Message from the Group CFO

In the previous plan, we identified improving capital efficiency and lowering the cost of capital as the most important priorities and worked to reduce risk accordingly. As a result, by FY2023, the final year, we achieved certain progress, with the cost of capital declining to around 9%. At the same time, adjusted ROE, a key indicator of capital efficiency, stood at 8.2%, remaining below the cost of capital. Therefore, we positioned the current plan as the final stage toward achieving capital efficiency that consistently exceeds the cost of capital.

In FY2024, the economic environment remained stable at a high level, and Daiichi Life's new business performance recovered significantly. In line with its risk-reduction objectives, Daiichi Life made steady progress in selling domestic equities in accordance with the plan. Overseas subsidiaries, including Protective and TAL, also delivered solid results. As a result, Group adjusted profit reached ¥439.5bn, exceeding the ¥400bn target originally set for FY2026 when the plan was announced. Furthermore, through share buybacks and other initiatives to improve capital efficiency, adjusted ROE reached 10.7%, exceeding the 10% target set for FY2026, the final year of the plan, and for the first time our capital efficiency exceeded our cost of capital.

The Japanese government is scheduled to introduce economic value-based solvency margin regulations in FY2026. With this in mind, we have set an economic solvency ratio (ESR) target range of 170–200%. In addition to domestic subsidiaries that had already applied the standard in advance, overseas subsidiaries started adopting the new measurement model at the end of FY2024. In January 2025, we raised funds through a large-scale subordinated bond issuance, which pushed ESR above 200% and enabled investments in asset-formation initiatives and new businesses in the overseas life insurance domain. In addition, changes to the ESR measurement model brought the new standard-based ESR to 210% at FY2024 year-end, exceeding our target range.

With respect to improving operating expense efficiency—a challenge we have long recognized— changes in the economic environment, particularly the recent rise in inflation, now require stronger measures, and our management team is deepening discussions on concrete responses. We have already made proactive investments in such areas as IT and AI. Going forward, we aim to leverage the benefits of these investments to create further value and improve operating expense efficiency.

From the second year of the plan onward, we need to further raise capital efficiency while maintaining financial soundness, thereby sustaining and expanding a position in which capital efficiency exceeds the cost of capital. With this in mind, we intend to drive capital circulation management even further.

As mentioned earlier, adjusted ROE in FY2024 reached 10.7%, exceeding our 10% target and reflecting progress toward achieving capital efficiency that consistently exceeds the cost of capital. It is important to note that this is not a temporary phenomenon, but rather a reflection of our intent to deliver consistently high capital efficiency in FY2025 and beyond.

While we achieved a high adjusted ROE, global top-tier peers we benchmark ourselves against are delivering even higher ROE levels. Therefore, we must also raise our sights and strive to achieve an even higher ROE. In light of these circumstances, we have raised our adjusted ROE target to 12% or higher for FY2026 and 14% or higher for FY2030. To achieve these targets, Daiichi Life sells its domestic equity holdings, with part of the proceeds to be reinvested in long-term JGBs. The capital released as profit will be allocated through the holding company to business investments that strengthen the competitiveness and profitability of Group companies. In addition, we will carry out disciplined and well-balanced capital allocation toward strategic investments for future growth and stable shareholder payouts as our most important priorities.

In Japan, a prolonged low interest rate environment has made it difficult for insurers to offer attractive assumed interest rate products, particularly in the asset-formation segment, but the recent rise in domestic interest rates has become a tailwind for the life insurance business. In the US, the world's largest insurance market where interest rates began rising ahead of Japan, the life and annuity market has undergone significant changes in recent years. The ability to manage assets in alternatives and securitized products has become a key success factor, and the asset management functions that support this have also grown substantially. As similar changes are anticipated in Japan, we are pursuing new product development that leverages the rise in yen interest rates with our efforts to strengthen our asset management capabilities. Through investments in the asset management field, meanwhile, we aim to achieve an average annual growth of 10% in adjusted earnings per share (EPS) from FY2023 through FY2030. To this end, we will support our business strategy to realize this growth from a capital policy perspective.

Since the start of FY2025, we have announced several strategic investments, but we also decided to withdraw from the Thai market. Looking ahead, we will continue pursuing strategic investments in businesses with high growth potential. If the initially expected benefits can no longer be realized, however, we will replace businesses in our portfolio. In this way, we will further advance capital circulation management by making disciplined and effective use of capital to drive growth.

We will continue striving relentlessly to enhance corporate value as we advance toward our Vision for FY2030.

While maintaining financial soundness, the Group manages its capital policy based on the ERM framework, aiming for sustainable enhancement of corporate value and stable shareholder payouts.

Under our current mid-term plan, we will continue building on the previous plan by pursuing sustainable growth through the practice of capital circulation management. “Capital circulation management” means reallocating capital—sourced from earnings generated through business operations or freed up through risk reduction—to higher-efficiency, higher-growth businesses, while maintaining financial soundness. This creates a virtuous cycle of capital and cash generation that drives the enhancement of corporate value.

With respect to ESR, we have set a target range of 170–200%. When the level exceeds 200%, we will actively consider strategic investments together with agile and flexible additional shareholder payouts, taking into account market conditions and other factors.

Capital circulation management

To advance capital circulation management, we are reducing market risk at Daiichi Life and tightening surplus capital management at subsidiaries. The surplus capital thus generated is being used for disciplined capital allocation to shareholder payouts including share buybacks, as well as strategic investments for future growth, aimed at improving capital efficiency. By generating stable cash flows from mature markets, particularly Japan, and continually allocating capital to growth markets with higher expected potential, we will drive sustainable growth for the future. In addition, through reinsurance and other intragroup financing mechanisms, we will further advance capital circulation management by optimizing the use of capital and retaining profits that had previously flowed outside the Group.

The amount of dividends remitted from operating subsidiaries to the holding company is determined based on “free cash,” or distributable capital, which takes into account the ESR range as well as solvency regulations and accounting constraints in each country. In FY2024, the amount of such dividends equated to a remittance ratio of approximately 86% of Group adjusted profit, mainly because Daiichi Life's profit level exceeded the initial projection. For FY2025, we forecast Group adjusted profit of around ¥410.0bn. Assuming a remittance ratio of roughly 90%, we estimate that free cash will amount to around ¥360.0bn.

We are working to reinforce our core businesses—protection and asset formation/succession—while exploring new areas, such as digital, health, and medical services, with the aim of optimizing our business portfolio through continuous expansion and diversification.

Through Protective, we acquired ShelterPoint, which operates a group insurance business in the US, in FY2024. Since the start of FY2025, we made an additional investment in Capula, a leading hedge fund in the UK. We also decided to invest in Challenger, the leading company in Australia's individual annuity market, through TAL. In addition, we resolved to invest in UK-based M&G, a major player in the asset management and life insurance fields in Europe. To optimize our business portfolio, we divested our Thai business, Ocean Life, as its strategic importance declined due to slowing market growth and other factors.

Seeking to achieve our profit target of ¥450.0bn in FY2026, we will carefully select investment opportunities while aiming for a well-diversified and efficient business portfolio—balanced across risks and regions—and disciplined capital allocation.

Capital strategy project pipeline

For shareholder payouts in FY2024, we paid a year-end cash dividend of ¥76 per share. Together with the interim dividend, this brought annual cash dividend to ¥137 per share, up ¥24 from the previous year. In addition, we launched a share buyback program in May 2025, with an upper limit of ¥100.0bn, marking our fifth consecutive year of large-scale share buybacks.

Starting in FY2025, we will raise our dividend payout ratio from the previous 40% or higher to 45% or higher. At the same time, we set a medium-term average target for total payout ratio at 50%. Considering various factors, such as ESR, cash flow, growth investment opportunities, and our share price, we are strategically considering and implementing agile, flexible additional payouts through share buybacks.

We aim to further enhance shareholder payouts by driving sustainable growth in Group profit and strengthening our capacity to generate capital and cash.

Shareholder payout policy (FY2024–2026)

Annual dividend per share and share buyback: Results and forecasts

Our Vision for FY2030 is to be a leader shaping the future of the Japanese insurance industry and a global top-tier insurance group. With this in mind, we formulated our current three-year mid-term plan by backcasting from that Vision, which targets market capitalization of ¥6tn in FY2026 and ¥10tn in FY2030.

At the end of FY2024, our adjusted ROE exceeded 10% for the first time, achieving the mid-term plan's final-year target ahead of schedule. As previously mentioned, global top-tier companies have reached even higher levels of ROE, so we raised our target to 12% or higher for FY2026 and 14% or higher for FY2030. Our adjusted profit in FY2024 also exceeded the mid-term plan's final-year target, prompting us to set a new target of ¥450bn for FY2026. We are also considering raising the ¥600bn amount set as the target to aim for by around FY2030.

During the mid-term plan period, we are placing top priority on achieving capital efficiency that consistently exceeds the cost of capital, and we will emphasize shareholder payouts until adjusted ROE stably surpasses the cost of capital.

Under our next mid-term plan starting from FY2027, we will enter a stage of accelerated growth toward achieving our Vision for FY2030. This stage presumes that capital efficiency has already consistently exceeded the cost of capital. With respect to capital policy, we will shift our focus to strengthening dividend payments. At the same time, we will flexibly conduct share buybacks, taking into account the balance between capital efficiency and growth investment opportunities. By pursuing strategic investments and other initiatives, we will also pursue further profit growth and enhance our corporate value.

Future direction of capital policy