Lifenet Insurance Company · TSE:7157
Lifenet Insurance — Q3 2021 Earnings Presentation
42 slides from Lifenet Insurance's earnings presentation, Feb 10, 2022
Slide 1: Presentation Material for Investors, Third Quarter Fiscal 2021
Securities Code: 7157 TSE Mothers Presentation Material for Investors Third Quarter for Fiscal 2021 February 10, 2022
Slide 2: LIFENET is... Comprehensible, Cost-Competitive, Convenient
LIFENET is... Comprehensible Cost-Competitive Convenient ◼ Remembering the original purpose of life insurance – mutual support ◼ Helping our customers embrace life more fully 1
Slide 3: Overview of Cumulative 3Q for Fiscal 2021
Overview of Cumulative 3Q for Fiscal 2021 Annualized premium1 of Annualized premium1 of policies-in-force new business 20,862 (111.5% vs. end of FY2020) million yen 3,107 (Y-on-Y 100.5%) million yen EEV2 (European Embedded Value) Adjusted incremental EV3 114,068 million yen 5,027 million yen (119.9%
Slide 4: Number of Policies-in-Force
Annualized Premium / Number of Policies-in-Force : Annualized premium of policies-in-force1 (JPY billions) : Number of policies-in-force 20.8 ◼ Continues to grow 17.9 491,611 steadily and about to reach 500,000 14.7 421,073 policies 12.5 348,429 10.7 295,662 ◼ Year-on-year 255,614 annualized premium
Slide 5: Changing Factors of Policies-in-Force
Changing Factors of Policies-in-Force FY2020/3Q FY2021/3Q (YTD) (YTD) Number of policies-in-force (BOP) 365,171 439,945 +）Number of new business 73,669 76,226 －）Decreased number of policies1 (17,767) (24,560) Non-recurring record of lapsed policies※ ー (633) Number of policies-in-force (EOP) 421,073
Slide 6: Number of New Business
Annualized Premium / Number of New Business : Annualized premium of new business1 (First 9 months of fiscal year, JPY millions) : Number of new business (fiscal year) : Number of new business (First 9 months of fiscal year) 3,093 3,107 ◼ Remained at FY2020 2,435 100,587 level despite a temporary reg
Slide 7: Surrender and Lapse Ratio (Quarter)
【Ref.】 Surrender and Lapse Ratio （Quarter） ◼ Recovered to previous level and contributing to net increase in policies-in-force :Impact of lump-sum recording of policies lapsed1 (%) :Surrender and lapse ratio2 without the above (%) 7.6% 0.5% 6.3% 6.0% 0.1% 0.0% 7.6% 7.1% 7.0% 7.1% 7.1% 6.4% 6.2% 5.9%
Slide 8: Marketing Efficiency
Marketing Efficiency : Marketing expenses per new business (JPY thousands) : Marketing expenses / Annualized premium of new business1 75 76 67 66 65 ◼ Prioritize 1.7 1.8 growth and 1.5 1.5 1.5 invest in marketing expenses (fiscal year) 2017 ’18 ’19 ’20 ’21/3Q(YTD) Marketing expenses 2,627 4,216 6,14
Slide 9: Operating Expenses Ratio
Operating Expenses Ratio : Operating expenses ratio¹ (%) : Insurance premiums (JPY millions) : Operating expenses excl. marketing expenses (JPY millions) 16,892 14,633 13,982 11,845 ◼ Aim to improve 10,421 operational 22.2 % 22.8 % 21.6 % efficiency by 19.6 % 19.6% further business expansion 2,315 2
Slide 10: Profit Structure under Current Statutory Accounting
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 Accounting
Slide 11: Adjusted Profit
Adjusted Profit ◼ Steadily increased adjusted profit generated from policies-in-force The method for calculating adjusted profit Adjusted profit＝ⅰ) Ordinary profit（loss)＋ⅱ) Marketing expenses －ⅲ) Impact of modified co-insurance ±ⅳ) Adjustment based on standard policy reserves1 JPY millions / fiscal
Slide 12: Structure of Embedded Value
Structure of Embedded Value Adjusted Value of in-force EV 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 Revenue Revenue Expense Expense Profit/loss for Unrealized future profits/losses on policies-in-f
Slide 13: Strong EEV Growth
Strong EEV1 Growth ◼ EEV and value of in-force business have been growing at a CAGR of 20%2 and 34%, respectively since IPO ◼ EEV per share has also steadily increased ¥1,637 since capital raising ¥1,570 114,068 ¥1,430 : Value of in-force business (JPY millions) : Adjusted net worth (JPY millions) 9
Slide 14: Changing Factors of EEV
Changing Factors of EEV1 ◼ EEV growth driven by adjusted incremental EV, assumption changes at 2Q and capital raising (JPY millions) 114,068 Adjustments to the values2 Adjusted Economic as of incremental EV variances Dec. 31, ’21 Assumption and assumption changes 9,846 Expected changes 791 existing
Slide 15: EV Resilience to Financial Changes
EV Resilience to Financial Changes ◼ Limited sensitivity to interest rates and stock prices Dec. 2021 Reference: March 2021 End1 End Lifenet Lifenet Company A Company B Company C 6% 5% 1.6% 1.6% 2% -1.0% -0.8% -1.7% -1.6% -3% -5% -5% 0.5% interest rate increase -7% -7% -8% 0.5% interest rate decreas
Slide 16: Life Time Value and Customer Acquisition Cost
【Ref.】 Life Time Value and Customer Acquisition Cost Key Metrics for a SaaS Company and Lifenet FY2019 FY2020 FY2021/3Q(YTD) Annualized Premiums per Annualized Premiums per Annualized Premiums per ARR per Contract Policy-in-force Policy-in-force Policy-in-force (Annual Recurring Revenue) JPY 42,486
Slide 17: Financial Condition
Financial Condition (JPY millions) (YY/MM) ’21/03 ’21/12 Total assets 54,501 67,781 ◼ The impact of Cash and deposits 2,059 4,373 rising interest Monetary claims bought 999 3,999 rates is limited Money held in trust 5,895 5,590 due to short 40,007 47,026 Securities duration Government bonds 9,004 8,
Slide 18: Innovation of Customer Experience
Investment in Innovation of Customer Experience ◼ Promote initiatives to redesign customer experience of life insurance April 2021 August 2021 January 2022 AI chatbot Enhancement of app AI site search function ・Enhance CX in non-business hours ・Add the function of premium quotation ・ User-friendly s
Slide 19: Evaluation for Customer Experience
Evaluation for Customer Experience ◼ Gained high evaluation from external organization and customers 3 Stars in the 2021 HDI Benchmarking • Awarded a three-star rating in two categories1 9times, the highest number of times in the life insurance industry • Awarded top rating in our website for the 11
Slide 20: Enhancement of Promotion Capabilities
Investment in Enhancement of Promotion Capabilities ◼ Continue to invest aggressively to accelerate growth Internet Channel White Label Channel Brand awareness is steadily Initiatives for mid- and long- increasing1 term growth : Brand awareness 49.0% Discussing initiatives to utilize KDDI Group asse
Slide 21: System Development
Investment in System Development ◼ Renewing system structure for improvement of customer experience and future business expansion Fiscal 2021 • Accelerate speed of UI/UX Revamping the front- development and end infrastructure improvement • Improve scalability and Enhancement on-demand performance of
Slide 22: Initiative for Sustainability
Initiative for Sustainability ◼ New page on IR website summarizes sustainability initiatives since business commencement https://ir.lifenet-seimei.co.jp/en/sustainability.html Enhancing disclosure on sustainability and communicating with ESG rating organizations 21
Slide 23: Revision of Business Forecasts FY2021
Revision of Business Forecasts FY2021 ◼ Revised in light of current business performance ◼ Bottom line has improved owing to lower insurance claim payment than expected (JPY millions) 【Revised】 【Previous】 FY2021 Forecasts FY2021 Forecasts FY2020 Results Annualized premium of policies-in-force 21,400
Slide 24: The Latest Business Environment (New Business)
The Latest Business Environment （New Business） ◼ New business performance bottomed out in November 2021 and is on a recovery trend ◼ Aiming for further growth while assessing the business environment September 30 : Number of new business (monthly)1 Lifted of the state of emergency 8,027 April May Ju
Slide 25: The Latest Business Environment (Policies-in-Force)
The Latest Business Environment （Policies-in-Force） ◼ Value of in-force business per policy maintained the certain level and future value is growing Value of in-force business Value of in-force business Number of policies-in-force per policy （Unrealized future value on policies-in-force） (JPY thousa
Slide 26: Growth Potential of Online Insurance Market
Growth Potential of Online Insurance Market ◼ Capturing the structural changes of digitization for sustainable growth in the future 20.0% Customers who have intention to purchase through the Internet1 17.4% Customers who actually purchased through the Internet1 15.0% 12.5% Emerging 10.0% significant
Slide 27: Management Policy
Management Policy Help our customers embrace life more fully Mission by offering comprehensible, cost-competitive and convenient products and services Vision Be the leading company driving the growth of the online life insurance market • Innovation of customer experience Priority Enhancing and evolv
Slide 28: LIFENET Manifesto
LIFENET Manifesto Comprehensible, Cost-Competitive, Convenient I. Our Guiding Principles II. Making Life Insurance Accessible Again - Headache-free (1) Creating the life insurance of the future without losing sight of (1) Helping the customers help themselves. By making our its original premise: “an
Slide 29: https://ir.lifenet-seimei.co.jp/en/
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 o
Slide 30: Appendix
Appendix ) LiFENE] LIFENET INSURANCE COMPANY
Slide 31: Develop Online Life Insurance Platform
Develop Online Life Insurance Platform Expand online products and services Supply Lifenet’s products and services ＋ Other insurers’ products and services “Online Platform” connects life insurance products and services with customers Provide products and services which customers need online Search Co
Slide 32: Breakdown of Policies-in-Force
Breakdown of Policies-in-Force Component ’21/03 ’21/12 ratio Number of policies-in-force 439,945 491,611 100% - Term Life 213,597 239,838 49% - Whole-life Medical 120,216 134,303 27% - Term Medical Care 8,840 8,598 2% - Long-term Disability 59,567 62,875 13% - Cancer 37,725 45,997 9% Sum insured of
Slide 33: Condensed Statements of Operation / Fundamental Profit
Condensed Statements of Operation / Fundamental Profit (Cumulative 3Q) (JPY millions) FY2020/3Q FY2021/3Q Change Note Increased due to growth in in-force business and reinsurance Insurance premiums and other 14,694 18,720 4,026 income from modified co-insurance. Other 450 579 129 Ordinary income 15,
Slide 34: Three Surplus Factors of Fundamental Profit
Three Surplus Factors of Fundamental Profit First 9 months of FY2021 (JPY mn) Statements of operations Profit analysis Insurance premiums and other 18,720 Ordinary income Premiums income 14,633 Net premiums Expense loading Reinsurance income 4,087 Reinsurance Other reinsurance income income Interest
Slide 35: Solvency Margin Ratio Calculation
Solvency Margin Ratio Calculation As of Dec. 31, 2021 ( (𝑅 1 + 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 3,258.7% <numerator> ÷ < the denominator> 38,963 2,391/2 Cash and deposits Other liabilities 4,373…
Slide 36: EEV (European Embedded Value)
EEV （European Embedded Value） ◼ Characteristics of Lifenet’s EEV are as follows: Strong growth • Maintaining increase in EEV since listing in March 2012 Resilience to interest rate changes • Limited sensitivity to interest rate and stock fluctuations 35
Slide 37: EV Sensitivity Analysis
EV Sensitivity Analysis1 Impacts of changes in assumptions (sensitivities) Change in EEV as of Change in (JPY millions) Dec. 31, 2021 VoNB EEV and new business value as of December 31, 2021 114,068 3,762 Sensitivity 1a: 1.0% increase in risk-free rate (3,992) (219) Sensitivity 1b: 1.0% decrease in r
Slide 38: Adjusted Incremental EV
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
Slide 39: Adjusted Profit
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 profitability of our business • We, therefore, disclose the indicator of profit level excluding marketing expenses
Slide 40: Explanation of Adjusted Profit
Explanation of Adjusted Profit ◼ Adjustments to provision for policy reserves based on standard policy reserves Calculation of adjusted profit Difference between methods of calculating provision for policy reserves ⅲ) Impact of ⅳ) modified co- Adjustment ⅱ) Marketing insurance based on expenses stan
Slide 41: Modified Co-Insurance
Modified Co-Insurance ◼ Ease pressure of new business costs on P&L ◼ Alleviate decrease in capital during growth Illustration image of change in Illustration image of impact of profit/loss structure by reinsurance reinsurance on net assets ：Revenue ：Costs ：Effects of reinsurance Reinsurance Without
Slide 42: J-GAAP vs IFRS
J-GAAP vs IFRS Illustration image of accounting structure1 ■Current Statutory Accounting (J-GAAP) Year 1 Year 2 Year 3 Year 4 Year 5 ・・・・ Heavy initial cost Revenue2 Revenue2 Revenue2 Revenue2 Revenue2 for acquiring new business3 is Expense recognized at for initial fiscal year. acquiring new busine
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