Securities Code: 7157
TSE GrowthPresentation
Material for
Investors

First Quarterfor Fiscal 2022
August 10, 2022

LIFENET is...

Comprehensible
Cost-Competitive
Convenient◼ Remembering the original purpose oflife insurance – mutual support◼ Helping our customers embrace life more fully1

1Q of FY2022 Key Highlights◼ Annualized premium1 of policies-in-force
up 14% YoY to JPY 22.1 billion◼ JPY 278 million in COVID-19 claims◼ EEV up 22% YoY to JPY 118.1 billion◼ Business alliance with au Jibun Bank
to launch group credit life insurance
business◼ Capital and business alliance with Eisai
to create new customer experiences
1.

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

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

22.1
19.4
16.4

◼ Continued
steady growth522,604

458,53913.6
387,775

11.5
321,829
272,830◼ Year-on-year
annualized
premium
113.7%,
number ofpolicies-inforce 114.0%

2018 1Q
2019 1Q
2020 1Q
2021 1Q
2022 1Q（YY/MM）
2018/06’19/06’20/06’21/06’22/06
1.

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

Policies-in-Force Movement◼ Continues to grow in the medium-term
while further acceleration is needed
Number of policies
FY2020/1Q

FY2021/
1Q

FY2022/
1Q
New
business Decreased
23,928 business1(8,752)

27,553

in-forcebusiness(8,959)522,604+14.0%

28,136(5,532)458,539+18.2%
387,775

2020/03’20/06

Surrender &lapse ratio2

5.5%
1.
2.

’20/09’20/12’21/03’21/06

Surrender &lapse ratio2

7.6%’21/09’21/12’22/03’22/06

Surrender &lapse ratio2

6.4%

Decreased number of policies include death, expiration and others in addition to surrender and lapse.
Surrender and lapse ratio is annualized. The surrender & lapse ratio in the first quarter of fiscal 2021 includes 0.5% of impact from lump-sum lapse regarding
expiration of special grace period for COVID-19.

4

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

2.0

86 ◼ Continued
a certain scale of
2.1

82
75
65

66

marketinginvestment
while carefully
monitoringmarketing efficiency

1.7
1.5

1.5

(fiscal year)

2018

’19

’20

’21

’22/1Q

Marketingexpenses

4,216

6,146

6,712

8,262

2,079

(JPY millions)1.

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【Ref.】 Marketing Efficiency(Quarterly): Marketing expenses per new business (JPY thousands): Marketing expenses / Annualized premium of new business1

98

73

76

81
2.4

1.8

1.8

1.9

86

◼ Controlledmarketing expenses
2.1 for 1Q comparedwith 4Q of FY2021◼ Explore the righttiming to re-boost
marketinginvestment(fiscal year) 2021/1Q ’21/2Q ’21/3Q ’21/4Q ’22/1Q
Marketingexpenses(JPY millions)

1.

2,033

1,995

1,833

2,400

2,079

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

Operating Expenses Ratio: Operating expenses ratio¹ (%): Insurance premiums (JPY millions): Operating expenses excl. marketing expenses (JPY millions)
19,835◼ Increased mainly
due to investments in
new initiatives

16,892

13,982
11,845◼ Aim to improve in the
mid-term by further
22.8 %
21.6 %
21.3% business expansion
19.6 %
19.5 %
5,367
and productivity
3,877
improvement
3,317
3,023
2,699
1,141

2018
1.

’19

’20

’21

’22/1Q （fiscal year)

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

7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

8Adjusted Profit◼ Steadily recorded adjusted profit generated fromin-force business while affected by COVID-19 claims
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

2018

2019

2020

2021

2022/1Qⅰ) Ordinary profit（loss)(1,719)(2,382)(3,089)(3,245)(1,062)ⅱ) Marketing expenses

4,216

6,146

6,712

8,262

2,079

－

(1,526)(804)(1,283)

(199)

347

546

739

721

47

2,844

2,784

3,558

4,455

865

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.

9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

10

Strong EEV1 Growth◼
◼

EEV and value of in-force business have been growing
at a CAGR of 20%2 and 33%, respectively since IPO
EEV per share has also steadily increased¥1,673 ¥1,695¥1,570116,604

118,10991,43594,741

25,16823,368: Value of in-force business (JPY millions): Adjusted net worth (JPY millions)95,140: EEV/share (JPY)76,149¥441

18,547
5,122
13,42518,9902012/03 ’13/03 ’14/03 ’15/03 ’16/03 ’17/03 ’18/03 ’19/03 ’20/03 ’21/03 ’22/03 ’22/06
1.

2.

(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, 2022 is
calculated applying the same operating assumptions as those used for March 31, 2022, 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.

11

1Q of FY2022 EEV Movement1◼ EEV growth driven by adjusted incremental
EV including value of new business

118,109(JPY millions)

Value ofnew business

116,604

1,003

Expected
existing
business
contribution

Operatingexperiencevariances

(116)

382

Assumptionchanges1

Economic
variances
and assumptionchanges

232

Changedassumptions at
March 31, 2022

Adjusted incremental EV2
total’22/03
1.
2.

1,269

million yen’22/06 (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, 2022 is calculated applying the same operating assumptions as those used for March 31,
2022, and is not reviewed by third-party specialists.
Adjusted Incremental EV accurately indicates our business growth during a certain period within increase in EEV.

12

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

Jun. 2022
End
Lifenet

1.9%

-0.9%
-2.0%

Reference: March 2022 End1
LifenetCompany B

4%4%Company C

1.8%

-1.9%

-1.0%

0.5% interest rate increase
0.5% interest rate decrease
10% decrease in equity andreal estate value and other1.

Company A-1%-5% -5%Prepared by Lifenet based on disclosed information of domestic public life insurance companies.

-0%

-4%
-6% -7%13

Financial Condition(JPY millions)(YY/MM)

Total assets’22/03’22/06◼ Limited financial
impact caused bychanges ininvestment
environment

67,82067,935

Cash and deposits

3,761

4,271

Monetary claims bought

3,999

3,999

Money held in trust

5,460

5,449

47,42546,667

Government bonds

8,946

8,897

Municipal bonds

1,469

1,457

Corporate bonds

24,042

24,783492

489

12,375

10,64145,74947,38643,54245,27922,071

20,549697

247

3,182％

3,297％

1.
2.

9.9

9.4

3.

Securities

StocksOther securities1

Total liabilities
Policy reserves and otherTotal net assets
Valuation difference on
available-for-sale securities

Solvency margin ratio2
Modified duration (year)3◼ Maintained
sufficientfinancial stability
as indicated bysolvency margin
ratio2
Investment trust including foreign bonds and others.
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.
Duration of yen-denominated bonds

14

Growing Value of In-Force Business◼ Value of in-force business up 20% YoY,
along with growth of value of in-force
business per policy
Number of policies-in-force

Value of in-force businessper policy

Value of in-force business（Unrealized future value on policies-in-force）(JPY billions)(JPY thousands)(JPY
billions)
94.7
522,604
165

458,539387,775

181
78.7
63.8

＋14.0%’21/06＝×＋18.2%

2020/06
2020/06172’22/06（YY/MM）

2020/06
2020/06’21/06’22/06（YY/MM）＋20.4%＋23.2%

2020/06
2020/06’21/06’22/06（YY/MM）

15

Major Initiatives for 1Q◼ Launched exclusive limited plan
Whole-life Medical
Jibun 3 for Kakaku.com◼ Ranked #1 in major PCWs
Term Life Ranked 1stfor 6th Consecutive Yearin Kakaku.com Insurance Award 20221

1.
2.

Two Products Ranked 1stin the Most Chosen Insurance
Ranking 2022 of HOKEN ICHIBA2

The annual ranking of insurance products with the highest number of applications on Kakaku.com from January to December 2021.
The Most Chosen Insurance Ranking 2022 of HOKEN ICHIBA is based on compiled date from the number of application from January through December 2021.

16

Business Alliance with au Jibun Bank
◼ Aim to expand business area to group credit life
insurance and strengthen partnership with
KDDI Group's financial service businesses

Overview of the alliance✓ Start business around 2Q
of FY20231✓ au Jibun Bank to change
its underwriting insurer ofexisting group credit life
insurance contracts toLifenet1

From KDDI CORPORATION “New Mid-Term Management Strategy (FY23.3-FY25.3)”

1.

Subject to approval of Financial Services Agency✓ Explore further synergies
within KDDI’s ecosystem
17

Capital and Business Alliance with Eisai◼ Collaborate in the medical and healthcare
fields with Pharmaceutical

Overview of the alliance✓ Eisai to obtain Lifenet common stock throughmarket transaction✓ Through Eisai’s ecosystem, both parties willconsider products and services to reduce the burdenof medical care and other services on consumers
18Adoption of International
Financial Reporting Standards◼ Aim for the voluntary adoption of IFRS 17
from FY2023
Main points• Expect to record an accounting profit1 fromFY2023• Capital adequacy2 and dividends will be
regulated by statutory accounting standards(J-GAAP) even after the adoption of IFRS

1.
2.

IFRS adoption is still in the preliminary stage, and the estimate is based on the current approximation. It is unaudited information and may differ from the actual
financial information under IFRS to be disclosed in the future.
Regarding capital adequacy, economic value-based solvency regulation is being considered for implementation toward 2025.

19

Schedule for IFRS Adoption
Financial results for
Fiscal 2021 in May✓ Announced
voluntary adoption
plan in FY2023

Fiscal 2022

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

Fiscal 2023

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

Fiscal 2024

Internal resolution(planned) in the second half
*The second IFRS study session will be held in October 2022
(Japanese Only)
20

Business Forecasts FY2022◼ Aim for double-digit growth in in-force businessAnnualized premium1(JPY millions)(Results)

New business

Decreased business2(Business forecast)(Business forecast)
Surrender andlapse ratio

21,511

4,400

Policies-in-force(Business forecast)

24,4006-7%+13%2023/032022/03
FY2022 Forecastof which impact
of modified
co-insurance

Ordinary income

30,3006,300

26,167

4,852

Ordinary profit (loss)(3,400)1,000(3,245)

1,283

Net income (loss)(3,400)1,000(3,319)1,283(JPY millions)

1.
2.

(YY/MM)

FY2021 Resultsof which impact
of modified
co-insurance

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.
Including death, expiration and others in addition to surrender and lapse.

21

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
22

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.

23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

Annualized Premium /Number of New Business (Quarter): Annualize premium1 of new business (JPY millions): Number of new business
1,166
1,104

1,123
1,051

991

990

981
934

822

822

794

933

969

23,928

818

741
637
572

28,13623,36923,314
17,312
13,285

1Q

19,117

18,795

19,685

4Q

1Q

2Q

3Q

27,553

26,16722,50622,164

24,41014,7632Q

3Q

FY20181.

19,075

26,918FY2019

4Q

1Q

2Q

3Q

FY2020

4Q

1Q

2Q

3Q

4Q

FY2021

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.

1Q
FY202226

Surrender and Lapse Ratio（Quarter）:Impact of lump-sum recording of policies lapsed1 (%):Surrender and lapse ratio2 without the above (%)

7.6%
0.5%

6.3%
0.1%

7.5%
6.3%

1Q

6.1%

3Q
FY2018

1.
2.

7.1%

7.1%

7.0%

0.0%

6.4%

0.0%

7.1%

6.4%

4Q

6.0%

7.6%

6.5%

2Q

6.6%

1Q

2Q

3Q
FY2019

4Q

5.5%

5.5%

1Q

2Q

5.9%

3Q
FY2020

4Q

1Q

6.5%

6.2%

6.0%

2Q

3Q
FY2021

4Q

1Q
FY2022

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.

27

Breakdown of Policies-in-Force’21/06Component
ratio

Number of policies-in-force

458,539522,604100%- Term Life

222,984

255,049

49%- Whole-life Medical

125,342

143,126

27%- Term Medical Care

8,740

8,389

2%

- Long-term Disability

60,60264,946

12%- Cancer

40,871

51,09410%

3,093,646

3,422,571

291,262

331,841

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

Number of policyholders

1.

’22/06

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

28

【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 Margin2(Marketing Expenses per
New Policy)
1.
2.
3.

Annualized Premiums per
Policy-in-force

Annualized Premiums per
Policy-in-force

JPY 42,536

×

JPY 42,394
×Annualized Premiums per
Policy-in-force

Average Policy Term

Average Policy Term

Average Policy Term

43%

44%

41%

16.7 years
×15.2 years
×

JPY 42,369
×15.6 years
×＝Customer Acquisition Cost3

FY2022/1Q＝(Annualized Premiums per
Policy * Life Time * Gross Profit
Margin)FY2021＝

Life Time ValueFY2020

JPY 305,451

JPY 283,531

JPY 270,992

JPY 66,737

JPY 82,113

JPY 86,922

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

29

Condensed Statements of Operation/ Fundamental Profit(JPY millions)

Condensed statements of operation

Change

6,957
243
7,201

1,109

Increased due to growth in in-force business and reinsuranceincome from modified co-insurance.

149
1,259

Includes utilization of modified co-insurance of 1,324 million yen.

Insurance premiums and other

5,848

Other

93
5,942

Ordinary income

Fundamental profit

FY2021/1Q FY2022/1Q

Note

Insurance claims and
other

1,907

2,821

914

Increased due to an increase in payment of insurance claims andbenefits related to COVID-19(278 million yen) and reinsurance
commissions from modified co-insurance. Percentage of insurance
claims and benefit claims to insurance premiums is 26.3%.

Insurance claims

605

748

143

Increased from 56 cases in 1Q of FY21 to 59 cases in 1Q of FY22.

Benefit claims

328

662

334

1,592

1,736

144

Increased from 3,033 cases in 1Q of FY21 to 8,124 cases in 1Q of
FY22.
Percentage of provision for policy reserves (1,686 million yen) toinsurance premiums is 31.4%.

Ordinary expenses

2,963
2,033
306
622
400
6,862

3,220
2,079
347
793
484
8,264

257
46
40
171
84
1,401

Ordinary profit (loss)(920)(1,062)(141)

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

Includes 1,677 million yen for advertising expenses.

Includes profit of 199M for utilization of modified co-insurance.

Extraordinary losses andincome taxes
Net income (loss)

6

8

2

(926)

(1,071)(144)

Includes profit of 199M for utilization of modified co-insurance.

Mortality margin

901

661
(1,707)(17)(1,063)(239)

Includes 155M loss due to utilization of modified co-insurance.

36

Includes 354M expense margin for utilization of modified coinsurance.

(3)
(206)

Includes profit of 199M for utilization of modified co-insurance.

Expense margin (loss)(1,744)

Interest margin (loss)

(14)
(856)

Fundamental profit

30

Three Surplus Factors ofFundamental Profit
1Q of FY2022(JPY mn)

Profit analysis

Statements of operations
Ordinary income

Insurance premiums and other 6,957

Premiums income 5,367

Net premiums

Expense loading

Reinsurance income 1,590

ReinsuranceincomeOther reinsuranceincomeInterest anddividends

Investment income 221

Gains on salesof securities

Other ordinary
incomeOther ordinary income 22

Ordinary expenses

Insurance claims and other 2,821

Insurance claims and benefits
1,411

Insurance claims
and benefits

Reinsurance commissions
1,410

Reinsurance
commissions

Other reinsurance
commissions

Provision for policy
reserves and others 1,736

Change in policy
reserves

Change inpolicy reserves

Interest
expenses

Investment expenses 91
Operating expenses 3,220

Operatingexpenses

Other ordinary expenses
393

Other ordinary
expenses

Income taxes 0

Mortality
margin (loss)

Expensemargin (loss)

Interest
margin (loss)

661(1,707)(17)

Net profit (loss) (1,071)
1.

Some items with minimal amounts have been omitted.

Losses on salesof securities

Capital gains(losses)47

Ordinary profit (loss)(1,062)Extraordinary profit (loss)(7)

Provision forcontingency
reserves

Projected
interest

Other onetime
gains (losses)(47)

Extraordinary profit (loss)(7)
Income taxes 0

Net profit (loss) (1,071)
31

Solvency Margin Ratio Calculation
As of June 30, 2022

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

Solvency margin ratio
3,297.1%
Cash and deposits
4,271
Monetary claims bought

3,999

Money held in trust
5,449

=

Total amount of solvency margin<numerator>
36,805

Other liabilities
1,901

Excess over the fullZillmerized reserve 13,812
Price fluctuation reserves 108

Securities
46,667

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

1,034

Contingency reserves 2,273

Deferred tax liabilities onavailable-for-sale securities

861

Valuation difference on
securities available-for-sale2221

Total amount of risk/2< the denominator>
2,232/2

Insurance risk R1 1,067

Reserves for outstanding claims

Policy reserves
44,244

÷(JPY mn)

Add liabilities
with strong
capitalcharacteristics
such as pricefluctuation
reserves andcontingency
reserves

Medical insurance risk R8 384
Risk of change in medical incidence rate (hospital admission
rate , etc.)

Assumed interest rate risk R2 4
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 1,570

Tangible fixed assets

91
Intangible fixed assets
1,230

Other assets
6,224
1.
2.

Capital stock andother assets
20,302

Net assets
20,549[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)

90% of the valuation difference on available-for-sale securities and deferred gains or losses on hedges (pre-tax) (if negative, 100%)
Items that do not apply to the Company or for which the amount is minimal have been omitted, except for certain bracketed items.

32

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

Change in
VoNB

118,109

1,003

Sensitivity 1a: 1.0% increase in risk-free rate

(4,682)(117)

Sensitivity 1b: 1.0% decrease in risk-free rate

4,429

94

Sensitivity 1c: 0.5% increase in risk-free rate

(2,331)(57)

Sensitivity 1d: 0.5% decrease in risk-free rate

2,270

51

(1,011)－

Sensitivity 3: 10% decrease in operating expenses

4,262

189

Sensitivity 4: 10% decrease in lapse rate

1,063

73

Sensitivity 5: 5% decrease in claim incidence rates for life business

5,947

192

Sensitivity 6: Change the required capital to the statutory minimum

193

6

EEV and new business value as of June 30, 2022

Sensitivity 2: 10% decrease in equity and real estate value and other1.

Change in EEV as ofJun. 30, 2022

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 more than
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 accordance with 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 the adjusted net
worth.

33

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 ofAdjustment
modified coⅱ) Marketing insurance
based onexpensesstandard policy
Adjustedreserves

profitⅰ) Ordinary
profit（loss)

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

Adjustment to provision forpolicy reserves1

721
1.

2.

Provision for policy
reserves

Increase in standard
policy reserves2

6,756

6,035

The amount of the adjustment to switch to provisioning based on standard policy reserves is 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. Please note that theprovision for contingency reserves is included in the provision for policy reserves, but is not included in the increase in standard policy reserves. As the transition to thestandard policy reserve was completed in FY2021, there will be no adjustment to the standard policy reserve in FY2022 regarding the premium reserve accumulation
method except for the exclusion of the provision for contingency 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 the balance inthe previous fiscal year. The standard policy reserves is the amount calculated by excluding the provision for contingency reserves from actually provisioned policy
reserves and adding the difference from the provision based on the standard policy reserves. There is no difference at the end of FY2022 because the transition to thestandard policy reserve was completed.

34

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 X35

J-GAAP vs IFRS
Illustration image of accounting structure1■Current Statutory Accounting (J-GAAP)
Heavy initial cost for
acquiring new business3
is recognized at initialfiscal 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.

Year 1・・・・＊Please refer to Material for IFRS 17 Study Meeting for details about IFRS 17.
1.
2.
3.

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.

36