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Long-Duration Insurance Contracts Relating to Life Insurance Operations
 6 Months Ended
Sep. 30, 2024
Insurance [Abstract]  
Long-Duration Insurance Contracts Relating to Life Insurance Operations
18.
Long-Duration
Insurance Contracts Relating to Life Insurance Operations
The following tables present balances of and changes in the liability for future policy benefits as of and for the fiscal year ended March 31, 2024 and for the six months ended September 30, 2024.
 
   
Millions of yen
  
   
March 31, 2024
    
September 30, 2024
  
Present value of expected net premiums
  
Yen-denominated

insurance

(First Sector)
    
Yen-denominated

insurance

(Third Sector)
    
Foreign
currency
denominated
insurance
    
Yen-denominated

insurance

(First Sector)
    
Yen-denominated

insurance

(Third Sector)
    
Foreign
currency
denominated
insurance
  
Beginning balance
   ¥ 894,537     ¥ 1,389,063     ¥ 374,951     ¥ 873,038     ¥ 1,306,719     ¥ 389,664  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Beginning balance at original discount rate
     865,333       1,338,398       409,847       858,959       1,289,145       424,186  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Effect of changes in cash flow assumptions
     (6,213 )      3,634       2,106       0       0       0  
Effect of actual variances from expected experience
     1,418       2,865       (2,531 )      818       (495 )      (1,905 ) 
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Adjusted beginning balance
     860,538       1,344,897       409,422       859,777       1,288,650       422,281  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Issuances
     94,169       52,510       43,378       59,515       17,612       15,702  
Interests
     10,840       18,439       12,405       5,213       8,874       6,097  
Net premium earned
     (106,300 )      (119,416 )      (61,594 )      (51,019 )      (58,074 )      (34,274 ) 
Actual variances from cash flow assumptions
     (550 )      (862 )      (1,222 )      (9 )      (390 )      (733 ) 
Derecognition
     262       (6,423 )      (32,681 )      4,575       219       (16,515 ) 
Effect of changes in foreign exchange rate
     0       0       54,478       0       0       (22,902 ) 
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Ending balance at original discount rate
     858,959       1,289,145       424,186       878,052       1,256,891       369,656  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Effect of changes in discount rates
     14,079       17,574       (34,522 )      8,748       5,698       (19,302 ) 
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Ending balance
   ¥     873,038     ¥   1,306,719     ¥     389,664     ¥   886,800     ¥   1,262,589     ¥   350,354  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
 
   
Millions of yen
  
   
March 31, 2024
    
September 30, 2024
  
Present value of expected future policy benefits
  
Yen-denominated

insurance

(First Sector)
    
Yen-denominated

insurance

(Third Sector)
    
Foreign
currency
denominated
insurance
    
Yen-denominated

insurance

(First Sector)
    
Yen-denominated

insurance

(Third Sector)
    
Foreign
currency
denominated
insurance
  
Beginning balance
   ¥ 1,571,886     ¥ 1,918,462     ¥ 387,073     ¥ 1,565,877     ¥ 1,844,599     ¥ 447,081  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Beginning balance at original discount rate
     1,598,009       1,887,744       573,616       1,658,143       1,895,730       659,217  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Effect of changes in cash flow assumptions
     (7,962 )      4,600       1,782       0       0       0  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Adjusted beginning balance
     1,590,047       1,892,344       575,398       1,658,143       1,895,730       659,217  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Issuances
     94,169       52,510       43,378       59,515       17,612       15,702  
Interests
     23,981       28,159       17,649       12,069       14,037       9,426  
Insurance claims paid
     (52,161 )      (70,513 )      (17,757 )      (26,917 )      (35,710 )      (10,258 ) 
Actual variances from cash flow assumptions
     (11,644 )      (7,465 )      11,794       (5,534 )      (4,180 )      7,557  
Derecognition
     13,751       695       (49,973 )      11,146       4,508       (27,651 ) 
Effect of changes in foreign exchange rate
     0       0       78,728       0       0       (37,753 ) 
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Ending balance at original discount rate
     1,658,143       1,895,730       659,217       1,708,422       1,891,997       616,240  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Effect of changes in discount rates
     (92,266 )      (51,131 )      (212,136 )      (112,056 )      (76,999 )      (171,113 ) 
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Ending balance
   ¥  1,565,877     ¥  1,844,599     ¥  447,081     ¥ 1,596,366     ¥ 1,814,998     ¥ 445,127  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Net liability for future policy benefits
   ¥ 692,839     ¥ 537,880     ¥ 57,417     ¥ 709,566     ¥ 552,409     ¥ 94,773  
Deferred profit liabilities
     47,068       68,539       26,930       52,578       71,651       31,161  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Subtotal
     739,907       606,419       84,347       762,144       624,060       125,934  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Less: Reinsurance recoverable
     211       0       0       104       0       0  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
The liability for future policy benefits, after reinsurance recoverable
   ¥ 739,696     ¥ 606,419     ¥ 84,347     ¥ 762,040     ¥ 624,060     ¥ 125,934  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
The following tables provide the breakdown of the policy liabilities and policy account balances recorded in the consolidated balance sheets as of March 31, 2024 and September 30, 2024:
 
    
Millions of yen
  
    
March 31, 2024
     
September 30, 2024
  
Yen-denominated
insurance (First Sector)
    ¥ 739,696      ¥ 762,040  
Yen-denominated
insurance (Third Sector)
      606,419        624,060  
Foreign currency denominated insurance
      84,347        125,934  
  
 
 
     
 
 
  
Subtotal
      1,430,462        1,512,034  
  
 
 
     
 
 
  
Policy account balances for variable annuity and variable life insurance contracts and market risk benefits
      167,207        151,331  
Fixed annuities and annuitization benefits
      138,419        128,975  
Others*
      156,422        138,390  
  
 
 
     
 
 
  
Total
    ¥   1,892,510      ¥   1,930,730  
  
 
 
     
 
 
  
 
*
Others include unearned premiums and liabilities for unpaid claims.
 
The amount of undiscounted and discounted expected future gross premiums and expected future policy benefits and expenses as of March 31, 2024 and September 30, 2024 are as follows:
 
                                                                   
    
Millions of yen
  
    
March 31, 2024
     
September 30, 2024
  
    
Undiscounted
     
Discounted
     
Undiscounted
     
Discounted
  
Yen-denominated
insurance (First Sector)
            
Expected future gross premiums
   
¥
1,525,071
 
   
¥
1,395,370
 
   
¥
1,554,073
 
   
¥
1,413,449
 
Expected future policy benefits and expenses
   
 
2,378,836
 
   
 
1,565,877
 
   
 
2,462,656
 
   
 
1,596,366
 
  
 
 
     
 
 
     
 
 
     
 
 
  
Yen-denominated
insurance (Third Sector)
            
Expected future gross premiums
   
 
2,590,963
 
   
 
2,242,701
 
   
 
2,531,429
 
   
 
2,171,202
 
Expected future policy benefits and expenses
   
 
2,583,535
 
   
 
1,844,599
 
   
 
2,576,511
 
   
 
1,814,998
 
  
 
 
     
 
 
     
 
 
     
 
 
  
Foreign currency denominated insurance
            
Expected future gross premiums
   
 
685,134
 
   
 
535,943
 
   
 
609,350
 
   
 
491,331
 
Expected future policy benefits and expenses
   
 
1,300,018
 
   
 
447,081
 
   
 
1,219,040
 
   
 
445,127
 
  
 
 
     
 
 
     
 
 
     
 
 
  
For the fiscal year ended March 31, 2024 and the six months ended September 30, 2024, the effects of net premium exceeding gross premiums in certain cohorts are immaterial in earnings for the respective periods.
The amounts of gross premiums and interest expense recognized in the consolidated statement of income for the six months ended September 30, 2023 and 2024 are as follows:
 
                                                                   
    
Millions of yen
  
    
Six months ended
September 30, 2023
     
Six months ended
September 30, 2024
  
    
Gross premiums
     
Interest expense
     
Gross premiums
     
Interest expense
  
Yen-denominated
insurance (First Sector)
   
¥
74,702
 
   
¥
6,484
 
   
¥
81,607
 
   
¥
6,856
 
Yen-denominated
insurance (Third Sector)
   
 
102,734
 
   
 
4,763
 
   
 
99,898
 
   
 
5,163
 
Foreign currency denominated insurance
   
 
44,288
 
   
 
2,381
 
   
 
47,059
 
   
 
3,329
 
  
 
 
     
 
 
     
 
 
     
 
 
  
Total
   
¥
221,724
 
   
¥
13,628
 
   
¥
228,564
 
   
¥
15,348
 
  
 
 
     
 
 
     
 
 
     
 
 
  
The weighted average discount rates for the liability for future policy benefits as of March 31, 2024 and September 30, 2024 are as follows:
 
    
Weighted average rate
  
    
March 31, 2024
    
September 30, 2024
  
Yen-denominated
insurance (First Sector)
     
Weighted average of the original discount rates
      1.7 %      1.7 % 
Weighted average of the current discount rates
      2.1       2.2  
  
 
 
    
 
 
  
Yen-denominated
insurance (Third Sector)
     
Weighted average of the original discount rates
      1.7       1.7  
Weighted average of the current discount rates
      2.1       2.1  
  
 
 
    
 
 
  
Foreign currency denominated insurance
     
Weighted average of the original discount rates
      3.1       3.2  
Weighted average of the current discount rates
        5.5         5.3  
  
 
 
    
 
 
  
The weighted average duration of the liability for future policy benefit as of March 31, 2024 and September 30, 2024 are as follows:
 
    
Years
  
    
March 31, 2024
    
September 30, 2024
  
Yen-denominated
insurance (First Sector)
      36.4            36.0   
Yen-denominated
insurance (Third Sector)
      34.7       33.6  
Foreign currency denominated insurance
       36.9        35.0  
  
 
 
    
 
 
  
 
Assumptions for calculating the liability for future policy benefits include assumptions related to mortality, morbidity, lapse rates and discount rates. The Company and its subsidiaries recognized actual variances from expected experience and updated the assumptions during the fiscal year ended March 31, 2024 as follows. For the six months ended September 30, 2024, the Company and its subsidiaries continued to use the same assumptions.
 
  •  
Yen-denominated
insurance (First Sector)
During fiscal 2024 the Company and its subsidiaries updated expected mortality and lapse rates due to the lower-than-expected mortality and the higher-than-expected lapse rates.
 
  •  
Yen-denominated
insurance (Third Sector)
During fiscal 2024 the Company and its subsidiaries updated expected mortality and lapse rates due to a
higher-than-expected
mortality and lower-than-expected lapse rates. The actual morbidity excluding deemed hospitalization was lower than-expected even after reclassification of the legal category of
COVID-19
by Japanese government. However, the relevant morbidity assumptions were not updated because the Company and its subsidiaries believe further observations are needed to determine whether such phenomenon is temporary or permanent.
 
  •  
Foreign currency denominated insurance
During fiscal 2024 the Company and its subsidiaries updated expected mortality rates due to a lower-than-expected mortality rate. In addition, the lapse rate was higher-than-expected due to the impact of rapid exchange rate fluctuations, but as this is considered to be a temporary factor, the Company and its subsidiaries excluded such impact in updating expected lapse rates.
The market data underlying the discount rate was updated quarterly for both the fiscal year ended March 31, 2024 and for the six months ended September 30, 2024.
For the effect of the changes in assumptions on expected net premiums and expected future policy benefits, see “Effect of changes in cash flow assumptions” and “Effect of changes in discount rates” in the tables that represent balances of and changes in the liability for future policy benefits.
The following tables present balances of and changes in the deferred policy acquisition costs as of and for the fiscal year ended March 31, 2024 and for the six months ended September 30, 2024:
 
   
Millions of yen
  
   
March 31, 2024
    
September 30, 2024
  
   
Yen-denominated

insurance

(First Sector)
    
Yen-denominated

insurance

(Third Sector)
    
Foreign
currency
denominated
insurance
    
Total
    
Yen-denominated

insurance

(First Sector)
    
Yen-denominated

insurance

(Third Sector)
    
Foreign
currency
denominated
insurance
    
Total
  
Beginning balance
   ¥ 77,957     ¥ 166,696     ¥ 42,726     ¥ 287,379     ¥ 82,341     ¥ 169,581     ¥ 53,812     ¥ 305,734  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Capitalization
     10,285       12,855       7,120       30,260       6,328       4,958       3,429       14,715  
Amortization
     (5,901 )      (9,970 )      (2,301 )      (18,172 )      (3,114 )
 
     (5,038 )
 
     (1,320 )     (9,472 ) 
Effect of changes in foreign exchange rate
     0       0       6,267       6,267       0       0       (3,152 )      (3,152 ) 
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Ending balance
   ¥ 82,341     ¥ 169,581     ¥ 53,812     ¥ 305,734     ¥ 85,555     ¥ 169,501     ¥ 52,769     ¥ 307,825  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Deferred policy acquisition costs are amortized over the expected term of the policies on a constant-level basis. The assumptions used for the amortization of deferred policy acquisition costs are consistent with the assumptions for the liability for future policy benefits. The underlying assumptions for deferred policy acquisition costs and the liability for future policy benefits are updated at the same time. In addition, deferred policy acquisition costs are included in other assets in the consolidated balance sheets.
 
The following table presents policyholder account balances for fixed annuity and annuitization benefits by range of minimum guaranteed interest rates as of March 31, 2024 and September 30, 2024.
 
                                 
    
Millions of yen
  
    
March 31, 2024
     
September 30, 2024
  
Range of minimum guaranteed interest rates
   
Minimum guarantees
     
Minimum guarantees
  
0.00% - less than 1.50%
   
¥
131,328
 
   
¥
121,743
 
1.50% - less than 2.50%
   
 
7,091
 
   
 
7,232
 
2.50% or more
   
 
0
 
   
 
  0
 
  
 
 
     
 
 
  
Total
   
¥
138,419
 
   
¥
128,975
 
  
 
 
     
 
 
  
There are no contracts with interest rates that exceed the minimum guaranteed interest rates.
The following table provides information about fixed annuity and annuitization benefits for the fiscal year ended March 31, 2024 and for the six months ended September 30, 2024.
 
    
Millions of yen
  
    
March 31, 2024
    
September 30, 2024
  
Beginning balance
    ¥ 158,952     ¥ 138,419  
  
 
 
    
 
 
  
Transfer in
          10,249       4,975  
Surrenders and partial surrenders
      (71 )      (51 ) 
Benefit payments and lump sum payments, etc.
      (31,179 )      (14,502 ) 
Policy charges
      (229 )      (109 ) 
Transfer out
      (290 )      (209 ) 
Interests
      1,023       462  
Others
      (36 )      (10 ) 
  
 
 
    
 
 
  
Ending balance
    ¥ 138,419     ¥ 128,975  
  
 
 
    
 
 
  
    
March 31, 2024
    
September 30, 2024
  
Weighted average guaranteed interest rate (%)
      0.7            0.7  
Benefits in excess of policyholder account balances (Millions of yen)
    ¥ 1     ¥ 0  
Cash surrender value (Millions of yen)
      132,411        123,132  
  
 
 
    
 
 
  
 
The following table provides information about policy account balances for variable annuity and variable life insurance contracts and market risk benefits as of and for the fiscal year ended March 31, 2024, and for the six months ended September 30, 2024:
 
                                 
    
Millions of yen
  
    
March 31, 2024
    
September 30, 2024
  
Beginning balance
   
¥
163,734
 
  
¥
167,207
 
  
 
 
    
 
 
  
Effect of changes other than through net income and other comprehensive income
   
 
(26,997
) 
  
 
(11,839
)
Surrenders and withdrawals
   
 
(7,641
) 
  
 
(2,634
) 
Transfer in
   
 
(7,891
) 
  
 
(3,853
) 
Benefit payments
   
 
(11,434
) 
  
 
(5,366
)
Others
   
 
(31
) 
  
 
14
 
  
 
 
    
 
 
  
Changes through net income
   
 
30,205
 
  
 
(4,141
) 
Effect of changes in fair value of corresponding investment assets
   
 
40,846
 
  
 
(2,766
) 
Fee income
   
 
(3,750
) 
  
 
(1,860
) 
Effect of changes in fair value of market risk benefits
   
 
(6,891
) 
  
 
485
 
  
 
 
    
 
 
  
Changes through other comprehensive income
   
 
265
 
  
 
104
 
Effect of changes in the instrument-specific credit risk
   
 
265
 
  
 
104
 
  
 
 
    
 
 
  
Ending balance
   
¥
167,207
 
  
¥
151,331
 
  
 
 
    
 
 
  
    
Millions of yen
  
    
March 31, 2024
    
September 30, 2024
  
Policyholder account balances
   
¥
167,496
 
  
¥
151,032
 
Market risk benefits
   
 
(289
) 
  
 
299
 
  
 
 
    
 
 
  
Total
   
¥
167,207
 
  
¥
151,331