ＤＤNEWS
RELEASEMay 12, 2016
Daisuke Iwase, President & COO
LIFENET INSURANCE COMPANY(Securities Code: 7157, TSE Mothers)

European Embedded Value as of March 31, 2016
EEV as of March 31, 2016: 30,578 million yen
TOKYO, May 12, 2016 - LIFENET INSURANCE COMPANY (TSE Mothers 7157, President &COO Daisuke Iwase, URL: http://ir.lifenet-seimei.co.jp/en/) hereby announces its Embedded
Value (“EV”) as of March 31, 2016.
EV is an indicator used to measure the corporate value and earnings performance of life
insurance companies. EV is the total of adjusted net worth, based on balance sheet values, andthe value of in-force business, based on projected cash flows from policies-in-force. In general,life insurance policies provide a steady level of premium income over a long period of time, while
advertising expenses, policy appraisal costs, etc. are expensed intensively in a short periodaround the time of policy sales. This timing difference in recognizing revenues and expenses andthe long time it takes before profits are recognized after a policy is sold are the characteristics oflife insurance accounting. As these characteristics make it difficult to evaluate a life insurance
business based on single-year financial results, disclosing EV is seen as a useful way of giving
investors a more accurate picture of operating conditions. Lifenet has adopted the European
Embedded Value (“EEV”) principles, which are widely used by leading life insurance companies,
especially in Europe, Canada and Japan.
Lifenet’s EEV as of March 31, 2016 and the summary of the results are as follows:
Summary of EEV results as of March 31, 2016
Lifenet’s EEV as of March 31, 2016 was 30,578 million yen, an increase of 5,330 million yen
from the end of the previous fiscal year.

Adjusted net worth was 16,086 million yen, an increase of 4,990 million yen from the end of
the previous fiscal year mainly due to the allocation of new shares.



Value of in-force business was 14,492 million yen, an increase of 339 million yen from theend of the previous fiscal year mainly due to updates made to operating assumptions,reflecting actual benefit payment experience despite of a decrease in interest rates.

Value of new business was negative 52 million yen, a decrease of 141 million yen from theprevious fiscal year mainly due to a decrease in interest rates.

Value of new business (Ultimate Unit Cost base) was negative 43 million yen, a decrease of
196 million yen from the previous fiscal year mainly due to a decrease in interest rates.

Value of new business (Ultimate Unit Cost base) per policy resulted in negative 1 thousandyen (5 thousand yen in the previous fiscal year).

LIFENET INSURANCE COMPANY
Copyright© LIFENET INSURANCE COMPANY All rights reserved.

1

ＤＤ
NEWS
RELEASEEEV as of March 31, 2016
(In millions of yen)

EEV
Adjusted net worth*1

Value of in-force business*2Mar. 31, 2015

Mar. 31, 2016

Increase (Decrease)

25,24830,578

5,330

11,09516,086

4,990

14,152

14,492

339

Value of new business(In millions of yen)
Fiscal year ended Mar. 31
Value of new business

2015

*3

2016

89

Increase (Decrease)

(52)

(141)

4

Value of new business (Ultimate Unit Cost base)*

The table below shows the value of new business calculated applying ultimate maintenanceexpense assumptions in the tenth year after the business commence to all years:(In millions of yen)
Fiscal year ended Mar. 31

2015

Value of new business(Ultimate Unit Cost base)
*1

*2
*3

*4

*4

2016

152

Increase (Decrease)

(43)

(196)

Adjusted net worth is defined as the excess of the market value of a life insurance company’s assets over themarket value of its policy reserves and other liabilities, and is considered to be the value attributable to thecompany’s shareholders. In other words, it is calculated as the sum of the total net assets, appropriate adjustments
for unrealized gains/losses and other items.
Value of in-force business is the present value at the valuation date of future after-tax profits distributable toshareholders from in-force business as of the valuation date, calculated under a set of assumptions.
Value of new business represents the impact on the EV of new business written during the fiscal year, calculated
applying the same assumptions as those used for the EEV. New business used for value calculation is defined asthat arising from the sale of new life insurance policies during the fiscal year and excludes future new business.
The expense assumptions used to calculate the EEV and the value of new business are set based on the premisethat unit costs decrease as the number of policies-in-force increases, and reach their ultimate equilibrium levels, atwhich income and expenses are equal, in the tenth year after the business commence (fiscal 2017). For reference,“Value of new business (Ultimate Unit Cost base)” shows the value of new business calculated applying theultimate unit costs to all years.

About Lifenet

URL： http://ir.lifenet-seimei.co.jp/en/

Returning to the original purpose of life insurance - mutual support - LIFENET INSURANCECOMPANY was founded with the goal of offering simple, convenient and competitively priced
products and services based on the highest levels of business integrity. We sell these products
and services directly to customers over the Internet. By using the Internet, we are able to offer
highly cost-competitive products and accept applications from customers at any given time.
Contact:
Investor Relations, Corporate Planning DepartmentTel:+81-3-5216-7900
e-mail: ir@lifenet-seimei.co.jp
Disclaimer: This is a summarized translation of the original Japanese document, prepared and provided
solely for readers' convenience. In case of any discrepancy or dispute, the Japanese document prevails.

LIFENET INSURANCE COMPANY
Copyright© LIFENET INSURANCE COMPANY All rights reserved.

2

May 12, 2016
LIFENET INSURANCE COMPANY

Disclosure of European Embedded Valueas of March 31, 2016

LIFENET INSURANCE COMPANY (“Lifenet” or “the company”) is disclosing its European
Embedded Value (“EEV”) results as of March 31, 2016.

Contents

1.

Outline of EEV ................................................................................................................22.

EEV results of Lifenet ....................................................................................................3

3.

Movement Analysis.........................................................................................................94.

EEV Methodology .........................................................................................................12

5.

Principal EEV Assumptions.........................................................................................16

6.

Sensitivities ...................................................................................................................19

7.

Notes on the Use of the Information ...........................................................................22

8.

Third Party Opinion .....................................................................................................23

1

1. Outline of EEV(1)What is EV?
The income and expenses of life insurance contracts are typically not matched in timing ofoccurrence, with substantial acquisition and other costs in the first year and with a delay between
acquisition of the contract and the emergence of profit. This makes it difficult to evaluate a life
insurance operation on the basis of a single year’s income and outgo. Embedded Value (“EV”),
calculated as the sum of net asset value and the present value of future after-tax shareholder profits
from the in-force business at the valuation date, has been adopted among life insurers in Europe,
Canada, Japan and elsewhere as an approach to the valuation of a life insurer and to the evaluation of
its performance.

(2)

What is EEV?
European Embedded Value (“EEV”) has been widely adopted in recent years among the leading
European insurers.
The EEV Principles and Guidance were published in May 2004 by the CFO Forum, a groupconsisting of CFOs from leading European insurance companies. The aim of the EEV Principles andGuidance is to improve the consistency and transparency of the financial reporting of embedded
values. Additional EEV Guidance was published by the CFO Forum in 2005 which covered
sensitivities and aspects of disclosure.
More recently the European Insurance CFO Forum Market Consistent Embedded Value Principles©1(“MCEV Principles”) were published in June 2008 by the CFO Forum with more clearly definedallowances for risk. A revision to these MCEV Principles was published in October 2009.

(3)

EEV Approach
The allowance for risk in the shareholder cash flows is a key feature of the EEV Principles. Lifenet’s
EEV has been calculated following the EEV Principles and Guidance, using a bottom-up
market-consistent approach, in which the discount rate is set individually for each product or cash
flow according to the risk characteristics of the product or cash flow.
EEV is calculated such that future cash flows arising from assets and liabilities are valued
consistently with cash flows arising from similar traded market instruments, with allowance included
for non-traded or non-diversifiable risk.
These approaches have been increasingly adopted among leading European insurers; moreover, the
MCEV Principles define a bottom-up market consistent approach.

1

Copyright © Stichting CFO Forum Foundation 20082

2. EEV results of Lifenet
The EEV results are presented below. For more details on the methodology employed, please refer to“4. EEV Methodology”.

The embedded value on an EEV basis as of March 31, 2016 is 30,578 million yen, an increase of
5,330 million yen (21.1%) from March 31, 2015. The adjusted net worth is 16,086 million yen, thevalue of in-force business is 14,492 million yen and the value of new business issued in the fiscal
year ended March 31, 2016 is negative 52 million yen.

March 31,2015
EEV(Millions of yen)
Increase(Decrease)

March 31,2016

25,24830,578

5,330

Adjusted net worth

11,09516,086

4,990

Value of in-force business

14,152

14,492339

FY2014
Value of new business(Millions of yen)
Increase(Decrease)

FY2015
89

(52)

(141)

Value of new business （Ultimate Unit Cost base）
For reference the table below shows what the value of new business would be if calculated applying
the ultimate maintenance expense assumption for fiscal year (“FY”) 2017 in all years. (See Sections
2.(3) and 5.(2) for further information.)

FY2014
Value of new business(Ultimate Unit Cost base)

FY2015152

3(Millions of yen)
Increase(Decrease)
(43)

(196)

(1)

Adjusted net worth

Adjusted net worth represents the market value of assets in excess of reserves and other liabilities.

Adjusted net worth is the sum of the net assets on the balance sheet and appropriate adjustments for
unrealized gains/losses and other items. The adjusted net worth has been derived as follows.

March 31,2015
Adjusted net worth(a) Shareholders’ equity on thebalance sheet(b) Unrealized gains/losses on
securities(c) Internal reserves as quasi-equity
liabilities (Note1)(d) Deferred assets defined in article
113 of Insurance Business Act(e) Tax effect (Note2)(Millions of yen)
Increase(Decrease)

11,09516,086

4,990

12,487

15,423

2,936

371

1,791

1,420

1,227

1,320

92

(3,180)(2,120)

1,060

188

(329)

(518)

Note1: Price fluctuation reserve and contingency reserve
Note2: Tax effect on (b) and DTL (deferred tax liability) in relation to (d)4March 31,
2016

(2)

Value of in-force business

Value of in-force business represents the present value as at the valuation date (March 31, 2016) offuture after-tax profits distributable to shareholders from the in-force business as of the valuation
date, calculated under a set of assumptions (see Section 5), and consists of the following
components.

(Millions of yen)
Increase(Decrease)

March 31, 2015

March 31, 2016

14,152

14,492339

28,48832,334

3,846

－

－

－

(126)

(60)

65

(14,209)(17,781)(3,572)

Value of in-force business
Certainty equivalent present
value of future profit
Time value of financial
options and guarantees
Frictional cost of capital
Allowance for non-market risk

・ The certainty equivalent present value of future profit is the present value of future profit
calculated deterministically by assuming the investment yield is equal to the risk-free rate andusing the risk-free rate as the discount rate.
The table below shows the present value of in-force business premiums included in thecalculation of the certainty equivalent present value of future profit.

Present value of in-force businesspremiums

March 31, 2015

March 31, 2016

148,502173,006(Millions of yen)
Increase(Decrease)
24,503・ The time value of financial options and guarantees could be calculated stochastically using a setof market-consistent risk-neutral economic scenarios for the cash flows with options orguarantees. However, the time value of options and guarantees is set as nil as the products ofLifenet are non-participating death and medical coverage protection products with no surrender
value.
・ The frictional cost of capital represents the costs associated with maintaining the level of capitalwhich the company considers as required in continuing the life insurance business. For details,
see Sections 4.(10) and 4.(11).
・ The allowance for non-market risk is an estimate of the impact of non-market risks which are
not adequately allowed for directly in the certainty equivalent present value of future profit. For
details, see Section 4.(12).
5(3)Value of new business

Value of new business is the value at the valuation date of the new business written during fiscal year
2015, calculated applying the same assumptions used to calculate the embedded value as of thatdate.
New business means the life insurance policies commencing within this accounting period (fiscal
year 2015) and does not include values anticipated from future new business. The figure for adjusted
net worth represents the loss arising between the point of sale and March 31, 2016 on business soldin the period. The table below shows the results.
The value of new business has been calculated using assumptions as of March 31, 2016. Given thefurther decrease in interest rates following Bank of Japan’s decision to adopt negative interest rates,
we have included in the table below, for reference, the value of fiscal year 2015 new businesscalculated using the economic assumptions as of March 31, 2015.

FY 2014

FY 2015

Increase(Decrease)(Millions of yen)
【Reference】
Calculated using
economicassumptions as ofMarch 31, 2015

Value of new business

89

(52)

(141)

476

Adjusted Net Worth(1,564)(1,086)478(1,086)

Present value of future profit

1,653

1,033

(620)

1,562

3,692

3,027

(665)

3,170

－

－

－

－

(19)

(7)

11

(15)

(2,019)(1,986)33(1,591)

Certainty equivalent present value of
future profit
Time value of financial options andguarantees
Frictional cost of capital
Allowance for non-market risk

6

The table below shows the new business margin, calculated as the ratio of the value of new businessto the present value of new business premiums.
(Millions of yen)

FY 2014(a) Present value of new business

FY 2015

Increase(Decrease)【Reference】
Calculated using
economicassumptions as ofMarch 31, 2015

20,36719,025(1,342)

17,419(b) Value of new business

89

(52)

(141)

476

Value of new business / Present valueof new business premiums ((b)/(a))0.4%(0.3)%(0.7) points

2.7%

premiums

The table below shows the value of new business on a per-policy basis.

FY 2014

Value of new business per policy

FY 2015

3(2)

Increase(Decrease)(Thousands of yen)
【Reference】
Calculated using
economicassumptions as ofMarch 31, 2015

(5)

Value of new business （Ultimate Unit Cost base）
The expense assumptions used to calculate the EEV as well as the value of new business shown
above have been set assuming a continuous increase in the number of policies in-force over the first
10 years of operation (i.e., until fiscal year 2017), so that the maintenance expense per policy
decreases over this period.
For reference the tables below show what the value of new business, as well as the new businessmargin, would be if calculated assuming the ultimate maintenance expense assumptions (from fiscal
year 2017) applies in all years.
The value of new business under ultimate unit cost base has been calculated using assumptions as ofMarch 31, 2016. Given the further decrease in interest rates following Bank of Japan’s decision to
adopt negative interest rates, we have included in the table below, for reference, the value of fiscal
year 2015 new business under ultimate unit cost base calculated using the economic assumptions asof March 31, 2015.
718

The value of new business under ultimate unit cost base is close to the normal base as fiscal year2017 is not far from the valuation date.

FY 2014

Value of new business(Ultimate Unit Cost base)

FY 2015

Increase(Decrease)(Millions of yen)
【Reference】
Calculated using
economicassumptions as ofMarch 31, 2015

152

(43)

(196)

485

Adjusted net worth(1,537)(1,081)455(1,081)

Present value of future profit

1,689

1,037

(652)

1,567

Certainty equivalent present value of
future profit

3,720

3,031

(688)

3,174

Time value of financial options andguarantees

－

－

－

－

Frictional cost of capital

(19)

(7)

11

(15)

(2,010)(1,986)24(1,591)

Allowance for non-market risk

The table below shows the new business margin (ultimate unit cost base).

FY 2014(a) Present value of new business premiums(b) Value of new business
Value of new business / Present value of
new business premiums ((b)/(a))

FY 2015

Increase(Decrease)(Millions of yen)
【Reference】
Calculated using
economicassumptions as ofMarch 31, 2015

20,36719,025(1,342)

17,419

152

(43)

(196)

485

0.8%

(0.2)%(1.0) points

2.8%

The table below shows the value of new business on a per-policy basis (ultimate unit cost base).
(Thousands of yen)

FY 2014

Value of new business per policy

FY 2015

5

8(1)

Increase(Decrease)【Reference】
Calculated using
economicassumptions as ofMarch 31, 2015

(7)

19

3. Movement Analysis
The table below shows the analysis of the increase (decrease) in the EEV during the fiscal year 2015.
Required capital increases with the volume of in-force business, which increased as a result of
acquiring the new business. Free surplus increased primarily due to a capital increase resulting fromthe allocation of new shares to a third party in May 2015. The change in the value of in-force
business was primarily due to updates made to operating assumptions, reflecting actual benefit
payment experience..

(Millions of yen)
EEV
Adjusted net worth（Required capital）

Adjusted net worth（Free surplus）

Value of in-force
business

EEV as of March 31, 2015

25,248

1,517

9,578

14,152Adjustment to the value at March 31, 2015

3,040

－

3,040

－

EEV as of March 31, 2015 after adjustment

28,2881,517

12,61814,152(52)

115(1,201)

1,033

1,201

－

8

1,193

14

－

6

8

－

8

625

(633)

Operating experience variances

1,026

(9)

940

95

Assumption changes

2,075

－

－

2,075

Operating EEV earnings

4,266

114

379

3,772

Economic variances and assumption changes(2,097)0

1,479(3,577)

Other variances

122

－

(22)

144

Change in EEV

2,290

114

1,836

339

EEV as of March 31, 2016

30,578

1,631

14,455

14,492New business value
Expected existing business contribution(Risk free rate)
Expected existing business contribution(In excess of risk free rate)
Expected transfer from Value of in-force
business to Adjusted net worthAdjustment to the value at March 31, 2015
This amount consists of shareholder dividends or increases to capital. In May 2015, capitalincreased by 3.04 billion yen as a result of the allocation of new shares to a third party.

9

New business value
This is the change in EEV due to the value of new business issued during fiscal year 2015. For
details of the approach, see Section 2.(3).

Expected existing business contribution (Risk-free rate)
In calculating the value of in-force business, future expected profits are discounted back usingrisk-free rates. Thus, the discounted value is assumed to earn the risk-free rate over time.
Moreover, this item includes the expected return on the free surplus assets using the risk-freerates, and the release for fiscal year 2015 of time value of financial options and guarantees, costof holding required capital and allowance for non-market risk.



Expected existing business contribution （In excess of risk-free rate）
Rates of future expected returns are assumed to be the risk-free rates when calculating EEV.
However, Lifenet expects higher rates of return on the assets than the risk-free rates. In
calculating the expected existing business contribution in excess of the risk-free rate, Lifenet
used an expected rate of return of 0.26% which consists of the risk-free rate of the 1 year swap
yield plus a risk premium of 0.11%, based on the asset position at the beginning of the period.

Expected transfer from value of in-force business to adjusted net worthThis item represents the after-tax surplus expected to emerge during the period from the businessthat was in force at the beginning of the period.
The effect is a movement of value from the value of in-force business to the adjusted net worth.
This does not affect the total embedded value.



Operating experience variancesThis is the impact on the embedded value of differences between the actual experience and theoperating assumptions during the period. The main differences came from mortality andmorbidity experience being lower than the levels assumed in the calculation of the value of
in-force business as of March 31, 2015, and from lower corporate tax payments than expected.
See Section 5.(2) for details of the operating assumptions.

Assumption changes
This is the impact of changes in the operating assumptions relative to those utilized at the
beginning of the period. The increase in the value of in-force business is primarily due toupdates made to operating assumptions, reflecting actual benefit payment experience. See
Section 5.(2) for details of the operating assumptions.
10Economic variances and assumption changes
This is the impact of differences between the actual investment returns in the period and the
expected investment returns, including the impact on the value of future profits from the change
to the end of period future economic assumptions. See Section 5.(1) for details of economic
assumptions.



Other variancesThis is the impact of reflecting the changes to the tax legislation (reduction of corporate tax rates
and revisions to the corporate tax offsets associated with losses carried forward) in accordance
to the Act on Partial Amendment of the Income Tax Act etc. (Act No. 15 of 2016), which wasenacted on March 29, 2016.

11

4. EEV Methodology(1) Basis of preparation
The methodology and assumptions adopted by the company to calculate the EEV as of March 31,
2016 are in accordance with the EEV Principles and Guidance issued by the European CFO Forumin May 2004.

(2) Covered business
The covered business represents all of the business of the company, which is all life insurance
business.

(3) Embedded value (EV)The embedded value comprises the sum of the adjusted net worth and present value of future
after-tax profits from in-force business, which provides an estimate of the value of the shareholders’interest in the covered business. The adjusted net worth is the net assets attributable to shareholders,and is represented by the sum of required capital and free surplus as discussed further below. The
value of in-force business is the present value of the projected stream of future after-tax distributableprofits available to shareholders from the existing business at the valuation date, allowing for risk ona product-by-product basis, and with adjustment for the cost of holding required capital. The future
profit includes renewal of in-force business but excludes any value that may be generated fromfuture new business. Assumptions used in the calculation are made on a best estimate basis.

(4) Allowance for risk
According to the EEV Principles all risks related to the covered business must be reflected. This isaccomplished, for example, by allowances for the cost of financial options and guarantees, for thecost of holding policy reserves and any additional required capital, and by adoption of a risk
discount rate. The company has used a market-consistent approach based on the principles of financetheory to allow for risk, as follows.

- Assets and liabilities other than policy reserves are valued at market value.
- Investment return assumptions and risk discount rates are set consistently with the risk profile ofeach cash flow.
- The time value of financial options and guarantees associated with the life insurance business isvalued explicitly and consistently with market prices of equivalent traded options. (The products ofLifenet are non-participating death and medical coverage protection products with no surrender
value and so in practice no time value of financial options and guarantees needs to be allowed for.)12

A market-consistent value assigns a value to cash flows in line with the prices of similar cash flows
traded on the open market.

Further details of the methodology are described in the sub-sections below.

(5) Adjusted net worth
Adjusted net worth represents the net assets attributed to shareholders and represents the market
value of assets in excess of policyholder liabilities, represented by statutory reserves (excluding
contingency reserve), and other liabilities (excluding reserve for price fluctuations).
In other words, adjusted net worth is calculated by adjusting the total net assets on the balance sheet
for the retained earnings in certain liabilities and unrealized gains/losses in assets/liabilities notaccounted for under the mark-to-market methodology. Deferred assets defined in article 113 of IBA
and related DTL are also adjusted.
We established Kyobo Lifeplanet Life Insurance Company (“Lifeplanet”) in Korea jointly with
Kyobo Life Insurance Co., Ltd.in September 2013 and our holding share is 8.7%. In order tocalculate adjusted net worth, we assume that the value of Lifeplanet is the same value as that on thebalance sheet.

(6) Value of in-force business
The value of in-force business is calculated as follows:
Certainty equivalent present value of future profit
lessTime value of financial options and guarantees

less

Frictional cost of capital

less

Allowance for non-market risk

A description of each item in the above formula is provided below.

(7) Value of new business
The value of new business is the value of new policies issued during fiscal year 2015. Future
renewals of those new business policies are included in the value of new business, while the values
that may be generated from future new business are not.

The value of new business has been calculated as of March 31, 2016, and consists, like the EEV, ofthe adjusted net worth and the present value of future profit. The adjusted net worth represents theimpact of all cash flows arising from the point of sale to March 31, 2016. The present value of future13

profit in respect of new business is calculated in the same manner as the value of in-force businessshown in (6), and using the same assumptions.

(8) Certainty equivalent present value of future profit
The certainty equivalent value is the present value of future after-tax profits, calculated on adeterministic basis, assuming all assets earn the risk-free rate and all cash flows are discounted at therisk-free rate. The certainty equivalent approach ensures that future investment risk premiums are
not capitalized in the embedded value.

(9) Time value of financial options and guarantees
There are no options and guarantees, and therefore the time value of financial options and guarantees
is zero.

(10) Required capital
Required capital is a part of adjusted net worth required to back the covered business and therefore
cannot be immediately paid out to shareholders. The EEV Principles and Guidance define theminimum level for required capital to be equal to the statutory minimum capital requirement, andalso allow companies to reflect other levels of required capital, such as their own required risk
assessment, as long as the minimum requirement is satisfied.

Reflecting the operation of Lifenet as a going concern, a level of required capital corresponding to a
500% Japanese statutory solvency margin ratio was assumed. This satisfies the EEV Principles andGuidance (note the statutory minimum in Japan is a 200% solvency margin ratio). Japanese solvency
regulations allow for the excess of the reserve over the full-Zillmer reserve to be counted as part ofthe solvency margin. The calculation of the amount of required capital reflects this benefit.

The adjusted net worth can be broken down into required capital and free surplus as follows.

March 31,2015

March 31,
2016

(Millions of yen)
Increase(Decrease)

Adjusted net worth

11,09516,086

4,990

Required capital

1,517

1,631

114

Free surplus

9,578

14,455

4,876(11) Frictional cost of capitalThis item is the cost of having to retain the level of required capital, and within the EEV bottom-up
14

approach, it is referred to as “frictional cost”.

Within this item, tax on investment returns on required capital has been allowed for. Investment
expenses incurred in respect of the assets backing the required capital (another frictional cost) arereflected in the unit cost assumptions.

(12) Non-market risk
EEV Principles define the EV to be calculated taking all the risks of the covered business into
account. There are some non-market risks where the existing best estimate experience assumptions
do not allow for the impact on embedded value of the full range of potential outcomes. These risks
should be allowed for in the EEV through the allowance for non-market risk.
Lifenet estimated these costs for operational risks, counterparty risks, lapse risks, mortality andmorbidity risks, using a simple model, and has made allowance for these risks in the EEV
calculation.

15

5. Principal EEV Assumptions(1) Economic assumptions
In the certainty equivalent calculation, the discount rates and investment yields are the risk-free rates
at the valuation date (March 31, 2016). These risk-free rates have been determined based on swap
rates. The table below shows, for selected terms, the swap rates (semi-annual par rates) used.
One-year forward rates beyond 40 years were assumed to be the same as the one-year forward rate atyear 40.

Swap rates as ofMarch 31, 2016
Swap rates as ofMarch 31, 2015

1 year

2 year

3 year

4 year

5 year

(0.05)%(0.11)%(0.13)%(0.11)%(0.07)%

0.15%

0.17%

0.19%

0.23%

0.28%

10 yearSwap rates as ofMarch 31, 2016
Swap rates as ofMarch 31, 201515 year

20 year

30 year

40 year

0.15%

0.35%

0.50%

0.60%

0.60%

0.58%

0.90%

1.15%

1.37%

1.44%

For “Sensitivity 1e: Interest rates based on JGB yields” in Section 6, Japanese government bond(“JGB”) yields were used to derive the risk-free rates. The table below shows, for selected terms, the
JGB yields (yields to maturity) used. One-year forward rates beyond 40 years were assumed to be
the same as the one-year forward rate at year 40.

JGB yields as ofMarch 31, 2016

JGB yields as ofMarch 31, 2016

1 year

2 year

3 year

4 year

5 year

(0.15)%(0.21)%(0.23)%(0.21)%(0.19)%

10 year15 year

20 year

30 year

40 year(0.05)%

0.18%

0.44%

0.55%

0.63%

(2) Other assumptions
All cash flows (premium, commission, non-commission expense, death benefit, tax, etc.) were
projected by applying best estimate assumptions. Expense assumptions have been set based on16

recent experience and the company’s business plan, and other non-financial assumptions have been
set based on past experience and industry experience.

Expenses
Expense assumptions have been set as best estimate assumptions, based on recent experience and thelatest business plan.
Some expenses were eliminated as one-off expenses which are not expected to occur regularly in the
future. The amount of one-off expenses incurred during fiscal year 2015 and eliminated in thederivation of the assumptions was 77 million yen (pre-tax), which relate to items such as costs forthe allocations of shares to the third party in May 2015.

In general, life insurers experience high levels of expense on a per-policy basis for a period
following their establishment. The level of per-policy expense generally reduces over time as thecompany grows and reaches a more mature and stable state. As Lifenet is a relatively new entity, themaintenance expense assumptions have been set assuming a continuous increase in the number ofpolicies in-force over the first 10 years (until March 31, 2018) of operation, so that the maintenanceexpense per policy decreases over this period. It is assumed an ultimate per-policy expense level isreached in fiscal year 2017 and applies from that time forward. In setting unit costs, Lifenet allows
for consumption taxes (including local consumption tax), of 8% (until March 31, 2017) and 10%(from April 1, 2017 onwards). The inflation rate is set to 0%.

For the purpose of calculating the value of new business, the actual acquisition expenses incurred in
the reporting period have been allowed for together with the same maintenance expense assumptions
used to calculate the EV.
For reference, the value of new business based on the ultimate unit cost (“Ultimate Unit Cost Base”),
has been calculated with the ultimate maintenance expense assumption for fiscal year 2017 applied
from the issue date (see “Value of new business （Ultimate Unit Cost base）” in Section 2. (3)).

Claim Payment, Lapse
As experience to date in claim payments and lapses is limited, the best estimate assumptions forclaim payments and lapses have been set based on Lifenet’s own experience, with consideration ofwhat the company considers to be a reasonable level based on industry experience.

Premium
The policy contract for term life and term medical allows the premium rate to be recalculated on
renewal. In projecting renewal premiums, current premium rates have been used, taking the renewal
17

age of the policyholder into account.

Policy reserve
The premium reserve which is a part of policy reserve is calculated in line with the 5 year
zillmerized reserving method in accordance with Insurance Business Regulation (“IBR”) 69.4.4.
Lifenet adopted this method for the calculation of the future projected profits, except that after the
renewal of the policy contract for the term life and term medical care, the future projected profits arecalculated in line with the standard valuation reserving method, regulated by the IBR issued by the
Financial Services Authority.

Corporate tax
In the future corporate tax calculation, the expected corporate tax offsets associated with losses
carried forward were calculated and included in the value of in-force business. In accordance to the
Act on Partial Amendment of the Income Tax Act etc. (Act No. 15 of 2016), which was enacted on
March 29, 2016, the effective corporate tax rates assumption (including local tax) has been set to28.24% between April 1, 2016 and March 31, 2018 and 28.00% from April 1, 2018 onwards. In
addition, revisions were made to the corporate tax offsets associated with losses carried forward
under the same Act, and this has been reflected.

18

6. Sensitivities
The impacts of changes in assumptions (sensitivities) on the EEV results are summarized below. For
each sensitivity, only one specific assumption is changed and other assumptions remain unchanged.
It should be noted that the effect of the change of more than one assumption at a time is likely to bedifferent from the sum of sensitivities carried out separately. As Japanese policy reserves arecalculated in accordance with the IBR, the sensitivities carried out do not affect the reserves at thevaluation date.
A sensitivity using Japanese government bond yields has also been included. In addition, given thefurther decrease in interest rates following Bank of Japan’s decision to adopt negative interest rates,
we have also included a sensitivity for a 0.5% decrease in interest rates where the decrease has notbeen floored and a sensitivity for the value of new business where the economic assumptions as ofMarch 31, 2015 have been used.
(Millions of yen)
Change inValue of
PercentageNewchange (*)
Business

Change in
EEV as ofMarch 31,
2016

Percentagechange

EEV and New Business Value as ofMarch 31, 2016

30,578－(52)－

Sensitivity 1a: 1.0% increase in interest rates

1,650

5.4%

509

964.8%

Sensitivity 1b: 1.0% decrease in interest rates(2,454)(8.0)%(531)(1,005.5)%

Sensitivity 1c: 0.5% increase in interest rates

990

3.2%

286

542.8%

Sensitivity 1d: 0.5% decrease in interest rates(1,952)(6.4)%(431)(815.7)%
Sensitivity 1d’: 0.5% decrease in interest rates(1,424)(4.7)%(368)(697.6)%(without flooring)Sensitivity 1e: Interest rates based on JGB
601
2.0%
90
170.8%
yieldsSensitivity 1f: Interest rates as of March 31, 2015
529
1,001.9%－－(value of new Business only)
Sensitivity 2: 10% decrease in equity and real
(73)(0.2)%－－
estate value
Sensitivity 3: 10% decrease in operating
1,916
6.3%
205
389.4%
expensesSensitivity 4: 10% decrease in lapse rate
(2,167)(7.1)%(298)(564.0)%Sensitivity 5: 5% decrease in claim incidence
4,094
13.4%
400
758.8%
rates for life business
Sensitivity 6: 5% decrease in mortality for－－－annuity business
Sensitivity 7: Change the required capital to
46
0.2%
5
10.9%
the statutory minimum(*) The percentage change for the change in value of new business is shown as a positive figure if
19the change is positive and negative if the change is negative.

Sensitivity 1a: 1.0% increase in interest rates (risk-free rate) (for all future years)

Sensitivity 1b: 1.0% decrease in interest rates (risk-free rate) (for all future years)

Sensitivity 1c: 0.5% increase interest rates (risk-free rate) (for all future years)

Sensitivity 1d: 0.5% decrease interest rates (risk-free rate) (for all future years)
Fixed interest assets (bonds, etc.) are revalued according to the change in the interest rate. The
value of in-force business and the adjusted net worth are re-calculated according to the change
of investment yield and discount rate. However if the interest rate becomes negative after the
deduction of 1.0% or 0.5%, the lower of 0% or the base interest rate is applied instead.
EEV Guidance only requires disclosure of the sensitivity of a 1% increase/decrease in risk freerate, but a sensitivity of 0.5% is shown as well considering the low level of interest rates in theJapanese market.



Sensitivity 1d’: 0.5% decrease in interest rates (risk-free rate) (for all future years, without
applying the flooring when the interest rate becomes negative)
The negative interest rates at short durations in the base scenario are unchanged whencalculating the Sensitivity 1d above. Therefore, we have also calculated a sensitivity where
flooring is not applied.



Sensitivity 1e: Applying risk-free rates derived from Japanese government bond (“JGB”) yields(for all future years)

Sensitivity 1f: Applying risk-free rates as of March 31, 2015 (calculated only for the value of
new business)Sensitivity 2: 10% decrease in equity and real estate valueMarket values of equities and real estate at the valuation date are reduced by 10%.

Sensitivity 3: 10% decrease in operating expenses
A factor of 0.9 is applied to expenses connected with the maintenance and continuation ofcontracts, leaving other expenses unchanged.

Sensitivity 4: 10% decrease in lapse rate
Base lapse rates are multiplied by 0.9.
20Sensitivity 5: 5% decrease in claim incidence rates for life business
Base claim incidence rates (mortality and morbidity) are multiplied by 95%. The possibility ofpremium rate cuts and any other management actions associated with such changes in the claim
level are not reflected.

Sensitivity 6: 5% decrease in mortality for annuity businessNot applicable as Lifenet has no annuity business.

Sensitivity 7: Change the required capital to the statutory minimum (200% of solvency
margin ratio)

21

7. Notes on the Use of the Information
The calculation of EV results involves certain assumptions regarding future projections that are
subject to risks and uncertainties. It should be noted that actual future results might differ materiallyfrom the assumptions used in the EV calculations, and users of this information are advised to be
cautious.

22

8. Third Party Opinion
Lifenet engaged Willis Towers Watson to review its EEV results and obtained the following
opinion.
Willis Towers Watson has reviewed the methodology and assumptions used to determine theembedded value results as of March 31, 2016 for Lifenet. The review covered the embedded
value as of March 31, 2016, the value of new business issued in fiscal year 2015, the analysis of
movement in the embedded value during fiscal year 2015 and the sensitivities of the embedded
value and new business value to changes in assumptions.
Willis Towers Watson has concluded that the methodology and assumptions used comply with
the EEV Principles and Guidance. In particular:The methodology makes allowance for the aggregate risks in the covered business throughLifenet’s market-consistent methodology as described in section 4 of this document;The operating assumptions have been set with appropriate regard to past, current andexpected future experience, whilst noting that Lifenet only started business in May 2008
and therefore the experience data is limited; 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,in all 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 Lifenet. This opinion is made solely to Lifenet 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 Lifenet for or in connection with its review work, the opinions it has formed,
or for any statement set forth in this opinion.
23