Dai ichi Life : Progress Report on Dai-ichi Life Group's Medium-Term Management Plan 'D-Ambitious' covering Fiscal 2015 to 2017 and Update on Management Objectives (Quantitative Targets) PDF

[Unofficial Translation] March 31, 2017

Koichiro Watanabe President and Representative Director Dai-ichi Life Holdings, Inc

Code: 8750 (TSE First section)

Dai-ichi Life Holdings, Inc. (President: Koichiro Watanabe) hereby reports the progress of the medium-term management plan 'D-Ambitious' ("D-Ambitious") of the Dai-ichi Life Group (the "Group") covering fiscal 2015 to 2017 announced on May 15, 2015, together with updates on certain management objectives (quantitative targets).

1. Progress of D-Ambitious
2. While engaging in new initiatives to accelerate growth, the "Three Growth Engines" are driving our growth strategy according to plan.

   Since the beginning of D-Ambitious, our growth strategy driven by the "Three Growth Engines", namely the domestic life insurance business, the overseas life insurance business, and the asset management business, has been continuously generating results.

   [Domestic life insurance business] Dai-ichi Life has continued to gain support from many customers through the enhancement of sales channels, portfolio of products and services, and increased added-value to high-quality consulting services. In addition, Dai-ichi Frontier Life's new business secured the lion's share in the bancassurance market after securing the top market share for two consecutive years up to fiscal year 2015. Neo First Life strives to satisfy new customer needs focused on medical and healthcare and has steadily been expanding sales since it began selling products in fiscal year 2015, as scheduled. [Overseas life insurance business] Acquired in 2015, Protective is contributing to consolidated profit for the period of D-Ambitious. Leveraging its expertise in the acquisition business, Protective continues to show further growth in the U.S. market. As for the Asian Pacific region, overall the business is progressing favorably. In 2016, we opened a representative office in Cambodia and we have been enhancing our activities in the Mekong Delta region where rapid market growth is anticipated. [Asset management business] With the establishment of "Asset Management One" and the proposed merger of our group company Janus Capital Group in the United States and Henderson Group in the United Kingdom, the Group enhanced its activities in the Asian market and is set to expand to the European and North American markets by forming a trilateral geographic structure in the asset management field, supported by Japan, the United States, and Europe. While maximizing the synergies between our asset management business and life insurance business, we will move forward towards full-scale global business expansion.

   [New initiatives to accelerate growth] In addition to the progress mentioned above, we have been engaging in new initiatives considering the changes in the market environment as well as exploring possibilities of entering new businesses. In 2015, we embarked on "InsTech (*1)" which is aimed at creating new value by integrating the insurance business and technology. In 2016, we entered into a comprehensive business alliance with Japan Post Insurance Co., Ltd. which covers, among other things, overseas life insurance and the asset management businesses.

   (*1) "InsTech" is our top priority strategic challenge promoted by the entire Group. It is to create innovation that is unique to the life insurance business with the utilization of insurance and technology. While we envision the realization of an eco-system in collaboration with other industries, we will actively utilize outside development resources and take in various ideas to strive to lead the life insurance industry in terms of innovation.

3. Enhanced management and governance structure that supports our growth strategy

   As planned, the Group transitioned to a holding company structure in October 2016, marking the halfway point of the D-Ambitious period. This transition makes it possible for us to lay down flexible business strategies and enables full-scale global business expansion. Through faster decision-making at Group companies and synergies generated between each Group company, we will accelerate growth of the Group.

   Coinciding with the transition, we shifted to a company with an Audit & Supervisory Committee. This reinforcement of governance towards the diversified and multi-functional businesses of the Group will firmly support our growth strategy.

4. Managed to maneuver through head-winds in the current financial environment and maintained a structure that makes it possible for us to expand our growth strategy.

   Even after the start of D-Ambitious, the introduction of a negative interest rate policy by the Bank of Japan, the referendum on "Brexit" and the slow-down of the Chinese economy were events that increased political and economic uncertainty globally and the Group was forced to operate under a difficult environment.

   However, as a result of our efforts to swiftly diversify our business and operation territories, as well as adapting to environmental changes in each business area, we have been able to deal with risk factors adequately without ceasing to move the Group's growth strategy forward.

   As a result, we continue to expect consolidated net income (*2) of 197.0 billion yen for

   the fiscal year ending March 31, 2017, which marks a significant increase compared to profit levels before the start of D-Ambitious. For the nine months ended December 31, 2016, favorable progress was made as we had already reached 93% of our fiscal year forecast.

   Despite a challenging environment, the Group demonstrated its ability to maneuver through head-winds created by external factors. We will continue to take timely and adequate measures whenever required to increase resilience and maintain a robust structure that can drive and enhance a sustainable growth strategy.

   (*2) "Consolidated net income" represents "Net income attributable to shareholders of parent company".

5. Update on Management Objectives (Quantitative Targets)

The Group will continue to pursue its growth strategy. However, based on the fact that super-low interest rates in Japan are likely to persist for the long term and in light of global political and economic uncertainty, we decided to modify certain of the principal management objectives of D-Ambitious. These modifications will be reflected in the financial results from the fiscal year ending March 31, 2017.

In light of the drastic changes in the surrounding environment since the formulation of D-Ambitious, as we are focused on the mid-to-long term rather than being influenced by short-term fluctuations under the current financial environment, the purpose of these modifications is to update the positioning of certain management objectives and modify the definition of profits in order to present a more appropriate index that represents our efforts to create sustainable value for our shareholders.

[Objective Maintained]

1. Maintain objective for Group in-force annual net premium

   [Original objective] Increment of 9% from end of Mar. 2015 (as of end of Mar. 2018)

   Despite being considerably affected by the sudden and drastic change in the surrounding environment since the formulation of D-Ambitious, due to our efforts mentioned above, top line performance of our life insurance business is strong. Under such circumstances, we maintain our original objective for Group in-force annual net premium which is a top line index that directly reflects the performance of our sales strategy.

2. Update positioning of average EV growth (RoEV)

[Original objective] [Updated]

Average RoEV of over 8% (Three-year average from fiscal 2015 to 2017)

Update positioning from a management objective to a "mid-to-long term vision (*3)" and aim for average RoEV of over 8% during the mid-to-long term time frame.

(*3) "Mid-to-long term vision" differs from an objective that is set in order to be reached within a particular time period but is put in place for the purpose of confirming that capital efficiency required to support sustainable growth is maintained and secured without being influenced by short-term business environment fluctuations.

Embedded value ("EV") is an indicator of value in a life insurance company, in which future profit is calculated under the assumption that the yield curve at the time of the valuation date will be maintained for the future. Because of this calculation standard, EV as of the end of fiscal year 2015 was affected by the negative interest rate policy introduced at the beginning of 2016 and was calculated under the assumption that super-low interest rates would continue in the long term. This is why future profit estimates significantly declined compared to the end of fiscal year 2014 and EV for fiscal year 2015 showed negative growth even though policies in force on an annual net premium basis progressed favorably.

If interest rate levels as of the end of fiscal year 2017 were to return to levels similar to those as of the end of fiscal year 2014, which was the time D-Ambitious was formulated, it could be possible to achieve our EV growth objective. In reality, the Bank of Japan announced its commitment to low interest rates through a comprehensive review of its policy in September 2016. We believe that there is a high possibility that super-low interest rates will persist for the long term.

We have concluded that it is extremely difficult to achieve our EV growth objective for the D-Ambitious period mainly through value of new business.

Based on the above, regarding EV Growth (RoEV), we update our three year period