Segment Information

12 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Segment Information

Note 14 – Segment Information

Our reportable segments are Finance operations and Voluntary protection operations. Finance operations include retail, leasing, and dealer financing provided to authorized dealers and their customers in the U.S. and Puerto Rico. Voluntary protection operations are performed by TMIS and its subsidiaries.

Financial information for our reportable operating segments, which includes allocated corporate expenses, is summarized as follows:

	Year ended March 31, 2023
	Finance		Voluntary protection			Intercompany
	operations		operations			eliminations			Total
Total financing revenues	$	11,293	$	-		$	-		$	11,293
Depreciation on operating leases		5,122		-			-			5,122
Interest expense		3,054		-			-			3,054
Net financing revenues		3,117		-			-			3,117
Voluntary protection contract revenues   and insurance earned premiums		-		1,053			-			1,053
Investment and other income (loss), net		314		(217	)		-			97
Net financing and other revenues		3,431		836			-			4,267
Expenses:
Provision for credit losses		713		-			-			713
Operating and administrative		1,331		445			-			1,776
Voluntary protection contract expenses and insurance losses		-		470			-			470
Total expenses		2,044		915			-			2,959
Income (loss) before income taxes		1,387		(79	)		-			1,308
Provision (benefit) for income taxes		346		(17	)		-			329
Net income (loss)	$	1,041	$	(62	)	$	-		$	979
Total assets	$	131,093	$	6,638		$	(136	)	$	137,595

Note 14 – Segment Information (Continued)

	Year ended March 31, 2022
	Finance		Voluntary protection			Intercompany
	operations		operations			eliminations			Total
Total financing revenues	$	11,920	$	-		$	-		$	11,920
Depreciation on operating leases		5,846		-			-			5,846
Interest expense		1,401		-			-			1,401
Net financing revenues		4,673		-			-			4,673
Voluntary protection contract revenues   and insurance earned premiums		-		1,015			-			1,015
Investment and other income (loss), net		45		(71	)		-			(26	)
Net financing and other revenues		4,718		944			-			5,662
Expenses:
Provision for credit losses		236		-			-			236
Operating and administrative		1,311		386			-			1,697
Voluntary protection contract expenses and insurance losses		-		405			-			405
Total expenses		1,547		791			-			2,338
Income before income taxes		3,171		153			-			3,324
Provision for income taxes		755		34			-			789
Net income	$	2,416	$	119		$	-		$	2,535
Total assets	$	128,684	$	6,510		$	(153	)	$	135,041

	Year ended March 31, 2021
	Finance		Voluntary protection		Intercompany
	operations		operations		eliminations			Total
Total financing revenues	$	11,799	$	-	$	-		$	11,799
Depreciation on operating leases		5,932		-		-			5,932
Interest expense		2,302		-		-			2,302
Net financing revenues		3,565		-		-			3,565
Voluntary protection contract revenues   and insurance earned premiums		-		956		-			956
Investment and other income, net		93		317		-			410
Net financing and other revenues		3,658		1,273		-			4,931
Expenses:
Provision for credit losses		426		-		-			426
Operating and administrative		1,124		363		-			1,487
Voluntary protection contract expenses and insurance losses		-		369		-			369
Total expenses		1,550		732		-			2,282
Income before income taxes		2,108		541		-			2,649
Provision for income taxes		502		130		-			632
Net income	$	1,606	$	411	$	-		$	2,017
Total assets	$	127,726	$	6,149	$	(147	)	$	133,728

Note 14 – Segment Information (Continued)

Voluntary protection operations

The voluntary protection operations segment offers vehicle and payment protection products on Toyota, Lexus and other domestic and import vehicles that are primarily sold by dealers along with the sale of a vehicle.

Voluntary protection contract revenues

We receive the contractually determined dealer cost at the inception of the contract. Revenue is then deferred and recognized over the term of the contract according to earnings factors established by management that are based upon historical loss experience. Contracts sold range in term from 3 to 120 months and are typically cancellable at any time. The effect of subsequent cancellations is recorded as an offset to unearned voluntary protection contract revenues in Other liabilities on our Consolidated Balance Sheets.

For the years ended March 31, 2023 and 2022, respectively, approximately 83 percent and 82 percent of voluntary protection contract revenues in the Voluntary protection operations segment were accounted for under the guidance for revenue from contracts with customers.

The Voluntary protection operations segment defers contractually determined incentives paid to dealers as contract costs for selling voluntary protection products. These costs are recorded in Other assets on our Consolidated Balance Sheets and are amortized to Operating and administrative expenses in the Consolidated Statements of Income using a methodology consistent with the recognition of revenue. The amount of capitalized dealer incentives and the related amortization was not significant to our consolidated financial statements as of and for the years ended March 31, 2023 and 2022.

We had $2.7 billion and $2.5 billion and of unearned voluntary protection contract revenues from contracts with customers included in Other liabilities on our Consolidated Balance Sheets as of March 31, 2022 and March 31, 2021, respectively. We recognized $800 million of the unearned amounts in voluntary protection contract revenues in our Consolidated Statements of Income during fiscal 2023, compared to $704 million during fiscal 2022. As of March 31, 2023, we had unearned voluntary protection contract revenues of $2.9 billion included in Other liabilities on our Consolidated Balance Sheet, and with respect to this balance, we expect to recognize revenue of approximately $827 million in fiscal 2024 and $2.1 billion thereafter.

Insurance earned premiums

Revenues from providing coverage under various insurance contracts are recognized over the term of the coverage in relation to the timing and level of anticipated claims. Revenues from insurance policies, net of premiums ceded to reinsurers, are earned over the terms of the respective policies in proportion to the estimated loss development. Management relies on historical loss experience as a basis for establishing earnings factors used to recognize revenue over the term of the contract or policy.

Voluntary protection contract expenses and insurance losses

Voluntary protection contract expenses and insurance losses include amounts paid and accrued for loss events that are known and have been recorded as claims, estimates of losses incurred but not reported based on actuarial estimates and historical loss development patterns, and loss adjustment expenses that are expected to be incurred in connection with settling and paying these claims.

Accruals for unpaid losses, losses incurred but not reported, and loss adjustment expenses are included in Other liabilities on our Consolidated Balance Sheets. These accruals arising from contracts entered into by TMIS are not significant as of March 31, 2023 and 2022. Estimated liabilities are reviewed regularly, and we recognize any adjustments in the periods in which they are determined. If anticipated losses, loss adjustment expenses, and unamortized acquisition and maintenance costs exceed the recorded unearned premium, a premium deficiency is recognized by first charging any unamortized acquisition costs to expense and then by recording a liability for any excess deficiency.

Note 14 – Segment Information (Continued)

Risk Transfer

Our voluntary protection operations transfer certain risks to protect us against the impact of unpredictable high severity losses. The amounts recoverable from reinsurers and other companies that assume liabilities relating to our Voluntary protection operations are determined in a manner consistent with the related reinsurance or risk transfer contract. Amounts recoverable from reinsurers and other companies on unpaid losses are recorded as receivables but are not collectible until the losses are paid. Revenues related to risks transferred are recognized on the same basis as the related revenues from the underlying contracts. Covered losses are recorded as a reduction to Voluntary protection contract expenses and insurance losses.