor-sale securities Land revaluation (35.3) (35.6) (0.2) Total net assets 1, , Total liabilities and net assets 14, ,

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65 MCEV Results As of March 31, 2017 As of March 31, 2018 *2 Change *2 Group MCEV 2, , MCEV 2, , Adjusted net worth 1, , Value of in-force business Value of new business * *1 Value of new business does not include values anticipated from future new business. For conversions, only net increase is included. *2 Group MCEV and value of new business as of March 31, 2018, applying the UFR was approximately 2.52 trillion and approximately billion, respectively. (Please refer to page 67) 64

66 Movement Analysis of EV (37.9) Capital movements Numerator of Core ROEV Value of new business Expected existing business contribution (reference rate) Expected existing business contribution (in excess of reference rate) (15.0) Experience variances (31.1) Assumption changes (27.2) Economic variances -Adjusted net worth: bn -Value of in-force business: (178.2) bn -Dividend payout: (21.9 bn) -Share buyback: approx. (17.0 bn), etc. MCEV as of March 31, ,262.4 bn Increase/decrease in EV (after considering capital movements) bn MCEV as of March 31, ,378.9 bn 65

67 Status of ESR ESR (Surplus EC) 200% 196% 217% 162% 175% 175% 180% 182% 168% *4 150% ESR Required level: 133% *3 100% 50% Surplus *1 (Economic value based net assets) 2, , , ,029.3 EC (Economic value based capital = risk amount *2 ) 2, , , , , , , , , , % 2014/ / / / / / / /3 *1 The difference between assets and liabilities evaluated based on economic value. The evaluation of both assets and liabilities are calculated basically based on the same assumptions of MCEV. The cost of capital for risk margin is 5% from the end of March It has been set referring to the Insurance Capital Standard (ICS) which the International Association of Insurance Supervisors (IAIS) is considering. The cost of capital for risk margin was 6% on and before the end of March *2 Risk amount is based on an internal model (99.5% VaR, 1-year) after diversification effects. Required capital for MCEV is calculated using the same internal model. *3 Represents the capital level needed to cover VaR 99.93%, assuming the current risk profile. *4 ESR as of end of March 2018 applying UFR was approximately 183%. (Please refer to page 67) 66

68 [Reference] Trial Calculation Value Applying UFR Economic value based indicators (EV and ESR) applying ultimate forward rate (UFR). The applied UFR has been set referring to the Insurance Capital Standard (ICS) which the International Association of Insurance Supervisors (IAIS) is considering as an international capital regulation for insurance companies. Forward rates from 31-year onwards are extrapolated to converge to the level of UFR of 3.5% at 60-year. Trial calculation value applying the UFR As of end of March 2018 Group MCEV Approx trillion Spot rate as of end of March 2018 Current *1 Applying UFR 1-yr (0.13)% (0.13)% 10-yr 0.04% 0.04% MCEV Value of new business Approx trillion Approx billion 20-yr 0.54% 0.54% 30-yr 0.78% 0.78% ESR Approx. 183% 40-yr 0.95% 1.19% 50-yr 1.07% 1.62% 60-yr *2 1.15% 1.93% *1 Forward rate is constant from 40-year onwards. *2 Forward rate at 60-year: Current 1.55%, UFR 3.5%. 67

69 Financial Soundness As of March 31, 2017 As of March 31, 2018 Changes Daido Life Solvency margin ratio 1,252.6% 1,206.2% (46.4P) Adjusted net assets 1, , Taiyo Life Solvency margin ratio 848.6% 835.1% (13.5P) Adjusted net assets 1, , T&D Financial Life Solvency margin ratio 1,295.6% 1,258.3% (37.3P) Adjusted net assets T&D Holdings Consolidated Consolidated solvency margin ratio 1,105.1% 1,061.8% (43.3P) Consolidated adjusted net assets 2, ,

70 (Blank) 69

71 Marketing Strategy of Medium-Term Management Plan: Daido Life 70

72 Key Performance Indicator: Daido Life Policy Amount in Force Trends in Policy Amount in Force * [Reference] Trends in New Policy Amount * (Trillions of yen) (Trillions of yen) / / / / / /03 * Total amount of individual insurance, individual annuities, J-type product, T-type product, Kaigo Relief and Kaigo Teiki Hoken. New policy amount includes net increase from conversion. 71

73 [Reference] Sales Results: Daido Life FY2016 FY2017 Changes New policy amount *1 Individual insurance and annuities, etc. *2 5, , % Individual term life insurance 4, ,944.0 (28.0%) Disability benefit/nursing care benefit 1, , % Affected by rate revision, etc. Favorable sales of disability benefit products *Introduced Kaigo Teiki Hoken in October 2017 Decrease in policy amount *3 Individual insurance and annuities, etc. *2 3, , % Surrender and lapse amount 2, , % Surrender and lapse rate *4 6.44% 6.30% (0.14P) Policy amount in force Individual insurance and annuities, etc. *2 40, , % Individual term life insurance 34, ,724.0 (0.1%) -Disability benefit products ( J-type product and T-type product, ) and nursing care benefit products ( Shunyu Relief, Kaigo Relief and Kaigo Teiki Hoken ): 5,652.9 bn (Increased by 2,364.1 bn from the previous FYE, up 71.9%) Annualized premiums of new policies * (16.3%) Medical benefits, living benefits, and others % Annualized premiums of total policies % Medical benefits, living benefits, and others % *1 Includes net increase from conversion. *2 Includes individual insurance, individual annuities, J-type product, T-type product, Kaigo Relief and Kaigo Teiki Hoken. *3 Decrease in policy amount = New policy amount Net increase in policy amount in force from previous fiscal year-end *4 Surrender and lapse rate = Surrender and lapse amount / Policy amount in force at the beginning of the fiscal year 72

74 Key Performance Indicator: Daido Life EV As of March 31, As of March 31, Change MCEV 1, , Adjusted net worth , Value of in-force business Value of new business * * Value of new business does not include values anticipated from future new business. For conversions, only net increase is included. 73

75 Marketing Strategy of Medium-Term Management Plan: Taiyo Life 74

76 Key Performance Indicator: Taiyo Life Protection-type Annualized Premiums of New Policies Trends in Protection-type Annualized Premiums of New Policies * [Reference] Trends in Protection-type Annualized Premiums of Total Policies / / / / / /03 * Performance indicator of Taiyo Life which is the sum of protection portion of the annualized premiums of new policies mainly excluding savingstype products. 75

77 [Reference] Sales Results: Taiyo Life FY2016 FY2017 Changes Annualized premiums of new policies * (24.0%) Protection-type * (4.1%) Medical benefits, living benefits, and others (1.2%) Annualized premiums of total policies (2.9%) Protection-type * % Medical benefits, living benefits, and others % New policy amount *1 Individual insurance and annuities total 2, ,686.7 (19.1%) Sales agent channel, etc. 1, ,505.7 (16.9%) OTC sales at banks (33.8%) Decrease in policy amount *3 Individual insurance and annuities total 2, ,273.5 (2.3%) Surrender and lapse amount 1, ,236.0 (1.6%) Surrender and lapse rate *4 5.71% 5.69% (0.02P) Policy amount in force Individual insurance and annuities total 21, ,154.4 (2.7%) Affected by the sale suspension/suppression of savings-type products As a result of the favorable sales of Himawari Dementia Treatment Insurance, reduced the decreasing rate recorded in the first quarter [(8.4%)]. *1 Includes net increase from conversion. *2 Performance indicator of Taiyo Life which is the sum of protection portion of the annualized premiums mainly excluding savings-type products. *3 Decrease in policy amount = New policy amount Net increase in policy amount in force from previous fiscal year-end *4 Surrender and lapse rate = Surrender and lapse amount / Policy amount in force at the beginning of the fiscal year 76

78 Key Performance Indicator: Taiyo Life EV As of March 31, As of March 31, Change MCEV Adjusted net worth Value of in-force business (70.2) (28.5) Value of new business * (3.3) * Value of new business does not include values anticipated from future new business. For conversions, only net increase is included. 77

79 Marketing Strategy of Medium-Term Management Plan: T&D Financial Life 78

80 Key Performance Indicator: T&D Financial Life New Policy Amount Trends in New Policy Amount [Reference] Trends in Policy Amount in Force 億円 1, , , / / / / / /03 79

81 [Reference] Sales Results: T&D Financial Life New Policy Amount FY2016 FY2017 Changes Individual insurance and annuities total % Single-premium products % Level-premium products % Decrease in policy amount *1 Individual insurance and annuities total % Surrender and lapse amount % Surrender and lapse rate *2 3.12% 3.52% +0.40P Policy amount in force Individual insurance and annuities total 1, , % Independent insurance agent 1, , % Individual variable annuities (28.9%) *1 Decrease in policy amount = New policy amount Net increase in policy amount in force from previous fiscal year-end *2 Surrender and lapse rate = Surrender and lapse amount / Policy amount in force at the beginning of the fiscal year - Shogai Premium Japan 4 (yendenominated): 7.5 bn (yoy increase of 7.5 bn) - Shogai Premium World 4 (foreign currency reference including Shogai Premium World 3 ): bn (yoy increase of 90.6 bn) - Kakei Ni Yasashii Shunyuhosho (income protection): bn (yoy increase of 30.9 bn) 80

82 Key Performance Indicator: T&D Financial Life EV As of March 31, As of March 31, Change MCEV Adjusted net worth Value of in-force business (56.1) (58.3) (2.1) Value of new business * * Value of new business does not include values anticipated from future new business. For conversions, only net increase is included. 81

83 Status of Investments: Daido Life Real Estate Others *1 Foreign Securities Loans 28.2% 29.4% 5.0% 5.2% 7.6% 7.6% Other Securities Domestic Stocks Net Exposure to domestic Stocks * bn bn (2017/03) (2018/03) Net Exposure to Foreign Currencies * bn bn (2017/03) (2018/03) Alternative Investments bn bn (2017/03) (2018/03) Including investments as follows: Private Equity Funds bn bn (2017/03) (2018/03) Hedge Funds 77.7 bn 65.1 bn Domestic Bonds (2017/03) (2018/03) Overseas Credit 55.5 bn 43.9 bn (2017/03) (2018/03) Monetary Claims Purchased 48.8% 47.2% 3.3% 3.2% 2017/ /03 Net Exposure to Domestic Stocks *2 6.8% 7.4% Net Exposure to Foreign Currencies *3 6.3% 7.7% Cash and Deposits, Call Loans 82 [Main investment activities] Investments in domestic bonds included ultra-long JGBs coupled with ultra-long municipal bonds, FILP bonds and corporate bonds which were enable of earning higher yields than JGBs Investments in foreign bonds were government bonds and corporate bonds in the U.S. and Europe Increased both net exposure to domestic stocks and foreign currencies *3 *1 Others: Deferred Tax Assets, etc. *2 Net exposure to domestic stocks includes stock investment trusts. *3 Net foreign currency exposure adjusted for hedges.