Lifenet Insurance Company · TSE:7157
Lifenet Insurance — Q2 2013 Earnings Presentation
69 slides from Lifenet Insurance's earnings presentation, Nov 15, 2013
Slide 1: Investor Meeting Presentation for 2Q of Fiscal 2013
Securities Code:7157 TSE Mothers Investor Meeting Presentation for 2Q of Fiscal 2013 November 15, 2013
Slide 2: LIFENET is… Comprehensible, Cost-Competitive, Convenient
LIFENET is… Comprehensible Cost-Competitive Convenient Returning to the original purpose of life insurance – mutual support – Lifenet was founded with the goal of offering simple, convenient and competitively priced products and services based on the highest levels of business integrity. We offer th
Slide 3: Contents
Contents 1. Progress of Mid-term Business Plan 2. Results for 2Q of Fiscal 2013 3. Challenges for Growth of New Business
Slide 4: Mid-term Business Plan
Mid-term Business Plan LIFENET 2015 Management Goal Achieve 15 billion in Offer new products and ordinary income (FY 2015) services as an “innovator” Push the company toward to create the future of life profitability (FY 2015) (Based on ordinary profit before amortization of insurance that resonat
Slide 5: Progress of Mid-term Business Plan (Ordinary Income)
Progress of Mid-term Business Plan (Ordinary Income) Aiming to achieve ordinary income of 15 billion yen, recorded year on year 130% 15,000 (JPY mn) :Fiscal Year :First-half of fiscal year Year on year up 30% 5,976 3,773 3,660 2,821 1,611 FY2011 12 13 15 4
Slide 6: Progress of Mid-term Business Plan (Ordinary Profit / Loss)
Progress of Mid-term Business Plan (Ordinary Profit / Loss) Aim to increase ordinary income and improve productivity, pushing the company toward profitability1 Turn profitable (JPY mn) :Fiscal Year :First-half of fiscal year (624) (908) (1,192) Year on year improved 48% (2,165) 2 (2,184) FY2011 12
Slide 7: Contents
Contents 1. Progress of Mid-term Business Plan 2. Results for 2Q of Fiscal 2013 3. Challenges for Growth of New Business
Slide 8: Overview of Second Quarter Results
Overview of Second Quarter Results Growth in ordinary income Suitable operating expense control Decrease in ordinary loss (before amortization cost of deferred assets) Remaining positive cash flows from operating activities Steadily recording mortality margin 7
Slide 9: Growth in Ordinary Income
Growth in Ordinary Income (JPY mn) 5,976 :Fiscal year Growth with the :First-half of fiscal year increase in 3,773 3,660 policies-in-force 2,821 Year on year 1,611 130% FY2011 12 13/1H 8
Slide 10: Number of Policies-in-force
Number of Policies-in-force Achieved 190,000 policies-in-force (Oct. 2) 192,746 189,958 180,591 23,124 169,312 155,947 10,162 Policies-in-force "Hataraku Hito" (Long-term disability) 144,575 "Jibun Plus" (Term medical care) 132,551 "Jibun" (Whole-life medical) 59,317 "Kazoku" (Term life) 118,040 1
Slide 11: Suitable Operating Expenses Control
Suitable Operating Expenses Control (JPY mn) 2,621 2,355 2,101 Tightly controlling 1,567 1,194 marketing expenses 1,021 Marketing Operating expenses ratio1 58% 291 Customer 293 service 258 870 System 794 786 and other 12/1H 12/2H 13/1H 97% 74% 58% Operating expenses ratio¹ 1. The ratio of operat
Slide 12: Marketing Expenses Per Policy
Marketing Expenses Per Policy (JPY thousand) 51 Continuously keep 30,000 yen level 39 since 2H FY2012 38 12/1H 12/2H 13/1H 11
Slide 13: Insurance Premium and Operating Expenses (Quarterly)
Insurance Premium and Operating Expenses (Quarterly) Controlled operating cost properly, while steadily increased insurance premium (JPY mn) 1,846 Insurance premium 1,309 Operating expenses 1,276 1,040 12/1Q 12/4Q 13/2Q 12
Slide 14: Decrease of Ordinary Loss
Decrease of Ordinary Loss Shrinking ordinary loss before deferred expenses and amortization due to controlled operating expenses (JPY mn) (JPY mn) 12/1H 12/2H1 13/1H Ordinary loss before deferred expenses and (1,192) (972) (624) amortization (624) Deferred expenses 1,535 1,165 - Amortization (972)
Slide 15: Cash Flows from Operating Activities
Cash Flows from Operating Activities (JPY mn) 768 Continuously 397 recording positive operating cash flows since 2H FY2012 (433) 12/1H 12/2H 13/1H 14
Slide 16: Mortality Margin
Mortality Margin (JPY mn) 965 Effect of Changing Calculation Formula of Policy Reserves Year on year 116% Steadily recording 501 mn 544 471 463 mortality margin 12/1H 12/2H 13/1H 15
Slide 17: Fundamental Profit
Fundamental Profit (JPY mn) 12/1H 12/2H 13/1H 9651 Increased Mortality margin 471 544 Expense margin(loss) (414) (805) (1,604) Interest margin Fundamental profit 14 71 13 173 7 (1,052) mortality margin (ref.) Insurance premiums and other 2,719 3,195 3,629 Increased expense Expense margin (loss)
Slide 18: Policies-in-Force
Policies-in-Force 189 (# in thousand) 169 Number of policies-in-Force 118 189,958 Annualized 63 premium1 JPY7.5 bn 11/03 12/03 13/03 13/09 2.65 4.87 6.87 7.59 Annualized Premium (JPY in bn) 1. The amount of money equivalent to what is to be paid to have the insurance coverage for one year. All p
Slide 19: New Business (first-half year ended Sep. 30)
New Business (first-half year ended Sep. 30) (# in thousand) 30.2 30.7 29.9 26.7 Number of new business down 13% from 1H/FY2012 Number of policies per customer1 183% 11/2H 12/1H 12/2H 13/1H 168% 170% 186% 183% Number of Policies per Customer 1. The ratio of new business / new customers of each h
Slide 20: Historical Financials
Historical Financials (JPY mn) FY2011 2012 12/1H 13/1H Ordinary income 3,773 5,976 2,821 3,660 Insurance premiums and other 3,720 5,915 2,719 3,629 Investment income 47 51 24 28 Other ordinary income 5 9 77 2 Ordinary expenses 4,461 5,999 2,890 4,814 Insurance claims and other 410 575 261 604 1 Prov
Slide 21: Financial Condition
Financial Condition (JPY mn) Total assets 12/03 18,861 20,450 20,559 Invested 13/03 13/09 Cash and deposits 428 353 431 conservatively Securities 13,800 13,488 14,002 Government bonds 9,939 7,331 6,653 Added Korean Local government JV stocks bonds - - - Corporate bonds 3,721 5,982 6,379 Modifi
Slide 22: Solvency Margin Ratio
Solvency Margin Ratio1 3,499% Maintained at 2,266% a healthy level, while decreased due to the Average of 4 major 1,885% increase in insurance companies as of March 31, 20132 policies-in-force 793% and investment in Korean JV. 12/03 13/03 13/09 1. The solvency margin ratio is an important financia
Slide 23: European Embedded Value
European Embedded Value1 (JPY mn) 19,837 18,547 18,746 Value of 8,306 In-Force Business Value of in-force business 125%2 of 11,531 Adjusted March 31, 2013 Net Asset 12/03 13/03 13/09 1. Lifenet has fully adopted the EEV Principles, while also taking into account a market-consistent approach for re
Slide 24: Value of New Business (VoNB)
Value of New Business (VoNB) :Fiscal Year Left: value of new business :First-half of Right: value of new business fiscal year (ultimate unit cost base) 709 Value of new (JPY mn) business (ultimate unit cost base¹) 80% of 1H FY2012 338 271 Mainly due to the declined number of 127 126 new business
Slide 25: VoNB (Ultimate Unit Cost Base)
VoNB (Ultimate Unit Cost Base) Per new business FY2012 12/1H 13/1H for FY2013 1st half (JPY mn) (JPY thousand) Certainty equivalent present value of future profit 5,795 3,417 2,441 91 －） Time value of financial options － － － － and guarantees －） Frictional cost of capital (38) (21) (16) (0) －） Allowa
Slide 26: Structure Breakdown of VoNB per Policy
Structure Breakdown of VoNB per Policy Nearly flat due to the declined insurance premiums per policy, while initial expenses improved VoNB per policy (ultimate unit cost base) (# JPY thousand) Change of Product mix Other Initial expenses Insurance decreased (2) premiums variables (decline of per p
Slide 27: EV Sensitivity Analysis
EV Sensitivity Analysis Impacts of Changes in Assumptions (sensitivities) on the EEV Results Change in EEV as of Change in Value of (JPY mn) Sep 30, 2013 New Business EEV and New Business Value as of September 30, 2013 19,837 126 Sensitivity 1a: 1.0% increase in risk-free rate 1,148 127 Sensitivit
Slide 28: Marketing Expenses / Value of New Business per Policy
Marketing Expenses / Value of New Business per Policy (JPY thousand) Marketing expenses per policy Well-controlled 45 38 marketing 35 expenses Value of new 27 business per policy 11 slightly decreased 10 by decrease in Value of new business per policy insurance premium (ultimate unit cost base)
Slide 29: Contents
Contents 1. Progress of Mid-term Business Plan 2. Results for 2Q of Fiscal 2013 3. Challenges for Growth of New Business
Slide 30: Transition to a New Growth Stage
Transition to a New Growth Stage Phase 2 (June 2013 - ) Changes in Representative Directors and Executive Officers More advantage of “online life insurance” for more customers Being an “innovator” in life insurance Phase 1 (5 years after business commencement) Birth of new business model, “o
Slide 31: To Achieve Mid-term Business Plan
To Achieve Mid-term Business Plan Aim to achieve ordinary income of 15 billion yen, pushing the company toward profitability based on ordinary profit1 15,000 Future Priorities (JPY mn) Focus on following up on our customers Target specific segments Improve consulting proposal via website 5,9
Slide 32: Continuous Changes in Customer Segments
Continuous Changes in Customer Segments Increase in customers who consult someone before applying, and who do not know Lifenet deeply Ratio of customers who did not consult anyone Ratio of customers who are aware of Lifenet before applying disclosing expense loadings 79.1% 63.6% 44.4% 26.8% FY2008
Slide 33: Customer Follow-up Function
Customer Follow-up Function Passively waiting for customers to approach Previous points of contact after brochure request Request Birthday Send brochure Enclosure Accepted E-mail Call SMS 3 months before 2 months before Letter birthday 32
Slide 34: Improved Customer Follow-up Function
Improved Customer Follow-up Function Encourage customers to complete application Points of contact after brochure request (ongoing) Effective To be launched in FY13 Request Birthday ＋ Enclosure Send brochure Enclosure Accepted …. E-mail …. Call SMS Send SMS reminder of the information given by pre
Slide 35: Follow-up Opportunities
Follow-up Opportunities Need to improve approaching after brochure request Brochure Brochure (Considering term) Applied to Send out received request Lifenet brochure by received customer Still in review approx. 70% Applied to other insurers Stopped considering Source: Lifenet survey results for br
Slide 36: Follow-up Calls for Brochure Requesters
Follow-up Calls for Brochure Requesters In-house operation started by Contact Center in November Application ratio after brochure request (Applicants after brochure request / Brochure requestors ) Follow-up test calls for brochure Full-scale operation requestors (January 2013 -) from November No f
Slide 37: Brochure Enclosures
Brochure Enclosures Encourage to understand Lifenet and its products HOKEN NATTOKU BOOK Corporate Brochure Leaflet (For understanding insurance (For understanding Lifenet) (Offering application products) opportunity) 36
Slide 38: Test Marketing with Enclosures
Test Marketing with Enclosures Application ratio changed by enclosures contents Application ratio up approx. 20% Leaflet Leaflet Leaflet No A B C leaflet 37
Slide 39: Improvement of Completion Ratio after Application
Improvement of Completion Ratio after Application Send notification post card to applicants who have not sent back required documents Improved returning ratio 38
Slide 40: Optimize Highly Evaluated Contact Center
Optimize Highly Evaluated Contact Center Organizing Contact Center for online life insurer Awarded three stars 2yrs in a row1 Awarded 2013 CRM Best Practice2 Trial airing CM to appeal Contact Center 1. Awarded “Contact Center” in the 2013 HDI Contact Center Rankings (Life Insurance Industry), 2 ye
Slide 41: Target Specific Segments
Target Specific Segments Create the awareness of customer needs of insurance at their life events Newly-married couples Young mothers 40
Slide 42: Website Improvement
Website Improvement Frequently improving our only “store” -- website 41
Slide 43: Contents to Clear Up Uncertainties and Doubts
Contents to Clear Up Uncertainties and Doubts “Visible faces” and “Reputation” make customers assured 42
Slide 44: Improve Consulting Plan Function
Improve Consulting Plan Function Offer more suitable plan for each customer More visitors via consulting plan apply than those not. Aim to provide more customers with the function. 43
Slide 45: Drastic Growth in Smartphone Usage
Drastic Growth in Smartphone Usage Brochure request via Smartphone increasing Brochure request composition by device 100% Feature Phone Smartphone PC 0% 11/01 13/10 44
Slide 46: Increase in Website Visitors via Smartphone
Increase in Website Visitors via Smartphone Sometimes more site visitors via Smartphone than PC Ratio variation of PC/Smartphone website visitors during airing TV program about Lifenet (per hour) TV program on-air Aug 18, 2013 （TV Tokyo ”The Solomon Style”） PC Smartphone 14:00 22:00 7:00 23:00 45
Slide 47: Continuously Optimizing Smartphone Website
Continuously Optimizing Smartphone Website Improved application with detailed medical declarations and seamless operation with PC 46
Slide 48: Application via Smartphone after Renewal
Application via Smartphone after Renewal Upward trend after Smartphone website renewal on Oct 28 also with the effect of TV program “The Solomon Number of application via Smartphone (per week) Style” rerun Smartphone website renewal Number of applications doubled 4W Sep 2013 1W Nov 47
Slide 49: Enhance Smartphone Website Contents
Enhance Smartphone Website Contents Providing contents ideal for Smartphone users Manga “Lifenet story” For better understanding Lifenet Product Ranking For comprehensible information to review 48
Slide 50: Challenging Measures for Smartphone Website
Challenging Measures for Smartphone Website Need to enhance Smartphone website visitors process as well as to improve of application ratio via Smartphone ・ PC website visitors 200,000-300,000/month ・ Increasing access via Smartphone (but only approx. 1/3 to 1/4 of PC access) ・ Number of brochure r
Slide 51: Smartphone in TV commercials
Smartphone in TV commercials Currently trial airing in selected areas 50
Slide 52: Strengthen Competitiveness of Existing Products
Strengthen Competitiveness of Existing Products Existing products under review 51
Slide 53: "Kazoku" Exceeded 100,000 Policies-in-force
“Kazoku” Exceeded 100,000 Policies-in-force Offering products to meet customer needs 100,143 98,920 95,058 90,407 84,786 79,839 73,721 66,606 59,474 53,081 45,626 38,881 32,547 26,095 21,221 16,516 12,760 9,121 6,121 1,891 3,642 291 974 08/06 09/03 09/03 10/03 10/03 11/03 11/03 12/03 12/03 13/03 1
Slide 54: Changes in Competitive Environment
Changes in Competitive Environment Challenging to spread “online insurance” Number of search keyword “life insurance” via PC search engine Life insurance 11/10 13/09 Source: Lifenet 53
Slide 55: Increased Online Insurer
Increased Online Insurer “Online Insurance” companies - 8 in total （Apr. 2008 -） AXA Direct Life （May 2008 - ） LIFENET （May 2011 -） ORIX Life （Sep. 2011 -） Rakuten Life （Dec. 2011 -） MetLife Alico Life （Sep. 2012 -） Sompo Japan DIY Life （Nov. 2012 -） AIG Fuji Life （Sep. 2013 -） Zurich Life Source:
Slide 56: Measures for Competitors
Measures for Competitors Subscribing the online listing ads accordingly 55
Slide 57: Online Life Insurance Market Still Predawn
Online Life Insurance Market Still Predawn Online life insurers increasing, but competition with other insurers is still the key for future growth Customers switching to other online life insurers account for below 20% among the entire switching customers1 Ratio of switching to online insurers a
Slide 58: Online Life Insurance Growth Potential
Online Life Insurance Growth Potential Existing consumers needs and market potential Preferred Future Service Channels1 (%) Market Share of Online Life Insurance (Number of Policies in Force) 0.2 2.9 4.5 10.5 Online 29.3 Others Captive agents, 22.7 Post offices, Banks, Securities brokers Sales 37.
Slide 59: Online Life Insurance Growth Potential
Online Life Insurance Growth Potential Market expects life insurance channel sift Forecast of life insurance premium in Japan in 2016 JPY trillion Segment Growth OTC sales at bank Direct Agents Sales representatives Total Source: Report by the “Working Group on the Provision of Insurance Products/
Slide 60: Strategic Alliance with Swiss Re
Strategic Alliance with Swiss Re Started continual discussion at Joint Committee with Swiss Re, the largest shareholder Swiss Re Lifenet Joint Committee Held regularly under the theme of product development and underwriting 59
Slide 61: Established Joint Venture in Korea
Established Joint Venture in Korea Lifenet established online life insurance company with Kyobo Life in Korea, as its first step towards overseas expansion Daisuke Iwase Haruaki Deguchi Yong Kil Shin Haksang Lee President & COO Chairman & CEO President President Lifenet Lifenet Kyobo Life Kyobo Li
Slide 62: Birth of Kyobo Lifeplanet
Birth of Kyobo Lifeplanet Plan to commence business operations in Dec. as first purely online life insurer in Korea Lifenet Kyobo Life Voting rights Experience and Well-established and Kyobo Life: 66% knowledge of strong business base Lifenet: 34% customer-focused online distribution Kyobo Lifepla
Slide 63: Outlook for Kyobo Lifeplanet
Outlook for Kyobo Lifeplanet Korea – Similar market environment Life Insurance Market in Korea ・ World’s eighth-largest market (insurance premium revenue basis) ・ Diversification of sales channels due to the deregulation ・ Online-based financial activities growing largely among the youth ・ 8 life
Slide 64: To Achieve Mid-term Business Plan
To Achieve Mid-term Business Plan Aim to achieve ordinary income of 15 billion yen, pushing the company toward profitability based on ordinary profit1 15,000 Future Priorities (JPY mn) Focus on following up on our customers Target specific segments Improve consulting proposal via website 5,9
Slide 65: LIFENET Manifesto
LIFENET Manifesto I. Our Guiding Principles II. Life Insurance will be Comprehensive (1) We believe that our responsibility to society is to return life insurance to its (1) Our products will be simple and comprehensible. There will not be complex original state. Life insurance is for the customers,
Slide 66: Forward-looking information disclaimer
http://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 fo
Slide 67: Appendix
Appendix oD) LiFENE] LIFENET INSURANCE COMPANY
Slide 68: Deferred Assets under Article 113 of the IBA
Deferred Assets under Article 113 of the IBA¹ Insurance company is allowed to record deferred assets under Article 113 of the IBA¹ for the first 5 years since business commencement (FY2012) Illustrative image of impact on P/L (focus on the relationship between operating expenses and deferred asset
Slide 69: Embedded Value and Value of New Business
Embedded Value and Value of New Business (Illustrative purpose only: Based on present value) Appraisal Value (AV) Insurance payments Premium for Value of in-force business is the present value future growth at the valuation date of future after-tax profits distributable to shareholders from in-force
Lifenet Insurance Company — Q2 2013 Earnings Presentation on 6ix