v3.26.1
Derivative Financial Instruments and Hedging
 12 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments and Hedging
27. Derivative Financial Instruments and Hedging
Risk management policy
The Company and its subsidiaries manage interest rate risk through asset-liability management (“ALM”). The Company and its subsidiaries use derivative financial instruments to hedge interest rate risk and avoid changes in interest rates that could have a significant adverse effect on the Company’s results of operations. As a result of interest rate changes, the fair value and/or cash flow of interest sensitive assets and liabilities will fluctuate. However, such fluctuation will generally be offset by using derivative financial instruments as hedging instruments. Derivative financial instruments that the Company and its subsidiaries use as part of the interest risk management include interest rate swaps.
 
 
The Company and its subsidiaries appropriately manage exchange rate risk by using means such as foreign currency-denominated loans, foreign exchange contracts and currency swaps to hedge exchange rate volatility in our business transactions in foreign currencies and overseas investments. A certain subsidiary holds futures and foreign exchange contracts for the purpose of economic hedges against minimum guarantee risk of variable annuity and variable life insurance contracts.
By using derivative instruments, the Company and its subsidiaries are exposed to credit risk in the event of nonperformance by counterparties. The Company and its subsidiaries attempt to manage the credit risk by carefully evaluating the content of transactions and the quality of counterparties in advance and regularly monitoring the amount of notional principal, fair value, type of transaction and other factors pertaining to each counterparty.
The Company and its subsidiaries have no derivative instruments with credit-risk-related contingent features as of March 31, 2025 and 2026.
(a) Cash flow hedges
The Company and its subsidiaries designate interest rate swap agreements, foreign currency swap agreements, foreign exchange contracts and forward agreements as cash flow hedges for variability of cash flows originating from floating rate borrowings and forecasted transactions and for exchange fluctuations. Net gains (losses) before deducting applicable taxes on derivative contracts were reclassified from other comprehensive income (loss) into earnings when earnings were affected by the variability in cash flows of the designated hedged item. The amounts of these net gains (losses) after deducting applicable taxes were net gain of
 
¥
2,947
 million,
 
net losses of 
¥
8,866
 million and
net gains of
¥
2,062
 million during fiscal 2024, 2025 and 2026, respectively. The amount of net derivative gain, ¥
163
 million, included in other comprehensive income (loss), net of applicable income taxes at March 31, 2026 will be reclassified into earnings within fiscal 2027.
(b) Fair value hedges
The Company and its subsidiaries use financial instruments designated as fair value hedges to hedge their exposure to interest rate risk and foreign currency exchange risk. A certain subsidiary designates foreign exchange contracts to minimize foreign currency exposures on bonds in foreign currencies in the insurance business. The subsidiary also uses interest rate swap agreements to hedge interest rate exposure of the fair values of bonds in foreign currencies in the insurance business.
(c) Hedges of net investment in foreign operations
The Company and its subsidiaries use foreign exchange contracts and borrowings and bonds denominated in foreign currencies to hedge the foreign currency exposure of the net investment in overseas subsidiaries and equity method investments.
(d) Derivatives not designated as hedging instruments
The Company and its subsidiaries entered into interest rate swap agreements, futures and foreign exchange contracts for risk management purposes which are not qualified for hedge accounting. A certain subsidiary holds futures and foreign exchange contracts for the purpose of economic hedges against minimum guarantee risk of variable annuity and variable life insurance contracts.
 
 
The effect of derivative instruments on the consolidated statements of income,
pre-tax,
for fiscal 2024 is as follows.
(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
 
 
 
Life insurance premiums
and related investment income
 
 
Interest expense
 
 
Other (income) and

expense
 
Interest rate swap agreements
 
¥
(5,090
) 
 
¥
0
 
 
¥
(114
) 
 
¥
0
 
Foreign exchange contracts
 
 
(57
) 
 
 
0
 
 
 
0
 
 
 
0
 
Foreign currency swap agreements
 
 
2,733
 
 
 
0
 
 
 
2,521
 
 
 
(6,299
) 
Options held/written and other
 
 
(1,092
) 
 
 
(0
) 
 
 
0
 
 
 
0
 
(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
   ¥ (216 )    ¥ 0     ¥ 335     ¥ 0  
Foreign exchange contracts
     (61,917 )      (130 )      62,028       42  
(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 equity
method investments
and liquidation losses, net
    
Interest expense
  
Foreign exchange contracts    ¥ (41,341 )    ¥ (87 )    ¥ 14,865  
Borrowings and bonds in foreign currencies
      (97,221 )      0       0  
(4) Derivatives not designated as hedging instruments
 
    
Millions of yen
  
    
Gains (losses) recognized in income on derivative
  
    
Life insurance premiums
and related investment income*1
    
Interest
expense*2
     
Other (income)
and expense
  
Interest rate swap agreements
    ¥ 0     ¥ 4      ¥ 92  
Futures
      (3,046 )      0        1,073  
Foreign exchange contracts
      40,127       2,980        16,152  
Credit derivatives held/written
      0       0        (27 ) 
Options held/written and other
      0       0        750  
 
*1
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 fiscal 2024 (see Note 23 “Income and Expenses Relating to Life Insurance Operations”).
*2
The portion of gains (losses) recognized in income on derivative arising from foreign exchange contracts that represents interest rate adjustments is recognized as interest expense.
 
 
The effect of derivative instruments on the consolidated statements of income,
pre-tax,
for fiscal 2025 is as follows.
(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
  
   
Life insurance premiums
and related investment income
     
Interest expense
    
Other (income)
and expense
  
Interest rate swap agreements
    ¥ (2,226 )    ¥ 0      ¥ (446 )    ¥ 0  
Foreign exchange contracts
      2,179       0        694       0  
Foreign currency swap agreements
      (10,239 )      0        2,977       8,262  
Options held/written and other
      (8,059 )      14        0       0  
(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
 
 
Interest
expense
 
 
Other (income)
and expense
 
 
Life insurance premiums
and related investment income
 
 
Other (income)
and expense
 
Interest rate swap agreements
 
¥
147
 
 
¥
0
 
 
¥
(91
) 
 
¥
(101
) 
 
¥
92
 
Foreign exchange contracts
 
 
(6,028
) 
 
 
968
 
 
 
(1,223
) 
 
 
6,090
 
 
 
959
 
(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 equity
method investments
and liquidation losses, net
    
Interest expense
  
Foreign exchange contracts
    ¥ 1,488     ¥ (15,995 )    ¥ 10,597  
Borrowings and bonds in foreign currencies
      (13,601 )      0       0  
 
 
(4) Derivatives not designated as hedging instruments
 
    
Millions of yen
  
    
Gains (losses) recognized in income on derivative
  
    
Life insurance premiums and
related investment

income*1
    
Interest
expense*2
    
Other (income)
and expense
  
Interest rate swap agreements
    ¥ 0     ¥ 0     ¥ 39  
Futures
      (262 )      0       300  
Foreign exchange contracts
      (10,355 )      (22,260 )      (1,910 ) 
Credit derivatives held/written
      0       0       (0 ) 
Options held/written and other
      0       0       (7,399 ) 
 
*1
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 fiscal 2025 (see Note 23 “Income and Expenses Relating to Life Insurance Operations”).
*2
The portion of gains (losses) recognized in income on derivative arising from foreign exchange contracts that represents interest rate adjustments is recognized as interest expense.
The effect of derivative instruments on the consolidated statements of income,
pre-tax,
for fiscal 2026 is as follows.
(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
  
   
Life insurance premiums
and related investment

income
     
Interest expense
    
Other (income)
and expense
  
Interest rate swap agreements
    ¥ 7,176     ¥ 0      ¥ (1,186 )   ¥    0  
Foreign exchange contracts
      1,141       0        946       (4,017 )
Foreign currency swap agreements
      5,447       0        2,720       (1,764 ) 
Options held/written and other
      (12,412 )     125        0       0  
(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
    
Interest
expense
    
Other (income)
and expense
    
Life insurance premiums
and related investment income
    
Other (income)
and expense
  
Interest rate swap agreements
   ¥ 0     ¥ 0     ¥ (225 )    ¥ 0     ¥ (0 ) 
Foreign exchange contracts
     44,810      
4,571
       9,183     (44,917 )     (9,400 )
 
 
(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 equity
method investments
and liquidation losses, net
    
Interest expense
  
Foreign exchange contracts    ¥ (14,009 )    ¥ 9,645     ¥ 8,430  
Borrowings and bonds in foreign currencies
      (1,759 )     0       0  
(4) Derivatives not designated as hedging instruments
 
    
Millions of yen
  
    
Gains (losses) recognized in income on derivative
  
    
Life insurance premiums

and related investment income*1
    
Interest expense*2
    
Other (income)
and expense
  
Interest rate swap agreements
    ¥    0     ¥    0     ¥    17  
Futures
      (1,433 )     0       2,784  
Foreign exchange contracts
      (30,694 )      (6,679 )      (6,308 )
 
Credit derivatives held/written
      0       0       16  
Options held/written and other
      0       0       (1,630 )
 
*1
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 fiscal 2026 (see Note 23 “Income and Expenses Relating to Life Insurance Operations”).
*2
The portion of gains (losses) recognized in income on derivative arising from foreign exchange contracts that represents interest rate adjustments is recognized as interest expense.
The effect of the components excluded from the assessment of hedge effectiveness on the consolidated statements of income,
pre-tax,
for fiscal 2024 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
    ¥ (25,208 )    ¥ 31      ¥ 0  
Options held/written and other
      0       0        57  
 
 
The effect of the components excluded from the assessment of hedge effectiveness on the consolidated statements of income,
pre-tax,
for fiscal 2025 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
    ¥ 24,143      ¥ 14      ¥    0  
Options held/written and other
      0        0        41  
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, 2025 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
    ¥ 491,447      ¥    0      
Long-term Debt
      ¥ 28,220      ¥    0  
Installment Loans
      22,451        (92 )      —         —         —   
The effect of the components excluded from the assessment of hedge effectiveness on the consolidated statements of income,
pre-tax,
for fiscal 2026 is as follows.
Fair value hedges
 
    
Millions of yen
    
Gains (losses) recognized in income
    
Life insurance premiums
and related investment income
     
Interest expense
Foreign exchange contracts
    ¥ 17,327      ¥(12)
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, 2026 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
    ¥ 701,086      ¥    10,090      
Long-term Debt
      ¥ 23,000      ¥ 0  
 
 
Notional amounts of derivative instruments and other, fair values of derivative instruments and other before offsetting at March 31, 2025 and 2026 are as follows.
March 31, 2025
 
           
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
    ¥ 676,691      ¥ 17,788        Other Assets      ¥ 2,768        Other Liabilities  
Options held/written and other
      94,608        98        Other Assets        7,323        Other Liabilities  
Futures, foreign exchange contracts
      932,649        9,515        Other Assets        25,445        Other Liabilities  
Foreign currency swap agreements
      303,060        9,570        Other Assets        159        Other Liabilities  
Foreign currency long-term debt
      250,702        0        —         0        —   
Derivatives not designated as hedging instruments:
               
Interest rate swap agreements
    ¥ 1,477      ¥ 81        Other Assets      ¥ 6        Other Liabilities  
Options held/written and other
      582,939        15,669        Other Assets        6,392        Other Liabilities  
Futures, foreign exchange contracts*
      1,592,590        11,449        Other Assets        13,942        Other Liabilities  
Credit derivatives written
      1,000             0        —         3        Other Liabilities  
 
*
The notional amounts of futures and foreign exchange contracts in the above table include futures contracts of ¥5,575 million and foreign exchange contracts of ¥2,205 million to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts at March 31, 2025, respectively. Derivative assets in the above table include fair value of the futures and foreign exchange contracts before offsetting of ¥38 million and ¥38 million and derivative liabilities include fair value of the futures and foreign exchange contracts before offsetting of ¥57 million and ¥11 million at March 31, 2025, respectively.
March 31, 2026
 
           
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
    ¥ 615,793      ¥ 26,273        Other Assets      ¥ 2,287        Other Liabilities  
Options held/written and other
      76,234        0        —         15,426        Other Liabilities  
Futures, foreign exchange contracts
      1,048,627        3,704        Other Assets        70,789        Other Liabilities  
Foreign currency swap agreements
      482,092        41,090        Other Assets        12        Other Liabilities  
Foreign currency long-term debt
      83,286        0        —         0        —   
Derivatives not designated as hedging instruments:
               
Interest rate swap agreements
    ¥ 2,274      ¥ 85        Other Assets      ¥ 2        Other Liabilities  
Options held/written and other
      774,332        17,402        Other Assets        6,117        Other Liabilities  
Futures, foreign exchange contracts*
      1,285,303        65,959        Other Assets        23,405        Other Liabilities  
Credit derivatives
held/
written
      1,372        0        —         23        Other Liabilities  
 
*
The notional amounts of futures and foreign exchange contracts in the above table include futures contracts of ¥1,741 million and foreign exchange contracts of ¥964 million to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts at March 31, 2026, respectively. Derivative assets in the above table include fair value of the futures and foreign exchange contracts before offsetting of ¥47 million and ¥8 million and derivative liabilities include fair value of the futures and foreign exchange contracts before offsetting of ¥6 million and ¥23 million at March 31, 2026, respectively.
 
 
The Company and its subsidiaries have contracted credit derivatives for the purpose of trading. Details of credit derivatives written as of March 31, 2025 and 2026 are as follows.
March 31, 2025
 
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
     
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
three
 years
    ¥ (3 ) 
 
*
Underlying reference company’s credit ratings are A1 or better rated by rating agencies as of March 31, 2025.
March 31, 2026
 
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
     
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
t
wo
 years
    ¥ (2 )
 
 
*
Underlying reference company’s credit ratings are A1 or better rated by rating agencies as of March 31, 2026.