Securities Code: 7157
TSE GrowthPresentation
Material for
Investors

Second Quarterfor Fiscal 2022
November 10, 2022

LIFENET is...

Comprehensible
Cost-Competitive
Convenient◼ Remembering the original purpose oflife insurance – mutual support◼ Helping our customers embrace life more fully1

1H of FY2022 Key Highlights◼ Annualized premium1 of policies-in-force
up 13% YoY to JPY 22.9 billion◼ Revised business forecasts fiscal 2022
mainly due to COVID-19 claims of
JPY 883 million for 1H of FY2022◼ EEV up 10% YoY to JPY 123.0 billion◼ Promoting business alliances with au Jibun
Bank, Eisai and Sumitomo Mitsui Card1.

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

2

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

22.9
20.2
17.2
14.2
11.9

◼ Continued
steady growth543,635

476,906

405,403

334,528

283,207◼ Year-on-year
annualized
premium
113.4%,
number ofpolicies-inforce 114.0%

2018 2Q
2019 2Q
2020 2Q
2021 2Q
2022 2Q（YY/MM）
2018/09’19/09’20/09’21/09’22/091.

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

3

Policies-in-Force Movement◼ Continues to grow in the mid-term
while further acceleration is needed
Number of policies
FY20202Q

FY2021
2Q

FY2022
2Q

Newbusiness Decreased1

29,864

26,167(7,800)23,369405,4032020/06

1.
2.

2020/09543,635

476,906+17.6%

2020/122021/03(8,833)
in-forcebusiness+14.0%(5,741)business

2021/06

2021/092021/122022/032022/06

2022/09

Surrender &lapse ratio2

Surrender &lapse ratio2

Surrender &lapse ratio2

5.5%

6.3%

6.3%

Decreased number of policies include death, expiration and others in addition to surrender and lapse.
Surrender and lapse ratio is annualized. The surrender & lapse ratio in the second quarter of fiscal 2021 includes 0.1% of impact from lump-sum lapse regarding
expiration of special grace period for COVID-19.

4

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

82
75

2.0

2.0

66

65

78 ◼ Continued

1.7
1.5

1.5

(fiscal year)

2018

’19

’20

’21

’22/1H

Marketingexpenses

4,216

6,146

6,712

8,262

4,237

(JPY millions)1.

a certain scale ofmarketinginvestment
while carefully
monitoringmarketing efficiency

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

98
86
76

81
2.4
2.1

1.8

1.9

(fiscal year) 2021/2Q ’21/3Q
Marketingexpenses(JPY millions)

1.

1,995

1,833

◼ Improved efficiency
72 in 2Q due to increase
1.8 in new business’21/4Q ’22/1Q ’22/2Q
2,400

2,079

◼ Explore the righttiming to re-boost
marketinginvestment

2,157

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.

6

Operating Expenses Ratio: Operating expenses ratio¹ (%): Insurance premiums (JPY millions): Operating expenses excl. marketing expenses (JPY millions)
19,835◼ Increased mainly
due to investments in
new initiatives

16,892

13,982
11,845◼ Aim to improve in the
mid-term by further
22.8 %
21.6 %
21.2% business expansion
19.6 %
19.5 %and productivity
3,877
improvement
3,317
3,023
2,699
10,893

2,314

2018
1.

’19

’20

’21

’22/1H （fiscal year)

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

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

Total profit/loss
Revenue collected
over long period

Accounting
profit/loss
Initialfiscal
初年度
year

RevenueYear 22年目

Year 33年目

Year 44年目…

Year X
X年目

Premiums

ExpenseMarketingexpenses1.

Heavy initial cost

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

: Premiums: Operating expenses1 excluding
marketing expenses: Marketing expenses

8Adjusted Profit◼ Steadily recorded adjusted profit generated fromin-force business, while affected by COVID-19 claims of
JPY 883 million
The method for calculating adjusted profit
Adjusted profit＝ⅰ) Ordinary profit（loss)＋ⅱ) Marketing expenses－ⅲ) Impact of modified co-insurance±ⅳ) Adjustment based on standard
policy reserves1
JPY millions / fiscal year

2018

2019

2020

2021

2022/1Hⅰ) Ordinary profit（loss)(1,719)(2,382)(3,089)(3,245)(2,492)ⅱ) Marketing expenses

4,216

6,146

6,712

8,262

4,237

－

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

(444)

347

546

739

721

114

2,844

2,784

3,558

4,455

1,414

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.

9Structure of Embedded ValueEV

Adjusted
net worth

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

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

Revenue

Revenue
ExpenseExpenseProfit/loss for
current fiscal year

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

10

Strong EEV1 Growth◼
◼

EEV and value of in-force business have been growing
at a CAGR of 20%2 and 33%, respectively since IPO¥1,765EEV per share has also steadily increased¥1,673¥1,570123,093
116,604: Value of in-force business (JPY millions): Adjusted net worth (JPY millions): EEV/share (JPY)

95,14091,435

101,725

25,16821,367

76,149¥441

18,547
5,122
13,42518,9902012/03 ’13/03 ’14/03 ’15/03 ’16/03 ’17/03 ’18/03 ’19/03 ’20/03 ’21/03 ’22/03 ’22/09 (YY/MM)
1.

2.

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

11

1H of FY2022 EEV Movement1◼ EEV growth driven by value of new business, andassumption changes of renewal rate and claim
incidence rate
123,093(JPY millions)

Adjusted incremental EV2
Expected
existing
business
contribution
Value ofnew business

732

Operatingexperiencevariances

Assumptionchanges

3,489

Economic
variances
and assumptionchanges

100

Adjustments
to the values3
as ofSep. 30, ’22

43

(421)

2,543

116,604
total JPY

’22/03
1.
2.
3.

2,855

million’22/09 (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 September 30, 2022 is calculated applying the updated operating assumptions from those used forJune 30, 2022, and is not reviewed by third-party specialists.
Adjusted Incremental EV accurately indicates our business growth during a certain period within increase in EEV.
Item for change in capital12

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

Sep. 2022
End
Lifenet2.2%

Reference: March 2022 End1
Lifenet

4%

4%

-1.9%

-1.0%

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

Company B

Company C

1.8%

-0.9%
-2.2%

Company A

-1%

0%

-4%
-5%

-5%

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

-6% -7%13

Financial Condition’22/03’22/0967,82068,065

Cash and deposits

3,761

3,193

Monetary claims bought

3,999

2,999

Money held in trust

5,460

5,635

47,42548,526

8,946
1,469
24,042492
98
12,3758,870
1,450
24,986550497
12,170(JPY millions)(YY/MM)

Total assets

Securities
Government bonds
Municipal bonds
Corporate bonds
StocksForeign securities
Other securities1

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

Solvency margin ratio2
Modified duration (year)3

45,74943,542
22,071697◼ Maintained
sufficient financial
stability as
indicated bysolvency margin
ratio2◼ Continue tomonitor the impact
of changes ininvestment
49,41447,593environment
18,650on market value of(257)
securities

3,182％

3,187％

1.
2.

9.9

9.1

3.

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

14

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

Value of in-force businessper policy

Value of in-force business（Unrealized future value on policies-in-force）(JPY billions)(JPY thousands)
543,635
174

476,906

177

187

101.7
84.3

405,403＋14.0%

2020/09
20/09
2020/06’21/0921/09＝

×＋17.6%＋20.6%

70.5’22/0922/09（YY/MM）

2020/06
2020/09
20/09’21/0921/09’22/0922/09（YY/MM）＋19.6%

2020/06
2020/09
20/09’21/0921/09’22/0922/09（YY/MM）

15

Promoting Business Alliances◼ Aim to create new value of online life
insurance through partnership
au Jibun Bank

Business alliance in the group credit life insurance✓ Start business around 2Q of FY20231✓ au Jibun Bank to change its underwriting insurer of existing group credit life
insurance contracts to Lifenet1✓ Explore further synergies within KDDI’s ecosystem

Eisai

Capital and business alliance✓ Started discussion for development of new products and services✓ Eisai completed acquisition of Lifenet’s common stock in the capital market
1.

Subject to approval of Financial Services Agency

16

New Business Alliance◼ Aim to provide new digital-based customer
experiences leveraging strengths of the three
Lifenet Group

Sumitomo Mitsui
Financial Group

Leading theonline life insurance market

Playing the core rolein digital financial services

Future initiatives✓ Utilize broad customer base of Sumitomo Mitsui Card through datadriven marketing✓ Develop digital tools and insurance stores to make choosing insurance
online more convenient✓ Discuss new insurance products and services

17

For More Convenient Services◼ Improved customer services for policyholders
Electronic insurance certificate

Second-contact registration

Enables policyholders to checkusing smartphone when necessary

Policyholders’ family can inquire
about policy details◼ Gained high external evaluation
the 2022 HDI Benchmarking

Three-star rating in two categories1 10 times,
the highest number of times2 in the life insurance industry

1.
2.

Two categories stand for “Phone Support (Contact Center)” and “Web Support (Website)”
Based on data collected by Lifenet

18

Adoption of International
Financial Reporting Standards◼ Aim for the voluntary adoption of IFRS 17
from FY2023
Main points✓ Expect to record an accounting profit1 from FY2023✓ Capital adequacy2 and dividends will be regulated bystatutory accounting standards (J-GAAP) even after the
adoption of IFRS
Schedule
Jan. 2023
May 2023
May 2024
1.
2.

The third IFRS study session will be held
(Japanese version only)

Financial results for FY2022✓ Disclose business forecasts under IFRSFinancial results for FY2023✓ Announcement of financial results under IFRSIFRS adoption is still in the preliminary stage, and the estimate is based on the current approximation. It is unaudited information and may differ from the actual
financial information under IFRS to be disclosed in the future.
Regarding capital adequacy, economic value-based solvency regulation is being considered for implementation toward 2025.

19

Recognition ofBusiness Environment◼ Though affected temporarily by COVID-19,
focus on the structural growth potential of
the online life insurance market
Temporary changes
Impact of COVID-19✓ Significant increase or decrease in demand for life insurance✓ Large increase in benefit payment of COVID-19 claims

Structural changes
Change in consumers’ behavior from offline to online
Ratio of intention to purchase insurance online1

9.1% →（2015）
1.

17.4％（2021）

Nationwide Report on the Life Insurance Industry (2015 and 2021) by the Japan Institute of Life Insurance20Revision ofBusiness Forecasts FY2022◼ Revised due to significant increase in COVID-19 claims
Ordinary profit (loss) (JPY millions)【Previous】【Revised】(3,400)(5,000)COVID-19
COVID-19
actualestimatedclaimsclaims(1,350) Reserves for
750

COVID-19
claimsOthers1
(300)
(700)

(JPY millions）

Revisedof which
impact ofmodified coinsurance

Previousof which
impact ofmodified coinsurance

Ordinary
income30,0005,900

30,3006,300

Ordinary profit(loss)(5,000)800(3,400) 1,000

Net income(loss)(5,000)800(3,400) 1,000◼ Aim for double-digit growth in in-force businessthough revised based on business environment
Annualized premium2 (JPY millions)
Policies-in-force(Results)

New business

21,511

Decreasedbusiness3

24,3004,200

Surrender andlapse ratio
6-7%

+13%

1.
2.
3.

Revised【Unchanged】【Revised】

2022/03(JPY millions）【Revised】

Previous

Annualized
premium2 ofpolicies-in-force

24,30024,400

Annualized
premium2 of
new business

4,200

4,400

2023/03(YY/MM)
Modified co-insurance and operating expenses.
The amount of money equivalent to what is to be paid to have the insurance coverage for one year. All payments are monthly installments, thus the annualized
premium is calculated as multiplying the monthly premium by 12 months.
Including death, expiration and others in addition to surrender and lapse.

21

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
22

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.

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

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

Appendix

Annualized Premium /Number of New Business (Quarter): Annualize premium1 of new business (JPY millions): Number of new business
1,166
1,104

1,137

1,123
1,051

991

990

981
934

822

822

794

933

969

29,864

818

741
637
572

28,13623,36923,314

13,285

1Q

14,763

2Q

17,3123Q

FY2018
1.

26,918 27,553 26,167

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

4Q

1Q

2Q

3Q

FY20194Q

1Q

2Q

22,50622,1643Q

FY2020

4Q

1Q

2Q

3Q

FY2021

24,410 23,928

4Q

1Q

2Q

FY2022

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

26

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

7.6%
0.5%

6.3%
0.1%

7.5%

6.3%

1Q

6.1%

2Q

6.5%

3Q

FY2018
1.
2.

7.6%

7.1%
6.4%

4Q

1Q

2Q

3Q

FY2019

7.1%

7.0%

4Q

5.5%

5.5%

1Q

2Q

3Q

FY2020

4Q

6.0%

0.0%

7.1%

5.9%

1Q

6.3%

6.6%

0.0%

6.2%

6.0%

2Q

3Q

FY2021

6.5%

6.4%

4Q

1Q

2Q

FY2022

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

27

Breakdown of Policies-in-Force’21/09Component
ratio

Number of policies-in-force

476,906

543,635100%- Term Life

232,487

263,856

49%- Whole-life Medical

130,234

150,29328%- Term Medical Care

8,667

8,304

2%

- Long-term Disability

61,90866,662

12%- Cancer

43,61054,520

10%

3,198,619

3,514,030

303,173

344,441

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

Number of policyholders

1.

’22/09Sum insured of polices-in-force are the sum of death coverage, and do not include third-sector insurance.

28

COVID-19 Claims Condition
The amount of payment of insurance claims and benefits related to COVID-19：Actual results：Amount estimated (Image for illustrative purpose）

Total actual results
From April to October 2022
approx.

JPY

1.2 billion

1
September 26
Revised the scope of
COVID-19 claims

Claims for the seventh wave
Claims for the sixth wave

Estimated total
From November 2022 to March 2023
approx.

JPY 0.15 billion

Image for illustrative purpose

Jan.

Feb.

Mar.

Apr.

FY20211.

Figure for October 2022 is preliminary

May

Jun.

Jul.

Aug.

Sep.

Oct. 1

Nov.

Dec.

Jan.

Feb.

Mar.

FY202229

【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 Margin2(Marketing Expenses per
New Policy)

1.
2.
3.

Annualized Premiums per
Policy-in-force

Annualized Premiums per
Policy-in-force

JPY 42,536

×

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

Average Policy Term

Average Policy Term

Average Policy Term

43%

44%

16.7 years
×15.2 years
×

JPY 42,211
×15.9 years
×
37%
(45%)

＝

Customer Acquisition Cost3

FY2022/1H＝(Annualized Premiums per
Policy * Life Time * Gross Profit
Margin)FY2021＝

Life Time ValueFY2020

JPY 305,451

JPY 283,531

JPY 248,327

JPY 66,737

JPY 82,113

JPY 78,774

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

(JPY 302,020)*Figures in () exclude theimpact of COVID-19 claimsof JPY 883 million
30

Condensed Statements of Operation/ Fundamental Profit(JPY millions)

Condensed statements of operation

Change14,146600
14,746

1,845

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

256
2,101

Includes utilization of modified co-insurance of JPY 2,786M.

Insurance premiums and other

12,301

Other

343
12,644

Ordinary income

Fundament
al profit

FY2021/1H FY2022/1H

Note

Increased due to an increase in COVID-19 claims (JPY 883M) andreinsurance commissions from modified co-insurance. Percentage
of insurance claims and benefit claims to insurance premiums is
25.8%.

Insurance claims and
other

4,066

5,738

Insurance claims

1,315

1,240

(74) Increased from 115 cases in 1H of FY21 to 109 cases in 1H of FY22.

693

1,570

877

3,208

4,050

842

Ordinary expenses

5,885
4,029
619
1,236
911
14,071

Ordinary profit (loss)(1,427)

6,551
4,237
713
1,600
898
17,239(2,492)

Benefit claims

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

1,672

Increased from 6,452 cases in 1H of FY21 to 21,052 cases in 1H of
FY22.
Percentage of provision for policy reserves (JPY 3,473M) to
insurance premiums is 31.9%.

665
208 Includes JPY 3,403M for advertising expenses.
93
364
(12)
3,167
(1,065) Includes profit of JPY 444M for utilization of modified co-insurance.

Extraordinary losses andincome taxes
Net income (loss)

49

16(1,476)(2,509)(1,033) Includes profit of JPY 444M for utilization of modified co-insurance.

Mortality margin

1,825

852

(972) Includes JPY 306M loss due to utilization of modified co-insurance.

Expense margin (loss)(3,197)

Interest margin (loss)

55(1,316)(3,496)42(2,601)

Fundamental profit(32)
Decreased due to an increase in COVID-19 claims (JPY 883M).

Includes JPY 751M expense margin for utilization of modified co-(298) insurance.

(13)(1,284) Includes profit of JPY 444M for utilization of modified co-insurance.

31Three Surplus Factors ofFundamental Profit
First 6 months of FY2022(JPY millions)

Profit analysis

Statements of operations
Ordinary income

Insurance premiums and other 14,146

Premiums income 10,893

Net premiums

Expense loading

Reinsurance income 3,252

ReinsuranceincomeOther reinsuranceincomeInterest anddividends

Investment income 558

Gains on salesof securities

Other ordinary
incomeOther ordinary income 41

Ordinary expenses

Insurance claims and other 5,738

Insurance claims and benefits
2,811

Insurance claims
and benefits

Reinsurance commissions
2,926

Reinsurance
commissions

Other reinsurance
commissions

Provision for policy
reserves and others 4,050

Change in policy
reserves

Change inpolicy reserves

Interest
expenses

Investment expenses 92
Operating expenses 6,551

Operatingexpenses

Other ordinary expenses
806

Other ordinary
expenses

Income taxes 1

Mortality
margin (loss)

Expensemargin (loss)

Interest
margin (loss)

852(3,496)42

Net profit (loss) (2,509)
1.

Some items with minimal amounts have been omitted.

Losses on salesof securities

Capital gains(losses)222

Ordinary profit (loss)(2,492)Extraordinary profit (loss)(14)

Provision forcontingency
reserves

Projected
interest

Other onetime
gains (losses)(114)

Extraordinary profit (loss)(14)
Income taxes 1

Net profit (loss) (2,509)
32

Solvency Margin Ratio Calculation
As of Sep. 30, 2022

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

Solvency margin ratio
3,187.0%
Cash and deposits
3,193
Monetary claims bought

2,999

Money held in trust
5,635

=

Total amount of solvency margin<numerator>
35,551Other liabilities
1,705

Excess over the fullZillmerized reserve 14,445
Price fluctuation reserves 115

Securities
48,526

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

1,562

Contingency reserves 2,340

Deferred tax liabilities onavailable-for-sale securities－1

Valuation difference on
securities available-for-sale(257)1

Total amount of risk/2< the denominator>
2,230/2

Insurance risk R1 1,061

Reserves for outstanding claims

Policy reserves
46,031

÷Add liabilities
with strong
capitalcharacteristics
such as pricefluctuation
reserves andcontingency
reserves

Medical insurance risk R8 392
Risk of change in medical incidence rate (hospital admission
rate , etc.)

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

Asset management risk R3 1,566

Tangible fixed assets

86
Intangible fixed assets
1,271

Other assets
6,352
1.
2.

Capital stock andother assets
18,907

Net assets
18,650[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 90
3% of the total of the amounts of the other 5 risks (in the
Company’s case)

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

33

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

Change in
VoNB

123,093

2,543

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

(5,402)(266)

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

5,348

222

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

(2,712)(129)

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

2,700

118

(1,134)－

Sensitivity 3: 10% decrease in operating expenses

4,556

432

Sensitivity 4: 10% decrease in lapse rate

1,382

161

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

6,179

401

Sensitivity 6: Change the required capital to the statutory minimum

221

16

EEV and new business value as of September 30, 2022

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

Change in EEV as of
Sep. 30, 2022

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

34

Explanation of Adjusted Profit◼

Adjustments to provision for policy reserves based onstandard policy reserves

Calculation of adjusted profit

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

profitⅰ) Ordinary
profit（loss)

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

Adjustment to provision forpolicy reserves1

721
1.

2.

Provision for policy
reserves

Increase in standard
policy reserves2

6,756

6,035

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

35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 X36

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

Year 1

Year 2

Year 3

Year 4

Year 5

Revenue2

Revenue2

Revenue2

Revenue2

Revenue2

ProfitProfitProfitProfitYear 2

Year 3

Year 4

Year 5

Revenue

Revenue

Revenue

Revenue

Revenue

ExpenseExpenseExpenseExpenseExpenseProfitProfitProfitProfitProfit・・・・

Expenseforacquiringnewbusiness

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

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

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

37