Dai ichi Life : Announces Financial Results for the Three Months Ended June 30, 2017 PDF

[Unofficial Translation]

August 9, 2017

On August 9, 2017, Dai-ichi Life Holdings, Inc. (the "Company", President: Seiji Inagaki) announced its financial results for the three months ended June 30, 2017. The following is a message from President Inagaki to our stakeholders.

1. Results for the Three Months Ended June 30, 2017

   The Domestic Life Insurance Business has successfully shifted its product mix strategically toward protection type products. Overseas Life Insurance Business continued a trend of favorable sales. While Dai-ichi Life net income declined due to hedge-related investment gains in the previous year, favorable financial markets improved the return on investments and each Group company reported earnings better than the Group expectation. Share exchange gain from the Janus Henderson merger increased Group net

   income significantly compared to last year.

   Net Income attributable to shareholders of parent company Domestic Sales in number of policies

   100

   80

   60

   40

   (billions of yen)

   Net income

   Overseas life

   & asset mgt.

   48.4 71.9

   +48.5%

   Year on year（1）

   Overseas life

   & asset mgt.

   350

   300

   250

   200

   150

   (thousand)

   20

   0

   Mar-17 1Q

   accounted 18% of total（2）

   Mar-18 1Q

   66% of total	81% of total

   100

   50

   0

   Mar-17 1Q

   Mar-18 1Q

2. Net income for the current quarter includes share exchange gain of 23.3 billion yen

3. Overseas business accounted for 27% excluding the impact of share exchange gain.

   Individual insurance Neo First Individual annuities Single premium Dai-ichi Frontier

   Thank you for your continued support of Dai-ichi Life Holdings, Inc. I would like to start by describing the quarter results in terms of sales performance. Dai-ichi Life adjusted product features to better reflect customer demand when the company revised assumed rates of return in April. The company also adjusted compensation level of the sales representatives. These actions contributed to the growth in protection-type products. Dai-ichi Frontier Life also adjusted product features and grew the sale of foreign currency single premium products. Sales went favorably in Overseas Life Insurance Business, too. In particular, Group Business in Australia signed a number of new partners and increased new sales significantly.

   Secondly, earnings for the quarter were in line with our expectation. Ordinary revenue went down as Dai-ichi Life shifted its product mix to protection-type products. Ordinary profit also went down because the company recorded gains on hedge-related investment transactions during the corresponding quarter last year. Excluding those gains, improvement in financial markets elsewhere led the earnings, including Dai-ichi Life, to a level better than the Group expectation. The Group also recorded share exchange gain as Janus Capital and Henderson Group merged in the end of May, leading to a significant increase in consolidated net income for the quarter.

   Thirdly, group embedded value at the end of June 2017 increased from the end of March 2016 to approximately 5.8 trillion yen due to improvements in economic conditions. Value of new business increased reflecting favorable sales activities by the Group companies.

4. Final Comments from the President

This is the final year of the medium-term management plan "D-Ambitious." In the Domestic Life Insurance Business, the Company is accelerating its drive to shift its product portfolio to protection-type products, with the launch of new products that reflected premium changes in April. The Company plans to strengthen its sales effort in order to grow the in-force base and thus increase corporate value over the medium-to-long term. We appreciate your continued support.

（Please refer to the following review of operation）

Review of the Group Financial Results for the Three Months Ended June 30, 2017

Consolidated Financial Results Highlights

(billions of yen unless otherwise noted) (Reference)

3 months ended Jun-16	3 months ended Jun-17 (a)	Change
Ordinary revenues	1,676.0	1,592.5	△ 83.5	△ 5%
Ordinary profit	117.6	98.1	△ 19.4	△ 17%
Net income	48.4	71.9	+ 23.4	+ 48%

Year ending Mar-18 (B)
*Disclosed on May 15, 2017	(a/b)
6,004.0 363.0 179.0	27% 27% 40%

(1)

(Note) Net income represents net income attributable to shareholders of parent company.

1. Consolidated Results Highlights

   Consolidated ordinary revenues declined by 80 billion yen against the first quarter of the previous year. Dai-ichi Life in August last year stopped sales of single premium whole life, and saw a decrease in premium revenue. On the other hand, sales of protection-type products and savings-type products at Dai-ichi Frontier Life increased and overall sales were in line with the Group's expectation.

   Ordinary profit declined by 20 billion yen. The decline was due to a difficult comparison as Dai-ichi Life recorded hedge-related investment gains during the first quarter of the previous year, and overseas life insurance companies' earnings were higher due to one-time factors, partly offset by an improvement in Dai-ichi Frontier Life. Net income attributable to shareholder of parent company, or consolidated net income, increased by 20 billion yen. Dai-ichi Life recorded lower extraordinary losses and the Group recorded a share exchange gain on the Janus Henderson merger.

   Financial Results of Each Group Company

   【Dai-ichi Life】(1) billions of yen			【Dai-ichi Frontier Life】 billions of yen			【Protective Life (USA)】(2) millions of USD			【TAL (Australia)】(2) millions of AUD			【Consolidated】 billions of yen
   3 months ended Jun-16	3 months ended Jun-17	Change	3 months ended Jun-16	3 months ended Jun-17	Change	3 months ended Mar-16	3 months ended Mar-17	Change	3 months ended Jun-16	3 months ended Jun-17	Change	3 months ended Jun-16	3 months ended Jun-17	Change
   Ordinary revenues	1,022.1	905.1	(11%)	451.3	348.8	(23%)	2,069	2,513	+21%	913	921	+1%	1,676.0	1,592.5	(5%)
   Ordinary profit	120.2	80.7	(33%)	(20.9)	6.1	--	172	112	(35%)	64	41	(35%)	117.6	98.1	(17%)
   Net income (3)	59.3	38.6	(35%)	(21.7)	2.7	--	115	75	(35%)	44	31	(28%)	48.4	71.9	+48%

2. In relation to the shift to a holding company structure, results of Dai-ichi Life for the three months ended June 2016 presented are the results of former Dai-ichi Life.

3. Figures of Protective Life and TAL are disclosed after re-classifying items from Protective Life and TAL's financial statements under United States' and Australian accounting standards, respectively, to conform to Dai-ichi Life Holdings' disclosure standards. For consolidation, these financial statements are translated into Japanese yen at rates of 1USD=112.68 yen (Mar-16) and 112.19 yen (Mar-17), 1 AUD=76.74 yen (Jun-16) and 86.18 yen (Jun-17), respectively.

4. Figures of "Consolidated Net income" represent those of "Net income attributable to shareholders of parent company."

5. Financial Results of Each Group Company [1] Dai-ichi Life

   During the quarter, Dai-ichi Life continued to control sale of savings-type products, leading to a decline in

   premium and other revenue. Dai-ichi Life recorded significant gains on derivative transactions due to the strong yen in the prior year when financial markets around the globe were clouded by uncertainty in the UK in light of the referendum in late June asking whether the country should exit the EU or not. Financial markets regained stability and the yen weakened during the first quarter of the current year, leading to an improvement in investment spreads, and net income excluding the impact exceeded the Group expectation.

   [2] Dai-ichi Frontier Life

   Dai-ichi Frontier Life introduced a new foreign currency annuity product in April, contributing to the popularity of products in the market, and a growth in premium revenue. Improved sales increased core profitability of the company and lower burden of reserve requirement due to improved financial conditions improved the results of Dai-ichi Frontier from a loss in the previous year to profit this year.

   [3] Protective Life

   Sale of universal life insurance in the Life Marketing segment was favorable. In the Annuities segment, sale of variable annuities remained weak but the sale of fixed annuities remained favorable. The contribution of consolidating United States Warranty Corporation provided a positive contribution to Asset Protection segment. However, an increase in claims from policies in the Acquisition segment reduced the earning of the segment and pre-tax operating income of the company. Net income of the company declined further compared to the prior year as recorded capital gains related to modified co-insurance contracts boosted earnings during the previous year.

   [4] TAL

   TAL signed with a number of new partners in the Group business during the quarter, while sales in the Individual business remained favorable. Revenues increased as policies in force grew. Insurance balance improved somewhat during the quarter against the previous year and together with cost controls, the company reported an improvement in underlying profit. During the corresponding quarter last year, interest rates declined faster, making the year on year comparison difficult and contributed to the 28% decline in net income.

6. Group Sales Results

The following statements describe the sales activities of the Group.

As for the domestic life insurance business, Dai-ichi Life introduced new product features reflecting customer needs when the company changed the assumed rates of return in April, and made an adjustment in its compensation system for sales representatives to promote protection products. That resulted in growth in sales of the flagship products such as Bright Way and Crest Way. The sale of protection-type nursing insurance for business owners remained strong, leading to high growth in third sector products. For Dai-ichi Frontier Life, a high growth in sales is related to volume sales of short-maturity annuity products. The company restarted the limited sale of yen-denominated annuities and introduced a new foreign currency annuity that can be converted to whole life once the investment period is over, all contributing to a popularity of products in the market. Strong sales of products based on medical big data at Neo First continued and contributed to a growth