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 priceand appraisal profit and loss) and others

26Japan Earthquake Reinsurance Co., Ltd. Annual Report 2011

Financial review
The fiscal 2010, the Japanese economy struggled with a difficult employment situation, the rapid appreciation of the yen, and other factors, which offset the effects of government fiscal stimulus and rising demandin emerging countries. In addition, the Great East Japan Earthquake in March seriously affected the Japanese
economy, causing a significant reduction in production activities, for example.
The number of earthquake insurance contracts increased during the year under review, as they did in the previous year. Premiums written also rose from the previous year, backed by factors such as a growing interest inearthquake insurance. The number and amount of earthquake insurance payouts declined from the previous
year, despite insurance payouts for the Surugawan Earthquake in 2009. For the Great East Japan Earthquakethat took place in March, there was no payment of earthquake reinsurance claims for the fiscal year underreview, so we posted a reserve for outstanding claims.
Profits from investments increased from the previous year, reflecting an increase in investment assets, which
offset the decline of interest rates in the first half of the fiscal year and the rapid appreciation of the yen in thesecond half. After the Great East Japan Earthquake, we sold securities to prepare for payment of reinsurance
claims.
Administrative expenses remained flat from the previous year as a result of a commitment to achieve efficientbusiness operations and cut costs as operations expanded.
The fiscal year under review was the second year of our second three-year medium-term business plan. During the year, we played an active role in enhancing and developing the earthquake insurance system and took
action to ensure that we achieved the plan, such as refining our expertise in earthquake insurance operations,bolstering our asset management and risk management, and improving our business continuity plan, aiming todevelop into a company that will be even more reliable and trustworthy for our stakeholders.
(1) Summary of earthquake insurance resultsa. Premiums written and insurance claims paid
Net premiums written amounted to 71.5 billion yen(down 1.0% year on year), reflecting an increase in thereinsurance premiums paid to direct insurance companies and the government, which exceeded the increasein the number of insurance contracts and premiums
written. Insurance claims paid came to 1 billion yen(down 81.4% year on year) due in part to the Surugawan Earthquake in 2009.
b. Risk reserves and underwriting reserves
Risk reserves added amounted to 43.3 billion yen (up2.0% year on year), the total of net premiums writtenof 37.2 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 fiscal year under review
were 424.4 billion yen (down 14.6% year on year), reflecting the drawing from risk reserves in the past year
following the payment of ongoing insurance claims of
1 billion yen, the provision of outstanding claims of
114.4 billion yen, as well as advertising and publicity
expenses of 0.1 billion yen.
Underwriting reserves at the end of the fiscal year under review totaled 515.9 billion yen (down 11.9% year
on year) after adding unearned premium reserves andrefunded reserves to the risk reserves.
c. Risk reserves of direct insurance companies
Risk reserves of direct insurance companies recorded
as entrusted reserves were 489.1 billion yen for the
fiscal year under review (down 6.7% year on year), obtained by adding net premiums written and profit frominvestments of 28.6 billion yen (up 2.6% year on year),and drawing a provision of outstanding claims of 63
billion yen and advertising and publicity expenses of
0.5 billion yen.

(2) Outline of investments
Medium- to long-term domestic interest rates declined
significantly in the first half of the fiscal year, due inpart to the slow recovery of the Japanese economy andthe decline in interest rates in Europe and the UnitedStates, which is attributable to the increasingly serious
sovereign debt problems in Europe. The interest rates
subsequently began to rise given global expectationsof an economic recovery. At the end of the fiscal year
under review, however, the interest rates were slightly
lower than the levels at the end of the previous fiscal
year, due in part to the impact of the Great East Japan
Earthquake.
The yen appreciated sharply against both the dollar
and euro. It remained strong against the dollar due tofurther monetary easing by the Federal Reserve Boardand against the euro because of the increasingly serious sovereign debt problems in Europe. Consequently,
compared with a year ago, the yen had appreciatedabout ten yen against the dollar and about seven yen
against the euro at the end of the fiscal 2010.
In the circumstances, we invested in assets with the
top priority placed on security and liquidity, followedby profitability. As a result, pre-tax profits from investments amounted to 7.1 billion yen in the business account and 5.4 billion yen in the entrusted reserves account. Consequently, investment assets at the end of
the year under review stood at 1,135.2 billion yen.
To prepare for the payment of reinsurance claims resulting from the Great East Japan Earthquake, we havesecured abundant funding by selling securities.
(3) Profit and loss for the fiscal year under review
Net income was 3 million yen after calculating interest and dividend income to capital account and otheritems.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201127

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

Fiscal Year

Division

2006

2007

Net premiums written(percentage change over the previous term)

67,981(△4.4%)

64,040(△5.8%)

67,126(4.8%)

72,225(7.6%)

71,532(△1.0%)

Ordinary incomes(percentage change over the previous term)

90,373(△16.2%)

81,290(△10.1%)

84,993(4.6%)

99,464(17.0%)

175,903(76.9%)

Ordinary expenses(percentage change over the previous term)

90,229(△16.3%)

81,273(△9.9%)

84,792(4.3%)

98,512(16.2%)

174,913(77.6%)

Ordinary profit(percentage change over the previous term)

143(521.1%)16(△88.5%)200(1,108.8%)

951(374.2%)990(4.1%)Net income(percentage change over the previous term)△16(△146.4%)

4
(–)

12
(184.1%)

5（△58.9%）3（△30.2%）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)

2008

2009

2010

Net assets

1,600

1,614

1,617

1,633

1,634

Total assets

908,963955,968

1,015,053

1,092,272

1,154,108

Underwriting reserves(percentage change over the previous term)

490,901(8.9%)

515,586(5.0%)

545,255(5.8%)

585,820(7.4%)

515,981(△11.9%)of the balance, risk reserve balance(percentage change over the previous term)

412,364(8.9%)

433,841(5.2%)

460,081(6.0%)

496,708(8.0%)

424,401(△14.6%)Loans(percentage change over the previous term)

–
(–)

–
(–)

–
(–)

–
(–)

–
(–)

Securities(percentage change over the previous term)

851,739(10.4%)

895,513(5.1%)

953,118(6.4%)

1,006,947(5.6%)

805,223(△20.0%)

Solvency-margin ratio

175.3%

185.4%

159.1%

161.6%

124.7%

Dividend propensity

–%

–%

–%

–%

–%

No. of employees

21

24

28

26

25

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.

Indicators showing results for thelast three fiscal years
Item: earthquake
q Indicators relating to insurance underwriting
1. Net premiums written

2. Underwriting profit(Unit: Million yen)

Division

Fiscal Year

2008

2009

2010

Division

2008

2009

2010

Premiums written

145,445

151,353

152,182

Underwriting incomes

70,546

79,278148,490

Return premiums

3,241

2,464

2,324

Underwriting expenses

69,884

77,828147,002

149,634

Operating and generalad­ministrative expenses

Assumed net premiums
written (A)141,271

148,349

Reinsurance premiums
ceded (B)74,145

76,123

78,102

Net premiums written (A-B)

67,12672,22571,532

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

28(Unit: Million yen)

Fiscal Year

Other incomes and expenses
Underwriting profit

474

509

503

△187

△941

△984

–

–

–

Notes:
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 and losses.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2011

❷ Indicators relating to accounting

3. Net claims paid
(Unit: Million yen)

Division

Fiscal Year

Assumed net claim paid (A)

2008

2009

2010

9,350

5,544

1,033

–

–

–

9,350

5,544

1,033

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

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

4. L
 oss ratio, net expense ratio and their combinedratio

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

Year As of the endof fiscal 2008

Outstanding claims

As of the endof fiscal 2009

As of the endof fiscal 2010

114,918228

420

Underwriting reserves

545,255

585,820515,981(Risk reserve)(460,081)(496,708)(424,401)(Unearned premium
reserve)(83,366)(87,453)(90,054)(Repayment reserve)(1,808)(1,659)(1,524)545,484

586,241

630,899

Total(Unit: Million yen)

Division

Fiscal Year

2008

Loss ratio
Underwriting expenses

2010

16.0%

8.6%

1.8%

29,897

31,381

31,740

(474)

(509)

(503)

As of the end of Fiscal 2009
Division(29,423)(30,872)(31,236)

Net expense ratio

44.5%

43.4%

44.4%

Combined ratio

60.5%

52.0%

46.2%

Notes:
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

5. R ate of premiums written by domestic and over­seas contracts
Division2. Detailed listing of liability reserves(Unit: Million yen)

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

2009

Fiscal Year

Domestic contract

2008

2009

2010

100%

100%

100%

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

Reserve for directors’ retirement
allowances

9

4

0

13

Reserve for bonus
payment

19

18

19

18

Reserve for pricefluctuation
Total

7

–

0

7

139

44

34

150

As of the end of Fiscal 2010
(Unit: Million yen)

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

Division

Balance asof the end of
fiscal 2009

Amount ofincrease in
fiscal 2010

Amount ofBalancedecrease
as of the end of
in fiscal 2010
fiscal 2010

2008

2009

2010

Reserve for ordinary
bad debts

–

–

–

–

No. of reinsurersthat ceded insurance
contracts

17

17

15

Reserve for individual bad debts

–

–

–

–

Rate of top fivereinsurers’ ceded
insurance premiums

77.5%

77.5%

81.9%

Reserve for specificforeign securities

–

–

–

–

Accrued sever­ance
benefits

110

20

28

102

Reserve for directors’ retirement
allowances

13

4

2

15

Reserve for bonus
payment

18

17

18

17

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

Reserve for pricefluctuation
Total

7

–

1

5

150

42

50

141

We pay no contractor dividend.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201129

3. Detailed listing of shareholders’ equity

5. Profit on sale of securities by category

As of the end of Fiscal 2009

Division(Unit: Million yen)

(Unit: Million yen)

Balance asof the endof fiscal
2008

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
2009
2009

Legal
reserve ofretainedearnings–

Balance asof the endof fiscal
2009

–

1,000

–

(2 mil. stock)
1,000

–

(2 mil. stock)
1,000

7

Foreign securities

–

574

408

27

582

1,501

Total

(Unit: Million yen)

Fiscal Year

Division

2008

2009

2010

Government bonds

6329

Foreign securities

–

232

638

Total

6

562

1,558

–

1

Specialreserves

17

–

–

17

Specialprice
fluctuation
reserves

39

–

–

39

8. D
 epreciation expenses by category

Total

57

–

–

57

As of the end of Fiscal 2009920

7. Securities appraisal loss by category
Nothing is to be mentioned.

As of the end of Fiscal 2010

Tangible fixed assets

Balance asof the endof fiscal
2009

Division
Common stock

Amount of Amount of
increase decreasein fiscalin fiscal
2010
2010

Balance asof the endof fiscal
2010

1,000

–

–

1,000

Ordinarystock(2 mil. stock)
1,000

–

–

(2 mil. stock)
1,000

Total

(2 mil. stock)
1,000

–

(2 mil. stock)
1,000

Legal
reserve ofretainedearnings

–

1

–

–

1

Voluntary
reserves
Specialreserves

17

–

–

17

Acquisition cost

61

40

60.0

(101)

(2)

(61)

(40)

(60.0)(forinvestment)

(–)

(–)

(–)

(–)

(–)

Others

95

20

68

26

72.2

Total

196

23

129

67

65.9

Intangible fixed assets
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

Aggregateddepreciations

Balanceas the endof fiscal
2010

As of the end of Fiscal 2010

39

Type of asset

Total

57

–

–

57

Tangible fixed assets(Unit: Million yen)

Personnel expenses
Non personnel expenses
Taxes

2008

2009

2010

474

378

350

1,673

1,085

702

185

197

196

Agency commissions andbrokerage fees

29,42330,872

31,236

Total

31,75732,53432,485Rate ofag­gregateddepreciations %2–

Fiscal Year

Balanceas the endof fiscal
2009

101

–

4. Business expenses (inclusive of loss adjustment)(Unit: Million yen)

Aggregateddepreciations(forunderwriting)

39

Note:
The number of owned shares was 11,400 as of the end of fiscal 2010.

Amount ofdepreciation in
fiscal 2009

Buildings

Specialprice
fluctuation
reserves

Division

1,092

6. Loss on sale of securities by category–

Voluntary
reserves

2010

27

Type of asset

Legal
reserve ofretainedearnings
andvoluntary
reserves

2009

Government bonds

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

Issued
stock

2008

1

(Unit: Million yen)

Acquisition cost

Amount ofdepreciation in
fiscal 2010

(Unit: Million yen)

Rate ofag­gregateddepreciations %Buildings

101

2

63

37

62.7

(for
underwriting)

(101)

(2)

(63)

(37)

(62.7)(forinvestment)

(–)

(–)

(–)

(–)

(–)

Others

94

11

80

14

84.6

Total

196

14

143

52

73.4

Intangible fixed assets
Software

407

81

153

253

37.8

Other
intangible
fixed assets

0

0

0

0

91.9

Total

407

81

154

253

37.9

Grand total

603

96

298

305

49.4

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.

30

Fiscal Year

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2011

2. Investments in outline

9. Loss from disposal of fixed assets(Unit: Million yen)

Division

Fiscal Year

2008

2009

2010

Deposits

(Unit: Million yen)

–

–

–


Division

Buildings–

0–

Deposits

24,27522,352Other tangible fixed assets

0

–

–

(Ordinary deposit)(1,475)(2,052)(2,909)

Total

0

0

–

(Time deposit)(22,800)(20,300)(7,500)

Land

Year

As of the endof fiscal 2008

As of the endof fiscal 2009

As of the endof fiscal 2010

10,409No mention is made about the level of underwriting
reserves because there is no target contract.

Total assets and investments assets

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.

Percentage
distribution(%)

There are no notes about the loan write-off and profit from property and equipment.
e Special deposit premium accountFiscalYear
Divisionr	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.

(Unit: Million yen)

2010

Percentage
distribution(%)

Percentage
distribution(%)

24,275

2.4

22,3522.0

10,4090.9

Call loans

8,819

0.9

28,254

2.6 319,586

27.7

Monetaryreceivablebought

–

–

–

–

–

–

Money trusts

13,495

1.3

13,692

1.3––

Securities

953,118

93.9 1,006,947

92.2

805,223

69.8

Buildings

41

0.0

0.0

37

0.0

40

999,749

98.5 1,071,286

98.1 1,135,256

98.4

Total assets 1,015,053

100.0 1,092,272

100.0 1,154,108

100.0

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

FiscalYeart	The amount of estimated final damages
associated with the elapse of a period fromthe occurrence of accidents does not apply toearthquake insurance.

2009

Deposits

Total ofinvestments
assetsNothing is to be mentioned.

2008

2008

2009

Yield (%)

Division

2010

Yield (%)

Yield (%)

Deposits

236

0.76

219

0.61

169

0.45

Call loans

27

0.29

11

0.07

20

0.06

Monetaryreceivablesbought

3

0.87

–

–

–

–

y Investments

Money trusts

91

0.66

86

0.63

50

0.40

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.

Securities

13,956

1.52

16,991

1.76

15,734

1.55

Buildings

–

–

–

–

–

–

14,315

1.47

17,3091.67

15,975

1.46

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 201131

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

FiscalYear Amount of

2009

2010

Deposits

219

Amount ofdenominator
35,819Call loans

11

16,691Divisionnumerator

Monetary receivablesboughtYield onworking
assets (%)
0.61
0.07

169

Amount ofdenominator
37,412

Yield onworking
assets (%)
0.45

20

35,101

0.06

Amount ofnumerator

–

–

–

–

–

–

Money trusts△72

13,750

△0.52

△218

12,604△1.73

Securities

17,011

967,658

1.76

15,676 1,011,852

1.55

5,372

542,992

0.99

6,121

1.04

Public andcorporate bonds

589,258

–

–

–

–

–

–

Foreign securities

11,968415,507

2.88

9,898

419,477

2.36

Other securities

Stocks

△329

9,158

△3.6

△343

3,116

△11.01

Loans

–

–

–

–

–

–

Buildings

–

42

–

–

40

–

9,326

–

–

17,035––△13,617–– △19,572––

13,112 1,097,011

1.20

Financial derivative
OthersTotal

12,879 1,033,962

1.25

Notes:
1. A
 sset 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.
Numerator = profit from asset management + investment income on sav­ings premiums – expenses of assets management

2. Profit and loss from financial derivatives principally involve foreign exchange forward contracts with the remainder primarily involving currency exchange of foreign
currency-denominated bonds. JER deals in foreign exchange forward contracts andother transactions for the purpose of hedging risks associated with foreign currencydenominated bonds.

6. B alance, percentage distribution and yield ofForeign Loans & Investments(Unit: Million yen)



2010

Deposits

219

37,412

Yield onworking
assets (%)
0.45

Call loans

11

16,6910.07

20

35,101

0.06

Monetary receiv­ablesbought

–

–

–

–

–

–

Divisionnumerator

Money trusts

124

13,4950.92△160

12,546△1.28

Securities

29,921

970,987

3.08

7,870

1,028,090

0.77

Public andcorporate bonds

8,113

546,170

1.49

3,563

595,176

–

–

–

–

–

–

Foreign securities

22,047416,011

5.30

4,385

430,061

1.02

Other securi­ties

△240

8,805

△2.73

△78

2,852

△2.77

–

–

–

–

–

–

StocksLoans
Buildings
Financial deriva­tive

0.60

–

42

–

–

40

–

9,326

–

–

17,035––

Others△13,617–

Total

25,986

1,037,036– △19,572
2.51

5,364

–

–

1,113,191

0.48

Notes:
1. M arket-price based overall yield: indicator showing the efficiency of op­eration on amarket price basis. The nu­merator reflects realized profit and loss and fluctuations inmarket price appraisal while the denominator is market-price based assets.
Numerator = (income from operated assets management + investment income on
savings premium – expenses for assets man­agement) + (after-tax unrealized gain
for the year – after-tax unrealized gain for previous year)* + fluctuation in deferredhedge profit and loss
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

Percentage
distribution(%)

Percentage
distribution(%)

60.0 270,894

63.6 152,723

48.4

40.0 154,918

36.4 162,901

51.6

100.0 425,813

100.0 315,624

100.0

Foreign publicand corporate 147,827
bonds
Total

369,151

Yield onforeign loans &investment
Investment
assets yield(income yield)

2.81%

2.80%

2.41%

Assetsmanagement(realized
yield)

2.81%

2.88%

2.36%

Market-pricebased overall
yield (for reference)

2.97%

5.30%

1.02%

Note:
Of the yield on foreign loans & investments, the investment assets yield was calculated
in the same manner as 3., Amount of interest and dividend received and yield on investment assets (income 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 2008

Govern­ment
bonds

412,278

Municipal
bonds

2,581

Corporatebonds

159,650

Stocks

As of the end of
fiscal 2009

Percentage
distribution(%)

Division–

As of the end of
fiscal 2010

Percentage
distribution(%)

Percentage
distribution(%)

43.3 457,324

45.4 414,095

0.3

80

0.0

–

–

16.8 120,593

12.0

75,503

9.4

–

–

–

38.7 425,813

42.3 315,624

39.2

–

–

51.4

Foreignsecurities

369,151

Other
securities

9,456

1.0

3,135

0.3

–

–

–

–

–

–

–

–

100.0 1,006,947

100.0

805,223

100.0

Loan
receivable insecurities
Total*Based on the amount before tax effect deduction

32

As of the end of
fiscal 2010

Yen
denominated(Unit: Million yen)Amount ofdenominator

Percentage
distribution(%)

Foreign publicand corporate 221,324
bonds

5. Market-price based overall yield (for reference)2009

As of the end of
fiscal 2009

Foreign currency
denominated

2. Profit and loss from financial derivatives principally involve foreign exchange forward contracts with the remainder primarily involving currency exchange of foreign
currency-denominated bonds. JER deals in foreign exchange forward contracts andother transactions for the purpose of hedging risks associated with foreign currencydenominated bonds.

Amount of
Yield onAmount ofdenomi- working asnumerator
nator
sets (%)
35,8190.61
169

As of the end of
fiscal 2008

Division

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

FiscalYear Amount ofYear

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2011

953,118

8. Yield on securities held

As of the end of fiscal 2010	(Unit: %)
Division

Fiscal Year

2008

2009

2010

Investment assets yield (income yield)
Public & corporate bonds

0.94

0.99

0.95

–

–

–

Foreign securities

2.81

2.80

2.41

Other securities

0.24

–

–

Total

1.52

1.76

1.55

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

0.99

1.04

–

–

–

Foreign securities

2.81

2.88

2.36

Other securities

0.24

△3.60

△11.01

Total

1.52

1.76

1.55

1.14

1.49

0.60

–

–

–

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

2.97

5.30

1.02

Other securities

△1.84

△2.73

△2.77

1.69

3.08

0.77

Total

Division

Up to
1 year

1 overup to
3 years

3 overup to
5 years

Govern­ment
bonds

196,002 128,689

41,261

5,614 40,503

Municipal
bonds

–

–

–

–

–

–

–

Corporatebonds

29,69843,870

415

1,518

–

–

75,503

–

–

–

–

–

–

–

59,386 20,300 12,266–

315,624

Stocks0.94

Foreignsecurities

72,255 151,415

Division
Govern­
ment
bonds

Up to
1 year

1 overup to
3 years

139,800 225,477

3 overup to
5 years
36,389(Unit: Million yen)

5 over 7 over
up to up to
7
10
years years

Over
10
years

6,344 36,734 12,577

457,32480

Corporatebonds

44,52854,001

20,437

104

1,521

–

120,593

–

–

–

–

–

–

–

54,596 219,828 115,466 23,655 12,267–

425,813

StocksForeignsecurities

–

–

–

–

–

80

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

2,024

414,095

–

–

–

–

–

–

–

–

–

–

–

–

–

297,957 323,974 101,063 27,433 52,769

2,024

805,223

Total

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

Year

Land
(for investment)

As of the endof fiscal 2008

As of the endof fiscal 2009

As of the endof fiscal 2010

–

–

–

(–)

(–)

(–)

(–)

(–)

(–)

41

40

37

(for underwriting)

(41)

(40)

(37)

(for investment)

(–)

(–)

(–)

–

–

–

(–)

(–)

(–)

Construction in progress(for underwriting)

Municipal
bonds

Total

–

Buildings
Total

Over
10
years

Loan
receivablein securities(for underwriting)

As of the end of fiscal 2009	

7 over
up to
10
years

Other
securities


Division

9. Balance Current Maturity of securities by category(Unit: Million yen)

5 over
up to
7
years

(for investment)

(–)

(–)

(–)

Total of property

41

40

37

(for underwriting)

(41)

(40)

(37)

(for investment)

(–)

(–)

(–)

Other tangible fixed assets

37

26

14

Total

79

67

52

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 201133

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

Fiscal Year

Item

(Unit: Million yen)2009
(As of March 31, 2010)
AmountPercentage
distribution

2010(As of March 31, 2011)
AmountCash & deposits
Deposits
Call loans

22,352
22,352
28,2542.0
2.6

10,40910,409319,586

Money trusts

13,692

1.3–

1,006,947
457,32492.2

805,223
414,095

Securities
Government bonds
Municipal bonds

80–

Corporate bonds
Foreign securities

120,593425,81375,503
315,624

Other securities

3,135

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
Other assets
Deferred tax assets   Total assets

67
40

27.7
69.8

52
37

0.0

14
0.0

0
20,547

0.9

–
0.0

26
334
334

Percentage
distribution

253
253

0.0

0
1.9

18,512

8,628

8,416

7
5,265
54
119
6,472

3,720
3,662
52
73
2,466

–

119

1.6

(LIABILITIES)


Fiscal Year

Percentage
distribution

Percentage
distribution

Item

AmountUnderwriting funds
Outstanding claims
Underwriting reserves
Entrusted reserves
Other liabilities
Reinsurance balance payable
Corporate taxes payable
Deposits payable
Accrued amounts pay­able
Financial derivative
Accrued serverance benefits
Reserves for directors’
retirement benefit
Reserves for bonus payment
Reserves under the
special law
Price fluctuation reserves
Net unrealized gains onavailable-for-sale securitiesof earthquake insurance

586,241420
585,820473,207
14,885
5,507
952
2
1,144
7,278
110

16,154

1.5

8,410

0.7

Total liabilities

1,090,639

99.9

1,152,474

99.9



Fiscal Year

Item

Amount0.0630,899
114,918
515,981500,250
12,772
5,632
601
3
999
5,535
102

0.0

15

18

0.0

17

0.0

7

0.0

5

0.0

13

53.7

43.3
1.4

7

54.7

43.3
1.1

0.0
0.0

5

(NET ASSETS)

(Unit: Million yen)2009
(As of March 31, 2010)
Percentage
distribution

Amount2010(As of March 31, 2011)
Percentage
distribution

Amount

76

0.0

71

0.0

Common stock

1,000

0.1

1,000

0.1

1,092,272

100.0

1,154,108

100.0

Retained earnings

622

0.1

625

0.1

 Legal reserve of retained
earnings

11 Other legal reserve ofretained earnings

621

624

  Special reserves

1717  Special price fluctuation
reserves

39

39  Retained earnings
brought forward

564

Treasury Stock

△5

△0.0

△5

Total shareholders’ equity

1,616

0.2

1,620

0.1

 et unrealized gain onNavailable-for-sale securities

16

0.0

14

0.0

 Total valuation andtranslation adjustments

16

0.0

14

0.0

1,633

0.1

1,634

0.1

1,092,272

100.0

1,154,108

100.0

Total net assets
Total liabilities and net
assets34(Unit: Million yen)

2009
2010
(As of March 31, 2010) (As of March 31, 2011)

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2011

568
△0.0

1. A
 ppraisal standards and method of securities, andmeth­od of indication(1) O f available-for-sale securities, those to which
the market price is applicable is appraised according to the mar­ket price at term end.
(2) O f available-for-sale securities, those to which
the market price is not applicable is appraised
based on cost or write-off cost price using themoving-aver­age 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 2011

35

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, 2011.
(Unit: Million yen)Balancesheet
amountFair value

Difference(i) Call loans

319,586

319,586–(ii) Securities
Available-for-salesecurities

805,223805,223–(iii) Derivatives*(3,068)(3,068)–* 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: Methods for calculating the fair values of financial instruments(i) Call loans
Call loans are settled in the short term, and their fair values are
therefore deemed equal to their carrying values.
(ii) 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.
(iii) Derivatives
The fair values of derivatives are determined by prices offered bycorrespondent financial institutions.

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.

36

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 143 million yen.
13. T
 otal deferred tax assets amount to 85 million yen,while total deferred tax liabilities come to 7 million yen. The amount deducted from deferred tax
assets as a valuation reserve is 5 million yen. The
breakdown of deferred tax assets reveals unpaid
business taxes of 19 million yen, unpaid special
local corporate tax of 14 million yen, a retirement
benefit reserve of 37 million yen and a bonus reserve of 6 million yen. The deferred tax liabilities
result primarily from an unrealized gain of 7 million yen on securities.
14. N
 et assets per share are 821.81 yen. The basis forthis calculation is that net assets are 1,634 million yen, net assets accrued from ordinary sharesare 1,634 million yen and the number of ordinary
shares at the end of the term is 1,988 million.

15. Changes in the method of accounting
In the accounting period under review, JER began
to apply the Accounting Standards for Asset Retirement Obligations (ASBJ Statement No. 18 ofMarch 31, 2008) and the Guidance on AccountingStandards for Asset Retirement Obligations (ASBJ
Guidance No. 21 of March. 31, 2008).
These changes do not have any influence on the
results.
16. E
 ach amount is rounded down to the nearest wholeunit.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2011

❷ Statements of income(Unit: Million yen)

Fiscal Year

Item
Ordinary income

2009

2010

(from April 1, 2009
to March 31, 2010)(from April 1, 2010
to March 31, 2011)

AmountAmount99,464

175,903

Underwriting income

79,278148,490   Net premiums written

72,22571,532  Investment income on savings
premiums

7,052

7,118

–

69,839Investment income

20,186

27,413   Interest and dividend income

17,222

15,924   Profit from operating monetary trust86

50   Realized gain on sale of securities

582

1,501

9,326

17,03521

19△7,052△7,1180098,512

174,91377,828147,002

5,544

1,033

Reversal of underwriting reserves   Financial derivative gain   Profit from other operations  Transfer of profit from Investment
income on savings premiums
Other ordinary income
Ordinary expenses
Underwriting expenses   Net claims paid   Loss adjustment expenses

653

235

30,872

31,236   Provision for outstanding claims

192

114,497   Provision for underwriting reserves

40,565–

14,35921,419  Agency commissions and brokerage
fees

Investment expenses   Loss from operating monetary trust

158

268

   Realized loss on sale of securities

562

1,558

   Foreign exchange loss

13,55019,523   Other operation cost

88

68

1,007

1,013

 Operating, general and administrative
expenses

5,317

5,477

   Interest paid

Other ordinary expenses

5,317

5,477

Ordinary profit

951

990

0

1

0

1

0

–

Extraordinary incomes
Reversal of price fluctuation reserves
Extraordinary losses

0–

Income before taxes

951

992

Income taxes – current

950

982

Income taxes – deferred△4

6

Total income taxes

946

988

5

3

Loss on disposal fixed assets

Net income

Notes for fiscal 2010
1. S
 ee below for the net premiums written by breakdown.
Premiums written:

149,634 (million yen)

Reinsurance premiums ceded:

78,102 (million yen)

Net premiums written:

71,532 (million yen)

2. T he interests and dividends income are given below
by category:Interest on deposits:
Call loans:

169 (million yen)
20 (million yen)Interest on securities:

15,734 (million yen)

Total:

15,924 (million yen)

3. P
 aper profit/loss involved in the financial derivative
expenses is a loss of 3,068 million yen.
4. The
net income per share is 1.80 yen.
T
 he basis for this calculation is such that the net income is 3 million yen, the net income accrued fromordinary shares is 3 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 99.64%. The difference is
explained by the following breakdown: the nondeductible amount of the taxable provision of risk
reserves is 67.70%, the amount of the write-off carried from publicity expenses related to risk reservesis △4.43%.
6. E
 ach amount is rounded down to the nearest wholeunit.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201137

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

Fiscal Year

Item

2009

2010

(from April 1, 2009
to March 31, 2010)(from April 1, 2010
to March 31, 2011)

AmountAmountNote:
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, 2010)

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

Cash & deposits

22,352

10,409951

992

Call loans

28,254

319,586

Depreciation

83

96

Securities

1,006,947

805,223

Changes in outstanding claims(△ denotes a decline)

192

114,497

Deposits of a depository periodof three months or longer
Securities other than cash equivalent

Changes in underwriting reserves(△ denotes a decline)
Changes in entrusted reserves(△ denotes a decline)

40,565△69,839

26,32027,043

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

7△7

Changes in directors’ retirement
benefit reserves (△ denotes a
decline)42

Changes in accrued bonuses for
employees (△ denotes a decline)△1△1Changes in reserve for pricefluctuation (△ denotes a decline)△0△1Interest and dividend income△17,222△15,924

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

△19

57

Foreign exchange gain or loss(△ denotes a gain)

5,360

666

Gain or loss on tangible fixed assets(△ denotes a gain)0–

Increase in other assets (other thaninvestment and financial activities
related) (△ denotes an increase)△120△3,453

Increase in other liabilities (otherthan investment and financial
activities related) (△ denotes a
decline)610△18

Others△8,4462,255    Subtotal

48,28556,363

Interest and dividends received

15,664

17,526

Income taxes paid

△298

△1,32663,651

72,5622,500

12,800Net cash provided by operating activities

Cash and cash equivalents

Net increase in deposits at bank(△ denotes an increase)
Proceeds from Decrease in Money
Held in Trust
Purchase of securities
Proceeds from sales and redemptionof securities
OthersTotal investment assets activities    (Total operating activities and    investment assets activities)–

13,750△275,224△443,199

229,340

636,394–△119△43,383△219,626(20,267)(292,189)

Acquisition of tangible fixed assets△11–

Others△243–△43,639

219,626

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

Net cash provided by investing activities

Net change in cash and equivalents

20,012

292,189

Cash and cash equivalents at the begin­ning of the year

10,29430,306

Cash and cash equivalents at the endof the year

30,306

322,495△20,300△7,500△1,006,947△805,223

30,306

322,495

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

Cash flow from investing activities

38(As of March
31, 2011)

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2011

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

2009



Fiscal Year

Item

(from April 1,
2009
to March 31,
2010)(from April 1,
2010
to March 31,
2011)

AmountAmountCommon stock
1,000

1,000

–

–

Amount of change during the term
Issuance of new shares
Total change during the term
Balance at the end of the fiscal year

–

–

1,000

1,000

Retained earnings
1

1

–

–

Amount of change during the term
Total change during the term
Dividend of surplus
Balance at the end of the fiscal year

–

–

1

1

17

17

–

–

17

17

39

39

–

–

39

39

Amount of change during the term
Balance at the end of the fiscal year
Special price fluctuation reserves
Balance at the end of the previous year
Amount of change during the term
Total change during the term
Balance at the end of the fiscal year
Retained earnings brought forward
Balance at the end of the previous year

559

564

Dividend of surplus––

Net income

53Total change during the term

5

3

564

568

617

622

Amount of change during the term
Dividend of surplus––

Net income

53Total change during the term
Balance at the end of the fiscal year

5

3

622

625

△5

△5

–

–

Treasury stock
Balance at the end of the previous year

Total change during the term

–

–

△5

△5

1,611

1,616

Issuance of new shares––

Dividend of surplus––

Net income

53Balance at the end of the fiscal year

Balance at the end of the previous year

6

16

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

10△2

Total change during the term

10

△2

16

14

6

16

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

10△2

Total change during the term

10

△2

16

14

1,617

1,633
–

Amount of change during the term

Total valuation and translation
adjustments
Amount of change during the term

Total net assets
Balance at the end of the previous year
Amount of change during the term
Issuance of new shares–

Dividend of surplus––

Net income

53

Deposition of treasury stock––

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

10△2

Total change during the term

15

0

1,633

1,634

Balance at the end of the previous year

(Unit: Million yen)Division
Dividend per stock

Fiscal Year

2008

2009

2010

–

–

–

6.30 yen

2.58 yen

1.80 yen

Dividend propensity

–

–

–

Net assets per stock

813.57 yen

821.32 yen

821.81 yen

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

Amount of change during the term
Deposition of treasury stock

AmountNet unrealized gains on available-for-salesecurities

Net income per stock

Total retained earnings
Balance at the end of the previous year

Amount❺ Dividend per stock and total assets per employee

Amount of change during the term

Balance at the end of the fiscal year

(from April 1,
2010
to March 31,
2011)

Balance at the end of the fiscal year

Special reserves

Total change during the term

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

Balance at the end of the previous year

Other legal reserve of retained earnings
Balance at the end of the previous year

Fiscal Year

Balance at the end of the fiscal year

Legal reserve of retained earnings
Balance at the end of the previous yearValuation and translation adjustments

Share holder’s equity
Balance at the end of the previous year

2010

2009

2010

36,25142,01046,164

Total share-holders’ equity
Balance at the end of the previous year
Amount of change during the term

Deposition of treasury stock––

Total change during the term

5

3

1,616

1,620

Balance at the end of the fiscal year

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201139

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
2009

As of theend of fiscal
2010

506,735

430,847

1,616

1,620

Price fluctuation reserves

7

5

Risk reserves––

496,708

424,401

–

–

8,403

4,464

Unrealized gain and loss included landholdings––

Suplus such as premium reserves––

Funding instruments with a debt-like nature––

Items deductible––

Others–

354

Division
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)Catastrophe reserves(A)

Reserves for ordinary bad debts
Unrealized gain / loss on available-for-salesecurities (excluded deductions for Tax
Consequences)

Total risk√(R1 + R2)2 + (R3 + R4)2 + R5 + R6

(B)

626,848

690,852

General underwriting risk (RI)––

Underwriting risk in third-area insurance (R2)––

Anticipated Rate of Return Risk (R3)

–

–

8,957

8,692

Investment risk (R4)(C)

Management risk (R5)

12,291

13,546

Catastrophe risk (R6)

605,600

668,614

Solvency-Margin ratio[(A) / { (B) x 1 / 2 }] x 100

161.6%

124.7%Note:
The 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.

40

Solvency-margin ratio
The non-life insurance companies 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 2011◎ 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. Available-for-sale securities with market priceAt the end of fiscal 2009
Division

Securities withacquisition costhigher than thatposted on thebalance sheet

Securities withacquisition cost
not higher thanthat posted on thebalance sheet

Acquisition
cost

Public &corporatebonds

483,926

Foreignsecurities
OthersBook value383,236

3,785

–

–

–

190,400

194,537

4,136

–

–

–

Subtotal

569,852

577,773

7,921

Public &corporatebonds

106,786

106,362

△423

–

–

–

133,378

121,087△12,291–––

240,164

227,449△12,714810,016805,223△4,793

StocksForeignsecurities
OthersSecurities withacquisition cost
not higher thanthat posted on thebalance sheet

StocksForeignsecurities
OthersSubtotal

Total

Difference

2. Available-for-sale securities sold at the term
(Unit: Million yen)

Fiscal 2009

Fiscal 2010

Type

Sales
price

Total ofprofit on
sale

Total ofloss on
sale

Sales
price

Total ofprofit on
sale

Total ofloss on
sale

Total

58,208582

562

243,308

1,501

1,558

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 priceDifference

1. Money trust for investment

490,673

6,746

As of the end of fiscal 2009

As of the end of fiscal 2010

–

–

–

269,042

279,448

10,405

Amountposted on
the balance
sheetAppraisaldifferencecontained in
profit/loss

Amountposted on
the balance
sheetAppraisaldifferencecontained in
profit/loss

10,000–––(Unit: Million yen)

–

–

–

752,969

770,121

17,152Public &corporatebonds

88,15287,324

△828

–

–

–

Foreignsecurities

158,746

146,365△12,381

Others

3,400

3,135

△264

250,299

236,825△13,473

1,003,268

1,006,947

3,678

Subtotal
Total

379,451

Book value❷ Money trust

Subtotal

StocksType
Public &corporate
bonds

Division

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

Acquisition
cost(Unit: Million yen)Type

StocksAt the end of fiscal 2010

Type

Money trust

2. Money trust for maturity
Nothing to be mentioned.
3. O ther money trusts with any other purpose thanop­eration and maturity(Unit: Million yen)

As of the end of fiscal 2009

As of the end of fiscal 2010

Type

Acquisi­
tion
cost

Book
value

Differ­ence

Acquisi­
tion
cost

Book
value

Differ­ence

Money trust

3,750

3,692

△57

–

–

–

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201141

❸ Derivative transaction contract amounts, market price and appraisal profit and loss
1. Derivatives transactions to which hedge accounting is not applied		 (a) Currency related(Unit: Million yen)

As of the end of fiscal 2009
Type

Contract amount

As of the end of fiscal 2010
Appraisal profit
and lossMarket priceContract amount1 year or
longer ones

Appraisal profit
and lossMarket price

1 year or
longer ones

Transactions other thanmarket transactions Forward foreignexchange contracts   Short positions    US dollar

22,549

6,394

679

679

–

–

–

–

    Euro

229,048

71,341△1,420△1,420142,439

27,931△2,938△2,938

1,211

–

△64

△64

–

–

△806

△806

    Canadian dollar
Total

–

–

△2,938△2,938Notes:
1. Currency related derivatives transactions other than the above are omitted as there is no applicable item.
2. Calculating a market price: Foreign exchange rates depend on futures quotations.

		 (b) Credit related(Unit: Million yen)

As of the end of fiscal 2009
Type

Contract amount

As of the end of fiscal 2010
Appraisal profit
and lossMarket priceContract amount1 year or
longer ones

Market priceAppraisal profit
and loss

1 year or
longer ones

Transactions other thanmarket transactions
Long position incredit derivatives
transactions
Total

–

–

–

–

7,994

7,994

△130

△130

–

–

–

–

7,994

7,994

△130

△130

Note:
Calculating a market price: Based on values presented by relationship financial institution.

2. Derivatives transactions to which hedge accounting is applied
		 Not applicable

42

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2011