Securities Code: 7157
TSE Mothers

Reference Data
for Third Quarter
Fiscal 2019

February 12, 2020

LIFENET is...

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

Table of Contents

1. Results for 3Q of Fiscal 2019
2. Future Initiatives

2

Overview of Cumulative 3Q for FY2019
Annualized premium1 ofpolicies-in-force

Annualized premium1 of
new businessmillion yen

million yen

14,7832,435(113.0% vs end of FY2018)(Y-on-Y 124.8%)

Adjusted profit2

EEV3 (European Embedded Value)

2,864

million yen(includes 1,096 million yen impact
of modified co-insurance)

67,455(Adjusted incremental EV4 2,303 million yen)

Main Initiatives

1.
2.
3.
4.
5.
6.

million yen

New◼

Launch of new whole-life medical products◼

Contact Center and Website receive top ratings5◼

LGBT initiatives win Gold Rating6 for 4th consecutive year

Whole-life Medical
Jibun 3

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 premiumis calculated as multiplying the monthly premium by 12 months.
Ordinary profit excluding marketing expenses, see page 11 and 32 for details.
EEV as of December 31, 2019 is calculated applying the same operating assumptions as those used for September 30, 2019, and has not been reviewed by third-party
specialists.
Adjusted incremental EV consisted of components accurately reflecting our business growth for fiscal 2019. See page 33 for details.
2019 HDI Benchmarking (Life Insurance Industry) hosted by HDI-Japan.
PRIDE Index 2019 for LGBT initiatives hosted by work with Pride.

3

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

14.7
12.5
10.7
9.2
222,598

9.8◼ Maintaining astrong growth348,429trend

295,662

255,614
234,828

2015/12 ’16/12 ’17/12 ’18/12 ’19/12 (YY/MM)◼ Year-on-year
annualized
premium
118.2%,
number ofpolicies-in-force
117.8%
4

Breakdown of Policies-in-Force’19/03’19/12Component
ratio

Number of policies-in-force

308,854

348,429100%- Term Life

150,808

168,07648%- Whole-life Medical

85,96895,79827%- Term Medical Care

9,493

9,200

3%

- Long-term Disability

49,21453,23915%- Cancer

13,371

22,116

6%2,289,567

2,478,919

197,669

222,173

Sum insured of policies-in-force1(JPY mn)

Number of policyholders’18/3Q(Reference) Surrender and lapse ratio2

6.3％’19/3Q

7.0%

1. Sum insured of polices-in-force are the sum of death coverage, and do not include third-sector insurance.
2. 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.

5

Annualized Premium /Number of New Business: Annualized premium of new business (First 9 months of fiscal year, JPY mn): Number of new business (Fiscal year): Number of new business (First 9 months of fiscal year)

2,435

1,951

64,43557,597

1,191

872

955

39,17529,741
25,15045,36018,267

20,5992015’16

26,997’17(fiscal year)’18’19/3Q(YTD)◼ Achieved newrecord high forfirst nine monthsof fiscal year
◼ Year-on-year
annualized
premium
124.8%,
number of new
business 127.0%
6

Marketing Efficiency◼ Forecasted marketing efficiency for FY2019
to be under 80,000 yen, improving from 84,000 yen
at end of 2Q: Marketing expenses per new business (JPY thousand): Marketing expenses / Annualized premium of new business2
Result of changing commission payment
scheme at 2Q and recorded agent commissions
in lump as marketing expenses

67

65

1.5

1.5

61
51

79

76 thousand JPY

1.8

when excluding lump recordingof agent commissions

1.3

1.8

1.0

when excluding lump recordingof agent commissions

1.

(fiscal year) 2015
Marketingexpenses

1,302

’16

’17

’18 ’19/3Q(YTD)

1,822

2,627

4,216

4,563

(JPY mn)2.

Includes the amount of recorded agent
commissions in lump
The amount of money equivalent to what is tobe paid to have the insurance coverage forone year. All payments are monthly
installments, thus the annualized premium is
calculated as multiplying the monthly
premium by 12 months.

7

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

11,845
10,421

10,269

9,628
9,007

21.5 %

1,937

2015
1.

23.1 %

22.2 %

2,225

’16

2,315

’17

(fiscal year)◼ Progress as planned,
forecasting to beroughly 22% range
for FY2019◼ Strive for further
21.5%
business expansion
and operational
efficiency
2,699
2,209
in mid- to long- term

22.8 %’18’19/3Q(YTD)

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 isrecognized at the time of acquisition, and revenue
is collected gradually 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◼ Disclosure of two key management
indicators during current period of growth

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◼ Stable growth despite of change in policy
reserves accumulation methodology
Adjusted profit

Ordinary profit/loss1(Ordinary profit1 excluding marketing expenses)

2,864(JPY mn):Fiscal year

584

(JPY mn):First 9 months of fiscal year

2,429

2,497

88

1,096
1,887

1,910

Impact ofmodifiedcoinsurance

(197)

1,500
(1,719)

2015

’16

’17
(fiscal year)

1.

’18

1,438

1,730

2015

’16

1,768

Changed method of policy
reserve accumulation
since FY 2018

(1,699)’19/3Q(YTD)

1,906

’17

’18

(fiscal year)

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

’19/3Q(YTD)

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

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

Strong EEV1 Growth◼ CAGR of EEV is 18%2 and value of
in-force business is 35% since IPO
67,45563,378(JPY mn)
Value of in-force business
Adjusted net worth
48,51853,90818,547
5,122
13,425

2012/03 ’13/03
1.

2.

’14/03’15/03’16/03’17/03’18/03

14,86013,546’19/03’19/12(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 December 31,
2019 is calculated applying the same operating assumptions as those used for September 30, 2019, and has not been 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
◼ Increase due to growth of new business,
improvement in operating expense ratio andassumption changes of renewal rate

67,455(JPY mn)
Assumptionchanges

Adjusted
incremental EV

1,669

Operatingexperiencevariances
Value ofnew business

63,378

1,498

total

’19/03
1.

2.

Expected
existing
business
contribution

99

Adjustments
Economic
to the values2
variances
as ofand assumption
Dec. 31, ‘19changes(22)

126

Changed assumptions at
end of 2Q for FY2019.

705

2,303

million yen’19/12 (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 December 31, 2019 is calculated applying the same operating assumptions as those used
for September 30, 2019, and has not been reviewed by third-party specialists.
Item for change in capital15

EV Resilience to Financial Changes◼ Limited sensitivity to interest rates andstock prices
Dec. 2019
End

Reference: March 2019 End1

Lifenetライフネット生命

Lifenetライフネット生命

Company
A社 A

Company
B
B社

Company
C
C社

Company
D
D社

13%
8%

1.5%

-1.6%

-0.6%

4%

1.9%

-2.0%

-0.7%

-2%

-1%
-5%

-6%
: 0.5%
interest rate increase
金利0.5%上昇: 0.5% interest rate decrease
金利0.5%下落: 10%
decrease in equity andrealestatevalue and10%下落
other
株式・不動産価値等

3%

-8%
-10%

-7%

-17%

1. Prepared by Lifenet based on disclosed information of domestic public life insurance companies.

16

Financial Condition’19/03’19/12

38,24740,607

1,192

1,312

999

499

3,114

3,698

30,98931,771Government bonds

8,071

8,083

Municipal bonds

1,394

1,398

Corporate bonds

16,76318,037363

372

Foreign securities

45

29

Other securities2

4,352

3,849

26,47430,23525,25628,861

Total net assets

11,773

10,371

Solvency margin ratio

2,085％

2,163％

1.

12.0

11.6

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.

2.

Investment trust including foreign bonds and others.

(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
ratio117

Main Initiatives◼ Launched new whole-life medical products
in December 2019
Expanded scope of benefits based on customer needs and advances in medical technology.

New

New
Whole-life Medical
Jibun 3Whole-life Medical
Jibun 3 for Women◼ Contact Center and Website awarded top ratings
Contact Center and Website awarded top rankings of three stars in HDI Benchmarking for 7thtime, the highest number of times for a company to receive three-star ratings in the life
insurance industry1.

Phone Support(Contact Center)

Web Support(Website)◼ LGBT initiatives win Gold Ratingfor 4th consecutive year in PRIDE Index 20191.

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

Table of Contents

1. Results for 3Q of Fiscal 2019
2. Future Initiatives

19

Starting Insurance Agency Scheme◼ Offering P2P insurance provided by justInCase,
small-amount and short-term insurer
via our website

がんになった人の保険金をP2P insurance is an insurance product that divides risk and determines
the premiums among the members of a group that share the same risk.

20

Business Alliance Agreementwith Seven Financial Service◼ Utilize Seven & I Group’s brand and customer base

2nd White Label Business Initiative

Launching product with brand of
Seven Financial Service this spring21

Business Forecast FY2019◼ No changes in business forecast from Nov.
12 disclosure. Aim for continuous growth(JPY mn)

FY2019 Forecast
Including impact
of modified
co-insurance(Reference)
FY2018 Results

Ordinary income

16,5002,000

12,560Ordinary profit(loss)(2,500)1,400(1,719)Net income(loss)(2,500)1,400(1,735)(Reference)

Annualized
premium of new
business1
1.

3,300

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.

22

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
23

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.

24

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

Number of New Business (Quarter)◼ Recorded historical high andmaintained at high level continuously

19,685: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 2Q 3Q
FY2008FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY201927

Condensed Statements of Operation/ Fundamental Profit (Cumulative 3Q)
2018/3Q

2019/3Q

ChangeInsurance premiums and other

8,949

2,995

Other

409
9,359

11,945297
12,242

Insurance claims and
other

1,950

2,743

792

Increased due to growth in in-force policies. Percentage of
insurance claims and benefit claims to insurance premiums is 19.7%.

Insurance claims

1,105

1,316

211

Increased from 71 cases in 3Q of FY18 to 96 in 3Q of FY19.

Benefit claims

498

704

206

Increased from 5,136 cases in 3Q of FY18 to 6,274 in 3Q of FY19.

Provision for policy
reserves and other

2,962

3,604

642

4,850
2,850
578
1,421
540
10,303

1,922
1,712
89
120
280
3,637

(944)

6,772
4,563
667
1,542
820
13,941(1,699)

Increased by transferring to standard policy reserves. Percentage ofprovision for policy reserves (3,590 million yen) to insurance
premiums is 35.0%.

12

12

(0)

Net income (loss)(957)(1,711)

Mortality margin

2,075

2,077

Expense margin (loss)(2,998)(3,771)(772) Includes 1,158M expense margin for utilization of modified co-Interest margin (loss)

(13)
(936)

17
(1,675)31(739)

Condensed statements of operation(JPY mn)

Ordinary income

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

Fundamental
profitExtraordinary losses andincome taxes

Fundamental profit

Note
Increased due to growth in in-force policies business and utilizationof modified co-insurance(112)
2,883 Includes 1,367M increase for utilization of modified co-insurance

Increase in marketing expenses, mainly advertising expenses(754) Includes profit of 1,096M for utilization of modified co-insurance.

(754) Includes profit of 1,096M for utilization of modified co-insurance.
1
Increase in marketing expenses, mainly advertising expenses.
insurance.

28

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

EEV and new business value as of December 31, 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 EEV67,455(2,298)
1,784(1,107)
981
345
(406)
2,937
10
3,946
58

Change in
VoNB

1,498
110
(291)
73
(117)
45
－
448
(14)
377
7

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 December 31, 2019 is calculated applying the same operating assumptions as those used for September 30, 2019, and has not beenreviewed by third-party specialists.

29

Three Surplus Factors ofFundamental Profit
3Q of FY2019

Ordinary income(JPY mn)

Profit analysis

Statements of operations
Insurance premiums and other 11,945

Premiums income 10,269

Net premiums

Expense loading

Reinsurance income 1,675

ReinsuranceincomeOther reinsuranceincomeInterest anddividends

Investment income 258

Gains on salesof securities

Other ordinary
incomeOther ordinary income 39

Ordinary expenses

Insurance claims and other 2,743

Insurance claims and benefits
2,021
Reinsurance commissions
721

Insurance claims
and benefits
Reinsurance
commissions

Other reinsurance
commissions

Provision for policy
reserves and others 3,604

Change in policy
reserves

Change inpolicy reserves

Interest
expenses

Investment expenses 46
Operating expenses 6,772

Operatingexpenses

Other ordinary expenses
773

Other ordinary
expenses

Income taxes 2

Mortality
margin (loss)

Expensemargin (loss)

Interest
margin (loss)

2,077(3,771)

17

Net profit (loss) (1,711)
1. Some items with minimal amounts have been omitted.

Losses on salesof securities

Capital gains(losses)(40)

Ordinary profit (loss)(1,699)Extraordinary profit (loss)(9)

Provision forcontingency
reserves

Projected
interest

Other onetime
gains (losses)
17

Extraordinary profit (loss)(9)
Income taxes 2

Net profit (loss) (1,711)

30

Solvency Margin Ratio Calculation
As of Dec. 31, 2019

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

Solvency margin ratio
2,163.6%=

Total amount of solvency margin<numerator>
19,727

Cash and deposits
1,312

Other liabilities
1,016

Monetary claims bought

Reserves for outstanding claims

499

Money held in trust
3,698

Contingency reserves 1,663

Excess over the fullZillmerized reserve 7,442
Price fluctuation reserves 52

Securities
31,771

Deferred tax liabilities onavailable-for-sale securities

2741

Valuation difference on
securities available-for-sale

7061

Total amount of risk/2< the denominator>
1,823/2

Insurance risk R1 1,153
Risk of change in mortality rate (calculated based on value ofpolicies in force)

484

Policy reserves
28,376

÷Add liabilities
with strong
capitalcharacteristics
such as pricefluctuation
reserves andcontingency
reserves

Medical insurance risk R8 320
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 withminimum guarantees

Asset management risk R3 942

Tangible fixed assets

98
Intangible fixed assets
716

Other assets
2,511

Capital stock andother assets
9,587

Net assets
10,371[Credit risk] Risk that asset values decline due todeterioration in financial condition of creditees[Price fluctuation risk]Risk of incurring losses due to decline inmarket value of stocks and bonds, etc.

Business management risk R4 72
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.

31

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

32

Adjusted Incremental EV◼ Adjusted Incremental EV accurately

indicates our business growth during acertain period within 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 variances
33

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
Reinsurance
FY2018End ofMar. 2019Year 1

2

3

4…

Year X

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.

34