FUKOKU MUTUAL LIFE INSURANCE COMPANY
Annual Report 2011
Year Ended March 31, 2011

Tokyo Head OfficeOsaka Fukoku Mutual Life Insurance Building

Contents
Financial Highlights (Non-consolidated) .......................
Message from the President .........................................
Fukoku Life’s Management Philosophy ........................
Review of Operations (Non-consolidated)
Overview .....................................................................
Business Performance in FY2010 ..............................
Investment Performance in FY2010(General Account) .....................................................
Investment Policies for FY2011 .................................
Governance System ........................................................
Corporate Citizenship ......................................................
Non-consolidated Financial Statements ........................
Consolidated Financial Statements ..............................
Corporate Organization .................................................
Corporate Information ...................................................

16

FUKOKU MUTUAL LIFE INSURANCE COMPANY

1
2
3
4
5
7
8
9
10
12
32
53
54

Financial Highlights (Non-consolidated)2009
As of March 31,

Life insurance in force ........................................
Total assets .........................................................
Securities .......................................................
Loans .............................................................
Tangible fixed assets ....................................
Total liabilities .....................................................
Policy reserves ..............................................
Subordinated bonds ......................................
Total net assets ...................................................

2010

2011

2011
Millions of
U.S. dollars

Millions of yen¥48,555,655
5,514,454
3,596,377
1,238,205
250,065
5,393,901
5,221,451
38,870120,553¥47,457,381
5,613,104
3,800,984
1,220,945
279,476
5,401,158
5,225,501
37,406211,946¥46,297,750
5,675,214
3,778,639
1,143,863
284,670
5,480,612
5,216,576
35,214
194,601$556,797
68,25245,443
13,756
3,423
65,91262,736423
2,340

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

881,685646,726
166,730
879,52056,863

787,517623,778
147,754754,558
26,135

836,916
665,844
146,400
777,90941,524

10,065
8,007
1,760
9,355
499

Solvency margin ratio (%) ...................................
Employees ..........................................................

1,008.4
13,836

1,127.6
14,207

1,088.3
13,702——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=¥83.15, the rate of exchange on March 31, 2011.
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

The recent massive earthquake and subsequent tsunami caused
unprecedented damage to Japan’s eastern region. In response,
Fukoku Life made a united effort to visit customers in regions affected by the disaster and ensure that insurance payments weremade without delay.
In fiscal 2010, ended March 31, 2011, the Japanese economy in general showed signs of emerging from a lackluster
period, buoyed by a number of factors. These included a firmingof residential purchases by individuals, a moderate increase incorporate capital expenditures amid improvement in earnings,
and a recovery in overseas demand from the beginning of calendar 2011. Due to the Great East Japan Earthquake, however,
economy activity took a sharp downturn as production facilities
and distribution networks suffered major damage.
In the course of managing and executing our business, wehave always worked hard to ensure that our “Customer-Centric”
philosophy underpins all ideas and actions. Under the philosophy, the assumption is that
all employees treat customers as they themselves would like to be treated. This serves
as the starting point for our provision of services.
In the areas of insurance sales, during the year we launched an educational endowment insurance product with more savings benefits than previous products. The new
product addresses the needs of customers wishing to prepare efficiently for investment
in education. Going forward, we will step up efforts to broadly embrace the ideas anddemands of customers, and reflect them in our business activities.
With respect to asset management, we sought to maintain the safety and liquidityof customer assets entrusted to us, by concentrating on domestic public bonds while
reducing holdings of equities and other instruments. At the same time, we increased ourholdings of foreign public bonds in order to raise profitability.
During the period, we upgraded voluntary surplus reserves by establishing a an accumulated fund for price fluctuation. We also reinforced equity capital by bolstering internal
reserves, which entailed increasing the reserve for price fluctuation of securities and thecontingency reserve. In these ways, we worked hard to provide customers with peace ofmind.
As a company engaged in the highly public business of mutual life insurance basedon the spirit of mutual assistance, Fukoku Life adheres to its management philosophy of“to protect the interests of our policyholders.” Under this philosophy, all executives andemployees will continue implementing our “Customer-Centric” approach as we strive
to be a company that is rated the most highly by customers.

Yoshiteru Yoneyama
President

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FUKOKU MUTUAL LIFE INSURANCE COMPANY

Fukoku Life’s Management Philosophy

ValuesOur “Customer-Centric” Values
Possessing “Customer-Centric” values means creating and providing unique services 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”Values”
Code 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 of protecting the interestsof policyholders and contributing to society. In addition, we will provide a workplace that enables
personal fulﬁllment so that all executives and employees ﬁnd their work rewarding.
To protect the interests of ourpolicyholders

To contribute to society

Code of Conduct

Personal expression

Business Policies

A “Customer-Centric” code of conduct to be
reﬂected in the attitudes of all executives andemployees as they carry out their daily business.

1. Foster personnel with “Customer-Centric” values

To us, “Customer-Centric” values means:

2. Reinforce sales staff structure❖ Valuing teamwork❖ Deserving the trust of each and every customer❖ Being enthusiastic and proud of our work
❖ Possessing common sense❖ Continuing to highlight the importance of life
insurance❖ Overcoming any kind of difﬁculty❖ Aiming to create a bright and friendly work
environment

With the aim of providing customers with peace of mind,
foster confident and proud employees who have the ability toadopt the customer’s perspective.
With the aim of providing meticulous services to customers,
reinforce the structure under which sales personnel conduct
face-to-face sales.

3. Net increase in customers

With the aim of earning the trust of more and more customers, strengthen insurance product design, provision, andfollow-up services to meet customer needs.

4. Enhance business efficiency

With the aim of achieving stable growth, improve the efficiency of the Company’s wide range of business activities.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

3

Review of Operations (Non-consolidated)

Overview
Individual Insurance
The insurance needs of customers have become increasingly diverse over time. We endeavor to the satisfaction ofcustomers by designing and proposing policies to meet current needs, and offering comprehensive follow-up services.
In these ways, we attach importance to providing customers with continued peace of mind, and thus achieving a netincrease in the number of policyholders.
In addition to nursing care insurance, medical insurance,and life insurance, we provide a wide range of products andservices that meet the varied needs of our customers. We
are further expanding the scope of coverage in the nursing
care insurance sector and constantly reviewing our products
in various other insurance fields, in order to provide customers with optimum insurance that covers the various risks
they are exposed to in the course of their lives.
Sales Channels
Fukoku Life’s products are sold through two major channels:
its own salespeople and the offices of financial institutions.
Our nationwide sales network consists of 62 branches andaround 11,000 salespeople promoting insurance and annuities to individuals and companies. With the aid of dedicatedmobile computers, introduced to enhance the consulting
skills of sales staff when conducting face-to-face sales, wework hard to provide optimal products to customers. We
have also boosted our follow-up services provided after acustomer takes out a new policy. In alliance with Fukokushinrai Life Insurance Co., Ltd., a subsidiary, we sell our prod-

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FUKOKU MUTUAL LIFE INSURANCE COMPANY

ucts through financial institutions, mainly credit unions withclose ties to local communities.
At the end of the period under review, our products wewere being sold via 279 financial institution branches and1,859 other agency outlets. Both Fukoku Life and Fukokushinrai Life Insurance provide ongoing support for the insurance sales activities of their partner financial institutions.
We are also developing other sales channels for suchproducts as tuition insurance through venues that include
large shopping centers and the Internet.
Group Insurance
Fukoku Life’s group insurance system provides consulting
services for corporate welfare programs. We provide professional consulting services for the design of corporate retirement funds and pension plans. We also offer consulting
services for the transition from qualified retirement pensions
to defined-benefit pension plans and defined-contribution
pension plans.
We also make socially responsible investments (SRIs)
in companies that work proactively in areas of environmental
protection and social contribution.
Globalization
On July 1, 2011, Fukoku Life opened a representative officein Singapore, having obtained approvals from local authorities
in April. We already conduct asset management activities
in London and New York via subsidiaries, and now we haveaugmented those activities with a presence in Singapore,
which continues to advance as an international financial
center. The representative office will conduct research into
insurance and asset management markets in Asia, which is
enjoying significant, ongoing economic development.

Business Performance in FY2010
Life Insurance in Force
At fiscal year-end, life insurance in force, which comprises
individual life insurance, individual annuities, and group insurance, amounted to ¥46,297.7 billion, down 2.4% from ayear earlier. Within this amount, life insurance for individuals
declined 5.1%, to ¥27,075.0 billion, and individual annuities
edged down 0.2%, to ¥2,975.4 billion. By contrast, the yearend balance of life insurance in force for groups increased
1.8%, to ¥16,247.2 billion. Meanwhile, group annuities inforce (policy reserve) declined 1.8%, to ¥1,966.4 billion.
Annualized Premiums for New Policies andPolicies in ForceIn the year under review, annualized premiums for new policies edged down 0.8%, to ¥25.0 billion. Within this amount,individual insurance was up 0.6%, to ¥19.5 billion, andindividual annuities declined 5.7%, to ¥5.5 billion. Annualized
premiums from medical insurance and living benefit insurance fell 12.1%, to ¥7.6 billion.
Annualized premiums for policies in force slipped 1.7%,¥411.8 billion. Within this amount, individual insurance
decreased 3.0%, to ¥284.8 billion, but individual annuities increased 1.4%, to ¥126.9 billion. Annualized premiums frommedical insurance and living benefit insurance rose 1.0%, to¥101.8 billion.
Premium Income and Payments
In the year under review, premium and other income increased 6.7%, to ¥665.8 billion. This was due mainly toa rise in premium income in the group insurance field,

Life insurance in force

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

49.9

49.8
14.2

15.1

2.8

‘07

30.2

‘08

623.7

665.8

2.9

28.5

‘09

646.7
16.2

2.9

Performance of Fukoku Life Group (Fukoku Life and
Fukokushinrai Life Insurance)
The Fukoku Life Group, including Fukokushinrai Life Insurance, posted a 43.1%, or ¥22.9 billion, increase in annualized
premiums for new policies, to ¥76.1 billion, owing mainly
due to healthy sales of fixed-amount annuities by Fukokushinrai Life Insurance. Within this amount, however, annualized
premiums from medical insurance and living benefit insurance declined 12.4%, or ¥1.0 billion, to ¥7.7 billion. This wasdue to a retreat in sales following a period of robust sales of
new products in the previous fiscal year.
Annualized premiums for policies in force increased
9.0%, or ¥42.4 billion, to ¥511.4 billion. Annualized premiums from medical insurance and living benefit insurance
edged up 0.9%, or ¥0.9 billion, to ¥103.5 billion.
The total value of premium and other income jumped
31.6%, or ¥290.7 billion, to ¥1,210.8 billion. Individual insurance and annuities in force generated from sales via branches of financial institutions jumped 88.1%, or ¥248.7 billion, to¥531.1 billion. This was due to Fukokushinrai Life Insurance’s
focus on sales of fixed-amount annuities.
Assets, Liabilities, and Net Assets
The outstanding balance of non-consolidated total assets,
including separate accounts, increased 1.4%, or ¥62.1 billion,to ¥5,675.2 billion. General account assets, which constitute
98.6% of this total, rose 1.4%, to ¥5,594.5 billion. Total liabilities increased 1.5%, or ¥79.4 billion, to ¥6,480.6 billion. Net
assets at fiscal year-end amounted to ¥194.6 billion, down
8.2% from a year earlier.
On a consolidated basis, total assets rose 9.6%, to¥6,670.3 billion, and net assets fell 7.8%, to ¥197.6 billion.

736.4

46.2
15.9

2.9

31.7

721.9

47.4
15.3

2.9

32.8

FY200648.5

although premium income in the individual field remained
mostly unchanged year-on-year. Claims and other payments
increased 8.8%, to ¥614.0 billion, due to a rise in benefit
payments for group annuity insurance.

With respect to our estimates for insurance payouts
associated with the recent earthquake, we increased areserve for outstanding claims, which was accounted forin the fiscal year ended March 31, 2011.

27.0

‘10

FY2006

‘07

‘08

‘09

‘10

Group insurance
Individual annuities
Individual life insurance

FUKOKU MUTUAL LIFE INSURANCE COMPANY

5

Review of Operations (Non-consolidated)

In the year under review, the Company increased its
contingency reserve by ¥0.4 billion, to ¥146.0 billion, and its
reserve for price ﬂuctuation of securities by ¥6.9 billion, to¥33.4 billion.
Solvency Margin
Fukoku Life’s solvency margin ratio at fiscal year-end was
1,088.3%, down 39.3 points year-on-year. The main factors
were insurance payouts associated with the earthquake anda decline in unrealized gains on securities due to falling stock
prices during the period. Nevertheless, the Company’s solvency margin far exceeds 200%, the level set as an indicator of financial soundness for life insurance companies, andclearly illustrates our ability to meet a high level of payments.
In accordance with Cabinet Office Ordinance No. 23 of2010 and Financial Services Agency Public Notice No. 48
of 2010, part of the calculation standard for the solvency
margin gross amount and the total amount of risk has beenchanged (tightening of margin calculations, tightening andrefining of risk measurements, etc.). These changes areapplied from the fiscal year ending March 31, 2012. We are
estimating the new solvency margin ratio to 668.4% as ofMarch 31, 2012.
We will continue making every effort to maintain a highsolvency margin ratio as one indicator of the added peace ofmind we offer our customers.
Ratings
Fukoku Life relies on four neutral rating organizations toprovide an objective assessment of the Company’s ability
to meet insurance payments. As of September 1, 2011, we
have received ratings of AA- from Rating and Investment
Information, A- from Standard & Poor’s, A from Fitch Ratings, and A2 from Moody’s. Despite global financial crises in
the autumn of 2008 and thereafter, these ratings have notchanged from year to year. Going forward, we will continue
striving to maintain and further improve our high financial ratings.

Strengthening Our Capital Base
Fukoku Life is constantly bolstering its internal reserves inorder to reinforce its operational foundation. We place particular emphasis on reinforcing the contingency reserve andthe reserve for price ﬂuctuation of securities. The contingency reserve is a legal reserve set up in preparation for futurerisks, and the reserve for price ﬂuctuation covers potential
future losses on major assets subject to price ﬂuctuation
risks. The Company regards both reserves as part of its equity capital.

Total assets

Net assets

Solvency margin ratio(¥ billions)(¥ billions)

(%)

395.2

1,228.8

5,893.0

5,725.2

5,514.4

5,613.1

5,675.2

1,146.9

1,127.6
1,008.4

1,088.3

246.9
211.9

194.6

120.5

FY2006

6

‘07

‘08

‘09

‘10

FY2006

FUKOKU MUTUAL LIFE INSURANCE COMPANY

‘07

‘08

‘09

‘10

FY2006

‘07

‘08

‘09

‘10

Investment Performance in FY2010 (General Account)
Overview
At the beginning of fiscal 2010, ended March 31, 2011, Japanese economy continued showing signs of a turnaround.
From autumn onwards, however, the economy stalled due toa slowdown in overseas economies. Although those economies subsequently recovered toward the end of fiscal year,
which provided a boost to the domestic economy, the Great
East Japan Earthquake in March sparked a sharp deceleration in the Japanese economy. Despite some remaining
uncertainty stemming from fiscal problems in peripheral
European nations, financial and capital markets were generally stable at the end of fiscal year.
Against this backdrop, Fukoku Life, seeking to build aportfolio that can respond swiftly to changing conditions,adopted medium- and long-term perspectives in allocating assets while preserving asset liquidity. Specifically, we
maintained our emphasis on yen-denominated assets, suchas public bonds and debt, while at the same time undertaking diversified investments in foreign securities, domestic
equities, real estate, and other areas in order to boost profitability.
At fiscal year-end, total general account assets stood at¥5,594.5 billion, up ¥75.0 billion from a year earlier.
Investment income from general accounts increased
9.8%, to ¥146.4 billion. Interest, dividends and other income,the main components of investment income, rose 1.1%, or¥1.2 billion, to ¥111.9 billion. Meanwhile, interest and dividend income, including income on trading securities, rose
4.9%, or ¥5.4 billion, to ¥118.7 billion, due to an increase inholdings of foreign public bonds. In addition, gains on salesof securities jumped 38.2%, or ¥8.4 billion, to ¥30.4 billion,

due mainly to increased sales of domestic public bonds andstocks. We also posted ¥3.3 billion in gains from derivative
instruments, mainly hedge-related income aimed at addressing yen appreciation risk.
Investment expenses declined 33.0%, to ¥47.0 billion.
Major factors were a 50.8% fall in losses on sales of securities, to ¥20.4 billion, centering on foreign securities. We also
posted ¥5.0 billion in losses from trading securities. This wasdue to losses on foreign public bonds stemming from risingoverseas interest rates and the yen’s appreciation.
As a result, investment income, net of investment
expenses, amounted to ¥99.3 billion, up 57.5%, or ¥36.2 billion, from the previous fiscal year.
Bonds:In the year under review, we focused on domestic publicbonds from an ALM perspective, while reducing the balanceof equities, which are risk-based assets. At the same time,
we sought to increase profitability by raising our holdings offoreign public bonds while closely monitoring interest rates
and foreign exchange trends. As a result, the Company’s
bond portfolio at fiscal year-end stood at ¥2,430.6 billion,
down 5.3%, or ¥135.3 billion, from a year earlier.
Stocks:Our year-end holdings of domestic equities fell 25.5%, or¥120.5 billion, to ¥352.6 billion. This was due to a reductionin the balance of stocks aimed at lowering risk and raisingprofitability, as well as a decline in unrealized gains stemming from falling equity prices. Accordingly, the proportion ofstocks in general account assets fell to the 6.3%.

Breakdown of general account assets(¥ billions)

Others:197.2 (3.5%)

General account assets(¥ billions)

5,763.9

5,610.5

5,402.9

5,519.4

5,594.5

Ordinary loans:
1,072.3 (19.2%)

Real estate:281.2 (5.0%)
Cash and deposits, and others:
272.3 (4.9%) (Note)
Other securities:
54.3 (1.0%)
Foreign securities:
862.0 (15.4%)

Loans:
1,143.8(20.4%)

Policy loans:
71.4 (1.3%)

Securities:
3,699.7 (66.1%)

Stocks:352.6 (6.3%)

Bonds:
2,430.6 (43.4%)

Total: ¥5,594.5 billion
Note: It is including cash and deposits, call loans, monetaryclaims bought and money held in trust
FY2006

‘07

‘08

‘09

‘10

FUKOKU MUTUAL LIFE INSURANCE COMPANY

7

to corporations. As a result, the fiscal year-end balance ofoutstanding loans slipped 6.3%, or ¥77.0 billion, to ¥1,143.8
billion.

Foreign Securities:
Our holdings of foreign securities increased due mainly to arise in foreign public bonds. As a result, the Company’s holdings of foreign securities, including equity holdings, grew
38.6%, or ¥240.0 billion, to ¥862.0 billion.

Real Estate:
The year-end balance of the Company’s real estate holdingsrose 2.0%, or ¥5.4 billion, to ¥281.2 billion, mainly reflecting
the Osaka Fukoku Mutual Life Insurance Building reconstruction project, which has been completed in October 2010.

Loans:
During the period, there was a decline in loans, especially

Bonds

StocksForeign securities

Loans

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

2,431.1 2,444.6 2,468.8

2,565.9

2,430.6

862.0

801.1
709.9

1,266.2 1,231.9 1,238.2
1,220.9

757.4

601.9
574.6

1,143.8

622.0

275.8

281.2

‘09

‘10

246.2
201.4

201.8

473.2
418.8
352.6

FY2006 ‘07

‘08

‘09

‘10

FY2006 ‘07

‘08

‘09

‘10

FY2006 ‘07

‘08

‘09

‘10

FY2006 ‘07

‘08

‘09

‘10

FY2006 ‘07‘08

Investment Policies for FY2011
Investment Environment
In the fiscal year ending March 31, 2012, we expect the Japanese economy to continue languishing initially, due to theGreat East Japan Earthquake and other factors. In the summer
months and thereafter, however, we expect the economy toturn upwards as corporate results return to stability, despite theweight of restrictions on electricity supply. In the latter half ofthe year, we forecast an increase in the economic growth rate,
boosted by full-scale reconstruction-related demand.
Bonds:
Fukoku Life’s policy going forward is to increase its holdingsof domestic public bonds in order to maintain long-term asset
management stability. From the ALM perspective, moreover,
we will continue emphasizing bonds with longer-term durations.
Stocks:Regarding stocks, our policy is to continue decreasing our holdings of domestic equities, with the aim of limiting price fluctuation risk.
Foreign Securities:
Our policy is to increase our holdings of foreign public bonds
while deploying hedges and limiting interest rate fluctuation

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FUKOKU MUTUAL LIFE INSURANCE COMPANY

In the financial and securities markets, we expect stock
prices to trend upwards after a period of stagnation stemmingfrom weak corporate results related to the earthquake. We also
expect long-term interest rates to remain low thanks to strong
investment sentiment among institutional investors. However,
we recognize the possibility that interest rates may increase,
due to concerns of fiscal deterioration associated with procurement of funds for post-disaster reconstruction.
risk and currency risk. With respect to investment trust funds,
we will continue investing in public bonds issued by emerging
nations, centering on Asia.

Loans:
With respect to financing, our policy is to limit new loans andreduce the balance of loans outstanding, due to falling interest
rates and profitability stemming from declining structural demand for funds.
Real Estate:
While maintaining real estate holdings, which center on business-use office buildings, at the current level, we will work to
improve the profitability of existing properties.

Governance System

As a mutual life insurance company, Fukoku Life is engaged
in the highly public business of protecting policyholders’rights. Therefore, we are committed to establishing a management system that ensures the soundness of operations,and to enhancing management measures, including our risk
management system and compliance measures. In addition,
we employ our internal control systems 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 execution functions, with the Board of Directors fulfilling decision-making
and supervisory functions. We are striving to strengthen internal controls through the activities of various committees,
including the Risk Management Committee and the Compliance Committee, which are under the direct supervision of
the Board of Directors.

Compliance System
As members of the community, all executives and employees undergo ongoing training in compliance-related matters
so that they not only observe laws and regulations, but also
comply with protocols and social conventions. To this end, as
well as improving and reinforcing the compliance system, wehold regular hands-on training programs.
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 make constant improvements and work to rectify thesituation in order to prevent a recurrence.
The Compliance Committee, which is chaired by the
President, is mandated by the Board of Directors to promotecompliance-related activities. The Chief Compliance Officer
and Compliance Officers stationed at our Head Office ensure
the constant monitoring of compliance.

Enhancement of Internal Control System
The Company’s Board of Directors has set the terms for thecreation of a system of internal controls to ensure the soundness of operations. We are working to enhance the efficiency of operations, strengthen risk management, and promotecompliance based on the core policies of our internal control
system.
Risk Management System
We must enhance financial soundness by addressing thevarious risks we face in order to be able to meet customers’
expectations over the long term, while maintaining their policies. We are working across the entire company to improve
the risk management system in an initiative that includes thefull involvement of top management.
The Risk Management Committee manages risk comprehensively in accordance with core policies set by the
Board of Directors. We also have five dedicated committees,
each providing expert risk management in its own specificrisk category: underwriting risk, asset management risk (covering market-related risk, credit risk, and real estate investment risk), liquidity risk, administrative risk, system risk, andother risk.
Each of these committees is chaired by a Company
director, thus ensuring efficacy and restraint with respect tomanaging its respective risk type. We also have a system
in which management teams themselves take the initiativein implementing risk management. In addition, the internal
auditing department monitors the effective operation of therisk management system.

Protection of Personal Information
As an insurance company that is trusted by its customers,
Fukoku Life takes great care in the handling of personal information. We ensure compliance with the Personal Information Protection Law enacted in Japan in April 2005, as well as
related laws and guidelines. The appropriate management of
personal information is also governed by the Company’s own
privacy policy.

Board of Representative Members of Policyholders

FUKOKU MUTUAL LIFE INSURANCE COMPANY

9Corporate Citizenship

Contributions to Society

Charity concert

Visiting concert©Marty Sohl/Metropolitan Opera

10

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Fukoku Life engages in a variety of activities aimed at building a better society in line with the management philosophyof “contributing to society,” which it has embraced since its
foundation.

Fukoku Life Concerts
Fukoku Life holds two types of concerts throughout the country: Visiting
Concerts and Charity Concerts. Visiting Concerts give children attending
schools for the disabled and disabled people living in institutions who cannot
easily get the opportunity to hear performances of classical music in concert
halls. Charity Concerts are held at concert halls as part of the Company’scommitment to fostering community welfare.
A Visiting Concert is held after a Charity Concert has been held. Musicians who performed at the Charity Concert visit a local welfare facility
where they play music and improvise as necessary to create an enjoyable
musical occasion for residents. Since 1993, the Company has held 206 Charity Concerts. Visiting Concerts, which were introduced in 2003, have been
held at a total of 157 welfare facilities.
At Charity Concerts, members of the audience are asked to makedonations, which are given to local welfare groups, and goods made by thedisabled are sold from stalls in the hall foyer.
Other Activities
We plan to attract universities and corporations to the new Osaka Fukoku
Mutual Life Insurance Building, completed in 2010, to provide information ofinterest related to culture and health to local communities.
The Company is a proud sponsor of the Pink Ribbon Campaign, which
promotes the importance of the early detection, diagnosis, and treatment ofbreast cancer.
Together with Shochiku Co., Ltd., which is involved with such entertainment business as Japanese Kabuki and films, Fukoku Life is a sponsor of theMetropolitan Opera: Live in High Definition series of screenings, which givemembers of the general public the opportunity to see some of the finest
opera performances in the world.

Flora Preservation
Recently in Japan, there has been an increase in forests left to grow unchecked due to the lack of people willing to take over forestry businesses.
One particular problem is uncontrolled groves of the vigorously growing
Moso bamboo, which not only invades forests, but also takes over farmland
and causes landslides due to the shallowness of their roots. This bamboo
problem is even found on land owned by the Company in Shizuoka Prefecture. Fukoku Life has set up a forest regeneration project to tackle this problem. The aim of the project is to not only assist forest regeneration by felling
bamboo groves, but to also return some bamboo groves to a healthy state.
Since 2006, Fukoku Life’s executives and employees have taken part in the
project. In the year under review, 308 executives, employees and their family members volunteered their time to take part in these activities.
Other Activities
Fukoku Life provides space and sales staff to support a mobile bakery business operated by disabled people. Our employees also participate in various
other initiatives, including neighborhood cleanup campaigns and collectionsof PET bottle lids. In addition, we continue to provide support aimed at
swiftly restoring communities affected by the Great East Japan Earthquake.

Communicating with Societies

Fukoku Life engages in advertising activities aimed at raising awareness of its operations. We are also upgrading ourcorporate communications to help more and more stakeholders understand the nature of our business.
Alliance with Sanrio
The Sanrio character Hello Kitty is famous all over the world. Fukoku Life
uses Hello Kitty in posters and pamphlets, and sponsors the “Sanrio Character Boat Ride,” one of the many attractions in the Sanrio Puroland indoor
theme park.

©1976,2011 SANRIO CO.,LTD. APPROVAL No. G521113

Providing Information
Fukoku Life publishes a variety of materials for its stakeholders. Publications
that provide information on the Company’s business activities include theJapanese-language magazine, “Disclosure” (and abridged versions thereof),
booklets written for policyholders, and this English-language annual report.
Our diverse lineup of public relations and advertising activities include theproduction of a variety of publications as needed, in order to strengthen thechannels of communication between the Company, its policyholders, and its
many other customers.
©’08, ’11 SANRIO/SEGA TOYS S.S/W.TX.JLPC©’11 SANRIO APPROVAL No.P0308301

FUKOKU MUTUAL LIFE INSURANCE COMPANY

11

Non-consolidated Financial Statements
Non-consolidated Balance Sheets
Fukoku Mutual Life Insurance Company
As of March 31, 2009, 2010 and 2011

As of March 31,

2009

2010

2011

Millions of
U.S. dollars

Millions of yen

Assets:				
Cash and deposits:
Cash ..................................................................................
¥
134
¥
164
Bank deposits ....................................................................
49,24868,945
		
49,382
69,110Call loans ...............................................................................
183,600
91,000
Monetary claims bought . ......................................................
2,055
1,752
Money held in trust ...............................................................
33,05332,902
Securities:
Government bonds . ..........................................................
1,746,556
1,887,071
Local government bonds ...................................................
136,848
124,642
Corporate bonds ................................................................
616,227
588,041
Stocks . ..............................................................................
448,295
505,012
Foreign securities ..............................................................
596,372
646,118
Other securities .................................................................
52,07750,097
		
3,596,377
3,800,984
Loans:
Policy loans . .......................................................................
76,967
74,186
Ordinary loans ...................................................................
1,161,237
1,146,758
		1,238,205
1,220,945
Tangible fixed assets:
Land . .................................................................................
141,825
162,160
Buildings ............................................................................
98,937
96,661
Lease assets .....................................................................
—
31
Construction in progress ...................................................
5,457
17,009Other tangible fixed assets ...............................................
3,845
3,613
		
250,065
279,476
Intangible fixed assets:
Software ............................................................................
7,337
7,007
Other intangible fixed assets . ...........................................
448
447
		
7,785
7,454
Reinsurance receivables . ......................................................
122
279
Other assets:
Accounts receivable ..........................................................
12,93012,284
Prepaid expenses ..............................................................
2,393
2,051
Accrued income ................................................................
21,52322,040
Deposits ............................................................................
2,416
2,228
Differential account for futures trading .............................
5,027—
Derivatives . .......................................................................
1,682
1,216
Suspense payments ..........................................................
4,340
5,430
Other assets ......................................................................
4,360
4,207
		
54,67449,460
Deferred tax assets ...............................................................
110,42262,170Allowance for possible loan losses .......................................
(11,290)(2,430)Total assets . .........................................................................
¥5,514,454¥5,613,104

12

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2011

¥

156
237,667
237,823—
1,424
33,169

$

1
2,858
2,860
—
17
398

1,695,927
149,399
615,051
379,416884,02954,814
3,778,639

20,395
1,796
7,396
4,563
10,631
659
45,44371,479
1,072,383
1,143,863

859
12,896
13,756

163,574
116,548
47
1,165
3,334
284,670

1,967
1,401
0
14
40
3,423

8,318
447
8,765
170

100
5
105
2

63,8591,653
23,444
2,145
73
881
4,740
5,070
101,867
87,332(2,513)¥5,675,214

767
19
281
25
0
10
57
60
1,225
1,050
(30)
$ 68,252

As of March 31,

2009

2010

2011

2011
Millions of
U.S. dollars

Millions of yen

Liabilities:						Policy reserves:
Reserve for outstanding claims .........................................
¥ 28,220¥ 25,342¥ 31,053$ 373
Policy reserve ....................................................................
5,135,913
5,145,399
5,132,317
61,723
Reserve for dividends to policyholders .............................
57,31754,75953,205639
		
Reinsurance payables . ..........................................................
Subordinated bonds ..............................................................
Other liabilities:
Corporate income tax payable ...........................................
Accounts payable ..............................................................
Accrued expenses .............................................................
Unearned income ..............................................................
Deposits received . ............................................................
Guarantee deposits received . ...........................................
Differential account for futures trading .............................
Derivatives . .......................................................................
Asset retirement obligations .............................................
Suspense receipts .............................................................

5,221,451
87
38,8705,225,501
117
37,406

5,216,576
86
35,21462,736
1
423

107
1,680
9,975
517
5,050
11,712
—
8,879
—
1,625

1,291
3,290
10,434452
5,016
12,893
337
6,867
—
1,338

10,85072,288
9,989
435
5,637
13,402
—
8,661
2,846
1,143

130
869
120
5
67
161
—
104
34
13

		
Reserve for employees' retirement benefits ........................
Reserve for price fluctuation of securities . ...........................
Deferred tax liabilities for revaluation reserve for land ..........

39,55049,29324,622
20,02641,921
49,776
26,451
19,983

125,256
50,10933,432
19,936

1,506
602
402
239

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

5,393,901

5,401,158

5,480,612

65,91240,00031,000112

40,00046,000112

40,00046,000
112

481
553
1

1,987

2,187

2,249

27

20,0003,895

15,000
3,895

20,000
3,895

240
46

311
767
56,660303
767
54,075296
767
69,554

3
9
836

		
		
Total foundation funds, surplus and others............................
Net unrealized gains (losses) on available-for-salesecurities, net of tax............................................................
Deferred valuation gains (losses)
under hedge accounting......................................................
Revaluation reserve for land, net of tax..................................
Total valuation and translation adjustments............................

81,634
83,621
154,733

74,042
76,229162,341

94,51396,763
182,875

1,136
1,163
2,199

(35,474)

48,291

9,994

120

479
814
(34,180)

538
773
49,604365
1,366
11,7264
16
141

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

120,553¥5,514,454

211,946¥5,613,104

194,601¥5,675,214

2,340$68,252

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....................................
Reserve for advanced depreciation ofreal estate for tax purpose............................................
Other reserves................................................................
Unappropriated surplus..................................................

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, 2009, 2010 and 2011

Years ended March 31,

2009

2010

2011

Millions of yen

Ordinary revenues:
Premium and other income:Premium income ...............................................................
¥646,500¥623,490¥665,618
Reinsurance income ..........................................................
226
288
226
		
646,726
623,778
665,844
Investment income:Interest, dividends and other income: 					Interest on deposits ......................................................
662
493
899
Interest and dividends on securities . ............................
75,05070,44472,789Interest on loans . ..........................................................
24,324
24,812
23,883
Income from real estate for rent ...................................
14,30014,71814,141Other interest and dividends .........................................
689
287
252
		
115,027
110,757
111,965
Gains from money held in trust, net . ................................
——
361
Gains from trading securities, net .....................................
—
165—
Gains on sales of securities . .............................................
51,491
22,04330,455
Gains from derivative instruments, net .............................
—
—
3,335
Other investment income .................................................
212
358
281
Gains from separate accounts, net ...................................
—
14,428—
		
166,730
147,754
146,400
Other ordinary revenues:
Fund receipt from annuity rider .........................................
557
777
842
Fund receipt from deposit of claims paid ..........................
19,967
10,1208,295
Reversal of reserve for outstanding claims........................
—
2,878
—
Reversal of policy reserve ................................................
45,866—
13,081
Reversal of reserve for employees'
retirement benefits . .......................................................
211——
Others ...............................................................................
1,624
2,208
2,452
		
68,227
15,984
24,671
Total ordinary revenues ......................................................
881,685
787,517
836,916

2011
Millions of
U.S. dollars$8,005
2
8,007

10
875
287
170
3
1,346
4
—
366
40
3
—
1,760
10
99
—
157
—
29
296
10,065

Ordinary expenditures:					Claims and other payments:
Claims . ..............................................................................
205,663
178,959
176,286
2,120
Annuities ...........................................................................
89,55088,092
91,536
1,100
Benefits .............................................................................
151,181
146,378
185,770
2,234
Surrenders .........................................................................
109,976
114,050
130,881
1,574
Other payments ................................................................
39,84036,39629,194351
Reinsurance premiums .....................................................
338
336
335
4
		
596,550564,214614,005
7,384
Provision for policy reserve and others:
Provision for reserve for outstanding claims .....................
1,804
—
5,711
68
Provision for policy reserve ...............................................
—
9,485
—
—
Interest on accumulated dividends to policyholders .........
242
157
116
1
		
¥ 2,047¥ 9,643¥ 5,828$ 70

14

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Years ended March 31,

2009

2010

2011

Millions of
U.S. dollars

Millions of yen

Investment expenses:
Interest expenses . ............................................................
Losses from money held in trust, net................................
Losses from trading securities, net....................................
Losses on sales of securities ............................................
Losses on valuation of securities ......................................
Losses from derivative instruments, net . .........................
Foreign exchange losses, net . ..........................................
Provision for allowance for possible loan losses ...............
Depreciation of real estate for rent and other assets ........
Other investment expenses ..............................................
Losses from separate accounts, net..................................
		
Operating expenses ..............................................................
Other ordinary expenditures:
Claim deposit payments ....................................................
Taxes .................................................................................
Depreciation ......................................................................
Provision for reserve for employees’
retirement benefits...........................................................
Others ...............................................................................
		
Total ordinary expenditures . ..............................................
Ordinary profits ...................................................................
Extraordinary gains:
Gains on disposal of fixed assets ......................................
Reversal of reserve for price fluctuation of securities........
Reversal of allowance for possible loan losses..................
Total extraordinary gains ....................................................
Extraordinary losses:
Losses on disposal of fixed assets . ..................................
Impairment losses .............................................................
Provision for reserve for price fluctuation of securities .....
Effect of applying the accounting standard for asset
retirement obligations.......................................................
Total extraordinary losses . .................................................
Surplus before income taxes . ............................................
Income taxes:
Current ..............................................................................
Deferred ............................................................................
Total income taxes . .............................................................
Net surplus for the year ......................................................

2011¥ 1,974
3,912
3,343
95,471
25,268
110
2,348
1,243
4,226
6,450
25,086
169,435
86,137¥ 1,852
197—
41,494
1,588
11,555
1,706
—
5,230
6,618
—
70,24487,658¥ 1,525—
5,069
20,418
5,922
—
2,654
—
5,732
5,717
3,034
50,07486,511

$ 18
—
60
245
71
—
31
—
68
68
36
602
1,040

14,532
4,957
5,583

11,551
4,916
5,430

10,421
4,793
5,413

125
57
65

—
277
25,349879,520
2,164

483
417
22,799754,558
32,958332
530
21,490777,90959,006

4
6
258
9,355
709

41,72429,289—71,014

326
—
606
933

16
—
899
915

0
—
10
11

904
514
—

685
865
1,829

96
318
6,981

1
3
83

—
1,418
71,760—3,380
30,511

966
8,362
51,559

11
100
620

3,645
11,251
14,896¥ 56,863

3,746
629
4,375
¥ 26,135

13,406(3,370)10,035¥ 41,524

161
(40)
120
$ 499

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, 2009, 2010 and 2011

Years ended March 31,

2009

2010

2011

Millions of yen

Foundation funds, surplus and others:
Foundation funds
		 Balance at the end of previous fiscal year.......................
¥40,000¥40,000¥40,000
		 Changes in the current fiscal year:
			 Financing of additional foundation funds....................
—
15,000—			 Redemption of foundation funds................................
—(15,000)—
			 Total changes in the current fiscal year.......................
———
		 Balance at the end of current fiscal year.........................
40,00040,00040,000
Accumulated foundation funds redeemed		 Balance at the end of previous fiscal year.......................
31,00031,00046,000		 Changes in the current fiscal year:..................................				
		
Additions to accumulated foundation funds—
15,000—			
redeemed.................................................................
			 Total changes in the current fiscal year.......................
—
15,000—		 Balance at the end of current fiscal year.........................
31,00046,00046,000Reserve for revaluation
		 Balance at the end of previous fiscal year.......................
112
112
112
		 Changes in the current fiscal year:
			 Total changes in the current fiscal year.......................
———
		 Balance at the end of current fiscal year.........................
112
112
112
Surplus:		 Legal reserve for future losses
			 Balance at the end of previous fiscal year..................
1,787
1,987
2,187
			 Changes in the current fiscal year:				 Additions to legal reserve for future losses............
200
200
62
				 Total changes in the current fiscal year..................
200
200
62
			 Balance at the end of current fiscal year.....................
1,987
2,187
2,249
		 Other surplus:
			 Reserve for redemption of foundation funds				 Balance at the end of previous fiscal year..............
10,00020,00015,000				 Changes in the current fiscal year:					 Additions to reserve for redemption of					foundation funds.............................................
10,00010,0005,000					 Reversal of reserve for redemption of					foundation funds.............................................
—(15,000)—					 Total changes in the current fiscal year..............
10,000(5,000)5,000				 Balance at the end of current fiscal year................
20,00015,00020,000		
Reserve for dividend allowances				 Balance at the end of previous fiscal year..............
3,895
3,895
3,895
				 Changes in the current fiscal year:					 Total changes in the current fiscal year..............
———
				 Balance at the end of current fiscal year................
3,895
3,895
3,895
			 Reserve for advanced depreciation of			real estate for tax purpose				 Balance at the end of previous fiscal year..............
319
311
303
				 Changes in the current fiscal year:					 Reversal of reserve for advanced depreciation of					real estate for tax purpose..............................
(8)
(7)
(7)
					 Total changes in the current fiscal year..............
(8)
(7)
(7)
				 Balance at the end of current fiscal year................
311
303
296

16

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2011
Millions of
U.S. dollars

$481
—
—
—
481
553

—
—
553
1
—
1
26
0
0
27
180
60
—
60
240
46
—
46
3
(0)
(0)
3

Years ended March 31,

2009

2010

2011

Millions of
U.S. dollars

Millions of yen

			 Other reserves				 Balance at the end of previous fiscal year..............
				 Changes in the current fiscal year:					 Total changes in the current fiscal year..............
				 Balance at the end of current fiscal year................
			 Unappropriated surplus				 Balance at the end of previous fiscal year..............
				 Changes in the current fiscal year:					 Additions to reserve for dividends to					policyholders....................................................
					 Additions to legal reserve for future losses.......
					 Payment of interest on foundation funds..........
					 Net surplus for the year.....................................
					 Additions to reserve for redemption of					foundation funds..............................................
					 Reversal of reserve for advanced					
depreciation of real estate for tax purpose......
					 Reversal of revaluation reserve for land............
					 Total changes in the current fiscal year..............
				 Balance at the end of current fiscal year................
		 Total surplus
			 Balance at the end of previous fiscal year..................
			 Changes in the current fiscal year:				 Additions to reserve for dividends to policyholders...
				 Payment of interest on foundation funds...............
				 Net surplus for the year..........................................
				 Reversal of reserve for redemption of				foundation funds..................................................
				 Reversal of revaluation reserve for land.................
				 Total changes in the current fiscal year..................
			 Balance at the end of current fiscal year.....................
Total foundation funds, surplus and others
		 Balance at the end of previous fiscal year.......................
		 Changes in the current fiscal year:
			 Financing of additional foundation funds....................
			 Additions to reserve for dividends to policyholders....
			 Additions to accumulated foundation			
funds redeemed........................................................
			 Payment of interest on foundation funds...................
			 Net surplus for the year..............................................
			 Redemption of foundation funds................................
			 Reversal of reserve for redemption of			foundation funds......................................................
			 Reversal of revaluation reserve for land......................
			 Total changes in the current fiscal year.......................
		 Balance at the end of current fiscal year.........................

2011

767

767

767

9

—
767

—
767

—
767

—
9

55,671

56,66054,075650(31,868)
(200)
(716)
56,863(17,856)
(200)
(716)
26,135(19,505)(62)(892)
41,524

(234)
(0)
(10)
499

(10,000)(10,000)(5,000)(60)

8(13,098)
988
56,6607
44(2,584)54,0757(592)
15,47969,554

0
(7)
186
836

72,441

83,621

76,229916(31,868)(716)
56,863(17,856)(716)
26,135(19,505)(892)
41,524

(234)
(10)
499

—
(13,098)
11,18083,621(15,000)
44(7,392)
76,229—(592)
20,53396,763

—
(7)
246
1,163

143,553

154,733

162,341

1,952—(31,868)

15,000(17,856)—(19,505)

—
(234)

—
(716)
56,863—15,000(716)
26,135(15,000)—(892)
41,524
—

—
(10)
499
—

—
(13,098)
11,180154,733(15,000)
44
7,607
162,341—(592)
20,533
182,875

—
(7)
246
2,199

FUKOKU MUTUAL LIFE INSURANCE COMPANY

17

Years ended March 31,

2009

2010

2011

Millions of
U.S. dollars

Millions of yen

Valuation and translation adjustments:
Net unrealized gains (losses) on available-for-salesecurities, net of tax
		 Balance at the end of previous fiscal year.......................
		 Changes in the current fiscal year:
			 Net changes, excluding foundation funds,			
surplus and others...................................................
			 Total changes in the current fiscal year.......................
		 Balance at the end of current fiscal year.........................
Deferred valuation gains (losses) under hedge accounting
		 Balance at the end of previous fiscal year.......................
		 Changes in the current fiscal year:
			 Net changes, excluding foundation funds,			
surplus and others...................................................
			 Total changes in the current fiscal year.......................
		 Balance at the end of current fiscal year.........................
Revaluation reserve for land, net of tax
		 Balance at the end of previous fiscal year.......................
		 Changes in the current fiscal year:
			 Net changes, excluding foundation funds,			
surplus and others...................................................
			 Total changes in the current fiscal year.......................
		 Balance at the end of current fiscal year.........................
Total valuation and translation adjustments
		 Balance at the end of previous fiscal year.......................
		 Changes in the current fiscal year:
			 Net changes, excluding foundation funds,			
surplus and others....................................................
			 Total changes in the current fiscal year.......................
		 Balance at the end of current fiscal year.........................
Total net assets
Balance at the end of previous fiscal year............................
Changes in the current fiscal year:
		 Financing of additional foundation funds.........................
		 Additions to reserve for dividends to policyholders........
		 Additions to accumulated foundation		
funds redeemed..............................................................
		 Payment of interest on foundation funds........................
		 Net surplus for the year...................................................
		 Redemption of foundation funds.....................................
		 Reversal of reserve for redemption offoundation funds............................................................
		 Reversal of revaluation reserve for land..........................
		 Net changes, excluding foundation funds,		
surplus and others........................................................
		 Total changes in the current fiscal year...........................
Balance at the end of current fiscal year..............................

18

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2011

115,334(35,474)

48,291580(150,809)(150,809)(35,474)

83,766
83,76648,291(38,297)(38,297)
9,994

(460)
(460)
120

408

479

538

6

70
70
479

59
59
538

(173)
(173)
365

(2)
(2)
4

(12,335)

814

773

9

13,14913,149
814

(40)
(40)
773

592
592
1,366

7
7
16

103,407(34,180)

49,604596(137,588)(137,588)(34,180)

83,78583,78549,604(37,878)(37,878)
11,726

(455)
(455)
141

246,961

120,553

211,9462,548—(31,868)

15,000(17,856)—(19,505)

—
(234)

—
(716)
56,863—15,000(716)
26,135(15,000)—(892)
41,524
—

—
(10)
499
—

—
(13,098)(15,000)
44

—
(592)

—
(7)

(137,588)(126,407)¥ 120,553

83,78591,393¥ 211,946(37,878)(17,344)¥194,601

(455)
(208)
$2,340Non-consolidated Statements of Surplus
Fukoku Mutual Life Insurance Company
For the years ended March 31, 2009, 2010 and 2011

Years ended March 31,

2009

2010

2011

Millions of
U.S. dollars

Millions of yen

Unappropriated surplus ......................................................

2011¥56,660¥54,075¥69,554$836

of real estate for tax purpose .........................................		

7

7

7

0

		

7

7

7

0

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

56,66754,08369,561836

17,856

19,50524,381

293

Legal reserve for future losses . ....................................

200

62

76

0

Interest payment for foundation funds . ........................

716

892

892

10

Reserve for redemption of foundation funds ...........

10,000

5,000

5,000

60

Accumulated fund for price fluctuation ....................

——

11,000132

		

10,0005,000

16,000192

		

10,916

5,954

16,968204

Total appropriation of surplus ............................................

28,772

25,46041,350497

Unappropriated surplus carried forward . .........................

¥27,894¥28,622¥28,211$339

Reversal of voluntary surplus reserve:
Reversal of reserve for advanced depreciation

Appropriation of surplus:
Reserve for dividends to policyholders .............................
Net surplus:

Voluntary surplus reserve:

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 with theprovisions set forth in the Insurance Business Law of Japan andits related rules and regulations and in conformity with accounting principles generally accepted in Japan, which are different incertain respects from accounting principles generally acceptedin countries and jurisdictions other than Japan.
In addition, the notes to the non-consolidated financial
statements include information which is not required under accounting principles generally accepted in Japan but is presented
herein as additional information.
Amounts of less than one million yen have been eliminated.
As a result, total in yen shown herein do not necessarily agreewith the sum of the individual amounts.
2. U.S. Dollar Amounts
The translations of yen amounts into U.S. dollar amounts areincluded solely for the convenience of the reader and have been
made, as a matter of arithmetical computation only, at the rateof ¥83.15 = US$1.00, the effective rate of exchange at the balance sheet date of March 31, 2011. The translations should not
be construed as representations that such yen amounts havebeen or could in the future be, converted into U.S. dollars at thator any other rates.

II. Notes to Balance Sheets
1. Significant Accounting Policies(1) Valuation methods of securities

The valuation of securities, including bank deposits and monetary claims bought which are equivalent to securities, andsecurities managed as trust assets in money held in trust, is asfollows: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 amortized cost
under the straight-line method, cost being determined by themoving average method.

20

FUKOKU MUTUAL LIFE INSURANCE COMPANYiii) Policy-reserve-matching bonds are stated at amortized 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 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
fiscal year. Costs of their sales are determined by the moving average method. Net unrealized gains or losses on theseavailable-for-sale securities, net of taxes, are recorded as aseparate component of net assets.
Available-for-sale securities whose fair values 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) Valuation methods of derivative instruments

Derivative instruments are stated at fair market value.
(3) Revaluation of land

The Company revalued the land for business purposes basedon the Law for Revaluation of Land (Law No.34 promulgated on
March 31, 1998). The difference between fair value and bookvalue resulting from the revaluation, net of related taxes, is recorded as revaluation reserve for land as a separate componentof net assets and the related tax is recorded as deferred tax
liabilities for revaluation reserve for land.
Date of revaluation: March 31, 2002
Method of revaluation as prescribed for in Article 3 Paragraph
3 of the said Law:
Calculation is based on the appraisal value for property tax set
forth in Article 2 item 3 of the Enforcement Ordinance of the
Law for Revaluation of Land (Government Ordinance No.119
promulgated on March 31, 1998) and the road rate set forth in
Article 2 item 4 of the said Ordinance with certain reasonableadjustments.

(4) Depreciation of tangible fixed assets

Depreciation of tangible fixed assets is calculated by the following methods.
Buildings (excluding lease assets)i) Acquired on or before March 31, 1998: Previous decliningbalance methodii) Acquired on or after April 1, 1998 but on or before March 31,
2007: Previous straight-line methodiii) Acquired on or after April 1, 2007: Straight-line method
Assets other than buildings (excluding lease assets)i) Acquired on or before March 31, 2007: Previous decliningbalance methodii) Acquired on or after April 1, 2007: Declining-balance method
Lease assets related to finance lease transactions that do nottransfer ownership: Straight-line method over the lease term
Other tangible fixed assets acquired for ¥100,000 or more but
less than ¥200,000 are depreciated equally over three years.
(5) Foreign currency translation

Foreign currency-denominated assets and liabilities, except forinvestments in subsidiaries and affiliates, are translated into
Japanese yen at the effective exchange rate prevailing at thebalance sheet date. Investments in subsidiaries and affiliates aretranslated into Japanese yen at the exchange rate on the date ofacquisition.

All credits are assessed by the relevant departments in accordance with the Company's standards of self-assessment on
credit quality. The results of the assessment are reviewed by
the audit department, which is independent of business-related
divisions. Subsequently, the allowance for possible loan losses
are provided based on the results of these assessments.
For the credits of legally bankrupt borrowers and substantially bankrupt borrowers, the amounts remaining after deductions of collateral value or the amounts collectible through theexecution of guarantees is written-off directly from the borrower's balance as the estimated uncollectible amounts. The
amounts written-off as of March 31, 2009, 2010 and 2011 were¥852 million, ¥9,036 million and ¥260 million (US$3 million),
respectively.
(7) Reserve for employees' retirement benefits

The Company adopts accounting standards for employees'
retirement benefits (Business Accounting Council dated June
16, 1998) and accounts for the reserve for employees' retirement benefits based on the projected benefit obligation and plan
assets at the balance sheet date.
(8) Reserve for price fluctuation of securities

Reserve for price fluctuation of securities is calculated in accordance with Article 115 of the Insurance Business Law.

(6) Allowance for possible loan losses(9) Lease Transactions as a Lessee

Allowance for possible loan losses is provided in accordancewith the Company's standards of self-assessment and write-offs
and reserves on credit quality:

Finance lease transactions that do not transfer ownership tothe lessee whose commencement day was on or before March
31, 2008 continued to be accounted for in a manner similar toaccounting treatment for ordinary rental transactions.

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 aresubstantially bankrupt (hereinafter called "substantially bankrupt borrowers"), the Company provides the remaining amountof credits after the direct write-off described below and the
deductions of the amount expected to be collected throughthe disposal of collateral or the execution of guarantees.
ii) For the credits of borrowers who are not currently bankrupt but have a high possibility of bankruptcy, the Company
provides the amounts deemed as necessary considering theborrowers' ability to pay, within the amounts after deductionsof the amount expected to be collected through the disposalof collateral or the execution of guarantees.
iii) For the credits of borrowers other than the above, the Company provides the amounts calculated by multiplying theborrowers' balance by the actual ratio of bad debt losses on
defaults during a certain past period.

(10) Lease Transactions as a Lessor
As for the finance lease transactions where the Company is alessor, the lease fee is recorded in “interest, dividends and otherincome” at the time of receiving lease fee. The corresponding
cost of the lease transactions is recorded in “other investment
expenses”, which is calculated by deducting an amount equivalent to the interest allocated over the lease term from the lease
fee received.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

21

(11) Accounting for hedge activities(14) Software

Hedge accounting is based on "Accounting Standards for
Financial Instruments" (ASBJ Statement No. 10 issued by the
Accounting Standards Board of Japan on August 11, 2006).
For the foreign currency forward contracts against the exchange rate fluctuations in the value of foreign currency-denominated bonds classified as available-for-sale securities, which
qualify for hedge accounting because of high correlation andeffectiveness between the hedging instruments and the hedged
items, valuation gains and losses on the foreign currency forward contracts are recorded in the statements of operations.
For the interest rate swaps against the interest rate fluctuations regarding loans, which qualify for hedge accounting
because of high correlation and effectiveness between thehedging instruments and the hedged items, valuation gains andlosses on the interest rate swaps are deferred until the maturityof the hedged transactions.
Deposits denominated in foreign currencies for which forward foreign exchange contracts are used to hedge the foreign
currency fluctuations are translated at the contract rates if theforward contracts qualify for specific hedge accounting. In thiscase, exchange differences between the exchange rate on the
trade date and the forward contract rate are allocated to eachfiscal year from the date contracted to the date settled.
For judging the effectiveness of hedge used, ratio analysis
of comparing the fluctuations in the fair value or cash flows ofhedged items and hedging instruments is mostly applied.

The software for internal use is amortized based on straight-line
method over the estimated useful lives.

(12) Accounting for consumption taxes

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 thatare stipulated to be deferred under the Tax Law, are deferred
as prepaid expenses and amortized equally over five years.
Consumption taxes other than deferred consumption taxes arerecognized as an expense when incurred.
(13) Policy reserve

Policy reserve is based on Article 116 of the Insurance Business
Law, and the premium reserve at the end of fiscal year is calculated by the following method:
In regard to the policies subject to the standard policy
reserve, the method as prescribed by the Commissioner of Financial Services Agency (Ministry of Finance Ordinance No. 48,
1996) is applied.
In regard to the policies not subject to the standard policy
reserve, the net level premium method is applied.

22

FUKOKU MUTUAL LIFE INSURANCE COMPANY(15) Deferred assets

Discount on bonds is amortized equally over the period forwhich interest on bonds is fixed. This amount is deducted frombonds.
(16) Policy-reserve-matching bonds

Of the bonds corresponding to the sub-groups of individual
insurance and annuities which are set by insurance types andinvestment policies, the bonds that are held to match the duration of liabilities are classified as policy-reserve-matching bonds
in accordance with "Temporary Treatment of Accounting and
Auditing Concerning Policy-reserve-matching Bonds in Insurance
Industry" (Industry Audit Committee Report No. 21 issued by theJapanese Institute of Certified Public Accountants on November
16, 2000).
The amounts of policy-reserve-matching bonds recorded on
the balance sheets and the market value of these bonds were¥628,570 million and ¥644,212 million as of March 31, 2009 andfor as of March 31, 2010 and 2011, are written in Notes No. 3“Financial Instruments”.
2. Changes in Accounting Policies(1) Effective for the year ended March 31, 2011, the Company
adopted “Accounting Standard for Asset Retirement Obligations” (ASBJ Statement No. 18 issued by the AccountingStandards Board of Japan on March 31, 2008) and “Guidanceon Accounting Standard for Asset Retirement Obligations”(ASBJ Guidance No. 21 issued by the Accounting Standards
Board of Japan on March 31, 2008). As a result, tangible
fixed assets increased by ¥1,722 million (US$20 million)
and the amount of asset retirement obligations recorded inbalance sheet was ¥2,846 million (US$34 million). Ordinary
profit decreased by ¥157 million (US$1 million) and surplus
before income taxes decreased by ¥1,124 million (US$13
million).
(2) Effective for the year ended March 31, 2010, the Company
adopted “Partial Amendments to Accounting Standard for
Retirement Benefits (Part 3)“ (ASBJ Statement No.19 issued
by the Accounting Standards Board of Japan on July 31,2008). There is no effect of the change on ordinary profit andsurplus before income taxes since the Company has decided
to use the same discount rate as before.
(3) Effective for the year ended March 31, 2009, the Company
adopted “Accounting Standard for Lease Transactions”(ASBJ Statement No. 13 issued by the Accounting Standards
Board of Japan on March 30, 2007). As a result, ordinary
profit decreased by ¥2 million, compared to the previous
methods.

3. Financial Instruments
Asset management of the general accounts other than theseparate accounts stipulated in Article 118 Paragraph 1 of the
Insurance Business Law is conducted on the principle of prudent and profitable investments, considering public and social
responsibilities of the insurance business. Based on this policy,
the Company allocates the fund, securing its liquidity, from themedium-to-long term viewpoints. The Company is diversifying
investments in assets such as foreign securities and equity securities 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. Derivatives aremainly used to mitigate the market risk regarding the securities
and loans. 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 “Basic Policy for Risk Management” establishedby the Board of Directors. Specifically, the Company eliminates
excessive risk deviating from the basic principle and secures thesafety of the assets by utilizing control functions of the Financial
and Investment Risk Management Department towards theasset 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 the possible
maximum losses which may arise from the holding assets withina certain range of risk buffers.
The carrying amounts, fair values and their relateddifferences of major financial assets and liabilities as of March
31, 2010 and 2011 were as follows:
As of March 31,

2010

2011

2011

Millions of yen
Carrying			amountFair value
Difference

Millions of U.S. dollars

Carrying			amountFair value
Difference

Carrying
amountFair value Difference

Deposits:
Deposits not treated as securities... ¥ 68,839 ¥ 68,839 ¥—¥ 237,583 ¥ 237,583 ¥—$ 2,857 $ 2,857
Total deposits...................................
68,83968,839—237,583
237,583
—
2,857
2,857
Call loans...............................................
91,00091,000——————
Monetary claims bought:
Claims treated as loans....................
1,752
1,743
(8)
1,424
1,424
0
17
17
Total monetary claims bought..........
1,752
1,743
(8)
1,424
1,424
0
17
17
Money held in trust:
Trading securities.............................
31,902
31,902—
32,16932,169—386
386
Total money held in trust..................
31,902
31,902—
32,16932,169—386
386
Securities:
Trading securities.............................
79,31779,317—228,171
228,171
—
2,744
2,744
Held-to-maturity debt securities.......
430,883
433,7172,834
427,312436,409
9,096
5,139
5,248
Policy-reserve-matching bonds........
639,749
657,551
17,801
652,180
672,087 19,907
7,843
8,082
Investments in subsidiaries
and affiliates...................................
1,393
933
(459)
1,393
868
(524)
16
10
Available-for-sale securities.............. 2,516,197 2,516,197—
2,347,024 2,347,024—
28,22628,226
Total securities................................. 3,667,541 3,687,718
20,176
3,656,081 3,684,560 28,478
43,96944,312Loans:
Policy loans......................................
74,18674,186(0)71,47971,479(0)859
859
Ordinary loans.................................. 1,146,758 1,174,444
27,685
1,072,383 1,099,281 26,897
12,896
13,220Total loans........................................ 1,220,945 1,248,630
27,685
1,143,863 1,170,761 26,897
13,756
14,080Derivative instruments:
Hedge accounting not applied..........
(1,644)(1,644)—(6,049)(6,049)—(72)(72)
Hedge accounting applied................
(4,006)(4,006)—(1,730)(1,730)—(20)(20)
Total derivative instruments............. ¥(5,650) ¥ (5,650) ¥— ¥ (7,780) ¥ (7,780) ¥—$(93) $(93)									

$ —
—
—
0
0
—
—
—
109
239
(6)
—
342
(0)
323
323
—
—
$ —

FUKOKU MUTUAL LIFE INSURANCE COMPANY

23

(1) Deposits excluding those which are treated as securities
based on “Accounting Standards for Financial Instruments”(ASBJ Statement No.10) and call loans:
The fair values of deposits and call loans are based on theirbook values since fair values approximate book values dueto their short maturities.
(2) Securities including deposits and monetary claims bought
which are treated as securities based on “Accounting Standards for Financial Instruments” (ASBJ Statement No.10)
and securities managed as trust assets in money held in
trust:
The fair values of marketable securities are measured at thequoted market price at the end of fiscal year. The fair values of other securities without the quoted market price arebased on the prices reasonably calculated such as the prices
offered by the information vendors or counterparty financial
institutions.
				 Investments in subsidiaries and affiliates, 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 subsidiaries
and affiliates, unlisted stocks and investments in partnerships were ¥26,132 million, ¥8,851 million and ¥8,306 million
as of March 31, 2010, and ¥26,616 million (US$320 million),¥8,845 million (US$106 million) and ¥8,201 million (US$98
million) as of March 31, 2011, 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 deadline havenot been set up due to the characteristics that the loan islimited 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 aremeasured by discounting the future cash flows to the present values. The fair values of loans receivable from legallybankrupt borrowers, substantially bankrupt borrowers andborrowers who are not currently bankrupt but have a high24

FUKOKU MUTUAL LIFE INSURANCE COMPANY

possibility of bankruptcy and monetary claims bought treatedas loans are computed by deducting the amount of the allowance for doubtful accounts from the book values before
direct write-offs.
(4) Derivative instruments:i) The fair values of the futures and options traded at theexchange are measured at the settlement price of the exchange.
ii) The fair values of 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.
4. Investment and Rental Property
The Company holds investment and rental properties such as
office buildings in Tokyo and other areas. The carrying amounts
and the fair values of investment and rental properties were
¥227,544 million and ¥298,967 million as of March 31, 2010and ¥233,921 million (US$2,813 million) and ¥284,059 million(US$3,416 million) as of March 31, 2011, respectively. The fairvalue is mainly based on the value calculated by the Company inaccordance with real estate appraisal 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 was ¥1,434 million (US$17 million) as of March 31, 2011.
5. Loans Receivable
The total amounts of credits to bankrupt borrowers, delinquentloans, delinquent loans past 3 months or more and restructuredloans, which were included in loans, were ¥10,749 million,¥2,638 million and ¥3,308 million (US$39 million) as of March
31, 2009, 2010 and 2011, respectively.
i) The balances of credits to bankrupt borrowers were ¥471 million, ¥352 million and ¥297 million (US$3 million) as of March
31, 2009, 2010 and 2011, respectively.
ii) The balances of delinquent loans were ¥10,277 million,¥2,119 million and ¥774 million (US$9 million) as of March 31,
2009, 2010 and 2011, respectively.
iii) There were no balances of delinquent loans past 3 months ormore as of March 31, 2009, 2010 and 2011.
iv) The balances of restructured loans were ¥166 million and¥2,236 million (US$26 million) as of March 31, 2010 and 2011,
and no balance as of March 31, 2009.

Credits to bankrupt borrowers represent loans, excluding the balances already written-off, which meet the conditions prescribedin Article 96 Paragraph 1 Item 3 and 4 of the Enforcement Regulations of the Corporate Tax Law. Moreover, accruing intereston these loans is not recorded as income after determining thatprincipal of or interest on these loans is unlikely to be collected
due to the significant delay in repayment of principal or interest
payment or for some other reasons.
Delinquent loans are credits whose accruing interest is notrecorded as income due to the same reasons as describedabove, and exclude credits to bankrupt borrowers and loans forwhich interest payments have been suspended and rescheduled
to assist and support the borrowers in the restructuring of theirbusiness.
Delinquent loans past 3 months or more are loans for whichinterest payment or repayment of principal are delinquent for
3 months or more from the due date under the terms of therelated loan agreements, excluding those loans classified as
credits to bankrupt borrowers and delinquent loans.
Restructured loans are loans for which certain concessions
favorable to borrowers, such as interest reduction or exemptions, rescheduling of due date 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 restructuring of their business. This category excludes loans classified as
credits to bankrupt borrowers, delinquent loans and delinquentloans past 3 months or more.
The direct write-offs related to loans decreased credits tobankrupt borrowers described above by ¥66 million, ¥8,097 million and ¥1 million (US$14 thousand) as of March 31, 2009, 2010
and 2011, respectively.
The direct write-offs related to loans decreased delinquentloans described above by ¥786 million, ¥938 million and ¥258
million (US$3 million) as of March 31, 2009, 2010 and 2011,
respectively.
6. Accumulated Depreciation of Tangible Fixed Assets
Accumulated depreciation of tangible fixed assets totaledto ¥124,586 million, ¥129,610 million and ¥137,343 million(US$1,651 million) as of March 31, 2009, 2010 and 2011, respectively.
7. Separate Accounts
Total assets in separate accounts provided for in Article 118 of
the Insurance Business Law were ¥113,498 million, ¥95,207
million and ¥83,280 million (US$1,001 million) as of March 31,
2009, 2010 and 2011, respectively. The amounts of separate
account liabilities were the same as separate account assets.
8. Receivables from/Payables to Subsidiaries
The total amounts of receivables from/payables to subsidiaries
were ¥3,579 million and ¥1,281 million as of March 31, 2009,¥3,463 million and ¥1,433 million as of March 31, 2010 and¥2,675 million (US$32 million) and ¥1,855 million (US$22 million), as of March 31, 2011, respectively.
9. Monetary Claims to Directors
Monetary claims to directors as of March 31, 2009, 2010 and2011 were ¥12 million, ¥8 million and ¥6 million (US$77 thousand), respectively.
10. Income Taxes
Deferred tax assets and deferred tax liabilities as of March 31,
2009 were ¥115,089 million and ¥1,939 million, respectively.
Valuation allowance for deferred tax assets was ¥2,727 million.
Major components of deferred tax assets were ¥57,150
million of policy reserves, ¥20,136 million of net unrealized losses on available-for-sale securities and ¥17,849 million of reservefor employees’ retirement benefits as of March 31, 2009.
The statutory tax rate and the actual effective tax rate forthe year ended March 31, 2009 were 36.2% and 20.8%, respectively. The major differences between the statutory tax rate andthe actual effective tax rate were (9.0%) of reserve for dividends
to policyholders and (6.6%) of revaluation reserve for land.
Deferred tax assets and deferred tax liabilities as of March
31, 2010 were ¥94,720 million and ¥29,692 million, respectively.
Valuation allowance for deferred tax assets was ¥2,857 million.
Major components of deferred tax assets were ¥57,349
million of policy reserves, ¥18,024 million of reserve for employees’ retirement benefits and ¥9,577 million of reserve for pricefluctuation of securities as of March 31, 2010. Major componentof deferred tax liabilities was ¥27,412 million of net unrealized
gains on available-for-sale securities as of March 31, 2010.
The statutory tax rate and the actual effective tax rate forthe year ended March 31, 2010 were 36.2% and 14.3%, respectively. The major difference between the statutory tax rate andthe actual effective tax rate was (23.1%) of reserve for dividends
to policyholders.
Deferred tax assets and deferred tax liabilities as of March
31, 2011 were ¥98,663 million (US$1,186 million) and ¥8,191
million (US$98 million), respectively. Valuation allowance fordeferred tax assets was ¥3,139 million (US$37 million).
Major components of deferred tax assets were ¥58,929
million (US$708 million) of policy reserves, ¥18,144 million(US$218 million) of reserve for employees’ retirement benefitsand ¥12,105 million (US$145 million) of reserve for price fluctuation of securities as of March 31, 2011. Major component ofdeferred tax liabilities was ¥5,673 million (US$68 million) of net
unrealized gains on available-for-sale securities as of March 31,
2011.
The statutory tax rate and the actual effective tax rate forthe year ended March 31, 2011 were 36.2% and 19.5%, respectively. The major difference between the statutory tax rate andthe actual effective tax rate was (17.1%) of reserve for dividends
to policyholders.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

25

11. Reserve for Dividends to Policyholders
Changes in reserve for dividends to policyholders were as follows:
Years ended March 31,

2009

2010

2011

Millions of
U.S. dollars

		Millions of yen

Balance at the end of previous fiscal year...................................................
Transfer from surplus in previous fiscal year...............................................
Dividends paid in the current fiscal year......................................................
Increase in interest......................................................................................
Balance at the end of fiscal year..................................................................

12. Stocks of Subsidiaries
The amounts of stocks of subsidiaries the Company held as ofMarch 31, 2009, 2010 and 2011 were ¥27,525 million, ¥27,525
million and ¥28,009 million (US$336 million), respectively.
13. Pledged Assets and Secured Debts
Assets pledged as collateral as of March 31, 2009 were ¥25,959
million of securities. Secured debts as of March 31, 2009 were
¥4,645 million.
Assets pledged as collateral as of March 31, 2010 were¥21,642 million of securities. Secured debts as of March 31,
2010 were ¥4,548 million.
Assets pledged as collateral as of March 31, 2011 were¥23,633 million (US$284 million) of securities. Secured debts asof March 31, 2011 were ¥4,629 million (US$55 million).
14. Policy Reserves for the Reinsurance Contracts
Reserve for outstanding claims for the reinsurance contracts
provided in accordance with Article 71 Paragraph 1 of the Enforcement Regulation of the Insurance Business Law (hereinafter
called "reserve for outstanding claims for ceded reinsurance")
were ¥55 million, ¥32 million and ¥42 million (US$513 thousand)as of March 31, 2009, 2010 and 2011, respectively.
Policy reserve for the reinsurance contracts provided in accordance with Article 71 Paragraph 1 of the Enforcement Regulation of the Insurance Business Law (hereinafter called "policy
reserve for ceded reinsurance") were ¥30 million, ¥30 millionand ¥31 million (US$384 thousand) as of March 31, 2009, 2010
and 2011, respectively.
15. Adjustment Items for Redemption of Foundation Funds
and Appropriation of Net Surplus
The total amounts of adjustment items for redemption of foundation funds and appropriation of net surplus defined in Article
30 Paragraph 2 of the Enforcement Regulation of the Insurance
Business Law were ¥1,406 million, ¥49,716 million and ¥11,838

26

FUKOKU MUTUAL LIFE INSURANCE COMPANY¥ 54,382
31,868(29,176)242¥ 57,317¥ 57,317
17,856(20,571)157¥ 54,759

2011¥ 54,759
19,505(21,176)116¥ 53,205

$ 658
234
(254)
1
$ 639

million (US$142 million) as of March 31, 2009, 2010 and 2011,
respectively.
16. Additional Foundation Funds
The Company raised additional foundation funds of ¥15,000 million during the year ended March 31, 2010 in accordance with
Article 60 of the Insurance Business Law.
17. Redemption of Foundation Funds
In the year ended March 31, 2010, in connection with the redemption of foundation funds of ¥15,000 million, the Company
reversed the reserve for redemption of foundation funds andprovided the equivalent amount for accumulated foundation
funds redeemed in accordance with Article 56 of the Insurance
Business Law.
18. Commitment LineAs of March 31, 2009, 2010 and 2011, there were unused
commitment line agreements under which the Company is thelender of ¥1,481 million, ¥5,653 million and ¥4,056 million (US$48
million), respectively.
19. Subordinated Bonds
Repayments of subordinated bonds are subordinated to otherobligations.
20. Assets Denominated in Foreign Currencies
Assets denominated in foreign currencies as of March 31, 2009,2010 and 2011 totaled to ¥463,674 million, ¥482,896 million and¥718,304 million (US$8,638 million), respectively. The principal
foreign currency asset amounts were 1,551 million euros and
US$2,465 million as of March 31, 2009, 1,466 million euros and
US$2,937 million as of March 31, 2010 and 1,799 million euros
and US$4,169 million as of March 31, 2011, respectively.
Liabilities denominated in foreign currencies as of March 31,
2009, 2010 and 2011 totaled to ¥39,840 million, ¥38,330 million

and ¥36,075 million (US$433 million), respectively. The foreign
currency liability amounts as of March 31, 2009, 2010 and 2011were 306 million euros.

Business Law were estimated at ¥11,059 million, ¥10,639 million and ¥10,770 million (US$129 million) as of March 31, 2009,2010 and 2011, respectively. The contributions were charged as
operating expenses in the year in which they were paid.

21. Contribution to Policyholders Protection Corporation
The future contribution to the Life Insurance Policyholders Protection Corporation of Japan under Article 259 of the Insurance

22. Reserve for Employees’ Retirement Benefits(1) The reserve for employees’ retirement benefits as of March 31, 2009, 2010 and 2011 were calculated as follows:
As of March 31,

2009

2010

2011

2011
Millions of
U.S. dollars

		Millions of yen

a. Projected benefit obligation.....................................................................

¥(71,981)¥(71,591)¥(71,742)$(862)

b. Fair value of pension plan assets.............................................................
c. Unfunded benefit obligation (a+b) ..........................................................
d. Unrecognized actuarial differences.........................................................
e. Unrecognized prior service cost..............................................................
f. Reserve for employees' retirement
benefits (c+d+e)....................................................................................

15,016(56,965)
7,499
172

16,009(55,581)
5,667
137

15,728(56,014)
5,802
102

189
(673)
69
1

¥(49,293)¥(49,776)¥(50,109)$(602)(2) Gross amount of retirement benefit expenses for the years ended March 31, 2009, 2010 and 2011 were as follows:
Years ended March 31,

2009

2010

2011

		
Millions of yen

Service cost.................................................................................................
Interest cost................................................................................................
Expected return on pension plan assets.....................................................
Amortization of actuarial differences...........................................................
Amortization of prior service cost................................................................
		¥3,218
1,434
(640)
779
34
¥4,826¥3,166
1,438
(450)
1,231
34
¥5,4202011
Millions of
U.S. dollars¥3,096
1,430
(480)
1,171
34
¥5,252

$ 37
17
(5)
14
0
$ 63

(3) The assumptions used in calculation of the above information were as follows:
Years ended March 31,

		

2009

2010

2011

Method of attributing the projected benefits to periods of service...................................

Straight-line
basis

Straight-line
basis

Straight-line
basis

Discount rate.....................................................................................................................
Expected rate of return on pension plan assets................................................................
Amortization period of actuarial differences......................................................................
Amortization period of prior service cost...........................................................................

2.0%
3.5%
10 years
10 years

2.0%
3.0%
10 years
10 years

2.0%
3.0%
10 years
10 years

FUKOKU MUTUAL LIFE INSURANCE COMPANY

27

III. Notes to Statements of Operations
1. Transactions with Subsidiaries
The total amounts of revenues and expenditures in connection
with subsidiaries were ¥1,032 million and ¥7,170 million for theyear ended March 31, 2009, ¥982 million and ¥7,764 million forthe year ended March 31, 2010 and ¥998 million (US$12 million)and ¥7,576 million (US$91 million) for the year ended March 31,
2011, respectively.

2. Gains on Sales of Securities
Major items of gains on sales of securities were as follows:
Years ended March 31,

2009

2010

2011

Domestic bonds..........................................................................................
Domestic stocks and others........................................................................
Foreign securities........................................................................................

¥29,312
17,176
5,002¥14,017
7,664
333

2009

2010

2011
Millions of
U.S. dollars

		Millions of yen¥19,211
11,239
4

$231
135
0

3. Losses on Sales of Securities
Major items of losses on sales of securities were as follows:
Years ended March 31,

2011

Millions of
U.S. dollars

		Millions of yen

Domestic bonds..........................................................................................
Domestic stocks and others........................................................................
Foreign securities........................................................................................

¥ 2,427
43,67949,363¥564
12,771
28,158

2011

¥

908
13,036
6,473

$ 10
156
77

4. Losses on Valuation of Securities
Major items of losses on valuation of securities were as follows:
Years ended March 31,

2009

2010

2011

Millions of
U.S. dollars

		Millions of yen

Domestic stocks and others........................................................................
Foreign securities........................................................................................

28

FUKOKU MUTUAL LIFE INSURANCE COMPANY¥21,507
3,761¥1,313—

2011¥5,87052$70
05. Policy Reserves for the Reinsurance Contracts
For the year ended March 31, 2009, provision for reserve foroutstanding claims for ceded reinsurance considered in calculation of provision for reserve for outstanding claims was ¥24
million and provision for policy reserve for ceded reinsurance
considered in calculation of reversal of policy reserve was ¥0
million.
For the year ended March 31, 2010, reversal of reserve foroutstanding claims for ceded reinsurance considered in calcula-tion of reversal of reserve for outstanding claims was ¥22 million
and provision for policy reserve for ceded reinsurance considered in calculation of provision for policy reserve was ¥0 million.
For the year ended March 31, 2011, provision for reserve foroutstanding claims for ceded reinsurance considered in calculation of provision for reserve for outstanding claims was ¥9
million (US$118 thousand) and provision for policy reserve forceded reinsurance considered in calculation of reversal of policy
reserve was ¥1 million (US$14 thousand).

6. Gains(Losses) from Trading Securities
Major items of gains(losses) from trading securities were as follows:
Years ended March 31,

2009

2010

2011

Millions of
U.S. dollars

		Millions of yen

Interest, dividends and other income..........................................................
Gains(Losses) on sales of trading securities...............................................
Gains(Losses) on valuation of trading securities.........................................

¥ 2,645734(6,724)¥ 2,527(494)(1,866)¥ 6,814(8,234)(3,640)7. Gains (Losses) from Money Held in Trust
Gains (Losses) from money held in trust for the years ended
March 31, 2009, 2010 and 2011 included valuation gains of ¥520
million, valuation gains of ¥0 million and valuation losses of ¥0
million (US$0 thousand), respectively.

(1) Method of grouping

8. Gains (Losses) from Derivative Instruments
Gains (Losses) from derivative instruments for the years ended
March 31, 2009, 2010 and 2011 included valuation losses of¥6,298 million, valuation gains of ¥5,607 million and valuation
losses of ¥4,346 million (US$52 million), respectively.

(2) Background of recognizing the impairment losses

9. Impairment Losses of Fixed Assets
For the years ended March 31, 2009 and 2010, impairment
losses of fixed assets were as follows:			
		

2011

$ 81
(99)
(43)

Real estate and other assets used for insurance business operations are classified as one asset group as a whole. Other assets
such as real estate for rent and unused real estate are classified
as one group individually.					Profitability of certain real estate for rent dropped down significantly due to a decrease in the level of rental income and a declining trend of market prices of land. The Company reduced its
book values of such real estate for rent and unused real estate
to their recoverable amounts. The amounts reduced were recognized as impairment losses and included in the extraordinary
losses.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

29

(3) Asset groups recognized impairment losses and losses by fixed assets
Years ended March 31,

			

2009

2010
Millions of yen

Real estate for rent:
Land...............................................................................................................................................			 ¥205
Buildings and others......................................................................................................................			 40

¥ 715Total real estate for rent (i).............................................................................................................			 245Unused real estate:Land...............................................................................................................................................			 55Buildings and others......................................................................................................................			 213

136
651

Total unused lease property (ii)......................................................................................................			 269

788

Total:
Land...............................................................................................................................................			 260Buildings and others......................................................................................................................			 254

208
656

Total (i)+(ii)......................................................................................................................................

		 ¥51476¥865(4) Calculation method of recoverable amount						Recoverable amount is based on net sales value. Net sales value is determined based on appraisal value, posted price or road rate.

30

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Report of Independent Auditors

The Board of Directors of Fukoku Mutual Life Insurance Company

We have audited the accompanying non-consolidated balance sheets of Fukoku Mutual Life Insurance Company as of March 31, 2009, 2010 and 2011, and the related non-consolidated statementsof operations, surplus and changes in net assets for the years then ended, all expressed in Japanese yen. These non-consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to independently express an opinion on these non-consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects, the non-consolidated financial position of Fukoku Mutual Life Insurance Company
as of March 31, 2009, 2010 and 2011, and the non-consolidated results of their operations for theyears then ended in conformity with accounting principles generally accepted in Japan.
The amounts expressed in U.S. dollars, which are provided solely for the convenience of the reader, have been translated on the basis set forth in Note I. 2 to the accompanying non-consolidated
financial statements with respect to the year ended March 31, 2011.

Tokyo, JapanMay 20, 2011

Kisaragi Audit Corporation

FUKOKU MUTUAL LIFE INSURANCE COMPANY

31

Consolidated Financial Statements
Consolidated Balance Sheets
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
As of March 31, 2009, 2010 and 2011

As of March 31,

2010

2009

2011

2011
Millions of
U.S. dollars

Millions of yen

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

¥

68,692¥

83,557¥ 314,392$ 3,781Call loans ...............................................................................

183,600

91,000——

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

2,055

1,752

1,424

17

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

33,05332,902

33,169398

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

3,760,762

4,248,119

4,681,280

56,299Loans .....................................................................................

1,240,369

1,223,402

1,146,719

13,790Land...................................................................................

141,825

162,160

163,574

1,967

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

99,01496,764

116,647

1,402

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

—

31

47

0

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

5,457

17,0091,165

14Tangible fixed assets:

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

3,944

3,728

3,427

41

		

250,242

279,694

284,863

3,425

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

7,856

7,626

8,750

105

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

7,087

6,304

5,520

66

Intangible fixed assets:

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

—

—

987

11

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

454

454

453

5

		

15,39814,384

15,712

188

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

2

1

4

0

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

127

281

174

2

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

56,69352,243

106,524

1,281

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

110,604

63,30888,745

1,067

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

(11,436)(2,586)(2,665)(32)

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

¥5,710,164¥6,088,061¥6,670,346$80,220

See notes to the consolidated financial statements.

32

FUKOKU MUTUAL LIFE INSURANCE COMPANYAs of March 31,

2009

2010

2011

2011
Millions of
U.S. dollars

Millions of yen

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

¥

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

5,327,274

28,855¥5,612,304

26,407

6,115,914

73,552

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

57,31754,75953,205639¥

32,792$

394

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

533

585

654

7

		

5,413,981

5,694,057

6,202,567

74,594

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

1,208

1,872

1,685

20

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

113

140

100

1

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

38,87037,40635,214423

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

40,73043,681

129,127

1,552

Reserve for employees' retirement benefits ........................

49,31349,80350,153603

Reserve for price fluctuation of securities . ...........................

24,772

26,69733,865

407

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

0

—

—

—

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

20,026

19,983

19,936239

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

5,589,016

5,873,642

6,472,650

77,843

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

40,00040,00040,000481

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

31,00046,00046,000553

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

112

112

112

1

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

83,36577,02098,228

1,181

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

154,477

163,132

184,340

2,216(36,210)48,045

10,006

120

479

538

365

4

Net assets:

Net unrealized gains (losses) on available-for-salesecurities, net of tax ............................................................
Deferred valuation gains (losses)
under hedge accounting ......................................................
Revaluation reserve for land, net of tax . ...............................

814

773

1,366

16

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

(667)

(583)

(761)

(9)

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

(35,584)

48,774

10,977132

Minority interests ..................................................................

2,254

2,513

2,378

28

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

121,147

214,419

197,696

2,377

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

¥5,710,164¥6,088,061¥6,670,346$80,220

See notes to the consolidated financial statements.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

33

Consolidated Statements of Operations
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
For the years ended March 31, 2009, 2010 and 2011

Years ended March 31,

2009

2010

2011

Millions of
U.S. dollars

Millions of yen

Ordinary revenues:
Premium and other income .....................................................
Investment income:Interest, dividends and other income ..................................
Gains from money held in trust, net . ..................................
Gains from trading securities, net .......................................
Gains on sales of securities . ...............................................
Gains from derivative instruments, net ...............................
Other investment income ...................................................
Gains from separate accounts, net .....................................

2011¥781,963¥920,125¥1,210,851$14,562

Other ordinary revenues . ........................................................
Total ordinary revenues ........................................................

117,035——
52,184—212—
169,432
23,506
974,902

116,073—165
22,398—358
14,428
153,424
16,412
1,089,963

124,544361—
30,6783,335
354—
159,276
12,507
1,382,635

1,497
4
—
368
40
4
—
1,915
150
16,628

Ordinary expenditures:
Claims and other payments:
Claims . ................................................................................
Annuities .............................................................................
Benefits ...............................................................................
Surrenders ...........................................................................
Other payments ..................................................................
		

207,944
89,662
152,251
114,574
40,503604,936

181,21388,245
147,812
119,42237,075
573,769

178,21091,729189,273
138,695
29,923627,832

2,143
1,103
2,276
1,668
359
7,550

1,782
74,803242—
285,029
157

6,385
503,609
116

76
6,056
1

0
76,8291
285,1880510,113

0
6,134

1,974
3,913
3,343
96,04325,556
110
2,348
1,292
—
4,226
5,923
25,086
169,818
95,922
26,226
973,732
1,169

1,852
197
—
41,753
1,676
11,555
1,711
—
0
5,230
6,093
—
70,070102,349
24,114
1,055,492
34,470

1,540
—
5,069
20,511
5,922
—
2,654
—
—
5,732
5,238
3,034
49,704
109,797
23,8691,321,317
61,318

18
—
60
246
71
—
31
—
—
68
63
36
597
1,320
287
15,890737

Provision for policy reserve and others:
Provision for reserve for outstanding claims .......................
Provision for policy reserve .................................................
Interest on accumulated dividends to policyholders ...........
Interest on accumulated dividends topolicyholders (subsidiary)....................................................
		Investment expenses:
Interest expenses . ..............................................................
Losses from money held in trust, net..................................
Losses from trading securities, net......................................
Losses on sales of securities ..............................................
Losses on valuation of securities ........................................
Losses from derivative instruments, net . ...........................
Foreign exchange losses, net . ............................................
Provision for allowance for possible loan losses .................
Write-off of loans . ...............................................................
Depreciation of real estate for rent and other assets ..........
Other investment expenses ................................................
Losses from separate accounts, net....................................
Operating expenses ................................................................
Other ordinary expenditures . ..................................................
Total ordinary expenditures . ................................................
Ordinary profits .....................................................................
34

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Years ended March 31,

2009

2010

2011

Millions of
U.S. dollars

Millions of yen

Extraordinary gains:
Gains on disposal of fixed assets ........................................
Reversal of reserve for price fluctuation of securities .........
Reversal of allowance for possible loan losses....................
Other extraordinary gains.....................................................
Total extraordinary gains ......................................................
Extraordinary losses:
Losses on disposal of fixed assets . ....................................
Impairment losses ...............................................................
Provision for reserve for price fluctuation of securities .......
Effect of applying the accounting standard for asset
retirement obligations .......................................................
Other extraordinary losses...................................................
Total extraordinary losses . ..................................................
Provision for reserve for dividends topolicyholders (subsidiary) ................................................
Surplus before income taxes . ..............................................
Income taxes:
Current ................................................................................
Deferred ..............................................................................
Total income taxes . ...............................................................
Net surplus before minority interests ..................................
Minority interests ..................................................................
Net surplus for the year ........................................................

¥41,724
29,249——70,974

¥

326
—
527
—
853

2011

¥

16
—
957
6
980

$

0
—
11
0
11

904
514
—

696
865
1,924

111
318
7,167

1
3
86

—
8
1,427

—
—
3,486

967
—
8,564

11
—
103

276
70,440397
31,439456
53,277

5
640

4,123
11,97016,094—(332)¥54,678

4,379
(350)
4,029
—
227
¥27,182

14,719(3,809)10,90942,367
168¥42,199

177
(45)
131
509
2
$507

See notes to the consolidated financial statements.

Consolidated Statement of Comprehensive Income
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
For the year ended March 31, 2011

Year ended March 31,

		Net surplus before minority interests............................................................................................... 		
Other comprehensive income:Net unrealized gains (losses) on available-for-sale securities, net of tax................................... 		
Deferred valuation gains (losses) under hedge accounting....................................................... 		
Foreign currency translation adjustment...................................................................................
				Comprehensive income attributable to:Parent company........................................................................................................................
Minority interests......................................................................................................................
				

2011

2011

Millions of yen

Millions of
U.S. dollars¥42,367$509(38,009)
(173)
(177)
(38,360)

(457)
(2)
(2)
(461)

3,809
196
¥ 4,00645
2$ 48

See notes to the consolidated financial statements.

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, 2009, 2010 and 2011

Years ended March 31,

2009

2010

2011

Millions of
U.S. dollars

Millions of yen

Cash flows from operating activities:
Surplus before income taxes . ................................................ ¥70,440Depreciation of real estate for rent and other assets .............
4,226
Depreciation ...........................................................................
5,741
Impairment losses ..................................................................
514
Amortization of goodwill . .......................................................
744
Increase (Decrease) in reserve for outstanding claims ..........
1,782
Increase (Decrease) in policy reserve . ...................................
74,803
Interest on accumulated dividends to policyholders ..............
242
Interest on accumulated dividends
to policyholders (subsidiary).................................................
0
Provision for reserve for dividends
to policyholders (subsidiary).................................................
276
Increase (Decrease) in allowance for possible loan losses ....
1,246
Increase (Decrease) in reserve for employees'
retirement benefits . ............................................................
(206)
Increase (Decrease) in reserve for directors'
and corporate auditors' retirement benefits ........................
(27)
Increase (Decrease) in reserve for pricefluctuation of securities .......................................................
(29,249)
Interest, dividends and other income .....................................
(117,035)(Gains) Losses on securities . .................................................
101,869
Interest expenses . .................................................................
1,974
Foreign exchange (gains) losses, net .....................................
2,348(Gains) Losses on tangible fixed assets .................................
(40,820)(Increase) Decrease in agency receivables ............................
(0)(Increase) Decrease in reinsurance receivables .....................
(3)(Increase) Decrease in other assets except frominvesting and financing activities.........................................
(3,158)
Increase (Decrease) in agency payables ................................
1,156
Increase (Decrease) in reinsurance payables .........................
(25)
Increase (Decrease) in other liabilities except frominvesting and financing activities.........................................
(964)
Others ....................................................................................
22,152
Subtotal ..............................................................................
98,027
Interest, dividends and other income received ......................
125,583
Interest paid ...........................................................................
(2,136)
Dividends to policyholders paid ..............................................
(29,176)
Dividends to policyholders paid (subsidiary) ...........................
(423)
Corporate income tax (paid) refunded ....................................
(20,125)
Net cash provided by (used in) operating activities (I) ........
171,748
Cash flows from investing activities:(Increase) Decrease in deposits .............................................
(289)
Proceeds from sales and redemption of monetaryclaims bought ......................................................................
477
Payments for increase in money held in trust ........................
(12,297)
Proceeds from decrease in money held in trust ....................
32,932
Payments for purchase of securities ...................................... (1,587,041)
Proceeds from sales and redemption of securities ................
1,504,934
Payments for additions to loans .............................................
(181,269)
Proceeds from collections of loans ........................................
160,153
Proceeds from settlement of derivatives ...............................
1,160
Others ....................................................................................
(2,856)
Subtotal (IIa) .......................................................................
(84,094)(I+IIa)...................................................................................
87,65336

FUKOKU MUTUAL LIFE INSURANCE COMPANY¥

31,439
5,230
5,622
865
783
(2,448)285,029
157

2011

¥

53,277
5,732
5,841
318
793
6,385
503,609
116

$

640
68
70
3
9
76
6,056
1

1

0

0

397
(8,849)

456
78

5
0

490

349

4

—

—

—

1,924
(116,073)
18,190
1,852
1,711
370
0
(153)

7,167
(124,544)
161
1,540
2,654
1,041
(2)
106

86
(1,497)
1
18
31
12
(0)
1

(2,064)
663
27

(929)
(187)
(39)

(11)
(2)
(0)

1,815
31,101
258,083
118,875(1,851)(20,571)
(346)
3,601
357,790985
18,819483,734
129,665(1,556)(21,176)(388)(4,563)585,713

11
226
5,817
1,559
(18)
(254)
(4)
(54)
7,044

29

160

1

303
(7,000)6,950(2,095,137)
1,720,166(155,444)
148,816(11,775)(1,395)(394,485)(36,695)

327(3,500)3,581(2,011,445)
1,505,910(124,767)
189,1147,271
5,654(427,690)
158,0233(42)
43(24,190)
18,110(1,500)2,274
87
68(5,143)
1,900

Years ended March 31,

2009

2010

2011

Millions of
U.S. dollars

Millions of yen

Payments for purchase of tangible fixed assets ....................
Proceeds from sales of tangible fixed assets . .......................
Payments for purchase of intangible fixed assets...................
Proceeds from sales of intangible fixed assets.......................
Payments for additional acquisition of shares of
consolidated subsidiary.........................................................
Net cash provided by (used in) investing activities . ...........
Cash flows from financing activities:
Financing of additional foundation funds ................................
Redemption of foundation funds . ..........................................
Interest payment for foundation funds . .................................
Dividends paid to minority interests........................................
Payments for lease obligations................................................
Net cash provided by (used in) financing activities . ...........
Effect of exchange rate changes on cash andcash equivalents ....................................................................
Net increase (decrease) in cash and cash equivalents ..........
Cash and cash equivalents at the beginning of the year ......
Cash and cash equivalents at the end of the year .................

2011(67,428)
58,176(1,982)
2(38,458)753(2,156)—(13,047)
116(2,737)
—

(156)
1
(32)
—

—
(95,327)—(434,346)(326)(443,686)(3)(5,335)

—
—
(716)
(52)
—
(768)

15,000(15,000)
(716)
(23)
—
(739)

—
—
(892)
(15)
(222)
(1,130)

—
—
(10)
(0)
(2)
(13)

(1,983)73,669177,956¥251,626(445)(77,740)
251,626¥173,885(842)
140,053
173,885¥313,939

(10)
1,684
2,091
$3,775

See notes to the consolidated financial statements.

FUKOKU 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, 2009, 2010 and 2011

Years ended March 31,

2009

2010

2011

Millions of
U.S. dollars

Millions of yen

Foundation funds, surplus and others:
Foundation funds
		 Balance at the end of previous fiscal year.......................
		 Changes in the current fiscal year:
			 Financing of additional foundation funds....................
			 Redemption of foundation funds................................
			 Total changes in the current fiscal year.......................
		 Balance at the end of current fiscal year.........................
Accumulated foundation funds redeemed		 Balance at the end of previous fiscal year.......................
		 Changes in the current fiscal year:
			 Additions to accumulated foundation			
funds redeemed.......................................................
			 Total changes in the current fiscal year.......................
		 Balance at the end of current fiscal year.........................
Reserve for revaluation
		 Balance at the end of previous fiscal year.......................
		 Changes in the current fiscal year:
			 Total changes in the current fiscal year.......................
		 Balance at the end of current fiscal year.........................
Consolidated surplus
		 Balance at the end of previous fiscal year.......................
		 Changes in the current fiscal year:
			 Additions to reserve for dividends to policyholders....
			 Payment of interest on foundation funds...................
			 Net surplus for the year..............................................
			 Reversal of reserve for redemption of			foundation funds......................................................
			 Reversal of revaluation reserve for land......................
			 Total changes in the current fiscal year.......................
		 Balance at the end of current fiscal year.........................
Total foundation funds, surplus and others
		 Balance at the end of previous fiscal year.......................
		 Changes in the current fiscal year:
			 Financing of additional foundation funds....................
			 Additions to reserve for dividends to policyholders.....
			 Additions to accumulated foundation funds			redeemed.................................................................
			 Payment of interest on foundation funds...................
			 Net surplus for the year..............................................
			 Redemption of foundation funds................................
			 Reversal of reserve for redemption of			foundation funds......................................................
			 Reversal of revaluation reserve for land......................
			 Total changes in the current fiscal year.......................
		 Balance at the end of current fiscal year.........................

38

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2011¥ 40,000¥ 40,000¥ 40,000

$ 481

—
—
—
40,00015,000(15,000)—
40,000———40,000———481

31,00031,00046,000553——
31,00015,00015,00046,000——46,000

—
—
553

112

112

112

1

—
112

—
112

—
112

—
1

74,36983,36577,020926(31,868)(716)
54,678(17,856)(716)
27,182(19,505)(892)
42,199

(234)
(10)
507

—
(13,098)
8,995
83,365(15,000)
44(6,345)77,020—(592)
21,20898,228

—
(7)
255
1,181

145,481

154,477

163,132

1,961—(31,868)

15,000(17,856)—(19,505)

—
(234)

—
(716)
54,678—15,000(716)
27,182(15,000)—(892)
42,199
—

—
(10)
507
—

—
(13,098)
8,995
154,477(15,000)
44
8,654
163,132—(592)
21,208184,340

—
(7)
255
2,216

Years ended March 31,

2009

2010

2011

Millions of
U.S. dollars

Millions of yen

Accumulated other comprehensive income:Net unrealized gains (losses) on available-for-salesecurities, net of tax
		 Balance at the end of previous fiscal year.......................
		 Changes in the current fiscal year:
			 Net changes, excluding foundation funds, surplus and others
			 Total changes in the current fiscal year.......................
		 Balance at the end of current fiscal year.........................
Deferred valuation gains (losses) under hedge accounting
		 Balance at the end of previous fiscal year.......................
		 Changes in the current fiscal year:
			 Net changes, excluding foundation funds, surplus and others
			 Total changes in the current fiscal year.......................
		 Balance at the end of current fiscal year.........................
Revaluation reserve for land, net of tax
		 Balance at the end of previous fiscal year.......................
		 Changes in the current fiscal year:
			 Net changes, excluding foundation funds, surplus and others
			 Total changes in the current fiscal year.......................
		 Balance at the end of current fiscal year.........................
Foreign currency translation adjustment
		 Balance at the end of previous fiscal year.......................
		 Changes in the current fiscal year:
			 Net changes, excluding foundation funds, surplus and others
			 Total changes in the current fiscal year.......................
		 Balance at the end of current fiscal year.........................
Total accumulated other comprehensive income
		 Balance at the end of previous fiscal year.......................
		 Changes in the current fiscal year:
			 Net changes, excluding foundation funds, surplus and others
			 Total changes in the current fiscal year.......................
		 Balance at the end of current fiscal year.........................
Minority interests
Balance at the end of previous fiscal year............................
Changes in the current fiscal year:
		 Net changes, excluding foundation funds, surplus and others
		 Total changes in the current fiscal year...........................
Balance at the end of current fiscal year..............................
Total net assets
Balance at the end of previous fiscal year............................
Changes in the current fiscal year:
		 Financing of additional foundation funds.........................
		 Additions to reserve for dividends to policyholders........
		 Additions to accumulated foundation funds redeemed..
		 Payment of interest on foundation funds........................
		 Net surplus for the year...................................................
		 Redemption of foundation funds.....................................
		 Reversal of reserve for redemption of		foundation funds .........................................................
		 Reversal of revaluation reserve for land..........................
		 Net changes, excluding foundation funds, surplus and others
		 Total changes in the current fiscal year...........................
Balance at the end of current fiscal year..............................

2011

115,335(36,210)48,045577(151,546)(151,546)(36,210)

84,25584,25548,045(38,038)(38,038)
10,006

(457)
(457)
120

408

479

538

6

70
70
479

59
59
538

(173)
(173)
365

(2)
(2)
4

(12,335)

814

773

9

13,14913,149
814

(40)
(40)
773

592
592
1,366

7
7
16

(3)

(667)

(583)

(7)

(663)
(663)
(667)

83
83
(583)

(177)
(177)
(761)

(2)
(2)
(9)

103,405(35,584)

48,774586(138,989)(138,989)(35,584)

84,35884,35848,774(37,796)(37,796)
10,977

(454)
(454)
132

2,438

2,254

2,513

30

(184)
(184)
2,254

258
258
2,513

(134)
(134)
2,378

(1)
(1)
28

251,325

121,147

214,419

2,578—(31,868)—(716)
54,678—15,000(17,856)
15,000(716)
27,182(15,000)—(19,505)—(892)
42,199
—

—
(234)
—
(10)
507
—

—
(13,098)(139,173)(130,177)¥ 121,147(15,000)
44
84,617
93,271¥ 214,419—(592)(37,931)(16,723)¥ 197,696

—
(7)
(456)
(201)
¥ 2,377

FUKOKU MUTUAL LIFE INSURANCE COMPANY

39

Notes to the Consolidated Financial Statements

I. Presentation of the Consolidated Financial
Statements
1. Basis of Presentation
The accompanying consolidated financial statements have been
prepared from the accounts maintained by Fukoku Mutual Life
Insurance Company (the "Company") and its consolidated subsidiaries in accordance with the provisions set forth in the Insurance Business Law of Japan and its related rules and regulations
and in conformity with accounting principles generally acceptedin Japan, which are different in certain respects from accounting
principles generally accepted in countries and jurisdictions otherthan Japan.
In addition, the notes to the consolidated financial statements include information which is not required under accounting principles generally accepted in Japan but is presented
herein as additional information.
Amounts of less than one million yen have been eliminated.
As a result, total in yen shown herein do not necessarily agreewith the sum of the individual amounts.
2. U.S. Dollar Amounts
The translations of yen amounts into U.S. dollar amounts areincluded solely for the convenience of the reader and have been
made, as a matter of arithmetical computation only, at the rateof ¥83.15 = US$1.00, the effective rate of exchange at the balance sheet date of March 31, 2011. The translations should not
be construed as representations that such yen amounts havebeen or could in the future be, converted into U.S. dollars at thator any other rates.

(2) Application of equity method

Unconsolidated subsidiaries (such as Fukoku Seimei building
Company Limited, etc.) are insignificant in their impact on net
surplus and surplus, and also immaterial as a whole, therefore,
application of equity method is withheld.
There are no affiliates for the years ended March 31, 2009,2010 and 2011.
(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 was 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 whenincurred.
(5) Valuation of subsidiary's assets and liabilities on acquisition

On acquisition of a subsidiary, all of the subsidiary’s assets andliabilities that exist at the date of acquisition are recorded at theirfair value.

II. Notes to Balance Sheets
1. Significant Accounting Policies(1) Valuation methods of securities

3. Principles of Consolidation(1) Scope of consolidation

Consolidated subsidiaries for the year ended March 31, 2011 arelisted below:
Fukoku Shinyo Hosho Company Limited
Fukoku Capital Management, Inc.
Fukokushinrai Life Insurance Company
Fukoku Information Systems Co., Ltd.
Fukoku Life International (U.K.) Limited
Fukoku Life International (America) Inc.
Major unconsolidated subsidiary is Fukoku Seimei Building Company Limited.
Seven subsidiaries are excluded from the scope of consolidation, as each one of them is small in its total assets, amountof sales, net surplus for the year and surplus and is sufficiently
insignificant to reasonable judgement on its impact on the financial position and results of operation of the Company's group.

40

FUKOKU MUTUAL LIFE INSURANCE COMPANY

The valuation of securities, including bank deposits and monetary claims bought which are equivalent to securities, andsecurities managed as trust assets in money held in trust, is asfollows: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 amortized cost
under the straight-line method, cost being determined by themoving average method.
iii) Policy-reserve-matching bonds are stated at amortized 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 Insurance Industry" (Industry Audit
Committee Report No.21 issued by the Japanese Institute ofCertified Public Accountants on November 16, 2000).

iv) Investments in unconsolidated subsidiaries and affiliates
which are not accounted for under the equity method arestated at cost, cost being determined by the moving averagemethod.
v) Available-for-sale securities with fair market value are stated
at fair market value based on the market prices at the end of
fiscal year. Costs of their sales are determined by the moving average method. Net unrealized gains or losses on theseavailable-for-sale securities, net of taxes, are recorded as aseparate component of net assets.
Available-for-sale securities whose fair values 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.

Assets other than buildings (excluding lease assets)i) Acquired on or before March 31, 2007: Previous decliningbalance methodii) Acquired on or after April 1, 2007: Declining-balance method
Lease assets related to finance lease transactions that do nottransfer ownership: Straight-line method over the lease term
Other tangible fixed assets acquired for ¥100,000 or more but
less than ¥200,000 are depreciated equally over three years.

(2) Valuation methods of derivative instrumentsi) For the credits of borrowers who are legally bankrupt suchas being in the proceedings of bankruptcy or civil rehabilitation (hereinafter called "legally bankrupt borrowers") and whoare substantially bankrupt (hereinafter called "substantiallybankrupt borrowers"), the Company 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 disposal of collateral or the execution of guarantees.
ii) For the credits of borrowers who are not currently bankrupt but have a high possibility of bankruptcy, the Company
provides the amounts deemed as necessary considering theborrowers' ability to pay, within the amounts after deductionsof the amount expected to be collected through the disposalof collateral or the execution of guarantees.
iii) For the credits of borrowers other than the above, the Company provides the amounts calculated by multiplying the borrowers' balance by the actual ratio of bad debt losses on defaults
during a certain past period.

Derivative instruments are stated at fair market value.
(3) Revaluation of land

The Company revalued the land for business purposes basedon the Law for Revaluation of Land (Law No.34 promulgated on
March 31, 1998). The difference between fair value and bookvalue resulting from the revaluation, net of related taxes, is recorded as revaluation reserve for land as a separate componentof net assets and the related tax is recorded as deferred tax
liabilities for revaluation reserve for land.
Date of revaluation: March 31, 2002
Method of revaluation as prescribed for in Article 3 Paragraph
3 of the said Law:
Calculation is based on the appraisal value for property tax set
forth in Article 2 item 3 of the Enforcement Ordinance of the
Law for Revaluation of Land (Government Ordinance No.119
promulgated on March 31, 1998) and the road rate set forth in
Article 2 item 4 of the said Ordinance with certain reasonableadjustments.

(5) Foreign currency translation

Foreign currency-denominated assets and liabilities are translated into Japanese yen at the effective exchange rate prevailingat the balance sheet date.
(6) Allowance for possible loan losses

Allowance for possible loan losses is provided in accordancewith the Company's standards of self-assessment and write-offs
and reserves on credit quality:(4) Depreciation of tangible fixed assets
Depreciation of the Company's tangible fixed assets is calculated by the following methods.
Buildings (excluding lease assets)i) Acquired on or before March 31, 1998: Previous decliningbalance methodii) Acquired on or after April 1, 1998 but on or before March 31,
2007: Previous straight-line methodiii) Acquired on or after April 1, 2007: Straight-line method

FUKOKU MUTUAL LIFE INSURANCE COMPANY

41

All credits are assessed by the relevant departments in accordance with the Company’s standards of self-assessment on
credit quality. The results of the assessment are reviewed by
the audit department, which is independent of business-related
divisions. Subsequently, the allowance for possible loan losses
are provided based on the results of these assessments.
For the credits of legally bankrupt borrowers and substantially bankrupt borrowers, the amounts remaining after deductions of collateral value or the amounts collectible through theexecution of guarantees is written-off directly from the borrower’s balance as the estimated uncollectible amounts. The
amounts written-off as of March 31, 2009, 2010 and 2011 were¥941 million, ¥9,159 million and ¥287 million (US$3 million),
respectively.

(8) Reserve for price fluctuation of securities

For the foreign currency forward contracts against theexchange rate fluctuations in the value of foreign currency-denominated bonds classified as available-for-sale securities, which
qualify for hedge accounting because of high correlation andeffectiveness between the hedging instruments and the hedged
items, valuation gains and losses on the foreign currency forward contracts are recorded in the statements of operations.
For the interest rate swaps against the interest rate fluctuations regarding loans, which qualify for hedge accounting
because of high correlation and effectiveness between thehedging instruments and the hedged items, valuation gains andlosses on the interest rate swaps are deferred until the maturityof the hedged transactions.
Deposits denominated in foreign currencies for which forward foreign exchange contracts are used to hedge the foreign
currency fluctuations are translated at the contract rates if theforward contracts qualify for specific hedge accounting. In thiscase, exchange differences between the exchange rate on the
trade date and the forward contract rate are allocated to eachfiscal year from the date contracted to the date settled.
For judging the effectiveness of hedge used, ratio analysis
of comparing the fluctuations in the fair value or cash flows ofhedged items and hedging instruments is mostly applied.

Reserve for price fluctuation of securities is calculated in accordance with Article 115 of the Insurance Business Law.

(12) Accounting for consumption taxes(7) Reserve for employees' retirement benefits

The Company and its consolidated subsidiaries adopt accounting standards for employees' retirement benefits (BusinessAccounting Council dated June 16, 1998) and account for the reserve for employees’ retirement benefits based on the projected
benefit obligation and plan assets at the balance sheet date.

(9) Lease Transactions as a Lessee
Finance lease transactions that do not transfer ownership to thelessee whose commencement day was on or before March 31,
2008 continued to be accounted for in a manner similar to accounting treatment for ordinary rental transactions.
(10) Lease Transactions as a Lessor
As for the finance lease transactions where the Company is alessor, the lease fee is recorded in “interest, dividends and otherincome” at the time of receiving lease fee. The corresponding
cost of the lease transactions is recorded in “other investment
expenses” , which is calculated by deducting an amount equivalent to the interest allocated over the lease term from the lease
fee received.
(11) Accounting for hedge activities

Hedge accounting is based on "Accounting Standards for
Financial Instruments" (ASBJ Statement No. 10 issued by the
Accounting Standards Board of Japan on August 11, 2006).

42

FUKOKU MUTUAL LIFE INSURANCE COMPANY

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 thatare stipulated to be deferred under the Tax Law, are deferred
as prepaid expenses and amortized equally over five years.
Consumption taxes other than deferred consumption taxes arerecognized as an expense when incurred.
(13) Policy reserve

Policy reserve is based on Article 116 of the Insurance Business
Law, and the premium reserve at the end of fiscal year is calculated by the following method:
In regard to the policies subject to the standard policy
reserve, the method as prescribed by the Commissioner of Financial Services Agency (Ministry of Finance Ordinance No. 48,
1996) is applied.
In regard to the policies not subject to the standard policy
reserve, the net level premium method is applied.

(14) Amortization method for intangible fixed assets

Intangible fixed assets are amortized as follows:i) Software
Software for internal use is amortized based on a straight-line
method over the estimated useful lives.
ii) Lease assets
Lease assets are amortized based on a straight-line method
over the lease term.
(15) Deferred assets

Discount on bonds is amortized equally over the period forwhich interest on bonds is fixed. This amount is deducted frombonds.
(16) Policy-reserve-matching bonds

Of the bonds corresponding to the sub-groups of individual
insurance and annuities which are set by insurance types andinvestment policies, the bonds that are held to match the duration of liabilities are classified as policy-reserve-matching bonds
in accordance with “Temporary Treatment of Accounting and
Auditing Concerning Policy-reserve-matching Bonds in Insurance Industry” (Industry Audit Committee Report No. 21 issued
by the Japanese Institute of Certified Public Accountants on
November 16, 2000).
The amounts of policy-reserve-matching bonds recorded on
the balance sheets and the market value of these bonds were¥721,357 million and ¥737,056 million as of March 31, 2009, andfor as of March 31, 2010 and 2011, are written in Notes No. 3“Financial Instruments”.
2. Changes in Accounting Policies(1) Effective for the year ended March 31, 2011, the Company
and its consolidated subsidiaries adopted “AccountingStandard for Asset Retirement Obligations” (ASBJ Statement No. 18 issued by the Accounting Standards Board ofJapan on March 31, 2008) and “Guidance on AccountingStandard for Asset Retirement Obligations” (ASBJ Guidance
No. 21 issued by the Accounting Standards Board of Japanon March 31, 2008). As a result, tangible fixed assets increased by ¥1,725 million (US$20 million) and the amount ofasset retirement obligations recorded in balance sheet was¥2,849 million (US$34 million). Ordinary profit decreased by¥157 million (US$1 million) and surplus before income taxes
decreased ¥1,124 million (US$13 million).
(2) Effective for the year ended March 31, 2010, the Company
adopted “Partial Amendments to Accounting Standard for
Retirement Benefits (Part 3)“ (ASBJ Statement No.19 issued by the Accounting Standards Board of Japan on July 31,2008). There is no effect of the change on ordinary profit andsurplus before income taxes since the Company has decided
to use the same discount rate as before.
(3) Effective for the year ended March 31, 2009, the Company
adopted “Accounting Standard for Lease Transactions” (ASBJ
Statement No. 13 issued by the Accounting Standards Boardof Japan on March 30, 2007). As a result, ordinary profits
decreased by ¥2 million, compared to the previous methods.
(4) Effective for the year ended March 31, 2009, the Company
adopted “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” (ASBJ PITF No.18 issued by the AccountingStandards Board of Japan on May 17, 2006). There was noeffect of this change on the income.

3. Financial Instruments
Asset management of the Company’s general accounts otherthan the separate accounts stipulated in Article 118 Paragraph 1of the Insurance Business Law is conducted on the principle ofprudent and profitable investments, considering public and social
responsibilities of the insurance business. Based on this policy,
the Company allocates the fund, securing its liquidity, from themedium-to-long term viewpoints. The Company is diversifying
investments in assets such as foreign securities and equity
securities 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. Derivatives aremainly used to mitigate the market risk regarding the securities
and loans. 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 “Basic Policy for Risk Management” establishedby the Board of Directors. Specifically, the Company eliminates
excessive risk deviating from the basic principle and secures thesafety of the assets by utilizing control functions of the Financial
and Investment Risk Management Department towards theasset 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 the possible
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 were as
follows:

FUKOKU MUTUAL LIFE INSURANCE COMPANY43

As of March 31,

2010

2011

2011

Millions of yen
Carrying			amountFair value
Difference

Carrying			amountFair value
Difference

Monetary claims bought:
Claims treated as loans.................... ¥1,752 ¥
1,743 ¥
(8) ¥1,424 ¥
1,424 ¥
0
Total monetary claims bought..........
1,752
1,743
(8)
1,424
1,424
0
Money held in trust:
Trading securities.............................
31,902
31,902—
32,16932,169—Total money held in trust..................
31,902
31,902—
32,16932,169—Securities:
Trading securities.............................
79,31779,317—228,171
228,171—
Held-to-maturity debt securities.......
514,566
519,051
4,485
685,249
691,061
5,811
Policy-reserve-matching bonds........
987,697 1,005,145
17,4481,270,781 1,291,435 20,654
Available-for-sale securities.............. 2,558,975 2,558,975—
2,400,737 2,400,737—
Total securities................................. 4,140,556 4,162,490
21,9334,584,939 4,611,406 26,466
Loans:
Policy loans......................................
76,69576,694(0)74,35774,357(0)
Ordinary loans.................................. 1,146,707 1,174,330
27,623
1,072,361 1,099,209 26,847
Total loans........................................ 1,223,402 1,251,025
27,623
1,146,719 1,173,566 26,846
Derivative instruments:
Hedge accounting not applied..........
(1,644)(1,644)—(6,049)(6,049)—Hedge accounting applied................
(4,006)(4,006)—(1,730)(1,730)—Total derivative instruments............. ¥(5,650) ¥(5,650) ¥— ¥(7,780) ¥ (7,780) ¥—(1) Securities including deposits and monetary claims bought
which are treated as securities based on “Accounting Standards for Financial Instruments” (ASBJ Statement No.10) andsecurities managed as trust assets in money held in trust:
The fair values of marketable securities are measured at thequoted market price at the end of fiscal year. The fair valuesof other securities without the quoted market price arebased on the prices reasonably calculated such as the prices
offered by the information vendors or counterparty financial
institutions.
Investments in unconsolidated subsidiaries and affiliates,
unlisted stocks and investments in partnerships whereby
partnership assets consist of unlisted stocks whose fairvalues 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 ¥240 million, ¥8,863
million and ¥8,306 million as of March 31, 2010, and ¥398
million (US$4 million), ¥8,847 million (US$106 million)and ¥8,201 million (US$98 million) as of March 31, 2011,
respectively.

44

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Millions of U.S. dollars
Carrying
amount

$

$

17
17

Fair value Difference

$

17
17

$

0
0

386
386

386
386

—
—

2,744
8,241
15,282
28,87255,1402,744
8,311
15,531
28,87255,458

—
69
248
—
318

894
12,896
13,790894
13,21914,113

(0)
322
322

(72)
(20)
(93) $

(72)
(20)
(93)

—
—
$ —

(2) 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 deadline havenot been set up due to the characteristics that the loan islimited 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 aremeasured by discounting the future cash flows to the present
values. The fair values of loans receivable from legally bankrupt borrowers, substantially bankrupt borrowers and borrowers who are not currently bankrupt but have a high possibilityof bankruptcy and monetary claims bought treated as loans
are computed by deducting the amount of the allowance for
doubtful accounts from the book values before direct writeoffs.

(3) Derivative instruments:i) The fair values of the futures and options traded at theexchange are measured at the settlement price of the exchange.
ii) The fair values of options and swaps traded over the counterare 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.

4. Investment and Rental Property
The Company holds investment and rental properties such as
office buildings in Tokyo and other areas. The carrying amounts
and the fair values of investment and rental properties were
¥223,701 million and ¥295,062 million as of March 31, 2010and ¥230,127 million (US$2,767 million) and ¥280,297 million(US$3,370 million) as of March 31, 2011, respectively. The fairvalue is mainly based on the value calculated by the Company inaccordance with real estate appraisal 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 was ¥1,411 million (US$16 million) as of March 31, 2011.
5. Loans Receivable
The total amounts of credits to bankrupt borrowers, delinquentloans, delinquent loans past 3 months or more and restructuredloans, which were included in loans, were ¥10,712 million,¥2,586 million and ¥3,288 million (US$39 million) as of March
31, 2009, 2010 and 2011, respectively.
i) The balances of credits to bankrupt borrowers were ¥435 million, ¥300 million and ¥280 million (US$3 million) as of March
31, 2009, 2010 and 2011, respectively.
ii) The balances of delinquent loans were ¥10,277 million,¥2,119 million and ¥770 million (US$9 million) as of March 31,
2009, 2010 and 2011, respectively.
iii) There were no balances of delinquent loans past 3 months ormore as of March 31, 2009, 2010 and 2011.
iv) The balances of restructured loans were ¥166 million and¥2,237 million (US$26 million) as of March 31, 2010 and 2011,
and no balance as of March 31, 2009.

on these loans is not recorded as income after determining thatprincipal of or interest on these loans is unlikely to be collected
due to the significant delay in repayment of principal or interest
payment or for some other reasons.
Delinquent loans are credits whose accruing interest is
not recorded as income due to the same reasons as describedabove, and exclude credits to bankrupt borrowers and loans forwhich interest payments have been suspended and rescheduled
to assist and support the borrowers in the restructuring of theirbusiness.
Delinquent loans past 3 months or more are loans for whichinterest payment or repayment of principal are delinquent for
3 months or more from the due date under the terms of therelated loan agreements, excluding those loans classified as
credits to bankrupt borrowers and delinquent loans.
Restructured loans are loans for which certain concessions
favorable to borrowers, such as interest reduction or exemptions, rescheduling of due date 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 restructuring of their business. This category excludes loans classified as
credits to bankrupt borrowers, delinquent loans and delinquentloans past 3 months or more.
The direct write-offs related to loans decreased credits tobankrupt borrowers described above by ¥102 million, ¥8,149
million and ¥19 million (US$232 thousand) as of March 31, 2009,2010 and 2011, respectively.
The direct write-offs related to loans decreased delinquentloans described above by ¥786 million, ¥938 million and ¥262
million (US$3 million) as of March 31, 2009, 2010 and 2011,
respectively.
6. Accumulated Depreciation of Tangible Fixed Assets
Accumulated depreciation of tangible fixed assets totaledto ¥124,761 million, ¥129,828 million and ¥137,605 million(US$1,654 million) as of March 31, 2009, 2010 and 2011, respectively.
7. Separate Accounts
Total assets in separate accounts provided for in Article 118 of
the Insurance Business Law were ¥113,498 million, ¥95,207
million and ¥83,280 million (US$1,001 million) as of March 31,
2009, 2010 and 2011, respectively. The amounts of separate
account liabilities were the same as separate account assets.

Credits to bankrupt borrowers represent loans, excluding the balances already written-off, which meet the conditions prescribedin Article 96 Paragraph 1 Item 3 and 4 of the Enforcement Regulations of the Corporate Tax Law. Moreover, accruing interest

FUKOKU MUTUAL LIFE INSURANCE COMPANY

45

8. Receivables from/Payables to Unconsolidated
Subsidiaries
The total amounts of receivables from/payables to unconsolidated subsidiaries were, ¥3,425 million and ¥165 million as ofMarch 31, 2009, ¥3,308 million and ¥186 million as of March 31,
2010, and ¥2,508 million (US$30 million) and ¥171 million (US$2
million) as of March 31, 2011, respectively.

9. Monetary Claims to Directors
Monetary claims to directors of the Company as of March 31,
2009, 2010 and 2011 were ¥12 million, ¥8 million and ¥6 million(US$77 thousand), respectively.
10. Income Taxes
Deferred tax assets and deferred tax liabilities as of March 31,
2009 were ¥116,732 million and ¥1,939 million, respectively.
Valuation allowance for deferred tax assets was ¥4,188 million.
Major components of deferred tax assets were ¥57,809 million of policy reserves, ¥20,318 million of net unrealized losses
on available-for-sale securities and ¥17,857 million of reserve for
employees' retirement benefits as of March 31, 2009.
For the year ended March 31, 2009, the Company's statutory tax rate was 36.2%. The major differences between thestatutory tax rate and 22.8% of the actual effective tax rate
were (9.2%) of reserve for dividends to policyholders and (6.7%)of revaluation reserve for land.
Deferred tax assets and deferred tax liabilities as of March
31, 2010 were ¥96,103 million and ¥29,717 million, respectively.

Valuation allowance for deferred tax assets was ¥3,077 million.
		Major components of deferred tax assets were ¥57,858
million of policy reserves, ¥18,034 million of reserve for
employees’ retirement benefits and ¥9,667 million of reservefor price fluctuation of securities as of March 31, 2010. Major
component of deferred tax liabilities was ¥27,435 million of net
unrealized gains on available-for-sale securities as of March 31,
2010.
		For the year ended March 31, 2010, the Company’s statutory tax rate was 36.2%. The major difference between thestatutory tax rate and 12.6% of the actual effective tax rate was(22.5%) of reserve for dividends to policyholders.
Deferred tax assets and deferred tax liabilities as of March
31, 2011 were ¥100,383 million (US$1,207 million) and ¥8,381
million (US$100 million), respectively. Valuation allowance fordeferred tax assets was ¥3,257 million (US$39 million).
Major components of deferred tax assets were ¥59,538
million (US$716 million) of policy reserves, ¥18,161 million(US$218 million) of reserve for employees’ retirement benefitsand ¥12,262 million (US$147 million) of reserve for price fluctuation of securities as of March 31, 2011. Major component ofdeferred tax liabilities was ¥5,859 million (US$70 million) of net
unrealized gains on available-for-sale securities as of March 31,
2011.
For the year ended March 31, 2011, the Company’s statutory tax rate was 36.2%. The major difference between thestatutory tax rate and 20.5% of the actual effective tax rate was(16.6%) of reserve for dividends to policyholders.

11. Reserve for Dividends to Policyholders
Changes in reserve for dividends to policyholders were as follows:
Years ended March 31,

2009

2010

2011

		
Millions of yen

Balance at the end of previous fiscal year...................................................
Transfer from surplus in previous fiscal year...............................................
Dividends paid in the current fiscal year......................................................
Increase in interest......................................................................................
Balance at the end of fiscal year..................................................................

46

FUKOKU MUTUAL LIFE INSURANCE COMPANY¥ 54,382
31,868(29,176)242¥ 57,317¥ 57,317
17,856(20,571)157¥ 54,759

2011
Millions of
U.S. dollars¥ 54,759
19,505(21,176)116¥ 53,205

$ 658
234
(254)
1
$ 639

12. Reserve for Dividends to Policyholders (Fukokushinrai Life Insurance Company)
Changes in reserve for dividends to policyholders were as follows:
Years ended March 31,

2009

2010

2011

		
Millions of yen

2011
Millions of
U.S. dollars

Balance at the end of previous fiscal year.......................................................
Dividends paid in the current fiscal year..........................................................
Increase in interest..........................................................................................
Provision for reserve for dividends to policyholders........................................

¥680
(423)
0
276

¥533
(346)
1
397

¥585
(388)
0
456

$7
(4)
0
5

Balance at the end of fiscal year......................................................................

¥533

¥585

¥654

$7

13. Stocks of Unconsolidated Subsidiaries
The amounts of stocks of unconsolidated subsidiaries the Company held as of March 31, 2009, 2010 and 2011 were ¥240 million, ¥240 million and ¥398 million (US$4 million), respectively.
14. Pledged Assets and Secured Debts
Assets pledged as collateral as of March 31, 2009 were ¥26,010
million of securities. Secured debts as of March 31, 2009 were
¥4,645 million.
Assets pledged as collateral as of March 31, 2010 were¥21,642 million of securities. Secured debts as of March 31,
2010 were ¥4,548 million.
Assets pledged as collateral as of March 31, 2011 were¥23,633 million (US$284 million) of securities. Secured debts asof March 31, 2011 were ¥4,629 million (US$55 million).
15. Policy Reserves for the Reinsurance Contracts
Reserve for outstanding claims for the reinsurance contracts
provided in accordance with Article 71 Paragraph 1 of the Enforcement Regulation of the Insurance Business Law (hereinafter
called "reserve for outstanding claims for ceded reinsurance")
were ¥55 million, ¥32 million and ¥42 million (US$513 thousand)as of March 31, 2009, 2010 and 2011.
Policy reserve for the reinsurance contracts provided in accordance with Article 71 Paragraph 1 of the Enforcement Regulation of the Insurance Business Law (hereinafter called "policy

reserve for ceded reinsurance") were ¥57 million, ¥56 millionand ¥55 million (US$666 thousand), as of March 31, 2009, 2010
and 2011.
16. Additional Foundation Funds
The Company raised additional foundation funds of ¥15,000 million during the year ended March 31, 2010 in accordance with
Article 60 of the Insurance Business Law.
17. Redemption of Foundation Funds
In the year ended March 31, 2010, in connection with the redemption of foundation funds of ¥15,000 million, the Company
reversed the reserve for redemption of foundation funds andprovided the equivalent amount for accumulated foundation
funds redeemed in accordance with Article 56 of the Insurance
Business Law.

18. Commitment LineAs of March 31, 2009, 2010 and 2011, there were unused
commitment line agreements under which the Company is thelender of ¥1,481 million, ¥5,653 million and ¥4,056 million (US$48
million), respectively.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

47

19. Subordinated Bonds
Repayments of subordinated bonds are subordinated to otherobligations.
20. Contribution to Policyholders Protection Corporation
The future contribution to the Life Insurance Policyholders Pro-

tection Corporation of Japan under Article 259 of the Insurance
Business Law were estimated at ¥11,283 million, ¥10,915 million and ¥11,285 million (US$135 million) as of March 31, 2009,2010 and 2011, respectively. The contributions were charged as
operating expenses in the year in which they were paid.

21. Reserve for Employees’ Retirement Benefits(1) The reserve for employees’ retirement benefits as of March 31, 2009, 2010 and 2011 were calculated as follows:
As of March 31,

2009

2010

2011

Millions of
U.S. dollars

		Millions of yen

a. Projected benefit obligation.....................................................................
b. Fair value of pension plan assets.............................................................
c. Unfunded benefit obligation (a+b)...........................................................
d. Unrecognized actuarial differences.........................................................
e. Unrecognized prior service cost..............................................................
f. Reserve for employees' retirement benefits (c+d+e)..............................

¥(72,001)
15,016(56,985)
7,499
172¥(49,313)¥(71,617)
16,009(55,608)
5,667
137¥(49,803)

2011¥(71,786)
15,728(56,058)
5,802
102¥(50,153)$(863)
189
(674)
69
1
$(603)(2) Gross amount of retirement benefit expenses for the years ended March 31, 2009, 2010 and 2011 were as follows:
Years ended March 31,

2009

2010

2011

Millions of
U.S. dollars

		Millions of yen

Service cost.................................................................................................
Interest cost................................................................................................
Expected return on pension plan assets.....................................................
Amortization of actuarial differences...........................................................
Amortization of prior service cost................................................................
		¥3,224
1,434
(640)
779
34
¥4,831¥3,173
1,438
(450)
1,231
34
¥5,4272011¥3,114
1,430
(480)
1,171
34
¥5,270

$37
17
(5)
14
0
$63

(3) The Company’s assumptions used in calculation of the above information were as follows:
Years ended March 31,

		

2009

2010

2011

Method of attributing the projected benefits to periods of service.................................
Discount rate...................................................................................................................		
Expected rate of return on pension plan assets..............................................................		
Amortization period of actuarial differences....................................................................		
Amortization period of prior service cost.........................................................................		

Straight-line
basis

Straight-line
basis

Straight-line
basis

48

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2.0%
3.5%
10 years
10 years

2.0%
3.0%
10 years
10 years

2.0%
3.0%
10 years
10 yearsIII. Notes to Statements of Operations
1. Net Surplus before Minority Interests
Net surplus before minority interests is presented in the consolidated statement of operations for the year ended March 31,
2011 in accordance with the revision of the Enforcement Rule ofthe Insurance Business Law based on “Accounting Standard forConsolidated Financial Statements” (ASBJ Statement No. 22 issued by the Accounting Standards Board of Japan on December
26, 2008).

year ended March 31, 2011, provision for reserve for outstanding claims for ceded reinsurance considered in calculation of provision for reserve for outstanding claims was ¥9 million (US$118
thousand) and reversal of policy reserve for ceded reinsurance
considered in calculation of provision for policy reserve was 0
million (US$10 thousand).
4. Impairment of Fixed Assets
For the years ended March 31, 2009 and 2010, impairment
losses of fixed assets were as follows:						(1) Method of grouping

2. Transactions with Unconsolidated Subsidiaries
The total amounts of revenues and expenditures in connection
with unconsolidated subsidiaries were ¥127 million and ¥2,558
million for the year ended March 31, 2009, ¥131 million and¥2,825 million for the year ended March 31, 2010, and ¥108
million (US$1 million) and ¥2,884 million (US$34 million) for theyear ended March 31, 2011, respectively.
3. Policy Reserves for the Reinsurance Contracts
For the year ended March 31, 2010, reversal of reserve for outstanding claims for ceded reinsurance considered in calculationof reversal of reserve for outstanding claims was ¥22 million andreversal of policy reserve for ceded reinsurance considered in
calculation of provision for policy reserve was ¥0 million. For theReal estate and other assets used for insurance business operations are classified as one asset group as a whole. Other assets
such as real estate for rent and unused real estate are classified
as one group individually.
(2) Background of recognizing the impairment losses

Profitability of certain real estate for rent dropped down
significantly due to a decrease in the level of rental income
and a declining trend of market prices of land. The Company
reduced its book values of such real estate for rent and unused
real estate to their recoverable amounts. The amounts reduced
were recognized as impairment losses and included in theextraordinary losses.

(3) Asset groups recognized impairment losses and losses by fixed assets						Years ended March 31,

			

2009

2010
Millions of yen

Real estate for rent:
Land....................................................................................................................................................			 ¥205
Buildings and others............................................................................................................................			
40
Total real estate for rent (i)..................................................................................................................			 245Unused real estate:Land................................................................................................................................................... 			 55Buildings and others........................................................................................................................... 			 213Total unused lease property (ii)........................................................................................................... 			 269Total:
Land................................................................................................................................................... 			
Buildings and others........................................................................................................................... 			

¥ 71
5
76
136
651
788

260
254

208
656

Total (i)+(ii).......................................................................................................................................... 			 ¥514

¥865(4) Calculation method of recoverable amount						Recoverable amount is based on net sales value. Net sales value is determined based on appraisal value, posted price or road rate.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

49

IV. Notes to Statement of Comprehensive Income
1. Comprehensive Income for Previous Fiscal Year
Total comprehensive income for previous fiscal year was as follows:Year ended March 31,

				

2010

		

Millions of yen

Total comprehensive income attributable to:Parent company................................................................................................................................................................... 				 ¥111,585
Minority interests................................................................................................................................................................ 				
281Total comprehensive income................................................................................................................................................... 				 ¥111,867
2. Other Comprehensive Income for Previous Fiscal Year
Other comprehensive income for previous fiscal year consisted of the following:
Year ended March 31,

				
		

2010
Millions of yen

Other comprehensive income:Net unrealized gains on available-for-salesecurities, net of tax.......................................................................................................................................................... 				 ¥84,310
Deferred valuation gains under hedge accounting............................................................................................................... 				59Revaluation reserve for land, net of tax................................................................................................................................ 				3Foreign currency translation adjustment.............................................................................................................................. 				83Total other comprehensive income.......................................................................................................................................... 				 ¥84,457

V. Notes to Statements of Cash Flows
1. Scope of Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2009, 2010 and 2011
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 ofthe date of acquisition", "Call loans" and "Monetary claims bought
maturing within 3 months of the date of acquisition".

2. Reconciliations of Cash and Cash Equivalents
Reconciliations of cash and cash equivalents in the consolidated

statements of cash flows to the consolidated balance sheets accounts as of March 31, 2009, 2010 and 2011 were as follows:
As of March 31,

2009

2010

2011

Millions of
U.S. dollars

		Millions of yen

Cash and deposits....................................................................................................
Call loans..................................................................................................................
Monetary claims bought...........................................................................................
Time deposits maturing over 3 months of the date of acquisition...........................
Foreign currency deposits maturing over 3 months of the date of acquisition........
Monetary claims bought maturing over 3 months of the date of acquisition...........
Cash and cash equivalents.......................................................................................

50

FUKOKU MUTUAL LIFE INSURANCE COMPANY¥ 68,692
183,600
2,055
(300)
(366)
(2,055)¥251,626¥ 83,557
91,000
1,752
(200)
(472)
(1,752)¥173,885

2011¥314,392
—
1,424
(200)
(252)
(1,424)¥313,939$3,781
—
17
(2)
(3)
(17)
$3,775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 thedesign and operation of internal control over financial reporting for the Company’s financial statements, namely, consolidated balance sheets and the related consolidated statements of operations, comprehensive income, cash flows
and changes in net assets prepared in accordance with Article 110 Paragraph 2 of the Insurance Business Law. The
Company designs and operates its internal control over financial reporting in accordance with the basic framework ofinternal 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 years, March 31, 2009, 2010 and 2011, 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 reliability offinancial 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 business processes("process-level controls") based on the results of assessment of company-level controls regarding the Company andone consolidated subsidiary. Other than those indicated above, five consolidated subsidiaries were determined to beimmaterial from quantitative and qualitative perspectives. Consequently, they are excluded from the scope 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, 2009, 2010 and 2011.
4. Supplementary Information (None)

			
			
			
			

May 19, 2011
Yoshiteru Yoneyama
President

Fukoku Mutual Life Insurance Company

FUKOKU MUTUAL LIFE INSURANCE COMPANY

51

Report of Independent Auditors

The Board of Directors of Fukoku Mutual Life Insurance Company
Financial Statements Audit
We have audited the accompanying consolidated balance sheets of Fukoku Mutual Life Insurance Company
and its consolidated subsidiaries as of March 31, 2009, 2010 and 2011, the related consolidated statementsof operations, cash flows and changes in net assets for the years then ended, and the related consolidated
statement of comprehensive income for the year ended March 31, 2011, all expressed in Japanese yen.
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to independently express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Fukoku Mutual Life Insurance Company and its consolidated subsidiaries as of March 31, 2009, 2010 and 2011, and the consolidated results of their operations and their cash
flows for the years then ended in conformity with accounting principles generally accepted in Japan.
The amounts expressed in U.S. dollars, which are provided solely for the convenience of the reader, havebeen translated on the basis set forth in Note I. 2 to the accompanying consolidated financial statementswith respect to the year ended March 31, 2011.
Internal Control Audit
We have also audited the management's report on internal control over financial reporting of the consolidated financial statements of Fukoku Mutual Life Insurance Company as of March 31, 2009, 2010 and2011. The Company's management is responsible for designing and operating effective internal control overfinancial reporting and for preparing its report on internal control. Our responsibility is to express an opinion
on management's report on internal control based on our audit. There is a possibility that material misstatements may not be completely prevented or detected by internal control over financial reporting.
We conducted our internal control audit in accordance with auditing standards for internal control overfinancial reporting generally accepted in Japan. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether management's report on internal control is free of material
misstatement. An internal control audit includes examining, on a test basis, representations on the scope,
procedures and results of the assessment of internal control over financial reporting made by management,
as well as evaluating the overall presentation of management's report on internal control. We believe that
our internal control audit provides a reasonable basis for our opinion.
In our opinion, management's report on internal control referred to above, which represents that the internal
control over financial reporting of the consolidated financial statements of Fukoku Mutual Life Insurance
Company as of March 31, 2009, 2010 and 2011, is effectively maintained, presents fairly, in all material respects, the assessment of internal control over financial reporting in conformity with assessment standards
for internal control over financial reporting generally accepted in Japan.

Tokyo, JapanMay 20, 2011

Kisaragi Audit Corporation

52

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Corporate Organization

Organization (as of July 5, 2011)
Branch Office62
Field Office478

Secretarial Div.
Strategic Planning Dept.
Compliance Control Dept.

Employees (as of March 31, 2011)
Office Staff
2,862
Sales Representative 10,840
Others (as of July 1, 2011)
Overseas
Representative Office

Corporate Risk Management Dept.
General Affairs Dept.
Personnel Dept.
Independent Auditors

Market Planning Dept.
Retail Management Dept.

1
Board of Statutory
Auditors

Market Developing Dept.

Assistant to the
Statutory Auditors

Group Credit Div. Related toJapan Housing Finance Agency

Strategic Market Promotion Dept.

Wholesale Management Dept.
Pension Actuarial Div.
Board of Representative
Members of Policyholders

Board of Directors

Customer Service Headquarters
Corporate Customer Service Dept.
Individual Customer Service Dept.

Nomination Committee of
Candidates for
Representative Members

Chief Actuary

Secretariat for Nomination
Committee of Candidates for
Representative Members

Executive Committee

Underwriting and Medical Dept.
Claims Dept.
Policy Administration Dept.
Operation & System Planning Dept.
Claim Inspection Div.

Human Resourse
Development
Headquarters

Equities Dept.
Fixed Income Dept.
Loans Dept.

Council

Separate Accounts Management Div.
Investment Assets Administrative Dept.
Financial and 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

1353

Corporate Information

Board of Directors andStatutory Auditors

Chairman of the Board

Statutory Auditor (Standing):

Tomofumi Akiyama

Shuichi Maeda

President and Chief Executive Officer

Statutory Auditor (Standing):

Yoshiteru Yoneyama*

Akio Imai

Deputy Presidents and Executive Officer

Executive Officer

Mikio Yamamoto

Tsutomu Hiruma

Deputy Presidents and Executive Officer

Executive Officer

Katsumasa Furuya

Toshiaki Kiwa

Directors and Managing Executive Officer

Executive Officer

Kenji Hirai

Haruki Kawashima

Directors and Managing Executive Officer

Executive Officer

Tadashi Akikawa

Toyoaki Oba

Director

Executive Officer

Katsuhiro Utada

Toshimitsu Furuhashi

Director

Executive Officer

Kozo Isshiki

Shigeki Matsuoka

Directors and Executive Officer

Hitoshi Sakai*Representative Director
Directors and Executive Officer

Toshihiro Hayashi
Directors and Executive Officer

Toshihide Fujiwara
Statutory Auditor

Yoshizumi Nezu
Statutory Auditor

Mitsuo Ohashi
Statutory Auditor

Akihiro Mochizuki

14
54

FUKOKU MUTUAL LIFE INSURANCE COMPANY(as of July 5, 2011)

Directory

Head Office2-2, 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 Mutual Life Insurance Company Singapore Representative Office
80 Robinson Road #16-04 Singapore 068898
Phone: 65-6220-8308
Facsimile: 65-6220-8736

Fukoku Life International (U.K.) Ltd.
From left : D. Reynolds, J. Doran, J. Morita,
K. Sato and K. Ohkawa

Fukoku Life International (America) Inc.
From left : A. Chang, M. Xu, M. Jensen,
Y. Onodera and S. Nozaki

Fukoku Mutual Life Insurance Company
Singapore Representative Office
From left: S. Narue and Y. Miki

FUKOKU MUTUAL LIFE INSURANCE COMPANY

1555

Printed in Japan