Overview of LIFENET INSURANCE COMPANY August 2014 LIFENET INSURANCE COMPANY Copyright LIFENET INSURANCE COMPANY All rights reserved. 0
Table of Contents I. Company Overview II. Overview of Japanese Life Insurance Industry III. Business Model & Strategy Copyright LIFENET INSURANCE COMPANY All rights reserved. 1
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 these products and services directly to customers over the Internet. By using the Internet, we are able to offer highly cost-competitive products and accept applications from customers at any given time. Copyright LIFENET INSURANCE COMPANY All rights reserved. 2
Lifenet at a Glance Ticker: 7157 Key Management Chairman & CEO: Haruaki Deguchi President & COO: Daisuke Iwase Executive Managing Director: Executive Managing Director: Key Figures (FYE 2014/3) Kazuko Nakada Shunichiro Higuchi Number of Policies in Force: 202,963 Sum assured: JPY 1,702,381 mn Annualized Net Premiums from Policies in Force: 8.1bn Premium and Other Income: 7.5bn Total Assets: 21.2bn Net Assets: 13.9bn Embedded Value: 22.9bn Number of Employees: 88 -Sales Force: 0 Solvency Margin Ratio: 1,922.2% Head Office Kojimachi NK Building, 2-14-2, Kojimachi, Chiyoda-ku, Tokyo 102-0083 Commencement of Operation May 18, 2008 (Established on October 23, 2006) Listing March 15, 2012 (Tokyo Stock Exchange Mothers market of the high growth and emerging stocks) Major Shareholders (March 31, 2014) Swiss Reinsurance Company Ltd 13.47% Asuka DBJ Investment Limited Partnership 13.47% MITSUI & CO., LTD. 11.38% Seven Financial Service Co., Ltd. 7.70% Shinsei Bank, Limited 4.58% Recruit Holdings Co., Ltd. 2.96% ASAHI Net, Inc. 2.76% Copyright LIFENET INSURANCE COMPANY All rights reserved. 3
Management Team ( as of March 31, 2014) Strong leadership and seasoned entrepreneurial management team with various backgrounds well suited for our innovative business model. Directors: Haruaki Deguchi, Founder Chairman & CEO 31 years at Nippon Life serving various positions including Head of Public Affairs and Head of International Planning and Operations. Bachelor of Law from Kyoto University. Daisuke Iwase, Co-Founder President & COO Ripplewood Japan and Boston Consulting Group. MBA from Harvard University (Baker Scholar) and Bachelor of Law from the University of Tokyo. Outside Directors: Kazuko Nakada Executive Managing Director GABA Corp. (Executive Director and Head of Marketing), Starbucks Coffee Japan (Executive Director and Head of Public Relations) and Dentsu Young and Rubicam. Bachelor of Humanities from Sophia University. Sakuya Fujiwara Former Deputy Governor of Bank of Japan Yoko Ishikura Former Professor of Keio University Graduate School, Media Design branch Shunichiro Higuchi Executive Managing Director, Chief Compliance Officer Head of Kinki Local Finance Bureau Ministry of Finance, and head of Policy Research Institute and Financial Supervisory Agency as head of the Insurance Supervisory Division. Bachelor of Economics from the University of Tokyo. Kazunari Uchida Professor of Faculty of Commerce, Waseda University Corporate Auditors: Seijiro Isa Yasuharu Fushimi Kenichi Masuda Tadasu Kawai Former Executive Managing Director of Asahi Mutual Life Insurance Co. Chairman & President, Tsuneishi Holdings Corporation Attorney-at-law, Partner, Anderson Mori & Tomotsune Former Senior Executive Officer of Sony Corporation Copyright LIFENET INSURANCE COMPANY All rights reserved. 4
Growth since business commencement in May 2008 Number of Polices-in-Force Policies-in-force "Hataraku-hito" (Long-term disability) "Jibun Plus" (Term medical care) "Jibun" (Whole-life medical coverage) "Kazoku" (Term-life death coverage) May 18, 2008 Commencement of Operation Nov. 21, 2008 Disclosure of Net Premiums (Product Cost Structure) Feb. 26, 2010 Launch of Longterm Disability 3,750 18,850 15,059 31,2092,177 11,371 23,5061,067 8,921 17,962 5,202 6,846 144 12,746 8,440 459 1,418 3,625 2,712 5,116 2,319 3,642 6,121 9,121 12,760 168 444 821 1,474 291 974 1,891 Jul. 14, 2011 Broadcasting of the TV program Cambrian Palace (TV Tokyo) 39,643 51,356 32,547 26,095 21,221 16,516 9,833 11,831 32,570 7,424 28,335 5,457 23,246 63,188 76,296 Mar. 15, 2012 IPO and Listing on the TSE Mothers 91,249 103,875 118,040 14,129 37,305 132,551 16,542 42,288 144,575 18,333 2,029 49,420 46,403 79,839 73,721 66,606 59,474 53,081 45,626 38,881 155,947 24,155 180,591 23,586 22,828 169,312 22,006 11,186 12,504 9,557 20,995 7,428 19,712 4,968 197,097 189,958 61,700 60,343 58,653 56,099 52,942 90,407 95,058 98,920 101,982 104,604 84,786 Jun. Sep. Dec. Mar. Jun. Sep. Dec. Mar. Jun. Sep. Dec. Mar. Jun. Sep. Dec. Mar. Jun. Sep. Dec. Mar. Jun. Sep. Dec. Mar. FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 202,963 Sum insured of policies-in-force 1,702,381 mn / Annualized premium 8,077 mn (as of March 31, 2014) Copyright LIFENET INSURANCE COMPANY All rights reserved. 5
Table of Contents I. Company Overview II. Overview of Japanese Life Insurance Industry III. Business Model & Strategy Copyright LIFENET INSURANCE COMPANY All rights reserved. 6
Key Characteristics of the Japanese Life Insurance Market Huge market Huge inefficiencies Huge changes World s 2nd largest market with approx. JPY 40 trln annual premiums Consumers bear the burden of high prices amidst a prolonged stagnation Proliferation of web-based financial services Approx. 90% Japanese households insured Lack of comparative information Diversifying consumer preferences for insurance products Approx. JPY 400,000 average annual premiums per Japanese household High turnover of untrained captive agents Industry deregulation aimed at promoting competition Copyright LIFENET INSURANCE COMPANY All rights reserved. 7
Huge Market Japan's life insurance market is the world's second largest, worth approximately JPY40 trillion. Roughly 90% of Japanese households have life insurance policies. Japanese Life Insurance Market (annual premiums) (JPY in tn) Ratio of households with policies 4 : 90.5% Average annual premiums per household 4 : JPY 415,000 Average cover amount per household 4 : JPY 27,628,000 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Private insurance¹ Cooperative insurance² Former Japan Post³ 44.6 43.6 44.4 44.9 44.5 42.0 42.7 40.9 40.5 40.8 41.0 5.7 6.5 14.3 12.3 11.7 11.2 4.6 9.2 5.3 5.5 5.9 4.5 4.9 4.5 4.2 4.4 4.9 35.2 35.3 35.1 37.0 38.1 31.8 25.9 26.4 27.9 29.2 28.5 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 1 Private insurance: Life insurance companies that are members of The Life Insurance Association of Japan; income from premiums and other sources. 2 Cooperative insurance: Cooperative insurance companies that are members of the Japan Cooperative Insurance Association; mutual aid premium contributions (total for life insurance and pension fund contributions). 3 Former Japan Post: Insurance premium until September 2007 (Postal Life Insurance); Japan Post Insurance included in data for private insurance from October 2007 following privatization. 4 Data as of FY2012. Source: Lifenet, based on data from The Life Insurance Association of Japan, the Japan Cooperative Insurance Association, and Japan Post Holdings Co., Ltd., a preliminary nationwide report on the life insurance industry (2012) by the Japan Institute of Life Insurance, and NLI Research Institute report. Copyright LIFENET INSURANCE COMPANY All rights reserved. 8
Huge Market Potential Sales channels for life insurance have been diversified, and more and more consumers are purchasing life insurance products via the Internet. We expect to see the trends continue going forward. Trends of Sales Channels and Preferred Sales Channels hereafter (%) Market Share of Online Life Insurance Number of Policies in Force (Lifenet and AXA Direct) AXA Direct LIFENET 218,810 256,452 0.2 2.9 4.5 10.5 29.3 22.7 Online Others Captive agents, Post offices, Banks, Securities brokers 39,774 90,344 63,188 158,465 118,040 169,312 10,237 23,506 16,268 27,156 40,425 49,498 53,489 5,116 5,121 3/2009 3/2010 3/2011 3/2012 3/2013 3/2014 Industry total (Mar. 2014) 143 mn Policies-in-force 202,963 37.6 Sales representatives (life insurers) Online life insurers (Mar. 2014) 256,452 Policies-in-force 1997 2009 2012 Preferred sales channel hereafter (as of 2012) Source: Lifenet, based on data from a preliminary nationwide report on the life insurance industry (2012) by the Japan Institute of Life Insurance. 0.18% High Growth Potential Copyright LIFENET INSURANCE COMPANY All rights reserved. 9
Table of Contents I. Company Overview II. Overview of Japanese Life Insurance Industry III. Business Model & Strategy Copyright LIFENET INSURANCE COMPANY All rights reserved. 10
Business Model We are a truly new customer-oriented life insurance company with an innovative business model and superior management philosophy in Japan. New Products New Sales Channels Simple products no rider, no participation, no cash value Disability income for individuals (first in Japanese life insurance industry) Internet Mobile Application (first in the world but ended in March 2014) Smartphone New Marketing Approaches Our Challenges Continue New Management Style Seminars by Top Management Books and Articles Social Media Tie-up Events (comedian, blogger, etc.) Transparency Human Capital Management Customer Communications Disclosure of net premiums and monthly operating figures Equal opportunity and diversity No retirement age Policyholder meetings Staff blog (relay system) Copyright LIFENET INSURANCE COMPANY All rights reserved. 11
Products We offer simple and competitively priced pure protection products. Internet-based low cost operations enable us to be extremely price competitive. On May 2014, we launched the renewal and new products which offer more extensive coverage with lower premium. 1 Our products have no maturity insurance, no dividends and no cash surrender value on our products. 2 Comparison of Lifenet and 3 other online life insurers term life insurance products (excluding risk sub-divided insurance products) under the following conditions: Insurance coverage amount 10,000 thousand yen / Insurance term 10 years. 3 As of August 2014, we also offer medical care insurance Jibun Plus. Copyright LIFENET INSURANCE COMPANY All rights reserved. 12
Competitive Cost Structure Internet-based low cost operations enable us to be price competitive. (Illustrative purpose only 1 ) Online sales channel holds down sales force Expense loading Costs to maintain sales teams Expense loading Commissions added by insurance companies Sales team personnel costs, employee personnel costs, office costs, utility costs, IT system costs, etc. Net premiums Other business costs Net premiums Other business costs Net premiums Net premiums Used for insurance payouts and other payments Assumed mortality rate based on the Standard Mortality Table 2007 developed by The Institute of Actuaries of Japan Monthly Premium Comparison for Term Life (As of 2011) (JPY) 8,000 6,000 4,000 2,000 0 3,450 3,476 3,484 815 NEXTIA (AXA Direct) 2,669 6,720 6,870 7,110 7,170 Orix Lifenet Sumitomo Dai-ichi Meiji Yasuda Nippon Company A Company B Company C Company D Company E Company F Net Premiums Expense Loading 1 Assuming traditional term life insurance without policyholders dividend through face-to-face selling. The proportion of expense loading and net premiums defers depending on age, sum insured, etc. Source: Diamond (October 8, 2011). Benefit: JPY30mn, 10 year term life, male, age: 30. Copyright LIFENET INSURANCE COMPANY All rights reserved. 13
Getting Quotes and Apply Online We make simple and easy-to-understand website to support the study of insurance by our customer. age Searching by the Company s name SEO Advertising Online Agent /Affiliate Insured amount Monthly premium Application is available on PC, tablet and smartphone website. Total monthly premium Calculated on August 11, 2014 Copyright LIFENET INSURANCE COMPANY All rights reserved. 14
Advanced Marketing Strategy We develop an advanced marketing strategy with an innovative mix of efforts and channels including high profile advertising icons. We have successfully acquired valuable marketing customers. Innovative Marketing Mix Effective mass-marketing approaches targeting volume business Our unique marketing approaches Documents and publications 20s 24% TV ads Marketing tie-ups Social media 30s 52% Strategic PR to generate publicity Marketing using all our employees Promotion efforts by top management SEO Initiative Underlying support Gradual kaizen improvements to marketing via our website and online advertising Website improvements Online ad optimization Copyright LIFENET INSURANCE COMPANY All rights reserved. 15
Cost Effective Marketing We improve our cost effectiveness through utilizing Internet as a main channel. Sales expense per new policy 1 : Major Life insurers in Japan (FY2013) 200 170 164 178 191 (JPY 000s) 206 150 134 136 100 78 60 64 50 35 0 LN A B C D F E H G J I 1 Calculated by Sales expense / New business. Sales expense includes sales activity expense and sales administration expense. New business includes individual insurance and individual annuity. Source: Disclosure documents (FY2013) Copyright LIFENET INSURANCE COMPANY All rights reserved. 16
A Unique Customer Base People in their 20s and 30s make up roughly 75% of our policyholder base, with just under 50% of new policyholders taking out life insurance for the first time. We are aiming to attract younger customers with high lifetime value to help build our business base over the medium and long term. Number of new policies by age group Reason for buying a policy 3 Lifenet 1 Reference: Average for other life insurers 2 1 Lifenet Insurance new customer data (FY2013) compiled by Lifenet Insurance customer survey. Based on number of new policies, 46,237 that took out during FY2013. 2 Annual statistics on customer age and gender (FY2013) compiled by The Life Insurance Association of Japan. Based on number of new policies. 3 FY2013 valid responses from 6,274. Copyright LIFENET INSURANCE COMPANY All rights reserved. 17
High Quality Services & Third-party Evaluation We have also received various awards for our innovative business model with high quality products and services. High Quality Services Awards Surrender and lapse ratio 6.6% 1 Average Claims Payment Period 2 3.51 days 1 Contact Center and Website awarded the highest rating three stars in the 2013 HDI Contact Center Rankings for 2nd consecutive year 1 Data as of FY2013. 2 Not including the number of days required to obtain lacking documents. Cases which required fact confirmation before insurance payments were made are not included when calculating the average number of days required for payment. Source: Weekly Economist s Product Ranking by Influential Financial Planners, Oricon Client Satisfaction Rankings 2014 for Insurance Premium Satisfaction, the Japan Institute of Design Promotion 2013 Good Design Awarded, HDI Japan the 2013 HDI Contact Center Rankings(Life Insurance Industry), Kakaku.com Insurance Kakaku.com Insurance Award 2013-Internet Category Copyright LIFENET INSURANCE COMPANY All rights reserved. 18
Management as Advertising Icons Deguchi, Founder, Chairman & CEO, and Iwase, Co-Founder, President & COO, have become high profile advertising icons through frequent media exposure and their distinguished backgrounds. Copyright LIFENET INSURANCE COMPANY All rights reserved. 19
Hybrid Corporate Culture Hybrid corporate culture of an Internet Company and a Life Insurance Company best suited for our innovative business model. Diverse employee backgrounds: work experiences, academic backgrounds, qualifications, age, gender. Entrepreneurial Open & Flat Innovative Enthusiastic Experienced Motivated Copyright LIFENET INSURANCE COMPANY All rights reserved. 20
Mid-term Business Plan On May 15, 2013, Lifenet announced the formulation of its mid-term business plan leading up to fiscal 2015 ending March 2016. LIFENET 2015 Offer new products and services as an innovator to create the future of life insurance that resonate with stakeholders, and achieve the highest sustainable growth among online life insurance businesses. Management Goal Achieve 15 billion in ordinary income (FY 2015) Push the company toward profitability (FY 2015) (Based on ordinary profit before amortization of deferred assets under Article 113 of the IBA¹) Approx. 6 billion 15 billion 1. IBA: Insurance Business Act FY2012 FY2015 Copyright LIFENET INSURANCE COMPANY All rights reserved. 21
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 original state. Life insurance is for the customers, not for the company. In order to achieve this goal, we will only offer products we can recommend with confidence. (2) We will be transparent. We will disclose information on our management, products and company as a whole on our website to actively communicate with customers and society. (3) We will be fair. We believe that our services will be more benevolent if the employees are free of any and all limitations they may feel in the work environment, and as such, we will not discriminate against education, gender, age, nationality, or familial situations. (4) We will adhere to laws protecting personal information and comply with laws, regulations, and other social standards. We pledge to be respectable global citizens, acting fairly and ethically. (1) Our products will be simple and comprehensible. There will not be complex policies with special provisions. (2) Life insurance is a financial product designed to mitigate risk, and we believe the customer should decide what products are necessary for them. As we feel it is critical for customers to be well informed of products and policies, we will make accessible any and all relevant information on our website for customers to make logical and rational decisions. The Customer Contact Center is also available for further clarifications and questions. (3) Our website will promote the understanding of not only our company's products, but of life insurance in general. (4) We will make life insurance products tangible via clearly written policies and comprehensible terms and conditions. III. Life Insurance will be Cost-Competitive (1) We believe that no one should pay premiums that are more expensive than necessary, and will be innovative and creative in order to develop and maintain the most cost-competitive products possible. (2) We will handle every step of the process in providing good products to our customers; from the development of the products to the sales. This allows for us to maintain our cost-competitive prices. (3) Our products will be cost-competitive, but the content of the products and our services will not be sacrificed. All communication with customers will be conducted accurately and quickly, including claim processes. (4) Life insurance is a very expensive purchase, and life is also very expensive. We want for our customers to spend less on life insurance, and more on enjoying life. IV. Life Insurance will be Convenient (1) We know our customers have very busy lives. That is why our customers can apply for our life insurance policies via the internet, 24 hours a day, 7 days a week. (2) Our documents require only a signature. There are no other typical official items required to verify personal identification. (3) Our definition of "surgery" is aligned with the national healthcare insurance point table, making the claim process much more convenient and comprehensible. (4) We have a proxy claim system, allowing for the third party designated by the claim holder to file a claim. The appointed proxy need simply to make a phone call to our contact center for necessary documents. This manifesto is not simply as a declaration. This is how we do things. Join us on our journey. Copyright LIFENET INSURANCE COMPANY All rights reserved. 22
This material is based on information as of August 2014. 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 other information on this may differ materially from actual performance due to various risks and uncertainties. http://ir.lifenet-seimei.co.jp/en/ Subscribe to our "IR email service" to receive news releases and website updates via email. Contact: Investor Relations, Corporate Development Dept. e-mail: ir@lifenet-seimei.co.jp