Long-Duration Insurance Contracts Relating to Life Insurance Operations

12 Months Ended

Mar. 31, 2024

Insurance [Abstract]

Long-Duration Insurance Contracts Relating to Life Insurance Operations

24. Long-Duration Insurance Contracts Relating to Life Insurance Operations

The Company and its subsidiaries adopted the modified retrospective transition approach to the liability for future policy benefits and deferred policy acquisition costs based on the balance as of April 1, 2021, the transition date, in accordance with Accounting Standards Update 2018-12 (“Targeted Improvements to Accounting for Long-Duration Contracts”—ASC 944 (“Financial Services—Insurance”)).

The following table presents the effect on the liability for future policy benefits (including deferred profit liabilities) as of the transition date, using the modified retrospective transition approach.

	Millions of yen
	Yen-denominated insurance (First Sector)		Yen-denominated insurance (Third Sector)		Foreign currency denominated insurance			Total
Balance at March 31, 2021	¥	610,877	¥	493,558	¥	48,259		¥	1,152,694
Effect of change in discount rates *		22,686		52,967		(46,716	)		28,937
Balance at April 1, 2021	¥	633,563	¥	546,525	¥	1,543		¥	1,181,631

* The impact on the liability for future policy benefits is due to the difference in the discount rates used before and after the adoption of LDTI.

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, 2022.

	Millions of yen
	March 31, 2022
Present value of expected net premiums	Yen-denominated insurance (First Sector)			Yen-denominated insurance (Third Sector)			Foreign currency denominated insurance
Balance at April 1, 2021	¥	909,868		¥	1,377,265		¥	366,081
Beginning balance at original discount rate		843,892			1,261,182			355,835
Effect of changes in cash flow assumptions		21,353			28,690			662
Effect of actual variances from expected experience		2,351			1,414			(209	)
Adjusted beginning balance		867,596			1,291,286			356,288
Issuances		82,105			86,304			77,532
Interests		12,490			19,412			9,263
Net premium earned		(96,605	)		(114,874	)		(49,290	)
Actual variances from cash flow assumptions		(299	)		(652	)		(8	)
Derecognition		7,285			3,901			2,610
Effect of changes in foreign exchange rate		0			0			41,684
Ending balance at original discount rate		872,572			1,285,377			438,079
Effect of changes in discount rates		54,338			95,576			(15,326	)
Balance at March 31, 2022	¥	926,910		¥	1,380,953		¥	422,753

	Millions of yen
	March 31, 2022
Present value of expected future policy benefits	Yen-denominated insurance (First Sector)			Yen-denominated insurance (Third Sector)			Foreign currency denominated insurance
Balance at April 1, 2021	¥	1,526,258		¥	1,877,906		¥	366,081
Beginning balance at original discount rate		1,437,596			1,708,857			402,552
Effect of changes in cash flow assumptions		22,525			29,515			626
Adjusted beginning balance		1,460,121			1,738,372			403,178
Issuances		82,105			86,304			77,532
Interests		23,867			27,677			11,125
Insurance claims paid		(42,897	)		(65,052	)		(1,631	)
Actual variances from cash flow assumptions		(12,698	)		(6,083	)		(329	)
Derecognition		24,520			12,773			2,533
Effect of changes in foreign exchange rate		0			0			51,096
Ending balance at original discount rate		1,535,018			1,793,991			543,504
Effect of changes in discount rates		56,250			128,012			(106,040	)
Balance at March 31, 2022	¥	1,591,268		¥	1,922,003		¥	437,464
Net liability for future policy benefits	¥	664,358		¥	541,050		¥	14,711
Deferred profit liabilities		26,173			54,801			7,573
Subtotal		690,531			595,851			22,284
Less: Reinsurance recoverable		210			0			0
The liability for future policy benefits, after reinsurance recoverable	¥	690,321		¥	595,851		¥	22,284

The following table provides the breakdown of the policy liabilities and policy account balances recorded in the consolidated balance sheets as of March 31, 2022:

	Millions of yen
	March 31, 2022
Yen-denominated insurance
(First Sector)	¥	690,321
Yen-denominated insurance (Third Sector)		595,851
Foreign currency denominated insurance		22,284
Subtotal		1,308,456
Policy account balances for variable annuity and variable life insurance contracts and market risk benefits		198,905
Fixed annuities and annuitization benefits		193,322
Others *		212,015
Total	¥	1,912,698

* Others include unearned premiums and liabilities for unpaid claims.

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, 2023 and 2024.

	Millions of yen
	March 31, 2023									March 31, 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	¥	926,910		¥	1,380,953		¥	422,753		¥	894,537		¥	1,389,063		¥	374,951
Beginning balance at original discount rate		872,572			1,285,377			438,079			865,333			1,338,398			409,847
Effect of changes in cash flow assumptions		126			48,389			(6,975	)		(6,213	)		3,634			2,106
Effect of actual variances from expected experience		2,495			22,851			(1,957	)		1,418			2,865			(2,531	)
Adjusted beginning balance		875,193			1,356,617			429,147			860,538			1,344,897			409,422
Issuances		76,519			83,982			22,660			94,169			52,510			43,378
Interests		11,715			18,762			10,966			10,840			18,439			12,405
Net premium earned		(101,554	)		(117,670	)		(60,198	)		(106,300	)		(119,416	)		(61,594	)
Actual variances from cash flow assumptions		(385	)		(710	)		(1,274	)		(550	)		(862	)		(1,222	)
Derecognition		3,845			(2,583	)		(33,441	)		262			(6,423	)		(32,681	)
Effect of changes in foreign exchange rate		0			0			41,987			0			0			54,478
Ending balance at original discount rate		865,333			1,338,398			409,847			858,959			1,289,145			424,186
Effect of changes in discount rates		29,204			50,665			(34,896	)		14,079			17,574			(34,522	)
Ending balance	¥	894,537		¥	1,389,063		¥	374,951		¥	873,038		¥	1,306,719		¥	389,664

	Millions of yen
	2023									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	¥	1,591,268		¥	1,922,003		¥	437,464		¥	1,571,886		¥	1,918,462		¥	387,073
Beginning balance at original discount rate		1,535,018			1,793,991			543,504			1,598,009			1,887,744			573,616
Effect of changes in cash flow assumptions		1,506			53,098			(6,296	)		(7,962	)		4,600			1,782
Adjusted beginning balance		1,536,524			1,847,089			537,208			1,590,047			1,892,344			575,398
Issuances		76,519			83,982			22,660			94,169			52,510			43,378
Interests		24,023			27,839			14,552			23,981			28,159			17,649
Insurance claims paid		(45,075	)		(96,364	)		(13,370	)		(52,161	)		(70,513	)		(17,757	)
Actual variances from cash flow assumptions		(12,376	)		20,178			9,002			(11,644	)		(7,465	)		11,794
Derecognition		18,394			5,020			(47,189	)		13,751			695			(49,973	)
Effect of changes in foreign exchange rate		0			0			50,753			0			0			78,728
Ending 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 discount rates		(26,123	)		30,718			(186,543	)		(92,266	)		(51,131	)		(212,136	)
Ending balance	¥	1,571,886		¥	1,918,462		¥	387,073		¥	1,565,877		¥	1,844,599		¥	447,081
Net liability for future policy benefits	¥	677,349		¥	529,399		¥	12,122		¥	692,839		¥	537,880		¥	57,417
Deferred profit liabilities		35,770			61,668			15,578			47,068			68,539			26,930
Subtotal		713,119			591,067			27,700			739,907			606,419			84,347
Less: Reinsurance recoverable		215			0			0			211			0			0
The liability for future policy benefits, after reinsurance recoverable	¥	712,904		¥	591,067		¥	27,700		¥	739,696		¥	606,419		¥	84,347

The following tables provide the breakdown of the policy liabilities and policy account balances recorded in the consolidated balance sheets as of March 31, 2023 and 2024:

	Millions of yen
	2023		2024
Yen-denominated insurance (First Sector)	¥	712,904	¥	739,696
Yen-denominated insurance (Third Sector)		591,067		606,419
Foreign currency denominated insurance		27,700		84,347
Subtotal		1,331,671		1,430,462
Policy account balances for variable annuity and variable life insurance contracts and market risk benefits		163,734		167,207
Fixed annuities and annuitization benefits		158,952		138,419
Others*		177,700		156,422
Total	¥	1,832,057	¥	1,892,510

* 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, 2023 and 2024 are as follows:

	Millions of yen
	2023				2024
	Undiscounted		Discounted		Undiscounted		Discounted
Yen-denominated insurance (First Sector)
Expected future gross premiums	¥	1,538,107	¥	1,429,503	¥	1,525,071	¥	1,395,370
Expected future policy benefits and expenses		2,291,205		1,571,886		2,378,836		1,565,877
Yen-denominated insurance (Third Sector)
Expected future gross premiums		2,695,239		2,388,386		2,590,963		2,242,701
Expected future policy benefits and expenses		2,578,630		1,918,462		2,583,535		1,844,599
Foreign currency denominated insurance
Expected future gross premiums		626,411		492,588		685,134		535,943
Expected future policy benefits and expenses		1,097,567		387,073		1,300,018		447,081

For the fiscal year ended March 31, 2023 and 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 fiscal year ended March 31, 2022, 2023 and 2024 are as follows:

	Millions of yen
	Fiscal Year ended March 31, 2022				Fiscal Year ended March 31, 2023				Fiscal Year ended March 31, 2024
	Gross premiums		Interest expense		Gross premiums		Interest expense		Gross premiums		Interest expense
Yen-denominated insurance (First Sector)	¥	158,477	¥	11,376	¥	162,667	¥	12,309	¥	168,805	¥	13,142
Yen-denominated insurance (Third Sector)		207,553		8,265		208,640		9,077		205,787		9,720
Foreign currency denominated insurance		61,317		1,862		77,369		3,585		82,332		5,243
Total	¥	427,347	¥	21,503	¥	448,676	¥	24,971	¥	456,924	¥	28,105

The weighted average discount rates for the liability for future policy benefits as of March 31, 2023 and 2024 are as follows:

	Weighted average rate
	2023			2024
Yen-denominated insurance (First Sector)
Weighted average of the original discount rates		1.6	%		1.7	%
Weighted average of the current discount rates		1.9			2.1
Yen-denominated insurance (Third Sector)
Weighted average of the original discount rates		1.7			1.7
Weighted average of the current discount rates		1.8			2.1
Foreign currency denominated insurance
Weighted average of the original discount rates		2.9			3.1
Weighted average of the current discount rates		5.2			5.5

The weighted average duration of the liability for future policy benefit as of March 31, 2023 and 2024 are as follows:

	Years
	2023		2024
Yen-denominated insurance (First Sector)		37.9		36.4
Yen-denominated insurance (Third Sector)		36.8		34.7
Foreign currency denominated insurance		40.7		36.9

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 fiscal 2023 and 2024 as follows.

• Yen-denominated insurance (First Sector)

During fiscal 2023 the Company and its subsidiaries updated expected mortality and lapse rates due to the lower-than-expected mortality and lapse rates.

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 2023 the Company and its subsidiaries updated expected mortality and lapse rates due to the higher-than-expected mortality and the lower-than-expected lapse rate. The actual morbidity was higher than expected due to the impact of a significant amount of hospitalization benefits for deemed hospitalization caused by COVID-19. However, the relevant morbidity assumptions were not updated because benefits arising from such hospitalization benefits are not eligible for claim after reclassification of the legal category of COVID-19 by Japanese government.

During fiscal 2024 the Company and its subsidiaries updated expected mortality and lapse rates due to the higher-than-expected mortality and the lower-than-expected lapse rate. The actual morbidity excluding deemed hospitalization was lower than expected ever after reclassification of the legal category of COVID-19 by Japanese government. However, the relevant morbidity assumptions were not updated because Company and its subsidiaries believe further observations are needed to determine whether such assumption is temporary or permanent.

• Foreign currency denominated insurance

During fiscal 2023 the Company and its subsidiaries updated expected mortality and lapse rates due to lower-than-expected mortality and higher-than-expected lapse rate.

During fiscal 2024 the Company and its subsidiaries updated expected mortality rates due to lower-than-expected mortality rate. In addition, 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 removed the impact and updated expected lapse rates.

The market data underlying the discount rate was updated quarterly for both the fiscal year ended March 31, 2023 and for fiscal 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, 2023 and 2024:

	Millions of yen
	2023												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	¥	74,676		¥	159,041		¥	35,243		¥	268,960		¥	77,957		¥	166,696		¥	42,726		¥	287,379
Capitalization		8,682			16,795			5,725			31,202			10,285			12,855			7,120			30,260
Amortization		(5,401	)		(9,140	)		(1,779	)		(16,320	)		(5,901	)		(9,970	)		(2,301	)		(18,172	)
Effect of changes in foreign exchange rate		0			0			3,537			3,537			0			0			6,267			6,267
Ending balance	¥	77,957		¥	166,696		¥	42,726		¥	287,379		¥	82,341		¥	169,581		¥	53,812		¥	305,734

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, 2023 and 2024.

	Millions of yen
	2023		2024
Range of minimum guaranteed interest rates	Minimum guarantees		Minimum guarantees
0.00% - less than 1.50%	¥	152,259	¥	131,328
1.50% - less than 2.50%		6,644		7,091
2.50% or more		49		0
Total	¥	158,952	¥	138,419

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, 2023 and 2024.

	Millions of yen
	2023			2024
Beginning balance	¥	193,322		¥	158,952
Transfer in		17,223			10,249
Surrenders and partial surrenders		(58	)		(71	)
Benefit payments and lump sum payments, etc.		(50,956	)		(31,179	)
Policy charges		(262	)		(229	)
Transfer out		(409	)		(290	)
Interests		1,209			1,023
Others		(1,117	)		(36	)
Ending balance	¥	158,952		¥	138,419

	2023		2024
Weighted average guaranteed interest rate (%)		0.7		0.7
Benefits in excess of policyholder account balances (Millions of yen)	¥	1	¥	1
Cash surrender value (Millions of yen)		152,578		132,411

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, 2023 and 2024:

	Millions of yen
	2023			2024
Beginning balance	¥	198,905		¥	163,734
Effect of changes other than through net income and other comprehensive income		(28,754	)		(26,997	)
Surrenders and withdrawals		(4,083	)		(7,641	)
Transfer in		(14,093	)		(7,891	)
Benefit payments		(10,762	)		(11,434	)
Others		184			(31	)
Changes through net income		(6,343	)		30,205
Effect of changes in fair value of corresponding investment assets		(2,347	)		40,846
Fee income		(3,938	)		(3,750	)
Effect of changes in fair value of market risk benefits		(58	)		(6,891	)
Changes through other comprehensive income		(74	)		265
Effect of changes in the instrument-specific credit risk		(74	)		265
Ending balance	¥	163,734		¥	167,207

	Millions of yen
	2023		2024
Policyholder account balances	¥	157,399	¥	167,496
Market risk benefits		6,335		(289	)
Total	¥	163,734	¥	167,207