How does the rising interest rates in Japan affect Lifenet Insurance's EEV (European Embedded Value) ?



When domestic interest rates rise, the components of EEV, "adjusted net worth" and "value of in-force business" are affected as follows, respectively.


First, with respect to "adjusted net worth," it will decrease due to the decline in the market value of securities as a result of rising interest rates.
Second, with respect to "value of in-force business", the present value of future profits related to mortality and morbidity arising from the difference between premium base and actual benefit payment will be decreased due to higher discount rates. However, the present value of future profits from asset investment will increase because future investment income from assets which are accumulated and invested for future claim payments will increase with higher interest rates.


Most life insurance companies hold higher assets than the amount of EEV, and the impact of interest rate fluctuations on the present value of future profits from asset investment is relatively large. When interest rates rise, the present value of future profits from policies-in-force increases more than the decrease in adjusted net worth, and EEV tends to increase.


On the other hand, Lifenet only offers protection-type products, so the amount of assets under management is small in relation to EEV, and the impact of rising interest rates on the present value of future profits from asset investment is relatively small. Therefore,  Lifenet’s EEV will decrease with the decrease of both adjusted net worth and value of in-force business when interest rates rise.
Please note that one of the major features of our EEV is low sensitivity with the change of interest rates.

Reference: Presentation Material for Investors Third Quarter for Fiscal 2023




What is the impact of rising domestic interest rates on Lifenet Insurance's financial statements?


Lifenet Insurance has voluntarily adopted IFRS (International Financial Reporting Standards), and its financial statements are evaluated on an economic value basis. Therefore, the impact on financial statements is basically similar to the impact on EEV, with a rise in interest rates resulting in a decrease inequity.


On the other hand, it is expected to have a positive impact on the new investment in bonds from the monthly premium income in the future with higher interest rates.









What is your business forecasts for fiscal 2023?




The consolidated business forecasts for fiscal 2023 announced on May 11, 2023 were revised. As for annualized premium of policies-in-force, we revised based on the fact that group credit life insurance has made a good start while performance of individual insurance has weakened. As for net income, it was revised because actual claims and other payments in Q1 of FY2023 were lower than expected and financial results can be assumed to be higher than expected in light of financial market movement.

We project annualized premium of policies-in-force of 28,200 million yen, insurance service result of 8,600 million yen and net income attributable to owners of the
Company of 5,800 million yen.

See details of Financial Results for 1Q of Fiscal 2023 Ending March 31, 2024.







What is your asset management strategy?



In order to ensure the future payment of insurance claims to our policyholders, most of our assets are invested in yen-denominated fixed income assets, such as public bonds and corporate bonds with high credit ratings.

In addition to domestic bonds, we also partially hold stocks and overseas public and corporate bonds, while keeping attention to the overall balance of assets. Going forward, we will aim to increase investment income under appropriate risk management and with consideration of the market environment.  









How is your surrender and lapse ratio?



Lifenet calculates its surrender and lapse ratio annualizing the average monthly number of policies-in-force for a specific duration divided by the average monthly number of surrendered and lapsed policies during the same duration. Our surrender and lapse ratio has been around 6% to 7% since business commencement. 


Surrender and lapse of policies generally tend to occur from newer policies. Lifenet has a higher ratio of new policies in comparison to other life insurance companies as we have been in business for fewer years. Thus, it may be expected that we have a higher surrender and lapse ratio than other companies. 
We will continue to endeavor to improve this ratio by enriching customer services.