Financial Section

Financial Review
Indicators Showing the Main Results over the Last Five Fiscal Years
Indicators Showing Results for the Last Three Fiscal Years
Accounting Concepts
1. Financial statements
2. Risk management credits
3. P resent conditions of loans involving trust with contact for replacement of losses
4. Credit obligations based on debtor classification
5. Conditions of solvency-margin ratio
6. Information on market prices(acquisition cost or contract cost, market price and appraisal profit and loss) and others

24Japan Earthquake Reinsurance Co., Ltd. Annual Report 2008

Financial review
The number of earthquake insurance contracts increased as in the previous year, backed by factors such as a higher level of interest in earthquake insurance, while premiums written declinedreflecting the effect of lowering the premium rate. In the meantime, the number and amount ofearthquake insurance payouts rose compared with the previous year due to insurance payouts for
the Niigata Chuetsu offshore earthquake and other earthquakes.
Profits from investments declined from the previous year in the difficult operating environment
where medium- and long-term interest rates continued to fall in Japan, and the yen appreciatedsharply against the dollar in the second half.
Business expenses remained nearly flat from the previous year’s level as a result of our efforts
to achieve efficient business operations and reduce costs.

(1) Outline of earthquake insurance resultsa. Premiums written and insurance claims paid
Earthquake insurance premiums registered a decreasein the current fiscal year as in the previous year, resulting in net premiums written of 64 billion yen.
Earthquake insurance claims paid amounted to 12.3
billion yen, reflecting the fact that the Niigata Chuetsu
offshore earthquake and the Noto Peninsula earthquake occurred in 2007.
b. Underwriting reserves
Risk reserves added amounted to 32.6 billion yen, thetotal of net premiums written was 30.7 billion yen,given by deducting assumed insurance commissions
from net premiums written, and there was a profit of
1.9 billion yen from investments.
Risk reserves at the end of the current term amounted to 433.8 billion yen, reflecting the drawing of 11.2
billion yen from risk reserves in the past year following
the payment of ongoing insurance claims, an increasein outstanding claims, as well as advertising and publicity expenses.
Underwriting reserves at the end of the current term
amounted to 515.5 billion yen after adding unearned
premium reserves and refunded reserves to the risk
reserves.
c. Entrusted reserves
Designated entrusted reserves from the earthquake
insurance account were 423.9 billion yen for the year,
obtained by adding net premiums written and profit
from investments of 23.1 billion yen, and drawing advertising / publicity expenses of 500 million yen.
(2) Outline of investments
Although medium- and long-term interest rates rose inJune 2007, reflecting the prospect of a policy interest

rate hike by the Bank of Japan, the interest rate levelat the end of the current fiscal year was much lower
than it was at the end of the previous year. This mainlyreflects the emergence of uncertainty over the global
economy and the prospect of the BOJ postponing an
additional rate hike based on the fact that overseas
financial markets became temporarily dysfunctional
after August. This was attributable to the subprime
mortgage crisis in the United States and the subsequent credit crunch.
In the first half, the yen remained weak in the foreignexchange market owing to the interest rate differential
between Japan and overseas markets. At the end of
the current fiscal year, however, the exchange rate of
the yen against the dollar was 15% higher than it wasa year ago, reflecting the financial instability triggeredby the subprime mortgage crisis. The exchange rate
for the euro was unchanged from the level at the endof the previous year.
In this environment, we refrained from investing insecuritized products related to the subprime mortgage
and instead invested in assets with the highest priority placed on soundness, followed by profitability. As
a result, profits before tax from investments declined
2.5 billion yen from the previous year to 1.9 billion yen
in the business account, and they fell 2 billion yen to 2
billion yen in the entrusted reserves account, primarily
due to the effect of the stronger yen against the dollar in foreign currency denominated bond investments.
Consequently, investment assets at the end of the current fiscal year were 940.8 billion yen.
(3) Current profit and loss
Net income amounted to 4 million yen after calculating interest, dividend income and corporate taxes.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 200825

Indicators showing the main resultsover the last five fiscal years(Unit: Million yen)

Fiscal Year

Division

2003

2004

2005

2006

2007

Net premiums written(percentage change over the previous term)

50,896(7.0%)

58,198(14.3%)

71,132(22.2%)

67,981(△4.4%)

64,040(△5.8%)

Ordinary incomes(percentage change over the previous term)

66,352(13.5%)

71,856(8.3%)

107,868(50.1%)

90,373(△16.2%)

81,290(△10.1%)

Ordinary expenses(percentage change over the previous term)

66,167(13.8%)

71,758(8.4%)

107,845(50.3%)

90,229(△16.3%)

81,273(△9.9%)

Ordinary profit(percentage change over the previous term)

184(△39.3%)98(△46.7%)23(△76.4%)143(521.1%)16(△88.5%)

Net income(percentage change over the previous term)

17(74.2%)

10(△40.5%)36(243.6%)△16(△146.4%)

4
(–)

1,000
(2 mil. shares)

1,000(2 mil. shares)

1,000(2 mil. shares)

1,000(2 mil. shares)

1,000(2 mil. shares)

Common stock(sum of shares issued)
Net assets

1,579

1,587

1,605

1,600

1,614

Total assets

761,594

804,333

838,555

908,963955,968

Underwriting reserves(percentage change over the previous term)

412,968(5.5%)

415,802(0.7%)

450,892(8.4%)

490,901(8.9%)

515,586(5.0%)(of the balance, risk reserve balance)(percentage change over the previous term)

359,772(5.3%)

355,813(△1.1%)

378,731
(6.4%)

412,364(8.9%)

433,841(5.2%)

Loans(percentage change over the previous term)

–
(–)

–
(–)

–
(–)

–
(–)

–
(–)

Securities(percentage change over the previous term)

682,285(4.6%)

734,046(7.6%)

771,383(5.1%)

851,739(10.4%)

895,513(5.1%)

Solvency-margin ratio

184.3%

182.2%

160.2%

175.3%

185.4%

Dividend propensity

–%

–%

–%

–%

–%

No. of employees

17

18

21

21

24

Note:
Order to specify divisions, provided for in Section 2, Article 132, Insurance Business Law, our solvency-margin ratio is not supposed to be used as acriterion to enable the administrative authorities to trigger an order for improvement.
We conduct no trust business.

Indicators showing results for thelast three fiscal years
q Indicators showing the main business results
2. Underwriting profit

1. Net premiums written
Item: earthquake(Unit: Million yen)

(Unit: Million yen)

Fiscal Year

2005

2006

2007

DivisionPremiums written

143,493

142,841

142,811Return premiums

1,440

1,760

Division

2005

2006

2007

Underwriting incomes

91,001

72,451

67,3203,349

Underwriting expenses

90,58071,804

66,860Operating and generalad­ministrative expenses

421

521

459

Other incomes and expenses

–

△126

–

Underwriting profit

–

–

–

Assumed net premiums
written (A)139,621

139,172

138,086

Reinsurance premiums
ceded (B)68,48871,19074,045

Net premiums written (A-B)

71,132

67,98164,040Note:
1: R eturn premiums: Return premiums of receiving reinsurance.
2: A ssumed net premiums: Produced by deducting return premiums
from receiving premiums.
3: N et premiums written: Produced by deducting paid reinsurance premium ceded from assumed net premiums written.

26

Fiscal Year

Note:
1: T
 he above operating, general and administrative expenses are thoserelating to the underwriting of insurances mentioned in the operating, general and administrative expenses in a statement of profits andlosses.
2: Other incomes and expenses are those equivalent to corporate taxes mentioned in a statement of earthquake insurance profits andlosses.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2008

3. Net claims paide Indicators relating to accounting

Item: earthquake
Division

Fiscal Year

Assumed net claim paid (A)(Unit: Million yen)

2005

2006

2007

24,662

2,240

12,370–––24,662

2,240

12,370

Reinsurance claims
recovered (B)Net claims paid (A-B)

Note:
1: A
 ssumed net claims paid: Produced by deducting surrender value
from ceded insurance money paid.
2: N et claims paid: Produced by deducting reinsurance claims recov­eredby ceded contract from assumed net claims paid.

w Indicators relating to insurance contracts

1.	Amounts of outstanding claims and underwriting
reserves(Unit: Million yen)Division

2005

2006

As of the endof fiscal 2007

1,104

1,545

178

Underwriting reserves

450,892

490,901

515,586

Total

451,997492,446

515,765

2. Detailed listing of liability reserves
As of the end of Fiscal 2006
(Unit: Million yen)
Division(Unit: Million yen)

Fiscal YearAs of the endof fiscal 2006

Outstanding claims

1. L oss ratio, net expense ratio and their combined
ratio
Division

Year As of the endof fiscal 2005

2007

Balance asof the end of
fiscal 2005

Amount ofincrease in
fiscal 2006

Amount ofBalancedecrease
as of the end of
in fiscal 2006
fiscal 2006

Reserve for ordinary
bad debts

–

–

–

–

Loss ratio

37.9%

3.7%

21.0%

Underwriting expenses

28,982

29,34829,198Reserve for individual bad debts

–

–

–

–

(421)

(521)

(459)

Reserve for specificforeign securities

–

–

–

–

Accrued sever­ance
benefits

83

17

3

97

Reserve for directors’ retirement
allowances

7

4

–

11

Reserve for bonus
payment

14

16

14

16

 Insurance related operating,general and administrative
expenses Agency commissions andbrokerage fees

(28,560)(28,827)(28,739)

Net expense ratio

40.7%

43.2%

45.6%

Combined ratio

78.6%

46.9%

66.6%

Note:
1: L
 oss ratio: (Net claims paid + loss adjustment expenses) ÷ net premiums written
2: N et expense ratio: (Agency commissions and brokerage fees + Insurance related operating and general ad­ministrative expenses) ÷ net
premiums written
3: Combined ratio: Loss ratio + net expense ratio

Reserve for pricefluctuation
Total

Fiscal Year

Domestic contract

2005

2006

2007

100%

100%

100%

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

0

–

8

37

18

132

As of the end of Fiscal 2007

2. R
 ate of premiums written by domestic and over­seas contracts
Division7113(Unit: Million yen)
Division

Balance asof the end of
fiscal 2006

Amount ofincrease in
fiscal 2007

Amount ofBalancedecrease
as of the end of
in fiscal 2007
fiscal 2007

Reserve for ordinary
bad debts

–

–

–

–

Reserve for individual bad debts

–

–

–

–

Reserve for specificforeign securities

–

–

–

–

Accrued sever­ance
benefits

97

18

21

94

11

4

2

13

2006

2007

No. of reinsurers that ceded
insurance contracts

18

18

Reserve for directors’ retirement
allowances

Rate of top five reinsurers’
ceded insurance premiums

77.7

77.6

Reserve for bonus
payment

16

17

16

17

Reserve for pricefluctuation

8

0

–

8

132

40

40

133

Note:
The number of reinsurers that ceded insurance contracts is the number
who ceded treaty reinsurance contracts of 10 mil­lion or more yen.

Total

There are no notes about unearned claims paid.
There are no notes about the rate of damage occurrence, the expenses
ratio and rate of sum total before ceded insurance de­duction.
The ratio of ceded insurance premiums by rating does not apply toearthquake insurance.
We pay no contractor dividend.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 200827

3. Detailed listing of shareholders’ equity

5. Profit on sale of securities by category

As of the end of Fiscal 2006

Division(Unit: Million yen)

(Unit: Million yen)

Balance asof the endof fiscal
2005

Division
Common stock

1,000

–

(2 mil. stock)
1,000

Total

Legal
reserve ofretainedearnings
andvoluntary
reserves–(2 mil. stock)
1,000

Ordinarystock

Issuedstock

Amount of Amount of
increase decreasein fiscalin fiscal
2006
2006

Legal
reserve ofretainedearnings–

Balance asof the endof fiscal
2006

–

1,000

–

(2 mil. stock)
1,000

–

(2 mil. stock)
1,000

1

–

–

1

17

–

–

17

Voluntary
reserves

Specialprice
fluctuation
reserves

39

Total

57

–

–

–

39

–

57

(Unit: Million yen)

Balance asof the endof fiscal
2006

Division
Common stock

Amount of Amount of
increase decreasein fiscalin fiscal
2007
2007

1,000

–

–

Balance asof the endof fiscal
2007
1,000

Ordinarystock(2 mil. stock)
1,000

–

–

(2 mil. stock)
1,000

Total

(2 mil. stock)
1,000

–

–

(2 mil. stock)
1,000

1

–

Legal
reserve ofretainedearnings–

1

Voluntary
reserves
Specialreserves

17

–

–

17

39

–

–

39

Total

57

–

–

57

92

426

Foreign securities

–

–

–

92

426

597

Total

597

6. Loss on sale of securities by category(Unit: Million yen)

Fiscal Year

Division

2005

2006

2007

Government bonds

288

246

4

Foreign securities

401

–

66

Total

689

246

70

(Unit: Million yen)

Fiscal Year

Division

––Foreign securities

–

–

–

Total

–

–

–

8. D
 epreciation expenses by category

Type of asset

Acquisition cost

Taxes

(Unit: Million yen)

Aggregateddepreciations

2006

2007

453

343

391

2,512

721

1,397

195

186

177

Agency commissions andbrokerage fees

28,56028,82728,739Total

31,72230,07930,706

Note:
Business expenses are the total of loss adjustment expense, operating,general and administrative expenses, agency commissions and brokerage fees as shown in the income statement.

Balanceas the endof fiscal
2006

Rate of ag­
gregateddepreciations %Buildings

92

2

53

39

57.6

(for
underwriting)

(92)

(2)

(53)

(39)

(57.6)(forinvestment)

(–)

(–)

(–)

(–)

(–)

Others

22

0

19

3

86.5

Total

115

3

73

42

63.3

Software

9

2

4

4

51.3

Other
intangible
fixed assets

0

0

0

0

63.1

9

2

5

4

52.0

125

5

78

47

62.4

Intangible fixed assets

Grand total

Acquisition cost

Tangible fixed assets

Non personnel expenses

Amount ofdepreciation in
fiscal 2006

Tangible fixed assets

4. Business expenses (inclusive of loss adjustment)
2005

2007

–

Type of asset

Personnel expenses

2006

Government bonds

Note:
The number of owned shares was 11,400 as of the end of fiscal 2007.

Fiscal Year2005

As of the end of Fiscal 2007

(Unit: Million yen)

28

2007

Government bonds

Total

Specialprice
fluctuation
reserves

Division

2006

As of the end of Fiscal 2006

As of the end of Fiscal 2007

Legal
reserve ofretainedearnings
andvoluntary
reserves

2005

7. Securities appraisal loss by category

Specialreserves

Note:
The number of owned shares was 11,400 as of the end of fiscal 2006.

Issuedstock

Fiscal Year

Amount ofdepreciation in
fiscal 2007

(Unit: Million yen)

Aggregateddepreciations

Balanceas the endof fiscal
2007

Rate
of ag­
gregateddepreciations %Buildings

94

2

55

38

59.1

(for
underwriting)

(94)

(2)

(55)

(38)

(59.1)(forinvestment)

(–)

(–)

(–)

(–)

(–)

Others

75

3

21

53

29.2

Total

169

5

77

91

45.9

Software

18

3

7

10

43.0

Other
intangible
fixed assets

0

0

0

0

74.6

Total

18

3

8

10

43.9

Grand total

188

9

86

102

45.7

Intangible fixed assets

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2008

9. Loss from disposal of fixed assets

i Investments(Unit: Million yen)

Fiscal Year

Division

2005

2006

2007

Land

(–)

(–)

(–)

Buildings

(–)

(–)

(0)

Other tangible fixed assets

(–)

(–)

(0)

–

–

0

Total

No mention is made about the level of underwriting
reserves because there is no target contract.
Mention about fluctuations of ordinary profit or written loss over the increase in the loss ratio is omitted
because insurance claims are offset by the dispositionof underwriting reserves.
There are no notes about the loan write-off and profit from property and equipment.
r Special deposit premium account

1. Investments policy	Because we have to pay a substantial amount ofclaims promptly in the event of a natural disastersuch as a major earthquake, we put in principle thehighest priority on safety and liquidity in operating
our assets, followed by profitability to increase risk
reserves. The risk management division is engaged
in monitoring and controlling risks of all kinds, inde­
pendently of the transactions execution division.
2. Investments in outline
Deposits

(Unit: Million yen)DivisionYear

As of the endof fiscal 2005

Deposits

As of the endof fiscal 2006

38,02629,986

31,077(Ordinary deposit)(10,696)(4,586)(6,777)(Time deposit)(27,330)(25,400)(24,300)

Total assets and investments assets

Nothing is to be mentioned.
tE arthquake insurance underwriting reserves by
category

As of the endof fiscal 2007

Fiscal
Year

2005

2006

Percentage
distribution(%)

Division(Unit: Million yen)

2007

Percentage
distribution(%)

Percentage
distribution(%)(Unit: Million yen)

Deposits

38,026

4.5

29,986

3.3

31,077

3.3

As of the endof fiscal 2005

As of the endof fiscal 2006

As of the endof fiscal 2007

Call loans

–

–

–

–

–

–

Risk reserve378,731412,364

433,841

1,799

0.2

999

0.1

499

0.0

Unearned premium
reserve

69,521

76,24579,695

MonetaryreceivableboughtMoney trust

15,528

1.9

13,958

1.5

13,723

1.4

Repayment reserve

2,639

2,291

2,050

Securities

771,383

92.0 851,739

93.7 895,513

93.7

450,892

490,901

515,586

Buildings

42

0.0

0.0

38

0.0


Division

Total

Year

y	The conditions at the end of the current fiscal
year (runoff result) of outstanding claims(estimated amount) at the beginning of the term
do not apply to earthquake insurance.
u	The amount of estimated final damages
associated with the elapse of a period fromthe occurrence of accidents does not apply toearthquake insurance.

39

Total ofinvestments
assets826,779

98.6 896,723

98.6 940,851

98.4

Total assets

838,555

100.0 908,963

100.0 955,968

100.0

3. A
 mount of interest and dividend received andin­vestment assets yield (income yield)(Unit: Million yen)

Fiscal
Year

2005

2006
Yield

Division

2007
Yield

Yield

Deposits

91

0.20

143

0.33

215

0.67

Call loan

0

0.05

–

–

–

–

Monetaryreceivablesbought

4

0.12

2

0.30

7

0.76

Money trust

86

0.57

52

0.38

94

0.69

Securities

10,3071.40

11,705

1.46

12,894

1.49

Buildings

–

–

–

–

–

–

10,4901.31

11,904

1.39

13,211

1.45

Total

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

Japan Earthquake Reinsurance Co., Ltd. Annual Report 200829

4. Assets management yield (realized yield)(Unit: Million yen)

FiscalYear Amount of

2006

2007

Deposits

143

215

Amount ofdenominator
32,094

Call loan

–

–

–

–

–

–

Bond trading with
repurchase agreement

–

–

–

–

–

–

Monetary receivablesbought

2

842

0.30

7

921

0.76

Commodity securities

–

–

–

–

–

–

Money trust

265

13,7301.93

182

13,750

1.33

Securities

11,885

799,894

1.49

13,421

864,185

1.55

4,874

589,636

0.83

5,875

634,883

0.93

–

–

–

–

–

–

7,005

198,508

3.53

7,187

220,908

3.25

Total

5

11,749

0.05

357

8,393

4.26

Yield onforeign loans &investment

numerator

Public andcorporate bonds
StocksForeign securities
Other securities

Amount ofnumerator

Yield onworking
assets (%)
0.67(Unit: Million yen)Amount ofdenominator
43,612DivisionYield onworking
assets (%)
0.33

6.	Balance, percentage distribution and yield ofForeign Loans & Investments

Loan

–

–

–

–

–

–

Buildings

–

41

–

–

39

–

△3,425––△9,501––Others

65

–

–

47

–

–

Total

8,938

858,121

1.04

4,372

910,991

0.48

Financial derivative(Unit: Million yen)

2007

Deposits

143

Amount ofdenominator
43,612

Call loan

–

–

–

–

–

–

Bond trading with
repurchase agreement

–

–

–

–

–

–

Monetary receiv­ablesbought

2

842

0.30

7

921

0.76

Commodity securities

–

–

–

–

–

–

Division

Money trust
Securities
Public andcorporate bonds

numerator

Yield onworking
assets (%)
0.33

Amount ofnumerator
215

Amount ofdenominator
32,094

Yield onworking
assets (%)
0.67

96

14,1280.68△72

13,978△0.52

16,588790,4312.10

19,955

859,425

2.32

8,817

583,484

1.51

9,983

632,674

1.58

–

–

–

–

–

–

Foreign securities

7,589

195,301

3.89

9,838

218,285

4.51

Other securi­ties

180

11,646

1.55

133

8,465

1.58

Stocks33,90516.8

23.8

88,00336.6

201,642100.0 213,950

100.0 240,414

100.0

Yen
denominatedForeign publicand corporate
bonds

3.36%

3.53%

3.28%

Assetsmanagement(realized
yield)

3.13%

3.53%

3.25%

Market-pricebased overall
yield (for reference)

1.13%

3.89%

4.51%

Note:
1. O
 f the yield on foreign loans & investments, the investment assets
yield was calculated in the same manner as 3., Amount of interestand dividend received and yield on investment assets (income yield) inconnection with the assets involving foreign investment.
2. O
 f the yield on foreign investments, the asset management yield wascal­culated in the same manner as 4., Asset management yield (realized yield) in connection with the assets involving foreign investment.

7.	Balance of securities by category and percentage
dis­tribution(Unit: Million yen)



Year

As of the end of
fiscal 2005

Govern­ment
bonds

310,554

Municipal
bonds

4,476
239,851

–

–

–

–

–

–

–

39

–

Corporatebonds△3,425––△9,501––

Stocks

65

–

–

47

–

–

201,642

13,470849,058

1.59

10,650906,460

1.17

Foreignsecurities
Other
securities
Loan
receivable insecurities
Total

Denominator = acquisition cost or write-off based average balance + after-tax unrealized gain for previous year of other securi­ties + profit and loss for the previous year
related to se­curities for transaction*Based on the amount before tax effect deduction

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2008

As of the end of
fiscal 2006

Percentage
distribution(%)

Division

41

Numerator = (income from operated assets management + investment income on savings premium – expenses for assets man­agement) + (after-tax unrealized gain for theyear – after-tax unrealized gain for previous year)* + fluctuation in deferred hedge profit
and loss

50,819Investment
assets yield(income yield)

–

Total

Percentage
distribution
(%)

63.4

–

Note:
Market-price based overall yield: indicator showing the efficiency of op­eration on a market price basis. The nu­merator reflects realized profit and loss and fluctuations in market price appraisal while the denominator is market-price based assets.

Percentage
distribution(%)

76.2 152,411

Loans

Others

As of the end of
fiscal 2007

83.2 163,130

Buildings
Financial deriva­tive

30

Percentage
distribution(%)

Foreign publicand corporate 167,736
bonds

Denominator = acquisition cost or writing-off cost based average bal­ance

2006

As of the end of
fiscal 2006

Foreign currency
denominatedNumerator = profit from asset management + investment income on sav­ings premiums– expenses of assets management

FiscalYear Amount of

As of the end of
fiscal 2005

Division

Note:
Asset management yield (realized yield): indicator to show the result of managing ofassets from the point of contribution to the current profit and loss. The numerator isrealized profit and loss while the denomi­nator is an acquisition cost based assets.

5. Market-price based overall yield (for reference)

Year

–

As of the end of
fiscal 2007

Percentage
distribution(%)

Percentage
distribution(%)

40.3 411,753

48.3 449,201

50.2

0.6

0.5

4,404

0.5

25.0 191,835

21.4

4,390

31.1 212,777––

26.1 213,950

25.1 240,414

26.8

14,858

1.9

8,869

1.1

9,658

1.1

–

–

–

–

–

–

100.0 895,513

100.0

771,383––

100.0 851,739–

8. Yield on securities held

As of the end of fiscal 2007	(Unit: %)
Division

Fiscal Year

2005

2006

2007

Division

Up to 1year

3 overup to 5years

Govern­ment
bonds

134,967 159,353 127,555–

Investment assets yield (income yield)
Public & corporate bonds(Unit: Million yen)

5
over
up
to 7
years

1 overup to 3years

7 over
up to
10
years

Over
10
years

0.78

0.76

0.85

–

–

–

Foreign securities

3.36

3.53

3.28

Other securities

0.56

2.06

3.06

Municipal
bonds

1,825

2,578

–

–

–

Total

1.31

1.46

1.49

Assets management yield (realized yield)

Corporatebonds

51,57590,62547,724309

1,600

Public & corporate bond

Stocks

–

–

–

–

–

33,041 134,039

45,141

Stocks

0.74

0.83

0.93

–

–

–

Foreign securities

3.13

3.53

3.25

Other securities

△0.52

0.05

4.26

0.82

1.49

1.55

1.51

1.58

Stocks

Total

Market-price based overall yield (for reference)△1.29

Public & Corporate bonds
Stocks–––Foreign securities

1.13

3.89

4.51

Other securities

△0.46

1.55

1.58

Total

△0.98

2.10

2.32

Foreignsecurities

Total

3,842 23,482 449,201
–

4,404

– 191,835–– 28,192–– 240,414

Othersecurities

–

–

–

–

–

9,658

9,658

Loan
receivablein securities

–

–

–

–

–

–

–

Total

221,410 386,596 220,421

309 33,634 33,140 895,513

10. Tangible fixed assets by breakdown(Unit: Million yen)

9. Balance Current Maturity of securities by category
As of the end of fiscal 2006	
Division

Govern­
ment
bonds

Less
than 1year

1 to less 3 to lessthan 3than 5
years
years

48,073 126,365 211,470(Unit: Million yen)

5 to
less
than
7
years
–

7 to
less
than
10
years

–
47,93994,26370,077

99

397

–

–

–

–

–

4,312

21,464 112,657

77

61,789––– 18,037–

4,390– 212,777––– 213,950

Othersecurities

–

995

–

–

–

7,874

8,869

Loan
receivablein securities

–

–

–

–

–

–

–

Total

Year

Land
(for underwriting)

117,478 338,594 343,414

99 18,435 33,717 851,739

As of the endof fiscal 2005

As of the endof fiscal 2006

As of the endof fiscal 2007

–

–

–

(–)

(–)

(–)

(for investment)

(–)

(–)

(–)

Buildings

42

39

38

(for underwriting)

(42)

(39)

(38)

(for investment)

(–)

(–)

(–)

–

–

–

(–)

(–)

(–)

Construction in progress(for underwriting)Corporatebonds
Foreignsecurities

Total– 25,843 411,753

Municipal
bonds

Stocks10
years
orlonger
Division(for investment)

(–)

(–)

(–)

Total of property

42

39

38
(38)

(for underwriting)

(42)

(39)

(for investment)

(–)

(–)

(–)

Other tangible fixed assets

2

3

53

Total

45

42

91

There are no notes with respect to the following 11
items:
1. Commodity securities
2. A
 verage balance and sales amount of commodity
securities
3. Amount of stocks held by type of business4. Balance current maturity of loan by remaining life
5. Balance of loans by type of collateral secured
6. B alance and percentage distribution of loan bydesignated use
7. B alance of loan by industry and its ratio to the total
8. B alance of loan by debtor size and its ratio to the
total
9. A
 mount of loan & investment to public works (on abasis of newly undertaken loan)
10. Housing-related loan
11. Loan interests

Japan Earthquake Reinsurance Co., Ltd. Annual Report 200831

ACCOUNTING CONCEPTS
1. Financial statements❶ Balance sheets(ASSETS)
(Unit: Million yen)

Fiscal Year2006
(As of March 31, 2007)
AmountItem
Cash & deposits
Deposits
Monetary receivableboughtMoney trust
Securities
Government bonds
Municipal bonds
Corporate bonds
Foreign securities
Other securities
Tangible fixed assets
Buildings Other tangible fixed
assetsIntangible fixed assets
Software Other intangible fixed
assetsOther assets Reinsurance balancereceivable
Accounts receivable
Uncollected income
Deposits
Suspense payment
Financial derivative
Deferred tax assets   Total assets

Percentage
distribution

29,98629,986

3.3

999
13,958
851,739
411,753
4,390
212,777
213,950
8,869
42
39

Item

Fiscal Year

32

AmountPercentage
distribution

Common stock

1,000

0.1

1,000

0.1

Retained earnings

600

0.1

604

0.1

 Legal reserve of retained
earnings

1

1

1.5
93.7

13,723
895,513449,201
4,404
191,835
240,414
9,658
91
38

1.4
93.7

 Other legal reserve ofretained earnings

599

603

  Special reserves

1717  Special price fluctuation
reserves

39

39  Retained earnings
brought forward

542

Treasury Stock

△5

△0.0

△5

1,594

0.2

1,598

0.2

 et unrealized holding gainNon securities

5

0.0

15

0.0

 Total valuation andtranslation adjustments

5

0.0

15

0.0

1,600

0.2

1,614

0.2

908,963100.0

955,968

100.0

0.0

0.0

Total shareholders’ equity

53
0.0

10
10

0.0

0
1.3

14,993

Total net assets

1.6

Total liabilities and net
assets

292
3,348
51
96
161
76

0.0

464
3,500
51
160
3,195
59

0.0

908,963100.0

955,968

100.0(Unit: Million yen)

2006
2007
(As of March 31, 2007) (As of March 31, 2008)

907,363

Percentage
distribution

0.1

7,620

AmountAmount2007(As of March 31, 2008)

499

8,205

Underwriting funds
492,446
Outstanding claims
1,545
Underwriting reserves
490,901
Entrusted reserves
401,383
Other liabilities
17,940
Reinsurance balance payable
5,457
Corporate taxes payable
195
Deposits payable2
Accrued amounts pay­able
756
Financial derivative
11,528
Accrued serverance benefits
97
Reserves for directors’
11
retirement benefit
Reserves for bonus
16
payment
Price fluctuation reserves
8
Net unrealized gains
on other securities of△4,540earthquake insurance
Total liabilities

Item(Unit: Million yen)

2006
(As of March 31, 2007)

0.1(LIABILITIES)


Fiscal Year3.3

012,155Percentage
distribution

Amount

31,07731,0773
4
4

2007(As of March 31, 2008)(NET ASSETS)

Percentage
distribution
54.2

AmountPercentage
distribution
54.0

0.0

515,765
178
515,586
423,983
12,749
5,456
82
2
403
6,804
94

0.0

13

0.0

0.0

17

0.0

0.0

8

0.0

△0.5

1,722

0.2

99.8

954,353

99.8

44.2
2.0

44.4
1.3

0.0

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2008

546
△0.0

1. A
 ppraisal standards and method of securities, andmeth­od of indication(1) O f other securities, those to which the market
price is applicable is appraised according to themar­ket price at term end.
(2) Of other securities, those to which the market
price is not applicable is appraised based on
cost or write-off cost price using the movingaver­age method.
(3) W ith respect to the unrealized gain of assets
corresponding to the underwriting reserves andentrusted reserves of earthquake insurance, theamount before tax effect deduction is shown as
an Net unrealized gains on other securities ofearthquake insurance in Liabilities, according to
the pertinent Enforcement Rules of Insur­ance
Business Act. For other unrealized gains, theamount after tax effect deduction is processed
entirely according to the direct capital injection
method and indicated in Shareholders’ Equity.
The calcula­tion of the sales price is based on
the moving average method.
2. Appraisal standards and method of money trust(1) In money trust exclusively operated centering onse­curities, the appraisal of securities operated
as trust assets is done on the basis of market
price.
(2) In money trust exclusively operated with a viewto hold­ing securities which is not intended to be
operated or held to maturity, the appraisal of
securities operated as trust assets is done in thesame manner as other securities.
3. T he appraisal of derivatives is done on the basis ofmarket price.
4. A lthough depreciation of tangible fixed assets is calculated using the declining balance method, buildings (excluding equipment attached to buildings)
that were acquired on and after April 1, 1998 weredepreciated using the straight-line method.
5. C hanges in accounting policies 			In accordance with the corporate tax law revision,
we have changed the depreciation method for tangible fixed assets acquired on or after April 1, 2007
to the one based on the revised corporate tax law inthe current fiscal year. The impact of this change on
earnings is minor. 				(Additional information) 				For those tangible fixed assets acquired on andbefore March 31, 2007 that had already been depreciated to the depreciable amount, the difference
between the residual book value and the memorandum value is depreciated evenly for five years inaccordance with the revised corporate tax law. The
impact of this change on earnings is minor.
6. S oftware for in-house use that is recorded as an intangible fixed asset is amortized using the straightline method.
7. T he conversion of foreign cur­rency assets and liabilities into Japanese currency is processed according to the accounting standards for foreign cur­rencytransactions.
8. W
 riting standards of reserves(1) Reserve for bad debts
		Reserves for bad debts are written as follows
against losses from bad debts in accordancewith the self-appraisal standard of assets anddepreciation and re­serve standards.
		  In connection with claims against debtors
who have gone bankrupt legally and formally,
including bankrupt­cy, special liquidation or disposition by suspension of business at a clearing
house, or debtors who are effectively bankrupt,
the rest of any of the claims deduct­ing an estimated amount of disposable mortgage and adeductible amount by guarantee was appropriated for such reserves.
		  In connection with the other claims, the rateof bad debts calculated according to past bad
debts and other factors is multiplied by theamount of claims to ap­propriate for reserves.
		  In addition, all claims are written after thefinance department appraises the assets, andthe result is au­dited by the management department independent of the finance department to appropriate the appraisal for reserves.
		  There are no assets in the current term thatare to be appropriated for reserves, and no reserve is re­quired.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 200833

(2) Reserves for employees’ retirement
		For employees’ retirement and severance benefits, re­serves is appropriated according to theretirement allowance liabilities at the end of
the term and the esti­mated amount of pension
assets. The retirement allow­ance liabilities iscalculated using a simple method on the basisof the allowance to be supplied at the end of
the term for any employee who retires for his/her own reasons.
(3) Reserves for directors’ retirement benefit		For reserves for directors’ retirement benefits, thebenefits to be paid at the end of the term are recorded according to the relevant in-house rules.
(4) Accrued bonuses for employees		Accrued bonuses for employees’ bonus is calcu­
lated according to the standards of estimatedbonus payable.
(5) Reserves for price fluctuation
		To prepare for a loss from price changes ofshares and others, reserves are appropriatedaccording to Ar­ticle 115, Insurance BusinessLaw.

13. Total deferred tax assets amount to 78 million yen,while total deferred tax liabilities come to 13 million yen. The amount deducted from deferred tax
assets as a valuation reserve is 5 million yen. The
breakdown of deferred tax assets reveals unpaid
business taxes of 29 million yen, a retirement benefit reserve of 34 million yen and a bonus reserveof 6 million yen. The deferred tax liabilities result
primarily from an unrealized gain of 9 million yen
on securities.
14. In addition to the equipment mentioned in B/S,
some computers are used on a lease contract.
15. N
 et assets per share are 812.01 yen. The basis forthis calculation is that net assets are 1,614 million yen, net assets accrued from ordinary sharesare 1,614 million yen and the number of ordinary
shares at the end of the term is 1.988 million.
16. The amounts are indicated by rounding down any
amount not reaching the unit as mentioned.

9. T axes are excluded when preparing accounts for
consump­tion tax and other items. However, taxes
are included when recording loss adjustment expenses and operating, general and administrative
expenses. Consumption taxes and other items for
assets that are not subject to deductions are recorded as suspense payments and written down by anequal amount over five years.
10. T he risk reserves contained in the underwriting
reserves have been deposited according to the instructions for the cal­culation of liability reserves
by accumulating the amounts resulting from subtracting an amount equivalent to corporate taxes
from the net premiums written and profit from operating the assets.
11. F
 inancial lease transactions other than those inwhich the owner­ship of the leased item is deemed
to be transferred to the leaseholder are processed
according to the method equivalent to that of ordinary lease transactions.
12. T he accumulated depreciation of tangible fixed assets is 77 million yen.

34

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2008

❷ Statements of income(Unit: Million yen)

Fiscal Year

Item
Ordinary incomes

2006

2007

(from April 1, 2006
to March 31, 2007)(from April 1, 2007
to March 31, 2008)

AmountAmountNotes for fiscal 2007
1. S
 ee below for the net premiums written by breakdown.
Premiums written:

138,086 (million yen)

Reinsurance premiums ceded:

74,045 (million yen)

Net premiums written:

64,040 (million yen)

90,373

81,290Underwriting incomes

72,451

67,320   Net premiums written

67,98164,040

–

1,366

4,469

1,912

Investment income

17,92013,970   Interest and dividend income

11,851

13,116

Interest on deposits:

215 (million yen)   Profit from operating monetary trust

265

190

   Realized gain on sale of securities

426

597

Interest on monetary
receivable bought:

7 (million yen)

–

1,890

Interest on securities:

12,894 (million yen)

9,779

–

66

86

Total:

13,116 (million yen)

△4,469△1,912

1

0   Reversal of outstanding claims  Investment income on savings
premium, etc   Financial derivative gain   Foreign exchange gain   Profit from other operations  Transfer of profit from Investment
income on savings premiums
Other ordinary incomes
Ordinary expenses
Underwriting expenses   Net claims paid   Loss adjustment expenses  Agency commissions and brokerage
fees

90,22981,27371,804

66,8602,240

12,370287

1,065

28,82728,739   Provision for outstanding claims440–   Provision for underwriting reserves

40,00824,685

13,452

11,509Investment expenses   Loss from operating monetary trust–7   Realized loss on sale of securities

246

70

   Financial derivative cost   Foreign exchange loss   Other operation cost Operating, general and administrative
expenses
Other ordinary expenses   Interest paid   Other ordinary expenses
Ordinary profit
Extraordinary losses
Loss on disposal fixed assets
Provision for price fluctuation reserve

13,205––

11,392

0

39

964

901

4,008

2,001

4,008

2,001

–

0

143

16

0

0

–

0

0

0

Income before taxes

143

16

Income taxes – current

158

0

Income taxes – deferred

2

11

△16

4

Net income

2. T he interests and dividends income are given below
by category:

3. P aper profit/loss involved in the financial derivative
expenses is a loss of 3,608 million yen.
4. The
net income per share is 2.21 yen.
T
 he basis for this calculation is such that the net income is 4 million yen, the net income accrued fromordinary shares is 4 million yen and the term average No. of ordinary shares amount to 1.988 million.
5. T he legal effective tax rate at the end of the term is36.21%, and the corporate tax burden after applying
the tax effect is 72.88%. The difference is explainedby the following breakdown: the change in valuation
reserves is 32.22%, the amount of the write-off carried from publicity expenses related to risk reservesis △462.84%, the profit surplus from operating
unearned premium deposits is △212.92%, and thetax loss carried forward is △675.75%.
6. E
 ach amount is rounded down to the nearest wholeunit.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 200835

❸ Statements of cash flow
(Unit: Million yen)

Fiscal Year

Item

2006

2007

(from April 1, 2006
to March 31, 2007)(from April 1, 2007
to March 31, 2008)

AmountAmountNotes:
1. R elationship of cash and cash equivalents at the end of the year withthe amounts mentioned in the relevant balance sheet item.
(Unit: Million yen)

Ⅰ. Cash flow from operating activities
143

16

Cash & deposits

59

Monetary receivables bought

Increase in outstanding claims

440△1,366

Increase in underwriting reserves

40,00824,685

Increase in entrusted reserves

23,99322,600

Increase in reserves for employees’
retirement and severance benefits

13△3

Increase in directors’ retirement
benefit reserves

42

Increase in accrued bonuses for
employees

1

1

Net profit before income taxes
Depreciation

Increase in reserve for pricefluctuation00Interest and dividend income△11,851△13,116

Gain or loss on investment insecurities

△180

△527

Foreign exchange gain or loss

△7,113

13,726

Gain or loss on tangible fixed assets–

0

Increase in other assets (other thaninvestment and financial activities
related)102

348

Increase in other liabilities (otherthan investment and financial
activities related)

121

△353

Others

1,068△7,764    Subtotal

46,757

38,258

11,295

12,695Interest and dividends received
Income taxes paid
Net cash provided by operating activities

△51

△107

58,00150,846

Net increase in deposits at bank

1,930

1,100

△499

–

Proceeds from the sales or maturityof monetary receivables

1,498

–

Expenses for increase in monetary
trust

–

△20

Proceeds from sales of money trust
Purchase of securities
Proceeds from sales and redemptionof securities
Ⅱ ① Subtotal–△848,698

444,088798,528△63,912△49,090(△5,910)(1,756)

Acquisition of tangible fixed assets

△0

△55

Others△0△9△63,913△49,155––      (Ⅰ＋Ⅱ ①)

Net cash used in investing activities
Ⅲ. Cash flow in financing activities

36

1,400
△512,329

Ⅳ. Effect of exchange rate changes oncash and cash equivalents––

Ⅴ. Net change in cash and equivalents△5,911

1,691

Ⅵ. Cash and cash equivalents at the
begin­ning of the year

11,496

5,585

Ⅶ. Cash and cash equivalents at the endof the year

5,585

7,276

(As of March
31, 2008)

29,986

31,077999

499

Securities

851,739

895,513

Deposits of a depository periodof three months or longer△25,400△24,300

Securities other than cash equivalent△851,739△895,513

5,585

7,276

Cash and cash equivalents

2. C ash flow in investing activities includes cash flow from the investment
assets operations in the insurance business.

Ⅱ. Cash flow from investing activities
Acquisition cost of monetary
receivables bought(As of March
31, 2007)

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2008

❹ Statement of Changes in Shareholders’ Equity
For fiscal 2006 (from April 1, 2006 to March 31, 2007)(Unit: Million yen)
Shareholders’ equity
Capital surplus
Capitalstock
Balance as of March 31, 2006

Other
capitalreserve

Capitalsurplus

Earned surplus
Total
capitalsurplusLegalearnedreserve
1

1,000

Total
earnedsurplusTreasury
stock

Total
shareholders’equity

559

617

△5

1,611

△16

△16

△16

△16

542

600

Other earned surplus
Specialreserves

Special pricefluctuation
reserves

Earned surplus carriedforward

17

39

Amount of change during the term
Issuance of new shares
Dividends from surplus
Net income△16

Net amount of changes in items otherthan owners’ equity during the term
Total change during the term
Balance as of March 31, 2007

1000

1

17

39

Valuation and translation adjustments
Net unrealized
gains on othersecurities

Deferred gains orlosses on hedges

Land revaluation
surplusStocksubscription
rightsTotal valuationand translation
adjustments

△16
△5

1,594

Total net assets△5△5

Net amount of changes in items other than owners’
equity during the term

11

11

11

Total change during the term

11

11

△5

Balance as of March 31, 2007

5

5

1,600

Balance as of March 31, 2006

1,605

Amount of change during the term
Issuance of new shares
Dividends from surplus△16

Net income

Notes:
1. The number of shares issued as at the end of fiscal 2006 is 2 million shares of common stock.
2. The number of treasury stock at the end of fiscal 2006 is 11,400 shares of common stock.

For fiscal 2007 (from April 1, 2007 to March 31, 2008)(Unit: Million yen)
Shareholders’ equity
Capital surplus
Capitalstock
Balance as of March 31, 2007

Capitalsurplus

Othercapitalreserve

Earned surplus
Total
capitalsurplusTotal
earnedsurplusTreasury
stock

Total
shareholders’equity

542

600

△5

1,594

4

4

Other earned surplus

Legalearnedreserve

Specialreserves

Special pricefluctuation
reserves

Earned surplus carriedforward

1

17

39

1,000

Amount of change during the term
Issuance of new shares
Dividends from surplus
Net income

4

Net amount of changes in items otherthan owners’ equity during the term
Total change during the term
Balance as of March 31, 2008

1000

1

17

39

Valuation and translation adjustments
Net unrealized
gains on othersecurities
Balance as of March 31, 2007

Deferred gains orlosses on hedges

Land revaluation
surplus

4

4

546

604

Stock
subscription
rightsTotal valuationand translation
adjustments

4
△5

1,598

Total net assets

5

5

1,600

Net amount of changes in items other than owners’
equity during the term

9

9

9

Total change during the term

9

9

14

Balance as of March 31, 2008

15

15

1,614

Amount of change during the term
Issuance of new shares
Dividends from surplus
Net income

4

Notes:
1. The number of shares issued as at the end of fiscal 2007 is 2 million shares of common stock.
2. The number of treasury stock at the end of fiscal 2007 is 11,400 shares of common stock.

❺ Dividend per stock and total assets per employee(Unit: Million yen)
Fiscal Year
Division
Dividend per stock
Net income per stock
Dividend propensity
Net assets per stock
Total assets per employee

2005

2006

2007

–
18.23 yen–807.42 yen
39,931–△8.47 yen–804.80 yen
43,283–2.21 yen–812.01 yen
39,832

Notes:
1. N
 et income per share comes from net income / term average No. of stocks
2. T he number of treasury stock is deducted from producing information
per stock
3. T he total assets per employee come from the total assets at the end of
the term / No. of employees at the end of the term.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 200837

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

3. P resent conditions of loans involving trustwith contact for replace­ment of losses
No notes required.

4. C redits obligations based on debtor
classification
There are no notes about the following four items:(1) B ankrupt or bankrupt for all intents and pur­poses(2) On verge of bankruptcy(3) Financial status needs careful monitoring(4) Financial status normal

5. Conditions of solvency-margin ratio(Unit: Million yen)

Year

As of
the endof fiscal
2005

As of
the endof fiscal
2006

As of
the endof fiscal
2007

Total of solvency-margin
Total of stockholders’ equity
Price fluctuation reserve
Risk reserve
Catastrophe reserves
Reversal for ordinary bad debts
Variance of estimate for other(A) securities (excluded deductions for Tax
Consequences) unrealized gain / loss on
securities available for sale
Unrealized gain and loss included landholdings
Funding instruments with a debt-like nature
Items deductible
OthersTotal risk√(R1 + R2)2 + (R3 + R4)2 + R5 + R6
General underwriting risk (RI)
Underwriting risk in third-area insurance (R2)
(B)
Anticipated Rate of Return Risk (R3)
Investment risk (R4)Management risk (R5)
Catastrophe risk (R6)
Solvency-Margin ratio(C)[(A) / { (B) x 1 / 2 }] x 100

375,606
1,611
7–
378,731–411,6871,594
8–412,364–

436,505
1,598
8–
433,841–△4,743△2,279

1,057

–

–

–

–
–
–

–
–
–

–
–
–

468,880

469,506

470,696

–
–
–
7,676
9,193
452,010

–
–
–
8,290
9,206
452,010

–
–
–
9,457
9,229
452,010160.2%

175.3%

185.4%


Division

Notes:
1. T he amounts and figures above are calculated based on the provisions ofArticle 86 and Article 87 of the Enforcement Rules of the Insurance Business Act and the Ministry of Finance Official Notification No.50 in 1996.
“Total of stockholders’ equity (other than estimated outflow to the outside,
deferred assets and net unrealized gains on other securities)” was presented
as “Total of net assets (other than estimated outflow to the outside, deferredassets and net unrealized gains on other securities)” before fiscal 2007.
2. T he method of calculating the solvency margin was changed
at the end of fiscal year 2007, in association with the amendment of the Enforcement Rules of Insurance Business Act. Therefore, figures to fiscal 2006 and those at the end of the fiscal
year under review are calculated based on different standards.

38

Solvency-margin ratio
The non-life insurance company deposit reserves incase that they pay in­surance money for any insurance
accident that occurred or refund de­pository insurance
at maturity. It is also necessary for them to maintaina satisfactory ability to make payments or solvency
even in case of unusual, unforeseeable risk, including
a huge disaster or sharp drop in price of such assets
as owned by them.
The rate of “Non-life insurance company’s ability tomake payments by owned assets and reserves (A in theabove table) over any risk unfore­seeable (B in the abovetable)” is indicated as the solvency-margin ratio (C inthe above table) which is calculated according to thepertinent rules, including the Insurance Business Law.
[Unforeseeable risk] (Total of risks): Sum of 1~5
1. G eneral underwriting risk: risk associated with aninsurance accident rate that is higher than normallypredictable (other than the risk associated with ahuge disas­ter).
2. A
 nticipated ratio of Return Risk: risk that mightarise when actual yields from operation are lower
than original at the time of calculating premiums ofa deposi­tory insurance
3. Investment risk: management risk that might arise
when the value of assets owned including securities
changes in an unforeseeable manner.
4. M anagement risk: risk that might arise on businessman­agement in an unforeseeable manner, otherthan 1~3 and 5.
5. C
 atastrophe risk: risk that might arise with a hugedisaster (such as the Great Kanto Earthquake) which
is nor­mally unforeseeable.
[Capability of payment by non-life insurance company owned capital and reserves] (Total of solvencymargin)
The total of capital owned by a non-life insurance company, reserves (price fluctuation reserve, catastrophe reserve, securities and part of latent profit from land, andso on)The solvency-margin ratio is one of the indicators
used when the admin­istrative authorities check insurance companies to determine the sound­ness of management for supervisory purposes. When the rate is
200% or more, the insurance company is deemed satisfactory in terms of its ability to make insurance andother payouts.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2008

◎ JER has entered into a reinsurance contract with thegovernment of Japan for earthquake insurance in accordance with Law concerning Earthquake Insurance.
The law stipulates in addition that the govern­ment takes
responsibility for support and for lending funds for thepayment of insurance money. Because this is a form ofspecial business, JER’s solvency-margin ratio is not usable as a figure to enable the administrative authorities
to trigger an order for improvement, irrespective of theabove solvency-margin ratio, as provided for in Section
4, Article 3, Order to specify the division stated in Section 2, Article 132, Insurance Business Law.
Note: The article is as follows.
[In the event that an insurance company has enteredinto a reinsurance contract with the government asstated in Section 1, Article 3, Law con­cerning Earthquake Insurance (law No. 73, 1966), any order to beissued according to the listed division in Section 1 of
the Article applicable to the insurance company shallbe issued in accordance with the list of inapplicabledivision.]

6. I nformation on market prices (acquisition costor contract cost, market price and appraisal
profit and loss) and others❶ Securities
1. Other securities with market priceAt the end of fiscal 2006
Division

Securities withacquisition costhigher than thatposted on thebalance sheet

Securities withacquisition cost
not higher thanthat posted on thebalance sheet

Total(Unit: Million yen)Type

Acquisition
cost

Public &corporatebonds

197,594

StocksForeignsecurities

Book value

Division

Securities withacquisition costhigher than thatposted on thebalance sheet(Unit: Million yen)Type

Acquisition
cost

Public &corporatebonds

392,773

396,684

3,910

–

–

–

91,443

101,414

9,971

–

–

–

Subtotal

484,217

498,098

13,881

Public &corporatebonds

250,768

248,756△2,012

StocksForeignsecurities
OthersSecurities withacquisition cost
not higher thanthat posted on thebalance sheet

StocksBook value

Difference

–

–

–

Foreignsecurities

145,511

139,000△6,511Others

9,810

9,658

△152

Subtotal

406,090

397,414△8,675890,307895,513

5,206

Total

2. Other securities sold at the term
(Unit: Million yen)

Fiscal 2006

Fiscal 2007

Type

Sales
price

Total ofprofit on
sale

Total ofloss on
sale

Sales
price

Total ofprofit on
sale

Total

67,531426

246

120,027

597

Total ofloss onsale△70

There are no notes with respect to the following items:
1. Securities held for trading purposes
2. S
 ecurities to be held until maturity and with market
price
3. S
 ecurities sold at the term which were to be held
until maturity
4. M ain contents of securities without market priceand the amounts posted on the balance sheet.

Difference

198,763

1,169

–

–

–

156,809

171,806

14,996

Others

2,800

2,921

121

Subtotal

357,203

373,492

16,288Public &corporatebonds

433,535

430,156△3,378–––Foreignsecurities

42,60342,143△460

Others

5,997

5,947

△50

Subtotal

482,136478,247△3,888839,340

851,739

12,399StocksAt the end of fiscal 2007

❷ Money trust
1. Money trust for investment(Unit: Million yen)

As of end of fiscal 2006
Type

Money trust

As of end of fiscal 2007

Amountposted on
the balance
sheetAppraisaldifferencecontained in
profit/loss

Amountposted on
the balance
sheetAppraisaldifferencecontained in
profit/loss

10,000–10,000–2. Money trust for maturity
Nothing to be mentioned.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2008

39

3. O
 ther money trusts with any other purpose thanop­eration and maturity(Unit: Million yen)

As of the end of fiscal 2006

As of the end of fiscal 2007

Type

Acquisi­
tion
cost

Book
value

Differ­ence

Acquisi­
tion
cost

Book
value

Differ­ence

Money trust

3,730

3,958

228

3,750

3,723

△26

❸ Information on transactions involving derivatives
1. On the conditions of transactions
	With a view to hedging risks as a result of possible
changes in the foreign exchange of assets in foreign
currency, JER deals in foreign ex­change forward
contracts and currency option transactions. In addition, we conduct over-the-counter securities option
transactions to reduce interest fluctuation risks inconnection with securities.
	  The derivative transactions we engage in havemarket risks associated with market fluctuations.
Most of them are done, however, to hedge the as-

sets in kind, and losses from the transaction inquestion never arise on their own. In some cases,
we use options transactions for securities scheduled
to be purchased. But risks are limited because weput a quantita­tive limit on such transactions.
	  Because we deal with highly reputable financial
institutions, we believe that there is little credit risksuch as non-fulfillment of a contract.
	  Our derivatives transactions are checked by the
Risk Management Division, independent of theTransactions Execution Division, and the results ofthe checks are regularly reported to the board ofmanaging directors.
2. On market prices for transactions
	A contract amount in a derivative transaction is
simply a nominal contract amount or an as­sumed
principal by calculation in such a trans­action. The
contract amount as such represents no market risk
or credit risk.

3. Derivative transaction contract amounts, market price and appraisal profit and loss(a) Currency related(Unit: Million yen)

As of end of fiscal 2006
Type

Contract amountMarket priceAs of end of fiscal 2007
Appraisal profit
and loss

Contract amount1 year or
longer ones

Market priceAppraisal profit
and loss

1 year or
longer ones

Transactions other thanmarket transactions Forward foreignexchange contracts   Currency used    US dollar

56,592

25,88960,440△3,84856,50028,86154,546

1,954    Euro

76,38033,086

83,738△7,35870,987

26,24776,370△5,383    Canadian dollar

3,037

3,037

3,197

△160

3,037

1,211

3,216

Total

△11,366

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

40

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2008

△179
△3,608