FY2016 Q4 Conference Call for Institutional Investors and Analysts
Q&A (Executive Summary)
Date:
Respondents:

May 15, 2017, 15:30-16:30 (JST)Hiroaki Kiyomiya, Managing Director, Member of the Board,Sony Financial Holdings Inc.
Yuji Oosato, Executive Officer, Sony Life Insurance Co., Ltd.
Takayuki Ishii, Managing Executive Officer, Sony Assurance Inc.
Sumio Mizoguchi, Senior Executive Officer, Sony Bank Inc.

Note: The original content has been revised, sorted and edited appropriately for ease of understanding.

Ahead of the Q&A, Mr. Kiyomiya made the following comments regarding Sony Life’s operating
performance.
 As page 42 of the presentation materials shows, in FY2016 Sony Life has made changes in its
numerous products, suspending sales and making premium revisions as part of managing
product profitability based on economic value.
 In Q4, the impact of these product revisions, combined with such factors as the favorable
acquisition new policies and interest rate increases, led to the acquisition of ¥14.1 billion in
new business value.
 In product revisions, a certain lead time exists between announcement and execution. This isdue in part to Sony Life’s consulting-based selling style, which involves meeting withcustomers multiple times to provide optimal protection, and because we believe certain
processes are needed to execute our selling style and customer-first business operations.
 Lifeplanner sales employees and independent agents make rational proposals from the productline up at the time of sales in line with customers’ needs. This approach builds trust withcustomers, which we believe helps increase corporate value over the medium to long term.
 In FY2017, we expect a revision in standard yields used for calculating policy reserves andsteady acquisition of new policies to put downward pressure on profit under statutory
accounting. However, we will work to steadily enhance corporate value through theaccumulation of new business value.
<Q&A>
Q1: [Sony Life]MCEV did not increase much between September 30 and December 31, 2016, which I believe wasdue to the impact of a decline in the lapse rate, but MCEV increased moving toward March 31,
2017. Of this rise, what was the impact of changes in insurance-related assumptions, such as1

interest rate changes, the effect of stock prices and the lapse rate? Also, looking at risk amount asof March 31, 2017, was the decrease in insurance risk compared with December 31, 2016, due toa fall in the lapse rate?
A: Reasons for changes from December 31, 2016: Changes in insurance-related assumptions mainly
include ¥11.3 billion from improvements in the mortality rate and ¥135.2 billion from the effect ineconomic assumptions. Of this amount, major factors were ¥75 billion from the rise of yen interest rate(parallel shift and changes in the shape of the yield curve) and ¥28 billion from fluctuations in stock
prices, exchange rates and volatility. The decrease in insurance risk was due to the rise in interest rates.
Q2: [Sony Life]
Please explain the assumptions behind the ¥4 billion improvement in expenses related to theprovision of policy reserves for minimum guarantees for variable life insurance shown on page 41of the presentation materials. How have the sales forecast and market factors improved?
A: As we expect the sales volume of variable life insurance to remain essentially flat year on year inFY2017, the impact of the sales volume of new policies is not incorporated into expenses related to theprovision of policy reserves for minimum guarantees for variable life insurance. Gains (losses) onhedges related to minimum guarantees for variable life insurance going from negative in FY2016 toreturn to neutral is forecast to have an impact of positive ¥7 billion, while factors including the revisionin standard yields related to variable life insurance are expected to have an impact of minus ¥3 billion.
These factors are included in the positive ¥4 billion in gains (losses) on minimum guarantees forvariable life insurance.
Q3: [Sony Life]Why did the company fall below its target for net income in FY2016?
A: In FY2016, no gain on sale of securities was recorded in Q4. We had expected to secure somedegree of profit based on progress through February 2017, but profit was lower than expected in March.
The first factor was an increase in the payment of insurance claims. The payment of insurance claims
was lower than we had forecast through February, but in March these payments were larger than we
had expected. The second factor was an increase in new policies. Because sales of long-term level
premium plan term life insurance were higher than we had expected due to the introduction of premium
revisions in April 2017, we incurred additional initial-period expenses for statutory accounting.
Additional Q: Do these two factors correspond to after-tax profit of around ¥4.4 billion?
A: On the basis of ordinary profit, they account for around ¥5 billion.
Q4: [Sony Life]Your forecast for net income in FY2017 is ¥42 billion. This amounts to a decrease of around ¥152billion compared with your FY2015 forecast of ¥57 billion. Are there factors in play behind thisdecrease other than the revision in standard yields as no other life insurance companies seem toexpect such decrease in profit? Don’t you expect to return to the profit levels of two years
previously?
A: The impact of the revision in standard yields is a major factor in performance compared with twoyears ago. We believe the impact of the decrease in interest rates was also a factor. Sony Life invests
mostly in ultralong-term bonds, and a positive spread was increasing two years ago, but we currently
expect this to be flat due to a decrease in yields on these bonds. With the impact of a revision instandard yields continuing, we do not expect any sudden rise in statutory profit from FY2018 onward.
Q5: [Sony Life]
Within statutory accounting profit, the impact of the revision in standard yields is ¥12 billion.
What products are particularly affected?
A: The impact on whole life insurance is large.
Additional Q: Wouldn’t premium revisions on whole life insurance improve statutory profit?
A: Revising premiums on whole life insurance would improve statutory profit temporarily, but Sony
Life manages profitability based on economic value. We have set the current insurance premiums basedon decisions that should contribute to growth over the medium to long term, taking an ample new
business margin and sales volumes into account.
Q6: [Sony Life]On page 41 of the presentation materials, of the factors causing the ¥12 billion in changes inordinary profit, approximately what is the impact of the revision in standard yields?
A: Most of the impact came from the revision in standard yields.
Q7: [Sony Life]You anticipate an increase in new policies in FY2017 as well. Is this because of the positive
recruiting of Lifeplanner sales employees or because price competitiveness is becoming apparent
due to the early introduction of premium revisions?
A: As sales of variable life insurance decreased, productivity of the Lifeplanner channel in FY2016
also declined, but not substantially. Going forward, we expect higher productivity and an increase in
the number of sales personnel to lead to an increase in the acquisition of new policies. In 2H of FY2016,
the life insurance premium revisions introduced in October led to a decrease in competitiveness in theindependent agent channel. From April 2017, competitors also introduced premium revisions so newpolicies from the independent agent channel should increase.

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Q8: [Sony Life]
What are the assumed interest rates for US dollar-denominated insurance?
A: 3% for US dollar-denominated whole life insurance and 2.75% for US dollar-denominatedendowments.
Additional Q: Do you plan to change your assumed interest rates on US dollar-denominatedwhole life insurance?
A: Not at this point.
Q9: [Sony Life]
What factors behind changes in profits have not been incorporated into your current
medium-term business plan? Have a decrease in interest rates and a revision in standard yields
been taken into account to some degree?
A: Our product portfolio is changing, due the impact of responding to the low interest rate environment.
As we explained at our corporate strategy meeting last fiscal year, our mid-term plan didn’t incorporate
these impacts because we expect the change in our pricing strategy at that time due to the revision instandard yields.
Q10: [SFH]
I would like to confirm the intent behind the changes in your dividend policy. As you expect little
increase in statutory profit in FY2017, do you forecast dividend per share of ¥55? You say thatyou also want to take profit based on economic value into consideration, leaving the dividend pershare at ¥55 for FY2017, but if economic value increases, is it possible that you will increase
dividends during the fiscal year? Profit based on US GAAP is two to three times the level ofstatutory profit. I believe profit based on US GAAP is near the level of profit based on economicvalue. Even so, do you plan to maintain the level of ¥55 based on statutory profit levels?
A: In FY2017, Sony Life expects the impact of the revision in standard yields and the accelerated
acquisition of new policies to put downward pressure on statutory profit. However, we expect profit
based on economic value to expand. While maintaining SFH’s past focus on stable dividends, weexpect to raise dividends that give more weight to increases in profit based on economic value, given
Sony Life’s increased management focus on profit based on economic value. If new policy acquisitionis higher than we are assuming for FY2017 and FY2018, this would cause a decrease on the basis ofstatutory accounting, but the accumulation of new business value would lead to higher profit based on
economic value. If this situation occurs, we would consider dividend increases.
Q11: [SFH]
Looking at page 34 of the presentation materials, if you plan to maintain a dividend payout ratio4

of 50% or more for the foreseeable future, when EPS exceeds ¥110 are you likely to increase
dividends regardless of MCEV levels?
A: If the acquisition of new policies outpaces our forecasts, this factor could put downward pressure on
statutory profit. Our dividend payout ratio might then exceed 50% or even 60%. By “foreseeablefuture,” we are talking about our forecast dividend payout ratio for a two-year period: FY2017 andFY2018.
Additional Q: Would dividends increase if new policies does not increase but statutory profit
rises?
A: This would be a departure from the target dividend payout ratio indicated in our mid-term dividend
policy. By “50% or more,” we are referring to estimates of 50% or more based on the Company’s
forecasts. We will make decisions on actual dividends by taking growth based on economic value into
consideration, as well.
Q12: [SFH]
What statutory profit KPIs are you attaching importance to? Profit based on US GAAP isfavorable, but statutory profit is lower than expected. Given the size of the gap with profit basedon economic value, won’t management concentrate on meeting statutory profit targets?
A: We will explain medium- to long-term KPIs at the corporate strategy meeting. In the past, forshareholder dividends we have focused on net income. However, although revision in standard yields
result in the acquisition of new policies making a positive contribution to profit based on economicvalue, it brings a strong trend putting downward pressure on profit under statutory accounting. For thisreason, as business expansion accelerates it is becoming increasingly difficult for Sony Life to express
growth based both on statutory profit and profit based on economic value. We have therefore realizedthat the importance of statutory profit needs to be reduced, so we have changed SFH’s dividend policy.

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