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 2010

Financial review
The number of earthquake insurance contracts increased during the year under review, as they didin the previous year. Premiums written also rose from the previous year, backed by factors suchas a higher level of interest in earthquake insurance and a lower premium rate. The number andamount of earthquake insurance payouts declined from the previous year, despite insurance payouts for the Surugawan Earthquake in 2009.
Profits from investments increased from the previous year, reflecting a rise in the ratio of foreign
currency-denominated bonds, which offset the appreciation of the yen.
Administrative expenses remained flat from the previous year as a result of a commitment toachieve efficient business operations and cut costs as operations expanded.

(1) Summary of earthquake insurance resultsa. Premiums written and insurance claims paid Net
premiums written amounted to 72.2 billion yen (up7.6% year on year), reflecting an increase in the number of insurance contracts and premiums written.
Earthquake insurance claims paid came to 5.5 billion
yen (down 40.7% year on year) due to the Surugawan
Earthquake in 2009.
b. Underwriting reserves
Risk reserves added amounted to 42.4 billion yen (up19.0% year on year), the total of net premiums writtenof 36.4 billion yen, given by deducting assumed insurance commissions from net premiums written, and a
profit of 6 billion yen from investments.
Risk reserves at the end of the current term were496.7 billion yen (up 8.0% year on year), reflecting
the drawing of 5.8 billion yen from risk reserves in thepast year following the payment of ongoing insurance
claims, the provision of outstanding claims, as well as
advertising and publicity expenses.
Underwriting reserves at the end of the current term
totaled 585.8 billion yen (up 7.4% year on year) after
adding unearned premium reserves and refunded reserves to the risk reserves.
c. Entrusted reserves
Risk reserves of direct insurance companies recorded
as entrusted reserves were 524.3 billion yen for thecurrent term (up 5.4% year on year), obtained by adding net premiums written and profit from investmentsof 27.9 billion yen (up 15.8% year on year), and drawing advertising and publicity expenses of 900 million
yen.

(2) Outline of investments
Medium- to long-term domestic interest rates rose in
the first half of the fiscal year, reflecting rises in interest rates in the United States and concerns about
the supplementary issuing of Japanese government
bonds. However, the interest rates fell thereafter after
the Bank of Japan hammered out policy to step up its
relaxed monetary policy to deal with protracted deflation. Long-term interest rates at the end of the fiscal
year under review were mostly on a par with the levels
at the end of the previous fiscal year, and mediumterm interest rates declined sharply.
The yen appreciated against both the dollar andeuro, reflecting forecasts that monetary easing by central banks in Europe and the United States would be
protracted, and moves to avoid risk given the bad-debt
problem related to government-affiliated companies in
Dubai and the fiscal crisis in Greece. Compared witha year ago, the yen had appreciated about five yen
against both the dollar and euro at the end of the fiscal year under review.
In the circumstances, we invested in assets withthe top priority placed on security and liquidity, followed by profitability. We did this by raising the ratio of foreign currency-denominated bonds, primarily
safe issues with government guarantees, to mitigate
exchange fluctuation risks. As a result, pre-tax profits
from investments amounted to 7.0 billion yen in thebusiness account and 5.3 billion yen in the entrusted
reserves account. Consequently, investment assets at
the end of the term under review stood at 1,071.2 billion yen.
(3) Current profit and loss
Net income was 5 million yen (down 58.9% year onyear) after calculating interest and dividend income tocapital account and other items.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201025

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

Fiscal Year

Division

2005

2006

2007

2008

2009

Net premiums written(percentage change over the previous term)

71,132(22.2%)

67,981(△4.4%)

64,040(△5.8%)

67,126(4.8%)

72,225(7.6%)

Ordinary incomes(percentage change over the previous term)

107,868(50.1%)

90,373(△16.2%)

81,290(△10.1%)

84,993(4.6%)

99,464(17.0%)

Ordinary expenses(percentage change over the previous term)

107,845(50.3%)

90,229(△16.3%)

81,273(△9.9%)

84,792(4.3%)

98,512(16.2%)

Ordinary profit(percentage change over the previous term)

23(△76.4%)143(521.1%)16(△88.5%)200(1,108.8%)

951(374.2%)

Net income(percentage change over the previous term)

36(243.6%)△16(△146.4%)

4
(–)

12
(184.1%)

5（△58.9%）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

1,605

1,600

1,614

1,617

1,633

Total assets

838,555

908,963955,968

1,015,053

1,092,272

Underwriting reserves(percentage change over the previous term)

450,892(8.4%)

490,901(8.9%)

515,586(5.0%)

545,255(5.8%)

585,820(7.4%)(of the balance, risk reserve balance)(percentage change over the previous term)

378,731
(6.4%)

412,364(8.9%)

433,841(5.2%)

460,081(6.0%)

496,708(8.0%)

Loans(percentage change over the previous term)

–
(–)

–
(–)

–
(–)

–
(–)

–
(–)

Securities(percentage change over the previous term)

771,383(5.1%)

851,739(10.4%)

895,513(5.1%)

953,118(6.4%)

1,006,947(5.6%)

Solvency-margin ratio

160.2%

175.3%

185.4%

159.1%

161.6%

Dividend propensity

–%

–%

–%

–%

–%

No. of employees

21

21

24

28

26

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

2007

2008

2009

DivisionPremiums written

142,811

145,445

151,353

Return premiums

3,349

3,241

Division

2007

2008

2009

Underwriting incomes

67,32070,546

79,2782,464

Underwriting expenses

66,86069,884

77,828Operating and generalad­ministrative expenses

459

474

509

Other incomes and expenses

–

△187

△941

Underwriting profit

–

–

–

Assumed net premiums
written (A)138,086

141,271

148,349

Reinsurance premiums
ceded (B)74,04574,145

76,123

Net premiums written (A-B)

64,04067,12672,225Note:
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 2010

3. Net claims paide Indicators relating to accounting

Item: earthquake
Division

Fiscal Year

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

2007

2008

2009

12,370

9,350

5,544

–

–

–

12,370

9,350

5,544

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

Outstanding claims

178

228

420

545,255

585,820

Total

515,765

545,484

586,241

2. Detailed listing of liability reserves
As of the end of Fiscal 2008
(Unit: Million yen)
Division––

31,381

Reserve for individual bad debts

–

–

–

–

(509)

Reserve for specificforeign securities

–

–

–

–

Accrued sever­ance
benefits

94

18

9

102

Reserve for directors’ retirement
allowances

13

4

8

9

Reserve for bonus
payment

17

19

17

19

21.0%

16.0%

8.6%

Underwriting expenses

29,19829,897

(459)

(474)

2009

(28,739)(29.423)(30,872)

Net expense ratio

45.6%

44.5%

43.4%

Combined ratio

66.6%

60.5%

52.0%

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

Domestic contract

2007

2008

2009

100%

100%

100%

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

8

–

0

7

133

42

36

139

As of the end of Fiscal 2009

2. R
 ate of premiums written by domestic and over­seas contracts
Fiscal Year

Amount ofBalancedecrease
as of the end of
in fiscal 2008
fiscal 2008–

Loss ratio

Division

Amount ofincrease in
fiscal 2008

–

2008

 Agency commissions andbrokerage fees

Balance asof the end of
fiscal 2007

Reserve for ordinary
bad debts

2007 Insurance related operating,general and administrative
expenses

As of the endof fiscal 2009

515,586(Unit: Million yen)

Fiscal YearAs of the endof fiscal 2008

Underwriting reserves

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

Year As of the endof fiscal 2007

(Unit: Million yen)
Division

Balance asof the end of
fiscal 2008

Amount ofincrease in
fiscal 2009

Amount ofBalancedecrease
as of the end of
in fiscal 2009
fiscal 2009

Reserve for ordinary
bad debts

–

–

–

–

Reserve for individual bad debts

–

–

–

–

Reserve for specificforeign securities

–

–

–

–

Accrued sever­ance
benefits

102

21

13

110

9

4

0

13

2008

2009

No. of reinsurers that ceded
insurance contracts

17

17

Reserve for directors’ retirement
allowances

Rate of top five reinsurers’
ceded insurance premiums

77.5

77.5

Reserve for bonus
payment

19

18

19

18

Reserve for pricefluctuation

7

–

0

7

139

44

34

150

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 201027

3. Detailed listing of shareholders’ equity

5. Profit on sale of securities by category

As of the end of Fiscal 2008

Division(Unit: Million yen)

(Unit: Million yen)

Balance asof the endof fiscal
2007

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
2008
2008

Legal
reserve ofretainedearnings–

Balance asof the endof fiscal
2008

–

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
2008

Division
Common stock

Amount of Amount of
increase decreasein fiscalin fiscal
2009
2009

1,000

–

–

Balance asof the endof fiscal
2009
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

Specialprice
fluctuation
reserves

39

–

–

39

Total

57

–

–

57

597

27

7

Foreign securities

–

–

574

597

27

582

Total

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

Fiscal Year

Division

2007

2008

2009

Government bonds

4

6

329

Foreign securities

66

–

232

Total

70

6

562

(Unit: Million yen)

Fiscal Year

Division

––Foreign securities

–

–

–

Total

–

–

–

8. D
 epreciation expenses by category

Type of asset

Acquisition cost

Non personnel expenses
Taxes

Amount ofdepreciation in
fiscal 2008

(Unit: Million yen)

Aggregateddepreciations

2008

2009

391

474

378

1,397

1,673

1,085

177

185

197

Agency commissions andbrokerage fees

28,73929,42330,872

Total

30,70631,75732,534

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
2008

Rate of ag­
gregateddepreciations %Tangible fixed assets
Buildings

100

2

58

41

58.5

(for
underwriting)

(100)

(2)

(58)

(41)

(58.5)(forinvestment)

(–)

(–)

(–)

(–)

(–)

Others

86

27

48

37

56.1

Total

186

29

107

79

57.4

Software

175

16

23

151

13.7

Other
intangible
fixed assets

0

0

0

0

86.0

Total

175

16

24

151

13.9

Grand total

362

45

131

230

36.3

Intangible fixed assets

Acquisition cost

Tangible fixed assets

2007

2009

–

4. Business expenses (inclusive of loss adjustment)

Personnel expenses

2008

Government bonds

Type of asset

Fiscal Year2007

As of the end of Fiscal 2009

(Unit: Million yen)

28

2009

Government bonds

Note:
The number of owned shares was 11,400 as of the end of fiscal 2009.

Division

2008

As of the end of Fiscal 2008

As of the end of Fiscal 2009

Legal
reserve ofretainedearnings
andvoluntary
reserves

2007

7. Securities appraisal loss by category

Specialreserves

Note:
The number of owned shares was 11,400 as of the end of fiscal 2008.

Issuedstock

Fiscal Year

Amount ofdepreciation in
fiscal 2009

(Unit: Million yen)

Aggregateddepreciations

Balanceas the endof fiscal
2009

Rate
of ag­
gregateddepreciations %Buildings

101

2

61

40

60.0

(for
underwriting)

(101)

(2)

(61)

(40)

(60.0)(forinvestment)

(–)

(–)

(–)

(–)

(–)

Others

95

20

68

26

72.2

Total

196

23

129

67

65.9

Software

409

60

75

334

18.4

Other
intangible
fixed assets

0

0

0

0

86.9

Total

410

60

75

334

18.4

Grand total

607

83

205

401

33.8

Intangible fixed assets

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2010

9. Loss from disposal of fixed assets

i Investments(Unit: Million yen)

Fiscal Year

Division

2007

2008

2009

Land

(–)

(–)

(–)

Buildings

(0)

(–)

(0)

Other tangible fixed assets

(0)

(0)

(–)

0

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

Division(Unit: Million yen)Year

As of the endof fiscal 2007

As of the endof fiscal 2008

Deposits

31,077

24,27522,352(Ordinary deposit)(6,777)(1,475)(2,052)(Time deposit)(24,300)(22,800)(20,300)

Total assets and investments assets

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

As of the endof fiscal 2009

Fiscal
Year

2007

2008

Percentage
distribution(%)

Division(Unit: Million yen)

2009

Percentage
distribution(%)

Percentage
distribution(%)(Unit: Million yen)

Deposits

31,077

3.3

24,275

2.4

22,3522.0

As of the endof fiscal 2007

As of the endof fiscal 2008

As of the endof fiscal 2009

Call loans

–

–

8,819

0.9

28,254

2.6

Risk reserve433,841

460,081496,708

499

0.0

–

–

–

–

Unearned premium
reserve

79,69583,36687,453

MonetaryreceivableboughtMoney trusts

13,723

1.4

13,495

1.3

13,692

1.3

Repayment reserve

2,050

1,808

1,659

Securities

895,51393.7 953,118

93.9 1,006,947

92.2

515,586545,255

585,820

Buildings

38

0.0

0.0

40

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.

41

Total ofinvestments
assets940,851

98.4 999,749

98.5 1,071,286

98.1

Total assets

955,968

100.0 1,015,053

100.0 1,092,272

100.0

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

Fiscal
Year

2007

2008
Yield

Division

2009
Yield

Yield

Deposits

215

0.67

236

0.76

219

0.61

Call loans

–

–

27

0.29

11

0.07

Monetaryreceivablesbought

7

0.76

3

0.87

–

–

Money trusts

94

0.69

91

0.66

86

0.63

Securities

12,894

1.49

13,956

1.52

16,991

1.76

Buildings

–

–

–

–

–

–

13,2111.45

14,315

1.47

17,309

1.67

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 201029

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

FiscalYear Amount of

2008

2009

Deposits

236

219

Amount ofdenominator
35,819Call loans

27

9,481

0.29

11

16,691

0.07

Bond trading with
repurchase agreement

–

–

–

–

–

–

Monetary receivablesbought

3

448

0.87

–

–

–

Commodity securities

–

–

–

–

–

–

Money trusts

273

13,7501.99△72

13,750△0.52

Securities

13,977

918,528

1.52

17,011

967,658

1.76

5,804

618,392

0.94

5,372

542,992

0.99

–

–

–

–

–

–

Foreign securities

8,149

290,325

2.81

11,968415,507

2.88

Total

Other securities

23

9,810

0.24

△329

9,158

△3.6

–

Yield onforeign loans &investment

numerator

Public andcorporate bonds
StocksAmount ofnumerator

Yield onworking
assets (%)
0.61(Unit: Million yen)Amount ofdenominator
31,183

DivisionYield onworking
assets (%)
0.76

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

Loans

–

–

–

–

–

Buildings

–

42

–

–

42

–

△7,711––△4,223––

Others

△31

–

–

△66

–

–

Total

6,774

973,434

0.70

12,879 1,033,962

1.25

Financial derivative(Unit: Million yen)

FiscalYear Amount of

2008

2009

Deposits

236

Amount ofdenominator
31,183219

Amount ofdenominator
35,819Call loans

27

9,481

0.29

11

16,691

0.07

Bond trading with
repurchase agreement

–

–

–

–

–

–

Monetary receiv­ablesbought

3

448

0.87

–

–

–

Divisionnumerator

Yield onworking
assets (%)
0.76

Amount ofnumerator

Yield onworking
assets (%)
0.61

Commodity securities

–

–

–

–

–

–

Money trusts

45

13,7230.33

124

13,4950.92

15,531

920,302

1.69

29,921

970,987

3.08

7,083

620,291

1.14

8,113

546,170

1.49

–

–

–

–

–

–

Foreign securities

8,626

290,353

2.97

22,047416,011

5.30

Other securi­ties

△177

9,658

△1.84

△240

8,805

△2.73

Loans

–

–

–

–

–

Buildings

–

42

–

–

△7,711––△4,223

Securities
Public andcorporate bonds
StocksFinancial deriva­tive

Foreign publicand corporate 152,411
bonds

88,00336.6 147,827

40.0 154,918

36.4

240,414100.0 369,151

100.0 425,813

100.0

Yen
denominatedForeign publicand corporate
bonds

Investment
assets yield(income yield)

3.28%

2.81%

2.80%

Assetsmanagement(realized
yield)

3.25%

2.81%

2.88%

Market-pricebased overall
yield (for reference)

4.51%

2.97%

5.30%

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 2007

Corporatebonds

191,835

42–

Stocks––Foreignsecurities

240,414Other
securities

–

–

△66

–

–

975,181

0.83

25,986

1,037,036

2.51

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 lossLoan
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 2010

As of the end of
fiscal 2008

Percentage
distribution(%)

Division–△31

Percentage
distribution
(%)

63.6

4,404

8,101

Percentage
distribution(%)

60.0 270,894

Municipal
bonds

Total

As of the end of
fiscal 2009

63.4 221,324

449,201

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.

30

Percentage
distribution(%)

Govern­ment
bonds

Others

As of the end of
fiscal 2008

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

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

As of the end of
fiscal 2007

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.

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

Year

–

As of the end of
fiscal 2009

Percentage
distribution(%)

Percentage
distribution(%)

50.2 412,278

43.3 457,324

45.4

0.5

0.3

80

0.0

16.8 120,593

12.0

2,581

21.4 159,650––

26.8 369,151

38.7 425,813

42.3

9,658

1.1

9,456

1.0

3,135

0.3

–

–

–

–

–

–

100.0 1,006,947

100.0

895,513––100.0 953,118–

8. Yield on securities held

As of the end of fiscal 2009	(Unit: %)
Division

Fiscal Year

2007

2008

2009

Investment assets yield (income yield)
Public & corporate bonds

0.85

0.94

0.99

–

–

–

Foreign securities

3.28

2.81

2.80

Other securities

3.06

0.24

–

Total

1.49

1.52

1.76

StocksAssets management yield (realized yield)
Public & corporate bond
Stocks

0.94

0.99

–

–

–

Foreign securities

3.25

2.81

2.88

Other securities

4.26

0.24

△3.60

Total

1.55

1.52

1.76

1.58

1.14

1.49

–

–

–

Market-price based overall yield (for reference)
Public & Corporate bonds
StocksDivision

Up to 1year

1 overup to 3years

3 overup to 5years

Govern­ment
bonds

139,800 225,477

36,3896,344 36,734 12,577

Foreign securities

4.51

2.97

5.30

Other securities

1.58

△1.84

△2.73

Total

2.32

1.69

3.08

DivisionLessthan 1year

1 to less 3 to lessthan 3than 5
years
years

5 to
less
than
7
years

7 to
less
than
10
years

56,096 196,100 132,707

Municipal
bonds

2,501

79

–

–

–

Corporatebonds

43,21277,35537,232409

1,440

StocksForeignsecurities

–

–

–

–

–

–

–

80

44,52854,001

20,437

104

1,521

–

120,593

–

–

–

–

–

–

–

54,596 219,828 115,466 23,655 12,267–

425,813

Foreignsecurities
Other
securities

–

–

–

–

–

3,135

3,135

Loan
receivablein securities

–

–

–

–

–

–

–

Total

239,005 499,307 172,293 30,104 50,523 15,712 1,006,947

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

69,899 139,709 103,025–

9,299 47,217

As of the endof fiscal 2008

As of the endof fiscal 2009

–

–

–

(–)

(–)

(–)

(for investment)

(–)

(–)

(–)

Buildings

38

41

40

(for underwriting)

(38)

(41)

(40)

(for investment)

(–)

(–)

(–)

–

–

–

(–)

(–)

(–)

Total

–

2,581

– 159,650––– 369,151

–

–

–

–

–

9,456

9,456

Loan
receivablein securities

–

–

–

–

–

–

–

171,709 413,245 272,965

As of the endof fiscal 2007

10
years
or
longerOther
securities

Total

Year

(Unit: Million yen)

– 9,636 17,737 412,278–

457,324–Construction in progress

Govern­
ment
bonds

Total

80

(for underwriting)

As of the end of fiscal 2008	

Over
10
years

CorporatebondsDivision

9. Balance Current Maturity of securities by category

7 over
up to
10
years

Municipal
bonds

Stocks0.93(Unit: Million yen)

5 over
up
to 7
years

9,709 58,295 27,194 953,118(for underwriting)(for investment)

(–)

(–)

(–)

Total of property

38

41

40
(40)

(for underwriting)

(38)

(41)

(for investment)

(–)

(–)

(–)

Other tangible fixed assets

53

37

26

Total

91

79

67

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 201031

ACCOUNTING CONCEPTS
1. Financial statements❶ Balance sheets(NET ASSETS)

(ASSETS)
(Unit: Million yen)

Fiscal Year2008
(As of March 31, 2009)

Item

AmountCash & deposits
Deposits
Call loans
Money trusts
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

24,27524,275
8,819
13,495
953,118
412,278
2,581
159,650
369,151
9,456
79
41

   Total assets

Percentage
distribution
2.4
0.9
1.3
93.9

0.0

0.0

334
334

20,547

Item

32

0.0

0.0

0.0

7
5,265
54
119
6,472
76

0.0

1,015,053

100.0

1,092,272

100.0

53.7

1,013,435

Amount

0.0
0.0

13

0.0

0.0

18

0.0

0.0

7

0.0

0.3

16,1540.5

99.8

1,090,639

99.9

44.0
1.8

0.1

1,000

0.1

617

0.1

622

0.1

  Special reserves

1717  Special price fluctuation
reserves

39

39  Retained earnings
brought forward

559

Treasury Stock

△5

△0.0

△5

△0.0

1,611

0.2

1,616

0.1

 et unrealized holding gainNon securities

6

0.0

16

0.0

 Total valuation andtranslation adjustments

6

0.0

16

0.0

1,617

0.2

1,633

0.1

100.0 1,092,272

100.0

Percentage
distribution
53.7

1,000

Percentage
distribution

621

Total liabilities and net
assets586,241420
585,820473,207
14,885
5,507
952
2
1,144
7,278
110

Amount616(Unit: Million yen)

Percentage
distribution

Percentage
distribution

Amount

1

2008
2009
(As of March 31, 2009) (As of March 31, 2010)
Amount2009(As of March 31, 2010)1

Total net assets

1.9(Unit: Million yen)

2008
(As of March 31, 2009) Other legal reserve ofretained earnings

Total shareholders’ equity

271
4,081
54
106
2,264
78

Fiscal Year

 Legal reserve of retained
earnings

2.6
1.3
92.2

8,628

Underwriting funds
545,484
Outstanding claims
228
Underwriting reserves
545,255
Entrusted reserves
446,886
Other liabilities
17,861
Reinsurance balance payable
5,431
Corporate taxes payable294
Deposits payable3
Accrued amounts pay­able
609
Financial derivative
11,522
Accrued serverance benefits
102
Reserves for directors’
9
retirement benefit
Reserves for bonus
19
payment
Price fluctuation reserves
7
Net unrealized gains
3,063
on other securities ofearthquake insurance
Total liabilities

Retained earnings

8,257(LIABILITIES)


Common stock

2.0

0
1.5

Fiscal Year

Item

Percentage
distribution

26

0
15,036

Amount22,352
22,352
28,254
13,692
1,006,947
457,32480
120,593425,813
3,135
67
40

37
151
151

2009
(As of March 31, 2010)



43.3
1.4

0.0

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2010

1,015,053

564

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 trusts(1) In money trusts exclusively operated centering
on se­curities, the appraisal of securities operated as trust assets is done on the basis of market price.
(2) In money trusts 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. Softwarefor in-house use that is recorded as an intangible fixed asset is amortized using the straightline method over the usable life (five years).
6. T he conversion of foreign cur­rency assets and liabilities into Japanese currency is processed according to the accounting standards for foreign cur­rencytransactions.

7. 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.
(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 Business
Law.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2010

33

8. F
 inancial instruments and fair values of financial
instruments(1) S ituation of financial instruments
The Company carries out asset managementin preparation for the payment of reinsurance
claims, primarily considering soundness, namely,
low price fluctuation risks, credit risks, and liquidity risks, and also taking profitability into account.
As a result, the financial assets that the Company owns consist primarily of domestic andforeign, high-rated, medium-term bonds. The
Company regularly obtains and manages information on fair values and credit information inassociation with each risk.
Trading in derivatives principally involves foreignexchange forward contracts used to hedge therisks arising from possible changes in exchange
rates for bonds in foreign currencies and is kept
within the scope of actual demand.
(2) F air values of financial instruments
The table below shows the balance sheet
amounts and fair values of financial instruments
and the differences between them as of March
31, 2010.
(Million yen)Balancesheet
amountFair value

Difference(i) Cash and deposits

22,35222,509157(ii) Call loans

28,25428,254–(iii) Money trusts

13,692

13,692–(iv) Securities
Other securities(available for sale)

1,006,947

1,006,947

–

(806)

(806)

–

(v) Derivatives**Derivatives recorded in other assets and other liabilities.
Net receivables or net payables generated from derivatives trading are shown. Figuresin parentheses are net payables.

Note 1: Methods for calculating the fair values of financial instruments(i) Cash and deposits
The fair values of deposits without maturities and time deposits
whose maturities are within one year of the end of the fiscal year
approximate their carrying values and are therefore deemed equal
to the carrying values. The fair values of time deposits whose maturities exceed one year are present values estimated by discounting
the future cash flows, using interest rates at which similar new time
deposits would be made.
(ii) Call loans
Call loans are settled in the short term, and their fair values are
therefore deemed equal to their carrying values.
(vi) Money trusts
The fair values of money trusts are determined by prices offered bytrust and banking companies.
(iii) Securities
In principle, the fair values of securities are based on their market
prices, which are reference prices in the trading statistics of theJapan Securities Dealers Association or market prices obtained fromoutside vendors or brokers.
(iv) Derivatives
The fair values of derivatives are determined by prices offered bycorrespondent financial institutions.

34

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 based on instructions
for the cal­culation of liability reserves by accumulating the amounts that result from subtracting anamount equivalent to corporate taxes from the net
premiums written and profit from operating theassets.
11. F or finance leases commencing before April 1 2008,
other than those in which the ownership rights of
the leased property are deemed to transfer to thelessee, an accounting method similar to that used
for ordinary rental transactions is used.
12. T he accumulated depreciation of tangible fixed assets is 129 million yen.
13. T
 otal deferred tax assets amount to 90 million yen,while total deferred tax liabilities come to 9 million yen. The amount deducted from deferred tax
assets as a valuation reserve is 4 million yen. The
breakdown of deferred tax assets reveals unpaid
business taxes of 21 million yen, unpaid special
local corporate tax of 14 million yen, a retirement
benefit reserve of 40 million yen and a bonus reserve of 6 million yen. The deferred tax liabilities
result primarily from an unrealized gain of 9 million yen on securities.
14. N
 et assets per share are 812.32 yen. The basis forthis calculation is that net assets are 1,633 million yen, net assets accrued from ordinary sharesare 1,633 million yen and the number of ordinary
shares at the end of the term is 1.988 million.
15. T he amounts are indicated by rounding down any
amount not reaching the unit as mentioned.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2010

❷ Statements of income(Unit: Million yen)

Fiscal Year

Item
Ordinary incomes

2008

2009

(from April 1, 2008
to March 31, 2009)(from April 1, 2009
to March 31, 2010)

AmountAmount84,993

99,464

Underwriting incomes

70,546

79,278   Net premiums written

67,12672,225  Investment income on savings
premium, etc

3,420

7,052

Investment income

14,44520,186   Interest and dividend income

14,224

17,222

Notes for fiscal 2009
1. S
 ee below for the net premiums written by breakdown.
Premiums written:

148,349 (million yen)

Reinsurance premiums ceded:

76,123 (million yen)

Net premiums written:

72,225 (million yen)

2. T he interests and dividends income are given below
by category:   Profit from operating monetary trust

273

86

Interest on deposits:

219 (million yen)   Realized gain on sale of securities

27

582

Call loans:

11 (million yen)

3,267

9,326

72

21

Interest on securities:

16,991 (million yen)

△3,420△7,052

Total:

17,222 (million yen)   Financial derivative gain   Profit from other operations  Transfer of profit from Investment
income on savings premiums
Other ordinary incomes
Ordinary expenses
Underwriting expenses

2

084,792

98,512

69,884

77,828   Net claims paid

9,350

5,544

   Loss adjustment expenses

1,391

653

  Agency commissions and brokeragefees

29,42330,872   Provision for outstanding claims   Provision for underwriting reserves
Investment expenses

50

192

29,66840,565

11,09014,359   Loss from operating monetary trust–158   Realized loss on sale of securities

6562   Foreign exchange loss

10,97913,550   Other operation cost

104

88

 Operating, general and administrative
expenses
Other ordinary expenses   Interest paid   Other ordinary expenses
Ordinary profit
Extraordinary incomes
Reversal of price fluctuation reserves
Extraordinary losses
Loss on disposal fixed assets

942

1,007

2,875

5,317

2,875

5,317

0

–

200

951

0

0

0

0

0

0

0

0

201

951

Income taxes – current

202

950

Income taxes – deferred

△13

△4

Total income taxes

188

946

Net income

125Income before taxes

3. P aper profit/loss involved in the financial derivative
expenses is a loss of 806 million yen.
4. The
net income per share is 2.58 yen.
T
 he basis for this calculation is such that the net income is 5 million yen, the net income accrued fromordinary shares is 5 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 termis 36.21%, and the corporate tax burden after applying the tax effect is 99.46%. The difference is
explained by the following breakdown: the nondeductible amount of the taxable provision of risk
reserves is 67.62%, the amount of the write-off carried from publicity expenses related to risk reservesis △4.56%.
6. E
 ach amount is rounded down to the nearest wholeunit.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201035

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

Fiscal Year

Item

2008

2009

(from April 1, 2008
to March 31, 2009)(from April 1, 2009
to March 31, 2010)

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)

(As of March
31, 2009)(As of March
31, 2010)

Cash & deposits

24,27522,352

Call loans

8,819

28,254

Cash flow from operating activities
Net profit before income taxes(△ denotes a loss)

201

951

Depreciation

45

83

Securities

953,118

1,006,947

Changes in outstanding claims(△ denotes a decline)

50

192

Deposits of a depository periodof three months or longer△20,300△20,300

Changes in underwriting reserves(△ denotes a decline)

Securities other than cash equivalent△953,118△1,006,947

29,66840,565

Cash and cash equivalents

10,29430,306

Changes in entrusted reserves(△ denotes a decline)

22,903

26,3202. C ash flow in investing activities includes cash flow from the investment
assets operations in the insurance business.

Changes in reserves for employees’
retirement and severance benefits(△ denotes a decline)

8

7

Changes in directors’ retirement
benefit reserves (△ denotes a
decline)△44

Changes in accrued bonuses for
employees (△ denotes a decline)

2△1

Changes in reserve for pricefluctuation (△ denotes a decline)△0△0Interest and dividend income△14,224△17,222

Gain or loss on investment insecurities (△ denotes a gain)

△20

△19

Foreign exchange gain or loss(△ denotes a gain)

10,631

5,360

Gain or loss on tangible fixed assets(△ denotes a gain)

00

Increase in other assets (other thaninvestment and financial activities
related) (△ denotes an increase)

△392

△120

Increase in other liabilities (otherthan investment and financial
activities related) (△ denotes a
decline)180

610

Others5,662△8,446    Subtotal

54,71348,285

13,277

15,664

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

△3

△298

67,98763,651

Cash flow from investing activities
Net increase in deposits at bank(△ denotes an increase)

1,500

2,500

△325,785△275,224

Proceeds from sales and redemptionof securities

259,489229,340

Total investment assets activities△64,795△43,383(3,191)(20,267)

Purchase of securities    (Total operating activities and    investment assets activities)
Acquisition of tangible fixed assets

△17

△11

Others△156△243△64,969△43,639––

Net cash used in investing activities
Cash flow in financing activities ffect of exchange rate changes on cashEand cash equivalents

36

–

–

Net change in cash and equivalents

3,017

20,012

Cash and cash equivalents at the begin­ning of the year

7,276

10,294

Cash and cash equivalents at the endof the year

10,29430,306

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2010

❹ Statement of Changes in Shareholders’ Equity(Unit: Million yen)

2008



Fiscal Year

Item

2008

2009

(from April 1,
2008
to March 31,
2009)(from April 1,
2009
to March 31,
2010)

AmountAmount

1,000

1,000

Issuance of new shares––

Total change during the term

–

–

1,000

1,000

1

1

–

–

Earned surplus

Amount of change during the term
Balance at the end of the fiscal year
Other earned surplus

–

–

1

1

Special reserve

AmountBalance at the end of the previous year

15

6

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

△910Balance at the end of the fiscal year

△9

10

6

16

15

6

Total change during the term
Total valuation and translation
adjustments
Balance at the end of the previous year
Amount of change during the term
Net amount of changes in items otherthan owners’ equity during the term

△9

10

Total change during the term

△9

10

6

16

1,614

1,617

Balance at the end of the fiscal year

Balance at the end of the previous year
Amount of change during the term

AmountBalance at the end of the fiscal year

Legal earned reseve

Total change during the term(from April 1,
2009
to March 31,
2010)

Amount of change during the term

Amount of change during the term

Balance at the end of the previous year

Item

2009

(from April 1,
2008
to March 31,
2009)

Net unrealized gains on other securities

Capital stock

Balance at the end of the fiscal year

Fiscal Year

Valuation and translation adjustments

Share holder’s equity
Balance at the end of the previous yearTotal net assets

17

17

39

39

Amount of change during the term
Issuance of new shares––

Balance at the end of the previous year––

Dividend of surplus––

Amount of change during the term

39

39

Net income

125

Deposition of treasury stock

–

–

△9

10

Balance at the end of the previous year

Total change during the term
Balance at the end of the fiscal year
Special price fluctuation reserves

Total change during the term
Balance at the end of the fiscal year

546

559

Earned surplus carried forward
Balance at the end of the previous year––

Amount of change during the term

12

5

Dividend of surplus

125

Net income

559

564

604

617

Total change during the term
Balance at the end of the fiscal year
Total earned surplus
Balance at the end of the previous year––

Amount of change during the term

12

5

Dividend of surplus

125

Net income

617

622

△5

△5

Balance at the end of the previous year––

Amount of change during the term

–

–

△5

△5

1,598

1,611

Total change during the term
Balance at the end of the fiscal year
Treasury stock

Total change during the term

Net amount of changes in items otherthan owners’ equity during the term
Total change during the term
Balance at the end of the previous year

3

15

1,617

1,633

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

2007

2008

2009

–
2.21 yen–812.01 yen
39,832–6.30 yen–813.57 yen
36,251–
2.58 yen–821.32 yen
42,010Notes:
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.

Balance at the end of the fiscal year
Total share-holders’ equity
Balance at the end of the previous year
Amount of change during the term
Issuance of new shares––

Dividend of surplus––

Net income

125

Deposition of treasury stock––

Total change during the term

12

5

1,611

1,616

Balance at the end of the fiscal year

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201037

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 theend of fiscal
2008

As of theend of fiscal
2009

Total of solvency-margin
Common stock, etc. (amount obtained bysubtracting an estimated outflow to theoutside, deferred assets and valuation andtranslation adjustments from total net
assets)Price fluctuation reserve
Risk reserve
Catastrophe reserves
Reversal for ordinary bad debts(A)
Variance of estimate for othersecurities (excluded deductions for Tax
Consequences) unrealized gain / loss on
securities available for sale
Unrealized gain and loss included landholdings

463,262

506,735

1,611

1,616

7
–
460,081–7–
496,708
–

1,562

8,403

–

–

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

–
–
–

–
–
–

582,221626,848–––
10,805
11,416560,000

–
–
–
8,957
12,291
605,600

159.1%

161.6%


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.

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 2010

◎ 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 price

Securities withacquisition costhigher than thatposted on thebalance sheet

Securities withacquisition cost
not higher thanthat posted on thebalance sheet

Total

Acquisition
cost

Public &corporatebonds

482,714487,886

5,171

–

–

–

137,947

147,415

9,468

Foreignsecurities

Securities withacquisition costhigher than thatposted on thebalance sheet

Type
Public &corporatebonds

483,926

490,673

6,746

–

–

–

269,042

279,448

10,405–––

Subtotal

752,969

770,121

17,152Public &corporatebonds

88,15287,324△828

StocksForeignsecurities
OthersSecurities withacquisition cost
not higher thanthat posted on thebalance sheet

Stocks–––158,746

146,365△12,381

Others

3,400

3,135

△264

Subtotal

250,299

236,825△13,473

1,003,268

1,006,947

3,678

Total

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

Fiscal 2008

Fiscal 2009

Type

Sales
price

Total ofprofit on
sale

Total ofloss on
sale

Sales
price

Total ofprofit on
sale

Total

83,06327

658,208582

Total ofloss onsale
562

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 without market price.

Book value

Difference

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

As of end of fiscal 2008
Type

Money trust

Appraisaldifferencecontained in
profit/loss

Amountposted on
the balance
sheetAppraisaldifferencecontained in
profit/loss

10,000–10,000

–

5,000

5,006

6

625,662

640,308

14,646

Public &corporatebonds

88,61888,623△1,994

2. Money trust for maturity
Nothing to be mentioned.

–

–

–

237,898

221,735△16,162

Others

4,810

4,450

△359

Subtotal

331,327

312,810△18,517956,989

953,118△3,870

As of end of fiscal 2009

Amountposted on
the balance
sheet

Subtotal

Foreignsecurities

Difference

Foreignsecurities

OthersStocksBook value(Unit: Million yen)Type

StocksDivision(Unit: Million yen)

Acquisition
cost❷ Money trust

At the end of fiscal 2008
Division

At the end of fiscal 2009

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2010

39

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

As of the end of fiscal 2008

As of the end of fiscal 2009

Type

Acquisi­
tion
cost

Book
value

Differ­ence

Acquisi­
tion
cost

Book
value

Differ­ence

Money trust

3,750

3,495

△254

3,750

3,692

△57

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 bond futures trading and over-the-counter securities option transactions to reduce interest
fluctuation risks in connection 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 2008
Type

Contract amountMarket priceAs of end of fiscal 2009
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   Short commitment    US dollar

52,98433,90753,582△598

22,5496,394

21,870679    Euro

141,384

103,181150,169△8,785229,048

71,341

230,469△1,420

1,211

1,211

1,085

126

1,211

–

1,276

    Canadian dollar
Total△9,257

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

40

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2010

△64△806