Lifenet Insurance Company · TSE:7157

Lifenet Insurance — Q2 2014 Earnings Presentation

54 slides from Lifenet Insurance's earnings presentation, Nov 14, 2014

  1. Slide 1: Investor Meeting Presentation for 2Q of Fiscal 2014

    Securities Code:7157 TSE Mothers Investor Meeting Presentation for 2Q of Fiscal 2014 November 14, 2014

  2. Slide 2: FY2014 1H Key Highlight

    FY2014 1H Key Highlight ✓ Ordinary income up 20% year on year ✓ Ordinary loss1 improved 28% year on year ✓ Positive cash flows from operating activities and mortality margin recorded steadily ✓ Primary challenge is return to growth in new business performance ✓ Change in management goal of mid-term

  3. Slide 3: Summary of FY2014 1H Results

    Summary of FY2014 1H Results (JPY mn) 2013/1H 2014/1H Year on year Ordinary income 3,660 4,393 120.0% Operating expenses 2,101 2,130 101.4% Ordinary profit (loss)1 (624) (450) - Cash flows from operating activities 768 1,151 149.7% Mortality margin 544 869 159.5% Annualized premium of policies-in-fo

  4. Slide 4: Contents

    Contents 1. Results for 2Q of Fiscal 2014 2. Key Initiatives 3. Change of Management Goal 3

  5. Slide 5: Key Accomplishment in FY2014 1H

    Key Accomplishment in FY2014 1H  First revisions of core products since business commencement - Revision of Term life - Launched new Whole-life Medical  Challenges for the “Second Stage” as an online life insurer - Open our owned media - Enhance customer follow-up - Optimize PC and smartphone webs

  6. Slide 6: First Revision of Core Products since Business Commencement

    First Revision of Core Products since Business Commencement  Reduced premium while realized rich coverage 1. Comparison of Lifenet and 3 other online life insurance companies’ term life insurance products (excluding risk sub-divided insurance products) under the following conditions: Insurance cove

  7. Slide 7: Annualized Premium per Policy of Application

    Annualized Premium per Policy of Application  Increasing trend due to new Whole-life Medical products launch 51,294 49,861 50,376 49,408 50,745 (JPY) Ave. 38,441 New products launch (May 2014) 13/04 14/01 14/09 (YY/MM) 6

  8. Slide 8: Opened Our Owned Media

    Opened Our Owned Media  Diversify traffic source besides TVCM http://media.lifenet-seimei.co.jp/ 7

  9. Slide 9: Performance of Free Consultation Services

    Performance of Free Consultation Services  Steady increase in the number of applications via free consultation service Number of calls :Number of free consultation calls :Number of applications via free consultation service 14/02 14/03 14/04 14/05 14/06 14/07 14/08 14/09 (YY/MM) 8

  10. Slide 10: Contact Center and Website Awarded

    Contact Center and Website Awarded¹  Contact Center and Website awarded the highest rating three stars in the 2014 HDI Contact Center Rankings for 3 consecutive years Contact Center Support Portal (Website) 1. Awarded in the 2014 HDI Contact Center Rankings (life insurance industry) hosted by HDI-J

  11. Slide 11: Enrich Customer Services

    Enrich Customer Services  Via online, telephone or in-person 10

  12. Slide 12: Major Updates on Kyobo Lifeplanet

    Major Updates on Kyobo Lifeplanet  Stable administration since commencement  Declined voting rights ratio due to preferred shares with voting rights and capital injection (plan)  Unchanged commitment from LIFENET  No impact on Lifenet’s P&L Voting rights ratio 34.0% (2013/9/20) Established 25.5%

  13. Slide 13: Number of New Business (Monthly)

    Number of New Business (Monthly)  Primary challenge is return to growth in new business performance :Number of new business :Annualized premium of new business (JPY mn) 115 2,429 13/04 14/01 14/09 (YY/MM) 12

  14. Slide 14: FY2014 1H Financial Results

    FY2014 1H Financial Results  Ordinary income up 20% year on year  Ordinary loss1 improved 28% year on year  Positive cash flows from operating activities stay  Mortality margin recorded steadily  Primary challenge is return to growth in new business performance  Marketing expenses increased du

  15. Slide 15: Continuous Growth in Ordinary Income

    Continuous Growth in Ordinary Income :Fiscal year 7,603 (JPY mn)  Increased with :First-half of fiscal year 5,976 growth of 4,393 policies-in-force 3,660 2,821  Year on year 20% growth 2012 13 14/1H 14

  16. Slide 16: Annualized Premium of Policies-in-Force

    Annualized Premium of Policies-in-Force (JPY in bn) 8.0 8.4 7.5  Annualized 6.8 Premium1 JPY 8.4bn  Number of Policies-in-Force 13/03 13/09 14/03 14/09 (YY/MM) 209,814 1. The amount of money equivalent to what is to be paid to have the insurance coverage for one year. All payments are monthly inst

  17. Slide 17: Number of Policies-in-force

    Number of Policies-in-force  Exceeded 210,000 policies-in-force in October 210,648 209,814 206,453 202,963 197,097 189,958 24,982 180,591 169,312 Policies-in-force 155,947 Long-term disability 144,575 76,344 132,551 Whole-life medical and Term medical care 118,040 Term life 103,875 91,249 76,296 63

  18. Slide 18: Number of New Business/Annualized Premium (Semi-annual)

    Number of New Business/ Annualized Premium (Semi-annual) :Number of new business :Annualized premium of new business (JPY mn) 26,777 Y-on-Y 44% decrease  Primary challenge is 19,460 return to growth in new business Y-on-Y 15,053  Annualized premium 29% decrease 975 decreased moderately 732 694 rel

  19. Slide 19: Operating Expenses Control

    Operating Expenses Control (JPY mn) 2,101 2,029 2,130  Marketing expenses increased 15% from 1,021 927 1,070 Marketing 13/2H due to advertising expenses increase Customer 293 318 280 service 786 784 779 System  Operating expenses and other ratio1 52% 13/1H 13/2H 14/1H 58% 52% 52% Operating expense

  20. Slide 20: Advertising Expenses

    Advertising Expenses  Increased in 1Q for new products launch while controlled in 2Q 527 462 (JPY mn) 420 389 322 338 13/1Q 13/2Q 13/3Q 13/4Q 14/1Q 14/2Q 19

  21. Slide 21: Marketing Expenses per New Business

    Marketing Expenses per New Business :Marketing expenses per new business (JPY thousand) :Marketing expenses/Annualized premium of new business 71  Exceeded JPY 70K Y-on-Y up 86% due to increased 47 marketing expenses 38 Y-on-Y up 47% 15 and slower new 10 12 business  Controlled on a 13/1H 13/2H 14

  22. Slide 22: TV Commercial Expenses

    TV Commercial Expenses  TV commercial not performed as assumed despite more expenses : TV commercial expenses : Number of search for Lifenet 11/2H 12/1H 12/2H 13/1H 13/2H 14/1H TVCM 見積りトライ 見積りトライ 見積りトライ 見積りトライ 見積りトライ （札幌編） 妊婦編 新婚編 プロ野球選手編 死亡保険編 （福岡編） 見積りトライ 見積りトライ 見積りトライ ブランド訴求編 保険見直し編 女性医療保険編 （東京編

  23. Slide 23: Ordinary Profit/Loss Improved

    Ordinary Profit/Loss Improved  Improved steadily towards profitability 1 (JPY mn) (JPY mn) 2013/1H 2013/2H 2014/1H Ordinary loss before amortization (624) (574) (450) cost (450) Amortization cost (530) (530) (530) Y-o-Y improved (574) 28% Ordinary loss (1,154) (1,104) (980) (624) 13/1H 13/2H 14/1H

  24. Slide 24: Positive Cash Flows from Operating Activities

    Positive Cash Flows from Operating Activities 1,208 (JPY mn) 1,151  Continuously recording positive 768 despite marketing expenses increased  Year-on-year 50% increased 13/1H 13/2H 14/1H 23

  25. Slide 25: Mortality Margin Recorded Steadily

    Mortality Margin Recorded Steadily (JPY mn) 869  Steadily recorded mortality margin 596 544 despite increase of insurance payments  Year-on-year 60% increased 13/1H 13/2H 14/1H 24

  26. Slide 26: Insurance Claims and Benefits

    Insurance Claims and Benefits (JPY mn) 682  Payments 570 554 226 Benefit claims increased due to 192 policies-in-force 231 increase 378 456 Insurance claims  31 insurance 323 claims and 2,412 benefit claims 13/1H 13/2H 14/1H 25

  27. Slide 27: Provision for Policy Reserves

    Provision for Policy Reserves :Provision for policy reserves (JPY mn)  Adopt the five- :Provision for policy reserves/Insurance premiums (%) 1,607 1,690 year Zillmer 1,353 method since business 41.2 41.3 commencement 37.5  Increased moderately due to reinsurance 13/1H 13/2H 14/1H resolution 26

  28. Slide 28: Fundamental Profit

    Fundamental Profit (JPY mn) (JPY mn) Mortality margin 2013/1H 544 2013/2H 596 2014/1H 869  Improved Expense margin (loss) (1,604) (1,629) (1,868) fundamental Interest margin (loss) Fundamental 7 (3) 5 profit while (1,052) (1,036) (993) profit (ref. ) Insurance increasing 3,629 3,908 4,155 premiums

  29. Slide 29: Financial Condition

    Financial Condition (JPY mn) 13/03 14/03 14/09 Total assets Cash and deposits 20,450 21,188 21,727 353 418 455  Launched the Money held in trust - 1,000 1,007 investment of Securities Government 13,488 14,154 15,126 foreign bonds in 7,331 6,636 7,391 bonds Municipal bonds - - 510 money held in Corp

  30. Slide 30: Solvency Margin Ratio

    Solvency Margin Ratio1 2,266% 2,013%  Increased due to reduction of risk 1,922% by reinsurance solution Average of 4 major insurance companies as  Maintained at of March 31, 20142 846% healthy level 13/03 14/03 14/09 (YY/MM) 1. The solvency margin ratio measures a life insurance company’s ability

  31. Slide 31: European Embedded Value

    European Embedded Value1 (JPY mn) 22,907 22,449  Decreased by 18,746 reviewing future Value of 11,831 11,732 in-force operating expenses 6,668 business assumptions and decline of interest rates 12,078 11,075 10,716 Adjusted net assets  Negative value of new business 13/03 14/03 14/09 (YY/MM) 1. Li

  32. Slide 32: Value of New Business (VoNB)

    Value of New Business (VoNB) (JPY mn) 838  Negative due to 620 increased marketing :Fiscal Year :First-half of fiscal year expenses 271  Aim to improve Left: value of new business 126 Right: value of new business (ultimate unit cost base) VoNB by controlling marketing expenses (200)(177) and effic

  33. Slide 33: VoNB (Ultimate Unit Cost Base)

    VoNB (Ultimate Unit Cost Base) Per new business (JPY mn) 2013 13/1H 14/1H for 1H of FY2014 (JPY thousand) Certainty equivalent present value of future profit 4,442 2,441 1,720 114 －） Time value of financial options and guarantees － － － － －） Frictional cost of capital (28) (16) (12) (0) －） Allowance

  34. Slide 34: Structure Breakdown of VoNB per Policy

    Structure Breakdown of VoNB per Policy  Initial expenses increased significantly due to increase of advertising expenses with new products launch VoNB per policy (ultimate unit cost base) 18 (JPY thousand) Products mix Insurance change Ultimate premiums Interest rates Other 11 Initial expenses unit

  35. Slide 35: Contents

    Contents 1. Results for 2Q of Fiscal 2014 2. Key Initiatives 3. Change of Management Goal 34

  36. Slide 36: Key Concept of Initiatives

    Key Concept of Initiatives  Continuously focusing on priority areas of our mid-term business plan Priority Areas 1. Sustainable growth in insurance premium income (top-line) 2. Improvement in productivity 3. Being an "innovator" (front-runner) in life insurance 35

  37. Slide 37: Sustainable Growth of Insurance Premiums

    Sustainable Growth of Insurance Premiums  For achieving sustained growth consistently ― Encourage more customers to visit our website Revitalizing LIFENET brand Diversify traffic source besides TVCM Enhance business partnerships ― Improve application CVR Enhance customer follow-up Continuously opti

  38. Slide 38: Sustainable Growth of Insurance Premiums

    Sustainable Growth of Insurance Premiums  Multiple measures for growth Enhance partnerships Revitalizing brand Visit website Optimize website Create alternative path Application Enhance customer follow-up Enrich customer services Retention Growth of insurance premiums 37

  39. Slide 39: Enhance Business Partnership

    Enhance Business Partnership  Business partnerships with companies having customer bases covering online direct, main sales channel Agency agreement with SURUGA Bank Agency agreement with TOYOTA TSUSHO (Oct. 2014) INSURANCE PARTNERS (Nov. 2014) Start selling through internet branch of Provide insur

  40. Slide 40: Support for Working Diversity

    Support for Working Diversity  Provide opportunities to apply insurance for increasing freelance workers × × Life Support Menu for Products introduction Application CrowdWorks freelancers freelance workers in members’ page in LIFENET website 39

  41. Slide 41: Other Priority Areas

    Other Priority Areas  Improvement in productivity ― Strictly control operating expenses  Being an “innovator” in life insurance ― Keeping on “edgy” challenges with “social cause” ― Aim to expand online insurance market 40

  42. Slide 42: Contents

    Contents 1. Results for 2Q of Fiscal 2014 2. Key Initiatives 3. Change of Management Goal 41

  43. Slide 43: Mid-term Business Plan (May 2013)

    Mid-term Business Plan (May 2013) 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 a future of life profitability (FY 2015) insurance that resonates (Based on ordinary profit before amorti

  44. Slide 44: Change of Management Goal

    Change of Management Goal  Changed ordinary income target into JPY9.5 billion and focused on profitability1 Ordinary income Ordinary profit1 Turn 15,000 profitable (JPY mn) (JPY mn) 9,500 8,500 (800) 7,603 5,976 (1,198) 3,773 (1,664)2 (2,184) 2011 12 13 14 15 2011 12 13 14 15 1. The ordinary profit

  45. Slide 45: Background of Management Goal Change

    Background of Management Goal Change  Customer change  Device change  Competition environment change → Primary difficulty is our taken measures have not yet led to growth in new business performance 44

  46. Slide 46: Business Forecasts

    Business Forecasts  Disclose business forecasts for fiscal 2014 (JPY mn) Ordinary income Ordinary profit1 Business forecasts (Fiscal 2014) 8,500 (800) Previous results (Fiscal 2013) 7,603 (1,198) Change % +12% +33% 1. The ordinary profit (loss) before amortization of deferred assets under Article 1

  47. Slide 47: Progress of Mid-term Business Plan (Ordinary Income)

    Progress of Mid-term Business Plan (Ordinary Income)  Steadily aim to achieve new target ordinary income of JPY 9.5bn (JPY mn) :Fiscal Year 9,500 :First-half of fiscal year 8,500 7,603 Y-on-Y 5,976 20% up 3,773 4,393 3,660 2,821 1,611 2011 12 13 14 15 (Fiscal year) 46

  48. Slide 48: Progress of Mid-term Business Plan (Ordinary Profit / Loss)

    Progress of Mid-term Business Plan (Ordinary Profit / Loss)1  Aim to increase ordinary income and improve productivity towards profitability (JPY mn) profitability1 Y-on-Y :Fiscal Year 28% improved :First-half of fiscal year (624) (450) (908) (800) (1,192) (1,198) (1,664)2 (2,184) 2011 12 13 14 15

  49. Slide 49: Renewed Mid-term Business Plan

    Renewed Mid-term Business Plan  Aim to achieve mid-term business plan without changes in qualitative description Offer new products and services as an “innovator” to create the future of life insurance that resonate with stakeholders, LIFENET2015 and achieve the highest sustainable growth among onl

  50. Slide 50: Always with Customers

    Always with Customers  Customers’ convenience comes first 49

  51. Slide 51: 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,

  52. Slide 52: 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 forecasts. Earnings projections and o

  53. Slide 53: Appendix

    Appendix oD) LiFENE] LIFENET INSURANCE COMPANY

  54. Slide 54: 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

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