©1976, 2017 SANRIO CO., LTD.
APPROVAL No. G581109

YEAR ENDED MARCH 31, 2017

ANNUAL REPORT 2017

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Contents
Financial Highlights (Non-consolidated) .......................... 1
Message from the President ............................................... 2
Management Principles of Fukoku Life ........................... 3
Review of Operations (Non-consolidated)
Overview ............................................................................ 4
Business Performance in FY 2016 ................................ 5
Investment Performance in Fiscal 2016
(General Account) ........................................................... 7
Investment Policies for Fiscal 2017.............................. 8
Governance System .............................................................. 9
Corporate Social Responsibility (CSR) ............................. 10
Non-consolidated Financial Statements ........................... 12
Consolidated Financial Statements .................................. 32
Corporate Organization ....................................................... 57
Corporate Information ........................................................... 58

Financial Highlights (Non-consolidated)2016
As of March 31,

2017

2017
Millions of
U.S. dollars

Millions of yen

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

¥43,173,141¥43,102,531$384,192

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

6,489,815
5,091,762
693,680
218,565
5,882,868
5,555,450
141,935
606,947

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

58,52247,862
5,595
1,956
53,324
49,951
1,710
5,198

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

814,323
618,073
186,642753,979
41,551

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

6,624
5,120
1,427
6,141
326

Solvency margin ratio (%)
Employees

1,321.8
12,7201,214.8
12,644——

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=¥112.19, the rate of exchange on March 31, 2017.
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

I would like to begin by offering my sincere gratitude to all our
stakeholders for your continued support of Fukoku MutualLife Insurance Company.
Looking Back over the Past YearIn fiscal 2016, ended March 31,2017, initially the Japanese
economy remained at a standstill, but in the second half theeconomy entered a moderate recovery phase that reflected
overseas economic recovery. The financial and capital
markets were characterized by uncertainty in the first half,
due to the UK’s vote to leave the European Union, causing
the yen to appreciate, stock prices to fall and interest rates
to drop compared with the end of the previous fiscal year.
However, the period following the US presidential election in
November was marked by significant yen depreciation andstock price increases, due to expectations on the incoming
US administration’s fiscal policies. In late September, theBank of Japan introduced yield curve control policy, targeting
yields on 10-year JGB to around zero. After this newmeasures, interest rates rose slightly, but still remained low.
Amid this harsh environment, the combined fundamental
profit of Fukoku Mutual and subsidiary Fukokushinrai Life
Insurance Co., Ltd. maintained record-high levels in fiscal 2016,
staying above the ¥90 billion for the fourth year in a row at ¥91.5
billion. Further, our consolidated solvency margin ratio—anindicator of financial soundness—remained high, at 1,257.3%.
Customer-Centered Values
We work to ensure that our management and employees
maintain customer-centered values in all aspects of businessand operations. We create value by putting ourselves in ourcustomers’ shoes and creating services and experiencesthat only we can offer. Further, based on our basic policy forhuman resource development, we are working to train anddevelop personnel able to put customer-centered approach
into practice.
Meanwhile, the medium-term management plan
launched in fiscal 2016 is based on our vision of a becoming
the most highly regarded company among customers throughtrue differentiation. All executives and employees are pulling
together to achieve the goal, which is increasing customer
satisfaction as top priority.
In March 2017, the Financial Services Agency publishedthe “Principles for Customer-Oriented Business Conduct.”
We exactly regard its Customer-Oriented Business as ourcustomer-centered values and we announced a company
policy based on our values in June.
Insurance Sales and Asset Management
In insurance sales, based on our belief in the importanceof face-to-face sales activities rooted in local communities,
Fukoku Mutual Life Insurance conducts sales throughcustomer advisors(sales persons) and subsidiary Fukokushinrai
Life Insurance conducts over-the-counter sales through sales
agents and financial institutions. As the Fukoku Life Group,
we will continue working daily to provide products that meeteach customer’s needs and enhance our after-sales service.
“Iryo Daijin Premier Eight,” the new product launchedin April 2016, saw strong sales, and there was substantial
growth in the number of new medical insurance contracts.
Then, in line with revisions to the standard prospective
yield for life insurance in April 2017, we revised the educational
insurance product “Mirai no Tsubasa” and individual annuities“Mirai Plus.” To respond to various customer needs, we aremaking our products more flexible—expanding the optionsin terms of the period for premium payments and the start of2

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Yoshiteru Yoneyama
President

annuity payments—while maintaining the appeal of our savings
products. We will continue to ensure customer satisfaction by
developing differentiated products.
Given the ongoing low interest rates, we are working toincrease the level of sophistication of our asset management.
To ensure the safety and liquidity of the assets entrusted to
us by our customers, we focus on domestic bonds, loans,and other assets that generate interest income in yen. To
enhance profitability, we make diversified investments inforeign securities, stocks, and real estate within the scope of
acceptable risk.
Improving Our Financial Soundness
To maintain financial soundness regardless of the operating
environment, we are working to strengthen our capital. Ourbasic policy for strengthening capital is to accumulate internal
reserves, which are the source of net surplus, in combination
with external financing, including raising to foundation
funds and the issuing subordinated debt. In fiscal 2016, weaccumulated internal reserves by building up contingency
reserves and reserves for price fluctuations and, in October,
we issued 50 billion yen perpetual subordinated bonds. We
will continue taking steps to further bolster our financial
soundness and provide peace of mind for our customers.
Our Mission as a Mutual Company
Since our establishment in 1923, we have taken the form of amutual company. Our mission as a mutual company is to provide
customers with effective reductions in insurance premiums
through dividend payouts, underpinned by stable profits and asolid financial base with a long-term view. Our top priority as aninsurance company is to be able to pay out insurance claims at
any time, and we will continue to carry out this mission.
We look forward to your continued support and cooperation.

Yoshiteru Yoneyama
PresidentManagement Principles of Fukoku Life

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

Management
Philosophy

ValuesCode of
Conduct

Business
Policies
Tomofumi Akiyama

Yoshiteru Yoneyama

Chairman of the Board

President

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

To contribute to society

Code of Conduct

To help our employees achieve
personal fulfillment

Business Policies

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

1. Foster personnel with customer-centered values

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

2. Reinforce how sales representatives structure activities

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

❖ Remember the importance of teamwork

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

❖ Deserve the trust of each and every customer

3. Attain a net increase in the number of policyholders❖ Work with enthusiastic and pride

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

❖ Apply common sense in our work
❖ Emphasize the importance of life insurance❖ Overcome every difficulty❖ Create a friendly work environment

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

FUKOKU MUTUAL LIFE INSURANCE COMPANY

3

Review of Operations (Non-consolidated)

Overview
In line with our management philosophy, we strove tomanage and carried out business based on our customercentered values, which is the starting point of all our various
ideas and behaviors. Further, in line with our basic policy
for human resource development, we are working to train
and develop personnel able to put our customer-centeredapproach into practice, incorporating three elements: selfmotivation, creativity and altruism.
In addition, operating in a low-interest-rate environmentthat appears likely to continue, we have continued striving
to develop and sell products that meet customers’ changing
needs, offer increasingly sophisticated asset investment andpractice enterprise risk management (ERM).
Insurance Sales
Rooted in the concept of face-to-face activities that areclosely attuned to local communities, we conduct sales
through two channels: our own sales representatives andFukokushinrai Life Insurance, which sells insurance atagencies and over the counter at financial institutions, chiefly
shinkin banks.
In line with our policy of achieving a net increase in
the number of customers, we strive to design and propose
insurance that meets individual customers’ needs, thereby
earning their satisfaction. We have also extended our aftersales service to customers who have become policyholders
to that they can have ongoing confidence in their policies. To
this end, we have reinforced our system for providing faceto-face sales through Customer Advisors.
Cultivating Customer Advisors
We are augmenting employees’ knowledge and skills
by enhancing our training and education systems andencouraging them to earn financial planner certifications. In
these ways, we aim to cultivate human resources who willbe trusted by customers from the time they enter into apolicy through to the receipt of claims and benefits.
Selling Individual Insurance
In April 2016, we launched “Iryo Daijin Premier Eight,” a new
type of high-value-added medical insurance that provides
hospitalization benefits for an unlimited number of days forpolicyholders who are hospitalized for any of eight major
lifestyle diseases. The product also pays benefits after being
discharged following hospitalization for lifestyle diseases
or childbirth.
In addition to concentrating on the development of thissort of third-sector product, we continue to believe in theimportance of protecting the lifestyles of bereaved families
through death protection. For this reason, we enhanced thecontent of protection by selling new products. We also makeuse of Life Compass, a proposal tool that helps to indicate
specifically the necessary amount of protection in the eventof five life risks, such as death or the inability to work. Using
this tool, we are working harder than ever to offer detailed
consulting services tailored to individual customers’ life plansand provide protection to accurately cover a variety of risks.

4

FUKOKU MUTUAL LIFE INSURANCE COMPANYGroup Insurance
During the year, we conducted consulting related tocorporate benefit programs and proposed systems andproducts to meet customers’ diverse needs. To further
enhance the services we offer customers who have takenout corporate insurance, we provide Fukoku Life Anshin
Health Consultation Dial, which offers a broad rangeof services, including health and medical consultation,
specialized consultations (information on second opinions)and face-to-face mental health counseling.
Customer Service
In January 2017, we affirmed a proposal put forward by theOrganization to Promote Consumer-Oriented Management(an organization composed of the Consumer Affairs Agency
and other members) and publicized our Voluntary Statementof Consumer Orientation. In addition to obtaining a thirdparty written opinion in 2015 and making a self-declarationof conformance on response to complaint processing inaccordance with the ISO 10002 international standards, we
conduct surveys to obtain customer feedback and improve
management in line with society’s requests. In these ways,
we engage in activities aimed at further enhancing customer
satisfaction and trust.
Specifically, in August 2014 we began confirming thestatus of senior customers. To further enhance our support
system for senior customers, in April, 2016 we launched a
Family Information Registration System. Under this system,
customers can register with the Company a secondary
contact person so that we can confirm a customer’s status
via their family in the event we are unable to contact thecustomer directly. Also in April, we enabled customer
proposal management on the “PlanDo” tablet terminals
used by customer advisors. In addition to reinforcing ourmanagement system, this move was aimed at accelerating
customer response. In January, 2017 we introduced a
Medical Certificate Decision Automated Coding Systemusing IBM Watson Explorer into our operations for assessing
benefit and other payments. Combining system- and humangenerated assessments boosted the level of assessment
accuracy and accelerated payments.
Overseas BusinessWe established Fukoku Life Research Singapore Pte. Ltd. asa local subsidiary in April 2014. In May 2016, we added an
asset management function to this office and changed its
name to Fukoku Life Investment (Singapore) Pte. Ltd.
We invest in securities in Europe and the United States
via asset management subsidiaries in London and New
York. By commencing asset management at our base in
Singapore, we are establishing a global asset management
system for the Fukoku Life Group. At the same time, we aim
to accumulate research and investment expertise, including
through the cultivation of human resources well-versed in
Asia’s financial markets and in asset management. Throughthese initiatives, we will raise our level of sophistication in
asset management.

Business Performance in FY 2016
Life Insurance in Force
At fiscal year-end, life insurance in force, which comprises
individual life insurance, individual annuities, and groupinsurance, amounted to ¥43,102.5 billion, down 0.2%
compared with the previous fiscal year-end. Within thisamount, life insurance for individuals declined 1.1%, to¥23,160.6 billion, individual annuities increased 0.3%, to¥2,790.3 billion. The year-end balance of life insurance inforce for groups increased 1.1%, to ¥17,151.5 billion.
Group annuities in force (policy reserve) rose 1.8%, to¥2,156.7 billion.
Annualized Premiums for New Policies and Policies inForce
In the year under review, annualized premiums for new
policies increased 12.3% compared with the previous fiscal
year, to ¥26.3 billion. Within this amount, individual insurance
was up 6.1%, to ¥21.2 billion, and individual annuities up
48.5%, to ¥5.0 billion. Annualized premiums from medical
insurance and living benefit insurance increased 11.4%, to¥7.8 billion.
Annualized premiums for policies in force rose 1.3%,¥412.3 billion. Within this amount, individual insurance
increased 1.2%, to ¥277.9 billion, and individual annuities
increased 1.6%, ¥134.3 billion. Annualized premiums frommedical insurance and living benefit insurance rose 1.5%, to¥109.1 billion.
Premium Income and Payments
In the year under review, premium and other income
decreased 7.1% compared with the previous fiscal year, to¥574.4 billion.
Meanwhile, claims and other payments, which
represent the total of payments under insurance policies,
decreased 17.2%, to ¥489.1 billion.

Life insurance in force

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

44.3

43.7

43.2

43.1

647.7

43.1

16.3

16.5

16.6

16.9

17.1

3.0

2.9

2.8

2.7

2.7

24.8

24.2

23.6

23.4

23.1

FY2012

‘13

‘14

‘15

‘16

FY2012

598.3

‘13

643.1

Performance of Fukoku Life Group (Fukoku Life and
Fukokushinrai Life Insurance)
Annualized premiums for new policies of the Fukoku LifeGroup, including Fukokushinrai Life Insurance, fell 16.3%
year on year, or ¥6.4 billion, to ¥33.0 billion. This decrease
was due to such factors as Fukokushinrai Life Insurance’s
suspension on sales of lump-sum payment products. Within
this amount, annualized premiums from medical insurance
and living benefit insurance rose 11.1%, or ¥0.7 billion, to¥7.8 billion.
Annualized premiums for policies in force increased
1.2%, or ¥6.6 billion, to ¥581.9 billion. Annualized premiums
from medical insurance and living benefit insurance were up
1.5%, or ¥1.6 billion, to ¥110.8 billion.
The total value of premium and other income fell
17.8%, or ¥140.1 billion, to ¥648.7 billion. Over-the-countersales through financial institutions (from Fukokushinrai Life
Insurance) decreased 66.3%, or ¥99.2 billion, to ¥50.4 billion,
due to the suspension on sales of savings-type products,
given the worsening investment environment.
Assets, Liabilities, and Net Assets
The outstanding balance of non-consolidated total assets,
including separate accounts, increased 1.2%, or ¥75.8 billion,
to ¥6,565.6 billion. Within this amount, general accountassets rose 1.2%, to ¥6,489.9 billion.
The year-end balance of securities stood at ¥5,369.6
billion, an increase of ¥277.9 billion, or 5.5%, compared withthe previous fiscal year-end.
Total liabilities increased 1.7%, or ¥99.5 billion, to¥5,982.4 billion.
Net assets amounted to ¥583.1 billion, down 3.9%
compared with the previous fiscal year-end.
On a consolidated basis, total assets rose 1.2%,
to ¥8,432.9 billion, and net assets decreased 3.7%, to¥594.8 billion.

618.0
574.4

‘14

‘15

‘16

Group insurance
Individual annuities
Individual life insurance

FUKOKU MUTUAL LIFE INSURANCE COMPANY

5

Review of Operations (Non-consolidated)

Strengthening Our Capital Base
Fukoku Life builds up its internal reserves on an ongoingbasis in order to strengthen its capital base. We boost
internal reserves by soliciting additional foundation funds
and augmenting the contingency reserve. Foundation funds
at a mutual insurer correspond to capital at a joint stockcompany. Total foundation funds, including the accumulated
foundation founds redeemed, amounted to ¥116.0 billion asof March 31, 2017. In fiscal 2016, we redeemed (refunded)¥20.0 billion in foundation funds. When foundation funds are
redeemed (refunded), we are legally required to accumulate
as internal reserves “accumulated foundation founds
redeemed” in an amount equivalent to the redemption. Thus
the same amount of owned capital as the amount collected
is retained even after the redemption of foundation funds.

Solvency Margin
Fukoku Life’s solvency margin ratio at fiscal year-end was
1,214.8%, down 107.0 percentage points compared withthe previous fiscal year-end, but substantially above the
200% level set as a standard of financial soundness for
insurance companies.
Ratings
Fukoku Life relies on three neutral and unbiased ratingorganizations to provide an objective assessment of theCompany’s ability to meet insurance payments. As of July
1, 2017, we have received ratings of AA- from Rating andInvestment Information, A from Standard & Poor’s and A2
from Moody’s. These ratings represent strong evaluations of
the Company’s soundness and profitability. Going forward,
we will continue striving to maintain and further improve ourhigh financial ratings.

Total assets

Net assets

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

6,007.2

6,214.7

6,611.9

6,489.8

6,565.6

1,321.8

697.7
606.9

583.1
1,099.9

493.9
970.8

427.7

FY2012

6

‘13

‘14

‘15

FUKOKU MUTUAL LIFE INSURANCE COMPANY‘16

FY2012

1,214.8

1,169.3

‘13

‘14

‘15

‘16

FY2012

‘13

‘14

‘15

‘16

Investment Performance in Fiscal 2016 (General Account)
Overview
In fiscal 2016, ended March 31, 2017, initially the Japanese
economy remained at a standstill, but in the second half theeconomy entered a moderate recovery phase that reflected
overseas economic recovery. Although the employment
and income environment improved, growth in personal
consumption was sluggish due to an ongoing trend towardfrugality in household spending. However, reflecting aresurgence in overseas demand, exports increased in thesecond half of the fiscal year. Also, delayed capital investment
showed signs of recovery—chiefly in the manufacturingsector. Amid the protracted low-interest-rate environment,
housing investment increased, centered on rental housing.
The financial and capital markets were characterized byuncertainty in the first half, due to the UK’s vote to leave theEuropean Union, causing the yen to appreciate, stock prices
to fall and interest rates to drop compared with the endof the previous fiscal year. However, the period following
the US presidential election in November was marked bysignificant yen depreciation and stock price increases, due to
expectations about the incoming US administration’s fiscal
policies. Domestically, the Bank of Japan (BOJ) continued
its large-scale purchases of Japanese government bonds(JGBs). In addition to its negative interest rate policy, in late
September the BOJ introduced a yield curve control policy,
targeting yields on 10-year JGBs of around zero. Overseas,
the European Central Bank (ECB) continued with its negativeinterest rate policy and quantitative easing measures.
Meanwhile, in the United States, the Federal Reserve
Board (FRB) twice raised the policy rate by 0.25 percentage
point, in December 2016 and March 2017, resulting in a rateof 0.75 -1.00 %.
With regard to our asset management business, we
held back on investments in yen-denominated bonds, given
the ultralow interest rates in Japan, characterized by the
BOJ’s negative interest rate policy and the September
introduction of a new framework targeting yields of aroundzero on 10-year JGBs. Instead, we allocated funds towardforeign-currency-denominated bonds, mainly US government
bonds, to maintain profitability while ensuring liquidity. The
yen appreciated in the summer months, due to the sense of
uncertainty caused by UK's vote to exit the European Union.
General account assets(¥ billions)
6,530.2
5,929.6

6,133.4

6,410.7

6,489.9

Breakdown of general account assets (Fiscal year ended March 31, 2017)(¥ billions)

Others
83.5 (1.3%)
Real estate214.4 (3.3%)
Cash and deposits,
and others
266.8 (4.1%)
Other securities
94.7 (1.5%)

FY2012

‘13

‘14

‘15

‘16

Against this backdrop, we mainly accumulated foreign bonds
without foreign currency risk hedges. Following the US
presidential election in November, we sold hedged foreign
bonds, which had become less profitable due to the risingcost of foreign currency hedges, moving these funds into
ultralong-term JGBs. As a signatory to the U.N. Principles
for Responsible Investment (PRI), we heightened our focus
on stocks with environment, social and governance (ESG)
considerations when making investment decisions. Whenstock prices were trending downward, we accumulated
these stocks in a planned manner. Meanwhile, Fukoku Life
Investment (Singapore) Pte. Ltd. (FLIS), which received
approval as an investment management company in April,began managing stocks and bonds, mainly in Asia and Oceania.
We will increase the level of sophistication of our asset
management to counter a market environment marked by astrong ongoing sense of uncertainty through increasing ESG
investment, and diversifying our portfolio globally, focusing
on our subsidiaries in London, New York and Singapore.
As an institution that accepts Japan’s StewardshipCode, we concentrate on constructive “purposeful dialogue”(engagement) with key investee companies. Throughongoing engagement with investee companies, the exercise
of voting rights and other stewardship activities, we seek topromote their sustainable growth and increase medium- tolong-term returns of the funds customers have entrusted
to us.
Investment income from general accounts decreased¥30.4 billion (16.3%), to ¥156.1 billion. Of this amount,interest, dividends and other income, including those fromtrading securities, fell ¥5.4 billion (3.7%), to ¥140.9 billion.
This decrease was due to lower dividends on foreign stocks,
despite growth in interest on foreign bonds due to increased
holdings. Gains on sales of securities amounted to ¥14.4
billion, down ¥23.0 billion (61.4%), compared with highlevels in the previous year.
Investment expenses declined ¥0.9 billion (2.1%), to¥44.5 billion. Of this amount, losses on sales of trading
securities totaled ¥7.0 billion, down ¥5.3 billion (43.3%),
and the previous year’s ¥3.5 billion in losses from derivative
instruments turned positive. However, a rise in costs onhedging currency risks caused foreign exchange losses toForeign securities
1,702.6 (26.2%)
Domestic stocks
656.5 (10.1%)

Ordinary loans
568.4 (8.8%)

Loans
627.7
(9.7%)

Policy loans
59.2 (0.9%)

Securities
5,297.4 (81.6%)

Domestic bonds
2,843.5 (43.8%)

Total: ¥ 6,489.9 billion

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

FUKOKU MUTUAL LIFE INSURANCE COMPANY

7

Domestic Stocks
Holdings of domestic stocks increased ¥86.2 billion (15.1%),
to ¥656.5 billion, due to a planned increase in our investment
balance in this category and a rise in valuation gains due tostock price increases.

grow by ¥7.0 billion (81.6%), to ¥15.6 billion.
As a result, net investment income amounted to ¥111.5
billion, a decrease of ¥29.5 billion (20.9%) compared withthe previous fiscal year.
Domestic Bonds
Following the US presidential election in November, we soldoff hedged foreign bonds, as their profitability had declined
due to rising costs on foreign currency hedges, shiftingthese funds into ultralong-term JGBs. As a result, domestic
bonds expanded ¥184.3 billion (6.9%), to ¥2,843.5 billion.

Loans
Loans amounted to ¥627.7 billion, down ¥65.9 billion (9.5%),
as the ultralow-interest-rate environment kept the businessin a difficult position in terms of profitability.
Real Estate
The year-end balance of real estate was up ¥1.5 billion (0.7%),
to ¥214.4 billion, due to the completion of the Sapporo
Fukoku Life Koshiyama Building.

Foreign Securities
Valuation gains on foreign bonds decreased due to risingoverseas interest rates. However, because we bought
investment funds managed by FLIS, which commenced
investment management activities in June 2016, foreign
securities grew ¥2.5 billion (0.1%), to ¥1,702.6 billion.
Domestic bonds

Domestic stocks

Foreign securities

Loans

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

2,971.6

2,876.1 2,856.1
2,659.1

1,700.0 1,702.6

2,843.5

1,583.7

656.5

641.0
570.3

1,365.3

267.5

907.5
835.8

482.3

763.9

1,087.2

431.7

228.1

223.7

FY2012 ‘13

‘14

693.6

212.8

214.4

‘15

‘16

627.7

FY2012 ‘13

‘14

‘15

‘16

FY2012 ‘13

‘14

‘15

‘16

FY2012 ‘13◆

Investment Policies for Fiscal 2017

Investment Environment
In fiscal 2017, ending March 31, 2018, we expect theJapanese economy to continue its modest recovery,
buoyed by a rebound in overseas demand. Looking atoverseas economies, we expect developed countries to begenerally firm, with the US economy showing moderate
recovery. We also expect the Chinese economy to begenerally stable, leading to a gradual rebound in emerging
Domestic Bonds
We plan to reinvest a portion of redeemed funds into
domestic bonds, while monitoring interest rate levels.
Domestic Stocks
We intend to increase the profitability of our portfolio byincreasing our involvement in stewardship activities andincreasing our holding of stocks with high dividend yields.

8

FUKOKU MUTUAL LIFE INSURANCE COMPANY

‘14

‘15

‘16

FY2012 ‘13

‘14

‘15

‘16

countries. Under these economic circumstances, we
forecast that long-term interest rates will remain low andmove in a tight range, due to the BOJ’s ongoing yield curve
control policy. We expect stock prices to be generallyrobust thanks to improved corporate earnings. On foreignexchange rates, we believe that the pace of interest rate
rises and the US administration’s policies will affect foreignexchange rates, causing yen exchange rates to fluctuateagainst the dollar in a boxed range.
Foreign Securities
We will increase foreign bonds by using redemption
funds, diversifying our holdings of currency denominations
and taking interest rate levels and hedging costs
into consideration.

Governance System
Corporate Governance Enhancement Initiatives
As a mutual company, Fukoku Life is not directly subject toJapan’s Corporate Governance Code.
However, we have formulated a Basic Policy on
Corporate Governance to foster an understanding of ourperspective to enhance corporate governance. We publicize
this policy, along with our Corporate Governance Report.
Going forward, we will continue to engage in effective
corporate governance based on this policy and, in response
to our policyholders’ mandate, we will fulfill our mission todependably pay insurance proceeds and claims.
Management Structure and Internal Controls
As a mutual life insurance company, Fukoku Life isengaged in the highly public natured business of protecting
policyholders’ life. Therefore, we are committed to establish
a management that ensures the soundness of operations,and to enhance management measures, including our risk
management and compliance. In addition, we employ ourinternal control structure to ensure the efficient operation ofthese measures.
Establishment of Management Control Measures
The Board of Directors makes important business decisions
and monitors business execution. The two external directors
bring an outside perspective to the deliberations of theboard. In April 2009, Fukoku Life introduced an executive
officer system. Under this system, we have separated andstrengthened decision-making and business executionfunctions, with the Board of Directors fulfilling decisionmaking and supervisory functions. The Board of Full-Time
Directors, comprising the president and executive officer
and other titled executive officers, deliberates importantbusiness execution policy for the Company. Meanwhile,
various committees have been established beneath theBoard of Directors in an effort to strengthen internal controls.
Members of the Audit & Supervisory Board attend
meetings of the Board of Directors, the Board of Full-Time
Directors and other important boards, auditing the executionof operations by directors. The internal audit department
performs internal audits, verifies the appropriateness ofcorporate operations and strives to ensure the soundness ofbusiness operations.
Enhancement of Internal Control System
The Company’s Board of Directors has set the terms toestablish a structure of Internal Control Systems to ensure
the soundness of operations. We are working to enhancethe efficiency of operations, strengthen risk management,
and promote compliance based on the core policies of ourinternal control.
Risk Management System
Fukoku Life’s greatest responsibility from the standpointof its customer-centered values is to firmly maintaincustomer policies and meet expectations over the longterm. To ensure that we fulfill these responsibilities, wemust accurately understand and analyze the various risksfacing the Company, and take appropriate measures tomaintain and enhance financial soundness. Fukoku Lifehas established a risk management system with close
involvement by top management. This system is designed
to evaluate and analyze the impact of management strategy
and various risks on the Company, and to appropriately
control the overall Company.
At Fukoku Life, the Board of Directors has established
the Risk Management Committee to perform enterprise risk
management (ERM). Several subcommittees have been
established under the Risk Management Committee tomanage the various risks that arise in business operations,and to conduct asset and liability management (ALM).

The Risk Management Committee consolidates andevaluates these risks at the corporate level, and considers
the appropriate level of acceptable risk and risk response.
Furthermore, the Risk Management Committee has
established a specialized risk management committee tohelp enhance enterprise risk management.
Full-time directors are members of the Risk
Management Committee, which is chaired by the president.
Other directors chair subcommittees, creating a risk
management structure that is led by top management.
The specialized risk management committee is central
to understanding the Group’s overall risk management
situation. At Fukokushinrai Life Insurance, the Company’s
Risk Management Committee secretariat and thesecretariats of various subcommittees directly monitor the
management status of risks under their jurisdiction.
Furthermore, the audit department verifies that the risk
management system is functioning effectively.
Compliance System
As members of the community, all executives andemployees undergo ongoing training in compliance-related
matters so that they not only observe laws and regulations,but also comply with protocols and social conventions. This
training is also aimed at enhancing the spirit of compliance.
To this end, as well as improving and reinforcing thecompliance system, we hold hands-on compliance training
on an ongoing basis.
However, we recognize that even the most robustof systems cannot guarantee the complete eliminationof improper conduct. We believe that it is important todetect any improper conduct early, deal with it swiftly andappropriately, and make constant improvements and work
to rectify the situation in order to prevent a recurrence.
Accordingly, we believe that continuous improvement andcorrection are important.
The Compliance Committee, comprising full-time
directors and other executives and chaired by the president,
has the Board of Directors’ mandate to deliberate mattersrelated to compliance promotion and to promote compliance.
The Compliance Control Department serves as secretariat
for this committee. Furthermore, the chief complianceofficer and compliance officers are stationed at headquarters
to perform regular compliance checks.
Protection of Personal Information
As an insurance company that is trusted by its customers,
Fukoku Life recognizes the handling of personal information
as a topmost priority. Accordingly, we take great care inhandling personal information. We comply with the Act on
the Protection of Personal Information, which came into
force in July 2015, as well as other related legislation andguidelines, and we will continue endeavoring to appropriately
handle and protect personal information going forward. The
Company has also formulated its own privacy policy, which
describes its policy on the protection of personal information,
and a basic policy on the handling of specific personal
information. In these ways, we work to appropriately
manage the important personal information entrusted to
us by our customers. We also strive to respond swiftly andappropriately to any questions, consultations or requests
from customers with regard to personal information.
As rules for managing personal information appropriately,
we have formulated Regulations on the Handling of Personal
Information and Regulations on the Handling of Corporate
Customers’ Information. In addition, we appropriately
manage information by conducting spot checks on thestatus of personal information and other safety management
measures by subcontractors.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

9Corporate Social Responsibility (CSR)

Contribution to Society
In accordance with the highly public nature of the life insurance business, Fukoku Life believes that the soundmanagement of its business is its first priority in terms of fulfilling its corporate social responsibility (CSR).
Furthermore, we believe that the Company should engage proactively in a range of social contribution activities
aimed at helping to build a better society.

Fukoku Life Concerts
This activity began in fiscal 1989 with a Fukoku Salon
Concert, held in the lobby of our headquarters buildingin Uchisaiwaicho.
Fukoku Life holds Visiting Concerts, which are heldat schools and institutions for people with disabilities,
enabling them to enjoy genuine classical music performedby professional musicians. We also hold Charity Concerts,
which are held as a community benefit event and on which
Fukoku Life executives collaborate in fund-raising. These
concerts are held in cooperation with the regions where they
are held.
From their start in fiscal 2002 through March 31,
2017, Visiting Concerts had been held in 226 locations,while Charity Concerts had been held 273 times from their
beginning in 1993 through the end of the fiscal year.
・Visiting Concerts
Begun in fiscal 2002, Visiting Concerts are performed byCharity Concert musicians who visit schools and institutions
for people with disabilities in communities where Charity
Concerts are also being held.

Visiting Concert

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

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Smile Gallery

Hello Kitty Hospital Visit Program
Under this program, Fukoku Life’s brand mascot Hello Kitty—
which is a popular character worldwide—makes visits tochildren’s hospitals to help cheer up and encourage patients.
We mount commemorative photos with Hello Kitty into
picture frames devised by the Company and produced by inhouse volunteers and give these photos to children.
Activities to Support Reconstruction in Disaster-Affected
Areas
・Disaster-Area Visits and Support Concerts, Visiting
Concerts in Disaster-Affected Areas
It will still be some time before recovery following theGreat East Japan Earthquake is complete. To cheer on
the recovery, Fukoku Life continues to hold disaster-area
events and Support Concerts, as well as Visiting Concerts in
disaster-affected areas. We are conducting these activities
in the three prefectures affected by the earthquake:
Fukushima, Miyagi and Iwate.
In fiscal 2016, we held the Gambaro! Kumamoto!
Cheer Concert in Kumamoto Prefecture, which was hit
by earthquakes.
A portion of the donations received from Charity
Concerts are donated to areas affected by the Great East
Japan Earthquake and the Kumamoto earthquakes.
・Events to Sell Specialty Products from DisasterAffected Regions
At an open space in the first basement floor of ourheadquarters in Uchisaiwaicho and in the large cafeteria of
the training center in our Chiba New Town headquarters,
we hold events to sell specialty products from the threeprefectures affected by the Great East Japan Earthquake:
Fukushima, Miyagi and Iwate.
In fiscal 2016, we held such an event featuring products
from Kumamoto Prefecture, which was hit by earthquakes.
We receive substantial cooperation for events tosell specialty products from disaster-affected regions
from people outside the Company, as well as from within
the organization.

Environmental Protection Initiatives
・Flora Preservation
Since fiscal 2006, we have been conducting the Fukoku
Life (Inochi) Forest project, mainly as a measure to counterdamage from bamboo. This forest provides a venue forparticipation in and hands-on experience of environmental
preservation activities.
Currently, a growing number of forests in Japan arebeing left to grow unchecked due to the lack of people
willing to take over forestry businesses. One particular
problem is uncontrolled groves of Moso bamboo, which
invades the forests needed to absorb CO2—a greenhousegas—as well as farmland. Due to the shallowness of its
roots, bamboo can make ground slippery and contribute totopsoil erosion. It can also devastate mountainous forestsand cause landslides. Measures are therefore needed tocounter this “bamboo damage,” to protect the environmentand respond to disaster.
In the Fukoku Life (Inochi) Forest project, Company
executives and employees take part in cutting away bamboo
forests in order to protect mountainous forest land ownedby the Company. In addition to forest regeneration, thisthinning also aims to restore the bamboo forests themselves
to health. These activities are mainly carried out by Company

Flora Preservation

volunteers organized as the Usami Club. In fiscal 2016, these
activities were conducted 10 times, with 126 executives
and employees and their family members participating
as volunteers.
Other Activities
・Lobby Sales EventsThe lobby sales events at Visit & Charity Concerts sponsoredby our Uchisaiwaicho and Chiba New Town headquarters
have led to regular bakery shop sales events operated byinstitutions for people with disabilities. The Company's
employees participate as sales staff at these traveling
events. Thus we provide a sales location and cooperate
in institutions' activities. At the same time, through thisparticipation we promote better understanding within the
Company of people with disabilities.
・Art Promotion
Fukoku Life is a sponsor of the MET: Live in High Definition
series of screenings by the New York Metropolitan Opera(MET), which are distributed by Shochiku Co., Ltd. By giving
members of the general public the opportunity to see someof the finest opera performances in the world, we help
promote the arts and culture.

Strauss “Der Rosenkavalier”© Kristian Schuller / Metropolitan Opera

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

© ’13,’17 SANRIO S/D · G© ’76,’90,’96,’01,’17 SANRIO APPROVAL No.P0909215

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

FUKOKU MUTUAL LIFE INSURANCE COMPANY

11

Non-consolidated Financial Statements
Non-consolidated Balance Sheets
Fukoku Mutual Life Insurance Company
As of March 31, 2016 and 2017

As of March 31,

2016

2017

Millions of yen

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

FUKOKU MUTUAL LIFE INSURANCE COMPANY¥

182
113,999
114,182
200,000
813
87,793¥2017
Millions of
U.S. dollars

162
44,51844,681
193,000
753
29,787

$

1
396
398
1,720
6
265

1,881,618
142,336
663,209594,3121,722,110
88,1755,091,762

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

17,962
1,105
6,537
6,057
15,355844
47,862

61,437632,242
693,680

59,238568,483
627,722

528
5,067
5,595

125,31085,978
2,324
1,590
3,360
218,565

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

1,116
784
17
10
27
1,956

10,526
5,567
16,093
144

10,836
11,21622,052
200

96
99
196
1

8,585
1,053
27,731
2,239
761
21,877
2,192
767
3,421
68,631(1,850)¥6,489,815

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

52
11
246
19
0
141
22
6
34
535
(15)
$58,522

As of March 31,

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

Liabilities:

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

20,7195,484,362
50,3685,555,450
133
141,935¥ 19,533
5,533,544
50,9295,604,007
62
191,935

891
3,869
10,281
362
5,625
12,929
99
5,037
3,351
1,204
43,65326,083
68,28833,05014,274
5,882,868

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

42
31
93
3
49
120
—
19
28
10
399
229
735
170
127
53,32430,00086,000112

10,000106,000
112

89
944
1

2,742

2,849

25

18,00020,00041,0004,000
20,00041,000

35
178
365

266

257

2

—
767
65,509145,542
148,284
264,397100
767
60,453
126,578
129,427
245,539

0
6
538
1,128
1,153
2,188

338,4214,128
342,549
606,947¥6,489,815

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

2,973
36
3,009
5,198
$58,522¥$174
49,322453
49,9510
1,710

Net assets:

Foundation funds …………………………………………………………………
Accumulated foundation funds redeemed ……………………………………
Reserve for revaluation …………………………………………………………
Surplus
Legal reserve for future losses ………………………………………………
Other surplus
Reserve for redemption of foundation funds …………………………
Reserve for dividend allowances …………………………………………
Accumulated fund for price fluctuation …………………………………
Reserve for advanced depreciation ofreal estate for tax purpose ………………………………………………
Reserve for special account for advanced
depreciation of real estate for tax purpose ……………………………
Other reserves ………………………………………………………………
Unappropriated surplus ……………………………………………………

Total foundation funds, surplus and others …………………………………
Net unrealized gains (losses) on
available-for-sale securities, net of tax ………………………………………
Revaluation reserve for land, net of tax …………………………………………
Total valuation and translation adjustments ………………………………………
Total net assets ……………………………………………………………………
Total liabilities and net assets ……………………………………………………
See notes to the non-consolidated financial statements.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

13

Non-consolidated Statements of Operations
Fukoku Mutual Life Insurance Company
For the years ended March 31, 2016 and 2017

Year ended March 31,

2016

2017

Millions of yen

Ordinary revenues:
Premium and other income:Premium income …………………………………………………………………
Reinsurance income ……………………………………………………………

¥ 617,742
331
618,073¥574,124
302
574,427$5,1172
5,120

27110,276
13,343
13,444
137,324
11,33237,548—77360—
186,64221
109,253
11,314
13,736
125
134,451—
14,473
7,018
90
122
4,041
160,197

0
973
100
122
1
1,198
—
129
62
0
1
36
1,427

656
3,741
586
1,641
2,980
9,606
814,323

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

6
30
10
2
26
76
6,624

126,262
202,982
119,535
110,088
31,163477
590,510104,168
173,825
109,736
71,38829,658385
489,162

928
1,549
978
636
264
3
4,360

9,332
47
9,379

49,18120¥ 49,202

438
0
$ 438

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

14

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2017
Millions of
U.S. dollars

Year ended March 31,

2016

2017

Millions of yen

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

Operating expenses ………………………………………………………………
Other ordinary expenses
Deferred annuity payments ……………………………………………………
Taxes ………………………………………………………………………………
Depreciation ………………………………………………………………………
Others ……………………………………………………………………………
Total ordinary expenses …………………………………………………………
Ordinary profits ……………………………………………………………………
Extraordinary gains:
Gains on disposal of fixed assets ………………………………………………
Gains on contribution of securities to retirement benefit trust ……………
State subsidy and others ………………………………………………………
Others ……………………………………………………………………………
Total extraordinary gains …………………………………………………………
Extraordinary losses:
Losses on disposal of fixed assets ……………………………………………
Impairment losses ………………………………………………………………
Provision of reserve for price fluctuation ……………………………………
Total extraordinary losses ………………………………………………………
Surplus before income taxes ……………………………………………………
Income taxes:
Current ……………………………………………………………………………
Deferred …………………………………………………………………………
Total income taxes ………………………………………………………………
Net surplus for the year …………………………………………………………

¥

2017
Millions of
U.S. dollars

4,314—
12,422
5,820
—
3,549
8,600
4,482
6,340
2,354
47,886
86,500

¥

6,327
6,061
6,499
814
19,702753,979
60,344

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

48
53
59
7
168
6,141
482

1,503
7,913
140
—
9,557

2
—
195
42
240

0
—
1
0
2

266
242
21,754
22,26347,638180
71
14,176
14,42839,925

1
0
126
128
355

14,390(8,304)
6,086¥ 41,551

13,453(10,202)3,251¥ 36,674

119
(90)
28
$ 326

4,057
1,144
7,042
5,493
24
—
15,624
4,319
6,875
—
44,581
87,218

$

36
10
62
48
0
—
139
38
61
—
397
777

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, 2016 and 2017

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

For the year ended March 31, 2016

Foundation
funds

Accumulated
foundation
funds
redeemed

Balance at the beginning of
the fiscal year ………………………

¥30,000¥86,000

Reserve forrevaluation

Legal
reservefor future
lossesReserve forredemptionoffoundation
funds

Reserve foradvanced
Reserve for Accumulated depreciation ofdividend
fund for price real estate forallowances
fluctuation
tax purpose

Other
reserves

UnappropriatedsurplusTotal
surplusTotal
foundation
funds, surplus
and others¥112¥2,582¥12,000¥ 3,895¥767¥93,041¥143,548¥259,660(36,698)(36,698)(36,698)¥31,000¥262

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

(160)

—

—

Payment of interest on foundation
funds ……………………………

160

(316)

(316)

(316)

Net surplus for the fiscal year …

41,551

41,551

41,551(6,000)——(16,104)——(10,000)——

Additons to reserve for redemptionof foundation funds ……………

6,000

Additions to reserve for dividend
allowances ………………………

16,104

Additions to accumulated fund forprice fluctuation …………………

10,000Addition to reserve for advanced
depreciation of real estate for tax
purpose …………………………

7

(7)

—

—

Reversal of reserve for advanced
depreciation of real estate for tax
purpose …………………………

(3)

3

—

—

199

199

199

Reversal of revaluation reserve forland, net of tax …………………
Net changes, excluding
foundation funds, surplus andothers ……………………………
Total changes in the fiscal year ...........

—

—

—

160

6,000

16,10410,0003—(27,531)

4,736

4,736

Balance at the end of the fiscal year ... ¥30,000¥86,000¥112¥2,742¥18,000¥20,000¥41,000

¥266

¥767

¥65,509¥148,284¥264,397

Millions of yen
Valuation and translation adjustments

For the year ended March 31, 2016

Balance at the beginning of the fiscal year ………………………

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

Deferred valuation gains(losses) under hedge
accounting, net of tax

Revaluation
reserve for land,
net of tax

Total valuation andtranslation
adjustments

Total
net assets¥434,236¥0¥3,894¥438,131¥697,792

Changes in the fiscal year
Additions to reserve for dividends to policyholders …………

(36,698)

Additions to legal reserve for future losses ……………………

—Payment of interest on foundation funds ………………………

(316)

Net surplus for the fiscal year …………………………………

41,551

Additons to reserve for redemption of foundation funds ……

—

Additions to reserve for dividend allowances …………………

—Additions to accumulated fund for price fluctuation …………

—Addition to reserve for advanced depreciation of real estate
for tax purpose …………………………………………………

—Reversal of reserve for advanced depreciation of realestate for tax purpose …………………………………………

—Reversal of revaluation reserve for land, net of tax …………

199

Net changes, excluding foundation funds, surplus
and others ………………………………………………………

(95,815)(0)234(95,581)

Total changes in the fiscal year ……………………………………

(95,815)(0)234(95,581)(90,845)

Balance at the end of the fiscal year ………………………………

¥338,421—¥4,128¥342,549¥606,947

16

FUKOKU MUTUAL LIFE INSURANCE COMPANY(95,581)Millions of yen
Foundation funds, surplus and others
Surplus
Other surplus

Accumulated
foundation
Reserve forFoundation
funds
funds
redeemed revaluation¥86,000

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

¥112

Legal
reservefor future
lossesReserve forredemptionoffoundation
funds

Reserve for
special acReserve forcount foradvancedadvanced
Reserve for Accumulated depreciation of depreciation ofdividend
fund for price real estate for real estate forallowances
fluctuation
tax purpose
tax purpose¥2,742¥18,000¥20,000¥41,000

¥266

—

Other
reserves¥767

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

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

106(35,236)(35,236)

(106)

—

—

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

(35,236)(20,000)

(316)

(316)

(316)

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

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

20,000—¥112

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

2

(2)

—

—

(11)

11

—

—

(100)

—

—

20

20

20

100

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

—

(8)
¥257

100
¥100

—
¥767

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

Millions of yen
Valuation and translation adjustments

For the year ended March 31, 2017

Balance at the beginning of the fiscal year ……………………………………

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

Revaluation reserve forland, net of tax

Total valuation andtranslation adjustments

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

Changes in the fiscal year

(35,236)

Additions to reserve for dividends to policyholders ………………………
Additions to legal reserve for future losses …………………………………

—Additons to accumlated foundation funds redeemed ……………………

20,000

Payment of interest on foundation funds ……………………………………

(316)

Net surplus for the fiscal year ………………………………………………

36,674

Redemption of foundation funds ……………………………………………

(20,000)

Additions to reserve for redemption of foundation funds …………………

—Reversal of reserve for redemption of foundation funds …………………

(20,000)

Additions to reserve for advanced depreciation of real estate
for tax purpose ………………………………………………………………

—Reversal of reserve for advanced depreciation of real estate
for tax purpose ………………………………………………………………

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

—Reversal of revaluation reserve for land, net of tax ………………………

20

Net changes, excluding foundation funds,surplus and others ……………

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

Total changes in the fiscal year …………………………………………………

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

Balance at the end of the fiscal year ……………………………………………

¥333,545¥4,107¥337,652¥583,192

FUKOKU MUTUAL LIFE INSURANCE COMPANY

17

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

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

Accumulated
foundation
Reserve forFoundation
funds
funds
redeemed revaluation

$ 267

$766

$1

Legal
reservefor future
lossesReserve forredemptionoffoundation
funds

$24

$160

Reserve for
special acReserve forcount foradvancedadvanced
Reserve for Accumulated depreciation of depreciation ofdividend
fund for price real estate for real estate forallowances
fluctuation
tax purpose
tax purpose

$178

$365

$2

—

Other
reserves

UnappropriatedsurplusTotal
surplusTotal
foundation funds,
surplus andothers$6$583$1,321$2,356

(314)

(314)

(314)

(0)

—

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

0

178

Net surplus for the fiscal year ……
Redemption offoundation funds ………………
Additions to reserve for redemptionof foundation funds ………………
Reversal of reserve for redemptionof foundation funds ………………
Additions to reserve for advanced
depreciation of real estate fortax purpose ………………………
Reversal of reserve for advanced
depreciation of real estate fortax purpose ………………………
Additions to reserve for
special account for advanced
depreciation of real estate fortax purpose ………………………
Reversal of revaluation reserve
for land, net of tax ………………
Net changes, excluding foundation
funds, surplus and others ………

—

178
(2)

(2)

(2)

326

326

326

(53)

—

—

(178)

(178)

(178)

(178)
53
(178)
0

(0)

—

—

(0)

0

—

—

(0)

—

—

0

0

0

0

Total changes in the fiscal year ……

(178)

178

—

0

(124)

—

—

(0)

0

—

(45)

(168)

(168)

Balance at the end of the fiscal year …

$ 89

$944

$1

$25

$35

$178

$365

$2

$0

$6

$538

$1,153$2,188Millions of U.S. dollars
Valuation and translation adjustments

For the year ended March 31, 2017

Balance at the beginning of the fiscal year ……………………………………

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

Revaluation reserve forland, net of tax

Total valuation andtranslation adjustments

Total
net assets$3,016$36$3,053$5,409Changes in the fiscal year

(314)

Additions to reserve for dividends to policyholders ………………………
Additions to legal reserve for future losses …………………………………

—Additons to accumlated foundation funds redeemed ……………………

178

Payment of interest on foundation funds ……………………………………

(2)

Net surplus for the fiscal year ………………………………………………

326

Redemption of foundation funds ……………………………………………

(178)

Additions to reserve for redemption of foundation funds …………………

—Reversal of reserve for redemption of foundation funds …………………

(178)

Additions to reserve for advanced depreciation of real estate
for tax purpose ………………………………………………………………

—Reversal of reserve for advanced depreciation of real estate
for tax purpose ………………………………………………………………

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

—
0

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

(43)

(0)

(43)

(43)

Total changes in the fiscal year …………………………………………………

(43)

(0)

(43)

(211)

Balance at the end of the fiscal year ……………………………………………

$2,973$36$3,009$5,19818

FUKOKU MUTUAL LIFE INSURANCE COMPANYNon-consolidated Proposed Appropriations of Surplus
Fukoku Mutual Life Insurance Company
For the years ended March 31, 2016 and 2017

Year ended March 31,

2016

2017

Millions of yen

Unappropriated surplus

2017
Millions of
U.S. dollars¥65,509¥60,453

$538

11

1

0

—

100

0

11

102

0

65,52160,555539

35,236

34,592308

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

106

105

0

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

316

100

0

6,000

2,000

17

2

—

—

100

—

—

6,103

2,000

17

6,526

2,205

19

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

41,762

36,797

327

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

¥23,758¥23,758$211

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

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

Voluntary surplus reserve
Reserve for redemption of foundation funds ………………………………
Reserve for advanced depreciationof real estate for tax purpose ………………………………………………
Reserve for special account for advanced depreciationof real estate for tax purpose ………………………………………………

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

FUKOKU MUTUAL LIFE INSURANCE COMPANY

19

Notes to the Non-consolidated Financial Statements

I. Presentation of the Non-consolidated Financial
Statements
1. Basis of Presentation
The accompanying non-consolidated financial statements havebeen prepared from the accounts maintained by Fukoku MutualLife Insurance Company (the “Company”) in accordance withthe provisions set forth in the Insurance Business Act of Japanand its related rules and regulations and in conformity withaccounting principles generally accepted in Japan, which are
different in certain respects from accounting principles generally
accepted in countries and jurisdictions other than Japan.
In addition, the notes to the non-consolidated financial
statements include information which is not required underaccounting principles generally accepted in Japan but ispresented herein as additional information.
Amounts of less than one million yen have been rounded
down. As a result, the totals do not add up.
The translations of yen amounts into U.S. dollar amounts
are included solely for the convenience of the reader and havebeen made, as a matter of arithmetical computation only, at therate of ¥112.19 = US$1.00, the effective rate of exchange at thebalance sheet date of March 31, 2017. The translations should
not be construed as representations that such yen amounts
have been or could in the future be, converted into U.S. dollars
at that or any other rates.

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

20

FUKOKU MUTUAL LIFE INSURANCE COMPANY

component of net assets.
Available-for-sale securities whose market value are
deemed extremely difficult to obtain are stated at cost,
cost being determined by the moving average method,
except for public and corporate bonds including foreign
bonds, of which the difference between acquisition costand face value is considered to be an adjustment ofinterest. Such bonds are stated at amortized cost under
the straight-line method, cost being determined by themoving average method.
(2) Derivative instruments are stated at fair market value.
(3) The Company revalued the land used in the operations basedon the Act for Revaluation of Land (Act No.34 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
component of net assets and the related tax is recorded asdeferred tax liabilities for land revaluation.
• Date of revaluation: March 31, 2002
• Method of revaluation as prescribed for in Article 3
Paragraph 3 of the said ACT:Calculation is based on the appraisal value for property tax
set forth in Article 2 item 3 of the Enforcement Ordinanceof the Act for Revaluation of Land (Government OrdinanceNo.119 promulgated on March 31, 1998) and the roadrate set forth in Article 2 item 4 of the said Ordinance withcertain reasonable adjustments.
(4) Depreciation of tangible fixed assets is calculated by thefollowing methods.
• Tangible fixed assets (excluding lease assets):Decliningbalance method
However, buildings (excluding building attachments
and structures acquired on or before March 31, 2016)acquired on or after April 1, 1998 are depreciated using
Straight-line method.
• Lease assets related to finance lease transactions that do
not transfer ownership: Straight-line method over the leaseterm with no residual value.
Other tangible fixed assets acquired for ¥100,000 or
more but less than ¥200,000 are depreciated equally overthree years.
(5) Assets and liabilities denominated in foreign currencies,
except for investments in subsidiaries and affiliates, aretranslated into Japanese yen at the effective exchange
rate prevailing at the balance sheet date. Investments in
subsidiaries and affiliates are translated into Japanese yen at
the exchange rate on the date of acquisition.
(6) Allowance for possible loan losses is provided in accordancewith the Company’s standards of self-assessment and write-offs and reserves on credit quality:i) For the credits of borrowers who are legally bankrupt
such as being in the proceedings of bankruptcy or
civil rehabilitation (hereinafter called “legally bankrupt
borrowers”) and who are substantially bankrupt (hereinafter
called “substantially bankrupt borrowers”), the Company
provides the remaining amount of credits after the direct
write-off described below and the deductions of theamount expected to be collected through the disposal ofcollateral or the execution of guarantees.
ii) For the credits of borrowers who are not currently bankrupt
but have a high possibility of bankruptcy (hereinafter
called “not currently bankrupt borrowers”), the Company
provides the amounts deemed as necessary considering
the borrowers’ ability to pay, within the amounts after
deductions of the amount expected to be collected throughthe disposal of collateral or the execution of guarantees.
iii) For the credits of borrowers other than the above, theCompany provides the amounts calculated by multiplying
the borrowers’ balance by the actual ratio of bad debt
losses on defaults during a certain past period.
All credits are assessed by the relevant departmentsin accordance with the Company’s standards of selfassessment on credit quality. The results of the assessment
are reviewed by the audit department, which is independentof business-related divisions. Subsequently, the allowancefor possible loan losses is provided based on the results ofthese assessments.
For the credits of legally bankrupt borrowers andsubstantially bankrupt borrowers, the amounts remaining
after deductions of collateral value or the amounts
collectible through the execution of guarantees are writtenoff directly from the borrowers’ balances as the estimateduncollectible amounts. The amount written-off as of March
31, 2016 and 2017 were ¥247 million and ¥1 million (US$12
thousand), respectively.
(7) Reserve for employees’ retirement benefits is presented
based on projected benefit obligations and pension plan
assets at the balance sheet date.
The Company uses the following methods for amortizing
retirement benefit obligations and retirement benefit
expenses:• Method for allocation of projected retirement benefits................Benefit formula basis• Amortization period of actuarial gains and losses...10 years• Amortization period of prior service cost................10 years(8) Reserve for price fluctuation is calculated in accordance with
Article 115 of the Insurance Business Act.
(9) As for the finance lease transactions where the Company
is a lessor, the lease fee is recorded in “Interest, dividends
and other income” at the time of receiving lease fee. The

corresponding cost of the lease transactions is recorded
in “Other investment expenses”, which is calculated bydeducting an amount equivalent to the interest allocated overthe lease term from the lease fee received.
(10) Hedge accounting is based on “Accounting Standards for
Financial Instruments” (ASBJ Statement No. 10, August 11,2006). The Company applies a fair value hedge accounting
as a hedge against the risk of foreign exchange fluctuationin relation to bonds denominated in foreign currencies andagainst the risk of price fluctuation in relation to domestic
stocks, and a designated hedge accounting (“Furiate
shori”) for foreign currency swaps as a hedge against therisk of foreign exchange fluctuation in relation to bonds
denominated in foreign currencies issued by the Company.
For assessing the effectiveness of hedge used, ratio
analysis of comparing the fluctuations in the fair value orcash flows of hedged items and hedging instruments ismainly applied.
(11) Accounting of unrecognized actuarial differences andunrecognized prior service costs related to employees’
retirement benefits is different to the methods used forthese items in the consolidated financial statements.
(12) The Company accounts for consumption taxes by the
tax-exclusion method. The consumption taxes on certain
assets, which are not deductible from consumption taxes
withheld and that are stipulated to be deferred under the
Tax Act, are deferred as prepaid expenses and amortized
equally over five years. Consumption taxes other thandeferred consumption taxes are recognized as an expense
when incurred.
(13) Policy reserve is based on Article 116 of the Insurance
Business Act, and the premium reserve is calculated by thefollowing method:i) In regard to the policies subject to the standard policy
reserve, the method as prescribed by the Commissionerof Financial Services Agency (Ministry of FinanceOrdinance No. 48, 1996) is applied.
ii) In regard to the policies not subject to the standard policy
reserve, the net level premium method is applied.
Based on the provision of Article 69, paragraph 5, of the
Enforcement Regulation of the Insurance Business Act,
the Company includes additional funded policy reserves
as follows.
At the end of the fiscal year ended March 31, 2013,
among individual annuity insurance policies with anassumed interest rate of 5.00% or higher, policies that havean annuity commencement date on or prior to March 31,
2013 (excluding wife’s annuity insurance additional rider),the Company reduced the assumed interest rate to 1.00%
and funded additional policy reserves. As of March 31,

FUKOKU MUTUAL LIFE INSURANCE COMPANY

21

2017, the balance of these policy reserves was ¥42,748
million (US$381 million).
At the end of the fiscal year ended March 31, 2016,
among individual annuity insurance policies with anassumed interest rate of 5.00% or higher, policies thathave an annuity commencement date from April 1, 2013,
through March 31, 2017 (excluding wife’s annuity insurance
additional rider), the Company reduced the assumed interest
rate of policy reserve to 1.00% and funded additional policy
reserves. Furthermore, for certain whole life insurance
policies that include distribution of surplus every five years
the Company funded additional policy reserves. As of March
31, 2017, the balance of these policy reserves was ¥29,931
million (US$266 million).
(14) The software for internal use is amortized based on straightline method over the estimated useful lives.
(15) Of the bonds corresponding to the sub-groups of individual
insurance and annuities which are set by insurance types
and investment policies, the bonds that are held to matchthe duration of liabilities are classified as policy-reservematching bonds in accordance with “Temporary Treatmentof Accounting and Auditing Concerning Policy-reservematching Bonds in Insurance Industry” (Industry Audit
Committee Report No. 21 issued by the Japanese Instituteof Certified Public Accountants on November 16, 2000).
2. In line with a revision to the Corporation Tax Act, the Company
adopted the “Practical Solution on a Change in Depreciation
Method Due to Tax Reform 2016” (PITF No. 32, June 17,2016) from the current fiscal year. Accordingly, the method ofdepreciation was changed from the declining-balance method
to the straight-line method for facilities attached to buildings
and structures acquired on or after April 1, 2016.
As a result, both ordinary profits and the surplus before
income taxes increased by ¥100 million (US$900 thousand).

3. Asset management of the general accounts other than theseparate accounts stipulated in Article 118 Paragraph 1 ofthe Insurance Business Act is conducted on the principle ofprudent and profitable investments, considering public andsocial responsibilities of the insurance business. Based on thispolicy, the Company allocates the fund, securing its liquidity,
from the medium-to-long term viewpoints. The Company isdiversifying investments in assets such as foreign securities,
stocks and real estates within the scope of acceptable risk inorder to enhance the profitability, although yen-denominatedinterest bearing assets including debt securities such as
Japanese government bonds and loans are the cores of theportfolios under the asset liability management. Derivatives
are mainly used to hedge the market risk regarding spotpriced assets and liabilities. Major financial instruments

22

FUKOKU MUTUAL LIFE INSURANCE COMPANY

including securities, loans and derivatives are exposed tomarket risk and credit risk.
The Company manages its asset management risk by
establishing internal control systems including various rules
pursuant to the “Three Basic Rules related to Enterprise
Risk Management” established by the Board of Directors.
Specifically, the Company eliminates excessive risk deviatingfrom the basic principle and secures the safety of theassets by utilizing control functions of the Financial andInvestment Risk Management Department towards the asset
management sections, monitoring the status of market risk
and credit risk periodically on a daily or monthly basis. In
addition, the Company quantifies the market risk and credit
risk using value-at-risk (VaR) method in order to control thepossible maximum losses which may arise from the holding
assets within a certain range of risk buffers.
The carrying amounts, fair values and their relateddifferences of major financial assets and liabilities in thegeneral account were as follows:(1) Cash, deposits (excluding financial instruments treated as
securities based on “Accounting Standards for Financial
Instruments” (ASBJ Statement No.10)) and call loans:
The fair values of cash, deposits and call loans are based on
their book values since fair values approximate book values
due to their short maturities.
(2) Securities including deposits and monetary claims bought
which are treated as securities based on “AccountingStandards for Financial Instruments” (ASBJ Statement
No.10) and securities managed as trust assets in money heldin trust:
The fair values of marketable securities are measured at
the quoted market prices at the balance sheet date. The fairvalues of other securities without the quoted market prices
are based on the prices reasonably calculated such as theprices offered by the information vendors or counterparty
financial institutions.
Investments in subsidiaries and affiliates, unlisted
stocks and investments in partnerships whereby partnershipassets consist of unlisted stocks whose fair values are
deemed extremely difficult to obtain, are excluded fromabove securities. The carrying amounts of investments in
subsidiaries and affiliates, unlisted stocks and investments inpartnerships were ¥35,560 million, ¥6,127 million, and ¥8,371
million as of March 31, 2016, and ¥64,837 million (US$577
million), ¥6,109 million (US$54 million), and ¥17,418 million(US$155 million) as of March 31, 2017, respectively.
(3) Loans and monetary claims bought treated as loans:
The fair values of policy loans are deemed to approximatebook values, considering estimated repayment period andinterest rate conditions since their repayment deadlines havenot been set up due to the characteristics that the loans areAs of March 31,

2016
Millions of yen

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

Carrying
amountFair value¥ 112,405
112,405
200,000¥ 112,405
112,405
200,000

813
813

881
881

67
67

86,79386,79386,79386,793——233,015
768,786
1,074,535
1,433
2,889,888
4,967,659

233,015936,313
1,280,612
1,140
2,889,888
5,340,969—
167,526
206,077(293)—
373,31061,437632,242
693,680
6,061,352
141,935
141,935

61,437664,774
726,2126,467,262
148,943
148,943(0)32,531
32,531
405,910
7,008
7,008

(1,982)
18,823
16,841(1,982)
18,823
16,841

—
—
—

¥

¥

Difference

¥

¥

—
—
—

As of March 31,

2017

2017

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

¥¥

43,274
43,274
193,000¥

Millions of U.S. dollars

Fair value

Difference

43,274
43,274
193,000¥———

Carrying
amount

$

385
385
1,720

Fair value

Difference

$

$

385
385
1,720

—
—
—

753
753

808
808

54
54

6
6

7
7

0
0

28,78728,78728,78728,787

—
—

256
256

256
256

—
—

179,246764,914
1,008,212
3,256,735
5,209,110

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

1,597
6,818
8,986
29,02846,431

1,597
8,099
10,39929,02849,125

—
1,281
1,413
—
2,694

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

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

528
5,067
5,595
54,395
1,710
1,710

528
5,283
5,811
57,306
1,779
1,779

(0)
216
216
2,911
68
68

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

—
—
—

4
116
121

4
116
121

—
—
—

¥

¥

$

$

$

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

FUKOKU MUTUAL LIFE INSURANCE COMPANY

23

limited to the amount of cash surrender values. Therefore,
the book values are used as the fair values of policy loans.
The fair values of floating interest rate loans among theordinary loans and monetary claims bought treated as loans
approximate the book values because the market interest
rates are reflected in future cash flows in a short period.
Therefore, the fair values of floating interest rate loans andmonetary claims bought treated as loans are based on theirbook values. The fair values of fixed interest rate loans
are measured by discounting the future cash flows to thepresent values.
The fair values of loans from legally bankrupt borrowers,
substantially bankrupt borrowers and not currently bankrupt
borrowers and monetary claims bought treated as loans
are computed by deducting the amount of the allowancefor possible loan losses from the book values before direct
write-offs.
(4) Subordinated bonds:
Subordinated bonds issued by the Company are stated at fairmarket values.
(5) Derivative instruments:i) The fair values of the futures and options traded at theexchange are measured at the settlement price of theexchange.
ii) The fair values of forward contracts, options and swaps
traded over the counter are based on the quoted prices
offered by counterparty financial institutions.
iii) The fair values of foreign currency forward contracts are
determined based on the spot exchange rate and forward
contract rate.
4. The Company holds investment and rental properties suchas office buildings in Tokyo and other areas. The carrying
amounts and the fair values of investment and rental
properties were ¥170,027 million and ¥276,629 million as ofMarch 31, 2016, and ¥172,312 million (US$1,535 million) and¥283,598 million (US$2,527 million) as of March 31, 2017,
respectively. The fair value is mainly based on the value
calculated by the Company in accordance with real estateappraisal standards which includes some adjustments using
the reference prices.
The amount corresponding to asset retirement
obligations included in the carrying amount of investment
and rental properties were ¥1,119 million as of March 31,
2016, and ¥974 million (US$8 million) as of March 31, 2017,
respectively.
5. The amounts of securities lent under lending agreements
were ¥18,189 million and ¥38,863 million (US$346 million) as
of March 31, 2016 and 2017, respectively.
6. The total amounts of credits to bankrupt borrowers,

24

FUKOKU MUTUAL LIFE INSURANCE COMPANY

delinquent loans, delinquent loans past 3 months or more andrestructured loans, which were included in loans, were ¥990
million as of March 31, 2016 and ¥1,115 million (US$9 million)
as of March 31, 2017, respectively;i) The balances of credits to bankrupt borrowers were ¥217
million and ¥230 million (US$2 million) as of March 31,
2016 and 2017, respectively.
ii) The balances of delinquent loans were ¥773 million and¥884 million (US$7 million) as of March 31, 2016 and2017, respectively.
iii) There were no balances of delinquent loans past 3 months
or more and restructured loans as of March 31, 2016
and 2017.
The direct write-offs related to loans decreased credits tobankrupt borrowers described above by ¥247 million as ofMarch 31, 2016 and ¥1 million (US$12 thousand) as of March
31, 2017, respectively.
Credits to bankrupt borrowers represent loans, excluding
the balances already written-off, which meet the conditionsprescribed in Article 96 Paragraph 1 item 3 and 4 of the
Enforcement Regulations of the Corporate Tax Act. Moreover,accrued interest on these loans is not recorded as income
after determining that principal of or interest on theseloans is unlikely to be collected due to the significant delay
in repayment of principal or interest payment or for someother reasons.
Delinquent loans are credits which accrued interest
is not recorded as income due to the same reasons as
described above, and exclude credits to bankrupt borrowers
and loans for which interest payments have been suspended
and rescheduled to assist and support the borrowers in the
restructuring of their business.
Delinquent loans past 3 months or more are loans
for which interest payments or repayments of principal
are delinquent for 3 months or more from the due dateunder the terms of the related loan agreements, excluding
those loans classified as credits to bankrupt borrowers anddelinquent loans.
Restructured loans are loans for which certain
concessions favorable to borrowers, such as interest
reduction or exemption, rescheduling of due date forrepayments of principal or interest payment, waiver of claim
or other terms, have been negotiated for the purpose of
assisting and supporting the borrowers in the restructuringof their business. This category excludes loans classified
as credits to bankrupt borrowers, delinquent loans anddelinquent loans past 3 months or more.
7. Accumulated depreciation of tangible fixed assets were¥152,678 million and ¥158,873 million (US$1,416 million) as
of March 31, 2016 and 2017, respectively.
8. Total assets in separate accounts provided for in Article 118 of
the Insurance Business Act were ¥79,065 million and ¥75,678

million (US$674 million) as of March 31, 2016 and 2017,
respectively. The amounts of separate account liabilities were
the same as separate account assets.
9. The total amounts of receivables from/payables to subsidiaries
were ¥2,486 million and ¥2,752 million as of March 31, 2016,and ¥2,471 million (US$22 million) and ¥2,187 million (US$19
million) as of March 31, 2017, respectively.
10. Deferred tax assets and deferred tax liabilities as of March
31, 2016 were ¥108,997 million and ¥139,188 million,
respectively. Valuation allowance for deferred tax assets was¥2,859 million.
Major components of deferred tax assets were ¥69,311
million of policy reserves, ¥19,120 million of reserve for pricefluctuation and ¥12,530 million of reserve for employees’
retirement benefits as of March 31, 2016.
Major component of deferred tax liabilities was¥131,608 million of net unrealized gains on available-for-salesecurities as of March 31, 2016.
The statutory tax rate and the actual effective tax rate
for the year ended March 31, 2016 were 28.9% and 12.8%,
respectively. The difference between the statutory tax rate

and the actual effective tax rate was attributable mainly to-21.3% of reserve for dividends to the policyholders, and+6.1% of the tax rate adjustment of deferred tax assets at
the end of period.
Deferred tax assets and deferred tax liabilities as ofMarch 31, 2017 were ¥117,179 million (US$1,044 million)and ¥132,077 million (US$1,177 million), respectively.
Valuation allowance for deferred tax assets was ¥4,235
million (US$37 million).
Major components of deferred tax assets were ¥73,414
million (US$654 million) of policy reserves, ¥23,089 million(US$205 million) of reserve for price fluctuation and ¥12,447
million (US$110 million) of reserve for employees’ retirement
benefits as of March 31, 2017.
Major component of deferred tax liabilities was¥127,885 million (US$1,139 million) of net unrealized gains
on available-for-sale securities as of March 31, 2017.
The statutory tax rate and the actual effective tax rate
for the year ended March 31, 2017 were 28.2% and 8.1%,
respectively. The difference between the statutory tax rate
and the actual effective tax rate was attributable mainly to-24.5% of reserve for dividends to the policyholders.

11. Changes in reserve for dividends to policyholders were as follows:Year ended March 31,

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

Balance at the beginning of the fiscal year ............................................................

¥49,311¥50,368$448

Transfer from surplus in the previous fiscal year ...................................................

36,69835,236314

Dividend payments to policyholders during the fiscal year .....................................

(35,688)(34,695)(309)

Increase in interest ................................................................................................

47

20

0

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

¥50,368¥50,929$453

12. The amounts of stocks of subsidiaries were ¥36,994 millionand ¥64,837 million (US$577 million) as of March 31, 2016
and 2017, respectively.
13. Assets pledged as collateral as of March 31, 2016 were¥26,284 million of securities and ¥1,279 million of bankdeposits. Secured debts as of March 31, 2016, were
¥4,906 million.
Assets pledged as collateral as of March 31, 2017 were¥27,012 million (US$240 million) of securities and ¥1,688
million (US$15 million) of bank deposits. Secured debts as ofMarch 31, 2017, were ¥4,974 million (US$44 million).
14. Reserves for outstanding claims for the reinsurance
contracts provided in accordance with Article 71 Paragraph
1 of the Enforcement Regulation of the Insurance BusinessAct (hereinafter called “reserve for outstanding claims forceded reinsurance”) were ¥15 million and ¥3 million (US$29
thousand) as of March 31, 2016 and 2017, respectively.
Policy reserves for the reinsurance contracts provided inaccordance with Article 71 Paragraph 1 of the Enforcement
Regulation of the Insurance Business Act (hereinafter called“policy reserve for ceded reinsurance”) were ¥29 millionand ¥30 million (US$271 thousand) as of March 31, 2016
and 2017, respectively.
15. The total amounts of adjustment items for redemption offoundation funds and appropriation of net surplus definedin Article 30 Paragraph 2 of the Enforcement Regulationof the Insurance Business Act were ¥342,662 million and¥337,765 million (US$3,010 million) as of March 31, 2016
and 2017, respectively.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

25

16. In line with the redemption of ¥20,000 million (US$178
million) in foundation funds, the same amount of reserve
for redemption of foundation funds is transferred toaccumulated foundation funds redeemed in accordance with
Article 56 of the Insurance Business Act in this fiscal year.
17. There were unused commitment line agreements underwhich the Company is the lender of ¥12,172 million and¥10,500 million (US$93 million) as of March 31, 2016 and2017, respectively.

18. Repayments of subordinated bonds are subordinated toother obligations.
19. The future contribution to the Life Insurance Policyholders
Protection Corporation of Japan under Article 259 of the
Insurance Business Act were estimated at ¥10,356 millionand ¥9,406 million (US$83 million) as of March 31, 2016 and2017, respectively.
The contribution is recognized as operating expenses
when contributed.

20. Matters Related to Employees’ Retirement Benefits as ofMarch 31, 2016 and 2017
(1) Overview of Employees’ Retirement Benefit Plan
As for a defined benefit plan for office-based employees, theCompany has a defined benefit corporate pension plan andretirement lump-sum payments. As for a defined contribution
plan for these employees, the Company also has a defined

contribution pension plan.
As for a defined benefit plan for sales employees, theCompany has retirement lump-sum payments.
The Company places a retirement benefit trust
in relation to the retirement lump-sum grant plan forsales employees.

(2) Defined Benefit Plani) Reconciliation of beginning and end of balance of retirement benefit obligation
As of March 31,

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

Retirement benefit obligation at the beginning of the fiscal year ..........................

¥76,725¥85,184$759

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

3,067

3,508

31

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

1,073

510

4

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

9,106

656

5

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

(4,787)(4,583)(40)

Retirement benefit obligation at the end of the fiscal year ...................................

¥85,184¥85,277$760ii) Reconciliation of beginning and end of balance of pension plan assets
As of March 31,

2016

2017

Millions of yen

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

2017
Millions of
U.S. dollars¥26,114¥44,636$397

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

783

671

5

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

(1,987)57

0

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

2,380

2,689

23

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

(1,322)(1,400)(12)

Contribution amount on establishment of retirement benefit trust.....................

18,666——

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

¥44,636¥46,654$415

26

FUKOKU MUTUAL LIFE INSURANCE COMPANY

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

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

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

¥73,675¥73,902$658

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

(44,636)(46,654)(415)

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

29,03927,247242

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

11,50911,375101e. Unrecognized actuarial differences .................................................................

(14,864)(13,156)(117)

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

399

323

2

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

¥26,083¥25,789$229iv) Breakdown of retirement benefit gains and losses
As of March 31,

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

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

¥3,067¥3,508$31

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

1,073

510

4

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

(783)

(671)

(5)

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

921

2,306

20

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

(76)

(76)

(0)

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

¥4,202¥5,578$49v) Breakdown of pension plan assets
The breakdown of asset categories as a percentage of total pension plan assets was as follows:
As of March 31,

2016

2017

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

48.5%

46.1%

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

33.7%

34.2%

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

7.7%

8.0%

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

6.7%

7.9%

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

2.9%

2.7%

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

0.6%

1.1%

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

100.0%

100.0%

Within the total of pension assets, 37.2% of this amount is accounted for by the retirement benefit trust established in relation to
the retirement lump-sum grant plan for sales employees.

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

FUKOKU MUTUAL LIFE INSURANCE COMPANY

27vii) Underlying actuarial assumptions
Main underlying actuarial assumptions were as follows:
As of March 31,

2016

2017

0.6%

0.6%

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

3.0%

2.5%

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

0.0%

0.0%

Discount rate .......................................................................................................
Expected long-term rate of return on pension plan assets(3) The required contribution amounts by the Company to the defined contribution plan were ¥187 million and ¥194 million (US$1 million)
as of March 31, 2016 and 2017, respectively.
21. The “Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, March 28, 2016) has been applied
from the year ended March 31, 2017.

III. Notes to Non-consolidated Statements of Operations
1. The total amounts of revenues and expenses in connection with subsidiaries were ¥1,749 million and ¥8,584 million for theyear ended March 31, 2016, and ¥877 million (US$7 million) and ¥8,084 million (US$72 million) for the year ended March 31,
2017, respectively.
2. Major items of gains on sales of securities were as follows:Year ended March 31,

2016

2017

2017
Millions ofMillions of yen

U.S. dollars

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

¥30,067¥11,175$ 99

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

2,934

2,741

24

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

¥ 4,546

556

$ 4

¥

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

2016

2017

2017
Millions ofMillions of yen

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

¥

U.S. dollars

—

¥ 441

$ 3

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

2,701

1,312

11

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

¥ 3,119¥ 3,739$ 33

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

2016

2017

2017
Millions ofMillions of yen

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

¥—

U.S. dollars

¥24

$0

5. For the year ended March 31, 2016, in calculating the reversal of reserve for outstanding claims, a reversal of reserves for outstanding
claims reinsured of ¥35 million was deducted. In calculating the provision of policy reserves, a reversal of reserves for policy reserves

28

FUKOKU MUTUAL LIFE INSURANCE COMPANY

reinsured of ¥1 million was added.
For the year ended March 31, 2017, in calculating the reversal of reserve for outstanding claims, a reversal of reserves foroutstanding claims reinsured of ¥11 million (US$106 thousand) was deducted. In calculating the provision of policy reserves, aprovision of reserves for policy reserves reinsured of ¥0 million (US$8 thousand) was deducted.
6. Major items of losses on trading securities were as follows:Year ended March 31,

2016

2017

2017
Millions ofMillions of yen

U.S. dollars

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

¥ 9,034¥ 6,464$ 57

Gains on sales of trading securities ...................................................................

12,821——

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

¥(36,617)¥(17,796)$(158)

7. Gains on money held in trust for the year ended March 31, 2016 included valuation losses of ¥0 million.
Losses on money held in trust for the year ended March 31, 2017 included valuation gains of ¥0 million (US$0 million).
8. Losses on derivative instruments for the year ended March 31, 2016 included valuation losses of ¥2,428 million.
Gains on derivative instruments for the year ended March 31, 2017 included valuation gains of ¥2,224 million (US$19 million).

FUKOKU MUTUAL LIFE INSURANCE COMPANY

29

Report of Independent Auditors

30

FUKOKU MUTUAL LIFE INSURANCE COMPANY

FUKOKU MUTUAL LIFE INSURANCE COMPANY

31

Consolidated Financial Statements
Consolidated Balance Sheets
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
As of March 31, 2016 and 2017

As of March 31,

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

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

¥ 172,049¥ 136,494$ 1,216

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

200,000

193,000

1,720

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

813

753

6

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

87,79329,787265

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

6,859,234

7,130,780

63,559Loans ................................................................................................................

697,056

631,1095,625

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

125,310125,276

1,116

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

86,217

88,212786

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

2,324

2,013

17

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

1,590

1,140

10

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

3,531

3,230

28

218,974

219,873

1,959

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

11,25911,316

100

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

1,564

801

7

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

658

210

1

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

7,457

13,997

124

20,941

26,326234

Tangible fixed assets

Intangible fixed assets

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

2

4

0

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

144

200

1

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

75,30866,237590

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

—

42

0

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

137

153

1

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

(1,851)(1,776)(15)

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

¥ 8,330,606¥ 8,432,988$ 75,167

32

FUKOKU MUTUAL LIFE INSURANCE COMPANYAs of March 31,

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

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

¥

23,003¥22,223$

198

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

7,287,604

7,365,185

65,649Reserve for dividends to policyholders........................................................

50,36850,929453

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

650

598

5

7,361,627

7,438,936

66,306

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

480

98

0

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

146

79

0

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

141,935

191,935

1,710

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

45,94046,006410

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

40,64938,767345

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

77,28991,827

818

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

30,837

16,233

144

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

14,274

14,265127

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

7,713,180

7,838,150

69,864

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

30,00010,00089

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

86,000106,000

944

Net assets:

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

112

112

1

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

151,251

133,217

1,187

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

267,363249,3292,222

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

349,884

342,470

3,052

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

4,128

4,107

36

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

(115)

(433)

(3)

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

(10,414)(9,240)(82)

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

343,482

336,904

3,002

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

6,578

8,603

76

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

617,425594,837

5,302

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

¥ 8,330,606¥ 8,432,988$ 75,167

FUKOKU MUTUAL LIFE INSURANCE COMPANY

33

Consolidated Statements of Operations
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
For the years ended March 31, 2016 and 2017

Year ended March 31,

2016

2017

Millions of yen

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

34

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2017
Millions of
U.S. dollars¥ 788,854¥ 648,744$5,782

160,709
11,33238,438—77
350—
210,908
10,715
1,010,478

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

1,414
—
135
62
0
1
36
1,649
80
7,513

130,954204,136
130,191
155,996
31,884653,164

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

975
1,561
1,086
979
270
4,872

127,00447

77,58020691
00127,052

077,601

0
691

4,324
—
12,422
5,820
—
3,549
8,603
4,482
5,038
2,354
46,596
98,07822,435947,327¥ 63,151

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

36
10
62
48
0
—
139
38
50
—
386
866
188
7,006
$ 506

Year ended March 31,

2016

2017

Millions of
U.S. dollars

Millions of yen

Extraordinary gains:
Gains on disposal of fixed assets ................................................................
Gains on contribution of securities to retirement benefit trust ...................
State subsidy and others .............................................................................
Others..........................................................................................................
Total extraordinary gains ...............................................................................
Extraordinary losses:
Losses on disposal of fixed assets ..............................................................
Impairment losses .......................................................................................
Provision of reserve for price fluctuation .....................................................
Total extraordinary losses
Provision of reserve for dividends to policyholders (subsidiary) ...............
Surplus before income taxes .........................................................................
Income taxes:
Current.........................................................................................................
Deferred ......................................................................................................
Total income taxes ..........................................................................................
Net surplus ......................................................................................................
Net surplus attributable to non-controlling interests ..................................
Net surplus attributable to the parent company ..........................................

¥ 1,503
7,913
140
—
9,557

¥

2017

2
—
195
42
240

$

0
—
1
0
2

283
242
22,111
22,637422
49,647182
71
14,538
14,792419
41,895

1
0
129
131
3
373

15,619(8,336)
7,282
42,364240¥ 42,124

14,409(10,231)
4,178
37,716236¥ 37,479

128
(91)
37
336
2
$334

Consolidated Statements of Comprehensive Income
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
For the years ended March 31, 2016 and 2017

Year ended March 31,

2016

2017

Millions of yen

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

2017
Millions of
U.S. dollars¥ 42,364¥ 37,716$ 336

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

(89,444)(7,768)(69)

Deferred valuation gains (losses) under hedge accounting, net of tax ........

(0)

—

—

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

433

0

0

Other comprehensive income:

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

(62)

(318)

(2)

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

(7,414)

1,174

10(96,487)(6,912)(61)(55,144)

30,922275

Comprehensive income:Comprehensive income attributable to the parent company ......................
Comprehensive income attributable to non-controlling interests ................

1,021

(117)

(1)

¥ (54,123)¥ 30,804$ 274

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, 2016 and 2017

Year ended March 31,

2016

2017

Millions of yen

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

36

FUKOKU MUTUAL LIFE INSURANCE COMPANY¥

2017
Millions of
U.S. dollars

49,647
4,482
7,425
242
763

¥ 41,895
4,319
7,518
71
763

$

373
38
67
0
6

(7,913)(498)
127,00447—(780)
77,580
20

—
(6)
691
0

0
422
(96)
(1,623)
22,111(160,709)(25,624)
4,324
8,602
(1,231)
1
(37)

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

0
3
(0)
(2)
129
(1,414)
(111)
36
139
0
(0)
(0)

(1,037)
103
21

(851)
(382)
(66)

(7)
(3)
(0)

1,626
15,51843,574
172,162(4,943)(35,688)(479)(31,682)
142,943(581)
16,337
8,987
166,861(3,812)(34,695)(472)(9,832)
127,036

(5)
145
80
1,487
(33)
(309)
(4)
(87)
1,132

(73)
57
—
(1,050,013)
821,187(71,613)
132,491
45,173(4,093)(126,884)¥ 16,05974
60
56,742(944,430)
654,047(66,549)
123,722
1,311(5,309)(180,329)¥ (53,292)

00505(8,418)
5,829
(593)
1,102
11
(47)
(1,607)$ (475)

Year ended March 31,

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

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

¥ (7,838)¥ (9,040)

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

11,410

11

$

(80)
0

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

(8,925)(11,089)(98)

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

(132,237)(200,447)(1,786)

Proceeds from issuance of bonds ...............................................................

62,06550,000445

Redemption of subordinated bonds ............................................................

(40,326)——

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

—(20,000)(178)

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

(316)

(316)

(2)

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

—

2,215

19

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

(19)

(85)

0

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

(520)

(501)

(4)

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

20,88331,312

279

Cash flows from financing activities:

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

(377)

(193)

(1)

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

31,212(42,292)(376)

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

339,246

370,458

3,302

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

—

70

0

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

¥ 370,458¥ 328,236$ 2,925

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, 2016 and 2017

Millions of yen
Foundation funds, surplus and others

Foundation funds

Accumulated
foundation funds
redeemed¥30,000¥86,000

Consolidated surplus

Total foundation funds,
surplus and others¥145,942¥262,054

Additions to reserve for dividends to policyholders .............

(36,698)(36,698)

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

(316)

(316)

Net surplus attributable to the parent company
for the fiscal year ...............................................................

42,124

42,124

Reversal of revaluation reserve for land, net of tax .............

199

199

For the year ended March 31, 2016
Balance at the beginning of the fiscal year ..............................

Reserve for revaluation¥112

Changes in the fiscal year

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

—

—

—

5,309

5,309

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

¥30,000¥86,000¥112¥151,251¥267,363

Millions of yen
Accumulated other comprehensive income

For the year ended March 31, 2016
Balance at the beginning of
the fiscal year ........................................

Net unrealized
Deferred valuagains (losses) on tion gains (losses)
Accumulated
Total accumuavailable-for-sale
under hedge
Revaluation
Foreign currency remeasurements
lated othersecurities,
accounting,reserve for land,translationof definedcomprehensive
net of tax
net of tax
net of tax
adjustments
benefit plansincome¥440,109¥ 0¥3,894¥(52)¥(3,000)¥440,951

Non-controllinginterests

Total net assets¥5,576¥708,582

Changes in the fiscal year
Additions to reserve for dividends
to policyholders................................

(36,698)

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

(316)

Net surplus attributable to the parent
company for the fiscal year..............

42,124

Reversal of revaluation reserve
for land, net of tax.............................

199

Net changes, excluding foundation
funds, surplus and others .................

(90,225)

(0)

234

(62)

(7,414)(97,468)

1,002(96,466)

Total changes in the fiscal year .................

(90,225)

(0)

234

(62)

(7,414)(97,468)

1,002(91,157)

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

¥349,884¥—¥4,128¥(115)¥(10,414)¥343,482¥6,578¥617,425

38

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Millions of yen
Foundation funds, surplus and others

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

Foundation funds

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

Consolidated surplus

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

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

20,00020,000

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

(316)

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

37,479(316)
37,479(20,000)(20,000)

Reversal of reserve for redemption of foundation funds .....

(20,000)(20,000)

Reversal of revaluation reserve for land, net of tax .............

20

20

Change of scope of consolidation ........................................

30

30

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

(12)

(12)

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

(20,000)

20,000—(18,033)(18,033)

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

¥10,000¥106,000¥112¥133,217¥249,329

Millions of yen
Accumulated other comprehensive income

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

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

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

Accumulated
remeasurementsof defined
benefit plans

Total accumulated
othercomprehensive
incomeNon-controllinginterests

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

Changes in the fiscal year
Additions to reserve for dividends topolicyholders ................................................

(35,236)

Addtions to accumulated foundation funds
redeemed ....................................................

20,000

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

(316)

Net surplus attributable to the parent
company for the fiscal year..........................

37,479

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

(20,000)

Reversal of reserve for redemption offoundation funds ..........................................

(20,000)

Reversal of revaluation reserve for land,
net of tax......................................................

20

Change of scope of consolidation ..................

30

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

(12)

Net changes, excluding foundation funds,
surplus and others .......................................

(7,413)

(20)

(318)

1,174

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

Total changes in the fiscal year ..........................

(7,413)

(20)

(318)

1,174

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

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

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

FUKOKU MUTUAL LIFE INSURANCE COMPANY

39

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

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

Foundation funds

Accumulated
foundation funds
redeemed

$267

$766

Reserve for revaluation

Consolidated surplus

Total foundation funds,
surplus and others$1,348$2,383

(314)

(314)

$1

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

178

178

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

(2)

(2)

Net surplus attributable to the parent company
for the fiscal year ...............................................................

334

334

Reversal of reserve for redemption of foundation funds .....

(178)

(178)

Reversal of revaluation reserve for land, net of tax .............

0

0Change of scope of consolidation ........................................

0

0Change in ownership interest of parent due to transactions
with non-controlling interests ............................................

(0)

(0)

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

(178)

(178)

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

(178)

178

—

(160)

(160)

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

$ 89

$944

$1

$1,187$2,222Millions of U.S. dollars
Accumulated other comprehensive income

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

Net unrealized
gains (losses) on
available-for-salesecurities,
net of tax$3,118

Revaluation
reserve for land,
net of tax$36

Foreign currencytranslation
adjustments$(1)

Accumulated
remeasurementsof defined
benefit plans$(92)

Total accumulated
othercomprehensive
income$3,061

Non-controllinginterests$58

Total net assets$5,503

Changes in the fiscal year
Additions to reserve for dividends topolicyholders ................................................

(314)

Addtions to accumulated foundation funds
redeemed ....................................................

178

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

(2)

Net surplus attributable to the parent
company for the fiscal year..........................

334

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

(178)

Reversal of reserve for redemption offoundation funds ..........................................

(178)

Reversal of revaluation reserve for land,
net of tax......................................................

0Change of scope of consolidation ..................

0Change in ownership interest of parent
due to transactions with non-controllinginterests .......................................................

(0)

Net changes, excluding foundation funds,
surplus and others .......................................

(66)

(0)

(2)

10

(58)

18

(40)

Total changes in the fiscal year ..........................

(66)

(0)

(2)

10

(58)

18

(201)

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

$3,052

$36

$(3)

$(82)

$3,002$76$5,30240

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Notes to the Consolidated Financial Statements

I. Presentation of the Consolidated Financial
Statements
1. Basis of Presentation
The accompanying consolidated financial statements havebeen prepared from the accounts maintained by Fukoku MutualLife Insurance Company (the “Company”) and its consolidated
subsidiaries in accordance with the provisions set forth in
the Insurance Business Act of Japan and its related rules
and regulations and in conformity with accounting principles
generally accepted in Japan, which are different in certain
respects from accounting principles generally accepted incountries and jurisdictions other than Japan.
In addition, the notes to the consolidated financial
statements include information which is not required underaccounting principles generally accepted in Japan but ispresented herein as additional information.
Amounts of less than one million yen have been rounded
down. As a result, the totals do not add up.
The translations of yen amounts into U.S. dollar amounts
are included solely for the convenience of the reader and havebeen made, as a matter of arithmetical computation only, at therate of ¥112.19 = US$1.00, the effective rate of exchange at thebalance sheet date of March 31, 2017. The translations should
not be construed as representations that such yen amounts
have been or could in the future be, converted into U.S. dollars
at that or any other rates.

(2) Application of Equity method
Unconsolidated subsidiaries (such as Fukoku Business Service
Company Limited, etc.) are insignificant in their impact on net
surplus attributable to the parent company and consolidated
surplus, and also immaterial as a whole, therefore, application ofequity method is not applied.
There are no affiliates for the year ended March 31, 2016
and 2017.
(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 of thatdate are used and concerning any important transaction taking
place in between December 31 and the consolidated closing
date, necessary adjustments for consolidation are made.
(4) Amortization of Goodwill
Goodwill is amortized by the straight-line method over a
period of 10 years and in case of the immaterial amount of
goodwill, such amount is fully charged to operating expenses
when incurred.

2. Principles of Consolidation(1) Scope of Consolidation
Consolidated subsidiaries as of March 31, 2016 and 2017 arelisted below:
Fukoku Capital Management, Inc.
Fukokushinrai Life Insurance Co., Ltd.
Fukoku Information Systems Co., Ltd.
Fukoku Life International (U.K.) Ltd.
Fukoku Life International (America) Inc.
Fukoku Life Investments Singapore Pte. Ltd.
Fukoku Life Investments Singapore Pte. Ltd. has been
included in the scope of consolidation from the year ended
March 31, 2017 due to its significance.
Also, from the year ended March 31, 2017 the company
has changed its fiscal year-end from March 31 to December 31.
Accordingly, the company’s business year for this year is a ninemonth period, from April 1 through December 31.
Major unconsolidated subsidiary is Fukoku Business Service
Company Limited.
Five subsidiaries are excluded from the scope of
consolidation, as each one of them is small in its total assets,
amount of sales, net surplus for the period and surplus andare sufficiently insignificant to reasonable judgement on theirimpact on the financial position and results of operation of theCompany’s group.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

41

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

42

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

are reviewed by the audit department, which is independentof business-related divisions. Subsequently, the allowancefor possible loan losses is provided based on the results ofthese assessments.
For the credits of legally bankrupt borrowers andsubstantially bankrupt borrowers, the amounts remaining
after deductions of collateral value or the amounts
collectible through the execution of guarantees are writtenoff directly from the borrowers’ balances as the estimateduncollectible amounts. The amount written-off as of March
31, 2016 and 2017 were ¥247 million and ¥1 million (US$12
thousand), respectively.
(7) Net defined benefit liabilities, supposed to be incurred as ofMarch 31, 2017, are presented for the employees’ retirement
benefits after deducting pension plan assets from retirement
benefit obligations, based on estimated amounts as of thebalance sheet date.
The Company uses the following methods of accounting
in relation to retirement benefits:• Method for allocation of projected retirement benefits.....Benefit formula basis• Amortization period of actuarial gains and losses ...10 years• Amortization period of prior service cost.................10 years(8) Reserve for price fluctuation is calculated in accordance with
Article 115 of the Insurance Business Act.
(9) As for the finance lease transactions where the Company
is a lessor, the lease fee is recorded in “Interest, dividends
and other income” at the time of receiving lease fee. The
corresponding cost of the lease transactions is recorded
in “Other investment expenses”, which is calculated bydeducting an amount equivalent to the interest allocated overthe lease term from the lease fee received.
(10) Hedge accounting is based on “Accounting Standards for
Financial Instruments” (ASBJ Statement No. 10, August 11,2006). The Company applies a fair value hedge accounting
as a hedge against the risk of foreign exchange fluctuationin relation to bonds denominated in foreign currencies andagainst the risk of price fluctuation in relation to domestic
stocks, and a designated hedge accounting (“Furiate
shori”) for foreign currency swaps as a hedge against therisk of foreign exchange fluctuation in relation to bonds
denominated in foreign currencies issued by the Company.
For assessing the effectiveness of hedge used, ratio
analysis of comparing the fluctuations in the fair value orcash flows of hedged items and hedging instruments ismainly applied.
(11) The Company accounts for consumption taxes by the
tax-exclusion method. The consumption taxes on certain
assets, which are not deductible from consumption taxes

withheld and that are stipulated to be deferred under the
Tax Act, are deferred as prepaid expenses and amortized
equally over five years. Consumption taxes other thandeferred consumption taxes are recognized as an expense
when incurred.
(12) Policy reserve is based on Article 116 of the Insurance
Business Act, and the premium reserve is calculated by thefollowing method:i) In regard to the policies subject to the standard policy
reserve, the method as prescribed by the Commissionerof Financial Services Agency (Ministry of FinanceOrdinance No. 48, 1996) is applied.
ii) In regard to the policies not subject to the standard policy
reserve, the net level premium method is applied.
Based on the provision of Article 69, paragraph 5, of the
Enforcement Regulation of the Insurance Business Act,
the Company includes additional funded policy reserves
as follows.
At the end of the fiscal year ended March 31, 2013,
among individual annuity insurance policies with anassumed interest rate of 5.00% or higher, policies that havean annuity commencement date on or prior to March 31,
2013 (excluding wife’s annuity insurance additional rider),the Company reduced the assumed interest rate to 1.00%
and funded additional policy reserves. As of March 31,
2017, the balance of these policy reserves was ¥42,748
million (US$381 million).
At the end of the fiscal year ended March 31, 2016,
among individual annuity insurance policies with anassumed interest rate of 5.00% or higher, policies thathave an annuity commencement date from April 1, 2013,
through March 31, 2017 (excluding wife’s annuity insurance
additional rider), the Company reduced the assumed interest
rate of policy reserve to 1.00% and funded additional policy
reserves. Furthermore, for certain whole life insurance
policies that include distribution of surplus every five years
the Company funded additional policy reserves. As of March
31, 2017, the balance of these policy reserves was ¥29,931
million (US$266 million).
(13) Intangible fixed assets are amortized as follows:i) Software for internal use is amortized based on thestraight-line method over the estimated useful lives.
ii) Lease assets are amortized based on the straight-line
method over the lease term.
(14) Of the bonds corresponding to the sub-groups of individual
insurance and annuities which are set by insurance types
and investment policies, the bonds that are held to matchthe duration of liabilities are classified as policy-reservematching bonds in accordance with “Temporary Treatmentof Accounting and Auditing Concerning Policy-reservematching Bonds in Insurance Industry” (Industry Audit

FUKOKU MUTUAL LIFE INSURANCE COMPANY

43

Committee Report No. 21 issued by the Japanese Instituteof Certified Public Accountants on November 16, 2000).
2. In line with a revision to the Corporation Tax Act, the Company
adopted the “Practical Solution on a Change in Depreciation
Method Due to Tax Reform 2016” (PITF No. 32, June 17,2016) from the current fiscal year. Accordingly, the method ofdepreciation was changed from the declining-balance method
to the straight-line method for facilities attached to buildings
and structures acquired on or after April 1, 2016.
As a result, both ordinary profits and the surplus before
income taxes increased by ¥100 million (US$900 thousand).
3. Asset management of the general accounts other than theseparate accounts stipulated in Article 118 Paragraph 1 ofthe Insurance Business Act is conducted on the principle ofprudent and profitable investments, considering public andsocial responsibilities of the insurance business. Based on thispolicy, the Company allocates the fund, securing its liquidity,
from the medium-to-long term viewpoints. The Company isdiversifying investments in assets such as foreign securities,
stocks and real estates within the scope of acceptable risk inorder to enhance the profitability, although yen-denominatedinterest bearing assets including debt securities such as
Japanese government bonds and loans are the cores of theportfolios under the asset liability management. Derivatives
are mainly used to hedge the market risk regarding spotpriced assets and liabilities. Major financial instruments
including securities, loans and derivatives are exposed tomarket risk and credit risk.
The Company manages its asset management risk by
establishing internal control systems including various rules
pursuant to the “Three Basic Rules related to Enterprise
Risk Management” established by the Board of Directors.
Specifically, the Company eliminates excessive risk deviatingfrom the basic principle and secures the safety of theassets by utilizing control functions of the Financial andInvestment Risk Management Department towards the asset
management sections, monitoring the status of market risk
and credit risk periodically on a daily or monthly basis. In
addition, the Company quantifies the market risk and credit
risk using value-at-risk (VaR) method in order to control thepossible maximum losses which may arise from the holding
assets within a certain range of risk buffers.
The carrying amounts, fair values and their relateddifferences of major financial assets and liabilities in thegeneral account were as follows:(1) Cash, deposits (excluding financial instruments treated as
securities based on “Accounting Standards for Financial
Instruments” (ASBJ Statement No.10)) and call loans:
The fair values of cash, deposits and call loans are basedon their book values since fair values approximate bookvalues due to their short maturities.

44

FUKOKU MUTUAL LIFE INSURANCE COMPANY(2) Securities including deposits and monetary claims bought
which are treated as securities based on “AccountingStandards for Financial Instruments” (ASBJ Statement
No.10) and securities managed as trust assets in money heldin trust:
The fair values of marketable securities are measured at
the quoted market prices at the balance sheet date. The fairvalues of other securities without the quoted market prices
are based on the prices reasonably calculated such as theprices offered by the information vendors or counterparty
financial institutions.
Investments in unconsolidated 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, areexcluded from above securities. The carrying amounts ofinvestments in unconsolidated subsidiaries and affiliates,
unlisted stocks and investments in partnerships were ¥519
million, ¥6,127 million, and ¥8,371 million as of March 31,
2016 and ¥454 million (US$4 million), ¥6,109 million (US$54
million), and ¥17,418 million (US$155 million) as of March 31,
2017, respectively.
(3) Loans and monetary claims bought treated as loans:
The fair values of policy loans are deemed to approximatebook values, considering estimated repayment period andinterest rate conditions since their repayment deadlines havenot been set up due to the characteristics that the loans arelimited to the amount of cash surrender values. Therefore,
the book values are used as the fair values of policy loans.
The fair values of floating interest rate loans among theordinary loans and monetary claims bought treated as loans
approximate the book values because the market interest
rates are reflected in future cash flows in a short period.
Therefore, the fair values of floating interest rate loans andmonetary claims bought treated as loans are based on theirbook values. The fair values of fixed interest rate loans
are measured by discounting the future cash flows to thepresent values.
The fair values of loans from legally bankrupt borrowers,
substantially bankrupt borrowers and not currently bankrupt
borrowers and monetary claims bought treated as loans
are computed by deducting the amount of the allowancefor possible loan losses from the book values before
direct write-offs.
(4) Subordinated bonds:
Subordinated bonds issued by the Company are stated at fairmarket values.
(5) Derivative instruments:i) The fair values of the futures and options traded at
the exchange are measured at the settlement price ofthe exchange.

As of March 31,

2016
Millions of yen

Carrying amount

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

170,272
170,272
200,000

Fair value¥

170,272
170,272
200,000

Difference

¥

—
—
—

813
813

881
881

67
67

86,79386,79386,79386,793——233,015
1,237,993
2,105,736
40
3,193,386
6,770,172

233,015
1,521,976
2,419,734
41
3,193,386
7,368,155—
283,983
313,9981—
597,982

64,813
632,242
697,056
7,925,108
141,935
141,935

64,813664,774
729,587
8,555,690
148,943
148,943(0)32,531
32,531
630,581
7,008
7,008

(1,982)
18,823
16,841(1,982)
18,823
16,841

—
—
—

¥

¥

As of March 31,

2017

2017

Millions of yen

Millions of U.S. dollars

Carrying amount

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

¥¥

135,088
135,088
193,000

Fair value¥

135,088
135,088
193,000

Difference¥

Carrying amount

Fair value

Difference———$ 1,204
1,204
1,720

$ 1,204
1,204
1,720

$

—
—
—

753
753

808
808

54
54

6
6

7
7

0
0

28,78728,78728,78728,787

—
—

256
256

256
256

—
—

179,246
1,235,331
2,067,059
3,552,958
7,034,595

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

1,597
11,011
18,424
31,66962,702

1,597
13,151
20,62931,66967,048

—
2,140
2,205
—
4,345

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

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

558
5,067
5,625
71,515
1,710
1,710

558
5,283
5,841
76,077
1,779
1,779

(0)
216
216
4,562
68
68

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

—
—
—

4
116
121

4
116
121

—
—
—

¥

¥

$

$

$

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

FUKOKU MUTUAL LIFE INSURANCE COMPANY

45ii) The fair values of forward contracts, options and swaps
traded over the counter are based on the quoted prices
offered by counterparty financial institutions.
iii) The fair values of foreign currency forward contracts are
determined based on the spot exchange rate and forward
contract rate.
4. The Company holds investment and rental properties suchas office buildings in Tokyo and other areas. The carrying
amounts and the fair values of investment and rental
properties were ¥168,709 million and ¥275,299 million as ofMarch 31, 2016 and ¥171,021 million (US$1,524 million) and¥282,301 million (US$2,516 million) as of March 31, 2017,
respectively. The fair value is mainly based on the value
calculated by the Company in accordance with real estateappraisal standards which includes some adjustments using
the reference prices.
The amounts corresponding to asset retirement obligations
included in the carrying amount of investment and rental
properties were ¥1,117 million and ¥972 million (US$8 million)
as of March 31, 2016 and 2017, respectively.
5. The amounts of securities lent under lending agreements
were ¥18,189 million and ¥38,863 million (US$346 million) as
of March 31, 2016 and 2017, respectively.
6. The total amounts of credits to bankrupt borrowers,
delinquent loans, delinquent loans past 3 months or more andrestructured loans, which were included in loans, were ¥997
million and ¥1,124 million (US$10 million) as of March 31,
2016 and 2017, respectively;i) The balance of credits to bankrupt borrowers were ¥223
million and ¥239 million (US$2 million) as of March 31, 2016
and 2017, respectively.
ii) The balances of delinquent loans were ¥773 million and¥884 million (US$7 million) as of March 31, 2016 and2017, respectively.
iii) There were no balances of delinquent loans past 3 months
or more and restructured loans as of March 31, 2016 and2017, respectively.
The direct write-offs related to loans decreased credits
to bankrupt borrowers described above by ¥247 millionand ¥1 million (US$12 thousand) as of March 31, 2016 and2017, respectively.
Credits to bankrupt borrowers represent loans, excluding
the balances already written-off, which meet the conditionsprescribed in Article 96 Paragraph 1 item 3 and 4 of the
Enforcement Regulations of the Corporate Tax Act. Moreover,accrued interest on these loans is not recorded as income
after determining that principal of or interest on theseloans is unlikely to be collected due to the significant delay
in repayment of principal or interest payment or for someother reasons.
Delinquent loans are credits which accrued interest

46

FUKOKU MUTUAL LIFE INSURANCE COMPANY

is not recorded as income due to the same reasons as
described above, and exclude credits to bankrupt borrowers
and loans for which interest payments have been suspended
and rescheduled to assist and support the borrowers in the
restructuring of their business.
Delinquent loans past 3 months or more are loans
for which interest payments or repayments of principal
are delinquent for 3 months or more from the due dateunder the terms of the related loan agreements, excluding
those loans classified as credits to bankrupt borrowers anddelinquent loans.
Restructured loans are loans for which certain
concessions favorable to borrowers, such as interest
reduction or exemption, rescheduling of due date forpayments of principal or interest payment, waiver of claim
or other terms, have been negotiated for the purpose of
assisting and supporting the borrowers in the restructuringof their business. This category excludes loans classified
as credits to bankrupt borrowers, delinquent loans anddelinquent loans past 3 months or more.
7. Accumulated depreciation of tangible fixed assets were¥153,103 million and ¥159,372 million (US$1,420 million) as
of March 31, 2016 and 2017, respectively.
8. Total assets in separate accounts provided for in Article 118 of
the Insurance Business Act were ¥79,065 million and ¥75,678
million (US$674 million) as of March 31, 2016 and 2017,
respectively. The amounts of separate account liabilities were
the same as separate account assets.
9. The total amounts of receivables from/payables tounconsolidated subsidiaries were ¥2,347 million and ¥171
million as of March 31, 2016 and ¥2,349 million (US$20
million) and ¥117 million (US$1 million) as of March 31,
2017, respectively.
10. Deferred tax assets and deferred tax liabilities as of March
31, 2016 were ¥116,641 million and ¥144,360 million,
respectively. Valuation allowance for deferred tax assets was¥2,981 million.
Major components of deferred tax assets were ¥69,933
million of policy reserves, ¥21,641 million of reserve for pricefluctuation of securities and ¥16,610 million of net defined
benefit liabilities as of March 31, 2016.
Major component of deferred tax liabilities was ¥136,763
million of net unrealized gains on available for- sale securities
as of March 31, 2016.
Deferred tax assets and deferred tax liabilities as ofMarch 31, 2017 were ¥124,388 million (US$1,108 million)and ¥136,125 million (US$1,213 million), respectively.
Valuation allowance for deferred tax assets was ¥4,343
million (US$38 million).
Major components of deferred tax assets were ¥74,052

million (US$660 million) of policy reserves, ¥25,712 million(US$229 million) of reserve for price fluctuation and ¥16,085
million (US$143 million) of net defined benefit liability as ofMarch 31, 2017.
Major component of deferred tax liabilities was¥131,909 million (US$1,175 million) of net unrealized gains

on available-for-sale securities as of March 31, 2017.
The statutory tax rate and the actual effective tax rate
for the year ended March 31, 2017 were 28.2% and 10.0%,
respectively. The difference between the statutory tax rate
and the actual effective tax rate was attributable mainly to-23.3% of reserve for dividends to the policyholders.

11. Changes in reserve for dividends to policyholders were as follows:Year ended March 31,

2016

2017

Millions of yen

Balance at the beginning of the fiscal year ..........................................................

¥49,3112017
Millions of
U.S. dollars¥50,368$448

Transfer from surplus in the previous fiscal year .................................................

36,69835,236314

Dividend payments to policyholders during the fiscal year .................................

(35,688)(34,695)(309)

Increase in interest ..............................................................................................

47

20

0

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

¥50,368¥50,929$453

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

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

Balance at the beginning of the fiscal year ..........................................................

¥707

¥650

$5

Dividend payments to policyholders during the fiscal year .................................

(479)

(472)

(4)

Increase in interest ..............................................................................................

0

0

0

Provision of reserve for dividends to policyholders .............................................

422

419

3

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

¥650

¥598

$5

13. The amounts of stocks of unconsolidated subsidiaries were¥560 million and ¥454 million (US$4 million) as of March 31,
2016 and 2017, respectively.
14. Assets pledged as collateral as of March 31, 2016 were¥26,284 million of securities and ¥1,279 million of bankdeposits. Secured debts as of March 31, 2016, were
¥4,906 million.
Assets pledged as collateral as of March 31, 2017 were¥27,012 million (US$240 million) of securities and ¥1,688
million (US$15 million) of bank deposits. Secured debts as ofMarch 31, 2017, were ¥4,974 million (US$44 million).
15. Reserves for outstanding claims for the reinsurance
contracts provided in accordance with Article 71 Paragraph
1 of the Enforcement Regulation of the Insurance BusinessAct (hereinafter called “reserve for outstanding claims forceded reinsurance”) were ¥15 million and ¥5 million (US$49

thousand) as of March 31, 2016 and 2017, respectively.
Policy reserves for the reinsurance contracts provided inaccordance with Article 71 Paragraph 1 of the Enforcement
Regulation of the Insurance Business Act (hereinafter called“policy reserve for ceded reinsurance”) were ¥51 million and¥53 million (US$477 thousand) as of March 31, 2016 and2017, respectively.
16. In line with the redemption of ¥20,000 million (US$178
million) in foundation funds, the same amount of reserve
for redemption of foundation funds is transferred toaccumulated foundation funds redeemed in accordance with
Article 56 of the Insurance Business Act in this fiscal year.
17. There were unused commitment line agreements underwhich the Company is the lender of ¥2,172 million and¥500 million (US$4 million) as of March 31, 2016 and2017, respectively.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

47

18. Repayments of subordinated bonds are subordinated toother obligations.
19. The future contribution to the Life Insurance Policyholders
Protection Corporation of Japan under Article 259 of the

Insurance Business Act was estimated at ¥12,450 millionand ¥11,474 million (US$102 million) as of March 31, 2016
and 2017, respectively.
The contribution is recognized as operating expenses
when contributed.

20. Matters Related to Employees’ Retirement Benefits(1) Overview of Employees’ Retirement Benefit Plan
As for a defined benefit plan for office-based employees, the Company and its consolidated subsidiaries have a defined benefit
corporate pension plan and retirement lump-sum payments. As for a defined contribution plan for these employees, the Company
also has a defined contribution pension plan.
As for a defined benefit plan for sales employees, the Company has retirement lump-sum payments.
The Company places a retirement benefit trust in relation to the retirement lump-sum grant plan for sales employees.
(2) Defined Benefit Plani) Reconciliation of beginning and end of balance of retirement benefit obligation
As of March 31,

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

Retirement benefit obligation at the beginning of the fiscal year ........................

¥76,806¥85,285$760

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

3,088

3,610

32

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

1,073

510

4

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

9,106

656

5

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

(4,787)(4,591)(40)

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

—

(25)

(0)

Retirement benefit obligation at the end of the fiscal year .................................

¥85,285¥85,446$761

ii) Reconciliation of beginning and end of balance of pension plan assets
As of March 31,

2016

2017

Millions of yen

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

2017
Millions of
U.S. dollars¥26,114¥44,636$397

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

783

671

5

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

(1,987)57

0

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

2,380

2,757

24

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

(1,322)(1,401)(12)

Contribution amount on establishment of retirement benefit trust.....................

18,666——

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

—

(0)

(0)

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

¥44,636¥46,721$416

48

FUKOKU MUTUAL LIFE INSURANCE COMPANY

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

2016

2017

Millions of yen

a. Funded plan retirement benefit obligation .......................................................
b. Pension plan assets .........................................................................................
c. (a + b) ..............................................................................................................
d. Unfunded plan retirement benefit obligation ...................................................
e. Net amount of liabilities and assets presented on the consolidatedbalance sheet ..................................................................................................
f. Net defined benefit liabilities ...........................................................................
g. Net defined benefit assets ..............................................................................
h. Net amount of liabilities and assets presented on the consolidatedbalance sheet ..................................................................................................

2017
Millions of
U.S. dollars¥73,675(44,636)
29,03911,610¥73,926(46,721)
27,205
11,519

$658
(416)
242
102

40,64940,649—38,72538,767
(42)

345
345
(0)

¥40,649¥38,725$345iv) Breakdown of retirement benefit gains and losses
As of March 31,

2016

2017

Millions of yen

Service cost .........................................................................................................
Interest cost ........................................................................................................
Expected return on pension plan assets .............................................................
Amortization of actuarial differences ...................................................................
Amortization of prior service cost ........................................................................
Others..................................................................................................................
Retirement benefit expenses related to defined benefit plan .............................

¥3,088
1,073
(783)
921
(76)
—
¥4,2232017
Millions of
U.S. dollars¥3,610
510
(671)
2,306
(76)
0
¥5,680

$32
4
(5)
20
(0)
0
$50

v) Remeasurements of defined benefit plan
Remeasurements of defined benefit plan (before tax effects) comprised the following:
As of March 31,

2016

2017

Millions of yen

Amortization of actuarial differences ...................................................................
Amortization of prior service cost ........................................................................
Total .....................................................................................................................

¥(10,172)(76)¥(10,248)

2017
Millions of
U.S. dollars¥1,707(76)¥1,631

$15
(0)
$14

vi) Accumulated remeasurements of defined benefit plan
Accumulated remeasurements of defined benefit plan (before tax effects) comprised the following:
As of March 31,

2016

2017

Millions of yen

Unrecognized actuarial differences .....................................................................
Unrecognized prior service cost ..........................................................................
Total .....................................................................................................................

¥(14,864)
399¥(14,465)¥ (13,156)
323¥(12,833)

2017
Millions of
U.S. dollars$(117)
2$(114)FUKOKU MUTUAL LIFE INSURANCE COMPANY

49vii) Breakdown of pension plan assets
The breakdown of asset categories as a percentage of total pension plan assets was as follows:
As of March 31,

2016

2017

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

48.5%

46.0%

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

33.7%

34.3%

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

7.7%

8.0%

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

6.7%

7.9%

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

2.9%

2.7%

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

0.6%

1.1%

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

100.0%

100.0%

Within the total of pension assets as of March 31, 2017, 37.1% of this amount is accounted for by the retirement benefit trust
established in relation to the retirement lump-sum grant plan for sales employees.
viii) Method for setting the expected long-term rate of return
To set the expected long-term rate of return on pension plan assets, the Company takes into account the present and future
allocation of pension plan assets, and the present and expected future long-term rate of return on a variety of assets that makes up
the pension assets.
ix) Underlying actuarial assumptions
Main underlying actuarial assumptions were as follows:
As of March 31,

2016

2017

0.6%

0.6%

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

3.0%

2.5%

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

0.0%

0.0%

Discount rate ..........................................................................................................................
Expected long-term rate of return on pension plan assets.....................................................

(3) Defined Contribution Plan
The required contribution amounts by the Company and its consolidated subsidiaries to the defined contribution plan were ¥279
million and ¥297 million (US$2 million) as of March 31, 2016 and 2017, respectively.
21. The “Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, March 28, 2016) has been
applied from the year ended March 31, 2017.

III. Notes to the Consolidated Statements of Operations
1. The total amounts of revenues and expenses in connection with unconsolidated subsidiaries were ¥430 million and ¥2,879 million forthe year ended March 31, 2016 and ¥75 million (US$672 thousand) and ¥2,202 million (US$19 million) for the year ended March 31,
2017, respectively.
2. For the year ended March 31, 2016, in calculating the reversal of reserve for outstanding claims, a reversal of reserves for outstanding
claims reinsured of ¥35 million was deducted. In calculating the provision of policy reserves, a reversal of reserves for policy reserves
reinsured of ¥0 million was added.
For the year ended March 31, 2017, in calculating the reversal of reserve for outstanding claims, a reversal of reserves foroutstanding claims reinsured of ¥9 million (US$86 thousand) was deducted. In calculating the provision of policy reserves, a provisionof reserves for policy reserves reinsured of ¥1 million (US$15 thousand) was deducted.

50

FUKOKU MUTUAL LIFE INSURANCE COMPANY

IV. Notes to the Consolidated Statements of Comprehensive Income
1. Other Comprehensive Income
The reclassification adjustments and tax effect amounts related to other comprehensive income were as follows:i) Net unrealized gains (losses) on available-for-sale securities, net of tax
Year ended March 31,

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

Amount incurred during the fiscal year.....................................................................

¥(90,971)¥ (13,419)$ (119)Reclassification adjustments ....................................................................................

(40,566)797

7

Before tax adjustments ........................................................................................

(131,538)(12,621)(112)

Tax effects ............................................................................................................

42,0944,853

43

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

¥(89,444)¥ (7,768)$ (69)

ii) Deferred valuation gains (losses) under hedge accounting, net of tax
Year ended March 31,

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

Amount incurred during the fiscal year.....................................................................

¥(0)

¥—

$—

Reclassification adjustments ....................................................................................

(0)

—

—

Before tax adjustments ........................................................................................

(0)

—

—

Tax effects ............................................................................................................

0

—

—

Deferred valuation gains (losses) under hedge accounting, net of tax .................

¥0

¥—

$—

iii) Revaluation reserve for land, net of tax
Year ended March 31,

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

Amount incurred during the fiscal year.....................................................................

¥ —

¥—

$—

Reclassification adjustments ....................................................................................

—

—

—

Before tax adjustments ........................................................................................

—

—

—

Tax effects ............................................................................................................

433

0

0

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

¥ 433

¥ 0

$ 0

FUKOKU MUTUAL LIFE INSURANCE COMPANY

51

iv) Foreign currency translation adjustments
Year ended March 31,

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

Amount incurred during the fiscal year.....................................................................

¥(62)¥ (318)$(2)

Reclassification adjustments ....................................................................................

—

—

—

Before tax adjustments ........................................................................................

(62)

(318)

(2)

Tax effects ............................................................................................................

—

—

—

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

¥(62)¥ (318)$(2)v) Remeasurements of defined benefit plans, net of tax
Year ended March 31,

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

Amount incurred during the fiscal year.....................................................................

¥ (11,093)¥ (599)$ (5)Reclassification adjustments ....................................................................................

845

2,230

19

Before tax adjustments ........................................................................................

(10,248)

1,631

14

Tax effects ............................................................................................................

2,833

(456)

(4)

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

(7,414)

1,174

10

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

¥ (96,487)¥ (6,912)$ (61)

V. Notes to the Consolidated Statements of Cash Flows
1. Cash and cash equivalents as of March 31, 2016 and 2017 consist of “Cash,” “Deposits in transfer account,” “Current deposits,”“Ordinary deposits,” “Notice deposits,” “Time deposits maturing within 3 months of the date of acquisition,” “Foreign currency
deposits maturing within 3 months of the date of acquisition,” “Negotiable certificate of deposits maturing within 3 months of thedate of acquisition,” “Call loans” and “Monetary claims bought maturing within 3 months of the date of acquisition.”
2. Reconciliations of cash and cash equivalents in the consolidated statements of cash flows to the consolidated balance sheet accounts
were as follows:Year ended March 31,

2016

2017

2017
Millions of
U.S. dollars

Millions of yen

Cash and deposits ....................................................................................................

¥ 172,049¥ 136,494$ 1,216

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

200,000

193,000

1,720

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

813

753

6

Time deposits maturing over 3 months of the date of acquisition ...........................

(300)

(100)

(0)

Foreign currency deposits maturing over 3 months of the date ofacquisition ...............................................................................................................

(1,291)(1,157)(10)

Monetary claims bought maturing over 3 months of the date ofacquisition ...............................................................................................................

(813)

(753)

(6)

Cash and cash equivalents .......................................................................................

¥ 370,458¥ 328,236$ 2,925

52

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Management’s Report on Internal Control over Financial Reporting

1. Matters relating to the basic framework of internal control over financial reporting
Yoshiteru Yoneyama, President of Fukoku Mutual Life Insurance Company (the Company), is responsible for the designand operation of internal control over financial reporting for the Company’s financial statements, namely, consolidatedbalance sheet and the related consolidated statements of operations, comprehensive income, cash flows, changes
in net assets and a summary of significant accounting policies and other explanatory information for the year ended
March 31, 2017, prepared in accordance with Article 110 Paragraph 2 of the Insurance Business Act. The Company
designs and operates its internal control over financial reporting in accordance with the basic framework of internal
control set forth in the Standards and Practice Standards for Management Assessment and Audit concerning Internal
Control Over Financial Reporting (Council Opinions) issued by the Business Accounting Council of the Financial Service
Agency of Japan.
Internal control aims at achieving the objectives to a reasonable extent with the organized and integrated function ofindividual components of internal control as a whole. Therefore, internal control over financial reporting cannot always
ensure the prevention or detection of misstatements in the presentation of financial reporting.
2. Matters relating to the scope of assessment, the basis date of assessment and the assessment procedures
The Company performed an assessment of internal control over financial reporting for its consolidated financial
statements as of the end of the fiscal year, March 31, 2017 in accordance with generally accepted assessment
standards in Japan for internal control over financial reporting.
In the assessment of internal control over financial reporting, the Company first assessed internal controls that havea material impact on overall consolidated financial reporting (company-level controls) and, based on the results, theCompany selected the business processes to be assessed. In assessing those business processes, the Company
analyzed selected business processes, identified a key control that would have a material impact on the reliabilityof financial reporting, and assessed the establishment and operation with regard to the key control. The Company
assessed the effectiveness of internal control by the aforementioned procedures.
For the Company and its consolidated subsidiaries, the Company determined the scope of assessment of internal
control over financial reporting from the perspective of their materiality to the reliability of financial reporting. The
materiality to the reliability of financial reporting is determined in light of their degree of quantitative and qualitative
impact. The Company rationally determined the scope of assessment of internal controls incorporated into businessprocesses (process-level controls) based on the results of assessment of company-level controls regarding theCompany and one consolidated subsidiary. Other than those indicated above, five consolidated subsidiaries were
determined to be immaterial from quantitative and qualitative perspectives. Consequently, they are excluded from thescope of assessment of company-level controls.
With respect to the scope of assessment of process-level controls, the locations or business units were selected indescending order of ordinary revenues (after elimination of inter-company transactions) in the previous fiscal year until
their combined amount reached about two-thirds of consolidated ordinary revenues. As a result, the Company was
selected as significant locations or business units. At selected significant locations and business units (the Company),business processes related to accounting items that were closely associated with the company's business objectives,
including securities, ordinary loans and policy reserves, as well as premium and other income and claims and otherpayments, which have a material impact on the calculation of policy reserves, were determined to be within the scopeof assessment. Furthermore, at selected significant locations and business units and any other locations and business
units, added to the scope of assessment were business processes relating to important accounting items that havea high possibility of material misstatements and involve estimates and judgments, and business processes relating tobusinesses or operations dealing with high-risk transactions.
3. Matters relating to the results of the assessment
As a result of performing the assessment, the Company concluded that the design and operation of internal control
over financial reporting for the Company were effective as of March 31, 2017.
4. Supplementary information
Not applicable
5. Other special information
Not applicableMay 19, 2017
Yoshiteru Yoneyama
President

Fukoku Mutual Life Insurance Company

FUKOKU MUTUAL LIFE INSURANCE COMPANY

53

Report of Independent Auditors

54

FUKOKU MUTUAL LIFE INSURANCE COMPANY

FUKOKU MUTUAL LIFE INSURANCE COMPANY

55

Corporate Organization

Domestic Offices (As of April 1, 2017)
Branch Offices
62
Field Offices
467

Secretarial Div.
Strategic Planning Dept.
Compliance Control Dept.

Employees (As of March 31, 2017)
Office Staff
2,855
Sales Representatives 9,789

Corporate Risk Management Dept.
General Affairs Dept.
Independent Auditors
Personnel Dept.
Market Planning Dept.
Audit & Supervisory
Board

Retail Management Dept.
Sales Administration Dept.

Audit & Supervisory
Board Members' OfficeMarket Developing Dept.
Strategic Market Promotion Dept.
Pension Consulting Dept.

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

Secretariat for Nomination
Committee of Candidates for
Representative Members

Chief Actuary

Underwriting and Medical Dept.
Claims Dept.

Human Resourse
Development
Headquarters

Policy Administration Dept.
Operation and System Planning Dept.
Claim Inspection Div.

Board of Full-time Directors

Equities Dept.
Fixed Income Dept.
Loans Dept.

Council

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

FUKOKU MUTUAL LIFE INSURANCE COMPANY

57

Corporate Information

Directors, Audit & Supervisory
Board Members and Executive
Officers

Chairman of the Board

Audit & Supervisory Board Member (Standing)

Tomofumi Akiyama

Shinji Nakao

President and Chief Executive Officer

Executive Officer

Yoshiteru Yoneyama*

Osamu Suzuki

Deputy President and Executive Officer

Executive Officer

Katsumasa Furuya

Naoyuki Torii

Director and Senior Managing Executive Officer

Executive Officer

Toshihide Fujiwara

Masato Nakazuru

Director and Managing Executive Officer

Executive Officer

Tadashi Akikawa

Chikashi Ichikawa

Director and Managing Executive Officer

Executive Officer

Yuuki Sakurai

Takeshi Oomori

Director and Managing Executive Officer

Executive Officer

Toshikatsu Hayashi

Chikao Arita

Director

Executive Officer

Kozo Isshiki**

Keiichi Kurota

Director

Executive Officer

Hiroto Yoshimura**

Ichiro Yamada

Director and Executive Officer

Executive Officer

Yasuyuki Kitamura

Takeshi Kondou

Director and Executive Officer*Representative Director

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

Audit & Supervisory Board Member

Yoshizumi Nezu***
Audit & Supervisory Board Member

Yoshikazu Sashida***Audit & Supervisory Board Member

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

Kei Yoshizawa

58

FUKOKU MUTUAL LIFE INSURANCE COMPANY(As of July 4, 2017)

Directory

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

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

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

Fukoku Life Investments Singapore Pte. Ltd.
From left: T. Aoyama, J. Nishimaki, I. Chan,
K. Kozuka

FUKOKU MUTUAL LIFE INSURANCE COMPANY

59

▲ Tokyo Head Office▲ Osaka Fukoku Mutual Life Insurance Building

60

FUKOKU MUTUAL LIFE INSURANCE COMPANY

P-B10202