Can you tell us the reason for recoding a loss though in-force business is growing , and the prospect for turning into the black?
First, we explain the impact of growth in new business on accounting profit. Under current statutory accounting on the profit and loss statement, the entire acquisition cost for new business is recognized at the time of acquisition. On the other hand, the income from insurance premiums is recognized over a long period of time. So, the more new business grows, the greater the profit decline in the first fiscal year due to an increase in acquisition costs posted during the year. In addition, due to the ratio of new business to in-force business being relatively high as we have been in business for fewer years, our ordinary profit tends to record a loss.
See details of Profit Structure under Current Statutory Accounting.
Currently, we are prioritizing the growth of in-force business performance rather than recording a profit, so we proactively invest in marketing while focusing on the priority area of our Management Policy.
We aim to turn into the black in ordinary profit in the mid-2020s. For details, please refer to Future Direction in the Presentation Material for Investors Second Quarter for Fiscal 2020.
Can you tell us Lifenet's management policy?
Aiming for steady growth onward, Lifenet formulated a management policy in November 12, 2018.The summary is as follows.
Summary of Management Policy
See the detail of Announcement of New Management Policy.
What is your product strategy?
Lifenet provides simple and comprehensive pure protection-type insurance products which meet customer needs. We have four products; term-life, whole-life medical, long-term disability and cancer insurance.
See product details in the following news release:
Term-life (renewal in April 2018)
Whole-life medical (relaunched as a new product in December 2019)
Long-term disability (relaunched as a new product in June 2016)
Cancer (newly launched in August 2017)
Why did Lifenet enter into KDDI CORPORATION as its partner in the telecommunication sector?
Lifenet and KDDI, a Japanese telecommunications company with a strong brand and an extensive customer base, entered into a capital and business alliance in April 2015 with the aim of providing new financial services by combining life insurance with communications.
The three main reasons are as follows:
･KDDI and Lifenet both are interested in exploring the possibilities in planning and operating new customer-oriented services.
･KDDI has a deep understanding of the financial industry as it already has affiliated bank and non-life insurance companies.
･KDDI respects our continued management independence.
KDDI transferred all shares held in Lifenet to au Financial Holdings, the intermediate financial holdings company in December 2019. This will make au Financial Holdings the top major shareholder of Lifenet. In conjunction with this change, the three companies have also concluded a business alliance agreement.
What is your future sales channel strategy?
We have focused on the online sales channel since the company started business in May 2008. This has allowed us to increase the number of policies-in-force by offering highly cost-competitive products as well as convenience for customers. We believe the online channel is the best way to achieve our business goals and Manifesto.
In addition, we have also offered our products through insurance sales agents specializing in online life insurance since October 2008 in order to make it easier for our prospective customers to compare and understand our products and be completely satisfied with the products and services we offer. Moreover, we have strengthened over-the-counter sales since May 2014.
Furthermore, we started sales of au Life Insurance sold through KDDI Corporation in April 2016, and Seven Financial Service Life Insurance sold through Seven Financial Service Co., Ltd. in April 2020. Partner companies and Lifenet are exploring possibilities for joint efforts in planning and operating new customer-oriented services taking advantage of our combined strengths.
We will continue to focus on increasing the competitiveness of the online sales channel, but we will also look at developing other channels.