May 20, 2024

Mitsui Sumitomo Aioi Life Insurance Co., Ltd

Disclosure of European Embedded Value as of March 31, 2024
Mitsui Sumitomo Aioi Life Insurance Co, Ltd. (hereinafter “MSI Aioi Life” or “the Company”;
President: Shiro Kaji), a member of the 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 918.9 billion, an increase of Yen 10.9 billion(+1.2%) from the EEV at March 31, 2023. This increase was mainly due to the acquisition of newcontracts during the fiscal year (Yen 46.6 billion).

1【Attachments】 March 31, 2024 EEVMarch 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

Glossary2

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 at the valuation
date (“Value of In-Force”).
Business performance can be difficult to interpret using current statutory accounting whichapplies initial costs at the time of an insurance contract sale, with profits emerging in later years.
By considering the present value of future profits of in-force business, the EV can be considered
to be a useful supplement to statutory accounting measures regarding business performance andcompany value.
1-2. EEVThe EEV Principles and related guidance were published in May 2004 by the CFO Forum, anorganization comprising the chief financial officers of Europe's leading life insurers, in order toimprove 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 EEV Principles was published by the CFO Forum which
permits the use of projection methods and assumptions aligned with those applied for theEuropean Solvency II regime, which came into effect in January 2016, and equivalent market
consistent solvency regimes. EEV is the EV calculated following the EEV Principles and related
guidance, and the calculation of EEV has been adopted by a significant number of life insurers in
Europe and Japan.
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 not cover thebusiness of other life insurers, non-life insurers, or reinsurers within the GroupIn the calculation of EEV, the Company has adopted a market-consistent approach – an approach
which values cash flows from both assets and liabilities of a company consistently withcomparable financial instruments traded in the market. A market-consistent approach is currently
being adopted within Europe’s Solvency II regime and new regulations for adopting a similar
approach for Japanese life insurers are currently being considered. We have chosen a market
consistent approach to reduce the subjectivity of the valuation of risk in the EV, and also, throughthe adoption of the EEV Principles and associated guidance, to increase the transparency andcomparability of the calculation of our results. Further, we consider that the use of a net worth
based on market values enhances the EV as an indicator of business performance and company
value.
We note that this EEV was not prepared on the basis of the European Insurance CFO Forum
3

Market Consistent Embedded Value Principles ©1.
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 theirviews on the value of a company which may differ significantly from the EV. Sufficient caution
should be exercised when using the EV, with the aforementioned considerations kept in mind.

1

Copyright © Stichting CFO Forum Foundation 2008
4

2.

EEV Calculation Results

2-1. The Company’s EEV
The Company’s EEV at March 31, 2024 was Yen 918.9 billion, an increase of Yen 10.9 billion
from the EEV at March 31, 2023. This increase was mainly due to the acquisition of newcontracts during the fiscal year, such that the value of net assets was Yen -174.8 billion (adecrease of Yen 171.0 billion), and the value of in-force business was Yen 1,093.8 billion (anincrease of Yen 181.9 billion).
(Yen billions)
March 31, 2023
EEV

Increase

March 31, 2024

(decrease)

908.0

918.9

10.9

Value of net assets(3.8)(174.8)(171.0)

Value of in-force business

911.9

1,093.8

181.9

51.2

46.6

(4.5)

Value of new business
2-2. Value of Net Assets

The value of net assets represents the market value of assets in excess of policyholder and otherliabilities.
In other words, adjusted net worth is calculated by adjusting the total net assets on the balance
sheet for the retained earnings in quasi-equity liabilities, the general reserve for possible loan
losses, unrealized gains or losses in assets or liabilities not accounted for under the
mark-to-market methodology, unfunded pension benefit obligations, and tax effect equivalents on
the items above. The breakdown of the Company’s adjusted net worth is as follows:(Yen billions)
Increase

March 31, 2023

March 31, 2024

(3.8)

(174.8)(171.0)Net assets (Note 1)

147.3

169.9

22.6

Contingency reserve

40.4

40.0

(0.4)

Price fluctuation reserve

12.4

13.9

1.5

Unallocated dividend reserves

0.4

0.4

(0.0)

General reserve for possible loan

0.0

0.0

0.0

(265.9)(535.7)(269.7)

2.6

2.5

(0.1)

Unfunded pension benefit obligations

(0.1)

(0.2)

(0.0)

Tax effects on the above

58.8

134.1

75.3

Value of net assets

losses
Unrealized
gains/losses on securities
Unrealized gains/losses on loans(Note 1): Excluding unrealized gains and losses on balance sheet.

5(decrease)2-3. Value of In-force Business
The value of in-force business corresponds to the present value of future profits arising frombusiness in-force at the valuation date. The breakdown by item is as follows:(Yen billions)
Increase

March 31, 2023

March 31, 2024

911.9

1,093.8

181.9

1,153.3

1,310.8

157.4(93.6)(61.8)

31.8

Cost of holding required capital(13.0)(18.6)(5.5)

Allowance for non-financial risks(134.7)(136.5)(1.7)

Value of in-force business
Certainty equivalent present valueof future profits
Time value of financial options andguarantees(decrease)- The certainty equivalent present value of future profits is the discounted present valueof after-tax profits. The assumed investment return and discount rate are both aligned at
the risk free rate.
- The time value of financial options and guarantees is the value associated with thefluctuation of future cash flows, i.e. it is the value aside from the base value which is
captured in the certainty equivalent present value of future profits.
- The cost of holding required capital arises from the taxation on investment returns onrequired capital assets and the investment expenses on the required capital assets.
- The allowance for non-financial risks covers costs not otherwise included in thecertainty equivalent present value of future profits or the time value of financial options
and guarantees, including operational risk and other risk.

62-4. Value of New Business
The value of new business is the value at the valuation date (the end of the reporting period), of
new policies acquired during the reporting period. The method of calculating the value, and theassumptions employed, are the same as for the value of in-force business.
(Yen billions)
Increase

March 31, 2023

March 31, 2024

Value of new business

51.2

46.6

(4.5)

Value of net assets(25.4)(27.0)

(1.6)

76.6

73.7

(2.9)

86.3

82.0

(4.2)

(0.0)

(0.0)

0.0

Cost of holding required capital

(0.2)

(0.3)

(0.0)

Allowance for non-financial risks

(9.3)

(7.9)

1.3

Value of future profits
Certainty equivalent present valueof future profits
Time value of financial options
and guarantees(decrease)

The new business margins are as follows:(Yen billions)
Increase

March 31, 2023

March 31, 2024

Value of new business

51.2

46.6

(4.5)

Present value of future premium

389.7

373.7

(15.9)

incomeNew business margin

13.2%

12.5%

(0.7%)(decrease)- The present value of future premium income is the future premium income discounted at therisk free rate.
- The new business margin is the value of new business divided by the present value of
future premium income.

7

3.

Movement Analysis of EEV(Yen billions)
Value of net

Value ofassetsin-force

EEV

EEV at March 31, 2023

(3.8)

911.9

908.0

(1) Opening adjustment

(5.0)

－

(5.0)

EEV at March 31, 2023 after adjustment

(8.9)

911.9

902.9

(2) New business in reporting year

(27.0)

73.7

46.6

0.0

9.5

9.6

0.0

7.2

7.2

14.2

(14.2)－(6) Operating experience variances

2.3

(6.6)

(4.3)

(7) Changes in operating assumptions－(49.7)(49.7)(155.6)

162.2

6.5

(9) Other operating movements

－

(0.0)

(0.0)

(10) Other non-operating movements

－

－

－

(174.8)1,093.8918.9(3) Expected existing business contribution
at the risk free rate(4) Expected existing business contribution
above risk free rate(5) Transfers from value of in-force to valueof net assets(8) Economic variances and changes toeconomic assumptions

EEV at March 31, 2024
(1) Opening adjustment

Decrease of the value of net assets because of shareholders' dividends (excluding dividendof surplus) distributed in the fiscal year 2023.
(2) Value of new business
The value of new business represents the value, as at March 31, 2024, of the new businessacquired during the year.
(3) Expected existing business contribution at the risk free rate
In the market consistent approach, future profits distributable to shareholders are
discounted at the risk free rate to produce the value of in -force business. The expected
existing business contribution at the risk free rate represents the unwinding of this
discounting. This item includes the unwinding of the time value of options and guarantees,
the cost of required capital, and the cost of non-financial risk.
(4) Expected existing business contribution above the risk free rate
The market consistent approach assumes all future investment returns are equal to the risk
8

free rate, but due to the actual risk characteristics of the assets held, a return in excess of therisk free rate is expected. This item represents the excess investment income expected over
the risk free rate. For the expected return used, please refer to section 6-1-3.
(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 (i.e. theprofit associated with the current year) is transferred to the value of net assets. This
item is the transferred value. The transfer does not increase or decrease the total EEV.
(6) Operating experience variancesThis item is the result of differences between expected experience as at the end of theprevious year, and realized experience.
(7) Changes to operating assumptions
This item represents the impact on future profits due to changes in operating assumptions
since the end of the previous year. The negative impact this year is mainly 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, actual realized
experience, and changes in economic assumptions.
While the value of net assets has decreased due to increasing market interest rates, the value of
in-force has increased.
（9）Other operating movements
This item represents the impact on future profits of operational changes, excludingchanges in operating assumptions. Model changes are included in this item.
(10) Other non-operating movements
No changes are included in this item.

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

Increase

EEV(decrease)

EEV at March 31, 2024

918.9

－

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

859.8(59.1)

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

971.3

52.4

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

913.1

(5.8)

Sensitivity 4: 10% decline in maintenance expenses

953.6

34.7

Sensitivity 5: 10% decline in surrender and lapse rates

938.0

19.0

975.7

56.7

918.8

(0.1)

918.9

0.0

Sensitivity 9： Swaption implied volatility increase of 25%

894.1(24.7)

Sensitivity 10: Required capital set at statutory minimum level

931.4

12.5

932.7

13.7

Sensitivity 6: 5% decline in mortality and morbidity rates for lifeand medical insurance products
Sensitivity 7: 5% decline in mortality rates for annuity products
Sensitivity 8： Equity and property implied volatility increaseof 25%

Sensitivity 11: Applying an Ultimate Forward Rate (UFR) to
extrapolate long term interest rates

The following table shows the effect on the value of net assets of sensitivities 1 through 3 above.
In sensitivities 4 through 11, only the value of in-force business is affected.
(Yen billions)
Increase(decrease)
Sensitivity 1: 50bp upward parallel shift in risk-free yield curve(233.2)

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

264.3

Sensitivity 3: 10% decline in equity and real estate values(5.8)- Sensitivity 1
The item represents the effect on EEV of an upward parallel shift of 50bp in the yield curve ofrisk-free forward rates. Changes in the prices of bonds and loans change the value of net assets.
As future expected investment yields change, the value of in-force business changes.
- Sensitivity 2
The item represents the effect on EEV of a downward parallel shift of 50bp in the yield curve of10

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.
- Sensitivity 4
The item represents the effect on EEV of a decrease of 10% in estimated maintenance expenses
associated with maintaining the 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 forlife and medical insurance products.
- Sensitivity 7
The item represents the effect on EEV of a decrease of 5% in mortality rates for annuities.
- 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 business changes as thetime 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 time value offinancial options and guarantees changes.
- Sensitivity 10
The item represents the effect on EEV in the event that required capital was changed to thestatutory minimum level in Japan of a 200% solvency margin ratio.
- Sensitivity 11
The item represents the effect on EEV of changing the long-term interest rates extrapolation
method using an Ultimate Forward Rate (UFR). Concretely, the forward rate is extrapolated fromthe 30-year maturity (the extrapolation starting year) such that it converges to the UFR level, set
at 3.8%, in the next 30 years using the Smith-Wilson method.

114-2. Sensitivity Analysis of the Value of New Business(Yen billions)
Value of new

Increasebusiness(decrease)

Value of new business at March 31, 2024

46.6

-

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

47.8

1.1

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

44.9

(1.7)

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

46.6

0.0

Sensitivity 4: 10% decline in maintenance expenses

48.5

1.8

Sensitivity 5: 10% decline in surrender and lapse rates

49.4

2.7

50.4

3.7

46.6

(0.0)

46.6

0.0

Sensitivity 9： Swaption implied volatility increase of 25%

46.6

(0.0)

Sensitivity 10: Required capital set at statutory minimum level

46.9

0.2

47.3

0.6

Assumptions

Sensitivity 6: 5% decline in mortality and morbidity rates for lifeand medical insurance products
Sensitivity 7: 5% decline in mortality rates for annuity products
Sensitivity 8： Equity and property implied volatility increaseof 25%

Sensitivity 11: Applying UFR to extrapolate long term interest
rates

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

12

5. EEV Methodology
The methodology and assumptions adopted by the Company to calculate EEV aremarket-consistent and in accordance with the EEV Principles and related guidance issued by the
CFO Forum.
5-1. Covered business
The covered business represents the life insurance business of the Company at the valuation date.
No business or subsidiaries of the Company have been excluded. Any services provided by othercompanies in the MS&AD Insurance Group to the Company have been treated on an arms-length
basis in these EEV results, as this EEV disclosure is from the Company’s perspective and not the
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’s balance
sheet for the following:- In order to mark to market, differences in market value and book value of assets and liabilities
other than insurance contract liabilities have been reflected on an after-tax basis.
- Liabilities that are appropriate to be added to the value of net assets (the contingency reserve,
reserve for price fluctuations, unallocated portion of reserve for policyholder dividends, andgeneral reserve for possible loan losses) have been added on an after-tax basis.
- The value of net assets has been reduced for unfunded pension benefit obligations on anafter-tax basis.
The value of net assets consists of required capital and free surplus. Please refer to the amountrespectively 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 certainty equivalent 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 financial risks. The value of new business is calculated in
the same way.
5-4. Certainty equivalent present value of future profits
The certainty equivalent present value of future profits is the present value of after-tax profits
based on the projected cash flows, calculated on a deterministic basis. All cash flows are
discounted at the risk-free rate, assuming the investment yield of all assets is equivalent to therisk-free rate. The intrinsic value of options and guarantees is included in this item.
5-5. Time value of financial options and guarantees
The time value of financial options and guarantees is calculated as the difference between thecertainty equivalent present value of future profits and the average of the present value of future
13

after-tax profits calculated by stochastic methods where economic assumptions are market
consistent, as described in “6-1-2. Economic scenarios”.
The projected asset allocation is assumed to be the same as the asset allocation at the valuation
date.
The following options and guarantees are considered in calculating the time value of financial
options and guarantees.
- Participating policies
When investment returns exceed the expected interest rate for the policy, policyholder
dividends in respect of the difference are distributed. On the other hand, when interest losses
arise, the cost is not charged to the policyholders, resulting in asymmetries in the cash flows.
- Minimum accumulation interest-rate guarantee for interest-rate-sensitive products
When interest rates rise, higher accumulation interest rates are credited to interest
rate-sensitive products. On the other hand, a minimum accumulation interest rate isguaranteed even when interest rates decline, resulting in asymmetric cash flows and a cost to
the insurer.
- Policyholder behavior
Policyholders have the option to lapse at any time. We have considered the cost of selective
lapse under increases in market interest rates.
5-6. Cost of holding required capital
In order to secure financial solidity, life insurance companies are required to hold additional
assets in excess of the statutory liability. The cost of holding required capital is the cost incurred
through the payment of taxes on the investment income of the assets backing the required capitaland the related investment expenses incurred for the management of the assets.
The Company defined required capital as the capital level required to maintain 600% of thestatutory requirement as a target solvency margin ratio. The required capital on the respective
bases was Yen 104.2 billion at March 31, 2023 and Yen 114.8 billion at March 31, 2024. (Freesurplus was Yen -108.0 billion and Yen -289.7 billion, respectively.)
The solvency margin basis permits the inclusion of the excess of policyholders' contract deposits
up to a defined limit, and this inclusion was similarly reflected in this calculation.
5-7. Allowance for non-financial risks
EEV Principles define the EV to be the present value of distributable profits attributable toshareholders arising from assets allocated to the covered business, calculated taking into accountall the risks of the covered business.
The majority of the uncertainty in future cash flow is captured in the certainty equivalent 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
14

based on the results of simple models. The items are as follows.
- Operational risks; and- Non-recoverability of future tax losses.
In the future, if a loss arises, a tax loss is created, but may not be fully recoverable in su bsequent
years, in which case it cannot serve to reduce the future tax burden of the company. This risk is
not included in the certainty equivalent value of future profits or in the time value of options andguarantees, so we have considered it separately.
5-8. Value of new business
The value of new business is shown as the value of business acquired during the year at thevaluation date of March 31, 2024. The calculation approach and assumptions are the same as forthe value of in-force business as at March 31, 2024. The value of new business is based on thedefinitions used for statutory reporting and includes new policies but does not include renewals of
existing policies. With regard to corporate insurance, the increase in the company’s share ofco-managed policies in a group scheme and any increase of the sum insured are included as new
business.

15

6. Principal EEV Assumptions
6-1. Economic assumptions
6-1-1. Risk-free rate
In the certainty equivalent calculation, rates based on Japanese Government Bonds (JGBs) as atthe valuation date are used, taking into account assets in the company’s portfolio and the liquidityof the market. We have taken the forward rate beyond the last available year to be the same as theforward rate for the last available year (year 40). The table below shows, for selected terms, therisk-free reference rates (as spot rates) which we have used.
Year 1

Year 2

Year 3

Year 4

Year 5

Year 10

Year 15

March 31, 2024

0.054%

0.189%

0.202%

0.277%

0.358%

0.758%

1.167%March 31, 2023

(0.115%)(0.061%)(0.052%)0.024%

0.101%

0.396%

0.800%

Year 20

Year 25

Year 30

Year 35

Year 40

Year 45

Year 50

March 31, 2024

1.561%

1.696%

1.929%

2.045%

2.075%

2.091%

2.104%March 31, 2023

1.108%

1.235%

1.370%

1.437%

1.459%

1.473%

1.484%（Source: Analysis of Ministry of Finance data）
6-1-2. Economic scenarios(1) Interest rate model
We have adopted a Stochastic Alpha Beta Rho Libor Market Model, in which interest rates
associated with Japanese yen (JPY), U.S. dollars (USD), and Euros (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 with various
maturities. A set of 5,000 simulated economic scenarios are used in calculating the time value offinancial options and guarantees. These scenarios have been generated by Willis Towers Watson.
A selection of implied volatilities of interest rate swaptions used to calibrate the scenarios is asfollows:

16

Interest rate swaptions
OptionSwap

March 31, 2023

Term

Term

(years)(years)5

March 31, 2024

JPY

USD

EUR

JPY

USD

EUR

5

45.3bps

98.3bps

95.7bps

43.0bps

96.4bps

84.0bps

57

43.7bps

94.4bps

93.8bps

41.9bps

93.8bps

82.9bps

51043.1bps

89.9bps

90.9bps

41.9bps

90.5bps

81.7bps7542.0bps

89.9bps

88.5bps

42.5bps

91.0bps

80.9bps7

741.0bps

86.9bps

86.4bps

41.4bps

88.8bps

79.5bps7

1040.8bps

82.9bps

83.2bps

41.3bps

85.8bps

77.9bps

10539.9bps

79.2bps

81.4bps

42.2bps

83.3bps

76.5bps

10739.2bps

76.8bps

79.0bps

41.3bps

81.3bps

74.6bps

10

1039.2bps

73.8bps

75.4bps

41.2bps

78.5bps

72.2bps（Source: Analysis of Bloomberg data）(2) Implied volatilities of equities and exchange rates
Volatilities of traditional equity indices and exchange rates are calibrated based on the implied
volatilities of relevant options traded in the market. Selected implied volatilities used to calibrate
the economic scenarios are as follows:
Equity Options
Implied Volatility
March 31, 2023
March 31, 2024

Currency

Underlying

OptionTerm

JPY

Nikkei 225

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%

3 Year

18.5%

16.2%

4 Year

18.6%

16.3%

5 Year

19.0%

16.5%

USD

EUR

S&P500Euro Stoxx50（Source: Markit (interpolated/extrapolated)）

Foreign Exchange Options
Implied Volatility
March 31, 2024

Currency

OptionTerm

March 31, 2023

USD

5 Year

8.3%

7.9%

EUR

5 Year

10.7%

9.3%（Source: Bloomberg）

17

(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 shareof 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 the most recent 10
years of market data. The following table shows the correlation factors between the variables
used at March 31, 2024.

JPY Short
Rate
USD
Short Rate
EUR Short
Rate
JPY/USD
Exchange
Rate
JPY/EUR
Exchange
Rate
JPY Equity
Index
USD
EquityIndex
EUR
Equity
Index

JPY
Short
Rate

USD
Short
Rate

EUR
Short
Rate

JPY/USD
Exchange
Rate

JPY/EUR
Exchange
Rate

JPY
EquityIndex

USD
EquityIndex

EUR
Equity
Index

1.00

0.54

0.65

0.28

0.29

0.12

(0.15)(0.06)

0.54

1.00

0.75

0.58

0.44

0.21

(0.07)

0.00

0.65

0.75

1.00

0.35

0.45

0.05

(0.24)(0.13)

0.28

0.58

0.35

1.00

0.64

0.38

(0.04)

0.10

0.29

0.44

0.45

0.64

1.00

0.44

0.23

0.20

0.12

0.21

0.05

0.38

0.44

1.00

0.71

0.73

(0.15)(0.07)(0.24)(0.04)

0.23

0.71

1.00

0.79

(0.06)

0.00(0.13)

0.10

0.20

0.73

0.79

1.00

（Source: Ministry of Finance for JPY yields, Bloomberg for others）

18

6-1-3.

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 risk-free rate in the movement analysis are as follows:
Asset class

Assumed investment yield

Short term assets(0.115%): one year risk-free rate

Domestic bonds (Japanese(0.115%): one year risk-free rate

government)
Domestic bonds (other than Japanese 0.058%: One year risk-free rate + credit spreadgovernment)(0.173%)

Domestic equity

4.885%: one year risk-free rate + risk premium(5.0%)

Foreign bonds

0.885%: one year risk-free rate + credit spread (1.0%)

Foreign equity

6.885%: one year risk-free rate + risk premium(7.0%)In the calculation of the expected existing business contribution in excess of risk-free rate, theportfolio investment yield is calculated by taking a weighted average of the assumed investment
yield of each asset class above, with the weights taken to be the share of each asset as of March
31, 2023.
6-2. Non-economic assumptions
All cash flows (including premiums, operating expenses, benefits and claims, payments of cash
surrender value, taxes, and others) are projected applying best estimate assumptions, with theassumptions set by product with 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 rates
The future expense inflation rate is set based on the break-even inflation rate incorporated inrecently issued inflation-linked government bond and historical consumer price index, while
taking account of the impact on future expenses based on our operating cost structure. We have
set the future expense inflation rate as 1.2%.
Nevertheless, for the value computation of the Sensitivity number 11 (Applying UFR to
extrapolate long term interest rates), inflation rate was set to 1.2% until extrapolation starting
year of the risk-free rate (30 years) and increases together with the forward rate such that itconverges to 2% in the next years.

196-2-3. Policyholder dividends
Policyholder dividend rate assumptions were based on dividend practice.
6-2-4. Corporate tax rates
Corporate tax rates were set based on recent tax practice. In the EEV the corporate tax rate(including local tax) used is 28.00%.

20

7. Actuarial Opinion
The Company requested Willis Towers Watson, an independent actuarial firm, to review thecalculation 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 Aioi Life. The review covered theembedded values as at March 31, 2024, the value of new business issued in fiscal ye ar 2023, theanalysis of movement in the embedded value during fiscal year 2023 and the sensitiv ities of theembedded value and new business value to changes in assumptions.
Willis Towers Watson has concluded that the methodology and assumptions used, tog ether withthe disclosure provided in this document, comply with the EEV Principles. In particula r:⚫

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 al low for thefrictional cost of required capital and the impact of non-financial risks;⚫

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

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

For participating business, the assumed policyholders’ dividend rates, and the allocation of
profit between policyholders and shareholders, are consistent with the projection
assumptions, established company practice and local market practice.

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 ofTowers 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 to anyone
other than the Company for or in connection with its review work, the opinions it has formed, orfor any statement set forth in this opinion.

21

Glossary
Terminology

Description

Allowance for non-financial

An allowance for risks that are not reflected in the certainty

risks

equivalent present value of future profits or the time value offinancial options and guarantees. The Company determined theallowance in respect of the following risks:-

Operational risks such as rapid increases of surrenders, whether
due to reputational damage or natural disaster.

Best estimate assumption

Non-recoverability of future tax loss carryforwards.

An assumption which is developed based on experience data up to thepresent and expected future experience, and which represents the
expected outcome from the range of possible outcomes for future
experience.

Calibration

To set the parameters of a stochastic model in a manner that they are
consistent with observable market prices of traded financial
instruments.

Certainty equivalent present

The present value of future after-tax profit discounted at the risk-freevalue of future profits

rate, calculated using a deterministic cash flow projection withinvestment yields for all assets equal to the risk-free rate.

Financial options andRefers to the following features of insurance contracts:

guarantees-

The exercise of the contractual rights granted to policyholders
which affect insurance contract cash flows. For example, theexercise of the right to surrender.

-

Guarantees on claim amounts, policy values, or other insurance
contract amounts. For example, a minimum accumulation rate
for interest-rate-sensitive products.

Free surplus

The amount of any excess of the value of net assets over the required
capital.

Implied volatility

The implied volatility of an option contract is the market expectation
for price fluctuation implied by the market price of the option.

Interest rate swaption

An option granting the right to enter an interest rate swap transaction
with certain conditions at a certain time in the future.

Intrinsic value and time value

There are two components to the value of financial options andguarantees: intrinsic value and time value.
-

The intrinsic value is the value determined on a certainty
equivalent basis. This is included in the certainty equivalent
present value of future profits.

-

The time value is the value other than intrinsic value, andrepresents the value associated with the possibility of fluctuationof future cash flows. It is calculated as the difference between
22Terminology

Description
the average of the present value of future profits calculated
stochastically, and the certainty equivalent present value of
future profits.

Market-consistent approach

A measurement method using economic assumptions that value the
cash flows of assets / liabilities consistently with traded financial
instruments.

Required capital

The required capital is defined in EEV Principles as capital to be
maintained in excess of the amount to back liabilities whose
distribution to shareholders is restricted, being at least the solvency
capital required to maintain the regulatory minimum solvency level.
Capital required to meet the standards set by the company or to
obtain the company’s desired credit rating may be included. The
Company defined required capital as the capital amountcorresponding to a 600% solvency margin ratio.

Risk-free rate

The expected future yield of assets considered to be without default
or credit risk.

Risk-neutral

An assumption that on average market participants are neutral withrespect to risk, i.e. are neither risk averse nor risk seeking.

Solvency II

The economic-value-based solvency regulation framework
introduced in Europe from January 2016.

Ultimate Forward Rate

The long-term interest rate level to which forward rate converges incase a long-term equilibrium interest rate assumption is set. Setting isbased on macro-economic methods.

23