T&D Holdings (8795) FY2026 FY Earnings Report

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Executive Summary

FY2026 was a fiscal year in which Ordinary Income increased significantly, driven by the expansion of investment income, despite sluggish growth in premium and other income. Ordinary Revenues amounted to ¥34,822.1B, down 6.7% year on year, while Ordinary Income rose 29.5% year on year to ¥2,571.9B, and Net Income attributable to owners of the parent increased 10.0% year on year to ¥1,389.7B. The primary factors behind the increase in earnings were the expansion of investment income and higher profits at Dai-ichi Life and Taiyo Life, while the increase in extraordinary losses partially restrained the flow-through to final profit relative to the growth in Ordinary Income.

Factors Affecting Results

【Revenue】Ordinary Revenues amounted to ¥34,822.1B, down 6.7% year on year. Taiyo Life expanded on premium and other income of ¥9,830.9B (+22.0% year on year) due to an increase in reinsurance income, while T&D Financial Life declined to ¥7,846.6B (-14.9%), reflecting the competitive environment in the independent agency market. Dai-ichi Life maintained stable performance, specializing in the small and medium-sized enterprise market, with ¥8,553.3B (+1.7%).

【Profit and Loss】Ordinary Income increased 29.5% year on year to ¥2,571.9B, primarily due to the expansion of investment income to ¥7,479.7B (+53.2%). Gains on sales of securities of ¥1,715.4B and gains on money held in trust of ¥917.0B were positive contributors, while losses on sales of securities of ¥1,580.7B and losses on financial derivatives of ¥900.6B resulted in substantial volatility in investment-related gains and losses. By segment, Dai-ichi Life generated the largest Ordinary Income at ¥1,346.8B (+18.6%), while Taiyo Life exceeded it in growth rate, reaching ¥1,165.9B (+46.7%). Between Ordinary Income and Profit Before Tax, extraordinary losses of ¥469.5B substantially exceeded extraordinary gains of ¥63.8B, and temporary factors, including the provision for the price fluctuation reserve of ¥185.8B, caused the growth rate of final profit (Net Income +9.9%) to fall below the growth rate of Ordinary Income. The company reported a decline in revenue but an increase in profit.

Segment Analysis

The reported segments comprise Taiyo Life Insurance, Dai-ichi Life Insurance, T&D Financial Life Insurance, and T&D United Capital (consolidated). Dai-ichi Life was the largest profit-contributing segment, with Ordinary Income of ¥1,346.8B (profit margin 10.8%), supported by a stable earnings base specializing in the small and medium-sized enterprise market. Taiyo Life improved its Ordinary Income to ¥1,165.9B (+46.7%) and its profit margin to 9.1%, narrowing the gap with Dai-ichi Life. T&D Financial Life generated Ordinary Income of ¥123.3B (profit margin 1.4%), with the competitive environment in the independent agency market reflected in its relatively low profitability. T&D United Capital (consolidated) recorded an Ordinary Loss of ¥18.2B and remains in the stage of making strategic investments in growth businesses, requiring time to achieve monetization.

Key Financial Indicators

【Profitability】The Ordinary Income margin improved to 7.4% from 5.3% in the previous year, while the Net Income margin attributable to owners of the parent rose to 4.0% from 3.4%. ROE was 8.7% (approximately +0.5pt year on year), with the improvement in profitability primarily supported by an increase in investment income.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥1,502.2B, or 1.08x Net Income, indicating generally sound cash backing for earnings. However, OCF/EBITDA was only 0.55x, indicating relatively low cash conversion efficiency due to funding fluctuations related to insurance liabilities and investment assets.【Investment Efficiency】Capital expenditures amounted to ¥134.2B compared with depreciation and amortization of ¥166.0B, resulting in capital expenditures/depreciation and amortization of 0.81x, a level centered on maintenance investment.【Financial Soundness】The Equity Ratio was 9.3%, improving from 8.4% in the previous year. However, the majority of liabilities consisted of policy reserves of ¥139,796.4B, resulting in the high-leverage structure characteristic of the insurance industry. Valuation differences on securities amounted to ¥7,358.2B, accounting for approximately 45% of net assets, indicating high sensitivity of equity capital to market fluctuations.

Cash Flow Analysis

Operating Cash Flow was ¥1,502.2B, a substantial improvement from negative ¥3,598.7B in the previous year. Investing Cash Flow was negative ¥2,615.0B, and Financing Cash Flow was negative ¥146.8B, resulting in negative Free Cash Flow (OCF + Investing Cash Flow) of ¥1,112.8B. Financing Cash Flow included ¥1,063.2B in treasury stock acquisitions, while Investing Cash Flow was significantly affected by fund movements in the investment portfolio, including securities and loans. Cash and cash equivalents amounted to ¥6,961.5B at period-end, a decrease of ¥1,269.5B from the previous year, but remained at a sufficient level relative to short-term bonds of ¥79.8B, maintaining short-term funding and settlement capacity. The Free Cash Flow deficit reflects the nature of investment activities at insurance companies; however, it should be noted that reliance on asset sales and external financing increases when dividends and treasury stock acquisitions are funded solely through internal resources.

Earnings Quality

The increase in Ordinary Income for the current period was heavily dependent on the expansion of investment income. Gains on sales of securities of ¥1,715.4B and gains on money held in trust of ¥917.0B contributed positively, while losses on financial derivatives of ¥900.6B and losses on sales of securities of ¥1,580.7B resulted in substantial volatility in investment-related gains and losses. Between Ordinary Income and Profit Before Tax, extraordinary losses of ¥469.5B exceeded extraordinary gains of ¥63.8B by ¥405.7B, and temporary factors, including the provision for the price fluctuation reserve of ¥185.8B, lowered the conversion rate into final profit. OCF was 1.08x Net Income, indicating limited concern regarding accrual quality. However, OCF/EBITDA remained at 0.55x, and funding fluctuations specific to insurance companies, including policy reserves and transactions in investment assets, affected cash conversion efficiency for the fiscal year. Given the high proportion of investment gains subject to market conditions, confirmation of investment-related gains and losses and insurance underwriting income and expenses from the next fiscal year onward is necessary before regarding the improvement in the current-period profit margin as a permanent structural change.

Earnings Forecast and Guidance

The company’s forecast for Ordinary Income in the next fiscal year is ¥2,350.0B, representing an 8.6% decrease from the current-period results. The forecast EPS for the next fiscal year is ¥281.33, slightly above the current-period result of ¥279.64. Current-period Ordinary Income appears to have exceeded the company’s FY2026 forecast, and the expected decline in earnings in the next fiscal year is considered a conservative assumption incorporating a reversal of the upside in investment income during the current period.

Shareholder Returns

The FY2026 annual dividend was ¥130.00, comprising an interim dividend of ¥62.00 and a year-end dividend of ¥68.00. Total dividends amounted to ¥636.5B, resulting in a Payout Ratio of 46.5% relative to Net Income attributable to owners of the parent. Treasury stock acquisitions of ¥1,063.2B were conducted, bringing the Total Return Ratio, including dividends, to above 100% of Net Income. The company forecasts a dividend of ¥164.00 for the next fiscal year, representing a planned increase of ¥34.00, and the forecast Payout Ratio based on forecast EPS for the next fiscal year is approximately 58.3%. The large-scale treasury stock acquisition despite negative Free Cash Flow for the current period requires monitoring in terms of the balance between capital headroom and asset valuations.

Risk Factors

1. Market-related gains and losses volatility risk: Investment income increased 53.2% year on year, but the company also recorded losses on financial derivatives of ¥900.6B and losses on sales of securities of ¥1,580.7B, indicating a structure in which investment-related gains and losses can fluctuate substantially due to changes in interest rates, share prices, and foreign exchange rates.

2. Duration gap between policy reserves and long-term investment assets: Insurance contract liabilities and policy reserves increased 1.9% year on year to ¥139,796.4B, and the consistency of yields and durations with long-term investment assets will determine capital stability.

3. Balance between capital returns and cash flow: Treasury stock acquisitions of ¥1,063.2B were conducted while Free Cash Flow was negative ¥1,112.8B, and the Total Return Ratio exceeded 100% of Net Income. The sustainability of continued large-scale capital returns requires monitoring.

Industry Benchmark (For Reference; Company Research)

No industry benchmark data available
※Source: Compiled by the company

Key Takeaways from the Earnings Results

1. Ordinary Income increased 29.5% year on year, while Net Income attributable to owners of the parent increased 9.9%. The primary drivers of earnings growth were improved profitability at Dai-ichi Life and Taiyo Life and the expansion of investment income. However, the company remains highly dependent on investment income, and the forecast for Ordinary Income in the next fiscal year reflects a conservative assumption, at 8.6% below the current-period result.

2. Despite the increase in Ordinary Income, the conversion rate into final profit declined due to the recognition of extraordinary losses of ¥469.5B. The impact of temporary factors, including the provision for the price fluctuation reserve, requires continued monitoring.

3. The Payout Ratio of 46.5% is within a sound range, while the Total Return Ratio, including treasury stock acquisitions, exceeds 100% of Net Income. The scale of capital returns during a period of negative Free Cash Flow warrants attention from the perspective of financial soundness.

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmark data is reference information compiled by the company based on publicly available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with professionals as necessary.

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