Securities Code: 7157
TSE GrowthPresentation
Material for
Investors
Third Quarterfor Fiscal 2022
February 9, 2023

LIFENET is...

Comprehensible
Cost-Competitive
Convenient◼ Remembering the original purpose oflife insurance – mutual support◼ Helping our customers embrace life more fully
1Cumulative 3Q of FY2022 Key Highlights◼ Annualized premium1 of policies-in-force
up 12.8% YoY to JPY 23.5 billion◼ COVID-19 claims was within expectation of
JPY 1.32 billion◼ EEV up 7.8% YoY to JPY 122.9 billion◼ Renewed “au Life Insurance” to strengthen
white label business with KDDI

◼ Identified Materiality (key sustainability
issues)1.

The amount of money equivalent to what is to be paid to have the insurance coverage for one year. All payments are monthly installments, thus the annualized
premium is calculated as multiplying the monthly premium by 12 months

2

Annualized Premium /Number of Policies-in-Force: Annualized premium of policies-in-force1 (JPY billions): Number of policies-in-force

23.5◼ Exceeded 550,000
556,942 policies-in-force

20.8
17.9

491,61114.7
12.5
295,662

348,429

421,073◼ Year-on-year
annualized
premium 112.8%,
number ofpolicies-in-force
113.3%

2018 3Q
2019 3Q
2020 3Q
2021 3Q
2022 3Q（YY/MM）
2018/12’19/12’20/12’21/12’22/12
1.

The amount of money equivalent to what is to be paid to have the insurance coverage for one year. All payments are monthly installments, thus the annualized
premium is calculated as multiplying the monthly premium by 12 months.

3

Policies-in-Force Movement◼ Continues to grow in the mid-term
while further acceleration is needed
Number of policies
FY20203Q

FY2021
3Q

FY2022
3Q

New
business Decreased

22,612 business(9,305)22,506(7,801)
22,164(6,494)1

In-forcebusiness

556,942+13.3%
491,611+16.8%
421,073

2020/09

2020/12
Surrender &lapse ratio2

5.9%
1.
2.

2021/032021/06

2021/092021/12
Surrender &lapse ratio2

6.0%

Decreased number of policies include death, expiration and others in addition to surrender and lapse.
Surrender and lapse ratio is annualized.

2022/032022/06

2022/092022/12
Surrender &lapse ratio2

6.4%

4

Marketing Efficiency: Marketing expenses per new business (JPY thousands): Marketing expenses / Annualized premium of new business1

82

75
66

65

2.0
1.7

1.5

1.5

84
◼ Continued
2.1
a certain scale ofmarketinginvestment
while carefully
monitoringmarketing efficiency(fiscal year)

2018

’19

’20

’21

’22/3Q(YTD)

Marketingexpenses

4,216

6,146

6,712

8,262

6,424

(JPY millions)1.

The amount of money equivalent to what is to be paid to have the insurance coverage for one year. All payments are monthly installments, thus the annualized
premium is calculated as multiplying the monthly premium by 12 months.

5

Operating Expenses Ratio: Operating expenses ratio¹ (%): Insurance premiums (JPY millions): Operating expenses excl. marketing expenses (JPY millions)

19,835
16,892

16,627◼ Increased mainly
due to investments in
new initiatives

13,982◼ Aim to improve in the
mid-term by further
22.8 %
21.6 %
19.6 %
19.5 % 21.0%
business expansion
and productivity
3,877
3,499
3,317
improvement
3,023
2,699

11,845

2018
1.

’19

’20

（fiscal year)’21’22/3Q（YTD)

Operating expenses ratio is calculated by dividing operating expenses excluding marketing expenses by insurance premiums.

6

COVID-19 Claims Condition◼ Decreased to a certain level since revised therequirements of COVID-19 claims
The amount of COVID-19 claims：Actual results：Amount estimated(Image for illustrative purpose）

Total actual results from April 2022 to December 2022
approx.

JPY

1.32 billion

September 26
Revised the requirements of
COVID-19 claims

Claims for the seventh wave
Claims for the sixth wave

Image forillustrative purpose

Jan.

Feb.
FY2021

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

FY2022

Nov.

Dec.

Jan.

Feb.

Mar.

7

Profit Structure under
Current Statutory Accounting◼ Time lag is caused between the recognition of costs andrevenue as marketing expenses is recognized at thetime of acquisition, and revenue is collected gradually
over a long period
Insurance policy profit structure

Total profit/loss
Revenue collected
over long period

Accounting
profit/loss
Initialfiscal
初年度
year

RevenueYear 22年目

Year 33年目

Year 44年目…

Year X
X年目

Premiums

ExpenseMarketingexpenses1.

Heavy initial cost

Costs for policy management, payment of insurance claims and benefit claims, etc.

: Premiums: Operating expenses1 excluding
marketing expenses: Marketing expenses

8Adjusted Profit◼ Steadily recorded profit generated from in-force
business, while affected by COVID-19 claims of JPY
1.32 billion
The method for calculating adjusted profit
Adjusted profit＝ⅰ) Ordinary profit（loss)＋ⅱ) Marketing expenses－ⅲ) Impact of modified co-insurance±ⅳ) Adjustment based on standard
policy reserves1
JPY millions / fiscal year

2018

2019

2020

2021

2022/3Qⅰ) Ordinary profit（loss)(1,719)(2,382)(3,089)(3,245)(3,731)ⅱ) Marketing expenses

4,216

6,146

6,712

8,262

6,424

－

(1,526)(804)(1,283)

(549)

347

546

739

721

152

2,844

2,784

3,558

4,455

2,296

ⅲ) Modified co-insuranceⅳ) Adjustment

Adjusted profit
1.

The amount of the adjustment to the policy reserve provision is the adjustment calculated by excluding the provision for contingency reserves andadjusting for the switch in method for calculating the provision from the Zillmer method to provision based on the standard policy reserves.

(YTD)

9

Structure of Embedded ValueEV

Adjusted
net worth

Value of in-force
business(Net assets at end of period+ adjustments)

Profit/loss for thecurrent fiscal year isreflected in end-ofperiod net assets

Revenue

Revenue
ExpenseExpenseProfit/loss for
current fiscal year

Unrealized future profits/losses
on policies-in-force
at the end of current fiscal year

10

Strong EEV1 Growth◼
◼

EEV and value of in-force business have been growing
at a CAGR of 19%2 and 32%, respectively since IPO¥1,764EEV per share has also steadily increased¥1,673¥1,570122,985
116,604: Value of in-force business (JPY millions): Adjusted net worth (JPY millions): EEV/share (JPY)

95,14091,435

103,726

76,149¥441

18,547
5,122
13,42518,99025,16819,2592012/03 ’13/03 ’14/03 ’15/03 ’16/03 ’17/03 ’18/03 ’19/03 ’20/03 ’21/03 ’22/03 ’22/12 (YY/MM)
1.

2.

Lifenet’s EEV is calculated following the EEV Principles and Guidance and in terms of allowance for risk, MCEV Principles (The European Insurance CFO Forum Market
Consistent Embedded Value Principles©) is referred. From fiscal 2016 onward, a predetermined ultimate forward rate has been used to extrapolate the level of ultralong-term interest rates past the last liquid data point. This method of extrapolation has also been used to restate EEV as of March 31, 2016. EEV as of December 31,
2022 is calculated applying the same operating assumptions as those used for September 30, 2022, and has not been reviewed by third-party specialists.
The calculation includes JPY 3,040 million in proceeds from a third-party allotment in May 2015 and JPY 9,005 million from overseas public offering in July 2020 and JPY
9,771 million from overseas public offering in September 2021.

11

Changing Factors of EEV1
◼ Affected by rising interest rates while EEV growth
driven by value of new business and assumptionchanges in 2Q(JPY millions)

122,985

Adjusted incremental EV2
Expected
existing
business
contribution
Value ofnew business

1,084

Operatingexperiencevariances(170)

Assumptionchanges

3,339

Economic
Adjustments
variancesto the values3
and assumption
as ofchangesDec. 31, ’22(1,148)43

3,232

Changed assumptions at
the end of 2Q for FY2022

116,604
total JPY

’22/03
1.
2.
3.

4,146

million’22/12 (YY/MM)

Lifenet’s EEV is calculated following the EEV Principles and Guidance and in terms of allowance for risk, MCEV Principles (The European Insurance CFO Forum Market
Consistent Embedded Value Principles©) is referred. EEV as of December 31, 2022 is calculated applying the same operating assumptions as those used for
September 30, 2022, and has not been reviewed by third-party specialists.
Adjusted Incremental EV accurately indicates our business growth during a certain period within increase in EEV.
Item for change in capital12

EV Resilience to Financial Changes◼ Limited sensitivity to interest rates andstock prices

Dec. 2022
End
Lifenet

2.2%

-0.9%
-2.2%

Reference: March 2022 End1
LifenetCompany B

4%4%Company C

1.8%

-1.9%

-1.0%

0.5% interest rate increase
0.5% interest rate decrease
10% decrease in equity andreal estate value and other1.

Company A

-1%

-0%

-4%
-5% -5%Prepared by Lifenet based on disclosed information of domestic public life insurance companies.

-6% -7%13

Financial Condition’22/03’22/12

67,82067,897

Cash and deposits

3,761

4,092

Monetary claims bought

3,999

2,999

Money held in trust

5,460

5,221

47,42547,5838,946
1,469
24,042492
98
12,3758,619
1,431
24,331577
597
12,02545,74951,03143,542

49,15522,071

16,866697(795)

3,182％

3,140％

1.
2.

9.9

8.7

3.

(JPY millions)(YY/MM)

Total assets

Securities
Government bonds
Municipal bonds
Corporate bonds
StocksForeign securities
Other securities1

Total liabilities
Policy reserves and otherTotal net assets
Valuation difference on
available-for-sale securities

Solvency margin ratio2
Modified duration (year)3◼ Maintained sufficientfinancial stability as
indicated by solvency
margin ratio2◼ Mitigating negative
impact on net assets
by reducing yen
interest rate risk

Investment trust including foreign bonds and others.
The solvency margin ratio is a key benchmark for industry
regulators. It measures a life insurance company's ability to
pay out claims when unforeseen events occur.
Duration of yen-denominated bonds

14

Growing Value of In-Force Business◼ Value of in-force business up 20% YoY,
along with the growth of value of in-force
business per policy
Number of policies-in-force

Value of in-force businessper policy

Value of in-force business（Unrealized future value on policies-in-force）(JPY billions)(JPY thousands)
556,942172

491,611

176

186

103.7
86.7

421,073＋13.3%

2020/12
20/12
2020/06’21/12
21/12＝

×＋16.8%＋19.6%

72.8’22/12
22/12（YY/MM）

2020/1220/12’21/12
21/12’22/12
22/12（YY/MM）＋19.1%

2020/06
2020/1220/12’21/12
21/12’22/12
22/12（YY/MM）

15

New Initiative in White Label Business◼ Launched “au Life Insurance” with Ponta Point1 tostrengthen cooperation with KDDI Group
Adaptation to the au Economic Zone based Ponta Points

Adaptation to theMulti-Brand Strategy

Sales to a new customer base

“au Life Insurance” can be also available for customers without an au telecoms contract
1.

Ponta point is collected 1 point per JPY 100 and customers can use point at many usual stores and online services.

16

Promoting Collaboration with Partners◼ Lifenet to play a key role in comprehensive
financial services “Olive” launched by
Sumitomo Mitsui Financial Group

Comprehensive
financialservices

Securities

LIFENET MIRAI Inc.
• Provide insurance
products

Cashlesspayments

Insurance• Develop digital tools for
insurance selection

17

Initiative for Sustainability◼ Identified Materiality (key sustainability issues)
based on the concept of mutual support,
the original purpose of life insurance

https://ir.lifenet-seimei.co.jp/en/sustainability/materiality.html

18Adoption of International
Financial Reporting Standards◼ Aim for the voluntary adoption of IFRS 17
from FY2023
IFRS 17 Study Meeting✓

For a better understanding of IFRS financial statements,
explained with unaudited figures of past fiscal years1

Main points✓

Expect to record an accounting profit from FY20231✓

Capital adequacy2 and dividends will be regulated by statutory
accounting standards (J-GAAP) even after the adoption of IFRS

https://ir.lifenet-seimei.co.jp/en/library/earnings.html

Schedule (planned)

1.
2.

May 2023

Financial results for FY2022✓ Disclose business forecasts under IFRSMay 2024

Financial results for FY2023✓ Announce financial results under IFRSIFRS adoption is still in the preliminary stage, and the estimate is based on the current approximation. It is unaudited information and may differ from the actual
financial information under IFRS to be disclosed in the future.
Regarding capital adequacy, economic value-based solvency regulation is being considered for implementation toward 2025.

19

Business Forecasts FY2022◼ No change from November 2022 disclosure◼ Aim for double-digit growth in in-force businessAnnualized premium1(JPY millions)

Policies-in-force(Results)

New business

21,511(Business forecast)

4,200

Decreased business2

Policies-in-force(Business forecast)

24,300(Business forecast)
Surrender andlapse ratio3

6-7%

+13%

2023/032022/03(JPY millions)

1.
2.
3.

FY2022 Forecastsof which impact
of modified
co-insurance(YY/MM)

FY2021 Resultsof which impact
of modified
co-insurance

Ordinary income

30,0005,900

26,167

4,852

Ordinary profit (loss)(5,000)800(3,245)

1,283

Net income (loss)(5,000)800(3,319)1,283

The amount of money equivalent to what is to be paid to have the insurance coverage for one year. All payments are monthly installments, thus the annualized
premium is calculated as multiplying the monthly premium by 12 months.
Including death, expiration and others in addition to surrender and lapse.
The surrender and lapse ratio is the annual equivalent of the monthly number of policies surrendered and/or lapsed divided by the monthly average number of policiesin-force.

20

MissionBe the leading company driving the growthof the online life insurance market

Management goal

Priority
areas

Help our customers embrace life more fully
by offering comprehensible, cost-competitiveand convenient products and services

VisionManagement Policy• Innovation of customer experience

Enhancing and evolving the quality of all services with digital technology• Enhancement of promotion capabilities

Generating massive customer traffic by active promotion and expansion of
agent sales and white label business

Aim to achieve EEV (European Embedded
Value) of 200 billion yen by business growth
in a mid-term
21

LIFENET Manifesto
Comprehensible, Cost-Competitive, ConvenientI.

Our Guiding Principles(1) Creating the future of the life insurance without losing sight of
its original premise: “an ounce of prevention is worth more thana pound of cure.”(2) Listening to what our customers are saying. Recognizing theirneeds and acting accordingly. Allowing our actions to be borneout of their voices and needs.
(3) Delivering the caliber of products and services that we would
feel confident recommending to our own friends and families.
(4) Being a “straight-shooter”. Committing to transparency.
Communicating openly about our management team, ourproducts, and our employees.
(5) Embracing diversity and dialogue to keep us abreast of changing
needs and preferences. Delivering peace of mind that we’ll bearound in 100 years.
(6) Acting in good faith means always taking the high road when it
comes to compliance and ethics.

III.

Making Life Insurance Accessible Again - Affordable(1) Giving the customer what he/she needs. No more, no less at afair price.
(2) Staying vigilant as to how we can provide our products morecost-efficiently.
(3) Always putting ourselves in our customers’ shoes in thinking
about how to minimize their premiums.

II.

Making Life Insurance Accessible Again - Headache-free(1) Helping the customers help themselves. By making ourmaterials easy to understand, customers can determine which
coverage is truly the best fit.
(2) Turning “clauses” in the insurance contract into succinct points
that your grandmother could grasp.
(3) Making all touch points headache-free. Beyond the application
process, ensuring the claims and billing processes are also easy
to understand.

IV.

Making Life Insurance Accessible Again - Convenient(1) Thinking about our customers’ convenience from every angle
and every touch point along the way.
(2) Forming alliances with like-minded partners who can add value
above and beyond our products and services to our customers.
(3) Providing health and wellness tips beyond the framework of life
insurance to create value in our policyholders’ lives.
(4) Creating a precedent for future generations as to what life
insurance is (and should be) all about.

We wish to be a company that helps our customers embrace life more fully.
In order to live out that vision, we continue to challenge ourselves.

22All information on this document that is nothistorical fact constitutes forward-looking
information and is based on assumptions andforecasts available to the company at the time of
preparation. The company cannot guarantee theaccuracy of these assumptions and forecasts.
Earnings projections and other information on thismay differ materially from actual performance due
to various risks and uncertainties.
This is a translation of the original Japanese
document, prepared and provided solely forreaders' convenience. In case of any discrepancy or
dispute, the Japanese document prevails.

https://ir.lifenet-seimei.co.jp/en/
Subscribe to our "IR email service" to receive
news releases and website updates via email.

Appendix

Annualized Premium /Number of New Business (Quarter): Annualize premium1 of new business (JPY millions): Number of new business

1,166
1,104

1,137

1,123
1,051

991

990

981
934

822

822

794

933

923

969

818

741

22,612637
572

28,13623,36923,314
17,312

13,285

1Q

19,075 19,117 18,795 19,685

22,50622,164

24,410 23,928

14,7632Q

3Q

FY2018
1.

29,864

26,918 27,553 26,167

4Q

1Q

2Q

3Q

FY2019

4Q

1Q

2Q

3Q

FY2020

4Q

1Q

2Q

3Q

FY2021

4Q

1Q

2Q

3Q

FY2022

The amount of money equivalent to what is to be paid to have the insurance coverage for one year. All payments are monthly installments, thus the annualized
premium is calculated as multiplying the monthly premium by 12 months.

25

Surrender and Lapse Ratio（Quarter）:Impact of lump-sum recording of policies lapsed1 (%):Surrender and lapse ratio2 without the above (%)

7.6%
0.5%

6.3%
0.1%

7.5%
6.3%

1Q

6.1%

2Q

6.5%

3Q

FY2018
1.
2.

7.6%

7.1%
6.4%

4Q

1Q

2Q

3Q

FY2019

7.1%

7.0%

4Q

5.5%

5.5%

1Q

2Q

3Q

FY2020

4Q

6.0%

1Q

0.0%

0.0%

7.1%

5.9%

6.4%

6.6%

6.2%

6.0%

2Q

3Q

FY2021

6.5%

6.4%

6.3%

4Q

1Q

2Q

3Q

FY2022

Lifenet has extended grace period for insurance premium payment as one of the special measures in the COVID-19 pandemic. Surrender and lapse ratio includes theimpact of extended policies that were recorded as lapsed policies in a lump sum.
The surrender and lapse ratio is the annual equivalent of the monthly number of policies surrendered and/or lapsed divided by the monthly average number of policiesin-force.

26

Marketing Efficiency (Quarter): Marketing expenses per new business (JPY thousands): Marketing expenses / Annualized premium of new business1

96

98
86

81
2.4

72
2.1

1.9

1.8

(fiscal year)

2021/3Q’21/4Q’22/1Q’22/2Q’22/3Q

Marketingexpenses

1,833

2,400

2,079

2,157

2,187

(JPY millions)

1.

2.3

The amount of money equivalent to what is to be paid to have the insurance coverage for one year. All payments are monthly installments, thus the annualized
premium is calculated as multiplying the monthly premium by 12 months.

27

Breakdown of Policies-in-Force’21/12Component
ratio

Number of policies-in-force

491,611556,942100%- Term Life

239,838

270,451

49%- Whole-life Medical

134,303

153,628

28%- Term Medical Care

8,598

8,130

1%

- Long-term Disability

62,87567,54912%- Cancer

45,99757,18410%

3,271,082

3,576,874

312,344352,758

Sum insured of policies-in-force1(JPY millions)

Number of policyholders

1.

’22/12

Sum insured of polices-in-force are the sum of death coverage, and do not include third-sector insurance.

28

Life Time Value and Customer Acquisition Cost
Key Metrics for a SaaS Company and Lifenet

ARR per Contract(Annual Recurring Revenue)

Life Time1(Term of Contract)

Gross Profit Margin2(Marketing Expenses per
New Policy)

1.
2.
3.

Annualized Premiums per
Policy-in-force

Annualized Premiums per
Policy-in-force

JPY 42,536

×

JPY 42,394
×Annualized Premiums per
Policy-in-force

Average Policy Term

Average Policy Term

Average Policy Term

43%

44%

16.7 years
×15.2 years
×

JPY 42,247
×15.6 years
×
39%
(47%)

＝

Customer Acquisition Cost3

FY2022/3Q(YTD)＝(Annualized Premiums per
Policy * Life Time * Gross Profit
Margin)FY2021＝

Life Time ValueFY2020

JPY 305,451

JPY 283,531

JPY 257,031

JPY 66,737

JPY 82,113

JPY 84,090

1 / Churn rate. Churn rate represents the percentage of users who cancelled out their insurance policies.
(Insurance premiums – Insurance claims and benefits - Provision for policy reserves and others) / Insurance premiums.
Marketing expenses / Number of new business.

(JPY 309,755)*Figures in () exclude theimpact of COVID-19 claimsof JPY 1.32 billion
29

Condensed Statements of Operation/ Fundamental Profit (Cumulative 3Q)(JPY millions)

Condensed statements of operation

Change21,599649
22,2492,879

Increased due to growth in in-force business and reinsuranceincome from modified co-insurance.

70
2,949

Includes utilization of modified co-insurance of JPY 4,213M.

Insurance premiums and other

18,720Other

579
19,300Ordinary income

Fundament
al profit

FY2021/3Q FY2022/3Q

Note

Insurance claims and
other

6,174

9,137

2,962

Increased due to an increase in COVID-19 claims (JPY 1,326M) andreinsurance commissions from modified co-insurance. Percentage
of insurance claims and benefit claims to insurance premiums is
27.5%.

Insurance claims

1,810

2,048

238

Increased from 161 cases in 3Q of FY21 to 185 cases in 3Q of FY22.

Benefit claims

1,103

2,523

1,420

5,071

5,612

541

Increased from 10,241 cases in 3Q of FY21 to 33,249 cases in 3Q
of FY22.
Percentage of provision for policy reserves (JPY 5,350M) to
insurance premiums is 32.2%.

Ordinary expenses

8,724
5,862
953
1,907
1,278
21,248

1,200
562
153
484
28
4,732

Ordinary profit (loss)(1,948)

9,924
6,424
1,107
2,392
1,306
25,980(3,731)

Provision for policy
reserves and other
Operating expenses
Marketing expenses
Customer service
System and other
Other

Includes JPY 5,148M for advertising expenses.

(1,782) Includes profit of JPY 549M for utilization of modified co-insurance.

Extraordinary losses andincome taxes
Net income (loss)

61

24(2,009)(3,755)(1,746) Includes profit of JPY 549M for utilization of modified co-insurance.

Mortality margin

2,652

1,662

(990) Includes JPY 443M loss due to utilization of modified co-insurance.

Expense margin (loss)(4,662)(768) insurance.

Interest margin (loss)

45(1,964)(5,430)24(3,744)

Fundamental profit(36)
Decreased due to an increase in COVID-19 claims (JPY 1,326M).

Includes JPY 992M expense margin for utilization of modified co-(21)(1,779) Includes profit of JPY 549M for utilization of modified co-insurance.

30Three Surplus Factors ofFundamental Profit
First 9 months of FY2022(JPY millions)

Profit analysis

Statements of operations
Ordinary income

Insurance premiums and other 21,599

Premiums income 16,627

Net premiums

Expense loading

Reinsurance income 4,972

ReinsuranceincomeOther reinsuranceincomeInterest anddividends

Investment income 588

Gains on salesof securities

Other ordinary
incomeOther ordinary income 61

Ordinary expenses

Insurance claims and other 9,137

Insurance claims and benefits
4,572

Insurance claims
and benefits

Reinsurance commissions
4,563

Reinsurance
commissions

Other reinsurance
commissions

Provision for policy
reserves and others 5,612

Change in policy
reserves

Change inpolicy reserves

Interest
expenses

Investment expenses 93
Operating expenses 9,924

Operatingexpenses

Other ordinary expenses
1,213

Other ordinary
expenses

Income taxes 2

Mortality
margin (loss)

Expensemargin (loss)

Interest
margin (loss)

1,662(5,430)24

Net profit (loss) (3,755)
1.

Some items with minimal amounts have been omitted.

Losses on salesof securities

Capital gains(losses)166

Ordinary profit (loss)(3,731)
Extraordinary profit (loss)(21)

Provision forcontingency
reserves

Projected
interest

Other onetime
gains (losses)(152)

Extraordinary profit (loss)(21)
Income taxes 2

Net profit (loss) (3,755)
31

Solvency Margin Ratio Calculation
As of Dec. 31, 2022

( (𝑅 1 + 𝑅 8 )2 + (𝑅 2 + 𝑅 3 + 𝑅 7 )2 + 𝑅 4 )/2(JPY millions)

Solvency margin ratio
3,140.6%
Cash and deposits
4,092
Monetary claims bought

2,999

Money held in trust
5,221

=

Total amount of solvency margin<numerator>
34,457

Other liabilities
1,754

Excess over the fullZillmerized reserve 15,089
Price fluctuation reserves 121

Securities
47,583

Risk of change in mortality rate (calculated based on value ofpolicies in force)

1,246

Contingency reserves 2,379

Deferred tax liabilities onavailable-for-sale securities－1

Valuation difference on
securities available-for-sale(795)1

Total amount of risk/2< the denominator>
2,194/2

Insurance risk R1 1,053

Reserves for outstanding claims

Policy reserves
47,908÷Add liabilities
with strong
capitalcharacteristics
such as pricefluctuation
reserves andcontingency
reserves

Medical insurance risk R8 397
Risk of change in medical incidence rate (hospital admission
rate , etc.)

Assumed interest rate risk R2 4
Risk that the actual investment return will fall below the
expected return used as a basis for calculating policy
reserves[Minimum guarantee risk] R7 －Risk related to products, such as variable annuities withminimum guarantees

Asset management risk R3 1,520

Tangible fixed assets

81
Intangible fixed assets
1,291

Other assets
6,627
1.
2.

Capital stock andother assets
17,661

Net assets
16,866[Credit risk] Risk that asset values decline due todeterioration in financial condition of creditees[Price fluctuation risk]Risk of incurring losses due to decline inmarket value of stocks and bonds, etc.

Business management risk R4 89
3% of the total of the amounts of the other 5 risks (in the
Company’s case)

90% of the valuation difference on available-for-sale securities and deferred gains or losses on hedges (pre-tax) (if negative, 100%)
Items that do not apply to the Company or for which the amount is minimal have been omitted, except for certain bracketed items.

32

EV Sensitivity Analysis1
Impacts of changes in assumptions (sensitivities)(JPY millions)

Change in
VoNB

122,985

3,232

Sensitivity 1a: 1.0% increase in risk-free rate

(5,315)(393)

Sensitivity 1b: 1.0% decrease in risk-free rate

5,286

345

Sensitivity 1c: 0.5% increase in risk-free rate

(2,671)(193)

Sensitivity 1d: 0.5% decrease in risk-free rate

2,666

181

(1,101)－

Sensitivity 3: 10% decrease in operating expenses

4,532

580

Sensitivity 4: 10% decrease in lapse rate

1,427

224

Sensitivity 5: 5% decrease in claim incidence rates for life business

6,097

547

Sensitivity 6: Change the required capital to the statutory minimum

256

25

EEV and new business value as of December 31, 2022

Sensitivity 2: 10% decrease in equity and real estate value and other1.

Change in EEV as ofDec. 31, 2022

For each sensitivity, only one specific assumption is changed and other assumptions remain unchanged. It should be noted that the effect of the change of more than
one assumption at a time is likely to be different from the sum of sensitivities carried out separately. As Japanese policy reserves are calculated in accordance with the
IBR, the sensitivities carried out do not affect the reserves at the valuation date. The sensitivity on the value of new business excludes the impact on the adjusted net
worth.

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Explanation of Adjusted Profit◼

Adjustments to provision for policy reserves based onstandard policy reserves

Calculation of adjusted profit

Difference between methods of calculating
provision for policy reservesⅳ)ⅲ) Impact ofAdjustment
modified coⅱ) Marketing insurance
based onexpensesstandard policy
Adjustedreserves

profitⅰ) Ordinary
profit（loss)

Method of calculating the “ⅳ) Adjustment based on standard policy reserves”
e.g. Fiscal 2021 (JPY millions)

Adjustment to provision forpolicy reserves1

721
1.

2.

Provision for policy
reserves

Increase in standard
policy reserves2

6,756

6,035

The amount of the adjustment to switch to provisioning based on standard policy reserves is calculated by excluding the provision for contingency reserves andadjusting for the switch in method for calculating the provision from the Zillmer method to provision based on the standard policy reserves. Please note that theprovision for contingency reserves is included in the provision for policy reserves, but is not included in the increase in standard policy reserves. As the transition to thestandard policy reserve was completed in FY2021, there will be no adjustment to the standard policy reserve in FY2022 regarding the premium reserve accumulation
method except for the exclusion of the provision for contingency reserves.
The increase in standard policy reserves is the amount of the increase (decrease) in the standard policy reserve balance for the current fiscal year from the balance inthe previous fiscal year. The standard policy reserves is the amount calculated by excluding the provision for contingency reserves from actually provisioned policy
reserves and adding the difference from the provision based on the standard policy reserves. There is no difference at the end of FY2022 because the transition to thestandard policy reserve was completed.

34

Modified Co-Insurance◼ Ease pressure of new business costs on P&L◼ Alleviate decrease in capital during growth
Illustration image of change in
profit/loss structure by reinsurance：Costs ：Effects of reinsurance

Without
Reinsurance：Revenue

Illustration image of impact ofreinsurance on net assets

With
Reinsurance

With
Reinsurance

Ease pressure of new
business costs
Without
Reinsurance
End of Mar. 2019
FY2018

Note: Illustration of P&L structure of reinsuring new business of single fiscal year,
where illustration of impact on net assets of reinsuring new business for multiple years.
Lifenet has utilized reinsurance transactions by modified co-insurance method on partof new business since fiscal 2019.

Year 1

2

3

4

５

…

Year X35

J-GAAP vs IFRS
Illustration image of accounting structure1■Current Statutory Accounting (J-GAAP)
Heavy initial cost for
acquiring new business3
is recognized at initialfiscal year.

Year 1

Year 2

Year 3

Year 4

Year 5

Revenue2

Revenue2

Revenue2

Revenue2

Revenue2

ProfitProfitProfitProfitYear 2

Year 3

Year 4

Year 5

Revenue

Revenue

Revenue

Revenue

Revenue

ExpenseExpenseExpenseExpenseExpenseProfitProfitProfitProfitProfit・・・・

Expenseforacquiringnewbusiness

Profit(Loss atInitial Year)■IFRS
Initial cost for acquiring
new business3 isdeferred under IFRS 17.

Year 1・・・・＊Please refer to Material for IFRS 17 Study Meeting for details about IFRS 17.
1.
2.
3.

This is illustrative purpose only, and it does not necessarily guarantee that Lifenet will make profits as indicated.
Revenue is insurance premiums – costs for policy management, payment of insurance claims and benefit claims, etc. Expense for acquiring new business is not included.
The definition of “expense for acquiring new business” may differ in each accounting rule.

36