Individual Life Insurance

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					                                                                                                                             R EVIEW O F O PE RAT IO N S
Individual Life Insurance

Individual Life Insurance                                     2005 for the survival benefits hit ¥62.6 billion, account-
Products Offered to Individuals                               ing for 36.2% of the total.

The “Dodo Jinsei (Dignified Life)” series, which is now one
of Dai-ichi’s main products, was launched in October 1999     Expansion of Agency Networks
as a wrapped product with high coverage during its pre-       In order to better meet the increasingly diversified needs
mium paying term for a low insurance premium. April 2004      of customers and offer them greater convenience, Dai-
saw a new “Dodo Jinsei” plan with “income support” rider      ichi started developing agency channels on a full scale in
that add support for decreased incomes due to events          the fiscal year ended March 31, 2001. Since then, in its
such as three major diseases. This has been well received     initiative to develop the channels, the company has been
by customers along with the “Yell to Ladies (Support for      putting resources into organizations and assigning per-
Women)” rider that provides added surgery benefits for the    sonnel to deal with agency channels.
treatment of female-specific diseases, which was released        Specifically, the company focuses on channels such
concurrently.                                                 as financial institutions and tax accountants to reinforce
   In addition to non-life products from Sompo Japan          its response to personal financial assets that are expec-
Insurance Inc. (Sompo Japan) and cancer insurance             ted to increase in the future, as well as its advisory ser-
from American Family Life Assurance Company of Co-            vice to corporate executives. In order to offer products
lumbus (AFLAC), Dai-ichi also started selling variable an-    to more customers, Dai-ichi started working on the
nuity products through financial institutions when banks      agency channels of its business partners, Sompo Japan
and other financial institutions began selling insurance      and AFLAC in the fiscal year ended March 31, 2002. In
products at their counters in October 2002.                   October 2002, meanwhile, the company started selling
                                                              variable annuity products through financial institutions
Activities and Results in Medical Care                        when banks and other financial institutions began selling
Insurance and Other Survival Benefit                          insurance products at their counters.
Products (‘Third Sector’)
Under the concept of “Lifelong Plan,” Dai-ichi offers         Tie-up Sales
products that best respond to changes during the life-
                                                              The business partnerships with Sompo Japan and
cycle stages of customers, and their various needs in the
                                                              AFLAC, which were entered into in the fiscal year ended
area of medical care insurance and other survival benefit
                                                              March 31, 2001, play an important role in Dai-ichi’s
products (so-called “the third sector”). In January 2004,
                                                              product lineup when Dai-ichi sales personnel offer cus-
Dai-ichi launched the “Iryo no Odo (Medical Mainstream),”
                                                              tomers the “Lifelong Plan,” the concept which the Com-
a lifetime medical insurance plan for middle seniors, fol-
                                                              pany advocates.
lowed by the October 2004 launch of the “Shuyaku
                                                                 The results of sales by Dai-ichi of non-life products
Sengen (Starring Role),” which is a medical care insur-
                                                              from Sompo Japan show that the number of new poli-
ance plan covering death security. In addition to the in-
                                                              cies sold during the year was 553,000, up by 13.0% as
surance industry’s first “waiver of premium rider,” April
                                                              compared to the previous year, and that the amount of
2004 saw releases of “Income Support,” a specified in-
                                                              annualized net premium income for the year reached
come protection rider along with the “Yell to Ladies
                                                              ¥29.4 billion (up by 10.7%), accounting for about 2.0%
(Support for Women)” rider, both of which have been
                                                              of Sompo Japan’s total amount (excluding savings-type
well received by customers.
   As a result of these, the amount of annualized net
                                                                 The results of sales by Dai-ichi of AFLAC’s cancer insur-
premium income from policies in force as of March 31,
                                                              ance show that the number of new policies sold during the
2005 for Dai-ichi’s survival benefits showed a year-to-
                                                              year was 217,000 (down by 19.0%), and that the amount
year increase of 4.8%, reaching ¥453.3 billion.
                                                              of annualized net premium income for the year totaled
   The amount of annualized net premium income from
                                                              ¥7.82 billion (down by 24.3%), accounting for over 30% of
new policies sold in the fiscal year ended March 31,
                                                              AFLAC’s total number of new cancer insurance policies sold.


                                 A look at sales of Dai-ichi’s products by Sompo Ja-                                    In outbound operation, the contents of telephone
                              pan’s agencies and AFLAC’s agencies shows that the                                     conversations at the Communication Desks are transmit-
                              number of new policies sold and the value of new insur-                                ted to the mobile terminals of the sales representatives
                              ance contracts sold by the former were 14,373 and                                      involved, and if after-sales services are not satisfactory
                              ¥331.6 billion respectively, and by the latter 1,474 and                               instructions are given to the sales representatives in-
                              ¥28.5 billion. As of March 31, 2005, 3,591 of Sompo Ja-                                volved to visit customers immediately. Through these
                              pan’s agencies and 894 of AFLAC’s agencies served as                                   measures, a liaison system is in place to solidify custom-
                              agencies for Dai-ichi, indicating that the numbers have                                er contact.
                              been growing steadily.
                                                                                                                     Financial Results for the Fiscal Year
                              Enrichment of Services for Policyholders                                               Ended March 31, 2005
                              With respect to services for customers, Dai-ichi has                                   The net total amount of policies in force for individual life
                              worked hard to maintain and solidify customer contact                                  insurance and individual annuities as of March 31, 2005
                              with a long-term perspective and in an exhaustive man-                                 fell by 3.4% to ¥196,003.3 billion, as compared to the
                              ner. Achievements include the industry’s first point ser-                              end of the previous year, due to a rapidly aging popula-
                              vice, Dream Kingdom; the industry’s largest call centers;                              tion and very low birthrate, and other factors resulting in
                              the system of customer service representatives who de-                                 a flagging call for death insurance, although the breadth
                              vote themselves to after-sales follow-up; and “Lifelong                                of decrease was better than that of the previous year at
                              Plan e-Report” Internet-based insurance contract inquiry                               4.6%. In the fiscal year ended March 31, 2005, the
                              system.                                                                                amount of policies that were surrendered or lapsed was
                                 Dai-ichi’s call centers are engaged in both inbound                                 reduced by 16.3%, significantly lower than the previous
                              operations in which personnel respond to customer in-                                  year, as a result of customer contacts being maintained
                              quiries via telephone, and outbound operations in which                                and solidified through the improvement of after-sales
                              Dai-ichi personnel provide customers with the latest in-                               services. The decrease in surrenders has continued for
                              formation through telephone contact and other services.                                six consecutive years.

                                Policies in Force of Individual Insurance                                              Number of Policyholders
                                and Individual Annuities
                                212,599 Billion Yen 202,920 Billion Yen 196,003 Billion Yen                               9,092,536      8,877,759        8,739,015

                                                                                              Whole Life with                                                            Individual Insurance and
                                                                                              Term Insurance                                                             Individual Annuities

                                     38.2%              34.3%              31.1%              Renewable Type
                                                                                              Whole Life                                                                 Group Insurance and
                                                                                              Transferable Term                                                          Group Annuities

                                                                                              Whole Life Insurance
                                                                                                                          9,063,972       8,852,247       8,715,692
                                     29.7%              32.9%              34.6%              Term Insurance with
                                                                                              Survival Benefits

                                                                                              Endowment Insurance
                                      6.7%               6.8%               6.9%
                                      3.2%               2.9%               2.6%              Individual Annuities
                                      2.8%               2.7%               2.8%
                                      3.1%               3.2%               3.3%
                                                         1.2%               1.0%              Endowment with Term
                                      1.3%                                                    Insurance
                                     14.9%              16.1%              17.8%
                                                                                                                           28,564          25,512          23,323

                               As of March 31, As of March 31, As of March 31,                                         As of March 31, As of March 31, As of March 31,
                                     2003            2004            2005                                                    2003            2004            2005

                                                                                                                                                                    R EVIEW O F O PE RAT IO N S
Group Life Insurance

Sales Results of Products and Services for                                     growth in the amount of policies in force for group term
Corporate Clients                                                              life insurance (employee-funded) pushed up the total

In offering products and services to corporate clients,                        amount of policies in force for the overall group life in-

Dai-ichi was active in providing comprehensive consul-                         surance to ¥54,856 billion, up by 0.9% compared to the

tation services in order to help them realize optimal em-                      end of the previous year.

ployee welfare systems.                                                           At the end of the fiscal year ended March 31, 2005,

   In the field of corporate pension plans, drastic sys-                       the amount of policies in force for group annuities in the

temic governmental reforms were carried out, including                         general account fell by 8.6% compared to a year earlier

the introduction of the defined contribution pension                           and by 5.6% in the separate account, mainly due to the

system (DC system) and the enactment of the Defined                            return of the substitute portion of corporate pension

Benefit Corporate Pension Law (DB Law). With this as                           plans to the national government. As a result, the

a background, Dai-ichi enhanced its product lineup by                          amount of policies in force for the group annuity insur-

commencing sales of the Dai-ichi Life DC Smart Plan,                           ance, general and separate accounts combined, as of

which is designed to operate the corporate DC systems                          March 31, 2005 totaled ¥5,961 billion, an 8.1% de-

of many companies in accordance with a single agree-                           crease compared to the end of the previous year.

ment. Dai-ichi also offers comprehensive consultations                            The balance of group pension assets at DLIBJ Asset

covering pension and retirement pension benefits sys-                          Management Co., Ltd. (DIAM) totaled ¥3,471 billion,

tems in general.                                                               down 5.7% from the previous year.

   A look at the status of group life insurance as of                             As a result, the balance of group pension assets for

March 31, 2005 shows that, although the net amount of                          the Dai-ichi Life Group as a whole as of March 31, 2005

policies in force for group term insurance decreased                           totaled ¥9,432 billion, a decrease of 7.2% compared to

due to such factors as reductions in the numbers of                            the previous year.

personnel on the part of corporate clients, a steady

  Policies in Force of Group Life Insurance                                       Policies in Force of Group Annuities

  54,193 Billion Yen 54,344 Billion Yen 54,856 Billion Yen                       7,067 Billion Yen   6,483 Billion Yen   5,961 Billion Yen

                          54.6%             53.2%                                                                                            Corporate Pension
       55.5%                                                                          58.8%                                                  Insurance
                                                             Group Term Life                             67.9%
                                                             Insurance                                                                       Employees’ Pension
                                                                                                                             79.8%           Fund Insurance
                                                                                                                                             Group Survival
                                                             Group Credit                                                                    Insurance
                                                             Life Insurance
                                                                                                                                             National Pension
                                                                                                                                             Fund Insurance
                                                                                                                                             Defined Contribution
                          43.8%             45.3%                                                                                            Plan Insurance
       42.9%                                                                          39.9%

                                                                                      1.2%                1.3%                1.3%
                                                                                      0.1%                0.1%                0.1%
        1.5%              1.5%               1.5%                                     0.1%                0.2%                0.7%
  As of March 31,     As of March 31, As of March 31,                            As of March 31,     As of March 31, As of March 31,
        2003                2004            2005                                       2003                2004            2005



                              Investment Environment                                            March 31, 2005                ¥ 11,668
                              Economic conditions for the year were adversely affec-
                                                                                                March 31, 2004                  1,179
                              ted by slowdown in exports caused mainly by rising oil
                                                                                                March 31, 2005                  1,182
                              price and slower growth in foreign economies. Produc-
                              tion adjustments in the technology sector caused by
                                                                                                ■ Foreign Currency
                              high inventory level, together with other factors, forced
                                                                                                Although the Japanese yen strengthened against U.S.
                              the Japanese economy into a temporal stalemate. On
                                                                                                dollar up to and after Presidential election in November
                              the other hand, improved corporate earnings rein-
                                                                                                reflecting double deficit issue of the U.S. and other fac-
                              forced capital investment activities and new employ-
                                                                                                tors, U.S. dollar recovered toward the fiscal year end,
                              ment by firms, which resulted in slower but sound eco-
                                                                                                due to diverging economic fundamentals as well as in-
                              nomic growth.
                                                                                                terest rate differential between the U.S. and Japan. Euro
                                Although U.S. economy exhibited temporal weaknes-
                                                                                                strengthened against both the Japanese yen and U.S.
                              ses due to rising oil price and higher long-term interest
                                                                                                dollar throughout the year.
                              rates, strong employment and personal income situation
                              as well as lower market interest rate later in the year re-
                                                                                                yen/U.S. dollar:
                              sulted in stable economic growth, fueled by strong con-
                                                                                                March 31, 2004                ¥105.69
                              sumer spending and housing construction.
                                                                                                March 31, 2005                ¥107.39
                                Under the economic environment described above,
                              investment environment was as follows:
                                                                                                March 31, 2004                ¥128.88
                              ■ Domestic Interest Rates
                                                                                                March 31, 2005                ¥138.87
                              Yield on ten-year government bonds rose to 1.9% level
                              during the first half of the year reflective of the recovery in
                                                                                                Fundamental Investment Policy
                              the domestic economy. However, as a slowdown in eco-
                              nomic growth became evident later in the year, interest           Giving due consideration to stability and profitability that
                              rates declined. As a result, interest rate level at the fiscal    are required in the investment of insurance reserve
                              year end was lower than that of the previous year end.            funds and to the long-term prospects of life insurance
                                                                                                contracts, Dai-ichi has established its fundamental in-
                              Yield on ten-year government bonds:                               vestment policy based on the ALM (Asset Liability Man-
                              March 31, 2004                1.435%                              agement) approach which considers the long-term per-
                              March 31, 2005                1.320%                              spective of the balance between assets and liabilities.
                                                                                                Specifically, our investment portfolio is built around a
                              ■ Domestic Stocks                                                 core of yen-denominated fixed income assets, consist-
                              Nikkei 225 showed steady recovery to the 12,000 level             ing mainly of domestic bonds and loans. At the same
                              early in the year, reflecting the recovery in the economy         time, we are striving to increase the profitability of our
                              and improved corporate earnings. Although stock prices            portfolio by incorporating stocks and foreign securities
                              once turned to a sluggish trend due to increasing uncer-          within an acceptable range of risk. Additionally, risk-
                              tainty regarding domestic economic growth, strong cor-            monitoring is now more reliable as a result of our care-
                              porate earnings and steady foreign stock market trends            fully planned risk management system, and we have in-
                              led the stock prices to show another upturn toward the            creased investment efficiency.
                              year end, ending at almost the same level as the previ-
                              ous year end.                                                     Promotion of ALM
                                                                                                ALM (Asset Liability Management) is a system for con-
                              Nikkei 225 Stock Average:
                                                                                                trolling operating assets and liabilities (insurance con-
                              March 31, 2004                ¥11,715

                                                                                                                              R EVIEW O F O PE RAT IO N S
                                                                                                                              R EVIEW O F O PE RAT IO N S
tracts) appropriately.                                          Quarterly meetings by the Investment Risk Management
  Dai-ichi recognizes that in the insurance business it         Committee, as well as other meetings, are held so that
has become increasingly important to ensure proper              senior managers have a shared knowledge of potential
profit, risk and capital management through ALM. In             risks, and can make decisions on risk issues.
particular, the company believes that when a life insur-          The risk volumes for the entire portfolio, which com-
ance company promotes ALM, it is vital to fully recog-          bines market, credit and real estate investment risks,
nize the characteristics of its liabilities.                    are also measured and reported to management on a
  From this viewpoint, the company has introduced in-           regular basis. Thus Dai-chi works hard to strengthen its
ternal management accounting for each of the product            check functions from the perspective of financial
groups whose liabilities have different characteristics,        soundness.
while it has striven to develop an administrative struc-
ture for each product group according to the differences        Market risk management
in market characteristic and profitability among the            The balance of assets, including securities and deriva-
groups. In operating each product group, efforts are            tives, which involve market risks, and their transactions,
made to grasp the characteristics of liabilities that the       as well as their unrealized gains/losses are managed on
product groups have, and assets are appropriately allo-         a daily basis and reported to management. The frame-
cated according to their characteristics.                       work is in place to control potential risks by setting risk
  From the perspective of risk management as well, risk         limits to asset positions and loss amount. In addition,
trends in insurance underwriting, investment and liquidi-       various methods, including value-at-risk (VaR) analysis,
ty are grasped in quantitative terms for management ac-         a principal market risk measurement method, are used
cording to the major accounting units that correspond to        to grasp market risk volumes in numerical terms, thus
product characteristics. When new insurance products            ensuring even deeper market risk management.
are developed and marketed, efforts are also made to
properly check various risks involved in insurance un-          Credit risk management
derwriting and investment. Dai-ichi is endeavoring to im-       Measures for credit risk management include rigorous
prove its financial soundness by grasping and managing          preliminary review and post-transaction follow-up of in-
its capital adequacy level, risk volumes, capital-to-risk       dividual transactions. In addition, from the perspective
level and other factors on a consistent basis, and this         of portfolio management, the makeup of transactions
kind of risk management information is submitted to the         classified according to internal credit ratings, degree of
Board of Directors and the Executive Management                 concentration of credit granting and other factors are
Board at regular intervals.                                     periodically analyzed for management. Measures are
                                                                also taken to prevent the concentration of credit grant-
Investment Risk Management                                      ing by, for example, managing credit granting through
                                                                the setting of credit limits. Besides these measures,
Objective of investment risk management
                                                                portfolio credit risks are grasped in numerical terms for
The objective of risk management at Dai-ichi is to main-
                                                                management through the periodic measurement of
tain the soundness of its assets while paying close at-
                                                                credit risk volumes.
tention to the balance between risks and returns from a
mid- to long-term perspective.
                                                                Investment Policies for the Fiscal Year
Investment risk management structures
                                                                Ending March 31, 2006
At Dai-ichi, the Risk Management Department carries             The Company will continue to set fixed income invest-
out integrated risk management in which it oversees             ments, including bonds and loans, as a core of its asset
risks for the entire portfolio, including market, credit, and   portfolio in order to maintain stable investment income
real estate investment risks, and strengthens its check         stream, consistent with its mid- to long-term investment
function from the perspective of financial soundness.           policies.


                              Overall Risk Management

                              Basic Recognition                                                             mental company-wide procedures for ensuring effective
                              As the insurance company environment undergoes rap-                           risk management.
                              id change, insurance companies need to conduct                                     These policies set forth a basic recognition of risk
                              sound business operations in order to ensure customer                         management, provide a classification of risks, outline
                              trust and fulfill without fail their responsibilities in long-                risk management methods, define roles for managers
                              term insurance contracts. Therefore appropriate risk                          and employees, and so forth. Under these Basic Poli-
                              management at their own responsibility has become in-                         cies, the company has established procedures for
                              creasingly important.                                                         managing each type of risk as well as risk manage-
                                 Dai-ichi views effective risk management according                         ment regulations, standards and other guidelines as
                              to risk characteristics as one of its most important                          practical rules.
                              management issues, and thus strives to increase its
                              profitability while grasping various potential risks pre-                     Risk Management Structures
                              cisely and controlling them properly.                                         Various risks arising from operations are managed by
                                 Specifically, Dai-ichi has developed organizations                         the divisions responsible for the execution of opera-
                              and rules and sophisticated risk management methods                           tions at their own responsibility, in accordance with the
                              to cope with insurance underwriting, investment, liquid-                      Basic Risk Management Policy for each type of risk.
                              ity, operational, system, great earthquake and other                          The divisions responsible for checking each type of risk
                              risks, including protection of clients & classified infor-                    develop risk management structures, and all these risk
                              mation, in order to strengthen its internal risk manage-                      management efforts are supervised by the Risk Man-
                              ment systems.                                                                 agement Department that has been set up to strength-
                                 From the viewpoint of ALM, as described in the pre-                        en internal risk management systems. Moreover, the
                              vious section, Dai-ichi carries out quantitative and inte-                    effectiveness and appropriateness of these risk man-
                              grated management for insurance underwriting, invest-                         agement functions are examined by the Internal Control
                              ment, and liquidity risks.                                                    and Auditing Department on a regular basis.
                                                                                                                 The Board of Directors and the Executive Manage-
                              Risk Management Policies, Regulations, Etc.                                   ment Board periodically receive reports on the status of
                              In order to implement effective risk management ac-                           potential risks for proper decision-making. In addition,
                              cording to risk characteristics, Dai-ichi has established                     corporate auditors routinely perform audits for both the
                              the Basic Risk Management Policies, a set of funda-                           management and company’s overall risk management.

                                     Dai-ichi’s Risk Management Structure

                                                                                               Board of Directors                                          Reports
                                       Board of
                                       Corporate                                                 President                                                               Instructions
                                        Auditors                                       Executive Management Board
                                                                                    Instructions           Reports
                                           Statutory                   Risk Management Department (Overall risk management)
                                            Auditors    Audit                                                                                          Inspec-
                                                                          Departments in charge of specific risk management                                            Internal
                                                                                                                                                         tions       Control and
                                                                                          (Check functions)
                                                                                                                                                                 Auditing Department
                                      (functions )                                              Risk management
                                                                                                                                                       Inspec- ( Inspection function )
                                                                      Departments in charge of business execution (Self control)                         tions

                                                                  Insurance     Asset Investment risk
                                                                                                          Liquidity      Operational
                                                                 underwriting Market risk Credit risk                        risk        System risk
                                                                     risk                                            (Insurance-related)
                                                                              Real estate investment risk
                                                                                      A LM

                                                                                                                  R EVIEW O F O PE RAT IO N S
International Insurance Operations

Group Reinsurance                                         companies in Japan, we do business with over 400 in

As Japanese companies continue to enter foreign           the area of corporate insurance alone, and we are

markets, Dai-ichi has signed bilateral reinsurance        proud to be among the best-performing life insur-

agreements with the major insurance companies             ance companies in Japan in this area.

worldwide and is active in the group reinsurance            We offer a wide array of services to foreign-owned

business providing these Japanese companies with          companies, including our group term insurance-

products and services designed specifically for their     based survivors benefit plan, corporate pension as-

needs.                                                    set management, consulting for integration of 401(k)-

   We are also the Japan representative for the In-       type defined contribution pension plans. In addition,

ternational Group Program (IGP), an international         through alliances with Sompo Japan and AFLAC we

group reinsurance network established by John             now offer an even more varied product line-up, in-

Hancock Life Insurance, one of America’s leading          cluding long-term disability and accident insurance.

life insurance firms. Currently, with 50 of the world’s   In the area of group term insurance, our highly

leading insurance companies as members, IGP is            praised IGP system of partnerships through a net-

one of the world’s largest international group reinsur-   work of international associate insurers provides

ance network.                                             worldwide support for multinational companies.

   At the end of March 2005, Dai-ichi, providing
health and welfare support to Japanese companies
around the world had accepted policies with 200
companies totaling ¥67.9 billion (US$0.6 billion) and
                                                               About Reinsurance
handled ceded reinsurance policies for 228 compa-
nies totaling ¥341.3 billion (US$3.1 billion).                 Reinsurance refers to a situation in which
                                                               an insurance company that has undertak-
Individual Reinsurance                                         en to insure a policyholder enters into an
                                                               agreement with another insurance com-
Dai-ichi is also engaged in individual reinsurance
                                                               pany to bear all or part of the responsibili-
business, focusing especially on the Asia region,
                                                               ty for paying insurance benefits to the
where we have strong relationships with life insur-
                                                               policyholder when it becomes necessary.
ance companies. We currently conduct individual re-
                                                               For Dai-ichi’s international reinsurance
insurance business with 13 companies in 5 countries
                                                               purposes, group reinsurance refers to ca-
in the region.
                                                               ses when an overseas subsidiary of a
                                                               Japanese corporation or an individual liv-
Services to Foreign-Owned Companies
                                                               ing overseas buys an insurance product
in Japan
                                                               from a local insurance company, and Dai-
Our full range of benefit services for foreign compa-          ichi accepts some responsibility to pay in-
nies in Japan has been widely praised. In April 2000,          surance benefits and receives reinsurance
we established the International Corporate Relations           premiums as compensation.
Department to specialize in providing services to for-
eign-owned companies. Of the 2000 foreign-owned


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