Securities Code: 7157
TSE Mothers

Presentation
Material for
Investors
Third Quarterfor Fiscal 2020

February 9, 2021

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 2020
Annualized premium1 ofpolicies-in-force

Annualized premium1 of
new businessmillion yen

million yen

17,922

3,093(115.5% vs end of FY2019)(Y-on-Y 127.0%)

EEV2 (European Embedded Value)

Adjusted incremental EV3

93,176

million yen(126.9% vs end of FY2019)

6,196

million yen(Y-on-Y 269.0%)

Notable Achievements◼ Awarded #1 in the medical insurance product rankingof the 2021 Oricon Customer Satisfaction Survey4◼ Concluded Business Alliance Agreementwith Money Forward, Inc.
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, 2020 is calculated applying the same operating assumptions as those used for September 30, 2020, and has not been reviewed by thirdparty specialists.
Adjusted incremental EV consisted of components adequately reflecting our business growth for fiscal 2020, see page 13 and 33 for details.
The 2021 Oricon Client Satisfaction Survey hosted by Oricon Inc.

2

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

17.9
14.7
12.5

421,073

348,42910.7
9.8
234,828

295,662◼ Maintaining astrong growth
momentum

255,614◼ Year-on-year
Annualized
premium 121.2%,
number of policiesin-force 120.8%
2016 3Q
2017 3Q
2018 3Q
2019 3Q
2020 3Q （YY/MM）
2016/12’17/12’18/12’19/12’20/12
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

Breakdown of Policies-in-Force◼ Policies-in-force of Term Life exceeded 200,000’20/03’20/12Component
ratio

Number of policies-in-force

365,171

421,073100%- Term Life

175,713203,466

48%- Whole-life Medical

100,280

115,50127%- Term Medical Care

9,105

8,944

2%

- Long-term Disability

54,66558,521

14%- Cancer

25,40834,6418%

2,565,269

2,885,844

232,537

267,186

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

Number of policyholders’19/3Q(YTD)
Surrender and lapse ratio(annualized)2

7.0％’20/3Q(YTD)

5.6%

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

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◼ Achieved
new record
2,435
for the first nine
1,951
80,91173,669 months offiscal year
64,435
1,191
955◼ Year-on-Year
29,741annualized
57,59745,360premium 127.0%,
26,997
20,599number of new2016 ’17’18’19 ’20/3Q（YTD）
business 127.9%
39,175（fiscal year）

1.

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

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

75
67

62

65

62

61

1.7
1.5

1.5

1.3

1.4

◼ Improved mainly
due to temporary
impact by
COVID-19(fiscal year)

2016

’17

’18

’19

’20/3Q（YTD）

Marketingexpenses

1,822

2,627

4,216

6,146

4,615

(JPY millions)1.

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

6

Operating Expenses Ratio: Operating expenses ratio¹ (%): Insurance premiums (JPY millions): Operating expenses excl. marketing expenses (JPY millions)
13,982
12,406

11,845
10,421
9,628

23.1 %

2,225

2016
1.

22.8 %

22.2 %

2,315

’17

2,699

’18

（fiscal year)◼ Improved with thegrowth of in-force
business◼ Aim to improve
19.2% operational
efficiency by
3,023
further business
2,383
expansionin mid-term

21.6 %’19’20/3Q（YTD)

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

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
Revenue collected
over long period

Accounting
profit/loss
Initialfiscal
初年度
year

Revenue

Total profit/loss

Year 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
from policies-in-force
The method for calculating adjusted profit
Adjusted profit＝ⅰ) Ordinary profit（loss)1＋ⅱ) Marketing expenses－ⅲ) Impact of modified co-insurance±ⅳ) Adjustment based on standard
policy reserves2
JPY millions / fiscal yearⅰ) Ordinary profit（loss)ⅱ) Marketing expensesⅲ) Modified co-insuranceⅳ) Adjustment

Adjusted profit
1.
2.

2016

2017

2018

2019

2020/3Q
(YTD)

88

(197)

(1,719)(2,382)(1,714)

1,822

2,627

4,216

6,146

4,615

－

－

－

(1,526)

(555)

543

319

347

546

560

2,454

2,748

2,844

2,784

2,905

The ordinary profit (loss) before amortization of deferred assets under Article 113 of the Insurance Business Act
The amount of the adjustment to the policy reserve provision is the adjustment 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.

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

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

Strong growth• Maintaining significant increase in EEV
since listing in March 2012
• Steadily growing even in a low interest
rate environment

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

11Strong EEV1 Growth◼ EEV and value of in-force business have been

growing at a CAGR of 20%2 and 35%,
respectively(JPY millions)93,17673,431

Value of in-force business
Adjusted net worth

72,82860,87818,547
5,122
13,425

12,553

20,347

2012/03 ’13/03 ’14/03 ’15/03 ’16/03 ’17/03 ’18/03 ’19/03 ’20/03 ’20/12 (YY/MM)
1.

2.

Lifenet’s EEV is calculated following the EEV Principles and Guidance and in terms of allowance for risk, MCEV Principles (The European Insurance CFO Forum Market
Consistent Embedded Value Principles©) is referred. From fiscal 2016 onward, a predetermined ultimate forward rate has been used to extrapolate the level of ultralong-term interest rates past the last liquid data point. This method of extrapolation has also been used to restate EEV as of March 31, 2016. EEV as of December 31,
2020 is calculated applying the same operating assumptions as those used for September 30, 2020, 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.

12

Changing Factors of EEV1◼

Increased due to the strong new business performance, theimprovement of operating expenses ratio and capital raising

93,176(JPY millions)

Adjusted
incremental EV

Value ofnew business

4,526

Expected
existing
business
contribution

984

Operatingexperiencevariances684’20/03
1.
2.

6,196

3,522

9,051

975

Raised new capitalin July 2020

Changed assumptions at
the end of 2Q for FY2020

73,431
total

Economic
variances
and assumption
Assumptionchangeschanges

Adjustments
to the values2
as ofDec. 31, ’20

million yen’20/12 (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, 2020 is calculated applying the same operating assumptions as those used
for September 30, 2020, 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. 2020
End
LifenetReference: March 2020 End1
LifenetCompany A

Company B

Company C
11%

7%

1.7%

-1.8%

-0.8%

7%

1.5%

-1.7%

-0.6%
-4%

-5%
-7%
0.5% interest rate increase-10%

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.

-9%

-17%

14

【Ref.】 Life Time Value and Customer Acquisition Cost
Key Metrics for a SaaS Company and Lifenet
Commonly Used SaaS Glossary

ARR per Contract◼

(Annual Recurring Revenue)

Life Time(Term of Contract)

Contract period: from dateentered into contract until
the contract is cancelled◼ Calculated by reciprocal ofchurn rate◼

◼

Gross Profit Margin

CAC(Customer Acquisition Cost)

Accumulated profit per client
during the contract period◼ Revenue from new client *total revenue profitability(%) * contract period◼

◼

Marketing and sales
expenses incurred in bringing
1 client

Annualized Premiums per
Policy-in-force

Annualized Premiums per
Policy-in-force

××

JPY 42,486

Average Policy Term

14.3 years

1

JPY 42,564

Average Policy Term

17.9 years1

×

×

45%2

45%2

＝

(Life Time Value)

Percentage of revenue left
over after the cost ofservicing that revenue istaken into accountFY2020/3Q (YTD)＝

LTV

The value of the contracted
recurring revenue
components of the term
subscriptions normalized to a
one-year period

FY2019（Annualized Premiums
per Policy * Life Time *Gross Profit Margin)（Annualized Premiums
per Policy * Life Time *Gross Profit Margin)

Marketing Expenses per
New Policy

Marketing Expenses per
New Policy

JPY 273,397

JPY 75,9703

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

JPY 342,853

JPY 62,6533

15

Financial Condition(JPY millions)(YY/MM)

Total assets
Cash and deposits
Monetary claims bought
Money held in trust
Securities’20/03’20/12

41,14453,751

1,377

2,516

299

1,999

3,539
32,058Government bonds

8,065

Municipal bonds

1,391

Corporate bonds

18,119Stocks313

Foreign securities

0

Other securities1

4,167

Total liabilities
Policy reserves and otherTotal net assets
Solvency margin ratio2
Modified duration (year)◼ Maintained
38,865
sufficient
9,024
soundness as
1,488
21,219indicated by355
solvency margin
0
ratio
6,778
5,422

31,74436,61430,32834,832

9,400

17,136

2,117％

2,811％

11.3

11.4

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.

16

Initiatives for Innovation ofCustomer Experience◼ Redesigned the application procedure on
website in November
Easier and stress-free application procedure＜Feedback from policyholders ＞
I thought it’d be difficult to purchasepolicies online, but it was actuallysimple and easy. I would like torecommend Lifenet to my family andfriends.
Application procedure withsmartphone is very convenient.
It didn’t take a long time because
there was no need to contact sales
representative.
17

High Evaluation for Products and Services◼ Whole-life Medical awarded No.1,
evaluated by policyholders who received
benefit payments
The medical insurance product rankingof the 2021 Oricon Customer Satisfaction Survey

Whole-life
MedicalJibun 3For hospitalization, surgery
and advanced medical care18

Initiatives for Enhancement of
Promotion Capabilities◼ Concluded Business Alliance Agreement with
Money Forward, Inc., providing new customer
experience to its 11.5 million users

White label business initiative

Plan to launch new services this summer
to improve household finances by combining
PFM1 app and online insurance
1. Personal Financial Management

19

Recent Development◼ Significant growth in new business performancein January 2021, second to that in April 2020
■ Monthly trend in number of new business1

9,716
121%

8,030

6,497

2019/011.

Based on Monthly Disclosure.

2020/01

2021/0120

Future Direction◼ Leveraging a lifestyle with “new normal”,
aim for double-digit growth in in-force
business performance◼ Invest in marketing expenses aggressively
while focusing on its efficiency
under the current business environment◼ With expectation of early achievement of
the current management goal,
the revision of management target isunder discussion
21

Business Forecast FY2020◼ No change from August 2020 announcement
since aggressive investment in marketing
expenses is planned for the fourth quarter (JPY millions)
FY2020 Forecast(Reference)
FY2019 Results

Of which: impact
of modified
co-insurance

Ordinary income

20,0002,700

16,8502,034

Ordinary profit(loss)(3,200)650(2,382)

1,526

Net income(loss)(3,200)650(2,400)

1,526(Reference)

Annualized premiumof new business1
1.

Of which: impact
of modified
co-insurance

4,000

3,425

Annualized premium is the amount of money equivalent to what is to be paid to have the insurance coverage for one year. All payments for Lifenet products are inmonthly installments; we calculate annualized premium as multiplying the monthly premium by 12 months.

22

Transition to Company with
Audit and Supervisory Committee◼ Aim for further strength of corporate
governance and “growth and transformation”
Number of
Directors

Directors

New

New

11

9

Outside Directors
Ratio of outside
directors after change

Director
Full-time Audit and Supervisory
Committee Member

New

Outside Directors
Audit and Supervisory
Committee Member

New

New

Note: For details, please refer to the news release “Changes in Management Team” disclosed on February 9, 2021.

44%
23

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 100 billion yen by business growth
in a mid-term
24

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.

25

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

Number of New Business (Quarter)◼ Refrained from additional investment inmarketing expenses due to temporary regression
after the state of emergency was lifted

22,164:Number of new business1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY202028

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

Fundamental profit

Condensed statements of operation(JPY millions)

FY2019/3Q FY2020/3Q

Change

Note

2,749

297
12,242

14,694450
15,144

Increased due to growth in in-force policies business andreinsurance income from modified co-insurance.

152
2,901

Includes utilization of modified co-insurance of 1,892 million yen.

Insurance claims and
other

2,743

4,205

1,461

Insurance claims

1,316

1,479

162

Increased from 96 cases in 3Q of FY19 to 120 in 3Q of FY20.

704

826

121

Increased from 6,274 cases in 3Q of FY19 to 7,345 in 3Q of FY20.

3,604

4,597

993

Percentage of provision for policy reserves (4,597 million yen) toinsurance premiums is 37.1%.

Ordinary expenses

6,772
4,563
667
1,542
820
13,941

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

226
52
91
83
235
2,917

Ordinary profit (loss)(1,699)(1,714)(15)

Insurance premiums and other

11,945

Other
Ordinary income

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

Extraordinary losses andincome taxes
Net income (loss)

12

16

4

(1,711)(1,731)(19)

Mortality margin

2,077

635

Expense margin (loss)(3,771)

Interest margin (loss)

17(1,675)

2,713(4,260)(21)(1,568)Fundamental profit(489)

Increased due to an increase in reinsurance commissions frommodified co-insurance. Percentage of insurance claims and benefit
claims to insurance premiums is 18.6%.

Includes profit of 555M for utilization of modified co-insurance.

Includes profit of 555M for utilization of modified co-insurance.

Includes 743M expense margin for utilization of modified coinsurance.

(39)
107

29

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

EEV and new business value as of December 31, 2020
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, 2020

Change in
VoNB

93,176(3,455)2,941(1,689)
1,564
751
(705)
3,506
284
4,367
78

4,526
(53)
(153)
(6)
(43)
140
－
603
39
516
11

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. EEV as of December 31, 2020 is calculated applying the same operating assumptions as those used for September 30, 2020, and has not beenreviewed by third-party specialists.

30

Three Surplus Factors ofFundamental Profit
First 9 months of FY2020(JPY mn)

Profit analysis

Statements of operations
Ordinary income

Insurance premiums and other 14,694

Premiums income 12,406

Net premiums

Expense loading

Reinsurance income 2,287

ReinsuranceincomeOther reinsuranceincomeInterest anddividends

Investment income 303

Gains on salesof securities

Other ordinary
incomeOther ordinary income 146

Ordinary expenses

Insurance claims and other 4,205

Insurance claims and benefits
2,305

Insurance claims
and benefits

Reinsurance commissions
1,899

Reinsurance
commissions

Other reinsurance
commissions

Provision for policy
reserves and others 4,597

Change in policy
reserves

Change inpolicy reserves

Interest
expenses

Investment expenses 0
Operating expenses 6,999

Operatingexpenses

Other ordinary expenses
1,056

Other ordinary
expenses

Income taxes 2

Mortality
margin (loss)

Expensemargin (loss)

Interest
margin (loss)

2,713(4,260)(21)

Net profit (loss) (1,731)
1. Some items with minimal amounts have been omitted.

Losses on salesof securities

Capital gains(losses)65

Ordinary profit (loss)(1,714)Extraordinary profit (loss)(14)

Provision forcontingency
reserves

Projected
interest

Other onetime
gains (losses)(211)

Extraordinary profit (loss)(14)
Income taxes 2

Net profit (loss) (1,731)
31

Solvency Margin Ratio Calculation
As of Dec. 31, 2020

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

Solvency margin ratio
2,811.8%=

Total amount of solvency margin<numerator>
29,080Cash and deposits
2,516

Other liabilities
1,354

Monetary claims bought

Reserves for outstanding claims

1,999

Money held in trust
5,422

Contingency reserves 1,934

Excess over the fullZillmerized reserve 9,709
Price fluctuation reserves 70

Securities
38,865

Deferred tax liabilities onavailable-for-sale securities

3211

Valuation difference on
securities available-for-sale8271

Total amount of risk/2< the denominator>
2,068/2

Insurance risk R1 1,122
Risk of change in mortality rate (calculated based on value ofpolicies in force)

544

Policy reserves
34,288÷Add liabilities
with strong
capitalcharacteristics
such as pricefluctuation
reserves andcontingency
reserves

Medical insurance risk R8 352
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 1,323

Tangible fixed assets

105
Intangible fixed assets
1,042

Other assets
3,797

Capital stock andother assets
16,217

Net assets
17,136[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 84
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.

32

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
33

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

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Explanation of Adjusted profit
Adjustments to provision for policy reserves based onstandard policy reserves◼

Calculation of adjusted profit

Difference between methods of calculating
provision for policy reservesⅳ)ⅲ) Impact ofmodified co- Adjustmentⅱ) Marketing insurance
based onexpensesstandard policy
Adjustedreserves

We are currently in the transitional period and will transition all business tostandard policy reserves by the end of Fiscal 2022.

profitⅰ) Ordinary
profit（loss)

Method of calculating the “ⅳ) Adjustment based on standard policy reserves”
e.g. First 9 months of fiscal 2020 (JPY millions)

Adjustment to provision forpolicy reserves1

560
1.
2.

Provision for policy
reserves

Increase in standard
policy reserves2

4,597

4,037

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 607 million yen as ofDecember 31, 2020.

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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. 2019Year 1

2

3

4

５

…

Year X

FY2018
Note: Illustration of P&L structure of reinsuring new business of
single fiscal year, where illustration of impact on net assets ofreinsuring new business for multiple years.
Lifenet has utilized reinsurance transactions by modified coinsurance method on part of new business since fiscal 2019.

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