Anshin Guarantor Service Co.,Ltd.

If the real estate rental market were to decline due to a decrease in the population aged in their teens through 40s amid ongoing aging of society, this could significantly affect the Company's business continuity. Although the number of rental properties currently continues to increase steadily, the structural change in demographics represents a medium- to long-term risk factor. The Company strives to secure first-mover advantages by locking in relationships with major industry associations and major franchise chains.

The Company's flagship product, "Life Anshin Plus" (approximately 40% of operating revenue), is a rent advance model utilizing funds from LIFE Card Co., Ltd., and if the business alliance with that company were terminated, the Company would need to independently secure funding or find an alternative partner. "Anshin Plus" is a model that utilizes the Company's own funds and borrowings, and an increase in interest burden accompanying business expansion could lead to a decline in price competitiveness or pressure on profitability. These risks directly affect operating results and financial condition.

If well-capitalized banks or credit card companies were to build a rent-advance and guarantee business model similar to the Company's, competition could intensify. The Company maintains a competitive advantage through scoring using credit information from CIC and JICC as well as quantitative and qualitative credit assessment functions; however, changes in the operating environment resulting from entry by major players could affect operating results. The Company aims to maximize first-mover advantage by locking in relationships with major real estate associations and franchise chains.

In the rent guarantee business, when a tenant falls into rent arrears, an obligation arises to make subrogated payments to LIFE Card Co., Ltd. or the property management company. If contingent liabilities were to increase due to unforeseeable drastic changes in economic conditions, this could have a material impact on operating results and financial condition. During the fiscal year under review, the amount of subrogated payments reached ¥603,178 thousand, and the amount of debt guarantees reached ¥598,008 thousand.

Indemnity receivables acquired after making subrogated payments cannot always be fully collected, and if uncollected amounts arise, this would result in deterioration of cash flow and adverse effects on operating results and financial condition. If actual bad debt losses exceed forecasts, the current allowance for doubtful accounts may prove insufficient, requiring additional provisions. The Company seeks to hedge this risk through appropriate credit screening and by setting a guarantee fee structure based on analysis of past performance.

In the rent guarantee business, the Company handles a large volume of personal information, and information leakage resulting from unforeseen circumstances could affect operating results. The Company has established internal information management systems, including access authorization settings and restrictions on the use of external storage media; however, this does not guarantee complete prevention. If an information leak were to occur, there is a risk of loss of customer trust and legal liability.

The rent advance function of "Life Anshin Plus" and the initial collection of uncollected amounts are outsourced to LIFE Card Co., Ltd., and the business alliance agreement and comprehensive debt guarantee agreement with that company form the foundation of the Company's business. During the fiscal year under review, transaction amounts reached ¥735,489 thousand for the business alliance, ¥598,008 thousand for debt guarantees, and ¥603,178 thousand for subrogated payments; termination of the alliance due to circumstances that would not normally be anticipated could have a material impact on business continuity. In addition, under "Anshin Plus," the Company has strengthened its credit assessment functions through membership in CIC, making partnerships with credit information bureaus essential as well.

The Company may file eviction lawsuits against tenants who are unable to repay overdue rent and have no intention of vacating the premises, and an increase in the number of lawsuits or expansion of costs could affect operating results. In addition, if a landlord files a lawsuit against a tenant, the Company, as joint guarantor, could also become a defendant, and depending on the number, content, and outcome of such lawsuits, operating results could be affected. Since these litigation costs are included within the scope of the guarantee, an increase in the number of cases directly increases costs.

At present, there are no direct legal regulations targeting rent guarantee business operators; however, if new legal regulations having a significant impact on the real estate rental industry as a whole were introduced in the future, this could affect the Company's business model and profit structure. Depending on the content of such regulations, revisions to the guarantee fee structure or changes to business workflows may become necessary. While no specific regulatory trends are currently apparent, this remains a risk requiring continuous monitoring as part of changes in the industry environment.

The Company relies on systems for operations including credit screening, guarantee contract management, receivables management, and personal information management, and if stable system operation becomes difficult due to fire, natural disasters, power outages, human error, software malfunctions, or external cyberattacks, this could disrupt business activities and affect operating results and financial condition. The Company has established emergency response systems, including backup plans, and implemented appropriate security measures across its systems overall; however, this does not guarantee complete prevention.