PT Tokio Marine

Life Insurance Indonesia

tokiomarine.comLife & Health | Property & Casualty

Pension fund scheme and

success story of Japan

Takayuki Nakazato

Agenda

• The history of Japanese private pension

• The current issue

• Our suggestion for Indonesian pension

（Historical background）• Retirement Allowance started in 1700’s.

• Widely spread in large corporation in early 1900’s to retain good staffs

and workers especially labor incentive industry.

• Due to strong request from labor union after World WarⅡ, more than

80% of corporation issued a corporate retirement scheme in 1950’s.

★High Inflation (Salary incremental can NOT catch up to the inflation)

★Massive layoffs due to unstable economy

★Tax Incentive for both company and staffs.

The history of corporate retirement allowance/pension in Japan

The whole picture of Pension scheme in Japan

Public pension

Private pension(Corporate)

Annuity insurance Private pension(Individual)

17mil 41mil 9mil

Source; Health, Labour and Welfare Ministry in Japan

The end of march,2016

￥65Kmonth

Japanese high economic growth (1962～1990)Many company had changed their funding from “Internal” to “External “

• Difficulty for the company to manage the fund by themselves internally due to wage increasing• DB scheme had been started from 1962 because of the request by many companies

• Tax incentive• Provided by Life insurance company and

Trust bank

DB scheme

• No need to check “Unfunded amount “ • Cancelation without the employee’s

agreement.

Defect of the scheme

Source; Health, Labour and Welfare Ministry in Japan

Insufficient protection for entitlement1 2 3 4 5 6 7 8 9

AUM 0 43 375 1,314 3,707 8,257 14,106 18,466 22,659

The number 161 16,231 64,745 57,011 62,775 71,203 90,434 90,239 73,582

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

0

5,000

10,000

15,000

20,000

25,000

DB scheme

AUM The number

(Billion yen)

Before the crush of Japan‘s Bubble Economy(～1990)Main stream of private corporate pension scheme was still DB

• Many companies had enjoyed good performance thanks to good market condition

• Financial institution guaranteed fixed return to the company

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Long term interst rate(10 years govenrment bonds)

Japan’s Bubble

After the crush of Japan‘s Bubble Economy(1990～)

Many companies faced “Under Funded” on DB

• The performance less than expected return

• Many company had to put fixed amount to severance fund to fill the gap

72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

actual 9.0 9.2 9.6 9.6 9.5 9.0 8.4 8.5 8.7 8.9 9.0 9.1 9.2 9.3 9.8 5.9 7.9 3.4 3.7 2.0 5.2 5.2 0.7 10. 3.7 5.7 2.6 13. -9. -4. -12 16. 4.7 21. 4.6 -12 -19 15. -1.

expected 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 4.0 3.4 2.9 2.4 2.0 1.2 1.2 0.9 1.3 1.2 1.3 1.4 1.5 1.3

-25.0%-20.0%-15.0%-10.0%

-5.0%0.0%5.0%

10.0%15.0%20.0%25.0%

Performance of DB

Off balance to On balance(2000～）The new accounting guideline for Benefits liability had been installed

• The company had to book the under funded amount(unrecognized) on their Balance sheet

• Many companies had huge loss at the end of fiscal year 2001

Under funded amount of major companies at the fiscal year 2001

1)calculation of Benefits liability

2)Deduction of Pension asset

3)Deduction of Benefits liability(Booked)

4)Under funded amount(Unrecognized)

Source; NLI Research Institute(Trillion Yen)

The number of the companyBenefits liability

➀

Pension asset

➁

Under funded amount Benefitsliability

(already booked)⑤

Under funded amount(Unrecogniz

ed)

③(➀-➁)

Ratio of funded amount

➃（➁/➀）

⑥（③-⑤）

2.283 70,6 36,1 34,5 51,2% 23,5 11,0

Extraloss on P/L

36.1 23.5 11.0

0 10 20 30 40 50 60 70 80

Benefits liability ;70,6

Starting Defined Contribution(2001～）Japanese government decided to launch Defined Contribution

• Heavy burden of DB on their Balance Sheet after 2000• The government expected that DC support stock market and stimulate economy

0

5,000

10,000

15,000

20,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

The number of the company(DC)

0

1,000

2,000

3,000

4,000

5,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Un

it(K

)

The number of the emplyoee(DC)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

DC 0% 2% 4% 7% 10% 13% 16% 18% 20% 22% 25% 26%

DB 100% 98% 96% 93% 90% 87% 84% 82% 80% 78% 75% 74%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

The shift of DB and DC(Based on the employee)

Starting Defined Contribution(2001～）

• All people can now join DC(Individual type) from 2017 • DC(Individual type) is gradually increasing now

The challenging situation due to aging society

Difficulty to expand pension due to global competition

Public pension

Private pension(Corporate)

The government recommend DC(Individual)

• Tax incentive• Fund of lower fee

Advantage point

Source; National Pension Fund Association

The current issues ➀ (Shrink of public pension) Private pension would be more important due to the shrink of public pension

• The challenging situation of public pension due to Aging society • Working population is decreasing• Low premium payment ratio for public pension

Source; Health, Labour and Welfare Ministry in JapanSource; World Population Prospects ;The 2015 Revision

Pg l 12

The current issues ➁ (SME’s low interesting)

SME who doesn’t have any pension scheme is increasing.

• SME doesn’t focus on Benefits scheme to maintain and/or hire the employee.

• According to survey, Japanese doesn’t take care about Benefits scheme very

much when they choose the company.

The number of the company with No pension scheme Source; Health, Labour and Welfare Ministry in Japan

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

1000～ 300～ 100～ 1～

2008 2013

Pg l 13

Our Idea for Indonesian pension➀We should accelerate DPLK because there is still a lot of room

4%0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

Netherland US

UK

Australia

Canada

SouthA

frica

Malaysia

Japan

Hongkong

Mexico

Brazil

Indonesia

PenetrationofPensionfund

DPLK can help the company to systematically and regularly accumulate the fund for the severance payment

They should have “physical asset” for severance payment

Secures for the severance payment

As there are still huge opportunity to expand DPLK ,we should recommend more companies to install DPLK.

Source; DSS consulting

Tax incentive

The advantage point for DPLK

Company Tax incentiveEmployee Appropriate fund for bond

Government

Our Idea for Indonesian pension➁The important factor is “Financial Literacy”

The more cultivate Financial Literacy , the more increasing people who financially enjoy comfortable life would be

Financial Literacy

People should accumulate fund by themselves for retirement life

We should cultivate mind to save money

People should financially prepare for emergency event

1.Saving

2.Emergency event risk

3.Funding for retirement life

Education , housing and marriage ・・

4.For other important life event

Our business in Japanese pension industryTokio Marine & Nichido Fire Insurance(TMNF) has high market share both Corporate and Individual type in DC.

OurAUMisabove700billionYen

KeyFactor

AUM

Ourmarketpositionis7thonAUMbasis.

Rank

Ourparticipantisabove150k.(Thisfigureis2stscaleinthisbusiness)

Individualtype

WeforcesonSMEandIndividualtype

Marketingstrategy

Tokio Marine Insurance Group has sufficient knowledge of Japanese pension which is helpful for more development of Indonesian pension.

As the end of March ,2018

Our idea① To promote DPLK to

the company

② To encourage people to join DPLK individual fund

Tokio Marine Life Insurance Indonesia

Company PT Tokio Marine Life Insurance Indonesia

Solvency margin ratio 3,646% (excluded Sharia)※The regulation is required 100%.

Employee 251

Our share TMNF 97.8%、Minority shareholders 2.2％

Address International Financial Centre Tower 2, Level 35,Jl. Jenderal. Sudirman Kav, 22-23 Jakarta 12920, Indonesia

Name of Directors Position

Tham Chee Kong President Director

Takayuki Nakazato Director

Chong Yoon Hin Director

Liany S Kurniawan Director

Nelly Husnayati Director

Name of Commissioners Position

Tang Loo Chuan Komisaris Utama

Takayuki Shimomura Komisaris

Franciskus Antonius Alijoyo Komisaris Independen

Suryani SF Motik Komisaris Independen

Our business in IndonesiaThe end of December,2017

Board Members

Thank you

Dana Pensiun Lembaga Keuangan

Tokio Marine Life Indonesia terdaftar dan diawasi oleh