Dai ichi Life : August 10, 2022 Presentation Material with Speech Text PDF

• This is Taisuke Nishimura, Chief of Financial Planning Unit.
• Thank you for joining our conference call today.
• Today, I will make a general overview of our financial results, followed by a question and answer session.
• Please turn to page 2.

• Here are today's three key highlights.
• First I will review consolidated results. Group adjusted profits declined YoY due to COVID- 19 spread in Japan and impact of rising overseas interest rates.
• While DFL and PLC incurred temporary losses, group adjusted profit progress rate reached 34% thanks to the profit increase at DL. The impact of COVID-19 expansion in Japan at DL was offset by an increase in investment income including one-time items. Consolidated net income was negatively impacted by MVA-related gains and losses at DFL.
• Next is about new business results. Sales at DL and NFL in the 1Q were sluggish, mainly due to a reactionary YoY decline from the previous corresponding period when sales were strong. However, amid a rise in overseas interest rates, sales at DFL increased significantly, resulting in an increase of new business ANP for domestic life as a whole. Overseas new business ANP declined YoY at DLVN and TAL. However, group new business ANP, even excluding the impact of foreign exchange rates, increased YoY.
• In the 1Q, estimated value of new business is disclosed only for domestic business. Domestic business VNB was approximately ¥20 billion, a progress rate of 18%, mainly due to a sluggish sales at DL and NFL.
• Group EEV was slightly down since end of March 2022 due to the domestic equity market decline, while the positive impact of rising domestic interest rates was offset by the negative impact of higher overseas interest rates. ESR rose to approximately 235%.
• As a topic, TAL completed the acquisition of Westpac Life on August 1 and shifted to post- merger integration process. There is no change to the outlook for contributions to the group profits from the acquisition at this time.
• Finally, I will update on the status of insurance claims and other payments related to COVID-19 for domestic business. In the 1Q, the three domestic group companies paid insurance claims and benefits totaling approximately ¥26 billion, of which DL paid ¥23.8 billion.
• For FY2022 DL have budgeted approximately ¥30 billion of COVID-19 related hospitalization benefit. However, given the impact of the rapid increase in the number of infected cases since July, we anticipate an actual payment amount could exceed the budgeted amount.
• While there are no changes to the full-year forecast at this time, we will continue to closely monitor situation.
• Please see the next page.

• Here, I will explain details of profit indicators.
• Despite the deterioration of gains from core insurance activities, the fundamental profit at DL remained almost flat YoY, thanks to increase in positive spread impacted by yen depreciation, etc. Capital and extraordinary gains (losses) benefited from an improvement in gains on derivative transactions and foreign exchange losses excluding hedging cost, due to an increase in domestic interest rates and yen depreciation.
• DFL's adjusted profit impacted by an increase of regular foreign currency policy reserves due to the rapid rise in overseas interest rates, in addition to one-time losses on sale of securities associated with reallocation of bond holdings.
• Increase of regular foreign currency policy reserves recorded when assumed interest rate on new policy is higher than the standard interest rate. In periods of rapidly rising interest rates, such as current 1Q, assumed rate becomes higher than regular policy reserve rate, resulting in need for additional provision for policy reserve. However, this is acceleration of policy reserve provisioning, and thus there is no impact on total P/L over the whole policy term.
• At PLC, COVID-19 related insurance claims was lower than expected at the beginning of the fiscal year, and operating income improved. However, non-operating income had significant negative impact from the valuation losses due to rising interest rates and decline in the equity market.
• TAL's adjusted profit increased due to an improvement in underlying profit, as well as recovery from the losses recorded in the previous comparable period caused by the flattening of interest rate curve in Australia.
• Finally, consolidated net income was mainly affected by the deterioration in MVA related gains (losses) at DFL. MVA gains (losses) includes not only the gains (losses) from the change of MVA related reserve balance itself, but also valuation gains (losses) related to interest rate fluctuation derived from mark-to-market of money held in trust which is aimed to mitigate the impact of MVA gains (losses). As the MVA reserves balance declined significantly due to a rise in overseas interest rates up to the end of March 2022, the amount of reversal of MVA reserve in the 1Q was small, while gains (losses) on interest rate fluctuations, which directly reflect changes in market value, deteriorated significantly exceeding the reversal amount of MVA reserve. As a result, total MVA related gains (losses) had negative impact.
• Please go to the following page.

• Next, I will explain sales performance.
• Domestic new business ANP increased YoY, thanks to steady growth at DFL reflecting attractiveness of their product in the rising overseas interest rates. DFL is enjoying strong sales of index-linked saving products that can be expected to increase pension funds according to the index performance.
• On the other hand, sales at DL decreased by 30% YoY, reflecting a reactionary decline from relatively strong sales performance in the previous fiscal year, when policy conversion sales of medical insurance to existing policyholders prevailed, as well as a shift to DFL saving products with higher assumed interest rates. Although the share of new contracts improved (share of policy conversions declined) YoY, the expansion of the number of new policies sold is still necessary.
• DL has been restructuring its sales capabilities since July by implementing an integrated reform of its consulting process and product mix. We believe that a certain amount of time will be needed to promote initiatives and achieve concrete results. In conjunction with the selective recruitment since last fiscal year, training reform and new compensation systems that we have been implementing, we will continue to strive to reform our sales reps model steadily.
• At NFL, sales were weak, mainly at walk-in shop agency channel, due to a reactionary decline from strong sales seen since April last fiscal year following the revision of main medical insurance products as well as product revisions by competitors in this fiscal year.
• In overseas business PLC secured sales at the similar level YoY thanks to strong sales of BOLI/COLI products for senior executives. At DLVN, although sales in the bancassurance channel was firm, spread of COVID-19 restricted sales activities in agency channel. At TAL, sales of individual insurance was weak. As a result, overseas sales as a whole increased YoY in JPY terms, but decreased YoY when excluding the impact of foreign exchange rates.
• Please refer to the following page.