ANNUAL REPORT2018

YEAR ENDED MARCH 31, 2018©1976, 2018 SANRIO CO., LTD.
APPROVAL NO. G592162

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Contents
Financial Highlights (Non-consolidated) .......................... 1
Message from the President ............................................... 2
Management Principles of Fukoku Life ........................... 3
Review of Operations (Non-consolidated)
Overview ............................................................................ 4
Business Performance in FY 2017 ................................ 5
Investment Performance in Fiscal 2017
(General Account) ........................................................... 7
Investment Policies for Fiscal 2018.............................. 8
Governance System .............................................................. 9
Corporate Social Responsibility (CSR) ............................. 10
Non-consolidated Financial Statements ........................... 12
Consolidated Financial Statements .................................. 32
Corporate Organization ....................................................... 57
Corporate Information ........................................................... 58

Financial Highlights (Non-consolidated)2017
As of March 31,

2018

2018
Millions of
U.S. dollars

Millions of yen

Life insurance in force ...................................................................

¥43,102,531¥42,507,060$400,104

Total assets ....................................................................................
Securities ..................................................................................
Loans ........................................................................................
Tangible fixed assets ...............................................................
Total liabilities ................................................................................
Policy reserves .........................................................................
Subordinated bonds .................................................................
Total net assets..............................................................................

6,565,647
5,369,678
627,722219,515
5,982,454
5,604,007
191,935
583,192

6,626,609
5,458,790
593,734
218,549
6,035,126
5,650,879
191,935
591,482

62,37351,3815,588
2,057
56,80653,1891,806
5,567

Total ordinary revenues .................................................................
Premium and other income ......................................................
Investment income ..................................................................
Total ordinary expenditures ...........................................................
Net surplus for the year .................................................................

743,169
574,427
160,197
689,056
36,674

749,706
567,210
173,641
693,237
40,868

7,056
5,338
1,634
6,525
384

Solvency margin ratio (%)
Employees

1,214.8
12,644

1,081.2
12,654——

For the years ended March 31,

Notes 1. U.S. dollar amounts are converted from yen, for convenience only, at the rate of U.S.$1=¥106.24, the rate of exchange on March 31, 2018.
2. Yen and U.S. dollar amounts are rounded down to the nearest million yen or million dollars.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

1

Message from the President
Recently, Japan sustained various natural disasters such as
an earthquake centered in northern Osaka Prefecture in June,
heavy rains in part of western Japan in July and anotherearthquake hitting in Hokkaido Prefecture in September. I wish
to express my deepest sympathy to all those in any way
affected by the disasters and pray for the rapid restoration andrecovery of the region.
Looking Back over the Past Year
The Japanese economy continued its modest recovery during
fiscal 2017 (ended March 31, 2018). The financial and capital
markets remained stable, as the strong global economy,
subdued long-term interest rates because of low inflation rates
and rising stock prices thanks to strong corporate profits.
However, since February 2018, financial and capital
markets have been unstable, reflecting apprehension overaccelerating inflation resulting from the impact of US economic
stimulus measures and caution in the face of protectionist
policies in the US. Interest rates in Japan have remained low
as the Bank of Japan is continuing its yield curve control policy,
which targets 10-year JGB yields of around zero.
In this environment, the combined fundamental profitof Fukoku Mutual Life Insurance Company and subsidiary
Fukokushinrai Life Insurance Co., Ltd. amounted to ¥98.4 billion
which was the highest it had been since fiscal 2000 when we
began releasing the figures. Further, our consolidated solvency
margin ratio, an indicator of financial soundness, has remained
high, at 1,127.4%.
Customer-centered Values
We, as a mutual company, work to ensure that our management
and employees maintain customer-centered values in all
aspects of business and operations. The customer-centeredvalues, which we endeavor to make a starting point from which
to build new ideas and plan new activities, embodied ourphilosophy of putting ourselves in our customers’ shoes andcreating services and experiences that only we can offer.
To this end, we are working to develop human resourcesthat can put our customer-centered approach into practicein accordance with our basic policy for human resource
development, which provides the foundation for our philosophy
regarding personnel development.
Meanwhile, the medium-term management plan launchedin fiscal 2016 is based on our vision of a becoming the mosthighly regarded company among our customers through true
differentiation. All our executives and employees are pulling
together to achieve the goal, which is increasing customer
satisfaction as top priority.
In order to conduct customer-oriented business basedon our customer-centered approach, and respond to customer
demands over the long term, in June 2017 we launched acustomer-centered business management policy.
Full implementation of this approach is a lofty goal and weare only partway there, but we are steadily working toward that
goal, one step at a time.
Insurance Sales and Asset Management
Based on our belief in the importance of face-to-face sales
activities rooted in local communities, sales are conductedby customer advisors (sales representatives) and subsidiary
Fukokushinrai Life Insurance, which uses sales agents to
conduct over-the-counter sales, primarily in such financialorganizations as cooperative regional financial institutions thatserve small and medium-sized enterprises and local residents.
Sales were strong for such products as Mirai no Tobira,which offers tailored insurance coverage, and Iryo Daijin
Premier Eight, our high-value-added medical insurance thatprovides wide-ranging coverage. This includes hospitalization
benefits for an unlimited number of days for policyholders
hospitalized for any of eight major lifestyle-related diseases;
benefits for attending hospitals after hospitalization for lifestylerelated disease; and benefits for childbirth.
In January 2018, we introduced lightweight, high-security,
mobile communication-enabled terminals upgrading the2

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Yoshiteru Yoneyama
President

computers, known as PlanDo. With this change, we aim to
implement sophisticated consulting sales while improving
customer convenience and raising the quality and efficiency of
our office work. We will continue striving to offer products thatmeet the individual needs of our customers, and to improve ourafter-sales services.
As for asset management, we focus on domestic bonds,
loans and other assets that generate interest income in yen to
ensure the safety and liquidity of the assets entrusted to us by
our customers. To enhance profitability, we make diversified
investments in foreign securities, stocks, and real estate within
the scope of acceptable risk.
Amid concerns that extremely low interest rates will continue
long into the future the company is engaging in initiatives aimed
at improving its asset management, such as collaboration with
Payden & Rygel, a US investment management company, andappropriate risk taking, based on our capital adequacy to date.
Improving our Financial Soundness
To maintain financial soundness regardless of the operating
environment, we are working to strengthen our capital. To thisend, we are combining internal reserves, built from ordinary
profit, with external financing, such as the raising of foundation
funds and the issuing of subordinated bonds. In fiscal 2017, weredeemed the ¥30.0 billion in perpetual subordinated bondsthat we had issued in fiscal 2012 and, recognizing a favorable
fundraising environment, issued another ¥30.0 billion worth ofsubordinated bonds.
In addition, we built up additional reserves besides
increasing contingency reserves and price fluctuation reserves.
We shall endeavor to further improve our financial soundness,and to offer our customers security.
Our Mission as a Mutual Company
In November 2018, the company will mark its 95th anniversary.
We would not have been able to reach this milestone without
your kindness, for which we would like to express our deepest
gratitude. Since our founding in 1923, we have taken theform of a mutual company with a management philosophy of“protecting the interests of our policyholders” and, as such,
have seen as our mission the need to lighten customers’
premium contributions by improving dividend payouts. Further,
we are prompt to pay insurance claims at any time, believing
this to be an insurance company’s most important obligation.
We look forward to your continued support and cooperation.

Yoshiteru Yoneyama
PresidentManagement Principles of Fukoku Life

ValuesOur Customer-Centered Values
Possessing customer-centered values means creating and providing distinctive services andexperiences that provide true peace of mind to customers based on the assumption that all employees
treat customers as they themselves would like to be treated.

Management
Philosophy

ValuesCode of
Conduct

Business
Policies
Tomofumi Akiyama

Yoshiteru Yoneyama
President

Chairman of the Board

Management Philosophy
Fukoku Life will continue adhering to its original management philosophy ofprotecting the interests of policyholders and contributing to society.
In addition, we will continue to help our employees achieve personal fulfillment.
To protect the interests of ourpolicyholders

To contribute to society

Code of Conduct

To help our employees achieve
personal fulfillment

Business Policies

A customer-centered code of conduct to bereflected in the attitudes of all executives andemployees as they carry out their daily business.

1. Foster personnel with customer-centered values

We believe that having customer-centeredvalues requires us to do the following:

2. Reinforce how sales representatives structure activities

To provide customers with peace of mind, foster confident
and proud employees who have the ability to adopt acustomer’s perspective.

v Remember the importance of teamwork

To ensure meticulous service to customers, reinforce thestructure according to which sales personnel conduct face-toface sales activities.

v Deserve the trust of each and every customer

3. Attain a net increase in the number of policyholders

v Work with enthusiastic and pridev Apply common sense in our workv Emphasize the importance of life insurancev Overcome every difficultyv Create a friendly work environment

To earn the trust of a growing number of customers,
strengthen insurance product presentation design, provision,and follow-up services to meet customer needs.

4. Enhance business efficiency

To achieve stable growth, improve the efficiency of theCompany’s wide range of business activities.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

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Review of Operations (Non-consolidated)

Overview
Based on our management philosophy, which aims to protect
the interests of our policyholders, contribute to society andhelp our employees achieve personal fulfillment, all Fukoku
Life executives and employees strove to manage and conductbusiness with customer-centered values as the starting
point of all our ideas and actions, creating and providing
distinctive services and experiences while always treating
customers the way we would like to be treated. We believe
the customer-centered values we have engaged in up to
now are in line with the “Principles for Customer-Oriented
Business Conduct” published by the Financial Services Agency.
Fukoku Life formulated a business management policy basedon our customer-centered values, the details of which wereannounced in June, to align our thinking anew with regard to
standards based on customer-oriented values. We are also
focusing efforts on the development of human resources
meeting three requirements of self-motivation, creativity andaltruism as an initiative toward human resource development
capable of practicing customer-centered values.
In addition, operating in a low-interest-rate environmentthat appears likely to continue, we have continued striving
to develop and sell products that meet customers’ changing
needs, offer increasingly sophisticated asset investment andpromote enterprise risk management (ERM).
Insurance Sales
Rooted in the concept of face-to-face activities that are closely
attuned to local communities, we conduct sales through ourown sales representatives (Customer Advisors) and subsidiary
Fukokushinrai Life Insurance, which sells insurance products
at agencies and over the counter at shinkin banks and otherfinancial institutions.
In line with our policy of achieving a net increase in
the number of customers, we strive to design and propose
insurance that meets individual customers’ needs, thereby
earning their satisfaction. We have also extended our aftersales service to customers who have become policyholders tothat they can have ongoing confidence in their policies. To thisend, we have reinforced our system for providing face-to-facesales through Customer Advisors.
Cultivating Customer Advisors
We are augmenting employees’ knowledge and skills byenhancing our training and education systems and encouraging
them to earn financial planner certifications. In these ways,
we aim to cultivate human resources who will be trusted bycustomers from the time they enter into a policy through to thereceipt of claims and benefits.
Selling Individual Insurance
In line with revisions to the standard interest rate in April,
we revised the educational insurance product “Mirai no
Tsubasa” and individual annuities “Mirai Plus.” To respond tovarious customer needs, we are expanding options in termsof the period for premium payments and the start of annuity
payments while maintaining the appeal of our savings products.
In January, we also upgraded the “PlanDo” informationtablets carried by Customer Advisors that facilitate lightweight,
high-security mobile communications. Paperless procedures
enable onscreen policy applications and notifications that
reduce the number of documents required when applying for
insurance and prevent missing information and other problems.
Furthermore, the addition of the Life Compass proposal toolutilizing animation and other means to display the specific

4

FUKOKU MUTUAL LIFE INSURANCE COMPANY

amount of protection required with regard to the five life risks,such as death or the inability to work, can now be viewed in aneven more easily understandable way.
Utilizing core product “Mirai no Tobira,” which features
a highly customizable insurance design, through meticulous
consulting sales that use PlanDo and Life Compass, we madean effort to provide protection able to appropriately cover avariety of risks.
Additionally, from September we placed advertisements
promoting women’s medical insurance on “Hoken Ichiba,” thelargest insurance comparison website in Japan operated by
Advance Create Co., Ltd., a major insurance subscription agency.
Customers who request information through the website
receive a face-to-face explanation by Customer Advisors. Goingforward, we will continue striving to provide products meetingcustomer needs while diversifying sales channels.
Group Insurance
During the year, we conducted consulting related to corporate
benefit programs and proposed systems and products to meetcustomers’ diverse needs. To further enhance the services weoffer customers who have taken out corporate insurance, we
provide Fukoku Life Anshin Health Consultation Dial, which
offers a broad range of services, including health and medical
consultation, specialized consultations (information on second
opinions) and face-to-face mental health counseling.
Customer Service
Based on the opinions of outside experts on the Complaint
Countermeasures Consultation Committee, we conducteda customer satisfaction survey regarding our response tocomplaints received from customers. Also, in response to
feedback from older customers who found our voice guidance
difficult to understand, in April we established the “Quick Line”
enabling direct communication by omitting voice guidancefor phone calls from customers aged 70 or older. Survey
results indicate that customers who actually used this service
were satisfied with it. In November, we added an automatedconversation program (chatbot) function to our website able torespond to routine questions that provides customer support on
non-business days and during non-business hours. Additionally,
we established a rule whereby our employees assist customers
who are older or have disabilities by assisting them with writing
and reading pertaining to policy-related procedures in an
attempt to further enhance our support system.
Through these efforts which are promoted based on our
Voluntary Statement of Consumer Orientation announced in
January 2017, we will continue to utilize customer feedback
to improve business going forward in an attempt to further
enhance our services and engage in activities aimed atincreased customer satisfaction and trust.
Overseas BusinessWe have three asset management subsidiaries, Fukoku LifeInternational (U.K.) Ltd., Fukoku Life International (America)
Inc. and Fukoku Life Investments Singapore Pte. Ltd. The
subsidiary in Singapore also has a research function for
financial markets and insurance markets in Asian countries.
By enhancing our global asset management system,
we will be able to maintain sufficient investment returns wellinto the future. At the same time, we will raise our level ofsophistication in asset management through the cultivation ofhuman resources well-versed in global financial markets andasset management business.

Business Performance in FY 2017
Life Insurance in Force
At fiscal year-end, life insurance in force, which comprises
individual life insurance, individual annuities, and groupinsurance, amounted to ¥42,507.0 billion, down 1.4% comparedwith the previous fiscal year-end. Within this amount, life
insurance for individuals declined 1.7%, to ¥22,765.3 billion,
individual annuities decreased 4.4%, to ¥2,668.4 billion. The
year-end balance of life insurance in force for groups decreased
0.5%, to ¥17,073.2 billion.
Group annuities in force (policy reserve) rose 1.1%, to¥2,180.3 billion.
Annualized Premiums for New Policies and Policies in ForceIn the year under review, annualized premiums for new policies
decreased 41.2% compared with the previous fiscal year, to¥15.4 billion. Within this amount, individual insurance was down
30.1%, to ¥14.8 billion, and individual annuities down 87.8%, to¥0.6 billion. Annualized premiums from medical insurance andliving benefit insurance decreased 0.8%, to ¥7.7 billion.
Annualized premiums for policies in force fell 1.9%, ¥404.3
billion. Within this amount, individual insurance decreased 1.2%,
to ¥274.7 billion, and individual annuities declined 3.5%, ¥129.6
billion. Annualized premiums from medical insurance and living
benefit insurance increased 1.4%, to ¥110.7 billion.
Premium Income and Payments
In the year under review, premium and other income decreased
1.3% compared with the previous fiscal year, to ¥567.2 billion.
Meanwhile, claims and other payments, which represent
the total of payments under insurance policies, increased 2.5%,
to ¥501.1 billion.

Life in addition to lower sales of Fukokushinrai Life Insurance
lump-sum payment products. Within this amount, annualized
premiums from medical insurance and living benefit insurance
decreased 0.2%, or ¥0.01 billion, to ¥7.8 billion.
Annualized premiums for policies in force decreased 2.2%,
or ¥12.7 billion, to ¥569.2 billion. Annualized premiums frommedical insurance and living benefit insurance were up 1.5%, or¥1.6 billion, to ¥112.4 billion.
The total value of premium and other income fell 7.9%, or¥51.5 billion, to ¥597.1 billion.
Assets, Liabilities, and Net Assets
The outstanding balance of non-consolidated total assets,
including separate accounts, increased 0.9%, or ¥60.9 billion,
to ¥6,626.6 billion. Within this amount, general account assets
rose 0.8%, to ¥6,544.2 billion.
The year-end balance of securities stood at ¥5,458.7
billion, an increase of ¥89.1 billion, or 1.7%, compared with theprevious fiscal year-end.
Total liabilities increased 0.9%, or ¥52.6 billion, to¥6,035.1 billion.
Net assets amounted to ¥591.4 billion, up 1.4% comparedwith the previous fiscal year-end.
On a consolidated basis, total assets rose 0.7%,
to ¥8,488.8 billion, and net assets increased 2.0%, to¥606.7 billion.

Performance of Fukoku Life Group (Fukoku Life and
Fukokushinrai Life Insurance)
Annualized premiums for new policies of the Fukoku Life Group,
including Fukokushinrai Life Insurance, fell 50.6% year on
year, or ¥16.6 billion, to ¥16.3 billion. This decrease was due tofactors including a decline in savings products sold by Fukoku
Life insurance in force

Premium and other income(¥ trillions)(¥ billions)

43.7

43.2

43.1

42.5

43.1

598.3

16.5

16.6

16.9

17.1

2.9

2.8

2.7

2.7

2.6

24.2

23.6

23.4

23.1

22.7

FY2013

‘14

‘15

‘16

643.1

618.0
574.4

567.2

‘16

‘17

17.0

‘17

FY2013 ‘14‘15Group insurance
Individual annuities
Individual life insurance

FUKOKU MUTUAL LIFE INSURANCE COMPANY

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Review of Operations (Non-consolidated)

Strengthening Our Capital Base
Fukoku Life builds up its internal reserves on an ongoing basis inorder to strengthen its capital base. We boost internal reserves
by soliciting additional foundation funds and augmenting thecontingency reserve. Foundation funds at a mutual insurer
correspond to capital at a joint stock company. Total foundation
funds, including the accumulated foundation founds redeemed,amounted to ¥116.0 billion as of March 31, 2018.

Ratings
Fukoku Life relies on three neutral and unbiased ratingorganizations to provide an objective assessment of theCompany’s ability to meet insurance payments. As of July
1, 2018, we have received ratings of AA- from Rating andInvestment Information, A from Standard & Poor’s and A2
from Moody’s. These ratings represent strong evaluations of
the Company’s soundness and profitability. Going forward, we
will continue striving to maintain and further improve our highfinancial ratings.

Solvency Margin
Fukoku Life’s solvency margin ratio at fiscal year-end was
1,081.2%, down 133.6 percentage points compared withthe previous fiscal year-end, but substantially above the
200% level set as a standard of financial soundness for
insurance companies.

Total assets

Net assets

Solvency margin ratio(¥ billions)(¥ billions)(%)

6,611.9
6,214.7

6,489.8

6,565.6

6,626.6

1,321.8

697.7
606.9

583.1

591.4

1,099.9‘16‘17

FY2013

1,214.8

1,169.3

1,081.2

493.9

FY2013

6

‘14

‘15

‘16

FUKOKU MUTUAL LIFE INSURANCE COMPANY‘17

FY2013

‘14

‘15

‘14

‘15

‘16

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Investment Performance in Fiscal 2017 (General Account)
Overview
In fiscal 2017, ended March 31, 2018, the Japanese economy
remained on a gradual path to recovery, supported by exports
helped by solid international demand and the ongoing
expansion of capital investment backed by strong corporate
earnings. In overseas economies, the US maintained its trend
toward growth primarily through domestic demand suchas personal consumption and capital investment while theeconomy in Europe gradually rallied back as exports increased
in response to overall improvement in the global economy.
Under this economic environment, the US Federal Reserve
Board proceeded to normalize its monetary policies, raisinginterest rates three times and, from October, gradually scaling
down reinvestment of refunds on bond holdings. In Europe,
the European Central Bank decided to cut back on monthly
asset purchases in October despite continuing its policy ofquantitative easing. On the other hand, the Bank of Japan
continued its yield curve control policy targeting 10-year
government bond yields of about 0% as prospects regarding
the achievement of its 2% price stability target remained
murky. The policy was continued despite a phase of heightened
speculation that Bank of Japan might change its policy due toreductions in government bond purchases.
With regard to our asset management business, we
focused on initiatives aimed at maintaining stable profitability
through appropriate risk-taking based on capital adequacy todate amid fears that ultralow interest rates would continue.
While targeting currency diversification and continuing
to hold back on investments in yen-denominated bonds, we
actively purchased unhedged foreign bonds, concentrating
primarily on bonds denominated in Australian and Canadiandollars, which have relatively high interest rates. We also
increased investment in stocks from European and US
companies, which are expected to deliver high dividend yields.
At the same time, we sold hedged foreign bonds that had
become less profitable as costs associated with currency
hedging rose partly due to interest rate hikes in the US.
With the intention of enhancing our medium-to longterm competitiveness in asset management, we began a
General account assets(¥ billions)

6,133.4

6,530.2

6,410.7

6,489.9

6,544.2

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‘15

‘16

‘17

Domestic Bonds
Domestic bonds fell ¥24.9 billion (0.9%) year on year to¥2,818.6 billion as we held back on investments in light ofextremely low interest rates in Japan.

Breakdown of general account assets (Fiscal year ended March 31, 2018)(¥ billions)

Others
83.6 (1.3%)
Real estate
213.6 (3.3%)
Cash and deposits,
and others
272.4 (4.2%)
Other securities
107.5 (1.6%)

FY2013collaboration in September with Payden & Rygel (headquarteredin Los Angeles), one of the leading invest managementcompanies in the active management of fixed income portfolios.
In addition to entrusting Payden & Rygel with the managementof about ¥10.0 billion in foreign corporate bonds, we have begun
sending Fukoku Life employees to them for training as part ofour efforts to develop human resources able to improve asset
management. Additionally, in order to contribute to society asa signatory to the U.N. Principles for Responsible Investment(PRI) while securing constant profitability, we actively conductedenvironment, social and governance (ESG) investment. This
investment included bonds issued for the purpose of resolving
various social issues in developing countries through poverty
reduction and environmental protection measures.
In response to revisions to Japan’s Stewardship Code,we established a Stewardship Committee, which was chairedby a member from outside of the Company and aimed to
improve the transparency and effectiveness of our stewardship
activities. We enhanced our stewardship activities through thecommittee’s wide-ranging discussions.
Investment income from general accounts increased¥10.9 billion (7.0%) to ¥167.0 billion. The interest, dividends
and other income within this figure amounted to ¥154.8 billion
including that from trading securities, a year-on-year increaseof ¥13.9 billion (9.9%), reaching its highest level in the 25 years
since fiscal 1992. This result was due to contributions fromheightening interest that occurred after accumulating foreign
bonds and a rise in dividends from domestic and foreign stocks
caused by favorable corporate performance.
Investment expenses were ¥39.6 billion, down ¥4.9 billion
year on year (11.1%), as loss on trading securities totaled ¥1.4
billion, down 78.7% year on year.
As a result, net investment income amounted to ¥127.4
billion, up by ¥15.8 billion (14.2%) year on year.

Foreign securities
1,713.8(26.2%)
Domestic stocks
740.8 (11.3%)

Ordinary loans
536.5 (8.2%)

Loans
593.7
(9.1%)

Policy loans
57.1 (0.9%)

Securities
5,380.8 (82.2%)

Domestic bonds
2,818.6 (43.1%)

Total: ¥ 6,544.2 billion

Note: This total includes cash and deposits, call loans,monetary claims bought and money held in trust.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

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Foreign Securities
We sold hedged foreign bonds as they had become lessprofitable due to a rise in costs associated with currency
hedging. Targeting currency diversification, we also actively
purchased unhedged foreign bonds mainly denominated inAustralian and Canadian dollars, which have relatively highinterest rates. Although we continued purchasing these bonds
throughout the fiscal year, foreign bonds decreased ¥10.5 billion(0.7%) year on year to ¥1,434.4 billion as valuation gains fell due
in part to a rise in US interest rates. Foreign stocks increasedby ¥21.8 billion (8.5%) to ¥279.4 billion as we increased
investment in stocks from European and US companies, which
are expected to deliver high dividend yields.

Domestic Stocks
Domestic stocks rose ¥84.2 billion (12.8%) year on year to¥740.8 billion due to our replacement purchase of stocks
expected to provide stable dividends and to valuation gains that
increased thanks to rising stock prices.
Loans
Loans fell ¥31.9 billion (5.6%) year on year to ¥536.5 billion as
the ultralow interest rate environment continued to produce
tough conditions in terms of profitability.

Domestic bonds

Domestic stocks

Foreign securities

Loans

Real estate(¥ billions)(¥ billions)(¥ billions)(¥ billions)(¥ billions)

2,876.1 2,856.1
2,659.1

2,843.5 2,818.6

740.8
1,583.7

656.5

641.0

1,700.0 1,702.6 1,713.8

835.8

228.1
763.9

1,365.3

570.3

223.7

212.8

214.4

213.6

‘15

‘16

‘17

693.6
627.7

593.7

482.3

FY2013 ‘14

‘15

‘16

‘17

FY2013 ‘14

‘15

‘16

‘17

FY2013 ‘14

◆

‘15

‘16

‘17

FY2013 ‘14

‘15

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FY2013 ‘14

Investment Policies for Fiscal 2018

Investment Environment
In fiscal 2018, ending March 31, 2019, we expect the Japanese
economy to continue its modest recovery, buoyed by overseas
demand. Overseas economies are also expected to remain
firm overall, particularly in the US, where the economy isbeing stimulated by large tax cuts. In this economic climate,
we predict that long-term interest rates will remain within a
low and tight range as the Bank of Japan continues its yield

curve control policy. Although we generally expect stock
prices to be solid as corporate profits improve, apprehension
regarding protectionist US trade policies will likely dampen
their rise. On foreign exchange rates, we foresee the yen
going sideways against the dollar. Due to differences in the
direction of monetary policies in the US and Japan, we expectthat extreme appreciation of the yen is unlikely.

Domestic Bonds
We plan to continue to restrain investment in yendenominated bonds.

Foreign Securities
In terms of foreign bonds, we will accumulate unhedged
foreign bonds to improve profitability and diversify currency
allocation while selling less profitable hedged foreign bonds
with the aim of curbing costs associated with currency
hedging. We also plan to increase foreign corporate bondexposure, including the purchase of investment funds focusedon such securities. Concerning foreign stocks, we will selectand acquire securities expected to produce stable dividends.

Domestic Stocks
We plan to rebalance our portfolio by selling a portion ofstocks that have greatly increased in market value whilefurther improving profitability and financial soundness utilizing
unrealized capital gains.

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FUKOKU MUTUAL LIFE INSURANCE COMPANY

Governance System
Corporate Governance Enhancement Initiatives
As a mutual company, Fukoku Life is not directly subject toJapan’s Corporate Governance Code.
However, we have formulated a Basic Policy on Corporate
Governance to foster an understanding of our perspective toenhance corporate governance. We publicize this policy, alongwith our Corporate Governance Report.
Going forward, we will continue to engage in effective
corporate governance based on this policy and, in response
to our policyholders’ mandate, we will fulfill our mission todependably pay insurance proceeds and claims.
Management Structure and Internal Controls
As a mutual life insurance company, Fukoku Life is engaged in
the highly public natured business of protecting policyholders’life. Therefore, we are committed to establish a managementthat ensures the soundness of operations, and to enhance
management measures, including our risk management
and compliance. In addition, we employ our internal control
structure to ensure the efficient operation of these measures.
Establishment of Management Control Measures
The Board of Directors makes important business decisions
and monitors business execution. The two external directors
bring an outside perspective to the deliberations of theboard. In April 2009, Fukoku Life introduced an executive
officer system. Under this system, we have separated andstrengthened decision-making and business executionfunctions, with the Board of Directors fulfilling decision-making
and supervisory functions. The Board of Full-Time Directors,
comprising the president and executive officer and other titledexecutive officers, deliberates important business execution
policy for the Company. Meanwhile, various committees havebeen established beneath the Board of Directors in an effort tostrengthen internal controls.
Members of the Audit & Supervisory Board attend meetingsof the Board of Directors, the Board of Full-Time Directors andother important boards, auditing the execution of operations bydirectors. The internal audit department performs internal audits,verifies the appropriateness of corporate operations and strives toensure the soundness of business operations.
Enhancement of Internal Control System
The Company’s Board of Directors has set the terms to establish
a structure of Internal Control Systems to ensure the soundnessof operations. We are working to enhance the efficiency
of operations, strengthen risk management, and promotecompliance based on the core policies of our internal control.
Risk Management System
Life insurance is a “promise” to pay insurance claims andbenefits in the event of an unforeseen emergency, a lifetime
commitment to customers that can even span generations.
Events may occur, such as drastic changes in the economic
environment or other catastrophes, during the many months
and years in which we accompany customers on theirlife journey. When this happens, the role of life insurancecompanies becomes even more important.
Only after keeping this promise with unwavering
reliability regardless of the circumstances can customers
enjoy peace of mind. To maintain this reliability into the future,
Fukoku Life promotes enterprise risk management (ERM) for
overall management of a diverse range of complicated risks
from a strategic perspective based on the recognition thateach executive officer and employee is responsible for risk
management commensurate with their position.
At Fukoku Life, the Board of Directors has established
the Risk Management Committee to perform enterprise risk
management (ERM). Several subcommittees have been

established under the Risk Management Committee to manage
the various risks that arise in business operations, and to conduct
asset and liability management (ALM). The Risk Management
Committee consolidates and evaluates these risks at thecorporate level, and considers the appropriate level of acceptablerisk and risk response. Furthermore, the Risk Management
Committee has established a specialized risk management
committee to help enhance enterprise risk management.
Full-time directors are members of the Risk Management
Committee, which is chaired by the president. Other directors
chair subcommittees, creating a risk management structurethat is led by top management.
The specialized risk management committee is central
to understanding the Group’s overall risk management
situation. At Fukokushinrai Life Insurance, the Company’s
Risk Management Committee secretariat and the secretariats
of various subcommittees directly monitor the management
status of risks under their jurisdiction.
Furthermore, the audit department veriﬁes that the risk
management system is functioning effectively.
Compliance System
As members of the community, all executives and employees
undergo ongoing training in compliance-related matters so thatthey not only observe laws and regulations, but also comply
with protocols and social conventions. This training is also
aimed at enhancing the spirit of compliance. To this end, as
well as improving and reinforcing the compliance system, wehold hands-on compliance training on an ongoing basis.
However, we recognize that even the most robust of
systems cannot guarantee the complete elimination of improper
conduct. We believe that it is important to detect any improper
conduct early, deal with it swiftly and appropriately, and makeconstant improvements and work to rectify the situation in orderto prevent a recurrence. Accordingly, we believe that continuous
improvement and correction are important.
The Compliance Committee, comprising full-time directors
and other executives and chaired by the president, has theBoard of Directors’ mandate to deliberate matters related
to compliance promotion and to promote compliance. The
Compliance Control Department serves as secretariat for thiscommittee. Furthermore, the chief compliance officer andcompliance officers are stationed at headquarters to perform
regular compliance checks.
Protection of Personal Information
As an insurance company that is trusted by its customers,
Fukoku Life recognizes the handling of personal information asa topmost priority. Accordingly, we take great care in handlingpersonal information. We comply with the Act on the Protectionof Personal Information, which came into force in September
2015, as well as other related legislation and guidelines, and wewill continue endeavoring to appropriately handle and protect
personal information going forward. The Company has also
formulated its own privacy policy, which describes its policyon the protection of personal information, and a basic policy on
the handling of specific personal information. In these ways,
we work to appropriately manage the important personal
information entrusted to us by our customers. We also strive to
respond swiftly and appropriately to any questions, consultations
or requests from customers with regard to personal information.
As rules for managing personal information appropriately,
we have formulated Regulations on the Handling of Personal
Information and Regulations on the Handling of Corporate
Customers’ Information. In addition, we appropriately manage
information by conducting spot checks on the status of
personal information and other safety management measures
by subcontractors.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

9Corporate Social Responsibility (CSR)

Contribution to Society
In accordance with the highly public nature of the life insurance business, Fukoku Life believes that the soundmanagement of its business is its first priority in terms of fulfilling its corporate social responsibility (CSR).
Furthermore, we believe that the Company should engage proactively in a range of social contribution activities
aimed at helping to build a better society.
Fukoku Life Concerts
This activity began in fiscal 1989 with a Fukoku Salon Concert,held in the lobby of our headquarters building in Uchisaiwaicho.
Fukoku Life holds Visiting Concerts, which are heldat schools and institutions for people with disabilities,
enabling them to enjoy genuine classical music performed byprofessional musicians. We also hold Charity Concerts, which
are held as a community benefit event and on which Fukoku
Life executives collaborate in fund-raising. These concerts areheld in cooperation with the regions where they are held.
From their start in fiscal 2002 through March 31, 2018,
Visiting Concerts had been held in 235 locations, while Charity
Concerts had been held 282 times from their beginning in 1993
through the end of the fiscal year.

・Visiting Concerts
Begun in fiscal 2002, Visiting Concerts are performed byCharity Concert musicians who visit schools and institutions forpeople with disabilities in communities where Charity Concerts
are also being held.

Smile Gallery

Hello Kitty Hospital Visit Program
Under this program, Fukoku Life’s brand mascot Hello Kitty—
which is a popular character worldwide—makes visits tochildren’s hospitals and pediatric wards to support hospitalized
children and their families. Commemorative photos with Hello
Kitty are taken, placed in frames that are handmade at Fukoku
Life and given to children as presents.
Activities to Support Reconstruction in Disaster-Affected
Areas

Visiting Concert

・Charity Concerts
In fiscal 1993, we began holding free-admission Charity
Concerts, which also raise funds through the cooperationof charity donations by customers at concert venues. The
funds raised in this manner are contributed to social welfare
councils and other community organizations, thereby assisting
communities’ social welfare.
Smile Gallery
To support the creation of art by children with disabilities, in the
shopping mall located in the second-floor basement of our head
office building in Uchisaiwaicho, we operate the Smile Gallery.
In this gallery, we display artworks by students of specialeducation schools from around Japan. This activity began in
fiscal 2002 as an offshoot of the Visiting Concerts, which visit
special-education schools.
We also use the artworks provided to create calendars,
which we distribute to employees and customers.
10

FUKOKU MUTUAL LIFE INSURANCE COMPANY

・Disaster-Area Visits and Support Concerts, Visiting
Concerts in Disaster-Affected Areas
It will still be some time before recovery following the Great
East Japan Earthquake is complete. To cheer on the recovery,
Fukoku Life continues to hold disaster-area events and Support
Concerts, as well as Visiting Concerts in disaster-affected areas.
We are conducting these activities in the three prefectures
affected by the earthquake: Fukushima, Miyagi and Iwate.
A portion of the donations received from Charity Concerts
are donated to areas affected by the Great East Japan
Earthquake and the Kumamoto earthquakes.
In fiscal 2017, Visiting Concerts in disaster-affected areas
were held at nine schools and Support Concerts were held at
Sendai branch office and Fukushima branch office.

・Events to Sell Specialty Products from Disaster-Affected
Regions
At an open space in the first basement floor of our headquarters
in Uchisaiwaicho and in the first-floor entrance lobby at our
Chiba New Town headquarters, we hold events to sell specialty
products from the three prefectures affected by the Great East
Japan Earthquake: Fukushima, Miyagi and Iwate, as well as
Kumamoto, which was damaged in the Kumamoto Earthquake.
In fiscal 2017, we held such an event featuring products
from Kumamoto Prefecture, which was hit by earthquakes.
We receive substantial cooperation for events to sell
specialty products from disaster-affected regions from people
outside the Company, as well as from within the organization.

Environmental Protection Initiatives
・Flora Preservation
Since fiscal 2006, we have been conducting the Fukoku Life
(Inochi) Forest project, mainly as a measure to counter damage
from bamboo. This forest provides a venue for participation in andhands-on experience of environmental preservation activities.
Currently, a growing number of forests in Japan arebeing left to grow unchecked due to the lack of people willingto take over forestry businesses. One particular problem is
uncontrolled groves of Moso bamboo, which invades theforests needed to absorb CO 2 —a greenhouse gas—as well
as farmland. Due to the shallowness of its roots, bamboo canmake ground slippery and contribute to topsoil erosion. It canalso devastate mountainous forests and cause landslides.
Measures are therefore needed to counter this “bamboo
damage,” to protect the environment and respond to disaster.
In the Fukoku Life (Inochi) Forest project, Company
executives and employees take part in cutting away bamboo
forests in order to protect mountainous forest land owned by
the Company. In addition to forest regeneration, this thinningalso aims to restore the bamboo forests themselves to health.
These activities are mainly carried out by Company volunteers

Flora Preservation

organized as the Usami Club. In fiscal 2017, these activities
were conducted six times, with 71 executives and employees
and their family members participating as volunteers.
Other Activities
・Lobby Sales EventsThe lobby sales events at Visit & Charity Concerts sponsoredby our Uchisaiwaicho and Chiba New Town headquarters have
led to regular bakery shop sales events operated by institutions
for people with disabilities. The Company's employees
participate as sales staff at these traveling events. Thus weprovide a sales location and cooperate in institutions' activities.
At the same time, through this participation we promote better
understanding within the Company of people with disabilities.
・Art Promotion
Fukoku Life is a sponsor of the MET: Live in High Definition
series of screenings by the New York Metropolitan Opera(MET), which are distributed by Shochiku Co., Ltd. By giving
members of the general public the opportunity to see some of
the finest opera performances in the world, we help promote
the arts and culture.

Massenet “Cendrillon”© Bill Cooper / Royal Opera House

Communication with Society

Our Customer Advisors gather feedback directly from
customers and strive to offer better services, which
we believe to be most the most effective means ofadvertising and communication. We also provide
information through various advertising and public
relations activities to deepen communication between
customers and Customer Advisors and encourage abetter understanding of the Company.
・Alliance with Sanrio
The Hello Kitty character, owned by Sanrio Co., Ltd., has
attained worldwide popularity. Fukoku Life has adopted thiswidely loved character as its brand mascot, and features Hello
Kitty in many communications media, including Fukoku Life
posters and brochures, and in video on our website.
In fiscal 2014, we created an original Gotochi Kitty
character (“Gotochi” referring to a specific region), which weuse in numerous situations to evoke an even greater sense of
closeness with customers.
We also provide the Sanrio Character Boat Ride as afriendly-company attraction at Sanrio Puroland and Harmonyland.

© ’13,’18 SANRIO S/D · G© ’76,’90,’96,’01,’18 SANRIO APPROVAL No.P1009191

・Providing Information
Fukoku Life publishes a variety of materials for its stakeholders.
Publications that provide information on the Company’sbusiness activities include the Japanese-language annual
disclosure report. “Disclosure” (and abridged versions
thereof), booklets written for policyholders, and this Englishlanguage annual report. Our diverse lineup of public relations
and advertising activities include the production of a variety of
publications as needed, in order to strengthen the channels ofcommunication between the Company, its policyholders, and its
many other customers.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

11

Non-consolidated Financial Statements
Non-consolidated Balance Sheets
Fukoku Mutual Life Insurance Company
As of March 31, 2017 and 2018

As of March 31,

2017

2018

Millions of yen

Assets:Cash and deposits:
Cash …………………………………………………………………………………
Bank deposits ………………………………………………………………………
Call loans ………………………………………………………………………………
Monetary claims bought ……………………………………………………………
Money held in trust ……………………………………………………………………
Securities:
Government bonds …………………………………………………………………
Local government bonds …………………………………………………………
Corporate bonds ……………………………………………………………………
Stocks ………………………………………………………………………………
Foreign securities …………………………………………………………………
Other securities ……………………………………………………………………
Loans:
Policy loans …………………………………………………………………………
Ordinary loans ………………………………………………………………………
Tangible fixed assets:
Land …………………………………………………………………………………
Buildings ……………………………………………………………………………
Lease assets ………………………………………………………………………
Construction in progress …………………………………………………………
Other tangible fixed assets ………………………………………………………
Intangible fixed assets:
Software ……………………………………………………………………………
Other intangible fixed assets ……………………………………………………
Reinsurance receivables ……………………………………………………………
Other assets:
Accounts receivable ………………………………………………………………
Prepaid expenses …………………………………………………………………
Accrued income ……………………………………………………………………
Deposits ……………………………………………………………………………
Differential account for futures trading …………………………………………
Derivatives …………………………………………………………………………
Suspense payments ………………………………………………………………
Lease investment assets …………………………………………………………
Rest of the other asset ……………………………………………………………
Allowance for possible loan losses …………………………………………………
Total assets……………………………………………………………………………
12

FUKOKU MUTUAL LIFE INSURANCE COMPANY¥

2018
Millions of
U.S. dollars

162
44,51844,681
193,000
753
29,787¥166
66,093
66,260176,000
443
31,502

2,015,161
123,972
733,459
679,556
1,722,752
94,774
5,369,678

2,030,971
114,036
702,661
768,000
1,735,580
107,540
5,458,790

19,116
1,073
6,613
7,228
16,336
1,012
51,381

59,238568,483
627,72257,181
536,553593,734

538
5,050
5,588

125,276
88,010
2,013
1,140
3,074
219,515

125,278
86,343
1,565
2,052
3,309
218,549

1,179
812
14
19
31
2,057

10,836
11,21622,052200

21,651
2,049
23,701
167

203
19
223
1

5,883
1,291
27,6802,241
2515,824
2,487
734
3,864
60,032(1,776)¥6,565,647

7,268
2,055
28,5702,281
98
12,190
2,373
700
3,968
59,508(2,049)¥6,626,609

68
19
268
21
0
114
22
6
37
560
(19)
$62,373

$

1
622
623
1,656
4
296

As of March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Liabilities:

Policy reserves:
Reserve for outstanding claims ………………………………………………
Policy reserve ……………………………………………………………………
Reserve for dividends to policyholders ………………………………………
Reinsurance payables ………………………………………………………………
Subordinated bonds …………………………………………………………………
Other liabilities:
Corporate income tax payable …………………………………………………
Accounts payable …………………………………………………………………
Accrued expenses ………………………………………………………………
Unearned income …………………………………………………………………
Deposits received …………………………………………………………………
Guarantee deposits received ……………………………………………………
Derivatives …………………………………………………………………………
Cash collateral received for financial instruments …………………………
Asset retirement obligations ……………………………………………………
Suspense receipts ………………………………………………………………
Reserve for employees' retirement benefits ……………………………………
Reserve for price fluctuation ………………………………………………………
Deferred tax liabilities ………………………………………………………………
Deferred tax liabilities for land revaluation ………………………………………

Total liabilities ………………………………………………………………………

¥

19,533
5,533,544
50,9295,604,007
62
191,935¥

19,295
5,578,187
53,3955,650,879
56
191,935$

181
52,505502
53,189
0
1,806

4,733
3,501
10,520364
5,579
13,505
2,186
—
3,250
1,154
44,79725,78982,464
19,132
14,2655,982,454

2,445
2,381
10,834369
5,756
14,087
3,052
2,712
3,088
1,336
46,06625,417
95,798
10,733
14,241
6,035,126

23
22
101
3
54
132
28
25
29
12
433
239
901
101
134
56,806

10,000106,000
112

10,000106,000
112

94
997
1

2,849

2,954

27

4,000
20,00041,0006,000
20,00041,000

56
188
385

257

255

2

100
767
60,453
126,578
129,427
245,539—
767
64,561
132,584
135,538
251,650

—
7
607
1,247
1,275
2,368

333,545
4,107
337,652
583,192¥6,565,647

335,658
4,173
339,831591,482¥6,626,609

3,159
39
3,198
5,567
$62,373

Net assets:

Foundation funds ……………………………………………………………………
Accumulated foundation funds redeemed ………………………………………
Reserve for revaluation ……………………………………………………………
Surplus:
Legal reserve for future losses …………………………………………………
Other surplus:
Reserve for redemption of foundation funds ……………………………
Reserve for dividend allowances ……………………………………………
Accumulated fund for price fluctuation ……………………………………
Reserve for advanced depreciation ofreal estate for tax purpose …………………………………………………
Reserve for special account for advanced
depreciation of real estate for tax purpose ………………………………
Other reserves …………………………………………………………………
Unappropriated surplus ………………………………………………………
Total foundation funds, surplus and others ……………………………………
Net unrealized gains (losses) on
available-for-sale securities, net of tax …………………………………………

Revaluation reserve for land, net of tax ……………………………………………
Total valuation and translation adjustments…………………………………………
Total net assets………………………………………………………………………
Total liabilities and net assets………………………………………………………
See notes to the non-consolidated financial statements.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

13

Non-consolidated Statements of Operations
Fukoku Mutual Life Insurance Company
For the years ended March 31, 2017 and 2018Year ended March 31,

2017

2018

Millions of yen

Ordinary revenues:
Premium and other income:Premium income …………………………………………………………………
Reinsurance income ………………………………………………………………
Investment income:Interest, dividends and other income:Interest on deposits ……………………………………………………………
Interest and dividends on securities …………………………………………
Interest on loans …………………………………………………………………
Income from real estate for rent ………………………………………………
Other interest and dividends …………………………………………………
Gains on money held in trust, net ………………………………………………
Gains on sales of securities ………………………………………………………
Gains on derivative instruments, net ……………………………………………
Reversal of allowance for possible loan losses …………………………………
Other investment income …………………………………………………………
Gains on separate accounts, net …………………………………………………
Other ordinary revenues:
Fund receipt from annuity rider …………………………………………………
Proceeds from deferred insurance ………………………………………………
Reversal of reserve for outstanding claims ……………………………………
Reversal of reserve for employees' retirement benefits ………………………
Others ………………………………………………………………………………
Total ordinary revenues ……………………………………………………………
Ordinary expenses:
Claims and other payments:
Claims ………………………………………………………………………………
Annuities ……………………………………………………………………………
Benefits ……………………………………………………………………………
Surrenders …………………………………………………………………………
Other payments ……………………………………………………………………
Reinsurance premiums ……………………………………………………………
Provision of policy reserve and others:
Provision of policy reserve ………………………………………………………
Provision of interest portion of reserve for dividends to policyholders ………

14

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2018
Millions of
U.S. dollars¥574,124
302
574,427¥566,924
286
567,210$5,3362
5,338

21
109,253
11,314
13,736
125
134,451—
14,473
7,018
90
122
4,041
160,19722
124,480
10,054
14,541
120
149,219
1,769
15,280
—
—
819
6,553
173,641

0
1,171
94
136
1
1,404
16
143
—
—
7
61
1,634

743
3,368
1,185
288
2,959
8,545
743,169

1,150
3,854
237
371
3,240
8,854
749,706

10
36
2
3
30
83
7,056

104,168
173,825
109,736
71,38829,658385
489,162

126,371
166,137
106,399
73,651
28,357
264
501,181

1,189
1,563
1,001
693
266
2
4,717

49,18120¥ 49,202

44,64312¥ 44,655

420
0
$ 420

Year ended March 31,

2017

2018

Millions of yen

Investment expenses:
Interest expenses …………………………………………………………………
Losses on money held in trust, net ………………………………………………
Losses on trading securities, net …………………………………………………
Losses on sales of securities ……………………………………………………
Losses on valuation of securities …………………………………………………
Losses on derivative instruments, net …………………………………………
Foreign exchange losses, net ……………………………………………………
Provision of allowance for possible loan losses…………………………………
Depreciation of real estate for rent and other assets …………………………
Other investment expenses ………………………………………………………

Operating expenses……………………………………………………………………
Other ordinary expenses
Deferred annuity payments ………………………………………………………
Taxes …………………………………………………………………………………
Depreciation ………………………………………………………………………
Others ………………………………………………………………………………
Total ordinary expenses ……………………………………………………………
Ordinary profits ………………………………………………………………………
Extraordinary gains:
Gains on disposal of fixed assets …………………………………………………
State subsidy and others …………………………………………………………
Others………………………………………………………………………………
Total extraordinary gains……………………………………………………………
Extraordinary losses:
Losses on disposal of fixed assets ………………………………………………
Impairment losses …………………………………………………………………
Provision of reserve for price fluctuation ………………………………………
Losses on advanced depreciation of real estate for tax purpose……………
Total extraordinary losses…………………………………………………………
Surplus before income taxes ………………………………………………………
Income taxes:
Current ………………………………………………………………………………
Deferred ……………………………………………………………………………
Total income taxes …………………………………………………………………
Net surplus for the year ……………………………………………………………

¥

4,057
1,144
7,042
5,493
24
—
15,624
—
4,319
6,875
44,581
87,218¥2018
Millions of
U.S. dollars

4,216
—
1,498
4,977
0
225
16,013

$

39
—
14
46
0
2
150

279

2

4,271
8,158
39,64088,477

40
76
373
832

5,388
5,976
6,647
879
18,891
689,056
54,113

5,488
6,216
6,677
899
19,282
693,237
56,469

51
58
62
8
181
6,525
531

2
195
42
240

288
—
—
288

2
—
—
2

180
71
14,176—
14,42839,925547
141
13,334
3
14,02542,731

5
1
125
0
132
402

13,453(10,202)3,251¥ 36,674

11,374(9,511)
1,862¥ 40,868

107
(89)
17
384

$

See notes to the non-consolidated financial statements.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

15

Non-consolidated Statements of Changes in Net Assets
Fukoku Mutual Life Insurance Company
For the years ended March 31, 2017 and 2018

Millions of yen
Foundation funds, surplus and others
Surplus
Other surplus
Accumulated
foundation
Foundation
funds
Reserve for
funds
redeemed revaluation¥86,000

For the year ended March 31, 2017
Balance at the beginning of the
fiscal year�������������������������������������� ¥30,000

¥112

Legal
reservefor future
lossesReserve forredemptionoffoundation
funds

Reserve for
special acReserve forcount foradvancedadvanced
Reserve for Accumulated depreciation of depreciation offund for price real estate for real estate fordividend
allowances
fluctuation
tax purpose
tax purpose¥2,742¥18,000¥20,000¥41,000

¥266

—

Other
reserves¥767

UnappropriatedsurplusTotal
foundation funds,
surplus andothersTotal
surplus¥65,509 ¥148,284 ¥264,397

Changes in the fiscal year
Additions to reserve for dividends
to policyholders�������
Additions to legal reserve for
future losses………………………
Additons to accumlated
foundation funds redeemed………
Payment of interest on
foundation funds������

(35,236)(35,236)

(106)

—

—

106
20,00020,000Net surplus for the fiscal year��
Redemption offoundation funds������ (20,000)
Additions to reserve for redemptionof foundation funds…………………
Reversal of reserve for redemptionof foundation funds…………………
Additions to reserve for advanced
depreciation of real estate fortax purpose…………………………
Reversal of reserve for advanced
depreciation of real estate fortax purpose…………………………
Additions to reserve for
special account for advanced
depreciation of real estate fortax purpose…………………………
Reversal of revaluation reserve
for land, net of tax…………………
Net changes, excluding foundation
funds, surplus and others…………
Total changes in the fiscal year��(35,236)(20,000)

(316)

(316)

(316)

36,67436,67436,674(20,000)

6,000(6,000)(20,000)

20,000—¥112

106¥2,849(14,000)—¥ 4,000 ¥20,000—¥41,000—(20,000)(20,000)

2

(2)

—

—

(11)

11

—

—

(100)

—

—

20

20

20

100

Balance at the end of the fiscal year��� ¥10,000 ¥106,000

—

(8)
¥257

100
¥100

—
¥767

(5,055) (18,857) (18,857)¥60,453 ¥129,427 ¥245,539

Millions of yen
Valuation and translation adjustments

For the year ended March 31, 2017

Balance at the beginning of the fiscal year��������������

Net unrealized gains(losses) on available-for-salesecurities, net of tax

Revaluation reserve forland, net of tax

Total valuation andtranslation adjustments

Total
net assets¥338,421¥4,128¥342,549¥606,947

Changes in the fiscal year

(35,236)

Additions to reserve for dividends to policyholders���������
Additions to legal reserve for future losses�������������

—Additons to accumlated foundation funds redeemed��������

20,000

Payment of interest on foundation funds��������������

(316)

Net surplus for the fiscal year������������������

36,674

Redemption of foundation funds�����������������

(20,000)

Additions to reserve for redemption of foundation funds�������

—

Reversal of reserve for redemption of foundation funds�������

(20,000)

Additions to reserve for advanced depreciation of real estate
for tax purpose������������������������

—

Reversal of reserve for advanced depreciation of real estate
for tax purpose������������������������

—Additions to reserve for special account for advanced depreciation of realestate for tax purpose���������������������

—

Reversal of revaluation reserve for land, net of tax���������

20

Net changes, excluding foundation funds,surplus and others�����

(4,876)(20)(4,896)(4,896)

Total changes in the fiscal year�������������������

(4,876)(20)(4,896)(23,754)

Balance at the end of the fiscal year�����������������

¥333,545¥4,107¥337,652¥583,192

16

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Millions of yen
Foundation funds, surplus and others
Surplus
Other surplus

For the year ended March 31, 2018

Accumulated
foundation
Reserve forFoundation
funds
funds
redeemed revaluation

Balance at the beginning of the
fiscal year�������������������������������������� ¥10,000 ¥106,000

¥112

Legal
reservefor future
lossesReserve forredemptionoffoundation
funds

Reserve for
special acReserve forcount foradvancedadvanced
Reserve for Accumulated depreciation of depreciation offund for price real estate for real estate fordividend
allowances
fluctuation
tax purpose
tax purpose¥2,849¥4,000¥20,000¥41,000

¥257

¥100

Other
reserves¥767

UnappropriatedsurplusTotal
foundation funds,
surplus andothersTotal
surplus¥60,453 ¥129,427 ¥245,539

Changes in the fiscal year
Additions to reserve for dividends
to policyholders�������

(34,592)

Additions to legal reserve for
future losses��������

105

(105)

(34,592) (34,592)——

Payment of interest on foundation
funds�����������

(100)

(100)

(100)

Net surplus for the fiscal year��

40,86840,86840,868(2,000)

—

—

1

—

—

100

—

—

(65)

(65)

(65)

4,107

6,110

6,110

Additions to reserve for redemptionof foundation funds������

2,000

Reversal of reserve for advanced
depreciation of real estate for tax
purpose����������

(1)

Reversal of reserve for special
account for advanced
depreciation of real estate fortax purpose���������

(100)

Reversal of revaluation reserve
for land, net of tax������
Net changes, excluding foundation
funds, surplus and others���

—

—

105

2,000

—

—

(1)

(100)

—

Balance at the end of the fiscal year��� ¥10,000 ¥106,000¥112¥2,954¥6,000¥20,000¥41,000

¥255

—

¥767

Total changes in the fiscal year��—¥64,561 ¥135,538 ¥251,650

Millions of yen
Valuation and translation adjustments

For the year ended March 31, 2018

Balance at the beginning of the fiscal year��������������

Net unrealized gains(losses) on available-for-salesecurities, net of tax

Revaluation reserve forland, net of tax

Total valuation andtranslation adjustments

Total
net assets¥333,545¥4,107¥337,652¥583,192

Changes in the fiscal year
Additions to reserve for dividends to policyholders���������

(34,592)

Additions to legal reserve for future losses�������������

—Payment of interest on foundation funds��������������

(100)

Net surplus for the fiscal year������������������

40,868Additions to reserve for redemption of foundation funds�������

—

Reversal of reserve for advanced depreciation of real estate for tax
purpose���������������������������

—

Reversal of reserve for special account for advanced depreciation of realestate for tax purpose���������������������

—

Reversal of revaluation reserve for land, net of tax���������

(65)

Net changes, excluding foundation funds, surplus and others�����

2,113

65

2,178

2,178

Total changes in the fiscal year�������������������

2,113

65

2,178

8,289

Balance at the end of the fiscal year�����������������

¥335,658¥4,173¥339,831¥591,482

FUKOKU MUTUAL LIFE INSURANCE COMPANY

17

Millions of U.S. dollars
Foundation funds, surplus and others
Surplus
Other surplus

For the year ended March 31, 2018

Balance at the beginning of the
fiscal year��������������������������������������

Accumulated
foundation
Reserve forFoundation
funds
funds
redeemed revaluation

$94

$997

$1

Legal
reservefor future
lossesReserve forredemptionoffoundation
funds

$26

$37

Reserve for
special acReserve forcount foradvancedadvanced
Reserve for Accumulated depreciation of depreciation offund for price real estate for real estate fordividend
allowances
fluctuation
tax purpose
tax purpose

$188

$385

$2

$0

Other
reserves

UnappropriatedsurplusTotal
surplusTotal
foundation funds,
surplus andothers$7$569$1,218$2,311

(325)

(325)

(325)

(0)

—

—

Changes in the fiscal year
Additions to reserve for dividends
to policyholders�������
Additions to legal reserve for
future losses��������

0

Payment of interest on foundation
funds�����������

(0)

(0)

(0)

Net surplus for the fiscal year��

384

384

384

(18)

—

—

0

—

—

0

—

—

(0)

(0)

(0)

Additions to reserve for redemptionof foundation funds������

18

Reversal of reserve for advanced
depreciation of real estate for tax
purpose����������

(0)

Reversal of reserve for special
account for advanced
depreciation of real estate fortax purpose���������

(0)

Reversal of revaluation reserve
for land, net of tax������
Net changes, excluding foundation
funds, surplus and others���Total changes in the fiscal year��

—

—

—

0

18

—

—

(0)

(0)

—

38

57

57

Balance at the end of the fiscal year���

$94

$997

$1

$27

$56

$188

$385

$2

—

$7

$607

$1,275$2,368Millions of U.S. dollars
Valuation and translation adjustments

For the year ended March 31, 2018

Balance at the beginning of the fiscal year��������������

Net unrealized gains(losses) on available-for-salesecurities, net of tax$3,139

Revaluation reserve forland, net of tax$38

Total valuation andtranslation adjustments$3,178Total
net assets$5,489Changes in the fiscal year
Additions to reserve for dividends to policyholders���������

(325)

Additions to legal reserve for future losses�������������

—Payment of interest on foundation funds��������������

(0)

Net surplus for the fiscal year������������������

384

Additions to reserve for redemption of foundation funds�������

—

Reversal of reserve for advanced depreciation of real estate for tax
purpose���������������������������

—

Reversal of reserve for special account for advanced depreciation of realestate for tax purpose���������������������

—

Reversal of revaluation reserve for land, net of tax���������

(0)

Net changes, excluding foundation funds, surplus and others�����

19

0

20

20

Total changes in the fiscal year�������������������

19

0

20

78

Balance at the end of the fiscal year�����������������

$3,159$39$3,198$5,567

18

FUKOKU MUTUAL LIFE INSURANCE COMPANYNon-consolidated Proposed Appropriations of Surplus
Fukoku Mutual Life Insurance Company
For the years ended March 31, 2017 and 2018Year ended March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen¥60,453¥64,561

$607

1

45

0

100

—

—

102

45

0

60,55564,606608

34,592

38,630363

Legal reserve for future losses …………………………………………………

105

117

1

Interest payment for foundation funds …………………………………………

100

100

0

2,000

2,000

18

2,000

2,000

18

2,205

2,217

20

Total appropriation of surplus……………………………………………………

36,797

40,848384

Unappropriated surplus carried forward…………………………………………

¥23,758¥23,758$223

Unappropriated surplus
Reversal of voluntary surplus reserve:
Reversal of reserve for advanced depreciationof real estate for tax purpose…………………………………………………… 
Reversal of reserve for special account for advanced depreciationof real estate for tax purpose……………………………………………………

Total……………………………………………………………………………………
Appropriation of surplus
Reserve for dividends to policyholders……………………………………………
Net surplus:

Voluntary surplus reserve
Reserve for redemption of foundation funds…………………………………

Note: Net surplus is calculated by deducting reserve for dividends to policyholders from the sum of unappropriated surplus and reversal of voluntary surplus reserve.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

19

Notes to the Non-consolidated Financial Statements

I. Presentation of the Non-consolidated Financial
Statements
1. Basis of Presentation
The accompanying non-consolidated financial statements havebeen prepared from the accounts maintained by Fukoku MutualLife Insurance Company (the “Company”) in accordance withthe provisions set forth in the Insurance Business Act of Japanand its related rules and regulations and in conformity withaccounting principles generally accepted in Japan, which are
different in certain respects from accounting principles generally
accepted in countries and jurisdictions other than Japan.
In addition, the notes to the non-consolidated financial
statements include information which is not required underaccounting principles generally accepted in Japan but ispresented herein as additional information.
Amounts of less than one million yen have been rounded
down. As a result, the totals do not add up.
The translations of yen amounts into U.S. dollar amounts
are included solely for the convenience of the reader and havebeen made, as a matter of arithmetical computation only, at therate of ¥106.24 = US$1.00, the effective rate of exchange at thebalance sheet date of March 31, 2018. The translations should
not be construed as representations that such yen amounts
have been or could in the future be, converted into U.S. dollars
at that or any other rates.

II. Notes to the Non-consolidated Balance Sheets
1. (1) The valuation of securities, including bank deposits andmonetary claims bought which are equivalent to securities,
and securities managed as trust assets in money held in
trust, is as follows:i)	Trading securities are stated at fair market value.
Costs of their sales are determined by the moving
average method.
ii)	Held-to-maturity debt securities are stated at amortizedcost under the straight-line method, cost being
determined by the moving average method.
iii)	Policy-reserve-matching bonds are stated atamortized cost under the straight-line method, cost
being determined by the moving average method in
accordance with “Temporary Treatment of Accounting
and Auditing Concerning Policy-reserve-matching Bonds
in the Insurance Industry” (Industry Audit Committee
Report No.21 issued by the Japanese Institute ofCertified Public Accountants on November 16, 2000).
iv)	Investments in subsidiaries and affiliates are stated at cost,
cost being determined by the moving average method.
v)	Available-for-sale securities with fair market value
are stated at fair market value based on the market
prices at the end of the fiscal year. Costs of their sales
are determined by the moving average method. Net
unrealized gains or losses on these available-for-salesecurities, net of taxes, are recorded as a separate
component of net assets.

20

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Available-for-sale securities whose market value are deemed
extremely difficult to obtain are stated at cost, cost being
determined by the moving average method, except for
public and corporate bonds including foreign bonds, of which
the difference between acquisition cost and face value isconsidered to be an adjustment of interest. Such bonds arestated at amortized cost under the straight-line method, cost
being determined by the moving average method.
(2) Derivative instruments are stated at fair market value.
(3) T he Company revalued the land used in the operations basedon the Act for Revaluation of Land (Act No.34 promulgatedon March 31, 1998). The difference between fair value andbook value resulting from the revaluation, net of related
taxes, is recorded as revaluation reserve for land as aseparate component of net assets and the related tax isrecorded as deferred tax liabilities for land revaluation.
• Date of revaluation: March 31, 2002•M
 ethod of revaluation as prescribed for in Article 3
Paragraph 3 of the said Act:
Calculation is based on the appraisal value for property tax
set forth in Article 2 item 3 of the Enforcement Ordinanceof the Act for Revaluation of Land (Government OrdinanceNo.119 promulgated on March 31, 1998) and the roadrate set forth in Article 2 item 4 of the said Ordinance withcertain reasonable adjustments.
(4) D epreciation of tangible fixed assets is calculated by thefollowing methods.
•T angible fixed assets (excluding lease assets):Decliningbalance method
However, buildings (excluding building attachments
and structures acquired on or before March 31, 2016)acquired on or after April 1, 1998 are depreciated using
Straight-line method.
•L ease assets related to finance lease transactions that
do not transfer ownership: Straight-line method over thelease term with no residual value.
Other tangible fixed assets acquired for ¥100,000 or
more but less than ¥200,000 are depreciated equally overthree years.
(5) A ssets and liabilities denominated in foreign currencies,
except for investments in subsidiaries and affiliates, aretranslated into Japanese yen at the effective exchange
rate prevailing at the balance sheet date. Investments in
subsidiaries and affiliates are translated into Japanese yen at
the exchange rate on the date of acquisition.
(6) A llowance for possible loan losses is provided in accordancewith the Company’s standards of self-assessment and writeoffs and reserves on credit quality:i)	For the credits of borrowers who are legally bankrupt

such as being in the proceedings of bankruptcy or
civil rehabilitation (hereinafter called “legally bankrupt
borrowers”) and who are substantially bankrupt (hereinafter
called “substantially bankrupt borrowers”), the Company
provides the remaining amount of credits after the direct
write-off described below and the deductions of theamount expected to be collected through the disposal ofcollateral or the execution of guarantees.
ii)	For the credits of borrowers who are not currently bankrupt
but have a high possibility of bankruptcy (hereinafter
called “not currently bankrupt borrowers”), the Company
provides the amounts deemed as necessary considering
the borrowers’ ability to pay, within the amounts after
deductions of the amount expected to be collected throughthe disposal of collateral or the execution of guarantees.
iii)	For the credits of borrowers other than the above, theCompany provides the amounts calculated by multiplying
the borrowers’ balance by the actual ratio of bad debt
losses on defaults during a certain past period.
All credits are assessed by the relevant departmentsin accordance with the Company’s standards of selfassessment on credit quality. The results of the assessment
are reviewed by the audit department, which is independentof business-related divisions. Subsequently, the allowancefor possible loan losses is provided based on the results ofthese assessments.
For the credits of legally bankrupt borrowers andsubstantially bankrupt borrowers, the amounts remaining
after deductions of collateral value or the amounts
collectible through the execution of guarantees are writtenoff directly from the borrowers’ balances as the estimateduncollectible amounts. The amount written-off as of March
31, 2017 and 2018 were ¥1 million and ¥1 million (US$10
thousand), respectively.
(7) Reserve for employees’ retirement benefits is presented
based on projected benefit obligations and pension plan
assets at the balance sheet date.
The Company uses the following methods foramortizing retirement benefit obligations and retirement
benefit expenses:• Method for allocation of projected retirement benefits................Benefit formula basis• Amortization period of actuarial gains and losses...10 years• Amortization period of prior service cost................10 years(8) Reserve for price fluctuation is calculated in accordance with
Article 115 of the Insurance Business Act.
(9) As for the finance lease transactions where the Company
is a lessor, the lease fee is recorded in “Interest, dividends
and other income” at the time of receiving lease fee. The
corresponding cost of the lease transactions is recorded
in “Other investment expenses”, which is calculated bydeducting an amount equivalent to the interest allocated overthe lease term from the lease fee received.
(10) H edge accounting is based on “Accounting Standards for
Financial Instruments” (ASBJ Statement No. 10, August 11,2006). The Company applies a fair value hedge accounting
as a hedge against the risk of foreign exchange fluctuationin relation to bonds denominated in foreign currencies andagainst the risk of price fluctuation in relation to domestic
stocks, and a designated hedge accounting (“Furiate
shori”) for foreign currency swaps as a hedge against therisk of foreign exchange fluctuation in relation to bonds
denominated in foreign currencies issued by the Company.
For assessing the effectiveness of hedge used, ratio
analysis of comparing the fluctuations in the fair value orcash flows of hedged items and hedging instruments ismainly applied.
(11) A ccounting of unrecognized actuarial differences andunrecognized prior service costs related to employees’
retirement benefits is different to the methods used forthese items in the consolidated financial statements.
(12) T he Company accounts for consumption taxes by the
tax-exclusion method. The consumption taxes on certain
assets, which are not deductible from consumption taxes
withheld and that are stipulated to be deferred under the
Tax Act, are deferred as prepaid expenses and amortized
equally over five years. Consumption taxes other thandeferred consumption taxes are recognized as an expense
when incurred.
(13) P olicy reserve is based on Article 116 of the Insurance
Business Act, and the premium reserve is calculated by thefollowing method:i)	In regard to the policies subject to the standard policy
reserve, the method as prescribed by the Commissionerof Financial Services Agency (Ministry of FinanceOrdinance No. 48, 1996) is applied.
ii)	In regard to the policies not subject to the standard
policy reserve, the net level premium method is applied.
Based on the provision of Article 69, paragraph 5, of the
Enforcement Regulation of the Insurance Business Act,
the Company includes additional funded policy reserves
as follows.
Among individual annuity insurance policies with anassumed interest rate of 5.00% or higher, policies that havean annuity commencement date on or prior to March 31,2018 (excluding wife’s annuity insurance additional rider),the Company reduced the assumed interest rate to 1.00%
and funded additional policy reserves. At the end of the
fiscal year ended March 31, 2018, the balance of thesepolicy reserves was ¥73,222 million (US$689 million).
The Company also funded additional policy reserves

FUKOKU MUTUAL LIFE INSURANCE COMPANY

21

for certain individual annuity insurance policies, whole life
insurance policies that include distribution of surplus every
five years and highly advanced medical riders. At the end of
the fiscal year ended March 31, 2018, the balance of thesepolicy reserves was ¥5,628 million (US$52 million).
Of the above, the amount funded at the end of the
fiscal year ended March 31, 2018 was ¥13,574 million(US$127 million). As a result, compared to the amountwithout this additional funding, provision of policy reserve
increased ¥13,574 million (US$127 million), while ordinary
profit and surplus before income taxes decreased ¥13,574
million (US$127 million).
(14) The software for internal use is amortized based on straightline method over the estimated useful lives.
(15) O f the bonds corresponding to the sub-groups of individual
insurance and annuities which are set by insurance types
and investment policies, the bonds that are held to matchthe duration of liabilities are classified as policy-reservematching bonds in accordance with “Temporary Treatmentof Accounting and Auditing Concerning Policy-reservematching Bonds in Insurance Industry” (Industry Audit
Committee Report No. 21 issued by the Japanese Instituteof Certified Public Accountants on November 16, 2000).
2. A
 sset management of the general accounts other than theseparate accounts stipulated in Article 118 Paragraph 1 ofthe Insurance Business Act is conducted on the principle
of prudent and profitable investments, considering public
and social responsibilities of the insurance business. Basedon this policy, the Company allocates the fund, securing
its liquidity, from the medium-to-long term viewpoints.
The Company is diversifying investments in assets suchas foreign securities, stocks and real estates within theacceptable range of risk in order to enhance the profitability,
although yen-denominated interest bearing assets including
debt securities such as Japanese government bonds andloans are the cores of the portfolios under the asset liability
management. Derivatives are mainly used to hedge themarket risk regarding spot-priced assets and liabilities.
Major financial instruments including securities, loans andderivatives are exposed to market risk and credit risk.
The Company manages its asset management risk by
establishing internal control systems including various rules
pursuant to the “Three Basic Rules related to Enterprise
Risk Management” established by the Board of Directors.
Specifically, the Company eliminates excessive risk deviatingfrom the basic principle and secures the safety of theassets by utilizing control functions of the Financial andInvestment Risk Management Department towards the asset
management sections, monitoring the status of market risk
and credit risk periodically on a daily or monthly basis. In
addition, the Company quantifies the market risk and credit

22

FUKOKU MUTUAL LIFE INSURANCE COMPANY

risk using value-at-risk (VaR) method in order to control thepossible maximum losses which may arise from the holding
assets within a certain range of risk buffers.
The carrying amounts, fair values and their relateddifferences of major financial assets and liabilities in thegeneral account were as follows:(1) C ash, deposits (excluding financial instruments treated as
securities based on “Accounting Standards for Financial
Instruments” (ASBJ Statement No.10)) and call loans:
The fair values of cash, deposits and call loans are based on
their book values since fair values approximate book values
due to their short maturities.
(2) S ecurities including deposits and monetary claims bought
which are treated as securities based on “AccountingStandards for Financial Instruments” (ASBJ Statement
No.10) and securities managed as trust assets in money heldin trust:
The fair values of marketable securities are measured at
the quoted market prices at the balance sheet date. The fairvalues of other securities without the quoted market prices
are based on the prices reasonably calculated such as theprices offered by the information vendors or counterparty
financial institutions.
Investments in subsidiaries and affiliates, unlisted
stocks and investments in partnerships whereby partnershipassets consist of unlisted stocks whose fair values are
deemed extremely difficult to obtain, are excluded fromabove securities. The carrying amounts of investments in
subsidiaries and affiliates, unlisted stocks and investmentsin partnerships were ¥64,837 million, ¥6,109 million, and¥17,418 million as of March 31, 2017, and ¥64,837 million(US$610 million), ¥5,697 million (US$53 million), and ¥23,609
million (US$222 million) as of March 31, 2018, respectively.
(3) L oans and monetary claims bought treated as loans:
The fair values of policy loans are deemed to approximatebook values, considering estimated repayment period andinterest rate conditions since their repayment deadlines havenot been set up due to the characteristics that the loans arelimited to the amount of cash surrender values. Therefore,
the book values are used as the fair values of policy loans.
The fair values of floating interest rate loans among theordinary loans and monetary claims bought treated as loans
approximate the book values because the market interest
rates are reflected in future cash flows in a short period.
Therefore, the fair values of floating interest rate loans andmonetary claims bought treated as loans are based on theirbook values. The fair values of fixed interest rate loans
are measured by discounting the future cash flows to thepresent values.
The fair values of loans from legally bankrupt borrowers,
substantially bankrupt borrowers and not currently bankrupt

As of March 31,

2017

Carrying
amountCash and deposits:
Cash and deposits not treated as securities������������������������
Total cash and deposits
Call loans�����������������������������������������������������������������������������������
Monetary claims bought:
Claims treated as loans��������������������������������������������������������
Total monetary claims bought����������������������������������������������
Money held in trust:
Trading securities�����������������������������������������������������������������
Total money held in trust�����������������������������������������������������
Securities:
Trading securities�����������������������������������������������������������������
Held-to-maturity debt securities�������������������������������������������
Policy-reserve-matching bonds��������������������������������������������
Available-for-sale securities��������������������������������������������������
Total securities���������������������������������������������������������������������
Loans:
Policy loans��������������������������������������������������������������������������
Ordinary loans����������������������������������������������������������������������
Total loans����������������������������������������������������������������������������
Assets total
Subordinated bonds*1
Liabilities total
Derivative instruments*2:
Hedge accounting not applied���������������������������������������������
Hedge accounting applied����������������������������������������������������
Total derivative instruments�������������������������������������������������

¥¥43,274
43,274
193,000

Millions of yen¥

Fair value

Difference

43,274
43,274
193,000

¥

—
—
—

753
753

808
808

54
54

28,78728,78728,78728,787——179,246764,914
1,008,212
3,256,735
5,209,110

179,246
908,680
1,166,744
3,256,735
5,511,408—
143,766
158,531—302,297

59,238568,483
627,722
6,102,649
191,935
191,935

59,238592,719
651,958
6,429,237
199,659
199,659(0)24,23524,235326,588
7,724
7,724

535
13,102
13,638535
13,102
13,638

—
—
—

¥

¥

As of March 31,

2018

Carrying
amountCash and deposits:
Cash and deposits not treated as securities������������������������
Total cash and deposits
Call loans�����������������������������������������������������������������������������������
Monetary claims bought:
Claims treated as loans��������������������������������������������������������
Total monetary claims bought����������������������������������������������
Money held in trust:
Trading securities�����������������������������������������������������������������
Total money held in trust�����������������������������������������������������
Securities:
Trading securities�����������������������������������������������������������������
Held-to-maturity debt securities�������������������������������������������
Policy-reserve-matching bonds��������������������������������������������
Available-for-sale securities��������������������������������������������������
Total securities���������������������������������������������������������������������
Loans:
Policy loans��������������������������������������������������������������������������
Ordinary loans����������������������������������������������������������������������
Total loans����������������������������������������������������������������������������
Assets total
Subordinated bonds*1
Liabilities total
Derivative instruments*2:
Hedge accounting not applied���������������������������������������������
Hedge accounting applied����������������������������������������������������
Total derivative instruments�������������������������������������������������

¥¥64,46264,462
176,000

2018

Millions of yen
Fair value¥

64,46264,462
176,000

Difference

¥

—
—
—

Carrying
amount

$

606
606
1,656

Millions of U.S. dollars
Fair value

Difference

$

$

606
606
1,656

—
—
—

443
443

474
474

30
30

4
4

4
4

0
0

30,50230,50230,50230,502

—
—

287
287

287
287

—
—

149,265
758,872
973,736
3,404,811
5,286,686

149,265
897,574
1,134,148
3,404,811
5,585,800—
138,702160,412—299,114

1,404
7,142
9,165
32,04849,761

1,404
8,448
10,67532,04852,577

—
1,305
1,509
—
2,815

57,181
536,553593,734
6,151,829
191,935
191,935

57,181
558,957
616,138
6,473,379
200,774
200,774(0)22,404
22,404
321,549
8,839
8,839

538
5,050
5,588
57,905
1,806
1,806

538
5,261
5,799
60,931
1,889
1,889

(0)
210
210
3,026
83
83

(534)
9,672
9,138

(534)
9,672
9,138

—
—
—

(5)
91
86

(5)
91
86

—
—
—

¥

¥

$

$

$

*1 The fair value of derivative instruments that are currency swaps under designated hedge accounting is included in the fair value of subordinated bonds because it is accounted for as an integral
part of the subordinated bonds that are the hedge items.
*2 Assets and liabilities generated by derivative instruments are offset and presented net. Net liabilities in total are presented in brackets.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

23

borrowers and monetary claims bought treated as loans
are computed by deducting the amount of the allowancefor possible loan losses from the book values before direct
write-offs.
(4) Subordinated bonds:
Subordinated bonds issued by the Company are stated at fairmarket values.
(5) Derivative instruments:i)	The fair values of the futures and options traded at theexchange are measured at the settlement price of theexchange.
ii)	The fair values of forward contracts, options and swaps
traded over the counter are based on the quoted prices
offered by counterparty financial institutions.
iii)	The fair values of foreign currency forward contracts are
determined based on the spot exchange rate and forward
contract rate.
3. The Company holds investment and rental properties suchas office buildings in Tokyo and other areas. The carrying
amounts and the fair values of investment and rental
properties were ¥172,312 million and ¥283,598 million as ofMarch 31, 2017, and ¥172,740 million (US$1,625 million) and¥295,454 million (US$2,781 million) as of March 31, 2018,
respectively. The fair value is mainly based on the value
calculated by the Company in accordance with real estateappraisal standards which includes some adjustments using
the reference prices.
The amount corresponding to asset retirement
obligations included in the carrying amount of investment
and rental properties were ¥974 million as of March 31,
2017, and ¥841 million (US$7 million) as of March 31, 2018,
respectively.
4. The amounts of securities lent under lending agreements
were ¥38,863 million and ¥254,467 million (US$2,395 million)
as of March 31, 2017 and 2018, respectively.
5. The total amounts of credits to bankrupt borrowers,
delinquent loans, delinquent loans past 3 months or more
and restructured loans, which were included in loans, were¥1,115 million as of March 31, 2017, and ¥1,033 million(US$9 million) as of March 31, 2018, respectively;i)	The balances of credits to bankrupt borrowers were ¥230
million and ¥168 million (US$1 million) as of March 31,2017 and 2018, respectively.
ii)	The balances of delinquent loans were ¥884 million and¥865 million (US$8 million) as of March 31, 2017 and2018, respectively.
iii)	There were no balances of delinquent loans past 3
months or more and restructured loans as of March 31,2017 and 2018.

24

FUKOKU MUTUAL LIFE INSURANCE COMPANY

The direct write-offs related to loans decreased credits tobankrupt borrowers described above by ¥1 million as ofMarch 31, 2017 and ¥1 million (US$10 thousand) as of March
31, 2018, respectively.
Credits to bankrupt borrowers represent loans, excluding
the balances already written-off, which meet the conditionsprescribed in Article 96 Paragraph 1 item 3 and 4 of the
Enforcement Regulations of the Corporate Tax Act. Moreover,accrued interest on these loans is not recorded as income
after determining that principal of or interest on theseloans is unlikely to be collected due to the significant delay
in repayment of principal or interest payment or for someother reasons.
Delinquent loans are credits which accrued interest
is not recorded as income due to the same reasons as
described above, and exclude credits to bankrupt borrowers
and loans for which interest payments have been suspended
and rescheduled to assist and support the borrowers in the
restructuring of their business.
Delinquent loans past 3 months or more are loans
for which interest payments or repayments of principal
are delinquent for 3 months or more from the due dateunder the terms of the related loan agreements, excluding
those loans classified as credits to bankrupt borrowers anddelinquent loans.
Restructured loans are loans for which certain
concessions favorable to borrowers, such as interest
reduction or exemption, rescheduling of due date forrepayments of principal or interest payment, waiver of claim
or other terms, have been negotiated for the purpose of
assisting and supporting the borrowers in the restructuringof their business. This category excludes loans classified
as credits to bankrupt borrowers, delinquent loans anddelinquent loans past 3 months or more.
6. Accumulated depreciation of tangible fixed assets were¥158,873 million and ¥163,520 million (US$1,539 million) as
of March 31, 2017 and 2018, respectively.
7. Total assets in separate accounts provided for in Article
118 of the Insurance Business Act were ¥75,678 millionand ¥82,347 million (US$775 million) as of March 31, 2017and 2018, respectively. The amounts of separate accountliabilities were the same as separate account assets.
8. The total amounts of receivables from/payables to subsidiaries
were ¥2,471 million and ¥2,187 million as of March 31, 2017,and ¥2,466 million (US$23 million) and ¥1,687 million (US$15
million) as of March 31, 2018, respectively.
9. Deferred tax assets and deferred tax liabilities as of March
31, 2017 were ¥117,179 million and ¥132,077 million,
respectively. Valuation allowance for deferred tax assets was¥4,235 million.

Major components of deferred tax assets were ¥73,414
million of policy reserves, ¥23,089 million of reserve for priceﬂuctuation and ¥12,447 million of reserve for employees’
retirement beneﬁts as of March 31, 2017.
Major component of deferred tax liabilities was ¥127,885
million of net unrealized gains on available-for-sale securities
as of March 31, 2017.
The statutory tax rate and the actual effective tax rate
for the year ended March 31, 2017 were 28.2% and 8.1%,
respectively. The difference between the statutory tax rate
and the actual effective tax rate was attributable mainly to-24.5% of reserve for dividends to the policyholders.
Deferred tax assets and deferred tax liabilities as ofMarch 31, 2018 were ¥127,044 million (US$1,195 million)and ¥133,230 million (US$1,254 million), respectively.

Valuation allowance for deferred tax assets was ¥4,547
million (US$42 million).
Major components of deferred tax assets were ¥79,506
million (US$748 million) of policy reserves, ¥26,823 million(US$252 million) of reserve for price fluctuation and ¥12,343
million (US$116 million) of reserve for employees’ retirement
benefits as of March 31, 2018.
Major component of deferred tax liabilities was ¥128,972
million (US$1,213 million) of net unrealized gains on availablefor-sale securities as of March 31, 2018.
The statutory tax rate and the actual effective tax rate
for the year ended March 31, 2018 were 28.2% and 4.4%,
respectively. The difference between the statutory tax rate
and the actual effective tax rate was attributable mainly to-25.5% of reserve for dividends to the policyholders.

10. C hanges in reserve for dividends to policyholders were as follows:Year ended March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Balance at the beginning of the fiscal year������������������������������������������������������������

¥50,368¥50,929$479

Transfer from surplus in the previous fiscal year���������������������������������������������������

35,236

34,592

325

Dividend payments to policyholders during the fiscal year�������������������������������������

(34,695)(32,138)(302)

Increase in interest������������������������������������������������������������������������������������������������

20

12

0

Balance at the end of the fiscal year���������������������������������������������������������������������

¥50,929¥53,395

$502

11. T
 he amount of stocks of subsidiaries were ¥64,837 millionand ¥64,837 million (US$610 million) as of March 31, 2017and 2018, respectively.
12. A
 ssets pledged as collateral as of March 31, 2017 were¥27,012 million of securities and ¥1,688 million of bank deposits.
Secured debts as of March 31, 2017, were ¥4,974 million.
Assets pledged as collateral as of March 31, 2018 were¥25,447 million (US$239 million) of securities and ¥1,378
million (US$12 million) of bank deposits. Secured debts asof March 31, 2018, were ¥5,174 million (US$48 million).
13. Reserves for outstanding claims for the reinsurance contracts
provided in accordance with Article 71 Paragraph 1 of the
Enforcement Regulation of the Insurance Business Act(hereinafter called “reserve for outstanding claims for ceded
reinsurance”) were ¥3 million and ¥10 million (US$102
thousand) as of March 31, 2017 and 2018, respectively.
Policy reserves for the reinsurance contracts
provided in accordance with Article 71 Paragraph 1 of the
Enforcement Regulation of the Insurance Business Act(hereinafter called “policy reserve for ceded reinsurance”)
were ¥30 million and ¥31 million (US$295 thousand) as ofMarch 31, 2017 and 2018, respectively.

14. The total amounts of adjustment items for redemption offoundation funds and appropriation of net surplus definedin Article 30 Paragraph 2 of the Enforcement Regulationof the Insurance Business Act were ¥337,765 million and¥339,944 million (US$3,199 million) as of March 31, 2017and 2018, respectively.
15. T here were unused commitment line agreements underwhich the Company is the lender of ¥10,500 million and¥2,490 million (US$23 million) as of March 31, 2017 and2018, respectively.
16. R
 epayments of subordinated bonds are subordinated toother obligations.
17. T he future contribution to the Life Insurance Policyholders
Protection Corporation of Japan under Article 259 of the
Insurance Business Act were estimated at ¥9,406 and¥8,972 million (US$84 million) as of March 31, 2017 and2018, respectively.
The contribution is recognized as operating expenses
when contributed.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

25

18. Matters Related to Employees’ Retirement Benefits(1) Overview of Employees’ Retirement Benefit Plan
As for a defined benefit plan for office-based employees, the Company has a defined benefit corporate pension plan andretirement lump-sum payments. As for a defined contribution plan for these employees, the Company also has a defined
contribution pension plan.
As for a defined benefit plan for sales employees, the Company has retirement lump-sum payments.
The Company places a retirement benefit trust in relation to the retirement lump-sum grant plan for sales employees.

(2) Defined Benefit Plani) Reconciliation of beginning and end of balance of retirement benefit obligation

As of March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Retirement benefit obligation at the beginning of the fiscal year��������������������������

¥85,184¥85,277$802

Service cost�����������������������������������������������������������������������������������������������������������

3,508

3,493

32

Interest cost����������������������������������������������������������������������������������������������������������

510

511

4

Actuarial differences occurred during the fiscal year���������������������������������������������

656

1,232

11

Retirement benefit payments��������������������������������������������������������������������������������

(4,583)(4,313)(40)

Retirement benefit obligation at the end of the fiscal year�����������������������������������

¥85,277¥86,201$811ii) Reconciliation of beginning and end of balance of pension plan assets
As of March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Pension plan assets at the beginning of the fiscal year........................................

¥44,636¥46,654$439

Expected return on pension plan assets..............................................................

671

732

6

Actuarial differences occurred during the fiscal year............................................

57

3,386

31

Contributions by the employer.............................................................................

2,689

2,679

25

Retirement benefit payments...............................................................................

(1,400)(1,080)(10)

Pension plan assets at the end of the fiscal year.................................................

¥46,654¥52,372$492

26

FUKOKU MUTUAL LIFE INSURANCE COMPANY

iii) Reconciliation of retirement benefit obligation and pension plan assets with reserve for employees’ retirement benefits presented
on the non-consolidated balance sheet
As of March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

a. Funded plan retirement benefit obligation........................................................

¥73,902¥74,783$703

b. Pension plan assets..........................................................................................

(46,654)(52,372)(492)

c. (a + b)................................................................................................................

27,24722,410210

d. Unfunded plan retirement benefit obligation....................................................

11,375

11,417107

e. Unrecognized actuarial differences..................................................................

(13,156)(8,657)(81)

f. Unrecognized prior service cost.......................................................................

323

247

2

g. Reserve for employees’ retirement benefits (c + d + e + f)............................

¥25,789¥25,417$239iv) Breakdown of retirement benefit gains and losses

As of March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Service cost..........................................................................................................

¥3,508¥3,493$32

Interest cost.........................................................................................................

510

511

4

Expected return on pension plan assets..............................................................

(671)

(732)

(6)

Amortization of actuarial differences....................................................................

2,306

2,345

22

Amortization of prior service cost.........................................................................

(76)

(76)

(0)

Retirement benefit expenses related to defined benefit plan..............................

¥5,578¥5,541$52v) Breakdown of pension plan assets
The breakdown of asset categories as a percentage of total pension plan assets were as follows:

As of March 31,

2017

2018

Domestic stocks...................................................................................................

46.1%

47.7%

Life insurance general account.............................................................................

34.2%

32.9%

Foreign stocks......................................................................................................

7.9%

7.8%

Domestic bonds...................................................................................................

8.0%

7.5%

Foreign bonds.......................................................................................................

2.7%

2.7%

Others...................................................................................................................

1.1%

1.4%

Total......................................................................................................................

100.0%

100.0%

Within the total of pension assets as of March 31, 2018, 38.1% of this amount is accounted for by the retirement benefit trust
established in relation to the retirement lump-sum payments plan for sales employees.

vi) Method for setting the expected long-term rate of return
To set the expected long-term rate of return on pension plan assets, the Company takes into account the present and future
allocation of pension plan assets, and the present and expected future long-term rate of return on a variety of assets that makes
up the pension assets.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

27vii) Underlying actuarial assumptions
Main underlying actuarial assumptions were as follows:

As of March 31,

2017

2018

0.6%

0.6%

Defined Benefit Plan..........................................................................................

2.5%

2.5%

Retirement benefit trust....................................................................................

0.0%

0.0%

Discount rate........................................................................................................
Expected long-term rate of return on pension plan assets(3) Defined Contribution Plan
The required contribution amounts by the Company to the defined contribution plan were ¥194 million and ¥213 million (US$2 million)
as of March 31, 2017 and 2018, respectively.

III. Notes to the Non-consolidated Statements of Operations
1. The total amounts of revenues and expenses in connection with subsidiaries were ¥877 million and ¥8,084 million for the year ended
March 31, 2017, and ¥780 million (US$7 million) and ¥8,586 million (US$80 million) for the year ended March 31, 2018, respectively.

2. Major items of gains on sales of securities were as follows:Year ended March 31,

2017

2018

2018
Millions ofMillions of yen

U.S. dollars

Domestic bonds.................................................................................................

¥11,175¥4,903$46

Domestic stocks and others...............................................................................

2,741

1,798

16

556

¥8,578$80

Foreign securities...............................................................................................

¥

3. Major items of losses on sales of securities were as follows:Year ended March 31,

2017

2018

2018
Millions ofMillions of yen

U.S. dollars

Domestic bonds.................................................................................................

¥ 441

¥ 391

$ 3

Domestic stocks and others...............................................................................

1,312

1,095

10

Foreign securities...............................................................................................

¥ 3,739¥ 3,421$ 32

4. Major items of losses on valuation of securities were as follows:Year ended March 31,

2017

2018

2018
Millions ofMillions of yen

U.S. dollars

Domestic stocks and others...............................................................................

¥—

¥ 0

$ 0

Foreign securities...............................................................................................

¥ 24

¥—

$—

28

FUKOKU MUTUAL LIFE INSURANCE COMPANY5. For the year ended March 31, 2017, in calculating the reversal of reserve for outstanding claims, a reversal of reserves foroutstanding claims reinsured of ¥11 million was deducted. In calculating the provision of policy reserves, a provision of reserves forpolicy reserves reinsured of ¥0 million was deducted.
For the year ended March 31, 2018, in calculating the reversal of reserve for outstanding claims, a provision of reserves foroutstanding claims reinsured of ¥7 million (US$71 thousand) was added. In calculating the provision of policy reserves, a provision ofreserves for policy reserves reinsured of ¥0 million (US$8 thousand) was deducted.

6. Major items of losses on trading securities were as follows:Year ended March 31,

2017

2018

2018
Millions ofMillions of yen

U.S. dollars

Interest, dividends and other income.................................................................

¥ 6,464¥ 5,647$ 53

Losses on valuation of trading securities...........................................................

¥(17,796)¥ (7,938)$ (74)

7. Losses on money held in trust for the year ended March 31, 2017 included valuation gains of ¥0 million.
Gains on money held in trust for the year ended March 31, 2018 included valuation gains of ¥0 million (US$0 thousand).
8. Gains on derivative instruments for the year ended March 31, 2017 included valuation gains of ¥2,224 million.
Losses on derivative instruments for the year ended March 31, 2018 included valuation losses of ¥454 million (US$4 million).

FUKOKU MUTUAL LIFE INSURANCE COMPANY

29

Report of Independent Auditors

30

FUKOKU MUTUAL LIFE INSURANCE COMPANY

FUKOKU MUTUAL LIFE INSURANCE COMPANY

31

Consolidated Financial Statements
Consolidated Balance Sheets
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
As of March 31, 2017 and 2018

As of March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Assets:Cash and deposits.............................................................................................

¥ 136,494¥ 157,703$ 1,484

Call loans...........................................................................................................

193,000

176,000

1,656

Monetary claims bought....................................................................................

753

443

4

Money held in trust...........................................................................................

29,78731,502296

Securities...........................................................................................................

7,130,780

7,203,196

67,801Loans.................................................................................................................

631,109597,285

5,622

Land..............................................................................................................

125,276

125,278

1,179

Buildings.......................................................................................................

88,21286,548814

Lease assets.................................................................................................

2,013

1,565

14

Construction in progress..............................................................................

1,140

2,052

19

Other tangible fixed assets...........................................................................

3,230

3,450

32

219,873

218,895

2,060

Software.......................................................................................................

11,316

24,643231

Goodwill........................................................................................................

801

37

0

Lease assets.................................................................................................

210

11,226

105

Other intangible fixed assets........................................................................

13,9972,148

20

26,32638,056358

Tangible fixed assets:

Intangible fixed assets:

Agency receivables............................................................................................

4

0

0

Reinsurance receivables....................................................................................

200

221

2

Other assets......................................................................................................

66,237

67,341

633

Net defined benefit asset..................................................................................

42

107

1

Deferred tax assets...........................................................................................

153

166

1

Allowance for possible loan losses....................................................................

(1,776)(2,049)(19)

Total assets.......................................................................................................

¥ 8,432,988¥ 8,488,872$ 79,902

32

FUKOKU MUTUAL LIFE INSURANCE COMPANYAs of March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Liabilities:
Policy reserves:
Reserve for outstanding claims....................................................................

¥

22,223¥22,166$

208

Policy reserve...............................................................................................

7,365,185

7,391,773

69,576

Reserve for dividends to policyholders.........................................................

50,92953,395502

Reserve for dividends to policyholders (subsidiary)......................................

598

539

5

7,438,936

7,467,875

70,292

Agency payables................................................................................................

98

70

0

Reinsurance payables........................................................................................

79

75

0

Subordinated bonds...........................................................................................

191,935

191,935

1,806

Other liabilities...................................................................................................

46,00659,509560

Net defined benefit liabilities.............................................................................

38,76734,019320

Reserve for price fluctuation.............................................................................

91,827

105,521

993

Deferred tax liabilities........................................................................................

16,233

8,875

83

Deferred tax liabilities for land revaluation.........................................................

14,265

14,241

134

Total liabilities..................................................................................................

7,838,150

7,882,122

74,191

Foundation funds...............................................................................................

10,00010,00094

Accumulated foundation funds redeemed........................................................

106,000

106,000

997

Net assets:

Reserve for revaluation......................................................................................

112

112

1

Consolidated surplus.........................................................................................

133,217

139,621

1,314

Total foundation funds, surplus and others..................................................

249,329

255,733

2,407

Net unrealized gains (losses) on available-for-sale securities, net of tax...........

342,470

344,585

3,243

Revaluation reserve for land, net of tax.............................................................

4,107

4,173

39

Foreign currency translation adjustment...........................................................

(433)

(377)

(3)

Accumulated remeasurements of defined benefit plans..................................

(9,240)(6,055)(56)

Total accumulated other comprehensive income.........................................

336,904

342,326

3,222

Non-controlling interests...................................................................................

8,603

8,690

81

Total net assets................................................................................................

594,837

606,750

5,711

Total liabilities and net assets.........................................................................

¥ 8,432,988¥ 8,488,872$ 79,902

FUKOKU MUTUAL LIFE INSURANCE COMPANY

33

Consolidated Statements of Operations
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
For the years ended March 31, 2017 and 2018Year ended March 31,

2017

2018

Millions of yen

Ordinary revenues:
Premium and other income...............................................................................
Investment income:Interest, dividends and other income...........................................................
Gains on money held in trust, net................................................................
Gains on sales of securities..........................................................................
Gains on derivative instruments, net............................................................
Reversal of allowance for possible loan losses............................................
Other investment income.............................................................................
Gains on separate accounts, net..................................................................
Other ordinary revenues....................................................................................
Total ordinary revenues..................................................................................
Ordinary expenses:
Claims and other payments:
Claims...........................................................................................................
Annuities.......................................................................................................
Benefits........................................................................................................
Surrenders....................................................................................................
Other payments............................................................................................
Provision of policy reserve and others:
Provision of policy reserve............................................................................
Provision of interest portion of reserve for dividends to policyholders........
Provision of interest portion of reserve for dividends topolicyholders (subsidiary)............................................................................
Investment expenses:
Interest expenses.........................................................................................
Losses on money held in trust, net..............................................................
Losses on trading securities, net..................................................................
Losses on sales of securities.......................................................................
Losses on valuation of securities.................................................................
Losses on derivative instruments, net.........................................................
Foreign exchange losses, net.......................................................................
Provision of allowance for possible loan losses...........................................
Depreciation of real estate for rent and other assets...................................
Other investment expenses.........................................................................
Operating expenses..........................................................................................
Other ordinary expenses...................................................................................
Total ordinary expenses..................................................................................
Ordinary profits................................................................................................

34

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2018
Millions of
U.S. dollars¥ 648,744¥ 597,178$5,621

158,645—
15,178
7,018
90
114
4,041
185,088
9,082
842,915

173,481
1,769
16,780
—
—
811
6,553
199,395
9,890
806,464

1,632
16
157
—
—
7
61
1,876
93
7,590

109,450
175,156
121,841
109,934
30,314
546,696

132,639
167,565
119,468
113,367
28,840561,881

1,248
1,577
1,124
1,067
271
5,288

77,58020

26,58812250
0077,601026,600

0
250

4,061
1,144
7,042
5,493
24
—
15,619
—
4,319
5,665
43,371
97,21821,161
786,049¥ 56,866

4,232
—
1,498
4,977
0
225
16,012
280
4,271
6,781
38,27898,72522,623
748,109¥ 58,354

39
—
14
46
0
2
150
2
40
63
360
929
212
7,041
$ 549

Year ended March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Extraordinary gains:
Gains on disposal of fixed assets.................................................................

¥

2

¥

288

$

2

State subsidy and others..............................................................................

195

—

—

Others...........................................................................................................

42

—

—

Total extraordinary gains................................................................................

240

288

2

Extraordinary losses:
Losses on disposal of fixed assets...............................................................

182

552

5

Impairment losses........................................................................................

71

141

1

Provision of reserve for price fluctuation......................................................

14,538

13,693128

Losses on advanced depreciation of real estate for tax purpose.................

—

3

0

14,792

14,390135

Provision of reserve for dividends to policyholders (subsidiary)................

419

336

3

Surplus before income taxes..........................................................................

41,89543,916

413

Current..........................................................................................................

14,40912,377

116

Deferred.......................................................................................................

(10,231)(9,722)(91)

Total extraordinary losses

Income taxes:

Total income taxes...........................................................................................

4,178

2,655

24

Net surplus.......................................................................................................

37,716

41,261388

Net surplus attributable to non-controlling interests...................................

236

100

0

Net surplus attributable to the parent company...........................................

¥ 37,479¥ 41,161$387

Consolidated Statements of Comprehensive Income
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
For the years ended March 31, 2017 and 2018Year ended March 31,

2017

2018

Millions of
U.S. dollars

Millions of yen

Net surplus........................................................................................................

2018¥ 37,716¥ 41,261$ 388

Net unrealized gains (losses) on available-for-sale securities, net of tax.....

(7,768)2,115

19

Revaluation reserve for land, net of tax........................................................

0

—

—

Foreign currency translation adjustments....................................................

(318)

56

0

Remeasurements of defined benefit plan, net of tax...................................

1,174

3,184

29

(6,912)

5,356

50

Comprehensive income attributable to the parent company.......................

30,922

46,518437

Comprehensive income attributable to non-controlling interests.................

(117)

100

0

¥ 30,804¥ 46,618$ 438

Other comprehensive income:Comprehensive income:

FUKOKU MUTUAL LIFE INSURANCE COMPANY

35

Consolidated Statements of Cash Flows
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
For the years ended March 31, 2017 and 2018Year ended March 31,

2017

2018

Millions of yen

Cash flows from operating activities:
Surplus before income taxes........................................................................
Depreciation of real estate for rent and other assets...................................
Depreciation.................................................................................................
Impairment losses........................................................................................
Amortization of goodwill...............................................................................
Increase (decrease) in reserve for outstanding claims.................................
Increase (decrease) in policy reserve...........................................................
Provision of interest portion of reserve for dividends to policyholders........
Provision of interest portion of reserve for dividends
to policyholders (subsidiary)......................................................................
Provision of reserve for dividends to policyholders (subsidiary)...................
Increase (decrease) in allowance for possible loan losses...........................
Increase (decrease) in net defined benefit liabilities.....................................
Increase (decrease) in reserve for price fluctuation......................................
Interest, dividends and other income...........................................................
Losses (gains) on securities, net..................................................................
Interest expenses.........................................................................................
Foreign exchange losses (gains), net...........................................................
Losses (gains) on tangible fixed assets, net.................................................
Decrease (increase) in agency receivable.....................................................
Decrease (increase) in reinsurance receivable.............................................
Decrease (increase) in other assets except frominvesting and financing activities................................................................
Increase (decrease) in agency payable.........................................................
Increase (decrease) in reinsurance payable..................................................
Increase (decrease) in other liabilities except frominvesting and financing activities................................................................
Others...........................................................................................................
Subtotal...................................................................................................
Interest, dividends and other income received............................................
Interest expenses paid.................................................................................
Dividends to policyholders paid....................................................................
Dividends to policyholders paid (subsidiary).................................................
Corporate income tax (paid) refunded..........................................................
Net cash provided by (used in) operating activities (a)............................
Cash flows from investing activities:
Net decrease (increase) in deposits.............................................................
Proceeds from sales and redemption of monetary claims bought...............
Increase in money held in trust....................................................................
Decrease in money held in trust...................................................................
Payments for purchase of securities............................................................
Proceeds from sales and redemption of securities......................................
Payments for additions to loans...................................................................
Proceeds from collections of loans..............................................................
Proceeds from and payments for settlements of derivatives, net...............
Others...........................................................................................................
Subtotal (b)..............................................................................................
(a + b)......................................................................................................

36

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2018
Millions of
U.S. dollars¥ 41,895
4,319
7,518
71
763
(780)
77,58020¥ 43,916
4,271
8,830
141
763
(56)
26,588
12

0
419
(74)
(293)
14,538(158,645)(12,532)
4,061
15,616
110
(1)
(56)

0
336
273
(390)
13,693(173,481)(18,402)
4,232
16,012
(63)
3
(20)

0
3
2
(3)
128
(1,632)
(173)
39
150
(0)
0
(0)

(851)
(382)
(66)

(1,875)
(28)
(4)

(17)
(0)
(0)

(581)
16,337
8,987
166,861(3,812)(34,695)(472)(9,832)
127,036

1,642
17,202(56,403)
180,718(4,491)(32,138)(395)(14,492)
72,798

15
161
(530)
1,701
(42)
(302)
(3)
(136)
685

74
60
—
56,742(944,430)
654,047(66,549)
123,722
1,311(5,309)(180,329)¥ (53,292)

225
271(8,800)8,800(916,556)
821,149(83,642)
108,673
22,930(5,897)(52,845)¥ 19,952

2
2
(82)
82
(8,627)
7,729
(787)
1,022
215
(55)
(497)
$ 187

$

413
40
83
1
7
(0)
250
0

Year ended March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Payments for purchase of tangible fixed assets...........................................

¥ (9,040)¥ (7,376)

Proceeds from sales of tangible fixed assets..............................................

11

551

$

(69)
5

Payments for purchase of intangible fixed assets........................................

(11,089)(6,479)(60)

Net cash provided by (used in) investing activities..................................

(200,447)(66,150)(622)

50,00030,000282

Cash flows from financing activities:
Proceeds from issuance of subordinated bonds..........................................
Redemption of subordinated bonds.............................................................

—(30,000)(282)

Redemption of foundation funds..................................................................

(20,000)——

Payment of interest on foundation funds.....................................................

(316)

(100)

(0)

Proceeds from share issuance to non-controlling interests.........................

2,215

—

—

Dividends paid to non-controlling interests..................................................

(85)

(13)

(0)

Payments for lease obligations.....................................................................

(501)(1,526)(14)

Net cash provided by (used in) financing activities..................................

31,312(1,641)(15)

Effect of exchange rate changes on cash and cash equivalents.................

(193)

(643)

(6)

Net increase (decrease) in cash and cash equivalents.................................

(42,292)

4,363

41

Cash and cash equivalents at the beginning of the fiscal year....................

370,458

328,236

3,089

Increase (decrease) in cash and cash equivalents resulting
from change in scope of consolidation......................................................

70

—

—

Cash and cash equivalents at the end of the fiscal year..............................

¥ 328,236¥ 332,599$ 3,130FUKOKU MUTUAL LIFE INSURANCE COMPANY

37

Consolidated Statements of Changes in Net Assets
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
For the years ended March 31, 2017 and 2018

Millions of yen
Foundation funds, surplus and others

For the year ended March 31, 2017
Balance at the beginning of the fiscal year������������������������������

Foundation funds

Accumulated
foundation funds
redeemed¥30,000¥ 86,000Reserve for revaluation

Consolidated surplus

Total foundation funds,
surplus and others¥151,251¥267,363(35,236)(35,236)¥112

Changes in the fiscal year
Additions to reserve for dividends to policyholders�������������
Addtions to accumulated foundation funds redeemed��������

20,00020,000

Payment of interest on foundation funds����������������������������

(316)

Net surplus attributable to the parent company
for the fiscal year���������������������������������������������������������������
Redemption of foundation funds�����������������������������������������

(316)

37,47937,479(20,000)(20,000)

Reversal of reserve for redemption of foundation funds�����

(20,000)(20,000)

Reversal of revaluation reserve for land, net of tax�������������

20

20

Change of scope of consolidation����������������������������������������

30

30

Change in ownership interest of parent due to transactions
with non-controlling interests��������������������������������������������

(12)

(12)

Net changes, excluding foundation funds, surplus
and others��������������������������������������������������������������������������
Total changes in the fiscal year������������������������������������������������

(20,000)

20,000—(18,033)(18,033)

Balance at the end of the fiscal year���������������������������������������

¥10,000¥106,000¥112¥133,217¥249,329

Millions of yen
Accumulated other comprehensive income

For the year ended March 31, 2017
Balance at the beginning of the fiscal year��������

Net unrealized
gains (losses) on
available-for-salesecurities,
net of tax

Revaluation
reserve for land,
net of tax¥349,884¥4,128Foreign currencytranslation
adjustments¥(115)

Accumulated
remeasurementsof defined
benefit plans

Total accumulated
othercomprehensive
incomeNon-controllinginterests

Total net assets¥(10,414)¥343,482¥6,578¥617,425

Changes in the fiscal year
Additions to reserve for dividends topolicyholders������������������������������������������������

(35,236)

Addtions to accumulated foundation funds
redeemed����������������������������������������������������

20,000

Payment of interest on foundation funds������

(316)

Net surplus attributable to the parent
company for the fiscal year�������������������������

37,479

Redemption of foundation funds�������������������

(20,000)

Reversal of reserve for redemption offoundation funds������������������������������������������

(20,000)

Reversal of revaluation reserve for land,
net of tax�����������������������������������������������������

20

Change of scope of consolidation������������������

30

Change in ownership interest of parent
due to transactions with non-controllinginterests�������������������������������������������������������

(12)

Net changes, excluding foundation funds,
surplus and others���������������������������������������

(7,413)

(20)

(318)

1,174

(6,578)2,024(4,553)

Total changes in the fiscal year��������������������������

(7,413)

(20)

(318)

1,174

(6,578)2,024(22,587)

Balance at the end of the fiscal year�����������������

¥342,470¥4,107¥(433)¥(9,240)¥336,904¥8,603¥594,837

38

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Millions of yen
Foundation funds, surplus and others

Foundation funds

Accumulated
foundation funds
redeemed¥10,000¥106,000

Consolidated surplus

Total foundation funds,
surplus and others¥133,217¥249,329

Additions to reserve for dividends to policyholders�������������

(34,592)(34,592)

Payment of interest on foundation funds����������������������������

(100)

(100)

Net surplus attributable to the parent company
for the fiscal year���������������������������������������������������������������

41,161

41,161

Reversal of revaluation reserve for land, net of tax�������������

(65)

(65)

For the year ended March 31, 2018
Balance at the beginning of the fiscal year������������������������������

Reserve for revaluation¥112

Changes in the fiscal year

Net changes, excluding foundation funds, surplus
and others��������������������������������������������������������������������������
Total changes in the fiscal year������������������������������������������������

—

—

—

6,403

6,403

Balance at the end of the fiscal year���������������������������������������

¥10,000¥106,000¥112¥139,621¥255,733

Millions of yen
Accumulated other comprehensive income

For the year ended March 31, 2018
Balance at the beginning of the fiscal year��������

Net unrealized
gains (losses) on
available-for-salesecurities,
net of tax

Revaluation
reserve for land,
net of tax¥342,470¥4,107

Foreign currencytranslation
adjustments¥(433)

Accumulated
remeasurementsof defined
benefit plans

Total accumulated
othercomprehensive
incomeNon-controllinginterests

Total net assets¥(9,240)¥336,904¥8,603¥594,837

Changes in the fiscal year
Additions to reserve for dividends topolicyholders������������������������������������������������

(34,592)

Payment of interest on foundation funds������

(100)

Net surplus attributable to the parent
company for the fiscal year�������������������������

41,161

Reversal of revaluation reserve for land,
net of tax�����������������������������������������������������

(65)

Net changes, excluding foundation funds,
surplus and others���������������������������������������

2,115

65

56

3,184

5,422

86

5,508

Total changes in the fiscal year��������������������������

2,115

65

56

3,184

5,422

86

11,912

Balance at the end of the fiscal year�����������������

¥344,585¥4,173¥(377)¥(6,055)¥342,326¥8,690¥606,750

FUKOKU MUTUAL LIFE INSURANCE COMPANY

39

Millions of U.S. dollars
Foundation funds, surplus and others

Foundation funds

Accumulated
foundation funds
redeemed

$94

$997

Consolidated surplus

Total foundation funds,
surplus and others$1,253$2,346

Additions to reserve for dividends to policyholders�������������

(325)

(325)

Payment of interest on foundation funds����������������������������

(0)

(0)

Net surplus attributable to the parent company
for the fiscal year���������������������������������������������������������������

387

387

Reversal of revaluation reserve for land, net of tax�������������

(0)

(0)

For the year ended March 31, 2018
Balance at the beginning of the fiscal year������������������������������

Reserve for revaluation$1

Changes in the fiscal year

Net changes, excluding foundation funds, surplus
and others��������������������������������������������������������������������������
Total changes in the fiscal year������������������������������������������������

—

—

—

60

60

Balance at the end of the fiscal year���������������������������������������

$94

$997

$1

$1,314$2,407

Millions of U.S. dollars
Accumulated other comprehensive income

For the year ended March 31, 2018
Balance at the beginning of the fiscal year��������

Net unrealized
gains (losses) on
available-for-salesecurities,
net of tax$3,223

Revaluation
reserve for land,
net of tax$38

Foreign currencytranslation
adjustments$(4)

Accumulated
remeasurementsof defined
benefit plans$(86)

Total accumulated
othercomprehensive
income$3,171

Non-controllinginterests$80

Total net assets$5,598Changes in the fiscal year
Additions to reserve for dividends topolicyholders������������������������������������������������

(325)

Payment of interest on foundation funds������

(0)

Net surplus attributable to the parent
company for the fiscal year�������������������������

387

Reversal of revaluation reserve for land,
net of tax�����������������������������������������������������

(0)

Net changes, excluding foundation funds,
surplus and others���������������������������������������

19

0

0

29

51

0

51

Total changes in the fiscal year��������������������������

19

0

0

29

51

0

112

Balance at the end of the fiscal year�����������������

$3,243

$39

$(3)

$(56)

$3,222$81$5,71140

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Notes to the Consolidated Financial Statements

I. Presentation of the Consolidated Financial
Statements
1. Basis of Presentation
The accompanying consolidated financial statements havebeen prepared from the accounts maintained by Fukoku MutualLife Insurance Company (the “Company”) and its consolidated
subsidiaries in accordance with the provisions set forth in
the Insurance Business Act of Japan and its related rules
and regulations and in conformity with accounting principles
generally accepted in Japan, which are different in certain
respects from accounting principles generally accepted incountries and jurisdictions other than Japan.
In addition, the notes to the consolidated financial
statements include information which is not required underaccounting principles generally accepted in Japan but ispresented herein as additional information.
Amounts of less than one million yen have been rounded
down. As a result, the totals do not add up.
The translations of yen amounts into U.S. dollar amounts
are included solely for the convenience of the reader and havebeen made, as a matter of arithmetical computation only, at therate of ¥106.24 = US$1.00, the effective rate of exchange at thebalance sheet date of March 31, 2018. The translations should
not be construed as representations that such yen amounts
have been or could in the future be, converted into U.S. dollars
at that or any other rates.

(2) Application of Equity method
Unconsolidated subsidiaries (such as Fukoku Business
Service Company Limited, etc.) are insignificant in theirimpact on net surplus attributable to the parent company
and consolidated surplus, and also immaterial as a whole,
therefore, application of equity method is not applied.
There are no affiliates for the year ended March 31,2017 and 2018.
(3) Fiscal Year of Consolidated Subsidiaries
Among the subsidiaries to be consolidated, fiscal year-end ofoverseas subsidiaries is December 31. For the preparation of
consolidated financial statements, financial statements as ofthat date are used and concerning any important transaction
taking place in between December 31 and the consolidated
closing date, necessary adjustments for consolidation are made.
(4) Amortization of Goodwill
Goodwill is amortized by the straight-line method over a
period of 10 years and in case of the immaterial amount of
goodwill, such amount is fully charged to operating expenses
when incurred.

2. Principles of Consolidation(1) Scope of Consolidation
Consolidated subsidiaries as of March 31, 2017 and 2018 arelisted below:
Fukoku Capital Management, Inc.
Fukokushinrai Life Insurance Co., Ltd.
Fukoku Information Systems Co., Ltd.
Fukoku Life International (U.K.) Ltd.
Fukoku Life International (America) Inc.
Fukoku Life Investments Singapore Pte. Ltd.
Major unconsolidated subsidiary is Fukoku Business
Service Company Limited.
Five subsidiaries are excluded from the scope of
consolidation, as each one of them is small in its total assets,
amount of sales, net surplus for the period and surplus andare sufficiently insignificant to reasonable judgement on theirimpact on the financial position and results of operation of
the Company’s group.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

41

II. Notes to the Consolidated Balance Sheets
1. (1) The valuation of securities, including bank deposits andmonetary claims bought which are equivalent to securities,
and securities managed as trust assets in money held in
trust, is as follows:i) Trading securities are stated at fair market value.
Costs of their sales are determined by the moving
average method.
ii)Held-to-maturity debt securities are stated at amortizedcost under the straight-line method, cost being
determined by the moving average method.
iii) Policy-reserve-matching bonds are stated atamortized cost under the straight-line method, cost
being determined by the moving average method in
accordance with “Temporary Treatment of Accounting
and Auditing Concerning Policy-reserve-matching Bonds
in the Insurance Industry” (Industry Audit Committee
Report No.21 issued by the Japanese Institute ofCertified Public Accountants on November 16, 2000).
iv) Investments in unconsolidated subsidiaries andaffiliates which are not accounted for under the equity
method are stated at cost, cost being determined by
the moving average method.
v) Available-for-sale securities with fair market value
are stated at fair market value based on the market
prices at the end of the fiscal year. Costs of their sales
are determined by the moving average method. Net
unrealized gains or losses on these available-for-salesecurities, net of taxes, are recorded as a separate
component of net assets.
Available-for-sale securities whose market value are
deemed extremely difficult to obtain are stated at cost,
cost being determined by the moving average method,
except for public and corporate bonds including foreign
bonds, of which the difference between acquisition costand face value is considered to be an adjustment ofinterest. Such bonds are stated at amortized cost under
the straight-line method, cost being determined by themoving average method.
(2) Derivative instruments are stated at fair market value.
(3) The Company revalued the land used in the operations basedon the Act for Revaluation of Land (Act No.34 promulgatedon March 31, 1998). The difference between fair value andbook value resulting from the revaluation, net of related
taxes, is recorded as revaluation reserve for land as aseparate component of net assets and the related tax isrecorded as deferred tax liabilities for land revaluation.
• Date of revaluation: March 31, 2002
• Method of revaluation as prescribed for in Article 3
Paragraph 3 of the said Act:
Calculation is based on the appraisal value for property tax
set forth in Article 2 item 3 of the Enforcement Ordinance

42

FUKOKU MUTUAL LIFE INSURANCE COMPANYof the Act for Revaluation of Land (Government OrdinanceNo.119 promulgated on March 31, 1998) and the roadrate set forth in Article 2 item 4 of the said Ordinance withcertain reasonable adjustments.
(4) D epreciation of the Company’s tangible fixed assets is
calculated by the following methods.
•T angible fixed assets (excluding lease assets):Decliningbalance method
However, buildings (excluding building attachments
and structures acquired on or before March 31, 2016)acquired on or after April 1, 1998 are depreciated using
Straight-line method.
• Lease assets related to finance lease transactions that do
not transfer ownership: Straight-line method over the leaseterm with no residual value.
Other tangible fixed assets acquired for ¥100,000 or
more but less than ¥200,000 are depreciated equally overthree years.
(5) A ssets and liabilities denominated in foreign currencies,
except for investments in unconsolidated subsidiaries
and affiliates, are translated into Japanese yen at theeffective exchange rate prevailing at the balance sheet date.
Investments in unconsolidated subsidiaries and affiliates aretranslated into Japanese yen at the exchange rate on thedate of acquisition.
(6) A llowance for possible loan losses is provided in accordancewith the Company’s standards of self-assessment and writeoffs and reserves on credit quality:i) F or the credits of borrowers who are legally bankrupt
such as being in the proceedings of bankruptcy or
civil rehabilitation (hereinafter called “legally bankrupt
borrowers”) and who are substantially bankrupt(hereinafter called “substantially bankrupt borrowers”), theCompany provides the remaining amount of credits after
the direct write-off described below and the deductions of
the amount expected to be collected through the disposalof collateral or the execution of guarantees.
ii) For the credits of borrowers who are not currently bankrupt
but have a high possibility of bankruptcy (hereinafter
called “not currently bankrupt borrowers”), the Company
provides the amounts deemed as necessary considering
the borrowers’ ability to pay, within the amounts after
deductions of the amount expected to be collected throughthe disposal of collateral or the execution of guarantees.
iii) F or the credits of borrowers other than the above, theCompany provides the amounts calculated by multiplying
the borrowers’ balance by the actual ratio of bad debt
losses on defaults during a certain past period.
All credits are assessed by the relevant departmentsin accordance with the Company’s standards of selfassessment on credit quality. The results of the assessment

are reviewed by the audit department, which is independentof business-related divisions. Subsequently, the allowancefor possible loan losses is provided based on the results ofthese assessments.
For the credits of legally bankrupt borrowers andsubstantially bankrupt borrowers, the amounts remaining
after deductions of collateral value or the amounts
collectible through the execution of guarantees are writtenoff directly from the borrowers’ balances as the estimateduncollectible amounts. The amount written-off as of March
31, 2017 and 2018 were ¥1 million and ¥1 million (US$10
thousand), respectively.
(7) Net defined benefit liabilities, supposed to be incurred
as of March 31, 2018, are presented for the employees’
retirement benefits after deducting pension plan assets fromretirement benefit obligations, based on estimated amounts
as of the balance sheet date.
The Company uses the following methods of accounting
in relation to retirement benefits:• Method for allocation of projected retirement benefits.....Benefit formula basis• Amortization period of actuarial gains and losses...10 years• Amortization period of prior service cost.................10 years(8) Reserve for price fluctuation is calculated in accordance with
Article 115 of the Insurance Business Act.
(9) As for the finance lease transactions where the Company
is a lessor, the lease fee is recorded in “Interest, dividends
and other income” at the time of receiving lease fee. The
corresponding cost of the lease transactions is recorded
in “Other investment expenses”, which is calculated bydeducting an amount equivalent to the interest allocated overthe lease term from the lease fee received.
(10) Hedge accounting is based on “Accounting Standards for
Financial Instruments” (ASBJ Statement No. 10, August 11,2006). The Company applies a fair value hedge accounting
as a hedge against the risk of foreign exchange fluctuationin relation to bonds denominated in foreign currencies andagainst the risk of price fluctuation in relation to domestic
stocks, and a designated hedge accounting (“Furiate
shori”) for foreign currency swaps as a hedge against therisk of foreign exchange fluctuation in relation to bonds
denominated in foreign currencies issued by the Company.
For assessing the effectiveness of hedge used, ratio
analysis of comparing the fluctuations in the fair value orcash flows of hedged items and hedging instruments ismainly applied.
(11) The Company accounts for consumption taxes by the
tax-exclusion method. The consumption taxes on certain
assets, which are not deductible from consumption taxes

withheld and that are stipulated to be deferred under the
Tax Act, are deferred as prepaid expenses and amortized
equally over five years. Consumption taxes other thandeferred consumption taxes are recognized as an expense
when incurred.
(12) P olicy reserve is based on Article 116 of the Insurance
Business Act, and the premium reserve is calculated by thefollowing method:i) In regard to the policies subject to the standard policy
reserve, the method as prescribed by the Commissionerof Financial Services Agency (Ministry of FinanceOrdinance No. 48, 1996) is applied.
ii) In regard to the policies not subject to the standard policy
reserve, the net level premium method is applied.
Based on the provision of Article 69, paragraph 5, of the
Enforcement Regulation of the Insurance Business Act,
the Company includes additional funded policy reserves
as follows.
Among individual annuity insurance policies with anassumed interest rate of 5.00% or higher, policies that havean annuity commencement date on or prior to March 31,2018 (excluding wife’s annuity insurance additional rider),the Company reduced the assumed interest rate to 1.00%
and funded additional policy reserves. At the end of the
fiscal year ended March 31, 2018, the balance of thesepolicy reserves was ¥73,222 million (US$689 million).
The Company also funded additional policy reserves
for certain individual annuity insurance policies, whole life
insurance policies that include distribution of surplus every
five years and highly advanced medical riders. At the end of
the fiscal year ended March 31, 2018, the balance of thesepolicy reserves was ¥5,628 million (US$52 million).
Of the above, the amount funded at the end of the
fiscal year ended March 31, 2018 was ¥13,574 million(US$127 million). As a result, compared to the amountwithout this additional funding, provision of policy reserve
increased ¥13,574 million (US$127 million), while ordinary
profit and surplus before income taxes decreased ¥13,574
million (US$127 million).
(13) Intangible fixed assets are amortized as follows:i) S oftware for internal use is amortized based on thestraight-line method over the estimated useful lives.
ii) L ease assets are amortized based on the straight-line
method over the lease term.
(14) O f the bonds corresponding to the sub-groups of individual
insurance and annuities which are set by insurance
types and investment policies, the bonds that are held
to match the duration of liabilities are classified as policyreserve-matching bonds by the Company in accordancewith “Temporary Treatment of Accounting and Auditing
Concerning Policy-reserve-matching Bonds in Insurance

FUKOKU MUTUAL LIFE INSURANCE COMPANY

43

Industry” (Industry Audit Committee Report No. 21 issued
by the Japanese Institute of Certified Public Accountants on
November 16, 2000).
2. Asset management of the general accounts other than theseparate accounts stipulated in Article 118 Paragraph 1 ofthe Insurance Business Act is conducted on the principle
of prudent and profitable investments by the Company,
considering public and social responsibilities of the insurance
business. Based on this policy, the Company allocates thefund, securing its liquidity, from the medium-to-long term
viewpoints. The Company is diversifying investments inassets such as foreign securities, stocks and real estates
within the acceptable range of risk in order to enhance
the profitability, although yen-denominated interest
bearing assets including debt securities such as Japanese
government bonds and loans are the cores of the portfolios
under the asset liability management. Derivatives aremainly used to hedge the market risk regarding spot-priced
assets and liabilities. Major financial instruments including
securities, loans and derivatives are exposed to market risk
and credit risk.
The Company manages its asset management risk by
establishing internal control systems including various rules
pursuant to the “Three Basic Rules related to Enterprise
Risk Management” established by the Board of Directors.
Specifically, the Company eliminates excessive risk deviatingfrom the basic principle and secures the safety of theassets by utilizing control functions of the Financial andInvestment Risk Management Department towards the asset
management sections, monitoring the status of market risk
and credit risk periodically on a daily or monthly basis. In
addition, the Company quantifies the market risk and credit
risk using value-at-risk (VaR) method in order to control thepossible maximum losses which may arise from the holding
assets within a certain range of risk buffers.
The carrying amounts, fair values and their relateddifferences of major financial assets and liabilities in thegeneral account were as follows:(1) Cash, deposits (excluding financial instruments treated as
securities based on “Accounting Standards for Financial
Instruments” (ASBJ Statement No.10)) and call loans:
The fair values of cash, deposits and call loans are based on
their book values since fair values approximate book values
due to their short maturities.
(2) Securities including deposits and monetary claims bought
which are treated as securities based on “AccountingStandards for Financial Instruments” (ASBJ Statement
No.10) and securities managed as trust assets in money heldin trust:
The fair values of marketable securities are measured at
the quoted market prices at the balance sheet date. The fair

44

FUKOKU MUTUAL LIFE INSURANCE COMPANY

values of other securities without the quoted market prices
are based on the prices reasonably calculated such as theprices offered by the information vendors or counterparty
financial institutions.
Investments in unconsolidated subsidiaries andaffiliates, unlisted stocks and investments in partnerships
whereby partnership assets consist of unlisted stocks
whose fair values are deemed extremely difficult to obtain,
are excluded from above securities. The carrying amounts
of investments in unconsolidated subsidiaries and affiliates,
unlisted stocks and investments in partnerships were ¥454
million, ¥6,109 million, and ¥17,418 million as of March 31,2017 and ¥454 million (US$4 million), ¥5,697 million (US$53
million), and ¥23,609 million (US$222 million) as of March 31,
2018, respectively.
(3) Loans and monetary claims bought treated as loans:
The fair values of policy loans are deemed to approximatebook values, considering estimated repayment period andinterest rate conditions since their repayment deadlines havenot been set up due to the characteristics that the loans arelimited to the amount of cash surrender values. Therefore,
the book values are used as the fair values of policy loans.
The fair values of floating interest rate loans among theordinary loans and monetary claims bought treated as loans
approximate the book values because the market interest
rates are reflected in future cash flows in a short period.
Therefore, the fair values of floating interest rate loans andmonetary claims bought treated as loans are based on theirbook values. The fair values of fixed interest rate loans
are measured by discounting the future cash flows to thepresent values.
The fair values of loans from legally bankrupt borrowers,
substantially bankrupt borrowers and not currently bankrupt
borrowers and monetary claims bought treated as loans
are computed by deducting the amount of the allowancefor possible loan losses from the book values before direct
write-offs.
(4) Subordinated bonds:
Subordinated bonds issued by the Company are stated at fairmarket values.
(5) Derivative instruments:i) The fair values of the futures and options traded at theexchange are measured at the settlement price of theexchange.
ii) T he fair values of forward contracts, options and swaps
traded over the counter are based on the quoted prices
offered by counterparty financial institutions.
iii) The fair values of foreign currency forward contracts are
determined based on the spot exchange rate and forward
contract rate.

As of March 31,

2017Millions of yen
Carrying amount

Cash and deposits:
Cash and deposits not treated as securities�����������������������
Total cash and deposits������������������������������������������������������
Call loans��������������������������������������������������������������������������������
Monetary claims bought:
Claims treated as loans������������������������������������������������������
Total monetary claims bought��������������������������������������������
Money held in trust:
Trading securities����������������������������������������������������������������
Total money held in trust����������������������������������������������������
Securities:
Trading securities����������������������������������������������������������������
Held-to-maturity debt securities�����������������������������������������
Policy-reserve-matching bonds�������������������������������������������
Available-for-sale securities������������������������������������������������
Total securities��������������������������������������������������������������������
Loans:
Policy loans�������������������������������������������������������������������������
Ordinary loans���������������������������������������������������������������������
Total loans���������������������������������������������������������������������������
Assets total�����������������������������������������������������������������������������
Subordinated bonds*1 ������������������������������������������������������������
Liabilities total�������������������������������������������������������������������������
Derivative instruments*2 :Hedge accounting not applied��������������������������������������������
Hedge accounting applied��������������������������������������������������
Total derivative instruments�����������������������������������������������

¥¥135,088
135,088
193,000

Fair value¥

135,088
135,088
193,000

Difference

¥

—
—
—

753
753

808
808

54
54

28,78728,78728,78728,787——179,246
1,235,331
2,067,059
3,552,958
7,034,595

179,246
1,475,486
2,314,447
3,552,958
7,522,139—
240,155
247,387—
487,543

62,625568,483
631,1098,023,334
191,935
191,935

62,625592,719
655,3448,535,168
199,659
199,659(0)24,23524,235
511,833
7,724
7,724

535
13,102
13,638535
13,102
13,638

—
—
—

¥

¥

As of March 31,

2018

2018

Millions of yen

Millions of U.S. dollars

Carrying amount

Cash and deposits:
Cash and deposits not treated as securities�����������������������
Total cash and deposits������������������������������������������������������
Call loans��������������������������������������������������������������������������������
Monetary claims bought:
Claims treated as loans������������������������������������������������������
Total monetary claims bought��������������������������������������������
Money held in trust:
Trading securities����������������������������������������������������������������
Total money held in trust����������������������������������������������������
Securities:
Trading securities����������������������������������������������������������������
Held-to-maturity debt securities�����������������������������������������
Policy-reserve-matching bonds�������������������������������������������
Available-for-sale securities������������������������������������������������
Total securities��������������������������������������������������������������������
Loans:
Policy loans�������������������������������������������������������������������������
Ordinary loans���������������������������������������������������������������������
Total loans���������������������������������������������������������������������������
Assets total�����������������������������������������������������������������������������
Subordinated bonds*1 ������������������������������������������������������������
Liabilities total�������������������������������������������������������������������������
Derivative instruments*2 :Hedge accounting not applied��������������������������������������������
Hedge accounting applied��������������������������������������������������
Total derivative instruments�����������������������������������������������

¥¥155,905
155,905
176,000

Fair value¥

155,905
155,905
176,000

Difference¥

Carrying amount

Fair value

Difference———$ 1,467
1,467
1,656

$ 1,467
1,467
1,656

$

—
—
—

443
443

474
474

30
30

4
4

4
4

0
0

30,50230,50230,50230,502

—
—

287
287

287
287

—
—

149,265
1,237,461
2,011,805
3,696,942
7,095,474

149,265
1,475,318
2,254,443
3,696,942
7,575,970—
237,857
242,638—
480,495

1,404
11,647
18,936
34,79866,787

1,404
13,886
21,22034,79871,309

—
2,238
2,283
—
4,522

60,732536,553597,285
8,055,612
191,935
191,935

60,732558,957
619,6908,558,543
200,774
200,774(0)22,404
22,404502,930
8,839
8,839

571
5,050
5,622
75,824
1,806
1,806

571
5,261
5,832
80,558
1,889
1,889

(0)
210
210
4,733
83
83

(534)
9,672
9,138

(534)
9,672
9,138

—
—
—

(5)
91
86

(5)
91
86

—
—
—

¥

¥

$

$

$

*1 The fair value of derivative instruments that are currency swaps under designated hedge accounting is included in the fair value of subordinated bonds because it is accounted for as an integral
part of the subordinated bonds that are the hedge items.
*2 Assets and liabilities generated by derivative instruments are offset and presented net. Net liabilities in total are presented in brackets.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

45

3. The Company holds investment and rental properties suchas office buildings in Tokyo and other areas. The carrying
amounts and the fair values of investment and rental
properties were ¥171,021 million and ¥282,301 million as ofMarch 31, 2017 and ¥171,415 million (US$1,613 million) and¥294,210 million (US$2,769 million) as of March 31, 2018,
respectively. The fair value is mainly based on the value
calculated by the Company in accordance with real estateappraisal standards which includes some adjustments using
the reference prices.
The amounts corresponding to asset retirement
obligations included in the carrying amount of investment andrental properties were ¥972 million and ¥839 million (US$7
million) as of March 31, 2017 and 2018, respectively.
4. The amounts of securities lent under lending agreements
were ¥38,863 million and ¥254,467 million (US$2,395 million)
as of March 31, 2017 and 2018, respectively.
5. The total amounts of credits to bankrupt borrowers,
delinquent loans, delinquent loans past 3 months or more
and restructured loans, which were included in loans, were¥1,124 million and ¥1,045 million (US$9 million) as of March
31, 2017 and 2018, respectively;i) The balances of credits to bankrupt borrowers were ¥239
million and ¥180 million (US$1 million) as of March 31,2017 and 2018, respectively.
ii) The balances of delinquent loans were ¥884 million and¥865 million (US$8 million) as of March 31, 2017 and 2018,
respectively.
iii) There were no balances of delinquent loans past 3 months
or more and restructured loans as of March 31, 2017 and2018, respectively.
The direct write-offs related to loans decreased credits
to bankrupt borrowers described above by ¥1 millionand ¥1 million (US$10 thousand) as of March 31, 2017 and2018, respectively.
Credits to bankrupt borrowers represent loans, excluding
the balances already written-off, which meet the conditionsprescribed in Article 96 Paragraph 1 item 3 and 4 of the
Enforcement Regulations of the Corporate Tax Act. Moreover,accrued interest on these loans is not recorded as income
after determining that principal of or interest on these loans isunlikely to be collected due to the significant delay in repaymentof principal or interest payment or for some other reasons.
Delinquent loans are credits which accrued interest
is not recorded as income due to the same reasons as
described above, and exclude credits to bankrupt borrowers
and loans for which interest payments have been suspended
and rescheduled to assist and support the borrowers in the
restructuring of their business.
Delinquent loans past 3 months or more are loans forwhich interest payments or repayments of principal aredelinquent for 3 months or more from the due date under

46

FUKOKU MUTUAL LIFE INSURANCE COMPANY

the terms of the related loan agreements, excluding thoseloans classified as credits to bankrupt borrowers anddelinquent loans.
Restructured loans are loans for which certain
concessions favorable to borrowers, such as interest
reduction or exemption, rescheduling of due date forrepayments of principal or interest payment, waiver of claim
or other terms, have been negotiated for the purpose of
assisting and supporting the borrowers in the restructuringof their business. This category excludes loans classified
as credits to bankrupt borrowers, delinquent loans anddelinquent loans past 3 months or more.
6. Accumulated depreciation of tangible fixed assets were¥159,372 million and ¥164,086 million (US$1,544 million) as
of March 31, 2017 and 2018, respectively.
7. Total assets in separate accounts provided for in Article
118 of the Insurance Business Act were ¥75,678 millionand ¥82,347 million (US$775 million) as of March 31, 2017and 2018, respectively. The amounts of separate accountliabilities were the same as separate account assets.
8. The total amounts of receivables from/payables tounconsolidated subsidiaries were ¥2,349 million and ¥117
million as of March 31, 2017 and ¥2,338 million (US$22
million) and ¥110 million (US$1 million) as of March 31,
2018, respectively.
9. D
 eferred tax assets and deferred tax liabilities as of March
31, 2017 were ¥124,388 million and ¥136,125 million,
respectively. Valuation allowance for deferred tax assets was¥4,343 million.
Major components of deferred tax assets were ¥74,052
million of policy reserves, ¥25,712 million of reserve for priceﬂuctuation and ¥16,085 million of net deﬁned beneﬁt liability
as of March 31, 2017.
Major component of deferred tax liabilities was ¥131,909
million of net unrealized gains on available-for-sale securities
as of March 31, 2017.
Deferred tax assets and deferred tax liabilities as ofMarch 31, 2018 were ¥133,323 million (US$1,254 million)and ¥137,309 million (US$1,292 million), respectively.
Valuation allowance for deferred tax assets was ¥4,723
million (US$44 million).
Major components of deferred tax assets were ¥80,174
million (US$754 million) of policy reserves, ¥29,546 million(US$278 million) of reserve for price fluctuation and ¥14,756
million (US$138 million) of net defined benefit liability as ofMarch 31, 2018.
Major component of deferred tax liabilities was ¥132,998
million (US$1,251 million) of net unrealized gains on availablefor-sale securities as of March 31, 2018.
The statutory tax rate and the actual effective tax rate

for the year ended March 31, 2018 were 28.2% and 6.0%,
respectively. The difference between the statutory tax rate

and the actual effective tax rate was attributable mainly to-24.8% of reserve for dividends to the policyholders.

10. C hanges in reserve for dividends to policyholders were as follows:Year ended March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Balance at the beginning of the fiscal year����������������������������������������������������������

¥50,368¥50,929$479

Transfer from surplus in the previous fiscal year�������������������������������������������������

35,236

34,592

325

Dividend payments to policyholders during the fiscal year���������������������������������

(34,695)(32,138)(302)

Increase in interest����������������������������������������������������������������������������������������������

20

12

0

Balance at the end of the fiscal year�������������������������������������������������������������������

¥50,929¥53,395$502

11. Changes in reserve for dividends to policyholders (Fukokushinrai Life Insurance Co., Ltd.) were as follows:Year ended March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Balance at the beginning of the fiscal year����������������������������������������������������������

¥650

¥598

$5

Dividend payments to policyholders during the fiscal year���������������������������������

(472)

(395)

(3)

Increase in interest����������������������������������������������������������������������������������������������

0

0

0

Provision for reserve for dividends to policyholders��������������������������������������������

419

336

3

Balance at the end of the fiscal year�������������������������������������������������������������������

¥598

¥539

$5

12. The amount of stocks of unconsolidated subsidiaries were¥454 million and ¥454 million (US$4 million) as of March 31,2017 and 2018, respectively.
13. Assets pledged as collateral as of March 31, 2017 were¥27,012 million of securities and ¥1,688 million of bankdeposits. Secured debts as of March 31, 2017, were
¥4,974 million.
Assets pledged as collateral as of March 31, 2018 were¥25,447 million (US$239 million) of securities and ¥1,378
million (US$12 million) of bank deposits. Secured debts as ofMarch 31, 2018, were ¥5,174 million (US$48 million).
14. Reserves for outstanding claims for the reinsurance
contracts provided in accordance with Article 71 Paragraph
1 of the Enforcement Regulation of the Insurance
Business Act (hereinafter called “reserve for outstanding
claims for ceded reinsurance”) were ¥5 million and ¥10
million (US$102 thousand) as of March 31, 2017 and2018, respectively.
Policy reserves for the reinsurance contracts
provided in accordance with Article 71 Paragraph 1 of the

Enforcement Regulation of the Insurance Business Act(hereinafter called “policy reserve for ceded reinsurance”)
were ¥53 million and ¥53 million (US$502 thousand) as ofMarch 31, 2017 and 2018, respectively.
15. There were unused commitment line agreements underwhich the Company is the lender of ¥500 million and¥2,490 million (US$23 million) as of March 31, 2017 and2018, respectively.
16. Repayments of subordinated bonds are subordinated toother obligations.
17. The future contribution to the Life Insurance Policyholders
Protection Corporation of Japan under Article 259 of the
Insurance Business Act was estimated at ¥11,474 millionand ¥11,039 million (US$103 million) as of March 31, 2017and 2018, respectively.
The contribution is recognized as operating expenses
when contributed.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

47

18. Matters Related to Employees’ Retirement Benefits(1) Overview of Employees’ Retirement Benefit Plan
As for a defined benefit plan for office-based employees, the Company and its consolidated subsidiaries have a defined benefit
corporate pension plan and retirement lump-sum payments. As for a defined contribution plan for these employees, the Company
also has a defined contribution pension plan.
As for a defined benefit plan for sales employees, the Company has retirement lump-sum payments.
The Company places a retirement benefit trust in relation to the retirement lump-sum grant plan for sales employees.

(2) Defined Benefit Plani) Reconciliation of beginning and end of balance of retirement benefit obligation

As of March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Retirement benefit obligation at the beginning of the fiscal year������������������������

¥85,285¥85,446$804

Service cost���������������������������������������������������������������������������������������������������������

3,610

3,548

33

Interest cost��������������������������������������������������������������������������������������������������������

510

511

4

Actuarial differences occurred during the fiscal year�������������������������������������������

656

1,232

11

Retirement benefit payments������������������������������������������������������������������������������

(4,591)(4,317)(40)

Others.�����������������������������������������������������������������������������������������������������������������

(25)

—

—

Retirement benefit obligation at the end of the fiscal year���������������������������������

¥85,446¥86,420$813ii) Reconciliation of beginning and end of balance of pension plan assets

As of March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Pension plan assets at the beginning of the fiscal year���������������������������������������

¥44,636

Expected return on pension plan assets�������������������������������������������������������������

671

732

6

Actuarial differences occurred during the fiscal year�������������������������������������������

57

3,386

31

¥46,721$439

Contributions by the employer����������������������������������������������������������������������������

2,757

2,750

25

Retirement benefit payments������������������������������������������������������������������������������

(1,401)(1,081)(10)

Others������������������������������������������������������������������������������������������������������������������

(0)

0

0

Pension plan assets at the end of the fiscal year������������������������������������������������

¥46,721¥52,509$494

48

FUKOKU MUTUAL LIFE INSURANCE COMPANY

iii) Reconciliation of retirement benefit obligation and pension plan assets with net defined benefit liabilities presented on the
consolidated balance sheets
As of March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

a. Funded plan retirement benefit obligation�������������������������������������������������������

¥73,926¥74,811$704

b. Pension plan assets�����������������������������������������������������������������������������������������

(46,721)(52,509)(494)

c. (a + b) ��������������������������������������������������������������������������������������������������������������

27,20522,302

209

d. Unfunded plan retirement benefit obligation���������������������������������������������������

11,51911,608109

e. Net amount of liabilities and assets presented on the consolidatedbalance sheet����������������������������������������������������������������������������������������������

38,72533,911319

f. Net defined benefit liabilities���������������������������������������������������������������������������

38,76734,019320

g. Net defined benefit assets������������������������������������������������������������������������������

(42)

(107)

(1)

h. Net amount of liabilities and assets presented on the consolidatedbalance sheet����������������������������������������������������������������������������������������������

¥38,725¥33,911$319iv) Breakdown of retirement benefit gains and losses

As of March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Service cost���������������������������������������������������������������������������������������������������������

¥3,610¥3,548Interest cost��������������������������������������������������������������������������������������������������������

510

511

4

Expected return on pension plan assets�������������������������������������������������������������

(671)

(732)

(6)

Amortization of actuarial differences�������������������������������������������������������������������

2,306

2,345

22

Amortization of prior service cost������������������������������������������������������������������������

(76)

(76)

(0)

Others������������������������������������������������������������������������������������������������������������������

0

(0)

(0)

Retirement benefit expenses related to defined benefit plan�����������������������������

¥5,680¥5,595$52v) Remeasurements of defined benefit plan
Remeasurements of defined benefit plan (before tax effects) comprised the following:

As of March 31,

2017

2018

¥1,7072018
Millions of
U.S. dollars

Millions of yen

Amortization of actuarial differences�������������������������������������������������������������������

$33¥4,499$42

Amortization of prior service cost������������������������������������������������������������������������

(76)

(76)

(0)

Total���������������������������������������������������������������������������������������������������������������������

¥1,631¥4,422$41vi) Accumulated remeasurements of defined benefit plan
Accumulated remeasurements of defined benefit plan (before tax effects) comprised the following:
As of March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Unrecognized actuarial differences���������������������������������������������������������������������

¥(13,156)¥(8,657)

Unrecognized prior service cost��������������������������������������������������������������������������

323

247

2

Total���������������������������������������������������������������������������������������������������������������������

¥(12,833)¥(8,410)

$(79)

$(81)

FUKOKU MUTUAL LIFE INSURANCE COMPANY

49vii) Breakdown of pension plan assets
The breakdown of asset categories as a percentage of total pension plan assets were as follows:

As of March 31,

2017

2018

Domestic stocks���������������������������������������������������������������������������������������������������������������������

46.0%

47.6%

Life insurance general account�����������������������������������������������������������������������������������������������

34.3%

33.0%

Foreign stocks������������������������������������������������������������������������������������������������������������������������

7.9%

7.8%

Domestic bonds���������������������������������������������������������������������������������������������������������������������

8.0%

7.5%

Foreign bonds�������������������������������������������������������������������������������������������������������������������������

2.7%

2.7%

Others�������������������������������������������������������������������������������������������������������������������������������������

1.1%

1.4%

Total����������������������������������������������������������������������������������������������������������������������������������������

100.0%

100.0%

Within the total of pension assets as of March 31, 2018, 38.0% of this amount is accounted for by the retirement benefit trust
established in relation to the retirement lump-sum payments plan for sales employees.

viii) Method for setting the expected long-term rate of return
To set the expected long-term rate of return on pension plan assets, the Company takes into account the present and future
allocation of pension plan assets, and the present and expected future long-term rate of return on a variety of assets that makes
up the pension assets.

ix) Underlying actuarial assumptions
Main underlying actuarial assumptions were as follows:

As of March 31,

2017

2018

0.6%

0.6%

Defined Benefit Plan���������������������������������������������������������������������������������������������������������

2.5%

2.5%

Retirement benefit trust����������������������������������������������������������������������������������������������������

0.0%

0.0%

Discount rate��������������������������������������������������������������������������������������������������������������������������
Expected long-term rate of return on pension plan assets(3) Defined Contribution Plan
The required contribution amounts by the Company and its consolidated subsidiaries to the defined contribution plan were ¥297
million and ¥318 million (US$3 million) as of March 31, 2017 and 2018, respectively.

III. Notes to the Consolidated Statements of Operations
1. The total amounts of revenues and expenses in connection with unconsolidated subsidiaries were ¥75 million and ¥2,202 million forthe year ended March 31, 2017 and ¥95 million (US$902 thousand) and ¥2,027 million (US$19 million) for the year ended March 31,
2018, respectively.
2. For the year ended March 31, 2017, in calculating the reversal of reserve for outstanding claims, a reversal of reserves foroutstanding claims reinsured of ¥9 million was deducted. In calculating the provision of policy reserves, a provision of reserves forpolicy reserves reinsured of ¥1 million was deducted.
For the year ended March 31, 2018, in calculating the reversal of reserve for outstanding claims, a provision of reserves foroutstanding claims reinsured of ¥5 million (US$50 thousand) was added. In calculating the provision of policy reserves, a reversal ofreserves for policy reserves reinsured of ¥0 million (US$2 thousand) was added.

50

FUKOKU MUTUAL LIFE INSURANCE COMPANY

IV. Notes to the Consolidated Statements of Comprehensive Income
1. Other Comprehensive Income
The reclassification adjustments and tax effect amounts related to other comprehensive income were as follows:i) Net unrealized gains (losses) on available-for-sale securities, net of tax

Year ended March 31,

2017

2018

Millions of yen

Amount incurred during the fiscal year���������������������������������������������������������������������

2018
Millions of
U.S. dollars¥(13,419)¥ 20,802$ 195

Reclassification adjustments������������������������������������������������������������������������������������

797(17,598)(165)

Before tax adjustments����������������������������������������������������������������������������������������

(12,621)

3,204

30

Tax effects������������������������������������������������������������������������������������������������������������

4,853(1,088)(10)

Net unrealized gains (losses) on available-for-sale securities, net of tax��������������

¥ (7,768)¥ 2,115$ 19ii) Revaluation reserve for land, net of tax

Year ended March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Amount incurred during the fiscal year���������������������������������������������������������������������

¥—

¥—

$—

Reclassification adjustments������������������������������������������������������������������������������������

—

—

—

Before tax adjustments����������������������������������������������������������������������������������������

—

—

—

Tax effects������������������������������������������������������������������������������������������������������������

0

—

—

Revaluation reserve for land, net of tax����������������������������������������������������������������

¥ 0

¥—

$—

iii) Foreign currency translation adjustments

Year ended March 31,

2017

2018

Millions of yen

Amount incurred during the fiscal year���������������������������������������������������������������������

¥ (318)2018
Millions of
U.S. dollars

¥56

$0

Reclassification adjustments������������������������������������������������������������������������������������

—

—

—

Before tax adjustments����������������������������������������������������������������������������������������

(318)

56

0

Tax effects������������������������������������������������������������������������������������������������������������

—

—

—

Foreign currency translation adjustments������������������������������������������������������������

¥ (318)¥56$0

FUKOKU MUTUAL LIFE INSURANCE COMPANY

51

iv) Remeasurements of defined benefit plans, net of tax

Year ended March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Amount incurred during the fiscal year���������������������������������������������������������������������

¥ (599)¥2,153$20

Reclassification adjustments������������������������������������������������������������������������������������

2,230

2,269

21

Before tax adjustments����������������������������������������������������������������������������������������

1,631

4,422

41

Tax effects������������������������������������������������������������������������������������������������������������

(456)(1,238)(11)

Remeasurements of defined benefit plans, net of tax�����������������������������������������

1,174

3,184

29

Total other comprehensive income��������������������������������������������������������������������������

¥ (6,912)¥5,356$50

V. Notes to the Consolidated Statements of Cash Flows
1. Cash and cash equivalents as of March 31, 2017 and 2018 consist of “Cash,” “Deposits in transfer account,” “Current deposits,”“Ordinary deposits,” “Notice deposits,” “Time deposits maturing within 3 months of the date of acquisition,” “Foreign currency
deposits maturing within 3 months of the date of acquisition,” “Negotiable certificate of deposits maturing within 3 months of thedate of acquisition,” “Call loans” and “Monetary claims bought maturing within 3 months of the date of acquisition.”

2. Reconciliations of cash and cash equivalents in the consolidated statements of cash flows to the consolidated balance sheet accounts
were as follows:Year ended March 31,

2017

2018

2018
Millions of
U.S. dollars

Millions of yen

Cash and deposits����������������������������������������������������������������������������������������������������

¥ 136,494¥157,703$1,484

Call loans������������������������������������������������������������������������������������������������������������������

193,000

176,000

1,656

Monetary claims bought.������������������������������������������������������������������������������������������

753

443

4

Time deposits maturing over 3 months of the date of acquisition���������������������������

(100)

(100)

(0)

Foreign currency deposits maturing over 3 months of the date ofacquisition���������������������������������������������������������������������������������������������������������������

(1,157)(1,003)(9)

Monetary claims bought maturing over 3 months of the date ofacquisition���������������������������������������������������������������������������������������������������������������

(753)

(443)

(4)

Cash and cash equivalents���������������������������������������������������������������������������������������

¥ 328,236¥332,599$3,13052

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Management’s Report on Internal Control over Financial Reporting

1. Matters relating to the basic framework of internal control over financial reporting
Yoshiteru Yoneyama, President of Fukoku Mutual Life Insurance Company (the Company), is responsible for the designand operation of internal control over financial reporting for the Company’s financial statements, namely, consolidatedbalance sheet and the related consolidated statements of operations, comprehensive income, cash flows, changes
in net assets and a summary of significant accounting policies and other explanatory information for the year ended
March 31, 2018, prepared in accordance with Article 110 Paragraph 2 of the Insurance Business Act. The Company
designs and operates its internal control over financial reporting in accordance with the basic framework of internal
control set forth in the Standards and Practice Standards for Management Assessment and Audit concerning Internal
Control Over Financial Reporting (Council Opinions) issued by the Business Accounting Council of the Financial Service
Agency of Japan.
Internal control aims at achieving the objectives to a reasonable extent with the organized and integrated function ofindividual components of internal control as a whole. Therefore, internal control over financial reporting cannot always
ensure the prevention or detection of misstatements in the presentation of financial reporting.
2. Matters relating to the scope of assessment, the basis date of assessment and the assessment procedures
The Company performed an assessment of internal control over financial reporting for its consolidated financial
statements as of the end of the fiscal year, March 31, 2018 in accordance with generally accepted assessment
standards in Japan for internal control over financial reporting.
In the assessment of internal control over financial reporting, the Company first assessed internal controls that havea material impact on overall consolidated financial reporting (company-level controls) and, based on the results, theCompany selected the business processes to be assessed. In assessing those business processes, the Company
analyzed selected business processes, identified a key control that would have a material impact on the reliabilityof financial reporting, and assessed the establishment and operation with regard to the key control. The Company
assessed the effectiveness of internal control by the aforementioned procedures.
For the Company and its consolidated subsidiaries, the Company determined the scope of assessment of internal
control over financial reporting from the perspective of their materiality to the reliability of financial reporting. The
materiality to the reliability of financial reporting is determined in light of their degree of quantitative and qualitative
impact. The Company rationally determined the scope of assessment of internal controls incorporated into businessprocesses (process-level controls) based on the results of assessment of company-level controls regarding theCompany and one consolidated subsidiary. Other than those indicated above, five consolidated subsidiaries were
determined to be immaterial from quantitative and qualitative perspectives. Consequently, they are excluded from thescope of assessment of company-level controls.
With respect to the scope of assessment of process-level controls, the locations or business units were selected indescending order of ordinary revenues (after elimination of inter-company transactions) in the previous fiscal year until
their combined amount reached about two-thirds of consolidated ordinary revenues. As a result, the Company was
selected as significant locations or business units. At selected significant locations and business units (the Company),business processes related to accounting items that were closely associated with the company's business objectives,
including securities, ordinary loans and policy reserves, as well as premium and other income and claims and otherpayments, which have a material impact on the calculation of policy reserves, were determined to be within the scopeof assessment. Furthermore, at selected significant locations and business units and any other locations and business
units, added to the scope of assessment were business processes relating to important accounting items that havea high possibility of material misstatements and involve estimates and judgments, and business processes relating tobusinesses or operations dealing with high-risk transactions.
3. Matters relating to the results of the assessment
As a result of performing the assessment, the Company concluded that the design and operation of internal control
over financial reporting for the Company were effective as of March 31, 2018.
4. Supplementary information
Not applicable
5. Other special information
Not applicable
			
			
			
			

May 18, 2018
Yoshiteru Yoneyama
President

Fukoku Mutual Life Insurance Company

FUKOKU MUTUAL LIFE INSURANCE COMPANY

53

Report of Independent Auditors

54

FUKOKU MUTUAL LIFE INSURANCE COMPANY

FUKOKU MUTUAL LIFE INSURANCE COMPANY

55

Corporate Organization

Domestic Offices (As of April 1, 2018)
Branch Offices
62
Field Offices
466

Secretarial Dept.
Strategic Planning Dept.
Compliance Control Dept.

Employees (As of March 31, 2018)
Office Staff
2,872
Sales Representatives 9,782

Corporate Risk Management Dept.
Credit Analysis Div.
Independent Auditors

Audit & Supervisory
Board

General Affairs Dept.
Personnel Dept.
Market Planning Dept.
Retail Management Dept.

Audit & Supervisory
Board Members' Office

Sales Administration Dept.
Market Developing Dept.
Strategic Market Promotion Dept.

Board of Representative
Members of Policyholders

Board of Directors

Pension Consulting Dept.
Customer Service Headquarters
Corporate Customer Service Dept.

Nomination Committee of
Candidates for
Representative Members

Secretariat for Nomination
Committee of Candidates for
Representative Members

Chief Actuary

Individual Customer Service Dept.
Underwriting and Medical Dept.

Human Resourse
Development
Headquarters

Claims Dept.
Policy Administration Dept.
Operation and System Planning Dept.

Board of Full-time Directors

Claim Inspection Div.
Securities Investment Dept.
Loans Dept.

Council

Separate Accounts Management Div.
Securities Administrative Dept.
Investment Planning Dept.
Real Estate Dept.
Accounting Dept.
Actuarial Dept.
Internal Auditing Dept.
Affiliated Business Dept.
Committee for Editing History of the Company
Branch Offices

FUKOKU MUTUAL LIFE INSURANCE COMPANY

57

Corporate Information

Directors, Audit & Supervisory
Board Members and Executive
Officers

Chairman of the Board

Audit & Supervisory Board Member (Standing)

Tomofumi Akiyama

Shinji Nakao

President and Chief Executive Officer

Executive Officer

Yoshiteru Yoneyama*

Osamu Suzuki

Deputy President and Executive Officer

Executive Officer

Katsumasa Furuya

Naoyuki Torii

Director and Senior Managing Executive Officer

Executive Officer

Toshihide Fujiwara

Chikashi Ichikawa

Director and Managing Executive Officer

Executive Officer

Yuuki Sakurai

Takeshi Oomori

Director and Managing Executive Officer

Executive Officer

Toshikatsu Hayashi

Chikao Arita

Director

Executive Officer

Kozo Isshiki**

Ichiro Yamada

Director

Executive Officer

Hiroto Yoshimura**

Takeshi Kondou

Director and Executive Officer

Executive Officer

Yasuyuki Kitamura

Naoki Sunamoto

Director and Executive Officer*Representative Director

Takehiko Watabe**External Directors***External Audit & Supervisory Board Member

Director and Executive Officer

Keiichi Kurota
Audit & Supervisory Board Member

Yoshizumi Nezu***
Audit & Supervisory Board Member

Yoshikazu Sashida***Audit & Supervisory Board Member

Kyohei Takahashi***
Audit & Supervisory Board Member (Standing)

Kei Yoshizawa

58

FUKOKU MUTUAL LIFE INSURANCE COMPANY(As of July 3, 2018)

Directory

Fukoku Mutual Life Insurance Company (head office)2-2, Uchisaiwaicho 2-chome, Chiyoda-ku, Tokyo 100-0011, Japan
Phone: 81-3-3508-1101
Facsimile: 81-3-3591-6446
Fukoku Life International (U.K.) Ltd.
3rd Floor, Baltic Exchange, 38 St. Mary Axe, London, EC3A 8EX, U.K.
Phone: 44-20-7283-1331
Facsimile: 44-20-7626-7096
Fukoku Life International (America) Inc.
Times Square Tower, 7 Times Square, 35th Floor, New York, NY 10036, U.S.A.
Phone: 1-212-221-7760
Facsimile: 1-212-221-7794
Fukoku Life Investments Singapore Pte. Ltd.
80 Robinson Road #16-04 Singapore 068898
Phone: 65-6220-8308
Facsimile: 65-6220-8736

Fukoku Life International (U.K.) Ltd.
From left: J. Doran, D. Hanafusa, T. Shintani,
K. Sato and T. Keevil

Fukoku Life International (America) Inc.
From left: T. Hirai, A. Chang, H. Oizumi,
S. Lester and M. Xu

Fukoku Life Investments Singapore Pte. Ltd.
From left: K. Kozuka, I. Chan, J. Nishimaki,
M. Wan and H. Itoh

FUKOKU MUTUAL LIFE INSURANCE COMPANY

59

▲ Tokyo Head Office▲ Osaka Fukoku Mutual Life Insurance Building▲ Sapporo Fukokuseimei Koshiyama Building

60

FUKOKU MUTUAL LIFE INSURANCE COMPANY

P-B10202