November 12, 2021 Presentation Material with Speech Text PDF

This is Taisuke Nishimura, Chief of Corporate Planning Unit, Dai-ichi Life Holdings, Inc.

Thank you for joining our conference call to discuss the Dai-ichi Life Group's financial results for the six months ended September 30, 2021.

Today, I will make a general overview of our financial results, followed by a question and answer session.

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Here are today's three key highlights.

Let me start with sales performance. Although domestic life new business ANP increased significantly, reflecting a recovery from sales activities constraints amid the spread of Covid-19 in the previous fiscal year, ANP fell slightly when compared to the pre-Covid-19 period performance. Meanwhile, overseas life sales were steady and for the group the new business ANP was almost flat when compared to the pre-Covid-19 period.

Next highlight is about profit and dividends. Amid generally stable financial conditions, investment income at DL and improvements at PLC were greater-than-expected and contributed to significant profit progress. Group adjusted profit amounted to ¥156.3 billion, despite a non-recurrent loss of approximately ¥80 billion on reinsurance ceding of ¥300 billion policy reserves at DL, which was incorporated in the full-year forecast.

Taking into account improvement in investment income that exceed initial expectations, DL is considering additional reinsurance ceding. The full-year forecast has been revised upward to around ¥270 billion, including also the one-time expense to be incurred at DFL, which will be explained later.

Dividend per share is expected to increase by ¥3 from the initial forecast to ¥80.

In addition to higher group adjusted profit, net income forecast incorporates the impact of introducing Group Tax Sharing System, which is being considered for introduction from the next fiscal year. With such system introduction, the full-year forecast has been revised upward to ¥349 billion, reflecting the expected increase in deferred tax assets at the end of the current fiscal year.

Subject to the introduction of tax sharing system, DFL, based on the expected increase in net assets and other factors, plans to surrender a portion of its surplus relief contracts.

As a result, one-time expense of approximately ¥20 billion will be recorded, but profits are expected to improve to a certain extent from the next fiscal year onward.

Third highlight is about an economic value indicators.

Group EEV increased by 7% to ¥7,460.6 billion from the end of previous fiscal year.

While the VNB was generally steady at overseas life, domestic life, particularly in 1Q, was affected by higher number of policy conversion at DL with relatively lower additional profitability. In addition, at DFL, the ICS announced values for corporate bond spreads, used in the VNB calculation, were lower than expected at the time of the initial forecast. As a result, the progress rate for VNB was behind the initial full-year forecast. Therefore, we have revised downward the full-year forecast for group VNB to around ¥119 billion.

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Here I will explain sales performance.

At DL, in addition comprehensive medical insurance with lump-sum benefit, launched in January, mainly sold to existing policyholders, the hospitalization insurance with lump- sum benefit (simplified application type), launched in June, attracted a wide range of new customers, including the younger generation, and contributed to sales performance. Nevertheless, sales fell approximately 8% compared to the pre-Covid period 1H of FY2019.

At DFL, although sales of asset formation (saving-type) foreign currency denominated products grew in light of rising foreign interest rates, new business ANP fell approximately by 12% compared to the pre-Covid period 1H of FY2019. On the other hand, at NFL, product revisions including the expansion of coverage for 3 major critical illnesses from April and lump-sum hospitalization benefit insurance, for which insurance premiums determined based on the health age of customers, have contributed to the increase in sales.

Overseas life sales performance was generally solid even in previous year despite the spread of Covid-19 and it continued to grow in the current period.

At PLC, sales of bank and company owned products insuring their employees and sales of variable annuities expanded. TAL and DLVN also recorded double-digit YoY sales growth.

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Here, I will explain the details of profit indicators.

Group adjusted profit improved significantly YoY to ¥156.3 billion. It was mainly due to an YoY improvement in losses derived from sharp fluctuations in the financial markets in the previous year. DL was able to secure an increase in profits even after recording non-recurrent loss on conducted reinsurance ceding, which was incorporated in the full- year forecast. It was mainly due to improvement in capital gains from significant recovery of derivative transactions losses and increase in positive spread.

In addition, PLC recovered from non-operating valuation losses recorded in the previous year. On the other hand, at TAL, despite a significant improvement of underlying profit in individual and group insurance business segments, significant interest rates change (flattening of the yield curve) impacted unfavorably the market valuation of expected future premium and claims cash flows in the distant future. DLVN, which expects high profit growth in this fiscal year, is steadily expanding its profits.

Net income increased to ¥178.4 billion, reflecting these positive factors as well as the contribution of MVA related gains at DFL.

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