Good day, everyone, and welcome to ORIX Corporation Third Quarter Financial Results Conference Call. At this time, I would like to turn the call over to your moderator, Mr. Chun Yang. Please go ahead, sir. .

Good evening. This is Chun Yang of ORIX Corporate Planning Department, and I would like to welcome you to ORIX conference call to review our third quarter consolidated results for the 9-month period ended December 31, 2015. .

I'm joined here this evening by Mr. Kazuo Kojima, Deputy President and CFO; as well as Mr. Shintaro Agata, Head of the Treasury Headquarters; and Mr. Takao Kato, Head of the Accounting Headquarters. .

During this evening's call, I will go through the third quarter results, and then we will open up the line for Q&A with Mr. Kojima, with assistance of an interpreter. I presume that everyone has in front of them the presentation material that we posted on the IR section of the website this afternoon, Tokyo Time. .

The following live broadcast is copyrighted to ORIX. Statements made today may contain forward-looking information.

While this information reflects management's current expectations or beliefs, you should not place undue reliance on such statements as our future results and business activities may be affected by a wide variety of factors that are out of our control.

You should read the forward-looking disclaimer in our earnings presentation as it contains additional important disclosures on this topic. You should also consult our reports filed with the SEC for any additional information, including risk factors specific to our business. .

Also, please note that the net income used in this presentation is same as the net income attributable to ORIX Corporation shareholders, as referred to in the latest financial statements titled Consolidated Financial Results, April 1 to December 31, 2015. .

And without further ado, I would like to start the presentation from Slide 1. The net income for the third quarter was JPY 54.1 billion. On a year-to-date basis, the 9-month period ended December 2015 generated JPY 215.4 billion in total.

This figure represented a 16% increase year-on-year and also a profit growth for 7 consecutive years for the same period. Total revenues and net income for the period was first record-high in the company's history. The annualized ROE continues to improve, this time up from 12.3% to 13%.

Compared to the first half of this fiscal year, although there was no significant capital gains from sales of investment, each business segment, through expansions of its existing operations, has steadily contributed to the overall profit growth.

As we have pointed out in our midterm strategic direction, I think we had made good progress in the expansion of nonfinancial businesses, and the level of base incomes has been further elevated since the last fiscal year. .

Overseas Business, Investment and Operation, Real Estate and Corporate Financial Services have all achieved significant profit growth, while Maintenance Leasing segment remained a stable contributor. .

In Retail segment, due to the large macro gains recognized last fiscal year, segment profits have decreased year-on-year. More detailed result relating to these business segments will be explained in separate slides. .

Please turn to Slide 3. Total segment assets have decreased by 3% (sic) [ 2% ] since the end of last fiscal year.

Assets in certain segments, such as Overseas Business and Maintenance Leasing segment have increased due to decreases in life insurance assets associated with Hartford Life Insurance runoff business and the continuing sales of assets in Real Estate segment. As a result, overall segment asset has decreased compared to the end of last fiscal year.

If you compare segment asset between quarters, the third quarter actually achieved positive growth of JPY 213.6 billion, after 4 consecutive quarters of asset decline prior to that. Details on the asset movements will be explained in later slides. .

After-tax ROA on an annualized basis has improved from 2.9% in the last fiscal year to 3.2% as of the end of the third quarter. .

Please turn to Slide 4. This slide shows major components responsible for the overall profit and asset changes year-on-year. The chart on the left shows the year-on-year changes in the pretax profits.

Compared to the same 9 months during the last fiscal year, the 3 quarters this fiscal year, the pretax profits there have, in total, increased by JPY 56.4 billion. How this figure came about is explained in the chart on the left. But the existing operations increased by 61.5% -- JPY 61.5 billion.

And then there's gains on sales of Investments and others, JPY 93.9 billion. And also gains on sales of Real Estate, JPY 21.1 billion. And then we deduct the gains on sales of the Investments and gains on sales of Real Estate recorded during the first 3 quarters of the last fiscal year, the result was a net profit of JPY 56.4 billion. .

On the asset side, overall, segment asset decreased by JPY 230 billion, with notable asset reductions in Hartford Life Insurance, which is about JPY 325 billion and Real Estate business by about JPY 90.5 billion. And we would like to highlight that existing operation here has increased by roughly JPY 360 billion.

Asset increase in the existing operation mainly came from Overseas Business, which accounted for JPY 190 billion of new assets, namely new investments in aircraft-related business and new acquisitions in Asia and increased assets in the corporate loan portfolio in our OUS operation.

Other businesses that have achieved asset growth include Environment and Energy business, which mainly conducts mega solar project at the moment as well as organic growth in our auto-related business, life insurance and banking businesses. .

Please turn to Slide #5. From this slide, I will explain the third quarter results for each segment individually, and I would like to start with the Corporate Financial Services. Segment profits here has increased significantly compared to the last fiscal year to JPY 34 billion or 82% increase year-on-year.

We consolidated Yayoi during the fourth quarter last fiscal year, but even if we disregard the profit contribution from Yayoi, the segment profit here still would have achieved 60% growth year-on-year.

In addition to the contribution from Yayoi, the original core fee business in this segment targeting corporate customers continued to be in good shape, generating a significantly higher level of services income compared to last fiscal year.

Services income from our fee business here mainly come from commissions from acting as life insurance agents and sales and brokerage services in the environment and energy-related fields.

But for Yayoi, we expect to see new business opportunities arising from the upcoming implementation of the new Social Security and Tax Number System in Japan, and also changes in the consumption tax rate in the future. .

During Q1 and Q3 this year, we sold some of the investment securities that we held, which generated roughly JPY 6 billion in capital gains together. In terms of assets, we continue to defend the level of profitability in the segment by being selective on these transactions.

Furthermore, due to the securitization of around JPY 43 billion worth of assets that took place during Q1 this year, segment asset has decreased by 7% year-to-date..

On the other hand, fee business, which is asset light, has achieved large increase, posting the annualized segment ROA to 2.7%. If you disregard the capital gains, which is of onetime nature during this fiscal year, which I've just mentioned, the segment ROA becomes 2.3%. .

Please turn to Slide #6. In Maintenance Leasing, segment profits have increased by 7% year-on-year to JPY 33.7 billion. ORIX Auto and ORIX Rentec both continued to contribute stable profits, with increases coming from services income, such as maintenance services and other value-added services provided by ORIX Auto.

Segment assets have increased by 8% since the beginning of this fiscal year. ROA continued to stay above 4%. .

Please turn to the next slide. In Real Estate, segment profit increased to JPY 44.4 billion, almost doubling compared to the same period last fiscal year. The real estate market in Japan continued to be very active, and we have continued to sell our rental properties, generating higher gains on sale compared to last year.

During Q3, we sold our holdings in a commercial property in Ginza, the facility's name is KIRARITO GINZA, to a foreign investor, and such sale generated capital gains a little over JPY 3 billion. .

On the other hand, facility operation business, especially our hotels and Japanese inns continued to be very strong, generating significant profits for the segment. Segment asset here decreased by 11%, down below to JPY 750 billion, due to the continued sales of rental properties.

And because of this, the ROA had a significant increase to 5% as of the end of Q3. .

Please turn to the next page. On Investment and Operation, segment profit for the 3 quarters have reached JPY 46.7 billion, which basically doubled that of last fiscal year. Such profit growth was largely driven by capital gains from sales of 2 private equity investments, which we closed during Q1.

And the ROA has reached a high level of 6.4% on an annualized basis. As for new private equity investments, we made a new investment in a spring water producer/distributor called Cosmolife during the third quarter. Daikyo, one of our investments, has been making stable profit contributions this fiscal year, which is within our expectations. .

In the Environment and Energy business, which is shown as the light blue color on the segment after the bar chart on the right of the slide, basically, in this business, our mega solar project are gradually starting operation, which is reflected in our financial statements as well.

As of the end of December, the segment assets of the Environment and Energy business is around JPY 190 billion, which is a JPY 43 billion increase since the beginning of this fiscal year.

Segment assets decreased by 5% year-to-date due to factors such as collections of loan assets by our loan servicing unit and sales of private equity investment, which I just mentioned. There are areas where assets are increasing, such as Environment and Energy business as well as new private equity investment also. .

one was the sales of our shares in Monex; and the other was a bargain purchase again recognized in association with our acquisition of Hartford Life. And together, these 2 contributed about JPY 51 billion. If we disregard these 2 large items, the year-on-year segment profit comparisons would have resulted in positive profit growth. .

In our life insurance business, life insurance premiums have increased due to the increased underwriting volumes following the renewal of our life insurance products in October last year.

The bar chart in the middle shows the breakdown of life insurance premiums and related investment incomes, and you can see that ORIX Life Insurance, on a stand-alone basis, has been growing quite steadily. .

On the other hand, as for Hartford Life Insurance, if we were to look at its performance since last year after taking out the bargain purchase again, segment profits have increased year-on-year, even though its operating revenues this fiscal year were squeezed by the investment loss in the separate account during Q2.

This is because revenues and expenses relating to the separate account basically correlate to each other and move in the same direction. .

Segment asset decreased by JPY 190 billion or about 5% decrease year-to-date, primarily due to the JPY 320 billion [ph] of asset decline in Hartford Life Insurance asset, which is in a runoff at the moment.

In other parts of the Retail segment, housing loans and car loan assets as well as our asset in the life insurance business, generally, have all increased. .

Please turn to Slide 10. Okay, Overseas Business is the last segment here. Segment profits have increased by 37% year-on-year, reaching JPY 116 billion for these 3 quarters. This amount includes the capital gains and valuation gains associated with the IPO of the Houlihan Lokey during Q2, which made significant contribution to the profit growth.

Segment asset, despite a minus of JPY 40 billion due to Asian currency fluctuations, has increased by roughly JPY 100 billion, which is a 5% increase year-to-date. Contributors of this asset increase includes new investments in aircraft, acquisition of auto loan company in Indonesia. .

And I would like to briefly go through each of the major businesses in this segment. First, in Americas, financial revenues have been increasing, which is in line with the increased balance of this corporate loan portfolio.

Since the last fiscal year, in anticipation of the interest rate increase, we have been controlling our portfolio by shifting our assets from fixed-rate assets to floating rate ones.

The business portfolio there is widely diversified by sector, and its exposure to energy and resource sector is very limited, so there's almost no direct impact from the recent market volatility in that sector. .

With regards to our business in Asia, while the concerns for economic slowdown in China and its impact to its neighboring countries have been widely shared, our assets in Asia are well spread out and diversified across different sectors. And as of now, we do not see any material deterioration in the overall asset quality.

Furthermore, our direct exposure to China is rather limited. While we have not seen any major negative impact on our leased asset in emerging markets, we believe that it is necessary to continue our cautious stance towards this region for the time being.

Meanwhile, as the market is approaching an adjustment phase, with a degree of caution, we will continue to seek new investment opportunities. For Robeco, during August last year, we experienced the so-called China stock market shock, and -- which is shown in our Q2 result, where Robeco's AUM actually had decreased. But this was reversed in Q3.

This time, the AUM had a positive growth. And so far, Robeco's performance is in line with the annual business budget so far. .

With regards to our aircraft and shipping business. In our aircraft-related business this fiscal year, we have -- so far, we have made JPY 100 billion investment to buy -- to purchase 19 aircraft. During the same time, we sold some of the aircraft as well. So overall -- anyway, overall, we've purchased more than what we have sold.

So it's a net plus [ph]. .

Okay. Now please turn to the final summary slide on Slide 11. Here, I'd like to conclude the presentation with a summary. We have achieved net income for the first 3 quarters for the current fiscal year of JPY 215.4 billion, which is a 16% growth year-on-year. The ROE has reached 13%.

And overall, we feel that in each business segment, good progress has been made towards our midterm target of JPY 300 billion, which we would like to achieve by 2018 March.

In terms of the business environment, the outlook of the global economy is becoming increasingly unclear due to factors such as slowdowns in China and as well as other emerging markets, and there's also the oil price decline. But there is no direct impact to our business portfolio.

And also under such an environment, we see opportunities as well at the same time. So going forward, we will continue to proactively seek new investment opportunities and aim for a timely execution of those new investments. My presentation ends here. .

Thank you for listening. So now Mr. Kojima, Mr. Agata and Mr. Kato will be happy to answer any questions you may have. .

[Operator Instructions] Mr. Yang, there are no questions today. So at this time, I'd like to turn the conference back over to you for any additional or closing remarks. .

Thank you. If there are no further questions, Mr. Kojima has some final comments to share with you. .

This is Kojima. We have made some progress, as the third quarter results have demonstrated, that further progress was made to our midterm target of JPY 300 billion net income by year 2018 March. We're operating [ph] in the external environment can't finish [ph] to increase, and we are very aware of it.

Nevertheless, under such environment, we will focus on areas we have competitive advantage in, maintain our financial and basic management discipline and proceed with caution toward our midterm target. Having said that, I appreciate your interest and continued support to ORIX now [ph] and also in the future. Thank you. .

Thank you for participating in tonight's conference call. If you have any questions or comments, please do not hesitate to get in touch with us using the contact information found on the last page of this evening's presentation material.

Also, a replay of this conference call will be available shortly on the ORIX IR website, if you joined partway through or would like to listen to certain sections again. On behalf of the management and the entire ORIX Group, thank you for your participation.

I hope that we have a chance to meet, whether it is in your corner of the world or here in Tokyo. Thank you. .

Thank you. That concludes today's conference. Thank you for your participation, and you may now disconnect..