第一生命ホールディングス（8750） – Supplementary Materials for the Fiscal Year Ended March 31, 2022 (The Neo First Life Insurance Company, Limited)

[Unofficial Translation] May 12, 2022 Seiji Inagaki President and Representative Director Dai-ichi Life Holdings, Inc. Code: 8750 (TSE Prime section) Supplementary Materials for the Fiscal Year Ended March 31, 2022 (The Neo First Life Insurance Company, Limited) May 12, 2022 Financial Results for the Fiscal Year Ended March 31, 2022 The Neo First Life Insurance Company, Limited (the “Company”; President: Yuji Tokuoka) announces its financial results for the fiscal year ended March 31, 2022. [Contents] Financial Results for the Fiscal Year Ended March 31, 2022 1. Business Highlights………………………………………………………………………………………..P.1 2. Policies in Force as of March 31, 2022 by Benefit ……………………………………………….P.3 3. Policyholder Dividends based on Financial Results for the Fiscal Year Ended March 31, 2022 ………………………………………………………….P.3 4. Investment of General Account Assets for the Fiscal Year Ended March 31, 2022 …….P.4 5. Unaudited Non-Consolidated Balance Sheet ……………………………………………………….P.9 6. Unaudited Non-Consolidated Statement of Earnings …………………………………………. P.14 7. Breakdown of Ordinary Profit (Fundamental Profit) ………………………………………….. P.16 8. Unaudited Non-Consolidated Statement of Changes in Net Assets……………………….. P.17 9. Status of Claims Based on Insurance Business Act ……………………………………………. P.18 10. Solvency Margin Ratio ……………………………………………………………………………….. P.19 11. Status of Separate Account for the Fiscal Year Ended March 31, 2022 ………………… P.19 12. Consolidated Financial Summary …………………………………………………………………. P.19 * Please note that this is an unofficial translation of the original disclosure in Japanese. 1. Business Highlights (1) Annualized Net Premiums Policies in Force Individual insurance Individual annuities Total Medical and survival benefits New Policies Individual insurance Individual annuities Total Medical and survival benefits As of March 31, 2021 (millions of yen except percentages) As of March 31, 2022 % of March 31, 2020 total 100.8 139.7 100.8 140,557 14 140,571 % of March 31, 2021 total 98.9 145.0 98.9 139,008 20 139,028 26,869 143.9 36,448 135.6 Year ended March 31, 2021 (millions of yen except percentages) Year ended March 31, 2022 % of March 31, 2020 total 110.2 ― 110.2 101.1 12,094 ― 12,094 9,589 % of March 31, 2021 total 117.8 ― 117.8 122.3 14,246 ― 14,246 11,726 (Notes) 1. Annualized net premiums are calculated by using multipliers for various premium payment terms to the premium per payment. 2. Annualized net premium for medical and survival benefits includes (a) premiums related to medical benefits such as hospitalization and surgery benefits, (b) premiums related to survival benefits such as specific illness, and (c) premiums related to premium waiver benefits. -1- The Neo First Life Insurance Company, Limited (2) Sum Insured of Policies in Force and New Policies Policies in Force As of March 31, 2021 As of March 31, 2022 Number of policies (thousands) Amount (billions of yen) Number of policies (thousands) Amount (billions of yen) % of March 31, 2021 total 112.4 Individual insurance 150.4 Individual annuities ― Group insurance Group annuities ― Note: The amount of individual annuities shows policy reserves for policies after the commencement of annuities. % of March 31, 2020 total 135.9 150.0 ― ― % of March 31, 2021 total 129.6 150.0 ― ― % of March 31, 2020 total 119.9 125.8 ― ― 1,629.7 0.3 ― ― 1,449.6 0.2 ― ― 482 0 ― ― 625 0 ― ― New Policies Year ended March 31, 2021 Year ended March 31, 2022 Number of policies (thousands) Amount (billions of yen) Amount (billions of yen) Number of policies (thousands) % of March 31, 2020 total % of March 31, 2020 total New Business Net increase by conversions % of March 31, 2021 total % of March 31, 2021 total New Business Net increase by conversions 101.6 250.9 ― ― ― ― ― ― 88.4 250.9 ― ― ― ― ― ― ― ― ― ― 117.1 244.2 ― ― ― ― ― ― 97.4 244.2 ― ― ― ― ― ― ― ― ― ― 175 ― ― ― 150 ― ― ― Individual insurance Individual annuities Group insurance Group annuities (3) Profit and Loss Items Premium and other income Investment income Benefits and claims Investment expenses Ordinary profit (loss) (4) Total Assets Total assets Year ended March 31, 2021 (millions of yen except percentages) Year ended March 31, 2022 % of March 31, 2020 total 110.5 173.8 189.7 263.1 86.7 159,538 265 53,336 13 (14,136) % of March 31, 2021 total 120.0 155.7 179.0 37.2 57.3 191,371 412 95,453 4 (8,094) As of March 31, 2021 % of March 31, 2020 total 144.4 352,842 (millions of yen except percentages) As of March 31, 2022 % of March 31, 2021 total 117.7 415,192 -2- The Neo First Life Insurance Company, Limited 2. Policies in Force as of March 31, 2022 by Benefit (thousands, millions of yen) Death benefits Survival benefits Hospitalization benefits General Accidental Others Accidental Illness Others Individual insurance Group insurance Total Individual annuities Amount Amount Amount Number of policies Amount Number of policies 537 1,629,767 ― 27 2,939,394 ― ― ― ― 0 44 0 3,778 ― 721 3,778 ― 721 5,120 ― 334 ― ― ― ― ― 840 802 ― 5 203,272 ― 370 Number of policies ― ― ― ― ― ― ― ― ― ― ― ― ― ― 349 ― ― ― ― ― ― ― Number of policies ― ― ― ― ― ― ― ― ― ― ― 537 1,629,767 27 2,939,394 ― ― 394 0 3,778 721 3,778 721 5,120 334 ― ― ― 840 5 802 203,272 370 Injury benefits Surgery benefits Disability benefits Others (Notes) 1. For individual annuities, amounts in “Survival benefits” show policy reserves after the commencement of payment of annuities. 2. Amounts in “Hospitalization benefits” show the amount of hospitalization benefit to be paid per 3. Amounts in “Disability benefits” show the amount of disability benefits paid per month. 4. Amounts in “Others” show the amount of the diagnosis benefits of the cancer medical treatment day. rider, etc. 3. Policyholder Dividends based on Financial Results for the Fiscal Year Ended March 31, 2022 As the Company deals only with nonparticipating individual insurance, there is no applicable item. -3- The Neo First Life Insurance Company, Limited 4.Investment of General Account Assets for the Fiscal Year Ended March 31, 2022 (1) Investment Status of Assets in Fiscal 2021 (i)Operational environment In fiscal 2021, the Japanese economy got reversal against the recession in fiscal 2020, but the recovery speed remained moderate due to COVID-19 pandemic and the voluntary restraint. Although in third quarter, when the spread of infection settled down for a moment, domestic demand recovered strongly, since the beginning of 2022, consumption dropped again due to drastic increasing infected people with the Omicron COVID-19 variant. And in overseas market, the U.S. economy recovered as employment statistics and income improved in the environment which had prolonged supply constraints and rising prices put downward pressure on the economy. On the other hand, the growth of the Chinese economy slowed down from the downturn in the real estate market and the curtailment of economic activities under the Zero-COVID policy. Amid these economic conditions, the operational environment was as follows. Yields on 10-year JGBs continued to be controlled at around 0% as the Bank of Japan held its accommodative monetary policy. However, overseas interest rates have risen sharply because central banks of each country have tightened their monetary policies since the beginning of the year, and domestic interest rates followed them. Yield on ten-year government bonds: April 1, 2021 March 31, 2022 0.090% 0.210% The Nikkei 225 Stock Average experienced a moderate decline in fiscal 2021 as the corporate growth slowed due to the COVID-19 and soaring resource prices. It temporarily recovered to the 30,000yen level in the summer with the expectation of a new government, and exceeded the highest level in 31 years. Nikkei 225 Stock Average: TOPIX: April 1, 2021 March 31, 2022 April 1, 2021 March 31, 2022 29,178 27,821 1,954 1,946 The JPY/USD rate continued to depreciate toward the latter half of the fiscal year due to the widening of the interest rates’ difference between Japan and the U.S., against the backdrop of the Federal Reserve Board’s (FRB) tightening monetary policy. The JPY/EUR remained broadly unchanged as the European Central Bank (ECB) maintained its accommodative stance. Toward the end of the fiscal year, the JPY depreciation was strengthened by the rise in global interest rates, therefore the JPY/EUR rate rose. JPY /USD: JPY/EUR: April 1, 2021 March 31 2022 April 1, 2021 March 31, 2022 \110.71 \122.39 \129.80 \136.70 (ii) Investment Policies of the Company The Company invests mainly in fixed income assets such as bonds with the aim of securing stable investment income. (iii) Investment Results The balance of general account assets at the end of the fiscal year ended March 31, 2022 was ¥415,192 million. The balance of assets under management included deposits of ¥269,244 million, money held in trust of ¥19,997 million, bonds of ¥80,843 million, and stocks of ¥1,460 million. In addition, investment income was ¥412 million, and investment expenses were ¥4 million. -4- The Neo First Life Insurance Company, Limited (2) Asset Composition Cash, deposits, and call loans Securities repurchased under resale agreements Deposit paid for securities borrowing transactions Monetary claims bought Trading account securities Money held in trust Securities Domestic bonds Domestic stocks Other securities Loans Real estate Deferred tax assets Others Reserve for possible loan losses Total Foreign securities Foreign bonds Foreign stocks and other securities Foreign currency-denominated assets (3) Changes (Increase/Decrease) in Assets Cash, deposits, and call loans Securities repurchased under resale agreements Deposit paid for securities borrowing transactions Monetary claims bought Trading account securities Money held in trust Securities Domestic bonds Domestic stocks Other securities Loans Real estate Deferred tax assets Others Reserve for possible loan losses Total Foreign securities Foreign bonds Foreign stocks and other securities Foreign currency-denominated assets % % As of March 31, 2021 Carrying amount 248,955 ― ― ― ― ― 62,872 52,007 1,249 9,616 9,616 ― ― 1,313 96 ― 39,611 (7) 352,842 ― (millions of yen except percentages) As of March 31, 2022 Carrying amount 269,244 ― ― ― ― 19,997 82,304 68,125 1,460 12,718 12,718 ― ― 1,797 169 1,309 40,371 (2) 415,192 ― 70.6 ― ― ― ― ― 17.8 14.7 0.4 2.7 2.7 ― ― 0.4 0.0 ― 11.2 (0.0) 100.0 ― 64.8 ― ― ― ― 4.8 19.8 16.4 0.4 3.1 3.1 ― ― 0.4 0.0 0.3 9.7 (0.0) 100.0 ― Year ended March 31, 2021 (millions of yen) Year ended March 31, 2022 89,452 ― ― ― ― ― 27,039 25,578 263 1,198 1,198 ― ― 583 (2) ― (8,626) (3) 108,442 ― 20,289 ― ― ― ― 19,997 19,431 16,117 211 3,102 3,102 ― ― 483 72 1,309 760 5 62,350 ― -5- The Neo First Life Insurance Company, Limited (4) Investment Income (5) Investment Expense Interest from bank deposits Interest and dividends from securities Interest from loans Interest and dividends Rental income Other interest and dividends Gains on trading account securities Gains on money held in trust Gains on investment in trading securities Gains on sale of securities Gains on sale of domestic bonds Gains on sale of domestic stocks Gains on sale of foreign securities Others Gains on redemption of securities Derivative transaction gains Foreign exchange gains Reversal of reserve for possible loan losses Other investment income Total Interest expenses Losses on trading account securities Losses on money held in trust Losses on investments in trading securities Losses on sale of securities Losses on sale of domestic bonds Losses on sale of domestic stocks Losses on sale of foreign securities Others Losses on valuation of securities Losses on valuation of domestic bonds Losses on valuation of domestic stocks Losses on valuation of foreign securities Others Losses on redemption of securities Derivative transaction losses Foreign exchange losses Provision for reserve for possible loan losses Write-down of loans Depreciation of real estate for rent and others Other investment expenses Total (millions of yen) Year ended March 31, 2021 Year ended March 31, 2022 398 ― 356 41 ― ― ― ― ― 9 ― 9 ― ― ― ― ― 5 ― 412 265 ― 246 18 ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― 265 (millions of yen) Year ended March 31, 2021 Year ended March 31, 2022 2 ― 2 ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― 9 ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― 3 ― ― 0 13 ― 0 4 -6- The Neo First Life Insurance Company, Limited (6) Other Information on Investments (i) Rates of Return (%) Year ended March 31, 2021 Year ended March 31, 2022 ― ― ― ― ― ― 0.51 0.44 3.00 0.51 1.17 ― 0.08 ― ― ― ― ― ― (0.02) 0.48 0.43 2.91 0.45 2.93 ― 0.11 ― Cash, deposits, and call loans Securities repurchased under resale agreements Deposit paid for securities borrowing transactions Monetary claims bought Trading account securities Money held in trust Securities Domestic bonds Domestic stocks Foreign securities Loans Real estate Total of general account Foreign investments Investment in trading securities Money held in trust (Note) The rates of return above are calculated by dividing the net investment income included in ordinary profit by the average daily balance on a book value basis. (ii) Valuation Gains and Losses on Trading Securities As of March 31, 2021 As of March 31, 2022 Value on Balance Sheet Value on Balance Sheet Valuation gains or losses included in the statement of earnings ― ― ― ― Valuation gains or losses included in the statement of earnings (2) (2) 19,997 19,997 -7- The Neo First Life Insurance Company, Limited (iii) Fair Value Information on Securities (other than trading securities) (millions of yen) As of March 31, 2021 As of March 31, 2022 Book value Fair value Gains (losses) (256) Gains 103 Losses Book value Fair value Gains (losses) (969) Gains 36 Losses 1,005 Held-to-maturity bonds 61,525 61,268 360 80,745 79,776 ― ― 58 ― 58 ― ― ― ― ― ― ― 94 26 58 9 9 ― ― ― 205 ― 203 1 1 ― ― ― ― ― 1,210 980 203 26 26 ― ― ― ― ― Policy-reserve-matching bonds Stocks of subsidiaries and affiliated companies Available-for-sale securities Domestic bonds Domestic stocks Foreign securities Foreign bonds Foreign stocks and other securities Other securities Monetary claims bought Certificates of deposit Others Total Domestic bonds Domestic stocks Foreign securities Foreign bonds Foreign stocks and other securities ― ― ― ― 1,110 1,347 ― 1,010 100 100 ― 1,249 98 98 ― ― ― ― ― ― ― ― ― ― 62,635 62,616 52,007 51,737 1,249 1,010 9,629 9,617 9,629 9,617 ― ― 236 ― 238 (1) (1) ― ― ― ― ― (19) (270) 238 12 12 ― ― 238 ― 238 ― ― ― ― ― ― ― 341 78 238 24 24 ― ― ― ― ― ― ― 1 1,706 1,558 (147) ― ― ― ― 1 1 ― ― ― ― 1,606 100 100 ― ― ― ― ― ― ― 361 82,451 349 68,125 1,606 ― 12 12,720 12 12,720 ― 1,460 98 98 ― ― ― ― ― 81,334 67,170 1,460 12,703 12,703 ― (145) (1) (1) ― ― ― ― ― (1,116) (954) (145) (16) (16) ― ― ― ― ― ― ― Other securities Certificates of deposit Monetary claims bought ― ― ― ― Note: The table above includes assets which are considered appropriate to handle as securities as defined in ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― Others the Financial Instruments and Exchange Act. Book value of stocks without market value and associations, etc. Not applicable. (iv) Fair Value Information on Money Held in Trust (millions of yen) As of March 31, 2021 As of March 31, 2022 Value on Balance Sheet ― Fair value Gains (losses) Gains Losses Value on Balance Sheet Fair value ― ― ― ― 19,997 19,997 Gains (losses) (2) Gains Losses ― 2 Money held in trust Money held in trust for investment purposes (millions of yen) As of March 31, 2021 As of March 31, 2022 Value on Balance Sheet Value on Balance Sheet Valuation gains or losses included in the statement of earnings Valuation gains or losses included in the statement of earnings ― ― 19,997 (2) Money held in trust for investment purposes The Company does not have any held-to-maturity or policy-reserve-matching money held in trust, or other money held in trust. -8- The Neo First Life Insurance Company, Limited 5. Unaudited Non-Consolidated Balance Sheet As of March 31, 2021 As of March 31, 2022 Amount (ASSETS) Cash and deposits Deposits Money held in trust Securities Corporate bonds Domestic stocks Foreign securities Loans Policy loans Tangible fixed assets Buildings Other Software Other Intangible fixed assets Reinsurance receivables Other assets Accounts receivable Prepaid expenses Accrued revenue Deposits Suspense payments Amount 248,955 248,955 ― 62,872 52,007 1,249 9,616 1,313 1,313 235 96 139 4,313 4,307 5 25,995 9,163 7,080 1,500 94 199 6 As of March 31, 2021 (millions of yen) As of March 31, 2022 Amount 327,687 Amount 396,143 1,956 3,285 325,731 399 5,393 392,857 462 6,437 8 1,323 3,997 0 62 7 66 333,554 47,599 39,599 39,599 (68,081) (68,081) 8 1,520 4,801 1 106 10 ― 403,053 47,599 39,599 39,599 (74,949) (74,949) (68,081) (74,949) 19,117 12,248 170 (109) (LIABILITIES) 269,244 269,244 Policy reserves and others Reserves for outstanding claims Policy reserves 19,997 82,304 Reinsurance payable 68,125 Other liabilities 1,460 12,718 1,797 1,797 337 169 Corporate income tax payable Accounts payable Accrued expenses Deposits received Suspense receipt Reserve for price fluctuations 167 Deferred tax liabilities 6,306 Total liabilities 6,301 (NET ASSETS) 5 Capital stock 23,359 Capital surplus 10,537 Legal capital surplus 7,511 Retained earnings 2,293 123 275 3 Other retained earnings Retained earnings brought forward Total shareholders’ equity Net unrealized gains (losses) on securities, net of tax Total of valuation and translation adjustments, etc. Other assets 282 329 170 (109) Deferred tax assets Reserve for possible loan losses ― (7) 1,309 Total net assets 19,287 12,139 (2) Total assets 352,842 415,192 352,842 415,192 Total liabilities and net assets (Notes to Balance Sheet as of March 31, 2022) 1. Valuation Methods of Securities Of securities (including securities managed as trust property in money held in trust), trading securities are evaluated by the market value method (costs are calculated by the moving average method) and held-to-maturity bonds are evaluated by the amortized cost method (straight-line method) based on the moving average method. Available-for-sale securities, except stocks, etc. without market value, are evaluated by the market value method (costs are calculated by the moving average method) based on the market price, etc. on the last day of March. Net unrealized gains or losses on these available-for-sale securities are presented as a separate component of net assets and not in the non-consolidated statement of earnings. -9- The Neo First Life Insurance Company, Limited 2. Depreciation of Depreciable Assets (i) Depreciation of Tangible Fixed Assets Excluding Leased Assets Depreciation of tangible fixed assets excluding leased assets and buildings is calculated by the declining balance method. (Depreciation of buildings is calculated by the straight-line method.) (ii) Depreciation of Leased Assets Depreciation of leased assets with regard to finance leases whose ownership does not transfer to the lessees is computed under the straight-line method assuming zero remaining value. (iii) Amortization of Intangible Fixed Assets Excluding Leased Assets Amortization of intangible fixed assets excluding leased assets is calculated by the straight-line method. Amortization of software is calculated by the straight-line method based on the estimated useful life of the software. 3. Reserve for Possible Loan Losses To prepare for possible loan losses, the reserve for possible loan losses is calculated based on the asset quality assessment regulations, the internal rules for self-assessment, the write-offs and reserves recording regulations, and the internal rules for write-offs and reserves that have been established by the Company. For loans to and claims on obligors for which the Company has serious concerns over their recoverability or whose value is assessed by the Company to have been damaged materially as a result of the assessment of individual loans or claims, the amount that is deemed necessary is provided. 4. Reserve for Price Fluctuations A reserve for price fluctuations is calculated in accordance with the provisions of Article 115 of the Insurance Business Act. 5. Calculation of National and Local Consumption Tax The Company accounts for national and local consumption tax by the tax-exclusion method. However, the tax-inclusion method is employed for operating expenses and other expenses. Of the non-deductible consumption tax, etc. related to assets, deferred consumption tax, etc. provided for in tax law is posted in prepaid expenses and is amortized evenly in five years. The non-deductible consumption tax, etc. other than deferred consumption tax, etc. is recorded as an expense in the fiscal year under review. 6. Policy Reserves Policy reserves of the Company are calculated and set aside in accordance with the method specified in the statement of calculation procedures (Article 4, Paragraph 2, Item 4 of the Insurance Business Act) pursuant to the provisions of Article 116 of the Insurance Business Act for contracts in which the liability under insurance contracts have begun as of the end of the fiscal year in preparation for performance of future obligations under insurance contracts. Of the policy reserves, insurance premium reserves are calculated as follows: (i) Reserves for policies subject to the standard policy reserve rules are calculated based on the methods stipulated by the Commissioner of the Financial Services Agency (Notification of the Minister of Finance No. 48, 1996). (ii) Reserves for other policies are established based on the net level premium method. Of the policy reserves, contingency reserves are set aside for covering risks that may accrue in the future, so as to secure the performance of future obligations under the insurance contracts in accordance with Article 69, Paragraph 1, Item 3 of the Regulation for Enforcement of the Insurance Business Act. 7. The Company has applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) and the Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March 26, 2021) from the beginning of the fiscal year ended March 31, 2022 and changed the accounting treatment of national and local consumption taxes from the tax-inclusion method to the tax-exclusion method. However, there is no change from the tax-inclusion method for operating expenses and other expenses. There is no cumulative effect on net assets at the beginning of the period. 8. The Company has applied the Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019; hereinafter the “Fair Value Measurement Accounting Standard”), etc. from the beginning of the fiscal year ended March 31, 2022 and decided to continue to apply the new accounting policy stipulated in the Fair Value Measurement Accounting Standard, etc. according to the provisional treatment stipulated in Paragraph 19 of the Fair Value Measurement Accounting Standard and Paragraph 44-2 of the Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019). There is no impact on financial statements. Section 9 below describes matters related to financial instruments, -10- The Neo First Life Insurance Company, Limited including a breakdown of financial instruments by level of fair value. 9. Matters Related to Financial Instruments, Etc. (1) Status of financial instruments The basic policy of the Company is to aim for effective asset management conforming to the diversification of the investment environment and asset management by conducting appropriate income and risk management and working to strengthen risk management from the perspective of maintaining the soundness of business in asset management. Based on this policy, the Company manages assets by paying attention to their safety and cashability (liquidity). As major financial products, securities are exposed to market risk and credit risk. The Company manages the market risk by measuring its amount based on value-at-risk (VaR), which is a typical method of measurement. The Company also manages the credit risk by regularly surveying the credit standing of individual investments. (2) Fair values, etc. of financial instruments The values on the Balance Sheet and the fair values of financial instruments and differences between them are as follows. (millions of yen) (i) Money held in trust (ii) Securities Value on Balance Sheet Fair Value Difference 19,997 19,997 ― a. Held-to-maturity bonds b. Available-for-sale securities 80,745 1,558 1,797 (iii) Loans Total assets 104,099 (Note) The information on deposits is omitted because they have no maturity dates and their fair value is 79,776 1,558 1,797 103,130 (969) ― ― (969) close to their book value. (3) Breakdown of financial instruments by level of fair value The fair values of financial instruments are classified into the following three levels according to the observability and importance of inputs used in the calculation of fair values. Level 1 fair value: fair value calculated using market prices, on an active market, of assets or liabilities whose fair value is calculated of the observable inputs related to the calculation of fair value Level 2 fair value: fair value calculated using inputs other than the inputs used for Level 1 of the observable inputs related to fair value Level 3 fair value: fair value calculated using significant inputs that are not observable related to the calculation of fair value If more than one input that has a significant effect on the calculation of fair value is used, the fair value is classified to the level of inputs whose priority is lowest in the calculation of fair value. 1) Financial instruments whose fair values are posted in the Balance Sheet Fair Value (millions of yen) Available-for-sale securities Money held in trust Securities Domestic stocks Foreign bonds Total assets Level 1 Level 2 Level 3 Total ― 19,997 ― 19,997 1,460 ― 1,460 ― 98 20,096 ― ― ― 1,460 98 21,556 -11- The Neo First Life Insurance Company, Limited 2) Financial instruments other than those whose fair values are posted in the Balance Sheet Fair Value (millions of yen) Level 1 Level 2 Level 3 Total Securities Held-to-maturity bonds Corporate bonds Foreign bonds ― ― ― ― 67,170 12,605 ― 79,776 ― ― 1,797 1,797 67,170 12,605 1,797 81,573 Loans Total assets (Note) Explanations about assessment techniques used in the calculation of fair value and inputs related to the calculation of fair value (i) Money held in trust Money held in trust is evaluated using prices obtained from the financial institutions. Money held in trust is classified to Level 2 based primarily on the level of the composition of trust property. The securities for which market prices on an active market can be used without adjustment are classified as Level 1. The Level 1 securities are primarily domestic stocks. If published market prices of securities on a market that is not active are used, the securities are classified to Level 2. (ii) Securities (iii) Loans Loans do not have a repayment deadline due to their characteristics, e.g. the loan limit is within the value of collateral, and their fair value is assumed to be close to their book value based on the expected time of repayment, interest rate conditions, etc., and the book value is used as their fair value. Loans are classified as Level 3. 10. The claims do not include any claims provable in bankruptcy, claims provable in rehabilitation and claims equivalent to these, doubtful claims, delinquent claims of three months or more, and restructured claims. 11. The accumulated depreciation of property, plant and equipment as of March 31, 2022 was ¥275 million. 12. The total amount of payables to subsidiaries and affiliated companies was ¥2 million. 13. The total amount of deferred tax assets was ¥19,352 million, and the total amount of deferred tax liabilities was ¥4 million. The amount of deferred tax assets subtracted as valuation allowances is ¥18,038 million. The major components of deferred tax assets were insurance policy reserves of ¥953 million, the amount of excess depreciation of ¥235 million and tax losses carried forward of ¥17,890 million. Of the amount deducted from deferred tax assets as the amount of valuation allowances, the amount of valuation allowance pertaining to tax losses carried forward is ¥17,890 million, and the amount of valuation allowance pertaining to future deductible temporary differences is ¥147 million. The major component of deferred tax liabilities was stock dividends receivable of ¥4 million. The main reason for changes in the amount deducted from deferred tax assets as the amount of valuation allowances is that the judgments on the recoverability of deferred tax assets were changed on the assumption of application of the Group Tax Sharing System. Amounts of tax losses carried forward and deferred tax assets by the losses carry-forward period are as follows. Within a year More than a year and within five years More than five years Total (millions of yen) Tax losses carried forward (*1) Amount of valuation allowances Deferred tax assets (*1) The tax losses carried forward is an amount obtained by multiplying the effective statutory tax 17,890 (17,890) ― 13,665 (13,665) ― 4,225 (4,225) ― ― ― ― rate. The actual effective tax rate for the fiscal year ended March 31, 2022 was 15.54%, and the major component of the difference from the statutory tax rate of 28.00% was -12.30% for valuation allowances. -12- The Neo First Life Insurance Company, Limited The Company has decided to apply the Group Tax Sharing System, with Dai-ichi Life Holdings, Inc. being the parent company under the system, from the next fiscal year. Starting from the end of the fiscal year under review, the Company has therefore been carrying out accounting and disclosure related to tax effect accounting for national and local corporate income tax on the assumption of application of the Group Tax Sharing System pursuant to Practical Solution on the Accounting and Disclosure Under the Group Tax Sharing System (Accounting Standards Board of Japan (ASBJ) Practical Solution No. 42 issued August 12, 2021). 14. The amount of net assets per share of the Company was ¥2,925.13. 15. The balance of unamortized outwards reinsurance commissions at the end of the fiscal year under review pertaining to reinsurance contracts stipulated in Article 1, Paragraph 5 of the Public Notice No. 50 of the Ministry of Finance of 1996 was ¥14,547 million. 16. The estimated future obligations of the Company to the Life Insurance Policyholders Protection Corporation of Japan under Article 259 of the Insurance Business Act were ¥584 million as of March 31, 2022. These obligations will be recognized as operating expenses in the period in which they are paid. 17. Amounts are rounded off to the unit stated. -13- The Neo First Life Insurance Company, Limited 6. Unaudited Non-Consolidated Statement of Earnings Year ended March 31, 2021 Amount (millions of yen) Year ended March 31, 2022 Amount ORDINARY REVENUES Premium and other income Premium income Reinsurance income Investment income Interest and dividends Interest and dividends from securities Interest from loans Gains on sale of securities Reversal of reserve for possible loan losses Other ordinary revenues Other ORDINARY EXPENSES Benefits and claims Claims Annuities Benefits Surrender values Other refunds Ceding reinsurance commissions Provision for policy reserves and others Provision for reserves for outstanding claims Provision for policy reserves Investment expenses Interest expenses Losses on money held in trust Provision for reserve for possible loan losses Other investment expenses Operating expenses Other ordinary expenses National and local taxes Depreciation Other ordinary expenses ORDINARY PROFIT (LOSS) EXTRAORDINARY LOSSES Losses on disposal of fixed assets Provision for reserve for price fluctuations Income (loss) before income taxes Corporate income taxes – current Corporate income taxes – deferred Total of corporate income taxes Net income (loss) for the year 159,808 159,538 141,119 18,418 265 265 246 18 ― ― 5 5 173,945 53,336 1,878 46 4,573 13,298 2,390 31,148 91,613 452 91,160 13 9 ― 3 0 27,839 1,142 599 541 0 (14,136) 1 0 1 (14,138) 8 ― 8 (14,147) 191,801 191,371 141,765 49,606 412 398 356 41 9 5 17 17 199,896 95,453 2,061 303 7,414 30,713 4,184 50,776 68,455 1,329 67,126 4 2 2 ― 0 34,313 1,669 536 1,132 0 (8,094) 37 34 3 (8,132) 8 (1,271) (1,263) (6,868) -14- The Neo First Life Insurance Company, Limited (Notes to Statement of Earnings) (1) Premium income 1. The standards for recording of premium and other income and benefits and claims are as follows. For premium income, the amount of insurance premiums received for which the liability under insurance contracts has begun is recorded. Of the insurance premiums received, the portion corresponding to the unexpired period as of the end of the fiscal year is transferred to policy reserves in accordance with Article 69, Paragraph 1, Item 2 of the Regulation for Enforcement of the Insurance Business Act. (2) Reinsurance income For reinsurance income, the reinsured amount of the amount paid as insurance proceeds, etc. pertaining to the primary insurance contracts based on the reinsurance agreement is recorded in reinsurance income at the time of the payment of the insurance proceeds, etc. Of modified coinsurance, in some transactions that do not give or receive cash, the amount received as part of the amount equivalent to new contract expenses pertaining to the primary insurance contracts based on the reinsurance agreement is recorded in reinsurance income, and the same amount is recorded in the total amount of claims against reinsurance companies as unamortized outwards reinsurance commissions and amortized over the reinsurance contract period. (3) Benefits and claims (excluding ceding reinsurance commissions) Benefits and claims (excluding ceding reinsurance commissions) are recorded for contracts in which the amount calculated based on the policy conditions was paid due to the occurrence of the grounds for payment under the policy conditions, using the said amount. Based on Article 117 of the Insurance Business Act, reserves for outstanding claims are transferred for insurance proceeds, etc. for which payment is not made although the claims, etc. are due and payable as of the end of the fiscal year, or the grounds for payment are deemed to have already occurred although they are not reported. (4) Ceding reinsurance commissions Reinsurance premiums agreed based on the reinsurance agreement are recorded in ceding reinsurance commissions at the time of receiving insurance premiums pertaining to the primary insurance contracts. 2. Total amount of expenses arising from transactions with subsidiaries and affiliated companies was ¥67 million. 3. Gains on sale of securities consist of a gain on the sale of stocks of ¥9 million. 4. Interest and dividends include interest and dividends from securities of ¥356 million and interest from loans of ¥41 million. 5. Losses on money held in trust includes a loss on revaluation of ¥15 million. 6. The amount of loss per share was ¥1,655.12. 7. Reinsurance income includes ¥15,119 million, the amount of increase in unamortized outwards reinsurance commissions for reinsurance contracts stipulated in Article 1, Paragraph 5 of the Public Notice No. 50 of the Ministry of Finance of 1996. 8. Ceding reinsurance commissions include ¥2,785 million, the amount of decrease in unamortized outwards reinsurance commissions for reinsurance contracts stipulated in Article 1, Paragraph 5 of the Public Notice No. 50 of the Ministry of Finance of 1996. 9. Amounts are rounded off to the unit stated. -15- The Neo First Life Insurance Company, Limited 7. Breakdown of Ordinary Profit (Fundamental Profit) Year ended March 31, 2021 Year ended March 31, 2022 (millions of yen) Fundamental profit (loss) Capital gains A Gains on money held in trust Gains on investment in trading securities Gains on sale of securities Derivative transaction gains Foreign exchange gains Others Capital losses Losses on money held in trust Losses on investments in trading securities Losses on sale of securities Losses on valuation of securities Derivative transaction losses Foreign exchange losses Others Net capital gains (losses) Fundamental profit plus net capital gains (losses) Other one-time gains A + B B Reinsurance income Reversal of contingency reserve Reversal of specific reserve for possible loan losses Others Other one-time losses Ceding reinsurance commissions Provision for contingency reserve Provision for specific reserve for possible loan losses Provision for specific reserve for loans to refinancing countries Write-down of loans Others Other one-time profits (losses) Ordinary profit (loss) C A + B + C (13,806) ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― (13,806) ― ― ― ― ― 330 ― 327 3 ― ― ― (330) (14,136) (7,940) 9 ― ― 9 ― ― ― 2 2 ― ― ― ― ― ― 7 (7,933) 5 ― ― 5 ― 166 ― 166 ― ― ― ― (161) (8,094) -16- The Neo First Life Insurance Company, Limited 8. Unaudited Non-Consolidated Statement of Changes in Net Assets Year ended March 31, 2021 Shareholders’ equity (millions of yen) Capital stock Capital surplus Legal capital surplus Balance at the beginning of the year Changes for the year Issuance of new shares Net loss for the year Net changes of items other than shareholders’ equity Total changes for the year Balance at the end of the year Balance at the beginning of the year Changes for the year Issuance of new shares Net loss for the year Net changes of items other than shareholders’ equity Total changes for the year Balance at the end of the year Year ended March 31, 2022 Balance at the beginning of the year Changes for the year Net loss for the year Net changes of items other than shareholders’ equity Total changes for the year Balance at the end of the year Balance at the beginning of the year Changes for the year Net loss for the year Net changes of items other than shareholders’ equity Total changes for the year Balance at the end of the year 32,599 15,000 15,000 47,599 (27) 197 197 170 47,599 ― 47,599 170 (280) (280) (109) Valuation and translation adjustments Net unrealized gains (losses) on securities, net of tax Total of valuation and translation adjustments, etc. Valuation and translation adjustments Net unrealized gains (losses) on securities, net of tax Total of valuation and translation adjustments, etc. Total shareholders’ equity 3,264 30,000 14,147 15,852 19,117 19,117 6,868 (6,868) 12,248 Retained earnings Other retained earnings Retained earnings brought forward (53,934) 14,147 (14,147) (68,081) Total net assets 3,237 30,000 14,147 197 16,050 19,287 Retained earnings Other retained earnings Retained earnings brought forward (68,081) 6,868 (6,868) (74,949) Total net assets 19,287 6,868 (280) (7,148) 12,139 24,599 15,000 15,000 39,599 (27) 197 197 170 39,599 ― 39,599 170 (280) (280) (109) -17- The Neo First Life Insurance Company, Limited Capital stock Shareholders’ equity Capital surplus Legal capital surplus (millions of yen) Total shareholders’ equity (Notes to Statement of Changes in Net Assets) 1. Stock Acquisition Rights and Own Stock Acquisition Rights Not applicable. 2. Dividends Paid Not applicable. 3. Amounts are rounded off to the unit stated. 9. Status of Claims Based on Insurance Business Act (millions of yen except percentages) As of March 31, 2021 As of March 31, 2022 ― ― Claims provable in bankruptcy, claims provable in rehabilitation and claims equivalent to these Doubtful claims Delinquent claims of three months or more Restructured claims Subtotal (Ratio to total) Performing loans Total ― ― ― ― (―%) 1,813 1,813 (Notes) 1. Claims provable in bankruptcy, claims provable in rehabilitation, and claims equivalent to these refer to those loans to debtors who are bankrupt for a reason such as commencement of bankruptcy proceedings, commencement of rehabilitation proceedings, and filing a petition for the commencement of rehabilitation proceedings and claims equivalent to such loans. ― ― ― ― (―%) 1,313 1,313 2. Doubtful claims refer to those loans whose principal and interest are likely not collectible based on the contract due to the deterioration of the financial condition and business performance of the debtor despite not being bankrupt. (Excludes claims listed in Note 1.) 3. Delinquent claims of three months or more refer to those loans whose principal and interest payment is three months or more overdue reckoned from the day following the scheduled payment date. (Excludes claims lists in Note 1 and Note 2.) 4. Restructured claims refers to those loans for which terms more favorable to the borrower, such as reduction or waiver of interest, rescheduling of interest payments or principal repayments, or debt writeoff, has been agreed for purpose of reorganizing the debtor’s management or supporting the debtor. (Excludes claims listed in Notes 1 through 3.) 5. Performing loans refer to those loans that are classified into categories other than those described in Note 1 through Note 4 for not having particular problems in the financial position and operating results of the debtor. -18- The Neo First Life Insurance Company, Limited 10. Solvency Margin Ratio Common stock, etc. Total solvency margin Contingency reserve Reserve for price fluctuations General reserve for possible loan losses (A) As of March 31, 2021 (millions of yen) As of March 31, 2022 (Net unrealized gains (losses) on securities (before tax) and deferred hedge gains (losses) (before tax)) × 90% (Multiplied by 100% if losses) Net unrealized gains (losses) on real estate × 85% (Multiplied by 100% if losses) Policy reserves in excess of surrender values Qualifying subordinated debt Excluded portion of policy reserve in excess of surrender values and qualifying subordinated debt (30,203) (53,066) Excluded items Total risk Others Assumed investment yield risk Guaranteed minimum benefit risk 3rd sector insurance risk Insurance risk Solvency margin ratio Investment risk Business risk (A) (1/2) x (B) x 100 (B) R1 R8 R2 R7 R3 R4 3,688.8% 1,111.8% (Note) The figures above are calculated based on Articles 86 and 87 of the Enforcement Regulations of the Insurance Business Act, and Announcement No. 50, Ministry of Finance, 1996. 11. Status of Separate Account for the Fiscal Year Ended March 31, 2022 Not applicable. 12. Consolidated Financial Summary Not applicable. 14,057 12,248 10 1,945 ― (147) 53,066 ― ― ― ― 2,528 595 1,329 8 ― 1,468 102 39,806 19,117 7 1,778 ― 213 ― 48,892 ― ― ― 2,158 567 1,202 6 ― 1,072 85 -19- The Neo First Life Insurance Company, Limited 42732281)()(RRRRRR+++++