Financial Section

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

21

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2021

FINANCIAL STATEMENTS
1. Balance Sheets(NET ASSETS)

(ASSETS)

(Yen in millions)Fiscal Year2019
(As of March
31, 2020)

2020(As of March
31, 2021)

Item

AmountAmountCash and deposits
Deposits

231,608
231,608

263,355
263,355404

105

Call loans

9,999

19,999250,648
29,935
18,632
167,384
34,695–

365,834
16,68773,774
249,705
24,735
931

Tangible fixed assets
Buildings Other tangible fixed assets

66
22
44

52
20
31

Intangible fixed assets
Software Other intangible fixed assets

142
141
1

114
112
1

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

17,92817,517
2
227
45
9
125

17,812
17,530
3
227
45
5
–

Total assets

510,798

667,273

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

Item

2019
(As of March
31, 2020)

2020(As of March
31, 2021)

AmountAmountUnderwriting funds
Outstanding claims
Underwriting reserves

470,107
3,633
466,474

631,956
118,581
513,374

Entrusted reserves

25,05025,962Other liabilities
Reinsurance accounts payable
Income taxes payable
Deposits payable
Accrued amounts payable
Derivatives

13,27812,605
189
2
187
292

6,690
5,004
457
3
239
986

Reserve for retirement benefits

163

151

Reserve for directors’ retirement benefits

13

10

Reserve for bonus payments

23

23

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

623

939

509,261

665,734(Yen in millions)2019(As of March
31, 2020)

2020(As of March
31, 2021)

Item

AmountAmountCommon stock

1,000

1,000

545

546

Fiscal Year

Retained earnings Legal reserve of retained earnings Other legal reserve of retained earnings

1

1

544

545

  
Special reserves

1717  Special price fluctuation reserves3939  Retained earnings carried forward

487

488

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)

1,540

1,540

(2)

(1)

(2)

(1)

1,537

1,538

510,798

667,273

Notes for fiscal 2020
1. Matters relating to accounting policies are as follows.
(1)	Appraisal standards and method of securities
and method of indication are as follows.
(i)	Of available-for-sale securities, those to which
the market price is applicable is 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.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2021

22

(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).
(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.
	
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.

23(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 written 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.
(Additional information)
We started to apply the Accounting Standard for
Accounting Changes and Error Corrections (ASBJ
Statement No. 24, March 31, 2020) to financial
statements as of the end of the fiscal year underreview. Accordingly, for reinsurance transactions
and outstanding claims, it started to disclose accounting policies and methods adopted in casethe related accounting standards are not clarified.
2. Financial instruments and fair values of financial
instruments(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 2021

(2)Fair values of financial instruments
The table below shows the balance sheet amounts
and fair values of financial instruments and thedifferences between them as of March 31, 2021.
(Yen in millions)

Balancesheet
amountFair value

Difference(i) Cash and deposits

263,355

263,355

–

105

105

–

(iii) Monetary receivablesbought19,99919,999–(iv) Securities
Available-for-sale securities

365,834

365,834–

Total assets(ii) Call loans

649,294649,294–(v) Derivatives* to which
hedge accounting is notapplied

(986)

(986)

–

Derivatives total

(986)

(986)

–

* Derivatives recorded in other assets and other liabilities.
Net claims and debts derived from derivatives represent the net amounts, and items
whose net balance becomes debts are stated in brackets.

Note: Methods for calculating the fair values of financial instruments(i) Cash and deposits
Cash and deposits are settled in the short term and their fair values
are based on their carrying values as their fair values and carrying
values are similar.
(ii) Call loans
Call loans are settled in the short term and their fair values are
based on their carrying values as their fair values and carrying values are similar.
(iii) Monetary receivables bought
Monetary receivables bought are settled in the short term and theirfair values are based on their carrying values as their fair values andcarrying values are similar.
(iv) Securities
The fair values of securities are based on their market prices atterm end, which are reference prices in the trading statistics of theJapan Securities Dealers Association or market prices obtained
from outside vendors or brokers.
(v) Derivatives
The fair values of derivatives are determined by prices offered bycorrespondent financial institutions.

7. Total deferred tax assets amount to 738 million yen.
Deferred tax assets are all deducted from the total
amount for a valuation reserve.
A breakdown of deferred tax assets reveals tax loss
carried forward of 557 million yen, unpaid businesstaxes of 102 million yen, a reserve for retirement
benefits of 42 million yen and unpaid special business tax of 25 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 773.77 yen. The basis forthis calculation is that net assets are 1,538 million
yen, net assets accrued from ordinary shares are
1,538 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.

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 172 million yen.
6. See below for a breakdown of outstanding claims.
(Yen in millions)

Outstanding claims (before the deduction ofoutstanding reinsurance claims)

162,321

Outstanding reinsurance claims related to theabove claims

43,739Net outstanding claims

118,581

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2021

24

2. Statements of Income(Yen in millions)

Fiscal Year

2019

2020

Notes for fiscal 2020
1. See below for a breakdown of net premiums written.
(Yen in millions)(from April 1, 2019
to March 31, 2020)(from April 1, 2020
to March 31, 2021)

Item

AmountAmountReinsurance premiums ceded:

95,195

Ordinary income

138,413234,352

Net premiums written:

232,822

Underwriting income

137,376

233,000   Net premiums written

129,298

232,822

121

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

7,955

–

Investment income

1,028

1,339

   Interest and dividend income

872

752

   Gains on sales of securities

184

96

   Gains on derivatives

91–   Foreign exchange gains–

667   Other investment income  Transfer of investment income on
savings premiums
Other ordinary income
Ordinary expenses
Underwriting expenses   Net claims paid

1

0

(121)

(177)

(Yen in millions)

Provision of outstanding claims(before the deduction of outstanding
reinsurance claims)

157,303

10,187

Provision of outstanding reinsurance claims
related to the above claims

42,355

Net provision of outstanding claims

114,948–

114,948

49,773

46,900

712

1,006

40

69

   Losses on derivatives–

922  Foreign exchange losses

660–   Other investment expenses

11

15

1,437

1,733

0

–

Ordinary profit (loss)(2)0

Extraordinary income

1–

Provision of reserve for price fluctuation

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

231,610   Losses on sales of securities

Reversal of reserve for price fluctuation

10,187

26,223

2,338

Extraordinary losses

3,926

Net claims paid:

136,265

57,235

Other ordinary expenses

14,114

Reinsurance claims recovered:

12

5,338

 Operating, general and administrative
expenses(Yen in millions)

Claims paid:

234,351

54,929Investment expenses

2. S
 ee below for a breakdown of net claims paid.

7  Commissions and brokerage fees   Provision of underwriting reserves

328,017

138,415   Loss adjustment expenses  Provision of outstanding claims

Premiums written:

1

–

–

0

–

0

Net income (loss) before income taxes(0)0Income taxes

00

Total income taxes00

Net income (loss)(1)0

4. The interest and dividend income are given below
by category:(Yen in millions)

Deposits:

8

Call loans:0

Monetary receivables bought:

2

Securities:

741

Total:

752

5. Paper profit/loss involved in the losses on derivatives
is a loss of 986 million yen.
6. Net
income per share is 0.17 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 46.67%. The difference is
explained by the following breakdown: valuation reserve 16,479.26%, the amount of the write-off carried from publicity expenses related to risk reserves(16,514.54%).
8. Each amount is rounded down to the nearest whole
unit.

25

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2021

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

Fiscal Year

Item

2019

2020

(from April 1, 2019
to March 31, 2020)(from April 1, 2020
to March 31, 2021)

AmountAmountNotes for fiscal 2020
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
Depreciation

(0)

0

96

78

Increase (decrease) in outstanding
claims(7,955)

114,948

Increase (decrease) in underwriting
reserves

49,773

Cash and deposits
Call loans(As of March
31, 2021)

231,608

263,355

404

105

9,999

19,999Securities

250,648

365,834(14,000)(79,030)

Monetary receivables bought
46,900(As of March
31, 2020)

Increase (decrease) in entrusted
reserves

1,291

911

Deposits of a depository period
over three months

Increase (decrease) in reserve forretirement benefits

11

(12)

Monetary receivables bought other thancash equivalents(9,999)(4,999)Securities other than cash equivalent(250,648)(365,834)

Cash and cash equivalents

218,012

199,430

Increase (decrease) in reserve fordirectors’ retirement benefits

(0)

(3)

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

0

Interest and dividend income

(872)

(752)

Losses (gains) on investment insecurities

(144)

(27)

Foreign exchange losses (gains)371(1,132)

Decrease (increase) in other assets(other than investment and financial
activities related)

(115)

(10)

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

220(7,548)Others156

1,086   Subtotal

42,830154,439

1,337

1,347

Interest and dividends received
Income taxes paid

(0)

(0)

44,167

155,787

Net increase (decrease) in deposits–(65,030)

Purchase of monetary receivablesbought(27,999)(19,997)

Net 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

Proceeds from sales and redemptionof monetary receivables bought

27,99924,998(123,665)(199,266)

Proceeds from sales and redemptionof securities

99,532

84,962    Total investment assets activities(24,132)(174,333)    Total operating activities and   investment assets activities

20,035(18,546)

Purchase of securities

Acquisition of tangible fixed assets

(2)

(0)

Others(3)(34)(24,139)(174,369)

Cash flow in financing activities

Net cash provided by investing activities–– ffect of exchange rate changes on cashEand cash equivalents––

 et increase (decrease) in cash andNcash equivalents

20,028(18,582)

Cash and cash equivalents at the
beginning of the year

197,983

218,012

Cash and cash equivalents at the endof the year

218,012

199,430

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2021

26

4. Statement of Changes in Shareholders’ Equity
Fiscal 2019 (from April 1, 2019 to March 31, 2020)(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

546

(1)

(1)

Treasury
stock

(5)

Total
shareholders’equity

1,541

Net
Total
unrealized
valuation
gains onandavailabletranslation
for-saleadjustments
securities

1

1

Total net
assets1,543

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)

487

545

(5)

(1)

(4)

(4)

(4)

(1)

(4)

(4)

(5)

1,540

(2)

(2)

1,537

Fiscal 2020 (from April 1, 2020 to March 31, 2021)(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

487

545

0

0

Treasury
stock

(5)

Total
shareholders’equity

1,540

Net
Total
unrealized
valuation
gains onandavailabletranslation
for-saleadjustments
securities

(2)

(2)

Total net
assets1,537

Changes during
the period
Net income(loss)

0

Net changes
other thanshareholders’equity0

Total changes
Balance at theend of the period

1,000

1

17

39

0

0

488

546

Notes for fiscal 2020
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
2019

Increase in
fiscal 2020

Decrease in
fiscal 2020

Balance asof the endof fiscal
2020

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 whole
unit.

27

0

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2021

(5)

0

0

0

0

0

0

1,540

(1)

(1)

1,538