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 pertain to future operating performance and that are not historical facts are forward-looking statements. 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 statements are based on assumptions, decisions and judgments 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 in light of new information, future events or other findings. The information contained in this annual report does not constituteor 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 “Drive Counter” are registered trademarks of Sony Assurance.
• “MONEYKit” and “Foreign Currency World” are registered trademarks of Sony Bank. “Carbon Offset Bank” is a trademark of Sony Bank.
• 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.
• Unless otherwise indicated, figures in this material have been truncated if less than the indicated unit while ratios and percentage changes have beenrounded off.

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

26
Segment Performance Highlights

27

Life Insurance Business28

Non-life Insurance Business

30

Banking Business

32

Fiscal 2014 Analysis of Operating Performance34

SFH (Consolidated)

35

Life Insurance Business38

Non-life Insurance Business45

Banking Business48

Contributions to Sustainable Development

53
Corporate GovernanceCorporate Social Responsibility

Executive Profiles

54

Basic Stance on Corporate Governance

58

Management System

61

Compliance

65

Risk Management

67

Internal Audit

69

Stance on Corporate Social Responsibility (CSR)

70

Activity Profiles

71

Environmental Protection Activities

79

Corporate Section

81
Corporate Information

82

Profiles of Group Companies

83

Stock Information

85

Financial Section

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.

87
SFH Consolidated Financial Statements

88

MCEV Results for Sony Life as of March 31, 2015

118

Glossary

123

SFH’s Website Information127

http://www.sonyfh.co.jp/en/financial_info/annualreportSony Financial Holdings Inc. Annual Report 20151

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

Sony Financial Holdings (Consolidated)

Millions of yen

For the years ended March 31,

2010

2011

2012

2013

2014

2015

Ordinary revenues (Note 1)
Ordinary profit
Net income¥ 978,991
84,373
48,126¥1,002,201
76,86041,716¥1,078,070
74,62532,812¥1,259,041
79,25245,064¥1,320,456
76,13640,504¥1,352,325
90,062
54,419Comprehensive income

71,066

31,96360,37696,22544,79490,7076,001,088
269,439

6,597,140
294,877

7,241,414
347,800

8,096,164
435,4448,841,382
467,050

9,545,868
550,672

12.05%—

10.96%—

10.14%
1,380.3%

9.88%
1,520.6%

12.02%
1,563.8%

11.92%
1
49
1,635.6%¥ 881,798
80,09946,138¥ 900,091
73,17640,220¥ 967,400
69,436
31,426¥1,142,274
74,65942,444¥1,197,109
69,20537,063¥1,223,827
79,66542,5244,286,540
191,3122,637.3%

4,723,332
215,387
2,900.1%

5,222,846
264,836
1,980.4%

5,952,750
342,333
2,281.8%

6,624,903
369,230
2,358.7%

7,301,350
432,526
2,555.0%

¥

¥

¥

¥

¥

¥

As of March 31,

Total assets
Net assets
Consolidated capital adequacy ratio(Domestic criteria) (Note 2)
Consolidated solvency margin ratio (Note 3)

Sony Life (Non-consolidated)
For the years ended March 31,

Ordinary revenues
Ordinary profit
Net income
As of March 31,

Total assets
Net assets
Non-consolidated solvency margin ratio (Note 4)

Sony Assurance
For the years ended March 31,

Ordinary revenues
Ordinary profit
Net income

68,1742,565
1,604

74,1662,144
1,297

80,0962,859
1,299

84,7112,371
1,454

89,864
3,003
1,664

93,0224,209
2,233

As of March 31,

Total assets
Net assets
Non-consolidated solvency margin ratio (Note 4)

98,340
15,482
1,018.5%

109,382
16,772981.4%

118,61218,009557.8%

127,421
19,934504.2%

142,714
21,418527.6%

157,919
24,741
629.6%

Sony Bank (Non-consolidated)
For the years ended March 31,

Ordinary revenues (Note 1)
Ordinary profit
Net income¥

30,500
2,930
1,646

¥

29,521
3,377
2,054

¥

30,075
4,033
2,340

¥

31,351
4,282
879

¥

33,994
5,845
3,585

¥

35,7147,298
4,634

As of March 31,

Total assets
Net assets
Non-consolidated capital adequacy ratio(Domestic criteria) (Note 5)

1,612,186
58,989

1,761,830
59,971

1,890,503
62,7962,005,081
67,811

2,056,704
72,7742,062,525
77,06412.09%

10.84%

11.58%

11.98%

11.72%

10.66%
5

Notes: 1. The banking business revised its method of recording ordinary revenues and ordinary expenses on hedge transactions in the year ended March 31, 2015.
Ordinary revenues for the year ended March 31, 2014 (actual), have been retroactively adjusted to reflect the change. Consequently, consolidated ordinary
revenues have been revised from ¥1,319,766 million to ¥1,320,456 million, and Sony Bank’s non-consolidated ordinary revenues were revised from ¥33,303
million to ¥33,994 million. As adjustments to ordinary revenues were accompanied by adjustments to ordinary expenses in the same amounts, on aconsolidated basis for Sony Financial Holdings and on a non-consolidated basis for Sony Bank, ordinary profit and net income were unaffected.
2. SFH has calculated the consolidated capital adequacy ratio (domestic criteria) based on formulas stipulated in FSA Notification No. 20 (2006), which is based on
Article 52-25 of the Banking Act of Japan. Calculations do not include Sony Life, Sony Life Insurance (Philippines), Sony Assurance, AEGON Sony Life Insurance,or SA Reinsurance within the scope of consolidation until March 31, 2012. From March 31, 2013, the scope of consolidation for calculation purposes does notinclude Sony Life, Sony Assurance, AEGON Sony Life Insurance or SA Reinsurance. SFH applied FSA Notification No. 79 (2008) until March 31, 2012, andapplied FSA Notification No. 56 (2012) on March 31, 2013. From March 31, 2014, SFH applied FSA Notification No. 6 (2013) and FSA Notification No. 7 (2014).
3. SFH has calculated the consolidated solvency margin ratio based on the stipulations of Article 210, Paragraph 11-3 and Paragraph 11-4 of the Ordinanceof Enforcement of the Insurance Business Act of Japan, and FSA Notification No. 23 (2011).
4. Sony Life and Sony Assurance have applied the previous standards to the calculation of the non-consolidated solvency margin ratio until March 31, 2011,
while applying the current standards from March 31, 2012.
5. Sony Bank has calculated the non-consolidated capital adequacy ratio (domestic criteria) based on FSA Notification No. 19 (2006), which establishes standards based on Article 14-2 of the Banking Act of Japan for determining the capital adequacy of a bank in light of the assets held by the bank. Until March
31, 2012, Sony Bank applied FSA Notification No. 79 (2008), and applied FSA Notification No. 56 (2012) on March 31, 2013. From March 31, 2014, Sony
Bank applied FSA Notification No. 6 (2013) and FSA Notification No. 7 (2014).

2

Sony Financial Holdings Inc. Annual Report 2015

Sony Financial Holdings (Consolidated)
Ordinary revenues

Ordinary profit

Billions of yen

Net income

Billions of yen

1,352.3

1,500

90.0

100

Total assets

Billions of yen

Billions of yen

100

12,50010,0009,545.8
1,200

80

80

900

60

60

600

40

40

5,000

300

20

20

2,500

0

11

12

13

14

0

15

For the years ended March 31,

11

12

13

14

15

0

54.4

11

12

13

14

7,500

0

15

For the years ended March 31,

For the years ended March 31,

Sony Life

Sony AssuranceSony Bank

Non-consolidated solvency margin ratio

Non-consolidated solvency margin ratio

11

12

13

14

15

As of March 31,

Financial Soundness Indicators(As of March 31,)%%

Non-consolidated capital adequacy ratio(Domestic criteria)
%

3,000

1,000

15.0

2,400

800

12.0

1,800

600

9.0

1,200

400

6.0

600

200

3.0

2,555.0%5%
10.66

629.6%

0

11

12

13

14

15

0

11

12

13

14

15

0

11

12

13

14

15

Notes: 1. In the graphs above, Sony Life and Sony Assurance have calculated non-consolidated solvency margin ratios
based on the current standards, which were applied from March 31, 2012.
2. Sony Bank has calculated its non-consolidated capital adequacy ratio (domestic criteria) based on FSA Notification No. 19 (2006), which establishes standards based on Article 14-2 of the Banking Act of Japan for determining
the capital adequacy of a bank in light of the assets held by the bank. Until March 31, 2012, Sony Bank applied
FSA Notification No. 79 (2008), and on March 31, 2013, Sony Bank applied FSA Notification No. 56 (2012).
From March 31, 2014, Sony Bank applies FSA Notification No. 6 (2013) and FSA Notification No. 7 (2014).

Credit Ratings (As of July 1, 2015)

Credit Rating Agencies
Rating and Investment
Information (R&I)

Japan Credit Rating
Agency (JCR)

Sony Financial Holdings

Sony Life

Issuer rating

Insurance claims paying ability

AA–

AA

Sony Bank

Ability to pay insurance claims

Long-term issuer rating

AA

AA–

Insurer financial strength ratingStandard & Poor’s (S&P)

AA–

Moody’s Investors Service(Moody’s)

Insurance financial strength rating

Counterparty credit ratingA+

Long-term

Short-term

A-1

A1
Sony Financial Holdings Inc. Annual Report 20153

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

1990s

Jul. 1987 Sony Prudential Life Insurance agrees toterminate joint venture
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 was 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)
Dec.
Sony Life was approved to conduct banking agency
business on behalf of Sony Bank
Oct. 2008 Sony Life opens a representative office in Beijing(closed in July 2014)

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

Exchange

Jul. 2009 Sony Life opens a representative office in Taipei
Aug.
Oct.

2010s

Dec.

Apr. 2011 SFH conducts stock split and adopts share unit

AEGON Sony Life Planning changes its name to
AEGON Sony Life Insurance Co., Ltd.
Sony Life establishes SA Reinsurance Ltd. in
British Bermuda as a reinsurance company
specializing in variable annuities
AEGON Sony Life Insurance commences
operations. Sony Life’s Lifeplanner sales employees
begin selling individual variable annuities

systemNov. 2013 Sony Financial Group enters the nursing carebusiness, acquiring Senior Enterprise Corporation
as a wholly owned subsidiary of SFH
Apr. 2014 Sony Lifecare Inc. is established as a holding
company to oversee nursing care business
Oct.
Senior Enterprise Corporation changes its nameto Lifecare Design Inc.

Sony Life

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

Sony Financial Holdings Inc. Annual Report 2015

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
channel29%
71%Lifeplanner
channel*Annualized insurance premiums from new policies
in fiscal 2014 (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 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.

Sony Assurance official website
Apr. 2015 SmartLink Network, Inc. changes its name toSony Payment Services Inc.

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 2015

5

A Message from the President

We marked new record highs in our consolidated
performance for fiscal 2014. With future stability andsustainable profit growth in mind, we enhanced returns
to shareholders.
Let me take this opportunity to express my deepest
appreciation to all stakeholders for your support andinterest in the Sony Financial Group.
Sony Life, Sony Assurance and Sony Bank—the corebusinesses of the Group—have taken a forward-looking
perspective, looking ahead ten years, and worked to build
a platform that would drive the Group rapidly toward
a new stage of growth. As a result, the Group delivered
excellent results on a consolidated basis, with higher
ordinary revenues and higher ordinary profit in all three corebusinesses. In fact, ordinary revenues, ordinary profit andnet income, on a consolidated basis, hit new heights infiscal 2014 ended March 31, 2015.
Business volume also expanded steadily in all businesses.
In the life insurance business, new policy amount increased
significantly, pushing new policy amount to a record highwhile policy amount in force steadily charted an upward path.
In the non-life insurance business, net premiums written
increased, mainly in its mainstay automobile insurance. In
the banking business, the loan balance expanded, largely
from mortgage loans.
Furthermore, in the nursing care business, a market we
newly entered in November 2013, we are promoting the
opening and operation of nursing care homes by a subsidiary and business expansion through alliances with othercompanies as part of business development.

Going forward, we will continue to build on this steady
expansion of business volume and maintain a robust revenue base that is impervious to changes in the operating
environment.
We are also determined to further enhance returns toshareholders. It has already been our practice to increase
dividends in line with consolidated revenue growth, but fromfiscal 2015, ending March 31, 2016, we have revised upward
our medium-term target for the dividend payout ratio to
between 40% and 50%. We anticipate an annual dividend of¥55 per share for fiscal 2015, up ¥15 over fiscal 2014, which
will mark four straight years of dividend increases.
We will lift customer satisfaction yet higher and broaden
our customer base by continuing in our quest to provide
high-quality services, a strong point shared throughout
the Group. With these efforts, we will advance the sustainable growth of the Sony Financial Group. In addition, we
have always emphasized corporate governance, and with
enforcement of the Corporate Governance Code for listedcompanies in Japan, effective from June 2015, we will
strive even harder to enhance corporate value andcontribute to the advancement of society as a whole.

July 2015

Katsumi Ihara
President, Representative Director

6Sony Financial Holdings Inc. Annual Report 2015

Sony Financial Holdings Inc. Annual Report 2015

7

Vision and Strategies

This section focuses on the growthof the Sony Financial Group andthe medium-term management plan.
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 2015

Growth of the Sony Financial Group

Record-high results

SFH (Consolidated)

Ordinary revenues¥1,352.3

1,320.4*
1,259.0

Vision and Strategies

Gained customer loyalty throughinnovation in a mature market,
which led to sustainable growthbillion1,078.0

Ordinary Revenues/Ordinary Profit

978.9

1,002.2

Ordinary proﬁt

860.3

822.1

¥ 90.0

759.2

758.7
653.2

billion

84.3

76.8

74.6

79.2

76.1

2011

2012

2013

2014

44.5
34.2
25.3

18.3

12.2
2005

2006

2007

SFH establishedin April 2004

2008

2009

2010

2015

Changed to stable proﬁt-generating
structure less likely to be affected
by ﬁnancial market ﬂuctuations

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

Implemented asset liability management (ALM) review at Sony Life,and proﬁts increased substantially(For the years ended March 31,)

* Please see note on page 2 regarding ordinary revenues in fi scal 2013.

Total assets¥ 9,545.8

8,841.3

Expand asset scale by raising
the number of insurance policies soldand balance of deposits
Total Assets/Net Assets

billion

8,096.1
7,241.4
6,597.1

6,001.0
4,977.4

Net assets

5,313.6¥550.6

4,323.7

3,917.0

billion3,282.2

467.0

435.4
347.8
263.0

270.1

2006

2007

204.8

182.8
2005

SFH establishedin April 2004

294.8

269.4

261.6

2008

2009

2010

2011

2012

2013

2014

2015

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

(As of March 31,)

Composition by Business Segment(For the year ended March 31, 2015)(As of March 31, 2015)7% 3%

Ordinary Revenues

5%8%

Ordinary Proﬁt

Total Assets

22%

2%

Life Insurance Business
Non-life Insurance BusinessBanking Business

90%

87%

76%

Sony Financial Holdings Inc. Annual Report 2015

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
omer 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

2015

¥

•Financial soundness to meet future capital requirements

40.9
trillion

Total assets:¥5 trillion

39.0
37.7

36.0
Total assets:¥3 trillion

27.8

29.0

30.2

31.4

32.5

33.4

34.7

26.2
Total assets:¥1 trillion

April 1981
Business commenced

Changed name toSony Life Insurance

1980

0.2

1982

1985

0.7
1988

18.8

3.9
1.9
1991

1994

(As of March 31,)

10

21.5

10.9

August 1979
Sony Prudential Life InsuranceCo., Ltd. established

0.04

23.4

24.7

Sony Financial Holdings Inc. Annual Report 2015

1997

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

*Total amount of individual life insurance and individual annuities

Sony Assurance

Direct Premiums WrittenNon-life Insurance Business2015•High profitability, a unique aspect of a direct non-life insurer•Risk-segmented automobile insurance facilitates reasonable

90.4

Vision and Strategies¥

Became No. 1 in direct
premiums written for automobile
insurance for 12 straight years
among major direct non-life insurers**

billionpremium rates

87.3
82.5

•Excellent accident response, with high-quality customer center and website services

78.3
72.8

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
54.6
and cancer insurance

67.0
60.8

50.1
44.9

t$IBOHFEOBNFUP
Sony Assurance Inc.
t#FHBOTBMFTPG
automobile insurance

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

*Here, “major direct non-life insurers” refers to non-life insurers selling automobile insurance primarily via direct sales channels as of March 31, 2003.
**Here, “major direct non-life insurers” refers to non-life insurers selling automobile insurance primarily via direct sales channels as of March 31, 2014.
(For the years ended March 31,)Sony Bank (Non-consolidated)

Retail Balance**

Banking Business2015•Low-cost structure unique to an Internet bank¥

Loan balance exceeded¥1.0 trillion•Lineup of highly convenient, high-quality products leveraging

3.0

Total assets: ¥2 trillion

advantages of the Internet

Loan balance exceeded¥0.5 trillion•Services ranked No. 1 for eight straight years in the financial

2.8

trillion

2.9

2.6

institution customer satisfaction ranking*

2.4*Article in the February 1, 2015 issue of the Nihon Keizai Shimbun (Nikkei) newspaper
2.1
Deposit balance exceeded¥1 trillion

1.8
1.5

1.1
April 2001
Sony Bank Inc. established
Business commenced in June

0.9
0.7

0.4
0.1
2002

(As of March 31,)

0.2
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

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

Sony Financial Holdings Inc. Annual Report 201511

Sony Financial Group

Medium-term Business Plan

FY2017FY2015—

SFH president, Katsumi Ihara, and the presidents of Group companies
describe the overall strengths of the Group and the medium-term
strategies and targets.

Sony Financial Group

Page 13
Katsumi Ihara
Sony Financial Holdings
President, Representative Director

Sony Life

Page 16
Tomoo HagimotoSony Life
President, Representative Director

Extend industry-leading new policy
acquisition capability and increase policy
amount in force. Strengthen marketing
capabilities for death-protection insurance.

Sony Assurance

Page 20
Atsuo Niwa
Sony Assurance
President, Representative Director

Maintain growth in automobile insurance business andexpand business in other types of policies.

Sony Bank

Page 22
Yutaka Ito
Sony Bank
President, Representative Director

Refine strengths in foreign currency andmortgage loan businesses. Maintain profitability
even in a low interest rate environment.

12Sony Financial Holdings Inc. Annual Report 2015

Sony Financial Group’s Key Messages
Vision and Strategies

Operating performance reached record levels in fiscal 2014
•The life insurance, non-life insurance and banking businesses each posted increased
revenues and profits, leading to consolidated ordinary profit of ¥90.0 billion•Sony Life’s new policy amount made a V-shaped recovery to establish
a new record
The new medium-term management plan up to fiscal 2017 aims to further
strengthen competitiveness of each Group company and ensure sustained
and steady profit growth amid an ultralow-interest-rate environment

Medium-term Management Targets

Consolidated ordinary revenues

Results for FY2014

Targets for FY2017¥1,352.3 billion¥1,500 billion

Consolidated ordinary profit¥90.0 billion

Consolidated net income¥54.4 billion¥100 billion¥65 billion**Under targets for fiscal 2017, consolidated net income is equivalent to the amount of “profit attributable to owners of the parent” of the “Accounting Standard forBusiness Combinations” (ASBJ Statement No. 21, September 13, 2013) and the related revision.

Further augment returns to shareholders•Increase the medium-term target dividend payout ratio to 40%–50%,
enhancing returns to shareholders•Expect to raise dividends per share by ¥15 (from ¥40 per share to ¥55) in fiscal
2015**, for the fourth consecutive year of increases since fiscal 2012**Dividend for fiscal 2015 is a forecast.

Cautionary note regarding medium-term business plan:

We apply a process of annual, rolling updates to the Sony Financial Group’s three-year medium-term business plan to ensure
measures remain relevant to prevailing business conditions. Consequently, the management strategies and management targets
stated in these materials are not absolute and may be revised each year with the new fiscal year as the starting point.

Sony Financial Holdings Inc. Annual Report 201513

Sony Financial Group
Katsumi Ihara
Sony Financial Holdings
President, Representative Director

Fiscal 2014 Consolidated Business
Performance
On a consolidated basis, ordinary revenues, ordinary profit andnet income all hit new heights.
Ordinary revenues rose 2.4% over the previous fiscal year,to ¥1,352.3 billion, reflecting growth in all three business segments, namely, life insurance, non-life insurance and banking.
Ordinary profit was also higher across the board, climbing
18.3% year on year, to ¥90.0 billion. Net income jumped
34.4%, to ¥54.4 billion, due to higher ordinary profit as well asa change in the calculation policy applied at Sony Life Insurance on the reserve for price fluctuations.
This achievement is due to a favorable shift in businessvolume in all three core businesses. Especially in the life
insurance business, policy amount in force grew significantly
throughout the fiscal year. This was thanks to renewed
efforts to reinforce marketing capabilities for death-protection
insurance, an area of noteworthy expertise. Successful measures to enhance recruitment processes, including actively
promoting Lifeplanner sales employees to office managers
who then take on the role of recruiting new Lifeplanner sales
employees, ultimately expanded the number of registered
Lifeplanner sales employees. In the non-life insurance
business, profitability remained high thanks to the sustained
efforts to lower the loss ratio on automobile insurance, which
had been a priority in the previous fiscal year. In the banking
business, a certain level of profitability was maintained withthe growing balance of mortgage loans despite the negative
influence of low interest rates.

14

Sony Financial Holdings Inc. Annual Report 2015

Fiscal 2015 Outlook
We expect a stable and sustainable upward trend in businessvolume across all core operations—life insurance, non-life
insurance and banking.
On a consolidated basis, ordinary revenues are expected
to decrease, mainly in the life insurance business, because
we do not anticipate an improvement in investment income
backed by favorable market conditions, as was present infiscal 2014. Ordinary profit is expected to decrease because
we anticipate an increase in spending for medium-term business growth activities, an increase in provision of policy
reserves for minimum guarantees for variable life insurance
in the life insurance business, and lower gains on sale of securities in the life insurance and banking businesses. Meanwhile,
net income attributable to the parent company is expected
to increase due to the reduction in the corporate tax rate.

Sony Financial Group’s Medium-term
Corporate Strategy(Fiscal 2015 to Fiscal 2017)
Looking toward fiscal 2017, the Sony Financial Group will
focus on measures to improve the quality of services provided
by Group companies—the Group’s biggest strength—and toraise customer satisfaction to an even higher level. Anotherobjective is to realize stable and sustainable profit growth
fueled by expanded business volume on a robust revenue
base that is impervious to changes in the operating environment. We will also take a vigorous approach to enhancing
shareholder returns. We have always maintained a practiceof sharing improved revenues from Group operations withshareholders through dividend increases, and from fiscal 2015,
we intend to raise the medium-term target and boost thepayout ratio, which would deliver a fourth consecutive yearof higher dividends.

SFH’s Capital Strategy and Dividend Policy

Vision and Strategies

SFH aims for steady increases in dividends in line with earnings
growth over the medium to long term with sufficient internal
reserves to ensure financial soundness of Group companies
and to invest in growth fields.
Based on this policy, management determines specificdividend amounts for each fiscal year by taking into account acomprehensive range of factors, including capital adequacy—that is, sufficient capital in relation to the risks carried by Group
companies—as well as investment opportunities, business
forecasts and legal and regulatory developments. The year-end

dividend for fiscal 2014 was therefore set at ¥40 per share,up ¥10 for a third consecutive year of increases from fiscal
2012.
For fiscal 2015, ending March 31, 2016, we will enhance
returns to shareholders still further, with an upward revision of
the medium-term target for the payout ratio, which had hovered between 30% and 40%, to between 40% and 50% ofconsolidated net income. We anticipate an annual dividend of¥55 per share for fiscal 2015, up ¥15 over fiscal 2014.
Going forward, we remain committed to enhancing returns
to shareholders, based on stable earnings growth and robust
financial soundness.

Medium-term Target for
the Dividend Payout Ratio

Dividend per share/Dividend payout ratio

30–40%

Dividend payout ratio (%)

40–50%

Dividend per share (Yen)

42.0
32.2
26.5

26.4
21.2

40
30

13.6

15

15

FY2007

FY2008FY200955 yen

24.1

20.9

15

32.0

25
20

20

FY2010FY2011FY2012FY2013

FY2014FY2015(Forecast)

Adjusted ROE
Consolidated return on equity (ROE) on a fiscal accounting
basis has generally been maintained above 10%.
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) decreased in fiscal 2014,
paralleling low interest rates. In fiscal 2017, core ROEV, accumulated through the value of new business and contributions
from the value of existing business, is expected to be about
6%, assuming low interest rates prevail. For Sony Assurance,adjusted ROE should be around 14% by fiscal 2017, and forSony Bank, about 6%, on a par with fiscal 2014.
Each company will strive toward enhanced capitalefficiency.

FY2012 FY2013 FY2014

Sony Life ROEVFY2017(Target)3.3% 14.9%

9.6%Core ROEV

5.2%

6.0%

5.0%

Sony Assurance
adjusted ROE(0.1%)

9.8% 14.2%

Approx. 14%

Sony Bank(consolidated) ROE

4.3%

4.8%

6.0%

Approx. 6%

Consolidated
adjusted ROE

3.3% 14.2%

9.5%

Approx. 6%

Approx. 6%*Formulas for calculating adjusted ROE are presented on page 25.

Sony Financial Holdings Inc. Annual Report 201515

Sony Life
Tomoo HagimotoSony Life
President, Representative Director

Medium-term Business Strategies and Targets
Promote sustainable growth of sales
channels
Entrench competitive advantages,
take on growth domains• Expand the scope of the Lifeplanner channel and improve productivity• Increase business in the independent agent channel in response to changes
in the operating environment• Continue to concentrate on the death-protection business, an area ofcompetitive advantage• Undertake new initiatives targeting the corporate and senior markets

Ensure stable growth in corporate
value• Maintain a high level of soundness and enhance corporate value• Steadily increase profits over the medium to long term

Medium-term Targets for Fiscal 2017

Results for FY2014

Policy amount in force¥ 40.9 trillion

CAGR of approx. 4%

Number of Lifeplanner sales
employees1

4,329

An increase of
approx. 300 persons

MCEV2

Ordinary profit
1

Targets for FY2017

Over ¥
Over

4,600¥ 1.3 trillion

ROEV of approx. 6%¥ 1.5 trillion¥ 78.3 billion

CAGR of approx. 6% with
FY2015 forecast (¥74.1 billion)
as starting point¥ 84.0 billion

The figure includes the number of contracted Lifeplanner sales employees and those rehired on a fixed-term contract basis after retirement.
Sony Life’s assumptions about the market environment as of the middle of May, 2015 for the fiscal 2017 target.
Note: Because ordinary profit is expected to decrease in fiscal 2015, as mentioned earlier, CAGR is presented with fiscal 2015 as the starting point.

2

16

Sony Financial Holdings Inc. Annual Report 2015

45 trillion

Further Expansion of New Policy Amount

Trends of Sony Life’s new policy amount(Individual life insurance and annuities)

Lifeplanner channel¥

Independent agent channel(Trillions of yen)

5.4 trillion

4.7

4.4

4.2

Vision and Strategies

Death-protection insurance, a core product field for Sony Life,is typically hard to sell because death protection is more of alatent need product compared with saving-type products andthird-sector products where there is an obvious need. In selling death-protection insurance, Sony Life provides each customer with the required coverage, determined through consultations after discussing customers’ life plans. Consequently,
new policy amount is the sum of this required coverage, andis a key performance indicator that shows sales ability.

In fiscal 2013, a pullback in demand following the rushof purchasing in fiscal 2012 prior to the revision of premium
rates, resulted in a temporary slump. But in fiscal 2014, witha renewed emphasis on sales of death-protection insurance,
Sony Life generated a new policy amount exceeding ¥4.7
trillion, which marked an all-time high.
Looking toward fiscal 2017, the goal is to build a structurethat will generate ¥5.4 trillion in new policy acquisitions and tomaintain annualized growth of 4% for policy amount in force
through the strategies described below.

3.8

+4%
+29%
FY2011FY2012FY2013

FY2014FY2017

Note: Numbers rounded down to the nearest hundred billion yen

Strategy 1: Lifeplanner channel—Aiming to hire more than
500 Lifeplanner sales employees annually
The Lifeplanner channel is Sony Life’s core sales channel, withsales through this access point accounting for about 70% of
all new policies and steadily increasing.
Sony Life has actively promoted Lifeplanner sales employees to office managers, who are then responsible for recruiting. Through this approach, the company has been recruiting
more than 400 new Lifeplanner sales employees each year. As
a result, the number of registered Lifeplanner sales employees

Number of Lifeplanner sales employees
and productivity

at the end of March 2015 stood at 4,329, up more than 100
over the previous fiscal year. In fiscal 2015, the company willchange the compensation system for office managers withthe aim of establishing an environment in which Lifeplanner
sales employees with excellent results can pursue careers as
office managers. For fiscal 2017, Sony Life had set its target
at more than 500 office managers and recruiting more than
500 Lifeplanner sales employees, which will expand thenumber of Lifeplanner sales employees to more than 4,600
by the end of March 2018.

Productivity New policy amount productivity index(Productivity is indexed to111
FY2011 = 100, calculated on thebasis of new policy amount)100

Number of Lifeplanner sales employees
as of the end of the ﬁscal year*

Over

4,600

4,329

4,216
4,121

4,133

Increase by about
100 Lifeplanner sales
employees annually
FY2011FY2012FY2013

FY2014FY2017*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 201517

qualification and evaluation systems for Lifeplanner sales
employees and provide training on death-protection insurance
for all managers. In addition, we aim to enhance our system
for training Partners as well as reinforce their consulting
capabilities.
Share of business by product category(Based on annualized premiums
from new policies)

Sony Life

Individual annuities 6%
Medical protection,living benefit protection
and other products 20%

Death-protection insurance,
endowment insurance
74%

Industry Total
Individual annuities 29%

Strategy 2: Independent agent channel—Compliancewith the regulatory revision and growth through stronger
alliances with independent agencies
Insurance sales through independent agencies (Partners)
account for about 30% of all new policies at Sony Life, making
this an important sales channel, second only to the Lifeplanner
sales channel.
In fiscal 2014, the Financial Services Agency required
independent agencies to ensure appropriate solicitation andsales processes, prompting them to review the managementof individual agents. Going forward, revision of the Insurance
Business Act of Japan will require agencies to improve solicitation systems, to better understand customers’ intentions andto provide the necessary information to customers, and agencies will have to respond accordingly. For Sony Life’s Partners,
who already have been providing protection based on consultations, this movement heralds a business opportunity to distinguish themselves from other insurance agencies. We willdevelop and reinforce alliances with different types of agencies, including agencies with close regional ties and store-front
agencies that expand their networks over a wide area, and wewill raise demand by addressing diversifying needs, with theaim of further growth.
Strategy 3: Product focus—Providing thoroughconsultations on death protection
In fiscal 2014, Sony Life was keen to rekindle growth in newpolicy amount by strengthening its training program for new
Lifeplanner sales employees and also by introducing a new
type of family income insurance, the core of death-protection
insurance. These efforts were successful, propelling new policy
amount to an all-time high. Going forward, we will revise our

18Sony Financial Holdings Inc. Annual Report 2015

Medical protection,living benefit protection
and other products
18%

Death-protection insurance,
endowment insurance
53%

Source: Official disclosure documents of individual life insurers

Enhance training
systems

Revise training program for new Lifeplanner
sales employees, offer more sophisticatedtraining program for all managers

Reinforce productcapabilities

Release new products that expand thescope of coverage of family income
insurance

Revise qualificationand evaluation systems

Introduce death-protection sales
capabilities into the criteria for qualifying
and evaluating Lifeplanner sales employees
and managers

Strategy 4: Initiatives in growth domains
Sony Life is strengthening its approach also in areas thatoffer growth potential. As of July 2015, about one-quarterof all Lifeplanner sales employees have handled corporate
insurance. Going forward, we seek to expand consulting
activities to corporate clients in a manner similar to individual
clients, through developing and expanding support tools forsales and by reinforcing our training program. We will also target higher sales to corporate clients by improving back-officesystems and developing new products specifically for corporate clients.
We anticipate the growth of concerns in Japan overinheritance issues, paralleling a revision to the InheritanceTax Act of Japan in January 2015. In response, in addition
to our existing initiatives, mainly annuities and nursing careinsurance, we plan to cultivate the senior client market by
expanding the product lineup geared toward senior clients.

Stable Growth in Corporate Value

Profit from an Accounting Perspective
Fiscal 2015 ordinary profit, based on statutory accounting,is likely to decline year on year. The anticipated decrease isdue to such factors as higher spending to support growth
activities, an increase in provision of policy reserves forminimum guarantees for variable life insurance, comparedwith the previous fiscal year when market conditions weremore favorable, and an anticipated decline in capital gains.
Higher spending to support growth activities is primarily
investment designed to reinforce sales and customer
services. More to the point, this is investment to strengthen
the sales structure for death-protection insurance and todevelop tools to attract corporate clients’ interest. We will
push forward with such measures and still aim for averageannual growth of about 6% in ordinary profit, culminatingin ¥84.0 billion in fiscal 2017.

MCEV

Financial soundness based on economic value(Billions of yen)(Billions of yen)Core ROEV+5.0%
As of March 31,

1.5

trillion+63.3
1,201.3*+48.6
New
business
value

+14.7

+1.7

+56.5

1,322.9150%

ESR (MCEV/Risk amount)
184%
177% Maintainabove 150%

1,221.3

Expected Assumption Economicchanges variances,
existing
etc.
business
contribution

40-year(JGB yields) 1.775%

1,322.9

ROEV
approx. 6%
664.3

2014

Vision and Strategies

MCEV Growth and Financial Soundness Based on
Economic Value
Sony Life’s basic policy on risk preference is to ensure sufficientsolvency on an economic value basis and realize stable andsustainable growth in corporate value by increasing policies inforce and actively underwriting insurance risk. In asset investment, we prioritize investment in assets matched to the characteristics of insurance liabilities to lessen the interest rate risk
associated with insurance liabilities over the long term. In thisway, the company strives to grow corporate value derived
from the life insurance business.
Sony Life’s market consistent embedded value (MCEV) atthe end of March 2015 rose to ¥1,322.9 billion, up ¥101.6 billion from a year earlier, reflecting such factors as acquisitionof new policies, lower inflation rates and a drop in corporate
taxes and other factors. The value of existing businessdecreased significantly due to a decline in interest rates, but
a large portion of this was offset by the benefit of ALM (namely
an increase in the adjusted net worth).
Sony Life sees the value of new business and the contributions from existing business as the base for EV growthobtained through insurance underwriting, and defines thisvalue as a core return on embedded value (core ROEV). We
are forecasting a rate of about 6% by March 31, 2018. ROEV
decreases because it is susceptible to interest rate fluctuations, but core ROEV moves at a stable pace. We also

expect MCEV to hit ¥1,500 billion by March 31, 2018,reflecting expanded volume from the acquisition of newpolicies.
Risk amount on an economic value basis reached¥745.5 billion, after tax, as of March 31, 2015, and the economic solvency ratio (ESR)—MCEV divided by risk amount—came to 177%. We would like to continue to maintain ESR
above a benchmark value of 150%.
Going forward, we will ensure sufficient solvency on an
economic value basis, and realize stable and sustainablegrowth in corporate value.

+121.62015(32bp)

1.455%

2018*Dividends paid to shareholders of ¥20.0 billion in ﬁscal 2014 are not included.

2014

745.5

2015

MCEV
The risk amount based on economic value (after tax)

Please refer to Review of Operations: Life Insurance Business on page 28.
Sony Financial Holdings Inc. Annual Report 201519

Sony Assurance
Atsuo Niwa
Sony Assurance
President, Representative Director

Medium-term Business Strategies and Targets• Substantial recovery in profitability, due to an improved loss ratio on automobile
Ensure sound profitability

insurance• Ensure sound profitability through detailed ongoing measures to improve theloss ratio

Maintain growth and achieve stableprofits over the long term

• Firmly maintain its leading position in the market for direct automobile insurance• Reinforce the stable earnings base by expanding business in categories otherMaximize customer satisfaction,
the engine of growth• Concentrate on further enhancing customer retention capabilities• Augment customer satisfaction by optimizing services through individual

Medium-term Targets for Fiscal 2017

Results for FY2014

Direct premiums written¥ 90.4 billion

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

than automobile insurance

customer contact points

26.7%
64.3%
91.0%

CAGR +6%

Sum of two ratios
Decrease¥ 108.0 billion
Sum of two
ratios90% range

Ordinary profit¥ 4.2 billion

CAGR +7%¥ 5.0 billion

Adjusted ordinary profit2¥ 7.1 billion

CAGR +6%¥ 8.5 billion

Adjusted ROE3

14.2%

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 25.
220

Targets for FY2017

Sony Financial Holdings Inc. Annual Report 2015

Flat

14%

Approx.

Trend of ordinary profit andadjusted ordinary profit(Billions of yen)

We are also working to elicit greater customer loyalty,
by raising the quality of accident response services andpolicy processing services as well as by offering highly
convenient web/smartphone services. Through these measures, we will maintain growth in the core field of automobile
insurance and cement our leading position in the direct
automobile insurance market.
Another objective is to develop a presence in domains
other than automobile insurance, such as medical insurance, and expand business operations. This will support
our aim of an annual growth of 6% and direct premiums
written exceeding ¥100 billion by fiscal 2017. We aim toattain steady profitability by holding the sum of the net
expense ratio and the earned/incurred (E.I.) loss ratio
within the 90% range.

Vision and Strategies

At Sony Assurance, the loss ratio on automobile insurance,
which had trended upward until fiscal 2012, turned downward in fiscal 2013 and continued to decline through fiscal
2014, thanks to various measures, including a revision of
insurance premiums, and also the effect of a newly introduced bonus-malus system (non-fleet driver rating system).
In addition, the more favorable loss ratio led to a significant
improvement in profitability, culminating in record-high profit.
On the product front, in February 2015 we began sellinga new type of automobile insurance that reflects such driving
behavior as acceleration and deceleration, which has a highcorrelation with accident risk, in the insurance premiums.
Going forward, we will continue to develop automobile
insurance products matched to diversifying customer
needs through the pursuit of products with progressive,
rational and unique qualities.

7.1

Ordinary proﬁt
Adjusted ordinary proﬁt

4.1

4.2

3.9

2.1

3.0

2.8

2.5

2.3

2.1 2.1

FY2008FY2009FY2010

4.2

0.3

0.1

FY2011FY2012FY2013

FY2014

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

Trend of loss ratio(Automobile insurance)

Net loss ratio
74.3%

E.I. loss ratio

64.7%

66.8%

64.7%

60.2%

58.8%
Revision of insurance premiums

New bonus-malus system(non-ﬂeet driver rating system)

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014

Note: Net loss ratio = (Net losses paid + Loss adjustment expenses ) / Net premiums written
Earned/incurred loss ratio = (Net losses paid + Provision for reserve for outstanding losses +Loss adjustment expenses) / Earned premiums

Please refer to Review of Operations: Non-life Insurance Business on page 30.
Sony Financial Holdings Inc. Annual Report 201521

Sony Bank
Yutaka Ito
Sony Bank
President, Representative Director

Medium-term Business Strategies and Targets
Increase business volume leveraged
by customer evaluation• Maintain high third-party customer satisfaction ratings• Strengthen product and service promotions

Strengthen strategic products• Further enhance “Foreign Currency World”• Expand the individual loan business centering on mortgage loans

Ensure stable profit-generating
capacity

Medium-term Targets for Fiscal 2017

Retail balance (Sum of deposits,
investment trusts and personalloan balance)
Gross operating profit(Sony Bank consolidated)
Operating profit(Sony Bank consolidated)
ROE (Sony Bank consolidated)• Maintain and improve profit-generating capacity through more sophisticatedoperation of ALM• Secure a certain level of interest spread

Results for FY2014

Targets for FY2017

3.6 trillion¥ 3.0 trillion

CAGR over 6%¥ 24.9 billion(Change from FY2015
forecast of ¥23.9 billion)
CAGR approx. 5%¥ 26.3 billion¥ 7.3 billion(Change from FY2015
forecast of ¥6.4 billion)
CAGR over 10%¥ 7.8 billion

6.0 %Maintaining 6% level

Over ¥

Approx.

6.0 %Note: As for the CAGR targets of gross operating profit and operating profit, forecast amounts from fiscal 2015 to fiscal 2017 are used for the calculation consideringgains on the sale of bonds recorded in fiscal 2014.

22

Sony Financial Holdings Inc. Annual Report 2015

Sony Bank has a stellar reputation among customers, substantiated by many industry honors, including the distinction of being
No. 1 in the annual Nikkei customer satisfaction ranking of financial institutions* for eight consecutive years. This high level ofcustomer satisfaction drives our business forward, and we willuse it to solidify further growth with an emphasis on mortgage
loans and foreign currency, while continuing the sustainable
expansion of business operations. By the end of March 2018,
we expect to have ¥2 trillion in deposits, ¥1.3 trillion in mortgage
loans, and a retail balance in excess of ¥3.6 trillion.
In the foreign currency business, Sony Bank managed tocapture a high share—7%—of the domestic market, as ofMarch 31, 2015, despite heightened competition for foreign
currency deposits in the banking industry. Going forward, we
expect our foreign currency deposit balance to grow owing to
the further strengthening of the asset management function,
namely the “savings and investment” facility of our “Foreign
Currency World,” as well as its “usage” facility, which has amulti-currency feature for foreign currency settlements andprovides access to our website-based service for transferring
foreign currency overseas.

Investment trusts
Yen deposits

Vision and Strategies

Retail balance(Sum of deposits, investment trusts,
and personal loan balance)

In loans to individuals, we saw the mortgage loan balancesteadily rise. Going forward, we will continue to build stronger
ties with Sony Life’s Lifeplanner sales employees and with realestate agents to expand the mortgage loan business, while
enriching associated services, such as extended coveragefor group credit life insurance. In addition, we aim to movebeyond the mortgage loan business and will resume cardloans. As a medium- to long-term objective, we will pursue
planning on products for seniors, and strive to diversify product characteristics to meet customers’ needs for funding
throughout their lives.
We will also strive to reinforce profitability. Through thedevelopment of the strategic products outlined above, Sony
Bank will continue to expand business operations and ensurestable interest spread through appropriate ALM. We will
increase core gross operating profit by focusing on net interest
income, the principal profit source of any bank, and aim forgross operating profit of ¥26.3 billion by fiscal 2017.
*Nihon Keizai Shimbun (Nikkei) newspaper article, dated February 1, 2015

Over

Foreign currency deposits
Personal loans

3,600.0(Billions of yen)
At the end of the ﬁscal year

2,841.2

2,962.6

3,087.5

2,621.1

FY2011FY2012FY2013

FY2014FY2017

Trend of interest spread

Aiming to maintain current level

(%)

0.94

0.92

0.93

0.92

FY2011FY2012FY2013

FY2014FY2017

Please refer to Review of Operations: Banking Business on page 32.
Sony Financial Holdings Inc. Annual Report 201523

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.
The first nursing care home constructed since Sony
Lifecare was established will open in spring 2016 in Tokyo,
in the area of Soshigaya, Setagaya-ku. Based on theservices provided at an already existing home, we will planand pursue new nursing care services that are higher inquality and originality.
In strategic alliances with other companies, in May 2015,

Sony Lifecare took an equity stake in Yuuai Holdings (YHD),
which is involved in the operation of nursing care homes andother businesses through companies under its umbrella. YHD
has 29 facilities with about 1,400 rooms, and Sony Lifecare
will draw on its investment to absorb management expertisethat will help expand its bases while establishing more of apresence in the market. As of July 2015, Sony Lifecare holds
14.5% of issued shares in YHD and has agreed to accept
YHD-issued convertible bonds totaling ¥1.5 billion. Any future
increase in equity stake will be determined later, based on
the status of collaboration and progress made in the development of a business structure.

Trends in Japan’s Nursing Care Market
Accelerated aging of Japan’s society
The number of seniors over 65 years of age in Japan hit an all-time high of 33.17 million, as of December 1, 2014, comprising26.1% of the demographic spectrum, also a record high. It is assumed the number of youth aged 14 or under will continue todecrease, with no sign of an end to the trend toward fewer children and more seniors in the population.
As of October 31, 2014, the number of people who have been certified as needing care, including those requiring support,
had grown to 6,002,000, topping the six million mark. This is about 2.75 times higher than when the long-term care insurance
system debuted, indicating that the need for nursing care continues to grow as the population ages.
Revised compensation in 2015
Amid concerns about expanding market scale and a growing financial burden, the Japanese government revised the nursing
care compensation scheme in April 2015. Compensation under the public long-term care insurance system is the amountthat municipalities (cities, towns and villages)—the insurers—pay providers of nursing care services, from premiums. Suchcompensation is reviewed every three years. The most recent review is intended to realize by 2025 an Integrated Community
Care System that maintains the continuity of daily life for seniors in the community they have been living in and in the way theywish, to strengthen measures to address the needs of seniors in the third-stage care level or higher, of the five-stage scale ofcare need and of seniors with senile dementia, to support the stable retention of care workers, and to standardize service
evaluations. In the end, overall nursing care compensation will be cut by 2.27%. Amounts take into account such factors ascommodity prices, wage levels and the operating conditions of nursing care providers, but this is the first downward revisionin nine years. These are challenging times for providers as they are called upon to ensure streamlined and efficient operations
while providing higher-quality services.
In 2018, three years from now, nursing care compensation will be revised, along with medical service fees. The content ofrevisions is expected to indicate the government’s approach to social security with respect to nursing care and medical treatment, including cuts in nursing care and medical expenses.
Sources: “Population Estimates,” Statistics Bureau, Ministry of Internal Affairs and Communications; “Report on the Status of Long-term Care Insurance
Services (Provisional)” and materials prepared by councils and committees of the Ministry of Health, Labour and Welfare

24Sony Financial Holdings Inc. Annual Report 2015

Calculation of Adjusted ROESony Life’s adjusted ROE is calculated as follows:
Vision and Strategies

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:
Net income (loss)
The average amount of net assets during the fiscal year
Consolidated adjusted ROE for fiscal 2014 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: Net income (loss)
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

Sony Financial Holdings Inc. Annual Report 201525

Review of Operations

26

Sony Financial Holdings Inc. Annual Report 2015

Segment Performance Highlights

Details: p28

Life Insurance Business
Ordinary revenues

Ordinary profit

Total assets

Billions of yen

Billions of yen

Billions of yen

100

10,0001,500

1,223.9

78.3
80

8,000

900

60

6,000

600

40

4,000

300

20

2,000

0
Ordinary
revenues

11
900.3

12
967.5

13

14

0

15

Ordinary
profit1,142.3 1,196.6 1,223.9

For the years ended March 31,

11
72.1

12
68.1

13
72.7

14
67.2

15

0

78.3

Total
assetsFor the years ended March 31,

Non-life Insurance Business

7,301.0

11

Billions of yen

Billions of yen

Billions of yen

125

5

93.0

4.2

200

157.9

4

160

75

3

120

50

2

80

25

1

40

0

11

12

13

14

15

Ordinary
revenues

74.1

80.0

84.7

89.8

93.0

For the years ended March 31,

0
Ordinary
profit

11

12

13

14

15

0

2.1

2.8

2.3

3.0

4.2

Total
assetsFor the years ended March 31,

11

12

13

14

15

109.3

118.6

127.4

142.7

157.9

As of March 31,

Details: p32

Ordinary revenues

Ordinary profit

Total assets

Billions of yen

Billions of yen

Billions of yen

50

10

2,500

38.4

40

7.3

8

6

1,500

20

4

1,000

10

2

500

11
29.5

12
32.5

13
34.3

For the years ended March 31,

14
36.4*

15

0

38.4

Ordinary
profit

11
2.4

12
3.4

13
3.9

For the years ended March 31,

145.6

2,074.6

2,000

30

Ordinary
revenues

15

Details: p30
Total assets

014

As of March 31,

Ordinary profit

Banking Business

13

4,721.6 5,219.9 5,948.1 6,619.3 7,301.0

Ordinary revenues

100

12

Review of Operations

1,200

15

0

7.3

Total
assets

11

12

13

14

15

1,761.0 1,897.6 2,012.6 2,068.7 2,074.6

As of March 31,

Note: Segment figures are before consolidation adjustments.
*The banking business revised its method of recording ordinary revenues and ordinary expenses on hedge transactions in the fiscal year ended March 31,
2015. Ordinary revenues for the fiscal year ended March 31, 2014 (actual), have been retroactively adjusted to reflect the change. Consequently, ordinary
revenues in the banking business for the fiscal year ended March 31, 2014 (actual), have been revised from ¥35.7 billion to ¥36.4 billion. As adjustments
to ordinary revenues were accompanied by adjustments in the same amount to ordinary expenses, ordinary profit and net income were unaffected.
Sony Financial Holdings Inc. Annual Report 201527

Life Insurance BusinessBusiness 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 ¥857
trillion* as of March 31, 2015, 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 amount inforce, at ¥733 trillion*, as of March 31, 2015.
Looking at trends in sales of insurance products in Japan,
some life insurance companies halted sales of specified
savings-type products in fiscal 2014, a reflection of sinking
long-term interest rates. In fiscal 2015, a new calculation
method for the policy reserve rate directed mainly at lump-sum
savings-type products will be applied to policies concluded on
or after April 1, 2015. Since this will make it easier for life insurance companies to change premiums on savings-type products to match fluctuating interest rates, the product strategies
of each company will attract market attention.
On the sales front, sales channels are becoming increasingly diversified, with a notable expansion in the sale of products over-the-counter (OTC) at banks and a wider variety ofsales agency shop formats. Meanwhile, a heightened need forcustomer protection prompted the prohibition of commission
sales by life insurance solicitors who are not employees ofLife Insurance Premium Volume Share by Country

insurance companies in March 2015. Furthermore, in May
2016, regulations will be introduced that impose a duty toprovide sufficient information on products, to understandcustomer’s intent and to prepare the relevant systems.
Agencies are thus working to respond accordingly.
*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, driven mainly bymeasures to strengthen consulting-based sales through Lifeplanner sales employees and Partners (independent agents)
despite the trend of a shrinking death-protection insurance market. In fiscal 2014, the new policy amount recorded an all-time
high, and policy amount in-force charted a steady upward path.
As a result, Sony Life sat in the industry’s No. 5 position at theend of March 2015, right behind Japan’s four major domestic
life insurance companies, on a policy amount in force basis**.
In regard to asset management, Sony Life continued to invest
in ultralong-term Japanese government bonds to stem risinginterest rate risk associated with the ongoing acquisition of newpolicies. While experiencing ultralow interest rates from 2014 into
2015, the company secured high financial soundness by compiling an asset portfolio able to withstand market fluctuations.
Sony Life remains committed to measures that will drive
growth in business volume through new policy acquisition
while maintaining a high degree of financial soundness andenhancing its presence in Japan’s life insurance market.
**Individual life insurance (as of March 31, 2015)

Industrywide Policy Amount in Force* and Sony Life’s Market Share
As of March 31,

2014
US$2.7 trillion

Policy amount in force (left scale)
20% United States

34% Others

Sony Life’s share (right scale)

Trillions of yen

%

1,500

5.0

1,200

Sony Life
Industry scale

4.0

14% Japan
900

3.0

600

2.0

300

1.0

4% Germany

5% Italy

9% United Kingdom

7% France

7% China
0

Source: Swiss Re. Sigma No 4/2015, World Insurance in 201428

Sony Financial Holdings Inc. Annual Report 2015

05

06

07

08

09

10

11

12

13

14

15

*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

A consultation led by Sony Life’s Lifeplanner sales employee

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

7,627.8
7,002.5
4,625.7
4,112.8
3,753.1
3,653.4
3,367.0
3,092.1
3,043.0
2,925.2

11.3
10.4
6.9
6.1
5.6
5.4
5.0
4.6
4.5
4.3

1
2
3
4
5
6
7
8
9
10

Company name

A
B
C
D
Sony Life
E
F
G
H
I

Billions of yen, %Results

Share

146,649.3
121,655.7
89,060.4
74,463.2
40,391.0
39,159.0
35,086.0
33,172.2
32,411.0
27,229.5

17.1
14.2
10.4
8.7
4.7
4.6
4.1
3.9
3.8
3.2

Note: Individual life insurance (as of March 31, 2015)
Source: Data officially disclosed by individual life insurers

Recent Topics
October 2014:

Launch of Living Benefit Whole Life Insurance (Living
Standard Type) and Living Standard Special Provision 14
Sony Life began selling products with more extensive protection in the categories of specific disability and nursing care thatwill enable customers to live comfortably even if serious illness
or injury cause a financial burden.
Living Benefit Whole Life Insurance (Living Standard Type),with slightly higher premiums than its predecessor, Living Benefit Insurance (Whole Life Type) 98, provides protection for thethree major diseases (cancer, heart attack and stroke) anddeath and serious disability in addition to specific disabilities
and nursing care. The product links specific disabilities andnursing care to the public system, making it easy for customers to understand. Living Standard Special Provision 14 is
an updated version of Special Provisions of Living Standard

Insurance, with premiums generally lower than for thepredecessor product.
May 2015:

Launch of Lump-sum Payment Whole Life Insurance(No-notification Type)
Revision of Japan’s inheritance tax law in January 2015 has
spurred interest in using life insurance as a means of ensuring
a smooth transfer of assets at the time of inheritance. However, seniors, whose assets represent a comparatively large
proportion of overall private wealth, often have health concerns, and even though they are keen to utilize life insurance tofacilitate asset transfer, their health issues may preclude themfrom enrolling in such policies. Sony Life’s lump-sum payment
whole life insurance does not require any notification of healthstatus or medical examination, thereby enabling all seniors,even those with health concerns, to utilize life insurance as amethod for passing on their assets.
Sony Financial Holdings Inc. Annual Report 201529

Non-life Insurance BusinessBusiness 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 2014, Japan’s automobile insurance premium
revenues maintained a year-on-year upward trend, primarily
because of continuous insurance premium rate increases by
non-life insurers to achieve better loss ratios. Profitability
improved dramatically, especially among major non-life insurers, mainly due to reduced claims paralleling the introductionof a new bonus-malus system (non-fleet driver rating system).
Nevertheless, automobile ownership is expected to gradually decline over the medium and long term, primarily due tothe shrinking population as well as a growing disinterest in
automobiles among young people. In addition, more people
are opting for minicars, which carry comparatively lower insurance premiums. Going forward, there is also concern thatrevenues will deteriorate due to higher claims paid and higher
operating expenses following upward revision of the consumption tax. Such factors are making the market environment very
challenging. Furthermore, a number of insurance companies
are participating in research and introducing telematics insurance. This could bring a major change in the automobile
insurance market.

Against this backdrop, direct non-life insurance companies (direct insurers) on the whole, including Sony Assurance,
have seen steady increases in insurance premium revenues
as well as 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 structurescompared with major non-life insurers, plus heightened
recognition mirroring vigorous advertising activities by direct
insurers. Going forward, customers’ preference for low prices
is bound to become more firmly entrenched, which should
fuel continued expansion of direct insurers’ market share.
Conversely, the low-price strategies of direct insurers, especially newcomers to the industry, and an upward trend inadvertising 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 position1 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 2014, the company maintained a favorable increasein premium revenues and dramatically improved its revenue
position, largely thanks to revised premium rates and a lower
loss ratio, achieved through the introduction of a bonus-malus
system (non-fleet driver rating system).

Automobile 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

%

A

B

C

F

G

H

D

E

Billions of yen

5,000

10.0

100

4,000

8.0

80

3,000

6.0

60

2,000

4.0

40

1,000

2.0

20

0.0

0

Sony Assurance

0

05

06

07

08

09

10

11

12

13

14

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

30

Sony Financial Holdings Inc. Annual Report 2015

02

03

04

05

06

07

08

09

10

11

12

13

14

15

Note: The graph was prepared by Sony Assurance from data ofﬁcially disclosed
by individual non-life insurers. Amounts for ﬁscal 2014 are based on
published data available up to June 23, 2015.

Review of Operations

Sony Assurance’s official website (Japanese only)

A noteworthy new development in fiscal 2014 was thedebut of Gentle Driving Cash-Back Plan, Japan’s first2 automobile insurance that factors in such driving behavior as therate of acceleration and deceleration into insurance premiums.
Going forward, Sony Assurance remains committed to the

pursuit of rationality, progressiveness and uniqueness—qualities for which the company is known—in the automobile insurance business and will take steps to earn the trust and loyalty
of more customers by raising the customer-oriented value of
its products and services, which is the source of growth.

Recent Topics
February 2015:

Launch of Gentle Driving Cash-back Plan
Sony Assurance launched a pay-how-you-drive type of automobile insurance called Gentle Driving Cash-Back Plan thatenables policyholders to earn cash back on their insurance
premiums, based on predetermined premiums, for gentle
driving without rapid acceleration or hard braking. For thisinsurance, a compact measuring device—a Drive Counter—will
be installed in policyholders’ vehicles at no charge. This original
device will be used to reflect such driving behavior as acceleration and deceleration in insurance premiums,
making it thefirst automobile
insurance of thistype available
in Japan.2,3,4Sony Assurance’s original “Drive Counter”

By providing rebates for gentle driving, this new productwill allow customers whose insurance premiums tend to behigh to enjoy savings on insurance premiums. Customers
whose premiums tend to be high under the original plan are
drivers in their 20s and those whose bonus-malus (no-claims
discount) level has not risen.
July 2015:

Opening of a new customer support office inKumamoto PrefectureSony Assurance opened a customer support office inKumamoto Prefecture, which commenced operations inJuly 2015. This is the company’s third customer support
office, joining one in Tokyo and one in Sapporo, Hokkaido5.
Customer support offices offer wide customer support,
including responding to inquiries and conducting consultations about insurance as well as policy procedures, andafter-care services following policy sign-up5.

1

Based on the automobile insurance premiums of non-life insurers selling automobile insurance directly, as of March 31, 2003 (according to research by Sony Assurance)
The aspect that qualifies as “Japan’s first” is the reflection of acceleration and deceleration data in premiums. This is based on a survey conducted by Sony
Assurance as of February 2015, using information disclosed publicly by non-life insurance companies.
3
The Drive Counter was developed jointly with OPTEX CO., LTD.
4
“Driving behavior” refers to the frequency of acceleration and deceleration.
5
Accident response services are provided through 25 service centers across the country and through the nationwide service network rather than throughcustomer support offices.
2

Sony Financial Holdings Inc. Annual Report 201531

Banking BusinessBusiness 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 quantitative and qualitative monetary easing sinceApril 2013 and has even ratcheted up an already aggressive
policy on super low interest rates. The situation is compounded by mounting interest rate competition among banks.
In addition, Internet banks are not the only members of thefinance industry pursuing the online route to customers.
Megabanks are keen to enhance the convenience of their own
Internet banking services. Meanwhile, regional banks have
implemented an aggressive price offensive, which is bound to
add fuel to an intensely competitive retail finance market.

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 hit a historic low in fiscal 2014 and the mortgage loan balance shiftedin a favorable direction. This occurred despite a downward
trend in the supply of newly built homes, which was mainly
due to a reactionary drop in demand following a rush ofpurchasing activity in 2013 ahead of the consumption tax
increase. On the other hand, the sluggish interest rate situation kindled heated competition among banks to lower theirmortgage loan interest rates. In this operating environment,
Sony Bank steadily saw its mortgage loan balance rise, andgoing forward, the company will expand business volume
by improving the quality of its products and reinforcing sales
channels.
In the foreign currency business, Sony Bank has grown
its transaction volume by offering reasonable rates andproviding highly convenient services centered on foreign
currency. The company’s foreign-currency deposit balance
represented 7% of the domestic bank total, as of March
2015, right behind that of the major banks. Efforts will also
be directed into expanding the customer base by enhancing
convenience through stronger settlement functions.

*Source: Flow of Funds Accounts issued by the Bank of Japan**Sources: Prepared based on the Nikkin Report by The Japan Financial News Co., Ltd. and data officially disclosed by various financial institutions
Excludes data for shinkin (credit union) banks, credit associations, labor credit associations, agricultural cooperatives and certain other organizations

Deposit Balance at Domestic Internet Banks

Deposit Balance of Japan’s Six Internet Banks

As of March 31,
Billions of yen

Billions of yen

12,0004,000

10,978.6

3,576.1

3,047.1
9,000

3,000

6,000

2,000

1,878.2
1,246.8

3,000

0

1,000

09

10

11

12

13

14

15

0

661.4

A

B

Sony Bank

C

D

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

32

Sony Financial Holdings Inc. Annual Report 2015

569.0

E

Review of Operations

Sony Bank’s MONEYKit service site (Japanese only)

Recent Topics
August 2014:

Expands Interest Rate Discount on Mortgage Loans
Relative to Personal Funds
Sony Bank expanded the interest rate discount spread,on an annualized basis, up to 0.05% on mortgage loans topurchase existing or newly built homes or condominiums
for customers of loans where the percentage of personal
funds is greater than 10%* of the sum of the purchase priceand contract price. As a result, the discount spread on theinterest rate plan for mortgage loans maxes out at 1.05%(annualized) from 1.00% (annualized) and that of the variable select mortgage loan at 1.35% (annualized) from
1.30% (annualized).
*Interest rate discounts based on the percentage of new purchases to net
worth target customers whose total borrowing amount is within 90% of thesum of the purchase price and the contract price (excluding miscellaneous
costs and handling fees in both cases). The discounted rate does not apply
if the mortgage loan has been refinanced.

August 2014:

Commences ATM Alliance with AEON Bank
Sony Bank began an ATM alliance with AEON Bank, Ltd.
in August 2014. Through this arrangement, Sony Bank
customers with a cash card are able to access all services
available through AEON Bank ATMs located mainly at
AEON Group stores nationwide. Sony Bank customers

will not be charged a service fee for using the AEON Bank
ATMs. This expands Sony Bank’s alliance-based ATM
network to about 90,000 units.
December 2014:

Starts Handling Exchange Rate-linked Deposits(Yen-start)
Exchange rate-linked deposits, initiated with a deposit
amount in yen, are structured deposits based on a predetermined deposit period with contracts to repay the principal
and interest amount at maturity using exchange rate levels.
If the yen is stronger than the strike rate—telegraphictransfer middle rate (TTM) determined at time of contract—
and thus higher than the contract rate, the principal andinterest amount on the maturity date will be converted at
the contract rate to a specified currency (foreign currency)
and deposited into the customer’s foreign currency ordinary
deposit account. Conversely, if the yen has depreciated or
the reference rate is the same as the contract rate, the contract will be dissolved and the principal and interest amountwill be returned in yen to the customer’s yen ordinary deposit
account on the maturity date. Customers are not able todetermine the currency in which the deposit is repaid atmaturity, but this product offers the advantage of receiving
higher-than-usual rates of interest over a relatively shorttime frame.

Sony Financial Holdings Inc. Annual Report 201533

Fiscal 2014 Analysis of Operating Performance(April 1, 2014 – March 31, 2015)34

Sony Financial Holdings Inc. Annual Report 2015

SFH (Consolidated)
Operating Results

Analysis of Operating Performance

During fiscal 2014, the Japanese economy was affected in the first half by a pullback in demand in the wake of the consumption
tax increase. In the second half, however, the government’s growth strategies led to higher corporate earnings, and theemployment and income scenario improved. As a result, the economy continued along a path of modest recovery. In the financial
markets, Japanese stock prices spiked, while the yen significantly depreciated against the U.S. dollar on the back of enhanced
qualitative and quantitative monetary easing by the Bank of Japan, along with the expected review of asset management ratiosby the Government Pension Investment Fund (GPIF). Long-term domestic interest rates generally remained on a downward trend.
Against this backdrop, the Sony Financial Group provided customers with high-quality services with the aim of becoming oneof the most highly trusted financial services groups. The Group also implemented various measures to satisfy increasingly diverse
customer needs.
Consequently, Sony Financial Group, for fiscal 2014, posted increases in both revenues and profits in all three core businesses:
life insurance, non-life insurance and banking. Consolidated ordinary revenues rose 2.4% over the previous fiscal year, to ¥1,352.3
billion, while consolidated ordinary profit increased 18.3% year on year, to ¥90.0 billion. After deducting extraordinary losses aswell as the provision for reserve for policyholders’ dividends and income taxes from ordinary profit, consolidated net income
increased 34.4% year on year, to ¥54.4 billion. This reflects the rise in ordinary profit as well as the drop in extraordinary losses
resulting from a change in Sony Life’s policy for calculating the reserve for price fluctuations.
Segment performance was as follows:
Life Insurance Business Policy amount in force increased steadily, reflecting a record-high new policy amount achieved
through the strong acquisition of new policies. Ordinary revenues increased 2.3% year on year, to ¥1,223.9 billion, because ofhigher investment income, offsetting lower income frominsurance premiums due to the impact of a surge in demandBillions of yen
Ordinary Revenues
for lump-sum payment endowment insurance in the previous
1,500
For the years ended March 31,
fiscal year. Ordinary profit rose 16.5% year on year, to ¥78.3
1,200Life insurance businessbillion, reflecting factors including higher gains on the sale ofNon-life insurance businesssecurities in the general account, the absence of a decline
900
Banking businessin profit associated with the revision of the discount rate used
600
for calculating policy reserve on the interest rate-sensitive
whole life insurance, that was present in fiscal 2013, and a300
higher positive spread amount.
0

Non-life Insurance Business Ordinary revenues
increased 3.5% year on year, to ¥93.0 billion, reflecting higher
net premiums written primarily in the mainstay automobile
insurance. Ordinary profit surged 40.2% year on year, to¥4.2 billion, reflecting higher ordinary revenues, along with
an improvement in the loss ratio due primarily to a lower
automobile accident ratio.

Ordinary Profit
For the years ended March 31,
Life insurance businessBanking Business Ordinary revenues increased 5.3% year
on year, to ¥38.4 billion, due mainly to higher revenues associated with foreign currency-related transactions and mortgage
loans. Ordinary profit rose 30.0% year on year, to ¥7.3 billion,
reflecting higher ordinary revenues, as well as higher gains
from bond-dealing transactions.

11

12

13

14

15

* Please see the notes on page 2 and page 27 for information on
consolidated ordinary revenues for SFH and ordinary revenues fromthe banking business for fi scal 2013, respectively.

Non-life insurance businessBanking businessBillions of yen
100
80
60
40
20
0

11

12

13

14

15

Sony Financial Holdings Inc. Annual Report 201535

Financial Position
As of March 31, 2015, total assets amounted to ¥9,545.8 billion, up 8.0% from March 31, 2014. Among major components ofassets, securities—mostly Japanese government bonds—amounted to ¥7,377.5 billion, up 8.1% from March 31, 2014. Loanscame to ¥1,349.5 billion, up 11.4%, and monetary trusts
Billions of yen
Total Assets
reached ¥336.8 billion, up 3.4%.
10,000
As of March 31,
Total liabilities were ¥8,995.1 billion, up 7.4% from March
31, 2014. Major components of liabilities included policy
8,000
reserves and others of ¥6,879.0 billion, up 9.8%, and depos6,000
its totaled ¥1,872.8 billion, down 0.9%.
Total net assets were ¥550.6 billion, up 17.9% from
4,000
March 31, 2014. This included net unrealized gains on other
2,000
securities, net of taxes, which increased ¥35.1 billion, to¥127.1 billion.
0
11
12
13
14
15

Cash Flow Status
Net cash provided by operating activities in fiscal 2014 amounted to ¥425.6 billion, mainly on higher contributions from insurance
premiums in the life insurance business, down ¥176.0 billion from the previous fiscal year. The primary reason for this decrease
was a decline in income from insurance premiums in the life insurance business, a decline in customer deposits, and a growing
balance of loans such as mortgage loans in the banking business.
Net cash used in investing activities was ¥445.4 billion despite inflows from the sale and redemption of securities in the banking
and life insurance businesses, which were surpassed by payments to acquire securities in the life insurance business. This meansa ¥103.9 billion drop in payments compared with the previous fiscal year mainly because of an increase in inflows from the sale ofsecurities in the life insurance business.
Net cash used in financing activities was ¥13.0 billion mainly reflecting cash dividends paid, down ¥0.4 billion from the previous
fiscal year.
As a result of the above factors, cash and cash equivalents at March 31, 2015, amounted to ¥207.4 billion, down ¥32.8 billion
from March 31, 2014.

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

2014

2015

Bankrupt loans

¥ 308

¥ 207

Non-accrual delinquent loans

1,403

1,430

—

—

1,880

1,715

¥3,592¥3,353Category

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

36

Sony Financial Holdings Inc. Annual Report 2015

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

2014

2015

¥1,077,568¥1,216,296

Common stock, etc.

367,877

410,709

Reserve for price fluctuations

41,65742,969Contingency reserve

63,744

68,790Catastrophe reserve

8,451

11,344790

595

128,179

168,45475

15,325(2,938)(2,189)(A) Total consolidated solvency margin

General reserve for possible loan losses
Net unrealized gains on other securities (before tax deductions) x 90% (100% if losses)
Net unrealized gains on real estate x 85% (100% if losses)
Total amount of unrecognized net actuarial gain (loss) and unrecognized prior service cost (before subtracting tax effects)——

Unallotted portion of reserve for policyholders’ dividends

174

212

Tax effect equivalent (after deducting amount excluded)

78,86881,201

Subordinated debt and surplus components of premium reserve

400,056

429,392

—

—

9,369

10,510137,808

148,788

Insurance risk (R1)

22,512

23,045

Ordinary insurance risk (R5)

10,386

10,465Major catastrophe risk (R6)

649

737

8,368

8,422

—

—

Assumed interest rate risk (R2)

29,69430,225

Total solvency margin of small-amount short-term insurers
Deductible items(B) Total consolidated risk

2

2

2

2

( R1 +R5 +R8+R9) +(R2+R3+R7) +R4+R6

Third-sector insurance risk (R8)
Insurance risk of small-amount short-term insurers (R9)Minimum guarantee risk (R7)12,896

14,373

Asset management risk (R3)

84,744

93,583Business management risk (R4)

5,576

5,810

1,563.8%

49
1,635.6%

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

Analysis of Operating Performance

Amount excluded from deferred tax assets

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 approach.

Sony Financial Holdings Inc. Annual Report 201537

SFH’s consolidated operating results come from its life insurance, non-life insurance, andbanking businesses. Segment-by-segment reviews of fiscal 2014 operating performances are presented below.

Life Insurance Business
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. A discussion of the non-consolidated operating performanceof Sony Life follows.

New Policy Amount
New policy amount is the total policy amount of new insurance policies.
Billions of yen
For the years ended March 31,

2014

New policy amountIndividual life insurance

2015

Change¥3,889.3 ¥4,771.6
3,814.2 4,625.7

22.7%
21.3%

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

75.0
63.9
13.4
53.3

145.9
76.6
15.2
60.6

94.3%
19.7%
13.3%
13.7%

New Policy Amount and Number Billions of yen
5,000
of New Policies

10,000 policies
75(Individual life insurance +Individual annuities)

4,000

60

For the years ended March 31,

3,000

45

2,000

30

1,000

15

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

0

11

12

13

14

0

15

Main Points The new policy amount achieved a record high, due to higher sales of family income insurance and variable life insurance,

as a result of an initiative to promote sales of death-protection insurance. Annualized premiums from new policies also increased toa record high, due to robust sales of variable life insurance, educational endowment insurance and living benefit insurance.

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,

2014

Policy amount in force¥39,095.0
Individual life insurance
38,628.0
Individual annuities
466.9
Annualized premiums frominsurance in force
696.9
Medical protection, living benefit
protection and other products
167.0
The number of policies in force(10,000 policies)
633.0

2015

Change¥40,988.7
40,391.0
597.6

4.8%
4.6%
28.0%

735.7

5.6%

172.8

3.4%

667.2

5.4%

Policy Amount in Force andNumber of Policies in Force

Trillions of yen
50(Individual life insurance +Individual annuities)

40

600

As of March 31,

30

450

20

300

10

150

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

11

10,000 policies
750

12

13

14

15

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 34 years since the company commenced operations.

Sales of Products (Percentage Composition)
For the years ended March 31,

2014

2015

ChangeWhole life insurance
16.4%
Term life insurance
64.2%
Endowment and educational endowment insurance, and individual annuities 11.4%
Variable life insurance
6.1%
Medical and other types of insurance
1.9%

15.0%
65.0%

(1.4pt)
0.8pt

8.4%
10.4%
1.2%

(3.0pt)4.3pt(0.7pt)New Policy Amount by
Type of Product(Individual life insurance +Individual annuities;
Policy amount basis) 8.4%
For the year ended
March 31, 2015

10.4%
Variable life
insurance

Endowment
and educational
endowment
insurance, andindividual annuities

1.2%
Medical and othertypes of insurance
15.0%
Whole life
insurance
65.0%
Term life
insurance

Main Points Death-protection insurance products* accounted for about 90% of the new policy amount in fiscal 2014 (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 and educational endowment insurance, individual annuities and medical insurance.

38

Sony Financial Holdings Inc. Annual Report 2015

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 amount in force at the beginning of the fiscal year.
For the years ended March 31,

2014

2015

ChangeLapse and surrender rate

4.61%

5.35%

0.74ptMain Points The lapse and surrender rate rose in family income
insurance and living benefit insurance, as a certain portion ofcustomers switched over to other insurance products deemed
more rational for their purposes.

Lapse and Surrender Rate
(Individual life insurance +Individual annuities; Policy
amount basis)

%
8.0

6.0

For the years ended March 31,
4.0

2.0

0.0

11

12

13

14

15

12

13

14

15

Analysis of Operating Performance

Income from Insurance Premiums and Insurance Claims and Other Payments
Billions of yen
For the years ended March 31,

2014

2015

ChangeBillions of yen
1,000

Income from Insurance
Premiums

Income from insurance premiums¥960.9¥914.0(4.9%)

Insurance claims and other payments

327.2

382.9

17.0%

Of which, insurance claims

77.4

79.6

2.9%

Of which, insurance benefits

55.5

63.1

13.8%

Of which, annuity payments

10.7

11.2

4.7%

400

Of which, surrender payments

178.4

223.1

25.1%

200

For the years ended March 31,

800
600

0

11

Main Points Income from insurance premiums decreased due to the impact of a surge in demand for lump-sum payment endowment
insurance in the previous fiscal year. However, level-premium income is constantly increasing buoyed by business expansion.

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 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
2014

2015

As of March 31,

AmountComposition

AmountComposition

Japanese government bonds¥5,190.0

86.7%¥5,606.8

86.2%

Japanese stocks

33.2

0.6%

42.4

0.7%

Foreign bonds

79.8

1.3%

105.5

1.6%

Foreign stocks and other securities

26.9

0.4%

26.0

0.4%

Monetary trusts

305.3

5.1%

313.2

4.8%

Policy loans

154.1

2.6%

162.3

2.5%

Real estate

66.5

1.1%

117.7

1.8%

Cash and deposits, call loans

32.6

0.5%

56.8

0.9%

Other

95.6

1.6%

76.7

1.2%

Total

¥5,984.3

100.0%¥6,508.0

100.0%

Main Points In fiscal 2014, Sony Life continued to invest primarily in ultralong-term bonds. The ratio of JGBs stood at 91.0% as ofMarch 31, 2015, 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 most of the new funds generated by income
from insurance premiums and other sources in ultralong-term bonds.
Sony Financial Holdings Inc. Annual Report 201539

Interest Income and Dividends
Interest income and dividends are primarily 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,

2014

2015

ChangeCash and deposits¥
0 ¥
0 (36.0%)
Interest and dividends from securities 106,187 117,276 10.4%
Of which, Japanese governmentand corporate bonds
98,588 107,383
8.9%
Of which, Japanese stocks
397
464 16.9%
Of which, foreign securities
6,740
8,998 33.5%
Loans
5,691
5,921
4.0%
10,250
10,327
0.8%
Real estate for rent
Total, including other interest income
and dividends¥122,160 ¥133,592
9.4%

Interest Income and Dividends
For the years ended March 31,

Billions of yen
150
120
90
60
30
0

11

12

13

14

15

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 total solvency margin (numerator) used in calculating the solvency margin ratio (please see page 43).
*Unrealized gains and losses on securities list the total of unrealized gains or losses on held-to-maturity securities and available-for-sale securities with fair values.
The total of securities includes securities included in monetary trusts.
Billions of yen
As of March 31,

2014

2015

ChangeUnrealized gains on securities in thegeneral account¥554.7 ¥1,008.3 ¥453.6
Unrealized gains on held-to-maturity
430.3
839.4 409.1
securities
Net unrealized gains on available-for-salesecurities
124.3
168.8
44.4
Of which, unrealized gains on Japanese
government and corporate bonds
110.8
145.5
34.6
Of which, unrealized gains on Japanesestocks8.9
16.0
7.1
Of which, unrealized gains on foreign
securities
3.5
6.9
3.4

Unrealized Gains on Securities
As of March 31,

Billions of yen
1,200

900

600

300

0

11

12

13

14

15

Main Points Unrealized gains on securities in the general account increased owing to a rise in unrealized gains on Japanese
government and corporate bonds.

(Reference: On March 31, 2015, SFH assumed unrealized gains on Japanese stocks to be zero when the Nikkei Stock Average was ¥8,856 and the TOPIX
index was 711 points.)

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. The addition to coreprofit of capital gains and losses, including gains and losses on the sale of securities, as well as one-time gains and losses,
results in ordinary profit as listed in the statements of income.
Note: Sony Life, like most life insurers organized as stock companies, primarily sells non-participating life insurance. This contrasts with life insurers organizedas mutual companies, which typically offer participating policies for which premiums include an additional amount equal to the funds used for policyholder
dividends. This additional amount is recorded as core profit and the funds used for policyholder dividends are included in core profit. Mutual companies
consequently tend to show relatively higher core profit than stock companies of similar scale.

40

Sony Financial Holdings Inc. Annual Report 2015

Billions of yen
For the years ended March 31,

2014

2015

ChangeCore Profit

Core profit

¥72.3

¥76.5

5.7%

For the years ended March 31,

Main Points Core profit increased due mainly to the absence of adecline in profit associated with the revision of the discount rateused for calculating policy reserves on interest rate-sensitive
whole life insurance that was present in fiscal 2013 and theconstructive effect of a higher positive spread, despite a higher
provision of policy reserves for minimum guarantees for variable
life insurance.

Billions of yen
100
80
60
40
20
0

11

12

13

14

15

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

2015¥72,365
2,130
—
—
773
172
1,183
—
949
—
—
528
—
—
—
420
1,180
73,545
—
—
—
—
—
4,340
—
4,110
6
—
—
223
(4,340)¥69,205¥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

Analysis of Operating PerformanceCore 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)2014

Notes: 1. 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. Other capital losses include the provision of policy reserves of ¥3,693 million for currency market fluctuationsof products denominated in foreign currencies and impairment losses of ¥217 million from investment partnerships. “Others” of other one-time losses
include the provision of additional policy reserve of ¥207 million.
2. Core profit for fiscal 2013 (A) includes income gains of ¥5,311 million in income from monetary trusts. Other capital losses include the provision ofpolicy reserves of ¥227 million for currency market fluctuations of products denominated in foreign currencies and impairment losses of ¥193 million
from investment partnerships. “Others” of other one-time losses include the provision of additional policy reserve of ¥223 million.

Sony Financial Holdings Inc. Annual Report 2015

41

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 the actual investment yield is higher than the average assumed interest rate and viceversa for a negative spread. A negative spread occurs due to deterioration in the investment environment or other reasons.
Billions of yen
For the years ended March 31,

2014

2015

ChangePositive Spread

Positive spread

¥8.4

¥13.0

54.8%

For the years ended March 31,
Note: A negative ﬁgure for the positive
spread indicates a negative
spread.

Average assumed interest rate

2.18%

2.12%

(0.06pt)

Investment yield (general account)

2.20%

2.36%

0.16ptInvestment yield for core profit

2.35%

2.35%

0.00ptBillions of yen
15
10
5
0

Main Points Positive spread advanced ¥4.6 billion year on year,to ¥13.0 billion, due mainly to a drop in the average assumed
interest rate resulting from the acquisition of new policies.

-5
-10

11

12

13

14

15

11

12

13

14

15

Average Assumed Interest Rate, %Investment Yield for Core Profit 4.0
For the years ended March 31,
Investment yield for core proﬁt
Average assumed interest rate

3.0

2.0

1.0

0.0

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

1. Investment yield for core profit is the yield on general account policy reserves after
subtracting the provision for policyholder dividend reserve from the general accountinvestment 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

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

Ordinary revenues
Ordinary profit
Net income

2014

2015

ChangeOrdinary Profit and Net Income¥1,197.1
69.2
37.0¥1,223.8
79.6
42.5

2.2%
15.1%
14.7%

For the years ended March 31,
Ordinary proﬁt
Net income

Billions of yen
80

60

40

Main Points

Ordinary Revenues: Ordinary revenues increased due to higher
20
investment income, despite a decline in income from insurance
premiums resulting from the impact of a surge in demand for lump0
11
12
13
14
15
sum payment endowment insurance in the previous fiscal year.
Ordinary Profit: Ordinary profit increased due mainly to higher gains on the sale of securities in the general account, the absenceof a decline in profit associated with the revision in the policy reserve discount rate for interest rate-sensitive whole life insurance,
and the constructive effect of a higher positive spread, despite an increase in the provision of policy reserves for minimum guarantees for variable life insurance.
Net Income: Net income increased due to higher ordinary profit. As for the reserve for price fluctuations, Sony Life has changed its
calculation policy to accumulate reserves up to required levels, while it had accumulated reserves in excess of the required levels
until the previous fiscal year.

42

Sony Financial Holdings Inc. Annual Report 2015

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, unforeseen events
can occur as a result of changes in the environment, including major disasters and substantial declines in the stock market. The
solvency margin ratio is one measure used by regulatory authorities to determine whether an insurer has the ability to pay inresponse to the risk of such unpredictable events.
As of March 31,

Solvency margin ratio

2014

2015

Change2,358.7%

2,555.0%

196.3pt

Solvency Margin Ratio(Current standards)

Main Points Sony Life’s solvency margin ratio was 2,555.0%, as

As of March 31,

of March 31, 2015, up 196.3 points from March 31, 2014,
remaining at a high level.

Note: Solvency margin ratios havebeen calculated using current
standards applied since
March 31, 2012.

%
3,000
2,400
1,800
1,200
600
11

12

13

14

Analysis of Operating Performance

0

15

Millions of yen
As of March 31,

2014

2015

(A) Total solvency margin¥954,157¥1,078,363

Common stock, etc.

274,027

301,193

Reserve for price fluctuations

41,55642,845

Contingency reserve

63,671

68,70700118,354

158,91775

15,325General reserve for possible loan losses
Net unrealized gains on other securities 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

174

212

Deferred tax assets

78,86881,201

Excess amount of policy reserves based on Zillmer method

400,056

429,392——

The portion of the excess amount of policy reserves based on Zillmer method and subordinated debt thatis not included in the margin(20,626)(16,433)

Deductible items(2,000)(3,000)80,904

84,411

22,512

23,045Subordinated debt

(B) Total risk

2

2

(R1+R8) +(R2+R3+R7) +R4

Insurance risk (R1)
Third-sector insurance risk (R8)

8,368

8,422

Assumed interest rate risk (R2)

29,61630,138Minimum guarantee risk (R7)12,896

14,373

Asset management risk (R3)30,02331,493Business management risk (R4)

2,068

2,149

2,358.7%

2,555.0%(C) Solvency margin ratio [(A)/{(1/2)x(B)}] x 100

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 was calculated based on the standardized approach.

Sony Financial Holdings Inc. Annual Report 201543

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

2014

¥—
—
—
—
¥—

Millions of yen

2015

As of March 31,

2015

¥—
—
—
—
¥—

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

¥

—
—
—
156,815¥156,815

2015

¥

—
—
—
165,075¥165,075

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 listed in the loans by borrower category are classified as
normal loans.

Sony Life’s loan balance* was ¥162.3 billion as of March 31, 2015. As part of this balance, policy loans accounted for ¥162.3
billion. Most of the loan balance consists of policy loans, which are limited to recoverable surrender values.
*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.

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 withJapan’s aging population and low birthrate. AEGON Sony Life Insurance sells individual variable annuity products which respondto customers’ needs to help save for retirement through Sony Life’s Lifeplanner channel and partner agencies, involving 21 partners including banks.**As of July 1, 2015

For the years ended March 31,

2014

2015

ChangeNumber of new policies

28,893

26,834(7.1%)¥167,547¥163,254(2.6%)

38,221

63,593

66.4%¥236,482¥390,423

65.1%

New policy amount (Millions of yen)
As of March 31,

Number of policies in force
Policy amount in force (Millions of yen)

Main Points AEGON Sony Life Insurance, which sells variable annuities, has continued to deliver steady growth. Although the newpolicy amount fluctuates, influenced by stock market conditions, the business scale itself has been expanding, as shown in thesteady rise in the policy amount in force.

44

Sony Financial Holdings Inc. Annual Report 2015

Non-life Insurance Business
SFH’s non-life insurance business is conducted by Sony Assurance, a wholly owned subsidiary of SFH.
Below is a discussion 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
2014

2015

161

Change170

5.4%

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 steadily increased,
mainly for its mainstay automobile insurance.

100

50

11

12

13

14

Analysis of Operating Performance

0

15

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,

2014

2015

ChangeNet Premiums Written

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

¥88.6
78.4
8.6

¥91.7
81.3
8.8

3.5%
3.7%
2.7%

For the years ended March 31,

1.5

1.4

(1.4%)

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 due to the solid

sales of automobile insurance.

0

11

12

13

14

15

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,

2014

Net loss ratio

59.3% 57.6% (1.7pt)

Net Loss Ratio

62.4% 60.2% (2.2pt)

For the years ended March 31,

Net loss ratio for automobile insurance

2015

ChangeNet loss ratio for personal accident insurance* 27.2% 28.7% 1.5pt

%
80

60

*Including medical and cancer insurance
Main Points The net loss ratio went down, due to an increase in

net premiums written in automobile insurance combined witha decrease in net losses paid.

40

20

0

11

12

13

14

15

Net Expense Ratio
The net expense ratio is the ratio of the total cost for marketing and maintaining insurance to net premiums written. These
expenses include company operating costs and new product development costs.
Sony Financial Holdings Inc. Annual Report 201545

For the years ended March 31,

2014

2015

ChangeNet Expense Ratio%

Net expense ratio

25.6%

26.7%

1.1pt

For the years ended March 31,

40

Combined ratio(Net loss ratio + net expense ratio)

84.9%

84.3%

(0.6pt)30

Main Points The net expense ratio rose, due mainly to higher
system-related expenses and policy acquisition costs, alongwith an upward revision to the consumption tax.

20

10

0

11

12

13

14

15

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,

2014

2015

ChangeUnderwriting profit

¥1.8

¥3.0

62.4%

2.0

1.0

Main Points Underwriting profit increased, mainly due to higher

net premiums written and a lower net loss ratio.

0.0

11

12

13

14

15

12

13

14

15

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

2014

2015

ChangeOrdinary Profit and Net Income

Ordinary revenues
Ordinary profit
Net income

¥89.8
3.0
1.6

¥93.0
4.2
2.2

3.5%
40.1%
34.2%

For the years ended March 31,
Ordinary proﬁt
Net income

Billions of yen
5.0
4.0
3.0

Main Points

2.0

Ordinary Revenues: Ordinary revenues increased, due to anincrease in net premiums written mainly in mainstay automobile
insurance.
Ordinary Profit: Ordinary profit increased, benefitting fromhigher ordinary revenues and a lower loss ratio, led by a lower car accident ratio.
Net Income: Net income grew as a result of improved ordinary profit.

1.0
0.0

11

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

46

As of March 31,

2014

2015

ChangeComposition of Total Assets

Total assets
Cash and deposits
Securities
Tangible fixed assets
Intangible fixed assets
Other assets¥142.7
6.9
101.2
3.1
8.2
23.1

¥157.9
10.7
111.8
3.5
7.0
24.7

10.7%
55.4%
10.4%
14.0%
(14.5%)
6.8%

As of March 31, 2015

Sony Financial Holdings Inc. Annual Report 2015

¥157.9 billion

15.7% Other assets

6.8%
Cash and deposits

4.5%
Intangible ﬁxed assets

2.2%
Tangible ﬁxed assets

70.8%
Securities

Non-consolidated Solvency Margin Ratio
The non-consolidated solvency margin ratio is an important indicator of the ability of non-life insurers to pay claims.
As of March 31,

2014

2015

ChangeNon-consolidated solvency margin ratio

527.6% 629.6% 102.0pt

Main Points The non-consolidated solvency margin ratio significantly increased year on year and remained at a sound level.

Non-consolidated Solvency
Margin Ratio

%
1,000

(Current standards)
As of March 31,*The ﬁgures have been calculatedusing the current standards applied
from March 31, 2012.

800
600
400
200
0

11

12

13

14

15

Millions of yen
As of March 31,

Capital or treasury

2015¥30,118¥36,650

21,171

23,389124

Reserve for price fluctuations

101

Contingency reserve

73

82

Catastrophe reserve

8,451

11,344General reserve for possible loan losses—̶Net unrealized gains on other securities (before subtracting tax effects)

320

1,709

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—

̶

Others—̶

11,416

11,641

10,386

10,465(B) Total non-consolidated risk

(R1+R2)2+(R3+R4)2+R5+R6

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

Assumed interest rate risk (R3)77

86

Asset management risk (R4)

662

1,101

Business management risk (R5)

353

371

Major catastrophe risk (R6)

649

737

527.6%

629.6%(C) Non-consolidated solvency margin ratio [(A)/{(B)x(1/2)}] x 100

Analysis of Operating Performance(A) Total non-consolidated solvency margin2014

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).

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,

2014

2015

¥—
—
—
—
¥—

¥—
—
—
—
¥—

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

Millions of yen
As of March 31,

2014

2015

¥—
—
—
—
¥—

¥—
—
—
—
¥—

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

Sony Financial Holdings Inc. Annual Report 2015

47

Banking Business
SFH’s banking business comprises 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.
*On April 1, 2015, SmartLink Network, Inc. changed its name to Sony Payment Services Inc.
**SmartLink Network Hong Kong Limited is included under the scope of consolidation from the fourth quarter of fiscal 2013.

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

2014

2015

ChangeConsolidated ordinary revenues

¥36.4

¥38.4

5.3%

Consolidated ordinary profit

5.6

7.3

30.0%

Consolidated net income

3.4

4.5

32.9%

*Please see the note on page 27 for information regarding consolidated ordinary
revenues for fiscal 2013.

Main Points

Consolidated Ordinary Revenues: Sony Bank’s consolidated
ordinary revenues increased year on year, achieving a record
high, due mainly to higher revenues associated with foreign
currency-related transactions and mortgage loans.
Consolidated Ordinary Profit: Sony Bank’s consolidated
ordinary profit increased year on year, also achieving a record
high, due to higher profit associated with bond-dealing transactions, in addition to the increase in consolidated ordinary revenues.
Consolidated Net Income: Sony Bank’s consolidated net income
achieved a record high, supported by higher ordinary profit.

Non-consolidated
Sony Bank accounts for nearly all of SFH’s banking business. A discussion of the operating performance of Sony Bank
(non-consolidated) is presented below.

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 and an indicator of the amount of profit a bank generates from its main services.
Net interest income refers to the spread between investment returns such as interest received on loans, securities, and otheritems, and funding costs, including interest paid on deposits. Sony Bank uses the deposits received from customers primarily toprovide 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 sale and purchase of bonds, including government bonds; and, gains and losses on swaps and other financial derivatives held as hedges for securities and other investments.
Billions of yen
For the years ended March 31,

2014

2015

ChangeGross operating profit

¥20.7

¥22.5

8.8%

For the years ended March 31,

Net interest income

17.3

16.6

(3.7%)Net fees and commissions

(0.0)

0.0

―

Net other operating income

3.4

5.8

70.4%

Net interest income
Net fees and commissions
Net other operating income

Gross Operating Profit

Billions of yen
25
20
15
10

Main Points Sony Bank achieved a record-high gross operating5
profit, due to an improvement in net gains on the sale of bonds
and other bond-dealing transactions, along with an increase in
0
11
12
13
14
15
revenues associated with foreign currency-related transactions(gains on foreign exchange transactions), in addition to an increase in revenues associated with mortgage loans.
Net Interest Income: Net interest income decreased, due partially to lower interest income associated with the investment insecurities resulting from a decline in the market interest rate.
Net Other Operating Income: Net other operating income increased because of an improvement in net gains on the sale of bonds
and other bond-dealing transactions, along with higher gains on foreign exchange transactions.

48

Sony Financial Holdings Inc. Annual Report 2015

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

2014

2015

ChangeGeneral and administrative expenses

¥14.6

¥15.3

4.5%

General and Administrative
ExpensesBillions of yen
16

For the years ended March 31,

Main Points General and administrative expenses rose, mainly

12

due to higher personnel expenses in step with businessexpansion.

8

4

0

11

12

13

14

15

Ordinary Revenues, Ordinary Profit and Net Income
Billions of yen
2014

2015

ChangeOrdinary Profit and Net Income

Ordinary revenues
Ordinary profit
Net income

¥33.9
5.8
3.5

¥35.7
7.2
4.6

5.1%
24.9%
29.3%

For the years ended March 31,
Ordinary proﬁt
Net income

Billions of yen
8Analysis of Operating Performance

For the years ended March 31,

6*Please see the note on page 2 for information regarding ordinary revenues forfiscal 2013.

4

Main Points Ordinary revenues, ordinary profit and net income all2

achieved record highs, due to the same reasons stated in the
0
11
12
13
14
15
consolidated operating results.
Ordinary Revenues: Ordinary revenues increased due mainly
to higher revenues associated with foreign currency-related transactions and mortgage loans.
Ordinary Profit: Ordinary profit expanded year on year, due to higher gains on bond-dealing transactions, in addition to the increasein ordinary revenues.
Net Income: Net income grew due to higher ordinary profit.

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

2014

2015

ChangeNumber of accounts

97

105

8.0%

Main Points The number of customer accounts steadily increased,
partially because Sony Life’s Lifeplanner sales employees havebeen handling account-opening operations since May 2014.

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

2014

2015

ChangeCustomer assets(Total of deposits and investment trusts) ¥2,007.5 ¥2,007.9 0.0%
Billions of yen
As of March 31,

Deposit balance
Yen deposits
Foreign currency deposits
Investment trust balance

Deposit Balance
As of March 31,
Yen deposits
Foreign currency deposits

Billions of yen
2,000
1,600

2014

2015

Change1,200¥1,890.0
1,526.4¥1,878.2
1,551.0(0.6%)
1.6%

800

363.5

327.2

(10.0%)

400

117.4

129.6

10.4%

0

11

12

13

14

15

Main Points

Yen Deposits: Yen deposits increased, as foreign currencies were increasingly converted into yen.
Foreign Currency Deposits: The foreign currency deposit balance decreased due to the shift toward yen deposits paralleling the
yen’s further drop in foreign exchange markets.
Investment Trusts: The balance of investment trusts increased due partially to a rise in net asset value. Sales to customers also
grew reflecting the booming stock market.
Sony Financial Holdings Inc. Annual Report 201549

LoansBillions of yen
As of March 31,

Loans
Mortgage loans
Others2014

2015

ChangeLoans¥1,057.4
949.3¥1,187.1
1,074.3

12.3%
13.2%

As of March 31,

108.1

112.8

4.3%

Billions of yen
1,250

Mortgage loans
Others

1,000
750

Main Points The balance of loans increased, mainly due to the500
growth in the balance of mortgage loans, which recorded thehighest amount of annual execution on the back of the declin250
ing interest rate.
0
11
12
13
14
15
The balance of the mortgage loan business, despite intensifying competition to reduce lending rates, steadily increased, exceeding the one trillion yen mark. This was due to the effect of ahigher discount rate since August 2014, applied based on the percentage of personal funds, in addition to an increase in new loans
thanks to enhanced relationships with alliance partners such as real estate developers.
The “Others” balance includes corporate loans, card loans and special-purpose loans. The corporate loan balance stood at¥107.5 billion as of March 31, 2015.

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,

2014

2015

ChangeBalance of securities
Japanese government bonds
Japanese municipal bonds¥773.896.8
56.7¥730.082.8
56.6(5.7%)(14.4%)(0.2%)

Japanese corporate bonds

159.5

107.7

(32.5%)

Japanese stocks

2.0

2.0

0.0%

Foreign securities

455.0

476.1

4.6%

Other securities

3.5

4.5

27.9%

Balance of Securities(by Ratings)

Billions of yen
1,000

As of March 31,
800

AAA
AA
A
BBB
Others

600
400
200
0

11

12

13

14

15

Main Points With respect to the ratings of the securities* held by Sony Bank, securities rated AA or above accounted for 52.5% 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 approach 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,

2014

2015

ChangeComposition of Total Assets

Total assets
Loans
Securities¥2,056.7
1,057.4
773.8¥2,062.5
1,187.1
730.0

0.3%
12.3%
(5.7%)

As of March 31, 2015

Cash and due from banks

171.2

96.9

(43.4%)

Monetary trusts

20.4

23.5

15.0%

Call loans

6.0

6.0

0.0%

Main Points Sony Bank’s total assets were on a par with the level
recorded in the previous fiscal year due to decreases in securities
and cash and due from banks, despite an increase in loan assets.

50

Sony Financial Holdings Inc. Annual Report 2015

¥2,062.5 billion

0.3% Call loans

0.9% Others

1.1% Monetary trusts
4.7%
Cash and duefrom banks
35.4% Securities

57.6%
Loans

Non-consolidated Capital Adequacy Ratio
The capital adequacy ratio is an important indicator of a bank’s financial soundness. From March 31, 2014, Sony Bank calculates
its capital adequacy ratio* based on Basel III.
As of March 31,

Non-consolidated capital adequacy ratio(Domestic criteria)

2014

2015

Change5 (1.06pt)
11.72% 10.66%
7

Non-consolidated Capital
Adequacy Ratio%
15.0(Domestic criteria)*Please refer to the note below for information on the application of theBasel III framework.

12.0

As of March 31,

9.0

Main Points Sony Bank continuously maintains a sound financial

6.0

position.

3.0
0.0

11

12

13

14

15

Sony Bank’s Non-consolidated Capital Adequacy Ratio (Domestic criteria)
2014

2015

Amounts
excludedundertransitional
measures

As of March 31,

Analysis of Operating Performance

Millions of yen

Amounts
excludedundertransitional
measuresCore capital: instruments and reserves
Directly issued qualifying common share capital or preferred share capital witha compulsory conversion clause plus related capital surplus and retained earnings¥ 68,091¥72,715

Of which: Capital and capital surplus

52,00052,000Of which: Retained earnings

16,091

20,715

Total reserves factored into core capital: instruments and reserves

790

595

Of which: General reserve for loan losses including core capital

790

595

Eligible non-cumulative perpetual preferred shares subject to transitional arrangements(amount allowed to be included in Core capital: instruments and reserves)

20,00018,000Core capital: instruments and reserves

88,881

91,310(A)

Core capital: regulatory adjustments
Total amount of intangible assets (excluding those relating to mortgage servicing rights)—¥1,768397¥1,588

Of which: Other intangibles other than those relating to goodwill and mortgage
servicing rights

—

1,768

397

1,588

Core capital: regulatory adjustments

(B)

—

397

(C)

88,881

90,913

CapitalCapital ((A)-(B))
Risk-weighted assets
720,4549813,151

Of which: Total amount included in risk-weighted assets by transitional measures(27,892)(35,339)

Of which: Intangible assets (excluding those relating to goodwill and mortgage
servicing rights)

1,768

1,588

Total amount of credit risk-weighted assets(29,661)(36,928)

Amount obtained by dividing total sum of operational risk equivalent amounts by 8%

Of which: Exposure to other financial institutions

37,48339,250Total amount of risk-weighted assets

757,937

853,202

11.72

10.65

(D)

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 Japan’s Financial
Services Agency (FSA) regarding the method 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 a standard based on domestic criteria. Also, since fiscal 2013,
ended March 31, 2014, the company has applied FSA Notification No. 6 (2013) and Notification No. 7 (2014).
Sony Financial Holdings Inc. Annual Report 201551

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
sales division also works 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 andscreening system.
Risk-monitored Loans

Problem Loans Based on the Financial Reconstruction Law
Millions of yen

As of March 31,

2014

2015

Category

Millions of yen
As of March 31,

¥ 308
1,403
—
1,880
¥3,592

¥ 207
1,430
—
1,715
¥3,353Bankrupt 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 Law)
As of March 31,

2014

2015

ChangeNon-performing loan ratio

0.35%

0.28%

(0.07pt)*Non-performing loans (loans based on the Financial Reconstruction Law) / Total loan exposure

Sony Financial Holdings Inc. Annual Report 2015

2015

Category

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

52

2014

¥

847 ¥
744
980
899
1,882
1,716
1,064,528 1,186,701¥1,068,238 ¥1,190,062

Corporate GovernanceContributions to Sustainable Development

Contributions to
Sustainable Development

CSR

Sony Financial Holdings Inc. Annual Report 201553

Contributions to Sustainable Development Corporate Governance

Executive Profiles(As of July 1, 2015)

Directors

8.

3.

2.

5.
President, Representative Director
1.

Katsumi Ihara

Executive Vice President,
Representative Director
2.

Shigeru Ishii

1.
Managing Director
3.

Hiroaki Kiyomiya[In charge of Auditing][In charge of Corporate Planning,
Corporate Control and Human
Resources & General Affairs]

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

Director, Sony Life Insurance Co., Ltd.

Director, Sony Life Insurance Co., Ltd.

Director, Sony Assurance Inc.

Director, Sony Assurance Inc.

Director, Sony Assurance Inc.

Director, Sony Bank Inc.

Director, Sony Bank Inc.

Director, Sony Bank Inc.

7.
4.
Directors
4.

[In charge of Corporate
Communications & Investor
Relations and Accounting]President, Representative Director,
Sony Life Insurance Co., Ltd.

5.

President, Representative Director,
Sony Bank Inc.

6.

Sony Financial Holdings Inc. Annual Report 2015

Yutaka Ito

Director, Sony Lifecare Inc.

Notes: 1. Responsibilities of each SFH director are in brackets.
2. Main concurrent positions are shown under the name of each individual.
3. EVP stands for executive vice president.
4. Isao Yamamoto and Shiro Kuniya are deemed Independent Directors basedon Tokyo Stock Exchange regulations.
5. Outside Directors and Outside Statutory Auditors are in accordance with
the Companies Act of Japan.

54

Tomoo Hagimoto

Atsuo Niwa
President, Representative Director,
Sony Assurance Inc.

7.

Shiro Kambe
EVP (Note 3), Corporate Executive
Officer, Sony Corporation

Contributions to Sustainable Development

9.

Statutory Auditors

6.
Directors (Outside)8.

9.

Isao Yamamoto (Note 4)

11.

13.
Standing Statutory Auditor (Outside)
10.

Yasuyuki Hayase

President, Enterprising Investment, Inc.

Statutory Auditor, Sony Life
Insurance Co., Ltd.

Shiro Kuniya (Note 4)

Statutory Auditor,
Sony Assurance Inc.

Managing Partner,
Oh-Ebashi LPC & Partners

Statutory Auditor, Sony Bank Inc.

Statutory Auditor (Outside)11.

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

12.
10.

Statutory Auditor (Outside)
12.

Yoshimichi Makiyama
Partner, Kitamura & Makiyama(law office)Statutory Auditor
13.

Mitsuhiro Koizumi
Standing Statutory Auditor,
Sony Life Insurance Co., Ltd.

Sony Financial Holdings Inc. Annual Report 2015

55

A Message from the Outside Director

Profiles of Outside Directors(As of July 1, 2015)

Isao Yamamoto
Biography

1981 Joined Nomura Research Institute, Ltd.
1991 Head of Strategic Advisory Group, Nomura ResearchInstitute, Ltd.
1996 Director, Investment Banking Division, Merrill Lynch Japan
Securities Co., Ltd.
1999 Managing Director, Investment Banking Division, Merrill Lynch
Japan Securities Co., Ltd.
2002 Co-head of Investment Banking Division, Managing Director,
Merrill Lynch Japan Securities Co., Ltd.

Isao Yamamoto2003 President & CEO, The Institute for Securities Investments &GovernanceOutside Director

2006 Director, Japan CableCast Inc.

As an independent outside director, I will
be committed to enhancing the quality ofdecision making of the Board of Directors
in order to maximize our corporate value.

Statutory Auditor, MASSTUNE, Inc. (current: MINKABU, Inc.)
2007 Director, MASSTUNE, Inc. (current: MINKABU, Inc.) (current
position)
2009 President, Enterprising Investment, Inc. (current position)2011 Director, SFH (current position)“Innovations spring up from the conflict between common sense
and anti-common sense” is an expression coined by Mr. Masaru
Ibuka, co-founder of Sony Corporation. One of the roles of an
outside director, I believe, is to challenge the common sense prevailing within a company, and within an industry. I strive to provide
SFH with an external point of view, capitalizing on my experiencein a career related to capital markets. I recognize that it is an
important role of an independent outside director to check forconflicts of interest (those between the Company and insidedirectors, as well as those between the major shareholder andminority shareholders). At SFH, in particular, minority shareholders’interests must be appropriately considered, in view of the presence of Sony Corporation, a shareholder controlling about 60%
of our shares.
I was particularly impressed by the discussions concerning
the dividend policy at the meetings of the Board of Directors in thepast year. I witnessed an open-minded exchange of opinions fromvarious points of view, such as on short to medium-term earnings
forecasts, a flexible stance toward growth opportunities, andeffects on the adequate pricing of shares in the Company on thestock market, in view of the possibility of heightened volatility inour business environment in future. I am pleased that the Company, through such discussions, has come to the conclusion that“growth along with an increase in dividends” should be our policy.
Along with promoting ongoing expansion strategies in thenursing care business, the Company must accelerate its efforts toadapt to changes in the medium- to long-term business environment, including the exit from a new phase of monetary easing, andthe expected long-term decline of spending power in Japan in theearly 2020s. As an independent outside director, I am determined
to contribute to improving the quality of the decision making of theBoard of Directors, with a view to maximizing our corporate value
over the medium- to long-term through good risk taking.

56

Sony Financial Holdings Inc. Annual Report 20152012 Director, BILCOM, Inc. (current position)
Reasons for Mr. Yamamoto possesses many years of experience as a securities
Appointment analyst and an advisor on corporate financial affairs and M&As, andhas no conflict of special interest with SFH. Accordingly, SFH has
determined that Mr. Yamamoto can properly fulfill the duties of an
outside director and independent director.

Shiro Kuniya
Biography

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

Reasons for Mr. Kuniya has specialized knowledge and experience as an
Appointment attorney and has no conflict of special interest with SFH.
Accordingly, SFH has determined that Mr. Kuniya can properly
fulfill the duties of an outside director and independent director.

A Message from the Outside Statutory Auditor

Profiles of Outside Statutory Auditors(As of July 1, 2015)

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
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)

Reasons for
Appointment

Mr. Hayase possesses many years of experience at a financial
institution, and as a standing statutory auditor there. Accordingly,
SFH has determined that Mr. Hayase will take advantage of thisprofessional experience to fulfill his role as outside statutory auditor.

Yasuyuki Hayase
Standing Statutory Auditor

As an outside statutory auditor, I will
strive to oversee management in order tofulfill the responsibilities I was entrustedwith by shareholders, and for the protection of policyholders and depositors.
I have been lately appointed as a standing outside auditor. SFH,
as a financial services group, encompasses the business operations of Sony Life, Sony Assurance and Sony Bank, all of which
achieve a high level of customer satisfaction, and posted thehighest ever Group consolidated net income in the previous fiscal year. SFH also maintains a superior level of soundness, as
demonstrated by the current solvency margin ratio in the life andnon-life insurance business and capital adequacy ratio in thebanking business.
I believe such excellent performance has been supportedby the unique and innovative business models, access channels
to customers and appropriate portfolio management. Thus, it iscritical to continually monitor for any possibility of devaluation,
an increase in risks, or for any failure to meet compliancerequirements in a financial business environment that is currently
undergoing significant and rapid changes. Keeping firmly in mind
the philosophy and principles to be upheld, as well as the challenges to be tackled, I will do my best to ensure governancethat can promptly, appropriately and accurately respond to theever-changing business environment.
Since I have long been working in the financial industry,engaging in risk management, investment and loan management, and study and research relating to financial business
operations and financial systems, I would like to capitalize onsuch experience in the auditing of the management decisionmaking bodies, such as the Board of Directors and Executive
Committee. Furthermore, in order to fulfill my responsibility toshareholders, and for the protection of policyholders anddepositors, I will capitalize on my experience as manager of acredit card business as well as banking operations to fulfill mymanagement oversight role.

Contributions to Sustainable Development

Biography

Yoshimichi Makiyama
Biography

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)

Reasons for
Appointment

Mr. Makiyama qualified as an attorney and patent attorney in Japanand as an attorney in the state of New York, with expertise in many
areas including information security and compliance, and has abreadth of professional experience both at home and abroad.
Accordingly, SFH has determined that Mr. Makiyama will draw on thisprofessional experience to fulfill his role as outside statutory auditor.

Hirotoshi Korenaga
Biography

1988 Joined Sony Corporation2007 Deputy General Manager, Planning and Administration
Department, Accounting Division, Sony Corporation
2008 Deputy General Manager, Consolidation Accounting
Department, Accounting Division, Sony Corporation2012 General Manager, Accounting Department 1, Accounting
Division, Sony Corporation2013 Statutory Auditor, SFH (current position)2014 General Manager, Accounting Department 1, Accounting
Division, Sony Corporation
2015 Senior General Manager, Global Accounting Division, Sony
Corporate Services (Japan) Corporation (current position)

Reasons for
Appointment

Mr. Korenaga has extensive knowledge about finance andaccounting acquired over many years of working in accounting
at Sony Corporation. Accordingly, SFH has determined that Mr.
Korenaga will use his professional experience to fulfill his role ofoutside statutory auditor.

Note: The conditions applicable to an outside statutory auditor changed withthe revision of the Companies Act of Japan, but Mr. Korenaga satisfies
the prevailing conditions applicable to an outside statutory auditor until
the conclusion of the Ordinary General Meeting of Shareholders planned
for June 2016.
Sony Financial Holdings Inc. Annual Report 201557

Basic Stance on Corporate Governance
The Sony Financial Group (hereafter, “the Group”) positions its corporate vision and corporate philosophy as the basic policy forformulating management strategies and decision making. The Group’s corporate vision is to become the most highly trusted
financial services group by customers. To achieve this objective, SFH makes effective use of the business characteristics andinformation available within the Group, based on an understanding of the differences in the history, scale of operations, businessmodels and other attributes of each Group company. The goal is to conduct integrated management of the entire Group. Above
all, this goal is premised on ensuring the financial soundness and appropriateness of business activities. Indeed, management sees
this task as a top priority. Accordingly, the organizational framework has been built with an emphasis on Groupwide complianceand risk management.

Establishing an Internal Control System
SFH’s Board of Directors formulated a Basic Policy on
Establishing an Internal Control System in compliance with
the Companies Act of Japan and associated enforcement
regulations to ensure the appropriateness of Group businessactivities. SFH implemented and maintains an internal control
system in line with this policy.
The basic policy was partially revised and approved at theBoard of Directors’ meeting taking into account the revisedCompanies Act of Japan and the associated enforcementof regulations promulgated on May 1, 2015. (The revisions

include specifying a structure for ensuring the appropriatenessof the Group’s business activities, as well as enhancing andspecifying structures to support auditing and for the gatheringof information by auditors.)
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.

Sony Financial Group’s Internal Control (As of July 1, 2015)

SFH

General Meeting of Shareholders
Appointment/dismissal
Appointment/dismissal

Compensation Advisory
Committee

Enquiry

Board of Directors(Directors/Outside Directors)

Response

Audit

Board of Statutory Auditors(Statutory Auditors/Outside Auditors)

ReportIndependent
AuditorExecutive Committee

Independent
audit

Business Execution Departments
Corporate Planning
DepartmenttServe concurrently as
directors and statutory
auditors

Corporate
Communications &Investor Relations
DepartmenttShare and confirm
information

Sony Life

58

Sony Financial Holdings Inc. Annual Report 2015

Accounting
Department

Corporate Control
DepartmenttReport andconfirmtDiscussin advanceSony Assurance

Human Resources& General Affairs
Department

tConvey Group policies

Sony Bank

Audit

Audit
Department

tManage and advisetMonitortDirectly audit, as neededSony Lifecare

Basic Policy on Establishing an Internal Control System

Contributions to Sustainable Development

1. System to ensure that the execution of duties by directors and employees complies with laws and with the Articles ofIncorporationi. The Board of Directors establishes a code of conduct as a basic policy for compliance and makes this code clear to SFH’s executives,
employees and subsidiaries.
ii. The Board of Directors creates a compliance manual that provides specific compliance guidelines and a compliance program thatdefines specific plans.
iii. The Board of Directors creates a compliance supervisory department to promote its compliance program. The compliance supervisorydepartment regularly reports to the Board of Directors on the progress of the compliance program.
iv. The Board of Directors formulates the Basic Group Policy on Eradicating Anti-social Forces. This policy describes the firm stance theGroup takes to counter anti-social forces and build the structure necessary to fulfill this policy.
v. The Board of Directors establishes an internal hotline system and informs SFH’s executives, employees and subsidiaries about thesystem. This system allows employees or others who become aware of business policies, operations or other activities that contravene(or are in danger of contravening) laws and regulations to report directly to a hotline desk. The system prohibits any action from being
taken against employees or others who provide such notification.
vi. The Board of Directors creates the Group Information Security Policies and streamlines a structure to properly control Group information assets, including customer information.
vii. The Board of Directors creates the Conflicts of Interest Policy within the Group and ensures that the necessary formats are in place toproperly control transactions which have the potential to harm the interests of customers.
viii. The Board of Directors establishes an internal audit supervisory department, which is independent from other operating departments.
The internal audit supervisory department liaises and cooperates with the statutory auditors and the accounting auditor; monitors andverifies, from an independent and objective viewpoint, the implementation and operational status of the internal control system; andreports regularly to the Board of Directors the status of internal audits.
ix. The Board of Directors formulates the Basic Policy Related to the Group’s Internal Audits as well as Regulations on Internal Audits, andinforms SFH’s executives and employees and subsidiaries of these.
2. System for storing and managing information related to the execution of duties by directors
SFH establishes the Record-keeping Regulations to ensure that documents pertaining to the execution of duties by directors, such asrecords of decisions at Board of Directors and Executive Committee meetings, are appropriately stored and managed in accordancewith these laws and regulations.
3. System of regulations related to risk management
i. The Board of Directors formulates the Fundamental Principles for Risk Management Activities as a basic policy on Group risk
management and informs SFH’s executives, employees and subsidiaries of these.
ii. The Board of Directors establishes a risk management supervisory department to manage risks appropriately for SFH and its subsidiaries, in accordance with each entity’s scale, characteristics and business model. This department reports regularly to the Board of
Directors on the status of risk management.
iii. The Board of Directors evaluates the capital adequacy of subsidiaries to ensure that their levels of capitalization are sufficient in light of
the risks the Group directly faces and to implement appropriate capital allocations. If necessary, the Board of Directors takes measuresdesigned to strengthen capital bases.
iv. The Board of Directors creates the Basic Policy Related to Group Business Continuity Risk Management, as well as contingency plans,
to build a structure that enables the Group to respond rapidly to a crisis and put in place measures to minimize the impact of theserisks. The Board of Directors makes these plans known to SFH’s executives, employees and subsidiaries.
4. System to ensure the efficient execution of duties by directors
i. The Board of Directors establishes approval regulations, organizational and task-sharing regulations and other internal rules, andcreates an appropriate structure for the efficient execution of duties.
ii. The Board of Directors sets up an executive committee and delegates to this committee the discussion and decision-making authority
regarding execution of important corporate day-to-day business activities.
iii. The Board of Directors establishes the Business Plan Control Regulations, formulates and executes non-consolidated and consolidated medium-term business plans and annual business plans, and regularly confirms progress on business plans.

Sony Financial Holdings Inc. Annual Report 201559

5. System to ensure reliability of financial reports
SFH maintains the necessary system to ensure reliability of financial reports, in accordance with the Basic Policy Regarding Group
Financial Reporting.
6. System to ensure the appropriateness of operations at SFH and the corporate group, including SFH’s parent company andsubsidiaries
i. In addition to exercising shareholder rights as a financial holding company, SFH makes management control agreements with its
subsidiaries, under which SFH manages subsidiaries by requiring them to comply with the Groupwide Basic Policy and to report andobtain prior approval of SFH on matters necessary for ensuring the appropriateness of operations of the Group, including subsidiaries.
ii. Based on its Basic Policy on the Management of Transactions within the Group, SFH deliberates and examines the appropriatenessand compliance of intra-Group transactions with subsidiaries that have the potential to significantly impact the operations of the Group
before commencement of those transactions. Such issues are resolved at or reported to the Board of Directors. In addition, to protect
minority interests, when conducting transactions with parent company Sony Corporation (controlling shareholder) and its group companies, SFH and its subsidiaries duly confirm that these transactions are necessary and that they are entered into under conditions thatare not conspicuously divergent from those of typical transactions with third parties.
iii. SFH’s Audit Department takes responsibility for ensuring that subsidiaries have appropriate internal control systems in place andmonitors and verifies the results of internal and third-party audits of subsidiaries.
iv. SFH and its subsidiaries submit management information about the Group as needed to SFH’s parent company and interact with theparent company’s internal audit supervisory department.
7. Items pertaining to employees who are requested to assist statutory auditors in their duties
If directors receive requests from statutory auditors for employees to be allocated to assist them in their duties, the directors assign
such personnel without delay.
8. Independence from directors of employees assigned to assist statutory auditors referred to in 7 above
i. Statutory auditors must agree to the appointment, removal and evaluation of employees assigned to assist them in their duties.
ii. Employees assigned to assist statutory auditors in their duties must exclusively follow the instructions and directives of statutory
auditors, once they are given.
9. System for directors and employees to report to statutory auditors, and other reporting systems
i. If directors or employees are requested to provide reports regarding the execution of their business to statutory auditors, they must
do so immediately.
ii. If directors or employees discover a fact that could significantly affect the operations or financial condition of SFH or its subsidiaries,
they must report such discovery to statutory auditors immediately. No actions may be taken against persons providing such reports,
while the information provided via such report shall be shared among SFH’s executives, employees and subsidiaries.
iii. If directors or employees receive notification via the internal hotline system, they must report immediately to the statutory auditors.
10. Other systems to ensure the effectiveness of audits by statutory auditors
i. Representative directors endeavor to forge and deepen relationships with statutory auditors based on mutual understanding and trustby creating an environment that facilitates audits by statutory auditors.
ii. When statutory auditors request, SFH shall pay expenses or discharge obligations attendant to requests for counsel, studies, expert
opinion or other activities by attorneys, certified public accountants or other outside specialists for the execution of statutory auditors’
duties, unless SFH proves that such activities were not necessary to their execution.

60

Sony Financial Holdings Inc. Annual Report 2015

Management System
SFH has adopted the director system and the statutory auditor system. The Company appoints outside directors who work withstatutory auditors to supervise management, thereby strengthening corporate governance.
Note: SFH prepares and discloses a Corporate Governance Report and Information Pertaining to Controlling Shareholders in accordance with the regulations of
the Tokyo Stock Exchange. These documents can be viewed on the Tokyo Stock Exchange’s or SFH’s website (http://www.sonyfh.co.jp/index_en.html).

Statutory Audits, Internal Audits and Accounting
AuditsBoard of Directors(As of July 1, 2015)

Attendance of outside directors and outside statutory
auditors in meetings of the Board of Directors and theBoard of Statutory Auditors for fiscal 2014
Name

Outsidedirectors

Isao Yamamoto
Shiro Kuniya

Outsidestatutory
auditors

Hiroshi Sano
Hirotoshi
Korenaga(As of July 1, 2015)

Statutory Audits
SFH’s Board of Statutory Auditors has four members, three ofwhom are outside statutory auditors. Statutory auditors audit
the execution of duties by directors based on the audit policy,
audit plan, audit methodology and assignment of audit duties
stipulated by the Board of Statutory Auditors.
Statutory auditors attend important meetings, including
Board of Directors’ meetings, review the details of reports
received from directors, key personnel and other persons, andexamine SFH’s operations and financial condition. At the sametime, statutory auditors maintain close contact with outside
directors and the director and employees in charge of internal
audits to enhance the supervisory function with respect tocorporate management.

Internal Audits
SFH performs internal audits through its Audit Department.
The Audit Department reports directly to the director in chargeof internal audits (the President and Representative Directorof SFH) and is independent of SFH’s operating divisions. This
department conducts internal audits from an independent andobjective standpoint.
Please see page 69 for further details.

Accounting Audits

Board of Directors’
meeting

Board of Statutory
Auditors’ meeting

Attended all 15
meetings
Attended 13 outof 15 meetings
Attended all 15
meetings
Attended 14 out
of 15 meetings—

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

Breakdown: CPAs and the
back-up team members

Eight CPAs, five others*

Attended all 11
meetings
Attended 10 out
of 11 meetings

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 nine members. In
addition to three executive directors, there are three representative directors from SFH’s subsidiaries who serve as nonexecutive directors of SFH and contribute to efficient business
operations of the Group as a whole.
Additionally, to obtain general management advice applicable to the Group, SFH has appointed directors from outside
the Group, one of whom serves concurrently as a Corporate
Executive Officer of Sony, the parent company. Because SFH
is the subsidiary 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,
two of SFH’s representative directors and one of its executive
directors serve concurrently as directors of subsidiaries withthe aim of increasing the effectiveness of Group strategies andensuring the sound business management of each company.

*For the year ended March 31, 2015

Sony Financial Holdings Inc. Annual Report 2015

61

Compensation for SFH’s Directors and Statutory
Auditors
SFH sets the Policy for Determining the Compensation of
Directors and the Policy for Determining the Compensationof Statutory Auditors.
Additionally, SFH has created the Compensation Advisory
Committee Regulations to clarify the process for determining
the compensation of directors of SFH and representative
directors of subsidiaries, and established the Compensation
Advisory Committee to deliberate these matters. Consistingof a small number of SFH directors, including an outside

director who serves as the committee chair, the Compensation
Advisory Committee receives advice from the Board of Directors of SFH and the boards of directors of subsidiaries asnecessary, and reports the results of its deliberations to therespective boards of directors. Compensation of individual
directors is determined by resolution of the Board of Directors,
based on a report from the Compensation Advisory Committee. Meanwhile, compensation of individual statutory auditors
is determined through discussion by statutory auditors.
Directors with no executive duties, except outside directors, are, in principle, paid no compensation.

1. Executive Directors
Basic policy• The main responsibility of executive directors is to continuously increase corporate value as corporate managers
of SFH and the Group. Consequently, SFH’s basic policy is to determine compensation for executive directors,
considering a balance between a fixed portion and a results-linked portion with a focus on securing talented
human resources and ensuring that compensation serves as an effective incentive for improving businessperformance.

Compensation• Compensation comprises a fixed portion depending on the position, such as president and representative
director, and a results-linked portion depending on the performance of SFH and the Group as a whole, andindividual responsibilities.
• The results-linked portion could range from 0% to 200% of the standard amount subject to achievement ofmanagement targets of SFH and the Group and fulfillment of responsibilities.

Level• A suitable level of compensation shall be paid in order to secure talented individuals. The level of compensation
is determined by resolution of the Board of Directors, in consideration of the results of third-party surveys on thecompensation levels of corporate managers and other relevant information.

Retirement benefits• Based on regulations related to retirement benefits for directors set out by the Board of Directors, SFH sets aside
an amount equivalent to a defined portion of compensation for every year in office and determines the full amountcalculated as at the time of retirement, subject to the resolution of the General Meeting of Shareholders. A
defined portion of the reserved amount is converted into shares of SFH and granted, with the aggregate numberof shares converted at the market price and paid upon retirement.

2. Outside Directors

62

Basic policy• The main responsibility of outside directors is to enhance the transparency and objectivity of corporate management through the oversight and supervision of executive directors’ execution of duties. Consequently, compensation for outside directors is determined as fixed compensation with a focus on securing talented human resourcesand ensuring that supervision and oversight function 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 determined by resolution of the Board of Directors, in consideration of the results of third-party surveys on
the compensation levels of corporate managers and other relevant information.

Retirement benefits• None paid.

Sony Financial Holdings Inc. Annual Report 2015

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 for statutory auditors isdetermined to be fixed compensation with a focus on 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 is determinedthrough discussion of statutory auditors, in consideration of the results of third-party surveys on the compensation levels of corporate auditors and other relevant information.

Retirement benefits• Based on regulations related to retirement benefits for standing statutory auditors set out by the Board of Statutory Auditors, SFH determines the fixed amount commensurate with the number of years in office as at the timeof retirement, subject to resolution of the General Meeting of Shareholders.
• No retirement benefits are paid to non-executive statutory auditors.

Compensation for SFH’s directors and statutory auditors for fiscal 2014
Details of compensation for SFH’s directors and statutory auditors for fiscal 2014 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

Directors (internal)

3

199

164

34

Directors (outside)

2

16

16

—

Statutory auditor (internal)

—

—

—

—

Statutory auditor (outside)

1

21

20

1

Total

6

236

200

36

Total amount by compensation category

Contributions to Sustainable Development

Note: Compensation categories refer to basic compensation, stock options, bonuses and retirement benefits and others. To date, SFH has neither paid bonuses
nor granted stock options as compensation for directors and auditors.

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 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.

Sony Financial Holdings Inc. Annual Report 2015

63

Relationship with Parent Company, Sony Corporation

Using the “Sony” Trade Name and Trademark(As of July 1, 2015)

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
monetary amount of 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.

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 thepayment of dividends.

Personnel RelationshipTo obtain general management advice concerning the SonyFinancial Group and to strengthen the audit structure, 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 two employees to
SFH. Also of note, two Sony employees serve as statutory
auditors at SFH’s consolidated subsidiaries. Because theappointment of concurrent directors and statutory auditorscomes at the request of the Sony Financial Group, SFH
believes that it is in a position to make independent management decisions.
From the standpoint of further enhancing independence
from the parent company, SFH has appointed two outside
directors who have no special relationship with the Sony
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 businesswith a high degree of independence from the Sony Group.
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.

64Sony Financial Holdings Inc. Annual Report 2015

Transactions with Sony Corporation
SFH is a listed company with a listed parent company. For
this reason, SFH has set out a Policy Concerning Measures
to Protect Minority Shareholders in Transactions with theControlling 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, the SonyFinancial Group believes that it has secured a degree of independence from the Sony Group, because it conducts independent
business activities in line with its own management policies andstrategies, and operates in different business fields than theSony 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 of the aforementioned policy
With regard to transactions with Sony, based on the aforementioned policy, SFH confirms the necessity for such transactions
and ensures that conditions do not differ markedly from theterms of ordinary transactions with third parties.

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 under the laws and regulations.
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 holdings 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
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.

Compliance Meetings
SFH holds regular compliance meetings with Group
companies to conduct preliminary consultations on compliance-related issues and exchange information about the status of compliance dissemination and legal issues. Members ofthe meeting include SFH and Sony Financial Group company

Internal Hotline System If executives and employees of
SFH and Group companies believe that business policies,
operating activities or other activities of the companies either
breach (or could breach) respective laws and regulations orinternal regulations, they can report matters of concern bychoosing and notifying the appropriate hotline desk at SFH orat any Sony Financial Group company, or the Sony Ethics andCompliance Hotline, which is the desk for the Sony Group.
SFH implements appropriate measures to protect those who
contact these desks, while strictly managing and responding
to the information provided.
Moreover, SFH communicates with Sony regarding appropriate responses to notifications received at Sony. SFH also
communicates with Sony about notifications on issues having
the potential to affect Sony Group companies other than SFH.

Contributions to Sustainable Development*The Compliance Manual outlines SFH’s compliance system, as wellas 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.

executives, general managers and other staff in charge ofcompliance, depending on the agenda. The results of these
discussions are reported to the Board of Directors and at otherimportant meetings.

Compliance System of the Sony Financial Group (As of July 1, 2015)

SFH

Board of Statutory Auditors

Director in Charge(President, Representative Director)

General Meeting of Shareholders

Statutory Auditors

Board of Directors
ReportReportAudit Department

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

ReportSony Life

Compliance Meetings
Secretariat: Corporate Control Department

Sony AssuranceSony Bank

Advise and monitor

Sony Lifecare

Sony Financial Holdings Inc. Annual Report 201565

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
in place and working effectively in the prevention of insider
trading at SFH and Group companies, and takes actions
as necessary.
Note: Visit SFH’s website (http://www.sonyfh.co.jp/index_en.html) for details.

Conflicts of Interest Policy (Summary)SFH formulated the Conflict of Interest Policy* and established a structure, under which the director in charge of the Corporate Control
Department shall be responsible for managing conflicts of interest, while the Corporate Control Department shall be the business unit
responsible for managing conflicts of interest. The overall goal is to ensure that customers’ interests are not harmed by Group companies.
The manager responsible for managing conflicts of interest shall require Group companies to take the following actions when he or
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) Take any other action deemed necessary by the business unit responsible for managing conflicts of interest
The business unit responsible for managing conflicts of interest shall retain records, that specify transactions to be managed and thatare associated with actions taken to properly protect customers, for five years.
*Visit SFH’s website (http://www.sonyfh.co.jp/index_en.html) for more about Conflicts of Interest Policy.

Basic Group Policy on Eradicating Anti-social Forces
SFH has formulated a Basic Group Policy on Eradicating Antisocial Forces* whereby SFH and the Group companies have inplace the structures necessary to take a firm stance on countering anti-social forces, including setting up an organizational
unit responsible for dealing with anti-social forces, appointing aperson responsible for refusing unreasonable demands andgathering information on anti-social forces in collaboration withexternal specialized agencies.
*Visit SFH’s website (http://www.sonyfh.co.jp/index_en.html) for more about
Basic Group Policy on Eradicating Anti-social Forces.

Privacy Policy
SFH has formulated a Privacy Policy* governing the handlingof personal information. It sets out SFH’s policies on the useof personal information for specific purposes and its acquisition of personal information to ensure compliance with applicable laws and regulations. SFH has also established and66

Sony Financial Holdings Inc. Annual Report 2015

observes Rules on Information Security that set out specificsecurity control protocols.
SFH monitors the effectiveness of Sony Financial Group
companies’ security control protocols. In addition, SFH andGroup companies formulate and revise the Privacy Policy,
and set up an organization to protect personal information
and appoint persons responsible, prepare a set of rules anda manual for the handling of personal information, as well as
education and training programs on the handling of personal
information and information security.
SFH and its Group companies strive 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, andother incidents.
*Visit SFH’s website (http://www.sonyfh.co.jp/index_en.html) for more about
the Privacy Policy.

Risk Management
One of SFH’s roles as a financial holdings company is to further enhance and integrate Groupwide risk management by
centralizing the Group’s management resources. SFH has formulated a 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
to enhance 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/index_en.html) for more about the Basic Policy on Group Risk Management.

Approach to Risk Management by SFH and Group
Companies
SFH’s Board of Directors has formulated the Fundamental
Principles for Risk Management and communicates them todirectors, employees, and throughout the Sony Financial
Group. The Board also identifies the types of risks specific tothe subsidiaries’ scale, characteristics and business model,
and establishes structures designed to manage such risks
effectively. SFH’s Executive Committee, which is appointed
by the Board of Directors, executes routine tasks pertaining

to Group risk management. In more detail, subsidiaries each
assess, monitor, and manage their risks on their own. At thesame time, the Corporate Control Department, which is
responsible for SFH’s risk management, controls risks throughmonitoring and holding Risk Management Meetings with thesubsidiaries’ risk management divisions. The Corporate
Control Department also reports its findings on the state ofrisk management regularly to SFH’s Board of Directors andExecutive Committee.

SFH

Board of
Statutory Auditors

Director in Charge(President, Representative Director)

General Meeting of Shareholders

Statutory
Auditors

Contributions to Sustainable Development

Risk Management Structure of the Sony Financial Group (As of July 1, 2015)

Board of Directors

ReportReportAudit Department

ReportAudit

Executive Committee
Corporate Control Department(Centralized Risk Management)

Investment RisksrMarket-related RiskrCredit RiskrReal Estate Investment Risk

Supervisory Department:
Corporate Control Department

Administrative Risk

Supervisory Department:
Corporate Communications &Investor Relations Department

Insurance Underwriting Risk

Systems Risk

Reputational Risk

Liquidity Risk

Legal Risk
Business Continuity Risk

Confirm

Sony Life

ReportRisk Management Meetings

Sony AssuranceManage, advise, monitor

Sony Bank

Present risk management policies

Sony Lifecare

Each company puts risk management into practice independently

Sony Financial Holdings Inc. Annual Report 201567

Types and Definitions of Risks
The types and definitions of risks that SFH and Group companies must manage are shown in the following table:
Market-related Risk

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 profitability ofreal 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, accidents, or other crises.

Each Group company establishes its own framework for
managing risks matched to its respective scale, characteristics
and business model, and optimizes its framework according torisk type and definition.
As the operating and business environment changes, theGroup companies’ risk management departments review therisk types and definitions set forth above, amending them asappropriate 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,

68

Sony Financial Holdings Inc. Annual Report 2015

manuals and other guidelines reflecting their respective
business volume and nature of business activities. SFH hasa 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 toaddress under the risk management system set forthin the fundamental principles for risk management, among
other guidelines, SFH shall establish a contingency response
headquarters led by the President and Representative Directorof SFH and execute business continuity measures aimed at
the full restoration of all operations.
Moreover, SFH and Sony Life are scheduled to relocate
their respective head offices by the end of July 2016, forpurposes that include the further reinforcement of business
continuity of operations in case of disaster or other incidents.

Internal Audit
SFH has formulated the Basic Policy on Internal Audits for the Group, and internal audits are conducted within the Company andat Group companies.

Basic Stance on Internal Audits
Internal audit divisions at SFH and Group companies take a fair and objective standpoint in examining and evaluating the status ofbusiness activities from the perspective of legitimacy and rationality as a way of protecting their customers’ interests. Based onthese, the divisions then state their opinions and offer advice and suggestions for improvement, thereby contributing to ensuringsound and appropriate execution of business activities.

Internal Audit System at SFH and Group Companies

Contributions to Sustainable Development

SFH has set up an Audit Department to perform internal audits. Separated from other operating divisions as a structure under the
direct supervision of the director in charge of internal audits (the President and Representative Director of SFH), this department
takes an independent and objective standpoint in performing internal audits to check and evaluate the appropriateness of work
processes and risk responses. Sony Financial Group companies each have their own internal audit division to perform internal
audits designed to match their specific industry, scale of business and types of risk they face. SFH’s Audit Department monitors
the results of both internal and external audits of Group companies with the aim of ensuring sound business operations. Whennecessary, the Audit Department provides advice and proposals to the subsidiaries’ internal audit divisions. SFH’s Audit Department regularly reports the results of its monitoring activities to the director in charge and the Board of Directors. Should the director
in charge see the need, as a result of the monitoring, the Audit Department may directly audit subsidiaries 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 accounting auditors, as necessary.

Internal Auditing Structure of the Sony Financial Group (As of July 1, 2015)

SFH
Director in Charge (President, Representative Director)

Board of Directors

ReportReportReportAudit

Executive Committee

Audit

Board of Statutory Auditors
Statutory Auditors

Audit Department
Operations Department

Direct audit, as neededSony Life

Sony AssuranceSony Bank

Sony Lifecare

Internal Audit DivisionInternal Audit DivisionInternal Audit DivisionInternal Audit Division

Audit

Operating Divisions

Audit

Operating Divisions

Audit

Operating Divisions

Audit

Operating Divisions

Sony Financial Holdings Inc. Annual Report 2015

69

Contributions to Sustainable Development Corporate Social Responsibility

Stance on Corporate Social Responsibility (CSR)
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 senseof purpose.
Furthermore, in order to fulfill its responsibilities as a member of society, the Sony Financial Group actively participates in social
contribution activities, and believes that the continuation of these activities will earn it even greater trust from local communities andcustomers.
Based on these basic approaches, Sony Financial Group companies have formulated the following Basic CSR Policy, andevery company in the Sony Financial Group conducts different CSR activities.
Basic CSR Policy (Excerpt)
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.

Structure for Promoting CSRSony Financial Group companies carry out CSR initiatives independently through their business activities. At SFH, the Corporate
Planning Department promotes and manages CSR and formulates policies for the Sony Financial Group. Furthermore, SFH’s
other relevant departments monitor the CSR activities at Sony Financial Group companies by sharing information with them, andmake reports or proposals as necessary to the Executive Committee and the Board of Directors.

Departmental CSR Responsibilities

70

Corporate Communications & Investor Relations Department

Promotes external communications on Group activities

Corporate Control Department

Monitors risk management and compliance activities related to overall businessactivities at Group companies

Accounting Department

Manages internal controls over financial information for the Group as a whole

Human Resources & General Affairs Department

Monitors general administrative activities at Group companies, including activities
related to personnel systems and the environment

Audit Department

Monitors internal auditing of business activities at Group companies

Sony Financial Holdings Inc. Annual Report 2015

Activity Profiles
In giving back to society through its business activities, the Sony Financial Group regards and respects
the interests of all stakeholders—customers, shareholders and other investors, business partners,
employees and local communities.

Customers Guided by our corporate vision and corporate philosophy, the Sony Financial Group is seeking tobecome the most highly trusted financial services group in Japan.

Utilizing Customer Feedback

Customer Service Divisions at Major Subsidiaries

Sony Life

VOC* DivisionSony Assurance

Customer Response Service Department

Sony Bank

Customer Support Unit(Centered on the Customer Service Office at head
office, the unit engages in VOC activities to reflect
customer feedback and requests in marketing.)

Sony Life Sony Life conducts customer awarenesssurveys once a year, and has gathered valuable feedback
and requests from 4,279 policyholders in fiscal 2014. Alsoin fiscal 2013, Sony Life launched the Customer Satisfaction
Survey, a telephone questionnaire aimed at policyholders
to survey levels of satisfaction with its sales representatives.
Additionally, an annual questionnaire is conducted targeting
Lifeplanner sales employees who come into daily contact
with customers.
The VOC Division works on improvement efforts incollaboration with other internal divisions based on concrete
improvement measures and plans formulated after analysis
of customer feedback. Furthermore, the VOC Committee,
which serves as a conduit for reports to and orders from the
Executive Committee, improves operations by executing
ongoing improvement measures, verifying the subsequenteffects of these measures, and revising them as necessary
to achieve further improvement.

Contributions to Sustainable Development

Sony Financial Group companies have in place a framework
under which feedback received from each company’s customers on a daily basis is compiled and analyzed by divisions incharge of promoting customer satisfaction and raising quality.
This feedback is reported to management and used to makerecommendations on operational improvements and productand service enhancements. As a result of this approach, theSony Financial Group’s three businesses—life insurance, nonlife insurance and banking—have received high appraisals incustomer satisfaction surveys conducted by outside institutions and the media.

*VOC=voice of customers

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Sony Financial Holdings Inc. Annual Report 201571

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. Feedback is reported to management
every quarter, and in particularly important cases, detailed
reports are made on the causes of incidents and countermeasures are recommended as necessary. The feedback is also
passed on to relevant departments, along with instructions
on improvements and other matters.
Sony Assurance has set up a complaint-handling management system. On April 1, 2011, Sony Assurance became thefirst* direct non-life insurer to declare conformity with ISO
10002, the international standard for complaint-handling management systems. Since that time, Sony Assurance has continued its daily activities to improve the quality of operations
directed at providing better services to customers. In recognition of these efforts, in 2015, Sony Assurance yet again
obtained approbation from Mr. Junzo Nabeshima, who had
chaired the Association of Consumer Affairs Professionals(ACAP), among other important posts.

Sony Bank Heeding the feedback from customers, and toprovide even better products and services, Sony Bank reviews
the comments and requests from customers and strives tomake improvements. Specific feedback and related details are
made available on the Voice of Customer webpage of SonyBank’s website.
In fiscal 2014, Sony Bank placed first for the eighth consecutive year in Nikkei’s eleventh annual ranking* of Japanesefinancial institutions based on customer satisfaction, and washighly evaluated on many other customer satisfaction surveys.

*Article in the February 1, 2015 issue of the
Nihon Keizai Shimbun (Nikkei) newspaper*Based on a survey by Sony Assurance, as of March 31, 2011. Direct nonlife insurance companies refer to Japanese non-life insurance companies
selling insurance products and providing services directly to customers
without relying primarily on insurance agencies.

Measures for improvement—Discussion with
consumer affairs expert
With a view to promoting further improvements, Sony Assurance,in December 2014, sought opinions about Sony Assurance fromMs. Kaoru Nakatani, Representative of the Financial Services
Research Working Group at the Japan Association of Consumer
Affairs Specialists, deeming it important to hear from a fair andneutral consumer affairs expert.

After the interview

Ms. Nakatani, a consumer affairs expert,
offered several suggestions with respect to certain issues that exist
between consumers and insurance companies. She has significant
insight into the inherent gap between consumers and insurancecompanies because she regularly supports consumers with advice
and solutions on insurance-related issues, grounded in her solid
understanding of the interests and positions of both parties.
Thanks to the concerns she raised and her suggestions, we havebecome aware of what is lacking at Sony Assurance at present.
We have renewed our commitment to ongoing operational
improvements by carefully listening to the voice of consumers
and by having a fuller understanding of the consumer, and as aresult will fill the aforementioned gap.
General Manager, Customer Response Service Department
Kenichi Osada
Leader of the division responsible forfacilitating operational improvements ininternal divisions, based on customer
feedback that is collected and managed.

*Organizational affiliation, job title and the content of
this article are as of July 2015.

72

Sony Financial Holdings Inc. Annual Report 2015

Sony Bank also promotes in-person mortgage
loan consultations.

Shareholders and Other Investors

The Sony Financial Group has built internal systems for thetimely disclosure of corporate information, and under these systems, we provide timely and accurate information on
the Company to shareholders and other investors. SFH has established the following Investor Relations (IR) Policy toprovide ample opportunities for two-way communication between shareholders and SFH management, with the aimof maximizing shareholder value.

IR Policy
Purpose of IR Activities
SFH strives to provide members of the investment community,
including its shareholders and other investors, as well as securities
analysts, with information related to the assessment of corporate value
in a timely, accurate and fair manner. At the same time, SFH strives toprovide feedback to management in an effort to strengthen two-way
communication. Furthermore, by enhancing its disclosure of businessstrategies and financial position, SFH makes every effort to gain thetrust of the investment community and obtain a fair corporate valuationfrom stakeholders.

Quiet Period for IR Activities
In order to ensure fair disclosure of information and prevent the leakof material information regarding the Sony Financial Group’s businessresults prior to earnings announcements, SFH has established a quiet
period for IR activities. SFH observes a quiet period for IR activities fromthe second Monday of the month following the end of every quarter until
the earnings announcement. During this period, SFH shall not, in principle, hold individual meetings, presentations about the Company andother such events, and shall refrain from answering inquiries regarding
the settlement of accounts.

Contributions to Sustainable Development

Basic Approach to IR Activities(1) SFH will disclose the information necessary to assess its corporate
value based on the principles of promptness, accuracy, fairness
and consistency.
(2) SFH will engage with members of the investment community suchas its shareholders and other investors, as well as securities analysts, in a sincere and direct manner in order to establish relationships of trust.
(3) SFH will promote IR activities led by top management, based on
the concerted effort of the entire Sony Financial Group.

*Roles of the DC(1) Assist with the decision making of the President and Representative
Director regarding the design, implementation, evaluation and maintenance of the disclosure system(2) Promptly and comprehensively collect material corporate information ofGroup companies. Discuss the necessity of timely disclosure along withthe accuracy, completeness, clarity and level of formality of the content
of timely disclosure, as well as the fairness and urgency of the announcement. Provide the necessary information when authorized personnel
must make decisions on the disclosure of said information.

Framework for Disclosure of IR Information (As of July 1, 2015)
Method of Disclosure of IR Information• SFH will provide timely disclosure based on the Securities Listing
Regulations for marketable securities through the Timely Disclosure
Network (TDnet) of the Tokyo Stock Exchange, and will promptly
make such information available on the SFH corporate website. SFH
shall, in principle, make the information published through the TDnet
available on the SFH corporate website.
• SFH strives to provide fair disclosure worldwide by making a full range
of information available on its corporate website, including informationthat is not required under disclosure regulations.
Framework for Disclosure of IR Information
In order to promote timely disclosure, SFH has established the Rules
and Regulations Related to Timely Disclosure and set up a Disclosure
Committee (DC)*.
In the event that material information comes to light, SFH has aframework in place whereby SFH’s directors and employees, as wellas managers responsible for the material disclosure of information(hereinafter, the “Disclosure Managers”) of its subsidiaries, promptly
report on this information to the DC.
Furthermore, material corporate information that SFH must
disclose is set forth in the Sony Financial Group Guidelines for Reporting Important Information. These guidelines are made known to SFH’s
directors and employees, as well as the Disclosure Managers of its
subsidiaries.

The Sony Financial Group
Determination and occurrence of materiality of information*
SFH directors and employees
Sony Life
DisclosureManagerSony Assurance
DisclosureManagerSony Bank
DisclosureManagerSony Lifecare
DisclosureManager

SFH
Disclosure Committee (advisory body**)
Board of Directors/Executive Committee (decision-making bodies)
Corporate Communications & Investor Relations Department(department responsible for handling information)

Disclosure
TDnet/Press releases*Defined as information that has “an extremely high likelihood of being
deemed material by shareholders and other investors, as well as otherparties, on a rational basis,” when making an investment decision.
**This advisory body assists with the decision making of the President
and Representative Director. It comprises members of the Executive
Committee, including standing directors and general managers fromeach division (Secretariat/Corporate Communications & Investor
Relations Department).

Sony Financial Holdings Inc. Annual Report 201573

Investor Relations (IR) Initiatives in Fiscal 2014
SFH strives to communicate a broad range of information to shareholders and other investors
in Japan and overseas, to address various topics of interest. To this end, SFH conductedpresentations and individual meetings in a variety of formats, as detailed below.
The SFH IR website has received high marks, including taking first place for the third
consecutive year in the insurance sector on the fiscal 2014 Nikko Investor Relations Co.,
Ltd. industry-specific ranking of all listed Japanese company websites.
Record of IR Activities

Earnings briefings (teleconferences withdomestic institutional investors and analysts)
Corporate Strategy Meeting
Individual meetings with institutional investors
and analysts

4 times
1 timeApprox. 200
1 tour ineach region
7 times
2 times
1 timeOverseas IR meetings (Europe, North America, Asia)
Briefings for individual investors
Participation in an IR fair for individual investors
Business briefings (small meetings for domestic
institutional investors and analysts)
Sony Financial Group internal IR briefings

SFH President and Representative Director, Katsumi Ihara, gives a briefing
for individual investors in December 2014.

1 timeAnnual IR Schedule
Announcement of
Full-year Consolidated Financial Results

Apr.

May

Jun.

Announcement of
1Q Consolidated Financial Results

Jul.

Aug.

Ordinary
General Meetingof Shareholders
Shareholder
Newsletter(Japanese)

74

Sony Financial Holdings Inc. Annual Report 2015

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.

Interim Shareholder Newsletter(Japanese)
Interim Disclosure Report(Japanese)Mar.

Business Partners

The Sony Financial Group promotes fair and equitable transactions with institutions thatprovide financial products and services and with suppliers and vendors of goods and services, along with insurance agencies, and maintains healthy relationships with all of its business partners as part of the sustainable development of society.

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)

Partner (Independent Agent) Training ProgramSony Life provides various systematic training programs forPartners, which are collectively referred to as the Partner Training Program (PTP). To enable Partners to succeed as life insurance professionals, Sony Life provides training related to products, along with expertise on sales tailored to customer needs
based on sales processes developed by the Company over
the years.
Furthermore, Sony Life introduced the Professional Agent(PA) system in 2006 for the purpose of helping to nurture highquality sales people. The PA certification is conferred on carefully chosen sales people who satisfy fixed performance andqualification requirements and possess the skills needed bylife insurance sales professionals.

Contributions to Sustainable Development

Sony Life’s Partners (Sony Life refers to independent agentsas “Partners” not only because they are partners from a business standpoint but also because they are the lifelong partnersof customers) constitute a critically important sales channel
alongside Lifeplanner sales employees. Based on the desire toprovide high-quality services closely tied to regional communities, the Company’s approximately 1,900 Partners around thecountry, as of July 1, 2015, sell policies tailored to customer

needs based on their sophisticated insurance knowledge andconsulting capabilities as life insurance professionals, faithfully
fulfilling their responsibilities as partners to customers.

Employees The Sony Financial Group’s corporate philosophy states our commitment to fostering an open
corporate culture where employees can freely express their individuality and demonstrate their abilities to the fullest.
We consider it essential that all employees actualize their full potential, and thus implement initiatives to create pleasantand productive workplaces, through such means as, for example, the Employee Opinion Survey.

Work-life Balance
The Sony Financial Group promotes
initiatives to help balance careers withprivate 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 continually certified by the directorof the Tokyo Labour Bureau as a company that meets therequirements 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.

Sample Initiatives

Introduction offlex-time working
hours and othersystems

Established systems permitting flex-time working
hours, as well as earlier or later start and finish
times for work. Reduced work-hour system
available for employees in childcare periods.

Childcare leaveand nursing careleave, etc.

Amount of leave time provided exceeds legal
requirements. Childcare leave is taken by somemale employees.

Telecommuting
systemIntroduced in SFH and Sony Life.

Other leavesystems

Introduced volunteer leave and commemorative
leave.

*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 nonlife insurer that sells insurance products and provides services directly tocustomers without relying primarily on an insurance agency.

Sony Financial Holdings Inc. Annual Report 201575

environment that fits a diverse workforce, along with activities topromote a greater understanding of human rights and diversity
among employees.

Human Resources Development
Promotion of women’s empowerment For future growth,
the Sony Financial Group regards its female employees as valuable human resources and equal to male employees. During its
earliest days in business, when Japanese life insurers were predominantly relying on a female sales force, Sony Life dared to
deploy male Lifeplanner sales employees as the core of its sales
operations, and achieved growth through the sale of policies
tailored to customer needs by Lifeplanner sales employees who
had sophisticated insurance knowledge and consulting capabilities as life insurance/financial professionals. As times changed,
however, Sony Life started actively to employ female Lifeplanner
sales employees on a companywide basis, and is scheduled
to increase by five times the current annual number of newly
recruited female Lifeplanner sales employees, to 100 by 2020.
In April 2015, the Women’s Empowerment Promotion Department was established, which promotes a progressive workplace
for female Lifeplanner sales employees, including through organizational support for taking maternity/childcare leave, as well as
by recruiting female Lifeplanner sales employees.

New employee training In addition to training at each Group
company, training programs are conducted jointly at the Grouplevel to promote understanding of the business operations of theGroup 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

Promotion of diversity Following an increase in the numberof employees, the Group has come to embrace a diverse workforce including women, foreigner nationals and the physically or
mentally challenged. In April 2015, Sony Life established theDiversity Promotion Department for the development of a working

Self-development
ProgramGroup training sessions and opportunities totake 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 themanagerial capabilities of management-level
employees.

In-house
Inter-departmental
Training Program

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

Recruitment andTraining of Global
Human Resources

With an eye on overseas business expansion in
the future, the Sony Financial Group is conducting initiatives, 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, 2015)
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
Advanced

Certification
exam
Financialplannercertification
exam

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

JAFP
certification
training

Life Insurance
University course exams(6 fields)
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
Financial Planner

76

Sony Financial Holdings Inc. Annual Report 2015

CFP®

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 to harvest stem cells fromtheir bone marrow for donation to patients with intractable
blood diseases. There is no insurance premium burden forthe policyholder.

SURE supports bone-marrow donors.

Social Contribution Activities with Employee Participation
Sony Life Volunteer ClubSony Financial Group’s Donations and Grants for
Fiscal 2014
Main Recipients of Donations and Other Assistance

NPO Sorabear Foundation

Amount¥16,459,990

Donations to support children who have suffered inconnection with the Great East Japan Earthquake

6,893,007

The Eye Mate, Inc. and its supporting groups

6,309,973

Special Olympics Nippon Foundation

5,350,000

Purchase of green power and J-Credits in fiscal 2014

3,349,650

Funds for activities of Sony Life Volunteer Club

2,500,000

Examples of Main Activities

The Tokyo Philharmonic Orchestra Public Interest
Incorporated Foundation

1,000,000• Continuing support for the elderly victims of the Great Hanshin–
Awaji Earthquake

Hand in Hand Japan

1,000,000• Support for the Special Olympics Nippon Foundation* event

Others (incorporated associations, incorporated
foundations, academic societies, and others)• Hosting youth education events at care houses

Total

Contributions to Sustainable Development

Social contribution is a well-established part of thecorporate culture at Sony Life, where many employees
discover the value of volunteer activities and contribute tosociety 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, andthe organization is still in operation more than 20 years
after the disaster. Each member participates in runningthe club, which is funded by donations from employees.
Members devise and carry out a wide range of initiatives.

4,290,763¥47,153,383• Operational support for the Oita International Wheelchair Marathon• Support for the Relay for Life** event

Life-planning Course Given at 747 Schools• 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)

Since fiscal 2005, Sony Life has conducted life-planningcourses, a hands-on learning program for students nationwide.
Courses are conducted by Lifeplanner sales employees. The
program is designed to foster
students’ appreciation for theimportance of leading a wellplanned life, and working hard
toward goals. As of March 31,
2015, the life-planning courses
have been given at more than
747 schools nationwide
Life-planning Course given by(cumulative).

*What is the Special Olympics Nippon Foundation?
Special Olympics Nippon is a public-interest incorporated foundation thatprovides opportunities for daily sports training to intellectually challenged
people throughout the year, while promoting their social participation throughorganizing athletic competitions for them to demonstrate their achievements.
Sony Life has supported the foundation since 1996, and had approximately
700 volunteers (cumulative) at the Special Olympics Nippon National Summer
Games in Fukuoka, a three-day event held in 2014.
**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 have lost loved ones to the disease run laps around a track for 24 hours
to promote the eradication of cancer. Sony Life has participated in the Relay
for Life since 2007. In fiscal 2014, Sony Life participated in relays in 32 communities held across Japan. Led by Lifeplanner sales employees at regional
branches, over 2,300 people (cumulative) participated, including the familiesof employees and customers.

Sony Life
Life-planning Course

FY2014

Number of schools
143
Number of participating students
15,290
Cumulative total Number of schools
747 (cumulative)(FY2005–FY2014) Number of participating students
72,931

Sony Financial Holdings Inc. Annual Report 201577

Sony Life’s Initiatives as an Institutional Investor—Adopting Japan’s Stewardship CodeAs an institutional investor, Sony Life, a subsidiary of SFH, has announced its adoption of Japan’s Stewardship Code—a set of principles guiding the responsibilities of institutional investors.
Sony Life exercises its voting rights
Sony Life exercises its voting rights in regard to listed domestic companies based on the following criteria.
1. Criteria governing the exercise of voting rights• Voting rights shall be exercised with the main aim of contributing to stakeholders’ interests on a medium- to long-termbasis, through an increase in the investee’s corporate value.
2. Basic process for the exercise of voting rights• All proposals to be discussed at an investee’s general meeting of shareholders shall be examined in accordance with the
Guidelines on the Exercise of Voting Rights independently established by Sony Life.
• A proposal to be discussed at an investee’s general meeting of shareholders shall be subject to review to judge whether
such proposal can contribute to the sustainable growth of the investee, taking into consideration the results of monitoringand of discussions with the investee.
• Sony Life shall approve a proposal if after review it is deemed capable of contributing to the sustainable growth of theinvestee from a medium- to long-term perspective, while it shall disapprove a proposal if it is not.
• In principle, Sony Life shall exercise voting rights on all proposals.
• External investment companies may be used for making investments in listed domestic companies, provided that they
regularly inform Sony Life on the results of their exercise of voting rights, or publish such results on their websites.
Sony Life’s compliance with each principle of Japan’s Stewardship CodePrinciple 1 Formulation and disclosure of relevant policies
Sony Life, as a financial institution managing customers’ funds, is committed to fulfilling its stewardship responsibilities, throughstewardship activities of its own, or of the external asset management companies to which it entrusts the management of thefunds. Specific stewardship activities shall be regularly published on Sony Life’s website.
Principle 2 Conflicts of interest
Sony Life formulated the Conflicts of Interest Policy, in accordance with the Companies Act and the Financial Instruments andExchange Act of Japan, to ensure that interests of customers associated with operations executed by Sony Life or its subsidiary financial institutions are not harmed, in terms of transactions carried out by Sony Life Group companies. Following thisPolicy, Sony Life has developed a structure to properly manage information on such operations and to appropriately monitor
their status. Sony Life’s Conflicts of Interest Policy is published on its website.
Principle 5 Exercise of voting rights and the disclosure of results
All proposals to be discussed at an investee’s general meeting of shareholders shall be examined in accordance with the
Guidelines on the Exercise of Voting Rights independently established by Sony Life. Voting for or against a proposal shall be
reviewed not with respect to the short-term effect on performance but from a viewpoint of whether such proposal can contribute to sustainable growth in corporate value. Sony Life, in principle, shall exercise its voting rights on all proposals. Results ofthe exercise of voting rights shall be sorted into main categories and counted, and regularly published on Sony Life’s website.

Results of Voting by Sony Life
Results of the exercise of voting rights in 2014
At its investees’ general meetings of shareholders held between April 2014 and June 2014, Sony
Life exercised its voting rights (figures on the right) for the proposals presented by the investees
or by its shareholders, in accordance with its Guidelines on the Exercise of Voting Rights.
Examples of cases of proposals Sony Life disagreed
with in 2014
Of the categories of proposals (right), Sony Life disagreed
with those that were not backed by reasonable explanations as to how the proposal would lead to an increase in
the investee’s corporate value.

78

Sony Financial Holdings Inc. Annual Report 2015

AgreedDisagreed
Total number

351
40

of proposals

391•Appointment of directors in the absence of outside directors•Approval of anti-takeover measures that enable a capital increase
involving excessive dilution•Disposal of treasury stocks through a third-party allotment
involving uncertain use of the proceeds therefrom

Environmental Protection Activities
The Sony Financial Group recognizes that protecting the global environment is a critical challenge facing
humankind. The major subsidiaries have each established environmental policies, and through everyday
business activities, they carry out initiatives that give due consideration to environmental protection. Meanwhile, SFH has approved Sony Corporation’s Road to Zero environmental plan*, whereby its main subsidiaries
are engaged in environmental protection activities capitalizing on the strengths of each respective business.
*Sony Corporation’s environmental plan: http://www.sony.net/SonyInfo/csr/eco/RoadToZero

Group Company Activities
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 promote energy-saving and natural resource-saving activities
such as targets for reduced energy and photocopier paper
usage, recycling through sorting waste disposal and green
procurement to raise the percentage of eco-products used
in office supplies.

Use of Green PowerIn fiscal 2005, Sony Life became thefirst 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 also adopted this system forthe period from fiscal 2007 to fiscal 2013, and then adopted
the J-Credit Scheme* from fiscal 2014 for reducing CO2
emissions.
From fiscal 2008, Sony Bank has utilized the system tocover all of its power usage (excluding the portion of powerusage in outsourced operations) as a “Carbon Offset Bank.”
Since fiscal 2013, it has been offsetting 100% of its CO2 emissions through the use of credits certified under the J-Credit
Scheme, instead of the green power certificates used formerly.
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 2014, theentire Group purchased green power certificates and J-Credits
equivalent to 1,570 MWh.
*The J-Credit Scheme is a system whereby the government certifies credits
for the reduction or absorption of greenhouse gas emissions such as CO2
through measures including the introduction of energy-saving equipment orforest management. Credits used by Sony Bank are generated throughincreases in CO2 absorption via forest management activities (forest thinning,for example). Accordingly, Sony Bank’s use of credits also supports activities
to nurture woodlands.

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 since October 2012 by equipping its
sales force with approximately 5,000 new tablet devices aspart of its sales support system.
Sony Bank has requested that customers receive documents
related to investment trust transactions in electronic format.
Sony Assurance has also made it possible to apply for
automobile insurance policies online, thereby avoiding theprinting and mailing of insurance application forms and otherdocuments. In addition, Sony Assurance pursues environmental
conservation activities such as 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.
Amount of CO2
cut at Sony
Assurance byreducing thevolume ofautomobile
insurance
application
forms printed
and mailed

Contributions to Sustainable Development*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 auditsof ISO 14001-certified offices, and the audit results are reported to top
management.

Reducing CO2 Emissions by Switching to Paperless
Contract Procedures and Electronic Issuance ofDocuments for Customers

kg
400,000

300,000

200,000

100,0000(FY) 03 04 05 06 07 08 09 10 11 12 13 14

The number of customers who buy automobile insurance policies online is growing
every year. This contributes to the reduction of CO2 emissions related to the printing
and mailing of application forms.
Basis for calculating CO2 emissions generated by the printing and mailing of
application forms
New
Amount of CO2 generated in the printing of 1 application form
customers Amount of CO2 generated in the mailing of 1 application form
Amount of CO2 generated in the printing of 1 insurance
certificate
RenewalAmount of CO2 generated in the mailing of 1 application form
customers Amount of CO2 generated in the printing of 1 renewal
certificate

0.130 kg
0.097 kg
0.114 kg
0.097 kg
0.114 kg

Note: Calculations are based on CO2 emission rates in Chart 2.2 of the Reportfrom the Study Group on ICT Policy for Addressing Global Warming(Ministry of Internal Affairs and Communications)Sony Financial Holdings Inc. Annual Report 201579

Conservation Activities Together with Customers
Donating to the Sorabear Foundation
Teaming up with Sorabear Foundation, a non-profit
organization that promotes the spread of renewable energies
and environmental education, Sony Assurance has carried out
a program to install solar power generators at kindergartens
since March 2009.
Sony Assurance donates one yen to the Sorabear
Foundation for every 100 kilometers of total distance thatwas not driven by its policyholders compared to the forecast
distance. The Sorabear Foundation uses the donations toprovide Sorabear power generation equipment—solar power
generators—to kindergartens and nursery schools aroundthe country. In fiscal 2014, the program contributed two solar
power generators to nursery schools in Hiroshima andMiyazaki prefectures. To date, Sony Assurance has donateda total of 15 solar power generators through this program (asof July 1, 2015).
In addition, Sony Life began offering policy guidelines andagreements on CD-ROM for policies dated March 2, 2010 orlater. Sony Life donates ¥10 for every policyholder whochooses a CD-ROM instead of paper documents when they
sign up for insurance, and donates the proceeds to the Sorabear Foundation. In fiscal 2014, Sony Life used the collected
donations to provide two solar power generators to nurseryschools in Fukushima and Niigata prefectures.

Opening an Account with Sony Bank Supports Forest
Conservation in Sumatra
To protect World Heritage forests on the island of Sumatra,Sony Bank supports reforestation, the Elephant Patrol program*, and other conservation activities, as well as the activities of the World Wildlife Fund Japan (WWF Japan) to preserve
forests through its Project for Forest Conservation in Sumatra,Indonesia. Since September 2012, Sony Bank has donated¥10 to the project each time a customer opens a new accountwith Sony Bank. Customers can thus help support the effort topreserve Sumatra’s forests simply by opening an account withSony Bank.
*Staff astride elephants patrol for illegal activity and keep wild animals awayfrom populated areas.

Amount contributed
up to March 2015 (cumulative)
trees

Equivalent toplanted*Equivalent to 343 trees planted in 2012, 757 trees planted
in 2013 and 1,130 trees planted in 2014

©WWF Indonesia

Ceremony to mark the donation of Sorabear power generation equipment
to Don Bosco nursery school in Miyazaki Prefecture, in October 2014

80

Sony Financial Holdings Inc. Annual Report 2015

Project for Forest Conservation in Sumatra, Indonesia
Open a new bankaccount withSony Bank

Contribute ¥10 per
every newly
opened accountUse the contributions
to support the Projectfor Forest Conservationin Sumatra

Customers

Sony BankWWF Japan

Corporate Section

Corporate Section

Sony Financial Holdings Inc. Annual Report 201581

Corporate Information(As of March 31, 2015)

Name

Sony Financial Holdings Inc.

Established

April 1, 2004

Head office

1-1, Minami Aoyama 1-chome, Minato-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

SFH: 48(Consolidated: 8,448, Life insurance business: 6,762, Non-life insurance business: 1,118, Banking business: 532,
Parent: 36)

Common stock¥19,900 million

Note: The number of employees of SFH includes 9 belonging to the life insurance business, 1 belonging to the non-life insurance business, 2 belonging to thebanking business, and 36 belonging to the parent.

Organizational Chart(As of July 1, 2015)
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

Corporate Control
Department

Accounting Department

Human Resources &General Affairs Department

Sony Financial Group Organizational Chart of Business Operations(As of July 1, 2015)
Sony Corporation

Sony Financial Holdings Inc.

Life Insurance BusinessSony Life Insurance Co., Ltd.

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

Non-life Insurance BusinessSony Assurance Inc.

Life Insurance Business
SA Reinsurance Ltd.

Consolidated subsidiaries
Non-consolidated subsidiaries
Affiliate accounted for by
the equity method

Trade name andtrademark license
Sales of and referrals toother Group companies’
products

Management fee
Shareholding

Banking BusinessSony Bank Inc.

Nursing Care BusinessSony Lifecare Inc.

Banking BusinessSony Payment Services Inc.

Nursing Care Business
Lifecare Design Inc.

Banking Business
SmartLink Network
Hong Kong Limited

Notes: 1. The information for each business is based on SFH’s classification of segment information.
2. Senior Enterprise Corporation, a subsidiary of Sony Lifecare Inc., changed its name to Lifecare Design Inc. on October 1, 2014.
SmartLink Network, Inc., a consolidated subsidiary of Sony Bank Inc., changed its name to Sony Payment Services Inc. on April 1, 2015.

82

Sony Financial Holdings Inc. Annual Report 2015

Profiles of Group Companies(As of July 1, 2015)

Life Insurance Business
Name

Established

Head officeBusiness

CommonstockSony Life Insurance Co., Ltd.

August 10,
1979

1-1, Minami Aoyama
1-chome, Minato-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¥13,000 Sony Life Insurance Co., Ltd.
million50%

British Bermuda

Reinsurance
business

SA Reinsurance Ltd.

October 29,
2009

Share ownership

AEGON International B.V.
50%
¥11,000 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¥760
millionSony Financial Holdings Inc.
100%

Banking BusinessSony Payment
Services Inc.

September 1, 3-13, Takanawa 1-chome,
Minato-ku,
2006
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 ¥495
millionand operation ofnursing care homes

Lifecare Design Inc.

Share ownership

Corporate Section

Nursing Care Business

Share ownershipSony Lifecare Inc.
100%

Sony Financial Holdings Inc. Annual Report 2015

83

Senior Management of Main Subsidiaries(As of July 1, 2015)

Sony Life

Title

Name

Concurrent Positions at Sony Group and SFH’s Main Subsidiaries

Chairman, Director

Katsumi Ihara

President, Representative Director
Representative Director

Tomoo Hagimoto
Masamitsu Shimaoka

President, Representative Director of Sony Financial Holdings Inc.
Director of Sony Assurance Inc.
Director of Sony Bank Inc.
Director of Sony Financial Holdings Inc.

Directors

Yuichiro Sumimoto
Shigeru Ishii

Hiroaki Kiyomiya

SonyAssurance

Standing Statutory Auditor
Statutory Auditors

Mitsuhiro Koizumi
Yasuyuki Hayase

President, Representative Director
Representative Director

Masayoshi Fukuya
Atsuo Niwa
Takashi Sakuma

Directors

Toshihiko Fukumoto
Katsumi Ihara

Shigeru Ishii

Hiroaki Kiyomiya

Standing Statutory Auditor
Statutory Auditors

Masayoshi Fukuya
Yasuyuki Hayase

Takayuki Nakagawa

Sony Bank

President, Representative Director
Executive Vice President,
Representative Director
Directors

Yutaka Ito
Takayuki Suzuki
Katsumi Ihara

Shigeru Ishii

Hiroaki Kiyomiya―
Executive Vice President, Representative Director of Sony Financial
Holdings Inc.
Director of Sony Assurance Inc.
Director of Sony Bank Inc.
Managing Director of Sony Financial Holdings Inc.
Director of Sony Assurance Inc.
Director of Sony Bank Inc.
Statutory Auditor of Sony Financial Holdings Inc.
Standing Statutory Auditor of Sony Financial Holdings Inc.
Statutory Auditor of Sony Assurance Inc.
Statutory Auditor of Sony Bank Inc.
Statutory Auditor of Sony Assurance Inc.
Director of Sony Financial Holdings Inc.
――
President, Representative Director of Sony Financial Holdings Inc.
Chairman, Director of Sony Life Insurance Co., Ltd.
Director of Sony Bank Inc.
Executive Vice President, Representative Director of Sony Financial
Holdings Inc.
Director of Sony Life Insurance Co., Ltd.
Director of Sony Bank Inc.
Managing Director of Sony Financial Holdings Inc.
Director of Sony Life Insurance Co., Ltd.
Director of Sony Bank Inc.
Statutory Auditor of Sony Life Insurance Co., Ltd.
Standing Statutory Auditor of Sony Financial Holdings Inc.
Statutory Auditor of Sony Life Insurance Co., Ltd.
Statutory Auditor of Sony Bank Inc.
Senior Manager, Japan Tax Planning Section, Tax Planning Office,Global Accounting Division of Sony Corporate Services (Japan)
Corporation
Director of Sony Financial Holdings Inc.
―
President, Representative Director of Sony Financial Holdings Inc.
Chairman, Director of Sony Life Insurance Co., Ltd.
Director of Sony Assurance Inc.
Executive Vice President, Representative Director of Sony Financial
Holdings Inc.
Director of Sony Life Insurance Co., Ltd.
Director of Sony Assurance Inc.
Managing Director of Sony Financial Holdings Inc.
Director of Sony Life Insurance Co., Ltd.
Director of Sony Assurance Inc.

Tohru Nakajima―

Standing Statutory Auditor

Shinji Sugiyama

Statutory Auditors

Yasuyuki Hayase―
Standing Statutory Auditor of Sony Financial Holdings Inc.
Statutory Auditor of Sony Life Insurance Co., Ltd.
Statutory Auditor of Sony Assurance Inc.
Deputy General Manager, Tax Planning Office, Global Accounting
Division of Sony Corporate Services (Japan) Corporation

Hidemichi Takenaka

84―

Sony Financial Holdings Inc. Annual Report 2015

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, 2015)

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

Major Shareholders(As of March 31, 2015)
Number of
Shares Held

Percentage ofOwnership (%)

Sony Corporation
GOLDMAN, SACHS & CO. REG
STATE STREET BANK AND TRUST COMPANY 505223
Japan Trustee Services Bank, Ltd. (Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account)
STATE STREET BANK AND TRUST COMPANY
JP MORGAN CHASE BANK 385632
Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account)
SAJAP
MORGAN STANLEY & CO. LLC

261,000,000
12,220,167
11,325,544
8,039,337
7,992,300
6,271,057
6,266,611
5,801,019
5,028,100
2,912,692

60.00
2.80
2.60
1.84
1.83
1.44
1.44
1.33
1.15
0.66

Corporate Section

Name

Distribution of Share Ownership(As of March 31, 2015)

By shareholder type
Financial instruments firms 1.03%

Total number of shares issued

Foreign investors 26.48%

435,000,000
Corporations 60.14%

Financial institutions 9.65%
Individuals and others 2.70%

Sony Financial Holdings Inc. Annual Report 201585

Dividend Policy
Dividends

Consolidated Net Income

FY2011FY2012FY2013

FY2014FY2015 (Forecast)¥32.8 billion¥45.0 billion¥40.5 billion¥54.4 billion¥57.0 billion*

Net Income per Share¥75.43¥103.60¥93.11¥125.10¥131

Dividend per Share

¥20

¥25

¥30

¥40

¥55

26.5%

24.1%

32.2%

32.0%

42.0%

Dividend Payout Ratio (Consolidated)*The above consolidated net income for FY2015 (Forecast) is equivalent to the amount of “profit attributable to owners of the parent” of the AccountingStandard for Business Combinations (ASBJ Statement No. 21, September 13, 2013) and the related revision.

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. We have decided to revise
upward our medium-term target for the dividend payout ratio from the current range of 30% to 40%, to that of 40% to 50% ofconsolidated net income, further enhancing shareholder returns. Management will determine specific dividend amounts for eachfiscal year by taking into account a comprehensive range of factors, including the capital adequacy of each Group 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 the year-end dividend for fiscal 2014, taking this period’s overall operating performance into consideration, SFH
declared a year-end dividend of ¥40 per share, up ¥10 from the previous fiscal year, representing an annual dividend amount of¥17,399 million. This dividend was approved by resolution of the Ordinary General Meeting of Shareholders held on June 24, 2015.
In terms of the year-end dividend for fiscal 2015, taking into account a comprehensive range of factors, including the policy
mentioned above and business forecasts for fiscal 2015, SFH plans to raise the amount by ¥15 to ¥55 per share.

Share Price

Yen
2,500

2,000

1,500

1,000

500

0

Trading Volume

4 5 6
2012

7

8

9 10 11 12 1 2 3
2013

4

5

6

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
2013

4

5

6

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

Thousand shares
90,00060,00030,000

0

86

4 5 6
2012

Sony Financial Holdings Inc. Annual Report 2015

Financial Section
Contents
SFH Consolidated
Financial Statements

Consolidated Balance Sheets

88

Consolidated Statements of Income andConsolidated Statements of Comprehensive Income

90

Consolidated Statements of Changes in Net Assets

93

Consolidated Statements of Cash Flows95

Notes to the Consolidated Financial Statements(For the year ended March 31, 2015)96

MCEV Results for Sony Life as of March 31, 2015

118

Financial Section

Sony Financial Holdings Inc. Annual Report 201587

SFH Consolidated Financial Statements

Consolidated Balance Sheets
Sony Financial Holdings Inc.
As of March 31, 2014 and 2015
Millions of yen
2014

2015

Cash and due from banks¥ 204,546¥ 134,803

Call loans and bills bought

40,62877,234

Monetary trusts

325,831

336,842

Securities

6,822,151

7,377,545

Loans

1,211,638

1,349,586

71,565123,083Land

30,10383,007

Buildings

37,03035,323

Leased assets

106

74

Construction in progress

947

1,666

Other tangible fixed assets

3,376

3,010

36,77433,366

Software36,571

33,245

Goodwill

179

99

Other intangible fixed assets

24

21

Due from reinsurers

158

297

Foreign exchanges

7,752

2,224

100,503102,756

Net defined benefit asset

1,730

3,005

Deferred tax assets

19,872

6,545

Reserve for possible loan losses(1,769)(1,422)¥8,841,382¥9,545,868

AssetsTangible fixed assets

Intangible fixed assets

Other assets

Total Assets

88Sony Financial Holdings Inc. Annual Report 2015

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
Special reserves
Reserve for price fluctuations
Deferred tax liabilities
Deferred tax liabilities on land revaluation
Total Liabilities2015¥6,263,315
57,4006,201,676
4,237
2,169
650
1,889,970
6,000
20,00040
20,00095,7253,204
30,272250
41,65741,657539
536
8,374,332¥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

19,900195,277
164,790(0)379,967

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

92,002(2,388)(1,513)0(2,292)85,8071,275
467,050¥8,841,382

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

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
Minority interests
Total Net Assets
Total Liabilities and Net Assets

2014

See accompanying “Notes to the Consolidated Financial Statements.”

Sony Financial Holdings Inc. Annual Report 201589

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
Sony Financial Holdings Inc.
For the years ended March 31, 2014 and 2015
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
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
Gains on redemption 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

2014

2015

¥1,320,456
1,194,315
959,911
958,585
1,325
211,829
121,666
5,311
—
773
2
172
1,183
47
82,67022,57589,863
88,63988,600
39
—
1,199
1,209
25
3
(39)
24
36,27726,32814,134
12,077
8
107
0
4,928
4,864
2,782
2,082
155

¥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

(Continued on next page)90

Sony Financial Holdings Inc. Annual Report 2015

Millions of yen
2015¥1,244,319
1,128,787
327,257
77,413
10,76855,510178,402
3,203
1,959
650,76455
650,703
5
8,182
48
528
—
—
6
1,952
5,646
113,442
29,14086,18965,03046,183
6,367
948
4,098
7,433
0
7
5
2
21,1500¥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

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
Provision for reserve for possible loan losses
Depreciation of real estate for rent and others
Other investment expenses
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
Provision for underwriting reserves
Other underwriting expenses
Investment expenses
Losses on sale of securities
Losses on redemption of securities
Operating, general and administrative expenses
Other ordinary expenses

2014(Continued on next page)

Sony Financial Holdings Inc. Annual Report 201591

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 special reserves
Provision for reserve for price fluctuations
Losses on transfer of business
OthersProvision for Reserve for Policyholders’ Dividends
Income before Income Taxes
Income Taxes-Current
Income Taxes-Deferred
Total Income Taxes
Income before Minority Interests
Minority Interests in Income (Loss)Net Income

Millions of yen
2014

2015

¥29,343
8,964
4,905
6
26
119
3,905
0
1,735
1,424
16,920298
76,136
9,508
137
36
9,312
9,312
—
20
2,232
64,396
26,451(2,517)23,93340,462(42)¥40,504¥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

See accompanying “Notes to the Consolidated Financial Statements.”(2) Consolidated Statements of Comprehensive Income
Income before Minority Interests
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
Share of other comprehensive income of affiliates accounted for using equity method
Total other comprehensive income
Comprehensive Income(Details)
Comprehensive income attributable to parent company
Comprehensive income attributable to minority interests

92

Sony Financial Holdings Inc. Annual Report 2015

Millions of yen
2014

2015

¥40,462¥54,442

3,672
659
—
0
—
0
4,332
¥44,794

35,164
302
33
1
762
0
36,264¥90,707¥44,837¥(42)¥90,690¥16

Consolidated Statements of Changes in Net Assets
Sony Financial Holdings Inc.
For the years ended March 31, 2014 and 2015
Millions of yen
2014
Shareholders’ Equity

Common stock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equity¥19,900¥195,277¥135,160¥—¥350,337

—
—
—

—
—
—

(10,875)
40,504———(0)(10,875)
40,504(0)——¥19,900——¥195,277—
29,629¥164,790

—
(0)
¥ (0)

—
29,629¥379,967

Balance at the beginning of
the period
Changes during the period
Dividends from surplus
Net income
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
2014
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
Changes during the period
Dividends from surplus
Net income
Purchase of treasury stock
Net changes of items otherthan shareholders’ equity
Total changes during the period
Balance at the end of the periodLand
revaluation,
net of taxes

Foreigncurrencytranslation
adjustments¥88,329¥(3,047)¥(1,513)

¥—

—
—
—

—
—
—

—
—
—

3,672
3,672
¥92,002659
659¥(2,388)——¥(1,513)

RemeasureTotal
ments ofaccumulated
definedotherbenefit plans, comprehensive
net of taxes
incomeMinority
Interests

Total Net
Assets¥—¥83,767¥1,339¥435,444

—
—
—

—
—
—

—
—
—

—
—
—

(10,875)
40,504(0)00¥0(2,292)(2,292)¥(2,292)

2,039
2,039
¥85,807(64)(64)¥1,275

1,975
31,605¥467,050(Continued on next page)

Financial Section

Sony Financial Holdings Inc. Annual Report 201593

Consolidated Statements of Changes in Net Assets (Continued)
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
Net income
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)
54,419———(0)(13,049)
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

Balance at the beginning of
the period¥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—
Net income—
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

Foreigncurrencytranslation
adjustments

RemeasureTotal
ments ofaccumulated
definedotherbenefit plans, comprehensive
net of taxes
incomeMinority
Interests

Total Net
Assets¥(2,388)¥(1,513)¥0¥(2,292) ¥ 85,807¥1,275¥467,050

—

—

—

—

—

—

5,965

(2,388)(1,513)0(2,292)85,8071,275

473,015

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

(13,049)
54,419(0)

302
302¥(2,086)

33
33¥(1,480)

0
0
¥0

769
36,270769
36,270¥(1,522) ¥122,078

16
16¥1,29236,28777,657¥550,672

See accompanying “Notes to the Consolidated Financial Statements.”

94

Sony Financial Holdings Inc. Annual Report 2015

Consolidated Statements of Cash Flows
Sony Financial Holdings Inc.
For the years ended March 31, 2014 and 2015

2015

¥ 64,396
1,952
9,147
36
79
4,153
658,136
5
2,232
(108)
2,865
(161)
9,312
(149,204)(74,996)
9,012(30,559)
146
1,538(87,193)
33,55920,0004,000(4,000)
202
(47)
7,078
481,587
160,737(9,178)(2,273)(29,134)
601,738¥ 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(2,301)
5,100(990,899)
480,946(54,102)25,405—(535,850)
65,887(3,326)
2,021(7,707)(1,058)(3,500)75(549,346)(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)(10,878)(2,000)
(0)
(600)
(43)
(13,522)5
38,875
201,404¥ 240,279(13,050)
—
(0)
—
(36)
(13,087)4(32,857)
240,279¥ 207,422

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
Increase in interest portion of reserve for policyholders’ dividends
Increase (decrease) in 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 bills bought
Net increase (decrease) in call money and bills soldNet (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
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
Proceeds from sale of tangible fixed assets
Purchases of intangible fixed assets
Purchase of securities of a subsidiary
Purchase of securities of affiliates
OthersNet cash provided by (used in) investing activities
Cash flows from financing activities
Cash dividends paid
Net decrease in subordinated borrowings
Purchase of treasury stock
Balance from securitization of lease receivables
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

Millions of yen
2014

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 201595

Notes to the Consolidated Financial Statements(For the year ended March 31, 2015)

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, theInsurance 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 ofgenerally accepted accounting principles and practices under the International Financial Reporting Standards.

2 Principles of Consolidation(1) Scope of consolidation
Number of consolidated subsidiaries: 5
Consolidated subsidiaries: Sony Life Insurance Co., Ltd., Sony Assurance Inc., Sony Bank Inc., SmartLink Network, Inc.
(changed its name to “Sony Payment Services Inc.” on April 1, 2015), and SmartLink Network Hong Kong Limited.
Number of non-consolidated subsidiaries: 2
Non-consolidated subsidiaries: Sony Lifecare Inc. and Lifecare Design Inc.
Sony Lifecare Inc. and Lifecare Design Inc. are excluded from the scope of consolidation for the current year because
they are immaterial in light of the total assets, ordinary revenues, net income or loss, retained earnings, and accumulated
other comprehensive income and their exclusion from the scope of consolidation does not hinder a rational judgment of theSony Financial Group’s financial position and results of operations.

(2) Application of the equity method
Number of affiliates accounted for by the equity method: 2
Affiliates accounted for by the equity method: AEGON Sony Life Insurance Co., Ltd., and SA Reinsurance Ltd.
Number of non-consolidated subsidiaries and affiliates that are not accounted for by the equity method: 2
Non-consolidated subsidiaries and affiliates that are not accounted for by the equity method: Sony Lifecare Inc. and
Lifecare Design Inc.
Sony Lifecare Inc. and Lifecare Design Inc., the non-consolidated subsidiaries, are not accounted for by the equity
method because they are immaterial in light of the net income or loss, retained earnings, and accumulated other comprehensive income and their exclusion does not hinder a rational judgment of the Sony Financial Group’s financial position andresults of operations.

(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.

3 Summary of Significant Accounting Policies(1) Securities
Securities, including monetary claims bought which are equivalent to securities, and securities managed as assets ofmoney held in trust, are stated in the following manner: Securities held for trading purposes (“trading securities”) arestated at fair value with unrealized gains and losses charged to income. The cost of such securities sold is determinedby the moving-average method. Held-to-maturity securities are stated at amortized cost (straight-line method) using themoving-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.

96

Sony Financial Holdings Inc. Annual Report 2015

(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: 2 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 thestraight-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
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 tobankruptcy, 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”) andmoney on deposits whose market 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 the amount deemed necessary by comprehensively considering the borrowers’
solvency, of the remaining amount after deducting amounts expected to be collectible from collateral, guarantees and othermeans. For other loans, the Companies provide a reserve in the amount calculated by multiplying the loans by a historicalloan 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 the assessment 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.

(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.
Financial Section(8) Reserve for directors’ retirement benefits
The reserve for directors’ and statutory auditors’ retirement benefits is provided based on the internal regulations of theCompanies 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 thoseassets.

Sony Financial Holdings Inc. Annual Report 201597

(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 net actuarial gain or loss, prior service cost and net obligation at transition
Unrecognized net obligation at transition is amortized using the straight-line method over 15 years. Unrecognized priorservice cost is amortized using the straight-line method over 10 years 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 at each balance sheet date, whereas components of net assets denominated in foreign currencies are translated athistorical 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 forhedging 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).
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-salesecurities, 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 the hedged 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 andshort-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 notincluded in income and expenses. Under the Consumption Tax Act of Japan, the consumption taxes paid on property andequipment are not deductible from the consumption taxes received; they are recorded as “other assets” and amortized ona straight-line basis over 5 years. Other non-deductible consumption taxes are charged to income as incurred.

(15) Policy reserves
Pursuant to Article 116 of the Insurance Business Act of Japan, SFH’s life insurance subsidiary maintains a policy reserve
for the fulfillment 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 aportion 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 using mortality 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.

98Sony Financial Holdings Inc. Annual Report 2015

(16) Changes in accounting policies
Application of Accounting Standards for Retirement Benefits
The Companies have applied Clause 35 of the “Accounting Standards for Retirement Benefits” (ASBJ Statement No. 26,
May 17, 2012) and Clause 67 of the “Guidance on Accounting Standards for Retirement Benefits” (ASBJ Guidance No. 25,
March 26, 2015) from this fiscal year. Accordingly, the Companies have reviewed the calculation method of retirement benefit obligations and service costs, changed the method of attributing expected benefit to periods from the point basis andstraight-line basis to the benefit formula basis, and changed the method of determination of the discount rate. Primarily, thischange was from a discount rate based on a number of years approximately equal to the average remaining service period
to a weighted average discount rate for expected retirement benefit payment periods and the expected payment amountfor each expected payment period.
Following Clause 37 of the “Accounting Standards for Retirement Benefits,” which stipulates transitional treatment of
the new standard, the effect of the change in the calculation method of retirement benefit obligations and service costs isadjusted in retained earnings at the beginning of the fiscal year.
As a result, at the beginning of this fiscal year, net defined benefit liability decreased ¥8,341 million, deferred tax assets
fell ¥2,651 million, net defined benefit assets increased ¥274 million, and retained earnings grew ¥5,965 million. Ordinary
profit and income before income taxes for the year ended March 31, 2015, declined ¥231 million.
Net assets per share increased ¥13.34 during the year, while net income per share declined ¥0.37. Fully diluted net
income per share was unaffected, as no dilutive shares exist.

(17) Changes in presentation method
In the past, the Companies included amounts of interest on interest rate swaps and the like, which are hedging instrument
gains (losses) resulting from interest rate risk hedging on available-for-sale securities, within “Other operating income” and“Other operating expenses” for the banking business in the consolidated statements of income and in “Income before
income taxes” within cash flows from operating activities in the consolidated statements of cash flows. From this fiscal year,
the Companies have instead included these amounts in “Interest income” and “Interest expenses,” in the consolidated
statements of income and “Interest income and dividends” and “Interest expenses” within cash flows from operating activities in the consolidated statements of cash flows.
The Companies made this change to clarify hedging effectiveness by correlating the gains (losses) of hedged assets
with the losses (gains) of the hedging instrument. The Companies made this change because of the growing importance ofhedge transactions following an increase in the bond investment balance that is hedged.
As a result, ¥1,987 million presented as “Other operating expenses” in the consolidated statements of income for theprevious fiscal year has been restated to ¥690 million for “Other operating income” and ¥2,678 million for “Interest
expenses.”
Furthermore, restatements in the consolidated statements of cash flows included ¥2,678 million in interest expenses,
interest paid of ¥(2,713) million and “others” of ¥34 million.

4 Notes to the Consolidated Balance Sheets
1. Securities with a book value of ¥27,918 million were pledged as collateral for the ¥6,000 million of call money and bills sold,
Financial Section

and the ¥20,000 million of borrowed money at March 31, 2015. In addition to the assets described above, securities with abook value of ¥49,107 million were pledged as collateral for cash settlements, variation margins of futures markets and certain other purposes at March 31, 2015.

2. Securities include shares in non-consolidated subsidiaries and affiliates worth ¥12,570 million. Among this, investments injointly controlled companies are ¥10,510 million.

Sony Financial Holdings Inc. Annual Report 201599

3. The balance of loans includes ¥207 million in loans to bankrupt borrowers (before deductions for reserve for possible loan
losses) and ¥1,430 million in non-accrual delinquent loans (before deductions for reserve for possible loan losses). Loans tobankrupt borrowers include loans that have been in arrears on principal or interest payments for a considerably long periodof time or loans (before deductions for reserve for possible loan losses) on which principal or interest payments are considered unlikely to occur in the future for other reasons and on which interest income is not recognized. These loans are withreasons 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 the same guidelines. Non-accrual delinquent loans are loans on which accrued interest
income is not recognized, excluding loans to bankrupt borrowers and loans on which interest payments are deferred inorder to support the borrowers’ recovery from financial difficulties.

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

5. The balance of loans includes ¥1,715 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., reductionof 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 (3 months or more).

6. The total amount of loans to bankrupt borrowers, non-accrual delinquent loans, and restructured loans was ¥3,353 million(before deductions for reserve for possible loan losses).

7. 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 Instituteof Certified Public Accountants, Statement No. 3) includes the consolidated balance sheet amount of ¥3,008 million.

8. Accumulated depreciation of tangible fixed assets as of March 31, 2015 was ¥28,741 million.
9. The balance sheet includes ¥793,344 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, 2015, at SFH’s life insurance subsidiary.

10. Changes in the reserve for policyholders’ dividends at SFH’s life insurance subsidiary for the fiscal year ended March 31,
2015 are as follows:
Balance at the beginning of the fiscal year
Policyholders’ dividends during the fiscal year
Increase in interest
Provision for reserve for policyholders’ dividends
Balance at the end of the fiscal year

100

Sony Financial Holdings Inc. Annual Report 2015

¥4,237 million¥2,202 million¥3 million¥2,153 million¥4,191 million

11. 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 isaccounted for differently, depending on whether there are gains or losses; when there is a loss, a valuation allowance is fully
provided for the tax effect of the loss, and when there is a gain, the tax effect is recorded in “deferred tax liabilities on land
revaluation.” After excluding these amounts, 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).

12. Contracts for commitments to provide credit lines and overdrafts of the life insurance subsidiary and the banking subsidiary
are agreements to lend to customers, up to a prescribed amount, as long as there is no violation of the conditions stipulated
in the contracts. The amount of unused commitments at March 31, 2015 was ¥25,439 million, and the amount of unused
commitments whose original contract terms are within 1 year at March 31, 2015 was ¥22,505 million.

13. 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 ¥9,869 million. Such losses are recognized as
expenses during the fiscal year in which they are contributed.

14. Net assets per share were ¥1,262.94.
15. 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 provisionsof 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 ofJapan 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, Japanesestocks 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 therisk of interest rate and exchange rate fluctuations, they strive to protect themselves from the negative effects of thesefluctuations 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 mitigate risks in the life insurance
business and banking business.

Sony Financial Holdings Inc. Annual Report 2015

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 funds
invested in investment associations. These holdings are intended either for trading, for holding to maturity or for available-for-sale, and they are subject to various risks, including interest rate risk, credit risk, stock price fluctuation risk andexchange rate risk. Furthermore, the Companies hold some of their financial assets in the shares of overseas unlistedcompanies, which have 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 tothe 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 asinterest rate risk.

101

The life insurance business uses several derivative transactions such as interest rate swaps for hedging interest raterisks on assets and liabilities, forward foreign exchange transactions for hedging foreign exchange risks associated withforeign currency-denominated assets as well as the minimum guarantees for individual variable life insurance, and stockindex futures trading for hedging stock risks associated with the minimum guarantees for individual variable life insurance,
and as a matter of policy, does not use derivative transactions for speculative purposes. Hedge accounting is notapplied 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 of loans, the banking subsidiary ensures hedge effectiveness by confirming at the commencement ofhedging that the hedged loans and the interest rate swaps as hedging instruments are grouped on the basis of threemonths or less of the remaining maturity. In respect of deposits, the banking subsidiary ensures hedge effectiveness byconfirming at the commencement of hedging that the hedged deposits and the interest rate swaps as hedging instruments share the same interest rate index, and are 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-ratebonds 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 andmarket liquidity risk. Cash flow risk is the risk of our inability to make cash payments when due because of an inability tomaintain sufficient cash reserves, as well as the risk of loss if the Companies are forced to raise funds under unfavorable
conditions in order to 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 casedue to market turmoil or other factors.
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 Grouprisks, while each of 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 recognizedthrough 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) The life insurance subsidiary manages issuer credit risk on securities and counterparty risk by specifying details suchas risk management methods and procedures in regulations. The risk management division periodically reports thisinformation to the Board of Directors and the Executive Committee.
(b) The non-life insurance subsidiary ascertains issuer credit risk and market values on securities in line with various regulations for asset management risk. The risk management division periodically reports such information 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 a framework for managing individual credit, including credit screenings, management of credit information,
setting of collateral and 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.

102

Sony Financial Holdings Inc. Annual Report 2015

Sony Financial Holdings Inc. Annual Report 2015

Financial Section(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 specifying details such as risk management methods andprocedures in regulations. Based on ALM policies that are determined through such methods as deliberation by the
Executive Committee, the subsidiary determines and confirms actual risk conditions with the Board of Directors. The
subsidiary’s risk management division maintains an overall grasp on the interest rates and durations of financial instruments, and monitors them based on the analysis of the quantity of risk using value at risk (VaR). The division periodically reports such information to the Board of Directors and the Executive Committee.
• Exchange rate risk Exchange rate risk is managed by specifying details such as risk management methods andprocedures in regulations. The risk management division reports the information regularly to the Board of Directors
and the Executive Committee.
• Risk associated with equity securities The subsidiary’s risk management division periodically analyzes theamount of risk by the methods prescribed in the regulations. The risk management division reports this information
regularly to the Board of Directors and the Executive Committee.
• Derivative transactions Derivative transactions are managed by specifying details such as risk management
methods and procedures in regulations. The risk management division reports the information regularly to the Boardof 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
and procedures based on risk management policies determined by the Board of Directors. The risk management
division monitors individual risks and reports regularly to the Board of Directors and the Executive Committee.
• Price fluctuation risk The equity securities exposed to price fluctuation risk are held for strategic investment forthe purpose of enhancing the business partnerships. The subsidiary monitors the market environment and financial
condition of business partners.
(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,the subsidiary 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 each month—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 ofinterest and exchange rates on financial assets and liabilities, as well as their durations, conducts monitoring that
includes VaR and interest rate sensitivity analysis, and ensures regulatory conformance. In relation to ALM, the subsidiary also conducts interest rate swaps, currency swaps, foreign exchange and other derivative transactions tohedge against interest and exchange rate fluctuation risks.
• Market price fluctuation risk The subsidiary manages the holding of investment products, including securities,
in accordance 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 of hedge effectiveness and operations management.

103• Quantitative information on market risk The principal financial instruments affected by the major risk parameters of interest rate risk and exchange rate fluctuation risk are loans, securities, deposits in the banking business andderivative transactions.
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 then employed quantitative analysis to manage interest rate and exchange rate fluctuation risks.
The resulting risk amount with a 99% confidence interval was ¥435 million as of March 31, 2015.
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, therisk impact may exceed the amount calculated. The aforementioned market risk management is carriedout primarily by the risk management division. The division periodically reports risk management conditions to theBoard of Directors and the Executive Committee. In addition, the internal audit division conducts regular audits.
(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 preparesand updates 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 divisionperiodically or as needed report this 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 and periodically reports the information 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 avariety of liquidity risks. Concerning the management of cash flow risks, cash flows are classified into phases basedon the degree of pressure,and methods for risk management and reporting are set out for each phase, while guidelines are formulated and reviewed as necessary. To manage market liquidity risk, the subsidiary works to understandmarket liquidity conditions that pertain 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 division periodically reports risk management conditions to the Board of Directors and the Executive Committee. In addition, the internal 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 this case, rational methods are used to measure their fair values. Although these measurements use assumptions thatare believed to be reasonable under the circumstances, the resulting values may differ if measured using different
assumptions.
Derivative transaction contract amounts indicated in “(2) Fair value information on financial instruments” do notthemselves indicate the volume of market risk related to derivative transactions.

104

Sony Financial Holdings Inc. Annual Report 2015

(2) Fair value information on financial instruments
Below is fair value information on financial instruments as of March 31, 2015, excluding securities whose fair values are
deemed extremely difficult to determine (see Note 2).
Millions of yen
2015

As of March 31,

1) Cash and due from banks2) Call loans and bills bought3) Monetary trust
Monetary trusts for trading
Other monetary trusts
4) Securities
Trading securities
Held-to-maturity securities
Available-for-sale securities
5) Loans
Reserve for possible loan losses (*1)
Loans (after deduction for reserve for possible loan losses)
Total Financial Assets
1) Deposits
2) Bonds payable
Total Financial Liabilities
Derivative financial instruments (*2)
Hedge accounting not applied
Hedge accounting applied
Total Derivative Financial Instruments

Consolidatedbalance sheet
amount¥ 134,803
77,234¥

Fair value

Difference

134,803
77,234¥——565
336,276565
336,276——

761,473
4,956,260
1,625,050
1,349,586(1,153)
1,348,433¥9,240,096¥1,872,860
20,000¥1,892,860

761,4735,805,065
1,625,050—
848,804—

1,470,052¥10,210,520¥ 1,874,170
20,107¥ 1,894,278

121,619¥970,424¥ 1,309107¥ 1,417

¥

¥

¥

¥

[906]
[25,295][26,202]¥[906][25,295][26,202]¥———(*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) Measurement of the fair value of financial instruments

Sony Financial Holdings Inc. Annual Report 2015

Financial Section

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 securities (bonds) is the market price on
financial instrument exchanges or the price indicated by a financial institution. Please see “17. Fair value information on
monetary trusts,” which indicates 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
and investment funds is the market price or the price indicated by a financial institution. Please see “16. Fair value information on securities,” which indicates fair values by purpose.
5) Loans(i) Loans in the banking business
The fair value of loans is measured by estimating their future cash flows and then applying predetermined discount rates,
depending on the type of loan. The discount rate is determined by adding to the Libor-based yield curve a risk premium
corresponding to the rate used to determine the general reserve for possible loan losses.
(ii) Policy loans in the life insurance business
The fair value of policy loans is measured by discounting future cash flows to their present value.
(iii) General loans in the life insurance business
The fair value of general loans is regarded as the carrying amount, as they are approximately equal.

105

Financial Liabilities
1) Deposits
The fair value of deposits is measured by estimating the deposits’ future cash flows and then applying a prescribeddiscount rate, depending on the type of deposit. 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.
2) Bonds payable
The fair value of bonds payable depends on the prices quoted on the bond and other markets, or indicated by financial
institutions and others.
Derivative Transactions
Please see “18. 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
2015
Consolidatedbalance sheet
amountAs of March 31,

1) Unlisted stocks in non-consolidated subsidiaries and affiliates (*1)2) Investment in partnership (*2)
Total

¥12,570
22,191¥34,761(*1) As unlisted stocks have no market prices and their fair values are deemed extremely difficult to determine, they are not included in the scope of fairvalue disclosure.
(*2) As assets included in “investment in partnership” are stocks in unlisted companies and their fair values are deemed extremely difficult to determine,
they are not included in the scope of fair value disclosure.
Note: Impairment losses on investment in partnership were recognized as ¥217 million for the year ended March 31, 2015. Impairment losses are principally recorded when the 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
2015

As of March 31,

Cash and due from banks
Call loans and bills bought
Securities
Held-to-maturity securities
Bonds
Japanese government and municipal bonds
Japanese corporate bonds
OthersAvailable-for-sale securities
Bonds
Japanese government and municipal bonds
Japanese corporate bonds
OthersLoans (*)
Total

More than
1 year to
5 years

More than
5 years to
10 yearsOver
10 years¥134,803
77,234

¥

¥

¥

952
952
801
151
—
170,236
31,5294,577
26,952
138,706
33,076¥416,302

19,317
19,217
16,7422,475
100
373,469
96,19873,821
22,377277,270
64,643¥457,430

1 year or
less(*) This figure excludes ¥162,397 million of loans such as policy loans that have no fixed redemption period.

106

Sony Financial Holdings Inc. Annual Report 2015

—
—

—
—

205,119
205,019
202,187
2,832
100
209,143
143,141
87,00756,13466,001
66,082¥480,345——

4,762,425
4,614,293
4,593,080
21,213
148,131694,677
690,700
690,65050
3,977
1,021,951¥6,479,055

(Note 4) Future return schedule of deposits and other liabilities with interest
Millions of yen
2015

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 (*)
Bonds payable
Total¥1,779,609—¥1,779,609¥18,379
10,000¥28,379¥14,980
10,000¥24,980¥4,661—¥4,661¥10,162—¥10,162¥45,067—¥45,067(*) Demand deposits are included in “1 year or less.”

16. Fair value information on securities as of March 31, 2015:(1) Trading-purpose securities
Millions of yen
As of March 31,

2015

Valuation gains changed to income¥89,147(2) Held-to-maturity securities
Millions of yen
2015

As of March 31,

Fair values exceeding the consolidated balance sheet amount
Bonds
Japanese government and municipal bonds
Japanese corporate bonds
OthersSubtotal
Fair values not exceeding the consolidated balance sheet amount
Bonds
Japanese government and municipal bonds
Japanese corporate bonds
OthersSubtotal
Total

Consolidatedbalance sheet
amountFair value

Difference¥4,857,893
4,831,051
26,84278,2804,936,173¥5,683,055
5,651,706
31,349102,024
5,785,079¥825,162
820,655
4,506
23,743848,906

20,08720,087——20,087¥4,956,260

19,98519,985——19,985¥5,805,065

(101)
(101)
—
—
(101)
¥848,804

Financial Section

Sony Financial Holdings Inc. Annual Report 2015107

(3) Available-for-sale securities
Millions of yen
2015

As of March 31,

Consolidated balance sheet amount exceeding the acquisition cost
Bonds
Japanese government and municipal bonds
Japanese corporate bonds
Equity securities
OthersSubtotal
Consolidated balance sheet amount not exceeding the acquisition cost
Bonds
Japanese government and municipal bonds
Japanese corporate bonds
Equity securities
OthersSubtotal
Total

Consolidatedbalance sheet
amountAcquisition cost

Difference¥1,054,235
950,926
103,309
32,045
376,767
1,463,047¥945,998
845,008
100,990
14,150360,986
1,321,136¥108,236
105,9172,318
17,894
15,780141,91129,64324,084
5,559—
132,359
162,002¥1,625,050

29,92024,356
5,563—
132,647
162,567¥1,483,703

(276)
(272)
(4)
—
(287)
(564)
¥141,346

Note: As the investment in partnership of ¥22,191 million has no market price and its fair value is deemed extremely difficult to determine, it is not includedin the table above.

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

(5) Available-for-sale securities sold during the period
Millions of yen
2015
For the year ended March 31,

Bonds
Japanese government and municipal bonds
Japanese corporate bonds
Equity securities
Others
Total

Sales

Gains on sales

Losses on
sales¥110,489
106,934
3,554
989
84,811¥196,290¥ 8,340
8,316
23
375
1,680
¥10,396

¥ 1
1
0
—
30
¥32

(6) Impairment of available-for-sale securities
Available-for-sale securities with market value are considered impaired if the market value decreases materially below theacquisition cost and such decline is considered non-recoverable. The market value is recognized as the consolidated balance sheet amount and the write-down is accounted for as a devaluation loss for the fiscal year.
No impairment loss was recognized for the year ended March 31, 2015.
“Material decline” is principally indicated when the market value declines by 30% or more below the acquisition cost.

108

Sony Financial Holdings Inc. Annual Report 2015

17. Fair value information on monetary trusts as of March 31, 2015:(1) Monetary trusts for trading
Millions of yen
2015

As of March 31,

Consolidatedbalance sheet
amountValuation gains
or losseschanged toincome¥565¥—

Monetary trusts for trading(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
2015

As of March 31,

Consolidatedbalance sheet
amountAcquisition
cost

Difference

Items whose
consolidatedbalance sheet
amount exceeds
acquisition cost

Other monetary trusts¥336,276¥291,067¥45,208¥45,208

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, 2015 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 market values that are included in monetary trusts for purposes other than trading, holding to maturity or
policy reserve matching are considered impaired if their market value decreases materially below the acquisition cost andsuch decline is considered non-recoverable. Their market value is recognized as the consolidated balance sheet amountand the write-down is accounted for as a devaluation loss for the fiscal year.
No impairment loss was recognized for the year ended March 31, 2015.
“Material decline” is principally indicated when the market value declines by 30% or more below the acquisition cost.

18. Derivative financial instruments:(1) Derivatives to which hedge accounting is not applied
The following provides a summary of contractual or notional amounts, current market or fair values and valuation gains orlosses as of March 31, 2015 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 market risk involved in derivative transactions.
Millions of yen
2015
Notional
Notional amountamount total
over 1 year

As of March 31,

Over-the-counter transactions
Total

Interest rate swaps¥1,000—¥1,000—Fair value

Valuation gains(losses)

¥139
¥139

Financial Section

1) Interest rate derivatives

¥139
¥139

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 the discounted present value of estimated future cash flows.

Sony Financial Holdings Inc. Annual Report 2015

1092) Currency derivatives

Millions of yen
2015
Notional
Notional amountamount total
over 1 year

As of March 31,

Over-the-counter transactions

Forward foreign exchanges
Foreign exchange margintransactions
Currency options
Currency forward contracts

Sold
BoughtSold
BoughtSold
BoughtSold
BoughtTotal¥144,512
188,611
63,10520,875503
514—
12,917—

Fair value

¥—
—
—
—
—
—
—
—
—

¥

42
121
(1,319)
1,624
(3)
3
—
(903)
¥ (434)

Valuation gains(losses)¥42
121(1,319)
1,624
0
0
—
(903)
¥ (433)

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 present value and option pricing models.

3) Stock derivatives

Millions of yen
2015
Notional
Notional amountamount total
over 1 year

As of March 31,

ListedTotal

Stock index futures

Sold¥21,903—¥——

Fair value

Valuation gains(losses)¥(612)¥(612)¥(612)¥(612)

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) Derivatives to which hedge accounting is applied
The following provides a summary of contractual or notional amounts and current market or fair values as of March 31,
2015 and the method of calculating the fair values of derivatives, classified by transaction, for each hedge accounting, towhich hedge accounting is applied. Notional amounts do not indicate market risk involved in derivative transactions.
1) Interest rate derivatives

Millions of yen

As of March 31,

2015

Hedge accounting

Hedging instrument

Hedged item

Deferred hedge accounting
Fair value hedge accounting

Interest rate swaps
Interest rate swaps

Loans, deposits
Available-for-salesecurities (bonds)

Total

Notional
amount total

Notional amountover 1 year

Fair value¥ 39,000¥ 39,000¥ (1,095)

362,048

321,092(24,635)——¥(25,731)

Notes: 1. The Companies apply deferred hedge accounting and fair value hedge accounting in accordance with “Accounting and Auditing Treatments on
Application of Accounting Standard for Financial Instruments in the Banking Industry” (Industry Audit Committee of Japanese Institute of Certified
Public Accountants Statement No. 24).
2. Fair value is measured mainly using discounted present value.

2) Currency derivatives

Millions of yen

As of March 31,

2015

Hedge accounting

Hedging instrument

Hedged item

Fair value hedge accounting

Currency swaps

Available-for-salesecurities (bonds)

Total
Notes: 1. The Companies apply mainly fair value hedge accounting.
2. Fair value is measured mainly using discounted present value.

110

Sony Financial Holdings Inc. Annual Report 2015

Notional
amount total

Notional amountover 1 year

Fair value¥8,998¥2,168

¥435

—

—

¥435

19. Information about retirement benefit obligations as of March 31, 2015:(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,

2015

Balance at the beginning of the current period of retirement benefit obligations
Cumulative effects of changes in accounting policies
Restated balance at the beginning of the fiscal year
Service cost
Interest cost
Net actuarial gain arising during the period
Retirement benefits paid
Balance at the end of the current period of retirement benefit obligations¥38,875(8,616)30,259
3,543
172
1,237
(1,371)¥33,8412) 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 current period of plan assets
Expected return on plan assets
Net actuarial gain arising during the period
Employer contribution
Retirement benefits paid
Balance at the end of the current period of plan assets

2015¥10,427
158
1,071
972
(264)
¥12,3653) 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,

Funded retirement benefit obligations
Plan assets

2015

Net defined benefit liability
Net defined benefit asset
Net liabilities and assets recorded on the consolidated balance sheets

24,558(3,005)¥ 21,553

Sony Financial Holdings Inc. Annual Report 2015

Financial Section

Unfunded retirement benefit obligations
Net liabilities and assets recorded on the consolidated balance sheets¥ 9,245(12,365)(3,119)24,672
21,553111

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

2015

Service cost
Interest cost
Expected return on plan assets
Amortization of net obligation at transition
Amortization of net actuarial gain
Amortization of prior service cost
OthersRetirement benefit expenses related to defined benefit plans¥3,543
172
(158)
414
1,043
(129)
125
¥5,011

Note: SFH includes the retirement benefit expenses in the service cost based on the simplified method.

5) Remeasurements of defined benefit plans, net of taxes
Millions of yen
For the year ended March 31,

2015

Prior service cost
Net actuarial gain
Net obligation at transition
Total¥ (129)877
414¥1,1626) Accumulated remeasurements of defined benefit plans, net of taxes
Millions of yen
As of March 31,

2015

Unrecognized net actuarial gain
Total

¥2,189¥2,1897) 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,

2015

Bonds
Equity securities
Others
Total

57
38
5
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
allocation of plan assets, and the current long-term return rate and the long-term return rate that is expected in the
future based on the various 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, 2015
Discount rate
0.2% – 1.0%
Long-term rate of expected return on plan assets
1.5% – 3.0%

112Sony Financial Holdings Inc. Annual Report 2015

9) Reconciliation of beginning and ending balances of net defined benefit liability of the plan based on thesimplified method
Millions of yen
For the year ended March 31,

2015

Balance at the beginning of the current period of net defined benefit liability
Retirement benefit expenses
Retirement benefits paid
Contribution to the plan
OthersBalance at the end of the current period of net defined benefit liability

¥82
8
(16)
(4)
7
¥77

(3) Defined contribution plans
The amount of contribution required for the defined contribution plans by the Companies was ¥245 million.

20. Information on tax effect accounting as of March 31, 2015:(1) Breakdown of major factors giving rise to deferred tax assets and deferred tax liabilities
Millions of yen
As of March 31,

2015

Deferred tax assets
Policy reserves and others
Reserve for price fluctuations
Net defined benefit liability
Write-down of securities
Net operating loss carryforwards for tax purposes
Depreciation and amortization
Net deferred losses on hedging instruments, net of taxes
OthersSubtotal of deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Net unrealized gains on other securities, net of taxes
OthersTotal deferred tax liabilities
Net deferred tax assets (liabilities)¥29,248
12,396
6,247
955
40
2,441
1,084
6,078
58,491(1,102)
57,389(50,387)(457)(50,844)¥6,545

Note: Net deferred tax assets for the year ended March 31, 2015 are included in the following items of the consolidated balance sheets.
Millions of yen
2015

Assets - Deferred tax assets
Liabilities - Deferred tax liabilities¥6,545—

Sony Financial Holdings Inc. Annual Report 2015

Financial Section

As of March 31,

113

(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,

2015

Statutory effective tax rate
(Adjustments)
Revision to reduce deferred tax assets at the fiscal year-end due to changes in tax rates
Difference in tax rate of subsidiaries
Increase (decrease) in valuation allowance
Others
Effective income tax rate after application of tax effect accounting

35.6
4.3
(4.4)
0.0
1.2
36.7

(3) Revision of deferred tax assets and deferred tax liabilities amounts due to changes in income tax rates“The Bill on the Partial Amendment of the Income Tax Act, etc.” (Act No. 9, 2015) and “The Bill on the Partial Amendmentof the Local Income Tax Act, etc.” (Act No. 2, 2015) were promulgated on March 31, 2015, and the income tax rate will be
reduced from the fiscal years beginning on or after April 1, 2015. Accordingly, the statutory effective tax rate used for the
calculation of deferred tax assets and deferred tax liabilities has been changed from 35.64% to 33.10% for the temporary
difference expected to be reversed in the fiscal year beginning on April 1, 2015, and 32.34% for that expected to bereversed in the fiscal years beginning on or after April 1, 2016.
The statutory effective tax rate used for the calculation of deferred tax assets and deferred tax liabilities by Sony Life
Insurance Co., Ltd. and Sony Assurance Inc. will be reduced from 30.78% to 28.85% for the temporary difference
expected to be eliminated in the fiscal years beginning on or after April 1, 2015, because certain portions of their tax baseare not subject to taxes, those that are usually applied to income.
As a result of these changes in tax rates, the net amount of deferred tax assets (after deduction of deferred tax liabilities), net deferred losses on hedging instruments, net of taxes and remeasurements of defined benefit plans, net of taxes
decreased ¥411 million, ¥109 million and ¥42 million, respectively, while income taxes–deferred and net unrealized gains
on other securities, net of taxes increased ¥3,700 million and ¥3,441 million, respectively. Also, deferred tax liabilities onland revaluation decreased ¥33 million, while land revaluation, net of taxes increased by the same amount.
In addition, the use of tax loss carryforwards will be limited to 65% of taxable income before deducting tax loss
carryforwards for the fiscal years beginning on or after April 1, 2015, and then to 50% for the fiscal years beginning on
or after April 1, 2017, resulted in no impact on the consolidated financial statements.

21. 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 withinvestment 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 and then applying a 1.2% to 2.3% discount rate.

114

Sony Financial Holdings Inc. Annual Report 2015

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

2015

Balance at the beginning of the current period
Increase due to purchase of tangible fixed assets
Changes resulting from the passage of time
Decrease due to execution of asset retirement obligations
Balance at the end of the current period

¥709
2
14
(4)
¥722

22. 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 ¥3,906 million for the year ended March 31, 2015. Below is the consolidated balance sheet amount, net ofchanges during the period, and the fair value at the end of the current period.
Millions of yen
For the year ended March 31,

2015

Consolidated balance sheet amount
Balance at the beginning of the current period
Changes during the period
Balance at the end of the current period
Fair value at the end of the current period¥ 57,253
51,232
108,486¥156,998

Notes: 1. The consolidated balance sheet amount is the acquisition cost less accumulated depreciation and impairment losses.
2. Of the changes during the period, increases are mainly accounted for by the acquisition of real estate (¥53,033 million).
3. The fair value at the end of the current period is determined by a licensed third-party real estate appraisal agent.

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
the period. For the year ended March 31, 2015, net income per share was ¥125.10. Diluted net income per share is notdisclosed for the year ended March 31, 2015 as SFH had no potentially dilutive shares of common stock.
The basis for this calculation for the year ended March 31, 2015 is net income of ¥54,419 million, the entire amount of
which is applicable to common stock. The weighted-average number of shares outstanding for the year ended March 31,
2015 was 434,999 thousand shares.

Financial Section

Sony Financial Holdings Inc. Annual Report 2015115

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, 2015 are as follows:
Millions of yen
For the year ended March 31,

Net unrealized gains on other securities, net of taxes:
Gains (losses) arising during the period
Reclassification adjustments
Pre-tax amount
Income tax benefit (expense)
Net unrealized gains on other securities, net of taxes
Net 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
Land revaluation, net of taxes:
Gains (losses) arising during the period
Reclassification adjustments
Pre-tax amount
Income tax benefit (expense)
Land revaluation, net of taxes
Foreign currency translation adjustments:
Gains (losses) arising during the period
Reclassification adjustments
Pre-tax amount
Income tax benefit (expense)
Foreign currency translation adjustments
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
Share of other comprehensive income of affiliates accounted for using equity method
Gains (losses) arising during the period
Reclassification adjustments
Share of other comprehensive income of affiliates accounted for using equity method
Total other comprehensive income

116

Sony Financial Holdings Inc. Annual Report 2015

2015

¥58,621(13,393)
45,228(10,064)
35,164
(248)
887
639
(336)
302
—
—
—
33
33
1
—
1
—
1
(168)
1,331
1,162
(399)
762
(0)
0
0
¥36,264

7 Notes to the Consolidated Statements of Changes in Net Assets
1. Types and numbers of shares issued are as follows:
Thousands of shares
2015
Number ofshares as ofApril 1, 2014

For the year ended March 31,

Issued shares
Common stock
Total
Treasury stock
Common stock
Total

Number ofshares increased
during the period

Number ofshares decreased
during the period

Number ofshares as ofMarch 31, 2015

435,000
435,000————

435,000
435,000

0
0

0
0

—
—

0
0

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, 2014

Commonstock¥13,049
million¥30

March 31,2014

June 25,
2014

Resolution

Type ofsharesAggregate
amountof dividends

Source ofdividends

Cashdividends
per share

Recorddate

Effective
date

Ordinary General Meeting of Shareholders
held on June 24, 2015

Commonstock¥17,399
millionRetainedearnings¥40

March 31,2015

June 25,
2015(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, 2015, is as follows:
Millions of yen
As of March 31,

2015¥134,803
71,234
1,385¥207,422

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

Sony Financial Holdings Inc. Annual Report 2015

Financial Section

Cash and due from banks
Call loans of life insurance subsidiary
Securities of non-life insurance subsidiary maturing within 3 months of the acquisition dateCash and cash equivalents

117

MCEV Results for Sony Life as of March 31, 2015

1 MCEV ResultsSony Life’s MCEV as of March 31, 2015 increased ¥101.6 billion due to the contribution of new business, the decrease
in inflation rates, the effect of the reduction in the corporate tax rate and other factors. While the value of existing businessdecreased significantly due to a decline in interest rates, most of the decrease was offset with the benefit of ALM (by theincrease in the adjusted net worth). The breakdown is as follows:
Billions of yen
As of March 31,

MCEV
Adjusted net worth
Value of existing businessNew business value

2014

2015

Change¥1,221.3
722.1
499.1
55.2

¥1,322.9
1,119.2
203.7
48.6¥ 101.6
397.1(295.5)(6.6)

2 Adjusted Net WorthAdjusted net worth at the end of the current fiscal year increased by ¥397.1 billion, primarily because of the increase in unrealized
gain on held-to-maturity securities caused by the decrease in interest rates. The breakdown is shown in the table below.
Billions of yen
As of March 31,

2014

2015

Change¥ 722.1
369.2
41.6
63.7
0.0
430.3
19.4
(3.2)
(23.9)(162.5)(12.5)¥1,119.2
432.5
42.8
68.7
0.0
839.5
49.8
(1.9)
(21.6)(282.0)(8.7)¥ 397.1
63.3
1.3
5.0
0.0
409.1
30.4
1.3
2.3
(119.5)
3.8

As of March 31,

2014

2015

ChangeAdjusted net worth
Free surplus
Required capital¥722.1566.2
156.0¥1,119.2
597.6
521.6

¥397.1
31.4
365.6

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 land and buildings
Unfunded pension liabilities
Intangible fixed assets
Tax effect equivalent of above seven items
Valuation gain or loss on subsidiaries and affiliated companies

Billions of yen

Sony Life sets its required capital as the larger of the amount of Japanese regulatory minimum capital requirement at thesolvency margin ratio of 200% or the amount of capital to cover risks based on an internal model based on economic value.
The increase in required capital at the end of the current fiscal year is due to an increase in the economic value of technicalprovisions that mainly resulted from the decrease in interest rates.

3 Value of Existing Business
Value of existing business decreased by ¥295.5 billion primarily due to the decrease in interest rates. The breakdown isshown in the table below.
Billions of yen
As of March 31,

Value of existing business
Present value of certainty-equivalent profit
Time value of options and guarantees
Frictional costs
Cost of non-hedgeable risks

118

Sony Financial Holdings Inc. Annual Report 2015

2014

2015

Change¥ 499.1
869.4(123.1)(9.2)(237.9)¥ 203.7
652.9(154.9)(20.2)(274.1)¥(295.5)(216.5)(31.8)(11.0)(36.2)

4 New Business Value
Despite the strong sales, new business value decreased by ¥6.6 billion primarily because of the decrease in interest rates.
A breakdown of the value of new business is as follows:
Billions of yen
As of March 31,

2014

2015

ChangeValue of new business
Present value of certainty-equivalent profit
Time value of options and guarantees
Frictional costs
Cost of non-hedgeable risks¥ 55.2
84.9
(9.4)
(0.3)
(20.0)¥ 48.692.5(17.2)(0.4)(26.3)¥(6.6)
7.7
(7.8)
(0.1)
(6.3)

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

Billions of yen

As of March 31,

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

2014

2015

Change¥ 55.2
1,069.7
5.2%¥ 48.6
1,289.0
3.8%¥ (6.6)219.3(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, 2015, from MCEV as of March 31, 2014. The
format of the table is in line with the format prescribed by European Insurance CFO Forum Market Consistent Embedded
Value Principles©* (MCEV Principles).
*Copyright © Stichting CFO Forum Foundation 2008

Free surplus

Value ofexisting business

MCEV¥566.2(20.0)
546.2
—
0.4
0.9
(4.7)
(53.7)
10.0(23.8)(0.1)(17.3)
58.7
9.9
51.4
—
¥597.6¥156.0
—
156.0
—
0.1
0.3
(35.0)
—
(2.2)
23.8
0.1
(12.9)
363.7
14.9
365.6
—
¥521.6¥ 499.1
—
499.1
48.6
14.1
6.2
39.8
53.7
(14.1)
1.7
(0.4)
95.9
(394.5)3.1(295.5)—¥ 203.7¥1,221.3(20.0)
1,201.3
48.6
14.7
7.3
—
—
(6.3)
1.7
(0.4)
65.7
27.9
27.9
121.5
—
¥1,322.9

Financial Section

Opening MCEV (MCEV as of March 31, 2014)
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, 2015)

Billions of yen
RequiredcapitalNotes: 1. Expected yield used for the fiscal year ended March 31, 2015 was 0.242%.
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 improvements in mortality and morbidity rates and other factors.
3. Other operating variance represents the impact of improvements and corrections of the model used in calculating MCEV.
4. As regards economic variances, overall MCEV changes are disaggregated into a decrease of ¥11.5 billion as a result of the change in the market environment such as the decrease in interest rates and the increase in stock prices, and an increase of ¥39.4 billion as a result of the decrease in inflation rates.
5. Other non-operating variance shows the effect of the change in the accounting standard for retirement benefits, the reduction of the corporate tax
rate and the change in the timing of the increase in the consumption tax rate.
Sony Financial Holdings Inc. Annual Report 2015

119

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

Billions of yen

Assumption

Change in assumption

MCEV

Change inamountRate ofchangeBaseInterest rates

No change
50bp decrease
50bp increase
Swap rates
10% decrease
25% increase
25% increase
10% decrease
x 0.9
Death protection products x 0.95
Third-sector and annuity products x 0.95
x 0.95
Regulatory minimum¥1,322.9
1,191.1
1,390.5
1,294.7
1,302.1
1,302.2
1,303.4
1,343.8
1,321.0
1,371.2
1,316.1
1,367.9
1,338.5¥—(131.8)67.6(28.2)(20.8)(20.6)(19.5)
20.9
(1.9)
48.3
(6.8)
45.0
15.6

—
(10%)
5%
(2%)
(2%)
(2%)
(1%)
2%
(0%)
4%
(1%)
3%
1%

Stock / Real estate market value
Stock / Real estate implied volatility
Interest swaption implied volatility
Maintenance expenses
Lapse and surrender rates
Mortality rates
Morbidity rates
Required capital

Changes in adjusted net worth within the amount of change in MCEV are shown in the table below. 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

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

50bp decrease
50bp increase
10% decrease
25% increase¥ 545.2(484.0)(13.7)(0.4)

8 Main Assumptions
Sony Life has used Japanese government bond (JGB) yields and the U.S. Treasury yields as of the end of March 2015 as
risk-free rates for the certainty-equivalent projections. It is assumed that forward rates in the 41st year and beyond wereequal 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. Sony Life has used Bloomberg’s government bond yields as our data source. The
government bond yields for key terms are as follows:
Japanese yen

U.S. dollar

As of the end of March,

2014

2015

2014

2015

Term
1 year
5 year10 year
20 year
30 year
40 year

0.08%
0.20%
0.64%
1.50%
1.70%
1.78%

0.03%
0.13%
0.40%
1.14%
1.36%
1.46%

0.11%
1.72%
2.72%
3.37%
3.56%
—

0.23%
1.37%
1.92%
2.30%
2.54%
—

Sony Life has not added a liquidity premium on the risk-free rate as there are no products which are considered to havereasonably predictable and illiquid cash flows and would therefore be appropriate to apply a liquidity premium.
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 2015. Best-estimate assumptions are developed toreflect past and current 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 future changes are assumed in the best-estimate assumptions applied.

120

Sony Financial Holdings Inc. Annual Report 2015

9 Opinion of Outside Specialist
Sony Life requested Milliman, Inc., an external actuarial consulting firm with expert knowledge in the area of MCEV
valuations, to review 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, 2015” (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
a clearer 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 (after tax) amounted to ¥745.5 billion. The breakdown of the risk amount is asfollows:
Billions of yen
As of March 31,

Insurance risk
Market-related risk
Of which, interest rate risk *Operational risk
Counter party risk
Variance effectRisk amount based on economic value

2014

2015

¥ 654.5
240.0
180.9
26.3
1.3
(257.8)664.3¥ 724.2
287.0
218.5
25.9
1.8
(293.4)745.5*Interest rate risk is calculated as the amount before excluding 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.
Note: The Solvency risk capital on an economic value basis 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 (QIS5) 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 2015121

Financial Data Book Contents

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)
Performance Indicators of Sony Life (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. Status of Individual Variable Life Insurance and Individual
Variable Annuities
8. Number of Agencies
9. Number of Employees and Recruits
10. 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
Performance Indicators of Sony Assurance
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
Performance Indicators of Sony Bank (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

122

Sony Financial Holdings Inc. Annual Report 2015

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 2015

123

E

Foreign currency-denominatedinsurance Life

Earned/incurred (E.I.) loss ratio• 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.

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
• 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.

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.

EV (embedded value)

Non-life• The ratio of expenses for soliciting,
maintaining, and managing insurance toinsurance 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.

F
Family income insuranceLife• 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.

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.

Individual annuities

Life

Life

Sony Financial Holdings Inc. Annual Report 2015

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 claims

Individual variable annuities

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.
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 forLife

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.

Insured• 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.

Insurance Act of Japan• 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.

124

General accounts

I

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 ratioGover 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.

Life

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
Lapse and surrender rate

Life

• 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.

M
Medical insuranceLife

Net other operating 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.

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
generated by providing services, such asbank transfer fees and investment trust
sales commissions, less the costs associated with providing these services.

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.

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

Non-performing assets
Life

Non-life Banking• 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.

O
Over-the-counter (OTC) sales of
insurance products at banks
Life

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%.

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.

Sony Financial Holdings Inc. Annual Report 2015

125

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.

R
Reinsurance

Life

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

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.

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.

Life

Risk segmented automobile
insurance Non-life

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.

Life

Separate accounts• 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.
Life

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.

126

Sony Financial Holdings Inc. Annual Report 2015

Third-sector insuranceLife

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

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.

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
The Financial Data Book is available only on
SFH’s website.

IR-related materials, such as earnings releases
and presentation materials, are available for viewing
or downloading.

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 2015127

Sony Financial Group

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