FactsBusiness conspectus
1. Business results in the last ﬁscal year .............................................. 24
2. Indicators showing the main business results over the last ﬁve ﬁscal years ...... 25
3. Indicators showing the business results in the last 3 ﬁscal years .......... 25

Accounting conspectus
1. Accounts in the last 2 years ........................................................... 31
2. Risk management credits ............................................................... 35
3. Present conditions of loans involving trust with contact for replacement of losses ..... 35
4. Credits obligations based on debtor classiﬁcation ............................ 35
5. Conditions of solvency-margin ratio ................................................ 35
6. Information on the market prices (acquisition cost or contract cost,market price and appraisal proﬁt and loss) and others....................... 36

Glossary
For an understanding of earthquake insurance ...................................... 38

Japan Earthquake Reinsurance Co., Ltd. 200623�������������������

1. Business results in the last ﬁscal year
The number of earthquake insurance contracts and premiums written continued to beon the increase in ﬁscal 2005 mainly because
earthquakes that happened, including the Fukuoka-ken Seiho-oki earthquake, aroused more
attention than ever among people to natural disasters. As a result, the number of payments ofearthquake insurance claims and insurance premiums marked increase over the previous year.
In the meantime, safety and liquidity came ﬁrst
in operating the assets, followed by earnings,
under interest rate ﬂuctuations to enable us tobe well prepared for the payment of reinsurance
claims.
(1) Earthquake insurance results in outline
a. Premiums written and insurance claims paid 3①
1, 3Media coverage and occurrence of earthquakes madepeople more interested in or aware of, earthquake
insurance, which served as a tail wind to let the net
premiums written reach 71.1 billion yen in the current ﬁscal year.
Insurance claims paid came to 24.6 billion yen to compensate damages caused by earthquakes such as Fukuoka-ken Seiho-oki earthquake.

b. Underwriting reserves 3 ⑤This resulted in that the risk reserves added amounted to 31 billion yen, a total of the net premiums written held 27.9 billion yen given by deducting the assumed insurance and held of commissions from thenet premiums written and a proﬁt of 3 billion yen fromoperation.
The risk reserves at the end of the current term cameto 378.7 billion yen after the ongoing insurance claims
were paid, the outstanding claims calculated in theprevious year were returned and the risk reserves
were drawn in the past year by 8 billion yen. The
underwriting reserves at the end of the current term
amounted to 450.8 billion yen after adding unearned
premium reserves and refunded reserves to the risk
reserves.

c. Entrusted reserves
Designated as entrusted reserve from the earthquake
insurance account, the entrusted reserves for the year
reached 377.3 billion yen by adding net premiums
written and proﬁt from investment of 23.4 billion yen
and drawing advertisement / publicity expenses of 500
million yen.

(2) Investments in outline 3 ⑥
It was expected that the business situation remained
at a phase of adjustment in the ﬁrst half of the year
and BOJ’s quantitative easing of monetary policy
would be protracted, with the result that the interest rate of 10-year government bond went down fromthe 1.3% level at the beginning of the ﬁscal year to
the 1.1% level in June. The Japanese government andBank of Japan declared in August, however, that theJapanese economy had escaped from the landing, letting people begin to feel optimistic about the domestic
economy. While the short- and mid-term interest rates
were on the increase, the quantitative easing policy
was abandoned in March, leading to a sharp rise ininterest rate to the 1.7% level at the end of ﬁscal year.
The dollar rose about 10 yen and the Euro dollar about
4 yen against the yen over the previous year on theforeign exchange market partly because there was observed a wider difference in interest rate among theUnited States of America, European countries and Japan. Under such circumstances, we operated the assets with utmost emphasis on safety and liquidity andthen proﬁtability. As a result, the proﬁts from investment before tax reached 3 billion yen in business account and in entrusted reserve account respectively.

(3) Current proﬁt and loss
The net income amounted to 36 million yen after calculating interests, dividend income and corporate taxes.
The proﬁt was added to the retained earnings brought
forward from last year in the amount of 520 million
yen, with the result that the unappropriated retained
earnings for the year came to 550 million yen.
Since a direct writing insurance company reported, in
addition, to JER that they had failed to add up reinsurance, we added up the reinsurance of the past year
to that of the current year. This brought a total of net
premiums written of 203 million yen.

24

Japan Earthquake Reinsurance Co., Ltd. 2006

2. Indicators showing the main business results over the last ﬁve ﬁscal
years(Unit: Yen in million)

Fiscal Year

2001

2002

50,859(△3.4%)

47,566(△6.5%)

50,896(7.0%)

58,198(14.3%)

71,132(22.2%)

Ordinary incomes (percentage changeover the previous term (△)

73,430(7.5%)

58,460(△20.4%)

66,352(13.5%)

71,856(8.3%)

107,868(50.1%)

Ordinary expenses(percentage change over the previous term (△)

72,722(7.3%)

58,156(△20.0%)66,167(13.8%)

71,758(8.4%)

107,845(50.3%)

Ordinary proﬁt(percentage change over the previous term (△)

707(32.5%)

303(△57.1%)

184(△39.3%)98(△46.7%)23(△76.4%)

Net income(percentage change over the previous term (△)

22(△34.5%)

10(△55.6%)17(74.2%)

10(△40.5%)36(243.6%)

1,000(2 mil. shares)

1,000(2 mil. shares)

1,000(2 mil. shares)

1,000(2 mil. shares)

1,000(2 mil. shares)

Net assets

1,569

1,577

1,579

1,587

1,605

Total assets

681,736

726,458

761,594

804,333

838,555

Underwriting reserves(percentage change over the previous term (△)

360,778(6.6%)

391,482(8.5%)

412,968(5.5%)

415,802(0.7%)

450,892(8.4%)(of the balance, risk reserve balance)(percentage change over the previous term (△)

312,523(6.2%)

341,675(9.3%)

359,772(5.3%)

355,813(△1.1%)

378,731
(6.4%)

Loans(percentage change over the previous term (△)

−
(−)

−
(−)

−
(−)

−
(−)

−
(−)

Securities(percentage change over the previous term (△)

618,296(14.0%)

652,210(5.5%)

682,285(4.6%)

734,046(7.6%)

771,383(5.1%)

Solvency-margin ratio

203.3%

176.3%

184.3%

182.2%

160.2%

Dividend propensity

−%

−%

−%

−%

−%

No. of employees

20

20

17

18

21

Division

Net premiums written (percentage changeover the previous term (△)

Common stock (sum of shares issued)

2003

2004

2005

Note:
As seen in Section 4, Article 3, Order to specify divisions, provided for in Section 2, Article 132, Insurance Business Law, our solvency-margin ratio is notsupposed to be used as criterion to enable the administrative authorities to trigger an order for improvement. For detail, see p.17

We conduct no trust business.

3. Indicators showing the business results in the last 3 ﬁscal years❶ Indicators showing the main business results
1. Net premium written

2. Underwriting proﬁt

Item: earthquake
Division

Fiscal Year

Ceded insurance
premiums (A)Surrender value (B)(Unit: Yen in million)
2003

2004

2005

108,028

120,972

143,493

1,045

1,082

1,440

(Unit: Yen in million)
Division

Fiscal Year

2003

2004

2005

Underwriting incomes

54,67861,99591,001

Underwriting expenses

54,09761,51590,580

427

401

421

Assumed net
premiums written (A-B)

104,993

117,942

139,621

Sales and general administrative expenses

Reinsurance premiums
ceded (C)54,09659,744

68,488Other incomes andexpenses

△154

△78

−

Net premiums written(A-B-C)

50,89658,19871,132

Underwriting proﬁt

−

−

−

Note:
1: Surrender value: Surrender value of receiving reinsurance.
2: Net receiving premiums: Produced by deducting surrender value
from receiving premiums.
3: Net premium written: Produced by deducting paid reinsurance premium ceded from net reinsurance premiums.

Note:
1: The above sales and general administrative expenses are thoserelating to the underwriting of insurances mentioned in the sales
and general administrative expenses in a statement of proﬁts andlosses.
2: Other incomes and expenses are those equivalent to corporate
taxes mentioned in a statement of earthquake insurance proﬁts
and losses.

Japan Earthquake Reinsurance Co., Ltd. 200625

❸ Indicators relating to accounting

3. Net claims paid
Item: earthquake
Division

Fiscal Year

(Unit: Yen in million)
2003

2004

2005

Assumed net claim
paid (A)

9,682

15,987

24,662

Reinsurance claims
recovered (B)

−

−

−

Net claims paid (A-B)

9,682

15,987

24,662Note:
1: Assumed Net claim paid: Produced by deducting surrender value
from ceded insurance money paid.
2: Net claims paid: Produced by deducting reinsurance claims recovered by ceded contract from assumed claim paid.

❷ Indicators relating to insurance contracts
1. Net loss ratio, net expense ratio and their added
ratio(Unit: Yen in million)

Fiscal Year

2003

2004

2005

Net loss ratio

20.5%

28.7%

37.9%

Division

1. Amounts of outstanding claims and underwriting reserves(Unit: Yen in million)

As of the endof ﬁscal 2004

As of the endof ﬁscal 2005

Outstanding claims

327

17,8781,104

Underwriting reserves

412,968

415,802450,892

Total

413,296

433,681451,997

2. Detail Listing of Liability Reserves
Balanceas ofthe endof ﬁscal2004

Amountofincreasein ﬁscal2005

Reserve forordinary bad
debts

−

Reserve forindividual bad
debts

Division(Unit: Yen in million)

Amount of decreasein ﬁscal 2005

Balanceas ofthe endof ﬁscal2005

Use per
objectOthers

−

−

−

−

−

−

−

−

−

Reserve for
speciﬁc foreign
loans

−

−

−

−

−

Accured severance beneﬁts

72

22

5

5

83

−

7

−

−

7

Underwriting expenses

22,34524,80429,982

Insurance related underwriting and general administrative
expenses

Reserve for ofﬁcer retirement
allowances

(427)

(401)

(421)

Reserve forbonus payment

13

14

13

−

14

(Agency commissions andbrokerage fees)(21,918)(24,403)(28,560)

Reserve for priceﬂuctuation

0

7

−

−

7

Net expense ratio

43.9%

42.6%

40.7%

Total

86

52

19

5

113

Added ratio

64.4%

71.3%

78.6%

Note:
1: Net loss ratio: (Net claims paid + loss adjustment expenses) ÷ net
premiums written
2: Net expense ratio: (Agency commissions and brokerage fees +Insurance related underwriting and general administrative expenses) ÷ net premiums written
3: Added ratio: Net loss ratio + net expense ratio

3. Common Stock

Fiscal Year

Division

Domestic contract

2003

2004

2005

100%

100%

100%

3. No. of reinsurers that ceded insurance contracts andtop 5 reinsurers for ceded reinsurance premiums
No. of reinsurers that ceded
insurance contracts

Rate of top 5 reinsurers’ ceded
insurance premiums

19

77.9%

Note:
The number of reinsurers that ceded insurance contracts is that ofthose who ceded treaty reinsurance contracts amounting to 10 million or more yen.
Nothing is mentioned about unearned claims paid.
Nothing is mentioned about the rate of damage occurrence, theexpenses ratio and rate of sum total before ceded insurance deduction.
Ratio of ceded insurance premiums by rating does not apply toearthquake insurance.
We pay no contractor dividend.

Japan Earthquake Reinsurance Co., Ltd. 2006

Balance asof the endof ﬁscal2004

Amount ofincrease inﬁscal 2005

Amount ofdecrease inﬁscal 2005

Balance asof the endof ﬁscal
2005

1,000

−

−

1,000

(2 mil. stock)−−(2 mil. stock)

1,000

−

−

1,000

(2 mil. stock)−−(2 mil. stock)

−

−

−

−

Common stock
Ordinary stock
Issued
stock
Total

1,000

(Legal reserve)
Legalreserveand appropriatedretainedearnings

Remarks(Unit: Yen in million)

Division

2. Rate of premiums written by domestic and overseas contracts

26

As of the endof ﬁscal 2003

Year

Division

1,000

1Appropriatedretainedearnings

1

Special reserve

17

−

−

17

Special reservefor priceﬂuctuation

39

−

−

39

Total

57

−

−

57

Note:
The number of owned shares was 11,400 as of the end of ﬁscal 2005.

4. Business expenses (inclusive of loss adjustment)(Unit: Yen in million)

Fiscal Year

Division

2003

2004

2005

Personnel expenses

352

420

453

Physical expenses

1,090

1,014

2,512

Taxes / contributions

139

159

195

Agency commissions andbrokerage fees

21,91824,40328,560Total

23,501

25,99831,722Note:
The business expenses are a total of loss adjustment expense, sales andgeneral administrative expenses, agency commissions and brokerage
fees as shown in a statement of proﬁt and loss.

5. Proﬁt on sale of securities by category(Unit: Yen in million)
Fiscal Year

Division

2003

2004

❹ Special deposit premium accountNothing is to be mentioned.

2005

Government bonds

26

35

92

Foreign securities

146

6

−

Total

172

41

92

❺ Earthquake insurance underwriting reserves by
category(Unit: Yen in million)Year

As of the endof ﬁscal 2003

As of the endof ﬁscal 2004

As of the endof ﬁscal 2005

Risk reserve359,772

355,813378,731

Repayment reserve

3,297

3,303

2,639

Unearned premium
reserve

49,89856,68569,521

Total

412,968

415,802450,892

Division

6. Loss on sale of securities by category(Unit: Yen in million)
Fiscal Year

Division

2003

2004

2005

Government bonds

92

10

288

Foreign securities

51

221

401

Total

143

231

689

❻ Investments
1. Investments policy

7. Securities appraisal loss by category(Unit: Yen in million)
Fiscal Year

Division

2003

2004

2005

Government bonds

−

−

−

Foreign securities

−

−

−

Total

−

−

−

8. Depreciation expenses by category(Unit: Yen in million)

Asset kind

Acquisition cost

Amount ofdepreciationin ﬁscal2005

Aggregateddepreciations

Balanceas the endof ﬁscal2005

Rate of aggregateddepreciations %Buildings

92

3

50

42

54.6

(for
business)

(92)

(3)

(50)

(42)

(54.6)(forinvestment)

(−)

(−)

(−)

(−)

(−)

Equipment

21

0

18

2

86.5

Others

9

0

2

6

28.4

Total

124

5

72

51

58.2

9. Loss from disposal of property and equipment
Fiscal Year

Division

2003

Because we have to pay a huge amount of claims
in a prompt manner in case of a natural disastersuch as a heavy earthquake, we put in principle thehighest priority on safety and liquidity in operating
the assets, followed by proﬁtability to increase risk
reserves. The risk management division is engaged
in grasping and controlling risks of all kinds, independently of the transactions execution division.
2. Investments in outline
Deposits(Unit: Yen in million)
Year

Division

As of the endof ﬁscal 2003

As of the endof ﬁscal 2004

As of the endof ﬁscal 2005

Deposits

44,06628,47038,026(Ordinary deposit)(15,736)(1,140)(10,696)(Time deposit)(28,330)(27,330)(27,330)

Total assets and investments assets
Fiscal
Year

2003

2004

Percentage
composition(%)

Division(Unit: Yen in million)
2005

Percentage
composition(%)

Percentage
composition(%)(Unit: Yen in million)

Deposits

44,066

5.8

28,4703.5

38,026

4.5

2004

Call loans−−

15,0001.9−−

Monetaryreceivablebought10,994

1.4

6,297

0.8

1,799

0.2

2005

Property−−−(Land)

(−)

(−)

(−)

(Building)

(−)

(2)

(−)

Equipment

0

−

−

Total

0

2

−

No mention is made about the level of underwriting reservesbecause there is no target contract.
Mention about ﬂuctuations of ordinary proﬁt or written loss
over increase in loss ratio is omitted because insurance
claims are offset by disposition of underwriting reserves.
Nothing is to be mentioned about loan write-off and proﬁt
from property and equipment.

Money trust

11,794

1.5

9,173

1.1

15,528

1.9

Securities

682,28589.6

734,046

91.3

771,383

92.0

Buildings

43

0.0

45

0.0

42

0.0

Total ofinvestments
assets749,18598.4

793,033

98.6

826,779

98.6

Total assets

761,594100.0

804,333

100.0

838,555

100.0

Japan Earthquake Reinsurance Co., Ltd. 2006

27

3. Amount of interest dividend received and yield on investment assets (income yield)

4. Asset management yield (realized yield)(Unit: Yen in million)

Fiscal
Year

2003

2004

Percentage
composition(%)

Division(Unit: Yen in million)

2005

Percentage
composition(%)

Percentage
composition(%)

Deposits

56

0.15

85

0.18

91

0.20

Call loan

0

0.05

0

0.05

0

0.05

Monetaryreceivablesbought

15

0.18

14

0.17

4

0.12

Money trust

117

0.95

75

0.78

86

0.57

Securities

9,199

1.39

9,140

1.30

10,307

1.40

Building

−

−

−

−

−

Total

9,389

1.30

9,315

1.21

10,490FiscalYear

Division

2004

2005

Amount Amount Yield on Amount Amount Yield onofof
workingofofworking
numera- denomi- assets numera- denomi- assets
tor
nator
(%)
tor
nator
(%)

Deposits

85

48,8090.18

91

46,8850.20

Call loan

0

80

0.05

0

208

0.05

Bond trading with
repurchaseagreement

−

−

−

−

−

−

14

8,425

0.17

4

3,918

0.12

−

Monetaryreceivablesbought1.31

Commodity
securities

−

−

−

−

−

−

Note:
Yield on investments (income yield): indicator showing the result of investment assets from a point of income (interest and dividend income)(which has been disclosed)
The numerator is composed of interest and dividend income from operating the assets while the denominator is an acquisition cost based
yield.
Numerator = Interest and dividend income (including the amount equivalent to interest and dividend income of proﬁt (or loss) frommonetary trust operation)
Denominator = Acquisition cost or depreciation based average balance

Money trust

83

9,633

0.87

270

15,2601.77

Securities

8,932

704,877

1.27

9,595

737,410

1.30

Public andcorporate
bonds

4,837

548,463

0.89

4,051

548,823

0.74

Stocks

−

−

−

−

−

−

Foreignsecurities

4,060

150,782

2.69

5,594

178,579

3.13

Other
securities

△1

5,631

△0.03

△51

10,007

△0.52

Loan

−

−

−

−

−

−

Buildings

−

48

−

−

45

−

Financialderivative△1,294−−△3,457−−

Others

86

−

−

105

−

−

Total

7,907

771,874

1.02

6,609

803,728

0.82

Note:
Asset management yield (realized yield): Indicator to show the result ofmanaging of assets from a point of contribution to the current proﬁt
and loss. The numerator is realized proﬁt and loss while the denominator is an acquisition cost based yield.
Numerator = proﬁt from asset management + investment income on savings premiums – expenses of assets management
Denominator = acquisition cost or writing-off cost based average balance

28

Japan Earthquake Reinsurance Co., Ltd. 2006

5. Market-price based overall yield (for reference)(Unit: Yen in million)
FiscalYear

2004

6. Balance, percentage composition and yield of Foreign
Loans & Investments(Unit: Yen in million)

2005

Year

Amountofnumerator

Amountofdenominator

Yield onworking
assets(%)

Amountofnumerator

Amountofdenominator

Yield onworking
assets(%)

Deposits

85

48,8090.18

91

46,8850.20

Foreign currency
denominatedDivision

Call loan

0

80

0.05

0

208

0.05

Foreign public andcorporate bonds

−

−

−

−

−

−

Yen denominatedMonetary receivables bought

14

8,425

0.17

4

3,918

0.12

Commodity
securities

−

−

−

−

−

−

Money trust

62

9,827

0.63

495

15,434

3.21

Securities

7,407

711,706

1.04△5,171

742,714△0.70

Public andcorporate
bonds

5,315

553,069

0.96△7,147553,869△1.29

Stocks

−

−

−

−

−

−

2,164

153,045

1.41

2,021

178,946

1.13

Other securities

△71

5,591

△1.29

△45

9,897

△0.46

Loans

−

−

−

−

−

−

Buildings

−

48

−

−

45

−

△1,294−−△3,457−−

Financial derivative
Others

86

−

−

105

−

−

Total

6,361

778,897

0.82△7,931

809,205

△0.98

Note:
Market-price based overall yield: Indicator showing the efﬁciency of operation on a market price basis. The numerator reﬂects realized proﬁt and loss,
and ﬂuctuation in difference in market
price appraisal while the denominator ismarket-price based yield.
Numerator = (income from operated assets management + investment
income on savings premium – expenses for assets management) + (after-tax unrealized gain for the year – after-tax
unrealized gain for previous year)* + ﬂuctuation in deferredhedge proﬁt and loss
Denominator = acquisition cost or write-off based average balance +after-tax unrealized gain for previous year of other securities + proﬁt and loss for the previous year related to securities for transaction*Based on the amount before tax effect deduction

As of the endof ﬁscal 2004

As of the endof ﬁscal 2005

Percentage
composition(%)

Percentage
composition(%)

Percentage
composition(%)

Division

Bond tradingwith repurchaseagreement

Foreignsecurities

As of the endof ﬁscal 2003

99,80277.8 137,611

82.7 167,736

83.2

Foreign public andcorporate bonds

28,49022.2

17.3

33,905

16.8

Total

128,293

100.0 166,320

100.0 201,642

100.0

28,709Yield on foreignloans & investment
Investments
assets yield(income yield)

2.94%

2.84%

3.36%

Assetsmanagement(realized yield)

3.03%

2.69%

3.13%

Comprehensive
market priceyield(for reference)

2.60%

1.41%

1.13%

Note:
1. Of the yield on foreign loans & investments, investment assets yield was
calculated in the same manner as 3 investment income and yield on
investment assets (income yield) in connection with the assets involving
foreign investment.
2. Of the yield on foreign investments, assets management yield was calculated in the same manner as 4 assets management yield (realized
yield) in connection with the assets involving foreign investment.

7. Balance of securities by category and percentage distribution(Unit: Yen in million)Year

As of the endof ﬁscal 2003

As of the endof ﬁscal 2004

Percentage
composition(%)

Division

As of the endof ﬁscal 2005

Percentage
composition(%)

Percentage
composition(%)

Government bonds

204,37330.0

256,14534.9

310,554

40.3

Municipal
bonds

21,453

3.1

17,940

2.4

4,476

0.6

Corporatebonds

323,201

47.4

287,23839.1

239,851

31.1

Stocks

−

−

−

−

−

−

Foreignsecurities

128,29318.8

166,32022.7

201,642

26.1

Other
securities

4,963

0.7

6,401

0.9

14,858

1.9

Loadreceivablein securities

−

−

−

−

−

−

682,285100.0

734,046

100.0

771,383

100.0

Total

Japan Earthquake Reinsurance Co., Ltd. 2006

29

8. Yield on securities held

(Unit: %)Fiscal Year

Division

2003

2004

10. Property & Equipment by breakdown(Unit: Yen in million)

2005
Year

Investment assets yield (income yield)
Division

As of theend of ﬁscal 2004

As of theend of ﬁscal 2005

Public & corporate bonds

1.07

0.88

0.78

Stocks

−

−

−

Land

−

−

−

(−)

(−)

(−)

(−)

(−)

(−)

Foreign securities

2.94

2.84

3.36

(for business)

Other securities

0.25

0.28

0.56

(for investment)

Total

1.39

1.30

1.31

Buildings

43

45

42

(for business)

(43)

(45)

(42)

0.74

(for investment)

(−)

(−)

(−)

Construction inprogress−−−

Assets operation yield (realized yield)
1.06

Corporate bonds

0.89

Shares−−−Foreign securities

3.03

2.69

3.13

(for business)

(−)

(−)

(−)

Other securities

△0.22

△0.03

△0.52

(for investment)

(−)

(−)

(−)

Total

1.39

1.27

0.82

Total of property

43

45

42

(for business)

(43)

(45)

(42)

(−)

(−)

(−)

Comprehensive market price yield (for reference)
Public & Corporate bonds

0.21

0.96

△1.29

(for investment)

Stocks−−−Equipment

432Foreign securities

2.60

1.41

1.13

Total

48

48

45

Other securities

△0.50

△1.29

△0.46

Total

0.62

1.04

△0.98

9. Balance Current Maturity of securities by category
As of the end of ﬁscal 2004

(Unit: Yen in million)

Division

Up to 1year

1 overup to 3years

3 overup to 5years

5 overup to 7years

7 over
up
to 10
years

Government
bonds

58,281

56,205 116,838

194−

Municipal
bonds

13,553

−

4,387

−

−

Corporatebonds

86,144 106,893

Over
10
years

Total

24,625 256,145−

17,94090,992

3,004

203

Stocks

−

−

−

−

−

−

Foreignsecurities

22,301

45,52895,223

3,267−− 166,320

Othersecurities

913

−

−

−

1,497

3,990

6,401

Loan
receivablein securities

−

−

−

−

−

−

−

181,194 208,626 307,442

6,466

1,700

DivisionLessthan 1
year

3 to
less
than 5
years

5 to
less
than 7
years

7 to
less
than 10years

Government
bonds

43,635 87,471 153,791−− 25,655 310,554

2,553

−

95

−

56,979 99,109 83,469

97

195

− 239,851

Total

As of the end of ﬁscal 2005

Municipal
bonds
Corporatebonds
StocksForeignsecurities

−

−

1 to
less
than 3
years

1,828

−

− 287,238−

28,616 734,046(Unit: Yen in million)
10
years
or
longer

4,476

−

−

−

6,403

2,919

− 201,642
6,805 14,858

−

−

5,066

−

2,986

Loan
receivablein securities

−

−

−

−

−

117,668 242,012 366,543

6,501

−

Total

17,053 53,602 121,662

Othersecurities

Total

30

As of theend of ﬁscal 2003

−

−

−

6,196 32,460 771,383

Japan Earthquake Reinsurance Co., Ltd. 2006

There is nothing to be mentioned about the following 11 items:
1. Commodity securities
2. Average balance and sales amount of commodity securities
3. Amount of stocks held by type of business4. Balance current maturity of loan by remaining life
5. Balance of loans by type of collateral secured
6. Balance and percentage distribution of loan by desinated use
7. Balance of loan by industry and its ratio to the total
8. Balance of loan by debtor size and its ratio to the total
9. Amount of loan & investment to public works (on a basis of newly
undertaken loan)
10. Housing-related loan
11. Loan interests���������������������

1. Accounts in the last 2 years
The president has conﬁrmed for the reasons given below that the ﬁnancial statements prepared on thefollowing ﬁscal years contain no untrue mention and the process of preparing was considered proper by(LIABILITIES)internal audit.
(Unit: Yen in million)
Fiscal Year
2004
2005
1. The administrative system has done the ﬁnancial(As of March 31, 2005) (As of March 31, 2006)
statements properly according to the division ofPercentage
Percentage
AmountAmountItem
distribution
distribution
duties, business handling rules and authorized
Underwriting funds
433,68153.9
451,99753.9
power.
Outstanding claims
17,8781,104
2. The internal audit depertment has reported to theUnderwriting reserves
415,802450,892
board of directors that it found out that the process
Entrusted reserves
354,48344.1
377,39045.0
of preparing the ﬁnancial statements was properand left nothing to be indicated.
Of the documents to be put to the public inspection
according to Item 1, Article 111, Insurance Business
Law, in addition, the balance sheet, and proﬁt andloss statement were audited by the auditors.
❶ Balance sheet(ASSET)
Fiscal Year

Corporate taxes payable

99

114

Deposits payable

2

2

746

702

Suspense receipts

7−

Financial derivative

3,259

10,292

Accrued amounts payable2005(As of March 31, 2006)

Reserves for directors’
retirement beneﬁt

Percentage
distribution

Percentage
distribution

28,470

Deposits

28,4703.5

38,026

4.5

38,026

Call loan

15,0001.9

Monetary receivable bought

6,297

0.8

1,799

0.2

Money trust

9,173

1.1

15,528

1.9

Securities

734,046

91.3

771,38392.0

256,145

−

0

0.0

7

0.0

After-tax unrealized gain
in securities of earthquake
insurance

5,458

0.7

△9,054△1.1(SHAREHOLDERS’ EQUITY)
Fiscal Year

4,476
Item

Foreign securities

166,320

201,642

Common stock

14,858Retained earnings

0.0

45
42

Equipment

3

2

Other assets

11,241

Reinsurance loan

1.4

8,032

11,686

0.0

1.4

8,172

Accounts receivable

109

427

Uncollected income

2,419

2,910

Deposits

52

51

Suspense payment

176

Financial derivative

448

Other assets

3

6

Deferred tax assets

54

0.0

85

0.0

Total assets

804,333

100.0

838,555

100.0

0.0

Price ﬂuctuation reserves

239,851

45

7

0.0

17,940

48

0.0

14

287,238

Buildings

83

0.0

Corporate bonds

Property & Equipment

0.0

13

310,554

6,401

72

2.0

Reserves for bonus
payment

Municipal bonds

Other securities

16,503
5,390(Unit: Yen in million)

Amount

1.1

4,920

2004
(As of March 31, 2005)

Cash & deposits

Government bonds

9,036

Reinsurance debts

Accrued serverance
beneﬁts

Amount

Item

Other liabilities(Unit: Yen in million)

2004(As of March 31, 2005)
Percentage
distribution

Amount2005(As of March 31, 2006)
Percentage
distribution

Amount

1,000

0.1

1,000

0.1

580

0.1

617

0.1

Legal reserve of retained
earnings

1

1

Voluntary reserves

56

56(Special reserves)

(17)

(17)

(Special price ﬂuctuation
reserves)

(39)

(39)

Unappropriated retained
earnings for the year

522

559

(Net income)

(10)

(36)

96

After-tax unrealized gain in
securities

11

0.0

△5

△0.0

20

Treasury Stock

△5

△0.0

△5

△0.0

1,587

0.2

1,605

0.2

804,333

100.0

838,555

100.0

Total shareholders’ equity
Total liabilities andshareholders’ equity

Japan Earthquake Reinsurance Co., Ltd. 200631

Notes for ﬁscal 2005
1. Appraisal standards and method of securities, and method of indication(1) Of the other securities, those to which market price
was applicable were appraised according to the market price on the term-end day.
(2) Of the other securities, those to which market price
was not applicable were appraised according to basisof cost or write-off cost price using the moving-average method.
(3) As to the unrealized gain of assets corresponding to
the underwriting reserves and entrusted reserves ofearthquake insurance, the amount before tax effectdeduction was indicated as after-tax unrealized gain
in securities of earthquake insurance in LIABILITIES
according to the pertinent Enforcement Rules of Insurance Business Act. As to other unrealized gain, theamount after tax effect deduction was all processed
according to the direct capital injection method andindicated in SHAREHOLDERS’ EQUITY. The calculation of sales price was based on the moving averagemethod.
2. Appraisal standards and method of money trust(1) In money trust exclusively operated centering on securities, the appraisal of securities operated as trust
assets was done on the basis of market price.
(2) In money trust exclusively operated with a view to holding securities which were not intended to be operated
or held to maturity, the appraisal of securities operated
as trust assets was done in the same manner as othersecurities.
3. The appraisal of derivatives was done on the basis ofmarket price.
4. The depreciation of property & equipment was done using the composite-line method.
5. Writing standards of reserves(1) Reserve for bad debts
The reserves for bad debts are written as follows
against loss from bad debts in accordance with the selfappraisal standard of assets and depreciation and reserve standards.
In connection with claims against debtors who havegone bankrupt legally and formally, including bankruptcy, special liquidation or disposition by suspension ofbusiness at a clearing house, or debtors who are substantially bankrupt, the rest of any of the claims deducting an estimated amount of disposable mortgage and adeductible amount by guarantee was appropriated forsuch reserves.
In connection with the other claims, the rate of bad
debts calculated according to the past bad debts andother factors is multiplied by the amount of claims to appropriate for reserves.
In addition, all the claims are written after the ﬁnancedepertment appraises the assets, and the result is audited by the management depertment independent of
the ﬁnance depertment to appropriate the appraisal forreserves.
There are no assets, nevertheless, in the current term
to be appropriate for reserves, and no writing is required.
(2) Reserves for employees’ retirement
For employees’ retirement and severance beneﬁts, reserves were appropriated according to the retirement
allowance liabilities at the end of the term and the esti-

32

Japan Earthquake Reinsurance Co., Ltd. 2006

mated amount of pension assets. The retirement allowance liabilities were calculated using a simple method
on a basis of the allowance to be supplied at the end of
the term for any employee who retires for his / her own
reasons.
On top of the above, 7 million yen is reserved as directors’ retirement beneﬁts to be paid at the end of theterm according to the pertinent in-house rules. The directors’ retirement beneﬁts were conventionally written
when they were paid, but we changed the related inhouse rules at this term to write the beneﬁts to be paid atthe end of the term into the directors’ retirement beneﬁt
reserves. With this, the beneﬁts payable at the end of
the terms has been written into the sales and generaladministrative expenses. As a result, the ordinary incomes and income before income tax were respectively
reduced by 7 million yen over the previous terms. The
directors’ retirement beneﬁt reserves are as speciﬁed in
Article 43, Enforcement Rules of the Commercial Act.
(3) Accrued bonuses for employees
Accrued bonuses for employees’ bonus were calculated according to the standards of estimated bonus
payable.
(4) Reserves for price ﬂuctuation
To prepare against loss from price changes of sharesand others, reserves are appropriated according to Article 115, Insurance Business Law.
6. The conversion of assets and liabilities in foreign currency into Japanese currency is processed according to
the accounting standards of transactions in foreign currency.
7. Taxes are excluded when doing accounts of consumption taxes and others.
8. The risk reserves contained in the underwriting reserves
have been deposited according to the instructions of calculation of liability reserves by accumulating the amounts
resulting from subtracting from the net premiums written
and proﬁt from operating the assets such an amount asequivalent to corporate taxes.
9. The transaction of ﬁnance lease other than the ownership of a lease item is transferred to the leaseholder isprocessed according to the method equivalent to that ofordinary lease transactions.
10. The accumulated depreciation of property & equipment
was 69 million yen.
11. In addition to the equipment mentioned in B / S, somecomputers are used on a lease contract.
12. The total sum of deferred tax assets reached 89 million
yen while the total sum of tax liabilities came to 3 million
yen. The deferred tax assets are by breakdown an unpaid taxes amount of 41 million yen, a retirement beneﬁt
reserve of 30 million yen and a bonus reserve of 5 million yen. The deferred tax liabilities come mainly from an
unrealized gain of 3 million yen of securities.
13. We started at this term to apply the accounting standards as to loss of ﬁxed assets (Written opinions about
setting the accounting standards as to loss of ﬁxed
assets issued on August 9, 2002 by the Corporate Accounting Council) and Guidelines to applying the accounting standards as to loss of ﬁxed assets issued on
October 31, 2003 as No. 6, corporate accounting standards application guideline). There are no ﬁxed assets,
however, to which the standards are applicable.
14. The amounts are indicated by rounding down any
amount not reaching the unit as mentioned.

❷ PROFIT AND LOSS STATEMENT(Unit: Yen in million)
Fiscal Year

Item

2004

2005

AmountAmount(from April 1, 2004 (from April 1, 2005
to March 31, 2005) to March 31, 2006)

Ordinary income & expenses
Ordinary incomes

71,856

107,868

Notes for ﬁscal 2005
1. See below for the net
breakdown.

premiums written by

Premiums written

139,621 (1 million yen)

Reinsurance money paid

68,488 (1 million yen)

Balance

71,132 (1 million yen)

Underwriting incomes

61,99591,001

Net premiums written

58,19871,132−

16,773

3,796

3,095

Claims paid

24,662 (1 million yen)

9,860

16,846

Balance

24,662 (1 million yen)

9,240

10,403Proﬁt from operating monetary trust

79

376

Realized gain on sale of securities

41

92

4,208

8,964

86

105

△3,796△3,0951

20

71,758107,845

61,51590,580

Payment reserve return
Investment income on savings
premium, etc
Investment incomesInterest and dividend incomes

Foreign exchange gain
Proﬁt from other operations
Transfer of proﬁt from Investment
income on savings premiums
Other ordinary incomes
Ordinary expenses
Underwriting expenses
Net claims paid

15,987

24,662739

2,266

Agency commissions and brokeragefees

24,40328,560

Provision for outstanding claims

17,550−

Provision for underwriting reserves

2,834

35,0895,753

13,331

Loss from operating monetary trust−

105

Realized loss on sale of securities

231

689

Loss on securities refundment

17

114

5,503

12,422

0

0

855

894

3,634

3,038

Interest paid

3,634

3,038

Ordinary income

98

23

0

−

0

−

2

7

2

−

Loss adjustment expenses

Investment expenses

Financial derivative cost
Other operation cost
Sales and general administrative
expenses
Other ordinary expenses

Extraordinary gain & losses
Extraordinary gain
Reversal of price ﬂuctuation reserve
returnExtraordinary losses
Loss from real estate and movables
disposition
Provision for price ﬂuctuation reserve
Income before taxes
Corporate income taxes and local taxes

−

7

96

15

96

0

△10

△21

Net income

1036

Retained earnings brought forward from last
year

512

522

Unappropriated retained earnings for the
year

522

559

Deferred income taxes(The income premiums include 203 million yen not registered.)

2. Net claims paid are as follows.

3. See below for the agency commissions and brokerage fees.
Commissions on reinsurance accepted 28,560 (1 million yen)
28,560 (1 million yen)

Balance

4. The interests and dividends income are given
below by category.
Interests on deposits

91 (1 million yen)Interests on call loan

0 (1 million yen)Interests on monetary receivable bought

4 (1 million yen)Interests on securities

10,307 (1 million yen)Total

10,403 (1 million yen)

5. Paper proﬁt / loss involved in the ﬁnancial derivative expenses is a loss of 10,272 million yen.
6. The net income per share is 18.23 yen.
The basis for this calculation is such that the net
income was 36 million yen, the net income accrued from ordinary shares was 36 million yen
and the term average No. of ordinary sharesamounted to 1 million 988 thousand.
7. The legal effective tax rate of the term was
36.21%, and the rate of burden of corporate taxes after applying tax effect was △134.11%. The
difference is explained by breakdown as follows.
The amount of write-off carried from publicity expenses related to risk reserve was △487.71%,
the surplus of proﬁt from operating unearned
premium deposits was △406.71%, and carried
tax loss was 718.81%.
8. Each amount is shown by omitting the ﬁgures
not reaching the unit.

Japan Earthquake Reinsurance Co., Ltd. 200633

❸ Statement of cash ﬂow(Unit: Yen in million)
Fiscal Year

2004

2005

AmountAmountNet proﬁt before net proﬁt tax

96

15

Depreciation

5

5

17,550△16773

Increase in underwriting reserves

2,834

35,089

Increase in entrusted reserves

20,26822,907

Increase in reserves for employees’
retirement and severance beneﬁts

810

Increase in directors’ retirement
beneﬁt reserves−

7

Increase in accrued bonuses for
employees

1

Item(from April 1, 2004 (from April 1, 2005
to March 31, 2005) to March 31, 2006)

Ⅰ. Cash ﬂow from operating activities

Notes
1. Relation of cash and cash equivalents at theend of the year with the amounts mentioned in
the related subject of the balance sheet.
(Unit: Yen in million)(As of March
31, 2005)(As of March
31, 2006)

Cash & deposits

28,47038,026

Call loan

15,000−

Monetary receivables bought

6,297

1,799

Securities

734,046

771,3831

Deposits of a depository periodof 3 months or longer△27,330 △27,330△0

7Monetary receivables bought
other than cash equivalent△9,240△10,403207

711△6,280△8,705Gain or loss on disposal of property
and equipment2−

2. Funds (cash and cash equivalents) in the state-

Increase in other assets (other thaninvest and ﬁnancial activities related)△1,048△377

ment of cash ﬂow statement are composed of
cash on hand, savings that allow optional drawing and short-term investments such as time
deposits readily realizable and of a good risk,
a depository period of 3 months or shorter fromacquisition to maturity or refundment.

Increase in outstanding claims

Increase in reserve for price ﬂuctuation
Interests and dividend income
Gain or loss on investment in securities
Foreign exchange gain or loss

Increase in other liabilities (other thaninvest and ﬁnancial activities related)
OthersSubtotal

459

418

5,585

7,486

30,44930,402

Interests and dividends received

9,410

10,019

Income tax paid

△103

△10

39,756

40,410Net cash provided by operating activities△5,297△999△734,046 △771,383

Securities other than cash equivalent

17,140Cash and cash equivalents

11,496

Ⅱ. Cash ﬂow in investing activities
Net increase in deposit at bank

1,000

−

Acquisition cost of monetary receivablesbought△14,589△3,497

Proceeds from the sales or maturity ofmonetary receivables

20,287

7,796

Expenses for increase in monetary
trust

−

△10,130

2,600

4,000

Proceeds from sales of money trust△333,388△332,403

Proceeds from sales and redemptionof securities

285,744

288,186

Ⅱ ① Subtotal△38,345△46,049(Ⅰ＋Ⅱ ①)(1,410)(5,638)△7△5Purchase of securities

Acquisition of property and equipment❹ Distribution of net proﬁts(Unit: Yen in million)
Fiscal Year

Item

2003

2004

2005

Unappropriated retained
earnings for the year

512

522

559

Retained earnings
carried forward

512

522

559

❺ Dividend per stock and total assets per employee△38,352△46,054

Ⅲ. Cash ﬂow in ﬁnancing activities−−

Ⅳ. Effect of exchange rate changes oncash and cash equivalents−−

Dividend per stock

–

–

–

Ⅴ. Net change in cash and equivalent

1,403△5,643

Net income per stock

8.90

5.30

18.23

Ⅵ. Cash and cash equivalents at beginning of the year

15,73617,140

Dividend propensity

–

–

–

Ⅶ. Cash and cash equivalents at end of
the year

17,14011,496

Net assets per stock

794.04798.07807.42

Total assets per
employee

44,79944,68539,931

Net cash used in investing activities(Unit: Yen in million)
Division

Fiscal Year

2003

2004

2005

Note:
1. Net income per share comes from net income / term average No.
of stocks
2. The number of own shares is deducted from producing information
per stock
3. The total assets per employee come from the total assets at the endof the term / No. of employees at the end of the term.

34

Japan Earthquake Reinsurance Co., Ltd. 2006

2. Risk management credits
There is no mention about the following ﬁve items:(1) Currently in bankruptcy(2) Delinquent in payments(3) Delinquent in payments more than 3 months(4) Favorable loan revisions completed(5) Total of risk management credit

3. Present conditions of loans involving trust with contact for replacement of losses
No mention is necessary.

4. Credits obligations based on debtor classiﬁcation
There is no mention about the following four items:(1) Bankrupt or bankrupt for all Intents and purposes(2) On verge of bankruptcy(3) Financial status needs careful monitoring(4) Financial status normal

5. Conditions of solvency-margin ratio(Unit: Yen in million)
As ofthe endof ﬁscal
2003

As of
the endof ﬁscal
2004

As of
the endof ﬁscal
2005

Total of solvency-margin364,308359,908

375,606

Total of stockholders’ equity (otherthan estimated outﬂow to the outside, deferred assets and after-tax
unrealized gain in securities)

1,564

1,575

1,611

Year
Division

Reversal for price ﬂuctuation
Catastrophe reserves
Reversal for ordinary bad debts(A)7
378,731

−

−

−

2,971

2,520

△4,743

Unrealized gain loss included landholdings−−−

Funding instruments with a debt-likenature−−−Items deductible

−

−

−

Others−−−395,324

394,964

468,880

General insurance risk (RI)

−

−

−

Anticipated Rate of Return Risk
(R2)

−

−

−

7,543

7,190

7,676

Investment risk (R3)(C)

0355,813

Variance of estimate for othersecurities (excluded deductions for
Tax Consequences) unrealized gain /loss on securities available for sale

Total risk
R12+(R2+R3)2+R4+R5(B)

0359,772

Default risk (R4)

7,751

7,744

9,193

Catastrophe risk (R5)

380,030

380,030

452,010

Solvency-Margin ratio[(A)/{(B)x1/2}]x100

184.3%

182.2%

160.2%Note:
The above amounts and ﬁgures were produced in accordance with
Articles 86 and 87, Enforcement Rules of Insurance Business Act,and Bulletin No. 50 issued by the Ministry of Finance in 1996.

Solvency-margin ratio
Non-life insurance company deposit reserves in case that they pay insurance money for any insurance accident that happened or refund depository insurance at maturity. It is also necessary for them to maintain asatisfactory capability of payment or solvency even in case of unusual,
unforeseeable risk, including a huge disaster or sharp drop in price ofsuch assets as owned by them.
The rate of “Non-life insurance company’s capability of payment byowned assets and reserves (A in the above table) over any risk unforeseeable (B in the above table)” is indicated as solvency-margin ratio (Cin the above table) which is calculated according to the pertinent rules
including Insurance Business Law.
[Unforeseeable risk] (Total of risks): Sum of 1~5
1. Risk on underwriting insurance: risk which might be caused byan insurance accident rate higher
than normally predictable (otherthan risk involved in a huge disaster).
2. Anticipated ratio of Return Risk: risk which might be caused when
actual yields from operation arelower than original at the time of
calculating premiums of a depository insurance
3. Risk on assets : management risk which might be caused when thevalue of assets owned including securities changes
in an unforeseeable manner.
4. Risk on management: risk which might be caused on business management in an unforeseeable manner, otherthan 1~3 and 5.
5. Risk involved in a huge disaster: risk which might be caused due toa huge disaster (such as the Great
Kanto Earthquake) which is normally unforeseeable.
[Capability of payment by non-life insurance company owned capitaland reserves] (Total of solvency-margin)
The total of capital owned by a non-life insurance company, reserves(price ﬂuctuation, catastrophe reserve, securities and part of latent proﬁt
from land, and so on)

Japan Earthquake Reinsurance Co., Ltd. 2006

35

The solvency-margin ratio is one of the indicators used when the administrative authorities give a check to insurance companies for the soundness of management for supervising purposes. When the rate is 200%
or higher, the insurance company is deemed as satisfactory in terms of
payment capability of insurance money and so on.

ﬁgure to enable the administrative authorities to trigger an order for
improvement in spite of the above solvency-margin ratio, as provided
for in Section 4, Article 3, Order to specify the division stated in Section
2, Article 132, Insurance Business Law.
Note: The article is as follows.
[In the event that an insurance company has entered into a reinsurance
contract with the government as stated in Section 1, Article 3, Law concerning Earthquake Insurance (law No. 73, 1966), any order to be issued
according to the listed division in Section 1 of the Article applicable tothe insurance company shall be issued in accordance with the list of
inapplicable division.]◎JER has entered into a reinsurance contract with the government ofJapan for earthquake insurance in accordance with Law concerning
Earthquake Insurance. The law stipulates in addition that the government takes responsibility to make efforts to conduct good ofﬁce andlend funds for the payment of insurance money. Because this is a formof special business, JER’s solvency-margin ratio is not usable as a

6. Information on the market prices (acquisition cost or contract cost,market price and appraisal proﬁt and loss ) and others❶ Securities
1. Other securities with market price

2. Other securities sold at the term

At the end of ﬁscal 2004

(Unit: Yen in million)Type

Acquisition
cost

Registeredamountin B/S

Difference

Public & corporate bonds

534,272

539,340

5,068

Stocks−−−Foreign securities

115,555

120,974

5,419

Division

Securities withacquisition
cost higher
than registeredin B/S

Others−−−Subtotal

649,827

660,315

10,487

Public & corporate bonds

22,00521,984△21

Stocks−−−Foreign securities

49,05745,345△3,711Others

6,510

6,401

△109

Securities withacquisition
cost not higher
than registeredin B/S

Subtotal
Total

77,57373,731△3,842

727,401

734,046

6,644

At the end of ﬁscal 2005
Type

Acquisition
cost

Registeredamountin B/S

Difference

Public & corporate bonds

99,781

100,108327

Stocks−−−Foreign securities

134,319

142,393

8,073

Others

1,797

1,826

28

Division

Securities withacquisition
cost higher
than registeredin B/S

Subtotal

235,898

244,328

8,430

Public & corporate bonds

461,253454,773△6,480

Securities withacquisition
cost not higher
than registeredin B/S

Total

36(Unit: Yen in million)

Stocks−−−Foreign securities

60,48359,248△1,234

Others13,164

13,032△131

Subtotal

534,901

527,054△7,846

770,799

771,383583

Japan Earthquake Reinsurance Co., Ltd. 2006

(Unit: Yen in million)

Fiscal 2004
Type

Total

Fiscal 2005

Sales
price

Total ofproﬁt onsale

Total ofloss on
sale

Sales
price

Total ofproﬁt onsale

Total ofloss onsale

50,18241

231

51,14992

689

There is nothing to be mentioned about the following items:
1. Securities held for trading purposes
2. Securities to be held till maturity and with market price
3. Securities sold at the term which were to be held till maturity
4. Main contents of securities without market price and the amounts registered in B / S.

❷ Money trust
1. Money trust for investment(Unit: Yen in million)

As of end of ﬁscal 2004
Type

As of end of ﬁscal 2005

Amountregisteredin B/S

Appraisaldifferencecontained in
proﬁt/loss

Amountregisteredin B/S

Appraisaldifferencecontained in
proﬁt/loss−−

10,000−

Money trust

2. Money trust for maturity

Nothing to be mentioned.
3. Other money trusts with any other purpose than operation and maturity(Unit: Yen in million)

As of end of ﬁscal 2004

As of end of ﬁscal 2005

Type

Acquisition
cost

Amountregistered in
B/S

Difference

Acquisition
cost

Amountregistered in
B/S

Difference

Money trust

9,000

9,173

173

5,130

5,528

398

❸ Information on transactions of derivatives
1. On the conditions of transactions

With a view to hedging risks due to possible
changes in foreign exchange of assets in foreign
currency, JER is engaged in dealing foreign exchange forward contracts and currency option
transactions. In addition, we conduct over-thecounter securities option transactions so as toreduce interest ﬂuctuation risks in connection
with securities.
The derivative transactions we are engaged
in have market risks due to market ﬂuctuation.
Most of them are done, however, to hedge theassets in kind, and it never happens that loss
from the transaction in question is caused alone.
In some cases, we use option transactions as tosuch securities as scheduled to be purchased.
But risks are limited because we put a quantitative limit on such transactions.
Now that we transact with highly reliable ﬁnancial
institutions, we understand there is little credit
risk such as non-fulﬁllment of a contract.
Our derivative transactions are checked by therisk management division independent of thetransactions execution division, and the resultsof checks are regularly reported to the board of
executive directors.
2. On market prices of transactions

A contract amount in a derivative transaction is
nothing but a nominal contract amount or an assumed principal by calculation in such a transaction. The contract amount as such represents
no market risk or credit risk.

3. Derivative transaction contract amounts, market priceand appraisal proﬁt and loss(a) Currency related

Type(Unit: Yen in million)

As of end of ﬁscal 2004

As of end of ﬁscal 2005

Contract
amountContract
amount1 year or
longerones

Marketprice

Appraisal
proﬁtand lossMarketprice

1 year or
longerones

Appraisal
proﬁtand loss

Transactions
other than market
ones
Forward foreignexchange
contract
Currencyused
US dollar

58,274 20,078 58,768 △494 61,231 28,403 66,631 △5,400

Euro

69,390 31,730 71,698 △2,308 83,141 34,779 87,637 △4,496

Canadiandollar−−−3,246 △374

− 2,872 1,211

130,467 △2,802

Total

157,516 △10,272

Note: Calculating a market priceForeign exchange forward contract: Foreign exchange rates depend on
futures quotation.

(b) Securities related

Type(Unit: Yen in million)

As of end of ﬁscal 2004

As of end of ﬁscal 2005

Contract
amountMarketprice

Appraisal
proﬁt
and
loss

Contract
amount

16

△8

(−)

−

△8

1 year or
longerones

1 year or
longerones

Marketprice

Appraisal
proﬁt
and
loss

−

−

−

−

Transactions otherthan market ones
Over-the-countersecurities option
transaction
Currency
used

5,000

Call
(Optionpremium)

(7)

−
−

Total

−

Note:
Calculating a market price is based on an option price calculation model.

Nothing to be mentioned more about information onmarket price and others.

Japan Earthquake Reinsurance Co., Ltd. 2006

37

Glossary
For an understanding of earthquake insuranceA
Amount Insured
The amount of insurance contract entered into by the insurance company and policyholder, which is the limit of theamount insured payable by the insurance company when
an insurance accident occurs.

C
Ceding Insurer
The insurance company which cedes part or whole of its
original insurance contract to spread risks.

Current price amount
A current price of a newly constructed building or house
after deducting a depreciation according to the years ofservice.

D
Direct Insurer
An insurance company which directly enters into an insurance contract with a general contractor.

Direct insurance contract
An insurance contract entered into by an insurance company and a general contractor.

E
Excess of loss reinsurance
A type of reinsurance according to which an excess
damage is compensated to a certain extent in the eventthat the amount of damage by an accident exceeds a certain limit.

H
Half loss
Half loss in earthquake insurance is such that when the
purpose of insurance is a building and it is damaged byearthquake, tunami or eruption, the amount of damage
to the main structures (foundation, pillars, walls and roof)
reaches 20% or higher to 50% of the insurable value or the
ﬂoor area of part of the building which was burnt or ﬂooded
away reaches 20% or higher to 70% of the total area of thebuilding.
As to movables for living, half loss is such that the rateof damage reaches 30% or higher to 80% of the insurable
value.

Household insurance
Insurance bought by an individual to respond to any
possible risk at home, which is told from enterprise insurance. Household insurance includes ﬁre and earthquake
insurance on personal housing and movables for living andautomobile insurance on home-use automobiles.

38

Japan Earthquake Reinsurance Co., Ltd. 2006

I
Insurable value
The value of any insurance purpose, land or in earthquake insurance when damage is caused.

Insurance interest
An interest or object to be insured. Buildings and movables for living are such objects in earthquake insurance.

L
Law of large numbers
When we observe many instances, we will know that
there is law of large numbers. That is, as you throw a dice,you will ﬁnd that there is a higher probability of 1 / 6 thatthe spot 1 is thrown. Even if the individual probabilities are
not always constant, the probability comes near to a certain
value. The probability of insurance accidents which givesbasis to the calculation of premiums will be thus calculated
according to law of large numbers.

Loss Ratio
Ratio of claims paid against income premiums during acertain term. Normally, the ratio is produced by adding loss
adjustment expenses to the net claims paid and dividing
the sum by the net premiums written.

N
Net premiums written
Insurance money produced by adjusting original insurance premium with reinsurance premium (by adding thepremium of accepted reinsurance and deducting reinsurance premium), and by deducting depository premium andreturns.

O
Operating expenses
Expenses required to conduct insurance business, whichaccording to non-life insurance accounting, are composedof loss adjustment expenses, sales & general administrative expenses, agency commissions and brokerage fees.

Outstanding claim
Reserve deposited for future payment of insurancemoney for an insurance accident which happened and theinsurance company is held responsible for payment by insurance contract.

P
Partial loss
Partial loss in earthquake insurance is such that when
the purpose of insurance is a building, and it is damaged
by an earthquake, tunami or eruption and the amount ofdamage to the main structures (foundation, pillars, walls,
and roof) reaches 3% or higher to less than 20% of the insurable value.
As to movables for living, the amount of damage is 10%
or higher to less than 30% of the insurable value of any ofsuch properties.

Payment limit due to a single Earthquake
Law concerning Earthquake Insurance stipulates the total insurance money to be paid by the government and theinsurance companies per earthquake, tunami or eruption
disaster. The limit is determined according to the maximum
estimated damage of earthquake insurance in force at thispoint, bearing in mind that insurance money can be paid
against disasters caused by an earthquake equivalent to
the Great Kanto Earthquake.
In the event that the total of insurance money payable
exceeds the limit, the insurance money per insurance contract may be reduced according to the rate of limit to thetotal amount of insurance money payable to the total sum of
insurance money payable.

Price ﬂuctuation reserve
Reserve against loss from price ﬂuctuation of securities
owned by an insurance company.

R
Receiving Reinsurer
The insurance company (the reinsurer) which undertakes reinsurance from a ceding insurance company (thereinsured)

Reinsurance
The insurance company cedes part or whole of the responsibility to pay insurance money for its direct insurance
contract to another insurance company. This is because thecompany needs to collect equivalent as many risks as possible and to average risks according to the Large-number
Law, essential to the insurance management.

Reinsurance commission
Commissions to be paid at a ﬁxed rate of reinsurance
premiums by the reinsurer to the reinsured when the former
takes reinsurance.

Reinsurance money
Insurance money to be paid to the reinsured by the reinsurer. The act of receiving reinsurance money by the reinsured from the reinsurer is called recovery of reinsurancemoney.

Reinsurance premium
Premiums to be paid when the direct Insurer cedes its
direct contract to any other insurance company

Retrocession

T
Term insured
The term during which the insurance company is responsible for liability from insurance contract. When an insurance accident happens during the term, the insurancecompany takes responsibility.

Total maximum liability
In earthquake insurance, it is decided in advance thathow much insurance money each of JER, non-life insurancecompanies and the government per time or per year. The
limit amount for which each is responsible is called the total
maximum liability. The total of maximum limits is equal to thetotal payment limit due to a single earthquake.

Total loss
Total loss in earthquake loss is such that when the purpose of insurance is a building and it is damaged by earthquake, tunami or eruption, the amount of damage to themain structures (foundation, pillars, walls and roof) reaches
50% of or higher than the insurable value or the ﬂoor area ofpart of the building which was burnt or ﬂooded away reaches 70% of or higher than the total area of the building.
As to movables for living, total loss is such that the rateof damage reaches 80% of or higher than the insurable
value.

Treaty reinsurance
A reinsurance contract in which there is concluded inadvance a blanket agreement on reinsurance transaction
by and between the reinsured and the reinsurer, and thetarget direct insurance contract is automatically and comprehensively reinsured.

U
Underwriting reserve
Reserve deposited by insurance company against possible insurance liabilities.

W
Warning System
This is a declaration to be announced according toLarge Scale Earthquake Countermeasures Act (Law No.
73, 1978). When he is given information on a prevision ofearthquake by the Director of the Metrological Agency andthink it necessary to take a quick step for earthquake disaster prevention, the prime minister is to hold a cabinet
meeting and issue an warning system, announcing that theparties concerned should follow an warning system against
earthquake disasters: In the event that such a declaration
is issued, Law concerning Earthquake Insurance prevents
any insurance company from entering into a new earthquake insurance on buildings and movables for living located in an area which needs reinforced measures against
earthquake disasters and any policyholder to increase incontract amount . For any earthquake insurance contract
which becomes mature while the declaration is in force, thepolicyholder is able to renew the contract at the same orlower amount.

Retroceded insurance, partially or wholly, from the reinsurer to another insurance company to spread risks.

Risk reserve
Reserve deposited by JER for the payment of insurancemoney due to possible earthquake, tunami or eruption
caused damages.
Japan Earthquake Reinsurance Co., Ltd. 2006

39

Japan Earthquake Reinsurance Co., Limited 2006
Published in Dec. 2006

Reinsurance Operation Group, Reinsurance Division
Japan Earthquake Reinsurance Company, Limited
Address:Kobuna-cho Fuji Plaza, 8-1, Nihonbashi-kobuna-cho, Chuo-ku,
Tokyo Japan 103-0024
URL: http://www.nihonjishin.co.jp/
E-mail: gyoumuunei@nihonjishin.co.jp
Phone: 03-3664-6107
This booklet was prepared in accordance with Article 111, Insurance Business Law of Japan.

Percentage of Waste Paper pulp 100%