Securities Code: 7157
TSE Mothers

Presentation
Material for
Investors
Second Quarterfor Fiscal 2021
November 10, 2021

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 2Q of Fiscal 2021

2.

Future Initiatives

2

Overview of 1H for Fiscal 2021
Annualized premium1 ofpolicies-in-force

Annualized premium1 of
new businessmillion yen

million yen

20,231

2,174(108.1% vs. end of FY2020)(Y-on-Y 100.7%)

EEV2 (European Embedded Value)

Adjusted incremental EV3112,104

million yen

3,439(117.8% vs. end of FY2020)

million yen(Y-on-Y 76.5%)

Notable Achievements
Expanded theWhite Label business

1.

2.
3.

Transformation toan online platform

Raised new capitalfor future growth

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.
EEV as of September 30, 2021 is calculated by updating the operating assumptions used for June 30, 2021, and has not been reviewed by third-party specialists.
Adjusted incremental EV consisted of components adequately reflecting our business growth for fiscal 2021, see page 16 and 41 for details.

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

20.2

17.2

14.2
11.9
10.4

476,906

405,403

334,528

283,207248,6352017 2Q
2018 2Q
2019 2Q
2020 2Q
2021 2Q
2017/09’18/09’19/09’20/09’21/091.

◼ Exceeded JPY20bn
in annualized
premium◼ Year-on-year
annualized premium
117.4%,
number of policiesin-force
117.6%（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.

4Changing Factors of Policies-in-ForceFY2020/1H
Number of policies-in-force(BOP)

FY2021/1H

365,171439,945

51,50553,720－）Decreased number of policies1(11,273)(16,759)

Non-recurring record oflapsed policies※

ー

(583)

Number of policies-in-force(EOP)

405,403476,906+）Number of new business

FY2020/1H
Surrender and lapse ratio(annualized)25.5%

FY2021/1H

6.9%※Lifenet has extended grace period for insurance premium payment as one of the special measures in the COVID-19 pandemic. Decreased number ofpolicies includes the impact of extended policies that were recorded as lapsed policies in a lump sum.
1. Decreased number of policies include death, expiration and others in addition to surrender and lapse.
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 business1 (1H of fiscal year, JPY millions): Number of new business (fiscal year): Number of new business (1H of fiscal year)
100,587

80,91164,435

2,158

1,616

53,7201,209
39,175730

51,50537,912
28,04816,442

2017
1.

’18

’19

2,174

’20

◼ Achieved new
half–year record
high◼ Year-on-Yearannualized
premium 100.7%,
number of new
business 104.3%’21/1H（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.

6

【Ref.】 Number of New Business（Half year）◼ Exceeded FY2020/1H including positive
impact from COVID-19

53,720:Number of new business
51,50549,082
42,99936,38737,912

28,04822,733
16,442

1H

2H
FY20171H

2H
FY20181H

2H
FY20191H

2H
FY20201H
FY2021

7

【Ref.】 Surrender and Lapse Ratio（Quarter）◼ Improved to the level before COVID-19:Impact of lump-sum recording of policies lapsed1 (%)

7.6%:Surrender and lapse ratio2 without the above (%)

0.5%

7.6%

7.1%

6.4%

7.1%

7.0%
5.5%

2019/1Q
2019/2Q
2019/3Q
2019/4Q
2019/1Q’19/2Q’19/3Q’19/4Q

5.5%

5.9%

6.3
%
0.1%

7.1%
6.2%

2020/1Q
2020/2Q
2020/3Q
2020/4Q
2021/1Q
2021/2Q’20/1Q’20/2Q’20/3Q’20/4Q’21/1Q’21/2Q（fiscal year）

1.
2.

Lifenet has extended grace period for insurance premium payment as one of the special measures in the COVID-19 pandemic. Surrender and lapse ratio includes theimpact of extended policies that were recorded as lapsed policies in a lump sum.
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 policiesin-force.

8

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

75

75
67

66

65

1.5

◼ Aggressively
1.8
invested inmarketing for
further growth

’19

’20

’21/1H

6,146

6,712

4,029

1.7
1.5

1.5

(fiscal year)

2017

’18

Marketingexpenses

2,627

4,216

(JPY millions)1.

※ From FY2017 to FY2020: operating expenses for full year
FY2021: operating expenses for half 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.

9

【Ref.】 Marketing Efficiency（Quarter）◼ Increased marketing expenses while
maintaining the efficiency: Marketing expenses per new business (JPY thousands): Marketing expenses / Annualized premium of new business1
89
78

73

76

1.8

1.8

1.8

77
69

67

66

2.1

70

53

1.8
1.6

1.5

1.5

1.6

76

1.2

（fiscal year）
Marketingexpenses(JPY millions)1.

2019/1Q 19/2Q

1,502

1,684

19/3Q

19/4Q

20/1Q

20/2Q

20/3Q

20/4Q

21/1Q

21/2Q

1,376 1,583

1,506

1,548

1,560

2,097

2,033

1,995

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.

10

Operating Expenses Ratio: Operating expenses ratio¹ (%): Insurance premiums (JPY millions): Operating expenses excl. marketing expenses (JPY millions)
16,892◼ Maintained below
20%

13,982

11,845
10,421◼ Aim to improve21.6 %
19.6 %
19.4% operational
efficiency byfurther business
3,317
3,023
2,699
1,856
expansionin mid-term
9,566

22.2 %

2,315

2017
1.

22.8 %

’18

’19

’20

’21/1H （fiscal year)

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

11

Profit Structure under
Current Statutory Accounting◼ Time lag is caused between the recognition of costs andrevenue as marketing expenses is recognized at thetime of acquisition, and revenue is collected gradually
over a long period.
Insurance policy profit structure

Total profit/loss
Revenue collected
over long period

Accounting
profit/loss
Initialfiscal
初年度
year

RevenueYear 22年目

Year 33年目

Year 44年目…

Year X
X年目

Premiums

ExpenseMarketingexpenses1.

Heavy initial cost

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

: Premiums: Operating expenses1 excluding
marketing expenses: Marketing expenses

12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

13

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

Strong growth• Maintaining increase in EEV since listing inMarch 2012
• Steadily growing even in a low interest
rate environment

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

14

Strong EEV1 Growth
EEV and value of in-force business have been growing at a
CAGR of 21%2 and 34%, respectively since IPO
EEV per share has also steadily increased¥1,609¥1,570since capital raising◼
◼

¥1,430: Value of in-force business (JPY millions): Adjusted net worth (JPY millions)

112,104
95,140: EEV/share (JPY)73,431

84,374
76,149¥441

60,87818,547
5,122
13,425

2012/03 ’13/03 ’14/03 ’15/03 ’16/03 ’17/03
1.

2.

12,553’18/0318,99027,729’19/03 ’20/03 ’21/03 ’21/09 (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 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 September 30,
2021 is calculated applying the updated operating assumptions from those used for June 30, 2021, 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 and 9,005 million yen from overseas public offering in July 2020 and
9,771 million yen from overseas public offering in September 2021.

15

Changing Factors of EEV1
◼ Increased due to the strong new businessperformance, revision of claim incidence rate, theimprovement of operating ratio and capital raising

112,104(JPY millions)

Adjusted
incremental EV

Value ofnew business

2,664

95,140
total’21/03
1.
2.

Expected
existing
business
contribution

718

3,439

Assumptionchanges
Operatingexperiencevariances

56

3,260

Economic
variances
and assumptionchanges

Adjustments
to the values2
as ofSep. 30, ’21

9,841

422

Raised new capitalin September 2021

million yen’21/09 (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. EEV as of September 30, 2021 is calculated applying the updated operating assumptions from thoseused for June 30, 2021, and is not reviewed by third-party specialists.
Item for change in capital16

EV Resilience to Financial Changes◼ Limited sensitivity to interest rates andstock prices

Sep. 2021
End
LifenetReference: March 2021 End1
LifenetCompany A

-1.7%

-0.8%

2%

1.6%

-1.6%

Company C

6%

5%
1.6%

Company B

-0.8%
-3%
-5%

-5%
0.5% interest rate increase-7%

0.5% interest rate decrease
10% decrease in equity andreal estate value and other

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

-8%

-7%

17

【Ref.】 Life Time Value and Customer Acquisition Cost
Key Metrics for a SaaS Company and Lifenet

ARR per Contract(Annual Recurring Revenue)

Life Time1(Term of Contract)

Gross Profit Margin3(Marketing Expenses per
New Policy)

1.
2.
3.
4.

Annualized Premiums per
Policy-in-force

Annualized Premiums per
Policy-in-force

×

JPY 42,536
×Annualized Premiums per
Policy-in-force

Average Policy Term

Average Policy Term

16.7 years
×

Average Policy Term

14.9 years2
×

45%

43%

46%

JPY 42,486

14.3 years
×

JPY 42,422
×＝Customer Acquisition Cost4

FY2021/1H＝(Annualized Premiums per
Policy * Life Time * Gross Profit
Margin)FY2020＝Life Time ValueFY2019JPY 273,397

JPY 305,451

JPY 290,760

JPY 75,970

JPY 66,737

JPY 75,002

1 / Churn rate. Churn rate represents the percentage of users who cancelled out their insurance policies.
Exclude the impact of lump-sum recording for lapsed policies.
(Insurance premiums – Insurance claims and benefits - Provision for policy reserves and others) / Insurance premiums.
Marketing expenses / Number of new business.

18

Financial Condition(JPY millions)(YY/MM)

Total assets’21/03’21/0954,501

66,204

2,059

3,950

999

7,999

5,895

5,496

40,00742,306

Government bonds

9,004

9,006

Municipal bonds

1,482

1,484

Corporate bonds

21,301

22,251397

550

Foreign securities

0100

Other securities1

7,821

8,913

38,694

41,81936,63939,802

Total net assets

15,80624,385

Solvency margin ratio2

2,647％

3,462％

11.1

10.6

Cash and deposits
Monetary claims bought
Money held in trust

Securities

StocksTotal liabilities
Policy reserves and other

Modified duration (year)3◼ Total net assets
increased bycapital raising◼ 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.

3.

Duration of yen-denominated bonds

19

Major Initiatives◼ June : Launched new long-term disability productWith industry-first coverage1, supports “medical expenses” or“decrease in income” after returning to work

Long-term Disability
Hataraku-Hito 3◼ July：Started sales of Money Forward Life Insurance
Offers the service of reviewing life insurance contracts for
Money Forward ME users to improve the household expenses◼ July：Subsidiary Lifenet MIRAI started business
Aiming to transform to an online insurance platform,
Lifenet MIRAI launched online insurance agency business andinsurance policy management service

1.

Coverage for support to come back to work. Industry-first full-scale long-term disability insurance for individuals (Lifenet Research as of the end of April, 2021）

20

Overseas Public Offering in September◼ Raised capital for further accelerating“Growth” and “Transformation”

Numberof shares
offeredThe
amountto raised

9,000,000 shares

CAGR CAGR
20% 15%EEV（JPY billions）
Management goal

About JPY 9.7 billion

EEV

200 billion yen

CAGR
10%

• Marketing expenses for acquiring new business

Use ofproceeds• System development costs to respond tochanges in business environment• Investments in new businesses to build an
online insurance platform and to promote
initiatives with Lifenet’s business partners

Periodfor useFive years between the fiscal year ending 31
March 2022 and the fiscal year ending 31 March2026

Lock-up

180 days for the issuer, au Financial Holdings
Corporation, Swiss Reinsurance Company Ltd,SEVEN FINANCIAL SERVICE CO., LTD., andMercuria Investment Co., Ltd.

95.1

18.5

21

Table of Contents

1.

Results for 2Q of Fiscal 2021

2.

Future Initiatives

22Business Environment Surrounding
Online Life Insurance Market◼ Large increase in preference for online
application in the latest survey
Latest result from thereport of 2021
20.0%

15.0%

Customers who have intention to purchasethrough the Internet1

17.4%

Customers who actually purchased throughthe Internet1

12.5%

10.0%

Needs for online life
insurance are expanding
and diversifying

3.3%

5.0%

4.0%

0.0%

2006
1.

09

12

15

Nationwide Report on the Life Insurance Industry (2021) by the Japan Institute of Life Insurance

18

21（year）

23

Investment to Improve Brand Awareness◼ Accelerated marketing investment with
updated TV commercials

24Promotion of the White Label Business◼ Started marketing promotion to accelerate
new business growth

Promotion to the customer base of
Money Forward ME

25

Investment for Online Insurance Platform◼ Promote the digitalization for customer

experience

Comparison &Proposal

Policy maintenance

Lifeplan simulation

26

Future Direction
Second half of FY2021◼ Aim for sustainable double-digit growth in in-force
business• Determine the timing of further investment in marketing
expenses while considering the business environment◼ Actively invest in business and systemdevelopment for mid to long term growth,
considering the life insurance’s super-long-termbusiness
Aim to achieve 200 billion yen of EEV inearly stage for further growth27

Revision of Business Forecast FY2021◼ Increase the use of the modified co-insurance toimprove capital efficiency◼ Aim to achieve record-high in new business for the
fourth consecutive year
(JPY millions)【Revised】
FY2021 Forecast
Annualized
premium1 ofpolicies-in-force

1.

FY2020 Results

21,90021,80018,713

4,500

4,400

4,197

Of which: impact
of modified
co-insurance

Of which: impact
of modified
co-insurance

Annualized
premium1 of
new business

Ordinary income【Previous】
FY2021 Forecast

26,1005,000

25,5004,400

Of which: impact
of modified
co-insurance

20,7892,778

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
profit1,400(3,600)(loss)Net income (loss)(3,700)1,400(3,800)700(3,089)804(3,800)700(3,114)804

28

Preliminary Study for IFRS Adoption◼ Continuing to study IFRS 17 effective in 2023
Illustration image of accounting structure1■Current Statutory Accounting (J-GAAP)
Heavy initial cost
for acquiring new
business3 isrecognized atinitial fiscal year.

Year 1

Year 2

Year 3

Year 4

Year 5

Revenue2

Revenue2

Revenue2

Revenue2

Revenue2

ProfitProfitProfitProfitYear 2

Year 3

Year 4

Year 5

Revenue

Revenue

Revenue

Revenue

Revenue

ExpenseExpenseExpenseExpenseExpenseProfitProfitProfitProfitProfit・・・・

Expenseforacquiringnewbusiness

Profit(Loss atInitial Year)■IFRS
Initial cost for
acquiring new
business3 isdeferred under
IFRS 17.
1.
2.
3.

Year 1

・・・・

This is illustrative purpose only, and it does not necessarily guarantee that Lifenet will make profits as indicated.
Revenue is insurance premiums – costs for policy management, payment of insurance claims and benefit claims, etc. Expense for acquiring new business is not included.
The definition of “expense for acquiring new business” may differ in each accounting rule.

29

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 200 billion yen by business growth
in a mid-term
30

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.

31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

Develop Online Life Insurance Platform
Expand online products and services
SupplyLifenet’s products and services＋

Other insurers’ products and services“Online Platform”
connects life insurance products and services with customers
Provide products and services which customers need online

DemandSearchConsult

ApplyManage

Review

Claim

Diversifying customer needs
34

Initiatives for Sustainability◼ Aim to increase the value provided to
stakeholders based on Manifesto
LifenetManifesto

Comprehensible, Cost-Competitive, Convenient

Enhancement ofCorporate Governance

Customer-focusedbusiness operations

Adaptation tosocial changes• Board of Directors includes outside
directors and independent outside
directors since our business
commencement in 2008

• Disclose the policy for customerfocused business operations,performance indicators and theaccomplishments• Established the discretionary
Nomination and Compensation
Committee• Promote efforts for diversity
including LGBTQ• Work on reduction of thepolicyholders’ burden on
procedures and development of
comfortable work environment for
employees under COVID-19
pandemic• Introduced restricted stockcompensation as director’s
remuneration• Disclose securities report before
Annual General Meeting of
Shareholders (Japanese version only)
1.
2.

• Disclose the breakdown of
insurance premiums for the firsttime in life insurance industry1• Evaluated as #1 by policy holders2,
realizing stress-free CX online

According to Lifenet’s research（as of the end of September 2021）
J.D. Power 2021 Japan Life Insurance Contract Customer Satisfaction Study SM• Widely provide more convenientservices by partnering with crossindustrial partners• Provide customer-centeredservices online through new joint
venture35

Breakdown of Policies-in-Force’21/03’21/09Component
ratio

Number of policies-in-force

439,945476,906100%- Term Life

213,597

232,48749%- Whole-life Medical

120,216130,234

27%- Term Medical Care

8,840

8,667

2%

- Long-term Disability

59,567

61,90813%- Cancer

37,72543,6109%2,994,198

3,198,619

279,243

303,173

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

Number of policyholders

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

36

Condensed Statements of Operation/ Fundamental Profit

Fundamental profit

Condensed statements of operation(JPY millions)

FY2020/1H FY2021/1H

Change

Note

2,807

356
9,849

12,301
343
12,644

Increased due to growth in in-force policies business andreinsurance income from modified co-insurance.

(12)
2,795

Includes utilization of modified co-insurance of 2,380 million yen.

Insurance claims and
other

2,574

4,066

1,492

Insurance claims

879

1,315

436

Increased from 81 cases in 1H of FY20 to 115 in 1H of FY21.

Benefit claims

537

693

156

Increased from 4,600 cases in 1H of FY20 to 6,452 in 1H of FY21.

3,029

3,208

179

Percentage of provision for policy reserves (3,208 million yen) toinsurance premiums is 33.5%.

Ordinary expenses

4,633
3,054
478
1,100
741
10,978

5,885
4,029
619
1,236
911
14,071

1,252
974
141
136
170
3,093

Ordinary profit (loss)(1,128)(1,427)(298)

Insurance premiums and other

9,493

Other
Ordinary income

Provision for policy
reserves and other
Operating expenses
Marketing expenses
Customer service
System and other
Other

Increased due to an increase in reinsurance commissions frommodified co-insurance. Percentage of insurance claims and benefit
claims to insurance premiums is 21.0%.

Includes 3,287 million yen for promotion expenses.

Includes profit of 787M for utilization of modified co-insurance.

Extraordinary losses andincome taxes
Net income (loss)

10

49

39

(1,138)(1,476)(337)

Includes profit of 787M for utilization of modified co-insurance.

Mortality margin

1,898

(73)

Includes 205M loss due to utilization of modified co-insurance.

Expense margin (loss)(2,938)(258)

Includes 992M expense margin for utilization of modified coinsurance.

Interest margin (loss)(9)(1,049)1,825(3,197)55(1,316)65(267)

Includes profit of 787M for utilization of modified co-insurance.

Fundamental profit

37

Three Surplus Factors ofFundamental Profit
First 6 months of FY2021(JPY mn)

Profit analysis

Statements of operations
Ordinary income

Insurance premiums and other 12,301

Premiums income 9,566

Net premiums

Expense loading

Reinsurance income 2,734

ReinsuranceincomeOther reinsuranceincomeInterest anddividends

Investment income 259

Gains on salesof securities

Other ordinary
incomeOther ordinary income 84

Ordinary expenses

Insurance claims and other 4,066

Insurance claims and benefits
2,008

Insurance claims
and benefits

Reinsurance commissions
2,057

Reinsurance
commissions

Other reinsurance
commissions

Provision for policy
reserves and others 3,208

Change in policy
reserves

Change inpolicy reserves

Interest
expenses

Investment expenses 0
Operating expenses 5,885

Operatingexpenses

Other ordinary expenses
911

Other ordinary
expenses

Income taxes 1

Mortality
margin (loss)

Expensemargin (loss)

Interest
margin (loss)

1,825(3,197)55

Net profit (loss) (1,476)
1. Some items with minimal amounts have been omitted.

Losses on salesof securities

Capital gains(losses)16

Ordinary profit (loss)(1,427)Extraordinary profit (loss)(47)

Provision forcontingency
reserves

Projected
interest

Other onetime
gains (losses)(127)

Extraordinary profit (loss)(47)
Income taxes 1

Net profit (loss) (1,476)
38

Solvency Margin Ratio Calculation
As of Sep. 30, 2021

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

Solvency margin ratio
3,462.0%
Cash and deposits
3,950

=

Total amount of solvency margin<numerator>
38,542Other liabilities
1,473

7,999

Money held in trust
5,496

Contingency reserves 2,130

Excess over the fullZillmerized reserve 11,646
Price fluctuation reserves 87

Securities
42,306

Risk of change in mortality rate (calculated based on value ofpolicies in force)

792

Policy reserves
39,009Deferred tax liabilities onavailable-for-sale securities

4101

Valuation difference on
securities available-for-sale

1,0561

Total amount of risk/2< the denominator>
2,226/2

Insurance risk R1 1,096

Reserves for outstanding claims

Monetary claims bought

÷(JPY mn)

Add liabilities
with strong
capitalcharacteristics
such as pricefluctuation
reserves andcontingency
reserves

Medical insurance risk R8 370
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 1,549

Tangible fixed assets

101
Intangible fixed assets
1,264

Other assets
5,084

Capital stock andother assets
23,211

Net assets
24,385[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 90
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.

39

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

EEV and new business value as of September 30, 2021
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 EEV as of
Sep. 30, 2021

Change in
VoNB

112,104(3,940)3,367(1,928)
1,789
863
(910)
3,781
675
4,675
105

2,664
(150)
49
(66)
41
82
－
407
108
339
9

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.

40

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
41

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

42

Adjusted Profit◼ Steadily recorded adjusted profit generated
from policies-in-force
The method for calculating adjusted profit
Adjusted profit＝ⅰ) Ordinary profit（loss)＋ⅱ) Marketing expenses－ⅲ) Impact of modified co-insurance±ⅳ) Adjustment based on standard
policy reserves1
JPY millions / fiscal year

2017

2018

2019

2020

2021/1Hⅰ) Ordinary profit（loss)(197)(1,719)(2,382)(3,089)(1,427)ⅱ) Marketing expenses

2,627

4,216

6,146

6,712

4,029

－

－

(1,526)

(804)

(787)

319

347

546

739

322

2,748

2,844

2,784

3,558

2,137

ⅲ) Modified co-insuranceⅳ) Adjustment

Adjusted profit
1.

The amount of the adjustment to the policy reserve provision is the adjustment calculated by excluding the provision for contingency reserves andadjusting for the switch in method for calculating the provision from the Zillmer method to provision based on the standard policy reserves.

43

Explanation of Adjusted Profit
Adjustments to provision for policy reserves based onstandard policy reserves◼

Calculation of adjusted profit

Difference between methods of calculating
provision for policy reservesⅳ)ⅲ) Impact ofmodified co- Adjustmentⅱ) Marketing insurance
based onexpensesstandard policy
Adjustedreserves

We are currently in the transitional period and will transition all business tostandard policy reserves by the end of Fiscal 2022.

profitⅰ) Ordinary
profit（loss)

Method of calculating the “ⅳ) Adjustment based on standard policy reserves”
e.g. 1H for fiscal 2021 (JPY millions)

Adjustment to provision forpolicy reserves1

322
1.
2.

Provision for policy
reserves

Increase in standard
policy reserves2

3,208

2,885

The amount of the adjustment to switch to provisioning based on standard policy reserves is calculated by excluding the provision for contingency reserves
and adjusting for the switch in method for calculating the provision from the Zillmer method to provision based on the standard policy reserves. Please notethat the provision for contingency reserves is included in the provision for policy reserves, but is not included in the increase in standard policy reserves.
The increase in standard policy reserves is the amount of the increase (decrease) in the standard policy reserve balance for the current fiscal year from thebalance in the previous fiscal year. The standard policy reserves is the amount calculated by excluding the provision for contingency reserves from actuallyprovisioned policy reserves and adding the difference from the provision based on the standard policy reserves. The difference was 302 million yen as of
September 30, 2021.

44

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：Costs ：Effects of reinsurance

Without
Reinsurance：Revenue

Illustration image of impact ofreinsurance on net assets

With
Reinsurance

With
Reinsurance

Ease pressure of new
business costs
Without
Reinsurance
End of Mar. 2019
FY2018

Note: Illustration of P&L structure of reinsuring new business of single fiscal year,
where illustration of impact on net assets of reinsuring new business for multiple years.
Lifenet has utilized reinsurance transactions by modified co-insurance method on partof new business since fiscal 2019.

Year 1

2

3

4

５

…

Year X

45