Securities Code: 7157 TSE Mothers
Presentation
Material for
Investors
First Quarter
for Fiscal 2020
August 11, 2020
LIFENET is...
Comprehensible
Cost-Competitive
Convenient
- Remembering the original purpose of life insurance - mutual support
- Helping our customers embrace life more fully
1
Overview of 1Q for Fiscal 2020
Annualized premium1 of
policies-in-force
16,461 million yen
(106.1% vs end of FY2019)
Adjusted profit2
854 million yen
Notable Achievements
Annualized premium1 of
new business
1,166 million yen
(Y-on-Y141.9%)
EEV (European Embedded Value)
75,921 million yen
(Adjusted incremental EV3 2,122 million yen)
- Launched new white label product with brand of Seven Financial Service
- Ranked #1 in major price comparison websites
- Raised new capital in July
1. | The amount of money equivalent to what is to be paid to have the insurance coverage for one year. All payments are monthly installments, thus the annualized | |
premium is calculated as multiplying the monthly premium by 12 months. | ||
2. | See page 9, 32 and 33 for details. | 2 |
3. | Adjusted incremental EV consisted of components accurately reflecting our business growth for fiscal 2020, see page 31 for details. |
Annualized Premium /
Number of Policies-in-Force
- Annualized premium of policies-in-force1 (JPY billions)
- Number of policies-in-force
16.4 | ||||
13.6 | 387,775 | |||
11.5 | 321,829 | ◼ Accelerated | ||
9.5 | 10.2 | growth pace | ||
272,830 | ||||
228,846 | 243,610 | ◼ Year-on-year | ||
Annualized | ||||
premium 120.6%, | ||||
number of policies- | ||||
in-force120.5% | ||||
2016/06 '17/06 | '18/06 | '19/06 | '20/06 (YY/MM) |
1. The amount of money equivalent to what is to be paid to have the insurance coverage for one year. All payments are monthly installments, thus the annualized | 3 |
premium is calculated as multiplying the monthly premium by 12 months. |
Breakdown of Policies-in-Force
- Improved surrender and lapse ratio
Component | |||||||
'20/03 | '20/06 | ||||||
ratio | |||||||
Number of policies-in-force | 365,171 | 387,775 | 100% | ||||
- Term Life | 175,713 | 186,984 | 48% | ||||
- Whole-life Medical | 100,280 | 106,508 | 27% | ||||
- Term Medical Care | 9,105 | 9,041 | 2% | ||||
- Long-term Disability | 54,665 | 56,416 | 15% | ||||
- Cancer | 25,408 | 28,826 | 7% | ||||
Sum insured of policies-in-force1 | 2,565,269 | 2,701,514 | |||||
(JPY millions) | |||||||
Number of policyholders | 232,537 | 246,432 | |||||
1Q of FY2019 | 1Q of FY2020 | ||||||
(Reference) Surrender and lapse ratio2 | 7.6% | 5.5% | |||||
1. Sum insured of polices-in-force are the sum of death coverage, and do not include third-sector insurance. | |||||||
2. The surrender and lapse ratio is the annual equivalent of the monthly number of policies surrendered and/or lapsed divided by the monthly average number of | 4 | ||||||
policies-in-force. |
Annualized Premium /
Number of New Business
: Annualized premium of new business (1Q of fiscal year, JPY millions)
: Number of new business (fiscal year)
: Number of new business (1Q of fiscal year)
1,166
80,911
39,175 | |
29,741 | |
341 | 343 |
7,307 7,793
- Achieved historical
64,435 | record high on a | |
822 | quarterly basis | |
572 | 28,136 ◼ Year-on-Year | |
annualized | ||
premium 141.9%, | ||
19,117 | number of new | |
13,285 | business 147.2% | |
2016 '17 | '18 | '19 '20/1Q(fiscal year) |
5
Marketing Efficiency
: Marketing expenses per new business (JPY thousands)
: Marketing expenses / Annualized premium of new business
75 | ◼ Significantly | |||||
67 | ||||||
65 | improved | |||||
61 | ||||||
53 | ||||||
under COVID-19 | ||||||
1.7 | ||||||
environment | ||||||
1.3 | 1.5 | 1.5 | 1.2 | |||
◼ Aim to improve | ||||||
from the level in | ||||||
fiscal 2019 | ||||||
(fiscal year) 2016 | '17 | '18 | '19 | '20/1Q | ||
Marketing | 1,822 | 2,627 | 4,216 | 6,146 | 1,506 | |
expenses |
(JPY millions)
6
Operating Expenses Ratio
- Operating expenses ratio¹ (%)
: Insurance premiums (JPY millions)
: Operating expenses excl. marketing expenses (JPY millions) 13,982
11,845 | ◼ | Aim to improve | ||||
10,421 | operational | |||||
9,628 | ||||||
23.1 % | 22.2 % | 22.8 % | efficiency by | |||
21.6 % 21.2% | further business | |||||
3,940 | expansion | |||||
in mid-term | ||||||
2,225 | 2,315 | 2,699 | 3,023 | |||
834 | ||||||
2016 | '17 | '18 | '19 | (fiscal year) | ||
'20/1Q |
1. Operating expenses ratio is calculated by dividing operating expenses excluding marketing expenses by insurance premium. | 7 |
Profit Structure under
Current Statutory Accounting
- Time lag is caused between the recognition of costs and revenue as marketing expenses is recognized at the time of acquisition, and revenue is collected gradually over a long period.
Insurance policy profit structure | ||||||||||||
Total profit/loss | ||||||||||||
Revenue collected | ||||||||||||
Accounting | ||||||||||||
over long period | ||||||||||||
profit/loss | ||||||||||||
… | ||||||||||||
Initial fiscal | Year 2 | Year 3 | Year 4 | Year X | ||||||||
year | ||||||||||||
Revenue | Premiums | ||||||||||||||
Expense | |||||||||||||||
Marketing | Heavy initial cost | ||||||||||||||
expenses | : Premiums | ||||||||||||||
: Operating expenses1 excluding | |||||||||||||||
marketing expenses | |||||||||||||||
: Marketing expenses | |||||||||||||||
1. Costs for policy management, payment of insurance claims and benefit claims, etc. | 8 |
Adjusted Profit
- Steadily recorded adjusted profit generated from policies-in-force
The method for calculating adjusted profit
Adjusted profit=ⅰ) Ordinary profit(loss)1+ⅱ) Marketing expenses
-ⅲ) Impact of modified co-insurance
±ⅳ) Adjustment based on standard
policy reserves2 | ||||||
JPY millions / fiscal year | 2016 | 2017 | 2018 | 2019 | 2020/1Q | |
ⅰ) Ordinary profit(loss) | 88 | (197) | (1,719) | (2,382) | (647) | |
ⅱ) Marketing expenses | 1,822 | 2,627 | 4,216 | 6,146 | 1,506 | |
ⅲ) Modified co-insurance | - | - | - | (1,526) | (212) | |
ⅳ) Adjustment | 543 | 319 | 347 | 546 | 208 |
Adjusted profit | 2,454 | 2,748 | 2,844 | 2,784 | 854 | |||
1. | The ordinary profit (loss) before amortization of deferred assets under Article 113 of the Insurance Business Act | |||||||
2. | The amount of the adjustment to the policy reserve provision is the adjustment calculated by excluding the provision for contingency reserves and adjusting for the switch | 9 | ||||||
in method for calculating the provision from the Zillmer method to provision based on the standard policy reserves. |
Structure of Embedded Value
EV
Adjusted | Value of in-force |
net worth | |
business | |
(Net assets at end of period | |
+ adjustments) |
Profit/loss for the
current fiscal year is reflected in end-of-period net assets
RevenueRevenue
Expense
Expense
Profit/loss for | Unrealized future profits/losses on policies-in-force |
current fiscal year | at the end of current fiscal year |
10
EEV (European Embedded Value)
- Characteristics of Lifenet's EEV are as follows:
Strong growth
- Maintaining increase in EEV since listing in March 2012
- Steadily growing even in a low interest rate environment
Resilience to interest rate changes
- Limited sensitivity to interest rate and stock fluctuations
11
Strong EEV1 Growth
- EEV and value of in-force business have been
growing at CAGR of 19%2 respectively
(JPY millions)
Value of in-force business Adjusted net worth
and 36%, 75,921
73,431
60,878 63,879
18,547
5,122
13,425 | 12,553 | 12,042 | |||
2012/03 '13/03 '14/03 '15/03 '16/03 '17/03 '18/03 '19/03 '20/03 '20/06 | (YY/MM) | ||||
1. | Lifenet's EEV is calculated following the EEV Principles and Guidance and in terms of allowance for risk, MCEV Principles (The European Insurance CFO Forum Market | ||||
Consistent Embedded Value Principles©) is referred. From fiscal 2016 onward, a predetermined ultimate forward rate has been used to extrapolate the level of ultra- | |||||
long-term interest rates past the last liquid data point. This method of extrapolation has also been used to restate EEV as of March 31, 2016. EEV as of June 30, 2020 | |||||
is calculated applying the same operating assumptions as those used for March 31, 2020, and is not reviewed by third-party specialists. | 12 | ||||
2. | The calculation includes 3,040 million yen in proceeds from a third-party allotment in May 2015. |
Changing Factors of EEV1
- Value of new business contributed to EEV growth because of strong new business performance
(JPY millions) | Adjusted | 75,921 | |||||
incremental EV | |||||||
Assumption | Economic | ||||||
variances | |||||||
Operating | changes | ||||||
and assumption | |||||||
experience | 31 | ||||||
changes | |||||||
Expected | |||||||
variances | 335 | ||||||
existing | 251 | ||||||
Value of | business | ||||||
contribution | |||||||
new business | |||||||
329 | |||||||
1,542 |
73,431
total 2,122million yen
'20/03 | '20/06 |
1. Lifenet's EEV is calculated following the EEV Principles and Guidance and in terms of allowance for risk, MCEV Principles (The European Insurance CFO Forum
Market Consistent Embedded Value Principles©) is referred. EEV as of June 30, 2020 is calculated applying the same operating assumptions as those used for March 31, 2020, and is not reviewed by third-party specialists.
(YY/MM)
13
EV Resilience to Financial Changes
- Limited sensitivity to interest rates and stock prices
June 2020 | |||||||||||||||||||||||||
Reference: March 2020 End1 | |||||||||||||||||||||||||
End | |||||||||||||||||||||||||
Lifenet | Lifenet | Company A | Company B | Company C | |||||||||||||||||||||
11% | |||||||||||||||||||||||||
7% | 7% | ||||||||||||||||||||||||
1.4% | 1.5% | ||||||||||||||||||||||||
-1.7% | -0.6% | -1.7% | -0.6% | ||||||||||||||||||||||
-4% | |||||||||||||||||||||||||
-5% | |||||||||||||||||||||||||
-7% | |||||||||||||||||||||||||
0.5% interest rate increase | -10% | -9% | |||||||||||||||||||||||
0.5% interest rate decrease | |||||||||||||||||||||||||
10% decrease in equity and | -17% | ||||||||||||||||||||||||
real estate value and other | |||||||||||||||||||||||||
1. Prepared by Lifenet based on disclosed information of domestic public life insurance companies. | 14 |
Financial Condition
'20/03 | |||||
(JPY millions) (YY/MM) | '20/06 | ||||
Total assets | 41,144 | 42,298 | |||
Cash and deposits | 1,377 | 1,566 | |||
Monetary claims bought | 299 | - | |||
Money held in trust | 3,539 | 3,710 | ◼ Solvency margin | ||
Securities | 32,058 | 32,846 | ratio remained | ||
Government bonds | 8,065 | 8,034 | |||
above 2,000% | |||||
Municipal bonds | 1,391 | 1,386 | |||
Corporate bonds | 18,119 | 18,684 | |||
Stocks | 313 | 388 | ◼ Raised capital in | ||
Foreign securities | 0 | 0 | |||
Other securities1 | 4,167 | 4,352 | July to accelerate | ||
Total liabilities | 31,744 | 33,346 | |||
growth | |||||
Policy reserves and other | 30,328 | 31,822 | |||
Total net assets | 9,400 | 8,951 | momentum | ||
Solvency margin ratio2 | 2,117% | 2,093% | 1. Investment trust including foreign bonds and others. | ||
Modified duration (year) | 11.3 | 11.4 | 2. The solvency margin ratio is a key benchmark for industry | ||
regulators. It measures a life insurance company's ability to | |||||
pay out claims when unforeseen events occur. | 15 | ||||
Notable Achievements
- Launched the second white label business with Seven & i group
- Ranked number one in major price comparison websites1,2
Term Life | Whole-life | Long-term | Cancer |
Medical | Disability | ||
1. | The most popular insurance products in each category from January through December 2019, receiving the highest number of applications of Kakaku.com | |
Insurance, the sales agent company of insurance products | 16 | |
2. | The Most Chosen Insurance Ranking 2020 of HOKEN ICHIBA is based on compiled date from the number of application from January through December 2019. |
Overseas Public Offering and
Secondary Offering
- Successfully executed full marketing while working remotely under COVID-19
Overview
- Offered shares totaled 13.8 billion yen
- Raised new capital of 9 billion yen from overseas market, mainly Asia and Europe
- All the proceeds to be used for future business growth
- Low discount rate of 4.02% due to excess demand
- Aim for improvement market liquidity by secondary offering
17
Objectives for Offering
- Aim for Growth and Transformation
Growth
- Confirm the positioning as a financial institution with strong growth potential
- Accelerate growth of in-force business
Transformation
- Realize the mid-term vision of
"Internet Service Company of Life Insurance"
- Improve the market liquidity
- Multiple expansion in stock valuation
18
【Ref.】 Life Time Value and Customer Acquisition Cost
Key Metrics for a SaaS Company and Lifenet
ARR per Contract
(Annual Recurring Revenue)
Life Time
(Term of Contract)
Gross Margin Rate
LTV
(Life Time Value)
CAC
(Customer Acquisition Cost)
Commonly Used SaaS Glossary
- The value of the contracted recurring revenue components of the term subscriptions normalized to a one-year period
- Contract period: from date entered into contract until the contract is cancelled
- Calculated by reciprocal of churn rate
- Percentage of revenue left over after the cost of servicing that revenue is taken into account
- Accumulated profit per client during the contract period
-
Revenue from new client * total revenue profitability
(%) * contract period - Marketing and sales expenses incurred in bringing 1 client
FY2019 | FY2020/1Q | |||||
Annualized Premiums per | Annualized Premiums per | |||||
Policy-in-force | Policy-in-force | |||||
JPY 42,486 | JPY 42,452 | |||||
× | × | |||||
Average Policy Term | Average Policy Term | |||||
14.3 years1 | 18.2 years1 | |||||
× | × | |||||
45%2 | 44%2 | |||||
= | = | |||||
(Annualized Premiums | (Annualized Premiums | |||||
per Policy * Life Time * | per Policy * Life Time * | |||||
Gross Margin Rate) | Gross Margin Rate) | |||||
JPY 273,397 | JPY 339,956 | |||||
Marketing Expenses per | Marketing Expenses per | |||||
New Policy | New Policy | |||||
JPY 75,9703 | JPY 53,5413 | |||||
1. 1 / Churn rate. Churn rate represents the percentage of users who cancelled out their insurance policies.
2. | (Insurance premiums - Insurance claims and benefits - Provision for policy reserves and others) / Insurance premiums. | 19 |
3. | Marketing expenses / Number of new business. |
Business Forecast FY2020
- Aim for record high of new business performance under COVID-19environment
(JPY millions) | ||||||||
FY2020 Forecast | (Reference) | |||||||
FY2019 Results | ||||||||
Of which: impact | Of which: impact | |||||||
of modified | of modified | |||||||
co-insurance | co-insurance | |||||||
Ordinary income | 20,000 | 2,700 | 16,850 | 2,034 | ||||
Ordinary profit | (3,200) | 650 | (2,382) | 1,526 | ||||
(loss) | ||||||||
Net income | (3,200) | 650 | (2,400) | 1,526 | ||||
(loss) | ||||||||
(Reference) | 4,000 | 3,425 | ||||||
Annualized premium | ||||||||
of new business1 | ||||||||
1. Annualized premium is the amount of money equivalent to what is to be paid to have the insurance coverage for one year. All payments for Lifenet products are in | 20 | |||||||
monthly installments; we calculate annualized premium as multiplying the monthly premium by 12 months. |
Management Policy
mentManagegoal- PriorityareasVision Mission
Help our customers embrace life more fully by offering comprehensible, cost-competitive and convenient products and services
Be the leading company driving the growth of the online life insurance market
- Innovation of customer experience
Enhancing and evolving the quality of all services with digital technology
- Enhancement of promotion capabilities
Generating massive customer traffic by active promotion and expansion of agent sales and white label business
Aim to achieve EEV (European Embedded Value) of 100 billion yen by business growth in a mid-term
21
LIFENET Manifesto
Comprehensible, Cost-Competitive, Convenient
- Our Guiding Principles
- Creating the life insurance of the future without losing sight of its original premise: "an ounce of prevention is worth more than a pound of cure."
- Listening to what our customers are saying. Recognizing their needs and acting accordingly. Allowing our actions to be borne out of their voices and needs.
- Delivering the caliber of products and services that we would feel confident recommending to our own friends and families.
- Being a "straight-shooter". Committing to transparency. Communicating openly about our management team, our products, and our employees.
- Embracing diversity and dialogue to keep us abreast of changing needs and preferences. Delivering peace of mind that we'll be around in 100 years.
- Acting in good faith means always taking the high road when it comes to compliance and ethics.
- Making Life Insurance Accessible Again - Affordable
- Giving the customer what he/she needs. No more, no less at a fair price.
- Staying vigilant as to how we can provide our products more cost-efficiently.
- Always putting ourselves in our customers' shoes in thinking about how to minimize their premiums.
- Making Life Insurance Accessible Again - Headache-free
- Helping the customers help themselves. By making our materials easy to understand, customers can determine which coverage is truly the best fit.
- Turning "clauses" in the insurance contract into succinct points that your grandmother could grasp.
- Making all touch points headache-free. Beyond the application process, ensuring the claims and billing processes are also easy to understand.
IV. Making Life Insurance Accessible Again - Convenient
- Thinking about our customers' convenience from every angle and every touch point along the way.
- Forming alliances with like-minded partners who can add value above and beyond our products and services to our customers.
- Providing health and wellness tips beyond the framework of life insurance to create value in our policyholders' lives.
- Creating a precedent for future generations as to what life insurance is (and should be) all about.
We wish to be a company that helps our customers embrace life more fully.
In order to live out that vision, we continue to challenge ourselves.
22
All information on this document that is not historical fact constitutes forward-looking information and is based on assumptions and forecasts available to the company at the time of preparation. The company cannot guarantee the accuracy of these assumptions and forecasts. Earnings projections and other information on this may differ materially from actual performance due to various risks and uncertainties.
This is a translation of the original Japanese document, prepared and provided solely for readers' convenience. In case of any discrepancy or dispute, the Japanese document prevails.
https://ir.lifenet-seimei.co.jp/en/
Subscribe to our "IR email service" to receive news releases and website updates via email.
Appendix
Impact of COVID-19
for 1Q of Fiscal 2020
- New business performance achieved record high on a quarterly basis
- Surrender and lapse ratio improved
- No significant impact on payment of insurance claim
- Various special measures based on customer-orientedbusiness
25
Number of New Business (Quarter)
- Recorded historical high
:Number of new business
28,136
1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q 3Q4Q1Q2Q3Q4Q1Q2Q 3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q 3Q4Q1Q2Q3Q4Q1Q2Q3Q 4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q
FY2008 | FY2009 | FY2010 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019FY2020 26 |
Condensed Statements of Operation
/ Fundamental Profit
Condensed statements of operation
Fundamen talprofit
Change | ||||||
(JPY millions) | FY2019/1Q | FY2020/1Q | Note | |||
Insurance premiums and other | 3,774 | 4,633 | 859 | Increased due to growth in in-force policies business and | ||
utilization of modified co-insurance | ||||||
Other | 121 | 92 | (28) | |||
Ordinary income | 3,895 | 4,726 | 831 | Includes 558M increase for utilization of modified co-insurance | ||
Insurance claims and | 772 | 1,236 | 463 | Increased due to growth in in-force policies. Percentage of | ||
insurance claims and benefit claims to insurance premiums is | ||||||
other | ||||||
18.1%. | ||||||
Insurance claims | 386 | 447 | 61 | Increased from 27 cases in 1Q of FY19 to 38 in 1Q of FY20. | ||
Benefit claims | 227 | 267 | 40 | Increased from 1,960 cases in 1Q of FY19 to 2,201 in 1Q of | ||
FY20. | ||||||
Provision for policy | 1,015 | 1,497 | 481 | Increased by transferring to standard policy reserves. | ||
Percentage of provision for policy reserves (1,497 million yen) to | ||||||
reserves and other | ||||||
insurance premiums is 38.0%. | ||||||
2,341 | ||||||
Operating expenses | 2,199 | 141 | ||||
Marketing expenses | 1,502 | 1,506 | 3 | |||
Customer service | 211 | 242 | 31 | |||
System and other | 486 | 592 | 106 | |||
Other | 228 | 299 | 71 | |||
Ordinary expenses | 4,216 | 5,374 | 1,157 | |||
Ordinary profit (loss) | (321) | (647) | (326) | Includes profit of 212M for utilization of modified co-insurance. | ||
Extraordinary losses and | 4 | 4 | 0 | |||
income taxes | ||||||
Net income (loss) | (325) | (652) | (326) | Includes profit of 212M for utilization of modified co-insurance. | ||
Mortality margin | 757 | 877 | 119 | |||
Expense margin (loss) | (1,180) | (1,424) | (243) | Includes 263M expense margin for utilization of modified co- | ||
(15) | insurance. | |||||
Interest margin (loss) | (5) | (10) | ||||
Fundamental profit | (428) | (562) | (134) | 27 | ||
EV Sensitivity Analysis1
Impacts of changes in assumptions (sensitivities)
(JPY millions) | Change in EEV as of | Change in |
June 30, 2020 | VoNB | |
EEV and new business value as of June 30, 2020 | 75,921 | 1,542 |
Sensitivity 1a: 1.0% increase in risk-free rate | (2,612) | 9 |
Sensitivity 1b: 1.0% decrease in risk-free rate | 1,969 | (97) |
Sensitivity 1c: 0.5% increase in risk-free rate | (1,253) | 13 |
Sensitivity 1d: 0.5% decrease in risk-free rate | 1,096 | (34) |
Sensitivity 1e: Interest rates based on JGB yields | 962 | 73 |
Sensitivity 2: 10% decrease in equity and real estate value and other | (442) | - |
Sensitivity 3: 10% decrease in operating expenses | 3,301 | 236 |
Sensitivity 4: 10% decrease in lapse rate | 145 | 12 |
Sensitivity 5: 5% decrease in claim incidence rates for life business | 3,963 | 183 |
Sensitivity 6: Change the required capital to the statutory minimum | 62 | 3 |
1. 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 be different from the sum of sensitivities carried out separately. As Japanese policy reserves are calculated in accordance with the IBR, the sensitivities carried out do not affect the reserves at the valuation date. The sensitivity on the value of new business excludes the impact on the adjusted net worth. EEV as of June 30, 2020 is calculated applying the same operating assumptions as those used for March 31, 2020, and is not reviewed by third- 28 party specialists.
Three Surplus Factors of
Fundamental Profit
1Q of FY2020 | (JPY mn) | |||||
Statements of operations | Profit analysis | |||||
income | Insurance premiums and other 4,633 | |||||
Premiums income 3,940 | Net premiums | Expense loading | ||||
Reinsurance income 693 | Reinsurance | Other reinsurance | ||||
Ordinary | income | income | ||||
Investment income 73 | Interest and | Gains on sales | ||||
dividends | of securities | |||||
Other ordinary income 19 | Other ordinary | |||||
income | ||||||
Insurance claims and other 1,236 | ||||||
Insurance claims and benefits | Insurance claims | |||||
expenses | 714 | and benefits | policy reserves | interest | reserves | |
reserves and others 1,497 | reserves | |||||
Reinsurance commissions | Reinsurance | Other reinsurance | ||||
521 | commissions | commissions | ||||
Provision for policy | Change in policy | Change in | Projected | Provision for | ||
contingency | ||||||
Ordinary | ||||||
Investment expenses 0 | expenses | Interest | Losses on sales | |||
expenses | of securities | |||||
Operating expenses 2,341 | Operating | |||||
Other ordinary expenses | Other ordinary | |||||
299 | expenses | Capital gains | Other onetime | |||
Ordinary profit (loss) (647) | (losses) | gains (losses) | ||||
4 | (89) | |||||
Extraordinary profit (loss) | Extraordinary profit (loss) | |||||
(3) | Mortality | Expense | Interest | (3) | ||
Income taxes 0 | margin (loss) | margin (loss) | margin (loss) | Income taxes 0 | ||
877 | (1,424) | (15) | ||||
Net profit (loss) (652) | Net profit (loss) (652) |
1. Some items with minimal amounts have been omitted. | 29 |
Solvency Margin Ratio Calculation
As of June 30, 2020 | ||||||||
(R1 + R 8 )2 + (R 2 + R 3 + R 7 )2 + R 4 / 2 (JPY mn) | ||||||||
= | ||||||||
Solvency margin ratio | Total amount of solvency margin | ÷ | Total amount of risk/2 | |||||
2,093.9% | < the denominator> | |||||||
19,367 | 1,849/2 | |||||||
Cash and deposits | Other liabilities |
1,566 | 1,190 |
Reserves for outstanding claims | |
634 | |
Money held in trust | Policy reserves |
3,710 | 31,187 |
Contingency reserves 1,812 | |
Excess over the full- | |
Zillmerized reserve 8,368 | |
Securities | Price fluctuation reserves 59 |
2461 | |
Deferred tax liabilities on | |
32,846 | available-for-sale securities |
Valuation difference on | |
securities available-for-sale | |
6341 | |
Tangible fixed assets | Capital stock and |
other assets | |
88 | |
8,245 | |
Intangible fixed assets | |
764 | |
Other assets | Net assets |
3,320 | 8,951 |
Add liabilities with strong capital characteristics such as price fluctuation reserves and contingency reserves
Insurance risk R1 1,137
Risk of change in mortality rate (calculated based on value of policies in force)
Medical insurance risk R8 338
Risk of change in medical incidence rate (hospital admission rate , etc.)
Assumed interest rate risk R2 3
Risk that the actual investment return will fall below the expected return used as a basis for calculating policy reserves
[Minimum guarantee risk] R7 -
Risk related to products, such as variable annuities with minimum guarantees
Asset management risk R3 984
[Credit risk] Risk that asset values decline due to deterioration in financial condition of creditees
[Price fluctuation risk]Risk of incurring losses due to decline in market value of stocks and bonds, etc.
Business management risk R4 73
3% of the total of the amounts of the other 5 risks (in the
Company's case)
1. | 90% of the valuation difference on available-for-sale securities and deferred gains or losses on hedges (pre-tax) (if negative, 100%) | 30 |
2. | Items that do not apply to the Company or for which the amount is minimal have been omitted, except for certain bracketed items. |
Adjusted Incremental EV
- Adjusted Incremental EV accurately indicates our business growth during a certain period within increase in EEV
Adjusted incremental EV
Defined as constitution of components below:
- New business value in the fiscal year
- Expected existing business contribution
- Operating experience variances
31
Adjusted Profit
Significance of Adjusted profit disclosure
- As accrual timing of cost and revenue do not match, statutory accounting does not necessarily provide an accurate picture of business profit for a given fiscal year.
- We disclose adjusted profit as an indicator of profit generated by policies-in-force. It is calculated by excluding marketing expenses for periods other than the period in which income was generated from ordinary profit (loss) and adjusting for the benefit from modified co-insurance and the level of policy reserves.
Adjusted profit
32
Explanation of Adjusted profit
- Adjustments to provision for policy reserves based on standard policy reserves
Calculation of adjusted profit
ⅲ) Impact of | ⅳ) | |||
Adjustment | ||||
ⅱ) Marketing | modified co- | |||
insurance | based on | |||
expenses | standard policy Adjusted | |||
reserves | profit | |||
ⅰ) Ordinary
profit(loss)
Difference between methods of calculating provision for policy reserves
We are currently in the transitional period and will transition all business to standard policy reserves by the end of Fiscal 2022.
Method of calculating the "ⅳ) Adjustment based on standard policy reserves"
e.g. 1Q for fiscal 2020 (JPY millions)
Adjustment to provision for | Provision for policy | Increase in standard | ||||
policy reserves1 | reserves | policy reserves2 | ||||
208 | 1,497 | 1,288 |
- The amount of the adjustment to switch to provisioning based on standard policy reserves is calculated by excluding the provision for contingency reserves and adjusting for the switch in method for calculating the provision from the Zillmer method to provision based on the standard policy reserves. Please note that the provision for contingency reserves is included in the provision for policy reserves, but is not included in the increase in standard policy reserves.
- The increase in standard policy reserves is the amount of the increase (decrease) in the standard policy reserve balance for the current fiscal year from the balance in the previous fiscal year. The standard policy reserves is the amount calculated by excluding the provision for contingency reserves from actually
provisioned policy reserves and adding the difference from the provision based on the standard policy reserves. The difference was 837 million yen as of June | 33 |
30, 2020. |
Modified Co-Insurance
- Ease pressure of new business costs on P&L
- Alleviate decrease in capital during growth
Illustration image of change in
profit/loss structure by reinsurance
:Revenue :Costs :Effects of reinsurance
Reinsurance
Without
Ease pressure of new | ||||||||||
With Reinsurance | ||||||||||
business costs | ||||||||||
Year 1 2 | 3 | 4 | 5 | … Year X |
Illustration image of impact of
reinsurance on net assets
11,773 million yen
With
Reinsurance
Without | |||
Reinsurance | |||
End of Mar. 2019 | |||
Note: Illustration of P&L structure of reinsuring new business of | |||
single fiscal year, where illustration of impact on net assets of | 34 | ||
reinsuring new business for multiple years. | |||
Attachments
- Original document
- Permalink
Disclaimer
Lifenet Insurance Co. published this content on 11 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 August 2020 06:33:01 UTC