SBI Insurance Group Co., Ltd.

In the Property & Casualty Insurance Business and Small-Amount & Short-Term Insurance Business, if a large-scale natural disaster such as an earthquake or typhoon occurs over a wide area or in a densely populated region, insurance claim payments could surge sharply, potentially exceeding what the catastrophe reserve can cover. The securities report rates the impact, if realized, as "large," and the Group seeks to transfer risk through regular loss ratio monitoring, stress testing, and the use of reinsurance.

In the Life Insurance Business, deviations between the assumed rates (mortality rate, assumed interest rate, assumed expense ratio) used as the basis for calculations and actual results directly affect earnings, and inherent uncertainty exists due to the long-term nature of insurance policy periods. Policy reserves account for the largest portion of the Group's liabilities, and a significant deviation in the Life Insurance Business could require additional reserve accumulation, potentially having a material impact on operating results and financial condition. This risk is managed through regular monitoring, stress testing, and the use of reinsurance.

Although SBI Life Insurance conducts ALM (asset liability management), if a duration mismatch arises between assets and liabilities, negative spread could occur during periods of falling interest rates, while during periods of rising interest rates, valuation losses on bonds and increased policy surrender rates could occur. The securities report rates the impact, if realized, as "large," and positions this as a key risk to long-term financial soundness.

In the wide range of administrative processes including insurance contract management, claim payments, and fund settlement, if material negligence or fraudulent activity occurs, customer damages, litigation, damages compensation, and additional costs could result. The securities report rates the impact, if realized, as "large," and this risk is managed through the development of procedural manuals, verification of incident cases, and formulation of recurrence prevention measures.

If business continuity is disrupted by a large-scale natural disaster, a pandemic, or a failure of social infrastructure, substantial costs and a lengthy period may be required to restore facilities and infrastructure. The securities report rates the impact, if realized, as "large." A business continuity plan (BCP) has been formulated to establish a response framework for unforeseen events, but the risk remains that the impact could exceed what is anticipated.

Because the direct sales model relies mainly on the internet channel, dependence on information systems is extremely high, and if a system outage or malfunction occurs due to a cyberattack, unauthorized access, or deficiencies in system development or operation, it could have a serious impact on business operations. Measures such as CSIRT operations, firewalls, virus countermeasures, and BCP formulation have been implemented, but in the event of a major failure, losses could arise from litigation, damages compensation, a decline in new policies, and an increase in cancellations.

While holding a large volume of customer personal information and confidential management information, if an information leak occurs due to the recent proliferation of cyberattacks or employee misconduct or negligence, litigation, damages compensation, administrative sanctions, and a decline in new policies or increase in cancellations due to damage to social credibility could result. The Group strives for strict management through the development of privacy policies and information leakage regulations and the operation of CSIRT.

The Group is subject to supervision under the Insurance Business Act, including restrictions on scope of operations, obligations to maintain the solvency margin ratio, and ESR regulations, and if there is a violation of laws or an act harming the public interest, there is a possibility of business suspension or license revocation. In addition, regulatory changes such as the introduction of new insurance contract standards under International Financial Reporting Standards (IFRS) could result in additional accumulation of policy reserves or response costs, potentially affecting the Group's operating results and financial condition.

In addition to the contraction of the life insurance market due to the declining birthrate and aging population and population decline, and the flat trend in the automobile insurance market, there is a risk of falling behind in price and product terms due to new entrants by competitors and synergies realized through management integration. The spread of an image of declining service quality for direct-sales non-life insurers could also become a factor hindering market share expansion. The Group continuously develops countermeasures through emerging risk management.

The parent company, SBI Holdings, Inc., can exert significant influence over resolutions at shareholders' meetings, and the use of the "SBI" trademark presupposes the continuation of the relationship with SBI Holdings, creating a risk that the trademark could no longer be used if the relationship were dissolved. In addition, while M&A is positioned as part of the Group's growth strategy, if post-acquisition corporate value stagnates, resulting in impairment losses, or if there is insufficient complementarity with existing businesses, this could affect operating results and financial condition.