Securities Code:7157
TSE Mothers

Presentation
Material for Investor
for 2Qof Fiscal 2018
November 12, 2018

LIFENET is…
Comprehensible
Cost-Competitive
Convenient Remembering the original purpose oflife insurance – mutual support – Plugged-in way to reach customers who needinsurance products with necessary coverage
1

Contents

1. New Management Policy
2. Results for 2Q of Fiscal 20182

Looking Back on 10 Years
since Business Commencement New business performance back on growth track
20,00018,00016,000Term Life andWhole-life
MedicalApplication via
smartphone

Renewal ofTerm Life andWhole-life
MedicalLoad charge rates
disclosed
Application via
feature phone

14,00012,000au Life Insurancewith KDDI

Agent
commission
rate disclosed

Long-term
Disability

Renewal ofLong-term
Disability

Online claim ofWhole-life
MedicalRenewal ofTerm Life

300,000
270,000
240,000

CancerInsurance

210,000
180,000

10,000150,000

8,000

120,000

6,000

90,0004,000

60,0002,000

30,00000
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
FY2008FY2009FY2010FY2011FY2012FY2013
FY2014FY2015
Number of new business
Number of policies in-force
保有契約件数（件、右軸）新契約件数（件、左軸）(left axis)(right axis)

FY2016FY2017 FY20183

Growth Potential of
Online Life Insurance Market

 Expect growth of online insurance market
based on growing consumers intension
14.0 %
12.0 %
10.0 %

12.5 %

Market share of direct automobile insurance1
ダイレクト自動車保険シェア
Market share of online life insurance2
オンライン生命保険シェア（加入）10.5 %

Ratio of life insurance application intention via online3
オンライン生命保険シェア（加入意向）

9.1 %

8.0 %

5.9 %

6.0 %
4.0 %

4.5 %

2.0 %
0.0 %

8.0 %

7.9 %

2.9 %
0.2 %

0.8 %

1.8 %

3.3 %
2.2 %

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
1.

Ratio of direct automobile insurance to direct writing premiums in whole automobile insurance market

2.

Ratio of online application to whole application channels of life insurance

3.

Ratio of consumers who intend to apply via online in case he/she applies life insurance in the future4

Priority Areas during 10 Years

Start-up period

Previous mid-termbusiness plan period

Current mid-termbusiness plan period

Telephoneconsultation

Telephoneconsultation

SPH channel

SPH channel

PC channel

PC channel

PC channel

Brand

Brand

Brand

Product

Product

Product

PR

PR

PR

Promotion

Promotion

Promotion

Agent

Agent andwhite label (KDDI)

competitiveness2016-2018

Product

2013-2015

Visit

Apply

Promotion
capabilities

2008-2012

Customerexperience Responding to changing customer needs
for sustainable growth5Mission

Help our customers embrace life more fully
by offering comprehensible, costcompetitive and convenient products andservices

VisionBe the leading company driving the growthof the online life insurance market

Priority areas

New Management Policy• Innovation of customer experience

Enhancing and evolving the quality of all services with digital technology• Enhancement of promotion capabilities

Generating massive customer traffic by active promotion and expansion of
agent sales and white label business6

Business Indicators
 Aim for sustainable growth ofEmbedded Value
Key businessindicators ofcorporate value

Business
indicators
supporting
sustainablegrowth ofcorporate value
1.
2.

Embedded Value(EV)

Growthindicators
Profitability
indicators
Soundness
indicators

 European Embedded Value (EEV)1
 Adjusted incremental EV2

 In-force business performance New business performance Adjusted profit(Ordinary profit excl. marketing expenses)- Operating expenses ratio excluding marketing expenses Marketing efficiency of new business Solvency margin ratio

EEV is one of the calculation metrology of EV. The EEV Principles and related guidance were published in May 2004 by the CFO Forum, an organization comprising the chief
financial officers of Europe's leading life insurers, in order to improve consistency and transparency in EV reporting.
Adjusted incremental EV consisted of components accurately reflecting our business growth in 1H of FY2018, see Page 23 for details.

7Management Goal
 Aim to achieve EEV of 100 billion yen
by business growth in a mid-term
1
（百万円）
EEV

(JPY mn)

100,000: Value of in-force business: Adjusted net worth

44,44018,547 18,746

22,907 25,248

31,28436,261

12/03 13/03 14/03 15/03 16/03 17/03 18/03 19/03
1.

(YY/MM)

Lifenet’s EEV is calculated following the EEV Principles and Guidance and in terms of allowance for risk, MCEV Principles (The European Insurance CFO Forum Market Consistent Embedded Value
Principles©) is referred. From fiscal 2016 onward, a predetermined ultimate forward rate has been used to extrapolate the level of ultra-long-term interest rates past the last liquid data point.
This method of extrapolation has also been used to restate EEV as of March 31, 2016.

8

Contents

1. New Management Policy
2. Results for 2Q of Fiscal 20189

Overview of 2Q for FY2018
Annualized premium1 ofpolicies-in-force

11,979(vs end of FY2017 107.5%)(JPY mn)

Annualized premium1 of
new business

1,209(Y-on-Y 165.5%)

Adjusted profit2

EEV (European Embedded Value)(Y-on-Y 120.4%)(Adjusted incremental EV3 1,992)

1,345

61,465

Products received externalhigh evaluation
1.

The amount of money equivalent to what is to be paid to have the insurance coverage for one year. All payments are monthly installments, thus the annualized premium is calculated as multiplying
the monthly premium by 12 months.

2.

Ordinary profit excluding marketing expenses, see Page 19 and 20 for details.

3.

Adjusted incremental EV consisted of components accurately reflecting our business growth in 1H of FY2018, see Page 23 for details.

10Annualized Premium/Number of Policies-in-Force: Number of policies-in-force: Annualized premium of policies-in-force (JPY bn)

11.1
10.0
8.7
215,403

9.3

As of
2Q end11.9

283,207263,847
225,534

Up 8%
vs end of
FY2017

239,800

 Policies-in-force
exceeded 280,000
Up 7%

vs end of
FY2017

 Increased steadily
and accelerated

15/03 16/03 17/03 18/03 18/09(YY/MM)11

Breakdown of Policies-in-force
 Exceeded 180,000 in-force policyholders
Number of policies-in-force- Term Life1- Whole-Life Medical1- Term Medical Care1- Long-term Disability1- Cancer1
Sum insured of policies-in-force2(JPY mn)

Number of policyholders

18/03

18/09

263,847
131,256
76,606
9,924
42,6293,432
2,059,703
169,532

283,207
139,479
80,3499,726
46,0137,640
2,160,391
181,936

17/1H

18/1H

(Reference) Surrender and lapse ratio3

6.1％

Component
ratio

100%
49%
28%
3%
16%
3%

6.2%

1.

Term Life insurance: Kazoku and au Term Insurance, Whole-life Medical insurance: Jibun, New Jibun, New Jibun for Women, au Medical Insurance and au Medical Insurance for Women, Term
Medical Care insurance: Jibun Plus, Long-term Disability insurance: Hataraku-Hito, Hataraku-Hito 2 and au Long-term Disability Insurance, Cancer insurance: Double Yell and au Cancer insurance.

2.

Sum insured of polices-in-force are the sum of death coverage, and do not include third-sector insurance.

3.

The surrender and lapse ratio is the annual equivalent of the monthly number of policies surrendered and/or lapsed divided by the monthly average number of policies-in-force.

12Annualized Premium/Number of New Business:Number of new business (Fiscal year):Number of new business (1H of fiscal year):Annualized premium of new business (1H of fiscal year, JPY mn)

1,209
Y-o-Y
up 66%

730

694

635
548

27,982

15,053

2014

39,17528,04829,741
25,150Y-o-Y
up 71%

16,442
11,403 13,619

15

16

17

18/1H

 Business result grewstrongly Factors of growth- Enhancement of ourbrand by advertising- Increase of
conversion rate byimprovement ofapplication website- Effect of channel
diversification
13

Business Performance
Back on Track for Growth Reached record high of monthly new
business performance since May 2012
: Number of new business policies

May 2008(Business commencement)
1.

Preliminary figures

6,242

May 2012

契約件数 (件)

契約年換算保険料 (百万円)

6,3891

Oct 2018

14

Marketing Expenses per New Business: Marketing expenses per new business (JPY thousand): Marketing expenses / Annualized premium of new business

67
61

59

1H of
FY201861  Maintained

51
1.5
1.3

1.2
1.0

2014
Marketingexpenses(JPY mn)

15

16

1.4

same level despite
increase inmarketing expenses

 Expecting around
60 thousand yen
17 18/1Hlevel for fiscal 2018

1,672 1,302 1,822 2,627 1,721
15

Operating Expenses Ratio1:Insurance premiums (JPY mn):Operating expenses excl. marketing expenses (JPY mn):Operating expenses ratio¹ (%)

10,4219,628

1H of
FY2018

9,007
8,372

22.5%

25.6 %
21.5 %

2,142

1,937

23.1 %

2,225

22.2 %

5,682

2,315
1,275

2014
1.

15

16

 Operating
expenses ratio1

17

18/1H

The ratio of operating expenses excluding marketing expenses to premiums income

22.5%

 Aim for improving
operating expenses
ratio1 by scale
expansion and cost
reduction
16

Long-term Profit Not Reflectedunder Current Statutory Accounting

 Taking time to generate profit, as initial cost isrecognized at the time of acquisition, and the revenue iscollected gradually over long period
Approximate profit structure for one policy: Premiums: Operation expenses1 excludingmarketingexpenses: Marketingexpenses

Total profit/loss

Collect revenue
over long period

Accounting
profit/loss
Initialfiscal year
初年度

Year 22年目

Year 33年目

Year 44年目…

Year X
X年目

Revenue
ExpenseHeavy initial cost1.

Costs for policy management, payment of insurance claims and benefit claims, etc.

17Key Business Indicators ofCorporate Value Disclosed as key indicators of substantial
profitability of insurance companies

Adjusted Profit(Ordinary profit(loss) excluding marketing expenses)
Indicator of profit generated from policies-in-force

EEV (European Embedded Value )1

Indicator of long-term profitability of insurancecompanies
1.

EEV is one of the calculation metrology of EV. The EEV Principles and related guidance were published in May 2004 by the CFO Forum, an organization comprising the chief
financial officers of Europe's leading life insurers, in order to improve consistency and transparency in EV reporting.

18

Newly Disclosed Adjusted Profit
 Indicator of profit generated from policies-in-force
Significance of Adjusted profit disclosure• As accrual timing of cost and revenue do not match,statutory accounting does not necessarily provide an
accurate picture of profitability of our business• Accrual timing of marketing expenses is far different fromthe one of revenue, therefore excluding marketing expenses
from ordinary profit(loss) enables to indicate profit
generated from policies-in-force
Ordinary profit excluding marketing expenses

Adjusted Profit

19

Newly Disclosed Adjusted Profit Adjusted profit steadily increased though ordinary
profit(loss)1 to be influenced by marketing expenses(JPY mn)(JPY mn)

Ordinary profit/loss1

Adjusted Profit＝Ordinary profit(loss)1
excluding marketing expenses: Fiscal year

2,429

: 1H of fiscal year

1,887

1,910

Y-on-Y
up 20%

584
1,200

88
(197)
(376)

(472)

619

2014
1.

15

16

17

18/1H

2014

The ordinary profit (loss) before amortization of deferred assets under Article 113 of the Insurance Business Act

967

989

1,117

15

16

17

1,345

18/1H

20

Structure of Embedded ValueEV

Adjusted
net worth

Value of in-force
business(Net assets at end of period+ adjustments)

Profit/loss for thecurrent fiscal year
is reflected in endof-period net assets

Revenue

Revenue
ExpenseExpenseProfit/Loss for
current fiscal year

Unrealized future profits/losses on policies-in-force
at the end of current fiscal year

21European Embedded Value1 (EEV)
 CAGR of EEV is 20%2 and value of in-force
business is 40% since IPO
 Steadily growing even in a low
61,465interest rate environment(JPY mn)

44,440

Value of in-force business
Adjusted net worth

36,26145,87031,28422,907
18,5471.
2.

18,74615,198

11,831

14,152

12,078

11,075

11,095

13/03

14/03

15/03

5,122

6,668

13,425

12/03

28,42725,24820,24015,59416,086

16,021

16,012

16/03

17/03

18/03

18/09 (YY/MM)

Lifenet’s EEV is calculated following the EEV Principles and Guidance and in terms of allowance for risk, MCEV Principles (The European Insurance CFO Forum Market Consistent Embedded Value
Principles©) is referred. From fiscal 2016 onward, a predetermined ultimate forward rate has been used to extrapolate the level of ultra-long-term interest rates past the last liquid data point.
This method of extrapolation has also been used to restate EEV as of March 31, 2016.
The calculation includes 3,040 million yen in proceeds from a third-party allotment in May 2015.

22

Newly Disclosed
Adjusted Incremental EV Accurately indicates our business growth ina certain period among increase in EEV
Adjusted incremental EV
Defined as constitution of components below- New business value in the fiscal year
- Expected existing business contribution- Operating experience variances23

1Structure Breakdown of EEV
 Adjusted incremental EV 1,992 million yen
 Changed assumptions based on 10 years experiencesince business commencement

61,465(JPY mn)

Adjusted
incremental EV

New businessvalue

44,440Assumptionchanges

Expected existing
business contribution

1,282

456

Total

1,992

14,621

Economic variances
and assumptionchanges

410

Operatingexperiencevariances253

million yen

18/09 (YY/MM)
1. Lifenet’s EEV is calculated following the EEV Principles and Guidance and in terms of allowance for risk, MCEV Principles (The European Insurance CFO Forum Market Consistent Embedded Value
24
Principles©) is referred.
18/03

Financial Condition
18/03

18/09

Cash and deposits

35,541926

37,101
1,022

Monetary claimsbought

1,999

999

Money held in trust

2,567
28,303
8,398
1,505
13,892346
4,161
22,153

3,029
30,222
8,344
1,490
15,528487
4,370
23,983

21,18622,965

Total net assets

13,387

13,118

Solvency margin ratio

2,455％

2,289％(JPY mn)(YY/MM)

Total assets

Securities
Government bonds
Municipal bonds
Corporate bonds
Stocks1
Other securities2

Total liabilities
Policy reserves andother Modified duration
11.7 years
 Maintain sufficientfinancial stability as
Solvency margin ratio
shows

1.

Holds shares of Advance Create Co., Ltd. and others for the purpose ofbusiness partnership etc. in online sales

2.

Investment trust including foreign bonds and others

25Evaluation for Products
 Products highly evaluated by professionals
Term Life

1.
2.
3.
4.

Long-term
Disability

Cancer

The most popular insurance products in each category from January through December 2017, receiving the highest number of applications of Kakaku.com Insurance, the sales agent company of insurance products
The Most Chosen Insurance Ranking 2018 of HOKEN ICHIBA is based on compiled date from the number of brochure request and application from January through December 2017.
Lifenet Cancer Insurance Double Yell received the Grand Prize in the cancer insurance product category in the Nikkei TRENDY magazine published by Nikkei Business Publications, Inc. of May 2018.
MONOQRO the MONEY magazine of December 201826

For Helping Customers Embrace Life
More Fully

 Aim for helping customers embrace life more fully
as well as embracing diversified life
Enhanced Survivorship Support Services1 to support those who
are working while being treated for cancer

Received Gold Rating in the PRIDE Index by wwP2 for LGBT3
initiatives for 3rd consecutive year

1. For details URL： https://www.lifenet-seimei.co.jp/survivorship/ (in Japanese only)
2. work with Pride is a private organization to support the promotion and institutionalization of diversity management relating to sexual minorities including lesbian, gay, bisexual and transgender in companies
and organizations
3. Sexual minorities such as Lesbian, Gay, Bisexual and Transgenders

27

Revision of Business Forecast FY2018
 Given new management policy and strong
new business result, aim for reachinghistorical high in a fiscal year

(JPY mn)

Ordinary income
Ordinary profit(loss)Net income (loss)(Reference)
Annualized premium1of new business
1.

【Original】【Revised in Aug】

【Revised in Nov】

Business forecast

Business forecast

Business forecast

for FY2018

for FY2018

for FY2018

12,0000012,300(800)(600)

12,600(1,600)(1,600)

1,800

2,200

2,600

The amount of money equivalent to what is to be paid to have the insurance coverage for one year. All payments are monthly installments, thus the annualized premium is calculated as
multiplying the monthly premium by 12 months.

28

Mission

Help our customers embrace life more fully
by offering comprehensible, costcompetitive and convenient products andservices

VisionBe the leading company driving the growthof the online life insurance market

Priority areas

New Management Policy• Innovation of customer experience

Enhancing and evolving the quality of all services with digital technology• Enhancement of promotion capabilities

Generating massive customer traffic by active promotion and expansion of
agent sales and white label business

29

LIFENET Manifesto
Comprehensible, Cost-Competitive, ConvenientI.

Our Guiding Principles(1) Creating the life insurance of the future without losing sight of its original
premise: “an ounce of prevention is worth more than a pound of cure.”(2) Listening to what our customers are saying. Recognizing their needs andacting accordingly. Allowing our actions to be borne out of their voices andneeds.
(3) Delivering the caliber of products and services that we would feel
confident recommending to our own friends and families.
(4) Being a “straight-shooter”. Committing to transparency. Communicating
openly about our management team, our products, and our employees.
(5) Embracing diversity and dialogue to keep us abreast of changing needs
and preferences. Delivering peace of mind that we’ll be around in 100
years.
(6) Acting in good faith means always taking the high road when it comes tocompliance and ethics.

III.

Making Life Insurance Accessible Again - Affordable(1) Giving the customer what he/she needs. No more, no less at a fair price.
(2) Staying vigilant as to how we can provide our products more costefficiently.
(3) Always putting ourselves in our customers’ shoes in thinking about how tominimize their premiums.

II.

Making Life Insurance Accessible Again - Headache-free(1) Helping the customers help themselves. By making our materials easy tounderstand, customers can determine which coverage is truly the best fit.
(2) Turning “clauses” in the insurance contract into succinct points that yourgrandmother could grasp.
(3) Making all touch points headache-free. Beyond the application process,ensuring the claims and billing processes are also easy to understand.

IV.

Making Life Insurance Accessible Again - Convenient(1) Thinking about our customers’ convenience from every angle and every
touch point along the way.
(2) Forming alliances with like-minded partners who can add value above andbeyond our products and services to our customers.
(3) Providing health and wellness tips beyond the framework of life insurance
to create value in our policyholders’ lives.
(4) Creating a precedent for future generations as to what life insurance is(and should be) all about.

We wish to be a company that helps our customers embrace life more fully.
In order to live out that vision, we continue to challenge ourselves.

30

All information on this document that is nothistorical fact constitutes forward-looking
information and is based on assumptions andforecasts available to the company at the time of
preparation. The company cannot guarantee theaccuracy of these assumptions and forecasts.
Earnings projections and other information on thismay differ materially from actual performance due
to various risks and uncertainties.
This is a translation of the original Japanese
document, prepared and provided solely forreaders' convenience. In case of any discrepancy or
dispute, the Japanese document prevails.

https://ir.lifenet-seimei.co.jp/en/
Subscribe to our "IR email service" to receive
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Appendix

Condensed Statements of Operation/ Fundamental Profit(JPY mn)

2017/1H

2018/1H

ChangeInsurance premiums and other

5,196
142
5,338

5,847
250
6,097

650
107
758

971

1,251

280

Increased by In-force policies business increase. Percentage of
insurance claims and benefit claims to insurance premiums is 18.1%.

Insurance claims

533

710

177

Increased from 35 cases to 48 year on year (1H of 2018)

Benefit claims

288

318

30

Increased from 3,039 cases to 3,331 year on year (1H of 2018)

Provision for policy
reserves and other

1,786

1,885

98

2,295
1,115
327
852
283
5,337

2,997
1,721
367
908
339
6,473

702
605
40
56
55
1,136

1

(376)

(377)

16

8

(7)

(15)

(384)

(369)

Mortality margin

1,278

1,442

164

Expense margin (loss)(1,232)(1,756)(523)

Interest margin (loss)

4

(6)

(10)

Fundamental profit

50

(319)

(370)

Other
Ordinary income

Condensed Statements of Operation

Insurance claims and other

Operating expenses
Marketing expenses
Customer service
System and other
Other
Ordinary expenses
Ordinary profit (loss)

Fundamental
ProfitExtraordinary losses andincome taxes
Net income (loss)

Note

In-force policies business increase

Increased slightly by transferring to standard policy reserves.
Percentage of provision for policy reserves (1,885 million yen) toinsurance premiums is 33.2%.
Marketing expenses mainly advertising expenses increased

Marketing expenses mainly advertising expenses increased33

Three Surplus Factors ofFundamental Profit

2Q of FY2018
Ordinary income

Statements of operations
Insurance premiums and other 5,847

Premiums income 5,682

Reinsurance income 164

Investment income
129

Other ordinary income 120

Ordinary expenses

Insurance claims and other 1,251
Insurance claims and benefits
1,028

Reinsurance commissions
222

Provision for policy reserves
and others 1,885

Profit analysis
Net premiums

Expense loading

ReinsuranceincomeReversal ofreserves foroutstanding
claimsInsurance claims
and benefits
Reinsurance
commissions

Change inpolicy reserves

Other ordinary
incomeChange inpolicy reserves

Investment expenses 0

Operatingexpenses

Operating expenses 2,997

Other ordinary
expenses 339

Interest anddividends

Projected
interest
Interest
expenses

Other ordinary
expenses

Income taxes 2

Mortality
margin (loss)
1,442

Net profit (loss)
(384)
1.

Some items with minimal amounts have been omitted.

Expensemargin (loss)(1,756)

Losses on salesof securities

Capital gains(losses)0

Ordinary profit (loss) (376)
Extraordinary profit (loss) (6)Gains on salesof securities

Interest
margin (loss)(6)

Provision forcontingency
reserves

Other
onetimegains (losses)(56)

Extraordinary profit (loss)(6)
Income taxes 2

Net profit (loss) (384)34

Solvency Margin Ratio Calculation
As of Sep 30, 2018

(R 1 + R 8 )2 + (R 2 + R 3 + R 7 )2 + R 4 / 2

Solvency margin ratio
2,289.3%
Cash and deposits
1,022
Monetary claims bought

999

Money held in trust
3,029

=

Total amount of solvency margin<numerator>
20,678Other liabilities
748
Policy reserves

22,642

Contingency reserves 1,575

Excess over the fullZillmerized reserve 5,798

Securities
30,222

Tangible fixed assets

92
Intangible fixed assets
633

Other assets
1,102

Price fluctuation reserves
37
Deferred tax liabilities onavailable-for-salesecurities
1

208
Valuation difference on
available-for-salesecurities
1535

Capital stockand otherassets12,523
Net assets
13,118

Total amount of risk/2< the denominator>
1,806/2

Insurance risk R1 1,123

Reserves for outstanding claims323

÷

Add liabilities
with strong
capitalcharacteristics
such as pricefluctuation
reserves andcontingency
reserves

Risk of change in mortality rate (calculated based onvalue of policies in force)

Medical insurance risk R8 405
Risk of change in medical incidence rate (hospital
admission rate , etc.)

Assumed interest rate risk R2 2
Risk that the actual investment return will fall below
the expected return used as a basis for calculating
policy reserves[Minimum guarantee risk] R7 －Risk related to products, such as variable annuities
with minimum guarantees

Asset management risk R3 819[Credit risk] Risk that asset values decline due todeterioration in financial condition of creditees[Price fluctuation risk]Risk of incurring losses due todecline in market value of stocks and bonds, etc.

Business management risk R4 70
3% of the total of the amounts of the other 5 risks (in the
Company’s case)1.

90% of the valuation difference on available-for-sale securities and deferred gains or losses on hedges (pre-tax) (if negative, 100%)2.

Items that do not apply to the Company or for which the amount is minimal have been omitted, except for certain bracketed items.

35