Financial Section

Financial Statements
1. Balance Sheets
2. Statements of Income
3. S
 tatements of Cash Flow
4. Statement of Changes in Shareholders’ Equity

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2023

28

FINANCIAL STATEMENTS
1. Balance Sheets(NET ASSETS)

(ASSETS)

(Yen in millions)Fiscal Year2021
(As of March
31, 2022)

Item

AmountAmountCash and deposits
Deposits

193,688
193,688

150,263150,26342

361

Call loans
Monetary receivables bought

17,99938,999457,705
25,89895,870303,916
32,020–452,280
12,17682,066
323,820
33,052
1,164

Tangible fixed assets
Buildings Other tangible fixed assets

46
20
26

215
19
196

Intangible fixed assets
Software Other intangible fixed assets

89
87
1

294
293
1

Other assets Reinsurance accounts receivable
Accounts receivable
Uncollected income
Deposits
Suspense payments
Derivatives

19,44919,090
5
236
45
71
–

18,643
18,200
6
283
45
27
79

Total assets

689,022

661,059

Securities
Government bonds
Municipal bonds
Corporate bonds
Foreign securities
Other securities(LIABILITIES)
(Yen in millions)Fiscal Year

Item

2021
(As of March
31, 2022)

2022(As of March
31, 2023)

AmountAmountUnderwriting funds
Outstanding claims
Underwriting reserves

664,942
144,276
520,665

646,152
2,822
643,330

Entrusted reserves

16,748

9,906

Other liabilities
Reinsurance accounts payable
Income taxes payable
Deposits payable
Accrued amounts payable
Derivatives

7,434
5,227
371
3
484
1,346

8,087
5,266
390
2
729
1,699

Reserve for retirement benefits

128

142

Reserve for directors’ retirement benefits

7

11

Reserve for bonus payments

22

24

Reserves under the special law
Reserve for price fluctuation

0
0

0
0

Net unrealized gains on available-for-salesecurities of earthquake insurance
Total liabilities

29

2022
(As of March
31, 2023)(1,792)(4,769)687,492

659,557(Yen in millions)2021(As of March
31, 2022)

2022(As of March
31, 2023)

Item

AmountAmountCommon stock

1,000

1,000

547

547

Fiscal Year

Retained earnings Legal reserve of retained earnings

11 Other legal reserve of retained earnings

546

546

  
Special reserves

1717  Special price fluctuation reserves3939  Retained earnings carried forward

489

490

Treasury Stock
Total shareholders’ equity
 et unrealized gains on available-for-saleNsecurities Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

(5)

(5)

1,541

1,542

(12)

(40)

(12)

(40)

1,529

1,501

689,022

661,059

Notes for fiscal 2022
1. Matters relating to accounting policies are as follows.
(1)	Appraisal standards and method of securities
and method of indication are as follows.
(i)	Available-for-sale securities are appraised according to the market price at term end.
(ii)	With respect to the unrealized gain of assets
corresponding to the underwriting reserves andentrusted reserves of earthquake insurance, theamount before tax effect deduction is shownas Net unrealized gains on other securities ofearthquake insurance in Liabilities on the form
attached to the 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) The appraisal of derivatives is done on the basisof market price.
(3) Although depreciation of tangible fixed assets
is calculated using the declining balance method, buildings (excluding equipment attached tobuildings) that were acquired on or after April 1,
1998 and equipment attached to buildings andstructures that were acquired on or after April
1, 2016 were depreciated using the straight-line
method.
(4) Software for in-house use that is recorded as
an intangible fixed asset is amortized using thestraight-line method over the estimated usable
life (five years).

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2023

(5)The conversion of foreign currency assets and liabilities into Japanese currency is processed according to the accounting standards for foreign
currency transactions.
(6)	Reserve for bad debts is written as follows against
losses from bad debts in accordance with theself-appraisal standard of assets and depreciation 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, ordebtors who are effectively bankrupt, the rest of
any of the claims deducting an estimated amountof disposable mortgage and a deductible amountby guarantee was appropriated for such reserves.

ten is recorded when reports on earthquake reinsurance premiums are received, and insurance
premiums recognized to have been ceded to nonlife insurance companies and the government arerecorded as reinsurance premiums ceded.
Moreover, claims paid are recorded when statements of earthquake reinsurance claims arereceived, and insurance claims recognized tobe recoverable by non-life insurance companies
and the government are recorded as reinsurance
claims recovered.
(12) The aggregate amount for the total amount ofoutstanding claims reported by non-life insurancecompanies and amounts of claims from non-life
insurance companies which is processed but unsettled are recorded as outstanding claims.

	

The portion of outstanding claims equivalent to
the portion covered by reinsurance in accordancewith Article 73, Paragraph 3 of the Insurance
Business Act is not recorded.
(Changes in accounting policies)
We have applied “Implementation Guidance on
Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31, June 17, 2021)
from the beginning of the fiscal year 2022. In accordance with the transitional treatment set forthin Paragraph 27-2 of “Implementation Guidanceon Accounting Standard for Fair Value Measurement,” the Company has prospectively applied
the new accounting policy prescribed by “Implementation Guidance on Accounting Standard for
Fair Value Measurement.” There is no effect on
the financial statements.

In connection with the other claims, the rate ofbad debts calculated according to past bad debts
and other factors is multiplied by the amount ofclaims to appropriate for reserves.
	In addition, all claims are written after the financedepartment appraises the assets, and the result
is audited by the planning and controller department independent of the finance department toappropriate the appraisal for reserves.
	
There are no assets in the current term that are
to be appropriated for reserves and no reserve isrequired.
(7) For employees’ retirement and severance benefits, reserve for retirement benefits is appropriated according to estimated retirement allowanceliabilities at the end of the term.
	Retirement allowance liabilities are calculated using a simple method on the basis of the allowance to be supplied at the end of the term for any
employee who retires for his/her own reasons.
(8) For reserve for directors’ retirement benefits, thebenefits to be paid at the end of the term arerecorded according to the relevant in-house rules.
(9) Reserve for bonus payments is calculated according to the standards for the estimated bonuses
payable as of the end of the fiscal year underreview.
(10) To prepare for a loss from price changes ofshares and others, reserve for price fluctuation isappropriated according to Article 115, Insurance
Business Law.
(11) Reinsurance transactions are based on provisionsof earthquake reinsurance treaty concluded with
non-life insurance companies and excess of loss
reinsurance with the government. Premiums writ-

2. Financial instruments, fair value of financial instruments, and breakdown by input revel.
(1) Situation of financial instruments
We mainly hold highly rated short- and mediumterm Japanese and foreign bonds and short-term
financial instruments in preparation for reinsurance payouts. We manage assets by attaching
top priority to liquidity and safety and giving
additional consideration to profitability. It is ourpolicy to engage in derivatives trading or forward
exchange contracts to reduce the market risks offoreign-currency receivables associated with exchange fluctuations, within the limits of actual
demand. In addition, we maintain an understanding of market risks, credit risks and liquidity risks
and manage current quotations and credit information on a regular basis in this regard.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2023

30

(2)

Fair value of financial instruments and breakdown by input revel
The following table presents the amounts shownon the balance sheet and fair value breakdown
by input level as of March 31, 2023. Cash anddeposits, call loans, and monetary receivables
are omitted because they are settled in a shortperiod of time and their fair values are similar totheir book values.
The fair value of financial instruments are classified into the following three levels based on theobservability and materiality of the inputs usedin the fair value calculation:
Level 1: Fair value measured by the market
price of the asset or liability in active markets
among the observable inputs
Level 2: Fair value measured by the observable
inputs other than the Level 1 inputs
Level 3: Fair value measured by unobservable
inputsIf multiple inputs are used with a significant impact on the fair value measurement, the fair value
measurement is categorized in its entirety in thesame level of the fair value hierarchy as the lowest level input.
Financial instruments recorded at fair value on
the balance sheet(Yen in millions)Category

Balance sheet amount
Level 1

Level 2

Level 3

Total

Available-for-sale securities–

452,280–452,280

Government bonds–

12,176–

12,176

Municipal bonds–

82,066–82,066

Corporate bonds–

323,820–

323,820

Foreign securities–

33,052–

33,052Other securities

–

1,164

–

1,164

–

(1,619)–(1,619)–(1,619)–(1,619)Securities

Derivatives (*)
Derivatives not subject tohedge accounting
Foreign currency–(*) Derivative assets and liabilities arising from derivative transactions included in Other
assets and Other liabilities are presented on a net basis. Net debts are shown inparentheses.

Note 1: Description of the valuation techniques and inputs used in the fairvalue measurement
Securities
Government bonds, municipal bonds, corporate bonds and foreign
securities are valued using market prices. The market prices are notconsidered to be market prices on active markets and are categorized within Level 2.
The investment trusts whose market prices are not available do nothave any important restrictions on withdrawal or repurchase requests (considered to be risk) for which market participants may
request payment. The NAV of the investment trusts is thus deemed
to be the fair value and they are categorized within Level 2.

31

Derivatives
Since derivative transactions are OTC transactions and no publishedmarket prices are available, the fair value is measured using discounted cash flow analysis according to the type of transaction
and the remaining maturity. The main inputs used in the valuation
technique are interest rates and exchange rates. Fair value that canbe measured without using unobservable inputs or that has little
impact is categorized within level 2.

3. Taxes are included when preparing accounts for
consumption tax and other items.
4. Risk reserves contained in Underwriting reserves
have been deposited based on instructions for the
calculation of underwriting reserves by accumulating the amounts that result from subtracting anamount equivalent to corporate taxes from the net
premiums written and profit from operating the assets.
5. The accumulated depreciation of tangible fixed assets is 103 million yen and the advanced depreciation of tangible fixed assets is 2 million yen.
6. See below for a breakdown of outstanding claims.
(Yen in millions)

Outstanding claims (before the deduction ofoutstanding reinsurance claims)

7,093

Outstanding reinsurance claims related to theabove claims

4,270

Net outstanding claims

2,822

7. Total deferred tax assets amount to 2,564 million
yen. Deferred tax assets are all deducted from thetotal amount for a valuation reserve.
A breakdown of deferred tax assets reveals tax loss
carried forward of 2,393 million yen, unpaid business taxes of 85 million yen, a reserve for retirement
benefits of 39 million yen and unpaid special business tax of 23 million yen.
8. No event that could have a material impact on assets
or profits or losses in or after the next fiscal year
has arisen since the last day of the fiscal year underreview.
9. Net assets per share are 755.24 yen. The basis forthis calculation is that net assets are 1,501 million
yen, net assets accrued from ordinary shares are
1,501 million yen and the number of ordinary sharesat the end of the term is 1,988 million.
10. Each amount is rounded down to the nearest
whole unit.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2023

2. Statements of Income(Yen in millions)

Fiscal Year

2021

2022

Notes for fiscal 2022
1. See below for a breakdown of net premiums written.
(Yen in millions)(from April 1, 2021
to March 31, 2022)(from April 1, 2022
to March 31, 2023)

Item

AmountAmountReinsurance premiums ceded:

79,440Ordinary income

254,971

413,488

Net premiums written:

268,987

Underwriting income

252,930

410,599   Net premiums written

252,468

268,987462

158  Investment income on savings
premiums  Reversal of outstanding claims

Premiums written:

2. S
 ee below for a breakdown of net claims paid.
(Yen in millions)

Claims paid:–

141,454

2,040

2,864

   Interest and dividend income

594

778

   Gains on sales of securities

144

290

1,763

1,951

0

2

(462)

(158)

–

24

254,970

413,487

251,456

409,015   Net claims paid

150,088

207,758   Loss adjustment expenses

13,27020,934

Provision of outstanding reinsurance claims
related to the above claims  Commissions and brokerage fees

55,111

57,657

Net provision of outstanding claims  Provision of outstanding claims

25,695–   Provision of underwriting reserves

7,291

122,664

1,662

2,489

Investment income   Foreign exchange gains   Other investment income  Transfer of investment income on
savings premiums
Other ordinary income
Ordinary expenses
Underwriting expenses

Investment expenses   Losses on sales of securities  Losses on derivatives   Other investment expenses Operating, general and administrative
expenses
Other ordinary expenses

82,307

Net claims paid:

207,758

3. See below for a breakdown of the provision of outstanding claims (figures in parentheses are the reversal of outstanding claims).
(Yen in millions)

Provision of outstanding claims(before the deduction of outstanding
reinsurance claims)(146,150)(4,695)(141,454)

4. The interest and dividend income are given below
by category:

207

272
2,200

15

16

1,828

1,982

22

–

Securities:

768

Total:

778

22–

Ordinary income (loss)

10Extraordinary income

2

–

2

–

Extraordinary losses

290,066

Reinsurance claims recovered:

1,439  Interest expenses

Other extraordinary income

348,427

20Provision of reserve for price fluctuation

0

0

Other extraordinary losses

2–

Net income (loss) before income taxes

10Income taxes

00

Total income taxes00

Net income (loss)

1

0(Yen in millions)

Deposits:

6

Call loans:0

Monetary receivables bought:

2

5. Paper profit/loss involved in the losses on derivatives
is a loss of 1,619 million yen.
6. Net
income per share is 0.12 yen.
The basis for this calculation is such that net income is 0 million yen, net income accrued from
common stocks is 0 million yen and the term average number of common stocks amount to 1.988
million.
7. The legal effective tax rate at the end of the termis 28.00%, and the corporate tax burden after applying the tax effect is 54.56%. The difference is
explained by the following breakdown: valuation
reserve 20,389.19% and exclusion from gross revenue of reversal of taxable risk reserves related to
publicity expenses (20,452.79%).
8. Each amount is rounded down to the nearest wholeunit.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2023

32

3. Statements of Cash Flow
(Yen in millions)

Fiscal Year

Item

2021

2022

(from April 1, 2021
to March 31, 2022)(from April 1, 2022
to March 31, 2023)

AmountAmountNotes for fiscal 2022
1. 
Relationship of cash and cash equivalents at theend of the year with the amounts mentioned in therelevant balance sheet item.
(Yen in millions)

Cash flow from operating activities
Net income (loss) before income taxes

10

Depreciation

74

86

25,695(141,454)

Increase (decrease) in outstanding
claimsCash and deposits
Call loans(As of March
31, 2023)

193,688

150,263

42

361

Monetary receivables bought

17,99938,999Securities

457,705452,280

Deposits of a depository period
over three months

Increase (decrease) in underwriting
reserves

7,291

122,664

Increase (decrease) in entrusted
reserves(9,214)(6,841)(79,030)(79,030)

Increase (decrease) in reserve forretirement benefits

(22)

13

Monetary receivables bought other thancash equivalents(7,999)(19,999)

Increase (decrease) in reserve fordirectors’ retirement benefits(2)4Securities other than cash equivalent(457,705)(452,280)

Cash and cash equivalents

124,700

90,594

Increase (decrease) in reserve forbonus payments(0)1

Increase (decrease) in reserve forprice fluctuation

0

0

(594)

(778)

Interest and dividend income
Losses (gains) on investment insecurities

62

(18)

Foreign exchange losses (gains)(1,711)(1,625)Decrease (increase) in other assets(other than investment and financial
activities related)(1,627)932

Increase (decrease) in other liabilities(other than investment and financial
activities related)

468

283

Others274

291   Subtotal

20,695(26,439)

1,319

1,190

Interest and dividends received
Income taxes paid

(0)

(0)

22,014(25,249)

Purchase of monetary receivablesbought(22,998)(30,997)

Proceeds from sales and redemptionof monetary receivables bought

19,99918,999Net cash provided by operating activities

2. Cash flow in investing activities includes cash flowfrom the investment assets operations in the insurance business.

Cash flow from investing activities

Purchase of securities(187,139)(123,001)

Proceeds from sales and redemptionof securities

93,440126,604    Total investment assets activities(96,699)(8,395)    Total operating activities and   investment assets activities(74,685)(33,644)

Acquisition of tangible fixed assets

(7)

(198)

Others

(36)

(262)

(96,744)(8,856)

Cash flow in financing activities–– ffect of exchange rate changes on cashEand cash equivalents––

 et increase (decrease) in cash andNcash equivalents(74,729)(34,105)

Cash and cash equivalents at the
beginning of the year

199,430

124,700

Cash and cash equivalents at the endof the year

124,700

90,594

Net cash provided by investing activities

33(As of March
31, 2022)

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2023

4. Statement of Changes in Shareholders’ Equity
Fiscal 2021 (from April 1, 2021 to March 31, 2022)(Yen in millions)

Valuation andtranslation adjustments

Shareholder’s equity
Retained earnings
Commonstock

Legalreserve ofretainedearnings

1,000

1Balance at the
beginning of theperiodOther legal reserve of retained earnings
Total
retainedearnings

Specialreserves

Specialprice
fluctuation
reserves

Retainedearnings
carriedforward

17

39

488

546

1

1

Treasury
stock

(5)

Total
shareholders’equity

1,540

Net
Total
unrealized
valuation
gains onandavailabletranslation
for-saleadjustments
securities

(1)

(1)

Total net
assets1,538

Changes during
the period
Net income(loss)

1

Net changes
other thanshareholders’equityTotal changes
Balance at theend of the period

1,000

1

17

39

1

1

489

547

(5)

1

(10)

(10)

(10)

1

(10)

(10)

(8)

1,541

(12)

(12)

1,529

Fiscal 2022 (from April 1, 2022 to March 31, 2023)(Yen in millions)

Valuation andtranslation adjustments

Shareholder’s equity
Retained earnings
Commonstock

Legalreserve ofretainedearnings

1,000

1Balance at the
beginning of theperiodOther legal reserve of retained earnings
Total
retainedearnings

Specialreserves

Specialprice
fluctuation
reserves

Retainedearnings
carriedforward

17

39

489

547

0

0

Treasury
stock

(5)

Total
shareholders’equity

1,541

Net
Total
unrealized
valuation
gains onandavailabletranslation
for-saleadjustments
securities

(12)

(12)

Total net
assets1,529

Changes during
the period
Net income(loss)

0

Net changes
other thanshareholders’equityTotal changes
Balance at theend of the period

1,000

1

17

39

0

0

490

547

(5)

0

(28)

(28)

(28)

0

(28)

(28)

(27)

1,542

(40)

(40)

1,501

Notes for fiscal 2022
1. Matters related to the types and total number ofstocks outstanding and the types and number oftreasury stock(Stock)Issuedstock
Treasurystock

Balance asof the endof fiscal
2021

Increase in
fiscal 2022

Decrease in
fiscal 2022

Balance asof the endof fiscal
2022

Ordinary stock

2,000,000––

2,000,000

Total

2,000,000––

2,000,000

Ordinary stock

11,400––11,400Total

11,400––11,4002. Each amount is rounded down to the nearest wholeunit.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2023

34