Securities Code: 7157
TSE Mothers

Presentation
Material for
Investors
Third Quarterfor Fiscal 2021
February 10, 2022

LIFENET is...

Comprehensible
Cost-Competitive
Convenient◼ Remembering the original purpose oflife insurance – mutual support◼ Helping our customers embrace life more fully
1

Overview of Cumulative 3Q for Fiscal 2021
Annualized premium1 ofpolicies-in-force

Annualized premium1 of
new businessmillion yen

million yen

20,862

3,107(111.5% vs. end of FY2020)(Y-on-Y 100.5%)

EEV2 (European Embedded Value)

Adjusted incremental EV3

114,068

million yen(119.9% vs. end of FY2020)

5,027

million yen(Y-on-Y 81.1%)

Notable Achievements◼ Awarded top ratings in HDI Benchmarking forour contact center and website4◼ Launched new sustainability page on IR website
1.
2.
3.
4.

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.
EEV as of December 31, 2021 is calculated applying the same operating assumptions as those used for September 30, 2021, and has not been reviewed by third-party
specialists.
Adjusted incremental EV consisted of components adequately reflecting our business growth for fiscal 2021, see page 13 and 37 for details.
2021 HDI Benchmarking (Life Insurance Industry) by HDI-Japan2

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

20.8

14.7
12.5

◼ Continues to grow
17.9
491,611 steadily and about
to reach 500,000
421,073
policies

348,42910.7
295,662
255,614◼ Year-on-year
annualized
premium 116.4%,
number of policiesin-force 116.8%

2017 3Q
2018 3Q
2019 3Q
2020 3Q
2021 3Q （YY/MM）
2017/12’18/12’19/12’20/12’21/12
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Changing Factors of Policies-in-ForceFY2020/3Q

FY2021/3Q

(YTD)

(YTD)

365,171439,945

73,66976,226－）Decreased number of policies1(17,767)(24,560)

Non-recurring record oflapsed policies※

ー

(633)

Number of policies-in-force(EOP)

421,073491,611

Number of policies-in-force(BOP)+）Number of new business※Lifenet has extended grace period for insurance premium payment as one of the special measures in the COVID-19 pandemic. Decreased number ofpolicies includes the impact of extended policies that were recorded as lapsed policies in a lump sum.
1.

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

4Annualized Premium /Number of New Business: Annualized premium of new business1 (First 9 months of fiscal year, JPY millions): Number of new business (fiscal year): Number of new business (First 9 months of fiscal year)

3,093

2,435

1,951

100,587

1,191
39,17573,66957,59745,36026,997

1.

’18

’19

◼ Remained at FY2020
level despite atemporary regression

76,22680,91164,435

2017

3,107

（fiscal year）’20◼ Year-on-year
annualized premium
100.5%,
number of new
business 103.5%’21/3Q(YTD)

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【Ref.】 Surrender and Lapse Ratio（Quarter）◼ Recovered to previous level and contributing
to net increase in policies-in-force:Impact of lump-sum recording of policies lapsed1 (%)

7.6%:Surrender and lapse ratio2 without the above (%)

0.5%

6.3% 6.0%
0.1%

7.6%

7.1%

2019/1Q ’19/2Q
2019/2Q
2019/1Q

6.4%

2019/3Q’19/3Q

7.1%

7.0%

2019/4Q’19/4Q

5.5%

5.5%

2020/1Q’20/1Q

2020/2Q’20/2Q

7.1%
6.2%

5.9%

2020/3Q’20/3Q

2020/4Q’20/4Q

0.0%

2021/1Q’21/1Q

6.0%

2021/2Q ’21/3Q
2021/3Q’21/2Q（fiscal year）

1.
2.

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.

6

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

76

75
67

66

65

◼ Prioritize
growth andinvest inmarketingexpenses

1.8

1.7
1.5

1.5

(fiscal year)

2017

’18

’19

’20

’21/3Q(YTD)

Marketingexpenses

2,627

4,216

6,146

6,712

5,862

(JPY millions)1.

1.5※ From FY2017 to FY2020: Marketing expenses for full year
FY2021: Marketing expenses for first 9 months of fiscal year

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.

7

Operating Expenses Ratio: Operating expenses ratio¹ (%): Insurance premiums (JPY millions): Operating expenses excl. marketing expenses (JPY millions)
16,892
14,633

13,982◼ Aim to improve
10,421
operational
22.8 %
efficiency by
22.2 %
21.6 %
19.6 %
further business19.6%
expansion
3,317
3,023
in mid-term
2,861
2,699
2,315
11,845

2017

’18

’19
（fiscal year)

1.

’20

’21/3Q（YTD)

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

8

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

9Adjusted Profit◼ Steadily increased adjusted profit generated
from policies-in-force
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

2017

2018

2019

2020

2021/3Q(YTD)ⅰ) Ordinary profit（loss)(197)(1,719)(2,382)(3,089)(1,948)ⅱ) Marketing expenses

2,627

4,216

6,146

6,712

5,862

－

－

(1,526)(804)(1,037)

319

347

546

739

448

2,748

2,844

2,784

3,558

3,325

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.

10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

11

Strong EEV1 Growth◼
◼

EEV and value of in-force business have been growing at a
CAGR of 20%2 and 34%, respectively since IPO
EEV per share has also steadily increased¥1,637¥1,570since capital raising¥1,430: Value of in-force business (JPY millions): Adjusted net worth (JPY millions)

114,068
95,140: EEV/share (JPY)73,431

86,702
76,149¥441

60,87818,547
5,122
13,425

2012/03 ’13/03 ’14/03 ’15/03 ’16/03 ’17/03
1.

2.

12,553’18/0318,99027,365’19/03 ’20/03 ’21/03 ’21/12 (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. 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,
2021 is calculated applying the same operating assumptions as those used for September 30, 2021, and has not been reviewed by third-party specialists.
The calculation includes 3,040 million yen in proceeds from a third-party allotment in May 2015 and 9,005 million yen from overseas public offering in July 2020 and
9,771 million yen from overseas public offering in September 2021.

12

Changing Factors of EEV1
◼ EEV growth driven by adjusted incremental EV,
assumption changes at 2Q and capital raising

114,068(JPY millions)

Adjusted
incremental EV

Value ofnew business

3,762

95,140
total’21/03
1.
2.

Expected
existing
business
contribution

1,057

5,027

Assumptionchanges
Operatingexperiencevariances206

million yen

3,262

Economic
variances
and assumptionchanges

Adjustments
to the values2
as ofDec. 31, ’21

9,846

791

Raised new capitalin September 2021
Changed assumptions at
the end of 2Q for FY2021’21/12 (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, 2021 is calculated applying the same operating assumptions as those used
for September 30, 2021, and has not been reviewed by third-party specialists.
Item for change in capital13

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

Dec. 2021
End
LifenetReference: March 2021 End1
LifenetCompany A

-1.7%

-1.0%

2%

1.6%

-1.6%

Company C

6%

5%
1.6%

Company B

-0.8%
-3%
-5%

-5%
0.5% interest rate increase-7%

0.5% interest rate decrease
10% decrease in equity andreal estate value and other

1. Prepared by Lifenet based on disclosed information of domestic public life insurance companies.

-8%

-7%

14

【Ref.】 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 Margin3(Marketing Expenses per
New Policy)

1.
2.
3.
4.

Annualized Premiums per
Policy-in-force

Annualized Premiums per
Policy-in-force

×

JPY 42,536
×Annualized Premiums per
Policy-in-force

Average Policy Term

Average Policy Term

16.7 years
×

Average Policy Term

15.6 years2
×

45%

43%

45%

JPY 42,486

14.3 years
×

JPY 42,438
×＝Customer Acquisition Cost4

FY2021/3Q(YTD)＝(Annualized Premiums per
Policy * Life Time * Gross Profit
Margin)FY2020＝Life Time ValueFY2019JPY 273,397

JPY 305,451

JPY 297,915

JPY 75,970

JPY 66,737

JPY 76,912

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

15

Financial Condition(JPY millions)(YY/MM)

Total assets’21/03’21/1254,501

67,781

2,059

4,373

999

3,999

5,895

5,590

40,00747,026

Government bonds

9,004

8,997

Municipal bonds

1,482

1,481

Corporate bonds

21,301

24,233397

545

Foreign securities

0

199

Other securities1

7,821

11,56938,694

43,76836,63941,710Total net assets

15,80624,012

Solvency margin ratio2

2,647％

3,258％

11.1

10.2

Cash and deposits
Monetary claims bought
Money held in trust

Securities

StocksTotal liabilities
Policy reserves and other

Modified duration (year)3◼ The impact ofrising interest
rates is limited
due to shortduration◼ Maintained
sufficientfinancial stability
as indicated bysolvency margin
ratio
1.

Investment trust including foreign bonds and others.

2.

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.

3.

Duration of yen-denominated bonds

16

Investment in
Innovation of Customer Experience◼ Promote initiatives to redesign customer experienceof life insurance
April 2021

August 2021

January 2022

AI chatbot

Enhancement of app

AI site search function

・Enhance CX in non-business hours
・Improve in operational efficiency
by limiting the number of operator

・Add the function of premium quotation ・ User-friendly search functionin addition to policy maintenance andclaim filing17

Evaluation for Customer Experience◼ Gained high evaluation from externalorganization and customers
3 Stars in the 2021 HDI Benchmarking•

Awarded a three-star rating in two categories1 9times,
the highest number of times in the life insurance industry•

Awarded top rating in our website for the 11th consecutive
year

2022 ORICON Customer Satisfaction Survey No.1
in category of Application Process, Life Insurance2
Rated No.1 in the life insurance ranking for theapplication process

•

1.
2.

Two categories stand for “Phone Support (Contact Center)” and “Web Support (Website)”
Survey period: from 2021/08/02 to 08/16, from 2020/08/21 to 08/28, and from 2019/08/21 to 08/28. Survey targets: 10,022 men and women aged 20
to 84 living in Japan who purchased life insurance for their own coverage within the past three years and were involved in the selection process

18

Investment inEnhancement of Promotion Capabilities◼ Continue to invest aggressively toaccelerate growthInternet Channel

White Label Channel

Brand awareness is steadily
increasing1

49.0%: Brand awareness37.3%

2016/121.

’17/12’18/12’19/12’20/12’21/12

Source: “MyVoice Communications survey on awareness rate of insurance companies”

Initiatives for mid- and longterm growth

Discussing initiatives to utilize
KDDI Group assets for further
growth.
Launched a new entry page toenhance user traffic in addition
to the existing assessment toolin app. Our focus is to improve
conversion rate.

19

Investment in
System Development◼ Renewing system structure for improvement ofcustomer experience and future business expansion
Fiscal 2021

Revamping the frontend infrastructure
Agiledevelopment

Cloud
migration• Accelerate speed of UI/UXdevelopment andimprovement• Improve scalability andon-demand performance

Enhancementof scalability
Speeding up
development

Front-end

CX platform

After Fiscal 2022

Renewal of the backend infrastructure
Cloud
migration

CRM

Data driven marketing• Innovate CX by improving
the efficiency of data
Data analysis
analysis and optimizing
touch points with customers• Reduce operating expenses
by improving efficiency ofinfrastructure cost

Back-end

Cost
Reduction

CRM

Marketingautomation

20

Initiative for Sustainability◼ New page on IR website summarizes sustainability
initiatives since business commencement
https://ir.lifenet-seimei.co.jp/en/sustainability.html

Enhancing disclosure on
sustainability andcommunicating with ESG
rating organizations

21

Revision of Business Forecasts FY2021◼ Revised in light of current business performance◼ Bottom line has improved owing to lower insurance
claim payment than expected(JPY millions)

Annualized
premium ofpolicies-in-force【Revised】
FY2021 Forecasts【Previous】
FY2021 Forecasts

FY2020 Results

21,40021,90018,713

4,100

4,500

4,197

Of which: impact
of modified
co-insurance

Of which: impact
of modified
co-insurance

Annualized
premium of
new business

Of which: impact
of modified
co-insurance

Ordinary income

26,1004,900

26,1005,000

20,7892,778

Ordinary profit(loss)(3,400)1,300(3,600)1,400(3,089)804

Net income (loss)(3,500)1,300(3,700)1,400(3,114)804

22

The Latest Business Environment（New Business）◼ New business performance bottomed out inNovember 2021 and is on a recovery trend◼ Aiming for further growth while assessing thebusiness environment:

September 30
Lifted of the stateof emergency

Number of new business (monthly)1

8,027

April
2021
1.

May

Based on Monthly Disclosure

June

July

AugustSeptember

OctoberNovember

DecemberJanuary2022

23

The Latest Business Environment（Policies-in-Force）◼ Value of in-force business per policy maintained
the certain level and future value is growing
Number of policies-in-force

Value of in-force businessper policy

Value of in-force business（Unrealized future value on policies-in-force）(JPY thousands)

86.7

491,611476,906(JPY billions)

173

172

177

84.3

176

458,53978.7

439,9452021/03’21/06＋3.1%’21/09’21/12

＝

×

＋4.2%

＋4.0%

2021/03’21/06’21/09’21/12

76.1

＋3.4%

2021/03＋7.2%’21/06＋2.8%’21/09’21/1224

Growth Potential of
Online Insurance Market◼ Capturing the structural changes of digitization
for sustainable growth in the future
20.0%

15.0%

Customers who have intention to purchasethrough the Internet1

17.4%

Customers who actually purchased throughthe Internet1

12.5%
Emerging
significant roomfor growth

10.0%

3.3%

5.0%

4.0%

0.0%

2006
1.

09

12

15

Nationwide Report on the Life Insurance Industry (2021) by the Japan Institute of Life Insurance

18

21（year）

25

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
26

LIFENET Manifesto
Comprehensible, Cost-Competitive, ConvenientI.

Our Guiding Principles(1) Creating the life insurance of the future 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.

27

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

Develop Online Life Insurance Platform
Expand online products and services
SupplyLifenet’s products and services＋

Other insurers’ products and services“Online Platform”
connects life insurance products and services with customers
Provide products and services which customers need online

DemandSearchConsult

ApplyManage

Review

Claim

Diversifying customer needs
30

Breakdown of Policies-in-Force’21/03’21/12Component
ratio

Number of policies-in-force

439,945491,611100%- Term Life

213,597

239,838

49%- Whole-life Medical

120,216

134,30327%- Term Medical Care

8,840

8,598

2%

- Long-term Disability

59,56762,875

13%- Cancer

37,72545,9979%2,994,198

3,271,082

279,243

312,344

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

Number of policyholders

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

31

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

Fundamental profit

Condensed statements of operation(JPY millions)

FY2020/3Q FY2021/3Q

Change

Note

4,026

450
15,144

18,720579
19,300

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

129
4,155

Includes utilization of modified co-insurance of 3,577 million yen.

Insurance claims and
other

4,205

6,174

1,969

Insurance claims

1,479

1,810

331

Increased from 120 cases in 3Q of FY20 to 161 in 3Q of FY21.

826

1,103

277

Increased from 7,345 cases in 3Q of FY20 to 10,241 in 3Q of FY21.

4,597

5,071

473

Percentage of provision for policy reserves (4,913 million yen) toinsurance premiums is 33.6%.

Ordinary expenses

6,999
4,615
758
1,625
1,056
16,858

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

1,724
1,247
195
282
221
4,389

Ordinary profit (loss)(1,714)(1,948)(233)

Insurance premiums and other

14,694

Other
Ordinary income

Benefit claims

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

Increased due to an increase in reinsurance commissions frommodified co-insurance. Percentage of insurance claims and benefit
claims to insurance premiums is 19.9%.

Includes 4,750 million yen for advertising expenses.

Includes profit of 1,037M for utilization of modified co-insurance.

Extraordinary losses andincome taxes
Net income (loss)

16

61

44

(1,731)(2,009)(277)

Includes profit of 1,037M for utilization of modified co-insurance.

Mortality margin

2,713

(60)

Includes 357M loss due to utilization of modified co-insurance.

Expense margin (loss)(4,260)(402)

Includes 1,394M expense margin for utilization of modified coinsurance.

Interest margin (loss)(21)(1,568)2,652(4,662)45(1,964)

67(395)

Includes profit of 1,037M for utilization of modified co-insurance.

Fundamental profit

32Three Surplus Factors ofFundamental Profit
First 9 months of FY2021(JPY mn)

Profit analysis

Statements of operations
Ordinary income

Insurance premiums and other 18,720

Premiums income 14,633

Net premiums

Expense loading

Reinsurance income 4,087

ReinsuranceincomeOther reinsuranceincomeInterest anddividends

Investment income 519

Gains on salesof securities

Other ordinary
incomeOther ordinary income 59

Ordinary expenses

Insurance claims and other 6,174

Insurance claims and benefits
2,913

Insurance claims
and benefits

Reinsurance commissions
3,259

Reinsurance
commissions

Other reinsurance
commissions

Provision for policy
reserves and others 5,071

Change in policy
reserves

Change inpolicy reserves

Interest
expenses

Investment expenses 4
Operating expenses 8,724

Operatingexpenses

Other ordinary expenses
1,273

Other ordinary
expenses

Income taxes 2

Mortality
margin (loss)

Expensemargin (loss)

Interest
margin (loss)

2,652(4,662)45

Net profit (loss) (2,009)
1. Some items with minimal amounts have been omitted.

Losses on salesof securities

Capital gains(losses)186

Ordinary profit (loss)(1,948)Extraordinary profit (loss)(58)

Provision forcontingency
reserves

Projected
interest

Other onetime
gains (losses)(170)

Extraordinary profit (loss)(58)
Income taxes 2

Net profit (loss) (2,009)
33

Solvency Margin Ratio Calculation
As of Dec. 31, 2021

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

Solvency margin ratio
3,258.7%
Cash and deposits
4,373
Monetary claims bought

3,999

Money held in trust
5,590

=

Total amount of solvency margin<numerator>
38,963

Other liabilities
1,445

Excess over the fullZillmerized reserve 12,349
Price fluctuation reserves 95

Securities
47,026

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

995

Contingency reserves 2,174

Deferred tax liabilities onavailable-for-sale securities

4651

Valuation difference on
securities available-for-sale

1,1961

Total amount of risk/2< the denominator>
2,391/2

Insurance risk R1 1,087

Reserves for outstanding claims

Policy reserves
40,715

÷(JPY mn)

Add liabilities
with strong
capitalcharacteristics
such as pricefluctuation
reserves andcontingency
reserves

Medical insurance risk R8 374
Risk of change in medical incidence rate (hospital admission
rate , etc.)

Assumed interest rate risk R2 3
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 1,764

Tangible fixed assets

108
Intangible fixed assets
1,302

Other assets
5,380

Capital stock andother assets
22,683

Net assets
24,012[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 96
3% of the total of the amounts of the other 5 risks (in the
Company’s case)

1. 90% of the valuation difference on available-for-sale securities and deferred gains or losses on hedges (pre-tax) (if negative, 100%)
2. Items that do not apply to the Company or for which the amount is minimal have been omitted, except for certain bracketed items.

34

EEV （European Embedded Value）◼ Characteristics of Lifenet’s EEV are as follows:

Strong growth• Maintaining increase in EEV since listing inMarch 2012

Resilience to interest rate changes• Limited sensitivity to interest rate andstock fluctuations

35

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

EEV and new business value as of December 31, 2021
Sensitivity 1a: 1.0% increase in risk-free rate
Sensitivity 1b: 1.0% decrease in risk-free rate
Sensitivity 1c: 0.5% increase in risk-free rate
Sensitivity 1d: 0.5% decrease in risk-free rate
Sensitivity 1e: Interest rates based on JGB yields
Sensitivity 2: 10% decrease in equity and real estate value and otherSensitivity 3: 10% decrease in operating expenses
Sensitivity 4: 10% decrease in lapse rate
Sensitivity 5: 5% decrease in claim incidence rates for life business
Sensitivity 6: Change the required capital to the statutory minimum
1.

Change in EEV as ofDec. 31, 2021

Change in
VoNB

114,068(3,992)
3,386(1,950)1,803
710(1,104)
3,888
673
4,792
112

3,762
(219)
83
(97)
64
93
－
568
150
476
13

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 morethan 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 accordancewith 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 theadjusted net worth.

36

Adjusted Incremental EV◼ Adjusted Incremental EV accurately

indicates our business growth during acertain period within increase in EEV

Adjusted Incremental EV
Defined as constitution of components below:- New business value in the fiscal year
- Expected existing business contribution- Operating experience variances
37

Adjusted Profit
Significance of Adjusted Profit disclosure• As accrual timing of cost and revenue do not match,statutory accounting does not necessarily provide an
accurate picture of profitability of our business• We, therefore, disclose the indicator of profit levelexcluding marketing expenses as there is a time lag
between the recognition of revenue and marketing
expenses as acquisition cost

Ordinary profit excluding marketing expenses

Adjusted Profit

38

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 ofmodified co- Adjustmentⅱ) Marketing insurance
based onexpensesstandard policy
Adjustedreserves

profitⅰ) Ordinary
profit（loss)

Method of calculating the “ⅳ) Adjustment based on standard policy reserves”
e.g. First 9 months of fiscal 2021 (JPY millions)

Adjustment to provision forpolicy reserves1

448
1.
2.

Provision for policy
reserves

Increase in standard
policy reserves2

4,913

4,464

The amount of the adjustment to switch to provisioning based on standard policy reserves is calculated by excluding the provision for contingency reserves
and adjusting for the switch in method for calculating the provision from the Zillmer method to provision based on the standard policy reserves. Please notethat the provision for contingency reserves is included in the provision for policy reserves, but is not included in the increase in standard policy 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 thebalance in the previous fiscal year. The standard policy reserves is the amount calculated by excluding the provision for contingency reserves from actuallyprovisioned policy reserves and adding the difference from the provision based on the standard policy reserves. The difference was 220 million yen as ofDecember 31, 2021.

39

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 X40

J-GAAP vs IFRS
Illustration image of accounting structure1■Current Statutory Accounting (J-GAAP)
Heavy initial cost
for acquiring new
business3 isrecognized atinitial fiscal 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.
1.
2.
3.

Year 1

・・・・

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.

41