Securities Code: 7157
TSE Mothers

Presentation
Material for
Investor Meetingfor Fiscal 2018

May 13, 2019

LIFENET is...
Comprehensible
Cost-Competitive
Convenient Remembering the original purpose oflife insurance – mutual support
 Reaching customers with insurance needs with
the necessary coverage in appropriate methods
1

Table of Contents

1. Financial Results for Fiscal 2018
2. New Management Policy and
Future Endeavors2

Overview of Fiscal 2018
Annualized premium1 ofpolicies-in-force

Annualized premium1 of
new businessmillion yen

million yen

13,0852,773(117.4% vs end of FY2017)(Y-on-Y 161.8%)

Adjusted profit2

EEV (European Embedded Value)

2,497

million yen(Y-on-Y 102.8%)

Notable Achievements
Products Releases

63,378million yen(Adjusted incremental EV3 3,779 million yen)High External
Product Evaluations

Expansion of
SPH Services

Term Life

1.
2.
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
premium is calculated as multiplying the monthly premium by 12 months.
Ordinary profit excluding marketing expenses, see page 11 and 12 for details.
Adjusted incremental EV consisted of components accurately reflecting our business growth for fiscal 2018, see page 15 for details.

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

13.0
11.1
10.0
9.3
8.7
215,403308,854  Annualized

premium 117.4%,
number of policiesin-force 117.1%
vs end of FY2017

263,847
225,534

239,800

 Continued strong
growth trend
2015/03 ‘16/03‘17/03 ‘18/03 ‘19/03(YY/MM)4

Breakdown of Policies-in-Force
18/03

19/03

Component
ratio

Number of policies-in-force

263,847

308,854100%- Term Life1

131,256

150,808

49%- Whole-life Medical1

76,60685,96828%- Term Medical Care1

9,924

9,493

3%

- Long-term Disability1

42,62949,21416%

3,432

13,3714%

2,059,703

2,289,567

169,532

197,669- Cancer1

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

Number of policyholders

FY2017(Reference) Surrender and lapse ratio3

5.9％

FY2018

6.6%

1. Term Life insurance: Kazoku and au Term Insurance, Whole-life Medical insurance: Jibun, New Jibun, New Jibun for Women, au Medical Insurance and au Medical
Insurance for Women, Term Medical Care insurance: Jibun Plus, Long-term Disability insurance: Hataraku-Hito, Hataraku-Hito 2 and au Long-term Disability
Insurance, Cancer insurance: Double Yell and au Cancer insurance.
2. Sum insured of polices-in-force are the sum of death coverage, and do not include third-sector insurance.
3. The surrender and lapse ratio is the annual equivalent of the monthly number of policies surrendered and/or lapsed divided by the monthly average number ofpolicies-in-force.

5

Annualized Premium /Number of New Business: Annualized premium of new business (JPY mn): Number of new business

2,773  Recorded
64,435

historical high of
new businessperformance

1,714
1,327

27,9822014 Y-on-Y
annualized
premium
161.8%,
number of new
business 164.5%

1,361
1,189

39,17529,741

25,150

‘15

‘16

‘17

‘18

(fiscal year)

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

67
61

59
51

1.5
1.3

1.2
1.0

Marketingexpenses(JPY mn)65

 Maintained
efficiency
while
1.5 expanding
business scale

2014

‘15

‘16

‘17

‘18 (fiscal year)

1,672

1,302

1,822

2,627

4,216

7

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

11,845
10,421
9,628

 Prioritizing
investment ingrowth

9,007
8,372

25.6 %
21.5 %

2,142

2014
1.

1,937

‘15

23.1 %

2,225‘16

22.2 %

2,315‘17

 Strive for further
22.8% business expansion
and operational
efficiency in mid- tolong- term
2,699

‘18 (fiscal year)

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

8

Profit Structure under
Current Statutory Accounting
 Takes time to generate profit as initial cost 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)

Total profit/loss

Year 22年目

Year 33年目

Year 44年目…

Year X
X年目

Revenue
ExpenseHeavy initial cost1.

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
 Key indicators of substantial profitability
during current period of growth disclosed
as follows:

Adjusted profit(Ordinary profit/loss excluding marketing expenses)
Indicator of profit generated from policies-in-force

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 thechief financial officers of Europe's leading life insurers, in order to improve consistency and transparency in EV reporting.

10Adjusted Profit
 Indicator of profit generated from policies-in-force
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.
• Accrual timing of marketing expenses is far from that ofrevenue, therefore, excluding marketing expenses fromordinary profit/loss enables the indication of profit
generated from policies-in-force.

Ordinary profit excluding marketing expenses

Adjusted profit
11Adjusted Profit
 Slight increase in Adjusted profit due to change inpolicy reserves accumulation methodology
Adjusted profit

Ordinary profit/loss1(Ordinary profit/loss1 excluding marketing expenses)(JPY mn)(JPY mn)

Y-on-Y
102.8%

584

2,429

2,497

‘17

‘18

88
1,887

1,910

‘15

‘16

(197)
(472)

1,200

(1,719)

2014
1.

‘15

‘16

‘17

‘18

(fiscal year)

2014

The ordinary profit (loss) before amortization of deferred assets under Article 113 of the Insurance Business Act(fiscal year)

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 year13European Embedded Value1 (EEV)
 CAGR of EEV is 19%2 and value of
in-force business is 38% since IPO
 Steadily growing even in a lowinterest rate environment

63,37844,440(JPY mn)
Value of in-force business
Adjusted net worth

48,51828,427

18,547
5,122

13,425

2012/031.
2.

‘13/03‘14/03‘15/03‘16/03‘17/0316,012

14,860‘18/03‘19/03 (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.
The calculation includes 3,040 million yen in proceeds from a third-party allotment in May 2015.

14

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
15

Structure Breakdown of EEV1
 Adjusted incremental EV indicating
periodical growth at 3,779 million yen

63,378(JPY mn)
Assumption
Changes

Adjusted
incremental EV

New businessvalue

44,440

2,443

total

‘18/03
1.

Expected
existing
business
contribution

910

15,598Economic
variances
and assumptionchanges(440)

Operatingexperiencevariances425

3,779 million yen‘19/03 (YY/MM)

16

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.

EV Sensitivity
to Interest Rates and Stock Prices
 Limited sensitivity to interest rates
and stock prices
March 2019End
Lifenetライフネット生命

Reference: March 2018 End1
Lifenetライフネット生命

Company
A社 A

Company
B社 B

Company
C社 C

Company
D社 D

10%
7%
5%
3%

1.9%
0.1%

-2.0%

-0.7%

-0.6%
-0.9%

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

-1%
-3%
-5%

-6%
-8%
-9%

-9%

-13%
1. Prepared by Lifenet based on disclosed information of domestic public life insurance companies

17Financial Condition(JPY mn)(YY/MM)

Total assets‘18/03‘19/0335,541

38,247926

1,192

Monetary claims bought

1,999

999

Money held in trust

2,567

3,114

28,30330,989Government bonds

8,398

8,071

Municipal bonds

1,505

1,394

Corporate bonds

13,892

16,763346

363

Foreign securities-

45

Other securities2

4,161

4,352

22,153

26,474

21,18625,256

Total net assets

13,387

11,773

Solvency margin ratio

2,455％

2,085％

11.9

12.0

Cash and deposits

Securities

Stocks1

Total liabilities
Policy reserves and other

Modified duration (year)

 Maintained
sufficientfinancialstability as
indicated bysolvency margin
ratio

1.

Holds shares of Advance Create Co., Ltd. and others for the
purpose of business partnership in online sales etc.

2.

Investment trust including foreign bonds and others

18Competitive Product Lineup Extended coverage at reasonable prices
continues to advance sales
Internet Channel
Renewed April 2018

White Label Products（KDDI channel)

Renewed April 2018

Term Life
Whole-life Medical

Whole-life Medical
for Women
Long-term
Disability

Released April 2018

Cancer19

Evaluations of Products Utilizing top ratings to promote sales
Term Life

Long-term
Disability

Cancer

1. The most popular insurance products in each category from January through December 2018, receiving the highest number of applications of Kakaku.com Insurance,
the sales agent company of insurance products
2. MONOQRO the MONEY magazine of December 2018
3. The 2019 Oricon Client Satisfaction Survey hosted by Oricon Inc. was conducted from August 20, 2018 to September 12, 2018, and evaluated by 30 financial
planners.
4. The Most Chosen Insurance Ranking 2019 of HOKEN ICHIBA is based on compiled date from the number of brochure request and application from January throughDecember 2018.

20

Continuously Providing
Customer-Centric Services

 Applying digital technology to enhance
convenience and usability
Smartphone App

Visual IVR

Screen Sharing
Support Service

Operator

Fingerprints and facialrecognition for login

Visual service menu sent tocustomers telephoning
Contact Center

Customer

Screen sharing to provide
extensive support

21

Innovation of
the Customer Experience Full renewal of website to improve site
performance and enhance customer experience- Feedback from customers after renewal“The website was made forpeople who find insurance
difficult to easily understandwhat it is.” (Male, 30s)
“The explanations were very
easy to understand on thesmartphone site, and I
applied fully understanding
the policy.” (Female, 40s)

22

Table of Contents

1. Financial Results for Fiscal 2018
2. New Management Policy and
Future Endeavors

23

Looking Back New business stalled briefly but making
strong comeback
300,000

Reasons for stagnation

Key areas of improvement• Rapid shift from computers tosmartphones• Reduction of marketing expenses• Smartphone usability• Product lineup• Diversification of sales channels• Active deployment of marketing
expenses

20,00018,000250,000

16,00014,000200,000
12,00010,000150,000

8,000
100,000

6,000
4,000

50,0002,000
00
1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q
FY2008FY2009FY2010FY2011FY2012FY2013

Policies-in-force
保有契約件数

FY2014FY2015

Numberof new business
新契約件数

FY2016FY2017FY201824

Growth Potential of
Online Life Insurance Market
 Expect growth of online insurance market
based on growing consumers intention
14.0 %

12.5 %

Market share of direct automobile insurance1
ダイレクト自動車保険シェア

12.0 %

Market share of online life insurance2
オンライン生命保険シェア（加入）10.5 %

Ratio of life insurance application intention via online3
オンライン生命保険シェア（加入意向）

9.1 %10.0 %

8.0 %

7.9 %
8.0 %

5.9 %
6.0 %
4.0 %

4.5 %

2.0 %
0.0 %

2.9 %
0.2 %

0.8 %

1.8 %

3.3 %
2.2 %

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
1.
2.
3.

Ratio of direct automobile insurance to direct writing premiums in whole automobile insurance market
Ratio of online application to whole application channels of life insurance
Ratio of consumers who intend to apply via online in case he/she applies life insurance in the future25

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

Vision

New Management 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
26

Business Indicators
 Aim for sustainable growth ofEmbedded Value
Key businessindicators ofcorporate value

Embedded Value(EV)

Growthindicators
Business
indicators
supporting
sustainablegrowth ofcorporate value

Profitability
indicators
Soundness
indicators

1.
2.

 European Embedded Value (EEV)1
 Adjusted incremental EV2

 In-force business performance New business performance Adjusted profit(Ordinary profit excl. marketing expenses)- Operating expenses ratio excluding marketing expenses Marketing efficiency of new business Solvency margin ratio

EEV is one of the calculation metrology 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.
Adjusted incremental EV consisted of components accurately reflecting our business growth for fiscal 2018, see page 15 for details.

27

Initiatives for EEV Growth

Further growth of new business

Improvement ofoperating expenses efficiency

28

Further Growth of New Business Aim to strengthen mid- to long-term growthbase focusing on two priority areas
1. Innovation of customer experience
Create a world where
the customer chooses
their own life insurance

Increase convenience as
an internet company inlife insurance

Provide customers withinsurance products andservices that fully
support their needs

Improve quality of all customer contact points
Products &services

Promotional activities, website,
contact center, SNS, etc.

2. Enhancement of promotion capabilities
Internet channel•Continue to actively deploy
operating expenses

Agent channel••

Strengthen relationship withcorporate partners
Develop new corporate
relationships

29

Improvement of
Operating Expenses Efficiency
 Aim to increase productivity company-wideand expand business
Operating expenses ratio1
excluding marketing expenses: Insurance premiums (JPY mn): Operating expenses excl. marketing expenses (JPY mn): Operating expenses ratio¹ (%)

37.7%

Marketing efficiency: Marketing expenses per new business (JPY thousand): Marketing expenses/Annualized premium of new businessPrioritize investment in growth in FY2019,
forecasting around 70,000 yen level

Increase operational efficiency by
reengineer operational processes
and adoption of technology

67
59

22.8%

65

61
51

11,845

1.5

1.5

‘17

‘18

1.3

1.2
1.0
5,876

2,215

2012

2,699

‘18

Future (fiscal year)

2014

‘15

‘16

<Visual representation>
1.

Operating expenses ratio is calculated by dividing operating expenses excluding marketing expenses by insurance premium‘19 (fiscal year)30Utilization of Reinsurance(Modified Co-Insurance)
 Ease pressure of new business costs on P&L
 Alleviate decrease in capital during growth
Illustration image of change in
profit/loss structure by reinsurance：Revenue

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

Without
Reinsurance

11,773 million yen

With
Reinsurance

With
Reinsurance

Ease pressure of new
business costs
Without
reinsurance
FY2018Year 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.

31

Business Forecast FY2019
 Prioritize investing in growth to increase mid- andlong-term corporate value while utilizing modified
co-insurance to alleviate pressure capital(JPY mn)
FY2019 Forecast
Impact ofmodified
co-insurance*(Reference)

FY2018 Results

16,2002,000

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

Ordinary income(Reference)

Annualized premiumof new business1

3,000

2,773

Note: Business forecast for FY2019 includes modified co-insurance
1.

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.

32

Change in Management Structure Increasing corporate governance anddecision making agility
 Before June 201910 Directors (4 outside)

Ratio ofoutside directors
after change

Outside directors

 After June 2019

8 Directors (4 outside)

50%

Outside directors
Note: Election of Directors is subject to approval at the 13th Annual General Meeting of the Shareholders on June 23, 2019.

33

Implementation of Restricted Stockto Compensate Directors
 Continue to enhance corporate value by
granting restricted stock to directors for
additional incentive
Current compensation system

Base salary (Fixed)
Outsidedirectors

Inside directors

New compensation system
Stockcompensation(Performance based)

Inside directors

Base salary(Fixed)Outsidedirectors

Note: Implementation of the above new system is subject to approval at the 13th Annual General Meeting of the
Shareholders on June 23, 2019.

34

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

Vision

New Management 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
35

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.

36

All information on this document that is nothistorical fact constitutes forward-looking
information and is based on assumptions andforecasts available to the company at the time of
preparation. The company cannot guarantee theaccuracy of these assumptions and forecasts.
Earnings projections and other information on thismay differ materially from actual performance due
to various risks and uncertainties.
This is a translation of the original Japanese
document, prepared and provided solely forreaders' convenience. In case of any discrepancy or
dispute, the Japanese document prevails.

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

Appendix

Condensed Statements of Operation/ Fundamental Profit
FY2017FY2018Change10,616346
10,962

12,159401
12,560

1,542
55
1,598

Insurance claims and
other

1,891

2,535

643

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

Insurance claims

978

1,353

375

Increased from 75 cases in FY17 to 89 in FY18

Benefit claims

584

701

117

Increased from 6,165 cases in FY17 to 6,987 in FY18

Provision for policy
reserves and other

3,684

4,070

385

Increased slightly by transferring to standard policy reserves.
Percentage of provision for policy reserves (4,029 million yen)
to insurance premiums is 34.0%.

Ordinary expenses

4,942
2,627
687
1,628
641
11,160

6,916
4,216
786
1,913
758
14,280

1,973
1,589
99
284
117
3,120

Ordinary profit (loss)(197)(1,719)(1,521)

51

16

(35)

(249)

(1,735)(1,486)2,623(2,752)
8
(120)

2,753
(4,395)(14)(1,656)130(1,642)(23)(1,535)(JPY mn)
Insurance premiums and other

Other

Condensed statements of operation

Ordinary income

Operating expenses
Marketing expenses
Customer service
System and other
Other

Fundamental profit

Extraordinary losses andincome taxes
Net income (loss)
Mortality margin
Expense margin (loss)
Interest margin (loss)
Fundamental profit

Note

Increase in in-force policies business

17.3%.

Increase in marketing expenses, mainly advertising expenses

Increase in marketing expenses, mainly advertising expenses

39

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

EEV and new business value as of March 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 EEV as ofMar. 31, 2019

Change in
VoNB

63,378(2,513)
2,253(1,239)
1,177
398
(434)
2,580
150
3,152
64

2,443
98
(292)
68
(116)
68
496
(3)
419
10

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

Three Surplus Factors ofFundamental Profit
FY2018
Ordinary income

Statements of operations(JPY mn)

Profit analysis

Insurance premiums and other
12,159Premiums income 11,845

Net premiums

Reinsurance income 313

ReinsuranceincomeExpense loading

Investment income

Interest anddividends

365

Gains on salesof securities

Other ordinary
incomeOther ordinary income 35

Ordinary expenses

Insurance claims and other 2,535
Insurance claims and benefits
2,054

Insurance claims
and benefits

Reinsurance commissions
480

Reinsurance
commissions

Provision for policy reserves
and others 4,070

Change inpolicy reserves

Change inpolicy reserves

Investment expenses 1
Operating expenses 6,916

Operatingexpenses

Other ordinary
expenses 757

Other ordinary
expenses

Projected
interest
Interest
expenses

Income taxes 4

Mortality
margin (loss)
2,753

Net profit (loss) (1,735)
1. Some items with minimal amounts have been omitted.

Expensemargin(loss)(4,395)Losses on sales of
securities

Capital gains(losses)98

Ordinary profit (loss)(1,719)Extraordinary profit (loss)(11)

Provision forcontingency
reserves

Interest
margin(loss)(14)

Other onetime
gains (losses)(161)

Extraordinary profit (loss)(11)
Income taxes 4

Net profit (loss) (1,735)

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Solvency Margin Ratio Calculation
As of Mar 31, 2019

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

Solvency margin ratio
2,085.2%
Cash and deposits
1,192

=

Total amount of solvency margin<numerator>
19,920

Other liabilities
941

Monetary claimsbought999

Reserves for outstanding claims

Money held in trust
3,114

24,786
Contingency reserves 1,680

Excess over the fullZillmerized reserve 6,273

Price fluctuation reserves
42

Securities
30,989Tangible fixed assets

99
Intangible fixed assets
629

Other assets
1,223

Deferred tax liabilities onavailable-for-sale securities

2101

Valuation difference on
securities available-for-sale
5401

Capital stockand otherassets
11,172
Net assets
11,773

Total amount of risk/2< the denominator>
1,910/2

Insurance risk R1 1,182
Risk of change in mortality rate (calculated
based on value of policies in force)

469

Policy reserves÷

Add liabilities
with strong
capitalcharacteristics
such as pricefluctuation
reserves andcontingency
reserves

Medical insurance risk R8 449
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 forcalculating policy reserves[Minimum guarantee risk] R7 －Risk related to products, such as variableannuities with minimum guarantees

Asset management risk R3 837[Credit risk] Risk that asset values decline due todeterioration in financial condition of creditees[Price fluctuation risk]Risk of incurring losses due
to decline in market value of stocks and bonds,
etc.
Business management risk R4 74
3% of the total of the amounts of the other 5 risks (inthe 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.

42