fiscal current state of housing indemnity, ltd.july 10, 2008 registered as small-claims and...

Fiscal 2013

Current state of Housing

Indemnity, Ltd. (Financial results for Fiscal Year 2012)

Housing Indemnity, Ltd.

Introduction

Thanks to all of you for your continued patronage of Housing Indemnity, Ltd.

At the end of March 2013 we concluded our fifth fiscal year (FY 2012) as a

small-claims and short-term insurance provider and we have created this Annual

Report, "2013: Current state of Housing Indemnity, Ltd.," in order to give an

overview of our business and to explain the financial conditions of our company.

We hope this report will help you get a better understanding of our company.

In July 2008 our company began operating as provider of small-amount,

small-scale insurance and started selling "Comprehensive Rental Housing

Insurance" offering compensation for the various risks inherent in the daily lives

of tenants of rental housing. We then began selling "Comprehensive Tenant

Insurance" offering compensation for the divers risks incurred in by business

operators established in rental housing in June 2009, and in December 2011 we

introduced the “Peace of Mind Compensation Special Contract” which expanded

compensation contents of the "Comprehensive Rental Housing Insurance,” and

we have been committed ever since to providing insurance products that meet

consumers’ needs.

Even in the future we will continue to carry on that same mutual aid association

spirit of the Housing Guarantee Mutual Aid Association with which our many

customers had been familiar and we shall spare no effort in order to raise the

profile of our company by providing high-quality services and products tailored to

the needs of our customers in the spirit of “customer first.”

We look forward to your continued support and patronage in the future.

Housing Indemnity, Ltd

President and Representative Director: Masahiko Sugiura

*The present report is a "document describing the state of business and

property” as prescribed by the provisions of Article 111 of the Insurance

Business Act as applied mutatis mutandis pursuant to Section 17 of Article

272 of the Insurance Business Act," and has been drafted in accordance with

Section 37 of Article 211 of the Insurance Business Act Implementation

Decree.

Table of Contents

I. Overview of the company and matters relating to its organization

1. Management principles ...........................................................................1

2. Distinctive features of the company..........................................................1

3. Company’s history……………………………………………………………..2

4. Company’s structure…………………………………………………………..3

5. Situation of shares and shareholders……………………………………..5

6. Profile of Directors…………………………………………………………….. 5

7. Information on employees…………………………………………………….5

8. Information on subsidiaries…………………………………………………5

II. Main business activities

1. Products handled .......................................................................................6

2. Situation of shares and shareholders………………………………………6

3. Claim payment stance…………………………………………………………. 6

4. Reinsurance ............................................................................................... 9

5. Residential Security QQ [Emergency] Service ............................................ 9

III. Matters relating to main business activities

1. Overview of business in Fiscal 2012 ........................................................10

2. Indicators showing the state of main business activities in the last three

fiscal years……………………………………………………………………………11

3. State of business in the last two fiscal years ............................................ 12

4. Balance of liability reserves…………………………………………………..17

IV. Matters relating to the conduction of business

1. Risk management stance…………………………………………………….. 18

2. Compliance stance…………………………………………………………….18

3. Handling of Personal (customer) information ........................................... 19

4. Designated bodies for the settlement of disputes………………………….. 21

V. Matters relating to the state of assets in the last two years

1. Financial statements ................................................................................. 22

2. Situation of solvency with regard to benefit payout.................................... 30

2

I. Overview of the company and matters relating to its organization

1. Management principles

The following are the management principles followed by our company in

order to heed to the various daily needs of tenants and to contribute to the

healthy development of the small-claims and short-term insurance industry

while strengthening our management structure.

・ We will strive to develop insurance policies and to offer satisfying

indemnification services

・ We will strive to conduct business in an appropriate way making

compliance our top priority.

・ We will strive to create an environment where employees can

continuously improve their capabilities and develop their business skills

to the full.

・ We will pursue solid business development focusing on profitability in

order to fulfill our commitment to shareholders.

・ We will strive to take active part in volunteer activities that can contribute

to the creation of a better global environment.

2. Distinctive features of the company

Our company registered as a small-claims and short-term insurer on July

10, 2008 [Kanto Finance Bureau (small-claims and short-term insurance)

No. 34], and we offer "Comprehensive Rental Housing Insurance" for rent

tenants and “Comprehensive Tenant Insurance “ for business operators

established in rental housing.

In order to be close to our customers and to provide friendly and polite

consultations as well as rapid response, our company is working to open

branches in major cities nationwide and strengthen the network of

3

distributors.

In April 2012 we opened a new branch in Kyushu branch and we have been

actively supporting all distributing agencies in the Kyushu region.

We shall continue to take advantage of the characteristics of small-claims

and short-term insurances in order to develop insurance products

appropriately tailored to the diverse needs of consumers and to continue

offering peace of mind to consumers.

3. History of the company

July 2, 1997 ACS Ltd. is established

November 14, 2007 The name of the company is changed to Housing

Indemnity, Ltd.

July 10, 2008 Registered as small-claims and short-term insurer.

[Kanto Finance Bureau (small-claims and short-term

insurance) No. 34]

July 10, 2008 Started selling home contents insurance (Comprehensive

Rental Housing Insurance)

September 30, 2008 Allocation of new shares to third parties

(Capital stock: 383,750,000 yen)

June 1, 2009 Started selling “Comprehensive Tenant Insurance”

September 1, 2009 “Special clauses for holders of corporate contracts” first

introduced in “Comprehensive Rental Housing Insurance”

September 10, 2009 Started offering Residential Security QQ [Emergency]

Service for policyholders of “Comprehensive Rental

Housing Insurance”

December 1, 2011 Started selling the “Peace of Mind Compensation Special

Contract” which expands compensation contents of the

"Comprehensive rental housing insurance"

December 1, 2011 Introduced the new "Updated Premium by Account

Transfer Special Contract"

4

3. Company’s structure (as of July 1, 2013)

1. Management structure

Housing Indemnity, Ltd. Organization Chart

Board of Auditors

Insurance Actuary

Board of Directors

President and

Managing Director

Compliance Committee

Personal/Customer Information Protection

Committee

Risk Management Committee

Standing Auditor

Human Resources Committee

Internal Audit Office Compliance Office

General Manager for Customer Services

Sales Headquarters

East Japan Sales

Promotion Department

West Japan Sales

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5

(2) Business Offices

Head Office

1-14-10 Shibadaimon, Minato-ku, Tokyo 105-0012

Tel: (03)5405-1151 Fax: (03)5405-1152

Tokyo Sales Department

1-14-10 3F Shibadaimon, Minato-ku, Tokyo 105-0012

Tel: (03)5405-1155 Fax: (03)5405-1154

Kansai Branch

2-12-4-703 Sonezaki, Kita-ku, Osaka 530-0057

Tel: (06)6809-3555 Fax: (06)6809-3556

Tohoku Branch

3-3-21-4C Uesugi, Aoba-ku, Sendai, Miyagi 980-0011

Tel: (022)726-2777 Fax: (022)726-2666

Tokai Branch

2-19-19-8F Nishiki, Naka-ku, Nagoya, Aichi 460-0003

Tel: (052)220-2401 Fax: (052)220-2402

Tohoku Branch

4-3-3-3A Hakata-ku, Fukuoka 812-0011

Tel: (092)292-3100 Fax: (092)292-3101

5. Situation of shares and shareholders (as of March 31, 2013)

(1) Number of shares

Issuable shares: 8,000 shares

Issued shares: 3,450 shares

(2) Number of shareholders at the end of the fiscal year: 7

6

(3) Information on shareholders

Shareholder's name

(person or organization)

Stake in our company

Number of

shares (stock)

Stockholding

ratio (%)

Masahiko Sugiura 1,703 49.36

Koichi Yamanaka 1,185 34.35

Toa Reinsurance Co., Ltd. 300 8.70

Housing Indemnity Employee

Stock Ownership Association

200 5.80

Satoshi Kudo 40 1.16

Shigeshi Suzuki 15 0,43

Sakura Real Estate Co., Ltd. 7 0.20

6. Profile of Directors (as of July 1, 2013)

Job title Name Responsibilities Main concurrent positions

President and

Representative

Director

Masahiko

Sugiura

Director Chiaki Ochiai

Head of East Japan

Sales Promotion

Division

Director Tadafumi

Sakai

Head of West Japan

Sales Promotion

Division

Director Kawauchino

Shigetoshi

General manager for

customer services

Corporate

Auditor Akira Sakurai

Corporate

Auditor Satoshi Kudo Outside Auditor

Director of Kudo Certified

Public Accountant and Tax

Accountant Office

Corporate

Auditor

Tomohisa

Tabata Outside Auditor

Director of Tomohisa

Tabata Law Firm

Auditor at Hamamatsu

Yanase Co.

7

7. Information on employees (as of March 31, 2013)

Number of

employees

Average age Average years of

employment

Average salary

per month

46 35.38 years old 3.44 years 323,000 yen

Notes: 1. Average monthly salaries include non-standard wages and have been rounded

down to the nearest thousand yens.

2. Average age and average years of service have been calculated to two decimal

places and rounded down to one decimal place.

8. Information on subsidiaries

N/A

II. Main business activities

1. Products handled

(1) “Comprehensive Rental Housing Insurances” for rent tenants; by

providing "household goods and repair costs" and "indemnity

liability" as a set, we offer compensation for a wide array of damages

to household goods of tenants living in rental housing, ranging from

damages caused by natural disasters to damages caused by fire,

theft, water leakage and breakage, and to the various damages

related to everyday living.

On December 1, 2011, in addition to the traditional “Basic plan,”

we started sales of "Peace of Mind Plan" which is based on the latter

but offers wider compensation coverage for repair costs and

household goods damages.

(2) "Tenant comprehensive insurances," are aimed at corporations running

businesses from “stores" or "offices" established in rented facilities

and offer indemnification for a wide array of damages to owned

assets or equipment, ranging from damages caused by natural

disasters to damages caused by fire, theft, water leakage and

breakage and to the various damages inherent in the conduction of a

business.

2. Insurance sales stance

Our products are intended for tenants living in rental housing and rented

facilities. Sales of our insurance policies are outsourced to real estate

agencies offering rental properties and to distributors offering insurance

policies to real estate managing agencies.

8

We believe that, when selling insurance policies, it is extremely important

to accurately assess the insurance needs of customers and to sell suitable

policies in compliance with laws and regulations.

With regard to outsourcing sales to distributors, our company carefully

investigates the suitability of distributors in terms of their compliance with

the law and, even after the outsourcing of sales, we strive to follow up by

offering training and guidance on how to best carry out sales.

3. Claim payment stance

In addition to maintaining a system for reporting the occurrence of

accidents, our company has also adopted a stance for ensuring rapid

damage services and appropriate claim payments with a considerate

approach that takes into account the customer’s position.

(1) Accident reporting

In the event of fires or accidents for which compensation is offered,

we provide a system for reporting accidents to our "Damage Service

Department" 24 hours a day, 365 days a year.

Furthermore, at the time of reporting accidents, we provide

solicitous support for submitting billing documents for those

customers with no previous experience of insurance claims.

"Special phone number for reporting accidents” (accessible also

from mobile phones)

0120-608-879 (toll free)

(2) Customer Support Center

All general inquiries, questions and complaints regarding

insurance underwriting and claim payments are handled with

politeness and professionalism by our full-time staff at our Customer

Support Center.

“Phone number of Customer Support Center”

0120-987-313 (toll free)

(Service available on weekdays from 9:00 to 17.00)

(3) Claims processing system

Our company, besides adequately managing the progress of all

claims, from accident reporting all the way to claim payment, by

means of a web-based reporting and management system, also

provides assistance toward accurate and reliable claims processing.

9

(4) Checking stance for claims processing.

On occasion of the audits carried out by the Internal Audit

Department we conduct a thorough checking of the claim payment

management system as well as detailed monitoring for preventing

claim payment leaks and ensuring accurate claim processing.

"Description of claim processing from accident occurrence to claim

settlement"

A description of the stages of claim processing, from the occurrence of

accidents to claim settlement, is given below.

Policyholder Housing Indemnity, Ltd.

Accident occurs

Accident reporting Incident Report Line 0120-608-879

With securities number on hand, report details of accident

Confirmation of policy contents and details of

accident

Completion of insurance claim documents, gathering and preparation of attachments Send

documents

Explanation of insurance payment and claim forms, shipment of claim

documents

Document submission Return

documents

Document receipt

Investigation, confirmation of accident or damage

situation, and calculation of insurance amount

Relaying of insurance amount

Payment of insurance amount

Confirmation of insurance amount

Out-of-court settlement with victim (if compensated)

Victim

Finalizing of insurance amount

10

4. Reinsurance

Our company, in order to distribute the risks of underwriting insurance

where damages occur simultaneously in a large number of wide-coverage

insurance contracts in case of natural calamities such as large-scale

typhoons, etc., and to maintain an adequate level of control, guarantees the

soundness of claim payment by concluding an insurance contract with a

reinsurance company for part of the insurance.

It should be noted that, as a general rule, when selecting a re-insurance

company, we only consider insurance companies in solid financial health

which have earned an A- (A minus) rating from Standard & Poor's.

In addition, from the perspective of distributing reinsurance risks, we

divide and cede risks to several reliable companies satisfying the

above-stated requirement.

5. Residential Security QQ [Emergency] Service

For policyholders of Comprehensive Rental Housing Insurances, we are

offering the Residential Security QQ [Emergency] Service which provides

24-hours a day, 365 days a year, plumbing assistance, locksmith services

in case of lock-out or loss of keys and glass repair services. (Partially free of

charge)

11

III. Matters relating to main business activities

1. Overview of business in Fiscal 2012

(1) Overview of our main activities

As for the world economy in the year under review, while the US enjoyed a gradual

recovery underpinned by that government’s monetary easing policies, the economy

continued to be in a state of general recession in Europe, in spite of a series of

measures aimed at resolving national debt issues. In addition, in many emerging

countries the growth rate has slowed down as a consequence of the global economy’s

downturn.

As for Japan, the economy has been picking up slowly amid the corrective measures

targeting the over-appreciation of the yen and the rise of stock prices in the second half

of the fiscal year. In the small-claims and short-term insurance (SSI) industry to which

our company belongs, 71 SSI providers were registered nationwide with the Financial

Bureau (as of the end of March 2013); among these, the number of SSI providers

handling the same household goods and compensation insurance as our company and

of casualty insurer companies is considered slightly excessive for the size of the market

and mutual competition is expected to intensify in the future.

Under such severe circumstances, we managed to ensure a 110% year-on-year

increase in written insurance premiums by strengthening cooperation with existing

distributing agencies, opening new distributing agencies, pursuing sales of our rental

housing insurance "Relief Plan" introduced last December which expands

compensation coverage, as well as by expanding our sales network with the

establishment of a new Kyushu branch in April. However, regional differences in the

rate of growth have emerged as a consequence of the intensifying of the competition.

With regard to the payment of insurance claims, the effects of expanding

compensation coverage (to include compensation for damages caused by freezing of

water pipes, etc.) were limited and payments remained within the limits specified in the

budget.

With respect to operating costs too, there were expenses related to branch openings,

branch relocations and the rethinking of the damage service department but, as

investments towards growth, they should be seen as contributions to future revenues.

On an unrelated note, distributing agency fees were also slightly increased fee as a

consequence of increased competition among industry operators. On the other hand,

we made efforts to contain operating costs by optimizing the cost of outsourcing

operations to external contractors.

As a result, ordinary revenue for the fiscal year under review amounted to

3,897,000,000 yen (2,142,000,000 of which in insurance premiums), ordinary profit

12

amounted to 123,000,000 yen and net income for the fiscal year was 118,000,000 yen.

(2) Issues that must be addressed by our company

In the fiscal year under review, just as in the previous year, we managed to

successfully achieve our planned goals and in the future we would like to devote our

energies to the prompt reduction of cumulative losses. To this end, from the next fiscal

year, we shall enhance our market competitiveness and work to improve profitability

even more by expanding on previous measures such as increasing the efficacy of our

Kyushu Branch opening, diversifying payment methods of insurance premiums,

adjusting agency commissions, digitalizing securities, etc. We will continue to

emphasize compliance throughout the whole company, including on the part of

distributing agencies, insurance salespersons and consignees.

"Changes in assets and profit/loss situation"

Category FY2011 FY2012

Total amount of contracts by the

end of the fiscal year

3,280,986,000 yen 3,661,183,000 yen

Insurance premiums 1,931,181,000 yen 2,142 580,000 yen

Interest and dividend income

Ordinary income (loss)

Net income (loss)

110,000 yen

83,717,000 yen

82,073,000 yen

124,000 yen

123,131,000 yen

118,621,000 yen

Total assets 865,713,000 yen 1,041,099,000 yen

Net income (loss) per share 23,789.19 yen 34,382.95 yen

Note: The amount of contracts at the end of the fiscal year is based on "premium + returned

reinsurance fees + reinsurance commission."

2. Indicators showing the state of main business activities in the last

three fiscal years

(In thousand yen)

Category FY2010 FY2011 FY2012

Recurring revenue 3,165,421 3,481,612 3,897,230

Ordinary income (loss) 13,066 83,717 123,131

Net income (loss) 10,216 82,073 118,621

Capital

(Issued shares)

383,750

(3,450 shares)

383,750

(3,450 shares)

383,750

(3,450 shares)

Net assets as per the

Insurance Business Act

177,226 263,921 387,684

13

Amount of net assets 708,849 865,713 1,041,099

Liability reserve balance 173,600 211,131 251,662

Balance of marketable

securities

― ― ―

Solvency margin ratio 605.1 % 787.5% 1,496.8%

Dividend payout ratio ― ― ―

Number of employees 45 45 46

Net premiums income 168,003 186,282 206,356

Notes: 1. Figures have been rounded down to the nearest unit used.

2. Breakdown of net premiums written

・ Insurance premiums: 2,142,580,000 yen

・ Reinsurance premiums ceded (-): 1,927,878,000 yen

・ Returned reinsurance fees (+): 74,281,000 yen

・ Canceled and returned premiums (-): 82,626,000 yen

Deducted net premiums: 206,356,000 yen

3. Our company started operating as a small-claims and short-term insurance

provider on July 10, 2008.

3. State of business in the last two fiscal years

(1) Indicators showing the state of main business activities

① Net original premiums

(In thousand yen)

Items FY2011 FY2012

Amount Component

ratio

Amount Component

ratio

Fire insurance 1,864,362 100.0% 2,059,954 100.0%

Other insurance ― ― ― ―

Total 1,864,362 100.0% 2,059,954 100.0%

Note: Net original premiums are calculated deducting original canceled and returned

premiums and other returns from original premiums.

14

② Reinsurance premiums ceded

(In thousand yen)

Items FY2011 FY2012

Amount Component

ratio

Amount Component

ratio

Fire insurance 1,678,080 100.0% 1,853,598 100.0%


Total 1,678,080 100.0% 1,853,598 100.0%

Note: Reinsurance premiums ceded are calculated deducting returned reinsurance fees

from reinsurance premiums.

③ Net premiums written

(In thousand yen)

Items FY2011 FY2012

Amount Component

ratio

Amount Component

ratio

Fire insurance 186,282 100.0% 206,357 100.0%


Total 186,282 100.0% 206,357 100.0%

Note: Net premiums written are calculated by deducting the paid net reinsurance premiums

of reinsurance contracts from the original net premiums written.

④ Original net claims paid

(In thousand yen)

Items FY2011 FY2012

Amount Component

ratio

Amount Component

ratio

Fire insurance 219,776 100.0% 257,848 100.0%


Total 219,776 100.0% 257,848 100.0%

Note: Original net claims paid are calculated deducting from contractual payments of the

original contracts the amount of money recovered through claims for compensation

pertaining to the original contracts.

15

⑤ Recovered reinsurance claims

(In thousand yen)

Items FY2011 FY2012

Amount Component

ratio

Amount Component

ratio

Fire insurance 197,798 100.0% 232,315 100.0%


Total 197,798 100.0% 232,315 100.0%

⑥ Net claims paid

(In thousand yen)

Items FY2011 FY2012

Amount Component

ratio

Amount Component

ratio

Fire insurance 21,978 100.0% 25,533 100.0%


Total 21,978 100.0% 25,533 100.0%

Note: Net claims paid are calculated deducting from contractual payments of the original

contracts the reinsurance premiums recovered on the basis of reinsurance contracts.

⑦ Insurance underwriting profit

(In thousand yen)

Items FY2011 FY2012

Amount Component

ratio

Amount Component

ratio

Fire insurance 83,717 100.0% 123,131 100.0%


Total 83,717 100.0% 123,131 100.0%

Note: Insurance underwriting profits are calculated by deducting insurance underwriting costs,

business expenses and general administrative costs from insurance underwriting income and by

taking into account other income and expenditures (other ordinary income and other ordinary

costs).

16

(2) Indicators related to insurance contracts

① Policyholder dividend

N/A

② Original loss ratio and original operating cost ratio before recovery of

reinsurance and original combined ratio

Items

FY2011 FY2012

Direct

Loss

ratio

Original

operating

ratio

Combined

ratio

Direct

Loss

ratio

Direct

operating

ratio

Combined

ratio

Fire insurance 11.8% 71.4% 83.2% 12.5% 71.1% 83.6%

Other insurance ― ― ― ― ― ―

Total 11.8% 71.4% 83.2% 12.5% 71.1% 83.6%

Notes: 1. Original loss ratio = Original net claims paid ÷ net original premiums×100

2. Original operating costs ratio = operating cost ÷ net original premiums×100

3. Combined ratio：original loss ratio＋original operating costs ratio

③ Net loss ratio, net expense ratio and combined ratio

Items

FY2011 FY2012

Net

Loss

ratio

Net

Operating

cost ratio

Combined

ratio

Net

Loss

ratio

Net

Operating

cost ratio

Combined

ratio

Fire insurance 11.8% 22.0% 33.8% 12.4% 9.7% 22.0%

Other insurance ― ― ― ― ― ―

Total 11.8% 22.0% 33.8% 12.4% 9.7% 22.0%

Notes: 1. Net loss ratio = net claims paid ÷ net premiums written × 100

2. Net expense ratio = net expenses÷ net premiums written × 100

3. Combined ratio (combined ratio) = net loss ratio + net expense ratio

17

④ The number of ceding reinsurance companies and the percentage of the

reinsurance premiums paid by the top two companies

Number of ceding

reinsurance companies

Percentage of reinsurance

premiums paid

FY2011 Two companies 100%

FY2012 Two companies 100%

Note: Type of re-insurance: proportional reinsurance (90% of the insurance amount)

⑤ Percentage of reinsurance premiums paid by ceding reinsurance

companies in each rating category

Rating category FY2011 FY2012

A- or higher 100% 100%

BBB or above ― ―

Other ― ―

Total 100% 100%

Note: Rating categories are those used by Standard & Poor's

⑥ Reinsurance claims recoverable

N/A

(3) Indicators related to accounting

① Claims reserves

(In thousand yen)

Items

FY2011 FY2012

Amount Component

ratio Amount

Component

ratio

Fire insurance 9,731 100.0% 7,897 100.0%


Total 9,731 100.0% 7,897 100.0%

Note: Claims reserves are calculated by deducting from ordinary claims reserves and losses

incurred but not reported concerning the original contracts the reinsurance portion

based on the related reinsurance contracts.

18

② Liability reserves (In thousand yen)

Items FY2011 FY2012

Amount Component

ratio

Amount Component

ratio

Fire insurance 211,131 100.0% 251,662 100.0%


Total 211,131 100.0% 251,662 100.0%

Note: Liability reserves are calculated by deducting from ordinary liability reserves and

catastrophe reserves concerning the original contracts the reinsurance portion based

on the related reinsurance contracts.

③ Remaining balance for each category of earned reserves and voluntary

retained earnings

N/A

④ Fluctuations of ordinary losses with respect to increases in the loss ratio

Scenario of increasing loss

ratio

Assuming that incurred loss ratio increases by 1%.

Calculation method: Net earned premiums × 1%

Impact on ordinary income FY2011 1,821,000 yen

FY2012 1,245,000 yen

Note: Earned premiums are calculated deducting the reinsurance portion based on the

reinsurance contract.

(4) Indicators related to asset management

① Situation of asset management

(In thousand yen)

Items FY2011 FY2012

Amount Component

ratio

Amount Component

ratio

Savings deposits 513,238 59.3% 674,243 64.8%

Cash in trust ― ― ― ―

Marketable securities ― ― ― ―

Total operating assets 513,238 59.3% 674,243 64.8%

Total assets 865,713 100.0% 1,041,099 100.0%

19

② Amount of income from interest on dividend and investment yield

(In thousand yen)

Items FY2011 FY2012

Amount Yield Amount Yield

Savings deposits 110 0.02% 124 0.02%

Cash in trust ― ― ― ―

Marketable securities ― ― ― ―

Subtotal 110 0.02% 124 0.02%

Other ― ― ― ―

Total 110 0.02% 124 0.02%

Note: yield = "amount of revenue" ÷ "average monthly invested amount" × 100

③ Component ratio with respect to balance by type of marketable securities

held and their total

N/A

④ Yield of marketable securities held

N/A

⑤ Balance of marketable securities by type and by remaining maturity

N/A

4. Balance of liability reserves

A breakdown of the balance of liability reserves is shown below.

(In thousand yen)

Items

FY2011 FY2012

Ordinary

liability

Reserve

Catastro

phe

Reserve

Policyhol

ders

Dividend

Reserve

Total

Ordinary

liability

Reserve

Catastro

phe

Reserve

Policyhol

ders

Dividend

Reserve

Total

Fire

insurance

196,438 14,693 ― 211,131 231,827 19,835 ― 251,662

Other

insurance

― ― ― ― ― ― ― ―

Total 196,438 14,693 ― 211,131 231,827 19,835 ― 251,662

20

IV. Matters relating to the conduction of business

1. Risk management stance

We have established a series of "Risk Management Regulations" with the

purpose of laying a sound management foundation by preventing the

occurrence of risks inherent in the small-claims and short-term insurance

business.

The term “risk” refers here to all losses incurred by the company as a

result of unforeseen damages, sharp fluctuations in economic conditions,

mistakes in the handling of accidents, reputational damages and so on.

<Classification of risks>

(1) Insurance underwriting risk

① Insurance underwriting risk

② Insurance payment risk

③ Reinsurance risk

(2) Asset management risks

(3) Operational risk

① Administrative risks

② System risks

③ Liquidity risks

(4) Harmful rumor risk

In addition, a "Risk Management Committee" has been established by

the decision of the Board of Directors as a Standing Committee.

Although each risk management department handles the above-

mentioned risks, by strengthening the cooperation between each risk

management department, the Board of Directors and the Risk Management

Committee, we are striving to give prompt and appropriate responses in the

course of day-to-day operations.

For projects requiring a company-wide response, we are presently

considering cross-departmental risk management as well as a series of

necessary measures which will center around the "Risk Management

Committee."

21

* Our aim is to adopt a risk management stance which will have the

least possible impact on policyholders and agents.

2. Compliance stance

The term “compliance” is used here in the sense of "compliance with laws

and regulations." Complying with all rules, including laws, company’s

regulations, social norms, etc., is the first requirement.

Even the "Guidelines for compliance with regulations," set forth by our

company as a code of conduct, state that "all officers and employees shall

comply with laws and regulations and shall not justify, nor condone, illegal

activities, regardless of any reasons," making compliance the basis of all

business conduction.

<Compliance stance>

In order to ensure thorough compliance, a Compliance Committee

meeting, chaired by the president, is held with all department heads four

times a year.

The Compliance Committee is responsible for the following matters.

(1) Planning and formulating strategies with regard to the general aspects of

compliance promotion.

① Planning and formulation of compliance program

② Appraisal and evaluation of progress and achievement status of

compliance programs and reporting of results to the Board of

Directors

③ Enacting, revising or abolishing compliance policies, code of

conduct, compliance regulations and compliance manual

(2) Matters relating to misconduct

(3) Analysis of complaints regarding compliance issues as well as the

planning and proposing of preventive measures

(4) Verification of investigation results for non-payment of insurance

premiums

In each department, the head of the department, as the person

responsible for compliance, enforces compliance with laws and

regulations and provides training and guidance for all employees.

22

The Sales Control Headquarters and the Compliance Control Office

cooperate in educating and advising distributors with regard to compliance

with rules and regulations.

* We aim to gain the total trust of our customers by ensuring thorough

compliance and an absolute lack of violations.

3. Handling of personal (customer) information

Given the fact that in recent years protecting personal information has

become increasingly important, we have formulated a series of "personal

information and customer information protection rules " and "personal

information and customer information protection guidelines" and we have

been applying them to ensure the appropriate and secure management of

said information.

In addition, we have also summed up how we handle personal

information in the section "Handling of customers' personal information"

which we make known to our customers by inserting it in the "Application

Form" and in the "Pamphlet."

<Handling of customers’ personal information>

1. Housing Indemnity, Ltd. (hereinafter referred to as "our company") will

acquire personal information concerning its customers by lawful and fair

means and only to the extent necessary for business.

2. Our company will use customers’ personal information within the

boundaries of the purposes stated below and as necessary for the

conduction of business.

(1) Underwriting, extending and maintaining of insurance contracts and

payment of insurance claims

(2) Operational management and provision of information regarding our

business as well as improvement of products and services

(3) Other operations related to, or associated with, the insurance

business

3. Our company shall take the appropriate measures in order to ensure the

accuracy of the collected personal information of our customers and to

keep them up-to-date.

23

Moreover, we shall take all safety measures deemed appropriate in

order to prevent unauthorized access to customers’ personal information

as well as the loss, destruction, tampering and leakage of said

information.

4. Our company, with the exception of the cases stated below, shall not

provide the collected personal information of customers to external

parties.

(1) If customers’ consent is given

(2) If required by laws and regulations

(3) In case of provision of personal information to our subcontractors to

the extent necessary for achieving the purpose stated in the

above section 2

(4) In case of provision of personal information to re-insurers to the

extent necessary for claiming reinsurance

(5) In case of provision of personal information to other insurance

companies (mutual aid organizations) to the extent necessary for

the prevention of the conclusion of unauthorized or unreasonable

insurance contracts or claims based on such contracts.

(6) If deemed necessary for the interest of the customer or for public

interest

(7) If there are other legitimate reasons

5. Our company will handle disclosure, revision, addition or deletion of

customers' personal information in the ways described below.

(1) Customers shall have the right to ask our company to disclose to

them any personal information regarding themselves which is in

possession of the company.

(2) In case of errors or mistakes in the personal information divulged as

a result of the disclosure indicated in the preceding section,

customers shall have the right to ask the company to correct,

amend or delete said information.

(3) In case of requests to disclose, correct, amend or delete information

as indicated in the preceding two sections, such requests have to

be made to our company in writing or by telephone.

24

4. Designated bodies for the settlement of disputes

Our company will respond with the maximum seriousness to all

consultations, inquiries or complaints from our customers.

Our company is also a member company of the Incorporated General

Association of Japanese Small Amount and Short Term Insurers which is

specifically authorized as a "Specified Dispute Settlement Body" (specified

ADR institution).

Consequently, our customers, whenever it is deemed necessary, will be

able to resort to the Specified Dispute Settlement Body listed below and

operated by this association.

The same specified Dispute Settlement Body shall attend to all

consultations and inquiries related to small-claims and short-term

insurances from all consumers, starting with policyholders, as well as to

processing complaint and resolving disputes.

Small-claims and short-term insurance consultation office of the

Incorporated General Association of Japanese Small Amount and Short

Term Insurers.

3-12-8 Hatchobori SF Building 2F, Hatchobori, Chuo-ku, Tokyo

104-0032, Japan

Tel: 0120-82-1144 Fax: 03-3297-0755

Hours: 9:00 to 12:00; 13:00 to 17:00

Days: Monday to Friday (except holidays and the New Year holiday

period)

25

V. Matters relating to the state of assets in the last two years

1. Financial statements

(1) Balance Sheet (In thousand)

Items

2012

As of the end

of March

2013

As of the end

of March

Items

2012

As of the end

of March

2013

As of the end

of March

(Assets)

Cash and savings

Cash

Savings deposits

Other current assets

Tangible fixed assets

Tangible fixed

assets

Intangible assets

Software

Other intangible

assets

Distributor accounts

receivable

Other assets

Accounts receivable

Prepaid Expenses

Other assets

Deferred tax assets

Deposits

513,300

62

513,238

―

15,301

15,301

49,691

49,611

80

64,358

205,063

162,204

8,865

33,994

―

18,000

674,267

24

674,243

―

14,863

14,863

31,077

30,997

80

69,423

219,883

176,831

11,975

31,078

12,585

19,000

(liabilities)

Insurance contract

reserve

Claims reserves

Liability reserves

Distributor accounts

payable

Reinsurance payable

Other liabilities

Income taxes

payable

Accounts payable

Accrued expenses

Deposits received

Suspense receipts

Other liabilities

Reserve for bonuses

Reserve for

retirement benefits

Total liabilities

(net assets)

Capital

Capital

Capital surplus

Capital reserve

Earned surplus

Other earned

surplus

Earned surplus

brought forward

Total shareholders'

equity

220,862

9,731

211,131

128,411

84,561

150,689

1,592

4,935

19,177

4,180

113,792

7,013

8,703

23,259

616,485

383,750

383,750

13,750

13,750

△151,947

△151,947

△151,947

245,553

259,559

7,897

251,662

144,189

70,176

170,374

20,272

2,119

21,277

4,680

113,474

8,552

10,270

18,682

673,249

383,750

383,750

13,750

13,750

△33,326

△33,326

△33,326

364,174

26

Stock acquisition

rights

Stock acquisition

rights

Total stock

acquisition rights

Total net assets

3,675

3,675

3,675

249,228

3,675

3,675

3,675

367,849

Total assets 865,713 1,041,099

Liabilities and net

assets

Total

865,713 1,041,099

Notes: 1. Depreciation and amortization methods of fixed assets

(1) Depreciation of tangible fixed assets, is based on the fixed-percentage method

However, small depreciable assets with an acquisition cost between 100,000

and 200,000 yen are amortized evenly over three years by the straight-line

method.

(2) Depreciation and amortization of intangible assets is based on the straight-line

method.

It should be noted that, for software, the straight-line method is adopted based

on the estimated usable period specified by our company (5 years).

2. Accounting for consumption tax

Consumption tax and local consumption taxes are accounted for by using the tax

inclusion method.

3. Assets pledged as collateral Time deposits: 122,385,000 yen

4. Accumulated depreciation of tangible fixed assets: 37,985,000 yen

5. Breakdown of claims reserves

Claims reserves (before recovery of outstanding reinsurance claims): 74,212,000

yen

Outstanding reinsurance claims related to the above: 66,791,000 yen

Net (a): 7,421,000 yen

IBNR reserves (b): 475,000 yen

Net: 7,897,000 yen

6. Breakdown of liability reserves

Liability reserves (balance remaining): 231,827,000 yen

Catastrophe reserves: 19,835,000 yen

Total: 251,662,000 yen

■ Reference

Reinsurance premiums ceded: 1,887,474,000 yen

27

7. Loan guarantee for borrowing from financial institutions of director: 110,900.000 yen

8. Net asset value per share: 105,557.74 yen

9. Figures have been rounded down to the nearest unit used and therefore total amounts

do not necessarily match.

(2) Income Statement (In thousand yen)

Items FY2011

(Apr. 1, ‘11 to Mar. 31, ‘12)

FY2012

(Apr. 1, ‘12 to Mar. 31, ‘13)

Recurring revenue

Insurance premium income

Insurance premiums

Reinsurance income

Recovered reinsurance

claims

Reinsurance commission

Returned reinsurance fees

Reversed reserves for

outstanding claims

Investment income

Interest and dividend income

Other recurring revenue

3,481,612

3,478,784

1,931,181

1,547,603

197,798

1,289,822

59,983

―

110

110

2,717

3,897,230

3,893,498

2,142,580

1,750,918

232,315

1,444,323

74,281

1,834

124

124

1,774

Ordinary costs

Insurance claims and other

expenses

Insurance claims, etc.

Surrendered contract payments

Reinsurance premiums

Liability reserve provisions

Claims reserves provisions

Liability reserve provisions

Investment costs

Operating costs

Business expenses and general

administrative costs

Tax

Depreciation costs

3,397,894

2,024,658

219,776

66,819

1,738,063

41,502

3,970

37,532

―

1,330,718

1,263,282

17,968

35,678

3,774,099

2,268,352

257,848

82,626

1,927,878

40,530

―

40,530

―

1,464,255

1,402,879

17,726

33,380

28

Provisions for reserves for

bonuses

Provisions for reserves for

retirement benefits

Other ordinary costs

8,703

5,088

1,016

10,270

―

961

Ordinary income 83,717 123,131

Extraordinary income ― 2,434

Extraordinary losses ― ―

Net income before taxes

Corporate tax and resident tax

Deferred income taxes

Net income (loss)

83,717

1,331

313

82,073

125,565

19,842

△12,899

118,621

Notes: 1. Claims reserves

Claims reserves provisions (before recovery of outstanding reinsurance claims):

19,984,000 yen

Reversals for outstanding reinsurance claims related to the above: 17,986,000 yen

Net (a): 1,998,000 yen

Provisions for IBNR reserves (b): 164,000 yen

Total (a) + (b): 1,834,000 yen

2. Liability reserves

Provisions for ordinary outstanding liability reserve claims: 35,389,000 yen

Provisions for catastrophe reserves: 5,141,000 yen

Provisions for outstanding liability reserve claims: 40,530,000 yen

■ Reference

Reinsurance premiums ceded: 807,767,000 yen

3. Net income per share: 34,382.95 yen

4. Significant transactions with related parties.

As for money (110,900,000 yen date 1 year update) borrowed from the financial

institution of Masahiko Sugiura, our President and Representative Director, we have

given a loan guarantee and we have provided a security (122,385,000 yen) to said

financial institution.

It should be noted no guarantee fee was set.

5. Significant subsequent events

There are no significant subsequent events



29

(3) Cash Flow Statement (In thousand yen)

FY2011

(April 1, 2011 to March 31, 2012)

FY2012 (April 1, 2012 to March 31, 2013)

Cash flow from operating activities

Current net income before taxes ( = loss) 83,717 125,565

Depreciation costs 35,678 33,380

Insurance Business Law Article 113 deferred assets amortization

Increase in claims reserves ( = decrease) 3,970 1,834

Increase in liability reserves ( = decrease) 37,532 40,530

Policyholder dividend reserves provision

Increase in reserves for retirement benefits ( = decrease) 2,948 4,577

Increase in reserves for directors retirement benefits ( = decrease)

Increase in reserves for price fluctuations ( = decrease)

Interest and dividend income 110 124

Marketable securities losses and gains ( = gain)

Payment interest 357 108

Foreign exchange losses and gains ( = gain)

Tangible fixed assets losses and gains ( = gain)

Increase in agency accounts receivable ( = increase) 9,706 5,065

Reinsurance receivable ( = increase)

Increases and decreases in other assets (except investment and financing activities-related, = increase)

20,156 28,405

Increase in agency accounts payable ( = decrease) 56,593 15,778

Increase in reinsurance borrowings ( = decrease) 12,082 14,384

Increases and decreases in other liabilities (except investment and financing activities-related, = decrease)

23,053 2,571

Other

Subtotal 179,852 163,543

Proceeds from interests and dividends, etc. 110 124

Amount of interest paid 357 108

Policyholder dividends paid

Other

Amount of income tax paid 1,570 11,736

Cash flow from operating activities 178,035 175,296

Cash flow from investment activities

Increase/decrease in savings ( = increase)

Purchases of marketable securities

Proceeds from sale and redemption of marketable securities

Purchases of Insurance Business Law Article 113 deferred assets

Other 22,317 14,329

Cash flow from investment activities 22,317 14,329

Cash flow from financing activities

Proceeds from borrowings

Repayment of borrowings △15,355 0

Proceeds from issuance bonds

Redemption of bonds

Proceeds from issuance of common stock 0 0

Purchases of treasury stock

Dividend payment 0 0

Other

Cash flow from financing activities 15,355 0

Exchange differences related to cash and cash equivalents

Increase/decrease in cash and cash equivalents ( = decrease) 140,363 160,967

Balance at beginning of year of cash and cash equivalents 372,937 513,300

Balance at end of year of cash and cash equivalents 513,300 674,267

Notes: 1. Funds (cash and cash equivalents) in the of cash flow statement derive from cash on

30

hand, demand deposits and time deposits (excluding foreign currency), and the like.

2. Figures have been rounded down to the nearest unit used and therefore subtotals do

not necessarily match.

(4) Statement of changes in shareholders' equity (in thousands of yen)

FY2011

(Apr. 1, ‘11 to Mar. 31,

‘12)

FY2012

(Apr. 1, ‘12 to Mar. 31,

‘13)

Subject Amount Amount

Shareholders' equity

Capital

Balance at the end of the previous

fiscal year

383,750 383,750

Changes during the fiscal year under

review

Total changes during the fiscal year

under review

― ―

Balance at the end of the fiscal year

under review

383,750 383,750

Capital surplus

Capital reserve


fiscal year

13,750 13,750


review

Total changes during the fiscal

year under review

― ―


under review

13,750 13,750

Other capital surplus


fiscal year

― ―


review


year under review

― ―

Balance at the end of the fiscal year ― ―

31

under review

Total capital surplus


fiscal year

13,750 13,750


review


year under review

― ―


under review

13,750 13,750

Earned surplus

Earned Reserve


fiscal year

― ―


review


year under review

― ―


under review

― ―

Other earned surplus


fiscal year

― ―

Changes during the fiscal year

under review


year under review

― ―

Balance at the end of the fiscal

year under review

― ―

Earned surplus brought forward


fiscal year

△234,019 △151,946

Changes during the fiscal year

under review

Net income for the fiscal year

under review

82,072 118,621


year under review

82,072 118,621

32

Balance at the end of the fiscal

year under review

△151,946 △ 33,326

Total Earned surplus


fiscal year

△234,019 △151,946


review

Net income for the fiscal year

under review

82,072 118,621


year under review

82,072 118,621


under review

△151,946 △33,326

Total shareholders' equity


fiscal year

163,480 245,553


review

Net income for the fiscal year under

review

82,072 118,621


under review

82,072 118,621


under review

245,553 364,174

Stock acquisition rights

Balance at the end of the previous fiscal

year

3,675 3,675


review

― ―


under review

3,675 3,675

Total net assets

Balance at the end of the previous fiscal

year

167,155 249,228


review

Net income for the fiscal year under

review

82,072 118,621

33


under review

82,072 118,621


under review

249,228 367,849

Notes: 1. Items related to the type and total number of shares issued

Class of shares Number of

shares at the

end of the

previous fiscal

year

Current-year

increase in

number of

shares

Current-year

decrease in

number of

shares

Number of

shares at the

end of the fiscal

year under

review

Common stock 3,450 shares ― ― 3,450 shares

2. Items related to acquisition rights of new stocks

Category

Breakdown of

stock acquisition

rights

Class of

shares to be

issued upon

exercise of

stock

acquisition

rights

Number of shares to be issued upon

exercise of stock acquisition rights Current

year-end

Balance

(thousand

yen)

Current

year

end

Current

year

increase

Current

year

decrease

Current

year-end

Submitting

companies

First-time stock

acquisition rights

Common

stock

1,500 ― ―

1,500 3,675

Submitting

companies

Second-time

stock acquisition

rights

Common

stock

60

― ―

60 ―



(5) Audit by independent auditor

In accordance with the provisions of Article 436, Paragraph 2,

Section 1 of the Companies Act , we have retained the services of

independent auditor "Deloitte Touche Tohmatsu LLC” for the auditing

of our company’s financial statements for FY 2012, such as the

"Balance Sheet," the "Income Statement," the "Statement of

changes in equity," etc.

34

2. Situation of enhancement of capacity to pay insurance claims, etc.

(solvency margin ratio)

(In thousands of yen and %)

Items End of FY2011 FY2012

(1) Solvency margin ratio 263,921 387,683

① Partial total of net assets (except estimated

outflow to the outside, differences arising from

valuation and translation and deferred assets)

249,228 367,850

② Reserves for price fluctuation ― ―

③ Catastrophe reserves 14,693 19,834

④ General allowance for bad loans ― ―

⑤ Evaluation differences of other

marketable securities (before effects of

taxation) (99% or 100%)

― ―

⑥ Profits and losses including land (85% or

100%) ― ―

⑦ Policyholder dividend reserves ― ―

⑧ Future profits ― ―

⑨ Taxation effect equivalent ― ―

⑩ Debt capital instruments, etc. ― ―

Items (⑩ (a)) listed in Section 5 of

Paragraph 3 of Article 2

of Notification (No. 14)

― ―

Items (⑩ (b)) listed in Section 5 of

paragraph 3 of Article 2

of Notification (No. 14)

― ―

⑪ Items to deduct (-) ― ―

(2) Total amount of risks √[R12 + R2

2] + R3 + R4 67,025 51,801

R1: General risks equivalent 18,677 11,999

R2: Asset management risks equivalent 23,898 35,032

R3: Operating management risks equivalent 2,309 1,800

R4: Catastrophe risks equivalent 34,386 12,970

Solvency margin ratio (1) and {(1/2) × (2)} 787.5% 1496.8%

Note: Figures have been rounded down to the nearest unit used.

The solvency margin ratio has been rounded down to the first decimal place.

End of document

fiscal current state of housing indemnity, ltd.july 10, 2008 registered as small-claims and...

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