The MCEV as of March 31, 2016 was ¥1,867.2 billion, a decrease of ¥403.9 billion from the previous fiscal year-end.
The Group MCEV, which is MCEV plus the net asset value of non-covered business, as of March 31, 2016 was ¥1,893.7 billion, a decrease of ¥404.3 billion from the previous fiscal year-end.
Group MCEV
Value of New Business
The value of new business decreased ¥36.6 billion from the previous fiscal year-end to ¥56.3 billion. The main reason for the decrease was a decline in the new business margin in connection with the decrease in domestic interest rates.
Value of New Business
- New business margin = Value of new business / Present value of new business premiums
Movement Analysis
MCEV was down ¥403.9 billion from the end of the previous fiscal year, mainly due to a large negative impact from economic variances in connection with the decline in domestic interest rates.
Movement Analysis in MCEV from March 31, 2015
Sensitivities
The impact of changes in assumptions (sensitivities) on MCEV results is summarized below. For each sensitivity, only one specific assumption is changed and other assumptions remain unchanged from the base. It should be noted that the effect of the change of more than one assumption at a time is likely to be different from the sum of two sensitivities with only one assumption change. Under different sensitivity scenarios, the basis for policy reserves (excluding reserves for separate accounts) is unchanged, in line with the Japanese statutory reserving rules.
Considering the additional decline in domestic interest rates following the introduction of a negative interest rate policy by the Bank of Japan, the Company has begun disclosing a new interest rate sensitivity that does not assume a zero interest rate floor, in addition to the existing sensitivity based on MCEV principles that do assume a zero interest rate floor.
Sensitivities
| ¥ billions | |||||||||
| MCEV | Adjusted net worth | Value of in-force business | Value of new business | ||||||
|---|---|---|---|---|---|---|---|---|---|
| MCEV as of March 31, 2016 (base scenario) | ¥1,867.2 | ¥2,220.2 | ¥(353.0) | ¥56.3 | |||||
| Economic factors | Interest rate (forward rate; for all future years)*1 |
+50bp | 248.3 | (397.0) | 645.4 | 33.9 | |||
| –50bp (with flooring)*2 |
(164.2) | 233.3 | (397.6) | (29.9) | |||||
| –25bp (without flooring)*3 |
(155.4) | 204.3 | (359.7) | (19.4) | |||||
| Equity and real estate value | –10% | (114.7) | (113.4) | (1.3) | - | ||||
| Other factors | Lapse rate | x 0.9 | 56.8 | - | 56.8 | 11.2 | |||
| Operating maintenance expenses | x 0.9 | 51.3 | - | 51.3 | 3.8 | ||||
| Claim incidence rates for the life business | x 0.95 | 102.3 | - | 102.3 | 7.8 | ||||
| Mortality for the annuity business | x 0.95 | (6.3) | - | (6.3) | (0.0) | ||||
| Change the required capital to the statutory minimum | 18.6 | - | 18.6 | 0.7 | |||||
| 25% increase in equity implied volatility | (0.0) | 0.7*4 | (0.7) | (0.0) | |||||
| 25% increase in swaption implied volatility | (38.1) | - | (38.1) | (0.5) | |||||
- *1 Fixed interest assets (bonds, loans, etc.) are revalued according to the change in the interest rate. The value of in-force business is re-calculated according to the change of investment yield and risk discount rate. Policyholder behavior also changes corresponding to these changes.
- *2 If the reference rate is negative before the deduction of 50 basis points, the rate is not decreased, and if the reference rate becomes. negative after the deduction of 50 basis points, 0% is applied instead.
- *3 All reference rates are decreased by 25 basis points even if they are negative.
- *4 The increase of adjusted net worth for equity implied volatility is due to the increase of the market value of put options held by T&D Financial Life for the purpose of hedging minimum guarantee risk of variable annuities.
