Securities Code:7157
TSE Mothers

Reference Datafor
Third Quarter
Fiscal 2016
February 9, 2017

Contents

1. Results for 3Q of Fiscal 2016
2. Progress of Mid-term Business Plan

1

Summary of 3Q for FY2016 Results(JPY mn)First 9 months First 9 months
Year on year
of FY2015
of FY2016

Ordinary income
Operating expenses
Ordinary profit / loss1
Cash flows fromoperating activities
Mortality margin
Annualized premium2 ofpolicies-in-force

Number of policies-in-force
Annualized premium2 of
new business
Number of new business
1.
2.

6,995
2,247
639
3,487
1,591
9,220
222,598872
18,267

7,568
2,714
347
3,069
1,691
9,856
234,828955
20,599108.2%
120.8%
54.3%
88.0%
106.3%
106.9%
105.5%
109.5%
112.8%

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

Key Highlight
Launched sales of “au Life Insurance”
with Refunds
Ordinary income 108% year on year

Bottomed out of new businessperformance
Recorded positive ordinary profit1
1.

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

3

New Product Launch Launched sales of “au Life Insurance” with
Refunds from Dec. 2016
au user
au smartphoneetc.

au Life Insurance“au Life Insurance”
with Refunds

Monthly refunds of 200 yen for up to
60 months as refunds of insurance
premiums per one policy
4Enhance “au Life Insurance” Lineup Newly launched “au Long-term Disability
Insurance”
au Term Insurancewith refunds

au Medical Insurancewith refundsNEW!
au Medical Insurance for Women
with refunds

au Long-term Disability
Insurance with refunds

5New Long-term Disability Product“Hataraku-Hito 2”
 Offered new product in expanding market
Hataraku-Hito 2

Product X

Product Y

Product Z

Policy term

55, 60, 65, 70 y/o60, 65 y/o50, 55～70,
75, 80 y/o55, 60, 65, 70 y/o

Amount ofbenefit

100,000～
500,000 yen/month

50,000～400,000 yen/month

500,000～
10million yen/year

100,000 yen/monthBenefit term

Until expiry

Until expiry

Until expiry

For 2, 3, 5, 10 years

When
recovered

Stop payment

Stop payment

Keep payment

Keep payment

Monthly
premiums1

2,984 yen

3,680 yen

9,468 yen

3,710 yen

Disability

Disability, death coverage,
and benefit for
hospitalization, surgery andadvanced medical care

Disability andhospitalization
benefitCoverage1

1.

2.

Disability

Under the following conditions: Male, age at issue 30 years old, policy term 65 years old, benefit 150,000 yen/month (product Z: benefit 100,000 yen/month for 5 years). The amount of benefit fora year and a half at Lifenet and product X is 75,000 yen/month and 50,000 yen/month, respectively. The definition of disability based on benefit condition differs by each company. Product Y
includes death coverage and benefits for hospitalization, surgery and advanced medical care. Product Z includes hospitalization benefit (5,000 yen/day from 61st day to 180th day).
Lifenet Insurance, based on information from Yomiuri Shimbun morning edition on October 19, 20166

Paperless Application Process Improved customer convenience without
sending application form by postal mail
 Usage of paperless application
process via smartphone1
Past

Not used

40%

Used

1.

Calculated based on data of customers applied in December 2016

Paperless

60%

Significantly
y shortened!

7

Highest Ratingin the 2016 HDI Benchmarking
 Contact center and website awarded highest
rating 3 stars for 5th consecutive year1
 Phone Support (Contact Center)

1.

Awarded in the 2016 Benchmarking (Life Insurance Industry) hosted by HDI-Japan

 Web Support (Website)

8Ordinary Income (Quarterly) 108% year on year mainly by increase of
insurance premiums and other

2,551

2,594

(JPY mn)

2,365

2,392

15/3Q

15/4Q

2,421

16/1Q

16/2Q

16/3Q

9

Ordinary Income (Quarterly) Insurance premiums and other steadily increased(JPY mn)

15/3Q

15/4Q

16/1Q

16/2Q

16/3Q

2,280

2,335

2,444

2,413

2,463

Investment income

113

54

51

56

52

Reversal of reserves foroutstanding claims
Other(excl. Reversal of reserves
for outstanding claims)

(31)

―

96

(53)

30

3

2

2

4

5

2,365

2,392

2,594

2,421

2,551

Insurance premiums andotherOrdinary Income10Annualized Premium /Number of Policies-in-force (Quarterly) In-force business steadily increased: Number of policies-in-force: Annualized premium of policies-in-force (JPY bn)

222,598 225,534

9.2

15/12

9.3

16/03

228,846

234,828
231,538

9.5

9.6

9.8

16/06

16/09

16/12 (YY/MM)11

Breakdown of Policies-in-force
 148,509 in-force policyholders (as of Dec. 31)
Number of policies-in-force- Term Life1- Whole-Life Medical1- Term Medical Care1- Long-Term Disability1
Sum insured of policies-in-force2 (JPY mn)

Number of policyholders

15/12

16/12

222,598
116,338
67,393
11,30427,563
1,889,077
137,667

234,828
121,208
70,033
10,64532,942
1,948,424
148,509

15/3Q

16/3Q

(Reference) Surrender and lapse ratio3

6.7％

Component
ratio

100.0％
51.6％
29.8％
4.5％
14.0％

6.5％

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”

2.

Sum insured of polices-in-force is the sum of death coverage, and does 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 (Quarterly) Number of new business keep exceeding
same period of last fiscal year
: Number of new business: Annualized premium of new business (JPY mn)

6,864

323

15/3Q

6,883

316

15/4Q

7,307
6,312

341

16/1Q

6,980

293

320

16/2Q

16/3Q

13

Annualized Premium / Numberof New Business (First 9 months)
 Bottomed out of new business performance: Number of new business: Annualized premium of new business (JPY mn)

Up 13%
Y-o-Y

20,59918,267872

Up 10%
Y-o-Y

15/3Q(accumulated)

955

16/3Q
(accumulated)

14

Insurance Claims and Benefits (Quarterly) 21 insurance claims, increased by 14, year on year
505

(JPY mn)

424

130
293
225

114

120
105
15/3Q

267
375

179
15/4Q

134

134

Benefitclaims290

Insurance
claims

133
16/1Q

16/2Q

16/3Q

15

Provision for Policy Reserves (Quarterly) Remaining at same level: Provision for policy reserves (JPY mn): Provision for policy reserves / Premiums income

950

917

911

925

917

41.9%

39.7%

38.8%

38.8%

37.8%

15/3Q

15/4Q

16/1Q

16/2Q

16/3Q

16

Operating Expenses (Quarterly) Increased marketing expenses to ensure
bottom out of new business performance(JPY mn)

861

787

441
312
138

997

992

135

339
134

855

428

Marketing

138

153

Customer
service

Systemand other

323

336

415

387

393

414

15/3Q

15/4Q

16/1Q

16/2Q

16/3Q

17

Marketing Expenses
per New Business (Quarterly) Declined efficiency year on year due tomarketing expenses increase: Marketing expenses per new business (JPY thousand): Marketing expenses / Annualized premium of new business

61

64

46

45
0.9
0.9

15/3Q

1.3
0.9

15/4Q

51

0.9
0.9

1.0
1.1

1.3
0.9

16/1Q

16/2Q

16/3Q

18

Ordinary Profit / Loss (Quarterly) Decreased year on year due to increased
operating expenses(JPY mn)

Ordinary profit / loss
before amortization ofdeferred assets
Amortization cost
Ordinary profit (loss)(JPY mn)

15/3Q

15/4Q

16/1Q

16/2Q

16/3Q

220

(54)

139

187

19

(265)
(44)

(265)
(319)

(265)
(125)

(265)
(77)

(265)
(245)

220
139

Ordinary profit (loss) before
amortization of deferredassets

187

19
(54)

19

Condensed Statements of Operation(JPY mn)

15/3Q

16/3Q

Change

6,782
212
6,995

7,321
246
7,568

538
34
573

937

1,384

446

2,847

2,754

(92)

(B)

2,247
322
6,355

2,714
367
7,220

466
44
865

Ordinary profit before amortization of deferredassets under Article 113 of IBA1 (A-B)

639

347

(292)

Amortization of deferred assets under Article
113 of IBA1
(C)

795

795

―

Ordinary loss

(155)

(447)

(292)

Insurance premiums and other
Other
Ordinary income(A)

Insurance claims and other
Provision for policy reserves
and other
Operating expenses
Other
Ordinary expenses

1.

the Insurance Business Act(A-B)-(C)20Structure Breakdown of Ordinary Profit
 Increase of insurance claims and other andoperating expenses
Transition of ordinary profit1 (First 9 months)(JPY mn)

IncomeIncrease of
insurance
premiums
and other

Expense

Other

Decrease ofprovisionfor policy
reservesand other

34

538

639

92
Increase of
insurance
claims and
other

(446)

347
Increase ofoperatingExpenses

(466)
15/3Q
1.

Ordinary profit before amortization of deferred assets under Article 113 of the Insurance Business Act

Other

(44)
16/3Q

21

Fundamental Profit Decreased year on year
due to increased expense loss
Mortality margin
Expense margin (loss)
Interest margin
Fundamental profit (loss)(Reference) Insurance
premiums and other(JPY mn)

15/3Q

15/4Q

16/1Q

16/2Q

16/3Q

532
(625)
9
(83)
2,280

509
(819)
11
(298)
2,335

549
(655)
5
(100)
2,444

589
(655)
8
(57)
2,413

552
(777)
1
(224)
2,463

208

(JPY mn)

181

164

Fundamental profit (loss)
before amortization ofdeferred assets

40
(33)

22

Operating Cash Flows (Quarterly) Steadily recorded positive operating cash flows(JPY mn)

1,235

1,363
1,123

947
758

15/3Q

15/4Q

16/1Q

16/2Q

16/3Q

23

Financial Condition(JPY mn)

15/03

16/03

16/12

Total assets

23,38730,31732,505

Cash and deposits

731

734

Monetary claimsbought-

1,999

Money held in trust

1,033

1,035

Securities

17,082

23,067

Government bonds

8,227

10,102

Municipal bonds

851

1,521

 Invested foreign
bonds for
1,001
26,022
investment
assets
10,024
1,505
diversification

Corporate bonds

6,894

10,428

11,271

Stocks1

222

211

Foreign securities2

886

804

Other securities--

Total liabilities
Policy reserves andother

10,89914,893

17,37010,084

13,908

16,590Total net assets

12,487

15,423

15,135

1.
2.

1,123
1,499


Modified
duration789
12.4 years
2,120
310

Lifenet holds shares of Advance Create Co., Ltd., its insurance sales agent, for the purpose of maintaining equity and business partnership.
Investment in Kyobo Lifeplanet Life Insurance Company in Korea

24

Solvency Margin Ratio1
 Maintained at high level despite of increased
asset management risk
2,782% 2,805%

15/12

2,778% 2,809% 2,782%

Average of 4 major
insurance companies2

Average of 4 major
insurance companies2

894％

910％

16/03

16/06

16/09

16/12

1.

The solvency margin ratio measures a life insurance company’s ability to pay out claims when unforeseen events occurs, such as natural disaster or a stock market collapse.

2.

Simple arithmetic average(YY/MM)25

Impact of Interest Rates
 Limited impact in 3Q of fiscal 2016
Interest
marginLimited because our products are
all protection type

Decreased unrealized gains ofgovernment bonds andBalance sheet
corporate bonds due to risinginterest rates
Investment
policyPromote diversification in
investment assets
26

Contents

1. Results for 3Q of Fiscal 2016
2. Progress of Mid-term Business Plan

27

New Mid-term Business Plan Summary of new Mid-term Business Plan
FY2018
Management
Goal

13.5 billion yen in ordinary income
Positive profitability of ordinary profit (loss)

Business
Strategy

1. The pillars of business : “Online direct sales”,“KDDI (exclusive alliance agent)” and “Overthe-counter agent”
2. Continuous creation of unique sales point inall channels
3. Commitment to business development for
future growth

Organization

Change, Challenge and Unity
28

To Achieve New Mid-term Business Plan Aiming for returning to growth innew business performance in fiscal 2016

 Return to
growth in new
business
performance Establish a system
realizing sustainableprofitability

 Achieve
Management Goal

2018

2017

2016
29

Progress of Mid-term Business Plan
(Ordinary Income) 8% increase year on year

13,500: Fiscal year
: First 9 months of fiscal year
(JPY mn)

10,000

9,387

Up 8%
Y-o-Y

6,995

FY2015

7,568

16

Progress ratio
to target
for 3Q76%

18

30

Progress of Mid-term Business Plan
(Ordinary Profit / Loss) Aiming for positive ordinary profit1
in fiscal 2018
(JPY mn)

Business forecasts
FY2016

Ordinary profit (loss) before
amortization of deferredassets under Article 113 of
IBA (A)
Amortization of deferredassets under Article 113 of
IBA (B)

Ordinary profit (loss)(A)-(B)
1.

Management
Goal FY2018

Results for first
9 months of
FY2016

(300)

-

347

(1,060)-(795)(1,360)Turn
profitable(447)

After completion of amortization of deferred assets under Article 113 in fiscal 2017, management indicator for Mid-term Business Plan ending in fiscal 2018 is positive profitability of accounting
ordinary profit (loss).

31

Key Initiatives
 Strengthen product development andchannel utilization
Online direct sales→Strengthen Smartphone
optimization, the way to draw
customers to the website andservices for policyholders

Onlinedirectsales

KDDI (exclusive alliance agent)→Build sales system utilizing
au shops andau financial support centerKDDI(exclusive
alliance
agent)

Agent

Agent
→Expand sales of“Hataraku-Hito 2” throughface to face consultation
32

Enhanced Insurance
Consultation Service via LINE

 Auto-reply service enables customers to
consult by Talk1

1.

Started auto–reply services via Facebook Messenger as well as LINE in January 2017.

33

Number of Application in Jan. 2017
 Contributed by “au Life Insurance” andincrease of marketing expenses
4,052
3,221

3,147

3,062

2,824

2,806

16/1

3,494

3,488

16/4

16/7

2,956

3,121

2,935

3,180

2,586

16/10

17/1 (YY/MM)34

Business Forecasts
 Business forecasts for fiscal 2016
announced in Nov. 2016 remain unchanged(JPY mn)

Business forecasts
FY2016(Reference)
Results for first 9 months
of FY2016
1.

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

Ordinary
incomeOrdinary
profit1

10,000

(300)

7,568

347
35

LIFENET is…

Comprehensible
Cost-Competitive
Convenient Returning to the original purpose oflife insurance – mutual support – Plugged-in way to reach customers who needinsurance products with necessary coverage
36LIFENET ManifestoI.

Our Guiding Principles(1) We believe that our responsibility to society is to return life insurance to its
original state. Life insurance is for the customers, not for the company. In
order to achieve this goal, we will only offer products we can recommend
with confidence.
(2) We will be transparent. We will disclose information on our management,
products and company as a whole on our website to actively communicate
with customers and society.
(3) We will be fair. We believe that our services will be more benevolent if theemployees are free of any and all limitations they may feel in the work
environment, and as such, we will not discriminate against education,
gender, age, nationality, or familial situations.
(4) We will adhere to laws protecting personal information and comply withlaws, regulations, and other social standards. We pledge to be respectableglobal citizens, acting fairly and ethically.

III.

Life Insurance will be Cost-Competitive(1) We believe that no one should pay premiums that are more expensive thannecessary, and will be innovative and creative in order to develop andmaintain the most cost-competitive products possible.
(2) We will handle every step of the process in providing good products to ourcustomers; from the development of the products to the sales. This allows
for us to maintain our cost-competitive prices.
(3) Our products will be cost-competitive, but the content of the products andour services will not be sacrificed. All communication with customers will
be conducted accurately and quickly, including claim processes.
(4) Life insurance is a very expensive purchase, and life is also very expensive.
We want for our customers to spend less on life insurance, and more on
enjoying life.

II.

Life Insurance will be Comprehensive(1) Our products will be simple and comprehensible. There will not be complex
policies with special provisions.
(2) Life insurance is a financial product designed to mitigate risk, and we believe
the customer should decide what products are necessary for them. As we
feel it is critical for customers to be well informed of products and policies,
we will make accessible any and all relevant information on our website
for customers to make logical and rational decisions. The Customer
Contact Center is also available for further clarifications and questions.
(3) Our website will promote the understanding of not only our company's
products, but of life insurance in general.
(4) We will make life insurance products tangible via clearly written policies andcomprehensible terms and conditions.

IV.

Life Insurance will be Convenient(1) We know our customers have very busy lives. That is why our customers canapply for our life insurance policies via the internet, 24 hours a day, 7 daysa week.
(2) Our documents require only a signature. There are no other typical official
items required to verify personal identification.
(3) Our definition of "surgery" is aligned with the national healthcare insurance
point table, making the claim process much more convenient andcomprehensible.
(4) We have a proxy claim system, allowing for the third party designated by
the claim holder to file a claim. The appointed proxy need simply to makea phone call to our contact center for necessary documents.

This manifesto is not simply as a declaration. This is how we do things.
Join us on our journey.

37

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.

http://ir.lifenet-seimei.co.jp/en/
Subscribe to our "IR email service" to receive
news releases and website updates via email.

Appendix

Three Surplus Factors ofFundamental Profit
3Q of FY2016

Ordinary income

Statements of Operations
Insurance premiums and other 7,321

Premiums income 7,163

Reinsurance income 157

Investment income
160
Other ordinary income 86
Insurance claims and other 1,384

Ordinary expenses

Profit analysis
Net premiums

ReinsuranceincomeReversal ofreserves foroutstanding
claimsReinsurance commissions
187

Insurance claims
and benefits
Reinsurance
commissions

Provision for policy reserves
and others 2,754

Change inpolicy reserves

Insurance claims and benefits
1,197

Expense loading

Interest anddividends
Other ordinary
incomeChange inpolicy reserves

Investment expenses 0
Operating expenses 2,714

Operatingexpenses

Other ordinary
expenses 1,162

Other ordinary
expenses

Projected
interest
Interest
expenses

Provision forcontingency
reserves
Losses on salesof securities

Capitalgains
ーOrdinary loss (447)Otheronetimeloss(66)

Extraordinary losses 4

Mortality
marginExpensemarginInterest
marginExtraordinary losses 4

Income taxes (28)1,691

(2,088)

15

Income taxes (28)Net loss (424)1.

Gains on salesof securities

Some items with minimal amounts have been omitted.

Net loss (424)40

Solvency Margin Ratio Calculation
As of Dec. 31, 2016

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

Solvency margin ratio
2,782.4%
Cash and deposits
1,123
Monetary claimsbought1,499
Money held in trust

1,001

Securities
26,022=

Total amount of solvency margin<numerator>
20,370

Other liabilities
446

Policy reserves 16,306
Contingency reserves 1,373

Excess over the fullZillmerized reserve 5,040

Price fluctuation reserves
17
Deferred tax liabilities onavailable-for-salesecurities
1791

Valuation difference on
available-for-salesecurities
1

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

Add liabilities
with strong
capitalcharacteristics
such as pricefluctuation
reserves andcontingency
reserves

461

Deferred assets under
Article 113 of the
Insurance Business Act

1,325

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 －Asset management risk R3 466[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.

13,296

Net assets
15,135

Medical insurance risk R8 294

Risk related to products, such as variable annuities
with minimum guarantees

Tangible fixed assets
Capital stock and114
other assets
Intangible fixed assets

490
Other assets
2,253

Total amount of risk/2< the denominator>
1,464/2

Insurance risk R1 1,035

Deferred tax liabilities(excluding those on availablefor-sale securities) 116
Reserves for outstanding claims 283

÷

Subtract deferred assets
under Article 113 of the
Insurance Business Act fromnet assets

Business management risk R4 53
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.

41