Management Strategy of Dai-ichi Frontier Life. Hiroshi KANAI, President, The Dai-ichi Frontier Life Insurance Co., Ltd.

Transcription

1 Management Strategy of Dai-ichi Frontier Life Hiroshi KANAI, President, The Dai-ichi Frontier Life Insurance Co., Ltd.

2 Bancassurance Market Sale of Insurance Products by Type (Savings-Type, Single Premium) (billions of yen) 6, 5, Dai-ichi Frontier Life started sales (October 27) 4, Foreign currency fixed 3, 2, Yen fixed 1, Yen variable (Source) Estimate by Dai-ichi Frontier Life based on various sources including Nikkin Report. Fixed products include hybrid of variable parts. Data exclude sale through securities brokers

3 Sales of DFL Sales Trend Market Share (billions of yen) 2, Foreign currency hybrid 1,8 1,6 1,4 F.C. fixed Yen hybrid Yen fixed Yen variable 1, % 3% 25% Top share for three consecutive years 3% 1,2 1, 2% < Share of product type (Mar-16) > F.C. fixed ca. 4% 8 15% Yen fixed* Including hybrid ca. 1% 6 4 1% Yen variable ca. 6% * Majority of products are offered without MVA 2 5% Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 (Fiscal years) % Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 (Fiscal years) 54

4 Number of Policies In-Force Number of policies in-force exceeded one million by June 216, making DFL the largest in the bancassurance market Number of Policies In-Force (Among Bancassurance Life) (thousands) 1, Dai-ichi Frontier Company A Company B 5 Company C 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Mar-12Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 (Source) Companies results announcements 55

5 Product Line-up Industry-leading line-up of 13 products Balanced portfolio of products for flexible sales under changing environment Fixed As of September 216 Variable Yen Foreign currency Yen Foreign currency Premier Pocket Annuity Premier Happiness Premier Story Premier Step Global 2 Premier Jump 2 Premier Currency Plus Premier Touch 3 Hybrid type Whole life Premier Receive Premier Receive Premier Jump 2 Premier Jump 2 Premier Gift Premier Gift Hybrid type Hybrid type 56

6 Development of Channel Partners 57 Number of Channel Partners Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Aug (Fiscal years) 216 Products Commissioned per Channels 4.2 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Aug (Fiscal years) 216 Management Knowledge Sales skill Differentiate with Support Revision of Insurance Business Act Support for introduction of new business process at channel partners Flawless introduction before May 29 introduction Enhance Training Program for Channel Partners Increased line-up of training programs Trainers share training know-how < Reference: Training Program Process Tree > FY Mar-16 more than 3 classes to 6,5 trainees Beginner Intermediate Advance Manager Sales communication training Training in improving presentation skills (service) (instructors) various trainings such as public pension, consulting, or taxation Sales communication training Lectures such as finance, economics, market forecast Management communication training Presence management training

7 Process & Underwriting Quality Lowest claim ratio among bancassurance providers, high-quality process Claim Ratios (FY 214) Of which claims related to sales, maintenance and payment Dai-ichi Frontier Life.27%.2% Company A.4%.35% Company B.43%.32% Company C.69%.51% Company D 1.53% 1.44% Company E 1.64% 1.48% Claim ratios: Claims received during the year (number of policies in force at the beginning of the fiscal year + new policies written during the year) (Source) Dai-ichi Frontier estimate based on companies disclosure 58

8 Productivity & Efficiency Maintenance Cost per Policy in-force Policy in-force per Employee 12 (Note) Indexed Fiscal year Mar-12 = 1 (billions of yen) Dai-ichi Frontier Company A Company B Company C 2 5 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 (Fiscal years) Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 (Fiscal years) (Source) Dai-ichi Frontier estimate based on companies disclosure 59

9 Challenges and Initiatives Business Environment DFL s Initiatives Market Economic Environment Competitors launching foreign currency products Products similar to our core Premiere Jump on the rise Negative interest rate policy by BoJ Difficulty in offering yen-denominated products, consumers turn to higher yielding foreign-currency products instead Further decline in interest rates in Australia Further provision of policy reserves relates to market value adjustment pressuring on accounting profits Revision of Premiere Jump family of products in May Develop new market with new immediate annuity products Initiatives to address maturities Study initiatives to reduce the impact on accounting profits Channel Partner Other Introduction of fiduciary duty Philosophy outlined by Market Working Group of the Financial Systems Council Disclosure of commission lead to compensation system New Group Structure for Dai-ichi Getting ready to disclose commissions Introduction of recurrent commission Group-wide cooperation for more synergies 6

10 Sales of DFL (continued) Sales Trend (Quarterly) Market for Fiscal Year ending Mar-17 (billions of yen) 5 4 Yen variable Yen fixed Yen Hybrid F.C. fixed F.C. Hybrid Foreign currency fixed Increasingly competitive Sale of hybrid products slowed as riskaverse customers shied away in volatile market Favorable sales of fixed products continue Yen fixed Stopped sale of part of fixed products in light of negative interest rates Yen variable 1 Sales slowed as more customers prefer risk averse products in volatile markets 61 1Q 2Q 3Q 4Q 1Q Mar-16 Mar-17 Sales also slowed as channel partners reviewed their marketing procedures in light of the enhanced fiduciary duty introduced by the revised Insurance Business Act (note) (Note) Effective on May 29, the Act makes it mandatory to observe customers intentions and to distribute sales literature before the signing. The Act also regulates sales through comparison.

11 Increased Competition Our peers launched mainly foreign currency products and thus tightened the competition DFL reacted with new products and revisions to address customer demand New Product Launches by Major Life Insurance Competitors F.C. fixed May 215 Company A July 215 Company C July 216 Company F Aug 216 Company B F.C. hybrid May 215 Company B Aug 215 Company D Sep 215 Company E Apr 216 Company C Jul 216 Company B Aug 216 Company A Aug 216 Company H Yen variable Jul 216 Company G Yen fixed Aug 216 Company B DFL <New> F.C. Hybrid <Revision> F.C. Hybrid <Revision> F.C. and Yen Hybrid <New> F.C. fixed Jul 215 Oct May 216 Jul 62

12 Maintaining Competitiveness 1 Introduction of new products Details of New Products Foreign currency fixed immediate annuity on July 21 - Answers immediate cash needs - Less competitive segment Commissioned partners 51 Cos (2 started sales) As of September 7 <Breakdown of Sales (August 216) > <Description of the Product Scheme (from sales literature) > 2% F.C. hybrid annuity New Products F.C. fixed annuity F.C. fixed whole life F.C. hybrid whole life Others 63

13 Maintaining Competitiveness (continued) 2 Strengthen initiatives to address maturities Current Status of DFL 9 years have passed since DFL started sales (October 27) Major contracts have 5- to 2-year period Policies in force and DFL s initiatives Sum insured of policies in force Now DFL started to take action to address increase in maturities of contracts Customers Sending notice of maturity together with sales literature addressing asset management and inheritance Started from September 216 Channel Partners Strengthen information flow and trainings to address maturities Expand Sales Expand Sales Retain customers 64 October 27 Started sales Maturity date

14 Moving Towards Profitability (billions of yen) Underlying earning capacity (note) (A) Hedging against minimum guarantee (2) (4) (6) (8) 65 (16.9) (21.9) Mar-14 Mar-15 Mar-16 Mar-17 1Q (note) Net income ((A) + (B) + (C) + (D)) (C) Provision for MVArelated policy reserve (D) Provision for contingency reserve (Fiscal years) 6.9 (B) Provision for policy reserve related to minimum guarantee (21.7) Net income / loss

15 Initiatives to Reduce Volatility in Accounting Utilize reinsurance and hedges to control risks related to minimum guarantee and ALM Reinsurance and hedges could also be effective on accounting profits Continue to study initiatives to mitigate the impact of financial environment changes that impact accounting Products Risks Hedge type Details Impact on accounting Variable products (Legacy) Variable products (New) Fixed products Minimum guarantee risk ALM risk Dynamic hedge Reinsurance Cash flow matching investment Adjustment of positions such as futures to offset the daily change in minimum guarantee value Transfer underwriting liabilities to reinsurers Construct asset portfolio so that expected cash flow of assets and liabilities match Gains and losses on hedging will offset provision or reversal of policy liabilities related to minimum guarantee when financial markets fluctuate No provision or reversal of policy liabilities related to minimum guarantee when financial markets fluctuate No provision or reversal of policy liabilities related to market value adjustment when interest rates fluctuate Utilize accounting for policy-reserve-matching bonds to offset impact on profits and net assets when interest rates fluctuate 66

16 (Reference) Economic Value Creation New business margins remains high despite being affected by low interest rates New Business Operating Margins 6.% 4.% New business operating margins = Adjusted new business value / Premium income Adjusted new business value is an internal KPI which allows for certain adjustments (note) to new business value and represents the present value of future profit from new business acquired. (Note) Before fixed expenses, before tax 4.3% 2.%.% Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 1Q (Fiscal years) 67

17 Disclosure of Specific Insurance Contracts Disclosure of policyholders total returns Total returns Charges to policyholders Variable Products Fixed Products Hybrid Products Quarterly letter to policyholders Specific Insurance Contracts: Insurance contracts with market risk such as variable annuities, foreign currency insurance, insurance with market value adjustment Disclose accumulating rate in semiannual letter to policyholders Disclose accumulating rate in quarterly letter to policyholders Variable Products Fixed Products Hybrid Products Initial fees - (No-charge) - (No-charge) Maintenance fees (note 1) (note 2) Surrender fees (note 3) - (No-charge) Annuity fees Currency translation fees (On F.C. products) (Note 1) The letter explains that accumulation rates are disclosed after deducting fees. (Note 2) Same explanation applies to variable part and fixed part of the product. (Note 3) Fees related to surrender penalty Commissions sales agents receive on sales of products 68 Disclosure starts in October 216

18 Initiatives for Disclosure of Commission Trends In order to comply with the fiduciary duty, DFL negotiates with its channel partners including regarding disclosure of commissions, and the shift to a recurrent commission Mega-banks DFL computer system ready to go < Image of sales literature > Ready to disclose commissions in October Banks adopting recurrent commission - AUM rather than commission - Sales activities in line with independent agents which focus on follow-up after the sales Negotiations with other channel partners continues 69

19 Group Cooperation & Synergies Sales of Dai-ichi Frontier Products by Dai-ichi Life (millions of yen) 3, (Note) Number includes sale by employees other than our sales representatives, such as in-house employees at Financial Planning and Consulting Department and Dai-ichi Insurance Shops 2, 1, 215.1Q 215.2Q 215.3Q 215.4Q 216.1Q < Schedule of extension of sales eligibility> May 215 Sep 215 Dec 215 May 216 Sep 216 Jan 217 In-house employees at branch offices Selected sales representatives in Tokyo Metropolitan Area Selected sales representatives nationwide <Products sold by sales representatives > Foreign currency fixed whole life and fixed annuity Extended selection of sales representatives nationwide Further extension of eligible sales representatives No. of eligible sales rep. 7 1,4 2,6 9, 25, 7

20 Medium-Term Business Plan KPIs Policies in-force (billions of yen) Net Profit (billions of yen) 7, 6 6, 4 5, 2 4, 3, (2) 2, (4) 1, (6) Mar-15 Mar-16 Mar-18 (F) (Fiscal years) (Note) Figures are forecast as at March 216 (8) Mar-15 Mar-16 Mar-18 (F) (Fiscal years) 71