T&D Holdings, Inc.

The risk of loss arising when economic conditions or insurance incidence rates fluctuate contrary to the projections made when setting premium rates. In the event of large-scale disasters or pandemics, substantial insurance claim payments may be required, and if contingency reserves become insufficient, this could adversely affect business performance and financial condition. The Group controls this risk through appropriate verification of rate-setting during the premium review stage, development of underwriting standards, regular analysis of actual incidence rates, and utilization of reinsurance.

This risk consists of three categories: market risk arising from fluctuations in interest rates, securities prices, and foreign exchange rates; credit risk arising from deterioration in the financial condition of credit extension counterparties; and real estate investment risk arising from changes in rental income or market conditions. It is explicitly stated that asset management risk in the life insurance business, together with insurance underwriting risk, has a particularly significant impact on Group performance. The Group manages this risk through monitoring of credit concentration status and problem loans, risk measurement using an internal management model (ESR 222%), and the implementation of stress tests.

The Group is highly dependent on the performance of its three life insurance companies—Taiyo Life Insurance, Daido Life Insurance, and T&D Financial Life Insurance—and if the business conditions of these three companies fluctuate significantly, this could adversely affect the Group's business performance and financial condition. In addition, the planned transfer of shares in T&D Financial Life Insurance scheduled for October 1, 2027, may affect Group performance thereafter. The Board of Directors conducts budget-versus-actual variance management and monitors progress of the management plan, and the Group's policy is to utilize the cash generated from the transfer to strengthen Taiyo Life Insurance and Daido Life Insurance.

The Group's business is regulated under the Insurance Business Act and is subject to supervision by the Financial Services Agency, and future changes in regulations or fiscal policy, among other matters, could adversely affect business performance and financial condition. The Group continuously monitors information on legal and regulatory amendments, and for changes expected to have a significant impact, has established a framework to verify and respond to such impacts in coordination with information sharing among Group companies.

If Fortitude Re (US) and Viridium Group (Europe), both equity-method affiliates, experience a slowdown in new closed book acquisitions or a deterioration in insurance and investment income, this could adversely affect the Group's business performance and financial condition. Fortitude Re, which adopts US accounting standards, also faces a structural challenge in that fair value fluctuations in reinsurance receivable assets, among other items, temporarily affect income for the period. T&D United Capital dispatches directors and advisory board members from its North American and European offices to directly engage in and monitor these companies, and the Group manages actual business conditions using Group Adjusted Profit indicators.

The risk of incurring losses due to computer system downtime or malfunction, or due to increasingly sophisticated and more frequent cyber attacks targeting financial institutions. If a serious system failure occurs, it could disrupt various operations and undermine trust in the Group, thereby adversely affecting business performance and financial condition. The Group continuously monitors systems using security tools and has established a Group-wide CSIRT as well as CSIRTs at each Group company to enable rapid response and formulation of recurrence prevention measures in the event of an incident.

If personal information is leaked due to accidents, misconduct, information leaks, or other causes involving officers and employees, this could adversely affect the Group's social credibility and reputation, as well as its business performance and financial condition. The Group complies with the Act on the Protection of Personal Information and the Act on the Use of Numbers to Identify a Specific Individual in Administrative Procedures (My Number Act), and strives to thoroughly manage information security through the establishment of personal information protection policies and privacy policies, the establishment of an oversight and promotion organization, and the implementation of education and training.

At Pet & Family Small-amount Short-term Insurance, insurance claim payments have continued to trend upward in recent years, putting pressure on income and expenditure. If loss ratios rise due to intensifying competition with other companies, a decline in demand for pet insurance, or the occurrence of infectious diseases among pets, the company's profitability could deteriorate, adversely affecting the Group's business performance and financial condition. A capital increase of ¥1.7 billion was implemented in December 2021, and additional investment or allocation of management resources may be required in the future; the Group checks the solvency margin ratio monthly and monitors insurance underwriting risk on a quarterly basis.

The majority of the Company's income comes from dividends from its life insurance subsidiaries and other companies, but under certain circumstances, the amount of dividends may be restricted by regulations under the Insurance Business Act, the Companies Act, and other laws. If a life insurance company is unable to record sufficient profit and is unable to pay dividends, the Company may become unable to pay dividends to its shareholders. The Group manages the securing of dividend resources through appropriate control of financial soundness risk at its life insurance companies and through budget-versus-actual variance management and monitoring of progress on the management plan.

In the domestic life insurance market, declining birthrates, an aging population, and a shrinking labor force may lead to a future decrease in new business volume and business in force, and competition in product pricing and services is expected to intensify due to new market entrants and progress in industry restructuring and strategic alliances. As of the end of March 2026, there are 41 companies, including the Group, licensed to conduct life insurance business or foreign life insurance business in Japan, and all of them are in a competitive relationship with the Group. A decline in the competitiveness of the three life insurance companies could adversely affect the Group's business performance and financial condition, and the Group seeks to mitigate this risk by developing new channels and pursuing external growth strategies.