Strong start in Q1, but the sustainability of earnings driven by financial gains and losses warrants scrutiny

Q1 insurance revenue rose 28.0% year on year to ¥1,616.982 billion, pretax quarterly profit rose 59.3% to ¥240.331 billion, and profit attributable to owners of the parent rose 52.8% to ¥181.168 billion. Both pretax profit and net profit were positive, with substantial year-on-year improvement.

Looking at the composition of profit, insurance service earnings increased by ¥23.4 billion year on year, while financial gains and losses increased by ¥79.8 billion. The increase in financial gains and losses was approximately 3.4 times the increase in insurance service earnings, while other gains and losses decreased by ¥13.8 billion. It is therefore premature to attribute the increase in profit solely to improvements in the core business, such as premium revisions and insurance claims management. The breakdown of financial gains and losses and the contributions from valuation gains and losses and foreign exchange factors should be confirmed in Q2.

The full-year forecast for profit attributable to owners of the parent is ¥490.0 billion, representing an expected 23.4% decline from the previous fiscal year's ¥640.0 billion, while the annual dividend forecast has been raised to ¥200. Q1 profit represents approximately 37.0% of the full-year forecast, but insurers' profits are affected by natural disasters, financial markets and seasonality, so the likelihood of achieving the forecast cannot be assessed solely from the progress ratio.

The Q1 financial results summary did not disclose operating profit, the full-year insurance revenue forecast or operating cash flow. In FY2027-H1, it will be important to confirm cumulative results separating insurance service earnings from financial gains and losses, natural catastrophe losses in Japan and overseas, the amount of one-off factors within financial gains and losses, and whether the full-year profit forecast of ¥490.0 billion and annual dividend of ¥200 can be maintained.