Another Step Forward

Transcription

1 Another Step Forward T&D Holdings, Inc. is the holding company for three core life insurance companies: Taiyo Life Insurance Company, Daido Life Insurance Company, and T&D Financial Life Insurance Company. Each of the three life insurance companies has a unique business model that is quite different from those of other companies in the industry in terms of markets, marketing channels, and products. Under the holding company structure, the three life insurance companies are focusing on their respective high-potential markets. Thanks to this focus, they boast high competitiveness within the life insurance industry and maintain strong business performance. Editorial Note The Annual Report 2013 has Another Step Forward as its central theme. The beginning of the report introduces the unique business models of the three life insurance companies, Taiyo Life, Daido Life and T&D Financial Life. The report also includes an interview with the president in which he discusses a range of subjects, such as the full implementation of Enterprise Risk Management (ERM) from April 2013 and the T&D Life Group s growth strategy. Later in the report, readers can find details on the current situation of the T&D Life Group, including information on the financial results and management indicators of the three life insurance companies as well as trends in Japan s life insurance industry. This information is arranged in a clear manner to facilitate understanding. Further, detailed information regarding embedded value (EV), one of the primary indicators of the corporate value of life insurance companies, has been assembled within the separate Market Consistent Embedded Value Report This reflects the T&D Life Group s transition to disclosure of Market Consistent Embedded Value (MCEV) from March 31, Please use the Market Consistent Embedded Value Report 2013 to supplement the Annual Report Forward-Looking Statements This annual report contains forward-looking statements about T&D Holdings future plans, strategies, beliefs, and performance that involve risks and uncertainties. Such statements are based on our current expectations and are subject to uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause such a difference include, but are not limited to, (I) general economic conditions, in particular, conditions in the insurance markets on which the T&D Life Group centers, (II) performance of financial markets, (III) mortality and morbidity levels and trends, (IV) persistency levels, (V) interest rate levels, (VI) currency exchange rates, (VII) general competitive factors, (VIII) changes in laws and regulations, including the tax treatment of insurance premiums, and (IX) changes in the policies of governments and/or regulatory authorities. T&D Holdings, therefore, wishes to caution readers not to place undue reliance on forward-looking statements. Furthermore, the Company undertakes no obligation to update any forward-looking statements as a result of new information, future events, or other developments.

2 Contents 2 T&D Life Group s Corporate Philosophy/Management Vision/Fundamental Strategies 3 To Our Shareholders 4 Life Insurance Industry Trends in Japan 6 T&D Life Group s Business Model 8 Group Performance 10 Group Topics 12 Fiscal 2012 Management Review 17 An Interview with the President Full Implementation of ERM page 18 Growth Strategy page Business Overview 26 Taiyo Life Insurance Company 30 Daido Life Insurance Company 34 T&D Financial Life Insurance Company 38 T&D Asset Management Co., Ltd. 40 Pet & Family Small-amount Short-term Insurance Company 41 Key Systems Underpinning T&D Life Group 42 Management Organization Board of Directors 44 Management Organization Audit & Supervisory Board Members 45 Corporate Governance 49 Corporate Social Responsibility 53 Financial Section 140 Glossary 144 History 146 IR Activities 147 Stock Information 148 Group Companies 149 Corporate Data T&D Holdings, inc. Annual Report

3 T&D Life Group s Corporate Philosophy, Management Vision and Fundamental Strategies Try & Discover 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. T&D Life Group s Management Vision From the customers point of view Aim to provide the best products and services to increase customer satisfaction. From the shareholders, investors, and market s point of view Aim to be a major life insurance group with a strong presence in the market by stable and sustainable increases in the value of the group through new challenges for growth. T&D Life Group s Fundamental Strategies 1. To provide products and services tailored to customer needs accurately and quickly in a kind and polite manner. 2. To maintain and develop the Group management to maximize the individual strengths of each Group company within the Group. 3. To establish an integrated management system of profit, risk, and capital for stable and sustainable EV growth. 4. To achieve the mid- and long-term growth of the Group by expanding the life insurance business and entering into new business areas through alliances and M&As. 5. To fulfill our public mission as a life insurance business and our corporate social responsibilities for the broader society including customers and shareholders. 2 T&D Holdings, inc. Annual Report 2013

4 To Our Shareholders Leveraging unique business models to increase corporate value The T&D Life Group aims to increase corporate value stably and sustainably by strengthening its unique business models, which set it apart from other companies, and by steadily promoting and enhancing Enterprise Risk Management (ERM). In fiscal 2012, the year ended March 31, 2013, the Japanese economy began recovering in the summer, backed by factors such as post-disaster reconstruction demand. The economy then weakened slightly, with a downturn in exports and production amid the slowdown in the world economy and other developments. However, signs of a mild recovery were seen in the Japanese economy toward the end of the fiscal year, backed by a global economic pickup, among other factors. In the life insurance industry, policy amount in force, which had been on a downward trend, remained almost unchanged from the previous fiscal year due to steady growth in both the number of new policies and the new policy amount. While the asset management environment was affected by domestic interest rates remaining at a low level, the latter half of fiscal 2012 saw a correction of the yen s appreciation, and a market rise in domestic and foreign stock. Under these conditions, the entire T&D Life Group s new policy amount and policy amount in force both increased year on year. In terms of earnings, ordinary profit rose, and net income reached a record high. All in all, we delivered a strong performance. The T&D Life Group continues to work to increase insurance profit by strengthening the unique business models of Taiyo Life, Daido Life, and T&D Financial Life. At the same time, we will promote and enhance ERM, which we fully introduced in April The aim of these efforts is to increase our corporate value stably and sustainably. With our Try & Discover motto for creating value, we aim to be a group that contributes to all people and society. Guided by this corporate philosophy, all the Group s corporate officers and employees will continue making a concerted effort to justify the trust of stakeholders. In closing, I would appreciate the continued support and cooperation of our shareholders and other investors and analysts. September 2013 Kenji Nakagome Representative Director and President T&D Holdings, inc. Annual Report

5 Life Insurance Industry Trends in Japan Years ended March 31 Total for Private-Sector Life Insurance Companies Income from Insurance Premiums 26,390,649 27,860,828 29,244,801 28,502,811 Insurance premiums 25,960,896 27,022,177 28,332,940 27,766,283 Policy Amount in Force 1,222,212,420 1,186,279,986 1,150,987,311 1,112,199,665 Individual insurance 1,152,648,515 1,112,170,505 1,070,570,886 1,026,336,003 Individual annuities 69,563,905 74,109,481 80,416,425 85,863,662 New Policy Amount 106,581,055 98,626,548 89,375,093 76,907,879 Individual insurance 101,381,191 91,159,270 80,753,423 67,991,970 Individual annuities 5,199,864 7,467,278 8,621,670 8,915, Year Historical Variation 2 Base Year (10 Years Ago) = Comparison with Market Share 10 Years Ago 3 Insurance Premiums /3 05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 n T&D n Japanese life insurance industry 1 Nippon 19.8% 2 Dai-ichi 13.2% 3 Meiji Yasuda 12.7% 4 Sumitomo 10.4% 5 AIG 4 7.3% 6 T&D 7.2% 7 Mitsui 3.5% 8 Aflac 3.4% 9 Fukoku 2.9% 10 Asahi 2.6% 11 Others 17.0% 1 Nippon 17.4% 2 Meiji Yasuda 11.9% 3 Dai-ichi % 4 Prudential US % 5 Sumitomo % 6 Aflac 6.5% 7 T&D 6.3% 8 MetLife Alico 4.2% 9 Sony 8 3.2% 10 MS&AD 9 2.8% 11 Others 15.0% Policy Amount in Force /3 05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 n T&D n Japanese life insurance industry 1 Nippon 22.8% 2 Dai-ichi 16.6% 3 Sumitomo 14.4% 4 Meiji Yasuda 13.8% 5 Asahi 5.1% 6 T&D 4.8% 7 Mitsui 4.5% 8 AIG 4 3.3% 9 Fukoku 3.1% 10 Sony 2.1% 11 Others 9.6% 1 Nippon 18.8% 2 Dai-ichi % 3 Sumitomo % 4 Meiji Yasuda 10.4% 5 Prudential US 6 7.2% 6 T&D 6.4% 7 Sony 8 4.1% 8 Fukoku % 9 Asahi 3.1% 10 MetLife Alico 3.0% 11 Others 16.5% New Policy Amount /3 05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 n T&D n Japanese life insurance industry 1 Nippon 18.3% 2 Dai-ichi 14.4% 3 Meiji Yasuda 12.2% 4 Sumitomo 11.9% 5 T&D 7.1% 6 AIG 4 5.4% 7 Mitsui 3.9% 8 Fukoku 3.5% 9 Sony 3.5% 10 Asahi 3.3% 11 Others 16.5% 1 Nippon 13.1% 2 Dai-ichi % 3 Prudential US % 4 T&D 9.8% 5 Sumitomo 7 6.5% 6 Sony 8 6.2% 7 MS&AD 9 5.7% 8 MetLife Alico 5.5% 9 Meiji Yasuda 4.7% 10 Tokio Marine & Nichido % 11 Others 21.6% 1 Source: Compiled by T&D Holdings based on Summary of Life Insurance Business in Japan, Life Insurance Association of Japan The policy amount in force and the new policy amount are the sums of individual insurance and annuities. The new policy amount includes net increase from conversions. Figures from the year ended March 31, 2008, do not include Japan Post Insurance. For convenience, U.S. dollar figures have been calculated at the rate of U.S.$1 = Source: Compiled by T&D Holdings based on Summary of Life Insurance Business in Japan, Life Insurance Association of Japan Insurance premiums, new policy amount, and policy amount in force for the year ended March 31, 2004, are assumed to be (base year). The new policy amount includes net increase from conversions. Figures from the year ended March 31, 2008, do not include Japan Post Insurance. The policy amount in force and the new policy amount include the insured amount of Daido Life s J-type product (insurance for serious diseases) from the year ended March 31, Source: Compiled by T&D Holdings based on Summary of Life Insurance Business in Japan, Life Insurance Association of Japan The policy amount in force and the new policy amount are the sums of individual insurance and annuities and the insured amount of Daido Life s J-type product (insurance for serious diseases). Figures do not include Japan Post Insurance. 4 AIG refers to Alico Japan, AIG Star and AIG Edison. 5 Dai-ichi refers to Dai-ichi and Dai-ichi Frontier. 6 Prudential US refers to Prudential, Gibraltar and Prudential Gibraltar Financial. 7 Sumitomo refers to Sumitomo and Medicare. 8 Sony refers to Sony and AEGON Sony Life. 9 MS&AD refers to Mitsui Sumitomo Aioi and Mitsui Sumitomo Primary. 10 Fukoku refers to Fukoku and Fukokushinrai. 11 Tokio Marine & Nichido refers to Tokio Marine & Nichido Life and Tokio Marine & Nichido Financial. 4 T&D Holdings, inc. Annual Report 2013

6 millions US$ millions ,953,897 27,329,483 27,759,869 27,760,689 30,173,126 31,587,301 $ 335,856 27,023,088 26,182,776 26,610,524 27,111,973 29,432,611 30,658, ,983 1,067,365,081 1,021,458, ,269, ,441, ,437, ,494,143 9,925, ,437, ,971, ,603, ,954, ,303, ,170,629 8,858,805 87,927,677 88,486,421 92,665,631 93,486,818 96,133, ,323,514 1,066,704 66,673,005 61,306,802 60,877,823 63,158,089 66,563,317 72,759, ,623 58,649,531 53,992,757 53,390,849 57,087,202 59,386,143 64,829, ,312 8,023,474 7,314,045 7,486,974 6,070,887 7,177,174 7,929,527 $ 84,311 Population Projection for Japan Thousands 80,000 60,000 40,000 20, ,818 (60.7%) 33,952 (26.8%) 15,827 (12.5%) 2015 n Youth population (0 to 14) n Working-age population (15 to 64) n Elderly population (65 and over) 53,531 (52.4%) 38,564 (37.7%) 10,116 (9.9%) Source: National Institute of Population and Social Security Research, Japan s Future Population Trends (demographic projections as of January 2012) Note: Figures in parentheses represent proportion of total population. Interest in Protection by Type % Sickness, injury, and hospitalization n Head of household Unfortunate events n Spouse Old-age living expenses Source: Japan Institute of Life Insurance, Nationwide Actualities Survey on Life Insurance in Fiscal 2012 (published December 2012) Japan s Share of the Global Life Insurance Market (Insurance Premiums) US$ billions Premium Volume Share 1 U.S.A % 2 Japan % 3 U.K % 4 France % 5 China % 6 Germany % 7 Italy % 8 South Korea % 9 Taiwan % 10 India % 11 Others % World total 2, % Source: Compiled by T&D Holdings based on Swiss Re, sigma No 3/2013 World insurance in 2012 Number of Sales Representatives, Agents, and Employees of Agencies Offices / Persons 120,000 80, ,076 72,382 1,005,471 64,470 1,200, ,000 Utilization of Sales Channels (Private Life Insurers) % ,000 36,023 34, , , , /3 09/3 10/3 11/3 12/ n Individual agents (offices) n Corporate agencies (offices) n Number of employees of agencies (persons) n Year-end number of sales representatives (persons) Source: Life Insurance Association of Japan, 2012 Life Insurance Trends Note: The number of employees of agencies is the total number of employees of corporate and individual agencies. n In-house sales representatives n Direct marketing method n Life insurance company contact points n Post offices and sales representatives n Banks and securities firms n Insurance agency or agency sales people n Workplace and labor unions n Other Source: Japan Institute of Life Insurance, Nationwide Actualities Survey on Life Insurance in Fiscal 2012 (published December 2012) T&D Holdings, inc. Annual Report

7 T&D Life Group s Business Model T&D Holdings, Inc. is the holding company for three core life insurance companies: Taiyo Life Insurance Company, Daido Life Insurance Company, and T&D Financial Life Insurance Company. Each of the three core life insurance companies has a unique business model that is quite different from those of other companies in the industry in terms of markets, marketing channels, and products. Under the holding company structure, the three life insurance companies are focusing on their respective markets and responding to customer needs by leveraging their own strengths. Thanks to this focus, they boast high competitiveness and have earned a high level of trust within the life insurance industry. T&D Life Group s Business Fields Japan Post Insurance Taiyo Household Market, Especially Women Dai-ichi Nippon Worksite Market Death Protection Sony Sumitomo Meiji Yasuda Gibraltar Prudential Gibraltar Financial Dai-ichi Frontier OTC Sales at Fukokushinrai Financial Institutions and Other Agents Mitsui Sumitomo Primary MetLife Alico Aflac T&D Financial Daido SMEs Market Prudential Tokio Marine & Nichido Life Mitsui Sumitomo Aioi NKSJ Himawari Medical ORIX Savings-type Products ING AXA Note: Complied by T&D Holdings Other companies may view the market differently. Taiyo Life Insurance Company Serving Household Insurance Needs Taiyo Life focuses on serving the household market, mainly targeting women, the middle-aged, and elderly people. The company sells comprehensive life coverage, which is centered on death protection and medical/nursing care products. Unlike other life insurers that typically target the workplace, Taiyo Life uses an in-house sales force of women of the same generation as target customers to visit customers at home and provide advice in tailoring policies to specific needs. Based on an extensive customer database and wealth of expertise, Taiyo Life aims to provide coverage for the whole family by broadening its market to include heads of households and children. Market Households Sales channel In-house sales representatives Products Comprehensive coverage centered on death protection and medical/nursing care products 6 T&D Holdings, inc. Annual Report 2013

8 Daido Life Insurance Company Serving the Needs of SMEs Daido Life focuses on the small and medium enterprises (SMEs) market and provides protection for corporations centered on the sale of partner-specific products in collaboration with tie-up groups. The links to entities such as the National Federation of Corporate Taxpayers Associations (NFCTA), the Tax Payment Associations (TPA) and the TKC National Federation have afforded Daido Life s business model a competitive edge over other firms, helping Daido Life to build a leading position in term life insurance in the SME market. Going forward, the firm aims to provide a full range of protection by providing policies that cater to various insurance needs of SME business owners. To this end, Daido Life will offer its core term life insurance and insurance for serious diseases (J-type product), as well as products catering to high-risk individuals, medical insurance (M-type product), other Third Sector products, and savings-type products (Life Gift, etc.) designed for inheritance planning, wealth building and other purposes. Market Sales channel Products Small and medium enterprises (SMEs) In-house sales representatives, Agents (tax accountants, etc.) Term life insurance, insurance for serious diseases, etc. T&D Financial Life Insurance Company Catering to a Variety of Needs through OTC Sales at Financial Institutions and Other Agents T&D Financial Life provides insurance products through independent insurance agents, including banks, securities firms and insurance shop agents. As of the end of March 2013, the firm had expanded its network to 89 agents, establishing a solid sales base centered on Japan s top commercial banks. In the future, T&D Financial Life aims to offer products to serve a broad range of needs, such as post-retirement living expenses and protection for bereaved families. Initiatives here include enhancing and expanding sales channels by strengthening ties with agents and product lineups incorporating customer needs. Market OTC sales at financial institutions and other agents Sales channel Banks, securities firms and insurance shop agents, etc. Products Single premium products and level premium products T&D Holdings, inc. Annual Report

9 Group Performance Years ended March 31 Income from Insurance Premiums (Three Companies) Core Profit (Loss) (Three Companies) Net Income (Loss) (Consolidated) 2, ,000 1, , , (50) 0 09/3 10/3 11/3 12/3 13/3 (50) 09/3 10/3 11/3 12/3 13/3 (100) 09/3 10/3 11/3 12/3 13/3 Income from insurance premiums increased 14.7% year on year to 1,939.6 billion, mainly reflecting increased income from insurance premiums at Taiyo Life and T&D Financial Life due to higher OTC sales at banks. Core profit increased 25.9% year on year to billion, mainly due to increases in interest, dividends and income from real estate for rent and a reversal of policy reserve relating to minimum guarantee risks for variable annuities. Net income increased 138.1% to 63.7 billion, setting a record high. This increase was mainly due to higher ordinary profit, along with the absence of the negative impact of the reversal of deferred income tax assets accompanying the lower corporate tax rates, which was recorded in the previous fiscal year. GROUP BREAKDOWN Year ended March 31, 2013 Taiyo Life New Policy Amount/Policy Amount in Force/MCEV % New Policy Amount Policy Amount in Force MCEV 4,000 25, ,500 22, , ,000 2, , ,500 17, ,000 12/3 13/3 15,000 12/3 13/ /3 13/3 Taiyo Life Daido Life T&D Financial Life nnn New Policy Amount 41.5% 55.8% 2.7% nnn Policy Amount in Force 35.0% 61.6% 3.4% nnn MCEV 38.9% 56.4% 4.7% Change n New Policy Amount 2, , Surrender and lapse amount 1, , n Policy Amount in Force 20, , n MCEV Adjusted net worth Value of in-force business 75.3 (61.5) (136.8) Value of new business (8.2) 8 T&D Holdings, inc. Annual Report 2013

10 New Policy Amount (Three Companies) Policy Amount in Force (Three Companies) Embedded Value (EV) 1 7,500 7,000 7, ,000 60,000 59, ,750 1,500 1, ,500 59,000 1,250 6,000 58,000 1,000 5,500 09/3 10/3 11/3 12/3 13/3 57,000 09/3 10/3 11/3 12/3 13/ /3 10/3 11/3 12/3 13/3 The new policy amount increased 8.0% to 7,158.9 billion, mainly due to strong sales of individual term life insurance at Daido Life, as well as of Taiyo Life s and T&D Financial Life s strong OTC sales at banks. The policy amount in force increased 2.1% to 59,996.5 billion, mainly due to an increase in the new policy amount and a decline in the surrender and lapse amount. Group MCEV increased 7.9% year on year to 1,664.4 billion, mainly due to an increase in adjusted net worth accompanying an increase of the market value of securities, despite a decline in the value of in-force business caused mainly by a decrease in the level of interest rates. 1 EV is represented by EEV from the fiscal year ended March 31, 2009 to March 31, 2011, and Group MCEV from the fiscal year ended March 31, Daido Life 2 T&D Financial Life New Policy Amount Policy Amount in Force MCEV New Policy Amount Policy Amount in Force MCEV 4,500 4,000 3, ,000 37,500 36, ,500 2, , ,500 35, , ,000 32, , ,500 12/3 13/3 30,000 12/3 13/ /3 13/3 0 12/3 13/3 1,500 12/3 13/ /3 13/ Change n New Policy Amount 3, , Surrender and lapse amount 2, ,738.4 (216.0) n Policy Amount in Force 36, , n MCEV Adjusted net worth Value of in-force business (127.2) Value of new business (1.2) Change n New Policy Amount Surrender and lapse amount n Policy Amount in Force 1, , n MCEV Adjusted net worth Value of in-force business (1.2) (14.9) (13.7) Value of new business The new policy amount and the policy amount in force include the insured amount of J-type product T&D Holdings, inc. Annual Report

11 Group Topics Enhanced Disclosure to Shareholders T&D Life Group ESR Disclosure in Step With Full Implementation of ERM From March 31, 2013, the T&D Life Group started disclosing the Economic Solvency Ratio (ESR), which indicates economic value-based solvency, in investor relations presentation materials. In conjunction with disclosure of ESR, the Group has also started providing data on the surplus, which is economic valuebased net assets, as well as economic capital, which represents the economic value-based risk amount. The details of the full implementation of ERM are explained in An Interview with the President on pages 18 to 21. Capital Adequacy Indicator (As of March 31, 2013) Surplus ESR 150% 1,524.3 billion Economic capital 1,013.6 billion T&D Life Group MCEV Disclosure The T&D Life Group began to disclose its embedded value in compliance with the European Insurance CFO Forum Market Consistent Embedded Value Principles (MCEV Principles) from March 31, The Group has been disclosing its European embedded value (EEV) with market consistent methodology. The Group has transitioned to disclosure of MCEV for further improvement of its embedded value disclosure and consistency with the Group s risk management on an economic value basis accompanying full implementation of ERM. For details of MCEV, please refer to the separate Market Consistent Embedded Value Report T&D s History of EV Disclosure TEV From March 31, 2007 EEV Adopted a market consistent approach Improved comparability From March 31, 2013 MCEV Enhanced risk assessment 10 T&D Holdings, inc. Annual Report 2013

12 Insurance companies with a long history in the T&D Life Group Taiyo Life Insurance Company 120th Anniversary Taiyo Life was founded as the Nagoya Life Insurance Co., Ltd. in Thanks to the support of its stakeholders, Taiyo Life celebrated its 120th anniversary in May Over the past 120 years, Taiyo Life has been steadily taking initiatives and transforming itself in response to changes in society. As part of these efforts, Taiyo Life started implementing paperless and cashless contract procedures in March All corporate officers and employees of Taiyo Life will make a concerted effort to fulfill the company s commitment to delivering peace of mind to people. Former head office building completed in 1930 (Nihonbashi, Tokyo) Daido Life Insurance Company 110th Anniversary Daido Life was born in 1902 through the merger of three life insurance companies and celebrated its 110th anniversary in July Kajimaya (Hirooka family), a prominent merchant in Osaka during the Edo period ( ), laid the foundation of Daido Life. In the 1970s, Daido Life made a major shift in its marketing strategy to focus on term life insurance, and established a distinctive business model targeting the corporate market through tie-ups with various groups. Staying true to the founding corporate mottos of Customer-oriented Service and Stable Management, Daido Life has continuously embraced challenges in step with changes in the times. Looking ahead, Daido Life will continue to work on bringing the greatest peace of mind and the utmost satisfaction to its customers. Kajimaya (Hirooka head family house) located near Tosabori River in Osaka T&D Financial Life Insurance Company Ten Years Since its Reorganization and the Launch of OTC Sales at Banks T&D Financial Life, formerly Tokyo Life Insurance Company, joined the T&D Life Group in October 2001 as a strategic company focused on OTC sales at financial institutions. In October 2002, the company began OTC sales at banks. During the four years following its reorganization, T&D Financial Life ran its business using both the sales representative channel and the OTC sales channel at financial institutions. In September 2005, however, the company transferred the sales representative channel to Taiyo Life and Daido Life, and made a new start as a company specializing in OTC sales at financial institutions and other agents. Playing a key role as a strategic company in the T&D Life Group focused on OTC sales at financial institutions and other agents, T&D Financial Life will further strengthen its business models. A poster announcing the operational start of T&D Financial Life T&D Holdings, inc. Annual Report

13 Fiscal 2012 Management Review The Group recorded solid results in fiscal 2012 in terms of both sales performance and earnings. The aim going forward is to continue growing corporate value by reinforcing the Group s robust financial base and working to increase the profitability of the core life insurance business. For details, please refer to the Business Overview and the separate Market Consistent Embedded Value Report SALES RESULTS EARNINGS EMBEDDED VALUE (EV) The aggregate new policy amount of the three life insurance companies Ordinary profit Group MCEV 7,158.9 billion billion 1,664.4 billion 8.0% increase 30.7 billion increase billion increase The aggregate policy amount in force of the three life insurance companies Net income Value of new business 59,996.5 billion 63.7 billion 61.6 billion 2.1% increase 36.9 billion increase 6.6 billion decrease 12 T&D Holdings, inc. Annual Report 2013

14 Policy Results 1 For fiscal 2012, the aggregate new policy amount for the Group s three life insurance companies increased 8.0% year on year to 7,158.9 billion. The surrender and lapse amount declined 4.6% year on year to 4,071.3 billion. Consequently, as of March 31, 2013, the policy amount in force was 59,996.5 billion, a 2.1% year-on-year increase. 1. Includes individual insurance and individual annuities, as well as Daido Life s J-type product. The new policy amount increased 2.1% at Taiyo Life, 8.9% at Daido Life, and 267.9% at T&D Financial Life. At Taiyo Life, the total new policy amount for individual insurance and individual annuities increased by 2.1% from the previous fiscal year, due to strong OTC sales at banks. The surrender and lapse rate improved 0.23 of a percentage point chiefly due to continuing efforts to improve the quality of the company s underwriting policy, reaching the lowest level in the past 10 years. As a result, the policy amount in force surpassed 21 trillion. This was a record level for the fourth straight year. In fiscal 2013, Taiyo Life aims to achieve a sustained increase in the policy amount in force, by continuing to deliver high-quality products and services. To this end, Taiyo Life will steadily refine Hoken Kumikyoku Best in line with customer needs. At Daido Life, the comprehensive new policy amount new policy amount including the insured amount of the company s core J-type product (non-participating insurance for serious diseases) increased by 8.9% over the previous fiscal year. The surrender and lapse rate improved 0.55 of a percentage point year on year, reaching its lowest-ever level in the past 10 years. In fiscal 2013, Daido Life will continue stepping up the integrated promotion of core products, namely partner-specific products based on tie-ups in the SME market, and the J-type product. Together with these core products, Daido Life will provide the new M-type product (medical insurance (rider)) to deliver a full range of protection, with the aim of attaining stable and sustainable growth. T&D Financial Life s new policy amount rose 267.9% year on year atop strong sales of the company s core product Shougai Premium Japan [non-participating whole life insurance (accumulation rate-selective type I)] and whole life insurance which focuses on inheritance planning needs [non-participating whole life insurance (increasing death benefit type I)]. In fiscal 2013, T&D Financial Life will continue its efforts to diversify its products and sales channels through a multi-track approach. Measures will include enhancing its product lineup incorporating customer needs and increasing the number of financial institutions and insurance shop agents. In doing so, T&D Financial Life seeks to increase the new policy amount and the policy amount in force, with the aim of enhancing its corporate value. New Policy Amount 8,000 Policy Amount in Force 80 Surrender and Lapse Rate % 12 6, , , /3 12/3 13/3 0 11/3 12/3 13/3 0 11/3 12/3 13/3 n Taiyo Life 2, , , n Daido Life 3, , , n T&D Financial Life Total 6, , ,158.9 Total Fiscal 2013 Policy Results Forecasts FY 2013 forecasts YoY change FY 2012 results FY 2011 results New Policy Amount 7,140 (0.3)% 7, ,630.9 Taiyo Life 3, % 2, ,911.9 Daido Life 3,830 (4.1)% 3, ,666.7 T&D Financial Life % Policy Amount in Force 60, % 59, ,780.1 Taiyo Life 21, % 21, ,234.1 Daido Life 37, % 36, ,557.3 T&D Financial Life 1,900 (6.9)% 2, ,988.6 Surrender and Lapse Rate Taiyo Life 5.90% 6.11% 6.34% Daido Life 7.50% 7.49% 8.04% T&D Financial Life 3.50% 4.86% 4.39% T&D Holdings, inc. Annual Report

15 Fiscal 2012 Management Review EARNINGS In fiscal 2012, ordinary profit rose due to an increase in net investment income. Net income increased sharply to a new record, partly due to the absence of the negative impact of the reversal of deferred income tax assets accompanying lower corporate tax rates, which was recorded in the previous fiscal year. Ordinary Profit/Net Income (Consolidated) Ordinary profit increased by 30.7 billion to billion, mainly due to increased net investment income supported by higher interest, dividends and income from real estate for rent. In terms of extraordinary losses, a provision of 24.8 billion was recorded for a provision for reserve for price fluctuations including additional internal reserves in excess of legal requirements of 8.7 billion at Daido Life, and 12.0 billion at Taiyo Life. Reflecting these factors, net income rose by 36.9 billion to 63.7 billion. Excluding one-time factors such as the reversal of reserve for outstanding claims due to the effect of the Great East Japan Earthquake and the impact of lower corporate tax rates recorded in the previous fiscal year, net income increased 18.6 billion year on year. Core Profit The core profit for the Group s three life insurance companies increased 37.5 billion year on year to billion, despite the absence of the 8.3 billion impact of the reversal of reserve for outstanding claims due to the effects of the Great East Japan Earthquake, which was recorded in the previous fiscal year. One of the main contributing factors was a 21.8 billion increase in interest, dividends and income from real estate for rent. Another factor was a 22.3 billion increase in the reversal of the policy reserve relating to minimum guarantee risks at T&D Financial Life, which was booked as core profit, due to a rise in stock prices in Japan and overseas. In addition, the negative spread of the three life insurance companies improved by 22.1 billion to a positive spread of 1.8 billion. Fiscal 2013 Forecasts Ordinary revenues are projected to fall by around 300 billion to about 2,120 billion, mainly based on an anticipated decline in income from insurance premiums from OTC sales at banks. Ordinary profit is projected to increase by around 13 billion, to about 165 billion, mainly based on an expected decline in investment expenses, as well as a reversal of the policy reserve relating to minimum guarantee risks at T&D Financial Life. Net income is expected to increase by approximately 2 billion to 66 billion. Ordinary Profit 200 Net Income 80 Core Profit (Loss) /3 12/3 13/3 0 11/3 12/3 13/ /3 12/3 13/3 n Taiyo Life n Daido Life n T&D Financial Life (4.8) Total Fiscal 2013 Forecasts 1 FY 2013 forecasts YoY change FY 2012 results FY 2011 results Ordinary revenues 2,120 (12.4)% 2, ,104.1 Income from insurance premiums 1,740 (10.3)% 1, ,690.3 Ordinary profit % Core profit 157 (13.9)% Net income % The economic assumptions for the earnings forecasts are as follows: Nikkei Stock Average: 11, Foreign currency: (U.S.$/ ) (Euro/ ) year JGB yield: 0.754% 10-year U.S. treasury bond yield: % 1 Ordinary revenues, ordinary profit, and net income are T&D Holdings consolidated figures. Income from insurance premiums and core profit are the simple sum of the three life insurance companies. 14 T&D Holdings, inc. Annual Report 2013

16 Investment Under the Group investment policy, the T&D Life Group ensured stable income by investing mainly in yen-denominated income assets, while also working to increase investment income by investing flexibly according to market movements within each life insurance company s risk tolerance. Group Investment Policy Under the principle of securing assumed interest yield and giving careful consideration to attribution of liability and risk tolerance, the Group investment policy is to increase investment returns stably in compliance with the risk taking policy set as the Group s common policy. To ensure stable income, we invest mainly in yen-denominated income assets, while also investing in such risk assets as domestic and foreign stocks and foreign bonds within each life insurance company s risk tolerance, taking into consideration risk and returns. Net Exposure to Domestic Stocks and Foreign Currency The net exposure to domestic stocks and foreign currencies of Taiyo Life and Daido Life remains at an appropriate level due to well-planned initiatives to reduce risk assets since the global financial crisis. As of March 31, 2013, net exposure of general account assets to domestic stocks was 5.3% for Taiyo Life and 4.7% for Daido Life. Foreign currency exposure after taking into account general account exchange hedging was 7.2% for Taiyo Life and 3.1% for Daido Life. Gains (Losses) on Sales of Securities and Devaluation Losses on Securities The T&D Life Group recorded net gains on sales of securities and devaluation losses on securities of 13.1 billion, an increase of 8.6 billion year on year. Net Unrealized Gains (Losses) on Securities Net unrealized gains on securities were billion, up billion from the previous fiscal year. This increase was mainly due to lower interest rates in Japan and overseas, rising stock prices and the yen s depreciation. Net Exposure 1 (Fiscal 2011 Fiscal 2012) Taiyo Life Daido Life Net exposure to domestic stocks 2 3.4% 5.3% 5.2% 4.7% Foreign currency exposure 3 3.1% 7.2% 3.0% 3.1% 1 Each company calculates its exposure percentages using its own method. 2 Net exposure to domestic stocks includes stock futures, stock investment trusts, and stocks, etc., in monetary trusts, etc. 3 Foreign currency exposure reflects foreign currency hedges, etc. Gains (Losses) on Sales of Securities and Devaluation Losses on Securities Three companies total Taiyo Life Daido Life Change Change Change JGBs, other bonds (1.0) 0.2 (1.3) Stocks, etc. (4.7) 2.2 (6.9) (3.7) 10.7 (14.5) (4.0) (8.5) 4.5 Foreign securities 6.8 (0.7) (0.0) 2.0 (5.6) 7.6 Others (3.4) (2.0) (1.4) (3.4) (2.0) (1.4) Total (3.7) (6.5) (15.8) 9.3 Net Unrealized Gains (Losses) on Securities 4 Three companies total Taiyo Life Daido Life Change Change Change Domestic bonds Domestic stocks Foreign securities Other securities 9.9 (1.3) (1.9) 6.1 Others Total Relates to securities with fair values. T&D Holdings, inc. Annual Report

17 Fiscal 2012 Management Review Capital Financial Soundness The solvency margin ratios of the three life insurance companies as of March 31, 2013 were 823.4% for Taiyo Life, 1,043.2% for Daido Life, and 648.4% for T&D Financial Life. The T&D Life Group thus has sufficient financial soundness. In order to further reinforce financial soundness in preparation for further strengthening of regulations that are expected going forward, we will continue to accumulate internal reserves. For fiscal 2012, Taiyo Life set aside 12.0 billion and Daido Life set aside 8.7 billion as additional internal reserves in excess of legal requirements related to provision for reserve for price fluctuations. For fiscal 2013, Taiyo Life expects to set aside 7.5 billion and Daido Life expects to set aside 12.0 billion as additional internal reserves in excess of legal requirements related to provision for reserve for price fluctuations. Returns to Shareholders In deciding the payout ratio, the Group first takes into consideration maintaining sufficient equity capital to ensure the financial soundness of its three life insurance companies. Over the medium- and long-term, T&D Holdings aims to stably return profits to shareholders based on a total return to shareholders ratio of approximately 30% of adjusted net income, which is net income plus additional internal reserves in excess of legal requirements related to reserves for contingency and price fluctuations, after taxes. Adjusted net income for fiscal 2012 was 78.0 billion. In fiscal 2012, T&D Holdings provided a total return to shareholders of 18.1 billion, comprising a cash dividend of per share and a share buyback involving the repurchase of 2.1 million shares at a total cost of approximately 3.0 billion. T&D Holdings also plans to pay a dividend of per share for fiscal Solvency Margin Ratio Change T&D Holdings Consolidated 943.8% 810.6% 133.2P Taiyo Life 823.4% 747.3% 76.1P Daido Life 1,043.2% 851.9% 191.3P T&D Financial Life 648.4% 553.7% 94.7P Annual Shareholders Dividends and Adjusted Net Income Years ended March Annual dividend per share ( ) Total dividends () Adjusted net income () Net income (loss) () Excess amount of reserve for contingency and price fluctuations, after taxes () The Company conducted a 2-for-1 stock split of common stock on October 1, The Company conducted a share buyback (at a total cost of approximately 3.0 billion) in addition to cash dividend payout. Embedded Value (EV) The Group MCEV as of March 31, 2013 stood at 1,664.4 billion, an increase of billion from the value as of March 31, This mainly reflected an increase in adjusted net worth due to an increase in the market value of securities, despite a decrease in the value of in-force business caused largely by a decrease in the level of interest rates. In addition, the value of new business was 61.6 billion, down 6.6 billion year on year mainly due to lower interest rates. From March 31, 2013, the Group has transitioned from disclosure of EEV to MCEV, with the view to enhancing EV disclosure. Risk assessment for MCEV employs the same internal model as risk management based on an economic value basis under ERM. Accordingly, the transition to MCEV will also increase consistency with risk management based on economic value. The T&D Life Group will continue to position EV as a key indicator of corporate value, as it endeavors to increase EV in a stable and sustainable manner. Embedded Value/Value of New Business 2,000 1,500 1,000 n Adjusted net worth 1, ,435.8 n Value of in-force business MCEV 1, ,638.0 n Value of new business Net asset value of non-covered business Group MCEV 1, , /3 13/3 Movement Analysis in MCEV from March 31, 2012 MCEV as of March 31, ,516.7 Capital movements (15.1) Expected existing business contribution (reference rate) New business value Expected existing business contribution (in excess of reference rate) Experience variances (10.4) Assumption changes Economic variances (18.7) (10.9) Other nonoperating variances MCEV as of March 31, , T&D Holdings, inc. Annual Report 2013

18 An Interview with the President Full Implementation of ERM What benefits do you expect from introducing ERM? page 18 What is the current status of your capital adequacy? page 19 What progress have you made in reducing EV volatility? Could you please go over your capital efficiency indicators (profitability)? page 20 page 20 Kenji Nakagome Representative Director and President Are there any changes in your shareholder return policy following the full implementation of ERM? page 21 Growth Strategy Could you please share your perspectives on the T&D Life Group s growth prospects? Driving further growth in the life insurance business Initiatives in new businesses page 22 page 22 page 23 What is the growth potential of the Japanese life insurance market? page 24 T&D Holdings, inc. Annual Report

19 An Interview with the President What benefits do you expect from introducing ERM? The T&D Group positions Enterprise Risk Management (ERM) as a management framework to grow corporate value stably and sustainably through integrated management of capital, profit, and risk. As the risks surrounding insurance companies become increasingly diverse and complex, the T&D Life Group intends to pursue capital efficiency (profitability) while ensuring capital adequacy (financial soundness and stability) through integrated risk management, with the aim of increasing corporate value stably and sustainably. ERM is a fresh approach to risk management. Rather than avoiding or reducing risk in the traditional passive manner, ERM is a strategic risk management approach based on the active targeting of performance indicators, namely, raising corporate value and maximizing income. The introduction of ERM will enable us to quantify various risks so that we can make a rational assessment concerning the magnitude of the risks assumed by the Group relative to the financial strength of the Group. In addition to capital adequacy, ERM aids rational decision-making in the area of capital efficiency (profitability) by providing new decision-making criteria for selecting acceptable risks. ERM is designed to drive stable and sustainable growth in corporate value through the integrated management of capital, profit, and risk. To achieve this goal, we will enhance and strengthen our management structure as we build a powerful framework that is resilient to changes in market conditions by taking on risk in a proper and efficient manner. ERM Framework Aim Integrated capital, profit, and risk management based on economic value to grow corporate value stably and sustainably Manage business by enhancing capital efficiency while ensuring capital adequacy Capital adequacy (financial soundness and stability) Maintain a comfortable capital level Appropriate risk management (control EV volatility) Stable and sustainable growth of corporate value Capital adequacy EV stability Capital efficiency (profitability) Enhance ROEV Appropriate capital management EV growth 18 T&D Holdings, inc. Annual Report 2013

20 What is the current status of your capital adequacy? Our capital adequacy has been increasing as a result of the beneficial impact of well-planned initiatives to reduce risks. In regard to capital adequacy, we have made two major changes. First, we changed the capital adequacy indicator in our disclosures from the economic capital (EC) ratio to the Economic Solvency Ratio (ESR). Second, we began disclosing the surplus and economic capital. Although the Group previously employed the EC ratio as a capital adequacy indicator, the Group has decided to disclose ESR, which indicates the economic value-based solvency ratio. ESR is the inverse of the conventional EC ratio, with the numerator and denominator reversed. ESR is calculated by dividing the surplus by economic capital: ESR = surplus / EC. As shown in the diagram, the Group had an ESR of 150% as of March 31, 2013, indicating a sufficient capital buffer exceeding the risk amount. Going forward, the Group s basic policy is to consistently maintain a comfortable capital adequacy ( A rating level or above). ESR Comfortable capital level (Consistently maintain an A rating level or above) Current internal model ESR (Surplus/EC) 150% BBB rating equivalent (100%) Maintain minimum capital level 1, ,013.6 Surplus (economic value-based net assets) EC (Economic value-based capital = risk amount) 2011/ / / / / / / / /03 High Low ESR Equivalent to A rating (VaR: 99.93%) Equivalent to BBB rating (VaR: 99.5%) Comfortable capital level Maintain minimum level of financial soundness Measures to ensure capital adequacy ESR: A rating level and above Maintain capital at a comfortable level through ERM ESR: Above BBB rating level and under A rating level Attain a comfortable capital level through well-planned risk reduction and steady surplus accumulation Risk amount < Capital Adequate Capital (100%) Risk amount > Capital Deficient capital T&D Holdings, inc. Annual Report

21 An Interview with the President What progress have you made in reducing EV volatility? Reducing EV volatility is one aspect of our efforts at the T&D Life Group to enhance EV stability. In specific terms, we have lengthened the duration of bonds to reduce duration mismatch between assets and liabilities based on a plan. We have also reduced our exposure to equities and other risk assets. These measures have lowered EV sensitivities to fluctuations in interest rates, stock prices, and real estate prices. As of March 31, 2013, we believe that the T&D Life Group had made steady progress on reducing EV sensitivities to fluctuations in interest rates, stock prices, and real estate prices through well-planned risk reduction. EV Sensitivities Trend in EV Sensitivities 50 basis point decrease in risk-free rate 10% decrease in equity and real estate values 0% 10.0% 9.8% 9.0% 9.7% 12.6% 9.5% 11.6% 6.6% 10.1% 5.7% 9.8% 5.0% 9.6% 5.1% 20.0% Market Indices 25.8% 30.0% 2007/ / / / / / / / / / / / / /03 Nikkei Average (Yen) 17, , , , , , , Year JGB yield (%) 1.659% 1.284% 1.353% 1.400% 1.260% 0.989% 0.551% Could you please go over your capital efficiency indicators (profitability)? The T&D Life Group positions ROEV as a key performance indicator for capital efficiency. The Group is targeting ROEV of 7.5% and above as its mediumto long-term profit target. Over the past few years, the Group has concentrated its efforts primarily on enhancing capital adequacy. Consequently, we have achieved a measure of success in such areas as improving the ESR level and reducing EV volatility. Going forward, while ensuring capital adequacy, we aim to maintain and further enhance our capital efficiency, with the view to increasing our corporate value stably and sustainably. ROEV* 7.5% and above * Annual increase in MCEV (less capital movements)/ Annual average of MCEV 20 T&D Holdings, inc. Annual Report 2013

22 Are there any changes in your shareholder return policy following the full implementation of ERM? There has been no change in our policy of steadily returning profit to shareholders based on a total return to shareholders ratio of approximately 30% of adjusted net income over the medium- and long-term. For example, we will not decide to increase shareholder returns simply because ESR reaches a certain threshold in percentage terms. We will consider shareholder returns as part of our capital policy, taking into account a comprehensive range of factors, such as the capital adequacy level, stock price, competitive landscape and future outlook. In fiscal 2012, we returned profit to shareholders by combining cash dividends with a stock buyback. Looking ahead, we plan to consider the total return to shareholders based on adjusted net income in terms of a combination of stable cash dividends and flexible stock buybacks based on the stock price level and other factors. Actual return to shareholders (fiscal 2012) Adjusted net income 1 1) Adjusted net income ( 78.0 billion) Net income ( 63.7 billion) Internal reserves in excess of legal requirements, after taxes ( 14.3 billion) 1 Net income plus internal reserves in excess of legal requirements, after taxes Total return to shareholders 2) Total return to shareholders ( 18.1 billion) Cash dividend 2 ( 15.1 billion) Share buyback ( 3.0 billion) 2 Shareholders dividend per share for the year ended March 31, 2013 was T&D Holdings, inc. Annual Report

23 An Interview with the President Could you please share your perspectives on the T&D Life Group s growth prospects? Considering the challenging business environment since the global financial crisis, management issues on the risk management front and other factors, the T&D Life Group has pressed ahead with developing and implementing an ERM framework and conducting Group management with an emphasis on ensuring financial soundness. In regard to financial soundness, the T&D Life Group has made progress on reducing EV volatility through risk reduction and other measures undertaken to date. The upturn in financial market conditions has also led to a dramatic improvement in the Group s financial soundness indicators. Against this backdrop, we believe that the T&D Life Group s business stage has shifted from giving top priority to ensuring financial soundness and restoring earnings, to one where we must pursue growth through new initiatives, while maintaining our financial soundness. Besides driving further growth in our core life insurance business, we believe that initiatives in new businesses have become increasingly important. Driving Further Growth in the Life Insurance Business The T&D Life Group is implementing a unique integrated business model where each of its three life insurance companies is focused on different markets, sales channels, and products. Specifically, Taiyo Life focuses on the household market, while Daido Life specializes in serving the SME market, and T&D Financial Life specializes in OTC sales at financial institutions and other agents. This sales strategy is quite distinct from that of other life insurance companies. As business performance languishes across the life insurance industry as a whole, the T&D Life Group has consistently delivered relatively steady business results. Looking at its business performance for the past 10 years, the T&D Life Group has grown the policy amount in force, even as this measure has decreased sharply for the industry as a whole. We are confident that our strategy of clear differentiation from the major life insurance companies will continue to enhance the T&D Life Group s market presence. The T&D Life Group will endeavor to achieve stable and sustainable growth by having its three life insurance companies, namely Taiyo Life, Daido Life and T&D Financial Life, maintain and reinforce their unique business models. (Please refer to pages for details of the strategies pursued by each of the three life insurance companies.) 22 T&D Holdings, inc. Annual Report 2013

24 The Business Models of the T&D Life Group s Three Life Insurance Companies Taiyo Life Daido Life T&D Financial Life Market Households Small and medium enterprises (SMEs) OTC sales at financial institutions and other agents Sales channel In-house sales representatives In-house sales representatives, agents (tax accountants, etc.) Banks and securities firms, insurance shop agents, etc. Products Comprehensive coverage including death protection and medical/ nursing care products Term life insurance, insurance for serious diseases, etc. Single premium products and level premium products Initiatives in New Businesses Our growth strategy for the T&D Life Group is focused mainly on supporting organic growth by Taiyo Life, Daido Life and T&D Financial Life. On the other hand, by leveraging the advantages of the Group s structure as a holding company, we also intend to implement measures to realize external growth by pressing ahead with alliances, mergers and acquisitions. In regard to initiatives that will complement and spur growth in the core businesses of the Group s three life insurance companies, and those that will help to diversify sources of profit, T&D Holdings will work closely with each life insurance company to conduct initiatives such as executing strategic investments from a Group-wide perspective. We are also investing Group resources to develop the Group s existing businesses such as asset management and pet insurance. (Please refer to pages for details of the asset management and pet insurance businesses.) T&D Holdings, inc. Annual Report

25 An Interview with the President What is the growth potential of the Japanese life insurance market? There is a commonly held view that life insurance in Japan is a mature industry with few prospects of growth, given that Japan s population is falling due to aging with a low birthrate, and a high percentage of households that already have life insurance. It is true that the life insurance market in Japan has shrunk drastically over the past 10 years as measured by the total of policy amount in force of individual life insurance and annuities, as well as the new policy amount. Yet, I believe that it would be rash to conclude that there is no longer any room for Japan s life insurance market to grow. In Japan, although demand for large death protection coverage for heads of households (protection for bereaved families) is decreasing due to low birthrates, demand is growing for post-retirement wealth accumulation products and Third Sector products, such as medical care and nursing care insurance, as the aging of society progresses. Furthermore, new sales channels are expanding such as OTC sales at banks and insurance shops. Some life insurance companies are growing their business performance by capitalizing on these changes in market needs and sales channels. And some foreign-based life insurance companies conducting business globally see the Japanese life insurance market as an attractive growth market. The T&D Life Group also shares this view. A comparison of the Japanese life insurance market with the life insurance markets of overseas countries highlights the Japanese market s appeal. First, in terms of scale, the Japanese life insurance market is second only to that of the U.S. based on premiums written. Second, Japan is also one of the world s most profitable life insurance markets because of the high proportion of protection products, high average life expectancy and health-conscious population. Third, there is good reason to believe the private life insurance sector will play an even larger role in the future in supplementing Japan s social security system. The life insurance market in Japan is therefore rare in the world in combining scale, profitability, and potential for future growth. Japanese Average Life Expectancy Age (Reference) Life Expectancy in Major Countries Age Male Female Italy France Germany U.K South Korea U.S.A China India n Male n Female Source: Ministry of Health, Labour and Welfare, The 21st Life Tables (Complete Life Table) Source: WHO, World Health Statistics T&D Holdings, inc. Annual Report 2013

26 Business Overview Taiyo Life Insurance Company page 26 Daido Life Insurance Company page 30 T&D Financial Life Insurance Company page 34 T&D Asset Management Co., Ltd. page 38 Pet & Family Small-amount Short-term Insurance Company Pet & Family Small-amount Short-term Insurance Company page 40 T&D Holdings, inc. Annual Report

27 Business Overview Focusing on life insurance sales in the household market, we will provide leading-edge products and services by leveraging our superior sales capabilities, aiming to expand our customer base and increase the policy amount in force. Katsuhide Tanaka Representative Director and President Management Targets Fiscal 2013 n Policy amount in force 21,830 billion n New policy amount 3,040 billion Fundamental Strategy n Promote unique marketing methods utilizing a wide customer base of women and middle-aged and elderly people n Offer comprehensive coverage that meets customer needs for death protection as well as medical and nursing care insurance through the in-house sales representative channel in the household market n Win new customers by increasing the number of sales representatives and enhancing productivity Business Model Market Sales channel Products Households In-house sales representatives Comprehensive coverage centered on death protection and medical/ nursing care products PERFORMANCE AND OPERATIONAL REVIEW In fiscal 2012, ended March 31, 2013, the new policy amount (individual insurance and individual annuities) increased 2.1% year on year, to 2,974.3 billion. The surrender and lapse rate decreased by 0.23 of a percentage point to 6.11%. The policy amount in force surpassed 21 trillion for the first time, reaching 21,023.2 billion, up 3.9% from the previous fiscal year-end. This was a record level for the fourth straight year. As of March 31, 2013, MCEV was billion, up 81.6 billion year on year. In fiscal 2012, Taiyo Life implemented the following measures on the product and sales fronts. First, on the product front, Taiyo Life continued working to enhance its mainstay product Hoken Kumikyoku Best, in order to provide customers with lifelong high-quality support and services according to the changing stages of their lives. In July 2012, Taiyo Life extended the permissible period for reviewing insurance benefit plans from two years before policies mature to three months, while expanding insurance categories eligible for review. As a result, Taiyo Life can now provide insurance review proposals to customers seeking to review insurance benefit plans whose needs it was previously unable to meet. Furthermore, in April 2013, Taiyo Life revised Hoken Kumikyoku Best by expanding the scope of hospitalization and surgery coverage. As a result, Hoken Kumikyoku Best now provides upgraded coverage, including protection for sameday hospital care and an expanded scope of surgery coverage. Next, on the sales front, Taiyo Life strove to enhance the training and educational framework for sales representatives. Specifically, Taiyo Life increased the number of personnel responsible for sales force training, while revamping the training system for new sales representatives. By increasing training hours and revising the training curriculum, Taiyo Life sought to improve the quality and amount of training for sales representatives. At the same time, to enhance the consulting skills of sales representatives, Taiyo Life is also encouraging sales representatives to gain financial planning qualifications. A total of 1,188 people gained the FP qualification in fiscal 2012, bringing the total number of qualified people to 2,448. FUNDAMENTAL STRATEGY Established in 1893, Taiyo Life celebrated its 120th anniversary in May The company rebuilt its business in the postwar period as a mutual insurance company. From the 1950s, the company 26 T&D Holdings, inc. Annual Report 2013

28 New Policy Amount/Policy Amount in Force/ Surrender and Lapse Amount/Surrender and Lapse Rate trillions % In-house Sales Representatives People ,000 8,000 8,226 9,014 9,102 8,886 8, , % % 6.25% 6.34% 6.11% ,000 2,000 2,559 1,949 2,800 2,563 2,007 2,475 2,333 2,548 2,691 2, /3 10/3 11/3 12/3 13/ /3 10/3 11/3 12/3 13/3 n New Policy Amount (left scale) n Policy Amount in Force (left scale) n n Surrender and Lapse Amount (left scale) Surrender and Lapse Rate (right scale) n Newly registered n In-house sales representatives n Deregistered adopted a unique marketing strategy focused on high volume sales of shortterm endowment insurance a highly savings-oriented product in the household market to housewives through doorto-door sales activities. As a result, Taiyo Life has built a unique customer base centered on middle-aged and elderly people as well as women, with 7.02 million policies in force. A combination of prolonged low interest rates, declining birthrates, increasing life expectancy, and deregulation produced major changes in the operating environment of the Japanese life insurance industry from the mid-1990s. Taiyo Life quickly adapted to these changes. Responding to the changing needs of customers, the company shifted its sales emphasis from savings-oriented products to protection-oriented products, such as death protection as well as medical and nursing care insurance. Taiyo Life continues to emphasize the provision of products to the household market through in-house sales representatives, focusing mainly on middle-aged and elderly people as well as women. Taiyo Life s basic marketing strategy is to expand sales of comprehensive coverage including death protection and medical and nursing care products in the household market a strategy quite different from that of other large domestic life insurers. Whereas other major life insurers have pursued a strategy of extending their marketing networks nationwide, Taiyo Life is conducting sales activities closely tied to metropolitan areas and major regional cities with high population densities. This enables the company to carry out home-visit marketing activities with efficiency and cultivate the household market in greater depth. Moreover, in contrast to most large Japanese life insurers, whose core sales target is the worksite market, Taiyo Life uses its extensive customer base to employ a sales consulting approach in which sales representatives visit customers at home and can take more time to discuss the insurance needs of the customer. Overview of Mainstay Products for Taiyo Life s Hoken Kumikyoku Best n Flexible custom-made design to match customer needs n Flexible revision according to changing needs n Introduction of new protection (nursing care protection, surgery coverage, hospitalization protection with lump-sum benefits) n More reasonably priced than existing products All protection treated as basic policy. Customers can flexibly add or drop the protection parts to meet their needs Death protection Medical protection Protection for three major diseases and nursing care Future life events Lifetime death protection Hospitalization coverage Coverage for three major diseases Living benefits/savings-type insurance Additional death protection for limited term Surgery coverage Nursing care protection Individual annuities T&D Holdings, inc. Annual Report

29 Business Overview Taiyo Life s Sales Strategy Taiyo Life Other major life insurance companies Focused on metropolitan areas, major regional cities Nationwide marketing In-house sales reps Direct home visits n Flexibly designed products matched to the needs of customers such as for death protection, and medical and nursing care protection n Visit customers on a timely basis according to the life stage of policyholders based on customer data In-house sales representatives, agents, etc. Households Target households starting with housewives Corporate customers, government entities, and households (household heads) Solid customer base: number of policies 7.02 million FUTURE GROWTH Launched in October 2008, Hoken Kumikyoku Best differs from conventional insurance plans in that it allows for combinations of individual insurance coverage (basic policies) through Hoken Kumitate Tokuyaku rider. This serves to boost the freedom of insurance planning and revision, while also making products more easily understood and more affordably priced. In March 2010, Taiyo Life launched Seikatsu Ohen Hoken (nonparticipating income protection policy) followed by Sogo Nenkin Relay Plan in July 2010, which combines Seikatsu Ohen Hoken with individual annuities, making it a product that meets all postretirement needs and offers coverage throughout one s life. In March 2011, Taiyo Life launched Seikatsu Ohen Hoken (nursing care), a non-participating nursing care income protection insurance policy, expanding its lineup of nursing care protection products. Launched in October 2008, Hoken Kumikyoku Best uses a basic policy to provide protection while offering the freedom to tailor other aspects to customer needs. Cumulative sales reached over 6 million basic policies 4 years and 6 months after the launch of sales. This product enables Taiyo Life to provide many customers with lifelong high-quality, fine-tuned support and services as their circumstances change. By continuing to drive the evolution of Hoken Kumikyoku Best in line with customer needs, Taiyo Life will deliver high-quality products and services to the household market, with the aim of further expanding the customer base and increasing the policy amount in force. In November 2011, with the aim of offering high-quality products and services to even more customers, Taiyo Life began selling single premium fixed annuity insurance through banks. Also Taiyo Life launched juvenile insurance in August 2012 and medical insurance in April 2013 to expand its product range to include installment premium policies in these categories. New Policyholders by Gender %, based on number of policies Taiyo Life Industry Total Female l 65.0% l 49.5% Male l 35.0% l 50.5% Source: Compiled by T&D Holdings based on Summary of Life Insurance Business in Japan (Fiscal 2012), Life Insurance Association of Japan 28 T&D Holdings, inc. Annual Report 2013

30 Evolution of Hoken Kumikyoku Best Introduction Oct Jun Introduction of Hoken Kumikyoku Best Launch of single premium endowment insurance Oct Start offering additional designated coverage Mar Launch of Seikatsu Ohen Hoken Jul Launch of Sogo Nenkin Relay Plan Evolution Mar Apr Launch of Seikatsu Ohen Hoken (nursing care) Product revisions related to medical coverage Enhancing Customer Service To offer an improved service to customers, Taiyo Life implements paperless and cashless contract procedures, while conducting insurance consultations, medical checks for underwriting and other activities through web camerabased videoconferencing functions. In December 2012, Taiyo Life shifted to paperless procedures for matured endowment payments and annuity payments. This has enabled the in-house sales representatives to perform the necessary procedures to conclude insurance policy contracts, process matured endowment payments and complete other tasks on a paperless, cashless basis using mobile devices (touch-screen notebook PCs). Through these initiatives, Taiyo Life has simplified customer administration procedures, while enabling more rapid acceptance of coverage. By shortening the time needed to complete the necessary customer administration procedures, the new system also allows salespeople to spend more time with the customer talking about issues or answering questions. Furthermore, Taiyo Life has started operating customer service centers seven days a week in order to enhance customer convenience. These customer service centers provide support by consulting with customers and responding to their inquiries. In regard to the payment of insurance claims and benefits, Taiyo Life provides consulting services related to such payments through visits by sales representatives to customers who have contacted branches or customer service centers about requests for payment of insurance claims and benefits. These payments can also be processed via the post. Specifically, sales representatives confirm the customer s policy details while providing information and explanations about the insurance protection that the customer can claim and how to fill out claim forms, in a courteous and straightforward manner. This allows Taiyo Life to provide faster and more accurate payment of insurance claims and benefits. Moreover, Payment Advisors have been stationed at all branches to serve as consultants on requests for payment of insurance claims and benefits at each branch. In addition, Taiyo Life is taking steps to develop a framework for ensuring fast and accurate payment of insurance claims and benefits. To this end, Taiyo Life has introduced a system that converts all items necessary for claims examination, as indicated on medical certificates (excluding personal data), into digital data. Transforming Taiyo Life Into a Provider of Coverage for the Whole Family Taiyo Life is working to offer coverage for the whole family by leveraging a customer base in the household market, centered on housewives, as a stepping-stone to broaden its customers to include heads of households and children. Generally, to sell insurance to the head of the household in Japan, a sales agent goes to the husband s workplace. Taiyo Life, however, works from the housewives point of view, selecting the insurance product based on the necessary protection for the family left behind if something should happen to the husband. By using this approach, Taiyo Life wins the family s understanding of the necessity of insurance. Through this process, we sell insurance that is optimally designed for each customer based on an analysis of the household s insurance coverage to determine where there is insufficient protection, to provide coverage for the whole family. T&D Holdings, inc. Annual Report

31 Business Overview By strengthening its core business of protecting even more small and medium enterprise (SME) owners from various risks, Daido Life aims to increase corporate value stably and sustainably. Tetsuhiro Kida Representative Director and President Management Targets Fiscal 2013 n Policy amount in force 37,110 billion n New policy amount 3,830 billion * Targets with Addition of Insured Amount for Serious Diseases (J-type Product) Fundamental Strategy n Further strengthen the core business of selling partner-specific products through tie-up groups n Enhance products and underwriting by offering new protection that serves the varied needs of SME owners Business Model Market Small and medium enterprises (SMEs) PERFORMANCE AND OPERATIONAL REVIEW Daido Life s sales activities target the SME market. Policies from the corporate market (the total of collective policies for individual insurance and individual annuities as well as insurance for serious diseases (J-type product) sold through tie-up groups and group insurance policies) accounted for approximately 93.7% of the company s new policy amount in fiscal For fiscal 2012, the company s new policy amount for individual insurance and individual annuities increased 5.0% year on year to 3,556.0 billion. The surrender and lapse amount declined 7.9% to 2,713.1 billion, which was less than the new policy amount for the third year in a row. The policy amount in force declined 0.1% to 36,157.9 billion. In terms of comprehensive results including the insured amount of J-type product as one of the core products (insurance for serious diseases), the comprehensive new policy amount rose 8.9% to 3,992.5 billion. In contrast, the comprehensive surrender and lapse amount declined 7.3% to 2,738.4 billion and the comprehensive policy amount in force rose 1.0% to 36,933.2 billion. MCEV amounted to billion at March 31, 2013, an increase of 27.0 billion. This mainly reflected an increase in adjusted net worth due to higher net unrealized gains on securities. Additionally, although the value of in-force business declined overall due to lower interest Sales channel Products In-house sales representatives, agents (tax accountants, etc.) Term life insurance, insurance for serious diseases, etc. Individual Term Life Insurance Market Shares by Policy Amount in Force % As of March 31, Daido 17.8% 2 Asahi 10.3% Gibraltar 8.9% 4 Sony 7.3% 5 NKSJ Himawari 6.9% 6 Nippon 6.3% Prudential 6.0% 8 Other 36.4% Source: Life Insurance Association of Japan, 2012 Summary of Life Insurance Business in Japan Note: Covers the 43 private-sector life insurance companies. 30 T&D Holdings, inc. Annual Report 2013

32 Quarterly Trends in Comprehensive New Policy Amount % YoY Change % 9.8% 2.0% (0.4)% 0 Quarterly Trends in Comprehensive Surrender and Lapse Amount (Rate) % Surrender and Lapse Rate % 8.38% 8.51% 7.61% 7.70% 7.89% 7.07% 6.76% (30) 1Q 2Q 3Q 4Q 6 1Q 2Q 3Q 4Q New Policy Amount Surrender and Lapse Amount 1,200 1, , , , , Q 2Q 3Q 4Q 0 1Q 2Q 3Q 4Q n Fiscal 2011 n Fiscal 2012 n Fiscal 2011 n Fiscal 2012 rates, Daido Life curtailed the decrease in the value of in-force business mainly due to an increase in the new policy amount, including J-type product, and an improved mortality rate. FUNDAMENTAL STRATEGY Daido Life was established in In the ensuing years, it has continued to work to always earn a high level of customer trust. Since the 1970s, the company has positioned as its core business the sale of partner-specific products in collaboration with tie-up groups in the SME market. Daido Life has driven the evolution of this business model, which is not easily imitated by competitors, according to changes in the times. As a result, the company has built a solid position as the leading provider of individual term life insurance in the SME market. Marketing Daido Life employs a distinctive business strategy targeting the SME market. In addition to specializing in this market, the company has developed an effective marketing system that organically links products and sales channels. In specific terms, Daido Life forms business tie-ups with SME-related groups to offer partner-specific products designed according to each group s needs. These partner-specific products are marketed to member enterprises of the SME-related groups and are offered by tax accountants and CPAs to corporate clients either as protection insurance or as part of employment benefit packages for SME owners and employees. Tie-ups with the NFCTA and the TPA Since 1971, Daido Life has been the official underwriter of the comprehensive insurance plan, Ohgata Hosho Plan, implemented by the National Federation of Corporate Taxpayers Associations (NFCTA, known as Hojinkai) and the Tax Payment Associations (TPA, known as Nouzei-kyokai). Under this arrangement, Daido Life sells partner-specific products to member companies. The spread of partner-specific products to member companies has made it easy for Daido Life s in-house sales representatives to earn the trust of managers of SMEs. In this sense, the system is an effective Daido Life s Relationship with Tie-up Groups NFCTA and TPA Tie-up Scheme NFCTA TPA TKC CPTA Associations & CPTA Cooperative Associations Other groups Daido Life Fees for premium collection Tie-ups NFCTA/TPA Business tie-ups Daido Life Partner-specific products In-house sales representatives and agencies Compensation and support for sales agencies Employment contract Agency contract In-house sales representatives (approx. 4,000) Non-life agents (1,200) Insurance products at group-rate discounts Promotion of products Activity support Enterprises Risk management Member Enterprises T&D Holdings, inc. Annual Report

33 Business Overview TKC, CPTA Associations and CPTA Cooperative Associations Tie-up Scheme Win-Win Situation for Stakeholders Created by Partner-specific Sales Compensation and support for sales agencies Daido Life Agency contract Fees for premium collection Tie-ups TKC, CPTA Associations, CPTA Cooperative Associations Activity support and information provision Win for Customers (SMEs) Safety offered by group Confidence provided by involvement of advising tax accountant Discount rates (applied group rates) Win for Tie-up Groups and TAs [Tie-up Groups] Can offer risk avoidance measures to members Receive fees for premium collection [TAs (Sales Agents)] Earn trust of customers based on risk management services provided Receive compensation TA and CPA sales agents (12,000) Insurance products at group-rate discounts Corporate Clients Insurance advice regarding risk management Win for Daido Life Using the membership of the tie-up groups as a sales base provides an efficient marketing system Together, the tie-up groups and Daido Life form a solid marketing organization that gives Daido Life a competitive advantage in the SME market. sales promotion method for customer base expansion. Tie-ups with the TKC National Federation, CPTA Associations, and CPTA Cooperative Associations In 1976, Daido Life started underwriting TKC Corporate Defense Plan, implemented by the TKC National Federation*, and in the 1970s the Comprehensive Business Security Plan, implemented by CPTA Associations and CPTA Cooperative Associations in various regions. As members of this federation or associations, TAs sell to their corporate clients partnerspecific products that provide protection for the various risks their businesses are exposed to, based on their calculation of the appropriate amount of protection required by the client. * An organization of working accountants, including TAs, who utilize a proprietary computerized accounting system. As shown in the diagram above, Daido Life s business model based on sales of partner-specific products through tie-up groups has created a win-win situation for all stakeholders SME customers, tie-up groups, TAs and CPAs, and Daido Life. FUTURE GROWTH Daido Life will continue to focus on sales of partner-specific products through tie-up groups in the SME market, as well as offering products that serve the varied needs of SME owners. Through these initiatives, the company will further cultivate its core markets in greater depth and pursue the creation and expansion of new markets. Further Enhancement of Core Business For many years, Daido Life has sold term life insurance as a form of death protection to SME owners to help mitigate the related business risk. An emerging risk in recent years is the danger posed to business survival by the owner being absent from the firm after suffering serious diseases such as cancer, acute myocardial infarction or a stroke. In response, Daido Life has positioned J-type product, which addresses business continuity risks in the event that an SME owner suffers a serious disease, as a second mainstay product alongside term life insurance. Accordingly, Daido Life is pressing ahead with the integrated promotion of both products. Further Enhancement of Core Business Expand coverage Meet further individual needs of SME owners Protection for SMEs and its business Protection for a business crisis Benefit for temporary absence of SME owners Protection of SME owners and individual business owners Term life insurance (R-type product, L-type product) Insurance for serious diseases (J-type product) Medical insurance (rider) (M-type product) Medical insurance (rider) (M-type product) Savings-type products (Life Gift*, etc.) Death of an SME owner or individual business owner Retirement of an SME owner or individual business owner due to serious diseases Deterioration in sales due to temporary work absence of an SME owner or individual business owner Preparation for individual medical expenses Inheritance, wealth building, etc. Market expansion via products catering to high risk individuals Expand underwriting eligibility for the elderly and high risk individuals * Single premium whole life insurance 32 T&D Holdings, inc. Annual Report 2013

34 Providing a Full Range of Protection for SME Owners and Individual Business Owners Protection for deterioration in sales due to temporary work absence of an SME owner or individual business owner Protection for a business crisis at a company or business Integrated Promotion of Term Life Insurance and J-type product Calculating the appropriate amount of protection required for risk of death and serious diseases [Preparation for funds to protect business] [Preparation for retirement benefits] Medical insurance (M-type product) Temporary work absence due to injury or illness Main funds required Provisional working capital Sympathy money Insurance for serious diseases (J-type product) Retirement due to serious diseases Main funds required Funds for repaying debt Working capital Retirement benefit Term life insurance (R-type product, L-type product) Death benefit Main funds required Funds for repaying debt Working capital Death benefit, condolence money Appropriate amount of protection Funds required Risk Funds to protect SMEs Funds for repaying debt Working capital, etc. Death of SME owner or individual business owner Funds to protect family members Retirement benefit, etc. Retirement of SME owner or individual business owner due to serious disease Creation and expansion of new markets Proposed product Term life insurance J-type product Daido Life is working to create and expand markets while cultivating core markets in greater depth by offering products that serve the varied needs of SME owners, including products catering to high risk individuals, medical insurance (M-type product) and other Third Sector products, as well as savings-type products (Life Gift, etc.) designed for inheritance, wealth building and other purposes. Providing a Full Range of Protection for SME Owners and Individual Business Owners In fiscal 2012, the new insured amount for J-type product was billion, up 55.2% from the previous fiscal year. From May 2012, to allow the provision of adequate serious diseases coverage for lawyers, tax accountants, doctors and other professional business owners, Daido Life also raised the maximum sum insured for J-type product from 20 million to 100 million, which is the same maximum sum insured as corporate policyholders. In June 2012, to expand the product lineup, Daido Life began selling a J wide rider to expand the scope of coverage and a low-premium J-type product (no surrender value and death benefit type). From August 2012, Daido Life stepped up the integrated promotion of term life insurance and J-type product by calculating the appropriate amount of protection required for the risk of death and serious diseases. In October 2012, Daido Life launched M-type product as medical insurance protection for SMEs against the owner s hospitalization risk. Through this product, Daido Life has enhanced financial coverage for working capital needs in the event of the hospitalization of an SME owner. With term life insurance covering death, J-type product covering serious diseases and M-type product medical insurance, Daido Life aims to provide a full range of protection to even more SME owners and individual business owners. In doing so, the company will ensure stable and sustainable growth. Main Features of J-type product Main Features of M-type product (1) Insurance payout before death for a particular condition (serious diseases: cancer, acute myocardial infarction, or cerebral stroke) The insured is paid out if he/she suffers from a serious disease that reaches a particular condition (2) Master contract excluding death protection with higher and extended coverage possible for SME owners Exclusion of death protection from the master contract makes the policy more suitable for those with existing coverage; maximum sum insured for serious diseases is 100 million; coverage is available up to 100 years of age (3) Payouts can be taken as a pension Inclusion of an additional rider allows payout to be taken in the form of a pension (1) Daily amounts of hospitalization benefits (daily hospitalization benefits) range from 3,000 to 40,000* The insurance payout can be used for medical expenses and living expenses during hospitalization, which tend to be costly, as well as provision of working capital during the temporary absence of an SME owner. (The maximum daily hospitalization benefit has been increased from 20,000.) * Policies with a daily hospitalization benefit of more than 20,000 must be the standard type of policy (up to 60 payment days per hospitalization). They must also be corporate policies for business owners. Only when SME managers are the insured persons. (2) Thirty times the daily hospitalization benefit will be paid out for hospitalization due to cancer, myocardial infarction, or cerebral stroke The policy enables business owners to secure provisional working capital through a lump-sum payment. [Launched Lump-sum Payments Rider for Hospitalization due to Specified Diseases] (3) Policies may be chosen from three types of policy, each with a different limit on the number of payment days per hospitalization The 180 payment days per hospitalization type of policy has been added to the two existing types: standard and long-term hospitalization due to specified diseases. (4) For policies with daily hospitalization benefits of up to 20,000, enrollment is possible with only a disclosure of current state of health. The maximum daily hospitalization benefit for policies written based only on health disclosures was increased from 10,000. (Differs according to entry age.) T&D Holdings, inc. Annual Report

35 Business Overview Focusing on OTC sales at financial institutions and other agents, T&D Financial Life aims to generate stable and sustainable growth by increasing the new policy amount and the policy amount in force based on multi-tracked development of products and channels. Kazuyoshi Shimada Representative Director and President Management Targets Fiscal 2013 n Policy amount in force 1,900 billion n New policy amount 270 billion Fundamental Strategy n Playing a key role as a strategic company in the T&D Life Group focused on OTC sales at financial institutions and other agents n Aiming to establish a strong brand in life insurance sales through financial institutions and other agents, the company is focusing its management resources on bolstering product development and sales support capabilities Business Model PERFORMANCE AND OPERATIONAL REVIEW T&D Financial Life specializes in providing insurance products through independent insurance agents, including banks, securities firms and insurance shop agents, which handle products from multiple insurers. The new policy amount for T&D Financial Life in fiscal 2012 was billion, up 267.9% year on year. This result outperformed the company s full-year forecast. The main contributing factors were strong sales of our mainstay product Shougai Premium Japan [non-participating whole life insurance (accumulation rateselective type I)], and Minna Ni Yasashii Shushinhoken [non-participating whole life insurance (increasing death benefit type I)], which focuses on inheritance planning needs. Reflecting the increase in the new policy amount, the policy amount in force for products sold through financial institutions and other agents increased by 18.0% from billion at the previous fiscal year-end to 1,139.4 billion. As of March 31, 2013, MCEV was up 12.6 billion from the previous fiscal yearend to 77.5 billion. The value of new business increased by 2.8 billion from the previous fiscal year-end to 2.9 billion. The value of new business increased due to an increase in the new policy amount. In addition, sales efficiency improved as sales Market Sales channel Products OTC sales at financial institutions and other agents Banks, securities firms and insurance shop agents, etc. Single premium products and level premium products T&D Financial Life s Policy Amount in Force (Portion corresponding to OTC sales at financial institutions and other agents) 1,200 1, , /3 10/3 11/3 12/3 13/3 34 T&D Holdings, inc. Annual Report 2013

36 improved, and we were able to recover the fixed cost portion of operating expenses associated with sales of new policies. Going forward, we aim to help increase the entire Group s EV by improving operating expense efficiency through improved sales efficiency and operational efficiency. FUNDAMENTAL STRATEGY T&D Financial Life is a strategic company in the T&D Life Group focused on OTC sales channel at financial institutions and other agents*. In October 2001, the T&D Life Group acquired Tokyo Life and restarted its operations as T&D Financial Life. The company began sales of variable annuities in November During the four years following its reorganization, T&D Financial Life pursued business expansion using two distribution channels the sales representative channel and the OTC sales channel at financial institutions. In September 2005, however, the company transferred the sales representative channel to Taiyo Life and Daido Life, and made a new start as a company specializing in OTC sales at financial institutions. In the period to the end of March 2010, T&D Financial Life expanded the number of agencies and the policy amount in force by selling mainly individual variable annuities with guaranteed minimum living benefits, which were the major product sold in the market at that time. This helped the company to establish and enhance a solid sales network base, including Japan s top commercial banks and securities firms. * The OTC sales channel at financial institutions and other agents collectively refers to the OTC sales channel at financial institutions, including banks and securities firms, and the insurance shop agent channel. Promoting Sales of Shougai Premium Series Following a contraction in sales of variable annuities, the market for OTC sales at financial institutions was dominated by single premium assumed interest ratetype products without market value adjustments (MVA), which were offered by the major domestic life insurers. Under these circumstances, T&D Financial Life has been taking a different product strategy than other Japanese major life insurers which mainly focused on single premium assumed interest rate-type products. Specifically, T&D Financial Life has focused on selling Shougai Premium Series, a product series that offers differentiated benefits based on the idea of gaining annual bonus incomes without withdrawing from one s accumulated amount. In August 2011, the company launched Shougai Premium Japan from this series as the company s core product. Shougai Premium Japan s marketing concept of gaining annual bonus incomes without withdrawing from one s accumulated amount, was received positively by agents and customers. As a result, the agency network for this product and the new policy amount increased. In fiscal 2012, the competitive environment showed some signs of shifting when other life insurers lowered assumed interest rates and limited sales of their assumed interest rate-type products. Against this backdrop, the new policy amount for Shougai Premium Japan increased significantly compared to the previous fiscal year. Multi-tracked Development of Products and Channels T&D Financial Life employs a multi-track approach to products and channels, with the aim of achieving stable and sustainable growth. Based on this policy, in an effort to diversify products through a multi-track approach, we launched Kakei Ni Yasashii Shunyuhoshou [non-participating income protection insurance (no surrender value type I)], as a level premium protectiontype product for customers in their 20s to 50s who are seeking to review their insurance benefit plans. Kakei Ni Yasashii Shunyuhoshou provides a monthly Business Model T&D Financial Life Provision of single premium products and level premium products Sales channel 81 banks (including shinkin banks) 5 securities firms 2 insurance shop agents 1 other OTC sales through financial institutions, etc. Customer Customer Agent support Customer support Product and marketing training by wholesalers Marketing support from support desk operations IT-based agent support system Customer support through call center T&D Financial Life s Sales Network Number of sales agents /3 09/3 10/3 11/3 12/3 13/ n Megabanks/Trust Banks n Regional Banks n Credit Associations (Shinkin Banks) n Securities Firms n Insurance Shop Agents n Others 60 T&D Holdings, inc. Annual Report

37 Business Overview survivor annuity over a fixed period in the event of the death of the insured during the policy term. One of the main features of this product is that the insurance premiums are more affordable than the conventional term life insurance products. Leveraging our wealth of expertise in supporting independent insurance agents over the years, we also began sales of Kakei Ni Yasashii Shunyuhoshou at insurance shop agents in September This initiative was also aimed at diversifying sales channels through a multi-track approach. Furthermore, T&D Financial Life has been working to enhance its lineup of single premium products. In December 2012, T&D Financial Life began sales of Minna Ni Yasashii Shushinhoken, a whole life insurance policy that addresses inheritance planning needs. The policy can be purchased by customers in a wide range of age groups from 50 to 95 simply by providing the company with information about their occupation. FUTURE GROWTH Continue Aiming to Develop a Business Model for More Stable Growth The market for OTC sales at financial institutions is a highly competitive marketplace. However, we see this market as one of the segments with high growth potential. For instance, there are existing needs for products that dispel anxieties over post-retirement living expenses, while sales of protection-oriented insurance products such as medical and nursing care through this channel are expected to increase more in the future. We also expect the insurance shop agents market to continue expanding based on increases in consumers who prefer to consider and compare a variety of products before deciding to purchase an insurance policy. Insurance shop agents also provide an effective means of reaching customers who are now difficult for conventional sales representatives of life insurance companies to visit, amid heightened company security and a rise in dual-earning households. For fiscal 2013, T&D Financial Life will remain focused on these growing markets while continuing to aim to develop a business model for more stable growth even in a fiercely competitive market by diversifying its products and sales channels through a multi-track approach. In terms of specific product strategies, T&D Financial Life launched Shougai Premium World 2 [non-participating variable whole life insurance (foreign exchange linked, multi-currency type II)] in July The product is a revised version of the former Shougai Premium World [non-participating variable whole life insurance (foreign exchange rate linked, multi-currency type I)]. The company revised the product by raising the entry age of the insured from 70 to 75 as well as upgrading other features. This product is for customers who are interested in overseas interest rates, which are higher than domestic interest rates, and in foreign currencies. T&D Financial Life s Products and Sales Channel Product Sales Channel Single premium wealth accumulation products Shougai Premium Series Shougai Premium Japan 2 [Non-participating whole life insurance (accumulation rate renewing type I)] Launched in August 2013 Shougai Premium World 2 [Non-participating variable whole life insurance (foreign exchange linked, multi-currency type II)] Launched in July 2013 Main Features: Under the concept of gaining annual bonus incomes without withdrawing from one s accumulated amount, Shougai Premium Series is a single premium whole life insurance series that features annual additions of a prescribed bonus policy amount to the accumulated bonus amount throughout the insured s lifetime. Shougai Premium Japan 2 is a product for customers interested in investing in yen-denominated assets, as the annual bonus policy amount is steadily added to the accumulated bonus policy amount every year using the JGB yields as the reference rate. Shougai Premium World 2 is a product for customers interested in overseas interest rates, which are higher than domestic interest rates, and in foreign currencies, as the product is based on the reference rate of its linked foreign currency (Australian dollar or U.S. dollar). Financial institutions Minna Ni Yasashii Shushinhoken [Non-participating whole life insurance (increasing death benefit type I)] Launched in December 2012 Main Features: Designed to be simple and easy to understand, this single premium whole life insurance product can be purchased by customers in a wide range of age groups from 50 to 95 simply by providing the company with information about their occupation. Level premium protectiontype products Kakei Ni Yasashii Shunyuhoshou [Non-participating income protection insurance (no surrender value type I)] Launched in August 2012 Main Features: This is an income protection insurance product which provides either a monthly survivor annuity or a disability annuity over a fixed period in the event of the death or the total disability of the insured. One of the main features of this product is that the insurance premiums are more affordable than conventional term life insurance products. Financial institutions Insurance shop agents 36 T&D Holdings, inc. Annual Report 2013

38 Rebuilding of the Business Model for More Stable Growth Diversify products Diversify sales channels Single premium wealth accumulation products: For middle aged and older customers with the need to fund retirement and for inheritance planning needs Level premium protection-type products: For working age customers seeking to review their insurance benefit plans Financial institutions Insurance shop agents Establish business platform Increase value of new business Develop and offer competitive products with: Simple product features Low premiums Suitable agent commission levels Boost the new policy amount and policy amount in force Establish a low-cost structure Reduce costs by improving operational efficiency, BPO (business process outsourcing), reducing IT costs, etc. Enhance product competitiveness In August 2013, the company launched Shougai Premium Japan 2 [non-participating whole life insurance (accumulation rate renewing type I)]. While maintaining the existing product concept of Shougai Premium Japan, T&D Financial Life has upgraded the product to ensure that it can be supplied in a stable manner even amid low interest rates. In terms of sales strategy, T&D Financial Life will continue working to expand the number of sales agents for single premium products in the OTC sales channel at financial institutions. The company also aims to expand the number of sales agents for level premium products in the OTC sales channel at financial institutions as well as in the insurance shop agent channel. Going forward, T&D Financial Life will strive to further strengthen the business model. Measures will include enhancing its product lineup incorporating customer needs and increasing the number of financial institutions and insurance shop agents. Increase Competitiveness by Establishing a Low-cost Structure To survive in a highly competitive independent insurance agent business, establishing a low-cost structure through cost reductions and other measures is essential because it links directly to the competitiveness of products. T&D Financial Life has reduced costs by improving operational efficiency and reducing IT and personnel costs. We Comprehensive Maintenance Costs* believe that T&D Financial Life is the only member of the T&D Life Group that can specialize in the competitive independent insurance agent business by leveraging a business model with a lean cost structure. While maintaining levels of customer service, the company will remain focused on realizing a low-cost structure that enables the company to offer competitive products with simple product features, low premiums and other advantages. Establish a low-cost structure /3 10/3 11/3 12/3 13/3 14/3 (projection) n Personnel costs n Others * Comprehensive maintenance costs = Maintenance costs (less holding company fees and commissions and contributions to the Life Insurance Policyholders Protection Corporation) + expenses for premium collection + provision for increase in reserve for bonus + depreciation T&D Holdings, inc. Annual Report

39 Business Overview As the T&D Life Group s core asset management company, T&D Asset Management aims to become a trusted asset management company in the eyes of its customers. Hiroshi Fujise Representative Director and President Management Targets Fiscal 2013 n Adjusted operating income 3.4 billion n Net income 270 million Note: Adjusted operating income is the actual income of T&D Asset Management after deducting commissions to sales companies and fees to external investment institutions to which asset management is entrusted. Fundamental Strategy n Strengthen competitiveness by executing differentiated strategies under the action policy of Make a Difference n Strengthen growth areas by strategically allocating management resources n Continue to transform the earnings structure to improve management efficiency further Business Segment Investment advisory services Investment trust business Provide timely solutions to domestic and overseas pension funds and institutional investors Provide a wide array of prime investment products mainly to individual investors through sales companies (securities firms, etc.) PERFORMANCE AND OPERATIONAL REVIEW In fiscal 2012, the financial and securities markets saw domestic interest rates remain low throughout the fiscal year. On the other hand, in the second half of the fiscal year, stock prices in Japan and overseas rose against the backdrop of a correction of the strong yen and anticipation for economic stimulus and monetary policies, among other factors. As a result, at the fiscal year-end, assets under management in Japan the total of investment trusts and investment advisory agreements increased 42.5 trillion from the previous fiscal year-end to trillion. Under these conditions, T&D Asset Management saw a large increase in assets under management in the investment trust business, mainly atop favorable Asset Management Market in Japan trillions sales of new publicly offered investment trusts. In investment advisory services, however, asset under management decreased due to outflows from pension investments reflecting the impact of a string of pension mismanagement scandals at certain independent investment advisory firms. Operating income as a whole decreased slightly as a result. Meanwhile, we curtailed operating expenses through rigorous cost cutting. Consequently, T&D Asset Management restored profitability by posting net income for fiscal 2012, after having recorded a net loss in the previous fiscal year. Regarding assets under management, while publicly offered investment trust assets at March 31, 2013 amounted to billion, up from billion at March 31, 2012, private placement /3 05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 38 T&D Holdings, inc. Annual Report 2013 Source: Compiled from information from the Investment Trusts Association and the Japan Securities Investment Advisers Association Note: Total of contractual-type investment trusts and assets held under investment advisory agreements.

40 Out of Group Assets under Management 1,200 Out of Group Assets under Management (As of March 31, 2013) % Investment advisory services 39.2% Investment trust business 60.8% 0 09/3 10/3 11/3 12/3 13/3 investment trust assets stood at billion, down from billion. As for investment advisory agreements, entrusted assets declined from 1,065.7 billion to billion. FUNDAMENTAL STRATEGY T&D Asset Management contributes to stable investment returns as the insurance asset management arm of the T&D Life Group. In conjunction with these activities, the company is increasing assets entrusted by customers from outside the T&D Life Group. Primarily, T&D Asset Management has provided the expertise it has developed through the investment of life insurance assets to domestic pension funds and institutional investors. In recent years, however, the company has been expanding its businesses for individual investors and overseas pension funds and institutional investors. T&D Asset Management s value strategy of Japanese equities and credit investment has earned high marks among many investors and external rating agencies. In the domestic equity and bond investment area, the company takes advantage of its asset management capabilities to provide competitive investment products. As for foreign equities, bonds, and other investment vehicles, T&D Asset Management has formed business tie-ups with prominent overseas investment institutions to enable the company to offer attractive investment products and investment opportunities. FUTURE GROWTH T&D Asset Management is strengthening internal asset management expertise and leveraging alliances with leading overseas asset management institutions to provide products and services that respond to customer needs in a timely manner. A critical aim is to expand the portfolio of assets entrusted by non-group customers both in the investment advisory services for domestic and overseas pension funds and institutional investors, and in the investment trust business, comprising mainly publicly offered investment trusts and private placement investment trusts. The company also aims to win greater trust as an asset management company by implementing thorough measures to improve its asset management services for existing customers. TOPIC Investment Advisory Services (Domestic and Overseas Pension Funds and Institutional Investors) The business environment of the pension market is going through a period of major fluctuations during the lead up to the implementation of changes in Japan s pension system and accounting system. With its customers facing a variety of issues, T&D Asset Management is aiming to win longterm trust by providing them with suitable solutions for their investment needs. The company is also actively offering its distinctive asset management capabilities to foreign institutional investors. Investment Trust Business In its investment trust business, T&D Asset Management is further strengthening its systems to develop and offer competitive products tailored to customer needs in a timely manner. Moreover, the company is upgrading its information provision capabilities for customers to inform customers about the nature of its products and the risks involved in an easy-to-understand manner. As part of its CSR activities, T&D Asset Management has been hosting the T&D Asset Management Investment Seminar for Universities since The company believes that the essence of CSR is to contribute broadly to society in its core business field of asset management. Accordingly, T&D Asset Management holds lectures on themes concerning private university administration and securities investment for staff involved in asset management at universities. In doing so, the company is helping universities to establish a governance structure and strong financial foundation with respect to asset management. T&D Holdings, inc. Annual Report

41 Business Overview Pet & Family Small-amount Short-term Insurance Company Pet & Family Small-amount Short-term Insurance aims to establish a firm presence in the pet insurance sector by expanding its market share. This will be achieved by expanding and strengthening the sales base centered on the pet shop sales channel. Takashi Nakao Representative Director and President Management Targets Fiscal 2013 n No. of policies in force 64,000 n No. of new policies 28,000 Fundamental Strategy n Build and strengthen a revenue base grounded on trust as a provider of smallamount, short-term insurance and a member of the T&D Life Group n Grow sales by expanding and strengthening the sales base centered on the core pet shop sales channel Business Model Market Sales channel Products Pets Agents (pet shops, etc.) Compensation insurance for pet vet expenses PERFORMANCE AND OPERATIONAL REVIEW In fiscal 2012, Pet & Family Small-amount Short-term Insurance (P&F) worked to expand business and improve profitability by focusing on expanding pet shop sales, the core sales channel, and developing this sales channel. As a result, the number of new policies in fiscal 2012 was 18,168, compared with 14,542 in fiscal The number of policies in force as of March 31, 2013 was 44,407, up from 31,328 as of March 31, Net premium income in fiscal 2012 was 1,236 million, up from 853 million in the previous fiscal year. FUNDAMENTAL STRATEGY P&F aims to establish and build an earnings base with future growth potential by positioning pet shops as the core sales channel for this type of insurance. In an age where pets are regarded as lifelong family members, pet owners are increasingly concerned about the costs of veterinary care. Pet insurance is considerably less prevalent in Japan than in Western countries, where pet culture is more advanced. P&F considers it a mission to serve the needs of pet owners in meeting the veterinary expenses of pets by making pet insurance more widely available. FUTURE GROWTH The pet insurance market is expected to see increasing demand going forward. In this growing market, P&F aims to establish a more stable revenue base, while developing proper operations with an emphasis on efficiency, to achieve compliance and low-cost operations as a provider of smallamount, short-term insurance. Net Premium Income (Pet Insurance) millions 2,000 1,500 1,236 1, /3 10/3 11/3 12/3 13/3 40 T&D Holdings, inc. Annual Report 2013

42 Key Systems Underpinning T&D Life Group Management Organization page 42 Corporate Governance page 45 Corporate Social Responsibility page 49 T&D Holdings, inc. Annual Report

43 Management Organization As of June 26, 2013 Board of Directors Representative Director and President KENJI NAKAGOME Born 1954 Apr Joined Taiyo Life Mar General Manager of General Affairs Department Jul Director of Taiyo Life Jun Managing Director of Taiyo Life Apr Managing Director of T&D Holdings Jun Director and Managing Executive Officer of Taiyo Life, Director and Managing Executive Officer of T&D Holdings Apr Director and Senior Executive Officer of Taiyo Life, Director and Senior Executive Officer of T&D Holdings Jun Representative Director and Senior Executive Officer of Taiyo Life Jun Director of T&D Holdings, Representative Director and President of Taiyo Life Apr Representative Director and President of T&D Holdings (current) Representative Director and Executive Vice President Group Planning Department SONOSUKE USUI Born 1953 Apr Joined Daido Life Sep General Manager of Separate Account Investment Department Jul Director of Daido Life Jul Representative Director and President of T&D Taiyo Daido Asset Management Jul Representative Director and President of T&D Asset Management Apr Senior Executive Officer of T&D Financial Life Jun Representative Director and Senior Executive Officer of T&D Financial Life Jun Director of T&D Asset Management (current) Apr Director of T&D Financial Life (current), Senior Executive Officer of T&D Holdings Jun Director of Daido Life (current), Director and Senior Executive Officer of T&D Holdings Apr Director and Executive Vice President of T&D Holdings Jun Representative Director and Executive Vice President of T&D Holdings (current) Director and Senior Executive Officer Group Finance & Accounting Department TAMIJI MATSUMOTO Born 1954 Apr Joined Taiyo Life Oct General Manager of Actuarial Accounting Department Jul Director of Taiyo Life Jun Managing Director of Taiyo Life Jun Director and Managing Executive Officer of Taiyo Life Apr Senior Executive Officer of T&D Holdings Jun Director of Taiyo Life (current), Representative Director and Senior Executive Officer of T&D Holdings Apr Director and Senior Executive Officer of T&D Holdings (current) Jun Director of T&D Asset Management (current) Director and Senior Executive Officer Risk Management Department and Business Auditing Department TSUTOMU IGARASHI Born 1951 Apr Joined Daido Life Mar General Manager of Marketing Planning Department Jul Director of Daido Life Apr Managing Director of Daido Life Jun Director and Managing Executive Officer of Daido Life Apr Director and Senior Executive Officer of Daido Life (current) Apr Senior Executive Officer of T&D Holdings Jun Director and Senior Executive Officer of T&D Holdings (current) Director and Senior Executive Officer Public Relations Department and second in charge of General Affairs Department Masahiro Ueda Born 1953 Apr Joined Daido Life Apr General Manager of General Affairs Department of T&D Holdings Apr General Manager of Planning Department of Daido Life Jun Executive Officer of Daido Life Apr Managing Executive Officer of Daido Life Jun Director and Managing Executive Officer of Daido Life Apr Director and Senior Executive Officer of Daido Life (current) Apr Senior Executive Officer of T&D Holdings Jun Director and Senior Executive Officer of T&D Holdings (current) Director and Managing Executive Officer General Affairs Department and second in charge of Business Auditing Department TERUNORI YOKOYAMA Born 1954 Apr Joined Taiyo Life Jul General Manager of General Planning Department Apr General Manager of Group Planning Department of T&D Holdings Jun Executive Officer and General Manager of Group Planning Department of T&D Holdings Apr Managing Executive Officer, and Marketing Executive General Manager of Taiyo Life Jun Director and Managing Executive Officer, and Marketing Executive General Manager of Taiyo Life Feb Director and Managing Executive Officer of Taiyo Life (current) Jun Director and Managing Executive Officer of T&D Holdings (current) 42 T&D Holdings, inc. Annual Report 2013

44 Director RYUJI HORI* Born 1943 Apr Joined Iwai Sangyo Company Jun Director of Nissho Iwai Corporation Jun Managing Director of Nissho Iwai Corporation Jun Senior Managing Executive Officer of Nissho Iwai Corporation Apr Professor of Waseda University School of Law Apr Professor of Waseda Law School (current) Jun Corporate Auditor of Daido Life Jun Director of Daido Life Jun Director of T&D Holdings (current) University Professor * Mr. Hori is an outside director as provided for in the Japanese Companies Act. Director Haruka Matsuyama* Born 1967 Apr Assistant Judge to the Tokyo District Court Jul Registered as an Attorney Jun Director of T&D Holdings (current) Attorney * Ms. Matsuyama is an outside director as provided for in the Japanese Companies Act. Director KATSUHIDE TANAKA Born 1954 Apr Joined Taiyo Life Sep General Manager of Policy Service, Conservation and Premium Receipts Department Jul Director of Taiyo Life Jun Director and Managing Executive Officer of Taiyo Life Apr Director and Senior Executive Officer of Taiyo Life May 2007 Director and Senior Executive Officer, and Customer Service Executive General Manager of Taiyo Life Feb Director and Senior Executive Officer, and Marketing Executive General Manager of Taiyo Life Jun Representative Director and Senior Executive Officer, and Marketing Executive General Manager of Taiyo Life Jun Representative Director and Executive Vice President, and Marketing Executive General Manager of Taiyo Life Apr Representative Director and President of Taiyo Life (current) Jun Director of T&D Holdings (current) Director TETSUHIRO KIDA Born 1953 Apr Joined Daido Life Mar General Manager of Planning Department Jul Director of Daido Life Apr Managing Director of Daido Life Jun Managing Executive Officer of Daido Life Apr Director of T&D Financial Life, Director of T&D Asset Management, Managing Executive Officer of T&D Holdings Jun Director and Managing Executive Officer of T&D Holdings Apr Director and Senior Executive Officer of T&D Holdings Apr Representative Director and President of Daido Life (current), Director of T&D Holdings (current) Director KAZUYOSHI SHIMADA Born 1953 Apr Joined Daido Life Jan General Manager of Reorganization Planning Department Jul Director of T&D Financial Life Jun Executive Officer of T&D Financial Life Apr Managing Executive Officer of T&D Financial Life Jun Director and Managing Executive Officer of T&D Financial Life Apr Director of T&D Asset Management Apr Representative Director and Managing Executive Officer of T&D Financial Life Jun Representative Director and President of T&D Financial Life (current), Director of T&D Holdings (current) T&D Holdings, inc. Annual Report

45 Management Organization Audit & Supervisory Board Members Audit & Supervisory Board Member MASAAKI UNO Born 1954 Apr Joined Daido Life Apr General Manager in charge of Contract Department Jun Audit & Supervisory Board Member of Daido Life (current), Audit & Supervisory Board Member of T&D Holdings (current) Audit & Supervisory Board Member Akimasa Yokokawa Born 1955 Apr Joined Taiyo Life Mar General Manager of Securities Investment Department Jun Director of Taiyo Life Jun Executive Officer of Taiyo Life Jun Director and Executive Officer of Taiyo Life Jun Executive Officer of Taiyo Life Oct Audit & Supervisory Board Member of Taiyo Life (current) Jun Audit & Supervisory Board Member of T&D Financial Life (current), Audit & Supervisory Board Member of T&D Holdings (current) Audit & Supervisory Board Member SHIGEKAZU IWAI* Born 1945 Apr Registered as an Attorney Apr Vice President of the Tokyo Bar Association Apr President of the Tokyo Bar Association, Vice President of the Japan Federation of Bar Associations Jun Audit & Supervisory Board Member of Daido Life (current), Audit & Supervisory Board Member of T&D Holdings (current) Attorney * Mr. Iwai is an outside audit & supervisory board member as provided for in the Japanese Companies Act. Audit & Supervisory Board Member Yuichi Ozawa* Born 1943 Apr Registered as an Attorney May 1985 Organizer, Commercial Law Subcommittee of the Legislative Council of the Ministry of Justice Apr Professor of Legal Training and Research Institute, Supreme Court of Japan (Defense of Civil Cases) Jan Member of National Bar Examination Committee (Commercial Law) Jun Audit & Supervisory Board Member of Taiyo Life (current) Jun Audit & Supervisory Board Member of T&D Holdings (current) Attorney * Mr. Ozawa is an outside audit & supervisory board member as provided for in the Japanese Companies Act. 44 T&D Holdings, inc. Annual Report 2013

46 Corporate Governance Basic Policy on Corporate Governance The T&D Life Group s basic corporate governance policy is to create efficient and transparent management systems to facilitate flexible and cohesive Group operations. Based on this view, the role within the Group of the holding company T&D Holdings is to determine Group business and capital strategies and to ensure optimal allocation of resources within the Group. T&D Holdings is also responsible for the development and operation of oversight systems for managing profits and risks at the Group level, including systems for accurately evaluating the operational risks of the five direct subsidiaries (the Group s three life insurance companies Taiyo Life, Daido Life, and T&D Financial Life as well as T&D Asset Management and Pet & Family Smallamount Short-term Insurance). Based on an independent business strategy, each of the direct subsidiaries determines its own marketing strategies in line with its strengths. This approach seeks to maximize the corporate value of the Group by enabling each company to make the most of its autonomy and originality in its business operations. Initiatives to Enhance Corporate Governance To ensure the effectiveness of its corporate governance, in fiscal 2012 T&D Holdings held the following meetings. The Board of Directors met 21 times to make decisions on important issues on the execution of business and to oversee the execution of duties by directors. In addition, the Audit & Supervisory Board met 14 times. The Executive Committee met 48 times, the Group Management Committee 16 times, the Group Risk Management Committee 12 times, the Group Compliance Committee 4 times, the Group Investment Committee 4 times, the Group CSR Committee 3 times, and the Group Information Technology and Administration Committee 6 times. The functions of the Group Investment Committee have been integrated into the Group ERM Committee, which was established in April Corporate Governance System Framework Group Compliance Committee Discusses matters relating to strengthening Group compliance Shareholders Meeting Board of Directors President Audit & Supervisory Board Members Audit & Supervisory Board Audit & Supervisory Board Members Office Executive Committee Group Management Committee Group ERM Committee Discusses matters relating to securing the required equity capital and promoting efficient utilization of same so as to maintain Group management stability and soundness Group Risk Management Committee Discusses matters relating to comprehensive management of Group risks and ensuring thorough risk management Organizational Units Group CSR Committee Discusses matters relating to establishing and strengthening Group CSR initiatives and formulating and executing Group-wide plans and measures Group Information Technology and Administration Committee Discusses matters for formulating policies and measures pertaining to cross-group issues concerning IT and administration strategy and Other Group Companies Pet & Family Small-amount Short-term Insurance Company T&D Holdings, inc. Annual Report

47 Corporate Governance Appointment of Outside Directors and Outside Audit & Supervisory Board Members As one facet of its internal control systems, T&D Holdings has established the policy of appointing outside directors that are unrelated to the Company and can serve as a control to ensure the appropriateness of the operational execution of directors. Accordingly, it has appointed two outside directors. In addition, the Company has established an Audit & Supervisory Board consisting of four audit & supervisory board members, two of which are outside audit & supervisory board members as provided by the Japanese Companies Act. Further, the outside directors and outside audit & supervisory board members of the Company are registered with the Tokyo Stock Exchange and Osaka Securities Exchange as independent officers who are free of conflicts with the common interests of shareholders (as of June 26, 2013). In this way, the Company believes that the outside directors and outside audit & supervisory board members are properly overseeing and serving as a control and that governance is functioning effectively. However, in order to bolster governance further, the Company will continue to look at ways to improve the approach to governance, taking into consideration examples and trends at other companies. Stock Compensation-type Stock Options (Stock Acquisition Rights) T&D Holdings and the three life insurance companies have introduced stock compensation-type stock options (stock acquisition rights) for directors (excluding outside directors) and executive officers, with the aim of boosting motivation to further contribute to the improvement of corporate value. These stock options will provide them with further incentives to work to stably and continuously improve the corporate value of the whole Group by aligning their interests more with shareholders, while they continue to manage the Company from a long-term standpoint. Risk Management System In light of the important social role played by its life insurance business, the T&D Life Group considers the accurate assessment and control of risk to be a top management priority for ensuring sound and appropriate management. Under the guidance of T&D Holdings, each Group company carries out appropriate risk management based on the principle of self-responsibility. Furthermore, the Group conducts integrated risk management through such means as utilizing risk management indicators based on economic value, which values assets and liabilities on a mark-to-market basis. Basic Policy on Risk Management Systems T&D Holdings has established a Group Risk Management Policy that sets forth the basic concepts for managing risk within the T&D Life Group. Based on this policy, the three life insurance companies have upgraded their risk management systems, including those for affiliates. T&D Holdings has established the Group Risk Management Committee, to integrate the management of risk within the Group. Moreover, the three life insurance companies are required to submit risk status reports based on integrated risk management indices periodically as well as on an as-needed basis. In this way, T&D Holdings is able to assess and manage the various risks faced by individual Group companies. In principle, the Group Risk Management Committee meets once a month. In fiscal 2012, it met 12 times. Also, T&D Holdings reports the risk status of each Group company to the Board of Directors and, based on these findings, provides guidance and assistance to the three life insurance companies as necessary. This not only ensures that each of the companies conducts thorough risk management but also strengthens the management of risk for the Group as a whole. Risk Management Framework Board of Directors Audit & Supervisory Board Members, Audit & Supervisory Board Executive Committee Group Risk Management Committee Risk Management Department Deliberation Reporting Guidance Advice Internal Auditing Taiyo Life Daido Life T&D Financial Life T&D Asset Management Pet & Family Small-amount Short-term Insurance and Other Group Companies 46 T&D Holdings, inc. Annual Report 2013

48 Compliance Basic Compliance Policies The Group has formulated the T&D Life Group CSR Charter, the T&D Life Group Compliance Code of Conduct, and the T&D Life Group Basic Policy for Strengthening the Compliance Structure. The Group ensures that corporate officers and employees are conversant with these basic compliance policies and standards to promote rigorous Group-wide compliance efforts. Fostering Compliance In line with the Group s basic policies on compliance, each company in the T&D Life Group has implemented a program of compliance awareness-raising measures that is tailored to the character and scale of that company s operations. For example, T&D Holdings and the three life insurance companies have formulated specific action plans called the Compliance Program and a guideline called the Compliance Manual to ensure full legal and regulatory compliance by corporate officers and employees. Internal Reporting System Within the T&D Life Group, each of the Group s three life insurance companies and other Group members previously operated their own internal reporting systems. In April 2005, however, the T&D Life Group Helpline was established for use by all corporate officers and employees in the Group. Rules applied to the T&D Life Group Helpline stipulate that whistleblowers will not suffer any disadvantageous treatment as a result of using the system to submit information relating to suspected compliance violations. Compliance-related reports can also be submitted by phone or online through an external independent company to help preserve anonymity, thereby enhancing the effectiveness of the system. Going forward, the T&D Life Group is committed to promoting greater compliance through the use of this internal reporting system. Accountability To maintain and reinforce trust among all of its stakeholders, beginning with its shareholders, investors, and policyholders, and to increase the level of transparency in its corporate governance, T&D Holdings strives to provide easy-to-understand disclosure based on its core disclosure principles of timeliness, fairness, and accuracy. T&D Holdings discloses statutory information stipulated in the Japanese Companies Act, the Insurance Business Act, the Financial Instruments and Exchange Act, other related laws and ordinances, and the rules of the stock exchanges on which its stock is listed. T&D Holdings also discloses information it deems to be important for its stakeholders, taking into account the business environment, economic conditions, and industry trends in accordance with its basic policy on disclosure. In releasing information, T&D Holdings works positively to disclose information to all stakeholders, utilizing various communication channels that include the Timely Disclosure Circulation System (TDnet) offered by the Tokyo Stock Exchange, news releases, and the T&D Holdings website, as well as printed materials such as disclosure materials, annual reports, and CSR reports. Furthermore, T&D Holdings is actively engaged in IR activities based on its IR policy (see page 146), while ensuring that briefings are provided by members of senior management, in principle. Basic Policy for Eliminating Antisocial Powers In its Group Compliance Code of Conduct, the T&D Life Group defines its policy toward antisocial powers as to Reject and stringently respond to any antisocial powers and organizations that threaten the order and safety of civil society. In accordance with this policy, the Group responds to antisocial powers in the following manner. Basic Policy for Responding to Antisocial Powers 1. Respond as an Organization When antisocial powers make threats or demands, the Company responds as a unified organization, rather than delegating this responsibility to the related personnel or divisions. Further, the Company takes steps to ensure the safety of the corporate officers and employees responsible for dealing with such threats or demands. 2. Cooperate with External Experts The Company maintains close contact with external organizations, such as the police, the National Center for the Elimination of Boryokudan, and lawyers, to protect itself against the threats or demands of antisocial powers. 3. Avoid Contact The Company avoids making any contact with antisocial powers and does not conduct any transactions with these powers. Also, the Company does not cooperate with threats or demands from antisocial powers. 4. Take Legal Action When necessary, the Company will take legal action in response to threats or demands from antisocial powers, including bringing civil and criminal charges against these powers. 5. Forbid Illegal Transactions and Provision of Funds Even in the event that the threats or demands of antisocial powers are in response to misdeeds in the Company s business operations or by its corporate officers or employees, the Company will not engage in illegal transactions with these powers to conceal this fact. Further, the Company will not provide funds to antisocial powers. T&D Holdings, inc. Annual Report

49 Corporate Governance Corporate Governance Data Total Compensation Paid to Directors and Audit & Supervisory Board Members (Fiscal 2012) Category Monthly compensation Reserve for bonus Stock compensation-type stock options Compensation total Number receiving compensation Amount ( millions) Number receiving compensation Amount ( millions) Number receiving compensation Amount ( millions) Number receiving compensation Amount ( millions) Directors (Outside appointees) (2) (7) (0) ( ) (0) ( ) (2) (7) Audit & Supervisory Board Members (Outside appointees) (3) (15) (0) ( ) (0) ( ) (3) (15) Total The annual compensation limit established at a shareholders meeting is 500 million for directors and 130 million for audit & supervisory board members. Bonuses are included in the amount for directors. In addition, the annual compensation limit for stock compensation-type stock options (stock acquisition rights) for directors is 100 million, established separately from the above annual compensation limit for directors (excluding outside directors). 2. The above-mentioned payments include one director and one audit & supervisory board member who stepped down from their posts as of the close of the eighth ordinary shareholders meeting, held on June 27, As of March 31, 2013, the Group had ten directors and four audit & supervisory board members. 3. In addition to the above, the Group passed a resolution on Final Payment of Retirement Benefits to Directors and Audit & Supervisory Board Members Following the Abolition of the Retirement Benefits Program at the eighth ordinary shareholders meeting held on June 27, Accordingly, the Company expects to pay retirement benefits totaling 59 million to seven directors and two audit & supervisory board members who are eligible for the payment of these retirement benefits following the abolition of the retirement benefits program. These retirement benefits were not included in the reserve for directors and audit & supervisory board members retirement benefits recorded through fiscal The directors will be paid 40 million and the audit & supervisory board members will be paid 18 million. 4. In addition to the above, the Group paid a total of 1 million during fiscal 2012 to two directors and one audit & supervisory board member who stepped down from their posts prior to the end of fiscal 2012 as retirement benefits that were not included in the reserve for directors and audit & supervisory board members retirement benefits through fiscal The directors were paid 0 million and the audit & supervisory board member was paid 1 million. From fiscal 2013, the Group plans to pay 6 million as retirement benefits, 3 million for directors and 3 million for audit & supervisory board members. Information Related to the Independent Financial Auditor (Fiscal 2012) Name Ernst & Young ShinNihon LLC Amount paid for statutory services million Total remuneration to be paid by the Group to the independent financial auditor million 1. Total remuneration for audits in accordance with the Japanese Companies Act and for audits in accordance with the Financial Instruments and Exchange Act. 2. Total amounts of remuneration and other financial profits to be paid by T&D Holdings and its subsidiaries. Holdings of the Directors and Audit & Supervisory Board Members June 26, 2013 June 27, June 28, 2011 President 13,881 shares 11,401 shares 4,315 shares Other directors (average) 9,390 shares 8,950 shares 3,580 shares Audit & supervisory board members (average) 4,448 shares 2,094 shares 900 shares 1. The Company conducted a 2-for-1 stock split of common stock on October 1, Board of Directors, Audit & Supervisory Board, and Executive Committee (Fiscal 2012) Name Number of meetings Attendance rate Main members and attendees Board of Directors % Directors, audit & supervisory board members Audit & Supervisory Board % Audit & supervisory board members Executive Committee % Chairman, president, executive officers, standing audit & supervisory board members Group Management Committee % President, presidents of the three life insurance companies, standing audit & supervisory board members, etc. Existence of Policy or System Item Yes/No Comments Executive officer system Yes Framework for setting directors compensation Yes Remuneration linked to performance Director/Audit & supervisory board member share ownership Yes Stock option system Yes Liability limitation contract for outside directors and audit & supervisory board members Yes Liability limitation contract for independent financial auditor No Hostile takeover protection plan No Basic code of ethics Yes T&D Life Group CSR Charter Basic corporate ethics policy Yes T&D Life Group Compliance Code of Conduct 48 T&D Holdings, inc. Annual Report 2013

50 Corporate Social Responsibility Top Management Commitment Creating new value in the midst of change based on the Group s breadth and depth The T&D Life Group, centered on a collection of companies having more than a century of experience in the life insurance business, has always acted in the belief that fulfilling its social responsibilities through its principal business is of the utmost importance. Social responsibilities in this context refers to those responsibilities we bear with respect to customers, shareholders, local communities, employees and all other stakeholders connected with the conduct of our business. As a corporate group hoping to grow perpetually alongside society, we absolutely must be motivated by a self-awareness of our social responsibilities to demonstrate the corporate behavior needed by, and worthy of the trust of, all stakeholders. Our Group shares the Corporate Philosophy, Management Vision, Fundamental Strategies, and CSR Charter. Group companies are presently leveraging their own unique features and distinctive business models to expand their businesses. At the same time these shared beliefs underlie all of their business activities, linking these companies by strong bonds of trust that allow for mutual cooperation. We are convinced that we can become an even stronger Group by recognizing our mutual values, sharing information, improving by learning from each other and occasionally competing while Group companies take maximum advantage of their respective strengths. Companies wishing to remain going concerns must always be thinking about what should be done to achieve growth five or ten years down the road, and they must adapt to an ever-changing society. Problems deriving from an aging population and declining birthrate as well as changes in employment patterns are becoming increasingly apparent in Japan. We must wholeheartedly face up to the changes in society, transform these issues into opportunities for creating new value such as by providing products/services and utiliziling diverse human resources, and exploit our Group s breadth and depth to meet the expectations of our stakeholders. Operating on the principle of mutual aid, insurance is inherently a business with an extremely strong public/social nature, and our Group boasted a corporate culture of acting to fulfill its social responsibilities long before the term CSR ever caught on. Conscious and very much proud of that fact, the T&D Life Group will continue its unshakable adherence to the Try & Discover motto as it lends an ear to the voices of all its stakeholders and transforms together with society. Kenji Nakagome Representative Director and President, T&D Holdings, Inc. T&D Life Group s Basic Policy on CSR and Promotion Framework The T&D Life Group s basic policy on CSR is to contribute to society through its core business as a life insurance company and to earn society s trust by dealing sincerely with the public and the Company s various other stakeholders based on its Group corporate philosophy and vision. Through these processes, we aim to achieve sustained growth in step with society. The T&D Life Group has established the Group CSR Committee, which is chaired by the President of T&D Holdings and consists of directors in charge of CSR and other representatives from each Group company. This allows all Group companies to play an active The T&D Life Group and Its Stakeholders Customers Group Corporate Social Responsibility Promotion System Board of Directors Shareholders/ Investors Providing appropriate returns on investments Regional Communities/ Society Providing excellent products and services Sales Agents Partnering for mutual cooperation and prosperity Business Partners Executive Committee President Group Management Committee Group Compliance Committee Activities contributing to society as a community member Government Entities Playing a public role in society Effective and highly transparent corporate governance Thorough compliance Proactive communication Environment Protecting the environment, everyone s home Fair dealings Employees Providing workplaces that make work meaningful and pleasurable Group ERM Committee Group Risk Management Committee Organizational Units Group CSR Committee Group Information Technology and Administration Committee T&D Holdings, inc. Annual Report

51 Corporate Social Responsibility role in the promotion of CSR-related activities. Further, this committee discusses Group-wide CSR policies and initiatives, and therefore has enabled the Group to strengthen its systems for promoting CSR activities uniformly throughout the Group. Through the Group CSR Committee, T&D Holdings and its direct subsidiaries discuss, consider and share information on the following matters: 1) Basic Policy on CSR 2) Common Group-wide measures 3) Promoting Group-wide collaboration on measures planned and implemented by Group companies 4) Progress on common Group-wide measures and measures at each company Inclusion in Socially Responsible Investment (SRI) Index T&D Holdings is included in the following SRI index. (As of March 31, 2013) FTSE4Good Global Index T&D Life Group CSR Charter and Main CSR Initiatives T&D Life Group CSR Charter The T&D Life Group has formulated the T&D Life Group CSR Charter as a basic policy for further promoting CSR in accordance with its corporate philosophy. The Public Mission of the Life Insurance Industry Life insurance is a mutual aid system based on pooling contributions from many people and intended to reduce the future financial burden and worry in case of need due to death, illness, or nursing care on the part of customers or their families. It also helps supplement the public social security system (public pensions, health insurance, etc.). Meanwhile, life insurance companies support economic activity by supplying capital needed by various sectors government, corporate, and private through investment of customer premiums. The life insurance industry is playing an increasingly important role as part of the social infrastructure intended to support society with its aging population and falling birthrate. The three life insurance companies in the T&D Life Group will continue contributing to people and to society by fulfilling the public and social responsibilities their business entails. T&D Life Group CSR Charter The T&D Life Group is firmly committed to fulfilling the public mission of life insurance and other businesses and to undertaking its corporate responsibilities based on its management philosophy and by achieving sustainable growth along with society. 1. Providing Better Products and Services The T&D Life Group will offer well-suited and high-quality products and services that meet customer needs. 2. Strict Compliance The T&D Life Group will strictly observe laws, regulations and rules, and act with integrity. The T&D Life Group will maintain and promote fair and free competition. The T&D Life Group will stand firmly against antisocial forces and groups that may threaten the order or safety of civil society. 3. Respect for Human Rights The T&D Life Group will respect human rights and make efforts to enlighten all its employees on human rights. The T&D Life Group will respect the individuality of all its employees, ensure a safe and rewarding work environment, and develop its human resources. The T&D Life Group will respect privacy and will strictly control and protect personal information. 4. Communication The T&D Life Group will widely disclose its management information in an appropriate and timely manner to the public as well as to its customers and shareholders, and will actively strive to maintain a dialogue with all its stakeholders. 5. Contribution to Communities and Societies The T&D Life Group will implement social action programs as a good corporate citizen and will make contributions to the sound development of regional communities and society. 6. Global Environmental Protection The T&D Life Group will carry out its activities with full awareness of the importance of environmental concerns and with sufficient consideration given to global environmental protection. T&D Life Group Environmental Policy The T&D Life Group will carry out business activities with full awareness of the importance of environmental concerns and will give sufficient consideration to global environmental protection based on the T&D Life Group CSR Charter. The Group will achieve sustainable growth along with society while fulfilling the public mission of life insurance and other businesses, and undertaking its corporate social responsibilities. The Group established the following environmental policy and is committed to complying with it in all of its business activities. 1. Environmental Conservation Efforts through Business Activities We will contribute to the protection of the global environment in all of our business activities. 2. Reduction in Environmental Impact Recognizing the environmental burden of resource and energy consumption and waste emissions, we will work toward reducing environmental impact by conserving energy and resources, recycling resources, and promoting green purchasing. 3. Compliance with Environmental Laws We will observe all environmental laws and regulations. 4. Promotion of Environmental Awareness-Raising Activities We will raise environmental awareness among all Group members through awareness-raising activities to promote environmental protection initiatives. 5. Continuous Improvement in Environmental Initiatives By setting environmental objectives and reviewing them regularly, we will endeavor to continuously improve our environmental performance. All members of the T&D Life Group are notified of this environmental policy, which is also publicly disclosed. 50 T&D Holdings, inc. Annual Report 2013

52 T&D Life Group Environmental Policy The T&D Life Group formulated the T&D Life Group Environmental Policy to clarify the Group s stance on the environment and has worked to disseminate the policy among corporate officers and employees. The Group also promotes various activities to reduce our environmental impact. The Group has also set out Green Purchasing Standards and Rules, and gives priority to purchasing environment-friendly products and services. These include not only office furniture, equipment and consumable supplies essential for business activities, but also printing of product pamphlets, policy terms and conditions, real estate facilities and system equipment. Examples of CSR Initiatives Product Development Based on Customer Feedback The T&D Life Group s three life insurance companies have created a system for utilizing customer feedback received in the course of daily sales activities in management. This feedback is being used to improve product and service development and quality as well as operations. For instance, Taiyo Life responded to the need to add postcontact protection so that customers can increase the coverage of their current insurance. In October 2009, Taiyo Life started offering add-on options for its mainstay Hoken Kumikyoku Best to allow policyholders of this product to add the latest features or modify details after purchase to ensure that coverage plans best meet each policyholder according to their life stage. At Daido Life, meanwhile, we developed new products that reflect customers wishes with respect to J-type product (nonparticipating insurance for serious diseases). We developed J-type product (no surrender value or death benefit type), protection that allows policyholders to be prepared for serious diseases with more affordable premiums by eliminating the cash surrender value, as well as J wide rider, which provides cover for a wider range of serious diseases than before. Initiatives to Support Women s Careers To enable work with high levels of motivation and enthusiasm by all employees, the Group actively makes full use of all personnel capabilities and determines postings regardless of gender. The Group is building workplaces where women can fully utilize their skills and engage in an extensive range of activities. Specific steps taken to this end include the promotion of talented female employees to management positions, provision for a change of job status from clerical work to career track, and organization of seminars to encourage female workers to build their careers. Making Various Social Contributions The T&D Life Group has formulated the T&D Life Group CSR Charter based on the 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. The Group regards not only contribution through our main business but also through extra activities of contribution to communities and society as naturally being a duty that an enterprise must discharge as a member of society. Based on this stance, the Group actively engages in a wide range of social contribution activities. Daido Life was a special sponsor of the 12th National Sports Festival for People with Disabilities ( Gifu-Seiryu National Sports Festival ), the largest such event in the country, held in Gifu Prefecture in October A Daido Life booth staffed by corporate officers and employee volunteers from Daido Life, Taiyo Life and T&D Holdings has been set up each year at this event in a space for interacting with participating athletes. Taiyo Life has been conducting an annual clean-up around its head office since In 2004, it renamed this activity the Nationwide Clean Campaign, and its branches nationwide began clean-up campaigns in the surrounding communities. In fiscal 2012, a total of 8,551 employees and their families from headquarters, branches and affiliated companies participated in these activities. Employee volunteers from Group companies (including Daido Life, T&D Financial Life, T&D Asset Management, and T&D Holdings) helped clean up the Shiodome district in Tokyo where T&D Holdings is headquartered. In cooperation with the Japanese Red Cross Tokyo Metropolitan Blood Center, the T&D Life Group every year sets up a blood donation clinic for two days at the Shiodome Head Office Building in the summer and winter, and encourages corporate officers and employees to donate blood. In fiscal 2012, a total of 371 people in the Group donated blood at the Shiodome Head Office Building. T&D Holdings, inc. Annual Report

53 Corporate Social Responsibility Group Environmental Impact-Reduction Initiatives Cool Biz / Warm Biz As measures to help mitigate global warming, the T&D Life Group sets room temperatures at around 28 C (82.4 F) from May through September for Cool Biz and at 20 C (68 F) from November through March for Warm Biz. Power Conservation Efforts The T&D Life Group is implementing a number of measures to address electricity supply shortages in summer. These powersaving measures include setting office room temperatures at around 28 C and reducing or turning off lighting, including in unused areas (such as meeting rooms and hallways). The Group also sets office equipment to energy-saving modes and has extended Cool Biz periods. Lights Down Campaign As an activity to raise the environmental awareness of each of the Group s corporate officers and employees, the T&D Life Group has been conducting a campaign in which it calls for a simultaneous light switch-off in offices twice a year, in July and December. This is done in support of the CO2 Reduction/Light- Down Campaign resting on the partnership between the Ministry of the Environment and the Candle Night movement organized by a private-sector group. The Campaign exhorts businesses to turn off both indoor and outdoor lights to call more attention to environmental problems from a standpoint of preventing global warming. T&D Life Group CSR Report The T&D Life Group prepares CSR reports every year to provide stakeholders with a clear picture of the Group s concepts of and approach to CSR, as well as its CSR initiatives. In making the 2012 report, as we did with the 2011 report, we divided the report into two different booklets special topics and Data Edition in order to better communicate the Group s various initiatives to a wide variety of stakeholders. The special topics booklet has been condensed into 16 pages by selectively choosing the booklet s contents to include information on items that are of high interest to stakeholders, along with items that the Group has a strong desire to communicate. Meanwhile, the Data Edition booklet offers a comprehensive overview of the wide-ranging management, social, and environmental initiatives the Group is advancing based on the GRI Guidelines, which are international guidelines for CSR reports. (Corporate Social Responsibility Report 2013 is scheduled to be published in September 2013.) Please read our CSR report for more on the T&D Life Group s CSR initiatives. Promoting Environmental Communication T&D Holdings endorses the activities of Associates of the Earth, a Japanese environmental NGO that produces the Japanese edition of Our Planet and TUNZA, both published by the United Nations Environment Programme (UNEP). These two publications are distributed to all companies in the T&D Life Group as well as to local junior and senior high schools, public libraries, and other parties, to raise awareness of environmental issues. 52 T&D Holdings, inc. Annual Report 2013