Dai-ichi Life’s Investment Strategy

Tatsusaburo YamamotoExecutive Officer and General Manager, Investment Dept.

Review of results (Asset Allocation)

(Note) Asset shares are based on internal asset allocation criteria on an book value basis

Asset allocation of general fund (lhs)

Given the low interest rates in Japan, we limited JGB investments and focused on hedged foreign bonds (relatively attractive yield even after hedge cost) and selective credit investments.

JGB

Other Yen-denominated fixed income

assets

Hedged foreign bonds

Other assets

Risk assets

36

44.4% 42.6% 42.6%

24.4% 21.8% 19.0%

8.3%10.5% 14.3%

19.9% 21.6% 20.7%

3.0% 3.5% 3.4%

1.39%

1.14%

0.08%0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

0%

20%

40%

60%

80%

100%

2013.3末 2015.3末 2016.6末

68.8% 64.4% 61.6%

20-year JGB yield (rhs)

Mar-2013 Mar-2015 Jun-2016

Review of results (Investment Performance)

The yield on our yen-denominated bonds was less affected by the lower interest rates because we limited new investments in this category.Positive spread increased due to increased exposure to hedged foreign bonds and other assets, as well as market recovery such as the weakening of the yen.

Yield trend on yen-denominated bonds Trend on positive/negative spread

1.92%

0.41%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

FY11 FY12 FY13 FY14 FY15

▲ 914

▲ 611

280

692

978

▲ 1,500

▲ 1,000

▲ 500

0

500

1,000

1,500

11年度 12年度 13年度 14年度 15年度

億円

Dai-ichiDai-ichi

20yr JGB20yr JGB

37FY11 FY12 FY13 FY14 FY15

1QFY2016

Fundamental Profit 86.4

Positive spread 4.0

Capital gains/losses 54.5

Gains/losses onsale of securities 36.9

Derivative transactiongains/losses 55.5

Ordinary revenue 120.2

59.3Net income(non-consolidated)

Review of investment activities in Q1 FY2016

38100

105

110

115

120

125

130

1,000

1,200

1,400

1,600

1,800

2,000

Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16

(yen)(billions of yen)

Increased hedged foreign bonds within fixed income assets: reduced exposure to risk asset category such as equities and un-hedged foreign bonds with the use of derivatives as well as sale of security.Secured ‘Positive Spread’ and derivative transaction gains in the Q1 under yen-strengthening period.

Major activities in 1Q Review of 1Q performance (condensed: billions of yen)

Yen-fixed income assetsYen-fixed income assets

Hedged foreign bondsHedged foreign bonds

Risk assets (incl. derivatives)Risk assets (incl. derivatives)

ca.+800 bil.ca.+800 bil.

Domestic & foreign equitiesDomestic & foreign equities

Un-hedged foreign bondsUn-hedged foreign bonds

ca (200) bil.ca (200) bil.

ca (200) bil.ca (200) bil.<Balance of un-hedged foreign bonds>

Un-hedged foreign bonds (lhs)

JPY/USD (rhs)

(note) Asset shares are based on internal asset allocation criteria on an book value basis

50

60

70

80

1970 1990 2010 2030 2050

Working age population will peak out globallyWorking age population will peak out globally

Low economic growth and low inflation rates are anticipated in the medium term, due to structural factors

Low interest rates Low interest rates to continue

Tightening Easing

Developed countries:

Lower external demand

Emerging countries: Growth expected due to

population increases starts deteriorating

Stagnant resource

prices(crude oil)

Structural issuesStructural issues Monetary policyMonetary policy

Monetary easing spreads globallyMonetary easing spreads globally

Developed countries

Developed countries ChinaChina

Emerging countriesEmerging countries

Financial MarketsFinancial Markets

Some space for easing

Some space for easing

U.S. Europe

Japan

U.K.

Emerging countries

Brexit

New dimension of monetary easing

Cautiously seeking rate hike

Ratio of working age population(%)

Forecast

Source: United Nations

Global market forecast of mid-to-long term

Higher volatility

39

Overview of our mid-to-long term investment policy

Coping with a changing environment, we aim for a stable profit increase through an increase in accounting profit and an adequate control of economic value indicators

Easing : Low interest rates Tightening : Interest rate increases

Improvednet income

② Asset allocation with flexibility to respond to market changes (increased exposure to hedged foreign bonds and risk assets, selective credit investments)

③ Enhancing investments in new areas (project finance, asset finance etc.)

Cautiously monitoring signs of interest rate increase / widening spreadBuild hedge position for sudden rate hike

④ Control of asset duration utilizing derivatives

More investments in bonds/Asset duration to lengthen

⑤Joint product development with asset management companies / consolidation of asset management companies

Risk control on an economic

basis

Utilizing group resources

Financial market environment

Our

initi

ativ

es

Excellencein ALM Liabilities: Strategically managing liability profiles

(market-oriented sales and product strategy)

Assets: Further enhancing our mid-to-long-term portfolio simulation model①

40

ALM-based investments are supported by segmentation accounting and the initiatives laid out belowOn the asset side, we run our mid-to-long-term portfolio simulation model on the premise that lower rates will continue. On the liability side, the investment team was actively involved in setting up sales and product strategy.

Segmentation accounting Portfolio management initiatives

Liability side initiatives

①Excellence in ALM

Segmentation accounting and ALM initiatives

• Reducing assumed rates on return for single premium whole life

• Suspended underwriting group pension fund in general account and promoted sales of new product in separate account

Market-oriented sales and product strategy

• With the use of our economic scenario generator, portfolio simulations are conducted on the premise that lower domestic interest rates will continue

Further enhancing our mid-to-long-term portfolio simulation model

Adequate portfolio management strategy based on product profile / liability nature

Individual businessin general

Group pension business

Single premium whole life policies

・・・

Balanced portfolio(fixed income and risk asset)

Duration matching(largely fixed income)

Balanced portfolio(fixed income and risk asset)

・・・41

52%

32%

17%

0%

25%

50%

75%

100%

2016/3末

▲1%

0%

1%

2%

3%

4%

2013

年12

月

2014

年3月

2014

年6月

2014

年9月

2014

年12

月

2015

年3月

2015

年6月

2015

年9月

2015

年12

月

2016

年3月

2016

年6月

JGB 10yr.

Trend on yield (after hedge-cost basis ) Sector composition

US corp. bonds（※）

US treasury（※）

※10-year yield, after hedge cost

Increased exposure to hedged foreign bonds since second half of FY2013, in light of the relative attractiveness in yen-based yieldIncreased number of invested countries/currencies in view of revenue growth and risk diversification (32 countries, 22 currencies)Took credit risk selectively to maintain/enhance revenue

② Asset allocation with agility to market changes

Selective investments in hedged foreign bonds

Sovereign bonds at Europe（※）

MBS

Corporatebonds

Sovereign, municipal

61.6%47.9%

28.4%

27.4%

3.2%

8.2%

6.8%16.5%

0%

25%

50%

75%

100%

2012/3末 2016/3末

Other

AUD

EUR

USD

Currency composition

Dec

201

3M

ar 2

014

Jun

2014

Sep

201

4D

ec 2

014

Mar

201

5Ju

n 20

15S

ep 2

015

Dec

201

5M

ar 2

016

Jun

2016

Mar-2012

Mar-2016

Mar-201642

③ Enhancing investments in new areas

Enhancing investments in new areas

• Aiming both accounting profit and risk control on economic-value basis, we plan to enhance investments in new areas that have different sources of income (risk profile).In particular, areas of focus are hard asset areas such as the infrastructure sector

Purpose of investments in new areas Areas of focus

Strengthenearning power

Capture capital needs from growing areas and pursue

higher yield

First mover advantage

Move faster than competitors to invest in superior projects

Risk diversification

Diversify sources of returns

Build robust portfolio

小小

Interest rates Hard assets Opportunity

oriented

Debt in emerging countries

Equity in emerging countries

Global equities

Un-hedged foreign bonds

Hedged foreign bonds

Domestic public bonds

Foreign corp. bonds

Corp. loans

Domestic corp. bonds

Hedge funds

Securitized products

PE funds

Hybrids

Real estate

infrastructure sector

(direct/indirect)

Corporate operation

Low

ris

k/re

turn

High

Low

ris

k/re

turn

High

(risk profile)

Aircraftfinance

Areas of focus

43

• Took initiatives in setting up yen-denominated debt funds consisting of overseas infrastructure projects in investable countries that generate stable cash flows over the long term.Going forward, we will cultivate potential needs in public pension etc. and grow the fund size to 100 bil. Yen, and contribute to an expansion of infra-debt market.

Overview of the fund Purpose / feature of the fund

Life Insurers

Banks

• Investment opportunity in longer duration loan fund with lower risk (i.e. completed projects)

duration matching with long duration liability• Strengthen project finding capability• Investment needs

• Seek liquidity from loan receivablesfor completed infrastructure projects(balance sheet control, optimizing ROA)

Expected return Around 2% (on a JPY basis)

Investment destination

Diversified project finance-related investments that generate stable cash flows over the long term, such as completed/operating projects in investable countries

Infrastructure sector

Mizuho Bank

MGAIMizuho Global Alternative

Investments(wholly owned by Mizuho)

Dai-ichi Life

Potential needs in public pension etc.

Infrast-ructure

debt fund

Provide loansDai-ichi

participates in setting up funds

InvestInvest

Liquidity from loan receivables

(example) thermal power project (gas- and coal-fired),photovoltaic project

③ Enhancing investments in new areas Debt funding of overseas infrastructure projects, the first time ever in Japan

44

• We promote (a) increased investment options, (b) accumulation of expertise, and (c) human resource development, through a synergy between direct investment in infrastructure sector and investment through fundsWill accelerate more investment in the sector, and pursue both quality (quality projects) and quantity (increased investment options)

Project monitoring

Sharing know-how

The size of the world’s project finance market: approx. 300 billion USD a year

Investment division of Dai-ichi life

<The core of our investments in new areas>

Other financial institutions (banks / trust banks)

③ Enhancing investments in new areas Developing a new investment scheme in new investment horizon

Gain investment and administration know-howHuman resources development

Reduce project size constraint and more risk diversificationShare expertise

45

Interest swaps(receiving fixed interest)

Purchase super long bonds

Acc

ount

ing

prof

it

Income gains ✓ (decrease income yield of existing portfolio)

Capital gains (Hedge accounting, andfair value through OCI)

(huge capital gains but higher risk of losses in

interest rate hike scenario)

Eco

nom

ic

valu

e Control of interest rate risk ✓ ✓

Liquidity✓

(relatively more liquid compared to JGB)

-

We increased the asset duration using derivatives, taking into consideration the impact to accounting profit and economic value indicators as well as liquidity in the marketWith interest rate swaps, we were able to lengthen the asset duration of the fixed income portfolio by approximately 1 year compared to that of Sep. 2015.

Reducing interest rate risk

④Control of asset duration utilizing derivatives

Trend of asset duration

Duration of fixed income assets

including derivative positions

Position of interest swaps

Mar-2016

400 bil. yen

13

14

15

16

17

2013

/3末

2013

/9末

2014

/3末

2014

/9末

2015

/3末

2015

/9末

2016

/3末

Mar

-201

3

Sep

-201

3

Mar

-201

4

Sep

-201

4

Mar

-201

5

Sep

-201

5

Mar

-201

6

46

Duration of fixed income assets w/o derivative

positions

Understand customer needs

Leverage DIAM’s expertise

Product development utilizing group resources

Separate Account Balanced Fund II (April 2014 - )• Agile asset allocation based on signs of market

changes (such as volatility) and avoid losses on sudden interest rate hike and/or equity market correction

Separate Account Bond Fund (January 2016 - )• Securing stable income based on quantitative

analysis

Customer-centric product developmentMarket-oriented product development

050

100150200250

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

(Billions of yen)

Bond Fund

Balanced Fund II

We developed customer-centric and market-oriented products jointly with DIAM and other group resources. AUM of Separate Account Balanced Fund II successfully increased to 200+ billion yenWe will strive to increase AUM by providing better solutions to pension fund customers such as Separate Account Bond Fund, and also continue to engage in joint product development.

Trends in AUM and performance

-10%

0%

10%

20%

30%

40%

50%

-5%

0%

5%

10%

15%

20%

25%

Apr-1

4

Jul-1

4

Oct

-14

Jan-

15

Apr-1

5

Jul-1

5

Oct

-15

Jan-

16

Apr-1

6

Jul-1

6

Balanced Fund IINikkei 225

⑤Joint product development with asset management company

Synergies for Product Development

FY16 (Apr.-Jul.)fund performance

: +2.6％ against Nikkei225

47

Domestic financial market 1,700 trillion yen

Management Management fees

Overseas financial market

Premium income

②

Group synergy

Consolidated Consolidated income

Acting as investment engine

In addition to the corporate value increments at our asset management companies, they provide investment services to insurance companies within the group and grow their net incomeIn addition to the corporate value increments at our asset management companies, they provide investment services to insurance companies within the group and grow their net income

→

Collaborating each Collaborating each other (cross selling

of products)

⑤ Consolidate and strengthen asset management companies

Overview of initiatives in the asset management business

Management Management fees

Management Management fees

Management Management fees

Dividends

Consolidated Consolidated income Dividends

48

Aim to acquire investment money globally focusing around Japan

Core competences

To be a global asset management company which provides solutions by using its expertise in investment in Japan and Asia

- Carry out fiduciary duties of high standard and contribute to customers’ wealth management- Aim to increase AUM from 53 trillion to 100 trillion yen, (i.e. A leap from No.1 in Asia to Global Top 20)

To be a global asset management company which provides solutions by using its expertise in investment in Japan and Asia

- Carry out fiduciary duties of high standard and contribute to customers’ wealth management- Aim to increase AUM from 53 trillion to 100 trillion yen, (i.e. A leap from No.1 in Asia to Global Top 20)

⑤ Consolidate and strengthen asset management companies

Vision of Asset Management One

EuropeMarket

size 2,400 trillion yen

Australia & Asia(excluding Japan)

Marketsize 700 trillion yen

JapanMarket

size 400 trillion yen

North AmericaMarket

size 4,000 trillion yen

Asset Management One’s officesDai-ichi Life & its subsidiaries’ officesMizuho & its subsidiaries’ offices

※ Market size：McKinsey & Company (2014), at a rate of 1USD = 112 JPY

High reputation for asset management capability in domestic market (aiming to expand in Asian markets)Provide solutions to customers with quantitative analysis capabilityCompetitive cost efficiency in passive investment products supported by large AUM49

FY2016H2 ～ FY2018 （Integration stage）

Boost the share in publicly offered mutual fundsDevelop and promote new flagship productsNew products to capture the shift “ from savings to investments”(bank deposit substitute, products for DC)Pursue sales volume leveraging the wide distribution network

Enhance product development capability for institutional investorsCross selling to customer base of integrating 4 companiesPromote sales of high value added products such as alternative products

Revenue expansion

Retail market(mutual funds)

Institutionalinvestors

market

Overseas market

Cost efficiency

Accelerategrowth

Strategy to increase mandate from overseas fundsProducts tailored for overseas market (Domestic & Asian equity, smart beta fund)Sales efforts collaborating with parent companies

Streamlining products Operational efficiencyConsolidation of IT Systems Cost efficiency

2019 onwards

The new company puts priority to improve revenue and cost efficiency for the initial 3 years. Thereafter it will pursue growth acceleration in the long term.

⑤ Consolidate and strengthen asset management companies

Strategy of Asset Management One

50

Col

labo

ratin

g w

ith

each

oth

erAc

ting

as in

vest

men

t en

gine

until 2010 2011 2012 2013 2014 2015 2016 onwards

Janu

s pr

oduc

ts s

old

thro

ugh

DIA

MJa

nus

prod

ucts

sol

d th

roug

h D

IAM

Mutual funds

Pension funds

Large-size mandates

(Japan Post Ins.)

Started to sell bond MFs

Started to sell equity MFs

Governmental pension fund

on trust

Separate accountsDL

(group pension

biz.)

DL(group

pension biz.)

DIAM products

DIAM started investment

advisoryDIAM productsold through

Dai-ichi

DFLDFL Variable annuity

Separate Account

Balanced Fund II

Separate Account

Bond Fund

DIAM started

investment

Co-use of AM companies w/

Japan Post Insurance

Year 1999～

Year 2006～

Dai-ichi’s new alliance with Japan Post Insurance creates additional business collaboration opportunities in asset management area. Utilize asset management companies’ capability to strengthen wealth management functions of the groupBenefit of group synergy amounts to ca. 20% of DIAM’s revenue and ca 10%+ of Janus’ international operation and, accordingly contributes to revenues of life insurance companies within the group

Dai-ichi’s new alliance with Japan Post Insurance creates additional business collaboration opportunities in asset management area. Utilize asset management companies’ capability to strengthen wealth management functions of the groupBenefit of group synergy amounts to ca. 20% of DIAM’s revenue and ca 10%+ of Janus’ international operation and, accordingly contributes to revenues of life insurance companies within the group

Prote-ctive

Prote-ctive

Variable annuity

Janus started providing

investment services

⑤ Consolidate and strengthen asset management companies

Creating group synergies

51

Alliance with Japan Post Insurance

Common challenge Difficulties in finding investment opportunities to maintain profitability

Common solution

Expansion of investment area/method by developing new horizon and utilizing capabilities of external asset management experts

Both Japan Post Insurance and Dai-ichi have a similar liability profile and, accordingly, similar challenges. Through the joint effort to enhance investment functions, we strive to tackle the challenges.

Front OfficeFront Office

Middle OfficeMiddle Office

Back OfficeBack Office

Co-investing in infrastructure projects globallyJoint utilization of external asset managers as Joint utilization of external asset managers as a supplement to in-house investments

• More access to superior projects.• Strengthen earning power /

diversify risk

HR exchange by mutually seconding trainees

Sharing credit analysis expertise

• Nurture people who manage • Nurture people who manage investments in new areas

• Strengthen credit analysis functions

Co-investing in custody banks

Sharing know-how on securities administration

• Sharing platform of security • Sharing platform of security administration that is flexible enough for the changing environment

Mutual efforts in developing investment functions are being made. We will announce the progress as and when necessary.

• Mutual efforts in developing investment functions are being made. We will announce the progress as and when necessary.

52