Profile

Sony Financial Holdings Inc. (SFH) is a financial holding company with three core subsidiaries:
Sony Life Insurance Co., Ltd. (Sony Life), Sony Assurance Inc. (Sony Assurance) and Sony Bank
Inc. (Sony Bank).
Corporate Vision

The Sony Financial Group seeks to become the most highly trusted financial services group by
customers. To this end, the Group will combine many different financial functions (savings,
investment, borrowing and protection) to provide high-value-added products and high-quality
financial services that meet every customer’s financial needs.
Corporate Philosophy

Put the Customer FirstWe will provide financial products and services that satisfy customers by embracing their individual views,
to ensure that we help them lead prosperous lives with financial security.

Give Back to Society
We believe that a special commitment to the public good is demanded of a financial services company.
Conscious of this, we will realize our vision by upholding the highest level of ethics
and a strong sense of purpose, and thereby give back to society. In addition,
we will fulfill our responsibilities as a good corporate citizen and member of society.

Strive for Originality
We will constantly strive to come up with fresh ideas from basic principles as we pursue creativity
and innovation, instead of merely following custom and convention.

Foster an Open Corporate Culture
We believe that every employee’s contribution is important to develop our ideal of a financial services company.
We will thus foster an open corporate culture where employees can freely express theirindividuality and demonstrate their abilities to the fullest.
Disclaimer
Statements made in this annual report concerning the current plans, expectations, strategies and beliefs of the Sony Financial Group. Any statements
contained herein that are not historical facts are forward-looking statements or pro forma information. Forward-looking statements may include—but are
not limited to—words such as “believe,” “anticipate,” “plan,” “strategy,” “expect,” “assume,” “forecast,” “predict,” “propose,” “intend” and “possibility” that
describe future operating activities, business performance, events or conditions. Forward-looking statements, whether spoken or written, may also be
included in other materials released to the public. These forward-looking statements and pro forma information are based on assumptions, decisions andjudgments made by the management of Sony Financial Group companies, and are based on information that is currently available to them. As such, they
are subject to various risks and uncertainties, and actual business results may vary substantially from the forecasts expressed or implied in forward-looking
statements. Consequently, investors are cautioned not to place undue reliance on forward-looking statements. Sony Financial Group companies are under
no obligation to revise forward-looking statements or pro forma information in light of new information, future events or other findings. The information contained in this annual report does not constitute or form part of any offer for sale or subscription of or solicitation or invitation of any offer to buy or subscribe
to any securities, nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever in Japan or abroad.
• “Lifeplanner” is a registered trademark of Sony Life.
• “SURE,” “Gentle Driving Cash-Back Plan” and “Trouble Navi” are registered trademarks of Sony Assurance.
• “MONEYKit” is a registered trademark of Sony Bank.
• Company names and product names that appear in this report, other than those mentioned above, are trademarks or registered trademarks of therespective company.
• The Sony Financial Group refers to the financial group that comprises Sony Financial Holdings Inc., Sony Life Insurance Co., Ltd., Sony Assurance Inc.,
Sony Bank Inc., Sony Lifecare Inc., as well as their subsidiaries and affiliates.
• Following revision to accounting standards, the previously used line item “net income” has changed to “profit attributable to owners of the parent.”• Unless otherwise indicated, figures less than the indicated unit in this material have been truncated, while ratios and percentage changes have beenrounded off.
• Fiscal 2012–fiscal 2020 represent the fiscal years ended March 31, 2013–2021.

Contents

Sony Financial Group’s Financial Highlights

2

Sony Financial Group’s Growth Trajectory

4

A Message from the President

6

Vision and Strategies

8
Growth of the Sony Financial Group

9Strengths of Group Companies

10

Sony Financial Group: Medium-term Business Plan

12

Review of Operations and Analysis of Operating Performance25

Segment Performance Highlights

26

SFH (Consolidated)

27

Life Insurance Business

30

Non-life Insurance Business38

Banking Business

44

Contributions to Sustainable Development
Corporate GovernanceCorporate Social Responsibility

51
Profiles of Directors and Statutory Auditors

52

A Dialogue between the President and Outside Directors

54

Basic Stance on Corporate Governance

58

Management System

59

Compensation for SFH’s Directors and Statutory Auditors

62

Dialogue with Shareholders and Other Investors

65

Compliance

66

Risk Management

68

Sony Financial Group’s CSR

70

Communication with Stakeholders

70

Environmental Protection Activities

76

Corporate Section

77
Corporate Information

78

Profiles of Group Companies

79

Stock Information

80

Financial Section

Please visit SFH’s website to view the Financial Data Book.
Financial Data Book

Detailed financial data for each operating company
is presented in a separate publication called the
Financial Data Book. The Financial Data Book isavailable only on SFH’s website.

83
SFH Consolidated Financial Statements

84

MCEV Results for Sony Life as of March 31, 2016

112

Glossary

117

SFH’s Website Information

121

http://www.sonyfh.co.jp/en/financial_info/annualreportSony Financial Holdings Inc. Annual Report 20161

Sony Financial Group’s Financial Highlights(SFH Consolidated and Main Subsidiaries)

For the years ended March 31,

Sony Financial Holdings (Consolidated)

2007

2008

¥ 759,280¥ 822,153

Ordinary profit

18,35444,500

Profit attributable to owners of the parent

10,021

24,255——

4,323,780

4,977,450

270,179

261,627

12.01%

14.62%——

Ordinary revenues

Comprehensive income
As of March 31,

Total assets
Net assets
Consolidated capital adequacy ratio(Domestic standard) (Note)
Consolidated solvency margin ratio (Note)
For the years ended March 31,

Ordinary revenues

Sony Life (Non-consolidated)¥ 689,591¥ 741,250

Ordinary profit

14,89539,290Net income

7,494

18,514

3,445,970

3,659,786

As of March 31,

Total assets
Net assets

216,568

182,671

Non-consolidated solvency margin ratio (Note)

1,852.0%

1,747.9%

For the years ended March 31,

Ordinary revenues

Sony Assurance¥

51,020Ordinary profit
Net income (loss)¥

55,649

2,044
1,598

2,817
2,185

Total assets

67,46878,645

Net assets

13,32015,385

1,009.7%

1,073.9%

As of March 31,

Non-consolidated solvency margin ratio (Note)
For the years ended March 31,

Ordinary revenues

Sony Bank (Non-consolidated)¥

19,470¥25,988

Ordinary profit

1,354

2,746

Net income (loss)

1,023

4,492

Total assets

806,848

1,211,000

Net assets
Non-consolidated capital adequacy ratio(Domestic standard) (Note)

36,87835,712

11.49%

9.15%

As of March 31,

Note: Calculated based on rules in force at the respective dates.

Composition by Business Segment(For the year ended March 31, 2016)

Life Insurance Business
Non-life Insurance BusinessBanking Business

Ordinary Revenues

7% 3%

Ordinary Proﬁt

7%

Total Assets

8%

21%
2%

90%

2

Sony Financial Holdings Inc. Annual Report 2016

85%

78%

Millions of yen
2009

2010

2011

2012

2013

2014

2015

2016

¥ 860,323¥ 978,991¥1,002,201¥1,078,070¥1,259,041¥1,320,456¥1,352,325¥ 1,362,044

34,25384,37376,86074,62579,252

76,13690,062

71,10330,722

48,126

41,71632,81245,06440,50454,41943,355—71,066

31,96360,37696,22544,79490,707

71,1055,313,677

6,001,088

6,597,140

7,241,414

8,096,164

8,841,382

9,545,868

10,352,114

204,897

269,439

294,877

347,800

435,444467,050

550,672

604,377

13.32%

12.05%

10.96%

10.14%

9.88%

12.02%

11.92%
1

10.70%———

1,380.3%

1,520.6%

1,563.8%

4.9
1,635.6%

1,637.1%¥ 765,910¥ 881,798¥ 900,091¥ 967,400¥1,142,274¥1,197,109¥1,223,827¥ 1,230,141

32,40980,09973,17669,43674,65969,20579,66560,79233,783

46,13840,22031,42642,44437,06342,52437,0963,810,929

4,286,540

4,723,332

5,222,846

5,952,750

6,624,903

7,301,350

8,035,408¥¥

140,730

191,312215,387

264,836

342,333

369,230

432,526

482,195

2,060.5%

2,637.3%

2,900.1%

1,980.4%

2,281.8%

2,358.7%

2,555.0%

2,722.8%

61,882¥

68,174¥

74,166¥80,096¥84,711¥89,864¥93,022¥

96,905

2,178(1,556)

2,565
1,604

2,144
1,297

2,859
1,299

2,371
1,454

3,003
1,664

4,209
2,233

4,680
2,586

86,69898,340109,382

118,612

127,421

142,714

157,919

172,323

13,67815,482

16,77218,00919,934

21,41824,741

28,305993.0%

1,018.5%

981.4%

557.8%

504.2%

527.6%

629.6%

693.5%

33,361¥30,500¥29,521¥

30,075¥31,351¥

33,994¥35,714¥34,892

414

2,930

3,377

4,033

4,282

5,845

7,298

5,857

(710)

1,646

2,054

2,340

879

3,585

4,634

3,912

1,411,956

1,612,186

1,761,830

1,890,503

2,005,081

2,056,704

2,062,525

2,126,564

46,26458,98959,971

62,796

67,811

72,77477,06477,42813.37%

12.09%

10.84%

11.58%

11.98%

11.72%

5
10.66%

9.89%

Credit Ratings (As of July 1, 2016)
Credit Rating Agencies

Sony Financial Holdings

Sony Life

Rating and Investment
Information (R&I)

Issuer rating

Insurance claims paying ability

Japan Credit Rating
Agency (JCR)
Standard & Poor’s (S&P)
Moody’s Investors Service(Moody’s)

AA–Sony BankAA
Ability to pay insurance claims

Long-term issuer rating

AA
Insurer financial strength rating

A+

AA–
Counterparty credit rating
Long-term

A

A-1

Short-term

Insurance financial strength rating

A1
Sony Financial Holdings Inc. Annual Report 2016

3

Sony Financial Group’s Growth TrajectorySony Financial Holdings

Sony Life
1970s

Aug. 1979 Sony Prudential Life Insurance Co., Ltd.,is established (currently Sony Life)

1980s

Apr. 1981 Sony Prudential Life Insurance commences

operations with launch of Lifeplanner system
Jul. 1987 Sony Prudential Life Insurance agrees toterminate joint venture

1990s

Apr. 1991 Changes its name to Sony Life Insurance Co., Ltd.
Aug. 1998 Sony Life establishes Sony Life Insurance(Philippines) Corporation as a wholly owned
subsidiary in the Philippines (In December 2012,
the business is transferred to Paramount Life & General Insurance Corporation.)

2000s

May 2001 Sony Life’s Lifeplanner sales employees begin selling

automobile insurance of Sony Assurance

Apr. 2004 Sony Financial Holdings Inc. is establishedDec. 2004 Sony Life’s Lifeplanner sales employees begin to

as a financial holding company

accept mortgage loan applications as agents ofSony Bank
Aug. 2007 Sony Life establishes AEGON Sony Life PlanningCo., Ltd. (currently AEGON Sony Life Insurance Co.,
Ltd.)
Dec.
Sony Life is approved to conduct banking agency
business on behalf of Sony Bank
Oct. 2009 Sony Life establishes SA Reinsurance Ltd. in
British Bermuda as a reinsurance company
specializing in variable annuities
Dec.
AEGON Sony Life Insurance commences
operations. Sony Life’s Lifeplanner sales employees
begin selling individual variable annuities

Oct. 2007 SFH is listed on the First Section of Tokyo Stock

Exchange

2010s
Apr. 2011 SFH conducts stock split and adopts share unit

systemNov. 2013 SFH acquires Senior Enterprise Corporation (cur-rently Lifecare Design Inc.) as a subsidiary andenters nursing care business
Apr. 2014 Sony Lifecare Inc. is established as a holding
company to oversee nursing care business
Apr. 2016 Lifecare Design Inc. opens Sony Lifecare Group’s

first nursing care home

Sony Life

4Main Products• Death-protection
insurance• Medical insurance,
educational endowment
insurance, living benefit
insurance and others

Sony Financial Holdings Inc. Annual Report 2016

Main Sales Channels• Lifeplanner sales employee
Supports customers throughlife’s stages with highly developed
consultation skills• Partner (independent agent)
Responds to diverse customer
needs concerning insurance
purchasing styles

Channel Composition
Independent
agent
channel30%70%Lifeplanner
channel*Annualized insurance premiums from new policies
in fiscal 2015 (managerial accounting basis)

Group StructureSony Life, Sony Assurance andSony Bank—the core companies of
the Sony Financial Group—have steadily
expanded business volume throughhighly original business models.

Sony Financial Holdings(Main Subsidiaries)

100%
owned

Sony Life

100%
owned

100%
owned

Sony AssuranceSony Bank

Sony Assurance
Jun. 1998 Sony Insurance Planning Co., Ltd., is established(currently Sony Assurance)

Sony Bank

Sep. 1999 Sony Insurance Planning changes its name to Sony

Assurance Inc.
Sony Assurance launches sales of automobile
insurance (over the Internet in September and bytelephone in October)

2000s

Apr. 2001 Sony Bank Inc. (Sony Bank) is establishedSony Bank commences operations. Launches
MONEYKit service site. Starts handling deposits,
investment trusts and card loans
Sep.
Sony Bank begins handling foreign-currency
deposits
Mar. 2002 Sony Bank begins handling mortgage loans
Jun.

Jun. 2002 Sony Assurance launches sales of SURE medical

and cancer insurance
Oct. 2004 Sony Assurance debuts long-term fire insurance

to customers taking out mortgage loans fromSony Bank
Jun. 2007 Sony Bank establishes Sony Bank Securities Inc.

(Sony Bank Securities) as a wholly owned subsidiary. (In August 2012, all shares of Sony Bank
Securities are transferred to Monex GGroup, Inc.)
Sony Bank’s
Bank MONEYKit
service site
Jan. 2009 Sony Assurance offers pet insurance throughalliance with Anicom Insurance, Inc.

2010s

Jun. 2010 Sony Bank opens its first over-the-counterbranch—Housing Loan Plaza
Jul. 2011 Sony Bank acquires 57% equity interest in

SmartLink Network, Inc. (currently Sony Payment
Services Inc.)

Sony Assurance official
official website

Main Products
Sony
Assurance • Automobile insurance (risk-segmented)• SURE medical and cancer insurance
Main Sales Channels• Internet• Telephone

Sony Bank

Main Products• Deposits (yen, foreign currencies)• Mortgage loans• Investment trusts, foreign-currency
margin trading and other services
Main Sales Channels• Internet

Sony Financial Holdings Inc. Annual Report 2016

5

A Message from the President

In a challenging revenue environment, we will execute
expeditious measures to improve earnings and reinforce
our capabilities to provide high-quality and highly
convenient products and services—a Group strength.
With these efforts, we will realize sustainable growth
for the Group overall and stable returns to shareholders.
Let me take this opportunity to express my deepest
appreciation to all stakeholders for the continued supportand interest you have extended to the Sony Financial
Group.
Since the January 2016 decision by the Bank of Japan
to introduce “Quantitative and Qualitative Monetary Easing
with a Negative Interest Rate,” long-term interest rates,
which were already at a low level, have fallen even further.
As a result, Sony Life and Sony Bank face a challenging
business environment from a revenue perspective.
To address the underlying issues of this businessenvironment, the Group will adopt an expeditious approachto at least maintain and ultimately improve revenues. Sony
Life, in particular, is considering revenue enhancement
options from every angle, including product strategies andsales strategies, based on enterprise risk management(ERM), and will steadily implement the necessary steps.
In fiscal 2015, ended March 31, 2016, the Groupmarked solid growth in business volume, reflecting a record
high for Sony Life, fueled mainly by a new policy amountexceeding ¥5 trillion, as well as favorable results at Sony
Bank, prompted by consistent demand for mortgage loans
as well as the debut of new products, such as “Sony BankWALLET.” Going forward, we remain committed to ourbasic policy for the sustainable improvement of corporate
value through higher business volume. Toward this end,
we will emphasize an enhanced Groupwide ability toprovide high-quality products and services—a composite
strength of the Sony Financial Group—and execute
future-oriented growth investments.

At the same time, each company under the Groupumbrella will move steadily forward to establish market
presence in new business domains and promote newservices. Sony Assurance and Sony Bank have quickly
embraced information technology, a move that has alreadyyielded positive results in the form of corporate growth.
We believe that there is unlimited potential for providing
new added value to our customers through user experiences that were previously unavailable.
As anticipated, we distributed annual dividends of ¥55
per share for fiscal 2015, up ¥15 over the previous fiscal
year. This marked the fourth consecutive year of dividend
increases. After taking into account the prevailing operating
environment, we anticipate that this dividend level will bemaintained for fiscal 2016. We aim, however, to steadily
increase dividends in line with the financial soundness ofeach operating segment and revenue growth over the
medium to long term.
It is our firm intention to work toward sustainablegrowth as a united corporate group and seek higher
corporate value as we strive to contribute to theadvancement of society as a whole.

July 2016

Shigeru Ishii
President and Representative Director

6Sony Financial Holdings Inc. Annual Report 2016

Sony Financial Holdings Inc. Annual Report 2016

7

Vision and Strategies

This section focuses on the growth
and the medium-term business planof the Sony Financial Group.
The Sony Financial Group’s core companies,
Sony Life, Sony Assurance and Sony Bank,
have continued to deliver steady growth byleveraging their respective strengths.
In this section, we highlight the growth
we have achieved so far and the strengthsof each Group company, which support thegrowth, along with medium-term strategies
and targets.

8

Sony Financial Holdings Inc. Annual Report 2016

Growth of the Sony Financial GroupSFH (Consolidated)

Ordinary revenues
billion

1,352.3

1,320.4

Vision and Strategies¥1,362.0

Gained customer loyalty throughinnovation in a mature market,
which led to sustainable growth1,259.0
1,078.0

Ordinary Revenues/Ordinary Profit
822.1
758.7

1,002.2

978.9
860.3

Ordinary proﬁt

759.2

653.2
90.0
84.3

76.8

74.6

79.2

2011

2012

2013

76.1

2014

¥ 71.1billion

44.5
34.2
25.3

18.3

12.2
2005

2006

2007

SFH establishedin April 2004

2008

2009

2010

Listed (First Section,
Tokyo Stock Exchange)in October 2007

2015

2016

Bank of Japan introduced a policy of“Quantitative and Qualitative Monetary
Easing with a Negative Interest Rates”

Sony Life implemented asset liability
management (ALM) review and switchedto stable proﬁt-generating structure lesssusceptible to ﬁnancial market ﬂuctuations

Lehman Shock(For the years ended March 31,)

Total assets¥ 10,352.1
billion9,545.8

Expand asset scale by raising
the number of insurance policies soldand balance of deposits

8,841.3
8,096.1
7,241.4
6,597.1

Total Assets/Net Assets

Net assets¥604.36,001.0
4,977.4

5,313.6

billion4,323.7
3,917.0550.6

3,282.2

435.4

467.0

347.8
263.0

270.1

SFH establishedin April 2004

294.8

204.8

182.8
2005

269.4

261.6

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Listed (First Section, Tokyo Stock Exchange)in October 2007

(As of March 31,)Sony Financial Holdings Inc. Annual Report 2016

9

Strengths of Group Companies

Life Insurance Business•Business expansion through tailor-made insurance design and sales approach andafter-sales consultations based on life planning
Characteristics of the Lifeplanner sales employee• Excellent staff hired in line with stringent standards of recruitment. Skills developed
through systemized training programs.
• Highly productive life insurance professionals.
• Full-commission payment structure rooted in entrepreneurial spirit.
Tailor-made approach to insurance design and sales• An approach applied since Sony Life’s earliest days in business that delivers practicalinsurance products perfectly suited to the needs of each customer
mer throughconsultations based on life planning.

A consultation led by a Lifeplanner
sales employee

After-sales consultation• Fine-tuned after-sales services that encompass a review ofpolicy content paralleling changes in customers’ lifestyles andvalue perceptions.

•Product composition centered on high-profit
death-protection insuranceSony Life provides death-protection insurance policies to many customers
mers withchildren, especially young parents in their 30s who are most in need of coverage for“just in case,” and offers peace of mind with regard to household finances in the eventof the policyholder’s death.

Sony Life (Non-consolidated)•ALM and asset management to match insurance liability characteristics to reduce

Policy Amount in Force*interest rate risk pertaining to liabilities of insurance policies with long-term
maturities

43.1

2016

¥

•Financial soundness to meet future capital requirements
Total assets:¥5 trillion

trillion

40.9
39.0
37.7

36.0
34.7

Total assets:¥3 trillion
31.4
27.8

29.0

32.5

33.4

30.2

26.2
Total assets:¥1 trillion
April 1981
Business commenced

Changed name toSony Life Insurance

August 1979
Sony Prudential Life InsuranceCo., Ltd. established

1980

0.04

0.2

1982

1985

0.7
1988

23.4
21.5

18.8

10.9

3.9
1.9
1991

1994

(As of March 31,)

10

24.7

Sony Financial Holdings Inc. Annual Report 201619972000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

*Total amount of individual life insurance and individual annuities

Sony Assurance

Non-life Insurance BusinessDirect Premiums Written
2016¥

Became No. 1 in direct
premiums written for automobile
insurance for 13 straight years
among major direct non-life insurers*•Risk-segmented automobile insurance facilitates reasonablepremium rates•Excellent accident response, with high-quality customer center and website services

94.3

Vision and Strategies•High profitability, a unique aspect of a direct non-life insurer

billion

90.4

87.3
82.5
78.3

June 1998
Sony Insurance Planning Co., Ltd.
establishedt#FDBNF/PGPSUIFmSTUUJNFJOUFSNTPGEJSFDU
premiums written for automobile insurance
among major direct non-life insurers*t-BVODIFETBMFTPG463&NFEJDBM
and cancer insurance
54.6
50.1
t$IBOHFEOBNFUP4POZ"TTVSBODF*OD
44.9
t#FHBOTBMFTPGBVUPNPCJMFJOTVSBODF

72.8
67.0
60.8

37.4
30.3
23.6
16.2

1999

1.3

7.5

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

*Here, “major direct non-life insurers” refers to non-life insurers selling automobile insurance primarily via direct sales channels as of March 31 of each year.
(For the years ended March 31,)

Banking BusinessSony Bank (Non-consolidated)

Retail Balance**•Low-cost structure unique to an Internet bank2016

•Lineup of highly convenient, high-quality products leveraging
advantages of the Internet

Loan balance exceeded¥1.0 trillion•Services ranked No. 1 for nine straight years in the financial
institution customer satisfaction ranking*¥

3.2
trillion

Total assets: ¥2 trillion*Article in the January 31, 2016 issue of the Nihon Keizai Shimbun (Nikkei) newspaper

Loan balance exceeded¥0.5 trillion
2.6

2.8

2.9

3.0

2.4
Deposit balance exceeded¥1 trillion

2.1
1.8

1.5
April 2001
Sony Bank Inc. established
Business commenced in June

1.1
0.9
0.7

0.1
2002

(As of March 31,)

0.4
0.2
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

**Sum of deposits, investment trusts and personal loan balances

Sony Financial Holdings Inc. Annual Report 201611

Sony Financial Group

Medium-term Business Plan

FY2016
Key Messages
Respond to the ultralowinterest rate environment

FY2018• We will respond expeditiously to maintain or improve profitability.
• We will reinforce our provision of high-quality, highly convenient services, andAchieve ongoing growth
for the Group as a wholecontinue expanding our business operations by strengthening our competitive edge.
We• will make up-front investments aimed at future growth.
• We will make steady progress on initiatives in new business fields and new services.

• Dividends have increased for the four consecutive fiscal years through fiscal 2015.
Shareholder returns

Tomooo Hagimoto
President,
Representative
tive Director
Sony Life

12Sony Financiall Holdings Inc. Annual Report 2016

Given the business environment, we plan to maintain dividends at the present levelin fiscal 2016. Based on the assumption that we will maintain financial soundness
in each of our businesses, we will aim for steady increases in dividends in line withearnings growth over the medium to long term.

Shigeru Ishii
President,
Representative Director
Sony Financial Holdings

Medium-term Management Targets

Results for FY2015
Consolidated
ordinary revenues

Plan for FY2016

Targets for FY2018¥ 1,362.0 billion ¥ 1,450.0 billion¥ 1,650.0 billion

Consolidated
ordinary profit¥ 71.1 billion¥ 71.0 billion¥ 80.0 billion

Profit attributable toowners of the parent¥ 43.3 billion¥ 46.0 billion¥ 51.0 billion

Vision and Strategies

Consolidated ordinary revenues are expected to grow as a result of business expansion.
However, consolidated ordinary profit is expected to moderately increase under theongoing ultralow interest rate environment.

Note: Interest rates as of the end of March 2016 are used for the assumption of calculating Sony Life’s medium-term business plan target figures for fiscal 2018.
The consumption tax increase which had been scheduled for April 2017 has been factored into the estimates, but the effect of the revision to the policy reserve
discount rate, also scheduled for April 2017, has not been taken into account.

Cautionary note regarding medium-term business plan: Forecasts and pro forma information that appear on pages 12-24 are as ofJune 1, 2016, when the medium-term business plan was announced. From fiscal 2016, ending March 31, 2017, the Sony Financial Group
has switched to having a fixed three-year medium-term business plan in order to further emphasize clarification of accountability regarding
progress toward medium-term targets and actual results.

Atsuo Niwa
dent,
President,
Representative Director
ectorSony Assurance
ance

Yutaka Ito
Y
President,
P
Representative Director
R
Sony BankS
Sony Financial Holdings Inc. Annual Report 201613

Sony Financial Group
Shigeru Ishii
President, Representative Director
Sony Financial Holdings

Fiscal 2015 Consolidated Business
Performance

Fiscal 2016 Outlook

On a consolidated basis, ordinary revenues increased 0.7%
year on year, to ¥1,362.0 billion. This is largely due to anincrease in income from insurance premiums in the life
insurance business, reflecting favorable acquisition of newpolicies, and is also due to an increase in gains on sale ofsecurities in the general account, which offset a tumble ininvestment performance in the separate account caused byworsening financial market conditions. Meanwhile, consolidated ordinary profit dropped 21.1% year on year, to ¥71.1
billion. This reflects a significant increase in provision of policy
reserves for minimum guarantees for variable life insurance
as a result of an increase in new policies and the worsened
financial market conditions, as well as higher expenses
incurred by strong sales of new policies. Profit attributableto owners of the parent fell 20.3%, to ¥43.3 billion, owing to
the lower ordinary profit.

(Billions of yen)

FY2014FY2015FY2016 (Forecast)

ChangeFY2015
vs. FY2014

Consolidated ordinary revenues

1,352.3

1,362.0

1,450.0

+0.7%

+6.5%

Of which, life insurance businessChangeFY2016 (Forecast)vs. FY2015

1,223.9

1,230.2

1,309.8

+0.5%

+6.5%

Of which, non-life insurance business

93.0

96.9

101.6

+4.2%

+4.8%

Of which, banking business

38.4

37.9

37.9

(1.3%)(0.1%)

90.0

71.1

71.0

(21.1%)(0.1%)Of which, life insurance business

78.3

60.2

62.5

(23.1%)+3.8%

Of which, non-life insurance business

4.2

4.6

4.4

+11.2%(6.0%)Of which, banking business

7.3

5.9

4.5

(18.3%)(24.9%)

54.4

43.3

46.0

(20.3%)+6.1%

Consolidated ordinary profit

Profit attributable to owners of the parent

14

The operating environment will likely become more difficult,mainly because the Bank of Japan plans to maintain its policy
on negative interest rates. However, steady business growthof Group companies should fuel sustained growth. Consolidated ordinary revenues are expected to rise, buoyed bystable increases in insurance premium revenues and higher
investment income in the life insurance business. Consolidated
ordinary profit is likely to be essentially flat, because we anticipate an increase in profit in the life insurance business, offset
by a decrease in profit in the banking business. In the life
insurance business, we anticipate higher ordinary profit, as apositive impact of a decline in the provision of policy reserves
for minimum guarantees for variable life insurance to be partially offset by lower gains on sale of securities. In the banking
business, operating profit is expected to decrease due tohigher operating expenses and the impact of the Bank ofJapan’s negative interest rates.
Profit attributable to owners of the parent is expected to
go up, owing to a reduction in the corporate tax rate.

Sony Financial Holdings Inc. Annual Report 2016

SFH’s Capital Strategy and Dividend Policy
Dividend amounts in each fiscal year will be determinedthrough a comprehensive evaluation of factors, including
capital adequacy, investment opportunities, business forecasts and legal and regulatory requirements.
Going forward, we aim for steady increases in dividends
in line with earnings growth over the medium and longterms.

Vision and Strategies

For fiscal 2015, we paid annual dividends of ¥55 per share, up¥15 from a year ago. This marked the fourth consecutive yearof dividend increases since fiscal 2012.
For fiscal 2016, we intend to maintain our dividend at ¥55
per share, given the business environment surrounding Group
companies and our performance outlook.
Our target for the dividend payout ratio is the range of
40% to 50% of profit attributable to owners of the parent.

Target for the Dividend
Payout Ratio

30–40%

40–50%
55.2

Dividend per Share/Dividend Payout Ratio
Dividend payout ratio (%)

52.0

Dividend per share (Yen)

32.2
26.5
21.2
13.6
15

15

FY2008FY200955 yenFY2015FY2016(Forecast)

32.0
40

24.1

20.9

55

30
25

20

20

FY2010FY2011FY2012FY2013

FY2014

Adjusted ROE
Consolidated return on equity (ROE) on a fiscal accounting
basis fell to 7.5% in fiscal 2015, but we expect to return toa level in the vicinity of 10% in the medium term.
Because Group companies are engaged in different
businesses, such as insurance and banking, an adjusted ROE
is calculated for each company based on adjusted profit andadjusted capital, to accurately pinpoint corporate value andcapital efficiency.
Sony Life’s adjusted ROE (ROEV) fell in fiscal 2015, a hugeconsequence of the underlying decrease in interest rates, butcore ROEV should remain stable at around 4% to 5%. For
Sony Assurance, adjusted ROE should be 13% in fiscal 2018,
and for Sony Bank, about 6%, on a par with fiscal 2015.
These ratios are calculated on the basis of market conditions that prevailed at the end of March 2016. However, going
forward, we will strive to boost capital efficiency through eachGroup company’s persistent implementation of measuresdetailed over the following pages.

FY2013 FY2014 FY2015

FY2018 (Target)

Sony Life ROEV

14.9%

9.6% (20.2%)

Core ROEV

6.0%

5.0%

4.3%

Sony Assurance
adjusted ROE

9.8% 14.2%

13.3%

13%

Sony Bank(consolidated) ROE

4.8%

6.0%

5.0%

Approx. 6%

Consolidated
adjusted ROE

14.2%

9.5% (17.8%)

4–5%

Consolidated ROE

9.0% 10.7%

4–5%*

7.5%

Around 10%

Formulas for calculating adjusted ROE are presented on page 82.
*Sony Life’s adjusted ROE for fiscal 2018 is calculated on the basis of interest
rates as of the end of March 2016.

Sony Financial Holdings Inc. Annual Report 201615

Sony Life
Tomoo Hagimoto
President, Representative Director
Sony Life

Initiatives Toward Growth• Further enhance its provision of death protection based on life planning
Strengthen its ability toprovide protection, cultivate • Conduct full-fledged development of the business of providing protection in the
new business fields
corporate market• Accelerate expansion of sales personnel in the Lifeplanner channel• Take changes in the operating environment as an opportunity to expand the

Expand sales channels

foundations of the independent agent channel
Ensure corporate value andsteady growth• Augment new business value through changes in the product mix and enhanced sales• By expanding business operations, achieve profit growth over the medium to long term

Medium-term Targets for Fiscal 2018
Results for FY2015

Targets for FY2018

Policy amount in force¥43.1 trillion

CAGR of approx. 5%

Number of Lifeplanner
sales employees1

4,612

An increase of
approx. 600 persons

MCEV2
Ordinary profit2
1¥1.0 trillion

ROEV3 of 4–5%

¥60.2 billion

CAGR of approx. 3%

Over ¥
Over

49 trillion

5,200Over ¥

1.1 trillion¥ 66.0 billion

The figure includes the number of contracted Lifeplanner sales employees and those rehired on a fixed-term contract basis after retirement.
MCEV is based on the calculation method used as of March 31, 2016 (not reflecting ultimate forward rates). Interest rates as of the end of March 2016 are used in
calculating medium-term business plan target figures for fiscal 2018. The consumption tax increase which was scheduled for April 2017 has been factored into theestimates for fiscal 2018 ordinary profit, but the effect of the revision to the policy reserve discount rate, also scheduled for April 2017, has not been taken into account.
3
The formula for ROEV is described on page 82.
216Sony Financial Holdings Inc. Annual Report 2016

Progress on Medium-term Management
Strategies

Product Strategy: Expeditious product revision andproviding thorough consultations on death protection
Sony Life evaluates profitability of products at the development
stage and after sales commence, using methods consistent
with MCEV, and utilizes the results to decisions on setting orrevising sales commission rate and revamping or terminating
certain products. Given the ultralow interest rate environment,
the profitability of insurance products has eroded, especiallyfor savings-type products and whole life insurance, and therefore Sony Life is expeditiously revising its products to improve
profitability.
Of savings-type products hugely impacted by low interest
rates, single premium whole life insurance and individual annuity insurance are difficult to get back on a profit upswing
through premium rate revision, so Sony Life suspended salesof some of these products in May 2016.
A challenging sales environment may continue to impact
savings-type products, etc. for a while, but Sony Life will utilize
its strong marketing capabilities honed in providing death protection through consultation to acquire a greater number of
new policies and thereby improve profitability.
Product Strategy: Extend sales of insurance to corporate
customers
Sony Life will target owners of small and midsized enterprises(SMEs) as a new demand sector and reinforce sales to corporate clients. To date, some Lifeplanner sales employees andindependent agencies have always handled corporate insurance, but going forward, Sony Life is keen to have all accesspoints become involved in the whole process of marketing
corporate insurance. As a step toward this end, in May 2016
it commenced sales of Level Premium Plan Term Life Insurancewith Reduced Surrender Value (Disability/Nursing Care Type)and made revisions to Increasing Term Life Insurance (Reduced
Surrender Value). In addition, dealing with corporate clientsrequires a varied landscape of knowledge, including insight intobusiness, personnel and tax systems. Accordingly, it conductedbroad-based training programs matched to the level of each
Lifeplanner sales employee and assigned skilled personnel witha wealth of corporate sales experience to provide sales support
at independent agencies. Sony Life seeks to expand the sales
structure for corporate insurance and for fiscal 2018, it will work
toward average annual growth of about 10% for new
policy amount in force in the products for corporate customers.
Sales Strategy: Boost annual Lifeplanner recruitment to 660
The Lifeplanner channel is Sony Life’s core sales channel, with

Number of Newly Recruited LifeplannerSales Employees/Office Managers

660

Recruited Lifeplanner sales employees
Ofﬁce managers

439
370
380

FY2012

577

Previous
medium-term business plan
More than 500

530

419

403

414

FY2013

FY2014

Vision and Strategies

Amid the huge drop in interest rates, its goal at Sony Life isto achieve stable growth in corporate value by steadily implementing measures with a view toward maintaining—and better
yet improving—profitability from all fronts, including productand sales strategies, under enterprise risk management (ERM).

sales through this access point accounting for about 70% of
all new policies and steadily increasing.
In recent years, Sony Life has actively promoted Lifeplanner
sales employees to office managers who are in charge of hiring
new Lifeplanner sales employees by improving aspects of theworkplace environment, such as promotion structure, compensation and training. As a result, the number of office managers
reached 455, as of March 31, 2016, up 41 from a year earlier.
Through this approach, the number of Sony Life’s newly recruited
Lifeplanner sales employees increased significantly by 577 year
on year. This brought the number of registered Lifeplanner sales
employees at the end of March 2016, to 4,612, achieving the
medium-term target set last year, two years ahead of schedule.
Going forward, Sony Life will continue to promote skilled
Lifeplanner sales employees to office manager positions andstrengthen its approach to recruit Lifeplanner sales employees.
By March 31, 2019, Sony Life expects to have placed 530
office managers and recruited 660 Lifeplanner sales employees,
which will boost the number of Lifeplanner sales employees
to over 5,200.

455

FY2015Previous
medium-termbusiness plan
500

FY2017(Target)

FY2018(Target)Number of Lifeplanner Sales Employees and Productivity
Productivity

New policy amount productivity index(Productivity is indexed to FY2012 = 100, calculatedon the basis of new policy amount)
Number of Lifeplanner sales employees
as of the end of the ﬁscal year*
117

Over

100
4,133

4,216

4,329

4,612

5,200

Previous
medium-termbusiness plan
More than 4,600

FY2012FY2013

FY2014FY2015FY2017(Target)

FY2018(Target)*The ﬁgure as of the end of the ﬁscal year includes the number of contracted
Lifeplanner sales employees and those rehired on a ﬁxed-term contract basis
after retirement.
Sony Financial Holdings Inc. Annual Report 201617

Sales Strategy: Compliance with the regulation on indepenTrends in Sony Life’s New Policy Amountdent agent channel and growth through stronger alliances(Individual life insurance and annuities)
Insurance sales through independent agencies (Partners)(Trillions of yen)account for about 30% of all new policies at Sony Life, making
Lifeplanner channel¥
trillion
this an important sales channel, second only to the Lifeplanner
Independent agent channel
5.1
sales channel.
4.7
4.4
The revised Insurance Business Act of Japan, introduced
3.8
in May 2016, requires independent agencies to ensure an
appropriate solicitation and sales process, and imposes a
duty on independent agencies to improve solicitation systems, to better understand customers’ intentions, and toprovide the necessary information to customers. Sony Life’sPartners have always provided coverage from a consultation
perspective and have already implemented the required sysFY2012
FY2013
FY2014FY2015FY2018tem. Partners are therefore poised to differentiate from other(Target)agencies and maximize on emerging business opportunities.
Note: Numbers rounded down to the nearest hundred billion yen
Sony Life will develop and reinforce alliances with different
types of agencies, including agencies with close regional ties and store-front agencies that expand their networks over a widearea, and it will address diversifying needs, with the aim of further growth.

5.8Enterprise Risk Management (ERM): Promoting ERM and asset investment policy
Sony Life formulated its ERM Guidelines and manages enterprise risk based on an integrated approach to risk, return and capital.
Under its ERM Guidelines, Sony Life prepared a basic policy on risk preferences designed to squeeze interest rate risk as much as
possible, from the perspective of assets as well as liabilities, and prioritize investment into assets matched to insurance liabilities
characteristics. Through this policy, it aims to maintain sufficient capacity to pay out future insurance claims on an economic value
basis while ensuring stable revenue from the insurance business, in consideration of the enormous interest rate risk precipitated by
the long-term nature of life insurance policies.
In asset investment, Sony Life remains committed to the above policy of prioritizing investment into assets matched to insurance
liability characteristics, even in this ultralow interest rate environment, and will continue to emphasize the investment of assets mainly
into ultralong-term Japanese government bonds. However, because of underlying concerns in the market, particularly negative interest rates and a downturn in the liquidity of government bonds, it is working to diversify investing methods, with an emphasis on
wider investment in ultralong-term fiscal investment and loan program (FILP) agency bonds and corporate bonds.
Risk amount based on economic value, as of March 31, 2016, stood at ¥1,019.2 billion (after taxes), up considerably year on
year, as lower yen interest rates caused insurance risk to rise. The economic solvency ratio (ESR)—the ratio of MCEV to the risk
amount—dropped 73 percentage points from the end of March 2015, to 104%. The main cause was higher surrender risk, paralleling huge interest rate erosion. Because of this lower ESR situation, Sony Life is taking steps, as noted above, that go further than
before, including expeditious termination of certain product sales and a reduction in risk assets.
Sony Life has maintained a conservative method for calculating ESR to ensure a high level of financial soundness against a
backdrop of uncertainty regarding regulatory changes. If calculated reflecting the ultimate forward rate, which has been adopted
in the European Union’s Solvency II framework, its ESR would be around 140%.
Financial Soundness Based on Economic Value
184%

ESR (MCEV/Risk amount)

177%

161%

MCEV
The risk amount basedon economic value (after tax)
(Billions of yen)
As of March 31,

1,064.7

104%

1,322.9

1,221.3
661.3

40-year (JGB yields)

Approx.140%

664.3

1,063.7 1,019.2
745.5

2013

2014

2015

2016

1.64%

1.78%

1.46%

0.63%

*Sony Life changed its extrapolation method for ultralong-term interest rates in Japanese yen to use the ultimate forward rates.
(In the 41st year and beyond, the yield curve is extrapolated to make the UFR for 20 years 3.5%)

18Sony Financial Holdings Inc. Annual Report 2016¥1.3 trillion¥0.9 trillion

2016(Assumed ﬁgures reﬂecting
ultimate forward rates (UFR)*)MCEV

Vision and Strategies

Stable Growth in Corporate Value: Higher MCEVSony Life uses ROEV—the MCEV growth rate—as one of its key performance indicators. It sees the value of new business andcontributions from existing business as the base for EV growth obtained through insurance underwriting, and defines this value asa core return on embedded value (core ROEV). Sony Life’s MCEV at the end of March 2016 was ¥1,063.7 billion, down ¥259.2
billion from a year earlier, mainly owing to a significant decline in yen interest rates. The value of existing business decreased significantly, but a certain portion of the decrease was offset by an increase in adjusted net worth with the benefit of ALM. In the medium
term, it will maintain the value of new business through a shift in product mix and enhanced sales, and increase MCEV. By the endof March 2019, Sony Life expects MCEV to exceed ¥1.1 trillion. Its ROEV target over the same time frame is about 4% to 5%.

Core ROEV+4.3%(Billions of yen)
As of March 31,+51.3
1,322.9(20.0)

+16.1

+29.7

New
businessvalue

Expected
existing
business
contribution

Assumptionchanges

1,302.9

Dividends
paid toshareholders

2015

+35.2

2015
(Adjusted opening MCEV)

40-year (JGB yields) 1.46%

1.1Over ¥
trillion(320.2)

1,063.7
Economic
variances,etc.

(239.2)

2016

2019*
(Target)(83bp)

0.63%*MCEV is calculated based on the calculation method used as of March 31, 2016 (not reﬂecting UFR).

Stable Growth in Corporate Value: Profit growth on statutory accounting basis
The positive impact of a decline in provision of policy reserves for minimum guarantees for variable life insurance is likely to be neutralized by lower gains on sale of securities. Profit generated from policy amount in force—core profit—should increase ¥6.0 billion
over fiscal 2015, paralleling the increase in the number of policies in force. Unfortunately, some of this will be offset by a decrease ininterest income and dividends due to lower interest rates. Consequently, ordinary profit is expected to rise year on year, amounting
to ¥62.5 billion.
Looking ahead to fiscal 2018, Sony Life is targeting average annual growth of approximately 3% in ordinary profit, culminatingin ¥66.0 billion, through higher profits by increasing policy amount in force despite the impact of up-front expenses on new policy
acquisition.
Ordinary Profit+13.0(Billions of yen)

+12.0

(12.0)

(3.0)
+6.0

(3.0)

Increasein proﬁt
owing togrowing
policyamount inforce

Decreasein interest
incomeanddividends
in lowerinterest
rates

60.2
Positive
Lower
impact from gains onlower sales
sale ofof variable securities
life insurance
and others (*)

FY2015

(5.0)

(0.5)

(1.5)

62.5
HigherIncrease
Effect of theexpenses consumption
in proﬁt
owing to of acquiring
tax rise
growing new policies
policyamount inforce

Others

FY201666.0¥

billion

Others

FY2018*Including changes in provision of policy reserves for minimum guarantees for valuable life insurance and gains (losses) on hedges of variable life insurance, andchanges in product mix for new policies and others.
The ordinary proﬁt forecast for FY2018 does not reﬂect the effect of a revision in the discount rate used for calculating policy reserves that is scheduled for April 2017.

Please refer to Review of Operations: Life Insurance Business on page 30.
Sony Financial Holdings Inc. Annual Report 201619

Sony Assurance
Atsuo Niwa
President, Representative Director
Sony Assurance

Initiatives Toward Growth
Ensure sound profitability• Three consecutive years of record profits, with solid operating performance in fiscal 2015
• Continue to steadily increase profits during the period of the medium-term plan bythoroughly controlling the loss ratio and operating costs

Sustain growth and enhance • Firmly maintain a leading position in the direct automobile insurance market
customer experience in• Provide progressive and unique products, and sustain growth by enhancing theautomobile insurance
customer experience through customer contact points• To ensure stable, long-term earnings, expand business categories outside automobile

Expand business categories
insurance, moving away from a structure heavily concentrated on automobiles
outside automobile
Introduce
new products in medical insurance and promote development of categories•
insuranceoutside automobile insurance

Medium-term Targets for Fiscal 2018
Results for FY2015¥ 110.0 billion

Direct premiums written¥94.3 billion

Net expense ratio
E.I. loss ratio1
Sum of two ratios

27.1%
63.3%
90.4%

Ordinary profit¥4.6 billion

CAGR +4%¥ 5.2 billion

Adjusted ordinary profit2¥7.6 billion

CAGR +4%¥ 8.7 billion

Adjusted ROE3

13.3%

1

For all types of policies and including loss adjustment expenses.
Adjusted ordinary profit = Ordinary profit + Provision for catastrophe reserve.
3
The formula for adjusted ROE is shown on page 82.
220

Targets for FY2018

Sony Financial Holdings Inc. Annual Report 2016

CAGR +5%

Sum of two ratios
Decrease

Remain at a high level

Sum of two
ratios90% range

13%

products, exemplified by the Gentle Driving Cash-Back Plan.
This industry-first automobile insurance, which debuted in2015, reflects such driving behavior as rapid acceleration andhard braking in the insurance premiums.
Furthermore, to ensure stable earnings over the long term,Sony Assurance will develop products in categories other thanautomobile insurance and shift away from a structure that isheavily concentrated in the automobile insurance business,over the medium to long term. Sony Assurance will kick off thisplan with the introduction of new medical insurance products,
and also implement a revision on the existing product lineup.
Sony Assurance will also seek business opportunities in categories other than automobile and medical insurance, where it
can capitalize on its strengths as a direct insurer.

Trend in Ordinary Profit and Adjusted Ordinary Profit(Billions of yen)
7.1

Ordinary proﬁt
Adjusted ordinary proﬁt

Vision and Strategies

Sony Assurance posted record-high profits, extending the
upward climb for a third consecutive year since fiscal 2013, bysteadily increasing premiums written and controlling the loss
ratio at a low level. Going forward, it will strive to keep the loss
ratio down and reduce operating expense ratio through more
efficient advertising and promotional activities to achieve continued profit growth.
Also, Sony Assurance aims to sustain growth in the mainstay automobile insurance business and cement its leading
position in the direct automobile insurance market. Toward thisgoal, it will raise the retention rate for its automobile insurance
products by enhancing the quality of accident response services and customer services, and by offering unique web/smartphone services. In addition, Sony Assurance will continue to pursue development of its leading high-value-added¥7.6billion
¥4.6

4.1

2.1

FY2008

4.2

3.9
2.5

FY20092.3

2.1

FY2010billion

3.0

2.8
2.1

4.2

0.3

0.1

FY2011FY2012FY2013

FY2014FY2015

Note: Adjusted ordinary proﬁt = Ordinary proﬁt + Provision for catastrophe reserve

Trend in Earned/Incurred Loss Ratio, Net Expense Ratio and Sum of Two Ratios
Sum of two ratios
Earned/Incurred loss ratio
Net expense ratio
90.2%

91.9%

63.5%

65.8%

95.2%

98.1%

98.9%

69.7%

72.4%

72.9%

93.8%

68.2%

91.0%

64.3%

90.4%
63.3%
27.1%

26.7%

26.1%

25.5%

25.7%

26.0%

25.6%

26.7%

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014FY2015

Note: Earned/Incurred loss ratio = (Net losses paid + Provision for reserve for outstanding losses + Loss adjustment expenses) / Earned premiums
Net expense ratio = Expenses related to underwriting / Net premiums written
Sum of two ratios = Earned/Incurred loss ratio + Net expense ratio

Please refer to Review of Operations: Non-life Insurance Business on page 38.
Sony Financial Holdings Inc. Annual Report 201621

Sony Bank
Yutaka Ito
President, Representative Director
Sony Bank

Initiatives Toward Growth
Strengthen strategic
products

Expand the customer baseEnhance customer
response capabilities• Establish solid market position as a “Foreign Currency Specialist”• Reinforce realtor sales channel and improve product characteristics to further expand
mortgage loans• Expand preferential services with Sony Bank WALLET as a hub• Provide products and services targeting asset investment (wealthy) stratum• Enhance customer response capabilities, using “People” and “IT,” in dealing withchanges in awareness of “Independent Individuals”

Medium-term Targets for Fiscal 2018
Results for FY2015

22

Targets for FY2018

Retail balance (Sum ofdeposits, investment trusts
and personal loan balance)¥3.2 trillion

CAGR Approx. 8%¥ 4.1 trillion

Gross operating profit(Sony Bank consolidated)¥24.3 billion

CAGR Approx. 4%¥ 27.6 billion

Operating profit(Sony Bank consolidated)¥5.9 billion

CAGR Approx. 7%¥ 7.2 billion

ROE(Sony Bank consolidated)

5.0%

Targeting 6% level

Sony Financial Holdings Inc. Annual Report 2016

Approx.

6%

At Sony Bank, efforts to grow the company hinge on strengthening its strategic products—foreign currency and mortgage
loans. In the foreign currency business, the number of new foreign currency deposit accounts expanded tremendously after
the January 2016 debut of Sony Bank WALLET, a Sony Bank
cash card featuring a Visa debit function with 11 currency
options. Going forward, Sony Bank aims to increase the foreign currency deposit balance significantly by introducing more
foreign currency-linked products and services, and establish
its status as a “Foreign Currency Specialist.” In the mortgage
loan business, Sony Bank strengthened ties with realtors,
leading to a dramatic increase in the amount of new loans
extended via this sales channel and briskly expanded themortgage loan balance. Recently, the sudden surge in rollover demand reflects the Bank of Japan’s negative interest
rate policy. Going forward, Sony Bank expects demand fromnew borrowers to continue to climb, as it reinforces existingties with realtors and forge additional alliances. In addition,
Sony Bank will work to improve product features andenhance service quality to keep the mortgage loan balancecharting upward.
Sony Bank is also keen to acquire a larger customer baseby adding mortgage loans and foreign exchange margin
Retail Balance(Sum of Deposits, Investment Trusts, and Personal Loan Balance)

Over ¥(Billions of yen)

Vision and Strategies

trading to the scope of preferential services currently available
to qualified customers to promote sales of a wide range of
products using Sony Bank WALLET as the access hub. In
addition, it will develop products geared to the asset investment needs of young customers, a client segment that has
expanded with the resumption of card loans in July 2015, as
well as customers in their 50s and 60s, whose demand has
grown in recent years.
In this information-filled society, customers have gained
a different level of awareness, spurring a trend to seek advice
from experts when entering into a financial transaction. Sony
Bank is keen to enhance its ability to respond to informationdemanding customers by reinforcing the customer responsedesk and utilizing IT, or more precisely, FinTech.
The ultralow interest rate environment will squeeze theinterest spread, adversely affecting Sony Bank’s businessresults. On the profit front, the situation will be exacerbatedby up-front expenses on new services, which will increase
marketing costs. However, it will expand the customer basethrough a wider range of transactions, including mortgage
loans, foreign currency deposits and card loans. Sony Bank
will aim for a retail balance exceeding ¥4 trillion by the end of
March 2019, and achieve sustainable profit growth.

4,100 billion

At the end of the ﬁscal year

2,841.2

3,282.1

3,087.5

2,962.6

Investment trusts

CAGR
Approx. 8%(March 31, 2016–
March 31, 2019)

Foreign currency
deposits
Yen deposits
Personal loans

FY2012FY2013

FY2014FY2015FY2018(Target)Trend in Ordinary Profit(Billions of yen)

7.3
5.9

5.6

7.2
(0.8)
(0.6)

4.4

4.5

FY2012FY2013

FY2014FY2015FY2016

Impact ofnegativeinterest rate

Up-front expenses
Impact of negativeinterest rate

FY2018(Target)Please refer to Review of Operations: Banking Business on page 44.
Sony Financial Holdings Inc. Annual Report 201623

Nursing care businessInitiatives Toward Growth in the Nursing Care BusinessSony Lifecare, established in April 2014 as a holding company
to oversee the Group’s operations in the nursing care business, is promoting business development in the operation andestablishment of nursing care homes by a subsidiary, andthrough alliances with other companies.
In new nursing care home development, the Group’s first
newly built nursing care home opened in April 2016 in Tokyo,
in the area of Soshigaya, Setagaya-ku, and a second facility
is scheduled to open in the spring of 2017 in the city of
Saitama, in Saitama Prefecture. Through these facilities,
it seeks to provide original, high-quality nursing care services.
Meanwhile, in May 2015, Sony Lifecare took an equity
stake in Yuuai Holdings (YHD), which is involved in the operation of nursing care homes and other businesses throughcompanies under its umbrella. Sony Lifecare will endeavor toestablish a presence in the market through its alliance with the
YHD Group, which has 28 facilities with about 1,400 rooms.

As of July 2016, Sony Lifecare holds 14.5% of issued shares
in YHD and has taken on YHD-issued convertible bonds totaling ¥2.0 billion. Any future increase in equity stake will bedecided based on the status of collaboration and progress tostrengthen the relationship.
Sony Lifecare iskeen to continue
efforts to solidify
and expand its
business base bypromoting such initiatives as theestablishment of
nursing care homes
and development ofstrategic alliances.
SONARE Soshigaya-Okura, a nursing care
home

Trends in Japan’s Nursing Care Market
Further aging of society
The number of seniors aged 65 years old and over in Japan hit a new all-time high of 33.99 million, as of November 1,
2015, comprising 26.7% of the demographic spectrum, also a record high. It is assumed the ratio of seniors in the
population will continue to climb, with 33.4%—or one in three citizens—in the 65-and-over age group by 2035.
The cost of nursing care benefits reached ¥9,762.4 billion in fiscal 2014, up about 5% from the year before, andmarking its highest figures ever. The increase is primarily because the number of people receiving benefits reached arecord-high 5.01 million. The situation indicates that the need for nursing care continues to grow with the graying of society.
Establishment of Integrated Community Care System and sustainable improvement in nursing careinsurance program
The graying of society is unfolding at a faster pace in Japan than anywhere else in the world. Given this situation, demand
for medical services and nursing care is expected to climb from 2025 onward as that is when baby-boomers (born during
first baby boom in 1947–1949; about 8 million people) are at least 75 years old and will require nursing care. To deal withheightened demand for senior care, the Ministry of Health, Labour and Welfare is pushing for the creation of an Integrated
Community Care System by 2025. This system will provide regionally based integrated support and services, enabling
seniors to remain in their familiar settings for as long as possible and continuing to live the way they wish until the end of
their days. In April 2015, the ministry revised the nursing care compensation scheme, with an emphasis on measures toenhance at-home support for seniors in the third-stage care level or higher of the five-stage scale of care need and to
optimize service evaluations.
In 2018, nursing care compensation is set to be reviewed, along with medical service fees, and movements toward
the establishment of an Integrated Community Care System and improved sustainability of the nursing care insurance
program are sure to pick up speed.
Sources: “Population Estimates,” Statistics Bureau, Ministry of Internal Affairs and Communications; “Population Projections for Japan,” National Instituteof Population and Social Security Research; “Annual Report on the Aging Society,” Cabinet Office; “Nursing Care Expenses,” All-Japan Federationof National Health Insurance Organizations; and materials prepared by councils and committees of the Ministry of Health, Labour and Welfare

24Sony Financial Holdings Inc. Annual Report 2016

Review of Operations and Analysis of Operating Performance

Review of Operations andAnalysis of Operating PerformanceSony Financial Holdings Inc. Annual Report 201625

Segment Performance Highlights

Details: p30

Life Insurance Business
Ordinary Revenues

Ordinary Proﬁt

Total Assets

Billions of yen

Billions of yen

Billions of yen

100

10,000

1,200

80

8,000

900

60

6,000

600

40

4,000

300

20

2,000

1,500

1,230.2

8,033.3
60.2

0Ordinary
revenues

12
967.5

13

14

15

0

16

1,142.3 1,196.6 1,223.9 1,230.2

For the years ended March 31,

Ordinary
profit

12
68.1

13
72.7

14
67.2

15
78.3

16

0

60.2

Total
assetsFor the years ended March 31,

Non-life Insurance Business

12

14

15

16

As of March 31,

Details: p38

Ordinary Revenues

Ordinary Proﬁt

Total Assets

Billions of yen

Billions of yen

Billions of yen

125

7.5

200

96.9

100

13

5,219.9 5,948.1 6,619.3 7,301.0 8,033.3

172.3

160

6.0

4.6
75

4.5

120

50

3.0

80

25

1.5

40

0

12

13

14

15

16

Ordinary
revenues

80.0

84.7

89.8

93.0

96.9

For the years ended March 31,

Banking Business

0.0
Ordinary
profit

12

13

14

15

16

0

2.8

2.3

3.0

4.2

4.6

Total
assetsFor the years ended March 31,

12

13

14

15

16

118.6

127.4

142.7

157.9

172.3

As of March 31,

Details: p44

Ordinary Revenues

Ordinary Proﬁt

Total Assets

Billions of yen

Billions of yen

Billions of yen

50

10

2,500

8

2,000

37.9

40

2,140.2

5.9
30

6

1,500

20

4

1,000

10

2

500

0
Ordinary
revenues

12
32.5

13
34.3

14
36.4

15
38.4

For the years ended March 31,

16

0

37.9

Ordinary
profitSony Financial Holdings Inc. Annual Report 2016

3.4

13
3.9

14
5.6

For the years ended March 31,

Note: Segment figures are before consolidation adjustments.

26

12

15
7.3

16

0

5.9

Total
assets

12

13

14

15

16

1,897.6 2,012.6 2,068.7 2,074.6 2,140.2

As of March 31,

SFH (Consolidated)
Operating Results

Review of Operations and Analysis of Operating Performance

During fiscal 2015, the Japanese economy was in a state of modest economic recovery, buttressed by higher corporate earnings
and improvements in the employment and income situation. However, the fiscal year was also characterized by concerns about
the economic downturn stemming from overseas economic issues, such as decelerating growth in Chinese and other emerging
market economies and falling crude oil prices, as well as volatile movements in the financial markets. As a result, the outlook was
uncertain.
Looking at financial conditions, the Japanese stock markets performed solidly in the first half of the fiscal year, but then turned
downward due to a drop in the Chinese stock markets and other factors. Thereafter, the Japanese stock markets remainedlargely volatile, reflecting emerging and U.S. market fluctuations. In the bond markets, long-term interest rates that were alreadylow due to the Bank of Japan (BOJ)’s monetary easing fell further when the BOJ decided in January 2016 on the introduction ofa policy of “Qualitative and Quantitative Monetary Easing with a Negative Interest Rates.” Even in foreign currency markets which
had generally demonstrated a trend toward yen depreciation, investors’ behavior to shed risk and purchase yen as a safe-havencurrency led to sharp yen appreciation.
Amid these circumstances, the Sony Financial Group sought to become the financial services group most highly trusted bycustomers. To this end, we undertook a variety of measures to maintain a sound financial base, reinforce and expand our product and service offerings in order to deliver high-value-added products and high-quality services to each of our customers, andenhance our internal control system.
Consequently, as for its operating results, consolidated ordinary revenues rose 0.7% year on year, to ¥1,362.0 billion, owing
to increases in ordinary revenues from the life insurance and the non-life insurance businesses, whereas ordinary revenues fromthe banking business decreased. Consolidated ordinary profit decreased 21.1% year on year, to ¥71.1 billion, owing todecreases in ordinary profit from the life insurance and the banking businesses, whereas ordinary profit from the non-life insurance business increased. Profit attributable to owners of the parent, after accounting for extraordinary losses, provision forreserve for policyholders’ dividends and income taxes, was down 20.3% year on year, to ¥43.3 billion due to the decrease inordinary profit.
Segment performance was as follows:
Life Insurance Business Ordinary revenues were almost flat with an increase of 0.5% year on year, to ¥1,230.2 billion. Thiswas due to an increase in income from insurance premiums, reflecting a favorable acquisition of new policies and an increase ingains on sale of securities in the general account, substantially offset by a deterioration in investment performance in the separate account, driven by the worsened financial market conditions. Ordinary profit decreased 23.1% year on year, to ¥60.2
billion. This was due to a significant increase in provisionof policy reserves for minimum guarantees for variable life
Billions of yen
Ordinary Revenues
1,500
insurance as a result of an increase in new policies and the
For the years ended March 31,
worsened financial market conditions. Moreover, increased
1,200Life insurance business
expenses incurred through the strong sales of new policies
Non-life insurance business
900
also contributed to the decrease in ordinary profit.
Banking business
Non-life Insurance Business Ordinary revenues rose
4.2% year on year, to ¥96.9 billion, due to an increase in
net premiums written, primarily for its mainstay automobile
insurance. Ordinary profit climbed 11.2%, to ¥4.6 billion, due
to a decline in provision for reserve for outstanding losses led
by a lower car accident ratio, as well as a rise in ordinary
revenues.

600
300
0

Ordinary Proﬁt
For the years ended March 31,
Life insurance businessBanking Business Ordinary revenues decreased 1.3%
year on year, to ¥37.9 billion, mainly due to a decline in gains
on sale of bonds, despite higher revenues associated withmortgage loans. Ordinary profit fell 18.3%, to ¥5.9 billion,
owing to lower ordinary revenues and an increase in generaland administrative expenses.

Non-life insurance businessBanking business

12

13

14

15

16

13

14

15

16

Billions of yen
100
80
60
40
20
0

12

Sony Financial Holdings Inc. Annual Report 201627

Financial Position
As of March 31, 2016, total assets amounted to ¥10,352.1 billion, up 8.4% from March 31, 2015. Among major components ofassets, securities—mostly Japanese government bonds—amounted to ¥8,021.4 billion, up 8.7%; loans came to ¥1,515.8 billion, up 12.3%; and monetary trusts reached ¥303.9 billion,
Billions of yen
Total Assets
down 9.8%.
12,000
As of March 31,
Total liabilities were ¥9,747.7 billion, up 8.4% from March
31, 2015. Major components of liabilities included policy
9,000
reserves and others of ¥7,504.4 billion, up 9.1%, and deposits totaled ¥1,912.5 billion, up 2.1%.
6,000
Total net assets were ¥604.3 billion, up 9.8% from March
31, 2015. This included net unrealized gains on other securi3,000
ties, net of taxes, which increased ¥30.1 billion, to ¥157.3
billion.
0
12
13
14
15
16

Cash Flow Status
Net cash provided by operating activities in fiscal 2015 reached ¥602.4 billion, mainly on higher contributions from insurance premiums in the life insurance business. This represented an increase in cash inflow of ¥176.8 billion year on year.
Net cash used in investing activities came to ¥558.8 billion, as payments to acquire securities in the life insurance business surpassed inflow from the sale and redemption of securities in the life insurance and banking businesses. This led to
an increase in cash outflow of ¥113.3 billion year on year.
Net cash used in financing activities amounted to ¥17.4 billion mainly reflecting cash dividends paid. This marked ayear-on-year increase of ¥4.3 billion in cash outflow for financing activities.
Given the above factors, cash and cash equivalents at March 31, 2016, stood at ¥233.6 billion, up ¥26.1 billion fromMarch 31, 2015.

Risk-Monitored Loans
Millions of yen
As of March 31,

2015

2016

Bankrupt loans

¥ 207

¥ 285

Non-accrual delinquent loans

1,430

1,332

—

—

1,715

1,443

¥3,353¥3,061Category

Past-due loans (3 months or more)
Restructured loans
Total

28

Sony Financial Holdings Inc. Annual Report 2016

Consolidated Solvency Margin Ratio
Millions of yen
As of March 31,

2016¥1,216,296¥1,282,209

Common stock, etc.

410,709425,351

Reserve for price fluctuations

42,96944,410Contingency reserve

68,79075,258Catastrophe reserve

11,344

14,363595

567

Net unrealized gains on other securities and net deferred gains or losses on hedging instruments, net of taxes(before tax deductions) x 90% (100% if losses)

168,454

194,745

Net unrealized gains on real estate x 85% (100% if losses)

15,325

20,778

Total amount of unrecognized net actuarial gain (loss) and unrecognized prior service cost (before subtracting tax effects)(2,189)(5,296)——(A) Total consolidated solvency margin

General reserve for possible loan losses

Amount excluded from deferred tax assets
Unallotted portion of reserve for policyholders’ dividends

212

302

Deferred tax assets (after deducting amount excluded)

81,201

83,648Subordinated debt and surplus components of premium reserve429,392

439,469

Total solvency margin of small-amount short-term insurers——

10,51011,389148,788

156,642

Insurance risk (R1)

23,04523,576

Ordinary insurance risk (R5)10,465

10,906

Major catastrophe risk (R6)

737

1,033

8,422

8,519

Deductible items(B) Total consolidated risk

( R12+R52 +R8+R9)2+(R2+R3+R7)2+R4+R6

Third-sector insurance risk (R8)
Insurance risk of small-amount short-term insurers (R9)——Assumed interest rate risk (R2)30,22530,709Minimum guarantee risk (R7)

14,373

15,902

Asset management risk (R3)

93,58399,003Business management risk (R4)

5,810

5,963

4.9
1,635.%

1,637.5%
1

Consolidated solvency margin ratio (A)/{(1/2)x(B)} x 100

Review of Operations and Analysis of Operating Performance

2015

Notes: 1. Figures are calculated in accordance with Article 210, Paragraph 11-3 and Paragraph 11-4 of the Ordinance of Enforcement of the Insurance BusinessAct of Japan, and FSA Notification No. 23 (2011).
2. Minimum guarantee risk is calculated based on the standardized method.

Sony Financial Holdings Inc. Annual Report 201629

Life Insurance Business
Review of Operations
Business Environment
Japan’s life insurance market is the second largest in the world
on an insurance premium income basis, with a global share ofabout 14%. Although the domestic life insurance market has
been contracting since the late 1990s, industrywide policy
amount in force for individual life insurance stood at ¥858 trillion* as of March 31, 2016, indicating that the life insurance
market remains enormous. A steadily falling birthrate and aging
population have precipitated a shift in protection needs, fromdeath-protection insurance to individual annuities and third
sector insurance, such as medical and nursing care insurance.
Nevertheless, death-protection insurance policies accounted
for more than 80% of individual life insurance policy amountin force, at ¥736 trillion*, as of March 31, 2016.
In fiscal 2015, the financial markets in Japan and abroadchanged significantly. Following a decision by the Bank of Japan
to introduce a negative interest rate policy at the end of January
2016, domestic interest rates tumbled. In addition, the yen
appreciated as expectations of an interest rate increase in the
United States faded, and stock markets also showed steep
declines. Given this deteriorating investment environment, somelife insurance companies decided to stop selling savings-type
products, such as single premium whole life insurance.
Furthermore, the policy reserve discount rate is anticipatedto be lowered in April 2017, reflecting the currently low interest
rate situation. As a result, life insurance companies are
expected to revise insurance premiums, while taking into
account the competitive environment, which would likely raise
the price of whole life insurance, as this product is particularly
susceptible to changes in the investment environment.
Sales channels are becoming increasingly diverse, witha wider variety of sales agency shop formats and a notable

Life Insurance Premium Volume Share by Country

expansion in the sale of products over-the-counter at banks.
To ensure greater protection for customers, given thesechanges in marketing patterns, regulations were introduced in
May 2016 that impose a duty on agencies to provide sufficient
information on products, to understand customers’ intent andto improve solicitation systems. Agencies are therefore
required to implement suitable training, management andguidance for solicitors.
*Source: “Summary of Life Insurance Business,” The Life Insurance
Association of Japan’s website

Sony Life’s Responses
Sony Life has increased sales of highly profitable insurance
products centering on death protection. This was driven
mainly by measures to strengthen consulting-based sales
through Lifeplanner sales employees and Partners (independent agents) despite the shrinking death-protection insurance
market. In regard to asset management, Sony Life maintained
its focus on ultralong-term Japanese government bonds tostem rising interest rate risk, based on the asset-liability management (ALM) approach. However, underlying concerns in
the investment environment, such as negative interest rates
and declining liquidity of Japanese government bonds, haveencouraged the company to pursue diversification in its investing methods, highlighted by greater investment in ultralongterm fiscal investment and loan program (FILP) agency bonds
and corporate bonds.
Sony Life remains committed to measures that will expand
business volume through new policy acquisition and will strive
to ensure thorough economic value-based revenue and risk
management while maintaining high profitability and a highdegree of financial soundness.
Industrywide Policy Amount in Force* and Sony Life’s Market Share
As of March 31,

2015
US$2.5 trillion

Policy amount in force (left scale)
22% United States

1,500

33% Others
14% Japan

4% South Korea
5% Italy

8% United Kingdom

6% France

8% China

Source: Swiss Re. Sigma No 3/2016, World Insurance in 201530

Sony Financial Holdings Inc. Annual Report 2016

Sony Life’s share (right scale)%

Trillions of yen

Industry scaleSony Life

5.0

1,200

4.0

900

3.0

600

2.0

300

1.0

0

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16*The above graph indicates individual life insurance.
Source: “Insurance,” by Hoken Kenkyujo (Insurance Research Institute), anddata ofﬁcially disclosed by individual life insurers

0Review of Operations and Analysis of Operating Performance

Industry Position
New Policy Amount
Rank

1
2
3
4
5
6
7
8
9
10

Billions of yen, %Policy Amount in Force

Company nameResults

Share

Rank

A
B
Sony Life
C
D
E
F
G
H
I

9,401.0
7,168.4
4,871.0
4,367.9
3,490.5
3,260.0
3,043.0
3,037.9
2,523.7
2,398.8

13.6
10.3
7.0
6.3
5.0
4.7
4.9
4.4
3.6
3.5

1
2
3
4
5
6
7
8
9
10

Company name

A
B
C
D
E
Sony LifeF
G
H
I

Billions of yen, %Results

Share

145,116.3
114,816.0
84,019.3
71,193.7
44,406.2
42,293.7
35,494.1
34,333.3
32,455.1
27,989.3

16.9
13.4
9.8
8.3
5.2
4.9
4.1
4.0
3.8
3.3

Note: Individual life insurance (as of March 31, 2016)
Source: Data officially disclosed by individual life insurers

Recent Topics
March 2016:

May 2016:

Launch of Industry’s First Instant Approval System

Debut of Level Premium Plan Term Life Insurance with
Reduced Surrender Value (Disability/Nursing Care Type)and Level Premium Plan Term Life Insurance with No
Surrender Value (Disability/Nursing Care Type)

Since 2012, Sony Life has adopted paperless insurance application procedures to enhance sales efficiency and at the sametime, greatly improve convenience to customers. In March
2016, Sony Life raised these features to a new level by introducing the Instant Approval System. For the paperless insurance application procedures, this new system—an industry
first—instantly shows the results of medical screening, including special conditions, in the presence of the customer andinforms the customer of acceptance on the spot. As a result,the handling of a new application, which traditionally averaged
7.5 days from application to acceptance, has been shortened
considerably, with the policy going into force immediately.

Sony Life began selling products which provide for one-time
expenses incurred in the event of the policyholder succumbing
to death, being diagnosed with a prescribed disability or falling
into a state that requires nursing care.
May 2016:

Commencement of New Service for Corporate Policyholders
Sony Life began a service for corporate policyholders that provides support for health, management and employee welfare.
It complements existing coverage perfectly tailored to protect
business plans so that users of the service, whether employees
or management, can live a satisfying life in good physical andmental health.
Sony Financial Holdings Inc. Annual Report 201631

Analysis of Operating Performance
SFH’s life insurance business consists of Sony Life, a wholly owned subsidiary of SFH, and AEGON Sony Life Insurance and SA
Reinsurance—both equity-method affiliates 50% owned by Sony Life.
Sony Life accounts for nearly all of SFH’s life insurance business. Below is an analysis of the non-consolidated operating performance of Sony Life.

New Policy Amount
New policy amount is the total policy amount of new insurance policies.
Billions of yen
2016

ChangeNew Policy Amount and Number Billions of yen
6,000
of New Policies¥4,771.6 ¥5,151.3
4,625.7 4,871.0

+8.0%
+5.3%

(Individual life insurance +Individual annuities)

4,800

60

For the years ended March 31,

3,600

45

2,400

30

1,200

15

For the years ended March 31,

2015

New policy amountIndividual life insurance
Individual annuities
Annualized premiums from new policies
Medical protection, living benefit
protection and other products
Number of new policies (10,000 policies)

145.9
76.6

280.3 +92.1%
85.0 +11.0%

15.2
60.6

15.7
62.9

New policy amount (left scale)
Number of new policies (right scale)

+2.8%
+3.8%

0

12

10,000 policies
75

13

14

15

0

16

Main Points The number of new policies increased due to higher sales of variable life insurance and variable annuities. Annualized pre-miums from new policies rose, owing to higher sales of variable life insurance as well as single premium whole life insurance and variable annuities.

Policy Amount in Force
Policy amount in force refers to the total amount of coverage that Sony Life provides to individual policyholders.
Billions of yen
As of March 31,

Policy amount in force

Policy Amount in Force andNumber of Policies in Force

Trillions of yen
50

+4.7%

(Individual life insurance +Individual annuities)

40

600

+43.2%

As of March 31,

30

450

20

300

10

150

2015

2016

Change¥40,988.7¥43,149.8+5.3%

40,391.0

42,293.7

597.6

856.0

Individual life insurance
Individual annuities
Annualized premiums frominsurance in force
Medical protection, living benefit
protection and other products
The number of policies in force(10,000 policies)

735.7

781.3

+6.2%

172.8

179.7

+4.0%

667.2

704.6

+5.6%

Policy amount in force (left scale)
Number of policies in force(right scale)0

12

10,000 policies
750

13

14

15

16

0

Main Points The policy amount in force increased owing to the solid rise in new policies. Sony Life’s policy amount in force forindividual life insurance and individual annuities has grown steadily for 35 years since the company commenced operations.

Sales of Products (Percentage Composition)

New Policy Amount by
Type of ProductFor the years ended March 31,

2015

2016

ChangeWhole life insurance

15.0%

11.4%

(3.6pt)Term life insurance

65.0%

61.0%

(4.0pt)(Individual life insurance +Individual annuities;
Policy amount basis)
For the year ended
March 31, 2016

Endowment and educational endowment insurance, and individual annuities

8.4%

8.9%

+0.5ptVariable life insurance

10.4%

17.8%

+7.4ptMedical and other types of insurance

1.2%

0.9%

(0.3pt)17.8%
Variable life
insurance

8.9%
Endowment
and educational
endowment
insurance, andindividual annuities

0.9%
Medical and othertypes of insurance
11.4%
Whole life
insurance
61.0%
Term life
insurance

Main Points Death-protection insurance products* accounted for about 90% of the new policy amount in fiscal 2015 (policy amount basis).
*Here, the new policy amount for death-protection insurance products represents the total new policy amount after deducting new policy amounts for endowment
insurance, educational endowment insurance, individual annuities and medical insurance.

32

Sony Financial Holdings Inc. Annual Report 2016

Lapse and Surrender Rate
The lapse and surrender rate shows the ratio derived by dividing the amount of lapses and surrenders, not adjusted for policy
amount decreases, increases and reinstatements, by the policy%
Lapse and Surrender Rateamount in force at the beginning of the fiscal year.
8.0
For the years ended March 31,

2015

2016

ChangeLapse and surrender rate

5.35%

4.72%

(0.63pt)(Individual life insurance +Individual annuities; Policy
amount basis)

6.0

For the years ended March 31,
4.0

Review of Operations and Analysis of Operating Performance

Main Points The lapse and surrender rate dropped, comparedwith the previous year when some policyholders of family
income insurance and living benefit insurance switched to otherinsurance products deemed more rational for their purposes.

2.0
0.0

12

13

14

15

16

Income from Insurance Premiums and Insurance Claims and Other Payments
Income from insurance premiums is revenue received mainly from insurance premiums paid by policyholders and is a major component of revenue for life insurance companies. Insurance claims and other payments are payouts based on insurance policies,
including insurance claims, insurance benefits, annuity payments and surrender payments.
Billions of yen
2016

Billions of yen
1,200ChangeIncome from Insurance
Premiums+12.5%For the years ended March 31,

For the years ended March 31,

2015

Income from insurance premiums¥914.0 ¥1,028.0

Insurance claims and other payments

382.9

363.3

(5.1%)Of which, insurance claims

79.6

84.2

+5.9%

720

Of which, insurance benefits

63.1

74.8

+18.5%

480

Of which, annuity payments

11.2

11.4

+1.9%

Of which, surrender payments

223.1

184.9

(17.1%)

960

240
0

12

13

14

15

16

Main Points Income from insurance premiums increased because of strong sales of variable life insurance and a new product, single

premium whole life insurance (non-notification type), launched in May 2015, in addition to steady growth in policy amount in force.

Asset Management (General Account)Sony Life’s investment policy is to identify the special characteristics of insurance liabilities, based on the asset-liability management(ALM) approach, and prioritize investment in assets suited to such characteristics. Specifically, to deal with long-term liabilities—that
is, life insurance policies—the company properly controls the inherent risk in insurance liabilities associated with fluctuating interest
rates by investing mainly in Japanese government bonds (JGBs) with long-term maturities. At the same time, the company limits
investment into risk assets, such as stocks.
Billions of yen
2015

2016

As of March 31,

AmountComposition

AmountComposition

Japanese government and corporate bonds
Japanese stocks
Foreign bonds
Foreign stocks and other securities
Monetary trusts
Policy loans
Real estate
Cash and deposits, call loans
Other
Total

¥5,606.8
42.4
105.5
26.0
313.2
162.3
117.7
56.8
76.7
¥6,508.0

86.2%
0.7%
1.6%
0.4%
4.8%
2.5%
1.8%
0.9%
1.2%
100.0%¥6,351.1
33.3
70.1
23.0
280.9
171.6
115.8
52.5
86.4
¥7,185.0

88.4%
0.5%
1.0%
0.3%
3.9%
2.4%
1.6%
0.7%
1.2%
100.0%

Main Points In fiscal 2015, Sony Life continued to invest primarily in ultralong-term bonds. The ratio of Japanese government andcorporate bonds stood at 92.3% as of March 31, 2016, in real terms, reflecting the inclusion of bonds invested in monetary trusts.
Going forward, Sony Life will continue to properly control the interest rate risk associated with insurance liabilities by investing mostof the new funds generated by income from insurance premiums and other sources in ultralong-term bonds. Also, given the environment after the Bank of Japan’s introduction of its negative interest rate policy, Sony Life has started investing in ultralong-term Fiscal
Investment and Loan Program (FILP) agency bonds and corporate bonds.
Sony Financial Holdings Inc. Annual Report 201633

Interest Income and Dividends
Interest income and dividends primarily consist of investment income, which is largely composed of interest income from deposits,
interest income and dividends from securities, income from real estate for rent and interest income from loans.
Millions of yen
For the years ended March 31,

2015

2016

ChangeDeposits¥
0 ¥0 +219.0%
Interest and dividends from securities 117,276 124,943+6.5%
Of which, Japanese governmentand corporate bonds
107,383 115,655+7.7%
Of which, Japanese stocks
464
522 +12.5%
Of which, foreign securities
8,998
7,246 (19.5%)
Loans
5,921
6,174
+4.3%
Real estate for rent
10,327
10,261(0.6%)
Total, including other interest income
and dividends¥133,592 ¥141,450+5.9%Interest Income and Dividends
For the years ended March 31,

Billions of yen
150
120
90
60
30
0

12

13

14

15

16

Unrealized Gains and Losses on Securities
Unrealized gains and losses on securities* refers to the differences between the carrying amounts of securities and their fair values.
When the fair value of an asset is higher than its carrying amount, the sale of the asset at fair value would result in a gain on thesale. Consequently, unrealized gains can function as a provision for various risks. A portion of unrealized gains and losses on
securities is included in the numerator (total solvency margin) used in calculating the solvency margin ratio (please see page 37).
*Unrealized gains or losses on securities list the total of unrealized gains or losses on held-to-maturity securities, policy-reserve-matching bonds and available-for-salesecurities, with fair values for securities other than securities held for trading. The total amount of securities includes securities included in monetary trusts.
Billions of yen
As of March 31,

2015

2016

ChangeUnrealized gains on securities in thegeneral account¥1,008.3 ¥2,271.1 ¥+1,262.8
Unrealized gains on held-to-maturity
securities
839.4 2,026.2 +1,186.7
Unrealized gains on
—
41.3
+41.3
policy-reserve-matching bonds
Net unrealized gains onavailable-for-sale securities
168.8
203.6
+34.7
Of which, unrealized gains on
Japanese government andcorporate bonds
145.5
186.0
+40.4
Of which, unrealized gains on
Japanese stocks
16.0
12.0
(4.0)
Of which, unrealized gains on
foreign securities
6.9
5.4
(1.5)

Unrealized Gains on Securities
As of March 31,

Billions of yen
2,500
2,000
1,500
1,000
500
0

12

13

14

15

16

Main Points Unrealized gains on securities in the general account,which are mainly Japanese government and corporate bonds,
increased, paralleling a huge drop in domestic interest rates.

(Reference: On March 31, 2016, SFH assumed unrealized gains on Japanese stocks to be zero when the Nikkei Stock Average was ¥7,751 and the TOPIX index
was 623 points.)

Ordinary Revenues, Ordinary Proﬁt and Net Income
Billions of yen
For the years ended March 31,

Ordinary revenues
Ordinary profit
Net income

2015

2016

¥1,223.8 ¥1,230.1
79.6
60.7
42.5
37.0

Main Points

Change+0.5%(23.7%)(12.8%)

Ordinary Proﬁt and Net Income
For the years ended March 31,
Ordinary proﬁt
Net income

Billions of yen
80
60
40

Ordinary revenues remained flat as the increase in income from insur20
ance premiums due to the favorable acquisition of new policies, andhigher gains on the sale of securities in the general account, substan0
tially offset by a deterioration in investment performance in the separate
12
13
14
15
16
account caused by worsening financial market conditions.
Ordinary profit decreased due to a significant increase in provision of policy reserves for minimum guarantees for variable life insurance as a resultof an increase in new policies and the worsened financial market conditions, partially offset by an increase in gains on sale of securities in the general account. Moreover, increased expenses incurred through the strong sales of new policies also contributed to the decrease in ordinary profit.
Net income decreased, owing to lower ordinary profit.

34

Sony Financial Holdings Inc. Annual Report 2016

Core Proﬁt
Core profit is an indicator of the profit-earning capacity of the primary insurance business over a one-year period. Primary insurance
business refers to the management of insurance premiums received from policyholders, along with investment income to pay insurance
claims, benefits and annuities, as well as to making and then investing policy reserve provisions for future payments. Ordinary profit in thestatements of income is calculated by adding the total amount of core profit, capital gains and losses including gains and losses on thesale of securities, and one-time gains and losses.
Core Proﬁt
For the years ended March 31,

Billions of yen
For the years ended March 31,

2015

2016

ChangeCore profit

¥76.5

¥43.0

(43.8%)

Billions of yen
100
80

Review of Operations and Analysis of Operating Performance

Note: Sony Life, like most life insurers organized as stock companies, primarily sells non-participating life insurance. This contrasts with life insurersorganized as mutual companies, which typically offer participating policies for which premiums include an additional amount equal to thefunds used for policyholder dividends. This additional amount isrecorded as core profit and the funds used for policyholder dividends
are included in core profit. Mutual companies consequently tend toshow relatively higher core profit than stock companies of similar scale.

60
40
20
0

12

13

14

15

16

Main Points Despite an improvement in the positive spread, core profit declined due to a significant increase in the provision of policy
reserves for minimum guarantees for variable life insurance, which paralleled an increase in new policies and deteriorating financial
market conditions, and also due to higher expenses in line with the strong sales of new policies.

Breakdown of Ordinary Profit (Core Profit)
For the years ended March 31,

Core profit (A)Capital gains
Income from monetary trusts, net
Income from trading securities, net
Gains on sale of securities
Gains on derivatives, net
Foreign exchange gains, net
Other capital gains
Capital losses
Losses on monetary trusts, net
Losses on trading securities, net
Losses on sale of securities
Devaluation losses on securities
Losses on derivatives, net
Foreign exchange losses, net
Other capital losses
Net capital gains (losses) (B)Core profit plus net capital gains (losses) (A) + (B)Other one-time gains
Gains from reinsurance
Reversal of contingency reserve
Reversal of specific reserve for possible loan losses
OthersOther one-time losses
Losses from reinsurance
Provisions for contingency reserve
Provisions for specific reserve for possible loan losses
Provisions for reserve for loan losses from borrowers in specific foreign countries
Write-off of loans
OthersNet other one-time gains (losses) (C)Ordinary profit (A) + (B) + (C)Millions of yen
2015

2016

¥76,505
14,447
—
479
8,899
—
5,068
—
6,011
—
—
0
—
2,099
—
3,910
8,435
84,940
—
—
—
—
—
5,275
—
5,035
31
—
—
207
(5,275)¥79,665¥43,019
27,387
7,119
41
12,204
4,768
—
3,253
2,951
—
—
—
—
—
2,798
153
24,43567,455
—
—
—
—
—
6,662
—
6,458
5
—
—
197
(6,662)¥60,792

Notes: 1. Core profit for fiscal 2015 (A) includes income gains of ¥4,853 million in income from monetary trusts along with interest income and dividends of ¥57
million in income from trading securities, net. Other capital gains include the reversal of policy reserves and others of ¥3,253 million for currency market fluctuations of products denominated in foreign currencies; other capital losses include impairment losses of ¥153 million from investment partnerships. “Others” of other one-time losses include the provision of additional policy reserve of ¥197 million.
2. Core profit for fiscal 2014 (A) includes income gains of ¥5,283 million in income from monetary trusts along with interest income and dividends of ¥28
million in income from trading securities, net. Other capital losses include the provision of policy reserves and others of ¥3,693 million for currency
market fluctuations of products denominated in foreign currencies and impairment losses of ¥217 million from investment partnerships. “Others” ofother one-time losses include the provision of additional policy reserve of ¥207 million.
Sony Financial Holdings Inc. Annual Report 201635

Positive Spread
Life insurers use a portion of the premiums received from policyholders to accumulate policy reserves for the payment of
future claims. These policy reserves assume an annual return
based on a fixed interest rate. This interest rate is known as
the assumed interest rate. A positive spread occurs when theactual investment yield is higher than the average assumed
interest rate and vice versa for a negative spread. A negative
spread occurs due to deterioration in the investment environment or other reasons.

Positive Spread
For the years ended March 31,
Note: A negative ﬁgure indicatesa negative spread.

Billions of yen
20
15
10
5
0
-5

Billions of yen
For the years ended March 31,

2015

2016

ChangePositive spread

¥13.0

¥15.3

+17.7%

Average Assumed Interest Rate, %Investment Yield for Core Proﬁt 4.0

Average assumed interest rate

2.12%

2.06%

(0.06pt)

For the years ended March 31,

Investment yield (general account)

2.36%

2.42%

+0.06pt

Investment yield for core profit

2.35%

2.31%

(0.04pt)

Investment yield for core proﬁt
Average assumed interest rate

Main Points Positive spread advanced ¥2.3 billion year on year,to ¥15.3 billion, due mainly to a drop in the average assumed
interest rate resulting from the acquisition of new policies.

Formula for Calculating Positive Spread(Investment yield for core profit1 – Average assumed interest rate2)
×General account policy reserves3||
Positive spread

12

13

14

15

16

12

13

14

15

16

3.0
2.0
1.0
0.0

1. Investment yield for core profit is the yield on general account policy reserves after
subtracting the interest portion of provision for reserve for policyholders’ dividends
from the general account investment returns included in core profit.
2. Average assumed interest rate is the assumed yield on general account policy reserves.
3. General account policy reserves are calculated based on the following formula forpolicy reserves in the general account, excluding contingency reserve:(Policy reserves at beginning of period + policy reserves at end of period –assumed interest) x 1/2

Non-performing Assets
Risk-monitored Loans

Loans by Borrower Category
Millions of yen

As of March 31,

Category
Bankrupt loans
Non-accrual delinquent loans
Past-due loans (3 months or more)
Restructured loans
Total

2015

¥—
—
—
—
¥—

Millions of yen

2016

As of March 31,

¥—
—
—
—
¥—

Category
Bankrupt and quasi-bankrupt loans
Doubtful loans
Sub-standard loans
Normal loans
Total

2015

¥

—
—
—
165,075¥165,075

2016

¥

—
—
—
223,255¥223,255

Main Points Sony Life’s asset assessment is shown in the above table. The company does not have any risk-monitored loans (loans
for which repayment conditions are not ordinary). Moreover, all figures are classified as normal loans listed in the loans by borrower
category.

As of March 31, 2016, Sony Life’s receivables comprised loans and securities lent. The loan balance* was ¥171.6 billion, consisting entirely of policy loans, which are limited to recoverable surrender values. Securities lent amounted to ¥48.7 billion, with theloaned bonds recorded as securities lending transactions with cash collateral.
*Life insurers earn interest income by lending a portion of their assets under asset management. Loans are categorized as either policy loans provided as a service tocustomers, or as commercial loans. The loan balance comprises the sum of these two categories.

36

Sony Financial Holdings Inc. Annual Report 2016

Non-consolidated Solvency Margin Ratio
The solvency margin ratio is an indicator of payment ability. Life insurers accumulate policy reserves to prepare for the paymentof future claims, allowing them to adequately respond to risks within a normally anticipated range. However, unpredictable events
can occur as a result of changes in the environment, including%
Non-consolidated
major disasters and substantial declines in the stock markets.
3,000
Solvency Margin Ratio
The solvency margin ratio is one measure used by regulatory(Current standards)
2,400
authorities to determine whether an insurer has the ability to
As of March 31,
pay in response to the risk of such unpredictable events.
Note: The ﬁgures have been
1,800

2015

Non-consolidated solvency
margin ratio

2,555.0%

2016

Changecalculated using the current
standards applied since
March 31, 2012.

1,200
600

2,722.8% +167.8pt

Main Points Sony Life’s non-consolidated solvency margin ratio
increased year on year, thus remaining at a high level.

0

12

13

14

15

16

Millions of yen

As of March 31,(A) Total solvency margin
Common stock, etc.
Reserve for price fluctuations
Contingency reserve
General reserve for possible loan losses[Net unrealized gains on other securities (before tax deductions) and net deferred gains or losses on hedging
instruments (before tax deductions)] x 90% (100% if losses)
Net unrealized gains on real estate x 85% (100% if losses)
Amount excluded from deferred tax assets
Unallotted portion of reserve for policyholders’ dividends
Deferred tax assets
Excess amount of policy reserves based on Zillmer method
Subordinated debt
The portion of the excess amount of policy reserves based on Zillmer method and subordinated debt thatis not included in the margin
Deductible items(B) Total risk

Review of Operations and Analysis of Operating Performance

As of March 31,(R1+R8)2+(R2+R3+R7)2+R4

Insurance risk (R1)
Third-sector insurance risk (R8)Assumed interest rate risk (R2)
Minimum guarantee risk (R7)
Asset management risk (R3)
Business management risk (R4)(C) Solvency margin ratio [(A)/{(1/2)x(B)}] x 100

2015

2016

¥1,078,363
301,193
42,84568,7070¥1,169,875
319,740
44,26075,166
0

158,917
15,325—
212
81,201
429,392—

188,217
20,778—302
83,648
470,777—(16,433)(3,000)(31,308)(1,707)

84,41185,93023,045
8,422
30,13814,37331,4932,149
2,555.0%

23,5768,519
30,613
15,90230,8312,188
2,722.8%

Notes: 1. The above figures are calculated based on provisions in Articles 86 and 87 of the Ordinance for Enforcement of the Insurance Business Act of Japanand Ministry of Finance Public Notice No. 50 (1996).
2. Minimum guarantee risk is calculated based on the standardized method.

AEGON Sony Life Insurance: Over-the-counter (OTC) Sales of Individual Annuity Products at BanksSony Life began sales of individual variable annuity products in December 2009 through AEGON Sony Life Insurance, a 50–50 joint
venture established with the AEGON Group (headquartered in the Netherlands), to meet annuity needs associated with Japan’s aging
population and low birthrate. AEGON Sony Life Insurance sells individual variable annuity products which respond to customers’ needs
to help save for retirement through Sony Life’s Lifeplanner channel and partner agencies, involving 25 financial institutions.**As of July 1, 2016

For the years ended March 31,

2015

2016

As of March 31,

2015

2016

Number of new policies

26,834

11,851 (55.8%)

Number of policies in force

63,59373,403 +15.4%¥163,254¥71,593 (56.1%)

Policy amount in force (Millions of yen) ¥390,423 ¥444,280 +13.8%

New policy amount (Millions of yen)

ChangeChangeMain Points The number of new policies decreased compared with fiscal 2014.
Sony Financial Holdings Inc. Annual Report 201637

Non-life Insurance Business
Review of Operations
Business Environment
Automobile insurance, positioned as Sony Assurance’s coreproduct category, accounts for the largest portion of Japan’s
non-life insurance industry and provides around half of theindustry’s insurance premium revenues. Japan’s automobile
insurance market is dominated by the major non-life insurers,
and approximately 90%* of insurance premium revenues are
generated by policies sold mainly through those insurers’
nationwide agencies.
In fiscal 2015, Japan’s automobile insurance premium
revenues continued to climb year on year, largely reflecting
the impact of revised insurance premiums to date by non-life
insurers. The upward trend in profits was maintained, especially among major non-life insurers, mainly because of
reduced claims paralleling the introduction of a new bonusmalus system (non-fleet driver rating system).
Nevertheless, automobile ownership is expected to gradually decline over the medium and long term, primarily due to theshrinking population and a growing disinterest in automobiles
among young people, making the market environment rather
challenging. In addition, the automobile insurance environment
itself is poised for big changes at an unprecedented speed.
Key catalysts include interest in telematics insurance among
several insurance companies pursuing research and the eventual introduction of policies, as well as fast-tracked initiatives
by the government and the private sector to make autonomous
cars of the future a practical reality.

Against this backdrop, direct non-life insurance companies(direct insurers) on the whole, including Sony Assurance, haveseen steady increases in insurance premium revenues as wellas growth in their share of the automobile insurance market
year after year. This growth has been driven by strong customer support for lower insurance premium structures compared with major non-life insurers, plus heightened recognition
mirroring vigorous advertising activities by direct insurers.
Going forward, customers’ preference for low prices will likely
continue, which should spur even wider expansion of direct
insurers’ market share. Conversely, the low-price strategies of
direct insurers, especially newcomers to the industry, and an
upward trend in advertising expenses are issues that could
lead to fiercer competition among direct insurers.
*The figure is based on a survey conducted by Sony Assurance from data officially disclosed by individual non-life insurers.

Sony Assurance’s Responses
Since taking the No. 1 position** based on direct premiums
written in the direct automobile insurance market in fiscal
2002, Sony Assurance has established a strong presenceat the forefront of the domestic direct insurers’ market. In fiscal
2015, the company steadily increased premium revenues
while expanding its revenue position.
During fiscal 2015, Sony Assurance emphasized steps toachieve a better customer experience through direct contact
with each customer. To improve customer experience over theAutomobile Insurance Market and Market Share of Major Direct
Non-life Insurers

Direct Premiums Written (Automobile Insurance) by Major Direct
Non-life Insurers

For the years ended March 31,

For the years ended March 31,

Direct premiums written (total of all non-life insurers and shown as theautomobile insurance market) (left scale)Market share of major direct non-life insurers (right scale)Sony Assurance

Billions of yen

%
10.0

5,000

A

B

C

F

G

H

D

E

Billions of yen
100Sony Assurance
4,000

8.0

80

3,000

6.0

60

2,000

4.0

40

1,000

2.0

20

0

06

07

08

09

10

11

12

13

14

15

Note: The graph was prepared by Sony Assurance from data ofﬁciallydisclosed by individual non-life insurers.

38

Sony Financial Holdings Inc. Annual Report 2016

0.0

002 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Note: The graph was prepared by Sony Assurance from data ofﬁcially disclosed
by individual non-life insurers. Amounts for ﬁscal 2015 are based on
published data available up to June 14, 2016.

Review of Operations and Analysis of Operating Performancephone, Sony Assurance commenced operations at a third
customer support center, in Kumamoto Prefecture, to boost
the quality of diverse customer support services, including
responding to inquiries and conducting policy procedures. In
addition, Sony Assurance worked to enhance customer convenience by strengthening the features of the free app “Trouble
Navi” for smartphones, as more and more people are using thisfree app.

Going forward, Sony Assurance remains committed toenhancing its well-known qualities of rationality, progressiveness and uniqueness in the automobile insurance business. At
the same time, the company will work to earn the trust and loyalty of more customers by raising the customer-oriented valueof its products and services, which is the source of growth.
** Based on the automobile insurance premium revenues of non-life insurers
selling automobile insurance primarily via direct sales channels, as of March
31, 2003 (according to research by Sony Assurance)

Recent Topics
October 2015:

Start of Direct Insurance Claims Payment Service to
Medical Facilities Providing Advanced Medical CareSony Assurance began a direct insurance claims payment
service for advanced medical treatments*, particularly highpriced proton therapy and heavy particle therapy, for which
the patient bears the full cost of the professional fee. Payments
under the new service go directly to the medical facility providing the treatment.
Advanced medical treatment insurance covers the sameamount of technical fees up to a total of ¥20 million, if the customer—the patient—receives treatment using an advanced
medical technology. However, the customer is initially responsible for paying the technical fee, on the expectation of being
reimbursed later. The new service lightens the initial financial
burden placed on the customer for proton therapy and heavy
particle therapy.

smartphone app designed to instruct drivers on how to
respond in the event of trouble on the road, such as car
accidents, mechanical breakdowns or other problems. The
new function allows the caller to send data including information on the location of the incident/accident as well as
pictures of the affected areas when road assistance isrequested.
The enhanced app function reduces the burden of
explaining the situation over the phone for the customer, andalso eliminates ambiguities that tend to occur in conversation, while facilitating smooth and accurate on-site roadservice responses.
* Road service users can either call by phone or use the GPS function from the
Trouble Navi app, which allows users to obtain services without making a phonecall. Though Trouble Navi can be downloaded by anyone, some functions such
as Transmission Service of Current Location by GPS and Road Service Staff
Locator Radar are only available to policyholders of Sony Assurance.

* Advanced medical treatments are medical technologies, among new medical
treatments not covered under public medical insurance, that are recognizedby the Ministry of Health, Labour and Welfare for use in conjunction withmedical examinations and treatment that qualify under the public medical
insurance program.

Information on
location of＋ incident/
accident &policyholder
State of incident/accident

January 2016:

Reinforcement of Road Service Call Function ofTrouble NaviSony Assurance has reinforced a function in the Trouble Navi*

Customer

Data transmission
Voice callRoad servicedeskSony Financial Holdings Inc. Annual Report 201639

Analysis of Operating Performance
SFH’s non-life insurance business consists of Sony Assurance, a wholly owned subsidiary of SFH.
Below is an analysis of the operating performance of Sony Assurance, which operates SFH’s non-life insurance business.

Policies in Force
As of March 31,

Number of policies in force(Automobile insurance +Medical and cancer insurance)

10,000 policies
2015

2016

170

Change179+5.8%

Number of Policies in Force

10,000 policies(Automobile insurance +Medical and cancer insurance)

200

As of March 31,

150

Main Points The number of policies in force increased, mainly for
its mainstay automobile insurance.

100
50
0

12

13

14

15

16

Net Premiums Written
Net premiums written correspond to net sales at most non-life insurance companies and comprise the premiums received frompolicyholders (direct premiums written), plus or minus reinsurance premiums (adding direct reinsurance premiums received andsubtracting direct reinsurance premiums paid).
Billions of yen
For the years ended March 31,

2015

2016

ChangeNet Premiums Written

Net premiums written
Voluntary automobile insurance
Personal accident insurance*
Others (Fire + Marine + Compulsory
automobile liability)

¥91.7
81.3
8.8

¥95.5
85.1
8.9

+4.2%
+4.6%
+1.2%

For the years ended March 31,

1.4

1.4

(1.3%)

Voluntary automobile insurance
Personal accident insurance
Others (Fire + Marine +Compulsory automobile liability)

Billions of yen
100
80
60
40

*Including medical and cancer insurance
20

Main Points Net premiums written increased, mainly in its mainstay

0

automobile insurance.

12

13

14

15

16

Net Loss Ratio
The net loss ratio describes the ratio of the total amount of insurance-claim payments (net losses paid) and damage-survey
expenses (loss adjustment expenses) to net premiums written.
For the years ended March 31,

2015

Net loss ratio

57.6% 57.8% +0.2pt

Net loss ratio for automobile insurance

2016

Change60.2% 60.1% (0.1pt)

Net loss ratio for personal accident insurance* 28.7% 30.5% +1.8pt

Net Loss Ratio
For the years ended March 31,

%
80
60

*Including medical and cancer insurance
Main Points The net loss ratio was essentially flat, owing to asustained decrease in the car accident ratio.

40
20
0

40

Sony Financial Holdings Inc. Annual Report 2016

12

13

14

15

16

Net Expense Ratio
The net expense ratio is the ratio of the total expenses for marketing and maintaining insurance to net premiums written. These
expenses include company operating costs and new product development costs.
For the years ended March 31,

2015

2016

ChangeNet Expense Ratio%

Net expense ratio

26.7%

27.1%

+0.4pt

For the years ended March 31,

40

Combined ratio(Net loss ratio + net expense ratio)

84.3%

84.8%

+0.5pt

30

Review of Operations and Analysis of Operating Performance

20

Main Points The net expense ratio rose, mainly due to higher
advertising costs.

10
0

12

13

14

15

16

Underwriting Proﬁt
Underwriting profit indicates profit generated from underwriting insurance. Underwriting profit is calculated by subtracting fromunderwriting income (net premiums written, etc.) any underwriting expenses (net losses paid and loss adjustment expenses, etc.)
and operating, general and administrative expenses associatedwith underwriting, then adding or subtracting other income andUnderwriting Proﬁt
Billions of yen
4.0
For the years ended March 31,
expenses (corporate taxes associated with compulsory automobile liability insurance, etc.).
3.0

Billions of yen
For the years ended March 31,

2015

2016

ChangeUnderwriting profit

¥3.0

¥3.4

+14.0%

2.0
1.0

Main Points Underwriting profit increased, reflecting higher net

premiums written as well as a decrease in the provision forreserve for outstanding losses led by a lower car accident
ratio.

0.0

12

13

14

15

16

13

14

15

16

Ordinary Revenues, Ordinary Proﬁt and Net Income
Billions of yen
For the years ended March 31,

2015

2016

ChangeOrdinary Proﬁt and Net Income

Ordinary revenues
Ordinary profit
Net income

¥93.0
4.2
2.2

¥96.9
4.6
2.5

+4.2%
+11.2%+15.8%For the years ended March 31,
Ordinary proﬁt
Net income

Billions of yen
5.0
4.0
3.0

Main Points

Ordinary revenues increased, due to an increase in net premiums written mainly in its mainstay automobile insurance.
Ordinary profit increased due to a decline in provision forreserve for outstanding losses led by a lower car accident ratio,
as well as a rise in ordinary revenues.
Net income increased as a result of improved ordinary profit.

2.0
1.0
0.0

12

Sony Financial Holdings Inc. Annual Report 201641

Total Asset Composition and Investment Policy
Sony Assurance’s basic investment policy is to invest primarily in yen-denominated bonds to ensure stable investment returns overthe medium to long term, taking into account the market environment, asset management risk and other factors.
Billions of yen
As of March 31,

2015

2016

ChangeComposition of Total Assets

Total assets
Cash and deposits
Securities
Tangible fixed assets
Intangible fixed assets
Other assets¥157.9
10.7
111.8
3.5
7.0
24.7

¥172.3
8.3
127.2
4.0
5.9
26.6

+9.1%
(21.9%)+13.8%+13.7%(15.5%)+7.8%

As of March 31, 2016
¥172.3 billion

15.5%
Other assets

4.9%
Cash and deposits

3.5%
Intangible
ﬁxed assets

2.3%
Tangible ﬁxed assets

73.8%
Securities

Non-performing Assets
Sony Assurance’s self-assessment indicates its assets are sound, as shown below.
Risk-monitored Loans

Loans by Borrower Category
Millions of yen

As of March 31,

2015

2016

¥—
—
—
—
¥—

¥—
—
—
—
¥—

Category
Bankrupt loans
Non-accrual delinquent loans
Past-due loans (3 months or more)
Restructured loans
Total

42

Sony Financial Holdings Inc. Annual Report 2016

Millions of yen
As of March 31,

2015

2016

¥—
—
—
—
¥—

¥—
—
—
—
¥—

Category
Bankrupt and quasi-bankrupt loans
Doubtful loans
Sub-standard loans
Normal loans
TotalNon-consolidated Solvency Margin Ratio
The non-consolidated solvency margin ratio is an important indicator of non-life insurers’ ability to pay claims.
As of March 31,

2015

Non-consolidated solvency margin ratio

629.6% 693.5% +63.9pt

2016

ChangeMain Points Sony Assurance’s non-consolidated solvency margin
ratio significantly increased year on year and remained at asound level.

Non-consolidated Solvency
Margin Ratio(Current standards)
As of March 31,

800
600

Review of Operations and Analysis of Operating Performance

Note: The ﬁgures have been
calculated using the current
standards applied fromMarch 31, 2012.

%
1,000

400
200
0

12

13

14

15

16

Millions of yen
As of March 31,(A) Total non-consolidated solvency margin
Capital or treasury

2015

2016

¥36,650¥42,701

23,38924,682

Reserve for price fluctuations

124

149

Contingency reserve

82

91

Catastrophe reserve

11,344

14,363—―General reserve for possible loan losses
Net unrealized gains on other securities and net deferred gains or losses on hedging instruments(before tax deductions)

1,709

2,910

Net unrealized gains on real estate—―

Excess refund reserve—―

Subordinated debt—―

The portion of the excess refund reserve and subordinated debt that is not included in the margin—―

Deductible items

—

―

—

502

11,641

12,313

10,465

10,906

Others(B) Total non-consolidated risk

2

2

(R1+R2) +(R3+R4) +R5+R6

Ordinary insurance risk (R1)
Third-sector insurance risk (R2)—―

Assumed interest rate risk (R3)86

96

Asset management risk (R4)

1,101

1,416

371

269

Business management risk (R5)
Major catastrophe risk (R6)(C) Non-consolidated solvency margin ratio [(A)/{(B)x(1/2)}] x 100

737

1,033

629.6%

693.5%

Note: The above figures are calculated based on provisions in Articles 86 (non-consolidated solvency margin) and 87 (non-consolidated risk) of the Ordinancefor Enforcement of the Insurance Business Act of Japan and the Ministry of Finance Public Notice No. 50 (1996).
The ratio for fiscal 2014 was based on regulations in force prior to the application of revised content in Cabinet Office Ordinance No. 16 (2016) and Public
Notice No. 10 (2016) issued by Japan’s Financial Services Agency (FSA). “Net unrealized gains on other securities and net deferred gains or losses on
hedging instruments (before tax deductions)” under “(A) Total non-consolidated solvency margin” is the amount of net unrealized gains on other securities(before tax deductions).

Sony Financial Holdings Inc. Annual Report 201643

Banking Business
Review of Operations
Business Environment

Sony Bank’s Response

In Japan, personal financial assets have climbed to approximately ¥1,700 trillion*, the second highest level in the world.
Cash and deposits account for more than half of this amount,a high level compared with that of other developed countries.
Investment preferences and requirements in managing these
personal financial assets are diversifying, along with changing
lifestyles and evolving social needs not to mention the accelerated shift to an aging society, coupled with a low birthrate. As aresult, in recent years Internet banks have achieved growth on theback of their cost-competitiveness and convenience to users.
Nonetheless, the deposit balance of Internet banks is asolid 1%** of personal financial assets—still quite small—but
given the rapid proliferation of smartphones, tablets and other
online-connectivity devices, there is certainly ample room for
growth. However, the Bank of Japan has continued andexpanded its quantitative and qualitative monetary easing policy since April 2013, and interest rates remain ultralow. The situation was worsened by the Bank of Japan’s decision to introduce a negative interest rate policy in January 2016, further
intensifying interest rate competition among banks in Japan.
The competition to secure foreign-currency deposits andmortgage loans has been particularly intense and is sure toescalate even more.

In this environment, Sony Bank has emphasized mortgage
loan and foreign currency businesses and expanded its
business volume on the strength of its reputation for highcustomer satisfaction.
In Japan’s mortgage loan market, interest rates fell toa new historic low in fiscal 2015, and the mortgage loanbalance continued to shift in a favorable direction. Thisoccurred despite a sustained downward trend in the supplyof newly built homes, which was mainly a reflection ofincreasing prices in the cities paralleling rising material andlabor costs. On the other hand, the sluggish interest ratesituation kindled heated competition among banks to lower
their mortgage loan interest rates. In this operating environment, Sony Bank steadily saw its mortgage loan balancerise, and going forward, the company will expand businessvolume by improving the quality of its products and reinforcing sales channels.
In the foreign currency business, Sony Bank has
achieved growth in its transaction volume by offering reasonable rates and providing highly convenient services centeredon foreign-currency deposits. The company’s foreign-currency deposit balance represented 7% of individual foreigncurrency deposits in the domestic bank total, as of March
2016, right behind that of the major banks. With the debut ofSony Bank WALLET, a cash card with a multi-currency debit
function, the company will reinforce its settlement capabilities and broaden its customer base.

*Source: Flow of Funds Accounts issued by the Bank of Japan**Sources: Prepared based on the Bank of Japan’s Deposits and Loans Market
and data officially disclosed by various financial institutions.
Excludes data for shinkin (credit union) banks, credit associations,labor credit associations, agricultural cooperatives and certain otherorganizations.

Deposit Balance at Domestic Internet Banks

Deposit Balance of Japan’s Six Internet Banks

As of March 31,
Billions of yen

11,478.8

12,000Billions of yen
4,000

3,446.8
3,121.5
9,000

3,000

6,000

2,000

3,000

1,000

0

09

10

11

12

13

14

15

16

0

1,923.5
1,628.2

747.0

A

B

Sony Bank

C

D

Source: Data compiled by Sony Bank based on publicly
disclosed material

44

Sony Financial Holdings Inc. Annual Report 2016

611.8

E

Review of Operations and Analysis of Operating Performance

Recent Topics
July 2015:

Introduction of New Card Loans
Sony Bank began handling a new card loan. It meets a wider
range of customer financing needs, offering the industry’s
lowest minimum interest rates, at 2.5% per year, and a user
limit that maxes out at ¥8 million. Applications are accepted
24 hours a day via computer or smartphone, and the entire
application process can be completed online, without having
to fill out a physical application form or contract paper.

account using the Sony Bank exchange rate (TTS) to ensuresmooth transactions.
In April 2016, the company launched an Android versionof the Sony Bank WALLET app. This smartphone service
enables confirmation of ordinary yen deposit and ordinary
foreign currency deposit balances as well as pro forma
amounts of available foreign currency credit for Sony BankWALLET in a single step. Also, shopping and ATM transaction records can be checked for each currency.

January 2016:

Launch of Sony Bank WALLET Service
Sony Bank WALLET is a Sony Bank cash card that features
a Visa debit function for use around the world.
As a debit card, it offers 11 currency options, including
Japanese yen, U.S. dollars and euro, and makes shoppinga breeze in more than 200 countries and regions. In addition, the card allows local-currency withdrawals at overseas
ATMs. Transactions in Japanese yen are deducted from thecustomer’s ordinary yen deposit account. In contrast, transactions in other currencies are, in principle, immediately
deducted from ordinary foreign currency deposits, andtherefore, foreign currency amounts deposited at Sony
Bank are used as is. If the foreign currency balance is insufficient, an amount equivalent to the shortfall is automaticallytransferred from the customer’s ordinary yen deposit

Sony Financial Holdings Inc. Annual Report 201645

Analysis of Operating Performance
SFH’s banking business consists of Sony Bank, a wholly owned subsidiary of SFH; Sony Payment Services, a 57%-owned
subsidiary of Sony Bank; and SmartLink Network Hong Kong Limited, a wholly owned subsidiary of Sony Payment Services.

Consolidated
Consolidated Ordinary Revenues, Consolidated Ordinary Proﬁt and Proﬁt Attributable to Owners of
the Parent
Billions of yen
For the years ended March 31,

2015

2016

ChangeConsolidated ordinary revenues

¥38.4

¥37.9

(1.3%)

Consolidated ordinary profit

7.3

5.9

(18.3%)

Profit attributable to owners of theparent4.5

3.9(14.8%)

Main Points

Consolidated ordinary revenues decreased, as a drop in thesale of bonds were partially offset by an increase in revenues
related to mortgage loans.
Consolidated ordinary profit decreased due to lower ordinary
revenues as well as an increase in general and administrative
expenses.
Profit attributable to owners of the parent decreased due tothe drop in consolidated ordinary profit.

Non-consolidated
Sony Bank accounts for nearly all of SFH’s banking business. Below is an analysis of the operating performance of Sony
Bank (non-consolidated).

Gross Operating Proﬁt
Gross operating profit represents the total income from the four components of income from banking services: net interest income,net fees and commissions, net trading income, and net other operating income. It is equivalent to the gross profit (sales minus
costs) of companies which operate businesses other than financing and an indicator of the amount of profit a bank generates fromits main services.
Net interest income refers to the spread between investment returns such as interest received on loans, securities and funding
costs, including interest paid on deposits. Sony Bank uses the deposits received from customers primarily to provide mortgage
loans and invest in securities.
Net fees and commissions refers to the spread between the fees and commissions received from mortgage loans, the securities trading of customers, domestic and foreign exchanges and other operations, and the fees and commissions paid for ATM
usage, domestic and foreign exchanges and other operations.
Net other operating income refers to income from operations not included in net interest income or net fees and commissions.
This includes gains and losses on foreign exchange trading; gains and losses on trading of bonds, including government bonds;
and, gains and losses on derivatives, such as swaps held as hedges for securities and other investments.
Billions of yen
For the years ended March 31,

2015

2016

ChangeGross Operating Proﬁt

Gross operating profit

¥22.5

¥21.6

(3.9%)For the years ended March 31,
Net interest income
Net fees and commissions
Net other operating income

Net interest income

16.6

16.5

(0.8%)Net fees and commissions

0.0

0.1

+448.7%

Net other operating income

5.8

5.0

(14.6%)

Billions of yen
25
20
15
10

Main Points

Net interest income decreased due to a decline in interest
income and dividends on securities.
Net fees and commissions increased due to a rise in fees andcommissions received from mortgage loans.
Net other operating income decreased due to a drop in gains on the sale of bonds.

46

Sony Financial Holdings Inc. Annual Report 2016

5
0

12

13

14

15

16

General and Administrative Expenses
Billions of yen
For the years ended March 31,

2015

2016

ChangeGeneral and administrative expenses

¥15.3

¥15.9

+4.2%

General and Administrative
ExpensesBillions of yen
16

For the years ended March 31,
12Main Points General and administrative expenses increased, due

to higher marketing costs associated with up-front investmentin the card loan business which was launched in July 2015.

8

Review of Operations and Analysis of Operating Performance

4
0

12

13

14

15

16

13

14

15

16

Ordinary Revenues, Ordinary Proﬁt and Net Income
Billions of yen
For the years ended March 31,

2015

2016

ChangeOrdinary Proﬁt and Net Income

Ordinary revenues
Ordinary profit
Net income

¥35.7
7.2
4.6

¥34.8
5.8
3.9

(2.3%)(19.8%)(15.6%)For the years ended March 31,
Ordinary proﬁt
Net income

Billions of yen
864

Main Points Sony Bank’s ordinary revenues, ordinary profit andnet income decreased for the same reasons that affected its
consolidated results.

2
0

12

Number of Accounts
10,000 accounts
As of March 31,

2015

2016

ChangeNumber of accounts

105

113

+7.3%

Main Points The number of accounts increased, reflecting thegrowing popularity of Sony Bank WALLET which was launched in
January 2016.

Customer Assets (Total of Deposits and Investment Trusts)
Billions of yen
As of March 31,

Customer assets(Total of deposits andinvestment trusts)

2015

2016

ChangeAs of March 31,+1.3%

Deposit balance
Yen deposits
Foreign currency deposits
Investment trust balance

Yen deposits
Foreign currency deposits

Billions of yen
2,000
1,600

¥2,007.9¥2,034.4

2015

2016

Change800¥1,878.2
1,551.0¥1,923.5
1,587.9

+2.4%
+2.4%

400

327.2

335.5

+2.5%

0

129.6

110.9

(14.4%)

Billions of yen
As of March 31,

Deposit Balance

1,200

12

13

14

15

16

Main Points

Yen deposit balance grew, reflecting special interest rates for yen time deposits in the second half of fiscal 2015.
Foreign currency deposits rose, as the sense that the weak yen had recovered prompted an upswing in foreign-currency
purchases.
Investment trust balance decreased due to a drop in net asset value and the sale of foreign money-market funds ahead ofrevisions to the tax system, effective from January 2016.
Sony Financial Holdings Inc. Annual Report 201647

LoansBillions of yen
As of March 31,

Loans
Mortgage loans
Others2015

2016

ChangeLoans¥1,187.1
1,074.3¥1,344.1
1,237.1+13.2%+15.1%

As of March 31,

112.8

107.0

(5.1%)

Billions of yen
1,500

Mortgage loans
Others

1,200
900

Main Points The balance of loans expanded because of a

600

favorable shift in demand for mortgage loans, substantiatedby a record-high amount of loans executed during the fiscal
year. “Others” includes corporate loans, card loans andspecial-purpose loans. The corporate loan balance was¥96.4 billion as of March 31, 2016.

300
0

12

13

14

15

16

Securities
Sony Bank’s securities investments consist of investments with interest rate risk, mainly Japanese government bonds, andinvestments with credit risk, mainly investment-grade corporate bonds.
Billions of yen
As of March 31,

Balance of securities
Japanese government bonds
Japanese local government
bonds
Japanese corporate bonds

2015

2016

Change¥730.082.8¥620.981.4(14.9%)(1.7%)

56.6
107.7

37.8
64.6

(33.3%)(40.0%)

Japanese stocks

2.0

2.0

0.0%

Foreign securities

476.1

431.0

(9.5%)

Other securities

4.5

3.9

(12.7%)

Balance of Securities(by Ratings)

Billions of yen
1,000

As of March 31,

800

AAA
AA
A
BBB
Others

600
400
200
0

12

13

14

15

16

Main Points With respect to the ratings of the securities* held by Sony Bank, securities rated AA or above accounted for 47.0% of thetotal. The ¥2.0 billion in Japanese stocks represents the company’s investment stake in Sony Payment Services.
*Sony Bank uses the Basel III standardized method and classifies its securities based on ratings by five rating agencies: Moody’s Investors Service, Standard & Poor’s, Rating and Investment Information, Japan Credit Rating Agency and Fitch Ratings.

Total Asset Composition
Billions of yen
As of March 31,

2015

2016

ChangeComposition of Total Assets

Total assets
Loans
Securities¥2,062.5
1,187.1
730.0¥2,126.5
1,344.1
620.9

+3.1%
+13.2%(14.9%)

As of March 31, 2016

Cash and due from banks

96.9

110.6

+14.1%

Monetary trusts

23.5

23.0

(2.4%)

Call loans

6.0

—

—

Main Points Despite a drop in the balance of securities, SonyBank’s total assets increased, due to a higher balance of loans.

48

Sony Financial Holdings Inc. Annual Report 2016

¥2,126.5 billion

1.1%
Monetary trusts
5.2%
Cash and duefrom banks
29.2% Securities

1.3% Others

63.2%
Loans

General and Administrative
ExpensesBillions of yen
16

Composition of Total Assets

For the years ended March 31,

1.1%
Monetary trusts

As of March 31, 201612

¥2,126.5 billion

1.3% Others

5.2%
Cash and duefrom banks

8
4

Non-consolidated Capital Adequacy Ratio

63.2%
Loans

29.2% Securities

The capital adequacy ratio is an0 importantfinancial soundness. From March 31, 2014, Sony Bank calculates
12 indicator
13
14 of
15a bank’s
16
its capital adequacy ratio* based on Basel III.
As of March 31,

2015

Non-consolidated
adequacy
ratio
Ordinary Profit andcapital
Net Income
Billionsof yen(Domestic
standard)
10.66%
58For
the years ended
March 31,2016

Change9.8 9% (0.76pt)

profit*POrdinary
lease referto the note below for informationon the application of the
6
Net income
Basel
III framework.

Non-consolidated Capital
Adequacy Ratio%
15.0(Domestic standard)

12.0

As of March 31,

Review of Operations and Analysis of Operating Performance

9.0

4

Main Points Sony Bank continuously maintains a sound financial

position.

6.0

2

3.0

0

12

13

14

15

0.0

16

12

13

14

Sony Bank’s Non-consolidated Capital Adequacy Ratio (Domestic standard)
Deposit Balance
As of March 31,
Yen deposits
Foreign currency deposits

As of March 31,

16

Millions of yen
2015

Billions of yen
2,000

15

2016

Amounts
excludedundertransitionalarrangements

1,600
1,200

Amounts
excludedundertransitionalarrangementsCore capital: instruments and reserves
800
Directly issued qualifying common share capital or preferred share capital with400
a compulsory conversion clause plus
related capital surplus and retained earnings¥72,715¥74,668

52,00052,00020,715

24,627—

1,959

Loansreserves included in core capital:
Total
and reserves
Billions instrumentsof yen595

512

1,500losses including core capital
As ofOfMarch
31, General reserve for loan
which,Of which, Capital and capital surplus
0

12

13

14

15

16

Of which, Retained earnings
Of which, Cash dividends to be paid (–)

595

512

Mortgageloansinstruments subject1,200
Eligible
capitalto transitional arrangements included in core capital:
Othersinstruments
and reserves

18,00016,000900Core capital: instruments and reserves

91,31091,180(A)

Core capital: regulatory adjustments600
Total amount of intangible assets (excluding those relating to mortgage servicing rights)

397¥1,588899¥1,349Of which, Other intangible assets other than goodwill and mortgage servicing rights

397

1,588

899

1,349

300

Core capital: regulatory adjustments

0

12

13

14

15

16
(B)

397

899

(C)

90,91390,280813,151
9872,034(35,339)(23,660)

CapitalCapital ((A)-(B))
Risk-weighted assets
Total amount of credit risk-weighted assets
Of which, Total amount included in risk-weighted assets subject to transitionalarrangements
Of which, Intangible assets other than goodwill and mortgage servicing rights
Of which, Exposures to other financial institutions
Total amount of operational risk equivalent / 8%
Total amount of risk-weighted assets

(D)

1,588

1,349

(36,928)(25,009)39,25040,0943,2852,402912,128

10.65

9.89

Capital adequacy ratio
Capital adequacy ratio ((C) / (D)) (%)

Note: The non-consolidated capital adequacy ratio was calculated using the standard set forth in Notification No. 19 (2006), issued by FSA regarding themethod for determining capital adequacy of a bank in light of the assets held by the bank, in accordance with Article 14-2 of the Banking Act of Japan.
But for credit risk-weighted assets, the company applies the standard method based on domestic standard. The company has applied FSA Notification
No. 6 (2013) and Notification No. 7 (2014).

Sony Financial Holdings Inc. Annual Report 201649

Non-performing Assets
Sony Bank strives for small-loan diversification in its lending to individuals, screens potential borrowers based on prescribed credit
screening standards, and manages loans after they have been granted. In lending to corporate customers, Sony Bank sets maximum loan limits according to customer credit and adheres to standards that prevent excessive lending to particular borrowers.
The business promotion divisions also work independently of the screening division, and the company ensures that financing
proceeds only following due diligence via relevant deliberative entities. In addition, the company has established a meticulous loan
management and screening system.
Risk-monitored Loans

Problem Loans Based on the Financial Reconstruction Act
Millions of yen

As of March 31,

2015

2016

Category

Millions of yen
As of March 31,

¥ 207
1,430
—
1,715
¥3,353

¥ 285
1,332
—
1,443
¥3,061

Bankrupt and quasi-bankrupt loans
Doubtful loans
Sub-standard loans
Normal loans
Total

Main Points Sony Bank has consistently maintained low levels of non-performing loans.

Non-performing Loan Ratio*(Loans disclosed under the Financial Reconstruction Act)As of March 31,

2015

2016

ChangeNon-performing loan ratio

0.28%

0.23%

(0.05pt)*Non-performing loans (loans based on the Financial Reconstruction Act) / Total loan exposure

Sony Financial Holdings Inc. Annual Report 2016

2016

Category

Bankrupt loans
Non-accrual delinquent loans
Past-due loans (3 months or more)
Restructured loans
Total

50

2015

¥

744 ¥
732
899
890
1,716
1,443
1,186,701 1,342,916¥1,190,062 ¥1,345,983

Corporate GovernanceContributions to Sustainable Development

Contributions to
Sustainable Development

CSR

Sony Financial Holdings Inc. Annual Report 201651

Contributions to Sustainable Development Corporate Governance

Profiles of Directors and Statutory Auditors(As of July 1, 2016)9.

Directors
6.
Chairman, Director
1.

Katsumi Ihara
Chairman, Director,
Sony Life Insurance Co., Ltd.

3.
2.

President, Representative Director
2.

Shigeru Ishii

4.
1.

Senior Managing Director
3.

Yuichiro Sumimoto

Director, Sony Life Insurance Co., Ltd.

Director, Sony Life Insurance Co., Ltd.

Director, Sony Assurance Inc.

Director, Sony Assurance Inc.

Director, Sony Bank Inc.

Director, Sony Bank Inc.

5.
Directors
5.

President, Representative Director,
Sony Life Insurance Co., Ltd.

6.

Hiroaki Kiyomiya
Director, EVP (Note 2),
Sony Life Insurance Co., Ltd.

Notes: 1. Main concurrent positions are shown under the name of eachindividual.
2. EVP stands for Executive Vice President.
3. Isao Yamamoto and Shiro Kuniya are deemed Independent
Directors based on Tokyo Stock Exchange regulations.
4. Outside Directors and Outside Statutory Auditors are in accordance with the Companies Act of Japan.

52

Sony Financial Holdings Inc. Annual Report 2016

Yutaka Ito
President, Representative Director,
Sony Bank Inc.

Managing Director
4.

Tomoo Hagimoto

7.

Atsuo Niwa
President, Representative Director,
Sony Assurance Inc.

Director, Sony Assurance Inc.
Director, Sony Bank Inc.
Director, Sony Lifecare Inc.

8.

Shiro Kambe
EVP (Note 2), Corporate Executive
Officer, Sony Corporation

Contributions to Sustainable Development

8.

10.

11.

Directors (Outside)
9.

Isao Yamamoto

13.

Statutory Auditors

7.

Standing Statutory Auditor (Outside)(Note 3)

11.

President, Enterprising Investment, Inc.
Director, BILCOM, Inc.

Yasuyuki Hayase
Statutory Auditor, Sony Life
Insurance Co., Ltd.
Statutory Auditor,
Sony Assurance Inc.

10.

Statutory Auditor, Sony Bank Inc.

Shiro Kuniya (Note 3)
Managing Partner,
Oh-Ebashi LPC & Partners

12.
Statutory Auditor
13.

Hirotoshi Korenaga
Corporate Executive,
Senior General Manager,
Global Accounting Division,
Sony Corporate Services (Japan)
Corporation

Statutory Auditor (Outside)
12.

Yoshimichi Makiyama
Partner, Kitamura & Makiyama(law office)Sony Financial Holdings Inc. Annual Report 201653

A Dialogue between the President andOutside Directors:
Corporate Governance at Sony Financial Holdings

A corporate culture that encourages
discussion based on diverse
perspectives is the cornerstone
to becoming a financial group that
supports customers from various
angles now and in the future.

Isao Yamamoto
Outside Director

Shigeru Ishii, President and Representative Director of Sony Financial Holdings, sat down with
Isao Yamamoto and Shiro Kuniya, both outside directors of the Company, to exchange opinions
on its corporate governance. (This feature is based on a dialogue held in May 2016.)

Growth-oriented and defensive
governance for maximizing
corporate value
Ishii: The decisions are made by the Board of Directors, ofcourse, and I believe the process of discussion, where we—
including you two outside directors—speak candidly, isvital. What are your impressions of the Board of Directors
at SFH?
Yamamoto: The first time I participated in the Board of Directors’ meeting, back in 2011, I was impressed with how openminded the discussions were. The key to good governanceis, first and foremost, the unhindered flow of information. SFH
already possesses this capacity, and the atmosphere of theBoard of Directors’ meetings as well as those of the Executive
Committee allows members to ask questions and speak theirminds at ease.
Kuniya: I, too, felt that I was able to express my mind freely,from the moment I sat down at the Board of Directors’ meeting. The executives, regardless of inside or outside directors,
as well as directors from Group companies were not hesitantto speak up, and I got the impression that SFH, even compared with other companies, has a very open and comfortable
atmosphere. The executives have been able to execute theirduties without being constantly reminded of the presence ofthe parent company, Sony Corporation (hereinafter “Sony”).

54

Sony Financial Holdings Inc. Annual Report 2016

Yamamoto: Nevertheless, SFH is the listed subsidiary of alisted parent and must therefore take the perspective of notdamaging the interests of minority shareholders who hold
40% of shares. I participate in discussions, always consciousof how I would see the situation if I were a minority shareholder.
Ishii: Sony holds 60% of SFH’s shares, but the Company
retains its independence in management matters. This balanceof distance between Sony and SFH is extremely important.
Regardless, I firmly believe that maximizing corporate value
is the key to eliminating conflicts of interest among stakeholders. Both growth-oriented and defensive governance are indispensable for achieving this goal, and I have high expectations
for the both of you for advice from that perspective.
Yamamoto: For me, coming from an investment banking
background, I favor the growth-oriented style. During meetings, I deliver questions based on my perspective that a
growth-oriented approach may yield better results or thattaking a different route could prove useful. The really important
thing, though, is to take good risks, and SFH seems to havea knack for properly identifying the right kind of risks. The way
companies embrace risks varies according to the type ofbusiness and the conditions that are set for each business.
As SFH’s subsidiaries are involved in life and non-life insurance
as well as banking, the Company leans more toward theconservative side. Even so, I would say, if a good risk appears,
the Company should take it.

Shigeru Ishii

Shiro Kuniya

President,
Representative Director

Outside Director

About the Nomination Advisory
Committee
Yamamoto: The Nomination Advisory Committee was set
up in December 2015. A significantly important issue for thecommittee was about the type of management group to becreated. Against a backdrop of major changes in the operating
environment, including the debut of FinTech*, the Nomination
Advisory Committee is tasked with discussing the type ofhuman resources that are needed, based on a strategy thatguides SFH toward its corporate vision, and constantly reviewing its deliberations.
Ishii: I believe the first task undertaken by the Nomination
Advisory Committee was my nomination. The committee has
another role, one that does not end with a nomination, andthat is, from my understanding, for the committee to conduct
an annual review of my progress upon providing an explanation of my performance for the year. Though the term of adirector is one year, approved by shareholders at the General

Contributions to Sustainable Development

Kuniya: I am an attorney, specializing in corporate law, andso, if Mr. Yamamoto were to take the growth-oriented style,
I could say my role is to be defensive. With regard to governance and compliance, I will fulfill my duty of precluding public
criticism if the Company were to incur a major risk, and if
complaints were to emerge, will provide a persuasive explanation to soften the negativity.
However, as I am involved in business alliances andinvestments as well, I do not necessarily think that a company should take a defensive stance every time. Take a
growth-oriented approach when appropriate. Strive for optimum risk-taking while complying with laws and regulations.
I am guided by these lines of approach in making comments.

Meeting of Shareholders, this will be reconsidered if the committee’s review, preceding the meeting, is less than favorable.
The Nomination Advisory Committee puts us in a tense situation—but in a positive way.
Kuniya: The selection of candidates for management positions
is an important issue, and I, too, have participated in discussions on the composition of the executive team, including therecent choice for president. For instance, I was interested inwhat kind of expertise the nominees from within the Grouppossessed as well as the potential for candidates to comefrom outside the Group as well. I believe, in the end, the selection was appropriate, viewed from various angles, such as
experience and field of expertise.
*FinTech, derived from the words “finance” and “technology,” draws on IT tobring about innovations in such areas as financial, settlement and monetaryservices.

Dealing head-on with the Bank ofJapan’s negative interest rate policy
Kuniya: Since I became a director in 2013, the Company hasremained stable and its business results have charted a steadyupward path. However, the environment that now prevails
since the Bank of Japan introduced its negative interest rate
policy could, at least from my perspective, put the Company ina difficult situation for the first time.
Ishii: I requested for discussion at the Board of Directors’
meeting held two weeks after the Bank of Japan decided at
the end of January 2016 to implement its negative interest rate
policy. The first item on the to-do list was to determine how
deeply we would actually be impacted by this policy, and thento decide how quickly we should hammer out a response.
Sony Financial Holdings Inc. Annual Report 2016

55

Yamamoto: I think the procurement of investment products is
also a rather pressing issue, with thought given to extending
the scope beyond conservative targets and globalizing investments. When I queried this at the Board of Directors’ meeting,I learned that everyone had already considered these issues.
I look forward to continued follow-ups on this topic.
Ishii: At the Board of Directors’ meetings, it is really important
to know how to pose a question and what angle to take witha topic because the answers are derived from underlying
matters of concern and even from the focal point of the question itself. For these reasons, we really welcome questions
from our outside directors.

Yamamoto: The introduction of the negative interest rate
policy was a significant event that affected fiscal 2015 business results right away, as evidenced by a very symbolic
consequence—a drop in the MCEV*. Responses will comeon two fronts—short-term actions, such as adjusting productcomposition and insurance premiums, and a more structural
approach—including strategic adjustments, such as revising
the medium-term business plan. I can confirm that the Boardof Directors has acknowledged the need to continuously
review the situation.
At the same time, some say that the market is in a simply
unusual condition following the introduction of the negativeinterest policy, and structural reforms are seen as premature
at this stage. This is particularly true in regard to the life insurance business, where value is projected number of decades
into the future, and since negative rates are certainly not likely
to persist for that entire time, the attitude is that MCEV will befine in the long term. Given such considerations, I think this isa good opportunity to redefine the business platform.
Members of the Board of Directors who are responsible
for executing operations are earnestly addressing these very
difficult circumstances, and I am sure they will turn challenges
into opportunities that fuel growth by leaps and bounds.
Ishii: It goes without saying, but the running of a financial
institution is measured by the kind of risks taken to boost
revenues. Risk comes in many forms, such as credit risk andmarket risk, but the biggest question is which risk to take,because the answer is inevitably going to be a source of profit.
It has been SFH’s policy to date to take very little interest
rate risk, and so when interest rates decline, its revenues do
not rise. Protecting customers’ assets is our top priority, but
negative interest rates mean a decline in assets. Trying to finda way to resolve this issue is a major dilemma. At the Board of
Directors’ meeting held that day, we talked about the timing ofrevisions to product composition and insurance premiums andthe outlook for anticipated revision to the policy reserve discount rate, not from the perspective of temporary measures
but rather from a more future-oriented view.

56

Sony Financial Holdings Inc. Annual Report 2016*MCEV: Market Consistent Embedded Value. An indicator used to support
an analysis of the value of a life insurance operation, MCEV is the sum of theresults of business activities (adjusted net worth) to date at the time of evaluation and future profit expected from existing insurance policies covered by the
insurance company (value of existing business).

Riding out the storm to a newdestination
Ishii: A building storm swirls around us. Only companies thathave achieved the right management to ride out this storm
can obtain the tools to map out the next leg of their journey.
In this sense, the prevailing challenges are opportunities forthe future.
In particular, FinTech continues to advance, primed andready to go like a sprinter bolting out of the starting block, andthereby this is our time to “change,” not to “be changed.”
When Sony Bank was established, that was probably FinTech
1.0. In the years since, IT has become much more pervasive.
Against this backdrop, I recognize two extremely criticalissues—how to draw on the merits of running Sony Financial
Group’s three businesses and what cohesive measures totake in response to the advancement of FinTech.
Though the current business environment is rather grim,when I got Sony Bank going, the atmosphere was also

pessimistic, with cynics saying that an internet bank was
an improbable idea. But we passed through, albeit on a very
narrow course, and look where the bank is today. I think theGroup might benefit again by traveling a similar path.

Yamamoto: The value chain for the traditional financial services currently available will be pulled apart by FinTech, recombined to match user needs, and inevitably yield an array ofbusiness models as well as products and services. For example, one day, it might be possible to use a wearable device todetermine an insurance premium while checking a person’shealth status. I have great hopes for SFH in their potential for
innovation such as the substantial changes in pricing standards for insurance products and its occurrence in real time.
Ishii: I see FinTech as an approach that makes everything
faster, economical and more convenient. The insurance value
chain involves a lot of administrative procedures, and I
assume FinTech will be applied to aspects of operations thatcurrently consume a lot of time and effort. The cost structure
for financial services will change dramatically. However, thefinal value of services is created by the people, and that
aspect of operations should not change. It is important todistinguish between aspects that raise added value and leadto higher revenues and aspects that reduce prices by notadding value but rationalizing cost.

Ishii: In a stormy situation, in particular, it is important to lookback to the origins of the Company. Where is the value
provided to customers? In May 2016, the revised Insurance
Business Act of Japan went into effect, obligating insurancecompanies to provide full product details to customers andidentify customer intentions with regard to insurance coverage.
Sony Life has been doing exactly that for many years, and therevised law validates the company’s approach.
No one really knows if a painting is beautiful until theactual painting is in hand. That is why we executives present
business in a tangible form—like painting a picture—and ask
for everyone’s opinion. Both of you (outside directors) are
expected to pursue discussions through a process akin tofinishing a painting and checking it over thoroughly. I believethat is what governance is all about.

Contributions to Sustainable Development

Kuniya: When the world was shaken by the Lehman Shock,it was not just financial institutions that saw revenues tumble
in double-digits—every industry was impacted—and a hugestorm raged throughout the business world. Today, the situation is similar. Call it a super-sized stress test to see which
companies will not just endure the events of the storm but
grow once the storm has passed. It is also a chance to execute changes, such as structural reforms. When all is calm,changes, even if proposed, are always deemed unnecessary
by someone. Now, when the winds of change are in the air,is the time to act.

Yamamoto: As society becomes increasingly more digitized,
services involving human interaction become exceedingly
more appreciated. Face-to-face contact with Lifeplanner sales
employees is a hallmark feature of Sony Life, and I believe thecompany will be able to elevate this quality further in the next
era. Digitization will permeate the non-life insurance and banking businesses as well, but services involving human interaction must be reinforced. Determining the right balance is vital,
and the Sony Financial Group has assembled the right humanresources to achieve the necessary structure. An issue going
forward is how to proceed with concrete discussions on such
topics including employee interactions among Group companies. I think the Group will enter a phase where it will find suchsynergies and seize business opportunities.

Kuniya: Whether a painting is deemed beautiful or not
depends on the person looking at it, so even if you, Mr. Ishii,
were to say it is lovely, Mr. Yamamoto and I might not find it
aesthetically pleasing at all. We may at times make comments
that, in all honesty, you do not really want to hear. However,I would like to keep the atmosphere of the Board of Directors’
meetings open so that these kind of comments are seen as
part of the process and a way to promote discussion, and I
hope, in the end, the content of the ensuing
discussions will be seen as constructive.
Ishii: At the beginning of Sony’s Purpose of Incorporation is
the phrase “To establish an ideal factory that stresses a spiritof freedom and open-mindedness.” This idea of freedom andopen mindedness appears in the corporate philosophy of eachGroup company as well. We have embraced this idea at SFH,
which is undoubtedly why both of you mentioned earlier thatthe Board of Directors’ meetings have an atmosphere conducive to open discussion.
I thank you for your unreserved comments and look forward to your continued contributions.

Sony Financial Holdings Inc. Annual Report 201657

Basic Stance on Corporate Governance
Basic Policy on Corporate Governance

Establishing an Internal Control System

SFH formulated the Basic Policy on Corporate Governance* inNovember 2015.
The Sony Financial Group (hereafter, “the Group”) positions
its corporate vision and philosophy as the basic policy forformulating management strategies and decision making.
SFH strives to meet the expectations and earn the trust of
stakeholders, realize sustainable corporate growth andincrease corporate value over the medium to long term bymaking effective use of the Group’s various management
resources and by realizing its corporate vision and philosophy.
Furthermore, as a financial holding company, SFH is aware of
the highly public nature of its financial business. Accordingly,
SFH has in place a governance structure that emphasizes
ensuring of soundness and appropriateness of the Group’s
management. SFH is a listed subsidiary of Sony Corporation.
As such, SFH maintains managerial independence from its
parent company and strives to ensure a highly transparent
management.

SFH formulated the Basic Policy on Establishing an Internal
Control System* in compliance with the Companies Act ofJapan and associated enforcement regulations to ensure theappropriateness of the Group’s business activities. SFH implemented and maintains an internal control system in line withthis policy.
SFH introduced its Internal Control and Financial Reporting
System in accordance with the Financial Instruments andExchange Act of Japan, with the aim of strengthening internal
controls governing financial reporting. As a listed company,
SFH put in place and maintains the necessary organizational
system and operational rules for disclosing proper financial
information.
*Visit SFH’s website (http://www.sonyfh.co.jp/en/company/governance.html)
for details of the Basic Policy on Corporate Governance and the Basic Policy on Establishing an Internal Control System.

Sony Financial Group’s Internal Control (As of July 1, 2016)

SFH

General Meeting of Shareholders
Appointment/dismissal

Nomination Advisory
Committee

Enquiry

Appointment/dismissal

Board of Directors(Directors/Outside Directors)

Response
Enquiry

Compensation Advisory
Committee

Audit

Board of Statutory Auditors(Statutory Auditors/Outside Auditors)

ReportResponse

Audit Department

Executive Committee

Audit

Independent
AuditorIndependent
audit

Business Execution Departments*
Corporate
Planning
Department

Corporate
Communications &Investor Relations
DepartmenttServe concurrently as
directors and statutory
auditors

Risk
Management
DepartmenttShare and confirm
information

Sony Life

ComplianceDepartmenttReport andconfirm

Accounting
DepartmenttDiscussin advanceSony Assurance*The Financial Market Research Department will be established on August 1, 2016.

58

Sony Financial Holdings Inc. Annual Report 2016

Human
Resources
Department

tConvey Group policies

Sony Bank

General Affairs
Department

tManage and advisetMonitortDirectly audit, as neededSony Lifecare

Management System
Outline of SFH’s Corporate Governance Structure (As of July 1, 2016)
Type of structure
Number of directors
Number of statutory auditors
Director’s term of office
Number of independent directors
Outside directors’ involvement in determination of compensation
Results-linked compensation system
Number of meetings of the Board of Directors held during fiscal 2015
Advisory bodies for the Board of Directors

Board of Directors (As of July 1, 2016)

Attendance of outside directors and outside statutory
auditors in meetings of the Board of Directors and theBoard of Statutory Auditors for fiscal 2015
Name

Outsidedirectors

Isao Yamamoto
Shiro Kuniya

Outsidestatutory
auditors

Yasuyuki Hayase

Yoshimichi
Makiyama

Hirotoshi
Korenaga*

Board of Directors’
meeting

Board of Statutory
Auditors’ meeting

Attended all 14
meetings
Attended 13 outof 14 meetings
Attended all 11
meetings after
taking office ofstatutory auditor
Attended all 11
meetings after
taking office ofstatutory auditor
Attended 12 out
of 14 meetings——
Attended all 9
meetings after
taking office ofstatutory auditor
Attended all 9
meetings after
taking office ofstatutory auditor
Attended 11 outof 12 meetings*The conditions applicable to an outside statutory auditor were changed withthe revision of the Companies Act of Japan. Mr. Korenaga, a statutory auditor
from fiscal 2016, had satisfied the prevailing conditions applicable to an outside
statutory auditor until the conclusion of the Ordinary General Meeting of Shareholders held in June 2016.

Statutory Audits, Internal Audits andAccounting Audits (As of July 1, 2016)
Statutory Audits
SFH’s Board of Statutory Auditors has three members, two ofwhom are outside statutory auditors. Statutory auditors audit
the execution of duties by directors based on the audit policy,
audit plan and other matters stipulated by the Board of Statutory Auditors. Statutory auditors attend important meetings,
including Board of Directors’ meetings and examine SFH’soperations and financial condition. At the same time, statutory
auditors maintain close contact such as through the receivingof reports from independent auditors, employees in charge ofinternal audits and other relevant persons.

Contributions to Sustainable Development

SFH, as a pure holding company, maintains a Board of
Directors not only to manage SFH itself, but also to promote
integrated Group management and to ensure the Group’s
corporate governance.
SFH’s Board of Directors is made up of 10 members, ofwhich three are representative directors from SFH’s subsidiaries
who serve as non-executive directors of SFH and contribute toefficient business operations of the Group as a whole.
Additionally, to obtain general management advice applicable to the Group, SFH has appointed directors from outside theGroup, one of whom serves concurrently as a Corporate Executive Officer of Sony, the parent company. Because SFH is thesubsidiary of a listed parent company, it has appointed two outside directors who are independent directors as required by the
Tokyo Stock Exchange to protect ordinary shareholders.
Regarding the boards of directors of Group subsidiaries,
one of SFH’s representative directors and three of its executive
directors serve concurrently as directors of subsidiaries with theaim of increasing the effectiveness of Group strategies andensuring the sound business management of each company.

Company with a Board of Directors and a Board of Statutory Auditors
10 (including 2 outside directors)
3 (including 2 outside statutory auditors)
1 year2
Involved
Adopted
14 times
Nomination Advisory Committee; Compensation Advisory Committee

Internal Audits
SFH performs internal audits through its Audit Department.
The Audit Department takes an independent and objective
standpoint in performing internal audits to check and evaluate
the appropriateness of work processes and responses torisks. The Audit Department also monitors the results of bothinternal and external audits of Group companies and provides
advice and proposals when necessary. The Audit Department
regularly reports the results of its monitoring activities to thedirector in charge and the Board of Directors. When necessary, the Audit Department may audit subsidiaries directly or
jointly within the scope of governing laws and regulations. In
addition, the Audit Department works closely with statutory
auditors, as well as external auditors, such as independent
auditors, as necessary.

Accounting Audits
The accounting firm and back-up team members of thecertified public accountants (CPAs) who acted as theaccounting auditors of SFH are as follows:
Accounting firm

PricewaterhouseCoopers Aarata LLC*1

Breakdown: CPAs and the
back-up team members*2

Five CPAs, Four others*1 PricewaterhouseCoopers Aarata LLC changed its corporate name fromPricewaterhouseCoopers Aarata on July 1, 2016.
*2 For the year ended March 31, 2016

Sony Financial Holdings Inc. Annual Report 2016

59

Profiles of Outside Directors and Outside Statutory Auditors (As of July 1, 2016)
Biography

OutsideDirectors

Isao Yamamoto

1981 Joined Nomura Research Institute, Ltd.
1991 Head of Strategic Advisory Group, Nomura Research Institute, Ltd.
1996 Director, Investment Banking Division, Merrill Lynch Japan Securities
Co., Ltd.
1999 Managing Director, Investment Banking Division, Merrill Lynch Japan
Securities Co., Ltd.

Reasons for Appointment
Mr. Yamamoto has many yearsof experience as a securities
analyst and an advisor on
corporate finance and M&As,
and has no conflict of special
interest with SFH.

2002 Co-head of Investment Banking Division, Managing Director, Merrill
Lynch Japan Securities Co., Ltd.
2003 President & CEO, The Institute for Securities Investments & Governance2006 Director, Japan CableCast Inc.
Statutory Auditor, MASSTUNE, Inc. (current: MINKABU, Inc.)
2007 Director, MASSTUNE, Inc. (current: MINKABU, Inc.)
2009 President, Enterprising Investment, Inc. (current position)2011 Director, SFH (current position)2012 Director, BILCOM, Inc. (current position)2016 Director, Falcon Technology K.K. (current position)

Shiro Kuniya

1982 Registered as attorney
Joined Oh-Ebashi Law Offices (current: Oh-Ebashi LPC & Partners)
1997 Audit & Supervisory Board Member, Sunstar Inc.
2002 Managing Partner, Oh-Ebashi LPC & Partners (current position)

Mr. Kuniya has specialized
knowledge and experience as
an attorney and has no conflictof special interest with SFH.

2006 Audit & Supervisory Board Member, Nidec Corporation2012 Director, NEXON Co., Ltd. (current position)
Director, Ebara Corporation (current position)2013 Director, SFH (current position)
Outside Director, Chairperson of Audit & Supervisory,
Takeda Pharmaceutical Company Limited (current position)

OutsideStatutory
Auditors

Yasuyuki Hayase

1980 Joined Mitsui Bank Corporation (current: Sumitomo Mitsui Banking
Corporation)
1999 Group Leader, Credit Planning Department, Mitsui Bank Corporation
2001 Deputy General Manager, Head Office Business Department 1,
Sumitomo Mitsui Banking Corporation

Mr. Hayase has many yearsof experience at a financial
institution, and as acorporate auditor there.

2002 Deputy General Manager, Head Office Business Department 3,
Sumitomo Mitsui Banking Corporation
2003 General Manager, Kumamoto Corporate Business Office,
Sumitomo Mitsui Banking Corporation2005 General Manager, Mitadori Corporate Business Office,
Sumitomo Mitsui Banking Corporation2007 General Manager, Credit & Investment Planning Department,
Sumitomo Mitsui Banking Corporation2010 Corporate Auditor, Sumitomo Mitsui Banking Corporation2012 President & CEO, Sakura Card Co., LTD.
2015 Standing Statutory Auditor, SFH (current position)
Statutory Auditor, Sony Life Insurance Co., Ltd. (current position)
Statutory Auditor, Sony Assurance Inc. (current position)
Statutory Auditor, Sony Bank Inc. (current position)

Yoshimichi Makiyama

1990 Registered as attorney, Japan
Joined Showa Law Office (current: Jones Day Law Office)1995 Joined Mitsui, Yasuda, Wani & Maeda (law office)1999 Registered as attorney, New York, U.S.A.
2000 Joined Microsoft Asia Limited (Law & Corporate Affairs)
2004 Registered as patent attorney, Japan
2006 Joined TMI Associates (law office)2013 Partner, Kitamura & Makiyama (law office) (current position)2015 Statutory Auditor, SFH (current position)

60

Sony Financial Holdings Inc. Annual Report 2016

Mr. Makiyama qualified as an
attorney and patent attorney inJapan and as an attorney in thestate of New York, withexpertise in many areas
including information security
and compliance, and has abreadth of professional
experience both at home andabroad.

Independence Standard of Outside Directors
and Outside Statutory Auditors

SFH has established two Committees as advisory bodies
for the Board of Directors to ensure the transparency andobjectivity of the decision-making process.
The Nomination Advisory Committee deliberates on theappointment and dismissal of SFH’s directors, statutory
auditors and Group companies’ presidents, as well as on the
succession planning of SFH and its Group companies’ presidents. It reports the results of its deliberations to the Boardof Directors.
The Compensation Advisory Committee deliberates thepolicy and total amount of compensation for SFH’s directors
and Group companies’ representative directors which are
to be proposed at a General Meeting of Shareholders. The
Committee also deliberates the amount of compensation,bonuses and retirement benefits for individual directors andGroup companies’ representative directors, within the limits
set by a resolution at a General Meeting of Shareholders.
It reports the results of its deliberations to the Board of
Directors.
Each of the Committees consists of a small number of
directors, including outside directors to reflect opinions froman objective and multifaceted perspective on its deliberations.
A member of the Compensation Advisory Committee shallnot participate in the resolution for determining his/her compensation.

SFH has formulated the Basic Policy on the Selection of
Director and Statutory Auditor Candidates* and set the independence standard of outside directors and outside statutory
auditors.
The Standard provides that a candidate is deemed to be
independent if he/she: (1) satisfies the independence requirements of the Companies Act and the standards for independent directors provided by the Tokyo Stock Exchange; (2) has
had no conflict of special interest with SFH and its Group companies in the past three years prior to his/her taking office andcurrently has no such conflict; (3) has not been an executive or
employee of SFH’s parent company or a subsidiary of SFH’s
parent company in the past three years prior to his/her taking
office and is not currently an executive or employee of thesecompanies; and (4) is not a spouse of or related within two
degrees of kinship to a person who does not satisfy either of
items (2) and (3) above.
By appointing highly independent outside directors andoutside statutory auditors, SFH strives to ensure the transparency of corporate management and enhance their supervisory
function.

Advisory bodies

Contributions to Sustainable Development

Nomination Advisory Committee and Compensation
Advisory Committee (As of July 1, 2016)*Visit SFH’s website (http://www.sonyfh.co.jp/en/company/governance.html)
for details of the Basic Policy on the Selection of Director and Statutory Auditor
Candidates.

Members

Nomination
Outside Director
Advisory Committee

Isao Yamamoto(Chairperson)

Outside Director

Shiro Kuniya

Chairman, Director

Katsumi Ihara

President,
Representative Director

Shigeru Ishii

Director
Compensation
Outside Director
Advisory Committee

Shiro Kambe
Shiro Kuniya(Chairperson)

Outside Director

Isao Yamamoto

President,
Representative Director

Shigeru Ishii

Senior Managing Director Yuichiro SumimotoSony Financial Holdings Inc. Annual Report 201661

Evaluation of Effectiveness of the Board of Directors
According to SFH’s Basic Policy on Corporate Governance, the Board of Directors conducts self-evaluations, evaluating theeffectiveness of its own decision-making and oversight, as well as its operation of meetings at least once a year.
Evaluation Process
For fiscal 2015, an independent third-party evaluation company evaluated the effectiveness of the Board of Directors byinterviewing all directors and statutory auditors.
Principal content of the interviews:• Quality and volume of the discussions at the Board of Directors’ meetings• Understanding of and responses to the businesses, strategies and risks• Evaluation, compensation and succession planning of management• Dialogue with shareholders• Composition of the Board of Directors and its expertise• Operating practices of the Board of Directors’ meetings
Summary of the Results of Evaluation• As a whole, a high level of effectiveness was achieved.
• The Board of Directors consists of members with a wide variety of experience.
• Each member has multifaceted opinions on respective management issues. They constantly and deeply consider how to
improve corporate management from their own perspectives with strong desires to invigorate the Board of Directors andincrease corporate value.
• The agendas of the Board of Directors’ meetings were properly selected in terms of their quality and volume. There was an
atmosphere where all members, including outside directors, could speak in a free and active manner. The deliberations
were properly made under the leadership of the chairperson. The members trusted one another.
• The members were well aware of the regulations and risks unique to the financial industry and held active discussions.
Meanwhile, some members pointed out: “We, as the members of the Board of Directors of a holding company, should
discuss further on Groupwide business and executive development strategies from a medium- to long-term standpoint, in
addition to the deliberations on the oversight of the corporate management of the Group companies.”
Issues to Address and Responses to Make Based on the Results of Evaluation
Based on the results of this evaluation, SFH’s Board of Directors judges itself to be wholly effective. That said, by focusing
on a more in-depth review of the Group’s medium- to long-term business and executive development strategies, the Board
will strive to further bolster its effectiveness through considering its role and involvement in addressing such issues.

Compensation for SFH’s Directors and Statutory Auditors
SFH sets the Policy for Determining the Compensation of Directors and the Policy for Determining the Compensation of Statutory
Auditors. SFH has created the Compensation Advisory Committee Regulations and established the Compensation Advisory
Committee (please see page 61) as its deliberative body. Compensation of individual directors is determined by the resolution of
the Board of Directors, based on a report from the Compensation Advisory Committee. Directors with no executive duties, except
outside directors, are paid no compensation. Compensation of individual statutory auditors is determined, within the limit set by aGeneral Meeting of Shareholders, through discussions by statutory auditors.
SFH has reviewed its compensation plan for directors and statutory auditors. Based on such review, SFH abolished theexisting plan of retirement benefits for directors and statutory auditors in line with the resolution adopted at the Ordinary General
Meeting of Shareholders held in June 2016. At the same time, SFH introduced a stock-type compensation stock options programfor executive directors with the aim to motivate directors to contribute to the continuous growth in corporate value of the Groupthrough sharing the benefits and risks of share price fluctuations with its shareholders.

62

Sony Financial Holdings Inc. Annual Report 2016

1. Executive Directors
Basic policy• A balance between a fixed portion, a results-linked portion and a medium- to long-term incentive portion shall be considered.
The objective of this is to secure talented executives for business execution and ensure that compensation serves as aneffective incentive for improving the business performance and corporate value of the entire Group.

Compensation • Compensation comprises a fixed portion depending on the position, a results-linked portion depending on the entire
Group’s performance for the year and individual responsibilities, and a medium- to long-term incentive portion in the form of
a stock-type compensation stock options program.
• The results-linked portion could range from 0% to 200% of the standard amount subject to achievement of managementtargets of the Group and fulfillment of responsibilities.
• Stock options, in principle, account for 20% of total annual compensation.
Level• A suitable level of compensation shall be paid in order to secure talented individuals. The level of compensation is determinedin consideration of the results of third-party surveys on the compensation levels of corporate managers and other relevant
information.

2. Outside Directors
Contributions to Sustainable Development

Basic policy• The main responsibility of outside directors is to enhance the transparency and objectivity of corporate management throughthe oversight and supervision of executive directors’ execution of duties. Consequently, compensation shall be fixed with theobjective of securing talented individuals and ensuring that the supervisory and oversight function is working effectively.

Compensation • A fixed amount is paid according to the role.
Level• A suitable level of compensation shall be paid in order to secure talented individuals. The level of compensation is determinedin consideration of the results of third-party surveys on the compensation levels of corporate managers and other relevant
information.

3. Statutory Auditors
Basic policy• The main responsibility of statutory auditors is to ensure the transparency and objectivity of corporate management by conducting operational and accounting audits. Consequently, compensation shall be fixed with the objective of securing talented
individuals and ensuring that the audit function is working effectively.

Compensation • A fixed amount is paid according to the respective role of standing statutory auditors and non-executive statutory auditors.
Level• A suitable level of compensation shall be paid in order to secure talented individuals. The level of compensation is determinedthrough discussion of statutory auditors, in consideration of the results of third-party surveys on the compensation levels ofcorporate auditors and other relevant information.

Compensation for SFH’s directors and statutory auditors for fiscal 2015
Details of compensation for SFH’s directors and statutory auditors for fiscal 2015 are as follows:

Number of payees

Total amountof compensation for directors
and statutory auditors(Millions of yen)

Basic compensation

Provision for reserve
for retirement benefits

5

259

210

48

Directors (outside)

2

18

18

—

Statutory auditors (internal)

—

—

—

—

Directors (internal)

Total amount by compensation category

Statutory auditors (outside)

3

27

26

1

Total

10

305

255

50

Notes: 1.Compensation categories refer to basic compensation, stock options, bonuses and retirement benefits and others. SFH neither paid bonuses nor
granted stock options as compensation for directors and statutory auditors prior to and including fiscal 2015.
2.The number of payees and amount of compensation stated above include those for two directors (internal) and one statutory auditor (outside), all ofwhom retired at the conclusion of the 11th Ordinary General Meeting of Shareholders held on June 24, 2015 due to the expiration of their terms. In
addition to the compensation shown above, SFH paid, as retirement benefits, a total of ¥9 million to two retired directors (internal) and ¥0 million to
one retired statutory auditor (outside) during fiscal 2015. These benefits were not included in the provision for reserve for retirement benefits recorded
in fiscal 2014.

Sony Financial Holdings Inc. Annual Report 2016

63

Relationship with Parent Company, Sony Corporation(As of July 1, 2016)

As is described in the Basic Policy on Corporate Governance(please see page 58), SFH is a listed subsidiary of Sony Corporation. Accordingly, SFH maintains managerial independence from its parent company and strives to ensure a highly
transparent management.

Capital Relationship
SFH is a financial holding company, established in April 2004
as a corporate spin-off from Sony (Sony Corporation, hereafter “Sony”). In October 2007, SFH’s shares were listed on theFirst Section of the Tokyo Stock Exchange with the initialpublic offering conducted in Japan and overseas, after which
Sony’s shareholding became 60%. As a result of this capital
relationship, SFH may be subject to the influence of Sony,irrespective of the intentions and interests of other shareholders, with regard to all matters requiring shareholder approval.
These matters include the appointment and dismissal of SFH
directors and statutory auditors, mergers and other organizational restructuring, material asset and business transfers,
amendments to the Articles of Incorporation, and the payment of dividends.

Personnel RelationshipTo obtain general management advice concerning the SonyFinancial Group and to strengthen the audit function, SFH
appoints directors and statutory auditors from outside theSony Financial Group. However, one of these SFH directors
and one statutory auditor serve concurrently as Corporate
Executive Officer or Senior General Manager of the Sony
Group. Moreover, Sony has seconded four employees to
SFH. Because the appointment of concurrent directors andstatutory auditors comes at the request of the Sony Financial
Group, SFH believes that concurrent directors and statutory
auditors are positioned to make independent management
decisions. From the standpoint of further enhancing independence from the parent company, SFH has appointed twooutside directors who have no special relationship with theSony Group, and have designated them as independent
directors based on rules set forth by the Tokyo Stock
Exchange.

Ensuring Independence in Business Activities
Because the Sony Financial Group’s business operations havea tenuous connection with Sony Group’s business domains
except for Financial Services*, and because the Sony Financial
Group operates its business primarily in accordance with theInsurance Business Act and the Banking Act of Japan, under
the supervision of the Financial Services Agency of Japan,
SFH believes that the Sony Financial Group conducts its
business with a certain degree of independence from theSony Group.

64

Sony Financial Holdings Inc. Annual Report 2016

In addition, Sony, which has obtained approval from the
Financial Services Agency to remain a major SFH shareholder,
recognizes and respects SFH’s corporate philosophy.
*The Sony Financial Group is included in Sony Group’s Financial Services
segment.

Using the “Sony” Trade Name and Trademark
SFH and Group companies have entered into royalty agreements with Sony for the use of the “Sony” trade name andtrademark. However, these agreements can be rescinded bySony under certain conditions, such as Sony’s share of voting
rights in SFH falling below a majority, or SFH’s percentage
ownership of the voting rights of Sony Financial Group companies dropping. Furthermore, Sony Financial Group companies
pay royalty fees to Sony based on these agreements. The
amount paid in fiscal 2015 was ¥2,541 million and the amountof these royalty fees has no material impact on the management base of the Sony Financial Group.
The Sony Financial Group believes that the use of the“Sony” trade name and trademark confers certain advantages,
including stronger brand recognition, enhanced trustworthiness, and higher employee motivation and awareness.

Transactions with Sony Corporation
SFH is a listed subsidiary of Sony Corporation (Sony Corporation owns 60% of the total shares in SFH). For this reason, SFH
has set out a Policy Concerning Measures to Protect Minority
Shareholders in Transactions with the Controlling Shareholder
to protect the interests of minority shareholders.

Policy Concerning Measures to Protect Minority
Shareholders in Transactions with Sony Corporation(Controlling Shareholder)Sony Financial Group’s policy is to develop business while
maintaining cooperative ties with the Sony Group. However, theSony Financial Group believes that it has secured a certain degreeof independence from the Sony Group, because it conducts
independent business activities in line with its own management
policies and strategies, and operates in different business fields
than the Sony Group.
When entering into transactions with Sony (the controllingshareholder), the Sony Financial Group adequately confirms thenecessity for such transactions, and ensures that the conditionsof such transactions do not differ markedly from the terms ofordinary transactions with third parties.

Status of implementation
With regard to transactions with Sony, SFH confirms the necessity
for such transactions and ensures that conditions do not differ
markedly from the terms of ordinary transactions with third parties.
Note: SFH prepares and discloses Information Pertaining to Controlling
Shareholders in accordance with the regulations of the Tokyo Stock
Exchange. The document can be viewed on the Tokyo Stock
Exchange’s or SFH’s website (http://www.sonyfh.co.jp/index_en.html).

Dialogue with Shareholders and Other Investors
For constructive dialogue with shareholders and other investors, SFH has formulated the Investor Relations (IR) Policy*, establishedthe department in charge of IR activities and assigned a corporate executive to oversee the IR activities. The department in charge ofIR activities shares information appropriately with SFH’s business execution departments and Group companies in order to disclose
information in a timely, accurate and fair manner, and provide ample opportunities for dialogue with shareholders and other investors.
SFH conducts presentations and individual meetings in a variety of formats, and engages in dialogue, centered on the president
and senior management. In addition, SFH strives toward enhanced disclosure of information via various IR tools (e.g., website information and annual reports).
Feedback and requests obtained through dialogue with shareholders and other investors are regularly reported to senior management to reflect on and improve their operations.
*Visit SFH’s website (http://www.sonyfh.co.jp/en/financial_info/ir_policy.html) for more about its IR Policy.

Investor Relations (IR) Initiatives in Fiscal 2015

Contributions to Sustainable Development

SFH undertook new types of communication for the first timein its IR activities, such as small meetings for domestic institutional investors and analysts presented by SFH and Group
companies’ top management members, as well as small
meetings with SFH’s outside directors. In addition, SFH’s IR
website has received high marks in several rankings.

ᵐᵎᵏᵓ

A small meeting held between domestic institutional investors and analysts,
and members of top management of SFH and the Group companies in
December 2015.

Record of IR Activities

Earnings briefings (teleconferences withdomestic institutional investors and analysts)

4 times

Corporate Strategy Meeting

1 timeIndividual meetings with institutional investors
and analysts

Approx. 220

Overseas IR meetings (Europe,
North America, Asia)

1 tour ineach region

Briefings for individual investors

6 times

Participation in an IR fair for individual investors

2 times

Business briefings (small meetings for domestic
institutional investors and analysts)

2 timesSony Financial Group internal IR briefings

1 timeA small meeting with outside directors in March 2016.

Facilitating the Exercise of Voting Rights
SFH undertakes the following activities to make it easier for
shareholders to exercise their voting rights.
• SFH sets the meeting date to avoid dates on which other companies’ annual general meetings of shareholders are concentrated.
• SFH posts the Notice of Convocation on its website.

• SFH posts the Notice of Convocation on its website before
dispatching to shareholders.
• SFH provides a partial translation of the Notice of Convocation
in English.
• SFH uses an electronic voting platform.
• SFH posts the results of shareholder voting on its website.

Annual IR Schedule
Announcement of
Full-year Consolidated Financial Results

Apr.

May
Shareholder
Newsletter(Japanese)

Jun.

Announcement of
1Q Consolidated Financial ResultsJul.

Ordinary
General Meetingof Shareholders

Aug.

Annual Report(Disclosure Report)(Japanese)

Sep.
Annual Report(English)Announcement of
2Q Consolidated Financial Results

Announcement of
3Q Consolidated Financial Results

Oct.

Jan.

Nov.

Dec.

Feb.

Mar.

Interim Shareholder Newsletter(Japanese)
Interim Disclosure Report(Japanese)Sony Financial Holdings Inc. Annual Report 2016

65

Compliance
Basic Stance on Compliance
SFH’s broad definition of compliance is that it encourages all executives and employees to deepen their understanding of theCompany’s corporate philosophy and relevant laws and regulations, enforces compliance with these laws and regulations, andmanages business operations transparently and properly based on a strong sense of ethics in order to ensure sound and proper
operations. SFH considers compliance to be one of its top management priorities and, accordingly, it has systems in place toensure that all executives and employees are fully aware of their duties and responsibilities.
While Group companies are responsible for establishing systems to enhance the effectiveness of compliance according to their
specific industry and scale of business operations, SFH, as a financial holding company, undertakes the ongoing monitoring andpromotion of the Group companies’ compliance by providing advice, as needed, from the viewpoint of Group management.

Compliance System at SFH

Internal Hotline System If executives and employees of

SFH’s Board of Directors formulated a Compliance Manual*and a Compliance Program**. SFH strives to monitor adherence to stated practices and their implementation at all times,
while proactively putting a compliance system in place for itself
and for Group companies.

SFH and its Group companies, as well as temporary employees and the employees of business partners, believe that business policies, operating activities or other activities of the companies breach (or could breach) respective laws andregulations or internal regulations, they can report their concerns by choosing and notifying the appropriate hotline desk
at SFH or at any Sony Financial Group company, or the Sony
Group hotline desk. SFH implements appropriate measures toprotect those who contact these desks, while strictly managing and responding to the information provided.

*The Compliance Manual outlines SFH’s compliance system, as well as
the Group’s corporate philosophy, which executives and employees
must understand, and laws and regulations, which they must comply
with. The manual also establishes measures for handling any contravention of compliance practices, and for confirming compliance status.
**The Compliance Program is drafted annually, in principle, and defines a
specific action plan for confirming compliance status, conducting training
and for other related items.

Compliance Meetings
SFH holds regular compliance meetings with Group companies to conduct preliminary consultations and exchange information about the status of compliance dissemination andother issues. Members of the meeting include SFH and SonyFinancial Group company executives, general managers andother staff in charge of compliance, depending on the agenda.
The results of these discussions are reported to the Board of
Directors and at other important meetings.

Prevention of Insider Trading SFH established a BasicGroup Policy on the Prevention of Insider Trading, whereby astructure for the prevention of insider trading has been developed at SFH and Group companies.
SFH monitors whether such framework is adequately inplace and working effectively in the prevention of insider trading at Group companies, and takes actions as necessary.
Note: Visit SFH’s website (http://www.sonyfh.co.jp/en/company/governance.
html) for details.

Compliance System of the Sony Financial Group (As of July 1, 2016)

SFH

Board of Statutory Auditors

Director in Charge(President, Representative Director)

General Meeting of Shareholders

Statutory Auditors

Board of Directors
ReportReportAudit Department

ReportEntrustExecutive Committee
ReportCompliance Department
Control over the planning and dissemination of compliance measures

ReportSony Life

66

Sony Financial Holdings Inc. Annual Report 2016

Compliance Meetings
Secretariat: Compliance Department

Sony AssuranceSony Bank

Advise and monitor

Sony LifecareConflicts of Interest Policy (Summary)SFH formulated the Conflict of Interest Policy* to ensure that customers’ interests are not harmed by Group companies. The director in
charge of the Compliance Department, as the manager responsible for managing conflicts of interest, shall require Group companies totake the following actions when he/she deems them to be necessary based on reports from Group companies, customer complaints
or other sources.
1) Sever the flow of information between divisions that have potential conflicts of interest2) Suspend the transaction concerned, or change the terms and conditions or method of the transaction
3) Disclose the fact or the possibilities of a conflict of interest, to customers4) Other actions deemed necessary
SFH shall retain records, which specify transactions to be managed and that are associated with actions taken to properly protect
customers, for five years.
*Visit SFH’s website (http://www.sonyfh.co.jp/en/company/governance.html) for a summary of the Conflicts of Interest Policy.

Basic Group Policy on Eradicating Anti-social Forces

SFH has formulated a Privacy Policy* governing the handlingof personal information. It sets out SFH’s policies on the acquisition and use of personal information for specific purposes.
SFH has also established Rules on Information Security thatset out specific security control protocols. SFH monitors theeffectiveness of Sony Financial Group companies’ security
control protocols.
SFH and its Group companies formulate and revise thePrivacy Policy, and set up an organization to protect personal
information, to which they appoint persons responsible. SFH
and its Group companies also prepare a set of rules and amanual, as well as training programs on the handling of personal information and information security. These initiatives
allow SFH and its Group companies to maintain entrusted
personal information so that it is accurate and up-to-date to
the extent necessary for the purposes of its use, and to protect personal information through steps to prevent unauthorized access, leakage, falsification, loss, destruction and otherincidents.

SFH has formulated a Basic Group Policy on Eradicating Antisocial Forces* whereby SFH and the Group companies havein place the structures necessary to take a firm stance on
countering anti-social forces. This includes setting up an organizational unit responsible for dealing with anti-social forces,
appointing a person responsible for refusing unreasonable
demands and gathering information on anti-social forces incollaboration with external specialized agencies.

Contributions to Sustainable Development

Privacy Policy*Visit SFH’s website (http://www.sonyfh.co.jp/en/company/governance.html)
for more about Basic Group Policy on Eradicating Anti-social Forces.

*Visit SFH’s website (http://www.sonyfh.co.jp/en/company/governance.html)
for more about the Privacy Policy.

Sony Financial Holdings Inc. Annual Report 2016

67

Risk Management
One of SFH’s roles as a financial holding company is to further enhance and integrate Groupwide risk management by centralizing
the Group’s management resources. SFH has formulated the Basic Policy on Group Risk Management* and develops a risk
management structure by aligning it with Groupwide strategic objectives and management policies. In addition, SFH seeks toenhance the corporate value of the Group by tailoring operating subsidiaries’ risk management to the types of risks inherent intheir respective lines of business.
*Visit SFH’s website (http://www.sonyfh.co.jp/en/company/governance.html) for more about the Basic Policy on Group Risk Management.

Approach to Risk Management by SFH and Group
Companies
SFH has formulated the Fundamental Principles for Risk
Management and communicates them to directors, employees, and throughout the Sony Financial Group. It also identifies the scope and types of risks of the Group companies,
and establishes structures designed to manage such risks
effectively. SFH’s department in charge of Risk Management
controls risks through monitoring and holding Risk Manage-

ment Meetings with the subsidiaries’ risk management divisions. It also reports its findings on the state of risk management regularly to SFH’s Board of Directors and Executive
Committee.
The Group companies optimize types and definitions of
their risks according to scale, characteristics and businessmodel. They have established risk management frameworks,
with the aim of autonomously assessing, monitoring, andmanaging these risks.

Risk Management Structure of the Sony Financial Group (As of July 1, 2016)

SFH

Board of
Statutory Auditors

Director in Charge(President, Representative Director)

General Meeting of Shareholders

Statutory
Auditors

Board of Directors

ReportReportAudit Department

ReportAudit

Executive Committee
Risk Management Department(Centralized Risk Management)

Supervisory Department:
Risk Management Department
Investment Risks
r.BSLFUSFMBUFE3JTL
r$SFEJU3JTL
r3FBM&TUBUF
Investment Risk

Insurance
Underwriting Risk

Administrative Risk

Liquidity Risk

Systems Risk

Supervisory Department:
Compliance Department

Supervisory Department:
Corporate Communications &Investor Relations Department

Legal Risk

Reputational Risk

Business Continuity Risk

Confirm

ReportSony Life

Risk Management Meetings

Sony AssuranceManage, advise, monitor

Sony Bank

Each company autonomously puts risk management into practice68

Sony Financial Holdings Inc. Annual Report 2016

Present risk management policies

Sony Lifecare

Types and Definitions of Risks
Type

Definition

Risks associated with losses due to changes in the value of assets and liabilities, including off-balance-sheet
items as a result of unfavorable fluctuations in interest rates, the value of securities held, exchange rates, andother factors.

Credit Risk

Risks associated with losses due to declines or loss in the value of assets, including off-balance-sheet items,
resulting from deterioration in the financial position of retail and corporate customers and other contracts entered
into.

Real Estate Investment Risk

Risks associated with losses due to declines in the market value of owned real estate or in the profitabilityof real estate holdings on account of unfavorable trends in prices and rents, respectively.

Liquidity Risk

Risks associated with losses are as follows:• Cash Flow Risk
Risks associated with losses due to our inability to make cash payments because of
failure to maintain sufficient cash reserves at settlement, as well as risks associatedwith losses if SFH and Group companies are forced to raise funds under unfavorable
conditions in order to fulfill cash payment obligations.
• Market Liquidity Risk Risks associated with losses due to the Group’s inability to conduct market transactions, in particular from an inability to unwind the Group’s market position at a given
time, as well as risks associated with losses if the Group is forced to complete transactions under unfavorable market conditions, in each case due to market turmoil orother factors.

Insurance Underwriting Risk

Risks affecting the Group due to significant differences between the assumptions SFH and Group companies
use to establish appropriate insurance premium levels, including assumptions regarding the expected
frequency and scale of insured events and future economic conditions.

Administrative Risk

Material and immaterial risks affecting the Group due to errors, misconduct, malfunction, and other factors
related to problems with the Group’s internal administrative processes.

Systems Risk

Material and immaterial risks affecting the Group due to IT-system malfunction or breakdown, improper use
or leakage of confidential information stemming from IT-system problems.

Legal Risk

Risks affecting the Group due to violations of applicable laws, rules and regulations occurring during the courseof business operations, as well as the risk of loss due to litigation or infringements of rights.

Reputational Risk

Material and immaterial risks associated with losses resulting from harm to the Group’s reputation in themarket and among customers as a result of unethical behavior, unfair business practices, improper disclosure,or other factors.

Business Continuity Risk

The risk that SFH and Group companies will be unable to continue operations as a result of a deteriorationin financial position, liquidity problems, system failures, scandals, disaster, accidents, or other crises.

Contributions to Sustainable Development

Market-related Risk

Note: As the operating and business environment changes, the Group companies’ risk management departments review the risk types and definitions,amending them as appropriate for new conditions.

Contingency Management System
SFH has established a contingency plan as part of theGroup’s comprehensive policy on business continuity fortimes when ordinary business operations of SFH or Group
companies are at risk due to accidents, disruptions or otherfactors. Group companies have developed regulations, manuals and other guidelines reflecting their respective businessvolume and nature of business activities. SFH has a system
in place whereby Group companies report to SFH when they
are unable to continue ordinary business operations. If SFH
determines that a reported situation is difficult to address

under the risk management system set forth in the fundamental principles for risk management, among other guidelines, SFH shall establish a contingency response headquarters led by the President and Representative Director of SFH
and execute business continuity measures aimed at the full
restoration of all operations.
Moreover, SFH and Sony Life relocated their respective
head offices in July 2016, for purposes that include the further reinforcement of business continuity of operations incase of disaster or other incidents.

Sony Financial Holdings Inc. Annual Report 2016

69

Contributions to Sustainable Development Corporate Social Responsibility

Sony Financial Group’s CSR
The Sony Financial Group believes that contributing to sustainable social development through the provision of financial services
that reflect real customer needs constitutes the core of corporate social responsibility (CSR). With the highest level of ethics and astrong sense of purpose, we strive to continuously improve corporate value by engaging in sound, responsible business activities.
Seeking to be the most trusted financial group, we work to benefit society as a good corporate citizen.
The Sony Financial Group has formulated the following Basic CSR Policy, and each company in the Group proactively conducts various CSR initiatives through its business activities. The various departments in SFH exchange information with Group
companies to monitor their CSR initiatives.

Basic CSR Policy
The Sony Financial Group believes that a special commitment to the public good is demanded of a financial services company, and seeks
to achieve its corporate vision and thus give back to society by upholding the highest level of ethics and a strong sense of purpose.
1. We recognize that a corporation’s fundamental responsibility to society is contributing to economic growth through sound businessactivities, and we will fulfill this responsibility by providing high-value-added products and high-quality services.
2. We will esteem our relationships with customers, shareholders, employees, business partners, local communities and all other stakeholders in the Sony Financial Group, and we will make management decisions while considering the impact on each stakeholder group.
3. In carrying out business operations, we will strictly comply with laws, regulations, company rules, policies and other requirements.
4. We will respect the human rights of all and ensure sound employment and labor practices.
5. In all aspects of our business activities we will act in consideration of protecting the environment to help bring about a sustainable
society.
6. We will disclose information in an appropriate and timely manner to maintain the trust and support of the Sony Financial Group’s stakeholders.

Communication with Stakeholders
Dialogue with sales employees, surveys, callcenter, website, opinion/complaint/inquiry
hotline, and public relations

Customers
Shareholders andother investors
General Meeting of Shareholders,Shareholder Newsletter; IR briefings;
information provided by website anddisclosures; and public relations(For more information, please read “Dialogue
with Shareholders and Other Investors”
on page 65.)

Local communities

Social contribution activities
and public relations

70

Sony Financial Holdings Inc. Annual Report 2016

Business partners
Fair trading based on “Conflicts ofInterest Policy,” “Basic Policy on
Eradicating Anti-social Forces,” and“Policy for Preventing Corruption”;
solidarity and cooperation in business;cooperation with industry
associations, etc.

SFH
Employees

Education and training, employee opinion surveys,
labor-management consultation, and systems toaddress inquiries and complaints

Customers
Utilizing Customer Feedback
Sony Financial Group companies have in place a framework under which feedback received from each company’s customers on adaily basis is compiled and analyzed by divisions in charge of promoting customer satisfaction and raising quality. This feedback isreported to management and used to make recommendations on operational improvements and product and service enhancements. As a result of this approach, the Sony Financial Group’s three businesses—life insurance, non-life insurance, and banking—have received high appraisals in customer satisfaction surveys conducted by outside institutions and the media.

Reflecting the Voice of Customers in Our
Business

Contributions to Sustainable Development

In the course of dialogue between its policyholders and Lifeplanner sales employees, Sony Life received requests tointroduce nursing care providers that can assure peace ofmind for families. Based on a commitment to “protecting
customers across the entire Group” and a desire for a “worldin which people sincerely feel happy to live long lives,” theSony Financial Group entered the nursing care business inNovember 2013.

Sony Life
Sony Life conducts annual customer awareness surveys by
post, and in fiscal 2015 received valuable feedback fromaround 5,800 policyholders. Sony Life also holds telephonecustomer satisfaction surveys for Lifeplanner channel policyholders. In these ways, the company gauges customer satisfaction levels in such areas as frequency of visits, provision of
new product and service information, and speed of responses.
Sony Life analyzes feedback from customers and formulates specific improvement measures and plans, which it
shares with various internal departments in an effort to improve
its services.

Industry’s First Instant Approval (Underwriting) System for New Policyholders Launched
In March 2016, Sony Life introduced its “Instant Approval
System” and started giving instant approval to new policyholders. Previously, it took an average of 7.5 days fromthe time of application to acceptance. Sony Life introduced the “Instant Approval System” in order to deploy
and advance its sales support system more effectively.
Through real-time processing, Sony Life can now provide
peace for mind for its customers instantly at the time andplace of application.
New Sales Offices Opened
On April 1, 2016, Sony Life opened new branches in Akita
Prefecture and Yamaguchi Prefecture. Committed to protecting its customers all across Japan throughout their entire
lives, Sony Life decided to establish operations in thesetwo prefectures, where it had yet to establish a presence.
By enhancing the efficiency and productivity of its sales
activities in this way, Sony Life will deepen its ties with local
communities and thus improve services for customers.

In April 2016, the Group opened its first nursing care home, SONARE
Soshigaya-Okura, in Setagaya-ku, Tokyo.

Coverage Period for Family Income Insurance
Expanded
Family income insurance, a mainstay product of Sony
Life, previously expired when the policyholder reached
the age of 70. Responding to feedback from customers
intending to continue working beyond 70, however, Sony
Life introduced additional policy periods, up to the agesof 75, 80, 85, and 90. This has enabled it to better meet
the broad-ranging demands of customers.

Sony Financial Holdings Inc. Annual Report 2016

71

Sony Assurance
Leveraging its unique advantage as an insurer that communicates directly with customers, Sony Assurance listens closely
to its customers and reports on specific improvement measures via its website. In addition, customer feedback is centrally managed, compiled, and analyzed on a monthly basis by
the Customer Response Service Department. Feedback isreported to management every quarter, and in particularly
important cases, detailed reports are made on the causes ofincidents and countermeasures are recommended as necessary. The feedback is also passed on to relevant departments,
along with instructions on improvements and other matters.

Claims Service Center Initiatives
Seeking to allay the anxieties of customers in times of accident, Sony Assurance provides a variety of services emphasizing swift initial responses on the same day as the incident.
According to feedback from a customer questionnaire
survey, however, while customers are satisfied with the
speed of responses from the service centers, many felt
dissatisfaction that the post-accident telephone responsetime was too long. To address this, Sony Assurance
reviewed the content of these questions from standpoints
including its priority, and reassessed the workflow of theclaims service centers, thus shortening the telephone
response time of the calls immediately after accidents.
Upon introducing the new workflow, the level of customer satisfaction with the claims service center improved
dramatically. Believing there is still much room for improvement in accident resolution services, it will reassess its
overall services based on the customer’s viewpoint, fromreception to resolution, to further improve its services.

Sony Bank
Heeding the feedback from customers, and to provide evenbetter products and services, Sony Bank reviews the comments and requests from customers and strives to make
improvements. Specific feedback and related details are madeavailable on the Voice of Customer webpage of Sony Bank’s
website. In fiscal 2015, Sony Bank placed first for the ninth
consecutive year in Nikkei’s twelfth annual ranking* of Japanese financial institutions based on customer satisfaction, andwas highly evaluated on many other customer satisfaction
surveys.

*Article in the January 31, 2016 issue of the Nihon Keizai
Shimbun (Nikkei) newspaper

Sony Bank WALLET Service Launched
In January 2016, Sony Bank launched the Sony BankWALLET service in response to feedback from customers
wishing to use their foreign-currency deposits as is andwithdraw them at overseas ATMs. A single Sony BankWALLET can be used not only as a cash card but also as
a Visa debit card for shopping in Japan and overseas, aswell as for withdrawal of local-currency funds at overseas
ATMs. Sony Bank will continue working to provide moreconvenient products based on feedback from customers.

Business Partners
Fair Trade
The Sony Financial Group has established the Conflicts ofInterest Policy, the Basic Policy on Eradicating Anti-social
Forces and the Policy for Preventing Corruption. As stated inour code of conduct, we comply with all applicable laws andregulations and conduct business activities ethically and ingood faith. We engage in fair trade practices with all business
partners on this basis.

Partners (Independent Agents)
Sony Life’s Partners (Sony Life refers to independent agentsas “Partners” not only because they are partners from a72Sony Financial Holdings Inc. Annual Report 2016business standpoint but also because they are the lifelong
partners of customers) constitute a critically important sales
channel alongside Lifeplanner sales employees. Sony Life
provides various systematic training programs for Partners
and training related to products, along with expertise on
sales tailored to customer needs based on sales processes
developed by the Company over the years.
Based on the desire to provide high-quality services
closely tied to regional communities, Sony Life’s approximately 1,900 Partners around the country, as of July 1,
2016, faithfully fulfill their responsibilities as Partners tocustomers.

Employees
Work-life Balance

Promotion of Diversity

The Sony Financial Group promotes initiatives to help balance careers with private
lives. Since it was established, Sony Life has
had a system in place that goes beyond
what is required by law to enable employees
who are raising children to continue working. Since July 2007,
Sony Life has been continuously certified by the director of theTokyo Labour Bureau as a company that meets the requirements of the Act on Advancement of Measures to Support
Raising Next-Generation Children. Also, Sony Assurance
became the first direct non-life insurer to receive this certification* in August 2012. Sony Bank formulated an action plan tohelp employees balance child-raising responsibilities withwork, and as part of this initiative, distributed a guidebook onsocial security and other support that can be referred to by
expecting parents regarding birth and child-raising. By continuing to help employees balance child-raising responsibilities
with work going forward, Group companies will remain
focused on proactively creating a work environment conduciveto healthy childbirth and parenting.

Following an increase in the number of employees, the SonyFinancial Group has come to embrace a diverse workforce
including women, foreign nationals and the physically or
mentally challenged. In April 2015, Sony Life established theDiversity Promotion Department for the development of aworking environment that fits a diverse workforce, along withactivities to promote a greater understanding of human rights
and diversity among employees.

Initiatives for Fiscal 2020
Each Group company is working to achieve the following targets by March 31, 2021.
Sony LifeFor future growth, the Sony Financial Group regards its female
employees as valuable human resources and equal to male
employees. During Sony Life’s earliest days in business, whenother Japanese life insurers were predominantly relying on afemale sales force, Sony Life strategically took the bold step of
deploying male Lifeplanner sales employees as the core of its
sales operations. As a result, it achieved growth through thesale of policies tailored to customer needs based on thesophisticated knowledge and consulting capabilities of its life
insurance/financial professionals. As times changed, however,Sony Life started actively to employ more female Lifeplanner
sales employees on a companywide basis, and is scheduled
to increase by three times the current annual number of newly
recruited female Lifeplanner sales employees, to 100 by 2020.
In April 2015, Sony Life established the Women’s Empowerment Promotion Department, which not only supports recruiting female Lifeplanner sales employees but also promotes aworkplace in which female Lifeplanner sales employees canperform continuously with peace of mind, including throughorganizational support for taking maternity/childcare leave.

Average monthly overtime per employee
20 hours or less

Initiatives for Fiscal 2020

Percentage of male employees taking childcare leave
13% or higher

Each Group company is working to achieve the following targets for female managers by March 31, 2021.

Sony Assurance

Percentage of employees taking vacation leave
75% or higher

Sony Bank

Average monthly overtime per manager/supervisor
30 hours or lessSony Life

Percentage of females inmanagement positions*1

Contributions to Sustainable Development*Sony Assurance is the first direct non-life insurer to receive the certification
based on a survey by Sony Assurance conducted on August 29, 2012. Only
those companies that have received the Kurumin logo certification and haveconsented to be listed on the Ministry of Health, Labour, and Welfare’s
website were surveyed. A direct non-life insurer refers to a Japanese
non-life insurer that sells insurance products and provides services directly
to customers without relying primarily on an insurance agency.

Promotion of Women’s Empowerment

20% or higher*1 Head office manager, section manager
Sony Assurance

Percentage of females inmanagement positions*2

15% or higher*2 Assistant manager or higher
Sony Bank

Percentage of females inmanagement positions*3

15% or higher*3 Senior manager or higher

Sony Financial Holdings Inc. Annual Report 201673

New Employee Training
In addition to training at each Group company, training programs are conducted jointly at the Group level to promote understanding of the business operations of the Group as a whole. These programs include life-planning courses, explanations of each company’s business operations, and workplace tours. Training for employees in their second year is also conducted at the Group level.

Sample Programs and Initiatives for the Development of Employees
Self-development ProgramGroup training sessions and opportunities to take correspondence courses for employees working independently to develop their skills.

Management Skill-development
ProgramConducted jointly by Sony Financial Group companies as a part of efforts to improve the managerial capabilities of management-level employees.

In-house Inter-departmental
Training Program

Work experience in different departments for a certain period of time allowing for better understanding of different operations or to achieve career plan objectives.

Recruitment and Training of Global With an eye on overseas business expansion in the future, the Sony Financial Group is conducting initiatives,
Human Resources
such as overseas actuary training.

Training System for Lifeplanner Sales Employees at Sony LifeAll Lifeplanner sales employees complete a 36-month program after joining the company in order to develop a customer-first approach,the knowledge and skills required of an insurance and finance professional, and appropriate conduct.
Lifeplanner Sales Employees Training System (As of July 1, 2016)
Graduation
test
est

In-house
education
programs

Branchtraining
process

Head
officetraining

Beforejoining
CIP*
4 timesfor atotal of
8 hours

BTP** 1
1 month
after joining

BTP new
employeetraining

Branch study sessions, group study sessions, sales office study sessions, and others
Ongoing training, up to 36 months

BTP 6

(focu
cus
used on knowledge
2 to 6 months after joining andnd
d skills training)

BTP 12

2 to 12 months after joining (focused on life planning)

BTP 242 to 24 months after joining (focused on knowledge, skills andd compliancecotraining)

BTP 362 to 36 months after joining (focused on corporate market andnd after-salesafollow-up consultations)

OJT(Process meetings, role playing, apprentice field work)

Start ofsales

BTP
follow-up
training

Graduation
test
est
Graduation
test
est

* CIP: Career Information Program**BTP: Basic Training Program

BTP
follow-up
training

Assurance certification exam (after more than one year of employment)
The Life
Insurance
Association ofJapan’s exam

Generalprocess exam
GeneralSpecial course exams
Variable insurance sales
certification examSpecial / Variableinsurance sales

Advancedcourse exam

Life Insurance
University course exams(6 fields)

Advanced

Certification
exam
Financialplannercertification
exam

Kinzai Institute for Financial Affairs, Inc.
Japan Association for Financial Planners (JAFP)

JAFP
certification
training

Life Insurance
University

2nd Grade
Certificationin Financial
Planning(national
qualification)

Total life consultant (financial
planner certified by The Life
Insurance Association of Japan)

1st Grade Certificationin Financial Planning(national qualification)
AFP

CFP®

Financial Planner

Local Communities
Social Contribution Activities through Insurance Products
Sony Assurance added a bone marrow donor support rider automatically to all policies in
its SURE medical and cancer insurance offerings in order to lessen the financial burden on
donors. Sony Assurance pays surgery benefits to policyholders who undergo surgery toharvest stem cells from their bone marrow for donation to patients with intractable blood
diseases. Under this rider, there is no insurance premium burden for the policyholder.

74

Sony Financial Holdings Inc. Annual Report 2016

SURE supports bone-marrow donors.

Social Contribution Activities with Employee
Participation
Life-planning Course Given at 900 Schools

Social contribution is a well-established part of the corporate
culture at Sony Life, where many employees discover the valueof volunteer activities and contribute to society under the slogan “One Love One Trust.” The Sony Life Volunteer Club was
established by Sony Life’s employees in 1995 after the Great
Hanshin–Awaji Earthquake, and the organization is still in
operation more than 21 years after the disaster. Each member
participates in running the club, which is funded by donations
from employees. Members devise and carry out a wide range
of initiatives.

Since fiscal 2006, Sony Life has conducted life-planning courses,
a hands-on learning program for students nationwide. Courses
are conducted by Lifeplanner sales employees. The program isdesigned to foster students’ appreciation for the importance ofleading a well-planned life, and working hard toward goals.
This program was launched following feedback from seniorhigh school teachers indicating that “by utilizing life planning, wewant to create opportunities for students to set future goals.” It
is an experiential, classroom-based program in which students,
with their whole lives ahead of them, visualize their personal
dreams and aspirations. Lifeplanner sales employees serve aslecturers, providing advice on the funds necessary to achievethese and other goals, and offering support to enable students tosee if their life plans are achievable from an economic standpoint.
Feedback from the students has been positive, with comments such as “With effort and ingenuity, I felt as if I could realize
my dreams,” “It was a good opportunity to think about my future
lifestyle and career,” and “I felt grateful that my parents are making ends meet to cover my living and educational expenses.”
By providing opportunities to think about life and money,
Sony Life hopes many members of the next-generation are able
to make their own choices in their paths of life.

Examples of Main Activities• Continuing support for the elderly victims of the Great Hanshin–
Awaji Earthquake• Support for the Special Olympics Nippon Foundation* event• Hosting youth education events at care houses• Operational support for the Oita International Wheelchair Marathon• Support for the Relay for Life** event• Activities to support reconstruction after the Great East Japan
Earthquake (soup kitchens, participation in local festivals, distributionof potted plants among temporary-housing residents, and more)

Contributions to Sustainable Development

Sony Life Volunteer Club

*What is the Special Olympics Nippon Foundation?
Special Olympics Nippon is a public-interest incorporated foundation that provides opportunities for daily sports training to intellectually challenged people
throughout the year, while promoting their social participation through organizing athletic competitions for them to demonstrate their achievements.
**What is Relay for Life?
Relay for Life is a charity event held in over 5,000 communities in 20 countries
around the world. Persons battling cancer, their families and those who havelost loved ones to the disease run laps around a track for 24 hours to promote
the eradication of cancer.

Sony Financial Group’s Donations and Grants for
Fiscal 2015
Main Recipients of Donations and Other Assistance

NPO Sorabear Foundation
The Eye Mate, Inc. and its supporting groups

Amount¥11,226,860

Life-planning Course given by Sony Life

6,323,418

Life-planning Course

FY2015

Number of schools
153
Number of participating students
19,437
Cumulative total Number of schools
900 (cumulative)(FY2006–FY2015) Number of participating students
92,368National Federation of UNESCO Associations in Japan

6,839,131Special Olympics Nippon Foundation

5,000,000

Purchase of green power and J-Credits in fiscal 2015

3,270,900

Funds for activities of Sony Life Volunteer Club

1,500,000

World Wide Fund for Nature Japan (WWF Japan)

1,130,300

Social Contribution Activities as an Institutional Investor

The Tokyo Philharmonic Orchestra Public Interest
Incorporated Foundation

1,000,000

Project Hand in Hand Japan

1,000,000

As an institutional investor, Sony Life, a subsidiary of SFH, hasannounced its adoption of Japan’s Stewardship Code—a set ofprinciples guiding the responsibilities of institutional investors.

Others (incorporated associations, incorporated foundations, academic societies, and others)
Total

3,839,653¥41,130,262

Note: Please refer to the following website for information about Sony
Life’s basic stance and exercise of voting rights with respect toJapan’s Stewardship Code (Japanese only):
http://www.sonylife.co.jp/company/management/jsc/

Sony Financial Holdings Inc. Annual Report 201675

Environmental Protection Activities
The Sony Financial Group recognizes that humankind faces a critical challenge in protecting the global
environment. The major subsidiaries have each established environmental policies, and through everyday
business activities, they carry out initiatives that give due consideration to environmental protection.

Group Company Activities
Use of Green PowerSony Life became the first Japanese life insurance company to introduce a Green Power Certification System, which enables companies to use
green power in their business activities and thus
reduce CO2 emissions. Sony Assurance andSony Bank adopt the J-Credit Scheme* to help reduce CO2
emissions. Sony Bank offsets 100% of CO2 emissions causedby its power usage (excluding the portion of power usage inoutsourced operations) as a “Carbon Offset Bank.”
In this way, each Group company contributes to the wider
use of natural sources of power, such as solar and wind
power, geothermal power, and biomass. In fiscal 2015, theentire Group purchased green power certificates and J-Credits
equivalent to 1,590 MWh.

*The J-Credit Scheme is a system whereby the government certifies credits forthe reduction or absorption of greenhouse gas emissions such as CO2
through measures including the introduction of energy-saving equipment orforest management.

Acquisition of ISO 14001 Certification
Sony Life, Sony Assurance and Sony Bank* have acquired
ISO 14001 certification, the international standard for environmental management systems. All three companies promoteenergy-saving and natural resource-saving activities such as
targets for reduced energy and photocopier paper usage, andgreen procurement to raise the percentage of eco-products
used in office supplies.
*ISO 14001 certification covers the head offices of Sony Life and Sony Assurance, along with Sony Bank’s head office and the Housing Loan Plaza. The
Sony Financial Group conducts regular internal environmental audits of ISO
14001-certified offices, and the audit results are reported to top management.

Conservation Activities Together with Customers
Donating to the Sorabear Foundation
Automobile insurance, one of Sony Assurance’s mainstay
products, supports the automotive lifestyles of its customers.
While automobiles add affluence and convenience to our lives,
exhaust gases emitted while driving are a cause of global
warming. For this reason, Sony Assurance considers promoting initiatives to prevent global warming, even a little, is its
social responsibility. Teaming up with the Sorabear Foundation, a non-profit organization that promotes the spread ofrenewable energies and environmental education, Sony Assurance has carried out a program to install solar power generators at kindergartens since 2009.
Donations to the Sorabear Foundation are used to provide
Sorabear power generation equipment—solar power generators—to kindergartens and nursery schools around the country.
In fiscal 2015, the program contributed three solar power gener-

Ceremony to mark the donation of Sorabear power generation equipment
to Kohitsuji Kindergarten in Aichi Prefecture, in October 201576

Sony Financial Holdings Inc. Annual Report 2016ators to nursery schools in Wakayama, Aichi and Hyogo prefectures. To date, Sony Assurance has donated a total of 17 solar
power generators through this program (as of July 1, 2016).
In addition, Sony Life made the donations to provide asolar power generator to a nursery school in Kagoshima prefecture in fiscal 2015.

Reducing CO2 Emissions by Switching to Paperless
Contract Procedures and Electronic Issuance ofDocuments for Customers
The Sony Financial Group has been striving to conserve paper
resources and cut down on CO2 emissions related to postal
mailings by shifting to paperless documentation for certain
contract procedures and transactions.
Sony Life has adopted paperless application procedures
for life insurance policies by equipping its sales force withapproximately 5,000 tablet devices as part of its sales support
system. As a result, Sony Life has reduced use of copier paper
by around five million sheets annually.
In addition, Sony Bank asks its customers to switch toelectronic delivery of investment trust transactional documents.
Sony Assurance has also made it possible to apply for
automobile insurance policies online, thereby avoiding the printing
and mailing of insurance application forms and other documents.
In addition, Sony Assurance pursues environmental conservation
activities, such as offering a paperless insurance certificate discount of ¥500 on automobile insurance premiums for customers
who buy a policy online and request not to have certificates of
insurance and other documents printed and mailed.

Corporate Section

Corporate Section

Sony Financial Holdings Inc. Annual Report 201677

Corporate Information(As of July 4, 2016)

Name

Sony Financial Holdings Inc.

Established

April 1, 2004

Head office

1-9-2, Otemachi, Chiyoda-ku, Tokyo, Japan

Business

Management control of subsidiaries (life insurance companies, a non-life insurance company, a bank and others)
specified by the Insurance Business Act of Japan and the Banking Act of Japan and all duties incidental to that role.

Number of employees(As of March 31, 2016)

SFH: 62(Consolidated: 9,029, Life insurance business: 7,280, Non-life insurance business: 1,177, Banking business: 532,
Parent: 40)

Common stock¥19,900 million

Note: The number of employees of SFH includes 13 belonging to the life insurance business, 1 belonging to the non-life insurance business, 8 belonging to thebanking business, and 40 belonging to the parent.

Organizational Chart*(As of July 1, 2016)
Sony Financial Holdings Inc.
General Meeting of Shareholders

Board of Statutory Auditors
Statutory Auditors

Board of Directors

Audit Department
Executive Committee
Business Execution Departments*
Corporate Planning
Department

Corporate
Communications &Investor Relations
Department

Risk Management
Department

ComplianceDepartment

Accounting
Department

Human Resources
Department

General Affairs
Department*The Financial Market Research Department will be established on August 1, 2016.

Sony Financial Group Organizational Chart of Business Operations(As of July 1, 2016)
Sony Corporation

Sony Financial Holdings Inc.

Life Insurance BusinessSony Life Insurance Co., Ltd.

Life Insurance Business
AEGON Sony Life
Insurance Co., Ltd.

Life Insurance Business
SA Reinsurance Ltd.

Consolidated subsidiaries
Affiliate accounted for by
the equity method

Banking BusinessSony Bank Inc.

Nursing Care BusinessSony Lifecare Inc.

Banking BusinessSony Payment Services Inc.

Nursing Care Business
Lifecare Design Inc.

Non-life Insurance BusinessSony Assurance Inc.

Sales of and referrals to other Group companies’
products
Shareholding

Note: The information for each business is based on SFH’s classification of segment information.

78

Sony Financial Holdings Inc. Annual Report 2016

Banking Business
SmartLink Network
Hong Kong Limited

Profiles of Group Companies(As of July 4, 2016)

Life Insurance Business
Name

Established

Head officeBusiness

CommonstockSony Life Insurance Co., Ltd.

August 10,
1979

1-9-2, Otemachi,
Chiyoda-ku,
Tokyo, Japan

Life insurance
business¥70,000 Sony Financial Holdings Inc.
million100%

AEGON Sony Life
Insurance Co., Ltd.

August 29,
2007

52-2, Jingumae 5-chome,
Shibuya-ku,
Tokyo, Japan

Life insurance
business¥14,000 Sony Life Insurance Co., Ltd.
million50%

British Bermuda

Reinsurance
business

SA Reinsurance Ltd.

October 29,
2009

Share ownership

AEGON International B.V.
50%
¥13,400 Sony Life Insurance Co., Ltd.
million50%
AEGON International B.V.
50%

Non-life Insurance Business
Name

Established

Head officeBusiness

CommonstockSony Assurance Inc.

June 10,1998

37-1, Kamata 5-chome,
Ota-ku, Tokyo, Japan

Non-life insurance
business¥20,000 Sony Financial Holdings Inc.
million100%

Name

Established

Head officeBusiness

CommonstockSony Bank Inc.

April 2,2001

3-26, Kanda-Nishikicho,
Chiyoda-ku,
Tokyo, Japan

Banking business¥31,000 Sony Financial Holdings Inc.
million100%

Credit card
settlement
services¥488
millionSony Bank Inc. 57%,
4 other companies

Hong Kong, China

Credit card
settlement
services¥13
millionSony Payment Services Inc.
100%

Commonstock

Share ownership¥1,010
millionSony Financial Holdings Inc.
100%

Banking BusinessSony Payment
Services Inc.

September 1, 3-13, Takanawa 1-chome,
2006
Minato-ku,
Tokyo, Japan

SmartLink Network February 27,
Hong Kong Limited 2013

Name

Established

Head officeBusinessSony Lifecare Inc.

April 1,
2014

11-11, Shibuya 3-chome,
Shibuya-ku,
Tokyo, Japan

Management
control of companies
handling the nursing
care business, andother duties incidental
to that role

October 5,
1999

11-11, Shibuya 3-chome,
Shibuya-ku,
Tokyo, Japan

Planning, development ¥695
and operation of
millionnursing care homes

Lifecare Design Inc.

Share ownership

Corporate Section

Nursing Care Business

Share ownershipSony Lifecare Inc.
100%

Sony Financial Holdings Inc. Annual Report 2016

79

Stock Information

Information on Common Stock, Shares Outstanding
Increase in Issued Total Number of
SharesShares Issued

Date

April 1, 2004 (Note 2)
June 25, 2004 (Note 3)
October 10, 2007 (Note 4)
March 31, 2011
April 1, 2011 (Note 5)

2,000,000
100,000
75,000—432,825,000

2,000,000
2,100,000
2,175,000
2,175,000
435,000,000

Increase inCommon Stock(Millions of yen)

Common Stock(Millions of yen)

Increase in
Capital Surplus(Millions of yen)

Capital Surplus(Millions of yen)

500
5,000
14,400
—
—

500
5,500
19,90019,90019,900175,877
5,000
14,400——175,877
180,877
195,277
195,277
195,277

Notes: 1. The shares outstanding listed above are all common stock with full voting rights and no restrictions, which are the standard shares of SFH.
2. Issued due to the Company’s establishment.
3. Issued in a private placement of 100,000 shares (0.05 shares for each share) to shareholders for an issue price of ¥100,000 per share. The amountadded to common stock was ¥50,000 per share.
4. Issued in a general book-building offering for an issue price of ¥400,000 per share and an underwriting price (the amount paid) of ¥384,000 per share.
The amount added to common stock was ¥192,000 per share and the total amount paid was ¥28.8 billion.
5. Issued due to a 200-for-1 stock split, with an effective date of April 1, 2011. Furthermore, the share unit system was adopted, whereby 100 sharesconstitute one unit.

Stock Exchange Listing(As of July 1, 2016)

The First Section of the Tokyo Stock Exchange (Securities code: 8729)

Major Shareholders(As of March 31, 2016)
Name

Number of
Shares Held

Percentage ofOwnership (%)

Sony Corporation
GOLDMAN, SACHS & CO. REG
STATE STREET BANK AND TRUST COMPANY 505223
The Master Trust Bank of Japan, Ltd. (Trust Account)
Japan Trustee Services Bank, Ltd. (Trust Account)
STATE STREET BANK AND TRUST COMPANY
Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account)
CHASE MANHATTAN BANK GTS CLIENTS ACCOUNT ESCROWMSCO CUSTOMER SECURITIES
SAJAP

261,000,000
13,136,660
9,893,655
9,222,200
8,022,937
6,250,390
4,267,114
3,875,122
3,216,600
3,043,500

60.00
3.01
2.27
2.12
1.84
1.43
0.98
0.89
0.73
0.69

Distribution of Share Ownership(As of March 31, 2016)

By shareholder type
Financial instruments firms 1.73%

Total number of shares issued

Foreign investors 25.30%

435,000,000
Corporations 60.40%80Sony Financial Holdings Inc. Annual Report 2016

Financial institutions 9.72%
Individuals and others 2.85%

Dividend Policy
Dividends

Profit Attributable to Owners of the Parent

FY2012FY2013

FY2014FY2015¥45.0 billion¥40.5 billion¥54.4 billion¥43.3 billion¥46.0 billion¥103.60¥93.11¥125.10¥99.67¥105.75

¥25

¥30

¥40

¥55

¥55

24.1%

32.2%

32.0%

55.2%

52.0%

Net Income per ShareDividend per ShareDividend Payout Ratio (Consolidated)

FY2016 (Forecast)

Basic Policy on Returning Profits to Shareholders
SFH aims for steady increases in dividends in line with earnings growth over the medium and long terms, while securing sufficientinternal reserves to ensure the financial soundness of Group companies and to invest in growth fields. Our target for the dividend
payout ratio is between 40% and 50% of profit attributable to owners of the parent. Management will determine specific dividend
amounts for each fiscal year by taking into account a comprehensive range of factors, including the capital adequacy of eachGroup company relative to risks, investment opportunities, business forecasts and legal and regulatory developments worldwide.
SFH pays dividends once a year as a year-end dividend. The Articles of Incorporation of SFH stipulate that it may also issue
an interim dividend. In regard to the decision-making entities for the payment of dividends, the General Meeting of Shareholders
decides the year-end dividend, while the Board of Directors decides the interim dividend.
As regards to the year-end dividend for fiscal 2015, taking this period’s overall operating performance into consideration, SFH
declared a year-end dividend of ¥55 per share, up ¥15 from the previous fiscal year, representing an annual dividend amount of¥23,924 million. This dividend was approved by resolution of the Ordinary General Meeting of Shareholders held on June 23, 2016.
This represents the fourth consecutive year-on-year increase in dividends since fiscal 2012.
For fiscal 2016, SFH plans to maintain its year-end dividend of ¥55 per share, taking into account the business environment of theGroup company and its forecast of consolidated financial results for the period.

Share Price

Yen
2,500
2,000
1,500
1,000
500
0

7

8

9 10 11 12 1 2 3
2014

4

5

6

7

8

9 10 11 12 1 2 3
2015

4

5

6

7

8

9 10 11 12 1 2 3
2016

4

5

6

7

8

9 10 11 12 1 2
2014

4

5

6

7

8

9 10 11 12 1 2
2015

4

5

6

7

8

9 10 11 12 1 2
2016

4

5

6

Corporate Section

Trading Volume

4 5 6
2013

Thousand shares
90,00060,00030,000

0

4 5
2013

6

3

3

3

Sony Financial Holdings Inc. Annual Report 201681

Calculation of Adjusted ROESony Life’s adjusted ROE is calculated as follows:
The amount of increase in market consistent embedded value (MCEV)* during the fiscal year plus dividends paid
MCEV* as of the beginning of the fiscal year less dividends paid plus MCEV* as of the end of the fiscal year, divided by two
Sony Assurance’s adjusted ROE is calculated as follows:
Net income (loss) plus provision amount for catastrophe reserveand its provision amount for reserve for price fluctuations, in each case after taxes
The average amount of net assets plus the sum of catastrophe reserveand its reserve for price fluctuations during the fiscal year, in each case after taxes
Sony Bank’s ROE is calculated as follows:
Profit (loss) attributable to owners of the parent
The average amount of net assets during the fiscal year
Consolidated adjusted ROE for fiscal 2015 is calculated as follows:
Consolidated adjusted ROE = Consolidated adjusted profit divided by consolidated adjusted capitalSony Life: The amount of increase in MCEV* during the fiscal year plus dividends paid
+ Sony Assurance: Net income (loss) plus provision amount for catastrophe reserve and its provision
amount for reserve for price fluctuations, in each case after taxes + Sony Bank: Profit (loss) attributable to owners of the parent
Sony Life: MCEV* as of the beginning of the fiscal year less dividends paid plus MCEV* as of the end of the fiscal year, divided by two+ Sony Assurance: The average amount of net assets plus the sum of catastrophe reserveand its reserve for price fluctuations during the fiscal year, in each case after taxes+ Sony Bank: The average amount of net assets during the fiscal year
*Sony Life discloses Market Consistent Embedded Value (“MCEV”). Sony Life’s MCEV is calculated in compliance with the European Insurance CFO Forum
Market Consistent Embedded Value Principles©** (“MCEV Principles”), the international standard in disclosing MCEV published by the CFO Forum comprising CFOs from major insurance companies in Europe.
**Copyright© Stichting CFO Forum Foundation 2008

82

Sony Financial Holdings Inc. Annual Report 2016

Financial Section
Contents
SFH Consolidated
Financial Statements

Consolidated Balance Sheets

84

Consolidated Statements of Income andConsolidated Statements of Comprehensive Income

86

Consolidated Statements of Changes in Net Assets

89

Consolidated Statements of Cash Flows91

Notes to the Consolidated Financial Statements(For the year ended March 31, 2016)92

MCEV Results for Sony Life as of March 31, 2016

112

Financial Section

Sony Financial Holdings Inc. Annual Report 201683

SFH Consolidated Financial Statements

Consolidated Balance Sheets
Sony Financial Holdings Inc.
As of March 31, 2015 and 2016
Millions of yen
2015

2016

AssetsCash and due from banks¥ 134,803

Call loans and bills bought

77,23488,200

Monetary claims purchased—

884

336,842

303,973

Securities

7,377,545

8,021,493

Loans

1,349,586

1,515,833

123,083

121,376Land

83,00783,007

Buildings

35,32333,21574

40

Construction in progress

1,666

213

Other tangible fixed assets

3,010

4,900

33,36629,887

Software33,24529,836

Goodwill

99

19

Other intangible fixed assets

21

31

Due from reinsurers

297

399

Foreign exchanges

2,224

1,139

102,756

115,474

Net defined benefit asset

3,005

2,216

Deferred tax assets

6,545

8,181

Reserve for possible loan losses(1,422)(1,308)¥9,545,868¥10,352,114

Monetary trusts

Tangible fixed assets

Leased assets

Intangible fixed assets

Other assets

Total Assets

84

Sony Financial Holdings Inc. Annual Report 2016¥

144,364

Millions of yen

Liabilities
Policy reserves and others
Reserve for outstanding claims
Policy reserves
Reserve for policyholders’ dividends
Due to agencies
Due to reinsurers
Deposits
Call money and bills soldBorrowed money
Foreign exchanges
Bonds payable
Other liabilities
Reserve for employees’ bonuses
Net defined benefit liability
Reserve for directors’ retirement benefits
Reserve under the special laws
Reserve for price fluctuations
Deferred tax liabilities
Deferred tax liabilities on land revaluation
Total Liabilities

2016¥6,879,055
61,114
6,813,749
4,191
2,450
675
1,872,860
6,000
20,00046
20,000122,340
3,395
24,558338
42,96942,969—503
8,995,195¥ 7,504,420
67,177
7,432,237
5,006
2,455
626
1,912,592—
40,00087
20,000183,835
3,557
29,263351
44,41044,4105,647
488
9,747,736

19,900195,277
212,124(0)427,301

19,900195,277
238,079(0)453,256

127,166(2,086)(1,480)0(1,522)122,078
1,292
550,672¥9,545,868

157,364(2,347)(1,465)—(3,760)149,791
1,329
604,377¥10,352,114

Financial Section

Net Assets
Shareholders’ equity
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income
Net unrealized gains (losses) on other securities, net of taxes
Net deferred gains (losses) on hedging instruments, net of taxes
Land revaluation, net of taxes
Foreign currency translation adjustments
Remeasurements of defined benefit plans, net of taxes
Total accumulated other comprehensive income
Non-controlling interests
Total Net Assets
Total Liabilities and Net Assets

2015

See accompanying “Notes to the Consolidated Financial Statements.”

Sony Financial Holdings Inc. Annual Report 201685

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
Sony Financial Holdings Inc.
For the years ended March 31, 2015 and 2016
Millions of yen(1) Consolidated Statements of Income
Ordinary Revenues
Ordinary Revenues from the Life Insurance Business
Income from insurance premiums
Insurance premiums
Ceded reinsurance commissions
Investment income
Interest income and dividends
Income from monetary trusts, net
Gains on trading securities, net
Gains on sale of securities
Gains on redemption of securities
Gains on derivatives, net
Foreign exchange gains, net
Other investment income
Gains on separate accounts, net
Other ordinary income
Ordinary Revenues from the Non-life Insurance Business
Underwriting income
Net premiums written
Interest and dividends on deposits of premiums
Other underwriting income
Investment income
Interest income and dividends
Gains on sale of securities
Transfer to interest and dividends on deposits of premiums
Other ordinary income
Ordinary Revenues from the Banking Business
Interest income
Interest income on loans
Interest income and dividends on securities
Interest income on call loans and bills boughtInterest income on deposits with banks
Other interest income
Fees and commissions
Other operating income
Gains on foreign exchange transactions, net
OthersOther ordinary income

2015

2016

¥1,352,325
1,221,077
912,605
911,068
1,537
279,691
133,135
5,283
507
8,899
1
—
5,068
7
126,789
28,78093,022
91,761
91,712
48
0
1,235
1,268
15
(48)
25
38,224
26,132
14,07011,960
7
93
0
5,880
5,997
3,906
2,090
213

¥1,362,044
1,227,409
1,026,615
1,024,974
1,640
170,048
140,981
11,97398
12,204
—
4,768
—
21
—
30,74596,904
95,612
95,549
62
0
1,264
1,313
12
(62)
27
37,731
25,481
14,73910,671
7
61
2
6,679
5,189
4,263
926
379

(Continued on next page)86

Sony Financial Holdings Inc. Annual Report 2016

Millions of yen
2016¥1,262,262
1,145,087
382,902
79,622
11,28063,166
223,130
3,675
2,027
604,357746
603,607
3
9,439
31
0
0
2,099
—
32
1,833
5,441
—
115,237
33,14988,11565,20645,985
6,857
929
2,966
8,465
0
1
1
22,9007¥1,290,941
1,169,419
363,370
84,283
11,496
74,842
184,936
5,711
2,099
613,480
4,185
609,291
2
23,095
53
—
1
—
2,798
5
1,825
3,675
14,735
132,896
36,57891,522
67,326
48,111
7,098
1,043
1,877
9,195
0
4
4
24,1883

Financial Section

Ordinary Expenses
Ordinary Expenses from the Life Insurance BusinessInsurance claims and other payments
Insurance claims
Annuity payments
Insurance benefits
Surrender payments
Other payments
Reinsurance premiums
Provision for policy reserves and others
Provision for reserve for outstanding claims
Provision for policy reserves
Interest portion of reserve for policyholders’ dividends
Investment expenses
Interest expenses
Losses on sale of securities
Losses on redemption of securities
Losses on derivatives, net
Foreign exchange losses, net
Provision for reserve for possible loan losses
Depreciation of real estate for rent and others
Other investment expenses
Losses on separate accounts, net
Operating expenses
Other ordinary expenses
Ordinary Expenses from the Non-life Insurance Business
Underwriting expenses
Net losses paid
Loss adjustment expenses
Net commission and brokerage fees
Provision for reserve for outstanding losses and claims
Provision for underwriting reserves
Other underwriting expenses
Investment expenses
Losses on sale of securities
Operating, general and administrative expenses
Other ordinary expenses

2015(Continued on next page)

Sony Financial Holdings Inc. Annual Report 201687

Consolidated Statements of Income (Continued)
Ordinary Expenses from the Banking Business
Interest expenses
Interest expenses on deposits
Interest expenses on call money and bills soldInterest on borrowed money
Interest expenses on bonds
Interest expenses on interest rate swaps
Other interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Other ordinary expenses
Ordinary Profit
Extraordinary Losses
Losses on disposal of fixed assets
Impairment losses
Provision for reserve under the special laws
Provision for reserve for price fluctuations
Losses on transfer of business
Provision for Reserve for Policyholders’ Dividends
Income Before Income Taxes
Income Taxes-Current
Income Taxes-Deferred
Total Income Taxes
ProfitProfit Attributable to Non-controlling Interests
Profit Attributable to Owners of the Parent

Millions of yen
2015

2016

¥29,060
9,407
5,012
6
22
97
4,268
0
1,948
135
17,51750
90,062
1,927
511
71
1,311
1,311
32
2,153
85,981
32,207(668)
31,53854,442
23¥54,419¥29,999
8,884
4,827
5
32
98
3,921
0
2,437
181
18,347
147
71,103
2,793
882
470
1,440
1,440
—
3,564
64,744
26,191(4,856)
21,33543,40954¥43,355

See accompanying “Notes to the Consolidated Financial Statements.”(2) Consolidated Statements of Comprehensive Income
ProfitOther Comprehensive Income
Net unrealized gains (losses) on other securities, net of taxes
Net deferred gains (losses) on hedging instruments, net of taxes
Land revaluation, net of taxes
Foreign currency translation adjustments
Remeasurements of defined benefit plans, net of taxes
Share of other comprehensive income of affiliates accounted for using equity method
Total other comprehensive income
Comprehensive Income(Details)
Comprehensive income attributable to owners of the parent
Comprehensive income attributable to non-controlling interests

88

Sony Financial Holdings Inc. Annual Report 2016

Millions of yen
2015

2016

¥54,442¥43,40935,164
302
33
1
762
0
36,264¥90,70730,198(261)
14(1)(2,254)—
27,695¥71,105¥90,690¥16¥71,068¥37

Consolidated Statements of Changes in Net Assets
Sony Financial Holdings Inc.
For the years ended March 31, 2015 and 2016
Millions of yen
2015
Shareholders’ equity

Balance at the beginning of
the period
Cumulative effects of changes
in accounting policies
Restated balance at the
beginning of the period
Changes during the period
Dividends from surplus
Profit attributable to ownersof the parent
Purchase of treasury stock
Net changes of items otherthan shareholders’ equity
Total changes during the period
Balance at the end of the period

Common stock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equity¥19,900¥195,277¥164,790¥(0)¥379,967

—

—

5,965

—

5,965

19,900195,277

170,755(0)385,932——(13,049)—(13,049)————

54,419——(0)54,419(0)——¥19,900——¥195,277—
41,369¥212,124

—
(0)
¥(0)

—
41,369¥427,301
Millions of yen

2015
Accumulated other comprehensive income
Net unrealized Net deferredgains (losses) gains (losses)
on otheron hedging
securities,
instruments,
net of taxes
net of taxes¥(2,388)¥(1,513)¥0¥(2,292) ¥ 85,807

—

—

—

—

(2,388)(1,513)

0

—

—

—
—
302
302
¥(2,086)

Total net
assets¥1,275¥467,050

—

—

5,965

(2,292)85,8071,275

473,015

—

—

—

—

(13,049)

—
—

—
—

—
—

—
—

—
—

54,419(0)

33
33¥(1,480)

0
0
¥0

769
36,270769
36,270¥(1,522) ¥122,078

16
16¥1,29236,28777,657¥550,672

Financial Section

Balance at the beginning of
the peiod¥92,002
Cumulative effects of changes
in accounting policies—
Restated balance at the
beginning of the period
92,002
Changes during the period
Dividends from surplus—
Profit attributable to ownersof the parent—
Purchase of treasury stock—
Net changes of items otherthan shareholders’ equity
35,164
Total changes during the period
35,164
Balance at the end of the period ¥127,166

Land
revaluation,
net of taxes

RemeasureTotal
Foreignments ofaccumulated
currency
definedothertranslation benefit plans, comprehensive Non-controlling
adjustments net of taxes
incomeinterests(Continued on next page)

Sony Financial Holdings Inc. Annual Report 201689

Consolidated Statements of Changes in Net Assets (Continued)
Millions of yen
2016
Shareholders’ equity

Common stock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equity¥19,900¥195,277¥212,124¥(0)¥427,301——(17,399)—(17,399)————

43,355——(0)43,355(0)——¥19,900——¥195,277—
25,955¥238,079

—
(0)
¥(0)

—
25,954¥453,256

Balance at the beginning of
the period
Changes during the period
Dividends from surplus
Profit attributable to ownersof the parent
Purchase of treasury stock
Net changes of items otherthan shareholders’ equity
Total changes during the period
Balance at the end of the period

Millions of yen
2016
Accumulated other comprehensive income
Net unrealized Net deferredgains (losses) gains (losses)
on otheron hedging
securities,
instruments,
net of taxes
net of taxes

Balance at the beginning of
the period¥127,166
Changes during the period
Dividends from surplus—
Profit attributable to ownersof the parent—
Purchase of treasury stock—
Net changes of items otherthan shareholders’ equity
30,198
Total changes during the period
30,198
Balance at the end of the period ¥157,364¥(2,086)¥(1,480)

¥0

—

—

—

—

—
—

—
—

—
—

—
—

(261)
(261)
¥(2,347)14
14¥(1,465)

(0)
(0)
¥ —

See accompanying “Notes to the Consolidated Financial Statements.”

90

Sony Financial Holdings Inc. Annual Report 2016Land
revaluation,
net of taxes

RemeasureTotal
Foreignments ofaccumulated
currency
definedothertranslation benefit plans, comprehensive Non-controlling
adjustments net of taxes
incomeinterests¥(1,522) ¥122,078

Total net
assets¥1,292¥550,672——(17,399)————

43,355(0)(2,237)
27,713(2,237)
27,713¥(3,760) ¥149,791

37
37¥1,32927,75053,705¥604,377

Consolidated Statements of Cash Flows
Sony Financial Holdings Inc.
For the years ended March 31, 2015 and 2016

Millions of yen
2015¥ 85,981
1,833
9,686
71
79
3,713
612,072
3
2,153
(116)
2,954
88
1,311
(160,536)(134,394)
9,438(32,341)42
1,506(129,767)(16,093)
—
—
—
5,528
6
27,714
290,938
172,736(9,117)(2,202)(26,698)
425,656

2016¥

64,744
1,825
10,067470
79
6,063
618,487
2
3,564
(113)
2,469
69
1,440
(167,777)
7,620
8,938
22,92418
718(156,996)
39,93520,000
5,115(6,000)1,085
40(16,020)
468,773
180,527(9,196)(2,752)(34,875)
602,475(3,081)5,300(943,359)
588,936(54,199)
24,618—(1,626)(383,413)
42,243(54,563)(4,712)(1,000)(2,500)758(445,431)—
48,465(1,327,890)
698,310(56,782)
28,76162,804(567)(546,898)
55,576(2,049)(6,927)(1,500)(1,450)—(558,825)(13,050)(0)(36)(13,087)4(32,857)
240,279¥ 207,422(17,401)(0)(36)(17,437)(13)
26,197
207,422233,620¥

Financial Section

Cash flows from operating activities
Income before income taxes
Depreciation of real estate for rent and others
Depreciation and amortization
Impairment losses
Amortization of goodwill
Increase (decrease) in reserve for outstanding claims
Increase (decrease) in policy reserve
Interest portion of reserve for policyholders’ dividends
Provision for (reversal of) reserve for policyholders’ dividends
Increase (decrease) in reserve for possible loan losses
Increase (decrease) in net defined benefit liability
Increase (decrease) in reserve for directors’ retirement benefits
Increase (decrease) in reserve for price fluctuations
Interest income and dividends(Gains) losses on securities
Interest expenses
Exchange (gains) losses(Gains) losses on disposal of tangible fixed assets
Equity in (gains) losses of affiliates
Net (increase) decrease in loans
Net increase (decrease) in deposits
Net increase (decrease) in borrowed money (excluding subordinated borrowings)
Net (increase) decrease in call loans and others
Net increase (decrease) in call money and others
Net (increase) decrease in foreign exchange (assets)
Net increase (decrease) in foreign exchange (liabilities)
Others, net
SubtotalInterest and dividends received
Interest paid
Policyholders’ dividends paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Investments in monetary trusts
Proceeds from sale of monetary trusts
Purchases of securities
Proceeds from sale and redemption of securities
Investments in loans
Collections of loans
Net increase (decrease) in collateral for securities lending transactions
OthersTotal of net cash provided by (used in) investment transactions
Total of net cash provided by (used in) operating activities and investment transactions
Purchases of tangible fixed assets
Purchases of intangible fixed assets
Purchase of securities of a non-consolidated subsidiary
Purchase of securities of affiliates
OthersNet cash provided by (used in) investing activities
Cash flows from financing activities
Cash dividends paid
Purchase of treasury stock
OthersNet cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period

See accompanying “Notes to the Consolidated Financial Statements.”
Note: The above Consolidated Statements of Cash Flows have been prepared based on Article 210-10 of Ordinance for Enforcement of the Insurance Business Act
of Japan.
Sony Financial Holdings Inc. Annual Report 201691

Notes to the Consolidated Financial Statements(For the year ended March 31, 2016)

1 Basis of Presenting Consolidated Financial Statements
Sony Financial Holdings Inc. (“SFH”) and its domestic subsidiaries maintain their accounting records and prepare theirfinancial statements in Japanese yen in accordance with the provisions set forth in the Companies Act of Japan, the Insurance Business Act of Japan and the Banking Act of Japan and in conformity with generally accepted accounting principles
and practices in Japan, which differ in certain respects from the application and disclosure requirements of generally
accepted accounting principles and practices under the International Financial Reporting Standards.

2 Principles of Consolidation(1) Scope of consolidation
Consolidated subsidiaries: 5 companies
Company names
Sony Life Insurance Co., Ltd.
Sony Assurance Inc.
Sony Bank Inc.
Sony Payment Services Inc.
SmartLink Network Hong Kong Limited
Non-consolidated subsidiaries:
Main companies
Sony Lifecare Inc.
Lifecare Design Inc.
These non-consolidated subsidiaries are excluded from the scope of consolidation for the current year because they are immaterial in light of the total assets, ordinary revenues, profit or loss (amounts equivalent to the Group’s interests in these companies),
retained earnings (amounts equivalent to the Group’s interests in these companies) and accumulated other comprehensive
income (amounts equivalent to the Group’s interests in these companies) and their exclusion from the scope of consolidation does
not hinder a rational judgment of the Sony Financial Group’s financial position and results of operations.

(2) Application of the equity method
Affiliates accounted for by the equity method: 2 companies
Company names
AEGON Sony Life Insurance Co., Ltd.
SA Reinsurance Ltd.
Non-consolidated subsidiaries that are not accounted for by the equity method:
Main companies
Sony Lifecare Inc.
Lifecare Design Inc.
These non-consolidated subsidiaries are not accounted for by the equity method because they are immaterial in light of the profit
or loss (amounts equivalent to the Group’s interests in these companies), retained earnings (amounts equivalent to the Group’s
interests in these companies) and accumulated other comprehensive income (amounts equivalent to the Group’s interests in thesecompanies) and their exclusion does not hinder a rational judgment of the Sony Financial Group’s financial position and results ofoperations.
Affiliates that are not accounted for by the equity method:
There is no related information to be reported.

(3) Fiscal year-end of consolidated subsidiaries
Fiscal year-end of all consolidated subsidiaries is March 31, the same date as the consolidated financial statements of SFH.

(4) Amortization of goodwill
Goodwill is amortized using the straight-line method over 5 years.

92

Sony Financial Holdings Inc. Annual Report 2016

3 Summary of Significant Accounting Policies(1) Securities
Securities, including monetary claims purchased which are equivalent to securities, and securities managed as assets of money
held in trust, are stated in the following manner: Securities held for trading purposes (“trading securities”) are stated at fair value
with unrealized gains and losses charged to income. The cost of such securities sold is determined by the moving-averagemethod. Held-to-maturity securities and policy-reserve-matching bonds held in accordance with the “Temporary Treatmentof Accounting and Auditing concerning Policy-Reserve-Matching Bonds in the Insurance Industry (The Japanese Institute ofCertified Public Accounts Industry Audit Committee Report No. 21, issued on November 16, 2000; hereinafter “the Industry
Audit Committee Report No. 21”) are stated at amortized cost (straight-line method) using the moving-average method. Available-for-sale securities whose fair values are readily determinable are stated at fair value in the consolidated balance sheets
based on market prices prevailing at each balance sheet date, with unrealized gains (losses), net of taxes, included in net
assets and acquisition costs calculated using the moving-average method. Available-for-sale securities whose fair values are
deemed extremely difficult to determine are stated at acquisition cost based on the moving-average method.
Moreover, the overview of risk management policies of policy-reserve-matching bonds is as follows:
Among the bonds corresponding to sub-segments (according to insurance class, years to maturity, etc.) for individual life
insurance and individual annuity sold by domestic life insurance subsidiaries, SFH records those held with the purpose ofcontrolling the duration of insurance liabilities as policy-reserve-matching bonds, in accordance with the Industry Audit
Committee Report No. 21.

(2) Derivative financial instruments
Derivative financial instruments are stated at fair value, with changes in fair value included in income for the period inwhich they arise, except for derivatives that are designated by SFH and its consolidated subsidiaries (the “Companies”) as “hedging instruments.”(3) Tangible fixed assets (excluding leased assets)
All tangible fixed assets, including real estate for lease, are initially recorded at cost. Subsequent expenses related to asset
improvements are capitalized or are recognized as a separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Companies and the cost of the item can be measured reliably.
All other repairs and maintenance charges are charged to income when incurred.
Depreciation is computed by the straight-line method over the estimated useful lives of the assets as follows:• Buildings: 3 to 47 years• Other tangible fixed assets: 2 to 20 years(4) Intangible fixed assets (excluding leased assets)
Intangible fixed assets are amortized using the straight-line method. Software for internal use is amortized using the straight-line
method generally over 5 years, its estimated useful life.

(5) Leased assets
All leased assets with respect to non-ownership-transfer finance leases are amortized by the straight-line method overthe lease term, without any residual value.

(6) Reserve for possible loan losses

Sony Financial Holdings Inc. Annual Report 2016

Financial Section

The reserve for possible loan losses is provided as follows for losses from bad debts mainly in accordance with self-assessment
guidelines and write-off and reserve guidelines. With respect to receivables such as loans to borrowers subject to bankruptcy,
court-guided rehabilitation, or similar legal or formal proceedings (the “Bankrupt Borrowers”), loans to borrowers that are substantially in the same condition as the Bankrupt Borrowers (the “Substantially Bankrupt Borrowers”) and money on deposits whosemarket value declined significantly, the Companies provide a reserve in the amount expected to be uncollectible after deducting
amounts expected to be collectible from collateral, guarantees and other means. For loans to borrowers that are not yet bankrupt
but are highly likely to be bankrupt in the future (the “potentially bankrupt borrowers”), the Companies provide a reserve in theamount deemed necessary by comprehensively considering the borrowers’ solvency, of the remaining amount after deducting
amounts expected to be collectible from collateral, guarantees and other means. For other loans, the Companies provide areserve in the amount calculated by multiplying the loans by a historical loan loss ratio determined over certain periods. All loans
are subject to asset assessment by the related operational departments in accordance with self-assessment guidelines, and theassessment results are reviewed by the departments responsible for asset inspection that are independent from the operational
departments. The amount of reserve is provided based upon the above results.

93

(7) Reserve for employees’ bonuses
The reserve for employees’ bonuses is provided for the estimated amount of bonuses the Companies are required to pay for services provided during the current fiscal year.

(8) Reserve for directors’ retirement benefits
The reserve for directors’ and statutory auditors’ retirement benefits is provided based on the internal regulations of the Companies and calculated at the amount that would be payable if all eligible directors and statutory auditors were to resign at the fiscal
year-end.

(9) Reserve for price fluctuations
Pursuant to requirements under Article 115 of the Insurance Business Act of Japan, the reserve for price fluctuations is provided
for price fluctuations primarily related to stocks, bonds and foreign currency-denominated assets which are exposed to losses due
to market price fluctuations. This reserve is only used to reduce losses arising from price fluctuations on those assets.

(10) Accounting for retirement benefits
1) Method of attributing projected retirement benefits
In the calculation of retirement benefit obligations, the Companies mainly apply the benefit formula basis in attributing
projected retirement benefits to the periods until the end of the current fiscal year.
2) Amortization method of prior service cost and net actuarial gain or loss
Unrecognized prior service cost is amortized using the straight-line method within the employees’ average remaining service
period at incurrence. Unrecognized net actuarial gain or loss is amortized using the straight-line method over 7 to 16 years
within the employees’ average remaining service period, commencing from the fiscal year immediately following incurrence.

(11) Translation of foreign currencies
Assets and liabilities denominated in foreign currencies are translated into Japanese yen at the foreign exchange rates in effect ateach balance sheet date, whereas components of net assets denominated in foreign currencies are translated at historical rates.
The current year’s profit and loss accounts are translated into yen using the average exchange rate for the fiscal year.

(12) Hedge accounting
The banking subsidiary applies either deferred hedge accounting or fair value hedge accounting to its transactions for hedging
interest rate risks on financial assets and liabilities. With regard to hedging that offsets fluctuating interest rates on fixed-rate loans,the subsidiary identifies the hedged items that are grouped on the basis of a certain period of their remaining maturity and designates interest rate swaps as a hedging instrument, in accordance with “Accounting and Auditing Treatments on Application of
Accounting Standard for Financial Instruments in the Banking Industry” (Industry Audit Committee of the Japanese Institute of Certified Public Accountants (the “Industry Audit Committee”) Statement No. 24, February 13, 2002).
With regard to hedging that fixes the cash flow of a forecasted transaction of a short-term fixed-rate deposit, the subsidiary
identifies the hedged items that are grouped on the basis of a certain period of their interest rate revision and designates interest
rate swaps as a hedging instrument, in accordance with the Industry Audit Committee, Statement No. 24. With regard to hedging
that offsets fluctuations in the fair value of fixed-rate bonds which are classified as available-for-sale securities, the subsidiary identifies the hedged items individually and designates interest rate swaps and others as a hedging instrument. The above-mentioned
hedging instruments are designated with almost identical significant terms and conditions for both the hedging items and thehedged instruments. Accordingly, such hedges are considered highly effective, allowing the banking subsidiary to ensure hedging
effectiveness.

(13) Cash and cash equivalents
Cash equivalents consist of highly liquid investments without significant market risks, such as demand deposits and short-term
investments with an original maturity of 3 months or less.

(14) Accounting for consumption taxes
National and local consumption taxes (the “consumption taxes”) received and paid by the Companies, excluding loss adjustment
expenses and operating, general and administrative expenses of SFH’s non-life insurance subsidiary, are not included in income
and expenses. Under the Consumption Tax Act of Japan, the consumption taxes paid on property and equipment are not deductible from the consumption taxes received; they are recorded as “other assets” and amortized on a straight-line basis over 5 years.
Other non-deductible consumption taxes are charged to income as incurred.

94

Sony Financial Holdings Inc. Annual Report 2016

(15) Policy reserves
Pursuant to Article 116 of the Insurance Business Act of Japan, SFH’s life insurance subsidiary maintains a policy reserve for thefulfillment of future obligations under life insurance contracts. The policy reserve is established by the net level premium reserve
method, which assumes a constant or level amount of net insurance premiums over the term of the relevant policy when calculating the amount of the reserve required to fund all future policy claims. The net insurance premium is a portion of the premium covering insurance under-writing risk, which is estimated based on factors such as mortality rates, investment yield, surrender rates
and other factors. The net level premium reserve for individual insurance contracts underwritten from FY1996 is calculated usingmortality and interest rates set by the Financial Services Agency of Japan as standard policy reserve. Additionally, the net level
premium reserve for individual insurance contracts underwritten before FY1996 is calculated using mortality and interest rates
approved by the supervisor of insurance business in Japan.

(16) Changes in accounting policies
Application of Accounting Standards for Business Combinations
The Companies have applied the “Revised Accounting Standards for Business Combinations” (ASBJ Statement No. 21, September 13, 2013), the “Revised Accounting Standards for Consolidated Financial Statements” (ASBJ Statement No. 22, September
13, 2013), the “Revised Accounting Standards for Business Divestitures” (ASBJ Statement No. 7, September 13, 2013) andrelated standards from the beginning of the fiscal year ending March 31, 2016. Accordingly, the method of presenting net income
and other items was amended, and “minority interests” was changed to “non-controlling interests.” These reclassifications of theconsolidated financial statements for the fiscal year ended March 31, 2015 have been made to conform to the presentation for theyear ended March 31, 2016.

4 Notes to the Consolidated Balance Sheets
1. Securities with a book value of ¥93,037 million were pledged as collateral for the ¥62,804 million of collateral for securities lendingtransactions and the ¥40,000 million of borrowed money at March 31, 2016. In addition to the assets described above, securities
with a book value of ¥37,960 million and cash collateral paid for financial instruments of ¥7,701 million were pledged as collateral
for cash settlements, variation margins of futures markets and certain other purposes at March 31, 2016.

2. The consolidated balance sheet amount of securities loaned for consumption under the loan agreement was ¥48,796 million.
3. Securities include shares in non-consolidated subsidiaries and affiliates worth ¥14,949 million. Among this, investments in jointly
controlled companies are ¥11,389 million.

4. The balance of loans includes ¥285 million in loans to bankrupt borrowers (before deductions for reserve for possible loan losses)and ¥1,332 million in non-accrual delinquent loans (before deductions for reserve for possible loan losses). Loans to bankrupt borrowers include loans that have been in arrears on principal or interest payments for a considerably long period of time or loans(before deductions for reserve for possible loan losses) on which principal or interest payments are considered unlikely to occur inthe future for other reasons and on which interest income is not recognized. These loans are with reasons defined under Article
96-1-3, i through v of the Order for Enforcement of the Corporation Tax Act (Enforcement Order 97 of 1965), or 96-1-4 of thesame guidelines. Non-accrual delinquent loans are loans on which accrued interest income is not recognized, excluding loans tobankrupt borrowers and loans on which interest payments are deferred in order to support the borrowers’ recovery from financial
difficulties.
Financial Section

5. The balance of loans does not include past due loans (3 months or more). Past due loans (3 months or more) are loans on whichprincipal or interest payments are delayed for 3 months or more from the date following the due date, excluding loans to bankrupt
borrowers and non-accrual delinquent loans.

Sony Financial Holdings Inc. Annual Report 201695

6. The balance of loans includes ¥1,443 million in restructured loans (before deductions for reserve for possible loan losses). Restructured loans are loans on which terms and conditions have been amended in favor of the borrowers (e.g., reduction of the original
interest rate, deferral of interest payments, extension of principal repayments or debt waiver) in order to support the borrowers’
recovery from financial difficulties, excluding loans to bankrupt borrowers, non-accrual delinquent loans and past due loans (3months or more).

7. The total amount of loans to bankrupt borrowers, non-accrual delinquent loans, and restructured loans was ¥3,061 million (before
deductions for reserve for possible loan losses).

8. In terms of loan participation, the participating principals that were accounted for as loans to the original obligor in accordance with
“Accounting and Presentation of Loan Participation” (Accounting Standards Committee of the Japanese Institute of Certified Public
Accountants, Statement No. 3, November 28, 2014) includes the consolidated balance sheet amount of ¥8,603 million.

9. Accumulated depreciation of tangible fixed assets as of March 31, 2016 was ¥31,898 million.
10. The balance sheet includes ¥850,323 million in assets and liabilities in equal amounts related to separate accounts as stipulated in
Article 118 of the Insurance Business Act of Japan as of March 31, 2016, at SFH’s life insurance subsidiary.

11. Changes in the reserve for policyholders’ dividends at SFH’s life insurance subsidiary for the fiscal year ended March 31, 2016 are
as follows:
Balance at the beginning of the period
Policyholders’ dividends during the period
Increase in interest
Provision for reserve for policyholders’ dividends
Balance at the end of the period¥4,191 million¥2,752 million¥2 million¥3,564 million¥5,006 million

12. On March 31, 2002, SFH’s life insurance subsidiary revalued its land for operating purposes, as permitted by the Act on Revaluation of Land (Act No. 34, enacted March 31, 1998—the “Law”). The tax effect of the revaluation difference is accounted for differently, depending on whether there are gains or losses; when there is a loss, a valuation allowance is fully provided for the tax effectof the loss, and when there is a gain, the tax effect is recorded in “deferred tax liabilities on land revaluation.” After excluding theseamounts, the net revaluation difference is reported as “land revaluation” in net assets.
The revaluation method stipulated by Article 3-3 of the Law was based on the land appraisal in conformity with Article 2-5 of
the Order for Enforcement related to the Law (Cabinet Order No. 119, effective from March 31, 1998).

13. Contracts for commitments to provide credit lines and overdrafts of the life insurance subsidiary and the banking subsidiary areagreements to lend to customers, up to a prescribed amount, as long as there is no violation of the conditions stipulated in thecontracts. The amount of unused commitments at March 31, 2016 was ¥30,611 million, and the amount of unused commitments
whose original contract terms are within 1 year at March 31, 2016 was ¥27,011 million.

14. Expected future losses of the life insurance subsidiary under the life insurance policyholder protection structure stipulated under
Article 259 of the Insurance Business Act of Japan amounted to ¥9,821 million. Such losses are recognized as expenses during
the fiscal year in which they are contributed.

15. Net assets per share were ¥1,386.32.

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Sony Financial Holdings Inc. Annual Report 2016

16. Financial Instruments(1) Description of financial instruments
1) Policy on financial instruments
The Companies conduct the life insurance, non-life insurance and banking businesses in accordance with the provisions of
the Insurance Business Act of Japan, the Banking Act of Japan and other relevant provisions. With regard to financial assets(except for assets in separate accounts as stipulated in Item 1, Article 118 of the Insurance Business Act of Japan in the life
insurance business), to ensure steady investment income the Companies hold various investment assets, including Japanese
government and corporate bonds, foreign government and corporate bonds, Japanese stocks and loans. Deposits from individual customers in the banking business account for nearly all of the Companies’ financial liabilities. Although the Companies
hold financial assets as well as financial liabilities, which are subject to the risk of interest rate and exchange rate fluctuations,they strive to protect themselves from the negative effects of these fluctuations by maintaining an appropriate balance between
assets and liabilities by conducting asset-liability management (ALM) in each of the businesses. Furthermore, derivative transactions are used to control risks in the life insurance business and banking business.

Sony Financial Holdings Inc. Annual Report 2016

Financial Section

2) Financial instruments and related risks
Securities and loans constitute the majority of the Companies’ financial asset holdings. Most of the securities holdings are in
Japanese government and corporate bonds. Other holdings include Japanese stocks, foreign securities and investment in partnership. These holdings are intended either for trading, for holding to maturity, for matching policy reserves or for available-forsale. They are subject to various risks, including interest rate risk, credit risk, stock market price fluctuation risk and exchange
rate risk. Furthermore, the Companies hold some of their financial assets in the shares of overseas unlisted companies, whichhave limited liquidity.
The majority of loans are policy loans in the life insurance business, and individual mortgage loans in the banking business.
These loans carry the credit risk of default, as well as interest rate risk. However, policy loans are limited to the amount of surrender payments, and mortgage loans are backed by real estate. Consequently, loan-related risks are relatively low.
Financial liabilities, meanwhile, are mainly deposits from individual customers, which are subject to interest rate risk. As
some of these deposits are denominated in foreign currencies, they are subject to exchange rate risk, as well as interest raterisk. The life insurance business uses several derivative transactions such as interest rate swaps for hedging interest rate risks
on assets and liabilities, forward foreign exchange transactions for hedging foreign exchange risks associated with assets aswell as the minimum guarantees for individual variable life insurance, and stock index futures trading for hedging equity market
price fluctuation risks associated with assets and the minimum guarantees for individual variable life insurance, and as a matterof policy, does not use derivative transactions for speculative purposes. Hedge accounting is not applied to derivative transactions used in the life insurance business.
The banking business uses several derivative transactions primarily as one aspect of ALM. In this category, hedge accounting is applied. Interest rate swaps are used to hedge against the interest rate risk of fixed-rate loans and deposits. In respect ofloans, the banking subsidiary ensures hedge effectiveness by confirming at the commencement of hedging that the hedgedloans and the interest rate swaps as hedging instruments are grouped on the basis of three months or less of the remaining
maturity. In respect of deposits, the banking subsidiary ensures hedge effectiveness by confirming at the commencement ofhedging that the hedged deposits and the interest rate swaps as hedging instruments share the same interest rate index, andare grouped on the basis of three months or less of the interest rate revision terms.
Interest rate swaps and others are used as hedging instruments to offset fluctuations in the fair value of fixed-rate bonds
classified as available-for-sale securities. When the hedge is implemented, the banking subsidiary determines hedge effectiveness by confirming that the cash flows of the securities to be hedged match those of the hedging method (such as interest rate
swaps).
Transactions involving financial instruments are subject to liquidity risk. Liquidity risk includes cash flow risk and market
liquidity risk. Cash flow risk is the risk of our inability to make cash payments when due because of an inability to maintain sufficient cash reserves, as well as the risk of loss if the Companies are forced to raise funds under unfavorable conditions in orderto obtain cash to meet their payment obligations. Market liquidity risk is risk of loss due to an inability to conduct market transactions, in particular from an inability to change our market position at a given time, as well as the risk of loss if the Companies
are forced to complete transactions under unfavorable market conditions, in each case due to market turmoil or other factors.

973) Risk management of financial instruments
SFH formulates fundamental principles for risk management and manages risks specific to its subsidiaries’ scale, business content and other attributes. Our Risk Management Guidelines establish specific conditions for managing Group risks, while eachof the subsidiaries manages risks on its own. SFH’s Corporate Control Department submits periodic reports to SFH’s Board of
Directors and Executive Committee on subsidiaries’ risk management conditions recognized through monitoring or by holding
Risk Management Meetings.
(i) Credit risk
The Companies use the following methods to manage the credit risk of principal subsidiaries:(a) At the life insurance subsidiary, the risk management division manages issuer credit risk on securities and counterparty risks
by specifying details such as risk management methods and procedures in regulations. The risk management division periodically reports such information to the Board of Directors and the Executive Committee.
(b) The non-life insurance subsidiary ascertains issuer credit information and market values on securities in line with various regulations for asset management risk. The risk management division reports on the situation regularly to the Board of Directors
and the Executive Committee.
(c) The banking subsidiary has formulated and conformed to various regulations for managing credit risks, and controls credit
risk depending on the nature of each type of financial asset. In respect of individual loans, the subsidiary has developed aframework for managing individual credit, including credit screenings, management of credit information, setting of collateraland the handling of problem assets on a case-by-case basis.
In respect of corporate loans or bonds payable, the subsidiary has developed a framework for managing corporate
credit and market credit, including credit screenings, credit limit control, the management of credit information, credit ratings, the setting of guarantees or collateral, and handling of problem assets on a case-by-case basis.
The subsidiary manages market credit risk, such as securities issuer credit risk and, on derivative transactions, counterparty risk, by periodically assessing market value information.
The aforementioned credit risk management is carried out by the risk management division and the screening division.
These divisions periodically report risk management conditions to management via the Board of Directors and the Executive
Committee. In addition, the internal audit division conducts regular audits.
(ii) Market risk
The Companies use the following methods to manage the market risk of principal subsidiaries:(a) The life insurance subsidiary manages various market-related risks in the following manner:• Interest rate risk Interest rate risk is managed by the risk management division based on the regulations for interest
rate risk management that specify details such as risk management methods and procedures. Based on ALM policies thatare determined through such methods as deliberation by the Executive Committee, the subsidiary determines and confirms
actual risk conditions with the Board of Directors. The division maintains an overall grasp on the interest rates and durationsof financial instruments, and monitors them based on the analysis of the quantity of risk using value at risk (VaR), and it periodically reports such information to the Board of Directors and the Executive Committee.
• Exchange rate risk Exchange rate risk is managed by the risk management division based on the regulations forexchange rate risk management that specify details such as risk management methods and procedures. The division periodically reports such information to the Board of Directors and the Executive Committee.
• Equity market price fluctuation risk Equity market price fluctuation risk is managed by the risk management division
based on the regulations for equity market price fluctuation risk management that specify details such as risk management
methods and procedures. The division periodically reports such information to the Board of Directors and the Executive
Committee.
• Derivative transactions Derivative transactions are managed by the risk management division based on the regulations
for derivative transactions that specify details such as risk management methods and procedures. The division periodicallyreports such information to the Board of Directors and the Executive Committee.
(b) The non-life insurance subsidiary manages various market-related risks in the following manner:• Interest rate risk Regulations on asset management risk specify the details such as risk management methods andprocedures based on risk management policies determined by the Board of Directors. The risk management division monitors individual risks and reports on the situation regularly to the Board of Directors and the Executive Committee.
• Price fluctuation risk Equity securities are held for strategic investments for the purpose of enhancing business partnerships. In accordance with regulations on asset management risk, the risk management division monitors the market
environment and financial conditions, and reports on the situation regularly to the Board of Directors and the Executive
Committee.

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Sony Financial Holdings Inc. Annual Report 2016

(c) The banking subsidiary manages various market-related risks in the following manner. The risk management division handles each of these risks and periodically reports risk management conditions to the Board of Directors and the Executive
Committee. In addition, the internal audit division conducts regular audits.
• Interest rate and exchange rate risk By formulating and conforming with market risk management regulations, thesubsidiary manages the risk of loss from changes in the value of assets and liabilities (including off-balance-sheet items) as
well as from changes in income from assets and liabilities, owing to fluctuations in various market risk factors, such as interest rates, exchange rates and stock prices. Market risk management regulations specify details such as risk management
methods and procedures. Based on ALM and risk management policies that are determined through such methods as
deliberation by the Board of Directors, an ALM committee and a risk management committee meet—typically once eachmonth—to understand and confirm actual conditions and deliberate future responses and risk conditions. On a daily basis,the risk management division maintains an overall understanding of interest and exchange rates on financial assets and liabilities, as well as their durations, conducts monitoring that includes VaR and interest rate sensitivity analysis, and ensuresregulatory conformance. In relation to ALM, the subsidiary also conducts interest rate swaps, currency swaps, foreignexchange and other derivative transactions to hedge against interest and exchange rate fluctuation risks.
• Market price fluctuation risk The subsidiary manages the holding of investment products, including securities, inaccordance with market risk management regulations as well as market credit risk. The investment division purchases securities externally, and risks associated with changes in the market price of such securities are managed through prior screening by the screening division, the setting and control of investment limits by the risk management division, and continuous
monitoring by each responsible division.
• Derivative transactions Derivative transactions are executed in accordance with regulations on market risk. The subsidiary also separates and conducts internal checks of individual departments’ execution of transactions, evaluation ofhedge effectiveness and operations management.
• Quantitative information on market risk The principal financial instruments affected by the major risk parameters ofinterest rate risk and exchange rate fluctuation risk are loans, securities, deposits in the banking business and derivativetransactions.
The impact of such risks on these financial assets and liabilities was calculated using the historical simulation method
to determine gains or losses over a given period of 20 business days, assuming the fluctuation of interest and exchange
rates within a rational forecast band determined over an observation period of 250 business days. The Companies thenemployed quantitative analysis to manage interest rate and exchange rate fluctuation risks. The resulting risk amount with
a 99% confidence interval was ¥1,781 million as of March 31, 2016.
This amount of impact is based on the assumption that risk parameters other than interest rates and exchange rates are
fixed. In the event that fluctuations exceed the rational forecast band for interest and exchange rates, the risk impact may
exceed the amount calculated. The aforementioned market risk management is carried out primarily by the risk management division. The division periodically reports risk management conditions to the Board of Directors and the Executive
Committee. In addition, the internal audit division conducts regular audits.

Financial Section(iii) Liquidity risk
The Companies use the following methods to manage the liquidity risk of principal subsidiaries.
(a) At the life insurance subsidiary, in line with liquidity risk management regulations, the accounting division prepares andupdates cash flow plans in a timely manner based on the reports from departments and manages cash flows, and the risk
management division manages the liquidity risk. The accounting division and risk management division periodically or asneeded report such information to the Board of Directors and the Executive Committee.
(b) The non-life insurance subsidiary establishes regulations related to liquidity risk. Its cash flow management division prepares and updates cash flow plans. The risk management division manages liquidity risk by monitoring the situations andreports on the situation regularly to the Board of Directors and the Executive Committee.
(c) The banking subsidiary has formulated and conformed with regulations for managing liquidity risk, and manages a variety ofliquidity risks. Concerning the management of cash flow risks, cash flows are classified into phases based on the degree ofpressure, and methods for risk management and reporting are set out for each phase, while guidelines are formulated andreviewed as necessary. To manage market liquidity risk, the subsidiary works to understand market liquidity conditions thatpertain to the types of products it handles. The subsidiary formulates and revises guidelines on a product by product basis,
as necessary. The aforementioned liquidity risk management is carried out by the risk management division. The divisionperiodically reports risk management conditions to the Board of Directors and the Executive Committee. In addition, theinternal audit division conducts regular audits.
4) Supplementary explanation of the fair value of financial instruments
Market prices of financial instruments are considered to indicate their fair value, unless market prices are not available. In thiscase, rational methods are used to measure their fair values. Although these measurements use assumptions that are believed
to be reasonable under the circumstances, the resulting values may differ if measured using different assumptions.

Sony Financial Holdings Inc. Annual Report 201699

(2) Fair value information on financial instruments
Below is fair value information on financial instruments as of March 31, 2016, excluding securities whose fair values are not readily
determinable (see Note 2).
Millions of yen
2016
As of March 31,

1) Cash and due from banks

Consolidated balance
sheet amount¥2) Call loans and bills bought

144,364

Fair value¥

144,364

Difference¥—

88,20088,200—303,973

303,973—3) Monetary trusts
Other monetary trusts
4) Securities
Trading securities
Held-to-maturity securities
Policy-reserve-matching bonds
Available-for-sale securities
5) Loans

796,241796,241—

5,463,440

7,511,682

2,048,241

251,260

292,566

41,305

1,477,548

1,477,548—

1,515,833

Reserve for possible loan losses (*1)

(1,035)Loans (after deduction for reserve for possible loan losses)

1,514,797

1,664,235

149,437

Total Financial Assets¥10,039,827¥12,278,812¥2,238,984

1) Deposits¥¥ 1,912,592¥ 1,915,960

2) Bonds payable

20,00020,081

813) Collateral for securities lending transactions

62,80462,804̶¥ 1,995,397¥ 1,998,847

¥

3,449

¥

¥

¥

—

¥

—

Total Financial Liabilities

3,368

Derivative financial instruments (*2)
Hedge accounting not applied
Hedge accounting applied
Total Derivative Financial Instruments

4,541[29,289]¥[24,748]

4,541[29,289]¥[24,748]—(*1) Excludes general and specific reserves for possible loan losses.
(*2) Figures are totals resulting from derivative transactions, which are accounted for as other assets and liabilities on the consolidated balance sheets. If thetotal is a debt amount, the above figure is shown in [ ].

(Note 1) Calculation of the fair value of financial instruments
Financial Assets
1) Cash and due from banks and 2) Call loans and bills bought
The fair value is regarded as the carrying amount, as they are approximately equal.
3) Monetary trusts
In individual monetary trusts mainly for investment purposes, the fair value of bonds is the market price on financial instrument
exchanges or the price indicated by a financial institution. Please see “18. Fair value information on monetary trusts,” whichindicates fair values by purpose.
4) Securities
The fair value of stocks is the market price on stock markets or financial instrument exchanges. The fair value of bonds andinvestment funds is the market price or the price indicated by a financial institution. Please see “17. Fair value information on
securities,” which indicates fair values by purpose.
5) Loans(i) Loans in the banking business
The fair value of these loans is calculated by type, by estimating their future cash flows and then applying a prescribed discountrate. The discount rate is determined by adding to the LIBOR-based yield curve a premium corresponding to the allowance rateof general provision for loan losses.
(ii) Policy loans in the life insurance business
The fair value of policyholder loans is valued by discounting future cash flows to their current value.
Financial Liabilities
1) Deposits
The fair value of deposits is calculated by type, by estimating their future cash flows and then applying a prescribed discountrate. The discount rate is determined by adding to the LIBOR-based yield curve a premium corresponding to the banking subsidiary’s cumulative default rate by rating.

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Sony Financial Holdings Inc. Annual Report 2016

2) Bonds payable
The fair value of bonds payable is the market price or the price indicated by a financial institution.
3) Collateral for securities lending transactions
The fair value is regarded as the carrying amount, as they are approximately equal.
Derivative Transactions
Please see “19. Derivative financial instruments,” which indicates measurement of fair value.
(Note 2) Securities whose fair values are deemed extremely difficult to determine are as follows. They are not included in “4) Securities” of
Financial Assets in (Note 1) above.
Millions of yen
2016
Consolidated balance
sheet amount

As of March 31,

1) Unlisted stocks in non-consolidated subsidiaries and affiliates (*1)

¥14,949

2) Unlisted stocks other than those in 1) above (*1)

149

3) Investment in partnership (*2)

17,902

Total¥33,001(*1) Unlisted stocks have no market prices and their fair values are not readily determinable.
(*2) Assets included in “investment in partnership” are stocks in unlisted companies.
Note: Unlisted stocks and investment in partnership are considered impaired if their actual value decreases materially below the acquisition cost andsuch decline is considered non-recoverable. Their actual value is recognized as the consolidated balance sheet amount and the write-down isaccounted for as a devaluation loss (hereinafter, “impairment”) for the fiscal year.
Impairment losses on investment in partnership were recognized as ¥153 million for the year ended March 31, 2016.
Impairment losses are principally recorded when their actual value as of the end of the fiscal year has declined by 50% or more from the acquisition cost.

(Note 3) Future redemption schedule of monetary claims and securities with maturities
Millions of yen
2016

As of March 31,

1 year or
lessMore than
1 year to
5 years

More than
5 years to
10 yearsOver
10 years

Cash and due from banks¥144,364¥¥¥

Call loans and bills bought

88,200

—

—

—

2,835

22,551

236,260

5,239,435

2,835

22,451

236,160

5,125,853

2,565

19,464

234,110

5,069,780

270

2,987

2,050

56,073

—

100

100

113,581

20,086

3,659—

218,130

20,086

3,659—

218,130

—

3,100

—

177,830

20,086559—

40,300143,665

361,150

198,405

566,501

17,224

117,747

136,687555,600

Japanese government and local government bonds

11,53082,757

108,383

555,550

Japanese corporate bonds

5,694

34,99028,30450

126,440

243,40361,717

10,901———

Securities
Held-to-maturity securities
Japanese government and corporate bonds
Japanese government and local government bonds
Japanese corporate bonds
Others
Policy-reserve-matching bonds
Japanese government and corporate bonds
Japanese government and local government bonds
Japanese corporate bonds
Available-for-sale securities
Japanese government and corporate bonds

Loans (*)
Total

29,591

61,52574,535

1,177,256¥428,743¥448,886¥509,200¥7,201,323

Financial Section

Others(*) This figure excludes ¥171,649 million that have no fixed redemption such as policyholder loans.

Sony Financial Holdings Inc. Annual Report 2016

101

(Note 4) The future return schedule of deposits and other liabilities with interest
Millions of yen
2016

As of March 31,

1 year or
lessMore than
1 year to
2 years

More than
2 years to
3 years

More than
3 years to
4 years

More than
4 years to
5 years

More than
5 years

Deposits (*)¥1,796,872¥18,290¥13,244¥9,981¥13,750¥60,452

10,00010,000————¥1,806,872¥28,290¥13,244¥9,981¥13,750¥60,452

Bonds payable
Total(*) Demand deposits are included in “1 year or less.”

17. Fair value information on securities as of March 31, 2016:*In addition to “Securities” on the consolidated balance sheets, the figures in the following tables include beneficiary certificates of investment trust in“Monetary claims purchased.”(1) Trading-purpose securities
Millions of yen
As of March 31,

2016

Valuation gains changed to income¥(75,945)(2) Held-to-maturity securities
Millions of yen
2016
Consolidatedbalance sheet
amountFair value

Difference¥5,418,387¥7,457,895¥2,039,507

5,356,583

7,378,702

2,022,119

61,804

79,192

17,388Others45,05353,786

8,733

Subtotal

5,463,440

7,511,682

2,048,241¥5,463,440¥7,511,682¥2,048,241

As of March 31,

Fair values exceeding the consolidated balance sheet amountJapanese government and corporate bonds
Japanese government and local government bonds
Japanese corporate bonds

Total
Note: There were no fair values that did not exceed their consolidated balance sheet amount.

(3) Policy-reserve-matching bonds
Millions of yen
2016

As of March 31,

Consolidatedbalance sheet
amountFair value

Difference¥41,306

Fair values exceeding the consolidated balance sheet amountJapanese government and corporate bonds¥245,519¥286,826

Japanese government and local government bonds

190,111220,242

30,131

Japanese corporate bonds

55,40866,583

11,175245,519

286,826

41,306

5,741

5,740

(0)

—

—

—

5,741

5,740

(0)

5,741

5,740

(0)

¥251,260¥292,566¥41,305

Subtotal
Fair values not exceeding the consolidated balance sheet amountJapanese government and corporate bonds
Japanese government and local government bonds
Japanese corporate bonds
Subtotal
Total

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Sony Financial Holdings Inc. Annual Report 2016

(4) Available-for-sale securities
Millions of yen
2016
Consolidatedbalance sheet
amountAcquisition cost

Difference¥ 979,725¥ 831,276¥148,449

Japanese government and local government bonds

909,832

763,337

146,494

Japanese corporate bonds

69,89367,938

1,955

29,20914,181

15,027

As of March 31,

Consolidated balance sheet amount exceeding the acquisition cost
Japanese government and corporate bonds

Equity securities
Others

310,742

298,750

11,992

Subtotal

1,319,678

1,144,208

175,469

Consolidated balance sheet amount not exceeding the acquisition cost
Japanese government and corporate bonds

6,790

6,801

(11)

Japanese government and local government bonds

5,026

5,034

(7)

Japanese corporate bonds

1,763

1,766

(3)

163

173

(10)

Others151,801

152,610(809)

Subtotal

158,754

159,585(830)¥1,478,433¥1,303,793¥174,639

Equity securities

Total

Note: As the unlisted stocks of ¥149 million (consolidated balance sheet amount) and other securities of ¥17,902 million (consolidated balance sheet
amount) have no market prices and their fair values are not readily determinable, are not included in the table above.

(5) Held-to-maturity securities sold during the period
There is no related information to be reported.

(6) Policy-reserve-matching bonds sold during the period
There is no related information to be reported.

(7) Available-for-sale securities sold during the period
Millions of yen
2016
For the year ended March 31,

Japanese government and corporate bonds

Sales

Total
gains on sales

Total losses
on sales¥ 26¥161,541¥11,422

Japanese government and local government bonds

127,256

11,392

4

Japanese corporate bonds

34,28530

21Equity securities

1,292

702

—

Others35,120

551

160

Total

¥197,954¥12,676¥186(8) Impairment of available-for-sale securities

Sony Financial Holdings Inc. Annual Report 2016

Financial Section

Available-for-sale securities with fair value are considered impaired if the fair value decreases materially below the acquisition costand such decline is considered non-recoverable. The fair value is recognized as the consolidated balance sheet amount and thewrite-down is accounted for as a devaluation loss for the fiscal year.
No impairment loss was recognized for the year ended March 31, 2016.
“Material decline” is indicated when the fair value is 30% or less than the acquisition cost.

10318. Fair value information on monetary trusts as of March 31, 2016:(1) Monetary trusts for trading
There is no related information to be reported.

(2) Monetary trusts for held-to-maturity and policy-reserve-matching
There is no related information to be reported.

(3) Other monetary trusts (other than for trading, held-to-maturity or policy-reserve-matching)
Millions of yen
2016

As of March 31,

Consolidatedbalance sheet
amountAcquisition
cost

Difference

Items whose
consolidatedbalance sheet
amount exceeds
acquisition cost

¥303,973¥255,542¥48,431¥48,431

Other monetary trusts

Items whose
consolidatedbalance sheet
amount does notexceed acquisition cost¥—

Notes: 1. The amount of jointly invested monetary trusts that is included in the table above as of March 31, 2016 is ¥50 million.
2. “Items whose consolidated balance sheet amount exceeds acquisition cost” and “Items whose consolidated balance sheet amount does notexceed acquisition cost” are the breakdown of the difference.

(4) Impairment of other monetary trusts
Securities with fair values that are included in monetary trusts for purposes other than trading, holding to maturity or
policy-reserve-matching are considered impaired if their fair value decreases materially below the acquisition cost and suchdecline is considered non-recoverable. Their fair value is recognized as the consolidated balance sheet amount and thewrite-down is accounted for as a devaluation loss for the fiscal year.
No impairment loss was recognized for the year ended March 31, 2016.
“Material decline” is indicated when the fair value is 30% or less than the acquisition cost.

19. Derivative financial instruments:(1) Hedge accounting not applied
Below is a summary of contractual or notional amounts, current market or fair values, valuation gains or losses, and the method of
calculating the fair values of derivatives, classified by transaction, to which hedge accounting is not applied. Notional amounts do
not indicate exposure to credit loss.
1) Interest rate derivatives

Millions of yen
2016
Notional
Notional amountamount total
over 1 year

As of March 31,

Over-the-counter transactions

Total

Fair value

Valuation gains(losses)Interest rate swaps
Fixed-rate receivable / Floating-rate payable¥26,921¥26,921¥448

Floating-rate receivable / Fixed-rate payable

25,921

25,921

(25)

(25)

—

—

¥422

¥422

Notes: 1. The above transactions are valued at market, and the valuation gains or losses are recorded in the consolidated statements of income.
2. Fair values are calculated using discounted cash flow and the price indicated by a financial institution.

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Sony Financial Holdings Inc. Annual Report 2016

¥448

2) Currency derivatives

Millions of yen
2016
Notional
Notional amountamount total
over 1 year

As of March 31,

Over-the-counter transactions

Forward foreign exchanges

Fair value

Valuation gains(losses)Sold¥130,658

¥—

¥ 714

¥ 714

Bought146,481

—

239

239

Foreign exchange margintransactions

Sold

54,688

—

1,920

1,920

Bought20,508

—

794

794

Currency options

Sold

210

—

(2)

0

Bought

211

—

2

0

Bought12,735

—

680

680

—

—

¥4,349¥4,350Currency forward contracts
Total

Notes: 1. The above transactions are valued at market, and the valuation gains or losses are recorded in the consolidated statements of income.
2. Fair value is measured using such as the discounted cash flow and option pricing models.

3) Stock derivatives

Millions of yen
2016
Notional
Notional amountamount total
over 1 year

As of March 31,

ListedStock index futures

Sold

Total

Fair value

Valuation gains(losses)¥72,793¥—¥(230)¥(230)——¥(230)¥(230)

Notes: 1. The above transactions are valued at market, and the valuation gains or losses are recorded in the consolidated statements of income.
2. Fair value is the closing price on the Exchange at the end of the fiscal year.

(2) Hedge accounting is applied
The following provides a summary of contractual or notional amounts, current market or fair values, valuation gains or losses, andthe method of calculating the fair values of derivatives, classified by transactions, to which hedge accounting is applied. Notionalamounts do not indicate exposure to credit loss.
1) Interest rate derivatives

Millions of yen

As of March 31,

2016

Hedge accounting

Hedging instrument

Deferred hedge accounting

Interest rate swaps
Floating-rate receivable/
Fixed-rate payable

Fair value hedge accounting

Hedged item

Notional
amount total

Notional amountover 1 year

Fair value

Loans, deposits¥ 50,111¥ 49,942¥ (2,048)

Available-for-salesecurities (bonds)

333,785

286,112¥(26,945)——¥(28,993)

Interest rate swaps
Floating-rate receivable/
Fixed-rate payable

Total

Notes: 1. The Company applies deferred hedge accounting and fair value hedge accounting in accordance with Industry Audit Committee No. 24).
2. Fair value is calculated using discounted cash flow and other methods.

2) Currency derivatives

Millions of yen
2016

Hedge accounting

Hedging instrument

Hedged item

Fair value hedge accounting

Currency swaps

Available-for-salesecurities (bonds)

Total

Notional
amount total

Notional amountover 1 year

Fair value¥15,206¥—¥(296)——¥(296)

Financial Section

As of March 31,

Notes: 1. The Companies apply mainly fair value hedge accounting.
2. Fair value is calculated using discounted cash flow and other methods.

Sony Financial Holdings Inc. Annual Report 2016105

20. Information about retirement benefit obligations as of March 31, 2016:(1) Overview of retirement benefit plans
The life insurance subsidiary provides a lump-sum retirement benefit plan to sales staff and a defined benefit corporate pension
plan and defined contribution pension plan to internal office staff. The non-life insurance subsidiary provides a lump-sum retirement benefit plan and a defined contribution pension plan. SFH and its banking subsidiary mainly provide a lump-sum retirement
benefit plan. SFH calculates retirement benefit obligations based on the simplified method.

(2) Defined benefit plans
1) Reconciliation of beginning and ending balances of retirement benefit obligations (excluding those listed in 9) )Millions of yen
For the year ended March 31,

Balance at the beginning of the period of retirement benefit obligations
Service cost
Interest cost

2016

¥33,841
3,997
114

Net actuarial gain arising during the period

3,713

Retirement benefits paid

(1,866)

Balance at the end of the period of retirement benefit obligations¥39,800

2) Reconciliation of beginning and ending balances of plan assets (excluding those listed in 9) )Millions of yen
For the year ended March 31,

Balance at the beginning of the period of plan assets

2016¥12,365

Expected return on plan assets

187

Net actuarial gain arising during the period(326)

Employer contribution

952

Retirement benefits paid

(334)

Balance at the end of the period of plan assets¥12,8443) Reconciliation of the ending balances of retirement benefit obligations and plan assets, and net defined benefit liability
and net defined benefit asset recorded on the consolidated balance sheets
Millions of yen
As of March 31,

2016

Funded retirement benefit obligations¥ 10,496

Plan assets(12,844)

Unfunded retirement benefit obligations

29,395Net liabilities and assets recorded on the consolidated balance sheets

27,047

Net defined benefit liability

29,263(2,348)Net defined benefit asset
Net liabilities and assets recorded on the consolidated balance sheets(2,216)¥ 27,047

4) Components and amounts of retirement benefit expenses
Millions of yen
For the year ended March 31,

2016

Service cost

¥3,997

Interest cost

114

Expected return on plan assets(187)

Amortization of net actuarial gain

932

OthersRetirement benefit expenses related to defined benefit plans
Note: SFH includes the retirement benefit expenses in the others based on the simplified method.

106

Sony Financial Holdings Inc. Annual Report 2016

45
¥4,902

5) Remeasurements of defined benefit plans (before tax deductions)
Millions of yen
For the year ended March 31,

2016

Net actuarial gain¥(3,106)

Total¥(3,106)6) Accumulated remeasurements of defined benefit plans (before tax deductions)
Millions of yen
As of March 31,

2016

Unrecognized net actuarial gain

¥5,296

Total¥5,296

7) Plan assets(i) Main components of plan assets
The percentage share of components by main asset class out of total plan assets is as follows:%
As of March 31,

2016

Bonds

65

Equity securities

32

Others

4

Total

100

(ii) Method of setting the long-term rate of expected return on plan assets
The long-term rate of expected return on plan assets is determined by taking into account the current and expected allocationof plan assets, and the current long-term return rate and the long-term return rate that is expected in the future based on thevarious assets that comprise the plan assets.
8) Basis for calculating actuarial gain or loss
Main basis for calculating actuarial gain or loss as of March 31, 2016
Discount rate
(0.2%) – 0.6%
Long-term rate of expected return on plan assets
1.5% – 2.7%
9) Reconciliation of beginning and ending balances of net defined benefit liability of the plan based on the simplified
methodMillions of yen
For the year ended March 31,

2016

Balance at the beginning of the period of net defined benefit liability¥77

Retirement benefit expenses

7

Retirement benefits paid

(9)

Contribution to the plan

(3)

Others19

Balance at the end of the period of net defined benefit liability¥91(3) Defined contribution plans

Sony Financial Holdings Inc. Annual Report 2016

Financial Section

The amount of contribution required for the defined contribution plans by the Companies was ¥267 million.

107

21. Information on tax effect accounting as of March 31, 2016:(1) Breakdown of major factors giving rise to deferred tax assets and deferred tax liabilities
Millions of yen
As of March 31,

2016

Deferred tax assets
Policy reserves and others¥ 31,987

Reserve for price fluctuations

12,434

Net defined benefit liability

7,604

Write-down of securities

949

Depreciation and amortization

2,596

Net deferred losses on hedging instruments, net of taxes

1,117

OthersSubtotal of deferred tax assets

7,533
64,223

Valuation allowance(1,098)

Total deferred tax assets

63,125

Deferred tax liabilities
Net unrealized gains on other securities, net of taxes
Others(60,139)(452)

Total deferred tax liabilities(60,591)

Net deferred tax assets (liabilities)¥ 2,533

Note: Net deferred tax assets for the year ended March 31, 2016 are included in the following items of the consolidated balance sheets.
Millions of yen
As of March 31,

2016

Assets - Deferred tax assets¥8,181

Liabilities - Deferred tax liabilities

5,647(2) Breakdown of major items giving rise to a significant difference between the statutory effective tax rate
and the effective income tax rate after application of tax effect accounting%
As of March 31,

2016

Statutory effective tax rate

33.1

(Adjustments)
Revision to reduce deferred tax assets at the fiscal year-end due to changes in tax rates

2.7

Difference in tax rate of subsidiaries(3.8)

Increase (decrease) in valuation allowance

0.1

Others
Effective income tax rate after application of tax effect accounting

0.9
33.0

(3) Revision of deferred tax assets and deferred tax liabilities amounts due to changes in income tax rates“The Law to Revise the Income Tax, etc.” (Act No. 15, 2016) and “The Law to Revise the Local Income Tax, etc.” (Act No. 13,
2016) were enacted in the Diet session on March 29, 2016, and the corporate tax rate will be reduced from the fiscal years beginning on or after April 1, 2016. Accordingly, the statutory effective tax rate used for the calculation of deferred tax assets anddeferred tax liabilities has been changed from 32.34% to 30.86% for the temporary difference expected to be reversed in the fiscal
years beginning on April 1, 2016 and April 1, 2017, and 30.62% for that expected to be reversed in the fiscal years beginning on
or after April 1, 2018. The statutory effective tax rate used for the calculation of deferred tax assets and deferred tax liabilities bySony Life Insurance Co., Ltd. and Sony Assurance Inc. will be reduced from 28.85% to 28.24% for the temporary difference
expected to be reversed in the fiscal years beginning on April 1, 2016 and April 1, 2017, and 28.00% for that expected to bereversed in the fiscal years beginning on or after April 1, 2018, because certain portions of their tax base are not subject to taxes,
those that are usually applied to income.

108

Sony Financial Holdings Inc. Annual Report 2016

As a result of these changes in tax rates, the net amount of deferred tax assets (after deduction of deferred tax liabilities), netdeferred losses on hedging instruments, net of taxes and remeasurements of defined benefit plans, net of taxes decreased ¥24
million, ¥59 million and ¥44 million, respectively, while income taxes–deferred and net unrealized gains on other securities, net oftaxes increased ¥1,761 million and ¥1,842 million, respectively. Also, deferred tax liabilities on land revaluation decreased ¥14 million, while land revaluation, net of taxes increased by the same amount.

22. Asset retirement obligations:
Asset retirement obligations recorded on the consolidated balance sheets(1) Overview of asset retirement obligations
The reserve for asset retirement obligations is provided for the estimated amount of asbestos removal cost associated with investment and rental property in accordance with Ordinance on Prevention of Health Impairment due to Asbestos.

(2) Basis of measurement for asset retirement obligations
The amount of asset retirement obligations is calculated by estimating the usable period to be 13 to 33 years from acquisition andthen applying a 1.2% to 2.3% discount rate.

(3) Changes in the balance of asset retirement obligations
Millions of yen
For the year ended March 31,

2016

Balance at the beginning of the period¥722

Increase due to purchase of tangible fixed assets

14

Changes resulting from the passage of time

14

Balance at the end of the period¥752

23. Fair value information on investment and rental property:
The life insurance subsidiary owns rental office buildings in Tokyo. Income related to investment and rental property amounted to¥5,384 million for the year ended March 31, 2016. Below is the consolidated balance sheet amount, net of changes during theperiod, and the fair value at the end of the current period.
Millions of yen
For the year ended March 31,

2016

Consolidated balance sheet amount¥108,486(2,350)106,135¥167,960

Balance at the beginning of the period
Changes during the period
Balance at the end of the period
Fair value at the end of the period
Notes: 1. The consolidated balance sheet amount is the acquisition cost less accumulated depreciation and impairment losses.
2. The fair value at the end of the period is determined by a licensed third-party real estate appraisal agent.

Financial Section

Sony Financial Holdings Inc. Annual Report 2016109

5 Notes to the Consolidated Statements of Income
Net income per share is calculated based on the weighted-average number of shares of common stock outstanding during theperiod. For the year ended March 31, 2016, net income per share was ¥99.67. Diluted net income per share is not disclosed forthe year ended March 31, 2016 as SFH had no potentially dilutive shares of common stock.
The basis for this calculation for the year ended March 31, 2016 is profit attributable to owners of the parent of ¥43,355 million, the entire amount of which is applicable to common stock. The weighted-average number of shares outstanding for the year
ended March 31, 2016 was 434,999 thousand shares.

6 Notes to the Consolidated Statements of Comprehensive Income
Reclassification adjustments and income tax benefit (expense) on components of other comprehensive income for the year ended
March 31, 2016 are as follows:
Millions of yen
For the year ended March 31,

2016

Net unrealized gains on other securities, net of taxes:
Gains (losses) arising during the period¥ 52,829

Reclassification adjustments(12,878)

Pre-tax amount

39,950

Income tax benefit (expense)(9,752)Net unrealized gains on other securities, net of taxes

30,198Net deferred losses on hedging instruments, net of taxes:
Gains (losses) arising during the period
Reclassification adjustments
Pre-tax amount
Income tax benefit (expense)
Net deferred losses on hedging instruments, net of taxes(1,089)
795
(293)
32
(261)

Land revaluation, net of taxes:
Gains (losses) arising during the period—

Reclassification adjustments—

Pre-tax amount—

Income tax benefit (expense)

14

Land revaluation, net of taxes

14

Foreign currency translation adjustments:
Gains (losses) arising during the period(1)

Reclassification adjustments—

Pre-tax amount(1)

Income tax benefit (expense)—

Foreign currency translation adjustments(1)

Remeasurements of defined benefit plans, net of taxes:
Gains (losses) arising during the period
Reclassification adjustments
Pre-tax amount
Income tax benefit (expense)
Remeasurements of defined benefit plans, net of taxes
Total other comprehensive income

110Sony Financial Holdings Inc. Annual Report 2016

(4,039)932(3,106)852(2,254)¥ 27,695

7 Notes to the Consolidated Statements of Changes in Net Assets
1. Types and numbers of shares issued are as follows:
Thousands of shares
2016
Number ofshares as ofApril 1, 2015

For the year ended March 31,

Number ofshares increased
during the period

Number ofshares decreased
during the period

Number ofshares as ofMarch 31, 2016

Issued shares
Common stock
Total

435,000——

435,000

435,000——

435,000

0

0

—

0

0

0

—

0

Treasury stock
Common stock
Total

Note: The increase of 0 thousand shares in the number of common stock (of treasury stock) is an increase as a result of purchases constituting less than 1 unit.

2. Information on dividends is as follows:(1) Dividends paid
Resolution

Type ofsharesAggregate
amountof dividends

Cashdividends
per share

Recorddate

Effective
date

Ordinary General Meeting of Shareholders
held on June 24, 2015

Commonstock¥17,399
million¥40

March 31,2015

June 25,
2015

Resolution

Type ofsharesAggregate
amountof dividends

Source ofdividends

Cashdividends
per share

Recorddate

Effective
date

Ordinary General Meeting of Shareholders heldon June 23, 2016

Commonstock¥23,924
millionRetainedearnings¥55

March 31,2016

June 24,2016(2) Dividends to be paid in the next fiscal year

8 Notes to the Consolidated Statements of Cash Flows
1. The reconciliation of cash and cash equivalents in the statement of cash flows to cash and due from banks as stated in the consolidated balance sheet as of March 31, 2016, is as follows:
Millions of yen
As of March 31,

2016

Cash and due from banks¥144,364

Call loans of life insurance subsidiary

88,200

Securities of non-life insurance subsidiary maturing within 3 months of the acquisition date

1,055

Cash and cash equivalents¥233,620

Sony Financial Holdings Inc. Annual Report 2016

Financial Section

2. Cash flows from investing activities include cash flows from lending operations of the insurance business.

111

MCEV Results for Sony Life as of March 31, 2016

1 MCEV ResultsSony Life’s MCEV as of March 31, 2016 decreased ¥259.2 billion due to a large fall in Japanese yen (JPY) interest rates and otherfactors. While the value of existing business decreased significantly and turned negative due to a large fall in JPY interest rates, alarge part of the decrease was offset with the benefit of ALM (by the increase in the adjusted net worth).
Billions of yen
As of March 31,

MCEV
Adjusted net worth
Value of existing business

2015

2016

Change¥1,322.9
1,119.2
203.7¥1,063.7
2,074.4(1,010.7)¥ (259.2)
955.2(1,214.4)

2 Adjusted Net WorthThe adjusted net worth at the end of the current fiscal year increased by ¥955.2 billion, primarily because of the increase in unrealized
gain on held-to-maturity securities caused by a large fall in JPY interest rates. The breakdown is shown in the table below.
Billions of yen
As of March 31,

Adjusted net worth
Total net assets
Reserve for price fluctuations
Contingency reserve
Reserve for possible loan losses
Unrealized gains or losses on held-to-maturity securities
Unrealized gains or losses on policy-reserve-matching bonds
Unrealized gains or losses on land and buildings
Unfunded pension liabilities
Intangible fixed assets
Tax effect equivalent of above eight items
Valuation gain or loss on subsidiaries and affiliated companies

2015

2016

Change¥1,119.2
432.5
42.8
68.7
0.0
839.5
—
49.8
(1.9)
(21.6)(282.0)(8.7)¥2,074.4
482.2
44.3
75.2
0.0
2,026.2
41.3
56.5
(4.8)
(19.2)(621.4)(5.8)¥ 955.2
49.7
1.4
6.5
(0.0)
1,186.8
41.3
6.7
(2.9)
2.4
(339.4)
2.9

2015

2016

Change¥1,119.2
597.6
521.6

¥2,074.4
100.1
1,974.3¥ 955.2(497.5)
1,452.7

Billions of yen
As of March 31,

Adjusted net worth
Free surplus
Required capitalSony Life sets its required capital as the larger of the amount of Japanese regulatory minimum capital requirement at the solvency
margin ratio of 200% or the amount of capital to cover risks based on an internal model based on economic value. The required
capital at the end of the current fiscal year increased due to an increase in the economic value of technical provisions that mainly
resulted from a fall in JPY interest rates.

3 Value of Existing Business
The value of existing business as of March 31, 2016 decreased by ¥1,214.4 billion and turned negative, primarily because theassumed investment returns fell below the interest rates assumed in statutory reserve for a large part of in-force business due to alarge fall in JPY interest rates. On the other hand, as noted in Sections 1 and 2 above, please note that the value of bonds held for
ALM purposes moves in a way to offset such a change in the value of existing business. The breakdown of the value of existing
business is shown in the table below.
Billions of yen

112

As of March 31,

2015

2016

ChangeValue of existing business
Present value of certainty-equivalent profit
Time value of options and guarantees
Frictional costs
Cost of non-hedgeable risks¥ 203.7
652.9(154.9)(20.2)(274.1)¥(1,010.7)(393.1)(127.6)(55.6)(434.4)¥(1,214.4)(1,046.0)
27.3(35.5)(160.2)

Sony Financial Holdings Inc. Annual Report 2016

4 New Business Value
Until the previous year-end disclosure, the value of new business had been calculated as a value at the end of the year; from thisyear-end disclosure, it is calculated as a value at point of sale. The value of new business as of March 31, 2016 was calculated
quarterly using the assumptions as of the end of each quarter.
Despite the strong sales, the new business value in this fiscal year decreased by ¥13.4 billion primarily because of a large fall in
JPY interest rates. A breakdown of the value of new business is as follows:
Billions of yen
For the year ended March 31,

2015

2016

ChangeValue of new business
Present value of certainty-equivalent profit
Time value of options and guarantees
Frictional costs
Cost of non-hedgeable risks
Other profits or losses¥ 48.692.5(17.2)(0.4)(26.3)—¥ 35.2101.0(29.4)(0.7)(36.9)
1.3¥(13.4)8.4(12.2)(0.3)(10.6)
1.3

5 New Business Margin
The new business margin described below is the ratio of the value of new business to the present value of premium income. The
present value of premium income is calculated applying the same assumptions as those for the calculation of new business value,
and is based on premiums before the deduction of reinsurance premiums.

Billions of yen

For the year ended March 31,

2015

Value of new business
Present value of premium income
Value of new business / Present value of premium income¥

48.6
1,289.0
3.8%

2016

Change35.2
1,476.9
2.4%¥ (13.4)
187.9(1.4)pt¥

6 Reconciliation Analysis from MCEV at the End of the Prior Year
The table below shows the reconciliation analysis of MCEV as of March 31, 2016, from MCEV as of March 31, 2015. The formatof the table is in line with the format prescribed by the European Insurance CFO Forum Market Consistent Embedded Value
Principles©* (MCEV Principles).
*Copyright © Stichting CFO Forum Foundation 2008

Free surplus¥ 597.6(20.0)
577.6
(5.0)
0.2
1.6
(13.5)(70.8)(4.4)(14.5)(4.1)(39.8)(433.6)(4.1)(477.5)¥ 521.6
—
521.6
6.3
0.2
1.8
(43.3)
—
2.0
14.5
7.4
(11.2)
1,440.6
23.3
1,452.7

Value ofexisting business

¥

203.7
—
203.7
34.0
15.8
12.6
56.9
70.8
(4.1)
29.7
10.3
155.0
(1,359.1)(10.4)(1,214.4)

MCEV¥1,322.9(20.0)
1,302.9
35.2
16.1
15.9
—
—
(6.5)
29.7
13.7
104.1
(352.1)8.8(239.3)

—

—

—

—

¥ 100.1¥1,974.3¥(1,010.7)¥1,063.7

Financial Section

Opening MCEV (MCEV as of March 31, 2015)
Opening adjustments
Adjusted opening MCEVNew business value
Expected existing business contribution (risk-free rate)
Expected existing business contribution (in excess of risk-free rate)
Transfers from value of existing business and required capital to free surplus
Of which, on new business
Experience variances
Assumption changes
Other operating variance
Operating MCEV earnings
Economic variances
Other non-operating varianceTotal MCEV earnings
Closing adjustments
Closing MCEV (MCEV as of March 31, 2016)

Billions of yen
RequiredcapitalNotes: 1. Expected yield used for the fiscal year ended March 31, 2016 was 0.337%.
2. Assumption changes primarily indicate the impact of changes in assumptions based on experience data in mortality and morbidity rates, lapse and surrender rates, and operating expense rates. The value of existing business increased due to the improvement in mortality rates and other factors.
3. Other operating variance represents the impact of improvements and corrections of the model used in calculating MCEV. Regarding renewals arising from in-force business in the future, until the previous year-end disclosure, some renewals had been reflected in a simplified manner; from thisyear-end disclosure, renewals are modeled for all renewable policies.
4. As regards economic variances, overall MCEV changes are disaggregated into a decrease of ¥404.0 billion as a result of the change in the market environment such as a large fall in JPY interest rates, and an increase of ¥51.9 billion as a result of the decrease in inflation rates.
5. Other non-operating variance shows the effect of the reduction of the corporate tax rate.
Sony Financial Holdings Inc. Annual Report 2016113

7 Sensitivity Analysis
The impact of changing the underlying assumptions of MCEV is as follows:
Sensitivities of MCEVBillions of yen

Assumption

Change in assumption

MCEV

Change inamount¥1,063.7¥

Rate ofchangeBase

No change——

Interest rates

50bp decrease

766.5(297.1)(28%)

50bp increase

1,225.0

161.3

15%

Swap rates

1,001.7(62.0)(6%)

10% decrease

1,043.2(20.5)(2%)

Stock / Real estate market value
Stock / Real estate implied volatility

25% increase

1,041.7(22.0)(2%)

Interest swaption implied volatility

25% increase

1,062.9

(0.8)

(0%)

25% decrease

1,067.7

4.0

0%

Maintenance expenses

10% decrease

1,087.1

23.4

2%

Lapse and surrender rates

x 0.9

991.3

(72.3)(7%)

Mortality rates

Death protection products x 0.95

1,116.6

52.9

5%

Third-sector and annuity products x 0.95

1,049.2(14.5)(1%)

Morbidity rates

x 0.95

1,126.4

62.7

6%

Required capital

Regulatory minimum

1,117.1

53.5

5%

Foreign exchange rates

10% appreciation of JPY

1,055.8

(7.8)

(1%)

The breakdown of the changes in MCEV into the adjusted net worth and the value of existing business are shown in the tablebelow. Of items not specified in this table, only the value of existing business has been changed while adjusted net worth remains
the same.
Billions of yen
Value ofexisting
business

MCEV

Adjusted
net worth50bp decrease¥(297.1)¥ 645.0¥(942.1)

50bp increase

161.3(663.1)824.5

Stock / Real estate market value

10% decrease(20.5)(10.8)(9.7)

Foreign exchange rates

10% appreciation of JPY

(7.8)

0.0

(7.8)

Assumption

Interest rates

Change in assumption

8 Main Assumptions
Sony Life has used the JGB yields and the U.S. Treasury yields as of the end of March 2016 as risk-free rates for the certaintyequivalent projections. It is assumed that forward rates in the 41st year and beyond were equal to those in the 40th year for JGB
yields and forward rates in the 31st year and beyond were equal to those in the 30th year for U.S. Treasury yields. The government bond yields for key terms are as follows:
Japanese yen
As of the end of March,

U.S. dollar

2015

2016

2015

2016

1 year

0.03%(0.15%)

0.23%

0.58%

5 year

0.13%(0.19%)

1.37%

1.21%

10 year0.40%(0.05%)

1.92%

1.77%

20 year

1.14%

0.44%

2.30%

2.17%

30 year

1.36%

0.55%

2.54%

2.61%

40 year

1.46%

0.63%

—

—

Term

(Data: Ministry of Finance Japan for JGB as of March 2016 and Bloomberg for others)

Sony Life has not added a liquidity premium on the risk-free rate as there are no products which are considered to have reasonably predictable and illiquid cash flows and would therefore be appropriate to apply a liquidity premium.

114

Sony Financial Holdings Inc. Annual Report 2016

Assumptions including mortality and morbidity rates, lapse and surrender rates, and operating expense rates, were developed
based on best estimates by product as of the end of March 2016. Best-estimate assumptions are developed to reflect past andcurrent experiences as well as expected experiences in the future. Expected future changes in assumptions should be reflected
only when they are supported by sufficient reasons. Except for a deteriorating trend in morbidity rates, no other expected futurechanges are assumed in the best-estimate assumptions applied.

9 Opinion of Outside Specialist
Sony Life requested Milliman, Inc., an external actuarial consulting firm with expert knowledge in the area of MCEV valuations, toreview the methodology, assumptions and calculations, and obtained an opinion from this firm. Please refer to Sony Life’s press
release “Disclosure of Market Consistent Embedded Value as of March 31, 2016” (http://www.sonyfh.co.jp/index_en.html) for
details.

10 Risk Amount Based on Economic Value (after Tax)
Sony Life has been disclosing the risk amount based on economic value since the end of March 2012 in an effort to provide aclearer picture of its financial soundness based on economic value. The risk amount based on economic value* refers to the total
amount of Sony Life’s risks, comprehensively examined and including insurance risk and market-related risk. Sony Life’s risk
amount based on economic value amounted to ¥1,019.2 billion, a sharp increase from the end of the previous fiscal year. Thiswas due to a rise in insurance risk primarily because of a large fall in JPY interest rates.The breakdown of the risk amount is asfollows:
Billions of yen
As of March 31,

Insurance risk (Note 1)
Market-related risk
Of which, interest rate risk (Note 2)
Operational risk

2015

2016

¥ 724.2¥1,097.6

287.0

256.3

218.5

183.6

25.9

31.4

Counterparty risk

1.8

2.0

Variance effect(293.4)(368.1)¥ 745.5¥1,019.2

Risk amount based on economic value
Notes: 1. Insurance risk excludes the variance effect within Life module and Health module.
2. Interest rate risk excludes the variance effect within market-related risk.

Sony Life is making every effort to ensure its financial soundness by maintaining the risk amount based on economic value at an
appropriate level relative to MCEV, which is capital based on economic value.
*The risk amount based on economic value is calibrated at VaR (99.5%) over one year and based on the internal model, which is a similar but modified
model based on the EU Solvency II standard method.

Financial Section

For further details, please refer to MCEV Results for Sony Life in the Financial Data Book.
http://www.sonyfh.co.jp/en/financial_info/annualreportSony Financial Holdings Inc. Annual Report 2016115

Financial Data Book Contents

Financial Data Book

Please visit SFH’s website to view the Financial Data Book.
Detailed financial data for each operating company is presented in a separate publication called the Financial
Data Book. The Financial Data Book is available only on SFH’s website.

http://www.sonyfh.co.jp/en/financial_info/annualreport

SFH Financial Data (Consolidated)
Principal Indicators of Operating Performance
Consolidated Balance Sheets
Consolidated Statements of Income andConsolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Sony Life Financial Data (Non-consolidated)
Balance Sheets
Statements of Income
Statements of Changes in Net Assets
Statements of Cash Flows
1. Loans by Borrower Category
2. Risk-monitored Loans
3. Accounting Indicators
4. Reconciliation to Core Profit andNon-consolidated Ordinary Profit
5. Fair Value Information on Securities (General Account)
6. Fair Value Information on Securities (Company Total)
Sony Life Performance Indicators (Non-consolidated)
1. Key Performance Indicators for Past Five Years
2. Key Performance Indicators
3. Indicators for Insurance Policies
4. Indicators Related to Asset Management(General Account)
5. Status of Insurance Claims Paying Ability
6. Balance of Separate Account Assets
7. Investment Progress of Separate Account Assets in
Individual Variable Life Insurance and Individual Variable
Annuities
8. Status of Individual Variable Life Insurance and Individual
Variable Annuities
9. Number of Agencies
10. Number of Employees and Recruits
11. Average SalarySony Assurance Financial Data
Balance Sheets
Statements of Income
Statements of Changes in Net Assets
Statements of Cash Flows
1. Loans by Borrower Category
2. Risk-monitored Loans
3. Assets and Liabilities
4. Profit and Loss
5. Fair Value Information, etc.
Sony Assurance Performance Indicators
1. Principal Indicators of Operating Performance
2. Underwriting Performance
3. Asset Management
4. Non-consolidated Solvency Margin Ratio
Sony Bank Financial Data (Consolidated)
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Sony Bank Financial Data (Non-consolidated)
Balance Sheets
Statements of Income
Statements of Changes in Net Assets
1. Loans by Borrower Category
2. Risk-monitored Loans
3. Profit and Loss
4. Fair Value Information
Sony Bank Performance Indicators (Non-consolidated)
1. Key Performance Indicators
2. Status of Operations (Deposits)
3. Status of Operations (Loans)
4. Status of Operations (Securities)
MCEV Results for Sony Life
1. MCEV Results
2. Assumptions
3. Calculation Method of MCEV
4. Overview of MCEV
5. Glossary of MCEV-related Terminology

116Sony Financial Holdings Inc. Annual Report 2016

Glossary (in Alphabetical Order)

Combined ratioA

B

ALM (asset liability management)

Benefits

Life Non-life Banking• Money paid by an insurance company toa beneficiary in the event of hospitalization,
surgery, or others involving the insured.

• A risk management method for ensuring
stable delivery of assumed interest rates
through a comprehensive grasp andmanagement of the special characteristics
of assets and liabilities.
Because the majority of life insurancecompany liabilities consist of policy
reserves accumulated based on assumed
interest rates fixed at the time of policy
enrollment, a company must take thisspecial characteristic into consideration
when using ALM.

Annualized insurance premiums

Life• An indicator of the approximate annual
premium income from existing policies,
which is used as a performance indicator.
Annualized insurance premiums arecalculated by adjusting differences in
the payment methods since insurance
premiums can be paid monthly, annually,or in a lump sum, and by assuming that
average payments will be made over theterm of the policy.

Assumed interest rate

Life

• Insurance companies anticipate a certain
return on invested assets in advance anddiscount insurance premiums only by thisamount. This discount rate is called theassumed interest rate.

Assumed mortality rate

Life

• The mortality rate is the percentage of
people who die in a single year for agiven large population.
The assumed mortality rate is themortality rate used when calculating theamount of insurance premiums needed
to cover future benefit payments, andrepresents a projection of the numberof deaths by gender and age based on
past statistics.

Assumed rate of expense

Life• In operating their businesses, insurancecompanies forecast their expenses, thendiscount their insurance premiums by thatamount. That discount rate is called theassumed rate of expense.

Life

Bonus-malus system(Non-fleet driver rating system)

Non-life• The sum of an insurance company’s net
loss ratio and net expense ratio. Indicatesan insurance company’s profitability in the
primary business operations.

Compulsory automobile liability
insurance Non-life• A system for applying discounted or
additional premiums for non-fleet
policyholders (owners/users of nine or
fewer automobiles or motorcycles) basedon their accident histories. Grades range
from 1 to 20, but typically start at Grade 6.
The higher the grade (large numbers), thebigger the discount rate, and the smaller
the number, the smaller the discount.

• Compulsory automobile liability insurance
is legally required for all vehicles andprovides protection for victims of traffic
accidents resulting in injury or death.
Compulsory automobile liability mutual
aid is similar. With compulsory automobile
liability insurance (mutual aid), indemnity
payments per person per accident arecapped at ¥30 million for death, ¥40 million
for serious residual disability, and ¥1.2
million for injury. Benefits are not paidfor vehicle or property damage.

C

Contingency reserve

Capital adequacy ratio

Non-life

Banking• An indicator of whether a bank has enoughcapital, including common stock, versus
credit risk assets (of total assets, thosewhich could become non-performing). If
a bank is unable to recover a large amountof loans, it can draw on capital and write
off these loans. A sharp decrease in capitalcreates difficulties in bank management.
Capital adequacy ratio regulations ensurethat banks are soundly managed by keeping
the capital adequacy ratio above a certain
level. This ratio is therefore an important
indicator to show financial soundness. Forbanks possessing business bases overseas,
the internationally standardized regulations
to preserve financial soundness are a capital
adequacy ratio of over 8%, and for banks
not possessing business bases overseas,in Japan a capital adequacy ratio of 4%
is required.

Catastrophe reserve

Non-life• A type of policy reserve, under which,pursuant to the provisions of the Insurance
Business Act of Japan, non-life insurancecompanies are required to accumulate eachfiscal year as an amount calculated basedon premium income to cover losses due
to catastrophic events. In consideration of
the special need for the non-life insurance
business to cover a wide range of risks,
the catastrophe reserve acts as a provision
against the risk of large insurance claims
resulting from earthquakes, typhoons, andother catastrophic events. It is structured tobe accumulated over the course of multiple
fiscal years, and reversed during the fiscal
year in which a disaster occurs.

Life

Non-life• Reserve to prepare for abnormal paymentsin the future resulting from various factors,
including insurance risk and assumed
interest rate risk. Insurance companies
list contingency reserve at every accountclosing as one component of policy
reserves in the financial statements.

Core profit

Life• An indicator of profits (losses) in the primary
insurance business over a one-year period.
It is derived by subtracting from ordinary
profit any profits earned from operations
other than the primary insurance business,
including profits from the sale of assets
owned by the insurance company. Profit
categories subtracted from ordinary profit
include gains and losses on the sale ofsecurities and one-time gains and losses.

D
Direct premiums writtenNon-life• Premiums received from policyholders,
calculated by subtracting direct surrender
payments and other direct payments fromdirect premiums.

DurationLife• A sensitivity index indicating the extent
to which the present value of future cash
flow (interest income, repayment of principal,
receipt of premiums, payment of insurance
benefits, dividends, etc.) from eligible assets(managed assets) and liabilities (policy
liabilities) will be affected by interest rate
fluctuations. While a variety of types andmethods for calculating duration exist, amethod expressing the weighted average
maturity of the cash flow in question isrelatively widely used.

Sony Financial Holdings Inc. Annual Report 2016

117

insurance premiums. Used as an indicatorof business efficiency at insurance companies.
The ratio is normally derived by adding
operating, general and administrative
expenses related to insurance underwriting
to net commissions and brokerage fees,
and then dividing by net premiums written.

E
Earned/incurred (E.I.) loss ratio
Non-life• An indicator that represents the loss ratio
incurred during the current period that takes
into account the provision and reversal ofreserve for outstanding losses and ordinary
underwriting reserves calculated using thefollowing formula: Earned/incurred (E.I.) loss
ratio = (Net losses paid + Provision for reservefor outstanding losses + Loss adjustment
expenses)/Earned premiums (excluding earthquake insurance and compulsory automobile
liability insurance)

Educational endowment
insurance Life

Endowment insurance

Life• Endowment insurance entitles a beneficiary
to receive death or serious disability benefits
upon the death or serious disability of theinsured within an insurance period specified
when the policy is purchased, or to receive
maturity benefits upon policy maturity.

Life• In the event the insured dies or becomesdisabled, this insurance pays an annual ormonthly benefit through policy maturationin the form of a family annuity or disability
annuity.

• Insurance product in which insurance
premiums are invested in foreign currency.
Sony Life sells U.S. dollar-denominatedinsurance, in which policyholders pay
the Japanese yen equivalent of the U.S.
dollar-denominated insurance premiums
and select the Japanese yen or U.S. dollar
when they receive insurance claims.

GLife

ERM (enterprise risk management)

General accounts

Life• Accounts for managing financial assets notincluded in separate accounts. This accountguarantees policyholders a certain assumed
interest rate, while the life insurance company
bears the asset management risk.

Non-life Banking• An approach to accomplishing corporate strategic goals and sustainable growth in corporate value, by conducting integrated recognition and control of all risks a company faces
and seeking to optimize the risk from a company-wide perspective.

ESR (economic solvency ratio)

Life• ESR is one of the financial soundness indicators, which measures whether an organization
possesses sufficient capital in relation to its
risks. Sony Life computes its ESR by dividing
MCEV by the risk amount based on economic
value. For details on MCEV and the risk
amount based on economic value, please see“MCEV Results for Sony Life” in the Financial
Data Book.

EV (embedded value)Life• An indicator of the corporate value of a life
insurance company. Sony Life discloses
MCEV (market consistent embedded value)in conformity with the MCEV Principles. For
details on MCEV, please see “MCEV Resultsfor Sony Life” in the Financial Data Book.

Expense ratio

Non-life• The ratio of expenses for soliciting,
maintaining, and managing insurance to118

Family income insuranceSony Financial Holdings Inc. Annual Report 2016

Gross operating profit

Banking• The total income from the four components
of banking services income: net interest
income, net fees and commissions, net
trading income, and net other operating
income. Equivalent to gross profit (sales
minus purchases) and an indicator of theamount of profits a bank generates fromits main services.

I
Individual annuities

Life• Policyholders are eligible for receiving
annuity payments from funds accumulated
by paid insurance premiums at a certain
age prescribed in the policy. There are avariety of types depending on the period
for receiving the annuity, structure of theannuity, method for paying premiums,
and death protection prior to receiving
the annuity.

Life• Individual annuity product in which assets
are invested mainly in stocks and bonds,
and annuity and surrender payments increaseor decrease depending on investment
returns. The individual policyholder bears
the asset management risk.

Insurance Act of JapanF

Foreign currency-denominatedinsurance Life

• An insurance policy designed to provide
for the future educational expenses ofchildren. An insurance benefit is paid out
when the child reaches a prescribed age
at the end of the policy period.

Individual variable annuities

Life

Non-life• Previously, rules concerning insurance
policies were stipulated in the Insurance
Chapter of the Commercial Code, which
was enacted in 1899. In April 2010, theInsurance Act entered into force as a newlaw independent of the Commercial Code.
Because no substantive amendments torules concerning insurance policies in theCommercial Code had been made forover a century, the Insurance Act contains
substantial changes from the standpointof protecting policyholders and others.
In addition, the Act has been written inlanguage reflecting modern usage, among
other revisions.

Insurance Business Act ofJapan Life Non-life• Insurance business has a public aspect,
and the Insurance Business Act, as noted in
Article 1, is intended to protect policyholders
and contribute to the stable lives of citizens
and to sound national economic development
by ensuring sound and appropriate businesspractices and fair insurance solicitation.

Insurance claimsLife

Non-life• Money paid by an insurance company
to the insured upon the death or serious
disability of the insured or policy maturity
in the case of life insurance; upon damage
caused by a compensation event according
to the insurance policy in the case of non-life
insurance; and upon hospitalization orsurgery of the insured in the case ofthird-sector insurance.

Insurance premiumsLife

Non-life• Money paid by policyholders to an insurancecompany based on the insurance policy.
Even after submitting an insurance policy
application, no protection or compensation
is provided unless premiums are paid.

InsuredLife

Non-life• A person who receives insurance protection
and compensation or a person who has
insurance coverage for his/her life, illness,or injury. This can be the same or different
person from the policyholder.

L
Life

Lapse and surrender rate

• Surrender refers to the cancellation of an
insurance policy at some point in the future.
Upon termination, the policy is surrendered,and from that point protection (or coverage,in the case of non-life insurance) is lost.
On the other hand, a lapse is when apolicyholder fails to pay premiums within
the payment grace period, causing thepolicy to lapse, from which point the policy
will no longer provide protection.
The lapse and surrender rate is the ratioof lapses and surrenders to policies in force
at the beginning of the fiscal year. It is
calculated by adding the total of lapses
and surrenders for the year in question,and then dividing by the amount of policies
in force at the beginning of the fiscal year.

Limited payment

Life• One of the methods of premium payment
in which insurance premiums are paid up
prior to the expiry of the insurance term.

Living benefit insuranceLife• This insurance provides a lump-sum benefit
payment when the insured is diagnosed
with one of three major diseases (cancer,
heart attack, or stroke).

Loss adjustment expenses

Non-life• Expenses incurred by an insurancecompany in examining an insured event.
These include personnel and non-personnel
expenses.

Loss ratio

Non-life• The ratio of insurance claims paid topremium income. Used in analyzing thebusiness of an insurance company andin calculating insurance premium rates.
The net loss ratio is the ratio derived byadding loss adjustment expenses to net
losses paid, then dividing by net premiums
written.

generated by providing services, such asbank transfer fees and investment trust
sales commissions, less the costs associated with providing these services.

Net interest income

Banking• Net other operating income is derived
from services other than the primarybanking services income categories of net
interest income, net fees and commissions,and net trading income. One example isbuying and selling in dollars and otherforeign currencies. In this case, after
purchasing foreign currency at a certain
price, any gain from a subsequent sale
at a price higher than the purchase pricewould be recorded in other operating
income, and any loss from a subsequentsale at a price lower than the purchaseprice would be recorded in other operating
expenses.

Net premiums writtenNon-life• Premiums received directly frompolicyholders (direct premiums written),adjusting for reinsurance premiums(subtracting direct reinsurance premiums
paid and adding direct reinsurance
premiums received), and subtracting
deposits of premiums.

M

Non-performing assets

Medical insurance• Non-performing assets are claims against
parties in bankruptcy, claims against parties
in effective bankruptcy due to poor businessor other reasons, and claims against parties
at risk of bankruptcy. Non-performing assets
also include loans for which principal orinterest payments are past due by threemonths or more, and loans for which
repayment on initial terms is impossible
and interest has been reduced or exempted
and the repayment of principal has been
extended.

Life
Life

Non-life• Medical insurance provides policyholders
with hospitalization and surgical benefits inthe event of hospitalization or surgery due
to illness or injury.

N
Net fees and commissions

Banking• Fees and commissions charged forproviding services. These refer to income

Over-the-counter (OTC) sales of
insurance products at banks
Life

Banking• Net interest income accounts for the largest
percentage of the four income componentsof gross operating profit. Banks generally
use the deposits received from individuals
and the funds raised in interbank markets
to provide loans to individuals andcompanies and to invest in securities. Net
interest income is the difference between
the total interest received from loans andother items (interest income) and the totalinterest paid for deposits and other items(interest expenses). Net interest income
is affected by changes in interest rates(e.g., if deposit interest rates rise whileloan interest rates stay at the same levels,
net interest income will decrease), and bydeposit and loan balances.

Net other operating incomeO

Non-life Banking

Non-life Banking• A bank serves as an insurance agency
to solicit insurance. There were previously
restrictions on what products could be sold,but these restrictions were abolished in
December 2007, and banks can now sella variety of insurance products.

P
Policy amount in forceLife• Total amount of protection provided bylife insurance companies to individual policyholders. This is different from the total
amount of premiums paid by policyholders(premium income).

Policy reserves Life
(Underwriting reserves)

Non-life• Reserves that insurance companies
accumulate in advance, funded bypremiums, investment income, and othersources, to prepare for future liabilities
resulting from insurance policies, including
payments of claims, annuities, and benefits.
Policy reserves include ordinary policy
reserves, catastrophe reserve, contingency
reserve, refund reserve, and reserve forpolicyholders’ dividends.

Policy reserves and others Life
(Underwriting reserves) Non-life• Reserves recorded in the liabilities sectionof the balance sheets for which insurancecompanies are required in the Insurance
Business Act of Japan to accumulate toprepare for the payment of future claims
and other items to fulfill their obligations
for paying claims and other actions basedon insurance policies. Policy reserves andothers include reserve for outstanding
claims, policy reserves, and reserve forpolicyholders’ dividends.

Policy reserve discount rate

Life

• The policy reserve discount rate is thecalculating rate insurance companies are
required to use when accumulating policy
reserves for future insurance payments.
A lowering of the rate means that the amountof the policy reserves insurance companies
must accumulate will increase. Since thesource of funds for the policy reserves is
primarily insurance premiums, the premium
rate may be revised as necessary in line withrevision to the policy reserve discount rate.
The policy reserve discount rate applied topolicies from April 2013 is 1.0%, half apercentage point lower than the previous
1.5%.
Sony Financial Holdings Inc. Annual Report 2016

119Policyholder

Life

Non-life• A person who signs up for an insurance
policy with an insurance company and hasvarious rights (e.g., request of changes in
the policy details) and obligations (e.g.,
payment of premiums) based on the policy.
Life

Policyholder loans• Loans provided up to a certain level of thesurrender payment on life insurance policies.
In general, policyholders retain insurance
protection and rights to receive dividends
during the period of the policyholder loan.
However, policyholder loans may not be
available depending on the type of insurance.

Policyholders’ dividend reserveLife• A reserve accumulated to fund dividend
payments to policyholders pursuant to theprovisions of the Insurance Business Act
of Japan.

Positive spread

Life• The amount by which the actual investment
income is higher than the expected
investment income from the assumed
interest rate.

ReinsuranceLife

Non-life• The insurance agreement that insurancecompanies conclude with domestic andoverseas reinsurance companies for someof the insurance policies they underwrite,
mainly large ones, in order to diversify
risks on insurance policies.

Reserve for outstanding claims Life
(Reserve for outstanding losses)
Non-life• Reserve for the estimated amount of unfixed
insurance payments and unpaid insurance
claims at the end of the fiscal year, among
payment obligations for insurance claims,
surrender value, and other benefits.

Reserve for price fluctuations
Non-life• This reserve is set aside to prepare for losses
caused by price fluctuations in stocks, bonds
and other assets held by an insurancecompany.

RidersLife

Non-life• Riders can enlarge the scope of protectionin the primary policy by adding provisions
to the primary coverage. Riders do notconstitute a policy by themselves. Multiple
riders can be added to the primary policy.
Riders are canceled when the primary policy
is canceled due to maturity, surrender, orother reasons.

120

T• Automobile insurance that segments therisk factors on which insurance premium
calculations are based. The provisions of
Insurance Business Act of Japan recognize
nine risk segment categories: age, sex,
driving history, purpose of use, conditionsof use, region, vehicle model, presence ofsafety equipment, and number of vehicles
owned.

Term insurance

ROEV (return on embedded value)
Life• ROEV is an indicator that refers to the growthpotential of corporate value. The amount of
increase of EV (embedded value), an indicator of a life insurance company’s corporate
value, is deemed to be profit that takes into
account the unique aspects of life insurance
accounting.
Core ROEV is the growth rate of EV which
excludes any fluctuation effects of the investment yield and discounted rate.

Life

Sony Financial Holdings Inc. Annual Report 2016

• Separate accounts are used for variable
life insurance, variable annuities, and otherinsurance products to invest assets separately from the other financial assets owned
by an insurance company in order to pay
investment returns directly to policyholders.

Solvency margin

Life• Term insurance entitles a beneficiary toreceive benefits in the event of death orserious disability of the insured within an
insurance period specified when the policy
is purchased.

Third-sector insuranceLife

Non-life• The solvency margin indicates payment
ability. Insurance companies accumulate
policy reserves to prepare for the paymentof future claims, allowing them to adequately
respond to risks within a normally anticipatedrange. However, unforeseen events canoccur, including major disasters andsubstantial declines in stock prices. The
solvency margin ratio is one measure usedby regulatory authorities to determine
whether an insurance company has theability to pay in response to the risk of such
unpredictable events. If this ratio falls below
200%, the Financial Services Agency ofJapan will take steps to quickly restore
financial soundness. New standards wereapplied beginning at the end of fiscal 2011,
with stricter solvency margin standards andstricter and more elaborate standards formeasuring risk.

Surrender payments

Life

Non-life• Money refunded to the policyholder in theevent that the insurance policy is surrenderedor cancelled. Surrender payment amounts
vary depending on several factors, including
the type of insurance, insurance period, andyears elapsed.

Life

Non-life• Third-sector insurance refers to insurance
positioned between life insurance (first
sector) and non-life insurance (second
sector). It encompasses a variety of typesof insurance, including medical insurance,cancer insurance, nursing care insurance,and personal accident insurance.
Regulatory easing has allowed both lifeand non-life insurance companies tohandle all third-sector insurance products
from July 2001.

U
Underwriting profit

S
Separate accounts

R

Life

Risk segmented automobile
insurance Non-life

Non-life• Underwriting profit is calculated bysubtracting any underwriting expenses(net losses paid and loss adjustment
expenses, etc.) and operating, generaland administrative expenses associatedwith underwriting from under writing
income (net premiums written, etc.) thenadding or subtracting other income andexpenses (corporate taxes associatedwith compulsory automobile liability
insurance, etc.).

V
Variable life insuranceLife• Insurance product in which assets areinvested mainly in stocks and bonds, andclaims and surrender payments increaseor decrease depending on investment
returns. The individual policyholder bears
the asset management risk. The minimum
insurance payment is guaranteed, regardlessof investment performance.

W
Whole life insuranceLife• Insurance that pays benefits in the eventthe insured dies or is disabled. Unlike termlife insurance, protection continues for
entire life.

SFH’s Website Information

SFH uses its website to provide timely disclosure and promotea better understanding of the Sony Financial Group.

http://www.sonyfh.co.jp/index_en.html
Financial Data Book
Financial Data Book

The Financial Data Book isavailable only on
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IR-related materials, such as earnings releases andpresentation materials, are available for viewing or
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Press releases are sorted into SFH and four businesssegments. Headings make it easy to determine thecontent of each press release.

Sony Financial Holdings Inc. Annual Report 2016

121

Sony Financial Group

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