Securities Code: 7157
TSE Mothers

Reference DataFirst Quarterfor Fiscal 2019

August 8, 2019

LIFENET is...

Comprehensible
Cost-Competitive
Convenient Remembering the original purpose oflife insurance – mutual support
 Helping our customers embrace life more fully
1

Overview of 1Q for Fiscal 2019
Annualized premium1 ofpolicies-in-force

13,652

million yen

Annualized premium1 of
new business822

million yen(104.3% vs end of FY2018)(Y-on-Y 143.7%)

Adjusted profit2

EEV3 (European Embedded Value)

1,181

million yen(including 370 million yen of impact
by modified co-insurance)

64,222

million yen(Adjusted incremental EV4 745 million yen)

Main Initiatives



1.
2.
3.
4.
5.

Contact center and website awarded top ratings5
Increased usability with social login features
Used AI to analyze data to create movie
promoting brand image
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.
Ordinary profit/loss excluding marketing expenses, see page 10 and 28 for details.
EEV as of June 30, 2019 is calculated applying the same operating assumptions as those used for March 31, 2019, and is not reviewed by third-party specialists.
Adjusted incremental EV consisted of components accurately reflecting our business growth for fiscal 2019, see page 29 for details.
Awarded in the 2018/2019 HDI Benchmarking (Life Insurance Industry) hosted by HDI-Japan2

Annualized Premium /Number of Policies-in-Force: Annualized premium of policies-in-force1 (JPY bn): Number of policies-in-force

13.6

11.5

by steady growth

10.2
9.5

272,8308.9
217,335

228,846

321,829  Exceeded 320,000

243,610

2015/06 ’16/06 ’17/06 ’18/06 ’19/06
1.

 Annualized
premium 118.4%,
number of policiesin-force 118.0%
year-on-year(YY/MM)

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.

3

Breakdown of Policies-in-Force In-force policyholders exceeded 200,000
19/03

19/06

Component
ratio

Number of policies-in-force

308,854

321,829100%- Term Life1

150,808

156,428

49%- Whole-life Medical1

85,96889,08428%- Term Medical Care1

9,493

9,367

3%

- Long-term Disability1

49,21450,521

16%- Cancer1

13,371

16,4295%2,289,567

2,351,117

197,669

205,741

1Q of FY2018

1Q of FY2019

6.3％

7.6%

Sum insured of policies-in-force2(JPY mn)

Number of policyholders(Reference) Surrender and lapse ratio3

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 ofpolicies-in-force.

4

Annualized Premium /Number of New Business:Annualized premium of new business1 (1Q of fiscal year, JPY mn):Number of new business (fiscal year):Number of new business (1Q of fiscal year)822

Strong growthtargeting to breakrecords for two
consecutive years

Annualized premium
143.7%,
number of new
business 143.9%
year-on-year572

64,435

341

343

279
39,17529,741

19,11725,150

5,756

2015
1.

7,307

7,793

’16

’17

13,285’18’19/1Q (fiscal year)

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.

5

Number of New Business (Quarter) Eight consecutive quarters increase andset new record
19,117:Number of new business1Q 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 3Q 4Q 1Q
FY2008FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY20196

Marketing Efficiency: Marketing expenses per new business (JPY thousand): Marketing expenses / Annualized premium of new business1

78

1.3

 Prioritizing
investment ingrowth, resulting
1.8 in marketing
efficiency decline

2015

’16

’17

 Expecting around70 thousand yen
level for fiscal
2019(fiscal year)

1,302

1,822

2,627 4,216

67
61

65

51
1.5

1.5

1.0

Marketingexpenses(JPY mn)
1.

’18 ’19/1Q
1,502

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.

7

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

 Improved though
investing in growth11,845
10,421
9,007

21.5 %

1,937

9,628

23.1 %

2,225

 Strive for further
22.2 %

2,315

22.8 %

2,699

21.3%
3,279

business expansion
and operational
efficiency in mid- tolong- term

697

2015
1.

’16

’17

’18

’19/1Q (fiscal year)

Operating expenses ratio is calculated by dividing operating expenses excluding marketing expenses by insurance premium.

8

Profit Structure under
Current Statutory Accounting
 Time lag is caused between the recognition of costs
and revenue as marketing expenses is recognizedat the time of acquisition, and revenue is collectedgradually over a long period
Insurance policy profit structure
Revenue collected
over long period

Accounting
profit/loss(Initial
fiscal
初年度
year)

Revenue

Total profit/loss

Year 22年目

Year 33年目

Year 44年目…

Year X
X年目

Premium

ExpenseMarketingexpenses1.

Heavy initial cost

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

: Premiums: Operating expenses1 excluding
marketing expenses: Marketing expenses

9Key Business Indicators ofCorporate Value Two key indicators during current period of
growth disclosed as follows:

Adjusted profit(Ordinary profit excluding marketing expenses)

Indicator of profit level excluding marketing
expenses as there is a time lag between therecognition of revenue and marketing expenses
as acquisition cost

EEV(European Embedded Value1)

Indicator of long-term profitability of insurancecompanies
1.

EEV is one calculation methodologies 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.

10Adjusted Profit
 Increased adjusted profit excluding
acquisition cost
Adjusted profit

Ordinary profit/loss1(Ordinary profit1 excluding marketing expenses):Fiscal year
(JPY mn):First quarter
2,429

2,497

(JPY mn)

584
1,887

88

(197)

1,910

1,181

(321)

370

(1,719)

2015
1.

’16

’17

’18

’19/1Q(fiscal year)

440

478

562

648

2015

’16

’17

’18

The ordinary profit (loss) before amortization of deferred assets under Article 113 of the Insurance Business Act in fiscal 2015 and fiscal 2016

Impact ofmodifiedcoinsurance

811’19/1Q(fiscal year)

11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 isreflected in end-ofperiod 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

12

EEV （European Embedded Value）
 Characteristics of Lifenet’s EEV are as
follows:

Strong growth• Maintaining increase in EEV since company
became public in March 2012
• Steadily growing even in a low interest
rate environment

Resilient to interest rate changes• Limited sensitivity to interest rate andstock fluctuations
13

Strong EEV1 growth CAGR of EEV is 19%2 and value of
in-force business is 37% since IPO
64,222
63,378(JPY mn)
Value of in-force business
Adjusted net worth
48,51849,50818,547
5,122
13,425

2012/03 ’13/03
1.

2.

’14/03’15/03’16/03’17/03’18/03

14,86014,713’19/03’19/06(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 ultralong-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. EEV as of June 30, 2019is calculated applying the same operating assumptions as those used for March 31, 2019, and is not reviewed by third-party specialists.
The calculation includes 3,040 million yen in proceeds from a third-party allotment in May 2015.

14

Structure Breakdown of EEV1
 Adjusted incremental EV indicating
periodical growth at 745 million yen

64,222(JPY mn)
Operatingexperiencevariances

63,378

Value ofnew business

453

Expected
existing
business
contribution

56

Assumption
Changes-

Economic
variances
and assumptionchanges

98

234

total

745

million yen

Adjusted
incremental EV’19/031.

’19/06 (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. EEV as of June 30, 2019 is calculated applying the same operating assumptions as those used for March 31,
2019, and is not reviewed by third-party specialists.

15

EV Resilience to Financial Changes
 Limited sensitivity to interest rates andstock prices
March 2019 End1
Lifenetライフネット生命

Company
A社 A

Company
B社 B

Company
C
C社

Company
D
D社

13%
8%
4%

1.9%

-2.0%

3%

-0.7%

-1%

-2%
-6%

-5%
-8%
-10%

-7%

-17%
:0.5%
interest rate increase
金利0.5%上昇:0.5%
interest rate decrease
金利0.5%下落

1. Prepared by Lifenet based on disclosed information of domestic public life insurance companies:10%
decrease in equity
and株式・不動産価値等
10%下落
real estate value and other16

Financial Condition’19/03’19/0638,24739,002

1,192

1,086

999

799

3,114

3,305

30,98931,351Government bonds

8,071

8,102

Municipal bonds

1,394

1,403

Corporate bonds

16,76317,023363

345

Foreign securities

45

43

Other securities1

4,352

4,433

26,474

27,46425,256

26,233

Total net assets

11,773

11,538

Solvency margin ratio

2,085％

2,216％

12.0

12.1(JPY mn)(YY/MM)

Total assets
Cash and deposits
Monetary claims bought
Money held in trust

Securities

StocksTotal liabilities
Policy reserves and other

Modified duration (year)

 Maintained
sufficient financial
stability as
indicated bysolvency margin
ratio2

1.

Investment trust including foreign bonds and others

2.

The solvency margin ratio is a key benchmark for industry
regulators. It measures a life insurance company's ability to pay
out claims when unforeseen events occur.

17

Main Initiatives
 Contact center and website awarded top ratings
Contact Center for “Phone Support (New Customers and Chat Services)” and “Web Support (Website)” havebeen awarded top rankings of three stars in the 2018/2019 HDI Benchmarking (Life Insurance Industry) 1

Phone Support
Monitoring(New Customers & Chat Services) (Customer Phone Support)

Web Support(Website) Increased usability with social login features
External IDs can now be used to login to Lifenet’s My Page and application process, increasingusability and convenience Used AI to analyze data to create movie
promoting brand image
11th Anniversary Special Movie (Japanese version only)“Lifenet supports the individual lifestyles of all of our customers”
1.

Awarded in the 2018/2019 HDI Benchmarking (Life Insurance Industry) hosted by HDI-Japan18

Business Forecast FY2019
 No updates from May 13 disclosure Prioritizing investments in growth to achieve
higher corporate value(JPY mn)

FY2019 Forecast
Including impact
of modified
co-insurance

FY2018 Results

16,2002,000

12,560Ordinary profit(loss)(2,000)1,400(1,719)Net income(loss)(2,000)1,400(1,735)

Ordinary income(Reference)

Annualized premiumof new business1
1.

(Reference)

3,000

2,773

Annualized premium is the amount of money equivalent to what is to be paid to have the insurance coverage for one year. All payments for Lifenet products are inmonthly installments; we calculate annualized premium as multiplying the monthly premium by 12 months.

19

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

Management goal

Priority
areas

Help our customers embrace life more fully
by offering comprehensible, cost-competitiveand convenient products and services

VisionManagement 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

Aim to achieve EEV (European Embedded
Value) of 100 billion yen by business growth
in a mid-term
20

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 thana pound of cure.”(2) Listening to what our customers are saying. Recognizing theirneeds and acting accordingly. Allowing our actions to be borneout of their voices and needs.
(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, ourproducts, and our employees.
(5) Embracing diversity and dialogue to keep us abreast of changing
needs and preferences. Delivering peace of mind that we’ll bearound in 100 years.
(6) Acting in good faith means always taking the high road when it
comes to compliance and ethics.

III.

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

II.

Making Life Insurance Accessible Again - Headache-free(1) Helping the customers help themselves. By making ourmaterials easy to understand, customers can determine which
coverage is truly the best fit.
(2) Turning “clauses” in the insurance contract into succinct points
that your grandmother 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 and beyond 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.

21

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
news releases and website updates via email.

Appendix

Condensed Statements of Operation/ Fundamental Profit (1Q)

Fundamental
profitCondensed statements of operation(JPY mn)

FY2018/1Q FY2019/1Q

ChangeNote

Insurance premiums and other

2,882

3,774

891

Due to increase in in-force policies business and utilization ofmodified co-insurance

Other

71
2,954

121
3,895

49
941

Includes 387M increase for utilization of modified co-insurance

Insurance claims and
other

600

772

171

Increased due to growth in in-force policies. Percentage of
insurance claims and benefit claims to insurance premiums is
18.7%.

Insurance claims

334

386

52

Increased from 22 cases in 1Q of FY18 to 26 in 1Q of FY19.

Benefit claims

159

227

67

Provision for policy
reserves and other

899

1,015

115

Increased from 1,606 cases in 1Q of FY18 to 1,960 in 1Q of
FY19.
Increased slightly by transferring to standard policy reserves.
Percentage of provision for policy reserves (1,015 million yen) toinsurance premiums is 31.0%.

1,380
739
188
453
163
3,045

2,199
1,502
211
486
228
4,216

819
763
22
32
64
1,171

Increase in marketing expenses, mainly advertising expenses

(90)

(321)

(230)

Includes profit of 370M for utilization of modified co-insurance.

Ordinary income

Operating expenses
Marketing expenses
Customer service
System and other
Other
Ordinary expenses

Ordinary profit (loss)
Extraordinary losses andincome taxes
Net income (loss)

4

4

(0)

(95)

(325)

(229)

Mortality margin (loss)

681

757

76

Expense margin (loss)(754)(1,180)(426)

Interest margin (loss)

(5)
(77)

(5)
(428)

0
(350)

Fundamental profit

Includes profit of 370M for utilization of modified co-insurance.

Increase in marketing expenses, mainly advertising expenses.
Includes 371M expense loss for utilization of modified coinsurance.

24

EV Sensitivity Analysis1
Impacts of changes in assumptions (sensitivities)(JPY mn)

EEV and new business value as of June 30, 2019
Sensitivity 1a: 1.0% increase in risk-free rate
Sensitivity 1b: 1.0% decrease in risk-free rate
Sensitivity 1c: 0.5% increase in risk-free rate
Sensitivity 1d: 0.5% decrease in risk-free rate
Sensitivity 1e: Interest rates based on JGB yields
Sensitivity 2: 10% decrease in equity and real estate value and otherSensitivity 3: 10% decrease in operating expenses
Sensitivity 4: 10% decrease in lapse rate
Sensitivity 5: 5% decrease in claim incidence rates for life business
Sensitivity 6: Change the required capital to the statutory minimum
1.

Change in EEV64,222(2,340)1,965(1,141)
1,050
344
(437)
2,719
25
3,323
55

Change in
VoNB

453
44
(108)
28
(44)
15
156
(5)
119
2

For each sensitivity, only one specific assumption is changed and other assumptions remain unchanged. It should be noted that the effect of the change of morethan one assumption at a time is likely to be different from the sum of sensitivities carried out separately. As Japanese policy reserves are calculated in accordancewith the IBR, the sensitivities carried out do not affect the reserves at the valuation date. The sensitivity on the value of new business excludes the impact on theadjusted net worth. EEV as of June 30, 2019 is calculated applying the same operating assumptions as those used for March 31, 2019, and is not reviewed bythird-party specialists.

25

Three Surplus Factors ofFundamental Profit
1Q of FY2019
Ordinary income

Insurance premiums and other 3,774

Premiums income 3,279

Net premiums

Expense loading

Reinsurance income 494

ReinsuranceincomeOther reinsuranceincomeInvestment income 70
Other ordinary income 50
Insurance claims and other 772

Ordinary expenses(JPY mn)

Profit analysis

Statements of operations

Reversal ofreserves foroutstanding
claimsInterest anddividends
Other ordinary
incomeReinsurance commissions
159

Insurance claims
and benefits
Reinsurance
commissions

Other reinsurance
commissions

Provision for policy reserves
and others 1,015

Change in policy
reserves

Change in policy
reserves

Insurance claims and benefits
613

Investment expenses 0
Operating expenses 2,199

Operatingexpenses

Other ordinary
expenses 228

Other ordinary
expenses

Projected
interest
Interest
expenses

Ordinary profit (loss) (321)

Extraordinary profit (loss) (3)Income taxes 0

Mortality
ExpenseInterest
margin (loss) margin (loss) margin (loss)
757(1,180)(5)

Net profit (loss) (325)
1. Some items with minimal amounts have been omitted.

Gains on salesof securities

Provision forcontingency
reserves

Losses on salesof securities

Capital gains(losses)0

Other onetime
gains (losses)
106

Extraordinary profit (loss) (3)Income taxes 0

Net profit (loss) (325)26

Solvency Margin Ratio Calculation
As of Jun 30, 2019

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

Solvency margin ratio
2,216.0%=

Total amount of solvency margin<numerator>
19,938Cash and deposits
1,086

Other liabilities
916

Monetary claims bought
799

Reserves for outstanding claims

Money held in trust
3,305

25,802
Contingency reserves 1,573

Excess over the fullZillmerized reserve 6,607

Price fluctuation reserves
45

Securities
31,351

Tangible fixed assets

86
Intangible fixed assets
678

Other assets
1,693

Deferred tax liabilities onavailable-for-salesecurities
1

241

Valuation difference on securities

available-for-sale 6211

Capital stockand otherassets
10,846
Net assets
11,538

Total amount of risk/2< the denominator>
1,799/2

Insurance risk R1 1,174
Risk of change in mortality rate (calculated based onvalue of policies in force)

431

Policy reserves

÷(JPY mn)

Add liabilities
with strong
capitalcharacteristics
such as pricefluctuation
reserves andcontingency
reserves

Medical insurance risk R8 308
Risk of change in medical incidence rate (hospital
admission rate , etc.)

Assumed interest rate risk R2 3
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 885[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 71
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.

27

Adjusted Profit
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• We, therefore, disclose the indicator of profit levelexcluding marketing expenses as there is a time lag
between the recognition of revenue and marketing
expenses as acquisition cost

Ordinary profit excluding marketing expenses

Adjusted profit

28

Adjusted Incremental EV Adjusted incremental EV accurately indicates ourbusiness growth during a certain period withinincrease in EEV

Adjusted incremental EV
Defined as constitution of components below:- New business value in the fiscal year
- Expected existing business contribution- Operating experience variances
29

Utilization of Reinsurance(Modified Co-Insurance)
 Ease pressure of new business costs on P&L
 Alleviate decrease in capital during growth
Illustration image of change in
profit/loss structure by reinsurance：Revenue

Illustration image of impact ofreinsurance on net assets：Costs ：Effects of reinsurance

Without
Reinsurance

11,773 million yen

With
Reinsurance

With
Reinsurance

Ease pressure of new
business costs
Without
reinsuranceYear 1

2

3

4

5

…

Year X

March
2019
Note: Illustration of P&L structure of reinsuring new business of
single fiscal year, where illustration of impact on net assets ofreinsuring new business for multiple years.

30