ＤＤNEWS
RELEASEMay 13, 2021
Ryosuke Mori, President
LIFENET INSURANCE COMPANY(Securities Code: 7157, TSE Mothers)

European Embedded Value as of March 31, 2021
EEV as of March 31, 2021: 95,140 million yen
TOKYO, May 13, 2021 - LIFENET INSURANCE COMPANY (TSE Mothers 7157, President
Ryosuke Mori, URL: https://ir.lifenet-seimei.co.jp/en/) hereby announces its Embedded Value(“EV”) as of March 31, 2021.
EV is an indicator used to measure the corporate value and earnings performance of life
insurance companies. EV is the total of adjusted net worth, based on balance sheet values, andthe value of in-force business, based on projected cash flows from policies-in-force. In general,life insurance policies provide a steady level of premium income over a long period of time,
while advertising expenses, policy appraisal costs, etc. are expensed intensively in a shortperiod around the time of policy sales. This timing difference in recognizing revenues andexpenses and the long time it takes before profits are recognized after a policy is sold are thecharacteristics of life insurance accounting. As these characteristics make it difficult to evaluate
a life insurance business based on single-year financial results, disclosing EV is seen as a
useful way of giving investors a more accurate picture of operating conditions. European
Embedded Value (“EEV”) is the EV calculated in accordance with the EEV Principles andGuidance.
Lifenet’s EEV as of March 31, 2021 and the summary of the results are as follows:
Summary of EEV results as of March 31, 2021⚫

Lifenet’s EEV as of March 31, 2021 was 95,140 million yen, an increase of 21,708
million yen from the end of the previous fiscal year.

⚫

Adjusted net worth was 18,990 million yen, an increase of 6,437 million yen from the endof the previous fiscal year, mainly due to the issuance of new shares by way of offering
made outside of Japan.

⚫

Value of in-force business was 76,149 million yen, an increase of 15,270 million yen
from the end of the previous fiscal year, mainly due to acquisition of new business andupdates made to expense assumptions.

⚫

Value of new business was 5,798 million yen, an increase of 2,820 million yen from theprevious fiscal year, mainly due to an increase in the volume of new business acquired
and updates made to expense assumptions.

Copyright© LIFENET INSURANCE COMPANY All rights reserved.

1

ＤＤ
NEWS
RELEASE(In millions of yen)

EEV as of March 31, 2021
Mar. 31, 2020

Mar. 31, 2021

Increase (Decrease)73,431

95,14021,708Adjusted net worth*1

12,55318,9906,437

Value of in-force business*2

60,87876,14915,270

EEV

Value of new business

Value of new business*3

*1

*2
*3

(In millions of yen)Mar. 31, 2020

Mar. 31, 2021

Increase (Decrease)

2,977

5,798

2,820

Adjusted net worth is defined as the excess of the market value of a life insurance company’s assets over themarket value of its policy reserves and other liabilities, and is considered to be the value attributable to thecompany’s shareholders. In other words, it is calculated as the sum of the total net assets, appropriate
adjustments for unrealized gains/losses and other items.
Value of in-force business is the present value at the valuation date of future after-tax profits distributable toshareholders from in-force business as of the valuation date, calculated under a set of assumptions.
Value of new business represents the impact on the EV of new business written during the fiscal year, calculated
applying the same assumptions as those used for the EEV. New business used for value calculation is defined asthat arising from the sale of new life insurance policies during the fiscal year and excludes future new business.

About Lifenet

URL： https://ir.lifenet-seimei.co.jp/en/

Remembering the original purpose of life insurance - mutual support - LIFENET INSURANCECOMPANY was founded with the goal of offering simple, convenient and competitively priced
products and services based on the highest levels of business integrity. We sell these products
and services directly to customers over the Internet. We aim to be the leading company driving
the growth of the online life insurance market.
Contact:
Investor Relations, Corporate Planning DepartmentTel:+81-3-5216-7900
e-mail: ir@lifenet-seimei.co.jp
Disclaimer: This is a summarized translation of the original Japanese document, prepared and provided
solely for readers' convenience. In case of any discrepancy or dispute, the Japanese document prevails.

Copyright© LIFENET INSURANCE COMPANY All rights reserved.

2

May 13, 2021
LIFENET INSURANCE COMPANY

Disclosure of European Embedded Valueas of March 31, 2021
LIFENET INSURANCE COMPANY (“Lifenet” or “the company”) is disclosing its European
Embedded Value (“EEV”) results as of March 31, 2021.

Contents
Contents ....................................................................................................................................1
1.

Outline of EEV ...................................................................................................................22.

EEV results of Lifenet .........................................................................................................4

3.

Movement Analysis ............................................................................................................94.

EEV Methodology ............................................................................................................ 11

5.

Principal EEV Assumptions ...............................................................................................15

6.

Sensitivities ......................................................................................................................18

7.

Notes on the Use of the Information ...................................................................................20

8.

Third Party Opinion ..........................................................................................................21

1

1. Outline of EEVWhat is EV?
The income and expenses of life insurance contracts are typically not matched in timing of occurrence,(1)

with substantial acquisition and other costs in the first year and with a delay between acquisition of
the contract and the emergence of profit. This makes it difficult to evaluate a life insurance operationon the basis of a single year’s income and outgo. Embedded Value (“EV”), calculated as the sum of
net asset value and the present value of future after-tax shareholder profits from the in-force businessat the valuation date, has been adopted among life insurers in Europe, Canada, Japan and elsewhereas an approach to the valuation of a life insurer and to the evaluation of its performance.

What is EEV?
European Embedded Value (“EEV”) is the EV calculated in accordance with the EEV Principles and(2)

Guidance.
The EEV Principles and Guidance were published in May 2004 by the CFO Forum1, a group consistingof CFOs from leading European insurance companies. The aim of the EEV Principles and Guidanceis to improve the consistency and transparency of the financial reporting of embedded values.
Additional EEV Guidance was published by the CFO Forum in 2005 which covered sensitivities andaspects of disclosure.
In May 2016 the EEV principles were amended by the CFO Forum to permit alignment withmethodology and assumptions applied for Solvency II, which has been effective since January 2016.
In addition, the European Insurance CFO Forum Market Consistent Embedded Value Principles©2(“MCEV Principles”) were published in June 2008 by the CFO Forum with more clearly definedallowances for risk. Revisions to these MCEV Principles were published in October 2009 and in May
2016.

EEV Approach
The allowance for risk in the shareholder cash flows is a key feature of the EEV Principles. Lifenet’s(3)

EEV has been calculated following the EEV Principles and Guidance, using a bottom-up marketconsistent approach, in which the discount rate is set individually for each product or cash flow
according to the risk characteristics of the product or cash flow.
EEV is calculated such that future cash flows arising from assets and liabilities are valued consistently
with cash flows arising from similar traded market instruments, with allowance included for nontraded or non-diversifiable risk.
12

http://www.cfoforum.nl/
Copyright © Stichting CFO Forum Foundation 2008
2

These approaches have been increasingly adopted among leading European insurers; moreover, the
MCEV Principles define a bottom-up market consistent approach.

32. EEV results of Lifenet
The EEV results are presented below. For more details on the methodology employed, please refer to“4. EEV Methodology”.
The embedded value on an EEV basis as of March 31, 2021 is 95,140 million yen, an increase of
21,708 million yen (29.6%) from March 31, 2020. The adjusted net worth increased to18,990 million
yen, primarily due to the issuance of new shares by way of offering made outside of Japan. The valueof in-force business increased to 76,149 million yen, primarily due to acquisition of new business andupdates made to expense assumptions.
The value of new business issued in the fiscal year ending in March 31, 2021 is 5,798 million yen.
Please refer to Section 3 for the movement analysis of EEV over the fiscal year.

(Millions of yen)
Increase(Decrease)

March 31, 2020

March 31, 2021

73,431

95,14021,708Adjusted net worth

12,55318,9906,437

Value of in-force business

60,87876,14915,270March 31, 2020

March 31, 2021

2,977

5,798

EEV

Value of new business4

Increase(Decrease)
2,820

(1)

Adjusted net worth

Adjusted net worth represents the market value of assets in excess of reserves and other liabilities.
Adjusted net worth is the sum of the net assets on the balance sheet and appropriate adjustments for
unrealized gains/losses and other items. The adjusted net worth has been derived as follows.

March 31, 2020
Adjusted net worth(Millions of yen)
Increase
March 31, 2021
(Decrease)12,55318,990

6,437

9,400

15,806

6,406

1,907

1,533

(373)

1,779

2,079

300

(534)

(429)

104

(a) Shareholders’ equity on thebalance sheet(b) Unrealized gains/losses on
securities(c) Internal reserves as quasi-equity
liabilities (Note1)(d) Tax effect (Note2)
Note1: Price fluctuation reserve and contingency reserve
Note2: Tax effect on (b)(2)

Value of in-force business

Value of in-force business represents the present value as at the valuation date (March 31, 2021) offuture after-tax profits distributable to shareholders from the in-force business as of the valuation date,calculated under a set of assumptions (see Section 5), and consists of the following components.

(Millions of yen)
Increase(Decrease)

March 31, 2020

March 31, 2021

60,87876,14915,27082,661

99,526

16,865

－

－

－

(66)

(159)

(92)

(21,715)(23,217)(1,501)

Value of in-force business
Certainty equivalent present
value of future profit
Time value of financial
options and guarantees
Frictional cost of capital
Allowance for
non-hedgeable risk

・ The certainty equivalent present value of future profit is the present value of future profit
calculated deterministically by assuming the investment yield is equal to the risk-free rate andusing the risk-free rate as the discount rate.
5

The table below shows the present value of in-force business premiums included in the calculationof the certainty equivalent present value of future profit.

Present value of in-force businesspremiums

March 31, 2020

March 31, 2021

(Millions of yen)
Increase(Decrease)

303,251

358,81055,558・ The time value of financial options and guarantees could be calculated stochastically using a setof market-consistent risk-neutral economic scenarios for the cash flows with options or guarantees.
However, the time value of options and guarantees is set to nil as the products of Lifenet are nonparticipating death and medical coverage protection products with no surrender value.
・ The frictional cost of capital represents the costs associated with maintaining the level of capitalwhich the company considers as required in continuing the life insurance business (see Sections
4.(10) and 4.(11)).
・ The allowance for non-hedgeable risk is an estimate of the impact of non-hedgeable risks which
are not adequately allowed for directly in the certainty equivalent present value of future profit(see Section 4.(12)).

6

(3)

Value of new business

Value of new business is the value at the valuation date of the new business written during fiscal year
2020, calculated applying the same assumptions used to calculate the embedded value as of that date.
New business means the life insurance policies commencing within this accounting period (fiscal
year 2020) and does not include values anticipated from future new business. The figure for adjusted
net worth represents the loss arising between the point of sale and March 31, 2021 on business soldin the period. The table below shows the results.
The primary reasons for the increase in the value of new business, compared to the same period of
the previous year, are an increase in the volume of new business acquired and updates made to
expense assumptions.

March 31,2020

March 31,2021

(Millions of yen)
Increase(Decrease)

Value of new business

2,977

5,798

2,820

Adjusted Net Worth(4,357)(5,374)(1,017)

Present value of future profit

7,334

11,172

3,838

10,955

15,535

4,579

－

－

－

(12)

(27)

(14)

(3,607)(4,335)(727)

Certainty equivalent present value of
future profit
Time value of financial options andguarantees
Frictional cost of capital
Allowance for non-hedgeable risk

7

The table below shows the new business margin, calculated as the ratio of the value of new businessto the present value of new business premiums.

March 31, 2020

(Millions of yen)
Increase
March 31, 2021
(Decrease)(a) Present value of new businesspremiums

54,201

69,81815,617(b) Value of new business

2,977

5,798

2,820

Value of new business / Present value of
new business premiums ((b)/(a))

5.5%

8.3%

2.8pts

The table below shows the value of new business on a per-policy basis.
March 31, 2020
Value of new business per policy

36

8(Thousands of yen)
Increase
March 31, 2021
(Decrease)57

20

3. Movement Analysis
The table below shows the analysis of the increase (decrease) in the EEV during fiscal year 2020.

(Millions of yen)
EEV
Adjusted net worth（Required capital）

Adjusted net worth（Free surplus）

Value of in-force
business

EEV as of March 31, 2020

73,431

2,083

10,46960,878New business value

5,798

102

(5,476)

11,172

1,179

－

(1)

1,180

132

－

17

114

－

19

2,600

(2,620)

444

40

(300)

704

Assumption changes

3,927

－

－

3,927

Operating EEV earnings

11,481

162(3,160)14,479Economic variances and assumption changes

1,162

3

369

789

Change in EEV

12,645165(2,791)

15,270

Closing adjustments

9,063

－

9,063

－

EEV as of March 31, 2021

95,1402,249

16,741

76,149

Expected existing business contribution(Risk free rate)
Expected existing business contribution(In excess of risk free rate)
Expected transfer from Value of in-force
business to Adjusted net worth
Operating experience variances➢

New business value
This is the change in EEV due to the value of new business issued during fiscal year 2020. For
details of the approach, see Section 2.(3).

➢Expected existing business contribution (Risk-free rate)
In calculating the value of in-force business, future expected profits are discounted back usingrisk-free rates. Thus, the discounted value is assumed to earn the risk-free rate over time. Moreover,this item includes the expected return on the free surplus assets using the risk-free rates, and therelease for fiscal year 2020 of time value of financial options and guarantees, cost of holding
required capital and allowance for non-hedgeable risk.

➢

Expected existing business contribution （In excess of risk-free rate）
Rates of future expected returns are assumed to be the risk-free rates when calculating EEV.
9

However, Lifenet expects higher rates of return on the assets than the risk-free rates. In calculating
the expected existing business contribution in excess of the risk-free rate, Lifenet used an expected
rate of return of 0.45% which consists of the risk-free rate of the 1 year swap yield plus a risk
premium of 0.47%, based on the asset position at the beginning of the period.

➢

Expected transfer from value of in-force business to adjusted net worthThis item represents the after-tax surplus expected to emerge during the period from the businessthat was in force at the beginning of the period.
The effect is a movement of value from the value of in-force business to the adjusted net worth.
This does not affect the total embedded value.

➢

Operating experience variancesThis is the impact on the embedded value of differences between the actual experience and theoperating assumptions during the period. The primary reason for the differences was actual lapse
experience being lower than expected.

➢

Assumption changes
This is the impact of changes in the operating assumptions relative to those utilized at the
beginning of the period. The increase in the value of in-force business was primarily due to updates
made to expense assumptions. The updated expense assumptions reflect a reduction in per-policy
maintenance expenses, owing to an increase in the volume of in-force policies. See Section 5.(2)for the explanation of how operating assumptions are set.

➢

Economic variances and assumption changes
This is the impact of differences between the actual investment returns in the period and the
expected investment returns, including the impact on the value of future profits from the change
to the end of period future economic assumptions. See Section 5.(1) for details of the economic
assumptions.

➢

Closing adjustments
This represents that the effect of an increase in net assets of JPY 9,063 million due to the issuanceof new shares by way of offering made outside of Japan, the issuance of shares as a restricted
stock remuneration, and the exercise of stock acquisition rights in fiscal year 2020.

10

4. EEV Methodology(1) Basis of preparation
The methodology and assumptions adopted by the company to calculate the EEV as of March 31, 2021
are in accordance with the EEV Principles and Guidance issued by the European CFO Forum in May
2004 (amended in May 2016).

(2) Covered business
The covered business represents all of the business of the company, which is all life insurance business.

(3) Embedded value (EV)The embedded value comprises the sum of the adjusted net worth and present value of future after-tax
profits from in-force business, which provides an estimate of the value of the shareholders’ interest in
the covered business. The adjusted net worth is the net assets attributable to shareholders, and isrepresented by the sum of required capital and free surplus as discussed further below. The value of
in-force business is the present value of the projected stream of future after-tax distributable profits
available to shareholders from the existing business at the valuation date, allowing for risk on a
product-by-product basis, and with adjustment for the cost of holding required capital. The future
profit includes renewal of in-force business but excludes any value that may be generated from future
new business. Assumptions used in the calculation are made on a best estimate basis.

(4) Allowance for risk
According to the EEV Principles all risks related to the covered business must be reflected. This isaccomplished, for example, by allowances for the cost of financial options and guarantees, for the costof holding policy reserves and any additional required capital, and by adoption of a risk discount rate.
The company has used a market-consistent approach based on the principles of finance theory to allow
for risk, as follows.
- Assets and liabilities other than policy reserves are valued at market value.
- Investment return assumptions and risk discount rates are set consistently with the risk profile ofeach cash flow.
- The time value of financial options and guarantees associated with the life insurance business isvalued explicitly and consistently with market prices of equivalent traded options. (The products ofLifenet are non-participating death and medical coverage protection products with no surrender value
and so in practice no time value of financial options and guarantees needs to be allowed for.)11

A market-consistent value assigns a value to cash flows in line with the prices of similar cash flows
traded on the open market.
Further details of the methodology are described in the sub-sections below.

(5) Adjusted net worth
Adjusted net worth represents the net assets attributed to shareholders and represents the market
value of assets in excess of policyholder liabilities, represented by statutory reserves (excluding
contingency reserve), and other liabilities (excluding reserve for price fluctuations).
In other words, adjusted net worth is calculated by adjusting the total net assets on the balance sheet
for the retained earnings in certain liabilities and unrealized gains/losses in assets/liabilities notaccounted for under the mark-to-market methodology.

(6) Value of in-force business
The value of in-force business is calculated as follows:
Certainty equivalent present value of future profit
lessTime value of financial options and guarantees

less

Frictional cost of capital

less

Allowance for non-hedgeable risk

A description of each item in the above formula is provided below.

(7) Value of new business
The value of new business is the value of new policies issued during fiscal year 2020. Future
renewals of those new business policies are included in the value of new business, while the values
that may be generated from future new business are not.
The value of new business has been calculated as of March 31, 2021, and consists, like the EEV, ofthe adjusted net worth and the present value of future profit. The adjusted net worth represents theimpact of all cash flows arising from the point of sale to March 31, 2021. The present value of future
profit in respect of new business is calculated in the same manner as the value of in-force businessshown in (6), and using the same assumptions. A modified coinsurance arrangement was establishedon April 1, 2019, for a portion of the new business and this has been reflected in the value of new
business.

12

(8) Certainty equivalent present value of future profit
The certainty equivalent value is the present value of future after-tax profits, calculated on adeterministic basis, assuming all assets earn the risk-free rate and all cash flows are discounted at therisk-free rate. The certainty equivalent approach ensures that future investment risk premiums are notcapitalized in the embedded value.

(9) Time value of financial options and guarantees
There are no options and guarantees, and therefore the time value of financial options and guarantees
is zero.

(10) Required capital
Required capital is a part of adjusted net worth required to back the covered business and therefore
cannot be immediately paid out to shareholders. The EEV Principles and Guidance define theminimum level for required capital to be equal to the statutory minimum capital requirement, and also
allow companies to reflect other levels of required capital, such as their own required risk assessment,
as long as the minimum requirement is satisfied.
Reflecting the operation of Lifenet as a going concern, a level of required capital corresponding to a
500% Japanese statutory solvency margin ratio was assumed. This satisfies the EEV Principles andGuidance (note the statutory minimum in Japan is a 200% solvency margin ratio). Japanese solvency
regulations allow for the excess of the reserve over the full-Zillmer reserve to be counted as part ofthe solvency margin. The calculation of the amount of required capital reflects this benefit.
The adjusted net worth can be broken down into required capital and free surplus as follows.

March 31, 2020

March 31, 2021

(Millions of yen)
Increase(Decrease)

Adjusted net worth

12,55318,9906,437

Required capital

2,083

2,249

165

Free surplus

10,46916,741

6,271

13

(11) Frictional cost of capitalThis item is the cost of having to retain the level of required capital, and within the EEV bottom-up
approach, it is referred to as “frictional cost”.
Within this item, tax on investment returns on required capital has been allowed for. Investment
expenses incurred in respect of the assets backing the required capital (another frictional cost) arereflected in the unit cost assumptions.

(12) Non-hedgeable risk
EEV Principles define the EV to be calculated taking all the risks of the covered business into account.
There are some non-hedgeable risks where the existing best estimate experience assumptions do notallow for the impact on embedded value of the full range of potential outcomes. These risks should beallowed for in the EEV through the allowance for non-hedgeable risk.
Lifenet estimated these costs for operational risks, counterparty risks, persistency risks, mortality andmorbidity risks, expense risks, catastrophe risks and uncertainty in the realization of the ultimate
forward rate using a simple model, and has made allowance for these risks in the EEV calculation.

14

5. Principal EEV Assumptions(1) Economic assumptions
In the certainty equivalent calculation, the discount rates and investment yields are the risk-free rates
at the valuation date (March 31, 2021). These risk-free rates have been determined based on swap
rates. The table below shows, for selected terms, the swap rates (one-year forward rates) used.

Swap rates as ofMarch 31, 2021
Swap rates as ofMarch 31, 2020

Swap rates as ofMarch 31, 2021
Swap rates as ofMarch 31, 2020

1 year

2 year

3 year

4 year

5 year10 year(0.04)%(0.01)%(0.01)%

0.04%

0.10%

0.45%

(0.02)%(0.06)%(0.08)%(0.05)%(0.05)%

0.30%

15 year

20 year

30 year

40 year

50 year

60 year

0.73%

0.87%

0.89%

1.30%

3.63%

3.79%

0.24%

0.30%

0.35%

0.96%

3.62%

3.79%

Interest rates beyond the last liquid data point are extrapolated based on a method using apredetermined ultimate forward rate.
Specifically, the ultimate forward rate is set at 3.8% and the last liquid data point is set at the 40th year.
Beyond the 40th year, we extrapolated the yield curve to the ultimate forward rate over a convergence
period of 20 years by using the Smith-Wilson method. This methodology is based on the discussions
for the Insurance Capital Standard being developed by the International Association of Insurance
Supervisors.
For “Sensitivity 1e: Interest rates based on JGB yields” in Section 6, Japanese government bond(“JGB”) yields are used to derive the risk-free rates. The table below shows, for selected terms, the
JGB yields (one-year forward rates) used. As with the swap rates above, the ultimate forward rate is
set at 3.8% and the last liquid data point is set at the 40th year. Beyond the 40th year, we extrapolated
the yield curve to the ultimate forward rate over a convergence period of 20 years by using the SmithWilson method.

15

JGB yields as ofMarch 31, 2021

JGB yields as ofMarch 31, 2021

1 year

2 year

3 year

4 year

(0.13)%(0.13)%(0.15)%(0.06)%

15 year

20 year

30 year

40 year

0.89%

1.06%

0.82%

1.76%

5 year
0.06%

50 year3.65%

10 year
0.54%

60 year
3.79%(2) Other assumptions
All cash flows (premium, commission, non-commission expense, death benefit, tax, etc.) were
projected by applying best estimate assumptions. Expense assumptions have been set based on recent
experience and the company’s business plan, and other non-financial assumptions have been set basedon past experience and industry experience.
Expenses
Expense assumptions have been set as best estimate assumptions, based on recent experience and thelatest business plan.
Some expenses were eliminated as one-off expenses which are not expected to occur regularly in the
future. The amount of one-off expenses incurred during fiscal year 2020 and eliminated in thederivation of the assumptions was 175 million yen, which includes costs associated with the issuanceof new shares by way of offering made outside of Japan.
In setting unit costs, Lifenet allows for consumption taxes (including local consumption tax), of 10%.
The inflation rate is set to 0% for the first 40 years from the valuation date. Beyond the 40th year,
inflation rates are increased based on the increase in forward rates to an ultimate inflation rate of 2%.
For the purpose of calculating the value of new business, the actual acquisition expenses incurred in
the reporting period have been allowed for together with the same maintenance expense assumptions
used to calculate the EV.
Claim Payment, Lapse
The best estimate assumptions for claim payments and lapses have been set based on Lifenet’s own
experience.
Premium
The policy contract for term life and term medical allows the premium rate to be recalculated on16renewal. In projecting renewal premiums, current premium rates have been used, taking the renewal
age of the policyholder into account.
Policy reserve
For policies issued by the end of March 2018, the premium reserve which is a part of policy reserveis calculated in line with the 5 year zillmerized reserving method in accordance with Insurance
Business Regulation (“IBR”) 69.4.4. For policies issued after the end of March 2018 and for term life
and term medical care policies after the renewal of the policy contract, the premium reserves arecalculated in line with the standard valuation reserving method.
Lifenet adopted this method for the calculation of the future projected profits.
Corporate tax
In the future corporate tax calculation, the expected corporate tax offsets associated with losses carriedforward were calculated and included in the value of in-force business. The effective corporate tax
rates assumption (including local tax) has been set to 28.00%.

17

6. Sensitivities
The impacts of changes in assumptions (sensitivities) on the EEV results are summarized below. 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 bedifferent 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.
A sensitivity using Japanese government bond yields has also been included.
(Millions of yen)
Change inValue of
PercentageNewchangeBusiness

Change in
EEV as ofMarch 31,2021

Percentagechange

EEV and New Business Value as ofMarch 31, 2021

95,140

－

5,798

－

Sensitivity 1a: 1.0% increase in interest rates(3,213)(3.4)%(120)(2.1)%

Sensitivity 1b: 1.0% decrease in interest rates

2,733

2.9%

(97)

(1.7)%

Sensitivity 1c: 0.5% increase in interest rates(1,505)(1.6)%(29)(0.5)%

Sensitivity 1d: 0.5% decrease in interest rates

1,533

1.6%

(1)

(0.0)%

635

0.7%

127

2.2%

(807)

(0.8)%

－

－

3,655

3.8%

783

13.5%

405

0.4%

111

1.9%

4,410

4.6%

699

12.1%

196

0.2%

32

0.6%

Sensitivity 1e: Interest rates based on JGB
yieldsSensitivity 2: 10% decrease in value of equity,
real estate and investment trusts
Sensitivity 3: 10% decrease in operating
expensesSensitivity 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◆

Sensitivity 1a: 1.0% increase in interest rates (risk-free rate) (for all future years)◆

Sensitivity 1b: 1.0% decrease in interest rates (risk-free rate) (for all future years)◆

Sensitivity 1c: 0.5% increase interest rates (risk-free rate) (for all future years)◆

Sensitivity 1d: 0.5% decrease interest rates (risk-free rate) (for all future years)
Fixed interest assets (bonds, etc.) are revalued according to the change in the interest rate. The
value of in-force business and the adjusted net worth are re-calculated according to the change ofinvestment yield and discount rate. Even if the interest rate becomes negative after the deductionof 1.0% or 0.5%, no flooring is applied.
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For all risk-free rate sensitivities above, the ultimate forward rate is unchanged.
◆

Sensitivity 1e: Applying risk-free rates derived from Japanese government bond (“JGB”) yields(for all future years)
As with the risk-free rates derived from swap rates, the risk-free rates used in this sensitivity are
extrapolated using the same method to the ultimate forward rate.

◆

Sensitivity 2: 10% decrease in value of equity, real estate and investment trust assets
Market values of equities, real estate and investment trusts at the valuation date are reduced by
10%.

◆

Sensitivity 3: 10% decrease in operating expenses
A factor of 0.9 is applied to expenses connected with the maintenance and continuation ofcontracts, leaving other expenses unchanged.

◆

Sensitivity 4: 10% decrease in lapse rate
Base lapse rates are multiplied by 0.9.

◆

Sensitivity 5: 5% decrease in claim incidence rates for life business
Base claim incidence rates (mortality and morbidity) are multiplied by 95%. The possibility ofpremium rate cuts and any other management actions associated with such changes in the claim
level are not reflected.

◆

Sensitivity 6: Change the required capital to the statutory minimum (200% of solvency margin
ratio)

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7. Notes on the Use of the Information
The calculation of EV results involves certain assumptions regarding future projections that are subject
to risks and uncertainties. It should be noted that actual future results might differ materially from theassumptions used in the EV calculations.
Regarding the widely publicized recent spread of the COVID-19 pandemic, it has had limited impact
on Lifenet’s business to date and future developments are uncertain. Therefore, we have not explicitly
considered its potential effect in the EV calculations.
Given the above, users of this information are advised to be cautious.

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8. Third Party Opinion
Lifenet engaged Willis Towers Watson to review its EEV results and obtained thefollowing opinion.
Willis Towers Watson has reviewed the methodology and assumptions used to determine
the embedded value results as of March 31, 2021 for Lifenet. The review covered theembedded value as of March 31, 2021, the value of new business issued in fiscal year
2020, the analysis of movement in the embedded value during fiscal year 2020 and thesensitivities of the embedded value and new business value to changes in assumptions.
Willis Towers Watson has concluded that the methodology and assumptions used,
together with the disclosure provided in this document, comply with the EEV Principles
and Guidance. In particular:⚫

The methodology makes allowance for the aggregate risks in the covered businessthrough Lifenet’s market-consistent methodology as described in Section 4 of thisdocument;⚫

The operating assumptions have been set with appropriate regard to past, current
and expected future experience; and⚫

The economic assumptions used are internally consistent and consistent withobservable market data.

Willis Towers Watson has also reviewed the results of the calculations, without howeverundertaking detailed checks of all the models, processes and calculations involved. On
the basis of this review, Willis Towers Watson is satisfied that the disclosed results havebeen prepared, in all material respects, in accordance with the methodology andassumptions set out in this disclosure document.
COVID-19 is an ongoing and continuously evolving issue which is and will continue tohave significant effects on global economic activity and insurance claims experience. The
actual effects of COVID-19 could have an unexpected material impact on our findings.
The level of uncertainty affecting our conclusions and the underlying volatility of actual
outcomes is increased because of the emergence and contingent evolution of COVID-19.
In arriving at these conclusions, Willis Towers Watson has relied on data and information
provided by Lifenet. This opinion is made solely to Lifenet in accordance with the termsof Willis Towers Watson’s engagement letter. To the fullest extent permitted by applicablelaw, Willis Towers Watson does not accept or assume any responsibility, duty of care or
liability to anyone other than Lifenet for or in connection with its review work, theopinions it has formed, or for any statement set forth in this opinion.

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