Securities Code: 7157
TSE Growth

IFRS 17
Insurance Contract
Study Meeting
Session 3

January 20, 2023

Disclosure of the Material◼ Lifenet held the IFRS 17 Insurance Contract study
meeting (Session 3) for investors and analysts on
January 20, 2023 (Japanese version only).
◼ Japanese version of this material was disclosed on
the TDnet and our website prior to the study
meeting following the Fair Disclosure Rule.
◼ 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.

Disclaimer (1)◼ The information in this document is based on
our current interpretations and views ofstatutory accounting and International Financial
Reporting Standards (IFRS).
◼ Other companies in the industry and otherrelated parties may have different
interpretations and views.
◼ For ease of understanding, some of theexpressions used in this document are different
from the actual accounting standards.

1

Disclaimer (2)◼ This document explains the figures relating to ouropening BS as a reference for a better understandingof our financial statements for the next financial yearand beyond. Please note that;✓ The formal adoption of IFRS has not been
decided yet at Lifenet officially✓ All figures in this document are unaudited*Subject to change

2Overview

1.

About the Study Meeting2.

Today’s Key Points

3.

Opening BS (Insurance
Structure of Income Statement 9.
Liability)
under IFRS
10. Opening BS（Entire）
Scope of Retrospective

4.

8.

Insurance Liability underIFRS17

Calculation

11. Negative Insurance Liability

5.

Retrospective Calculation
Insurance Service Results

12. Comparison of EV and IFRS
Equity6.

Analysis of Increase/Decreasein Insurance Service Results

7.

Retrospective Calculation
CSM Movements

13. Future Important
Indicators：EV and IFRSProfit14. Schedule for IFRS Adoption
Appendix3

1. About the Study Meeting◼ Purpose

Explain the key points of IFRS prior to ourvoluntary adoption from FY2023
Facilitate a smooth transition to our new financial statements
and financial analysis
Note: This study meeting is not intended to explain specificperformance forecasts at Lifenet◼ ScheduleThemeSession

Date

Basic information of IFRS 17

1st2nd•••Background and significance of the introduction of IFRSKey points of profit and loss under IFRS 17
Importance of CSM (Contractual Service Margin)

Financial analysis of IFRS 17•

Analysis of profit, financial indicators and changes inCSM

July 5, 2022

October 14, 2022

Opening BS of IFRS 17

3rd

•
•

Retrospective calculation of insurance service
results
Opening BS (insurance liability and the entire)

January 20, 2023
4

2. Today’s Key Points◼ We have performed retrospective calculations andprepared opening BS for FY2022 (unaudited).
This session includes;◼ Income Statement：Insurance service results for
FY2020 and FY2021• Financial results, other results and income tax expenses
are excluded from the retrospective calculation• In practice, income tax expenses will be reflected to profit◼ Balance Sheet：Opening BS for FY2022• Due to the protection type nature of our products,
insurance contract assets will be recorded (insuranceliabilities are negative)5

3. Structure of Income Statement
under IFRS
◼ Insurance revenue is not recorded directly from actual premium, but is released frominsurance liability◼ Insurance service results can be divided into difference between expected and actualclaims, risk adjustment release and amortization of CSM◼ Insurance service results and financial results corresponds to the sources of profits andIFRS P&L is structured to facilitate profit analysis
IFRS P&L

1

Expected claims

Expected insurance claims and operating expenses（Deduct the savings component)

Insurance revenue

2

Risk adjustment
releaseDecrease or release of risk adjustment during theperiod

Insurance service
expenses

3

Amortization of CSM

Amortization of CSM during the period

Insurance service results

4Actual claims

Actual insurance claims and operating expenses（Deduct the savings component)

5

Investment income(loss)

Net income and expenses from asset investment

6

Insurance financeexpenses

Interest on insurance liabilities

7

Other results

Expenses not directly related to insurance services
and gains(losses) other than insurance business

8

Income tax
expensesTax effect accounting based on the effective tax rate
is applied

Investment income
Insurance financeexpensesFinancial results
Other results
Profit before tax
Income tax expenses
Profit6

4. Scope of Retrospective Calculation◼

Insurance liability of opening BS in fiscal 2022 is calculated byretrospective calculation of insurance service results
items/ FY

P/LInsuranceserviceresults
Financialresults
Otherresults

2008

2009

・・・

2020

2021

2022

2023

Calculated retrospectively from thetime of business commencement
for preparation of opening BS

Partially
disclosed in May
2023 related tobusiness forecasts(planned)
No retrospective calculation

Profitbefore tax

the scope ofresults
explained inthisdocument

ProfitB/S

2022.4.1
OpeningBS7

5. Retrospective Calculation
Insurance Service Results◼

Results of insurance service results（Income Statement format）
JPY bnItems

FY2020

FY20211

Insurance revenue

15.2

18.0

2

Expected claims

6.3

7.9

3

Risk adjustment release

1.5

1.6

4

Amortization of CSM

5.2

5.8

5

Recovery of IACF*

2.2

2.7

8.5

10.4

6

Insurance service expenses

7

Actual claims

6.3

7.7

8

Amortization of IACF*

2.2

2.7

Reinsurance results

(0.1)

(0.3)

Insurance service results

6.6

7.2

910

*Insurance Acquisition Cash Flows8

6. Analysis of Increase/Decreasein Insurance Service Results◼

Amortization of CSM is the main source of insurance service results
JPY bnItems

FY2020

Increase/Decrease

FY2021

1Expected claims – Actual claims

0.0

0.2

0.2

2

Risk adjustment release

1.5

1.6

0.1

3

Amortization of CSM

5.2

5.8

0.5

4

Reinsurance results

(0.1)

(0.3)

(0.2)

5

Insurance service results

6.6

7.2

0.6

Analysis of Insurance Service Results

Expected
Insuranceminus actual
service results
0.2(FY2020)

Riskadjustment
releaseAmortizationof CSM

Reinsurance
results

0.5(0.2)

Insuranceservice results(FY2021)

7.2

0.1

6.6

9

7. Retrospective Calculation
CSM Movements◼

As CSM grows, amortization of CSM (revenue) increases◼

New business CSM and assumption changes,etc mainly contributeto the growth of CSM
JPY bnItem

FY2020

FY2021

55.1

65.7

New business CSM

8.9

7.7

3

Increase from interests

0.6

0.6

4Assumption change, etc.

6.4

6.6

5

Amortization of CSM

(5.2)

(5.8)

6CSM, end of the year

65.7

74.9

1CSM, beginning of the year

2（Ref.）Changing factors of EV※ Note that EV is an after-tax concept

Item

JPY bnFY2020

FY2021

Value of new business

5.8

4.7

Assumption changes

3.9

4.7
10

8. Insurance Liability under IFRS 17
IFRS Balance Sheet

Three components of
insurance liabilities

Liabilities

Insurance Liabilities

AssetsPresentvalue offuture
cashflows
Risk
adjustment

CSM

Equities*The figure above is an illustration of IFRS 17
for the general model.

◼

Present value of future cash flows:◼

Risk adjustment:

◼

CSM:

Calculated as present value of future expenses(insurance claims, etc.) deducted by presentvalue of future income (premiums)
Prepared for uncertainty of future cash flows

A liability representing future profit andamortized to profit over the insurance period

On transition to IFRS 17 (or on adoption of IFRS 17),in principle, insurance liabilities are calculated for inforce business retrospectively from the time ofcontract issue

119. Opening BS (Insurance Liability)◼

Present value of future CF will be negative due to the excess offuture premium income over insurance claims expenditures◼

CSM, a source of future profit, is JPY 74.9 billion yen
IFRS Balance Sheet
Liabilities

Insurance Liabilities

AssetsPresentvalue offuture
cashflows
Riskadjustment

CSMEquities

JPY bnIFRS Insurance Liability（2022.4.1）

Present value of future
cash flows(128.8)(Claims minus premiums)

Risk adjustment

32.0

CSM

74.9

Insurance Liabilities*total(21.9)*Only direct underwriting contracts

Since it is negative, it is recorded
as insurance contract assets(Ref.) J-GAAP Policy reserves and other
JPY 43.5 bn（2022.3.31）

12

10. Opening BS（Entire）◼

Instead of the liability of policy reserves under J-GAAP, an insurance
contract asset will be recorded under IFRS◼

Deferred tax liability includes the amount corresponding to thetaxable temporary difference in policy reserves
Lifenet’s
Opening BS
Insurance
contract
assets

JPY bnIFRS Opening（2022.4.1）

Liabilities
16.3

21.9

Insurance contract assets

21.9

Assets (other than above)

66.3

Assets total
Assets88.2

Equities
71.9

88.2

Deferred tax liabilities

14.4

Liabilities (other than above)

2.0

Liabilities total

16.3

Equities total

71.9(Ref.) J-GAAP Net assets
JPY 22.1 bn（2022.3.31）

1311. Negative Insurance Liability◼

Due to the level-payment and protection type nature of our products,
insurance liabilities tend to be negative(1) Expected future cashflows
Y1

Y2

Y3

Y4

Y5Y6Y7Y8Y9Y10Total

Premium income

100

100

100

100

100

100

100

100

100

100

1,000

Insurance claims

60

60

60

60

60

60

60

60

60

60

600

Insurance acquisition
cash flows

100

100

(2) Initial measurement (at the timing of contract)(3) Subsequent measurement(at the end of first year)

CSM
200

Presentvalue ofpremiumincome1,000Risk adjustment
100
Insurance
acquisition cash
flows 100

Present valueof insurance
claims600

Present value of
future cash flows (300)

Insurance Liabilities total 0

During the periodCF
CF in the first year
Premium income 100
Insurance claims 60
Insurance acquisition
cash flows 100

PL
Amortization of the first year
Risk adjustment 10
CSM 20

CSM
180
Presentvalue of
Risk adjustment
premium
90
incomePresent value
900
of insurance
claims540
Present value of
future cash flows (360)

Insurance liabilities total (90)（→ turned into assets）

14

12. Comparison of EV and IFRS Equity◼

The amount of IFRS equity plus CSM(after tax) is similar to EV in total

EV (2022.3.31)

Value ofin-force
business
JPY 91.4 bn
Adjusted
net worth
JPY 25.2 bn

total JYP 116.6 bn

Conceptually similar

IFRS17 (2022.4.1)

CSM*（after tax）

Equity increases
due to the deferralof insurance
acquisition cashflow

JPY 52.4 bn

EquityJPY 71.9 bn

total JPY 124.3 bn*CSM includes CSM of reinsurance

1513. Future Important Indicators：EV and IFRS Profit◼

EV and IFRS are positioned as important indicators that should beviewed from multiple perspectives, both reflect management efforts

Indicators•

Priority areas ofmanagement policy •Results

EVIFRS profit

Potential Value（Economic value thatincludes future profits
from in-force business）

Periodic profit and loss
（Based on the retentionof in-force business）

Innovation ofcustomer experience•

Increase in new business•

Improvement of persistency

Enhancement ofpromotion capabilities•

Improvement of operational
efficiency

EV increases due toan increase in
the value of in-force
business

Future period profit
will increase
through an increase
in CSM16

14. Schedule for IFRS Adoption
May
Financial results for
Fiscal 2021
✓ Announced we aimfor voluntary
adoption in FY2023

Fiscal 2022

May
Financial results for
Fiscal 2022
✓ Disclose business
forecast under
IFRS (planned)

Fiscal 2023

May
Financial results for
Fiscal 2023
✓ Announcement offinancial results
under IFRS (planned)

Fiscal 2024

Second Half
✓ Internal resolution(planned)
17

AppendixIFRS 17 Insurance Liabilities（Initial recognition）
Ex. Sigle premium life insurance (premium 1,000）
Figures are examples[Present value [Present valueof revenue]of expenditure]

CSM
200

AssetsRisk adjustment

100

Insurance acquisition
cash flows 100

Present valueof premiumincome

1,000

Presentvalue ofinsurance
claims, etc.

600

[Initial measurement]

Present valueof future cash
flows

300

Liabilities[Premium received 1,000,
after expenses of Insurance
acquisition cash flows 100]

Assets

CSM
200

CSM
200
Risk adjustment

Risk adjustment

100

100

= 1,000 – 600 – 100

Liabilities= 300 – 1,000 + 100

Presentvalue offuture cash
flows

600

Insurance
liabilities 0*If CSM is negative, it is recognized as a loss immediately

Insuranceliabilities 900

19IFRS 17 Insurance Liabilities(Subsequent measurement)••

Changes of assumptions and risk coefficientare adjusted by CSM
Changes of discount rates are NOT adjustedby CSM
Figures are examples

Basic1) Reduced
Assumption ofmortality rates

200

300

[CSM]

(+100)

100[Risk adjustment]

Future insurance service
results will be leveled2) Raised risk
coefficient

100(-100)

200(+100)

100[Present value of
future cash flows]600[Total amount ofinsurance liabilities]

600

900

900

900

fulfilment cashflows＋CSMDecrease in future
CF is adjusted byCSM

Increase in risk
adjustment isadjusted by CSM

fulfilment cash flows(Economic value)200
50(-50)500(-100)3) Raised interest
rates (discount rates)*If CSM is negative, it is recognized as a loss immediately

500(-100)

750
Changes is recognized as
profit/loss or OCI (othercomprehensive income)20

Revenue Recognition by CSM
New businessexpected future cashflows

CSM

Calculated by the latest best estimate
assumptions based on experience
Year1

Year2

Year3

・・・・

Premiums

Premiums

Premiums

・・・・

InsuranceClaims

Insurance
ClaimsInsurance
Claims・・・・

PresentValue

CSM
Risk adjustment

Presentvalue of Insurance
premium acquisition
cash flows
incomeInsurance
acquisition
cash flows

Present valueof insurance
claims, etc.

CSM is allocated asrevenue over thepolicy period
Revenue・・・・

Amortized based onin-force indicators*If CSM is negative, it is recognized as a loss immediately

Key matters for the increase of CSM(Future profit growth)•Acquiring profitable new business•

Updating assumptions of insurance claims and operating
expenses based on its favorable experience21Insurance Acquisition Cash Flows
Present valueof premiumincomeCSM
Risk
adjustment

Insurance
acquisition cash flows

Present valueof insurance
claims, etc.

◼ Cost directly attributable to theincreased acquisition of insurance
contract groups• Cost which is increased due to an increasein new contracts• Cost that increases new contracts byincreasing costs

Example of IACF
*Individual and specific determination should be made✓ Commissions for sales representatives and agents✓ Expenses related to the acquisition, conclusion, andunderwriting of new policies✓ Advertising expenses to promote insurance products
22Opening BS (Insurance Liabilities)
comparison with J-GAAP【IFRS Insurance Liabilities】

JPY bnIFRS Insurance Liabilities （2022.4.1）
Present value of future cash flows(Claims minus premiums)(128.8)Risk adjustment

32.0

CSM

74.9
(21.9)

Insurance liabilities*: total

Since it is negative, it
is recorded as
insurance contract
assets*Only direct underwriting contracts【J-GAAP Policy reserves and other】

JPY bnJ-GAAP Policy reserves and other（2022.3.31）
Policy reserves

42.6

Reserves for outstanding claims

1.0

Policy reserves and other: total

435
23

Opening BS comparison with J-GAAP
JPY bnIFRS Opening BS（2022.4.1）

JPY bnJ-GAAP BS（2022.3.31）

Insurance contract
assets21.9

Reinsurance contract
assets0.9

Reinsurance accounts
receivable

3.9

Assets (other than above)

65.4

Assets (other than above)

63.9

Assets total

88.2

Assets total

67.8

Policy reserves andother

43.5

Deferred tax liabilities

14.4

Deferred tax liabilities

0.3

Liabilities (other than above)

2.0

Liabilities (other than above)

1.9

Liabilities total16.3

Liabilities total

45.7

Equities total

71.9

Net assets total

22.1
24