Watanabe

Watanabe from Daiwa Securities asked about the change in the employed capital ratio from 92% to 89% (page 8), specifically what caused the improvement and if the target level had changed. He also sought an update on capital strengthening for life insurance, particularly regarding the utilization of excess capital.

Answer

Kazuki Yamamoto, Operating Officer, explained that the employed capital ratio change was due to an updated calculation model in Q3. This model now incorporates more detailed portfolio risk management at a project level, revealing a lower risk volume than previously estimated. Parameters for maximum loss (based on global financial crises) were also reviewed. He clarified that this update does not change ORIX's risk appetite but provides a 10% investment capacity buffer. For life insurance liability assessment, the JPY 234 billion reduction was attributed to mark-to-market adjustments based on long-term bonds. Discussions are ongoing with financial institutions and auditors to refine references for more stable asset evaluation, focusing on parameter accuracy rather than immediate utilization of excess capital for shareholder returns or growth investments.

Watanabe questioned the change in ORIX's employed capital ratio from 92% to 89% as shown on page 8, asking what caused the improvement and if the target level had changed. Watanabe also sought updates on the use of excess capital and capital strengthening initiatives for the life insurance segment.

Answer

Kazuki Yamamoto, Operating Officer, ORIX, attributed the improved employed capital ratio to an updated calculation model that provides more detailed portfolio risk management and project-level breakdowns, revealing a lower risk level than previously expected. He clarified that this change does not impact ORIX's risk appetite, maintaining a 10% investment capacity buffer. For life insurance, Yamamoto explained that the JPY 234 billion reduction in insurance contract liabilities was due to a higher discount rate and mark-to-market adjustments on long-term bonds, with ongoing discussions to improve reference indices for more stable asset evaluation, focusing on parameter accuracy rather than direct utilization of excess capital.

Watanabe of Daiwa Securities inquired about the JPY 6.6 billion compensation for phishing scams, asking if the cost reflects all damages up to June and where it is booked. He also asked for the drivers behind the relative weakness in FICC and strength in Equities, requesting monthly performance trends.

Answer

CFO Hiroyuki Moriuchi confirmed the phishing compensation cost was estimated for all trades up to June 28 and is included in "other expenses." He explained that FICC performance was impacted by a lag in Japan's rates product in April, while Equities were strong due to successful risk management and significant performance from U.S. derivatives, with April accounting for nearly 40% of the quarter's equity revenue.

Watanabe of Daiwa Securities inquired about the JPY 6.6 billion phishing scam compensation, asking if the cost was final for the period and where it was booked. He also asked for the reasons behind the relative weakness in FICC and strength in Equities within Global Markets.

Answer

Chief Financial Officer Hiroyuki Moriuchi confirmed the JPY 6.6 billion cost reflects all illegal trades up to June 28 and is booked under 'other expenses'. He explained that FICC performance was impacted by a lag in Japan's rates product in April, while Equities were strong due to the Americas derivatives business successfully capitalizing on market volatility.