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Long-Duration Insurance Contracts Relating to Life Insurance Operations

6 Months Ended

Sep. 30, 2025

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, 2025 and for the six months ended September 30, 2025.


	Millions of yen
	March 31, 2025									September 30, 2025
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	¥	873,038		¥	1,306,719		¥	389,664		¥	855,431		¥	1,162,214		¥	345,932

Beginning balance at original discount rate		858,959			1,289,145			424,186			877,300			1,216,705			368,846

Effect of changes in cash flow assumptions		(9,660	)		(7,648	)		66			0			0			0
Effect of actual variances from expected experience		984			812			(3,193	)		300			699			(579	)

Adjusted beginning balance		850,283			1,282,309			421,059			877,600			1,217,404			368,267

Issuances		130,605			34,189			31,717			47,401			12,013			15,370
Interests		10,568			17,489			12,323			5,278			8,423			5,480
Net premium earned		(116,850	)		(116,049	)		(62,788	)		(55,184	)		(56,025	)		(33,271	)
Actual variances from cash flow assumptions		(437	)		(770	)		(1,231	)		(28	)		(332	)		(273	)
Derecognition		3,131			(463	)		(27,567	)		4,541			2,746			(5,544	)
Effect of changes in foreign exchange rate		0			0			(4,667	)		0			0			(1,903	)

Ending balance at original discount rate		877,300			1,216,705			368,846			879,608			1,184,229			348,126

Effect of changes in discount rates		(21,869	)		(54,491	)		(22,914	)		(50,761	)		(130,409	)		(15,559	)

Ending balance	¥	855,431		¥	1,162,214		¥	345,932		¥	828,847		¥	1,053,820		¥	332,567


	Millions of yen
	March 31, 2025									September 30, 2025
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	¥	1,565,877		¥	1,844,599		¥	447,081		¥	1,511,436		¥	1,659,960		¥	442,939

Beginning balance at original discount rate		1,658,143			1,895,730			659,217			1,750,912			1,878,075			650,005

Effect of changes in cash flow assumptions		(10,284	)		(8,470	)		81			0			0			0

Adjusted beginning balance		1,647,859			1,887,260			659,298			1,750,912			1,878,075			650,005

Issuances		130,605			34,189			31,717			47,401			12,013			15,370
Interests		24,463			27,997			19,385			12,567			13,967			9,471
Insurance claims paid		(57,099	)		(72,044	)		(18,634	)		(28,419	)		(38,033	)		(6,179	)
Actual variances from cash flow assumptions		(9,571	)		(8,287	)		13,086			(6,523	)		(2,953	)		3,180
Derecognition		14,655			8,960			(46,693	)		11,387			8,007			(10,108	)
Effect of changes in foreign exchange rate		0			0			(8,154	)		0			0			(2,571	)

Ending balance at original discount rate		1,750,912			1,878,075			650,005			1,787,325			1,871,076			659,168

Effect of changes in discount rates		(239,476	)		(218,115	)		(207,066	)		(503,309	)		(490,118	)		(188,604	)

Ending balance	¥	1,511,436		¥	1,659,960		¥	442,939		¥	1,284,016		¥	1,380,958		¥	470,564

Net liability for future policy benefits	¥	656,005		¥	497,746		¥	97,007		¥	455,169		¥	327,138		¥	137,997
Deferred profit liabilities		61,448			74,962			37,340			69,235			77,943			43,995

Subtotal		717,453			572,708			134,347			524,404			405,081			181,992

Less: Reinsurance recoverable		196			0			0			128			0			0

The liability for future policy benefits, after reinsurance recoverable	¥	717,257		¥	572,708		¥	134,347		¥	524,276		¥	405,081		¥	181,992

The following tables provide the breakdown of the policy liabilities and policy account balances recorded in the consolidated balance sheets as of March 31, 2025 and September 30, 2025:


	Millions of yen
	March 31, 2025		September 30, 2025
Yen-denominated insurance (First Sector)	¥	717,257	¥	524,276
Yen-denominated insurance (Third Sector)		572,708		405,081
Foreign currency denominated insurance		134,347		181,992

Subtotal		1,424,312		1,111,349

Policy account balances for single-payment whole life insurance		134,572		238,337
Fixed annuities and annuitization benefits		119,093		110,259
Policy account balances for variable annuity and variable life insurance contracts and market risk benefits		136,257		142,700

Others*		133,813		122,183

Total	¥	1,948,047	¥	1,724,828

*	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, 2025 and September 30, 2025 are as follows:


	Millions of yen
	March 31, 2025				September 30, 2025
	Undiscounted		Discounted		Undiscounted		Discounted
Yen-denominated insurance (First Sector)
Expected future gross premiums	¥	1,551,749	¥	1,362,111	¥	1,574,161	¥	1,330,807
Expected future policy benefits and expenses		2,532,638		1,511,436		2,614,139		1,284,016

Yen-denominated insurance (Third Sector)
Expected future gross premiums		2,456,942		2,003,392		2,398,826		1,819,478
Expected future policy benefits and expenses		2,552,133		1,659,960		2,544,303		1,380,958

Foreign currency denominated insurance
Expected future gross premiums		617,771		493,328		594,234		483,039
Expected future policy benefits and expenses		1,288,727		442,939		1,309,972		470,564

For the fiscal year ended March 31, 2025 and the six months ended September 30, 2025, 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, 2024 and 2025 are as follows:


	Millions of yen
	Six months ended September 30, 2024				Six months ended September 30, 2025
	Gross premiums		Interest expense		Gross premiums		Interest expense
Yen-denominated insurance (First Sector)	¥	81,607	¥	6,856	¥	89,337	¥	7,289
Yen-denominated insurance (Third Sector)		99,898		5,163		96,721		5,543
Foreign currency denominated insurance		47,059		3,329		47,078		3,992

Total	¥	228,564	¥	15,348	¥	233,136	¥	16,824

The weighted average discount rates for the liability for future policy benefits as of March 31, 2025 and September 30, 2025 are as follows:


	Weighted average rate
	March 31, 2025			September 30, 2025
Yen-denominated insurance (First Sector)
Weighted average of the original discount rates		1.8	%		1.8	%
Weighted average of the current discount rates		2.7			4.5

Yen-denominated insurance (Third Sector)
Weighted average of the original discount rates		1.7			1.7
Weighted average of the current discount rates		2.7			4.5

Foreign currency denominated insurance
Weighted average of the original discount rates		3.3			3.4
Weighted average of the current discount rates		5.9			5.7

The weighted average duration of the liability for future policy benefit as of March 31, 2025 and September 30, 2025 are as follows:


	Years
	March 31, 2025		September 30, 2025
Yen-denominated insurance (First Sector)		35.1		34.5
Yen-denominated insurance (Third Sector)		32.5		31.6
Foreign currency denominated insurance		33.5		31.9

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, 2025 as follows. For the six months ended September 30, 2025, the Company and its subsidiaries continued to use the same assumptions.

•

Yen-denominated

insurance (First Sector)

During fiscal 2025 the Company and its subsidiaries updated expected mortality and lapse rates due to the higher-than-expected mortality and lapse rates.

•

Yen-denominated

insurance (Third Sector)

During fiscal 2025 the Company and its subsidiaries updated expected mortality and lapse rates due to a higher-than-expected mortality and 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 2025 the Company and its subsidiaries updated expected mortality rates due to the difference from expected mortality rates. In addition, similarly to the fiscal year ended March 31, 2024, the lapse rate was higher-than-expected due to the impact of rapid exchange rate fluctuations. However, the relevant lapse rates were not updated because the Company and its subsidiaries believe further observations are needed to determine whether such an assumption is temporary or permanent.

The market data underlying the discount rate was updated quarterly for both the fiscal year ended March 31, 2025 and for the six months ended September 30, 2025.

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, 2025 and for the six months ended September 30, 2025:


	Millions of yen
	March 31, 2025
	Yen-denominated insurance (First Sector)			Yen-denominated insurance (Third Sector)			Foreign currency denominated insurance			Single- payment whole life insurance			Total
Beginning balance	¥	82,341		¥	169,581		¥	53,812		¥	0		¥	305,734

Capitalization		13,431			9,180			6,633			6,627			35,871
Amortization		(6,411	)		(10,072	)		(2,689	)		(43	)		(19,215	)
Effect of changes in foreign exchange rate		0			0			(605	)		(137	)		(742	)
Others*		0			0			0			(5,808	)		(5,808	)

Ending balance	¥	89,361		¥	168,689		¥	57,151		¥	639		¥	315,840


	Millions of yen
	September 30, 2025
	Yen-denominated insurance (First Sector)			Yen-denominated insurance (Third Sector)			Foreign currency denominated insurance			Single- payment whole life insurance			Total
Beginning balance	¥	89,361		¥	168,689		¥	57,151		¥	639		¥	315,840

Capitalization		7,085			3,923			3,206			4,793			19,007
Amortization		(3,421	)		(5,040	)		(1,371	)		(217	)		(10,049	)
Effect of changes in foreign exchange rate		0			0			(203	)		5,853			5,650
Others*		0			0			0			(9,943	)		(9,943	)

Ending balance	¥	93,025		¥	167,572		¥	58,783		¥	1,125		¥	320,505

*	Others include adjustments of reinsurance.

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 policy account balances for single-payment whole life insurance and fixed annuity and annuitization benefits by range of minimum guaranteed interest rates as of March 31, 2025 and September 30, 2025.


	Millions of yen
	March 31, 2025
			Above minimum guarantees
Range of minimum guaranteed interest rates	Minimum guarantees		50-150bp		150bp or more
0.00 % - less than 1.50 %	¥	111,626	¥	7,421	¥	127,151
1.50 % or more		7,467		0		0

Total	¥	119,093	¥	7,421	¥	127,151


	Millions of yen
	September 30, 2025
			Above minimum guarantees
Range of minimum guaranteed interest rates	Minimum guarantees		50-150bp		150bp or more
0.00 % - less than 1.50 %	¥	102,794	¥	15,861	¥	222,476
1.50 % or more		7,465		0		0

Total	¥	110,259	¥	15,861	¥	222,476

The following table provides information about single-payment whole life insurance for the fiscal year ended March 31, 2025 and for the six months ended September 30, 2025.


	Millions of yen
	March 31, 2025			September 30, 2025
Beginning balance	¥	0		¥	134,572

New contract		136,863			99,129
Surrenders and partial surrenders		(66	)		(284	)
Benefit payments and lump sum payments, etc.		(49	)		(332	)
Policy charges		(188	)		(832	)
Interests		1,072			4,705
Effect of changes in foreign exchange rate		(3,060	)		1,379

Ending balance	¥	134,572		¥	238,337


	March 31, 2025			September 30, 2025
Weighted average guaranteed interest rate (%)		3.9			5.1
Benefits in excess of policy account balances (Millions of yen)	¥	0		¥	0
Cash surrender value (Millions of yen)		127,659			230,259

The following table provides information about fixed annuity and annuitization benefits for the fiscal year ended March 31, 2025 and for the six months ended September 30, 2025.


	Millions of yen
	March 31, 2025			September 30, 2025
Beginning balance	¥	138,419		¥	119,093

Transfer in		9,381			4,657
Surrenders and partial surrenders		(85	)		(24	)
Benefit payments and lump sum payments, etc.		(28,912	)		(13,521	)
Policy charges		(214	)		(103	)
Transfer out		(373	)		(239	)
Interests		895			406
Others		(18	)		(10	)

Ending balance	¥	119,093		¥	110,259


	March 31, 2025			September 30, 2025
Weighted average guaranteed interest rate (%)		0.7			0.7
Benefits in excess of policy account balances (Millions of yen)	¥	0		¥	0
Cash surrender value (Millions of yen)		113,492			104,798

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, 2025, and for the six months ended September 30, 2025:


	Millions of yen
	March 31, 2025			September 30, 2025
Beginning balance	¥	167,207		¥	136,257

Effect of changes other than through net income and other comprehensive income		(23,706	)		(10,571	)
Surrenders and withdrawals		(4,924	)		(2,366	)
Transfer in		(6,902	)		(3,163	)
Benefit payments		(11,851	)		(4,957	)
Others		(29	)		(85	)

Changes through net income		(7,292	)		17,278

Effect of changes in fair value of corresponding investment assets		(3,538	)		21,719

Fee income		(3,590	)		(1,636	)
Effect of changes in fair value of market risk benefits		(164	)		(2,805	)

Changes through other comprehensive income		48			(264	)
Effect of changes in the instrument-specific credit risk		48			(264	)

Ending balance	¥	136,257		¥	142,700


	Millions of yen
	March 31, 2025			September 30, 2025
Policy account balances	¥	136,662		¥	146,174
Market risk benefits		(405	)		(3,474	)

Total	¥	136,257		¥	142,700