Financial Section

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

27

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2022

FINANCIAL STATEMENTS
1. Balance Sheets(NET ASSETS)

(ASSETS)

(Yen in millions)Fiscal Year2020
(As of March
31, 2021)

2021(As of March
31, 2022)

Item

AmountAmountCash and deposits
Deposits

263,355
263,355

193,688
193,688

105

42

Call loans
Monetary receivables bought

19,99917,999365,834
16,68773,774
249,705
24,735931

457,705
25,89895,870303,916
32,020–

Tangible fixed assets
Buildings Other tangible fixed assets

52
20
31

46
20
26

Intangible fixed assets
Software Other intangible fixed assets

114
112
1

89
87
1

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

17,812
17,530322745
519,44919,0905236
4571

Total assets

667,273

689,022

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

Item

2020
(As of March
31, 2021)

2021(As of March
31, 2022)

AmountAmountUnderwriting funds
Outstanding claims
Underwriting reserves

631,956
118,581
513,374

664,942
144,276
520,665

Entrusted reserves

25,962

16,748Other liabilities
Reinsurance accounts payable
Income taxes payable
Deposits payable
Accrued amounts payable
Derivatives

6,690
5,004
457
3
239
986

7,434
5,227
371
3
484
1,346
128

Reserve for retirement benefits

151

Reserve for directors’ retirement benefits

10

7

Reserve for bonus payments

23

22

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

939(1,792)665,734

687,492(Yen in millions)2020(As of March
31, 2021)

2021(As of March
31, 2022)

Item

AmountAmountCommon stock

1,000

1,000

546

547

Fiscal Year

Retained earnings Legal reserve of retained earnings

11 Other legal reserve of retained earnings

545

546

  
Special reserves

1717  Special price fluctuation reserves3939  Retained earnings carried forward

488

489

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

1,541

(1)

(12)

(1)

(12)

1,538

1,529

667,273

689,022

Notes for fiscal 2021
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 2022

28

(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.

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 un-	settled 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 “Accounting Standard for Fair
Value Measurement” (ASBJ Statement No. 30,
July 4, 2019) and others from the beginning of
the fiscal year 2021.
In accordance with the transitional treatment set
forth in Paragraph 19 of “Accounting Standard
for Fair Value Measurement” and Paragraph 44-2
of “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019),
the Company has prospectively applied a new accounting policy prescribed by “Accounting Standard for Fair Value Measurement” and others.
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

29

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

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2022

(2)and manage current quotations and credit information on a regular basis in this regard.
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, 2022. 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–

457,705–

457,705

Government bonds–

25,898–25,898Municipal bonds–

95,870–95,870

Corporate bonds–

303,916–

303,916

Foreign securities–

32,020–32,020Derivatives (*)
Derivatives not subject tohedge accounting–(1,346)–(1,346)–(1,346)–(1,346)

Securities

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
The fair value of securities which is based on the Reference Statistical Prices of Japan Securities Dealers Association and prices
provided by external vendors is categorized within level 2 based onmarket activity.
Derivatives
Since derivatives are OTC derivatives and no public 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 andexchange rates. Fair value that can be 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 184 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)
Outstanding reinsurance claims related to theabove claims
Net outstanding claims

153,243
8,966
144,276

7. Total deferred tax assets amount to 2,447 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 2,295 million yen, unpaid business taxes of 81 million yen, a reserve for retirement
benefits of 36 million yen and unpaid special business tax of 22 million yen.
The major factor behind the significant change inamount for a valuation reserve is the 1,738 million
yen increase in the valuation allowance for tax loss
carried forward.
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 769.30 yen. The basis forthis calculation is that net assets are 1,529 million
yen, net assets accrued from ordinary shares are
1,529 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 202230

2. Statements of Income(Yen in millions)

Fiscal Year

2020

2021

Notes for fiscal 2021
1. See below for a breakdown of net premiums written.
(Yen in millions)(from April 1, 2020
to March 31, 2021)(from April 1, 2021
to March 31, 2022)

Item

AmountAmountReinsurance premiums ceded:

76,619Ordinary income

234,352

254,971

Net premiums written:

252,468

Underwriting income

233,000

252,930   Net premiums written

232,822

252,468177

462  Investment income on savings
premiums
Investment income

1,339

2,040

   Interest and dividend income

752

594

   Gains on sales of securities

96

144

   Foreign exchange gains

667

1,763

   Other investment income

0

0

(177)

(462)

  Transfer of investment income on
savings premiums
Other ordinary income

12–234,351

254,970

231,610

251,456

10,187150,088   Loss adjustment expenses

2,338

13,270  Commissions and brokerage fees

57,235  
Provision of outstanding claims   Provision of underwriting reserves

Ordinary expenses
Underwriting expenses   Net claims paid

Investment expenses

Premiums written:

329,088

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

Claims paid:

290,335

Reinsurance claims recovered:

140,247

Net claims paid:

150,088

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)(9,077)

55,111

Provision of outstanding reinsurance claims
related to the above claims(34,773)

114,948

25,695

Net provision of outstanding claims

25,69546,900

7,291

1,006

1,662

   Losses on sales of securities

69

207

  Losses on derivatives

922

1,439

   Other investment expenses

15

15

1,733

1,828

–

22

Monetary receivables bought:  Interest expenses–

22

Securities:

584

Ordinary income (loss)

01

Total:

594

Extraordinary income–2 Operating, general and administrative
expenses
Other ordinary expenses

Other extraordinary income

–

2

0

2

Provision of reserve for price fluctuation

0

0

Other extraordinary losses–

2

Net income (loss) before income taxes

01

Income taxes

00

Total income taxes00

Net income (loss)

01

Extraordinary losses

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

Deposits:

8

Call loans:

02

5. Paper profit/loss involved in the losses on derivatives
is a loss of 1,346 million yen.
6. Net
income per share is 0.75 yen.
The basis for this calculation is such that net income is 1 million yen, net income accrued from
common stocks is 1 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 16.24%. The difference is
explained by the following breakdown: valuation reserve 95,587.74%, exclusion from gross revenue ofreversal of taxable risk reserves related to claims
paid etc. (89,504.57%), and exclusion from grossrevenue of reversal of taxable risk reserves related
to publicity expenses (6,116.54%).
8. Each amount is rounded down to the nearest whole
unit.

31

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2022

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

Fiscal Year

Item

2020

2021

(from April 1, 2020
to March 31, 2021)(from April 1, 2021
to March 31, 2022)

AmountAmountNotes for fiscal 2021
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

01

Depreciation

78

74

114,948

25,695

Increase (decrease) in outstanding
claimsCash and deposits
Call loans(As of March
31, 2021)(As of March
31, 2022)

263,355

193,688

105

42

Monetary receivables bought

19,99917,999Securities

365,834

457,705

Deposits of a depository period
over three months

Increase (decrease) in underwriting
reserves

46,900

7,291

Increase (decrease) in entrusted
reserves

911(9,214)(79,030)(79,030)

Increase (decrease) in reserve forretirement benefits

(12)

(22)

Monetary receivables bought other thancash equivalents(4,999)(7,999)

Increase (decrease) in reserve fordirectors’ retirement benefits

(3)

(2)

Securities other than cash equivalent(365,834)(457,705)

Cash and cash equivalents

199,430

124,700

Increase (decrease) in reserve forbonus payments

0(0)Increase (decrease) in reserve forprice fluctuation

0

0

(752)

(594)

Interest and dividend income
Losses (gains) on investment insecurities

(27)

62

Foreign exchange losses (gains)(1,132)(1,711)

Decrease (increase) in other assets(other than investment and financial
activities related)(10)(1,627)

Increase (decrease) in other liabilities(other than investment and financial
activities related)(7,548)468

Others1,086

274   Subtotal

154,439

20,695

1,347

1,319

Interest and dividends received
Income taxes paid

(0)

(0)

155,787

22,014

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

Purchase of monetary receivablesbought(19,997)(22,998)

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
Purchase of securities

24,99819,999(199,266)(187,139)

Proceeds from sales and redemptionof securities

84,96293,440    Total investment assets activities(174,333)(96,699)    Total operating activities and   investment assets activities(18,546)(74,685)

Acquisition of tangible fixed assets

(0)

(7)

Others(34)(36)(174,369)(96,744)

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(18,582)(74,729)

Cash and cash equivalents at the
beginning of the year

218,012

199,430

Cash and cash equivalents at the endof the year

199,430

124,700

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2022

32

4. Statement of Changes in Shareholders’ Equity
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’equityTotal changes
Balance at theend of the period

1,000

1

17

39

0

0

488

546

(5)

0

0

0

0

0

0

0

0

1,540

(1)

(1)

1,538

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

Notes for fiscal 2021
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
2020

Increase in
fiscal 2021

Decrease in
fiscal 2021

Balance asof the endof fiscal
2021

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.

33

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2022

(5)

1

(10)

(10)

(10)

1

(10)

(10)

(8)

1,541

(12)

(12)

1,529