T&D Holdings, Inc. (8795) Earnings Call Transcript & Summary

I'm Tamura of Taiyo Life. Thank you very much for giving us your precious time today. I would like to explain the management strategy of Taiyo Life. Please turn to Page 2. As shown on the slide, this is the Taiyo Life's business model. Left-hand side is the chart depicting our business model. In explaining our business model, the foundation that supports include the -- that the sales activities are done in pairs. The sales reps form a pair in visiting households to conduct the sales activities. That is the foundation. And the market shows the assumptions. This reflects the change of the Japan overall, the declining birth rate and aging population is progressing and the household market ratio of senior citizens have increased in the household market. This is the market where Taiyo Life does our sales activities and sales method, the conventional way is our sales rep to visit the households in pairs. In addition, under the COVID-19 pandemic, we integrated the digital and face-to-face. So we have been switching our sales method to this hybrid type. The product, it says the industry-leading product, we are selling life insurance products to households, and there are changes to the household market. One element is the increase in elderly population. While the Japanese population decreased for the next 20 years, the number of elderly population will continue to increase. How to cater to this market will be equal to the enterprise value of Taiyo Life. The right-hand side shows the product development. And in 2008, we developed a product called Hoken Kumikyoku Best, and this is in response to the change in the environment. In the past, our main product was Term Life, but we recognize that this product alone cannot cater to the needs. And the third sector product needs have heightened such as medical and nursing care. So this product is customizable, and that is the reason for launching this product. And another typical disease related to the aging population is the dementia. So we have launched dementia treatment and prevention products. And also, we have developed products with relaxed underwriting type. Next page, please. This page describes the hybrid style sales by combining the information and the face-to-face sales. Left-hand side shows the evolvement of information sharing. In 2016, we started to test in commercial utilization. It was started as a trial, but then we created Sma-Hoken. And in April of 2020, under COVID-19 pandemic, we -- it was not possible under the pandemic for a pair of sales rep to visit the households. So we started to utilize the data from infomercials. The information or data is provided to sales rep and the sales rep will utilize that data to do sales activities. And that process has been evolved. And currently, we are promoting hybrid style sales activities. And the right-hand side shows the trend of number of information sharing and the number of lead information shared has increased steadily, and the contract ratio have risen to a certain level. Page 4, please. This is improvement of productivity and increase in number of in-house sales representatives. We rely on sales rep to sell our insurance products. So the most important sales challenge is to increase the quality and quantity of the sales reps. The number of sales reps and productivity is depicted on this page. The right-hand side shows the number of in-house sales representatives. The dark red is less than 3 years. The light red is 3 to 9 years and the top part is 10 years and over. The quality and quantity of sales reps need to be enhanced. And to achieve that, we need to have them build up their careers and build up their experience and increase the number of customers. The starting point is people with less than 3 years of experience. How can we expand this level of sales rep and lead to sales expansion? In 2019, there were 3,200 people with less than 3 years. But last year, it increased to 4,400 people. So there was an increase of more than 1,000 people and the layer above or layer people with 10 years and over also increased. And on the quality, please refer to the table to the left. Less than 3 years. In 2019, under pandemic, per person ANP of protection type new policies, this is a very important indicator at Taiyo Life, it was JPY 1.13 million, which is up to JPY 1.53 million. And also 3 to 9 years, JPY 1.5 million rose to JPY 1.74 million. In addition to expansion of the quantity, the productivity has steadily improved. The table or chart below shows a peer comparison of third sector ANP of new policies per person. And this includes medical and nursing care. In tile, it is JPY 1.82 million. We are focusing on third sector products and per person, third sector sales in our case, is higher than our peers. Moving on to Page 5. Based on these factors, what about our sales results? The graph to the left shows ANP of protection type policies. The line graph shows in-force and also bar graph shows new policies. The new policies through the COVID pandemic period increased. During the COVID, it was JPY 15.7 billion, but it grew to JPY 21.9 billion. The number of new policies have also increased, but there is a challenge. The policies purchased during the COVID-19 period started to show some lapse from 2 years ago. Currently, this trend has calmed down. And the blue line chart shows the bancassurance channel and the assumed interest rate was lower for these products sold during the pandemic, but this is one area we need to focus, although we have switched to different products. Next page, please. Page 6. In promoting these initiatives, we feel the importance of the capability of people. If you look at the left-hand side, this is about promoting operational innovation. The branches, which is the sales branches, we have done the reform. There are various roles such as clerical work and sales support and customer service, and we are shifting the allocation of human capital more to sales support and customer service. In March of 2026, all of the reform will be completed and the 70% of the clerical work can be reduced by then. Currently, this initiative is progressing well. The lower part of the slide shows personnel system revision. The role or the job description will shift from the clerical one to sales focus and the job definitions and the work type will also be shifted. That is described here. Right-hand side shows reform of branch office management. Currently, in FY '25, we have started this reform, and this continues to be our challenge. The branch, which used to have comprehensive functions -- used to have comprehensive functions and that was for all branches. But now we created branches dedicated to sales so that we can strengthen our sales activities and the management of our sales initiatives. We have just started this. And moving on to the next page, Page 7. This was launched in August last year, what we call T-AI-Face. This is a mobile device that sales rep will carry. We have expanded this in order to expand the market, even if it's non-face-to-face, the solicitation can be done, which is the same as the face-to-face. We can shorten the distance and time by using these devices, therefore, aiming to achieve the market. Under the enhancement of sales capabilities, AI will analyze customer attributes to propose the best plan for the customers and also enhance sales efficiency. The nearby customer location is shown by the device when a sales rep makes the visit. So Page 8, I've been talking about hybrid style sales. The most important theme here is quickness. That means that if we receive information from a customer through smartphones and telephones, how can we link that and connect that and share that to the salespeople. And I think that is a great factor to decide whether we can do the business or not. So we are providing a seamless connection so that the information would be shared to the salespeople in operation-wise as well as the organization-wise, we have made some revisions. As you can see on the right-hand side, the volume and the quality of the information has been in high. Group pension enrollment information has been now related to the sales representative in-house. We have just started that. Moving on to Page 9, expansion of market. As was mentioned earlier, Taiyo Life, our sales reps go visit plants households one-by-one. So we were not able to open stores with less populated area. 20,000 people per square meter was -- per square kilometer was measurement that we have been doing. So we have been now expanding the market by enhancing proposal method regardless of face-to-face or non-face-to-face sales channels. By doing so, we have been expanding our market. We cannot visit, but using T-AI-Face -- T-AI-Face, we have been making proposals. These types of sales activities have started from last year. And using this, we are able to expand the market with less populated areas. So this is going to be another step. Moving on to Page 10. This is enhancing profitability. What are we doing? On the left-hand side, it says improved product margin for the past few years. So to speak, assumed expense ratio by different types of products, we have been increasing this, increasing the margin and profitability, hence. On the left-hand side, you can see the figures. This is the result on the bottom, and it says here assumed or forecast. These are the effects that we will be seeing from the future. On the right-hand side, you can see underwriting capabilities. This is claims and contract assessment. We want to increase this and improve this. And on the bottom, I mentioned to you that some of -- how do we improve surrender and lapse ratio. This was a challenge for us. I think we are seeing a coming down of this increase. Moving on to Page 11 and 12. Those are the profits and sales indicators and forecast that is based on what we have been doing. That's all from me. Thank you very much.

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

I'm Kitahara. Thank you very much for your time today. First, I will explain last fiscal year sales performance and current trends, followed by the latest topics related to our management strategy. Please turn to the next page. This is the sales performance for fiscal 2024. New policy amounts increased by JPY 400 billion year-on-year to JPY 5.1 trillion, since the bubble economy, this is the highest. New policy amounts, which had declined due to the COVID-19 pandemic, recovered strongly from the low point of JPY 3.5 trillion in 2020. This was achieved through our diligent consulting sales efforts to address the diverse protection needs of our customers and the expansion of our total protection proposal, which promotes the bundling of life insurance and disability income insurance and also the new corporate clients total reached 17,000. Next is the in-force policy amount. The increase on net basis was JPY 300 billion. And to the right-hand side, the lapse and surrender rate is bottoming out in the middle of the page to the right, quarterly lapse and surrender is shown. And especially it declined quite rapidly in the fourth quarter, and it is roughly 90% right now. And there is comparison of the total set of policies, client and corporate clients with single coverage and the trend of surrender and lapse amount is lower for the corporate clients with total set of policies. This is the new business EV, and it has been growing steadily. One of the major factor is that the ratio of total coverage is expanding. MCEV has grown by 2.5x in the 10-year period and reached JPY 2.7 trillion. Next, I would like to cover the most recent trends. Due to Trump administration's tariff, there is a concern that there is an impact to SMEs. Left-hand side shows the current level of new policy amount for April to May period, and it has grown 103% year-on-year. And June number, although it's not in here, it is 109%, and we were able to achieve major progress in June. As of now, we are relieved to see this performance. In the future, it's not possible to anticipate what happens to the Trump tariffs. So we should not be complacent. We will continue to be careful. The surrender and lapse amount is declining 90% year-on-year, as shown to the right. Next page, please. This is on three Cs: customers, competitors and companies. First, on customers at SMEs, there is a structural issue, which is to take care of the business succession and labor shortage. And currently, the management issue has become complex, also partially due to Trump tariff and unclear situation will continue. The competition, this has been moderate at one point, thanks to the tax saving insurance, the market has been active, but -- and rather overheated, but that situation has calmed down. And in our company, we expect the unclear situation surrounding SMEs will continue. But basically, the needs of the insurance will not be impacted by the economic condition, and we have experienced various challenges in the past, and we will be taking measures appropriately, and we have confidence that we will be able to overcome. Next page, including Trump tariff, we have been doing market survey. The 64% of the companies are having concerns and especially the ratio of manufacturing industry and also our retail is rising. And also the concrete measures include the -- sorry, specific impact includes deteriorating earnings, a decrease in margin, review of sales pricing. And in terms of the measures against the impact, 48% said that they have no feasible countermeasures. The negotiation with the U.S. is still continuing and the unclear market environment surrounding SMEs will likely to continue. More than 90% of our agents are tax accountants, and they are providing management guidance by using -- on the use of insurance. And that is one of the major characteristics of our sales structure. The independent agent ratio remains the same. So we don't see any major changes in the competitive landscape. And also, there are new products launched by competitors, but we are able to maintain our superiority. Moving on to Page 9. Latest topics. First is the growth of our existing channels, including sales rep channels and the tax accounting channels. Both as written here is increasing. And moving on to the next page, please. Next is the steady capture of inheritance and business succession needs. The age of SME owners remains high. According to the 2025 edition of the white paper on SMEs, the majority of owners are 60 years or older. In order for SMEs to pass on their valuable management resources to the next generation and continue their business, it is necessary for owners themselves to make preparations from an early stage. For smooth business succession, the support of external experts is essential. For us, in order to further strengthen our support in dealing with inheritance and business construction, we are expanding our team of FPs and inheritance consultants and have completed the nationwide deployment of them in FY '24. Attentive consulting starting from stock valuation promotes a deep understanding of customers on protection and coverage. As evidence of this, the average contract value of cases supported by FPs and inheritance consultants is much higher than the company-wide average. We are also providing comprehensive support through introducing other partners such as financial institutions and M&A intermediary companies to our customers. Next, the development of the disability income protection in 2010, we launched J-Type product that can provide coverage for the risk of the business owners contracting a serious illness and being forced to leave the company for an extended period of time or retire, while also ensuring the high level of coverage necessary to manage the company. 15 years have gone since the launch of this J-Type, and we have updated them. Particularly for cancer early detection technology is advancing rapidly. And if the cancer is not serious, it is possible to return to management and business operation at an early stage without having to leave the company for a long time or retire. And we also have launched a new product in June to meet this demand. As a result of these efforts to evolve J-Type in line with advances in medical technology and changes in customer needs, the number of J-Type policy enforced at the end of FY '24 is 204,000 and the policy amount in force is JPY 4.1 trillion. Next page, please. Next is development of midsized business segment through financial institution channel. In addition to the in-house sales reps channel and tax accountant channel, I mentioned earlier, we are strengthening our financial institution channel. Currently, the majority of our business comes from mega banks, leasing companies and leading regional banks. However, from the perspective of developing new markets and reducing concentration risk, we are also working to develop other regional banks and securities companies. As of the end of FY '24, the number of financial institution agents reached 79, up 12% from FY '22. On the other hand, the new policy amount trend in financial institution channel shows a decrease of 93% from the previous year. Originally, the financial institutions were selling our business owners insurance for protection, not an asset-based single payment product. However, with the recent turnaround in asset management environment, we've seen a series of sales of single payment variable insurance and foreign currency-denominated insurance. We believe that such diversification of product promoted the financial institution agents may have been the factor behind. Although the financial institution channel is more competitive than other channels, we intend to continue to differentiate ourselves by not just our product lineup, but also leveraging our strengths on experiences and service. Next is about Dodai?, touchpoint with new customers. Dodai? released in 2022 has grown into one of the largest web-based community for business owners in Japan with shortly exceeding 100,000 members. In particular, the number of people registering as a member through advertisement and organic search is expanding. And at the end of FY '24, 38% of members registered not through existing channel. As a result, Dodai? contributed to creating touchpoints with a customer base that has previously been inadequately assessed such as customers and information telecommunication and young executives in their 20s and 30s. Dodai? has been launched with the aim of increasing the number of prospective customers who will become a future customer base in insurance business. Also, we will continue to contribute to the resolution of management issues of SMEs, and expansion of exchanges among owners through Dodai?, so that we will be able to have greater social impact such as growth and development of SMEs, regional revitalization and creation of new businesses. Next, moving on to Page 14. Next is create an employee market through contributions to human capital management. As labor shortages become more serious, the practice of health and productivity management to keep employee active and energetic for a long time is an important management issue for SMEs. As a tool to support the practice of health and productivity management of SMEs, we have released KENCO SUPPORT PROGRAM in 2017. The number of companies and users of this tool has been steadily increasing. As end of FY '24, the tool has been introduced to 45,000 people. The number of user is 157,000. Through the KENCO SUPPORT PROGRAM, we contribute to the human capital management of SMEs. We are also committed to creating and expanding the employee market to help SMEs prepare for the risk of their employees who are their most important capital. In addition, Ministry of Economic Trade and Industry has been doing the health and productivity management, and they have provided certification. We are supporting SMEs that they get the certification and also providing some awards in this regard. As mentioned, we will further differentiate ourselves from our competitors by enhancing our presence as a partner that supports the growth of SMEs by providing a variety of support to them. This is the last page. This is the full year forecast, same forecast we announced at the beginning of the fiscal year. But I will explain a bit more. The core profit -- profit indicator is expected to decrease due to an increase in wages and an increase in business expenses associated with the cost of opening our core system. Regarding sales performance, we will continue to implement the total coverage proposal, which is one of our strengths and expect to expand the number of new customers and deepen relationship with existing customers. We expect both new policy amount and policy amount in force to increase. Please note that there are some uncertainties due to U.S. reciprocal tariffs and so forth. So this trend may fluctuate our results. That's all for me. Thank you very much.

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

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

I'm Tamura of Taiyo Life. Thank you for your question. I would like to reply to your question. The insurance profit and loss, last year -- in the same time last year, we have presented a certain amount, and now it is lower than that amount. Major factors include: first is the wage increase, the internal in-house staff and sales staff, we increased the compensation for those people. Another factor is system investment. As I have said, we are -- we have developed the AI phase, and this investment has increased. And in addition to that, the sales rep channel, I said that, there is some improvement, but due to deterioration of the surrender, the content of the protection has changed. So those are the factors influencing the profit and loss. In case we discontinue completely the bancassurance, what would be the impact? I don't have a specific number at hand. But at bancassurance, the gap, there is a certain contribution. And if we discontinue, then we will have an impact on this bottom line on the gap. And if we have another opportunity, I would like to share with you a specific number.

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

Thank you for the question. Within Dodai?, the access is done by relatively younger corporate customers. So our overall customer age group is relatively higher compared to Dodai?. And Sony Life is scheduled to go public, and they have announced that their target will be corporate market. But I would like to refrain from commenting on other companies' strategy. I don't have the full picture. But in any case, variable products will not be fixed benefit for the death and some people are preparing for the future benefit and the corporate protection is a certain need that we do see. And for younger management, if they join the insurance at younger age, the premium will be lower. So that is preferred. But when they start a company, then their focus tends to be more on the business profit. And protection for the corporate customers, if they have something or someone to protect such as more employees or increase of loans, then there is no strong motivation. So I believe it is rather difficult to motivate them to purchase coverage when they are young.

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

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

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

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

This is Tamura speaking. Thank you for your question. The first question about infomercial. As for infomercial, as is written here, we use TV CM, we get phone calls. And based on that, we visit customers. And was mentioned earlier, the infomercial is the information that we got through phone calls, can we smoothly relay that to the sales reps. That is the most important part where which leads to the result. In our case, Taiyo Life, I think in our case, when we get the phone call, this is going to be most quickest time that we relay these information shared to our sales reps and the sales reps instantly visit the customers. I think, this has shown up the effect. That is the current status. What are the challenges? Yes, naturally, the phone call that we get would not necessarily lead to 100% contract or policy. If you could look at the right-hand side on Page 3, the graph, the contract ratio is about 30% -- less than 30% or so. So the remaining 70% or so has not led to the contract. Of course, we do have the information accumulated in Taiyo Life. So repeatedly, we need to use this information. And based on that, we have to visit the customers and relay that to the sales reps and lead to the contract. So I think we have to think about the next, so that we can have higher contract ratio. And here, as I have mentioned to you earlier, I've mentioned LC, Life Counselor in branches. Those clerical workers who was working in clerical things are now transferred to sales, and those are sales reps, and we do have shared information. And of course, in advance, we get customers' approval to visit them, and they would get this and visit the customers. And in this graph, you can see on the right-hand side, very right-hand side, the shaded 2024 bar chart. This is a portion where LCs had started the support sales activities and life counselor, LCs, I think this job has started from last October, and they have been supporting the sales reps. How can we enhance and improve these capabilities, I think, would be important. That's the first part. Second one, if you could turn to Page 4, per person new policies, ANP. This is per person, yes. As you have mentioned, Ms. Tsujino, yes, if it's visiting in pairs, if you compare with 2019, yes, JPY 800,000 is another positive vis-a-vis 2019. So that shows the higher quality of sales reps as well as the effectiveness of Sma-Hoken and Infomercial. I think, on a daily basis, those information are actively used in the sales reps' daily activities, and that has led to the result. Naturally, the sales reps in order to increase their compensation, they're working. If they get the contract, I think that would be high motivation, high motivation for those people to work more. So I think one word of thank you and getting the contract makes -- motivates them. So I think from the hire perspective -- hiring people perspective, this has been a good thing. So on Page 4, right-hand side, we have this -- the less than 3 years reps, we have more and more people joining us. So the next stage is that those people, we want them to retain with us and have more higher quality so that they can stay longer with us. Thank you very much.

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

Yes. Ms. Tsujino, thank you. Yes, as you say, yes, here, so to speak, the information sharing, how much can we increase this? This is the challenge. Yes, 2022 in that sense, we had pandemic demand, so to speak. Of course, we had COVID-19. I think people watching TV have increased. But recently, the numbers are declining. So during the COVID-19, people stayed home and were watching TVs. So they were watching TV longer hours. So this is shown in other statistics as well. So having higher viewing rate is difficult compared to the past. But of course, we have to invest more and control more about investment into the TV advertisement. We have more than 3 years of sales reps now with us. And for them, I think information, the volume and the quality is important. It is not just investing into TV CM makes a difference. I think the difference here or importance here is in what type of program are we going to invest into TV ads. So we have to be selective in programs so that it could be more efficient. So yes, as you say, this is going to be a challenge, and we will keep on going and controlling this as well. Thank you.

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

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

Thank you very much, Watanabe-san. First, the number of LCs currently at Taiyo Life, as explained, using this material, we are continuing with our operational reform from 10 to 20 years ago. There are massive volume of clerical work, and we have introduced automation in order to reduce the workload. And the initial benefit of that was reflected in the reduction of the labor cost. We reduced headcount and reduced the cost and contribute to the profit. How we did this is that, the new recruiting after somebody retires of the new grads, we stopped them for a certain period in order to reduce the number of general staff and thus reducing the total headcount. This time, the business operational reform is focused on the quality rather than the number of people. We are changing the quality and productivity. We have 600 or so LCs across Japan and their job description is changed from clerical ones to sales support. And Page 3 bar chart shows the fruits of that. This is a completely new challenge. And little by little, we are asking LCs to make more challenges. And among sales reps, there are reps who have a certain number of customers, but not fully leveraging we -- there is a gap between the number of customers held by rep and the performance. And the approach that rep should make to the customer is not fully done. So without fully proposing the full possible coverage, their contracts are being made. And that part is supported by LCs. And when we compare the sales rep with LC support and without LC support, we are starting to see the difference in the productivity. So these are the methods that we can further pursue. The second point -- on this point, you are exactly right. The reform of the branch structure, this is on Page 6. For Taiyo Life, when we look back at our history, this is the first attempt to do that. Until now, all branches had uniform same functionalities. But this time, we are challenging to make those changes. We currently have 150 branches categorized into 20 blocks. And this challenge is made in one block. The dedicated sales branch offices focusing on sales promotion. Well, conventionally, certain amount of management resource was allocated to clerical part. But June is a campaign month for Daido Life and -- sorry, Taiyo Life, and we are now seeing the expected results now. Of course, we have various issues since this is the first attempt. But by resolving each issue one by one and deploying the structure across Japan and also introducing layers to the sales organization, we can achieve the strengthening of the sales management and improvement of the productivity. This is a challenge for Taiyo Life, and we would like to proceed carefully, but in a speedy manner.

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

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

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

This is Sasaki from Nomura Securities. The first question is for Taiyo Life. Sales channel and your sales strategy. First is about you're going -- I'm interested in doing insurance business in BS -- BS coverage. The cost is reduced. And this is BS means broadcasting. You have a lot of company, Japanese Takata and so forth coming into this market. So as a broadcasting companies, do you have any intention to have a coordination with Japanese Takata or any broadcasting companies? Product, I have one question. And short interest rate is higher now. So in the past, we had savings and insurance, we had a product in between that type. So close to savings and selling those products, you have a lot of asset now. Do you intend to go into those products more?

Yes. Thank you for your question. Thank you for your two questions. First one is, so to speak, is information sharing, I believe. What you have mentioned, the activities that you have mentioned, we have not been not part of the business yet. But when you talk with the people in the forefront, TV broadcasting companies, they are concerned about the lower viewing rates. And we do -- and we do have some involvement in that. We do have the same concern. So the information source. How are we going to expand that? That is a very important theme for us. It is not infomercial, but as was mentioned to you earlier, for group life insurance, the customers' information shared to our sales reps maybe in the future. And those -- we have Shinyo Kumiai or corporate Kumiai financial institution and maybe we can tie up with them, and maybe sell similar product with them and acquire some information. So this is not just accumulating our own and collecting our own information, but maybe tying up with others and sharing information may be sought in the future. The second question is about the interest rate in the new world for us. Currently, when you look at the sales performance, sales-wise, I think we're not putting strength on, but the lump sum type of product compared to the previous year is selling well. So single payment, I think this shows the needs of our customers. We do have -- majority of our customers are seniors. So after retirement, of course, they stay home more. So as a customer, we have a lot of senior customers, and they do have some amount at hand. And in a sense, they have nowhere to put the money. So that kind of money, we visit to those households and probably we get more contract. I think that percentage is higher now for us. So the household market, we see some changing needs. We would have to address this and cope with this. But as you say, it is not the simple way of selling the product, as you say, visiting households and carefully selling to senior customers. Yes, that's a very important way of selling our products. And I think that is going to be another factor for us for next growth. So in the related department, we are now discussing how to do that business.

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

Well, this is rather technical, and we need to consider that in coming years. But what I can say is that after COVID-19 and the current situation is that our corporate clients, SMEs, their major challenges that they cannot hire people. And I think human resource-based management are now doing -- actively done by large corporations, and they are hiring more young people now. For SMEs, in some cases, they are not able to hire new people, and that is another factor leading them to bankruptcy. So I think human capital management is most important. Of course, having better benefits and so forth and wages is important for SMEs. So in that sense, we are providing them health and productivity management, they are not being penetrating in the SME market yet. In order to solve social issues, I think in our plan next year, we are incorporating this idea. How are we going to do this? I'm not able to provide you specific things, but these are a very important theme for us, and we are fully aware of that.

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

I'm Sato of JPMorgan. I have two questions. First question is to Taiyo Life, Page 10 of your material. The product margin improvement, various measures are shown here, especially the left-hand side bottom shows expense margin improvement effect and how much can you realize -- utilize this? Up to FY '24, the impact that you expected didn't materialize. That is my first question. And the realization of the impact in the future, the pace, I think, will be faster than the impact felt in the past. So what is your assumption? Why you are not realizing as of today, but why this is the measure -- these are measures for the future? That is my first (sic) [ second ] question.

Thank you very much for your question. On Page 10, left-hand side bottom, the expense margin improvement effect image. The first point, the actuals, the numbers in actual how probable or trust reliable these are. For these, this is quite -- quite accurate, and we have built up these effects. And in the right -- to the right, these are assumed for the calculation in the rates for the insurance products, and we have a certain number in the background. The red bar graph, unless there's a major decline in the sales volume or unless there's a major increase in surrender and lapse assuming the current trend of the sales volume and also surrender and lapse, then these bar graphs will steadily increase. That is for the red part. The blue part, you say that the impact may be too early. It says 4 -- in 2020, 0.4. And these are the impact of the products sold in April or November in 2019. And blue bar shows the impact after this fiscal year. So we do not expect that these timings are too early, but rather correct. The volume of new business, the budgeted business performance and also surrender and lapse ratio. If the -- if the assumptions and the actual vary significantly, then this may not be the result. But given the current budget, these are the impacts that we do expect.

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

Thank you very much for the question. The question you raised, how the effect has been built up or will be built up. From 2019 to 2025, there are various measures to increase business expense margin assumed business expense. It is not 1 year worth of the measure, but it's a buildup of the numbers, and it accumulates. So the measures in April 2019 and November 2019, each measure is building up. So it is not contributing to just a single year result. So please look at these numbers in such a way. And from 2019 to 2025, all of the measures impact or effect will build up. And as we progress into 2025, '26, '27, the impact of past measures will accumulate. The blue part shows the results of the measures from this fiscal year onward. And you say that this is rather large and product revision impact, we expect to be larger in the future than in the past. So from that perspective, the improvement effect will be larger in the future. In terms of the actual amount, monetary amount, the height of the bar, whether that is accurately reflecting the forecast or not, that may not be precise, but there is a major product revision, which is to relax the underwriting and that assumed expense is heightened.

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

One is disability protection product. The volatility is high. So the company is incorporating a buffer, but as compared to the past -- well, based on the past experience, the profitability of this type of product is high. So if that portion expands, then the profit margin will increase. We are a equity company, and there is no distribution to the policyholders. So basically, we need to set our sense of value to total revenue. The assumed rate -- interest rate of our products is right now far below 1%. If we increase the assumed rate, then that will not contribute to the revenue. And based on the fact that we are steadily continuously winning new business, we should look at the expense -- assumed expense rate on a total basis. And the digital cost is rising, we need to move away from host computer. Otherwise, we will not have flexibility and the maintenance cost of the host computer will rise and capable human resources will be short in the future. So labor cost will increase. So the assumed business expense will need to be raised in order to compensate for the -- for such increase of the cost. So on total basis, it is important to secure new business margin. If the assumed expense rate is a concern, then we will raise the assumed rate increase. And for customers' perspective, the premium will not change. So that does not have a significant meaning in implementing.

Tsujino-san of BofA Securities.

Because of the time, yes, I'm again asking questions. Last September, last year September, you were trying to launch a new system, core related and Taiyo and Daido, respectively, you were able to reduce the cost and the effect will come up. I think that's what you have explained. That was an explanation made by the President, I guess. Since then, some time have passed, is there any effect that you saw the timeline as well as the actual amount and so forth?

Thank you very much, Tsujino-san. This is going to be answered from Moriya. I think your question was Taiyo and Daido Life shared operational system, and that is considered at the holdings level. As was mentioned, earlier, Daido Life, they have made the core system open. And toward 2029, they are progressing with that. And that is going to be a group core system, and that is going to be shared by Taiyo Life. So including Taiyo and Daido, I think we are still considering that so that we can reduce the operational cost. For the time line, the target is the function of policy and contracts. And -- if you take just clerical works, the process, we have so many processes. And up to what level, how much can we share and how much cost will be reduced, we are now evaluating these effects at this point of time. Within this fiscal year, we will be evaluating and we have that time schedule. And based on that, that is going to be -- we will decide whether that will be incorporated in our long-term plan. So in that sense, according to the plan, in line with the plan, we are working on that. So if we are clear with that, we will make another announcement. Thank you very much. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]