Derivative Financial Instruments and Hedging (Tables)

6 Months Ended

Sep. 30, 2023

Derivative Instruments, Gain (Loss) [Line Items]

Schedule of Effect of Components Excluded From the Assessment of Hedge Effectiveness on the Consolidated Statements of Income

The effect of the components excluded from the assessment of hedge effectiveness on the consolidated statements of income,

pre-tax,

for the six months ended September 30, 2022 is as follows.

Fair value hedges


	Millions of yen
	Gains (losses) recognized in income
	Life insurance premiums and related investment income			Interest expense		Other (income) and expense
Foreign exchange contracts	¥	(1,474	)	¥	14	¥	0
Options held/written and other		0			0		27

The effect of the components excluded from the assessment of hedge effectiveness on the consolidated statements of income,

pre-tax,

for the three months ended September 30, 2022 is as follows.

Fair value hedges


	Millions of yen
	Gains (losses) recognized in income
	Life insurance premiums and related investment income			Interest expense		Other (income) and expense
Foreign exchange contracts	¥	(2,155	)	¥	7	¥	0
Options held/written and other		0			0		14

The carrying amount of hedged assets and liabilities recognized in balance sheets in fair value hedges and the cumulative amount of fair value hedging adjustments included in the carrying amount (excluding the effect of changes in foreign exchange rates) at March 31, 2023 is as follows.


Assets as hedged items in fair value hedges						Liabilities as hedged items in fair value hedges
	Millions of yen						Millions of yen
Consolidated balance sheets location	Carrying amount		The cumulative amount of fair value hedging adjustments included in the carrying amount			Consolidated balance sheets location	Carrying amount		The cumulative amount of fair value hedging adjustments included in the carrying amount
Investment in Securities	¥	470,204	¥	(1,107	)	—	¥	0	¥	0
Installment Loans		13,969		(1	)	—		0		0

The effect of the components excluded from the assessment of hedge effectiveness on the consolidated statements of income,

pre-tax,

for the six months ended September 30, 2023 is as follows.

Fair value hedges


	Millions of yen
	Gains (losses) recognized in income
	Life insurance premiums and related investment income			Interest expense		Other (income) and expense
Foreign exchange contracts	¥	(10,635	)	¥	17	¥	0
Options held/written and other		0			0		25

The effect of the components excluded from the assessment of hedge effectiveness on the consolidated statements of income,

pre-tax,

for the three months ended September 30, 2023 is as follows.

Fair value hedges


	Millions of yen
	Gains (losses) recognized in income
	Life insurance premiums and related investment income			Interest expense		Other (income) and expense
Foreign exchange contracts	¥	(6,578	)	¥	9	¥	0
Options held/written and other		0			0		10


Assets as hedged items in fair value hedges						Liabilities as hedged items in fair value hedges
	Millions of yen						Millions of yen
Consolidated balance sheets location	Carrying amount		The cumulative amount of fair value hedging adjustments included in the carrying amount			Consolidated balance sheets location	Carrying amount		The cumulative amount of fair value hedging adjustments included in the carrying amount
Investment in Securities	¥	506,514	¥	(1,387	)	—	¥	0	¥	0
Installment Loans		15,694		(1	)	—		0		0

Notional Amounts of Derivative Instruments and Other, Fair Values of Derivative Instruments and Other before Offsetting

Notional amounts of derivative instruments and other, fair values of derivative instruments and other before offsetting at March 31, 2023 and September 30, 2023 are as follows.

March 31, 2023


			Derivative assets			Derivative liabilities
	Notional amount		Fair value		Consolidated balance sheets location	Fair value		Consolidated balance sheets location
	Millions of yen		Millions of yen			Millions of yen
Derivatives designated as hedging instruments and other:

Interest rate swap agreements	¥	568,864	¥	22,798	Other Assets	¥	3,311	Other Liabilities

Options held/written and other		9,486		52	Other Assets		88	—

Futures, foreign exchange contracts		933,988		2,735	Other Assets		26,217	Other Liabilities

Foreign currency swap agreements		99,878		1,325	Other Assets		2,426	Other Liabilities

Foreign currency long-term debt		748,396		0	—		0	—

Derivatives not designated as hedging instruments:

Interest rate swap agreements	¥	464	¥	0	—	¥	8	Other Liabilities

Options held/written and other		632,211		30,435	Other Assets		28,335	Other Liabilities

Futures, foreign exchange contracts *		788,361		15,050	Other Assets		10,978	Other Liabilities

Credit derivatives held/written		1,098		3	Other Assets		3	Other Liabilities

The notional amounts of futures and foreign exchange contracts in the above table include futures contracts of ¥14,758 million and foreign exchange contracts of ¥5,554 million to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts at March 31, 2023, respectively. Derivative assets in the above table include fair value of the futures and foreign exchange contracts before offsetting of ¥52 million and ¥12 million and derivative liabilities include fair value of the futures and foreign exchange contracts before offsetting of ¥200 million and ¥179 million at March 31, 2023, respectively.

September 30, 2023


			Derivative assets			Derivative liabilities
	Notional amount		Fair value		Consolidated balance sheets location	Fair value		Consolidated balance sheets location
	Millions of yen		Millions of yen			Millions of yen
Derivatives designated as hedging instruments and other:

Interest rate swap agreements	¥	603,623	¥	26,777	Other Assets	¥	3,169	Other Liabilities

Options held/written and other		14,541		44	Other Assets		886	Other Liabilities

Futures, foreign exchange contracts		972,031		2,613	Other Assets		51,029	Other Liabilities

Foreign currency swap agreements		107,406		491	Other Assets		6,831	Other Liabilities

Foreign currency long-term debt		817,200		0	—		0	—

Derivatives not designated as hedging instruments:

Interest rate swap agreements	¥	2,122	¥	165	Other Assets	¥	8	Other Liabilities

Options held/written and other		564,816		33,397	Other Assets		29,818	Other Liabilities

Futures, foreign exchange contracts *		871,149		37,446	Other Assets		8,797	Other Liabilities

Credit derivatives held/written		1,979		8	Other Assets		6	Other Liabilities

The notional amounts of futures and foreign exchange contracts in the above table include futures contracts of ¥10,229 million and foreign exchange contracts of ¥3,622 million to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts at September 30, 2023, respectively. Derivative assets in the above table include fair value of the futures and foreign exchange contracts before offsetting of ¥144 million and ¥19 million and derivative liabilities include fair value of the futures and foreign exchange contracts before offsetting of ¥3 million and ¥168 million at September 30, 2023, respectively.

Credit Derivatives

The Company and its subsidiaries have contracted credit derivatives for the purpose of trading. Details of credit derivatives written as of March 31, 2023 and September 30, 2023 are as follows.

March 31, 2023

Types of derivatives

The events or circumstances
that would require the seller

to perform under the credit

derivative

Maximum potential
amount of future
payment under the
credit derivative

Approximate
remaining term

of the credit

derivative

Fair value of

the credit
derivative

Millions of yen

Credit default swap

In case of credit event (bankruptcy, failure to pay, restructuring) occurring in underlying reference company *

1,000

Less than

five years

)

*	Underlying reference company’s credit ratings are A1 or better rated by rating agencies as of March 31, 2023.

September 30, 2023

Types of derivatives

The events or circumstances

that would require the seller

to perform under the credit

derivative

Maximum potential
amount of future
payment under the
credit derivative

Approximate
remaining term

of the credit

derivative

Fair value of

the credit
derivative

Millions of yen

Credit default swap

In case of credit event (bankruptcy, failure to pay, restructuring) occurring in underlying reference company *

1,532

Less than

six years

)

*	Underlying reference company’s credit ratings are Baa3 or better rated by rating agencies as of September 30, 2023.

Cash flow hedges

Derivative Instruments, Gain (Loss) [Line Items]

Effect of Derivative Instruments on Consolidated Statements of Income, Pre-tax

(1) Cash flow hedges


	Millions of yen
	Gains (losses) recognized in other comprehensive income on derivative			Gains (losses) reclassified from other comprehensive income (loss) into income
				Interest expense		Other (income) and expense
Interest rate swap agreements	¥	22,506		¥	157	¥	0
Foreign exchange contracts		(172	)		17		147
Foreign currency swap agreements		(545	)		302		1,262

(1) Cash flow hedges


	Millions of yen
	Gains (losses) recognized in other comprehensive income on derivative			Gains (losses) reclassified from other comprehensive income (loss) into income
				Interest expense		Other (income) and expense
Interest rate swap agreements	¥	4,011		¥	30	¥	0
Foreign exchange contracts		170			0		0
Foreign currency swap agreements		5,352			1,001		(6,535	)
Options held/written and other		(838	)		0		0

(1) Cash flow hedges


	Millions of yen
	Gains (losses) recognized in other comprehensive income on derivative			Gains (losses) reclassified from other comprehensive income (loss) into income
				Interest expense			Other (income) and expense
Interest rate swap agreements	¥	10,230		¥	(63	)	¥	0
Foreign exchange contracts		(186	)		(155	)		239
Foreign currency swap agreements		1,788			180			(1,763	)

(1) Cash flow hedges


	Millions of yen
	Gains (losses) recognized in other comprehensive income on derivative			Gains (losses) reclassified from other comprehensive income (loss) into income
				Interest expense			Other (income) and expense
Interest rate swap agreements	¥	5,389		¥	(7	)	¥	0
Foreign exchange contracts		(36	)		0			0
Foreign currency swap agreements		(750	)		604			183
Options held/written and other		(913	)		0			0

Fair value hedges

Derivative Instruments, Gain (Loss) [Line Items]

Effect of Derivative Instruments on Consolidated Statements of Income, Pre-tax

(2) Fair value hedges


	Millions of yen
	Gains (losses) recognized in income on derivative and other						Gains (losses) recognized in income on hedged item
	Life insurance premiums and related investment income			Other (income) and expense			Life insurance premiums and related investment income			Other (income) and expense
Interest rate swap agreements	¥	3,173		¥	0		¥	(3,058	)	¥	0
Foreign exchange contracts		(78,667	)		(449	)		78,817			399

(2) Fair value hedges


	Millions of yen
	Gains (losses) recognized in income on derivative and other						Gains (losses) recognized in income on hedged item
	Life insurance premiums and related investment income			Other (income) and expense			Life insurance premiums and related investment income			Other (income) and expense
Interest rate swap agreements	¥	371		¥	0		¥	(227	)	¥	11
Foreign exchange contracts		(55,247	)		(101	)		55,301			48

(2) Fair value hedges


	Millions of yen
	Gains (losses) recognized in income on derivative and other						Gains (losses) recognized in income on hedged item
	Life insurance premiums and related investment income			Other (income) and expense			Life insurance premiums and related investment income			Other (income) and expense
Interest rate swap agreements	¥	1,305		¥	0		¥	(1,309	)	¥	0
Foreign exchange contracts		(29,199	)		(314	)		29,275			218

(2) Fair value hedges


	Millions of yen
	Gains (losses) recognized in income on derivative and other					Gains (losses) recognized in income on hedged item
	Life insurance premiums and related investment income			Other (income) and expense		Life insurance premiums and related investment income			Other (income) and expense
Interest rate swap agreements	¥	79		¥	0	¥	(76	)	¥	11
Foreign exchange contracts		(13,560	)		52		13,603			(35	)

Hedges of net investment in foreign operations

Derivative Instruments, Gain (Loss) [Line Items]

Effect of Derivative Instruments on Consolidated Statements of Income, Pre-tax

(3) Hedges of net investment in foreign operations


	Millions of yen
	Gains (losses) recognized in other comprehensive income on derivative and others			Gains (losses) reclassified from other comprehensive income (loss) into income
				Gains on sales of subsidiaries and affiliates and liquidation losses, net		Interest expense		Other (income) and expense
Foreign exchange contracts	¥	(24,595	)	¥	51	¥	1,956	¥	(252	)
Borrowings and bonds in foreign currencies		(122,739	)		0		0		0

(3) Hedges of net investment in foreign operations


	Millions of yen
	Gains (losses) recognized in other comprehensive income on derivative and others			Gains (losses) reclassified from other comprehensive income (loss) into income
				Gains on sales of subsidiaries and affiliates and liquidation losses, net			Interest expense
Foreign exchange contracts	¥	(30,436	)	¥	(69	)	¥	7,567
Borrowings and bonds in foreign currencies		(84,367	)		0			0

(3) Hedges of net investment in foreign operations


	Millions of yen
	Gains (losses) recognized in other comprehensive income on derivative and others			Gains (losses) reclassified from other comprehensive income (loss) into income
				Gains on sales of subsidiaries and affiliates and liquidation losses, net			Interest expense
Foreign exchange contracts	¥	(2,042	)	¥	(5	)	¥	1,166
Borrowings and bonds in foreign currencies		(42,929	)		0			0

(3) Hedges of net investment in foreign operations


	Millions of yen
	Gains (losses) recognized in other comprehensive income on derivative and others			Gains (losses) reclassified from other comprehensive income (loss) into income
				Gains on sales of subsidiaries and affiliates and liquidation losses, net		Interest expense
Foreign exchange contracts	¥	(5,159	)	¥	0	¥	3,316
Borrowings and bonds in foreign currencies		(21,284	)		0		0

Derivatives not designated as hedging instruments

Derivative Instruments, Gain (Loss) [Line Items]

Effect of Derivative Instruments on Consolidated Statements of Income, Pre-tax

(4) Derivatives not designated as hedging instruments


	Millions of yen
	Gains (losses) recognized in income on derivative
	Life insurance premiums and related investment income*		Interest expense		Other (income) and expense
Interest rate swap agreements	¥	0	¥	3	¥	(139	)
Futures		852		0		(4,105	)
Foreign exchange contracts		34,472		1,950		51,589
Credit derivatives written		0		0		4
Options held/written and other		0		0		(886	)

Futures and foreign exchange contracts in the above table include gains (losses) arising from futures and foreign exchange contracts held to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the six months ended September 30, 2022 (see Note 17 “Income and Expenses Relating to Life Insurance Operations”).

(4) Derivatives not designated as hedging instruments


	Millions of yen
	Gains (losses) recognized in income on derivative
	Life insurance premiums and related investment income*			Interest expense		Other (income) and expense
Interest rate swap agreements	¥	0		¥	2	¥	(8	)
Futures		(1,557	)		0		(685	)
Foreign exchange contracts		30,067			1,513		5,077
Credit derivatives held/written		0			0		8
Options held/written and other		0			0		(878	)

Futures and foreign exchange contracts in the above table include gains (losses) arising from futures and foreign exchange contracts to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the six months ended September 30, 2023 (see Note 17 “Income and Expenses Relating to Life Insurance Operations”).

(4) Derivatives not designated as hedging instruments


	Millions of yen
	Gains (losses) recognized in income on derivative
	Life insurance premiums and related investment income*		Interest expense		Other (income) and expense
Interest rate swap agreements	¥	0	¥	2	¥	(70	)
Futures		173		0		(1,424	)
Foreign exchange contracts		13,332		1,696		14,519
Credit derivatives written		0		0		4
Options held/written and other		0		0		(170	)

Futures and foreign exchange contracts in the above table include gains (losses) arising from futures and foreign exchange contracts held to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the three months ended September 30, 2022 (see Note 17 “Income and Expenses Relating to Life Insurance Operations”).

(4) Derivatives not designated as hedging instruments


	Millions of yen
	Gains (losses) recognized in income on derivative
	Life insurance premiums and related investment income*			Interest expense		Other (income) and expense
Interest rate swap agreements	¥	0		¥	1	¥	(6	)
Futures		(150	)		0		(1,095	)
Foreign exchange contracts		10,595			106		(5,102	)
Options held/written and other		0			0		(345	)

Futures and foreign exchange contracts in the above table include gains (losses) arising from futures and foreign exchange contracts to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the three months ended September 30, 2023 (see Note 17 “Income and Expenses Relating to Life Insurance Operations”).

- Definition

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

+ References + Details