May 20, 2024
Mitsui Sumitomo Primary Life Insurance Company, Limited.

Disclosure of European Embedded Value as of March 31, 2024
Mitsui Sumitomo Primary Life Insurance Co., Ltd. (hereafter “MSI Primary Life” or “theCompany”, President: Jun Kurata), a member of MS&AD Insurance Group, hereby
discloses the European Embedded Value (“EEV”) as of March 31, 2024.
Executive Summary:
The Company’s EEV at March 31, 2024 was Yen 719.4 billion, an increase of Yen 54.7
billion from the EEV at March 31, 2023. The main reason for the increase in value isdue to financial market movements.
(Yen billions)
March 31, 2023

March 31, 2024
Increase(decrease)

EEV

664.6
Value of net assets

429.3

719.4
424.5

Value of in-force
business

235.2

294.8

59.5

Value of new business

4.8

0.9

(3.8)

Attachments
March 31, 2024 EEV

1

54.7
(4.8)

[Attachments]
March 31, 2024 EEVContents
1. Overview
1-1. Embedded Value
1-2. EEV
1-3. The Company’s EEV
1-4. Use of EV
2. EEV Calculation Results
2-1. The Company’s EEV
2-2. Value of Net Assets
2-3. Value of In-force Business
2-4. Value of New Business
3.

Movement Analysis of EEV

4. Sensitivity Analysis
4-1. Sensitivity Analysis of EEV
4-2. Sensitivity Analysis of the Value of New Business
5.

EEV Methodology

6.

Principal EEV Assumptions

7.

Actuarial Opinion

2

1.

Overview

1-1. Embedded Value
Embedded value (“EV”) is calculated by adding the value of net assets at the valuation
date to the discounted present value of future profits arising from the in-force business atthe valuation date (“Value of In-Force”).
Business performance can be difficult to interpret using current statutory accounting
which applies initial costs at the time of insurance contract sale, with profits emerging inlater years. By considering the present value of future profits of in-force business, EV
can be said to be a useful supplement to statutory accounting measures regarding
business performance and company value.
1-2. EEVThe 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. In October
2005, further guidance on minimum required disclosures of sensitivities and other items
was provided by the CFO Forum. In May 2016, an amended version of the EEVPrinciples was published by the CFO Forum which permits the use of projection methods
and assumptions aligned with those applied for the European Solvency II regime, whichcame into effect in January 2016, and equivalent market consistent solvency regimes.
EEV is EV calculated following the EEV Principles and related guidance, and thecalculation of EEV has been adopted by a large number of life insurers in Europe andJapan.
1-3. The Company’s EEV
The EEV disclosed herein covers only the business of the Company. As a result, the EEV
disclosed herein is not the consolidated EEV of MS&AD Insurance Group, and does notcover the business of other life insurers, non-life insurers, or reinsurers within the GroupIn the calculation of EEV, the Company has adopted a market-adjusted valuation
approach. A market-adjusted valuation approach is based on the valuation by themarket-consistent approach, while the value of fixed products are calculated using a
discount rate that reflects the spread rates of actual assets held by the Company, and isbased on the discussion in the Insurance Capital Standard (ICS) being developed by theInternational Association of Insurance Supervisors. We have chosen a market-adjusted
approach to better reflect the enhancements to asset management in accordance with thecharacteristics of the Company’s insurance liabilities, and also, through the adoption of
the EEV Principles and associated guidance, to increase the transparency andcomparability of the calculation of our results.
3

1-4. Use of EV
In calculating the EV of the Company, numerous assumptions are required concerning
the future, which is inherently uncertain. As a result, future conditions may differ,perhaps significantly, from those assumed in the calculation of the embedded value.
Further, the EV is not the only indicator of the value of a company, and investors may
incorporate other information into their views on the value of a company which may
differ significantly from the EV. Sufficient caution should be exercised when using theEV, with the aforementioned considerations kept in mind.

4

2.

EEV Calculation Results

2-1. The Company’s EEV
The EEV of the Company at March 31, 2024 was Yen 719.4 billion, an increase of Yen
54.7 billion (+8.2%) from EEV at March 31, 2023. The overall value of net assets was
Yen 424.5 billion, a decrease of Yen 4.8 billion and the value of in-force business was
Yen 294.8 billion, an increase of Yen 59.5 billion.
The increase of EEV was mainly due to financial market movements.
(Yen billions)
March 31, 2023

March 31, 2024
Increase(decrease)

EEV
Value of net assets
Value of in-force
business
Value of new business

5

664.6
429.3

719.4
424.5

54.7
(4.8)

235.2

294.8

59.5

4.8

0.9

(3.8)

2-2. Value of Net Assets
The value of net assets represents the market value of assets in excess of policyholder
and other liabilities.
In other words, the value of net assets is calculated by adjusting the total net assets on thebalance sheet for the retained earnings in quasi-equity liabilities, unrealized gains orlosses in assets or liabilities not accounted for under the mark-to-market methodology
and tax effect equivalents on the items above. The breakdown of the Company’s value ofnet assets is as follows:(Yen billions)
March 31, 2023

March 31, 2024

Value of net assets

429.3

424.5

(4.8)

Net assets (*1)

246.6

258.6

12.0

Contingency reserve ( *2)

73.3

98.0

24.7

Price fluctuation reserve

198.1

144.1

(54.0)

8.0

18.1

10.1

Other adjustment ( *4)(25.6)(29.9)(4.2)

Tax effects on the above(71.0)(64.5)

6.5

Unrealized gains/losses on securities (*3)

Increase(decrease).
(*1): Excluding unrealized gains and losses on balance sheet.
(*2): Excluding Contingency reserve III (“CR III”), which was reserved for minimum guarantee risk for variable
products.
(*3): The unrealized gains and losses on securities and certain other assets backing policy reserves (Yen (156.7)
billion at March 31, 2023 and Yen (102.8) billion at March 31, 2024.) is allocated to the value of in-force
rather than the value of net assets.
(*4): An adjustment regarding unamortized ceding commission of the surplus relief reinsurance has been made for
EEV calculation.

6

2-3. Value of In-force Business
The value of in-force business corresponds to the present value of future profits arisingfrom business in-force and the assets backing policy reserves, including the value of
unrealized gains and losses on securities and certain other assets at the valuation date.
The breakdown by item is as follows:(Yen billions)
March 31, 2023

March 31, 2024

235.2

294.8

59.5

Present value of future profits

279.0

327.9

48.9

Time value of financial options andguarantees(26.5)(10.7)

15.9

Cost of holding required capital(6.6)(10.3)(3.6)

Allowance for non-hedgeable risks(10.4)(12.1)(1.6)

Value of in-force business-

Increase(decrease)

The present value of future profits is the present value of after -tax profits based on the projected cash
flows calculated on a deterministic basis. The discount rate used in discounting cash flows related toasset investment and after-tax future profits is equal to the investment yield. For variable products, theinvestment yield of all assets is assumed to be the risk-free rate, while for fixed products, investment
yield is assumed to be the risk-free rate plus a spread based on the actual assets held by the Company. In
addition, it includes the value of unrealized gains and losses on securities and certain other assetsbacking policy reserves.
- The time value of financial options and guarantees is the value associated with the fluctuation of future
cash flows, i.e. it is the value aside from the base value which is captured in the present value of future
profits.
- The cost of holding required capital arises from the taxation on investment returns on required capital
assets and the related investment expenses incurred for the management of the assets.
- The allowance for non-hedgeable risks covers costs not otherwise included in the present value of future
profits or the time value of financial options and guarantees, including operational ris k and other risk.

72-4. Value of New Business
The value of new business is the value of new policies at the time of sale, acquired
during the reporting period. Non-economic assumptions employed are the same as for thevalue of in-force business but point of sale economic assumptions have been used.
(Yen billions)Year ended
Year ended
March 31, 2023 March 31, 2024
Value of new business

Increase(decrease)

4.8

0.9

(3.8)

Present value of future profits

18.5

16.2

(2.3)

Time value of financial options andguarantees

(7.8)

(6.9)

0.9

Cost of holding required capital

(2.0)

(3.6)

(1.6)

Allowance for non-hedgeable risks

(3.8)

(4.6)

(0.8)

The new business margins are as follows:(Yen billions)Year ended March
Year ended
31, 2024
March 31, 2023
Value of new business
Present value of future premium income
New business margin

Increase(decrease)

4.8

0.9

(3.8)

1,228.4

1,363.9

135.4

0.4%

0.1%

(0.3%)- The present value of future premium income is the future premium income discounted at the discount rate.
- The new business margin is the value of new business divided by the present value of future premiumincome.

8

3. Movement Analysis of EEV(Yen billions)
Value of net

Value ofassetsin-force

EEV

EEV at March 31, 2023

429.3

235.2

664.6

(1) Opening adjustments

(6.8)

0.0

(6.8)

EEV at March 31, 2023 after adjustment

422.5

235.2

657.8

0.0

0.9

0.9

0.1

4.3

4.5

0.1

2.2

2.4

43.5

(43.5)

0.0

90.3(90.3)

0.0

Of which due to new business(46.8)

46.8

0.0(6) Operating experience variances

0.0

0.1

0.1

(7) Changes in operating assumptions

0.0(11.3)(11.3)(41.8)

106.7

64.8

(9) Other operating movements

0.0

0.0

0.0

(10) Other non-operating movements

0.0

0.0

0.0

424.5

294.8

719.4

(2) New business in reporting year(3) Expected existing business contribution
at the reference rate(4) Expected existing business contribut ion
above reference rate(5) Transfers from value of in-force to valueof net assets
Of which due to in-force at end of previous year(8) Economic variances and changes toeconomic assumptions

EEV at March 31, 2024

(1) Opening adjustments
This amount consists of shareholder dividends paid during the fiscal year ended
March 31, 2024 and is deducted from the value of net assets.

(2) Value of new business
The value of new business represents the value of new policies at the time of sale,acquired during the reporting year. Non-economic assumptions employed are the same
as for the value of in-force business but point of sale economic assumptions have beenused. Please refer to section 2-4 for the value of new business using the calculation
method.
(3) Expected existing business contribution at the reference rate
In the market consistent approach, future profits distributable to shareholders are9discounted at the reference rate to produce the value of in-force business. The
expected existing business contribution at the reference rate represents theunwinding of this discounting. This item includes the unwinding of the time valueof options and guarantees, the cost of required capital, and the cost of
non-hedgeable risk.

(4) Expected existing business contribution above the reference rate
The market consistent approach assumes all future investment returns are equal to
the reference rate, but due to the actual risk characteristics of the assets held, a
return in excess of the reference rate is expected. This item represents the excess
investment income expected over the reference rate. For the expected return used,
please refer to section 6-1-4.
(5) Transfers from value of in-force to the value of net assets
A part of the value of in-force business as of the end of the previous year anda part of the value of new business during the reporting year (i.e. the profit
associated with the current year) are transferred to the value of net assets. This
item is the transferred value. The transfer does not increase or decrease thetotal EEV.
(6) Operating experience variancesThis item is the result of differences between expected experience as at the end of
the previous year, and realized experience.

(7) Changes to operating assumptions
This item represents the impact on future profits of changes in operating
assumptions since the end of the previous year. The negative impact this year ismainly due to increases in expense assumptions (including future expense inflation).
(8) Economic variances and changes to economic assumptions
This is the variance due to differences between economic assumptions (market interest
rates, implied volatilities, and other assumptions) as at the end of the previous year,
actually realized experience, and changes in economic assumptions. The increase in thevalue of EEV is mainly due financial market movements.
10(9) Other operating movements
This item represents the impact on future profits of operational changes, excludingchanges in operating assumptions. No changes are included in this item.
(10) Other non-operating movements
No changes are included in this item.

11

4. Sensitivity Analysis
4-1. Sensitivity Analysis of EEV
The following table shows a sensitivity analysis of the EEV to changes in assumptions.
(Yen billions)
Assumptions

EEV

Increase(decrease)

EEV at March 31, 2024

719.4

-

Sensitivity 1: 50bp upward parallel shift in risk-free yield curve

714.3

(5.1)

Sensitivity 2: 50bp downward parallel shift in risk-free yield curve

724.5

5.1

Sensitivity 3: 10% decline in equity and real estate values

717.4

(1.9)

Sensitivity 4: 10% decline in maintenance expenses

726.5

7.1

Sensitivity 5: 10% decline in surrender and lapse rates

717.0

(2.3)

Sensitivity 6: 5% decline in mortality and morbidity rates for life
insurance products

723.2

3.8

Sensitivity 7: 5% decline in mortality and morbidity rates for annuity
products

718.3

(1.0)

Sensitivity 8 : Equity and property implied volatility increase of
25%

717.9

(1.4)

Sensitivity 9 : Swaption implied volatility increase of 25%

716.6

(2.7)

Sensitivity 10: Required capital set at statutory minimum level

728.2

8.8

Sensitivity 11: Nil spread

602.6(116.7)- Sensitivity 1
The item represents the effect on EEV of an upward parallel shift of 50bp in the yield
curve of risk-free forward rates. Changes in the prices of bonds and loans change thevalue of net assets. Also, as future expected investment yields change, the value of
in-force business changes. The level of spread rates above risk-free rate for fixed
products remains the same as base scenario. (Same applicable to Sensitivity 2)- Sensitivity 2
The item represents the effect on EEV of a downward parallel shift of 50bp in the yield
curve of risk-free forward rates. The risk-free forward rates are reduced by 50bp without
the lower limitation of zero.
- Sensitivity 3This item shows the effect on EEV of a decline of 10% in equity and real estate values.

12- Sensitivity 4
The item represents the effect on EEV of a decrease of 10% in estimated maintenanceexpenses associated with maintaining in-force business.
- Sensitivity 5
The item represents the effect on EEV of a decrease of 10% in surrender and lapse rates.
- Sensitivity 6
The item represents the effect on EEV of a decrease of 5% in mortality and morbidity
rates for life and medical insurance products.
- Sensitivity 7
The item represents the effect on EEV of a decrease of 5% in mortality rates forannuities.
- Sensitivity 8
The item represents the effect on EEV of an increase of 25% in the implied volatilities of
equity and real estate values. This effect occurs because the value of in-force businesschanges as the time value of financial options and guarantees changes.
- Sensitivity 9
The item represents the effect on EEV of an increase of 25% in the implied volatilities ofswaptions. This effect occurs because the value of in-force business changes as the timevalue of financial options and guarantees changes.
- Sensitivity 10
The item represents the effect on EEV in the event that required capital was changed tothe statutory minimum level in Japan of a 200% solvency margin ratio.
- Sensitivity 11
The item represents the effect on EEV of eliminating the spread rates above risk-freerates from the economic assumption basis.

13

4-2. Sensitivity Analysis of the Value of New Business(Yen billions)
Assumptions

Value of new
business

Increase(decrease)

Value of new business issued in the fiscal year of 2023

0.9-

Sensitivity 1: 50bp upward parallel shift in risk-free yield curve

3.9

3.0

Sensitivity 2: 50bp downward parallel shift in risk-free yield curve

(3.0)

(3.9)

Sensitivity 3: 10% decline in equity and real estate values

0.8

(0.0)

Sensitivity 4: 10% decline in maintenance expenses

3.2

2.2

Sensitivity 5: 10% decline in surrender and lapse rates

1.1

0.2

Sensitivity 6: 5% decline in mortality and morbidity rates for life
insurance products

2.9

2.0

Sensitivity 7: 5% decline in mortality and morbidity rates for annuity
products

0.8

(0.1)

Sensitivity 8：Equity and property implied volatility increase of
25%

0.8

(0.0)

Sensitivity 9 : Swaption implied volatility increase of 25%

(1.6)

(2.5)

Sensitivity 10: Required capital set at statutory minimum level

3.9

3.0

(88.2)(89.2)

Sensitivity 11: Nil spread

The calculation approach is the same as for the sensitivities of the value of in-force
business shown in Section 4-1.

14

5. EEV Methodology
The methodology and assumptions adopted by the Company to calculate EEV aremarket-adjusted valuation approach and in accordance with the EEV Principles andrelated guidance issued by the CFO Forum.
5-1. Covered business
The covered business represents all the life insurance business of the Company at thevaluation date, and the Company has no subsidiaries. Any services provided by othercompanies in the MS&AD Insurance Group to the Company have been treated on anarms-length basis in these EEV results, as this EEV disclosure is from the Company
perspective and not MS&AD Group.

5-2. Value of net assets
The value of net assets is calculated by adjusting the total net assets on the Company’sbalance sheet for the following:- In order to mark to market, differences in market value and book value of assets andliabilities other than insurance contract liabilities have been reflected on an after-tax
basis. The unrealized gains and losses on securities and certain other assets backing
policy reserves is allocated to the value of in-force rather than the value of net assets.
- Liabilities that are appropriate to be added to the value of net assets (the contingency
reserve, excluding CR III, and reserve for price fluctuations) have been added on anafter-tax basis.
- The value of net assets is shown after adjustment for the future costs of amortizationof surplus relief reinsurance commission. The Company receives surplus relief
reinsurance commission from the reinsurer to reduce the burden of initial costs at thetime of new policy sale, and the commission is amortized over the contract period.
For EEV purposes, we reclassify the future cost of amortization for surplus relief
reinsurance commission from the value of in-force business to the value of net assets
because we consider the reclassification more appropriately expresses the value of
in-force business and the value of net assets.
The value of net assets consists of required capital and free surplus. Please refer to theamount respectively in “5-6. Cost of holding required capital”.
5-3. Value of in-force business
The value of in-force business is calculated as the present value of projected after-tax
profits deducting the time value of financial options and guarantees, the cost of holding
required capital and allowance for non-hedgeable risks. The value of new business iscalculated in the same way.
5-4. Present value of future profits
15

The present value of future profits is the present value of after-tax profits based on the
projected cash flows calculated on a deterministic basis. The discount rate used indiscounting cash flows related to asset investment and after-tax future profits is equal tothe investment yield. For variable products, investment yield of all assets is assumed tobe the risk-free rate, while for fixed products, the investment yield is assumed to berisk-free rate plus a spread based on the actual assets held by the Company. In addition,
the value of unrealized gains and losses on securities and certain other assets . The
intrinsic value of options and guarantees is included in this item. As described in “5-2.
Value of net assets”, the present value of future profits is shown after the adjustment
regarding the surplus relief reinsurance.
5-5. Time value of financial options and guarantees
The time value of financial options and guarantees is calculated as the difference
between the present value of future profits and the average of the present value of future
after-tax profits calculated by stochastic methods using economic assumptions as
described in “6-1-3. Economic scenarios”.
The projected asset allocation is assumed to be the same as the asset allocation at thevaluation date.
.
The following options and guarantees are considered in calculating the time value offinancial options and guarantees.
- Minimum guarantees for variable products
For variable products with minimum guarantees, the benefits of investment
performance belong to policyholders if it is higher than minimum guarantee level,
while the Company must be responsible for costs to pay minimum guarantee benefits
if the performance is unfavorable.
- Automatic general account conversion at target
Automatic general account conversion at target rider is available to the policyholdersof both variable products and foreign currency denominated fixed products where
the fund value is automatically converted to a secure general account dominated inJapanese Yen when the surrender value reaches a target value set by the policyholder.
- Policyholder behavior
Policyholders have the option to lapse at any time. We have considered the cost of16

dynamic lapse for variable products and fixed products.
5-6. Cost of holding required capital
In order to secure financial solidity, life insurance companies are required to holdadditional assets in excess of the statutory liability. The cost of holding required capitalis the cost incurred through the payment of taxes on the investment income of the assetsbacking the required capital and the related investment expenses incurred for the
management of the assets.
The Company defined required capital as the capital level required to maintain a target
solvency margin ratio. The target solvency margin ratio was taken to be 600% on thesolvency margin basis in Japan. The required capital on the respective bases was Yen
207.0 billion at March 31, 2023 and Yen 333.8 billion at March 31, 2024. (Free surplus
was Yen 222.3 billion and Yen 90.7 billion, respectively.) The solvency margin basis
permits the inclusion of the excess of policyholders' contract deposits up to a definite
limit, and this inclusion was similarly reflected in this calculation.

5-7. Allowance for non-hedgeable risks
EEV Principles define the EV to be the present value of distributable profits attributable
to shareholders arising from assets allocated to the covered business, calculated taking
into account all the risks of the covered business.
Most of the uncertainty in future cash flow is captured in the present value of future
profits and the time value of options and guarantees. However, other risk factors should
be considered, and we have included allowance for the cost of these risks in the EEV
based on the results of simple models. The items are as follows.
- Reinsurance counterparty default risk
The Company has transferred most of the minimum guarantee risks of the variable
products and coinsured a portion of fixed products to reinsurance companies. These risks
are therefore considered in terms of risk to the Company of reinsurance counterparty
default.
- Operational risks- Non-recoverability of future tax losses
In the future, if a loss arises, a tax loss is created, but may not be fully recoverable insubsequent years, in which case it cannot serve to reduce the tax burden of the Company.
This risk is not included in the value of future profits or in the time value of options and17

guarantees, so we have considered it separately.
- Risk of uncertainty on spread assumption for fixed products
We have considered the risk of uncertainty on investment assumptions on fixed products,
where the investment yield is assumed to be risk-free rates plus a spread based on theactual assets held by the Company.

5-8. Value of new business
The value of new business is shown as the value of new policies at the time of sale,acquired during the reporting year. Non-economic assumptions employed are basicallythe same as for the value of in-force business but point of sale economic assumptions
have been used.
The value of new business is based on the definitions used for statutory reporting, andincludes new premiums and additional premiums paid by existing policyholders, but does
not include renewals of existing policies.

186. Principal EEV Assumptions
6-1. Economic assumptions
6-1-1. Risk-free rates
In the calculation, reference rates based on the swap rates as at the valuation date areused, taking into account assets in the Company’s portfolio and the liquidity of themarket. We have taken the forward rate for year’s beyond which market rates areavailable to be the same as the forward rate for the last year for which market data isavailable (year 40). The table below shows, for selected terms, the Japanese Yen (JPY)swap rates (spot rates) which we have used.
Year 1

Year 2

Year 3

Year 4

Year 5

Year 10

Year 15

March 31, 2024

0.175%

0.289%

0.366%

0.427%

0.493%

0.853%

1.154%March 31, 2023

0.054%

0.125%

0.180%

0.230%

0.291%

0.622%

0.849%

Year 20

Year 25

Year 30

Year 35

Year 40

Year 45

Year 50

March 31, 2024

1.395%

1.520%

1.580%

1.593%

1.586%

1.579%

1.573%March 31, 2023

1.022%

1.077%

1.085%

1.084%

1.080%

1.077%

1.075%（Source: Bloomberg, shown above following extrapolation and interpolation ）6-1-2. Discount rate
For fixed products, which mainly consist of Japanese Yen (JPY), US dollars (USD) andAustralian Dollars (AUD) denominated products, the discount rates for each currency
assume a spread above risk-free rates based on actual assets of a company. The spreads
used for valuation is based on the assets actually held by the Company and calculated by
the weighted-average of the spreads that exceeds risk-free rates for each currency as ofeach valuation date. Default rates is applied when calculating the spread above, whereby
default rates are determined by duration and rating based on historical records. The tablebelow shows the discount rate rates converted to spot rates which we have used.
Inforce Business
JPY

Year 1

Year 3

Year 5

Year 10

Year 15

Year 20

Year 30

March 31, 2024

0.486%

0.677%

0.805%

1.165%

1.414%

1.591%

1.711%March 31, 2023

0.560%

0.687%

0.798%

1.132%

1.272%

1.341%

1.297%

USD

Year 1

Year 3

Year 5

Year 10

Year 15

Year 20

Year 30

March 31, 2024

6.148%

5.319%

5.033%

4.883%

4.714%

4.459%

3.970%March 31, 2023

6.214%

5.171%

4.810%

4.618%

4.393%

4.044%

3.474%

AUD

Year 1

Year 3

Year 5

Year 10

Year 15

Year 20

Year 30

March 31, 2024

5.157%

4.768%

4.746%

5.027%

5.063%

4.895%

4.442%March 31, 2023

4.671%

4.446%

4.501%

4.851%

4.843%

4.559%

3.967%

19

New Business
JPY
Year ended March 31,2024
Year ended March 31,

Year 1

Year 3

Year 5

Year 10

Year 15

Year 20

Year 30

0.572%

0.764%

0.892%

1.252%

1.555%

1.797%

1.982%

0.518%

0.645%

0.756%

1.089%

1.316%

1.491%

1.554%

Year 1

Year 3

Year 5

Year 10

Year 15

Year 20

Year 30

6.352%

5.521%

5.235%

5.085%

5.076%

5.028%

4.724%

6.186%

5.143%

4.782%

4.591%

4.546%

4.460%

4.100%

Year 1

Year 3

Year 5

Year 10

Year 15

Year 20

Year 30

5.287%

4.898%

4.876%

5.157%

5.268%

5.229%

4.863%

4.737%

4.512%

4.567%

4.917%

4.960%

4.815%

4.324%

2023
USD
Year ended March 31,2024
Year ended March 31,
2023
AUD
Year ended March 31,2024
Year ended March 31,
2023[Reference: USD and AUD swap rates (spot rates)]
USD

Year 1

Year 3

Year 5

Year 10

Year 15

Year 20

Year 30

March 31, 2024

5.099%

4.277%

3.994%

3.845%

3.853%

3.813%

3.541%March 31, 2023

4.785%

3.755%

3.399%

3.210%

3.224%

3.169%

2.893%

AUD

Year 1

Year 3

Year 5

Year 10

Year 15

Year 20

Year 30

March 31, 2024

4.423%

4.036%

4.014%

4.293%

4.452%

4.438%

4.139%March 31, 2023

3.751%

3.528%

3.582%

3.930%

4.077%

3.986%

3.587%（Source: Bloomberg, shown above following extrapolation and interpolation ）6-1-3. Economic scenarios
1. Interest rate model
We have adopted a stochastic alpha beta rho LIBOR market model, in which interest
rates associated with JPY, USD, AUD and Euro (EUR) are calculated. The model follows
a risk-neutral approach in which JPY is set as a base currency, and correlations between
the interest rates are taken into account. The interest rate model has been calibrated
considering the market environment as of each reporting date, and the parameters used
are estimated from the yield curve and implied volatilities of interest rate swaptions withvarious maturities. A set of 5,000 simulated economic scenarios are used in calculatingtime value of financial options and guarantees. These scenarios have been generated byWillis Towers Watson.

20

A selection of implied volatilities of interest rate swaptions used to calibrate thescenarios is as follows:
Interest rate swaptions
Option

Swap

Term

Term

(years)(years)5

March 31, 2023

March 31, 2024

JPY

USD

AUD

EUR

JPY

USD

AUD

EUR

5

45.3bp98.3bp91.2bp95.7bp43.0bp96.4bp84.7bp84.0bp5743.7bp94.4bp87.7bp93.8bp41.9bp93.8bp82.9bp82.9bp5

1043.1bp89.9bp82.1bp90.9bp41.9bp90.5bp81.2bp81.7bp7542.0bp89.9bp81.0bp88.5bp42.5bp91.0bp78.5bp80.9bp7741.0bp86.9bp79.0bp86.4bp41.4bp88.8bp76.6bp79.5bp7

1040.8bp82.9bp75.2bp83.2bp41.3bp85.8bp75.0bp77.9bp10

539.9bp79.2bp70.0bp81.4bp42.2bp83.3bp69.8bp76.5bp10

739.2bp76.8bp68.8bp79.0bp41.3bp81.3bp68.6bp74.6bp10

1039.2bp73.8bp67.0bp75.4bp41.2bp78.5bp68.3bp72.2bp（Source: Bloomberg）
JPY, USD, AUD and EUR derived from the “Normal Model

2. Implied volatilities of equities and exchange rates
Volatilities of traditional equity indices and exchange rates are calibrated based on theimplied volatilities of relevant options traded in the market. Selected implied volatilities
used to calibrate the economic scenarios are as follows:
Equity Options
Currency
JPY

USD

Underlying
Nikkei225

S&P 500

Implied Volatility

OptionTerm

March 31, 2023

March 31, 2024

3 Year

18.3%

19.4%

4 Year

18.4%

19.5%

5 Year

18.5%

19.6%

3 Year

20.6%

18.3%

4 Year

21.0%

19.1%

5 Year

21.4%

19.9%

21

EUR

Euro

3 Year

18.5%

16.2%

Stoxx50

4 Year

18.6%

16.3%

5 Year

19.0%

16.5%

（Source: Markit (interpolated/extrapolated)）

Foreign Exchange Options
Implied Volatility
March 31, 2023
March 31, 2024

Currency

OptionTerm

USD

10 Year

9.0%

8.6%

AUD

10 Year

12.8%

12.8%

EUR

10 Year

10.3%

9.7%
（Source: Bloomberg）

3. Correlations
In addition to the use of the implied volatilities described above, we have calculated
volatilities reflecting our asset portfolio composition and correlation factors among asset
classes. The share of each asset in the portfolio is assumed to be unchanged over the
projection period.
For correlation factors, we have not observed relevant market data from exotic options
with sufficient liquidity. Therefore, we have estimated correlation factors based on themost recent 10 years of market data. The following table shows the correlation factors
between the variables used. The following table shows the correlation factors between
the variables used at March 31, 2024.

22

JPY
Short

AUD

USD

EUR

JPY/AUD

JPY/USD

JPY/EUR

JPY

USD

EUR

Short Rate Short Rate Short Rate Exchange

Exchange

Exchange

EquityEquityEquity

Rate

Rate

Rate

Index

Index

Index

Rate

JPY
Short Rate
AUD
Short Rate
USD
Short Rate
EUR
Short Rate

100%

66%

65%

69%

21%

28%

27%

15%

-20%

-6%

66%

100%

79%

81%

50%

43%

44%

16%

-15%

-10%

65%

79%

100%

79%

41%

57%

46%

26%

-9%

0%

69%

81%

79%

100%

31%

36%

46%

13%

-26%

-14%

21%

50%

41%

31%

100%

48%

69%

63%

55%

44%

28%

43%

57%

36%

48%

100%

64%

42%

-4%

10%

27%

44%

46%

46%

69%

64%

100%

47%

23%

20%

15%

16%

26%

13%

63%

42%

47%

100%

67%

71%

-20%

-15%

-9%

-26%

55%

-4%

23%

67%

100%

79%

-6%

-10%

0%

-14%

44%

10%

20%

71%

79%

100%

JPY/AUD
Exchange
Rate
JPY/USD
Exchange
Rate
JPY/EUR
Exchange
Rate
JPY
Equity Index
USD
EquityIndex
EUR
Equity Index（Source: Bloomberg）

23

6-1-4. Assumed investment yields on each asset class
The assumed investment yields on each asset class used in the calculation of the expected
existing business contribution in excess of reference rate in the movement analysis are as
follows:
Asset class

Assumed investment yield

Short term assets

0.00%

Domestic bonds

0.41%

Domestic equity

6.91%

Foreign bonds

2.98%

Foreign equity

7.46%

In the calculation of the expected existing business contribution in excess of reference
rate, the portfolio investment yield is calculated by taking a weighted average of theassumed investment yield of each asset class above as of March 31, 2023.
6-2. Non-economic assumptions
All cash flows (including premiums, operating expenses, benefits and claims, paymentsof cash surrender value, taxes, and others) are projected applying best estimate
assumptions up to the termination of the policies, with the assumptions set by productwith consideration to past, current and expected future experience.
6-2-1. Expenses
Expense assumptions were set based on the actual experience in the latest year.
6-2-2. Expense inflation
The future expense inflation rate is set based on the break-even inflation rate
incorporated in recently issued inflation-linked government bond and historical consumer
price index, while taking account of the impact on future expenses based on ouroperating cost structure. We have set the future expense inflation rate as 1.16%.
6-2-3. Corporate tax rates
Corporate tax rates were set based on recent tax practice. In the EEV the corporate tax
rate (including local tax) is 28.00%.

24

7. Actuarial Opinion
The Company requested Willis Towers Watson, an independent actuarial firm, to review
the calculation of the Company’s EEV results and obtained the following opinion.
Willis Towers Watson has reviewed the methodology and assumptions used to determine theembedded value results as at March 31, 2024 for MSI Primary Life. The review covered theembedded values as at March 31, 2024, the value of new business issued in fiscal year 2023, theanalysis of movement in the embedded value during fiscal year 2023 and the sensitivities of theembedded value and new business value to changes in assumptions.
Willis Towers Watson has concluded that the methodology and assumptions used, together withthe disclosure provided in this document, comply with the EEV Principles. In particular:⚫

The methodology makes allowance for the aggregate risks in the covered business throughthe Company’s bottom-up methodology as described in this document, which includes astochastic allowance for financial options and guarantees, and deductions to allow for thefrictional cost of required capital and the impact of non-hedgeable risks. For fixed products,
the Company uses a discount rate that takes the spreads of actual assets held into
consideration; and⚫

The operating assumptions have been set with appropriate regard to past, current andexpected future experience; and⚫

The economic assumptions used are internally consistent and consistent with observable
market data.

Willis Towers Watson has also reviewed the results of the calculations, without howeverundertaking detailed checks of all the models, processes and calculations involved. On the basisof this review, Willis Towers Watson is satisfied that the disclosed results have been prepared, inall material respects, in accordance with the methodology and assumptions set out in thisdisclosure document.
In arriving at these conclusions, Willis Towers Watson has relied on data and information
provided by the Company, including estimates for the market value of assets for which no
market prices exist. This opinion is made solely to the Company in accordance with the terms ofWillis Towers Watson’s engagement letter. To the fullest extent permitted by applicable law,
Willis Towers Watson does not accept or assume any responsibility, duty of care or liability toanyone other than the Company for or in connection with its review work, the opinions it hasformed, or for any statement set forth in this opinion.

25