2013
Annual ReportSony Financial Holdings (SFH) is a financial holding company. The
Sony Financial Group comprises three core subsidiaries: Sony Life
Insurance Co., Ltd. (Sony Life), Sony Assurance Inc. (Sony Assurance)
and Sony Bank Inc. (Sony Bank).
We seek to achieve sustained growth in the volume of all three ofour businesses, namely life insurance, non-life insurance and banking,with the aim of becoming the most highly trusted financial services
group by customers.

Disclaimers:
This annual report contains statements concerning the current plans, expectations, strategies and beliefs of the Sony Financial Group. Anystatements contained herein that pertain to future operating performance and that are not historic facts are forward-looking statements.
­Forward-looking statements may include—but are not limited to—words such as “believe,” “anticipate,” “plan,” “strategy,” “expect,” “forecast,”“predict,” and “possibility” that describe future operating activities, business performance, events or conditions. Forward-looking statements,
whether spoken or written, are based on judgments made by the management of the Sony Financial Group, based on information that is currently
available to it. As such, these forward-looking statements 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. The Sony Financial Group disclaims any 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 constitute or form part of any offer for saleor subscription of or solicitation or invitation of any offer to buy or subscribe for 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.

	“Lifeplanner” and “LIFEPLANNER VALUE” are registered trademarks of Sony Life.
	“Feel the Difference,” “SURE” and “Trouble Navi” 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.

Contents

P.002

About the Sony Financial Group

P.004

002
004
011

Group Summary

Message from the PresidentGroup Summary
Interview with the President

P.006
P.008

Review of Operations

P.010

020
022
028
030

Review of Operations

Strengths
Highlights
GrowthStrategies

About the Sony Financial
Group

Message from the PresidentAt a GlanceLife Insurance Business
Non-life Insurance BusinessBanking Business

Interview with the President

P.011

032
034
040
043

SFH (Consolidated)
Life Insurance Business
Non-life Insurance BusinessBanking Business

047
063

Corporate GovernanceCorporate Social Responsibility (CSR)

Please visit SFH’s website to viewthe ­Financial Data Book.

http://www.sonyfh.co.jp/web/en/financial_info_e/annualreport.html

Corporate Data
Company Profiles for Group Companies
Senior Management of Three Main Subsidiaries
Stock Information
History

Financial Section

Beginning with the 2013 Annual Report, SFH has provided
detailed financial data for each operating company and­certain other information that waspreviously shown in the annual
report in a separate publication
called the Financial Data Book.
The Financial Data Book is­available only on SFH’s website.

071
072
073
074
076

Financial Section
078

SFH Consolidated Financial Statements

102
106

Glossary
SFH’s Website Information

Sony Financial Holdings Inc. Annual Report 2013

Corporate Section

Corporate Section

Contribution to Sustainable
Development

Contribution to Sustainable Development

FY2012 Analysis of­Operating Performance

FY2012 Analysis of Operating Performance001

Message from the President

Through steady expansion of
our three core businesses,
we aim to achieve sustainable growth
for the Sony Financial Group.

002

Sony Financial Holdings Inc. Annual Report 2013

Sony Financial Group.
In FY2012, the fiscal year ended March 31, 2013, the Japanese economy was impacted bysluggish exports due to the slowdown in some overseas economies, including the protracted
European debt crisis, and the economic outlook remained unclear from the summer. With thechange of Japanese administration in December 2012, however, there were heightened­prospects of a proactive monetary easing policy. In the bond market long-term interest rates
fell ­further, while in the stock market there were rising expectations for growth in corporate
earnings, and the Nikkei Stock Average rose sharply. Meanwhile, in the foreign currency
market the yen weakened. Consequently, consumer sentiment improved, and personal­consumption held steady.
Under such conditions, all of the companies that comprise the core of the Sony ­Financial
Group—Sony Life, Sony Assurance, and Sony Bank—maintained a high degree of financial
soundness, responded to the diversifying needs of customers, and provided high-quality­financial services through distinctive sales channels. As a result, business operations continued
to expand steadily during FY2012 in all of our businesses, namely, life insurance, non-life insurance, and banking. Sony Life recorded a steady increase in market consistent embedded value(MCEV), despite the decline in ultralong-term interest rates, through stably acquiring new­policies. This demonstrates that the foundation for earnings we have established is resistant tofluctuations in the financial market. In accordance with our policy of enhancing shareholder
returns based on such a stable earnings foundation and high degree of financial soundness, we
increased our dividend payment for the fiscal year ended March 31, 2013 by ¥5 from the­previous fiscal year, to ¥25 per share.
The business environment in the insurance and banking industries going forward is expected
to be severe and unstable due to the continued slowdown in the global economy, uncertainty
regarding the economic recovery in Japan, and unsteady financial market d­ evelopments worldwide. However, we will continue to provide high-quality services to further increase ­customer
satisfaction and broaden our customer base. We will move forward with efforts to realize­sustainable growth for the Sony Financial Group, work to enhance our ­corporate value, andcontribute to the advancement of society as a whole.
July 2013

Katsumi Ihara
President, Representative Director

Sony Financial Holdings Inc. Annual Report 2013003

About the Sony Financial GroupLet me begin by expressing my heartfelt gratitude for your continued support and i­nterest in the

Strengths
Sony Financial Group’s Strengths

Life Insurance BusinessGroup Structure
100% owned

50% owned

AEGON Sony Life Insurance

50% owned

SA Reinsurance
A consulting session led by a Lifeplanner sales employee

Non-life Insurance Business
100% owned

Sony Assurance official website

Banking Business
100% owned

57% owned

SmartLink Network

Consolidated subsidiaries
Equity-method affiliates(As of July 1, 2013)

Sony Bank’s MONEYKit service site
004

Sony Financial Holdings Inc. Annual Report 2013

Sony Life
Main Products eath-protection insuranceDMedical insurance, educational endowment insurance,
living benefit insurance, nursing care insurance and others
Main Sales Channels
m Lifeplanner sales employeesm Partners (Independent agencies)

Strengthsm Business expansion with consulting sales approach and aftersales follow-up services based on life planningm High profitability from its product portfolio centering on­protection type of insurance productsm Financial soundness to meet future capital regulations
Please refer to page 22, “Life Insurance Business,” for details.

Sony Assurance
Main Products utomobile insurance (risk segmented)
A
SURE medical and cancer insurance
Main Sales Channels
m Internetm Telephone

Strengthsm Profitability based on a low-cost structure and risk segmentation unique to a direct non-life insurance company
m Leading position in the expanding direct ­automobile
insurance marketm High-quality accident response services and highly convenient
web-based services
Please refer to page 28, “Non-life Insurance Business,” for details.

Sony Bank
Main Products eposits (yen, foreign currencies)D
Mortgage loans
Investment trusts, foreign-exchange margin trading,and others
Main Sales Channels
m Internet

Strengthsm Steady business expansion backed by high customer satisfactionm Low-cost business structure unique to an Internet bankm A lineup of highly convenient, high-quality products leveraging
the advantages of the Internet

Please refer to page 30, “Banking Business,” for details.
Sony Financial Holdings Inc. Annual Report 2013005

About the Sony Financial GroupThe Sony Financial Group’s core companies, Sony Life, Sony Assurance and Sony Bank,
have each established business models based on their originality. This high degreeof originality is one of the Group’s key strengths, and constitutes the engine behind
its growth.

Highlights

Sony Financial Group’s Financial Highlights
Sony Financial Holdings (Consolidated)

For the years ended March 31

2008

2009

2010

2011

2012

(Millions of yen)
2013

Ordinary revenues
Ordinary profit
Net income
Comprehensive income¥  822,153
44,50024,255–¥  860,323
34,25330,722–¥  978,991
84,373
48,126
71,066¥1,002,201
76,86041,716
31,963¥1,078,070
74,62532,81260,376¥1,259,041
79,25245,06496,225

4,977,450
261,627

5,313,677
204,897

6,001,088
269,439

6,597,140
294,877

7,241,414
347,800

8,096,164
435,444

14.62%–

13.32%–

12.05%–

10.96%–

10.14%
1,380.3%

9.88%
1,520.6%¥  741,250
39,29018,514¥  765,910
32,40933,783¥  881,798
80,09946,138¥  900,091
73,17640,220¥  967,400
69,436
31,426¥1,142,274
74,65942,444

3,659,786
182,671
1,747.9%

3,810,929
140,730
2,060.5%

4,286,540
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%¥   55,649
2,817
2,185

¥   61,882
2,178(1,556)¥   68,174
2,565
1,604

¥   74,166
2,144
1,297

¥   80,096
2,859
1,299

¥   84,711
2,371
1,454

78,645
15,385
1,073.9%

86,69813,678993.0%

98,340
15,482
1,018.5%

109,382
16,772981.4%

118,61218,009557.8%

127,421
19,934504.2%¥   25,988
2,746
4,492

¥   33,361
414
(710)

¥   30,500
2,930
1,646

¥   29,521
3,377
2,054

¥   30,075
4,033
2,340

¥   31,351
4,282
879

1,211,000
35,712

1,411,956
46,264

1,612,186
58,989

1,761,830
59,971

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

9.15%

13.37%

12.09%

10.84%

11.58%

11.98%

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 (loss)
As of March 31

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

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

Ordinary revenues
Ordinary profit
Net income (loss)
As of March 31

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

Notes: 1.	All figures have been rounded down to the nearest ¥1 million.
2.	SFH has calculated the consolidated capital adequacy ratio (domestic criteria) based on formulas stipulated in the 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. Calculations do not include Sony Life, Sony Assurance, AEGON Sony Life Insurance, or SA Reinsurance on March 31, 2013.
		SFH applied FSA Notification No. 79 (2008) until March 31, 2012. SFH applied FSA Notification No. 56 (2012) as of March 31, 2013.
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 Ordinance of E­ nforcement of the
Insurance Business Act of Japan, and the FSA Notification No. 23 (2011). Calculations include Sony Bank, Sony Bank Securities, and SmartLink Network within the scope of consolidation as of March 31, 2012. Calculations include Sony Bank and SmartLink Network within the scope of consolidation as of March 31, 2013.
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 14-2of the Banking Act of Japan for determining the capital adequacy of a bank in light of the assets held by the bank. From March 31, 2009 to March 31, 2012, the Bank applied FSA
Notification No. 79 (2008). The Bank applied FSA Notification No. 56 (2012) as of March 31, 2013.

006

Sony Financial Holdings Inc. Annual Report 2013

Sony Financial Holdings (Consolidated)
Ordinary revenues

Ordinary profit

Net income

Total assets(Billions of yen)(Billions of yen)(Billions of yen)(Billions of yen)

¥1,259.0 billion

1,500¥79.2 billion

100

100

10,000

8,000

1,200

80

80

900

60

60

600

40

40

4,000

300

20

20

2,000

0

09

10

11

12

0

13

09

10

11

12

0

13

For the years ended March 31

For the years ended March 31¥45.0 billion

09

10

11

12

¥8,096.1 billion

6,000

0

13

For the years ended March 31

09

10

11

12

13

As of March 31

Financial Soundness Indicators (As of March 31)
The Sony Financial Group strives to ensure a high degree of financial soundness, in order to earn and maintain the trust of customers asa financial institution.

Sony Life

Sony AssuranceSony Bank

Non-consolidated solvency
margin ratio

Non-consolidated solvency
margin ratio

Non-consolidated capital­adequacy ratio (Domestic criteria)

(%)

(%)

(%)

3,000

2,281.8%

1,000

504.2%

2,400

800

1,800

600

9.0

1,200

400

6.0

600

200

3.0

0

11

12

13

11.98%

15.0

0

11

12

13

12.0

0.0

09

10

11

12

13

* In the above charts, Sony Life and Sony Assurance have calculated non-consolidated solvency margin ratios based on the current standards,
which were applied from March 31, 2012.

Credit Ratings (As of July 1, 2013)
RatingRating Agency

Rating and Investment
Information (R&I)
Issuer ratings

AA–

Rating Agency

Rating and Investment
Information (R&I)
Insurance claims paying ability

AA

Rating Agency

Japan Credit Rating
Agency (JCR)
Ability to pay insurance claims

AAStandard & Poor’s (S&P)

Moody’s Investors Service(Moody’s)

Insurer financial strength rating

Insurer financial strength rating

A+

Japan Credit Rating
Agency (JCR)
Long-term senior debts rating

AA–

Aa3

Standard & Poor’s (S&P)
Long-term counterparty credit ratingA

Short-term counterparty credit rating

A–1

Sony Financial Holdings Inc. Annual Report 2013

007

About the Sony Financial GroupThe Sony Financial Group has steadily expanded its business volume, while maintaining financial soundness. This high degree of financial soundness is crucial toearning and maintaining the trust of customers, and is also an essential foundation
for future growth.

GrowthSony Financial Group’s Growth TrajectorySony Life (Non-consolidated)
Policy amount in force*(As of March 31)(Trillions of yen)

40

Total Assets¥1 trillion

30

20

10

18.8

August 1979
Sony Prudential Life InsuranceCo., Ltd. established

1979

0

Renamed Sony Life Insurance Co., Ltd.

0.04

0.2

0.7

1.9

1982

1985

1988

1991

21.5

10.9

3.9

1994

1997

2000

2001

*	The total amount of individual life insurance and individual annuities

Sony Assurance
Direct premiums written(For the years ended March 31)

Common stock increasedto ¥10.0 billion(Billions of yen)

100.0

Renamed Sony Assurance Inc.
75.0

50.0

June 1998
Sony Insurance Planning Co., Ltd.
established

25.0

1.3
0

Corporate website when launched

1999

Sony Bank (Non-consolidated)
Retail Balance*(As of March 31)(Trillions of yen)

4

3

2

1

0
*	The total amount of deposits, investment trusts and personal loan balance008

Sony Financial Holdings Inc. Annual Report 2013

“MONEYKit” service site when launched

2000

7.5

2001

The Sony Financial Group’s core companies Sony Life, Sony Assurance and Sony Bank
have continued to deliver steady growth by leveraging their respective strengths.

23.4

24.7

26.2

27.8

29.0

31.4

30.2

32.5

(Trillions of yen)

34.7

33.4

36.0

37.7

40

30

20

10

2002

2003

2004

2005

2006

Became No. 1 for the first time interms of direct premiums written
for automobile insurance amongmajor direct non-life insurers*
Launched sales of
medical and cancer
insurance

16.2

2002

23.6

Common stock
was increased to¥20.0 billion
30.3

37.4

2007

2008

2009

50.1

2011

2012

Became No. 1 for 10 straight years
in terms of direct premiums written
for automobile insurance amongmajor direct non-life insurers**

Direct premiums
written exceeded¥50.0 billion

44.9

2010

2013

0

(Billions of yen)

100.0

54.6

60.8

72.8

67.0

78.3

82.5
75.0

50.0

25.0

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

0

*	Here, major direct non-life insurers refer to non-life insurers selling automobile insurance primarily via direct sales channels as of the end of FY2002.
**	Here, major direct non-life insurers refer to non-life insurers selling automobile insurance primarily via direct sales channels as of the end of FY2011.

Loans exceeded¥0.5 trillion

Depositbalance exceeded¥1 trillion
April 2001
Sony Bank Inc.
established

0.1

0.2

2002

2003

1.5

0.4

2004

0.7

2005

0.9

2006

Total Assets¥2 trillion

1.8

2.1

2.4

2.6

(Trillions of yen)

4

2.8

3

2

1.1
1

2007

2008

2009

2010

2011

2012

2013

Sony Financial Holdings Inc. Annual Report 2013

0009

About the Sony Financial Group

Total Assets¥2 trillion

Total Assets¥5 trillion

Total Assets¥4 trillion

Total Assets¥3 trillion

Strategies

Sony Financial Group’s Growth Strategies
Image of the Sony Financial Group’s Future

Synergies

Sony
Sony
AssurBank
ance

New Business Fields

Sony
Life

The Sony Financial Group Today

Specific
strategies
P.023

Sony
Assurance

Sony Bank

Specific
strategies
P.029

Specific
strategies
P.031

New Business Fields

Sony Life

Synergies

The Sony Financial Group in Future

1. Driving Growth in the Three Core Businesses
Sony Life, Sony Assurance and Sony Bank have set themselves apart by developing business models that differ
from those of their existing competitors in their respective industries. As a result, the three companies have been
providing customer-oriented and highly convenient financial products and services to individual customers.
­Looking ahead, the Sony Financial Group will continue to achieve sustained growth by strengthening the competitive advantages of each company, thereby further enhancing each company’s presence in the respective markets.
2. Promoting Group-wide Synergies
As deregulation proceeds in the financial services industry, the Sony Financial Group believes that it will be able
to enhance collaboration among Group companies on the sale of each company’s financial products to individual
customers. We have worked to promote collaboration within the Group by, for example, having Lifeplanner sales
employees at Sony Life sell Sony Assurance’s automobile insurance and Sony Bank’s mortgage loans. By continuing to strengthen and expand collaboration among its businesses, the Group will work to develop new customer
bases and raise the efficiency of business operations.
3. Expanding into New Business Fields
We intend to continuously enhance the range of products and services that satisfy the expectations of customers,
centered on business fields that are closely tied to our existing three businesses, in an effort to steadily expand
business volume. In fields it has yet to enter, the Sony Financial Group will actively consider moving into businessfields that help realize its vision, as it strives to diversify earnings sources and expand earnings.

010

Sony Financial Holdings Inc. Annual Report 2013

Interview with the President

Business Performance and Outlook

Q :	How did the Sony Financial Group perform in FY2012?
In FY2012, the fiscal year ended March 31, 2013, all of our business operations expanded, andA :	weremained on a sustainable and stable growth track. The recovery of market conditions­ rovided a boost, and we achieved increases in both revenues and profit compared to thep­previous fiscal year.
In FY2012, we achieved solid growth in our core
insurance underwriting and deposit and loan
­operations throughout the year.
All of the core subsidiaries of the Sony Financial
Group achieved growth in business volume. At
Sony Life, policy amount in force increased 4.7%
from the previous fiscal year-end to ¥37,779.0
billion. Sony Assurance recorded a 5.4% year-onyear increase in direct premiums written to ¥82.5
billion, while Sony Bank posted an 8.4% increase in the retail balance (the sum of­customers’ deposits, investment trusts and personal loan balance) to ¥2,841.2 billion.
As a result, consolidated ordinary revenues increased in all businesses, gaining 16.8%
year on year to ¥1,259.0 billion. Consolidated ordinary profit rose 6.2% to ¥79.2 billion,
primarily as a result of gains in the life insurance and banking businesses, offsetting adecline in the non-life insurance business. Consolidated net income jumped 37.3% to¥45.0 billion, due in part to the impact in the previous fiscal year of a partial reversal ofdeferred tax assets related to a reduction in the corporate income tax rate. Accordingly,
as all of our business operations expanded and were influenced by the recovery inmarket conditions, we achieved increases in both revenues and profit compared to theprevious fiscal year.

or FY2013 you are forecasting a change to a decline in revenues and profit. What are theQ :	F­factors
behind that projection?
We had not anticipated such a gain in revenues and profit recorded in FY2012 attributable toA :	themarket recovery. We are also taking into account the impact on the life insurance businessof the revision to the policy reserve discount rate. Excluding these factors, we expect our­revenues and profit to grow in FY2013.
The Sony Financial Group expects the steady growth in business volume to continue
during FY2013, but since we did not anticipate the gains recorded in FY2012 attributable to the market recovery, and considering that in the life insurance business we will
increase our policy reserves in response to the revision of the policy reserve discountrate, we are forecasting declines in both revenues and profit for FY2013. Excludingthese factors, we expect our revenues and profit to grow in FY2013.

Sony Financial Holdings Inc. Annual Report 2013011

About the Sony Financial GroupIn this section, Katsumi Ihara, President and Representative Director of SFH, answers­questions about strategies that will be crucial to enhancing the Sony Financial
Group’s corporate value going forward. The interview also takes a look at the SonyFinancial Group’s FY2012 business performance and FY2013 outlook.

Interview with the President

The Sony Financial Group’s Medium-term Management Policy(FY2013–FY2015) and Business Strategies

Q :	Please tell us about your medium-term management policy and business strategies.
ur medium-term management policy is to offer high-quality services to further enhance cusA :	Otomer
satisfaction and expand our customer base, and to support sustainable growth for theSony Financial Group. Moreover, we will build a stable earnings foundation and a sound financial base resistant to changes in the business environment, and strengthen shareholder returns.
The Sony Financial Group’s strength lies in the high quality of the services provided by
the Group companies. Enhancing this quality and maintaining a high level of customer
satisfaction are essential for our growth. Our medium-term management strategy is toreturn to this basic policy, and to establish “enhancing service quality” as the core business strategy for the Group companies. The business environment of the Sony Financial
Group is constantly changing, for example, by price fluctuations in the financial markets,and by the revision to the policy reserve discount rate in the insurance business. We
will continue to strengthen risk management and asset-liability management (ALM),
and establish a stable earnings foundation resistant to such changes in the market environment. In addition, as a financial group engaged in life insurance, non-life insurance
and banking businesses, we will strengthen shareholder returns on the basis of stableearnings growth and a robust financial soundness.

Group Mid-Term Management Policy (FY2013–FY2015)
Outline ofGroup Mid-Term
Management Policy‌ y pursuing each Group company’s core competencies in providing high-quality services, f­ urtheruBenhance customer satisfaction and expand our customer base, thereby achieving sustainable growth
for the Groupu ‌Establish a revenue base that is unshakable in the face of changing management environmentu ‌Enhance shareholder returns, underpinned by a stable revenue base and solid financial soundness

Group Mid-term Management Business Strategy (FY2013–FY2015)
By working to provide high-quality services, achieve further increases in customer satisfaction and expand the customer base, thereby
accelerating top-line growth

1. The Main Approach to Three Core Existing Businesses
Sony Life

Sony AssuranceSony BankExpand Lifeplanner channel while maintaining quality‌ Accelerate growth in independent agent channel‌ Enhance operating efficiency through business process re-engineering‌ Risk management for stable growth in corporate value
 ake initiatives that prioritize profitability improvements by improving the loss ratioTAggressively develop business in categories other than automobile insuranceAchieve further increase in service quality
 ontinue to expand the mortgage loan and foreign currency businesses
CExpand highly convenient settlement services

2. New Business Development: Making specific preparations for entering the nursing care business
012

Sony Financial Holdings Inc. Annual Report 2013

Q :	What measures are you taking for sustainable growth at Sony Life?
e are further strengthening sales channels, enhancing business process re-engineering, andA :	W­seeking
stable growth in corporate value.
• Strengthening recruitment and training of Lifeplanner sales employees
Sales through the Lifeplanner sales employees, Sony Life’s core sales channel, are growing steadily, accounting for three-quarters of all new policies. As a result of introducing
stricter recruitment standards and measures to develop the training framework, Sony
Life has enhanced the productivity of sales activities by Lifeplanner sales employees.
The number of Sony Life’s Lifeplanner sales employees was 4,119 as of March 31, 2013,just a slight rise from a year earlier. Although the number of new recruits increased,
more people retired or were transferred from Lifeplanner sales employees to officemanagers that recruit Lifeplanner sales employees. Transfer to office managers curbed
the increase in the number of Lifeplanner sales employees, but we believe that this willcontribute to future enhancement of the recruitment structure and expansion of theworkforce. Going forward, we will continue to transfer high-performing Lifeplanner
sales employees to office managers and strengthen our recruitment approach, which
will lead to the expansion of our scale of Lifeplanner sales channel.
• Developing the independent agent channel
Insurance sales through Partners (independent agencies) account for one-fourth of all
new policies at Sony Life, making this an important channel second only to Lifeplanner
sales employees.

Number of Lifeplanner Sales Employees

Lifeplanner Productivity(Number)

4,075

4,066

4,116

4,119

103.1

104.3
102.5

100.0

More stringent standards for recruitment* Productivity is indexed toMarch, 31 2010 =100,
calculated on the basis ofannualized premiums
from new policies

Strengthening training program10

As of March 31

11

12

13

10

11

12

13

For the years ended March 31

Sony Financial Holdings Inc. Annual Report 2013

013

About the Sony Financial GroupSony Life’s Growth Strategies

Interview with the President

We have increased earnings in the Partner channel by strengthening ties with“­walk-in” type agencies that expand a broad network of branch locations, as well aswith agencies specializing in life insurance, known as life insurance professionals. Goingforward, in addition to these measures, Sony Life will pursue further growth through awide range of independent agencies, including local and corporate affiliated agencies,
to accurately grasp diversifying customer needs.
• Business Process Re-engineeringSony Life is pursuing business process
re-engineering in an effort to establish
a foundation that can provide a highquality service broadly and effectively.
In FY2012, we introduced 5,000 new
tablet computers to renovate the sales
support system, and to spread paperless application procedures for new
policies. These efforts have raised theCarrying out an application procedure using a new
quality of the service provided to custablet computer
tomers, and led to a vast improvement
in office efficiency. For example, paperless application procedures for new policies has
lowered the deficiency rate for policies by approximately 70% compared to paper
forms, and the number of days to assess a policy has been halved. We believe that such
improvements in office efficiency allow us to concentrate on other areas, such as sales
activities, and the recruitment and training of Lifeplanner sales employees, thereby
leading to greater productivity.

The Risk Amount Basedon Economic Value(As of March 31)(Billions of yen)

Operational 26.0
riskCounterparty 2.3
risk

1,064.7(262.5)Market289.9 related
risk*
Variance
effect

661.3

MCEV

605.6 Insurance
risk(Break down)

The risk amount basedon economic value• Stable Growth in Corporate Value and Risk Management
Sony Life’s basic policy on risk preference is to ensure sufficient solvency on an economic
value basis and to realize stable and sustainable growth in corporate value by increasing
policies in force and actively underwriting insurance risk. In terms of asset management,
Sony Life lessens the interest rate risk from insurance policy liabilities over the longterm, and stabilizes its corporate value created by the insurance business by prioritizing
investment in assets suited to the characteristics of insurance liabilities.
Sony Life’s market consistent embedded value (MCEV) was ¥1,064.7 billion as ofMarch 31, 2013, an increase of ¥23.2 billion from a year earlier. This stable rise in MCEV
was mainly the result of a steady increase in policies in force, along with asset-liability­management (ALM) measures to lessen the effects of lower market interest rates.
The amount of risk on an economic value basis relative to MCEV amounted to¥661.3 billion (after tax) on March 31, 2013, which is a sufficiently low level relativeto MCEV (equivalent to owned capital on an economic value basis). Insurance risk
accounted for the majority of risk held, totaling ¥605.6 billion versus ¥289.9 billion
in market-related risk. Insurance risk is inherent in the life insurance business as itincreases corporate value, and so will increase along with the acquisition of new policies
and growth in policies in force. In market-related risk, interest rate risk comprises the* Interest rate risk amounted to ¥234.2
billion, excluding the variance effectwithin market-related risk.

014

Sony Financial Holdings Inc. Annual Report 2013

Q :	Could you tell us about Sony Life’s asset management policy?
not changed our existing asset management policy even after the monetary easing,A :	Wande havewill continue to apply the majority of our investment in new assets to ultralong-term­Japanese government bonds (JGBs).
Sony Life’s product portfolio is centered on death-protection products, so the durationof its liabilities is relatively long at around 30 years. Accordingly, Sony Life has favoredinvestment in ultralong-term JGBs for its asset portfolio in order to extend the asset
duration and reduce the interest rate risk. Further, by reducing the proportion of investment in risk assets such as stocks and convertible bonds, Sony Life has ensured morestable investment revenues and mitigated risk.
The recent monetary easing has lowered long-term interest rates and increased
interest rate risk. However, compared to the level of MCEV, the equivalent to owned
capital on an economic value basis, interest rate risk is being maintained at a sufficiently low level.
Going forward, in order to curb an interest rate risk that will especially increase
with the acquisition of new policies, our asset management policy is to continue toinvest in ultralong-term JGBs, while keeping a close watch on movements in thefinancial market.

Achievements of Sony Life’s ALM Initiatives
Year ended
March 31, 2009
(Billions of yen)

MCEVYear ended
March 31, 2013

Impact of a change
of interest rates, etc.

(Billions of yen)(410.0)

816.5

MCEV
Impact of a change
of interest rates, etc.
(41.3)

+41.6

+22.9

(426.2)+384.9

Value ofexisting
business

Adjusted New
business
net
value
worth

Others

1,041.5

1,064.7(75.4)

30YR
40YR(334.6)+15.4(21.1)

Value ofexisting
business

Adjusted Newnetbusiness
worth
value

Others400.9

March 31, 2008

(415.6)

March 31, 2009

2.26%
2.34%

(38bp)(45bp)

1.88%
1.89%

30YR
40YR

March 31, 2012

+23.2

March 31, 2013

1 95%
2.11%

(41bp)(47bp)

1 54%
1.64%

Sony Financial Holdings Inc. Annual Report 2013015

About the Sony Financial Groupmajority at around ¥230.0 billion. We will continue our efforts to mitigate interest raterisk, so that fluctuations in financial markets due to interest rate changes and otherfactors do not impair our corporate value that has been enhanced through new policy
acquisition and other means. Going forward, we will ensure sufficient solvency on an
economic value basis, and realize stable and sustainable growth in corporate value.

Interview with the President

do you expect to be the impact of any revision to insurance premium rates in line withQ :	Wthehat­loweringof the policy reserve discount rate* after April 2013?
expect the impact on sales as a result of any revision of insurance premium rates to
A :	Wbeelimited.
The recent revision to our insurance premium rates was based on a variety of factors,
including price competitiveness, profitability, and the nature of the types of insurance
we offer. Accordingly, from April 2013 we raised insurance premium rates for certain
savings-type products, while leaving unchanged the premiums for our mainstay products of term life insurance and family income insurance. (See page 23.)Sony Life, on the basis of thorough consulting, draws on a wide range of products todesign and sell a reasonable lineup of life insurance products that meets the need ofcustomers. Our attentive follow-up consultations after any policy is concluded havealso earned us high appraisal from customers. Consequently, we expect the impact onsales as a result of any revision to insurance premium rates to be limited. Due partly tothe revision to the policy reserve discount rates, we are forecasting a slight decline inprofit for FY2013, but expect to maintain profit growth from FY2014.
*	The policy reserve discount rate is the calculating rate insurance companies are required to use when accumulating policy reserves for future insurance payments. A lowering of the rate means that the amount of the policy
reserves insurance companies must accumulate will increase. Since the source of funds for the policy reserves is
primarily insurance premiums, the premium rate may be revised as necessary in line with the revision to thepolicy reserve discount rate. The policy reserve discount rate applied to policies from April 2013 is 1.0%, half a­percentage point lower than the previous 1.5%.

016Sony Financial Holdings Inc. Annual Report 2013

Q :	Please describe the efforts for business growth and ensuring profitability at Sony Assurance.
e will make improving the loss ratio for automobile insurance a priority issue, and regain
A :	W­profitability.
Furthermore, we will sustain growth by strengthening product features and maximizing customer satisfaction, and will secure a leading position in the direct insurance market.

Initiatives for Improving theLoss Ratio for Automobile
Insurance
1. Review insurance premium
levelsIntroduced successively in November
2012 and April 2013

2. Revise the bonus-malus
system (non-fleet driver rating
system) (From April 2013)
Gradually improve the loss ratio byrevising discount rates for policies
involving accidents

3. Normalize unit insurance
claim amounts
Encourage tie-ups with repair shops
and reinforce the appraisal process
to hold down costs on repairs andloaner vehicles

4. Revise underwriting standards

Sony Assurance, which handles the non-life insurance business, recognizes that the profitability
issues that have emerged as a result of a rise in
the loss ratio for automobile insurance should beprioritized. We are implementing four measures toimprove the loss ratio.
We will steadily improve the loss ratio andrecover profitability through 1) a review of insurance premium rates to better reflect the frequencyof accidents, and 2) the introduction of a new industry-standard bonus-malus system(non-fleet driver rating system). Further, through 3) the normalization of unit insurance
claim amounts through the utilization of affiliated repair shops and the strengthening ofour damage appraisal structure, and 4) the revisions to insurance underwriting standards.
At the same time, we expect that in the short term the revisions to insurance­premium rates will lower our cost competitiveness and slightly weaken our ability toacquire new policies. However, for longer term growth we will undertake a moresophisticated segmentation of risks in automobile insurance, and strengthen our product appeal through diversification of the product lineup. In addition, we will seek tomaximize ­customer satisfaction by enhancing our accident response service, customer
center consulting service, call support for website and smartphone users and smartphone ­services. We will also strengthen our policy acquisition capacity by conducting
more effective marketing.
Sony Assurance has maintained the top share* of the direct automobile insurance
market for ten consecutive years. We will sustain our growth through the implementation of the measures described above, and secure a leading position in this market.
*	From the business performance announcements for FY2011 of non-life insurers selling automobile insurance
primarily via direct channels.

Sony Financial Holdings Inc. Annual Report 2013017

About the Sony Financial Group

Growth Strategies and Ensuring Profitability at Sony AssuranceInterview with the President

Profit Growth at Sony Bank

Q :	Could you talk about profit growth at Sony Bank?
e are seeking stable business expansion centered on mortgage loans and foreign currency
A :	W­business,
as well as profit growth through appropriate asset-liability management (ALM).
Sony Bank, the core company for the banking business, placed first in customer satisfaction in theannual Nikkei ranking of financial institutions forthe sixth consecutive year, testifying to the strong
support it has earned from customers. We willcontinue to steadily expand business operations bydrawing on this high level of customer satisfaction.
Competition in Japan’s banking industry has
intensified during the prolonged period of low
interest rates. Under such conditions, to maintain profit growth going forward Sony
Bank is strengthening the market appeal and selling capability for its two mainstay
businesses of mortgage loans and foreign currency business, in order to maintain andraise its profitability. In mortgage loans, we are expanding cooperation with real estateagents and Lifeplanner sales employees at Sony Life to further increase mortgage loan
executions and build up our loan balance. In foreign currency business, we will secure alarge share of the foreign currency deposit market by strengthening the “save, build
assets, and spend” facility of Sony Bank’s “Foreign Currency World,” where users cansave foreign currency and spend it without converting into yen. In addition, Sony Bank
will provide a unique style of settlement service to further broaden its customer base.
In terms of profitability, we will sustain growth in business operations by strengthening the strategic products described above, and through appropriate ALM we willsecure a stable margin. We will expand our core base profit by focusing on net interest
income, the principal profit source of any bank.

Mortgage Loan Balance and Loan-deposit Ratio

Share of Foreign Currency Deposits(Billions of yen)

(%)

1,600

80

1,200

800

60

555.1

656.0

749.6

860.3
40

400

0

20

10

11

12

13

Sony Financial Holdings Inc. Annual Report 2013

Scale of foreign
currency deposit Megabanks
Others market: Approx.
¥5.5 trillion

0Sony Bank mortgage loan balance (left scale)Banks nationwide*, 2012 interim (right scale)Sony Bank (yen-based deposits) (right scale)
As of March 31* Source: Nationwide Bank Financial Statement Analysis, Japanese Bankers Association

018

Sony Bank
7.0%

As of March 31, 2013
Source: Bank of Japan statistics (individual customer deposit balances)

FH paid a dividend of ¥25 per share in FY2012 (up ¥5 from the previous fiscal year), andQ :	Splans
to maintain this level in FY2013. Could you please explain your dividend policies?
FH aims for steady increases in dividends in line with earnings growth over the medium andA :	Slongterms while securing sufficient internal reserves to ensure the financial soundness of theGroup companies and invest in growing fields.
SFH aims for steady increases in dividends in line with earnings growth over the
medium and long terms while securing sufficient internal reserves to ensure the financial
soundness of the Group companies and invest in growing fields. Our medium-term target
for the dividend payout ratio is 30% to 40% of consolidated net income. In FY2012,
we increased our dividend by ¥5 to ¥25 per share, reflecting our strong profit growth.
For FY2013, at the start of this period we currently expect to maintain the current
level of ¥25 per share. Management will determine the dividend amount by taking into
account a comprehensive range of factors, including the capital adequacy of eachGroup company relative to risk, investment opportunities, business forecasts and legal
and regulatory developments worldwide.

*	On August 12, 2013, SFH announced that it would increase the year-end dividend forecast for FY2013 to¥30, up ¥5 from the p­ revious forecast of ¥25.

Annual Dividend Amount / Dividend Payout Ratio(Billions of yen)

(%)

15

Mid-term target for 30
the dividend payout
ratio is 30% to 40%

26.4

21.2
10

8.700
13.6
6.525

26.5

24.1
10.875

8.700

Increase
dividend

20.9

6.525

6.525

20

Increased
dividend

5

10

0

08

09

10

11

12

13

Dividend
per share

¥15

¥15

¥15

¥20

¥20

¥25

0

Annual dividend amount (left scale)
Dividend payout ratio (right scale)
For the years ended March 31* SFH conducted a 200-for-1 stock split, with an effective date of April 1, 2011.
Dividends per share for the fiscal year ended March 31, 2008 were calculated assuming that this stock split was conducted
on April 1, 2007.

Sony Financial Holdings Inc. Annual Report 2013019

About the Sony Financial Group

SFH’s capital and dividend policies

Review of Operations/At a Glance (As of July 1, 2013)

Life Insurance Business
Operating Company
Sony LifeAEGON Sony Life Insurance
SA Reinsurance

Composition of Ordinary Revenues*

Ordinary Revenues(Billions of yen)
1,250

1,000
750

500

For the year ended
March 31, 2013250

¥1,142.3

0

09

10

11

12

Ordinary
revenues

766.2

882.0

900.3

967.5 1,142.3

09

10

11

12

13

61.8

68.1

74.1

80.0

84.7

09

10

11

12

13

33.3

30.5

29.5

32.5

34.3

billion13

For the years ended March 31

Non-life Insurance Business
Operating Company
Sony Assurance

Ordinary Revenues(Billions of yen)
100

80

Composition of Ordinary Revenues*
60

40

For the year ended
March 31, 2013

20

¥84.7

0

billionOrdinary
revenues

For the years ended March 31

Banking Business
Operating Company
Sony Bank
SmartLink Network

Ordinary Revenues(Billions of yen)
40

32

Composition of Ordinary Revenues*
24

16

For the year ended
March 31, 2013

8

¥34.3

0

billionOrdinary
revenues

For the years ended March 31* Proportion of SFH consolidated ordinary revenues

020

Sony Financial Holdings Inc. Annual Report 2013

Please refer to page 22,“Life Insurance Business,” for details.
Ordinary Profit

Total Assets(Billions of yen)(Billions of yen)
6,250

80

5,000

60

3,750

40

2,500

20

1,250

0

10

11

12

13

32.5

79.7

72.1

68.1

72.7

0

Total assets

09

10

11

12

13

3,810.4 4,286.0 4,721.6 5,219.9 5,948.1

At a Glance

Ordinary
profit09

Review of Operations

100

As of March 31

For the years ended March 31

Please refer to page 28,“Non-life Insurance Business,” for details.
Ordinary Profit

Total Assets(Billions of yen)(Billions of yen)

3.5

150

2.8

120

2.1

90

1.4

60

0.7

30

0

Ordinary
profit

09
2.1

10
2.5

11
2.1

12
2.8

13
2.3

0

Total assets

09

10

11

12

13

86.6

98.3

109.3

118.6

127.4

As of March 31

For the years ended March 31

Please refer to page 30,“Banking Business,” for details.
Ordinary Profit (Loss)

Total Assets(Billions of yen)(Billions of yen)

4

2,500

3

2,000

2

1,500

1

1,000

0

500

–1

Ordinary
profit (loss)

09
(0.5)

For the years ended March 31

10
1.9

11
2.4

12
3.4

13
3.9

0

Total assets

09

10

11

12

13

1,413.0 1,613.0 1,761.0 1,897.6 2,012.6

As of March 31* The figures for each business are before consolidation adjustments.

Sony Financial Holdings Inc. Annual Report 2013021

Life Insurance Business
Market Conditions
Japan’s life insurance market is the second largest in theworld, following the U.S.A. on a premium income basis. In
fact, Japan represents about 20% of the global market for life
insurance on this basis. Japan’s life insurance market has been
contracting since the late 1990s, but industry-wide policy
amount in force for individual life insurance stood at ¥861
trillion as of March 31, 2013, and death protection accounted
for over 80% of that total at ¥729 trillion.* Japan therefore
still has an enormous life insurance market rooted in persistently strong needs for life insurance among the public.
Meanwhile, looking at trends in sales of insurance products
in Japan, with the country’s population aging and its birthrate
falling, there has been an ongoing shift in protection needsfrom death-protection products to individual annuities and“third sector insurance” such as medical and nursing careinsurance. Moreover, on the sales front, sales channels havediversified as over-the-counter (OTC) sales of products atbanks, online sales and other channels have expanded, whilesales agencies have increased by opening more shops acrossthe country. As a result of these shifts in protection needs andthe diversification of sales channels, the market has become
more and more competitive.
Furthermore, in April 2013, the discount rate used for
calculating policy reserves was lowered for the first time in 12
years since April 2001, due to the impact of protracted low
interest rates. As a result, life insurance companies haverevised their insurance premium rates, leading to an increase
particularly in premiums for savings-type products.
In FY2012, the Japanese economy saw government policies
to end deflation since the December 2012 change in administration and the Bank of Japan’s proactive monetary easing policy
have a profound impact on financial markets. In the bondmarket, long-term interest rates have declined further. On theother hand, the stock market has seen a dramatic rally in the
Nikkei Stock Average on rising expectations for corporate earnings growth. And the yen’s depreciation and higher overseas

Life Insurance Premium Volume

stock prices have pushed up Japan’s stock prices further. Consequently, the improvement in consumer sentiment, among other
trends, has led to firm consumer spending. Nevertheless, there isa risk that this expectation-led economic r­ ecovery could reverse
course as an anticipated consumption tax hike takes effect andeconomic stimulus measures run their course. Accordingly, theoutlook for the Japanese ­economy remains uncertain.
In this competitive environment and under these financial
market conditions, Sony Life has increased sales of insurance
products, primarily death-protection products, mainly bymeans of measures to strengthen consulting-based sales
through Lifeplanner sales employees and its Partners­(independent agencies). Sales of living benefit insurance,
nursing care insurance and individual annuities have also
increased sharply, reflecting how the aging population andlow birthrate are causing changes in customer needs.
In terms of asset management, Sony Life continued toinvest in ultralong-term Japanese government bonds (JGBs) inorder to curtail rising interest rate risk associated with thecontinued acquisition of new policies. Sony Life has steadily
increased its corporate value by increasing policies in force andactively underwriting insurance risk, while reducing the interest
rate risk associated with insurance policy liabilities. Amid
falling ultralong-term interest rates sharply reflecting the Bankof Japan’s recent monetary easing policy announced in April
2013, Sony Life’s amount of interest rate risk increased further.
Nevertheless, Sony Life has maintained adequate payment
capacity on an economic value basis. Looking ahead, the financial markets could see significant volatility in the bond, stockand foreign exchange ­markets as expectations for economic
recovery collide with policymakers’ monetary easing stance.
Sony Life remains focused on driving growth in its businessvolume by acquiring new policies, as it maintains a highdegree of financial soundness while further raising its ­presence
in Japan’s life insurance market.
* Source: “Summary of Life Insurance Business” on the website of the Life
Insurance Association of Japan.

Industry-wide Policy Amount in Force* andSony Life’s Market Share(Trillions of yen)

U.S.A.
22%

Others31%

US$2.6 trillion(2012)
Italy
4%
Germany
4% China
U.K.
5% France 8%6%Source: Swiss Re. sigma No 3 / 2013, World insurance in 2012022

Sony Financial Holdings Inc. Annual Report 2013

Japan
20%

(%)

1,500

6.0

1,000

4.0

500

2.0

0

03

04

05

06

07

08

09

10

11

12

13 0.0

Policy amount in force (left scale)Sony Life’s share (excluding Japan Post Insurance Co., Ltd.) (right scale)
As of March 31* The above graph refers to individual life insurance.
* Source: “Summary of Life Insurance Business” on the website of the Life Insurance
Association of Japan, and data officially disclosed by individual life insurers.

Recent Initiatives

Assumed Interest Rates[Lump-Sum Payment] (%)
BeforeAfter
Revision­Revision (%) Revision (%) Amount (pt)Insurance ProductsInterest rate-sensitive whole
life insurance
Endowment insurance
Comprehensive medical
insurance
Living benefit insurance (whole
life type) 98, (term type) 98
Whole life cancer i­nsurance (08)Semi-participating whole life
nursing-care insurance
Semi-participating educational
endowment insurance

2.00
2.00

1.60
1.70

(0.40)(0.30)

2.35

1.70(0.65)

2.00
2.35
1.65
[1.50]
1.85[1.50]

1.70
1.70
1.60
[1.00]
1.60[0.90](0.30)(0.65)(0.05)[(0.50)](0.25)[(0.60)]* For interest rate-sensitive whole life insurance, revisions were applied for policies
commencing on or after May 2, 2013.
* Products other than semi-participating products are non-participating.

May 2013: Launch of U.S. Dollar Denominated InsuranceWith interest rates having remained low for an extended periodof time, in recent years attention has focused on products
denominated in foreign currencies, which offer higher rates ofinterest than their Japanese yen counterparts. A growing
number of people are choosing to divide their investments into
assets denominated in Japanese yen and foreign currencies.
Considered one of the most creditworthy of all currencies,
the U.S. dollar is a key currency that is widely used in trans­
actions throughout the world. As the U.S. dollar offers­superior liquidity and stability, investing some assets in thiscurrency is an effective way of reducing risk and ensuring
stable returns. Also, it is beneficial due to the relatively higher
investment yield on U.S. dollar assets compared with their
Japanese yen counterparts.
In May 2013, Sony Life launched U.S. dollar denominatedwhole life, endowment and specialty endowment insurance tomeet the needs of customers seeking to hold future funds inforeign currencies.

Business Strategies
Further enhance­marketing channels

E xpand cadre of quality Lifeplanner sales employees
Accelerate expansion of independent agent channel to meet diverse needs

Continuously
pursue ­operational
excellence hrough Business Process Re-engineering, dramatically improve service quality
Tand marketing and operational efficiencies
Strengthen product lineups to contribute to customers’ asset building by­introducing U.S. dollar denominated insurance products, and enhance the­product portfolio

Achieve steady growthin ­corporate value chieve steady growth in corporate value through the steady acquisition ofA
new policies and by mitigating interest rate risk
Sony Financial Holdings Inc. Annual Report 2013

023

Life Insurance Business


April
2013: Revision of Insurance Premium Rates
On April 2, 2013, Sony Life revised insurance premium rates
on some products in line with the April 2013 reduction in the
discount rate used for calculating policy reserves.
(1) Term life insurance and annuities: Insurance premiums
were not revised.
Rates were not revised on Sony Life’s mainstay “level premium
plan term life insurance,” “decreasing term life insurance,” and“family income insurance” (including non-smoker preferredrisk type, no surrender value type and term riders) products,
as the impact of policy reserve discount rate revisions is small.
Rate revisions were also not applied to level premium plan
type of “semi-participating individual annuities” and­“individual variable annuities.”(2) M edical insurance and cancer insurance (including term riders):
Rates were revised for these products, but insurance premiums
were maintained at near the current levels.
Premiums may increase or decrease in comparison withcurrent levels in some cases, depending on such factors aspolicy type and policyholder age.
(3) Principal products for which assumed interest rates
were revised:
Review of Operations

 ay 2012: Launch of the First Phase ofM
the “Co-Creation Project”
October 2012: Launch of the Second Phase of
the “Co-Creation Project”
In May 2012, Sony Life launched three services designed toachieve long-term consultation services based on life planning:
the provision of follow-up information, the periodic confirmation and checkup of the protection requirements, and consultation in case of illness, nursing care, and other difficulties.
The goal is to further enhance Sony Life’s consultation services
after policyholders have enrolled in policies and provide evenhigher quality and more effective consultation services than
before. These new services were followed in October 2012 by
the launch of a consultation service system called “C-SAAF”(Consulting-Sales and Follow-Up Support System). With thismove, we revamped the sales support system by newly introducing tablet PCs, while drastically reducing the administrative
workload for policy enrollment procedures mainly through theintroduction of on-line paperless applications and new notification procedures using an automated underwriting screening
engine. Sony Life has also introduced a new customer databasesystem called “CSM” (Customer Satisfaction Management)that enables unified management of customer information.
Through these advances, Sony Life is now able to provide
detailed consulting follow-up services.

AEGON Sony Life Insurance: Over-the-counter (OTC)
Sales of Individual Annuity Products at BanksSony Life began sales of individual variable annuity products
in December 2009 through AEGON Sony Life Insurance, a
50–50 joint venture established with the AEGON Group(headquartered in the Netherlands), to meet annuity needs
associated with Japan’s aging population and low birthrate.
AEGON Sony Life Insurance sells individual variable annuity
products featuring guarantees on annuity resources and on
total benefit amount received as well as special-accountwhole life annuities with guaranteed benefit amount throughSony Life’s Lifeplanner channel and partner agencies such as
12 partners including banks.*

Operating results in FY2012, the fourth year since the startof this business, increased sharply from the previous fiscal
year, as shown below.
2012

2013

ChangeThe number of new policies
2,498 7,357 294.5%
New policy amount (Millions of yen) 17,534 51,175 291.8%
The number of policies in force
3,669 10,232 278.9%
Policy amount in force (Millions of yen) 30,486 76,155 249.8%* As of July 1, 2013MCEV as of March 31, 2013
1. MCEV Results for Sony Life
Sony Life’s MCEV as of March 31, 2013 increased by ¥23.2 billion due to the contribution of new business value and the successful
execution of its ALM strategy as evidenced by the counterbalancing increases in market value of Japanese government bonds(JGBs) held for the purpose of ALM and decreases in the value of existing business primarily caused by the decline in interest rates.
The breakdown is shown in the table below.

(Billions of yen)

As of March 31

2012

2013

ChangeMCEV
Adjusted net worth
Value of existing businessNew business value¥1,041.5
409.2
632.4
65.2

¥1,064.7
770.8
293.9
41.6

¥   23.2
361.7(338.5)(23.6)

2. Adjusted net worth
The adjusted net worth as of March 31, 2013 increased by ¥361.7 billion, primarily because of a large increase in unrealized gains onheld-to-maturity securities caused by the decline in interest rates. The breakdown is shown in the table below.

(Billions of yen)

As of March 31

2012

2013

ChangeAdjusted 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¥409.2
264.8
25.3
55.3
0.0
155.9
11.5
(4.9)
(24.3)(66.8)(7.8)¥ 770.8
342.3
32.3
59.6
0.0
551.7
19.4
(5.0)
(26.1)(193.8)(9.6)¥ 361.7
77.5
6.9
4.2
(0.0)
395.9
7.9
(0.1)
(1.8)
(127.1)(1.8)

As of March 31

2012

2013

Adjusted net worth
Free surplus
Required capital¥409.2382.9
26.3¥770.8418.5
352.3(Billions of yen)

024

Sony Financial Holdings Inc. Annual Report 2013

Change¥361.735.7
326.0

3. Value of existing business
The value of existing business decreased by ¥338.5 billion, due mainly to the decline in interest rates. The breakdown is shown below.
(Billions of yen)

2012

2013

ChangeValue of existing business
Present value of certainty-equivalent profit
Time value of options and guarantees
Frictional costs
Cost of non-hedgeable risks¥ 632.4
907.7(84.5)(5.0)(185.9)¥ 293.9
633.2(111.2)(13.9)(214.2)¥(338.5)(274.6)(26.7)(8.9)(28.3)

Life Insurance Business

As of March 31

4. New business value
New business value decreased by ¥23.6 billion because of lower profitability caused primarily by the decline in interest rates. The
breakdown of the value of new business is shown below.

(Billions of yen)

As of March 31

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

2012¥ 65.2
91.5
(8.3)
(0.2)
(17.8)

2013¥ 41.674.1(12.4)(0.2)(19.9)

Change¥(23.6)(17.5)
(4.1)
0.0
(2.1)

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

(Billions of yen)

As of March 31

2012

2013

Value of new business
Present value of premium income
Value of new business / Present value of premium income¥   65.2
1,013.7
6.4%¥   41.6
1,187.5
3.5%

Change(23.6)
173.8(2.9pt)Sony Financial Holdings Inc. Annual Report 2013

Review of Operations

Sony Life set its required capital as the larger of the amount of capital required for a solvency margin ratio of 200% or the amountof capital to cover risks based on an internal model based on economic value. The large increase in required capital as of March 31,
2013 is due to an increase in the economic value of technical provisions that mainly resulted from the decline in interest rates. However, as a result of efforts to extend the asset duration to reduce interest rate risk, Sony Life has secured an adequate free surplus.
Sony Life defines the amount of capital required to cover risks based on the internal model as the total amount of technical provision and solvency risk capital on an economic value basis in excess of statutory policy reserves (excluding contingency reserves).
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.
The solvency risk capital on an economic value basis as of the end of March 2013 was ¥661.3 billion (after tax). The effective tax
rate used to adjust to the after-tax basis is 30.78%.

025

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, 2013, from MCEV as of March 31, 2012. The format of
the table is in line with the format prescribed by the MCEV Principles.

(Billions of yen)Free surplus

Opening MCEV (MCEV as of March 31, 2012)
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, 2013)

Value of existing
Required capitalbusiness

MCEV¥382.9(11.7)
371.2
–
0.4
0.7

¥  26.3
–
26.3
–
0.0
0.1

¥ 632.4
–
632.4
41.6
12.3
5.8

¥1,041.5(11.7)
1,029.9
41.6
12.7
6.6

(16.0)(37.5)
62.9(21.8)
8.9
35.1
23.2
(11.0)
47.3–¥418.51.0–(59.9)
21.8(8.9)(45.9)
360.9
11.0
326.0
–
¥352.3

15.0
37.5
2.1
48.6
4.1
129.5
(458.5)(9.5)(338.5)–¥ 293.9

–
–
5.1
48.6
4.1
118.8
(74.4)(9.5)
34.8–¥1,064.7

Notes: 1.	Exported yield used to calculate the profit expected in excess of the risk-free rate was 0.310%.
2.	Assumption changes indicate the impact of changes in assumptions, mainly on mortality and morbidity rates, lapse and surrender rates, and operating expense rates. Thechanges in mortality and morbidity rates increased the value of existing business.
3.	Other operating variance represents the impact of improvements and corrections of the model used in calculating MCEV, including the change in the reference of inflation ratefrom Consumer Price Index (CPI)-indexed Japanese government bonds to inflation swaps as well as the improvement of the model to calculate the value of existing business.
4.	As regards economic variances, overall MCEV decreased by ¥47.9 billion mainly as a result of the decline in Japanese government bond (JGB) yields and by ¥26.5 billion as aresult of the increase in the expenses tied to the increase in inflation swap rates.
5.	Other non-operating variance shows the effect of the increase in the consumption tax rate.

7. Sensitivity analysis
The impact of changing the underlying assumptions of MCEV is as follows:

Sensitivities
Change in Assumption

MCEV

Base

No change
100bp decrease
100bp 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¥1,064.7
829.6
1,121.4
1,231.8
1,047.7
1,053.0
1,049.9
1,082.3
1,070.1
1,104.7
1,059.8
1,100.2
1,074.2

Interest rates
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

026(Billions of yen)

Assumption

Sony Financial Holdings Inc. Annual Report 2013

Change inAmount¥–(235.1)
56.7
167.1(16.9)(11.6)(14.8)
17.6
5.5
40.0
(4.9)
35.5
9.5

Rate of
Change

–
(22%)
5%
16%
(2%)
(1%)
(1%)
2%
1%
4%
(0%)
3%
1%

Changes in adjusted net worth within the amount of change in MCEV are shown in the table below. Of items not specified in thistable, 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

100bp decrease
100bp increase
10% decrease
25% increase¥ 867.6(691.8)(11.5)(0.4)

Review of Operations(Main Assumptions)Sony Life has used Japanese government bond (JGB) yields as of the end of March 2013 as a risk-free rate for the certainty-­equivalentprojections. It is assumed that forward rates in the 41st year and beyond were equal to those in the 40th year. Sony Life has used
Bloomberg’s JGB yields as its data source. The JGB yields for key terms are as follows:
2012

2013

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

0.11%
0.32%
0.99%
1.76%
1.95%
2.11%

0.06%
0.13%
0.55%
1.40%
1.54%
1.64%

Life Insurance Business

As of the end of MarchSony Life has not added liquidity premium on the risk free rate as there are no products which are considered to have reasonably
predictable and illiquid cash flows and would therefore be appropriate to apply 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 2013. Best-estimate assumptions are developed to reflect past andcurrent experiences as well as expected experiences in the future. Expected future changes in assumptions should be reflected only
when they are supported by sufficient reasons. Except for a deteriorating trend in morbidity rates, no other expected future changes
are assumed in the best-estimate assumptions applied.
(Report of Outside Specialist)
Sony Life requested Milliman, Inc., an external actuarial consulting firm with expert knowledge in the area of MCEV valuations, toreview the methodology, assumptions and calculations. Sony Life has received an opinion from Milliman, Inc.

For further details, please refer to MCEV Results for Sony Life in the Financial Data Book.
http://www.sonyfh.co.jp/web/en/financial_info_e/annualreport.html

Sony Financial Holdings Inc. Annual Report 2013027

Non-life Insurance Business
Market Conditions
Automobile insurance accounts for the largest portion ofJapan’s non-life insurance industry and is positioned as Sony
Assurance’s core product category. It provides around half of
the industry’s insurance premium revenues. Japan’s auto­
mobile insurance market is dominated by the major non-life
insurers, and approximately 90% of insurance premium
revenues are generated by policies sold mainly through theirnationwide insurance agencies.
In FY2012, Japan’s automobile insurance premium revenues
increased over the previous fiscal year, mainly among major
non-life insurers. This chiefly reflected continuous insurance
premium rate increases implemented by non-life insurers to
mitigate worsening loss ratios, as well as strong growth in newautomobile sales underpinned by environmentally friendly cars
subsidies and other positive factors. Nevertheless, automobile
ownership is projected to gradually decline over the medium
and long terms, primarily reflecting a contracting population
and a shift in interest away from automobiles among young
people in recent years. These and other factors have beenshaping a challenging market environment.
Turning to profitability in automobile insurance, despite
continuous insurance premium rate increases, the loss ratio
has remained stubbornly high mainly because of a higher
incidence of car accidents along with the aging of society andthe impact of natural disasters. These trends have continued
to pressure the business environment. In response, non-life
insurers have strengthened measures to rectify the loss ratio
by introducing a new bonus-malus system (non-fleet driver
rating system). However, non-life insurers are expected tocontinue taking steps to restore profitability, such as by­raising insurance premium rates further.
In this environment, direct non-life insurance companies(direct insurers) as a whole, including Sony Assurance, haveseen steady increases in insurance premium revenues as wellas growth in their share of the automobile insurance market
year after year. This growth has been driven by strong­customer support for lower insurance premium structurescompared with major non-life insurers, plus direct insurers’
heightened brand power and recognition as a result of theirvigorous advertising activities.
As direct insurers continue to expand, Sony Assurance hasremained Japan’s No. 1* direct insurer in terms of direct
premiums written. In FY2012, Sony Assurance continued toachieve steady growth in its business results.
Although the Japanese economy has recently shown someencouraging signs in terms of corporate business results,business sentiment, employment and income conditions
remain severe. Therefore, given that direct insurers offer lower
insurance premiums than major non-life insurers, steadyincreases in insurance premium revenues and market shareare projected for direct insurers as a whole.

028

Sony Financial Holdings Inc. Annual Report 2013

Automobile Insurance Market andMarket Share of Major Direct Non-life Insurers(Billions of yen)

(%)

4,000

8.0

3,000

6.0

2,000

4.0

1,000

2.0

0

03

04

05

06

07

08

09

10

11

12

0.0

Direct premiums written (total of all non-life insurers) (left scale)Market share of major direct non-life insurers (right scale)
For the years ended March 31
The graph was made by Sony Assurance from published data from each company.

Direct Premiums Written (Automobile Insurance)by Major Direct Non-life Insurers(Billions of yen)
80

Sony Assurance

60

40

20

0

02

03

04

05

06

07

08

09

10

11

12

13

Sony Assurance
Company A
Company B
Company C
Company D
Company E
Company F
Company G
Company H
For the years ended March 31
The graph was made by Sony Assurance from published data from each company.

On the other hand, competition among direct insurers has
been heating up. In response, while striving to refine its business model in step with the environment, Sony Assurance will
implement measures to raise the value of products and services in the eyes of customers, as it endeavors to earn thetrust and support of as many customers as possible.
* From the business performance announcements for FY2011 of non-life
insurers selling automobile insurance primarily via direct channels (based on
Sony Assurance research).

Recent Initiatives
	July 2012: Renewal of Sony Assurance Official Website andLaunch of Smartphone Site	September 2012: Renewal of Sony Assurance’s Customer
Communication Website

Net Premiums Written and the Number of Policies
in Force at Sony Assurance(Billions of yen)

*	“Transmission Service of Current Location by GPS” is a function that enables
customers to easily and accurately convey their location to road service desk
personnel using smartphone GPS functions. Even when customers find themselvesin unfamiliar areas and cannot provide an address to describe their location, they
are able to immediately request road service assistance directly from the app.
**	“First smartphone functions in Japan’s non-life insurers” based on Sony
­Assurance research.
***	The bonus-malus system (new non-fleet rating system) will affect insurance
premium rates for policies commencing on or after April 1, 2014, in principle.

Combined Ratio at Sony Assurance(Net Loss Ratio + Net Expense Ratio)(10,000 of policies)

(%)

100

200

100

75

150

75

50

100

50

25

50

25

0

0

0

08

09

10

11

12

13

Automobile insurance (left scale)
Personal accident insurance* (left scale)
Others (left scale)
Number of policies in force** (right scale)
For the years ended March 31*	More than 90% of personal accident insurance is medical and cancer insurance.
**	The number of policies in force refers to the sum of automobile insurance and medical
and cancer insurance, which together account for 99% of net premiums written.

08

09

10

11

12

13

Net expense ratio
Net loss ratio
For the years ended March 31
Note: Net loss ratio = (Net losses paid + Loss adjustment expenses) / Net premiums written
Net expense ratio = Total underwriting costs / Net premiums written

Business Strategies
Improve profitability ake improving the loss ratio a topmost priority and return profitabilityM
to an appropriate level

Maintain growth hile prioritizing profitability, continue to achieve stable growth to firmlyWmaintain its leading position in the direct market

Maximize customer­satisfaction levels

 y making further improvements in service quality, earn ­customer trustB
and maintain their support of the brandSony Financial Holdings Inc. Annual Report 2013029

Non-life Insurance Business	October 2012: Launch of First Initiatives by a Japanese­Non-life Insurer to Provide Policyholders with Smartphone
Applications
Sony Assurance has added two new functions to “Trouble
Navi,” a free smartphone app designed to instruct drivers on
how to respond in the event of car accidents or other problems on the road. The two new functions are “Transmission
Service of Current Location by GPS”* and “Road Service Staff
Locator Radar.” The latter function allows policyholders to
confirm the present location of approaching road service staff
on a map when road service assistance is requested. These
are the first smartphone functions** to be offered in Japan bya non-life insurer.

Review of Operations	October 2012: Commitment to Making an Initial Responseby an Appointed Staff Member within an Hour after­Receiving an Accident Report for Automobile Insurance
Policyholders	November 2012 and April 2013: Sony Assurance Revises
Automobile Insurance Policy Details
Sony Assurance has revised policy details and insurance premium rates for automobile insurance policies commencing on
or after November 1, 2012. The policy revisions include theaddition of discounts requested by customers (paperless insurance certificate discount, multi-policy discount at renewal,
and discount on new contract from online user accounts) andriders (rider for rental car expense coverage in the event of an­accident and rider for new vehicle replacement coverage), as
well as reflecting customers’ opinions. The policy revision alsoentailed combining and removing certain forms of coverage tomake policies easier to understand. For automobile insurance
policies commencing in or after April 2013, Sony Assurance
also introduced a new bonus-malus system (non-fleet driver
rating system)***, and offered expanded Internet-based­discounts and revised ­insurance premium rates.

Banking Business
Market Conditions
The Japanese economy has seen a stable recovery in consumer spending, mainly due to improved consumer confidence reflecting rising stock prices since the December 2012change in administration. On the other hand, as the government implements policies to end deflation, expectations havebeen running high for aggressive monetary easing policies
targeting a 2% inflation rate based on consumer prices,­causing a further decline in long-term interest rates and the
yen’s depreciation. Nevertheless, there is a risk that thisexpectation-led economic recovery could reverse course as
an anticipated consumption tax rate hike takes effect andeconomic stimulus measures run their course. Therefore,
Japan’s prospects for a full-fledged economic recovery still
remain uncertain.
Meanwhile, Japan’s personal financial assets currently total
approximately ¥1,500 trillion, more than half of which is comprised of cash and deposits, a high level even compared to thatof other developed countries. Given the turmoil in the global
financial market environment triggered by the European debt
crisis, retail customers have avoided investing in risk assets. As
a result, the share of cash and deposits in Japan’s personal
financial assets has reached record-high levels.
In Japan, customers’ lifestyles and needs are diversifying as
the aging of its society, coupled with a low birthrate, gathers
pace. In this climate, financial institutions will need to swiftly
and accurately address asset management needs with respect
to personal financial assets. In recent years, Internet banks
have achieved growth on the back of their cost competitiveness. However, the deposit balance of Internet banks stillaccounts for only 1.5% of Japan’s personal financial assets
market as of March 31, 2013, so there is ample room for

growth. Accordingly, Sony Bank has been working to expand
business volume with an emphasis on mortgage loans andforeign currency business.
In mortgage loans, amid an unprecedented low interest
rate environment, demand for housing funds has been
increasing due to anticipation of higher interest rates associated with the effects of Abenomics policies and a rush indemand to prepare for a hike in the consumption tax rate.
Moreover, competition among banks based on mortgage loaninterest rates is intensifying. In this competitive landscape,Sony Bank is steadily growing its mortgage loan balance byenhancing highly convenient services and marketing activities.
In the foreign currency business, Sony Bank has steadilygrown its transaction volume by offering reasonable rates andhighly convenient services centered on foreign currency
deposits and foreign-exchange margin trading. In the wake of
the Lehman crisis, growth in Sony Bank’s foreign currency
business had slowed amid low interest rates worldwide andthe strong yen against major currencies. However, foreign
currency transactions by retail customers have returned to
growth against the backdrop of the yen’s depreciation since
the end of 2012. Competition based on services among­financial institutions will continue to intensify as they seek tocapture demand for foreign currency transactions, which are
expected to increase further going forward.
In this competitive environment, Sony Bank will continue
to demonstrate its strength of providing high customer satisfaction by expanding business volume with an emphasis on
mortgage loans and foreign currency business. Efforts will also
be focused on growing the customer base by enhancing­settlement functions.

Growth Potential in the Retail Financial Services Market
City banks¥154.8 trillion
27.0%Japan Post Bank
¥176.0 trillion
30.7%
Individual deposits

Approx.
¥573.2 trillion(As of March
Trust banks, etc.
31, 2013)¥25.9 trillion
4.5%
Secondregional banks¥45.2 trillion
7.9%

030

Sony Financial Holdings Inc. Annual Report 2013

Internet banks¥8.3 trillion
1.5%

Regional banks¥162.7 trillion
28.4%

Others¥6.5 trillion
77.8%

Sony Bank¥1.8 trillion
22.2%

Internet banks
Approx.
¥8.3 trillion

Sources: Prepared based on the Nikkin Report by The Japan Financial News Co., Ltd. anddata officially disclosed by various financial institutions. Excludes data for
Shinkin banks, credit associations, labor credit associations, agricultural cooperatives and certain other organizations.

Recent Initiatives

 ctober 2012: Sony Bank Begins Offering OffshoreO­Renminbi, South African Rand and Swedish Krona for­Foreign Currency Deposits
Sony Bank began offering three new currencies as part of its
foreign currency deposit lineup: the offshore renminbi andSouth African rand, which are two currencies from emerging
countries for which customers have shown strong tradingneeds, and the Swedish krona, a currency from a country witha stable economic growth rate in Northern Europe. As a result,Sony Bank’s foreign currency deposits are now available intwelve currencies: the U.S. dollar, euro, U.K. pound, Australian
dollar, New Zealand dollar, Canadian dollar, Swiss franc, Hong
Kong dollar, Brazilian real, offshore renminbi, South African
rand and Swedish krona. The addition of the three new currencies has enhanced and extended Sony Bank’s foreign currency
deposit lineup.
F ebruary 2013: Sony Bank Begins Accepting New Bank
Account Applications Via its Smartphone Site
From February 2013, Sony Bank has enabled customers tocomplete procedures needed to open new bank accounts
using their smartphones, in an effort to address the growing
popularity of smartphones, as an Internet bank. P­ reviously,
these procedures could only be completed using PCs.
Furthermore, Sony Bank started making foreign-exchange
margin trading available on its smartphone site in March 2013.

Retail Balance at Sony Bank

Loan-deposit Ratio at Sony Bank (Yen-based deposits)(Billions of yen)

(%)

3,000

80

60
2,000
40
1,000
20

0

08

09

10

11

Yen deposits
Foreign currency deposits
Investment trusts
Personal loans
As of March 31

12

13

0

08

09

10

11

12

13

As of March 31

Business Strategies
Increase business volume basedon strong customer satisfactionS teadily increase business volume, backed by high levels of customer
satisfaction

Strengthen strategic productsF urther enhance two major engines of business: the mortgage loans
and foreign currency businesses
Expand the customer base further by offering enhanced settlement
functions with a Sony Bank flavor

Maintain profit-generating
capacity hrough appropriate execution of ALM, maintain a stable interestT
spread and continue to expand a core base of profits that is relatively impervious to the financial environment
Sony Financial Holdings Inc. Annual Report 2013

031

Banking Business ugust 2012: Sony Bank Strengthens Business Alliance withA
Monex Group, Inc. and Transfers All Sony Bank Securities’
Shares to Monex GroupIn August 2012, Sony Bank concluded a basic agreement with
Monex Group, Inc. to strengthen its business alliance with
Monex, Inc., a wholly owned subsidiary of Monex Group, toenhance financial products intermediary services. Sony Bank
also transferred all shares of Sony Bank Securities Inc., awholly owned subsidiary of Sony Bank, to Monex Group. In
January 2013, Sony Bank launched new financial products
intermediary services for Japanese and overseas stocks andforeign bonds (new issues only) with Monex , Inc. as the­contracted broker.

Review of OperationsJ uly 2012: Sony Bank Enters into Tie-up with LIXIL Group
Companies
January 2013: Sony Bank Enters into Tie-up with Tokyu
Livable, Inc.
Sony Bank is entering into tie-ups with real estate companies
to increase its mortgage loan balance. In July 2012, Sony Bank
formed a business alliance with LIXIL Group companies, which
conduct a wide array of housing-related businesses. Under thealliance, Sony Bank will offer mortgage loans for newly built or
refurbished homes and condominiums in cooperation with
LIXIL Group companies. Furthermore, in January 2013, Sony
Bank entered into a partnership with Tokyu Livable, Inc. on
mortgage loans and refurbishment loans.

FY2012 Analysis of ­Operating Performance
SFH (Consolidated)
Operating Results

In FY2012, the fiscal year ended March 31, 2013, the Japanese economy initially saw increased public
spending due to demand from the reconstruction effort following the Great East Japan E­ arthquake, as
well as firm consumer spending. However, the outlook became uncertain from the summer of 2012
onward, due to slumping exports and the backdrop of signs of slowing overseas economies, mostnotably the protracted debt crisis in some European countries. In terms of financial market conditions,the yen initially remained strong against the world’s major currencies in the forex market amidst the
global economic slowdown, while long-term interest rates remained ­generally low, reflecting continued risk aversion on the part of investors.
However, from around mid-November 2012, Japan’s consumer spending has shown solid growth,
mainly due to improvement in consumer sentiment in response to rising stock prices and other factors. Meanwhile, rising expectations for aggressive monetary easing policies following Japan’s change
in administration led to a decline in long-term interest rates and the yen’s depreciation. Nevertheless,considering the ongoing global economic slowdown, the possibility of a reversal of course in theJapanese economy’s expectation-led recovery, and other factors, it seems the outlook for the Japanese
economy will remain uncertain in the near term.
Under these conditions, the Sony Financial Group implemented a range of initiatives addressing
diversifying customer needs, with the aim of becoming the most highly trusted financial services
group by customers through the provision of high-quality services.
As a result, the Group posted consolidated ordinary revenues for FY2012 of ¥1,259.0 billion, up 16.8%
from the previous fiscal year. This increase was due to ordinary revenue growth across all businesses,
namely the life insurance, non-life insurance and banking businesses. Consolidated ordinary profit increased
6.2% year on year to ¥79.2 billion. This was mainly the result of increases in ordinary profit in the life
insurance and banking businesses, despite a decline in ordinary profit in the non-life insurance business.
Looking at the main components of extraordinary gains and losses, the Group recorded ¥6.9 billion
in provision for reserve for price fluctuations in the life insurance business as an extraordinary loss.
This compares with ¥8.5 billion recorded in the previous fiscal year.
After adjusting ordinary profit by deducting extraordinary gains and losses, provision for reserve forpolicyholders’ dividends, and income taxes, net income increased 37.3% year on year to ¥45.0 billion. In
addition to the higher ordinary profit, this reflected the effects of the reversal of a portion of deferred
tax assets associated with a reduction in the corporate tax rate in the previous fiscal year.
Segment performance was as follows:

Life Insurance BusinessIn the life insurance business, income from insurance premiums rose sharply in step with steady
growth in policy amount in force. Another positive factor was an increase in gains on separate
accounts, net following a recovery in market conditions. As a result, ordinary revenues rose 18.1% year
on year to ¥1,142.3 billion.
Ordinary profit increased 6.7% year on year to ¥72.7 billion, mainly due to the reversal of policy
reserves related to minimum guarantees on variable life insurance policies and a recovery from anegative to a positive spread at Sony Life. These positive factors were partly offset by the negative
impact on profit stemming from the reversal of the reserve for outstanding claims related to the Great
East Japan Earthquake that was recorded in the previous fiscal year.

Ordinary revenues(Billions of yen)
1,500
1,200
900
600
300
0

09

10

11

12

13

12

13

12

13

Life Insurance Business
Non-life Insurance BusinessBanking Business
For the years ended March 31

Ordinary profit(Billions of yen)
100
80
60
40
20
0

09

10

11

Life Insurance Business
Non-life Insurance BusinessBanking Business
For the years ended March 31

Non-life Insurance BusinessIn the non-life insurance business, ordinary revenues increased 5.8% year on year to ¥84.7 billion, due toan increase in net premiums written atop growth in the number of policies in force centered on mainstay
automobile insurance. Ordinary profit decreased 17.1% year on year, to ¥2.3 billion. This decrease mainlyreflected an increase in the provision for the reserve for outstanding losses, although the net loss ratio
remained mostly unchanged from the previous fiscal year in the automobile insurance business.

Banking BusinessIn the banking business, ordinary revenues increased 5.5% year on year to ¥34.3 billion. This increase
was due to higher net fees and commissions following Sony Bank’s consolidation of SmartLink Network as a 57%-owned subsidiary in July 2011, in addition to higher interest income on loans led by a
growing balance of mortgage loans. Ordinary profit rose 14.2% year on year to ¥3.9 billion. The main
reason for this increase was the aforementioned higher interest income related to mortgage loans.

Financial Position

Total assets

As of March 31, 2013, total assets amounted to ¥8,096.1 billion, up 11.8% from a year earlier. The
major components of assets were securities (mostly Japanese government bonds (JGBs)) of ¥6,202.3
billion, up 12.1% from March 31, 2012; loans of ¥1,115.3 billion, up 14.4% from March 31, 2012; andmonetary trusts of ¥324.3 billion, up 7.0% from March 31, 2012.
Total liabilities amounted to ¥7,660.7 billion, up 11.1% from a year earlier. The major componentsof liabilities were policy reserves and others of ¥5,601.0 billion, up 12.9% from March 31, 2012; anddeposits of ¥1,857.3 billion, up 5.5% from March 31, 2012. In January 2013, SFH issued corporate
bonds of ¥10.0 billion for the purpose of reinforcing Sony Bank’s capital base. The bond issuanceproceeds were used to grant a subordinated loan to Sony Bank.
Total net assets amounted to ¥435.4 billion at March 31, 2013, up 25.2% from a year earlier. In
terms of the components of net assets, net unrealized gains on other securities, net of taxes, were
¥88.3 billion, up ¥51.3 billion from the end of the previous fiscal year. This increase mainly reflectedrising bond prices accompanying lower interest rates.

(Billions of yen)
9,000

6,000

3,000

0

09

As of March 31032

Sony Financial Holdings Inc. Annual Report 20131011

Cash FlowsNet cash provided by operating activities in FY2012 amounted to ¥580.8 billion, an increase of¥56.6 billion from FY2011. This increase was mainly due to increased income from insurance premiums in step with a higher policy amount in force in the life insurance business, which was partly
offset by a net increase in loans due to an increase in mortgage loans in the banking business.
Net cash used in investing activities was ¥550.1 billion, up ¥37.9 billion from the previous
fiscal year, mainly reflecting purchases of securities in the life insurance business. The increase
was mainly due to a decline in proceeds from the sale and redemption of securities in the life
insurance business.
Net cash used in financing activities was ¥5.0 billion, a change of ¥6.8 billion from net cash
provided by financing activities in the previous fiscal year, mainly reflecting cash dividends paid.
As a result of the above factors, cash and cash equivalents as of March 31, 2013 stood at ¥201.4
billion, up ¥25.7 billion from a year earlier.

Risk-monitored Loans(Millions of yen)

As of March 31

2012

2013

Category
Bankrupt loans
Non-accrual delinquent loans
Past-due loans (3 months or more)
Restructured loans
Total¥  174
1,369
–
2,068
¥3,613¥  150
1,534
–
2,220
¥3,905FY2012 Analysis of ­Operating Performance SFH (Consolidated)

Consolidated Solvency Margin Ratio(Millions of yen)

As of March 31(A) Total consolidated solvency margin
Common stock, etc.
Reserve for price fluctuations
Contingency reserve
Catastrophe reserve
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)
Unallotted portion of reserve for policyholders’ dividends
Tax effect equivalent (after deducting amount excluded)
Subordinated debt and surplus components ofpremium reserve
Total solvency margin of small-amount short-term insurers
Deductible items(B) Total consolidated risk
E [{(R12+R52)+R8+R9}2+(R2+R3+R7)2]+R4+R6
Insurance risk
(R1)
Ordinary insurance risk
(R5)
Major catastrophe risk
(R6)
Third-sector insurance risk
(R8)
Substantial insurance risk of
small-amount short-term insurers(R9)
Assumed interest rate risk
(R2)
Minimum guarantee risk
(R7)
Asset management risk
(R3)
Business management risk
(R4)
Consolidated solvency margin ratio[(A)/{(B)x(1/2)}]x100

2012

2013

¥835,119305,575
25,38055,392
9,406
835¥996,999
340,543
32,344
59,625
7,164
834

57,049(173)
700
58,774

123,898(2,012)464
70,604331,970–
9,793

371,470–
7,938

121,000
20,852
8,929
627
7,510

131,126
21,871
9,865
643
8,307

–
28,567
9,904
73,294
4,599–
29,122
11,47480,671
4,987

1,380.3%

1,520.6%

Notes: 1.	The figures are calculated based on the stipulations of Article 210, Paragraph 11-3 and Paragraph 11-4 of theOrdinance of Enforcement of the Insurance Business Act of Japan, and the FSA Notification No. 23 (2011).
2.	Minimum guarantee risk is calculated based on the standardized approach.

Sony Financial Holdings Inc. Annual Report 2013033

SFH’s consolidated operating results come from its life insurance, non-life insurance, and banking­businesses. Segment-by-segment reviews of FY2012 operating performance are presented below.

Life Insurance Business
SFH’s life insurance business consists of Sony Life, a wholly owned subsidiary of SFH; Sony Life Insurance (Philippines), a wholly owned
subsidiary of Sony Life; and AEGON Sony Life Insurance and SA Reinsurance—both equity-method affiliates 50% owned by Sony Life.
* Sony Life transferred all shares of Sony Life Insurance (Philippines) on December 6, 2012, and currently it has been excluded from the scope of the life insurance business.

Sony Life accounts for nearly all of SFH’s life insurance business. A discussion of the non-consolidated operating performance ofSony Life follows.

New Policy Amount

New Policy Amount andNumber of New Policies

New policy amount is the total policy amount of new insurance policies.

(Billions of yen)

(Individual life insurance + Individual annuities)

Change(Billions of yen)

For the years ended March 31

2012

2013

New policy amountIndividual life insurance
Individual annuities
Annualized premiums from new policies
Medical protection, living benefit
protection and other products
The number of new policies (10,000 policies)¥4,203.3
4,145.6
57.6
70.8¥4,454.6
4,396.6
57.9
73.2

6.0%
6.1%
0.5%
3.4%

17.1
59.1

18.3
62.0

7.6%
4.9%

Main Points
New policy amount increased atop significant growth in sales of living benefit insurance and whole life
insurance. Annualized premiums from new policies increased due to significantly higher sales of living benefit
insurance, whole life insurance and term life insurance.

(10,000 policies)

5,000

75

4,000

60

3,000

45

2,000

30

1,000

15

0

09

10

11

12

0

13

New policy amount (left scale)
Number of new policies (right scale)
For the years ended March 31

Policy Amount in Force
Policy amount in force refers to the total amount of coverage that Sony Life provides to individual
policyholders.

(Billions of yen)

As of March 31

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

2012

2013

Change¥36,077.0
35,707.3
369.7
635.4

¥37,779.0
37,366.3
412.7
669.9

4.7%
4.6%
11.6%
5.4%

148.9
567

158.6
604

6.5%
6.5%

Main Points
Policy amount in force increased due to the increase in new policies and a decline in the lapse and surrenderrate. Although the overall policy amount in force in Japan’s life insurance industry has been declining since
1996, Sony Life’s policy amount in force for individual life insurance and individual annuities has maintained
steady growth for 32 years since the Company commenced operations.

Sales of Products (Percentage Composition)

Policy Amount in Force andNumber of Policies in Force(Individual life insurance + Individual annuities)(Trillions of yen)
40

600

30

450

20

300

10

150

0

2012

2013

Whole life insurance
Term life insurance
Endowment and educational insurance,
and individual annuities
Variable life insurance
Others

14.2%
70.1%

18.3%
65.6%

4.1pt
(4.5pt)

8.3%
3.7%
3.7%

7.4%
4.2%
4.5%

(0.9pt)
0.5pt
0.8pt

ChangeMain Points
Death-protection products* accounted for around 90% of the new policy amount in FY2012 (policy amount basis).

10

11

12

13

0

(Individual life insurance + Individual annuities;
Policy amount basis)
Others 4.5%
Whole life
18.3%

Variable life 4.2%
Endowment andeducational
insurance, andindividual
annuities
7.4%* The new policy amount for death-protection products represents the total new policy amount after deduction of the newpolicy amounts for endowment insurance and educational endowment insurance, individual annuities, and medical insurance.
Term life
65.6%

Sony Financial Holdings Inc. Annual Report 201309

Policy amount in force (left scale)
Number of policies in force (right scale)
As of March 31

New Policy Amount by Type of ProductFor the years ended March 31034(10,000 policies)

FY2012

Lapse and Surrender Rate

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 amountin force at the beginning of the fiscal year.
For the years ended March 31

2012

2013

ChangeLapse and surrender rate

5.93%

5.31%

(Individual life insurance + Individual annuities;
Policy amount basis)(%)
8.0(0.62pt)

Main Points
In FY2012, the lapse and surrender rate (policy amount basis) declined across all insurance products,
centered on term life insurance.

6.0

4.0

2.0

0.0

09

10

11

12

13

For the years ended March 31

Income from Insurance Premiums and Insurance Claims
and Other Payments

Income from Insurance Premiums(Billions of yen)(Billions of yen)

2012

2013

Income from insurance premiums
Insurance claims and other payments
Insurance claims
Annuity payments
Insurance benefits
Surrender payments¥816.1
287.4
68.9
42.2
8.5
163.2

¥925.8
293.9
71.0
46.8
9.5
161.8

1,000

Change

13.5%
2.3%
3.0%
10.9%
11.6%
(0.9%)

Main Points
In FY2012, income from insurance premiums received from policyholders increased significantly as a result of
steady growth in policy amount in force.

800
600

FY2012 Analysis of ­Operating Performance Life Insurance Business

For the years ended March 31

400
200
0

09

10

11

12

13

For the years ended March 31

Asset Management
Sony Life’s investment policy in its general account is to invest with an emphasis on balancing
returns and market risk while seeking to ensure stable interest income and sound assets. Sony Life
invests in debt securities, primarily Japanese government bonds (JGBs) with long-term maturities,
while controlling interest rate risk in its investment portfolio.

(Billions of yen)2012
As of March 31

Japanese government andcorporate bonds
Japanese stocks
Foreign bonds
Foreign stocks and othersecurities
Monetary trusts
Policy loans
Real estate
Cash and deposits, call loans
OthersTotal

Amount2013
Composition

AmountComposition¥3,975.7
45.0
59.6

83.2%
0.9%
1.2%

¥4,561.0
31.1
62.0

84.4%
0.6%
1.1%

30.5
288.2
138.7
72.9
64.8
102.6
¥4,778.5

0.6%
6.0%
2.9%
1.5%
1.4%
2.1%
100.0%

25.4
306.1
145.0
70.3
103.3
97.7
¥5,402.1

0.5%
5.7%
2.7%
1.3%
1.9%
1.8%
100.0%

Main Points
In FY2012, Sony Life continued to invest in ultralong-term bonds with maturities of 20 years or more, leading
to an increase in the percentage of Japanese government bonds (JGBs) in the investment portfolio. The ratioof JGBs stood at 90.1% as of March 31, 2013 in real terms, reflecting such bonds included in monetary trusts.
Looking ahead, 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 othersources in ultralong-term bonds.

Sony Financial Holdings Inc. Annual Report 2013035

Unrealized Gains and Losses on Securities

Unrealized Gains on Securities

Unrealized gains and losses on securities* refer to the differences between the carrying amounts
and fair values of securities. When the fair value of an asset is higher than its carrying amount, thesale of the asset at fair value would result in a gain on the sale. Consequently, unrealized gains canfunction 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(see page 38).

(Billions of yen)

* Unrealized gains and losses on securities list the total of net unrealized gains or losses on held-to-maturity bonds andavailable-for-sale securities with fair values. The total of securities includes securities included in monetary trusts.

800

600

400

(Billions of yen)

As of March 31

Unrealized gains on securities
in the general accountUnrealized gains on held-to-maturity
securities
Net unrealized gains
on available-for-sale securities
Of which, unrealized gains on Japanese
government and corporate bonds
Of which, unrealized gains on
Japanese stocks
Of which, unrealized gains on foreign
securities

2012

2013

Change¥216.8¥675.0

200

458.1

155.8

551.7

395.8

60.9

123.2

62.3

53.4

111.6

58.1

5.8

6.2

0.3

1.3

4.2

2.8

0

09

10

11

12

13

10

11

12

13

As of March 31

Main Points
Unrealized gains on securities in the general account increased due to higher unrealized gains on Japanese
government bonds (JGBs) in line with lower long-term interest rates.
Reference: As of March 31, 2013, unrealized gains on Japanese stocks would be zero at a Nikkei Stock
Average of ¥8,270 and a TOPIX of 690 points.

Core Profit

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, andannuities, as well as to making and then investing policy reserve provisions for future payments. The
addition to core profit 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.

(Billions of yen)

Note: Sony Life, similar to most life insurers organized as stock companies, primarily sells non-participating life insurance. This
contrasts with life insurers organized as 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 isrecorded 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.
(Billions of yen)40

For the years ended March 31

Core profit

2012

¥71.6

2013

¥80.0

Change11.7%

Main Points
Core profit increased from FY2011, mainly due to a reversal of policy reserves related to minimum
guarantees on variable life insurance policies and a recovery from a negative to a positive spread. These
positive factors were partly offset by the negative impact on earnings in FY2012 of the reversal of thereserve for outstanding claims related to the Great East Japan Earthquake that was recorded in FY2011.

036

Sony Financial Holdings Inc. Annual Report 2013

80

60

20

0

09

For the years ended March 31

Reconciliation to Core Profit and Non-consolidated Ordinary Profit(Millions of yen)

2012

2013

Core profit(A)
Capital gains
Income from monetary trusts, net
Income from trading securities, net
Gains on sale of securities
Gains on derivatives, net
Foreign exchange gains, net
Other capital gains
Capital losses
Losses on monetary trusts, net
Losses on trading securities, net
Losses on sale of securities
Devaluation losses on securities
Losses on derivatives, net
Foreign exchange losses, net
Other capital losses
Net capital gains (losses)(B)
Core profit plus net capital gains (losses) (A) + (B)Other one-time gains
Gains from reinsurance
Reversal of contingency reserve
Reversal of specific reserve for possible loan losses
OthersOther one-time losses
Losses from reinsurance
Provisions for contingency reserve
Provisions for specific reserve for possible loan losses
Provisions for reserve for loan losses from borrowers
in specific foreign countries
Write-off of loans
OthersNet other one-time gains (losses)(C)
Ordinary profit(A) + (B) + (C)¥71,685
7,556
–
–
7,556
–
–
–
5,774
–
–
2,607
1,692
–
1,376
97
1,782
73,468
–
–
–
–
–
4,032
–
3,778
2

¥80,045
2,420
–
–
2,420
–
–
–
3,351
–
–
1,587
327
226
1,176
34
(931)
79,114
–
–
–
–
–
4,454
–
4,223
21

–
–
250
(4,032)¥69,436––
209(4,454)¥74,659

FY2012 Analysis of ­Operating Performance Life Insurance Business

For the years ended March 31

Notes: 1.	Core profit for the fiscal year ended March 31, 2013 (A) includes income gains of ¥5,259 million in income frommonetary trusts; other capital losses include impairment losses of ¥34 million from investment partnership; “Others”
of other one-time losses include provision of additional policy reserve of ¥209 million.
2.	Core profit for the fiscal year ended March 31, 2012 (A) includes income gains of ¥5,278 million in income frommonetary trusts; other capital losses include impairment losses of ¥97 million from investment partnership; “Others”
of other one-time losses include provision of additional policy reserve of ¥250 million.

Negative Spread

Negative Spread

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

(Billions of yen)
100(Billions of yen)

For the years ended March 31

2012

2013

Negative spread (plus amount indicates­positive spread)
Average assumed interest rate
Investment yield (general account)
Investment yield for core profit¥(1.5)
2.35%
2.17%
2.31%

¥2.1
2.27%
2.12%
2.31%

Change–%(0.08pt)(0.05pt)
0.00ptMain Points
Negative spread turned into a positive spread thanks to a lower average assumed interest rate reflecting
steady growth in new policies.

Formula for Calculating Negative Spread(  Investment yieldfor core profit*1

Average assumed–   interest
rate* )
2

×

General accountPolicy reserves*3

||

–10

–20

–30

09

10

11

12

13

For the years ended March 31
A positive amount for the negative spread indicates a
positive spread.

Average Assumed Interest Rate,
Investment Yield for Core Profit,
and Investment Yield (General Account)
(%)
4.0

3.0

2.0

Negative spread
1.0*1 Investment yield for core profit is the yield on general account policy reserves after subtracting the provision forpolicyholder dividend reserve from the general account investment returns included in core profit.
*2 Average assumed interest rate is the assumed yield on general account policy reserves.
*3 General account policy reserves are calculated based on the following formula for policy reserves in the generalaccount, excluding contingency reserve:(Policy reserves at beginning of period + policy reserves at end of period – assumed interest) x 1/2

0.0

09

10

11

12

13

Investment yield for core profit
Average assumed interest rate
Investment yield (general account)
For the years ended March 31
Sony Financial Holdings Inc. Annual Report 2013037

Ordinary Revenues, Ordinary Profit and Net Income

Ordinary Profit and Net Income(Billions of yen)

For the years ended March 31

2012

2013

Ordinary revenues
Ordinary profit
Net income¥967.469.4
31.4¥1,142.2
74.6
42.4

Change

18.1%
7.5%
35.1%

Main Points
Ordinary Revenues
Ordinary revenues increased year on year due mainly to higher income from insurance premiums on the backof steady growth in policy amount in force, and increased gains on separate accounts, net due to the market
recovery toward the end of FY2012.
Ordinary Profit
Ordinary profit increased year on year, mainly due to a reversal of policy reserves related to minimum
guarantees on variable life insurance policies and a recovery from a negative to a positive spread. These
positive factors were partly offset by the negative impact on earnings in FY2012 of the reversal of thereserve for outstanding claims related to the Great East Japan Earthquake that was recorded in FY2011.
Net Income
Net income increased year on year due in part to a reversal of a portion of deferred tax assets in FY2011
associated with the reduction in the corporate tax rate.

(Billions of yen)
80

60

40

20

0

09

10

11

12

13

Ordinary Profit
Net Income
For the years ended March 31

Solvency Margin Ratio

Solvency Margin Ratio (Current standards)

The solvency margin ratio is an indicator of payment ability. Life insurers accumulate policy reservesto prepare for the payment of future claims, allowing them to adequately respond to risks within anormally anticipated range. However, unforeseen events can occur as a result of changes in theenvironment, 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 theability to pay in response to the risk of such unpredictable events.

(%)

As of March 31

Solvency margin ratio

2012

2013

1,980.4%

2,281.8%

As of March 31(A) Total solvency margin
Common stock, etc.
Reserve for price fluctuations
Contingency reserve
General reserve for possible loan losses
Net unrealized gains on other securities x 90%(100% if losses)
Net unrealized gains on real estate x 85% (100% if losses)
Unallotted portion of reserve for policyholders’ dividends
Amount excluded from deferred tax assets
Deferred tax assets
Excess amount of policy reserves based on Zillmer method
Subordinated debt
The portion of the excess amount of policy reserves
based on Zillmer method and subordinated debt
that is not included in the margin
Deductible items(B) Total risk
E (R1+R8)2+(R2+R3+R7)2+R4
Insurance risk
(R1)
Third-sector insurance risk
(R8)
Assumed interest rate risk
(R2)
Asset management risk
(R3)
Minimum guarantee risk
(R7)
Business management risk
(R4)(C) Solvency margin ratio[(A)/{(B)x(1/2)}]x100

301.4pt(Millions of yen)

2012

2013

¥722,175
223,100
25,31955,3380¥872,502
252,363
32,26459,561054,656(173)
700–
58,774350,404–

114,602(2,012)464–
70,604
372,561–(45,945)–(27,907)–

72,93020,8507,509
28,50926,7419,904
1,870

76,472
21,871
8,307
29,054
27,592
11,474
1,966

1,980.4%

2,281.8%

Notes: 1.	The figures are calculated based on provisions in Articles 86 and 87 of the Ordinance for Enforcement of the­Insurance Business Act of Japan and the Ministry of Finance Public Notice No. 50 of 1996.
2.	Minimum guarantee risk was calculated based on the standardized approach.

038

Sony Financial Holdings Inc. Annual Report 2013

2,400
1,800

ChangeMain Points
Sony Life’s solvency margin ratio was 2,281.8% as of March 31, 2013, up 301.4 points from March 31,
2012, remaining at a high level.

Solvency Margin Ratio

3,000

1,200
600
0

11

12

13

As of March 31* The solvency margin ratios have been calculated
based on current standards applied from March
31, 2012.

Non-performing Assets
Risk-monitored Loans
As of March 31(Millions of yen)

2012

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

2013

¥–
–
–
–
¥–

Loans by Borrower Category
As of March 31

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

¥–
–
–
–
¥–
(Millions of yen)

2012

2013

¥–
–
–
141,384¥141,384¥–––147,608¥147,608

FY2012 Analysis of ­Operating Performance Life Insurance Business

Main Points
Sony Life’s asset assessment is shown in the above table. Sony Life 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 ¥145.1 billion as of March 31, 2013. Among this balance, policy loans were¥145.0 billion, and commercial loans* were ¥0.08 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 aseither policy loans provided as a service to customers, or as commercial loans. The loan balance comprises the sum of thesetwo categories.

Sony Financial Holdings Inc. Annual Report 2013039

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

A discussion of the operating performance of Sony Assurance, which operates SFH’s non-life insurance business, follows.

Policies in Force

Number of Policies in Force(10,000 policies)

As of March 31

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

2012

Change

2013

149

155

4.0%

Main Points
The number of policies in force steadily increased centered on automobile insurance.

(Automobile insurance +Medical and cancer insurance)(10,000 policies)
175

150

125

100

0

09

10

11

12

13

12

13

As of March 31

Net Premiums Written

Net Premiums Written

Net premiums written correspond to sales at most non-life insurance companies and comprise thepremiums received from policyholders (direct premiums written), plus or minus reinsurance premiums(adding direct reinsurance premiums received and subtracting direct reinsurance premiums paid).

(Billions of yen)
100

(Billions of yen)

For the years ended March 31

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

2012

75

Change

2013

¥79.1
70.4
7.6

¥83.5
74.1
8.1

5.6%
5.2%
6.7%

1.0

1.3

23.3%

50

25

* Including medical and cancer insurance

Main Points
Net premiums written increased in line with steady growth in the number of policies in force centered on
automobile insurance.

0

09

10

Net Loss Ratio

Net Loss Ratio

The net loss ratio describes the ratio of the total amount of insurance-claim payments (net lossespaid) and damage-survey expenses (loss adjustment expenses) to net premiums written.

(%)

For the years ended March 31

2012

2013

Net loss ratio
Net loss ratio for automobile insurance
Net loss ratio for personal accident insurance*

63.3%
66.8%
26.3%

63.2%
66.6%
27.0%

11

Voluntary automobile insurance
Personal accident insuranceOthers(Fire + Marine + Compulsory automobile liability)
For the years ended March 31

65

Change(0.1pt)(0.2pt)0.7pt* Including medical and cancer insurance

Main Points
The net loss ratio remained largely unchanged from the previous fiscal year, as higher net premiums written
mostly offset an increase in net losses paid from the previous fiscal year.

60

55

50

0

09

10

11

For the years ended March 31040

Sony Financial Holdings Inc. Annual Report 2013

12

13

Net Expense Ratio

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 productdevelopment costs.

(%)

For the years ended March 31

2012

2013

Net expense ratio
Combined ratio(Net loss ratio + net expense ratio)

25.7%

26.0%

Change

0.3pt

89.0%

89.2%

0.2pt

Main Points
The net expense ratio increased mainly due to higher system-related expenses and an increase in newpolicy acquisition costs.

40

30

20

10

0

09

10

11

12

13

12

13

For the years ended March 31

Underwriting Profit

Underwriting Profit

Underwriting profit indicates profit generated from underwriting insurance. Underwriting profit iscalculated by subtracting from underwriting income (net premiums written, etc.) any underwriting
expenses (net losses paid and loss adjustment expenses, etc.) and operating, general, and administrative expenses associated with underwriting, then adding or subtracting other income andexpenses (corporate taxes associated with compulsory automobile liability insurance, etc.).

(Billions of yen)(Billions of yen)

For the years ended March 31

Underwriting profit

2012

2013

¥2.1

¥1.3

2.5
2.0
1.5

Change(33.7%)

1.0
0.5
0.0

09

10

11

For the years ended March 31

Ordinary Revenues, Ordinary Profit and Net Income

Ordinary Profit and Net Income (Loss)(Billions of yen)

For the years ended March 31

Ordinary revenues
Ordinary profit
Net income

2012

¥80.0
2.8
1.2

2013

¥84.7
2.3
1.4

Change5.8%(17.1%)
11.9%(Billions of yen)
4.0

2.0

Main Points
Ordinary Revenues
Ordinary revenues increased, as a result of higher net premiums written in step with growth in thenumber of policies in force centered on automobile insurance.
Ordinary Profit
Ordinary profit decreased, although the net loss ratio remained largely unchanged from the previous fiscal
year. This was mainly due to an increase in provision for reserve for outstanding losses.
Net Income
Net income increased, due in part to a reversal of a portion of deferred tax assets in FY2011 associated withthe reduction in the corporate tax rate.

Ordinary profit
Net income (loss)
For the years ended March 31

Total Asset Composition and Investment Policy

Composition of Total Assets

Sony Assurance’s basic investment policy is to invest in yen-denominated bonds in order to ensurestable investment returns over the medium to long term, taking into account the market environment, asset management risks, and other factors.

Other assets
17.0%

0.0

–2.0

09

10

11

12

13

Cash and deposits
6.6%(Billions of yen)

As of March 31

2012

2013

ChangeTotal assets
Cash and deposits
Securities
Tangible fixed assets
Intangible fixed assets
Other assets¥118.6
5.1
84.4
0.4
6.8
21.7

¥127.4
8.4
88.6
1.1
7.5
21.6

7.4%
63.6%
5.0%
167.5%
10.4%(0.5%)

As of March
31, 2013¥127.4 billion

Tangible fixed assets
0.9%
Intangible fixed assets
5.9%

Securities
69.6%

Sony Financial Holdings Inc. Annual Report 2013

041

FY2012 Analysis of ­Operating Performance Non-life Insurance Business

Main Points
Underwriting profit decreased, although net premiums written increased while the net loss ratio remainedlargely unchanged from the previous fiscal year. This decrease mainly reflected an increase in the provision
for reserve for outstanding losses.

Non-consolidated Solvency Margin Ratio

Non-consolidated Solvency Margin Ratio(Current standards)

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

2012

2013

Non-consolidated solvency margin ratio

557.8%

504.2%(%)
1,000

Change(53.6pt)

800

Main Points
Non-consolidated solvency margin ratio was 504.2% as of March 31, 2013, down 53.6 points from March 31,
2012, remaining at a sound level.

600(Millions of yen)400

As of March 31

2012

2013

(A) Total non-consolidated solvency margin
Capital or treasury
Reserve for price fluctuations
Contingency reserve
Catastrophe reserve
General reserve for possible loan losses
Net unrealized gains on other securities(before tax deductions)
Net unrealized gains on real estate
Excess refund reserve
Subordinated debt
The portion of the excess refund reserve andsubordinated debt that is not included in the margin
Deductible items
Others(B) Total non-consolidated risk
E (R1+R2)2+(R3+R4)2+R5+R6
Ordinary insurance risk
(R1)
Third-sector insurance risk (R2)
Assumed interest rate risk (R3)
Asset management risk
(R4)
Business management risk (R5)
Major catastrophe risk
(R6)(C) Non-consolidated solvency margin ratio[(A)/{(B)x(1/2)}]x100¥27,51118,053
61
54
9,406
–

¥27,370
19,507
80
63
7,164
–

(63)
–
–
–

554
–
–
–

–
–
–

–
–
–

9,862
8,929
–
58
309
297
627

10,855
9,865
–
67
485
331
643

557.8%

504.2%

Note:	The foregoing figures were based on provisions in Articles 86 (non-consolidated solvency margin) and 87 (nonconsolidated risk) of the Ordinance for Enforcement of the Insurance Business Law 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
As of March 31(Millions of yen)

2012

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

2013

¥–
–
–
–
¥–

Loans by Borrower Category
As of March 31

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

042

Sony Financial Holdings Inc. Annual Report 2013

¥–
–
–
–
¥–
(Millions of yen)

2012

2013

¥–
–
–
–
¥–

¥–
–
–
–
¥–

200
0

11

12

13

As of March 31
The figures have been calculated based on current
standards applied from March 31, 2012.

Banking Business
SFH’s banking business comprises Sony Bank, a wholly owned subsidiary of SFH; Sony Bank Securities, a wholly owned subsidiary of Sony
Bank; and SmartLink Network, a 57%-owned subsidiary of Sony Bank.
* SmartLink Network has been included in the scope of consolidation from the second quarter of FY2011.
* On August 1, 2012, Sony Bank transferred all shares of Sony Bank Securities, engaged in the financial products and exchange business, and Sony Bank Securities was excluded from the scopeof consolidation.

Ordinary Revenues, Ordinary Profit and Net Income (Consolidated Basis)(Billions of yen)

For the years ended March 31

Consolidated ordinary revenues
Consolidated ordinary profit
Consolidated net income

2012

¥32.5
3.9
1.7

2013

¥34.3
4.4
3.2

Change

5.5%
12.4%
87.6%

Main Points
Consolidated Ordinary Revenues
Sony Bank’s consolidated ordinary revenues increased, due to higher net fees and commissions following Sony Bank’s consolidation of SmartLink Network as a­subsidiary, in addition to higher interest income received on loans due to an increase in the balance of mortgage loans.
Consolidated Ordinary Profit
Sony Bank’s consolidated ordinary profit rose due mainly to higher income related to mortgage loans.
Consolidated Net Income
Sony Bank’s consolidated net income increased due to the tax effect of reversing deferred tax assets on the transfer of all shares of Sony Bank Securities on
August 1, 2012.

Gross Operating Profit

Gross Operating Profit

Gross operating profit consists of net interest income, net fees and commissions, and net otheroperating income.
Net interest income refers to the spread between investment returns such as interest received
on loans, securities, and other items, and funding costs, including interest paid on deposits. Sony
Bank uses the deposits received from customers primarily to provide mortgage loans and invest
in securities.
Net fees and commissions refer to the spread between the fees and commissions received fromthe securities trading of customers, domestic and foreign exchanges and other operations, and thefees 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 andlosses 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

Gross operating profit
Net interest income
Net fees and commissions
Net other operating income

FY2012 Analysis of ­Operating Performance Banking BusinessSony Bank accounts for nearly all of SFH’s banking business. A discussion of the operating performance of Sony Bank
(non-consolidated) follows.

2012

¥18.3
16.1
0.1
2.0

2013

¥18.5
18.1
0.1
0.2

Change1.0%
12.5%(38.1%)(86.2%)(Billions of yen)
20
15
10
5
0
–5

09

10

11

12

13

Net interest income
Net fees and commissions
Net other operating income
For the years ended March 31

Main Points
Net Interest Income
Net interest income increased due to higher interest income received on loans in line with an increase in thebalance of mortgage loans and a decrease in interest expenses.
Net Fees and Commissions
Net fees and commissions decreased slightly due to the impact of waiving commissions on foreign-exchange
margin trading, despite an increase in fees and commissions received in conjunction with mortgage loans.
Net Other Operating Income
Net other operating income decreased due to lower gains related to bond dealings.

General and Administrative Expenses

General and Administrative Expenses(Billions of yen)

For the years ended March 31

General and administrative expenses

2012

¥13.8

2013

¥13.9

Change1.1%

Main Points
General and administrative expenses remained mostly unchanged despite an increase in personnel expenses
in step with business volume expansion.

(Billions of yen)
15

10

5

0

09

10

11

12

13

For the years ended March 31
Sony Financial Holdings Inc. Annual Report 2013043

Ordinary Revenues, Ordinary Revenues, Ordinary Profit andNet Income(Billions of yen)

For the years ended March 31

Ordinary revenues
Ordinary profit
Net income

2012(Billions of yen)
6

Change

2013

¥30.0
4.0
2.3

Ordinary Profit and Net Income (Loss)

¥31.3
4.2
0.8

4.2%
6.2%
(62.4%)

Main Points
Ordinary Revenues
Ordinary revenues increased as a result of higher interest income received on loans due to an increase in thebalance of mortgage loans.
Ordinary Profit
Ordinary profit rose due mainly to higher income related to mortgage loans.
Net Income
Net income decreased due to recording an extraordinary loss of ¥2.7 billion on the transfer of all shares ofSony Bank Securities.

4

2

0

–2

09

10

11

12

13

12

13

12

13

Ordinary profit
Net income (loss)
For the years ended March 31

Number of Accounts(10,000 accounts)

As of March 31

2012

Number of accounts

Change

2013

89

92

3.3%

Main Points
Sony Bank continued efforts to acquire new customers by upgrading and expanding its lineup of products
and services and raising brand recognition. As a result, the number of customer accounts increased steadily.

Customer Assets (Total of Deposits and Investment Trusts)(Billions of yen)

As of March 31

2012

2013

Customer Assets (Total of Deposits andInvestment Trusts)¥1,864.3¥1,974.3

As of March 31

2012

2013

Deposit balance
Yen deposits
Foreign currency deposits
Investment trust balance¥1,762.2
1,390.5
371.7
102.0

¥1,857.4
1,467.2
390.2
116.9

Change5.9%
Change

5.4%
5.5%
5.0%
14.6%

Main Points
Yen Deposits
Yen deposits increased due to the positive effect of special campaigns associated with the summer 2012bonus season and a shift from foreign currency deposits to yen deposits in step with the yen’s depreciation.
Foreign Currency Deposits
Foreign currency deposits increased due to the positive effects of translation into yen (+¥50.1 billion),
despite a negative impact from the cancellation of foreign currency deposits due to the yen’s depreciation.
Investment Trusts
The balance of investment trusts increased due to higher Net Asset Value (NAV) reflecting the rebound in
financial markets.

Loans
As of March 31

2012

2013

Loans
Mortgage loans
Others¥835.5749.6
85.9¥970.2
860.3
109.8

Change

16.1%
14.8%
27.9%

Main Points
The balance of loans increased due to a steady increase in the balance of mortgage loans, in addition to ahigher corporate loan balance centered on syndicated loans.
The mortgage loan business saw intensified competition in a low interest rate environment. However,Sony Bank’s balance of mortgage loans increased steadily, reflecting moves by borrowers to take out
mortgage loans in anticipation of rising interest rates and a consumption tax hike, in addition toenhanced tie-ups with real estate companies.
The “Others” balance includes corporate loans, card loans, and special-purpose loans. The corporateloan balance stood at ¥103.3 billion as of March 31, 2013.

Sony Financial Holdings Inc. Annual Report 2013

(Billions of yen)
2,000
1,600
1,200
800
400
0

09

10

11

Yen deposits
Foreign currency deposits
As of March 31

Loans(Billions of yen)044

Deposit Balance(Billions of yen)
1,000
800
600
400
200
0

09

Mortgage loans
Others
As of March 31

10

11

Securities

Securities (by Ratings)

Sony Bank’s securities investments consist of investments with interest rate risk, mainly Japanese
government bonds (JGBs), and investments with credit risk, mainly investment-grade corporate bonds.

(Billions of yen)(Billions of yen)

As of March 31

2012

2013

ChangeBalance of securities
Japanese government bonds
Japanese municipal bonds
Japanese corporate bonds
Japanese stocks
Foreign securities
Other securities¥912.9
206.9
29.1
284.7
7.0
376.4
8.5

¥908.8
194.0
61.2
202.4
2.0
442.0
7.0

(0.4%)(6.3%)
110.1%(28.9%)(70.9%)
17.4%(17.0%)

Main Points
With respect to the ratings of the securities held by Sony Bank, securities rated AA or above accounted
for 68.9% of the total. Sony Bank’s investments in SmartLink Network of ¥2.0 billion are recorded as
Japanese stocks.

1,000
800
600
400
200
0

09

10

11

12

13

AAA
AA
A
BBB
Others
As of March 31* S ony Bank uses the Basel II 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

Composition of Total Assets(Billions of yen)

2012

2013

Total assets
Securities
Loans
Cash and due from banks
Monetary trusts
Call loans¥1,890.5
912.9
835.5
87.0
13.2
10.0

¥2,005.0
908.8
970.2
61.9
18.1
10.0

Change6.1%(0.4%)
16.1%(28.9%)
37.3%
0.0%

Monetary trusts
0.9%

Call loans 0.5%
Others 1.8%

Cash and duefrom banks 3.1%

As of March
31, 2013¥2,005.0
billionMain Points
Sony Bank’s total assets increased, tracking expansion in loan assets.

Securities
45.3%
Loans
48.4%

Non-consolidated Capital Adequacy Ratio

Non-consolidated Capital Adequacy
Ratio and Tier I Ratio (Domestic criteria)

The capital adequacy ratio is an important indicator of a bank’s financial soundness.
As of March 31

2012

2013

Non-consolidated capital adequacy ratio(Domestic criteria)
Tier I ratio (Domestic criteria)

11.58%
9.63%

11.98%
8.85%

Change(%)
15.0

0.40pt(0.78pt)

Main Points
The non-consolidated capital adequacy ratio increased from the level at the previous fiscal year-end as aresult of a ¥10.0 billion subordinated loan granted by SFH to Sony Bank in February 2013 for the purpose ofreinforcing Sony Bank’s capital base. Sony Bank continues to maintain a sound financial position.

Sony Bank Non-consolidated Capital Adequacy Ratio (Domestic criteria)
As of March 31

Capital Common stock		
Capital surplus
		Retained earnings
Tier I (core) capital[A]   Preferred securities with step-up interest rate provision		General reserve for possible loan losses
		
Subordinated debt
		  Subordinated term debt and term preferred stock
Tier II (supplementary) capital[B]
Tier III (sub-supplementary) capital[C]
Capital subtotal [A + B + C][D]
Deductions[E]
Total capital [D] – [E]		
[F]
Risk-adjusted assets Balance sheet items			Off-balance sheet items
			Result of dividing operational risk
equivalent amount by 8%
Total risk assets		
[G]
Capital adequacy ratio (Domestic criteria) [F] / [G]Reference: Tier I ratio (Domestic criteria) [A] / [G](Millions of yen)

2012

2013

¥ 31,000
21,00011,627
63,627–835
12,00012,00012,835–76,463–76,463
622,548
6,254¥ 31,000
21,00012,50664,506–834
22,00022,00022,834–87,340–87,340690,590
5,398

31,287660,090
11.58%
9.63%

32,853728,843
11.98%
8.85%

12.0
9.0
6.0
3.0
0.0

09

10

11

12

13

 on-consolidated capital adequacy ratio
N(Domestic criteria)
Tier I ratio (Domestic criteria)
As of March 31

Note: 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 Law for determining the capital adequacyof a bank in light of the assets held by the bank, since the end of March 2007. Furthermore, in the fiscal year ended
March 31, 2012, the Bank applied FSA Notification No. 79 (2008), and in the fiscal year ended March 31, 2013, theBank applied FSA Notification No. 56 (2012).
Sony Financial Holdings Inc. Annual Report 2013045

FY2012 Analysis of ­Operating Performance Banking Business

As of March 31

Non-performing Assets
Sony Bank strives for small-loan diversification in its lending to individuals, screens potential­borrowers 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 tocustomer credit and adheres to standards that prevent excessive lending to particular borrowers.
The sales division also works independently of the screening division, and the bank ensures that
financing proceeds only following due diligence via relevant deliberative entities. In addition, Sony
Bank has established a meticulous loan management and screening system.

Risk-monitored Loans(Millions of yen)

As of March 31

2012

2013

Category
Bankrupt loans
Non-accrual delinquent loans
Past-due loans (3 months or more)
Restructured loans
Total¥  174
1,369
–
2,068
¥3,613¥  150
1,534
–
2,220
¥3,905

Problem Loans Based on the Financial Reconstruction Law
As of March 31

Category
Bankrupt and quasi-bankrupt loans
Doubtful loans
Sub-standard loans
Normal loans
Total
Main Points
Sony Bank has consistently maintained low levels of non-performing loans.

046

Sony Financial Holdings Inc. Annual Report 2013

(Millions of yen)

2012

2013

¥    849
828
2,073
845,977¥849,728¥    714
1,094
2,222
978,005¥982,036

Contribution to Sustainable Development

Corporate Governance

CSR

Aiming to Be the Most Highly Trusted Financial Services Group by Customers
Our Vision
The Sony Financial Group seeks to become the most highly trusted financial services group by customers.
To this end, the Sony Financial Group will combine many different financial functions (savings, investment,
borrowing, and protection) to provide high-value-added financial products and high-quality services thatmeet every customer’s financial needs.

Our 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 themlead prosperous lives with financial security.

Contribution to Sustainable Development

Give Back to Society
We believe that a special commitment to the public good is demanded ofa 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 customs and convention.

Foster an Open Corporate Culture
We believe that every employee’s contribution is important to develop our ideal ofa financial services company. We will thus foster an open corporate culture where employees
can freely express their individuality and demonstrate their abilities to the fullest.

Sony Financial Holdings Inc. Annual Report 2013047

Contribution to Sustainable Development

Corporate GovernanceDirectors of SFH (As of July 1, 2013)

6

9

3

5

1

2

4

8

7

President, Representative Director

1 Katsumi Ihara
President, Representative Director of Sony Life Insurance Co., Ltd.
Director of Sony Assurance Inc.
Director of Sony Bank Inc.

Senior Managing Director

Director

Director

Director

2 Hirotoshi Watanabe

3 Masamitsu Shimaoka

4 Shigeru Ishii

5 Atsuo Niwa

Director of Sony Life InsuranceCo., Ltd.
Director of Sony Assurance Inc.
Director of Sony Bank Inc.

Representative Director ofSony Life Insurance Co., Ltd.

President, Representative Directorof Sony Bank Inc.

President, Representative Directorof Sony Assurance Inc.

Director

Director

Director (Outside)

Director (Outside)

6 Masaru Kato

7 Takemi Nagasaka

8 Isao Yamamoto(Note 3)

9 Shiro Kuniya(Note 3)

Director, Representative Corporate
Executive Officer, EVP and CFO(Note 2)
of Sony Corporation

SVP(Note 2), Corporate Executive,
Senior General Manager,
Corporate Planning & Control
Division of Sony Corporation

President, Enterprising
Investment, Inc.

Notes: 1. Main concurrent positions are shown under the name of each individual.
2. EVP stands for Executive Vice President, CFO stands for Chief Financial Officer and SVP stands for Senior Vice President.
3. Mr. Isao Yamamoto and Mr. Shiro Kuniya are Independent Directors based on the rules of the Tokyo Stock Exchange.

048

Sony Financial Holdings Inc. Annual Report 2013

Managing Partner,
Oh-Ebashi LPC & Partners

Statutory Auditors of SFH (As of July 1, 2013)

2

3

Standing Statutory Auditor (Outside)

Statutory Auditor (Outside)

Statutory Auditor

1 Hiroshi Sano

2 Hirotoshi Korenaga

3 Mitsuhiro Koizumi

Statutory Auditor of Sony Life InsuranceCo., Ltd.
Statutory Auditor of Sony Assurance Inc.
Statutory Auditor of Sony Bank Inc.

General Manager, Accounting
Department 1, Corporate Planning& Control Division of Sony
Corporation

Contribution to Sustainable Development

1

Standing Statutory Auditor ofSony Life Insurance Co., Ltd.

Message from Outside Statutory Auditor
About the Sony Financial GroupThe Sony Financial Group has three core subsidiaries engaged in the life insurance, non-life insurance and banking
businesses. Each subsidiary has achieved sustained growth by building business models that differ from existing companies in their respective industries. Furthermore, the Group has striven to provide high-quality products and services topolicyholders and depositors, while ensuring a high degree of financial soundness.

Background to Appointment as Outside Statutory Auditor
Previously, I had conducted credit investigations of companies and checked the appropriateness of bank management
decisions for many years as the general manager of the legal affairs department of a major bank. When SFH was spunoff from Sony and established as a new company, I was appointed as a statutory auditor and have served as a standing
outside statutory auditor to this day.

Role of Outside Statutory Auditors

Hiroshi Sano

The outside statutory auditors’ role is to audit the directors’ execution of duties. This role encompasses both operational
audits and accounting audits. When conducting audits, I utilize my experience and knowledge to confirm whether or
not business execution is in compliance with laws, regulations and other rules as a matter of course. In addition, I check
whether or not the directors’ business execution could cause problems from the standpoint of protecting policyholders
and depositors, while auditing the status of risk management, compliance and internal audit activities. I also confirm
whether or not transactions between SFH and Sony, and its Group companies conform to the arm’s length rule stipulatedby the Insurance Business Act of Japan and the Banking Act of Japan.

Standing Statutory Auditor

Sony Financial Holdings Inc. Annual Report 2013049

Contribution to Sustainable Development

Corporate Governance

Profiles of Outside Directors and Statutory Auditors (As of July 1, 2013)
Outside Directors
Name

Isao Yamamoto

Shiro Kuniya

Biography

1981	Entered Nomura Research Institute, Ltd.
1991	Head of Strategic Advisory Group, Nomura Research ­Institute, Ltd.
1996	Director, Investment Banking Division, Merrill Lynch Japan
Securities Co., Ltd.
1999	Managing Director, Investment Banking Division, Merrill Lynch
Japan Securities Co., Ltd.
2002	Co-head of Investment Banking Division, Managing Director,
Merrill Lynch Japan Securities Co., Ltd.
2003	President & CEO, The Institute for Securities Investments &Governance2006	Director, Japan CableCast Inc.
2006	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 of SFH (current position)2012	Director, BILCOM, Inc. (current position)

1982	Registered as attorney and 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)2012	Director, Ebara Corporation (current position)2013	Director of SFH (current position)

Reasons for
Appointment

Mr. Yamamoto possesses many years of experience as a securities
analyst and an advisor for corporate financial affairs and M&As,
and has no conflict of special interest with SFH. Accordingly, SFH has
determined that Mr. Yamamoto can properly fulfill the duties of an
outside director and an independent director.

Mr. Kuniya has specialized knowledge and experiences as alawyer, 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.

Outside Statutory Auditors
Name

Hiroshi Sano

Hirotoshi Korenaga

Biography

1969	Entered Mitsui Bank
(current: Sumitomo Mitsui ­Banking Corporation)
2001	Senior Managing Director, The Sakura Servicing Co., Ltd.
2004	Standing Statutory Auditor of SFH (current position)
2004	Statutory Auditor, Sony Life ­Insurance Co., Ltd.
(current position)2005	Statutory Auditor, Sony ­Assurance Inc. (current position)2010	Statutory Auditor, Sony Bank Inc. (current position)

1988	Entered 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	General Manager, Accounting Department 1,
Corporate Planning & Control Division, Sony ­Corporation(current position)2013	Statutory Auditor of SFH (current position)

Reasons for
Appointment

Mr. Sano possesses strong insight into corporate audits along with
abundant work experience in a broad range of fields. Accordingly,
SFH has determined that Mr. Sano can fulfill the role of an outside
statutory auditor by using his professional experience.

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 can fulfill his role as an outside statutory auditor byusing his professional experience.

Message from Outside Director
Roles of Outside Directors
The outside directors’ roles are to pursue management transparency, objectivity and efficiency by supervising andmonitoring the executive directors’ execution of duties from an independent perspective, while enhancing decisionmaking quality by the Board of Directors to promote SFH’s sound growth and enhance its corporate value. Sony owns
more than 50% of the outstanding shares of SFH which conducts multiple financial services businesses as a group. For
this reason, I believe that it is particularly important to ensure legal compliance and fair trading with respect to transactions among Sony Financial Group companies and transactions with the Sony Group that may present conflicts ofinterest, as well as to give due consideration to the interests of minority shareholders. Leveraging my experience as afinancial advisor, I raise questions and express my opinions at meetings of the Board of Directors and of the Executive
Committee, and at other meetings.

SFH’s Corporate Culture
SFH has an open culture in which people can exchange a diverse array of views in a constructive and frank manner.
The presence of two outside directors, including me, and two outside statutory auditors, helps to ensure a healthy
degree of tension within the board. In this culture, SFH’s Board of Directors makes high-quality decisions while ensuringsoundness, effectiveness, fairness and transparency, based on thorough discussions.

Closing Message
Isao Yamamoto
Outside Director
President,
Enterprising Investment, Inc.

050

Given that SFH is a holding company, I strive to focus supervision and monitoring of SFH’s Board of Directors on thecreation of business synergies among subsidiaries and the development of new businesses. SFH must embrace thechallenge of taking on business risk to raise corporate value, while conducting risk management in order to ensure soundoperations as a financial group, including legal compliance. Mindful of these dual perspectives, I will continue working toenhance the supervisory and monitoring functions of SFH’s Board of Directors, to improve its decision-making quality.

Sony Financial Holdings Inc. Annual Report 2013

Basic Stance on Corporate Governance
The Sony Financial Group positions its corporate vision and corporate philosophy as the basic policy guiding various­activities—its polestar for formulating management strategies and making management decisions. The Sony Financial
Group’s corporate vision is to become the most highly trusted financial services group by customers. To achieve thisobjective, the Sony Financial Group makes effective use of the business characteristics, information and other featuresof its Group companies, based on an understanding of the differences in the history, size, business models and other attributes of each Group company. The goal is to conduct integrated management of the entire Group. Above all, this goal ispremised on ensuring the soundness and appropriateness of business activities. Indeed, management sees this task as a
top priority. Accordingly, the Sony Financial Group has built an organizational framework with emphasis on group-wide
compliance and risk management.

Establishing an Internal Control System
SFH’s Board of Directors has stipulated a Basic Policy on­Establishing an Internal Control System in compliance with theCompanies Act of Japan to ensure the appropriateness of company business activities. In line with this policy, SFH has established and operates an appropriate internal control system.

SFH has also introduced an Internal Control and Financial
Reporting System in accordance with the Financial Instruments
and Exchange Act of Japan, with the aim of strengthening
internal control governing financial reporting. As a listed company, SFH has put in place and operates the necessary organizational system and operational rules for disclosing proper
financial information.

Basic Policy on Establishing an Internal Control System
1. System to ensure that the execution of duties by directors and employees is legally compliant and in accordance with
the Articles of Incorporation

Contribution to Sustainable Developmenti.	The Board of Directors has established a code of conduct as a basic policy for compliance and made this code clear to SFH’s executives,
employees and subsidiaries.
ii.	The Board of Directors has created a compliance manual that provides specific compliance guidelines and a compliance program thatdefines specific plans.
iii.	The Board of Directors has created a compliance supervisory department to promote its compliance program. The compliance­supervisory department regularly reports to the Board of Directors on the progress of the compliance program.
iv.	The Board of Directors has formulated the Basic Group Policy on Eradicating Anti-social Influences. This policy describes the firm
stance the Group takes to counter anti-social influences and build the structure necessary to fulfill this policy.
v.	The Board of Directors has established an internal hotline system and has informed SFH’s executives, employees and subsidiaries about
the system. 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 has established 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 and verifies, from an independent and objective viewpoint, the implementation and operational status of the internal control
system; and reports regularly to the Board of Directors the status of internal audits.
vii.	The Board of Directors has formulated internal audit regulations, which define the basic policy regarding internal audits, and informs
SFH’s executives and employees and subsidiaries of these.

2. System for preserving and managing information related to the execution of duties by directors
SFH has established 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 preserved and managed in accordancewith these regulations and laws.

3. Systems on regulations related to risk managementi.	The Board of Directors has formulated the fundamental principles for risk management activities as a basic policy for group risk­management and informs SFH’s executives, employees and subsidiaries of these.
ii.	The Board of Directors has established a risk management supervisory department to manage risks appropriately for SFH and its­subsidiaries, in accordance with each entity’s scale, characteristics and type of business. This department reports regularly to the Boardof 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 lightof the risks the Sony Financial Group directly faces and to implement appropriate capital allocations. If necessary, the Board of Directors
takes measures designed to strengthen capital bases.
iv.	The Board of Directors formulates contingency plans to build a system that enables the Sony Financial Group to respond rapidly to acrisis and take measures to minimize the impact of these risks. The Board of Directors makes these plans known to SFH’s executives,
employees and subsidiaries.

Sony Financial Holdings Inc. Annual Report 2013051

Contribution to Sustainable Development

Corporate Governance

4. Systems to ensure the efficient execution of duties by directorsi.	The Board of Directors formulates approval regulations, organizational and task-sharing regulations and other internal provisions, andcreates an appropriate structure for the efficient execution of duties.
ii.	The Board of Directors formulates business plan control regulations, which are employed to control non-consolidated and consolidated
medium-term business plans and annual business plans.
iii.	The department in charge of business planning reports regularly to the Board of Directors regarding the progress of group-wide plans.

5. System to ensure the appropriateness of operations by SFH and the corporate group, including SFH’s parent company
and subsidiariesi.	In addition to exercising shareholder rights as a financial holding company, SFH ensures the appropriateness of its subsidiaries’ o­ perations
by exercising management control in accordance with the management control agreements made between SFH and its subsidiaries.
ii.	SFH deliberates and examines the appropriateness and compliance of group-wide transactions, alliances or new business by subsidiaries
that have the potential to significantly impact the management of the Group before the commencement of those transactions. Suchissues are resolved by or reported to the Board of Directors.
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.

6. 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.

7. Independence from directors of employees assigned as mentioned directly above
Statutory auditors must agree to the appointment, removal and evaluations of employees assigned to assist them in their duties.

8. System for directors and employees to report to statutory auditors, and other reporting systemi.	If directors or employees are requested to provide business reports to statutory auditors, they do so without delay.
ii.	If directors or employees receive notification via the internal hotline system, they report immediately to the statutory auditors.

9. Other systems to ensure the effectiveness of audits by statutory auditors
Representative directors endeavor to forge and deepen relationships with statutory auditors based on mutual understanding and trust by
fostering an environment that is necessary for audits by statutory auditors.

Management Systems
SFH has adopted the statutory auditor system. It appoints outside directors who work with statutory auditors to­supervise ­management, thereby strengthening corporate governance.
SFH is a listed company with a listed parent company (Sony Corporation, hereafter Sony, which holds 60% of SFH’s
shares). For this reason, SFH has specified a Policy Concerning the Measures to Protect Minority Shareholders in­Transactions with the Controlling Shareholder to protect the interests of minority shareholders.
* 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 at the Tokyo Stock Exchange’s or SFH’s website (http://www.sonyfh.co.jp/web/index_en.html).

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Sony Financial Holdings Inc. Annual Report 2013

Board of Directors (As of July 1, 2013)
SFH, as a pure holding company, has formed a Board of D
­ irectors
not only to manage SFH but also to integrate its group management system and to strengthen its corporate governance.
SFH’s Board of Directors is made up of nine members. In
addition to two executive directors, there are three representative directors of SFH’s subsidiaries who serve as non-­executive directors of SFH and contribute to efficient business
operations of the Group as a whole.
Furthermore, because SFH is a listed company with a publicly listed parent company, it has appointed two outside directors who are independent directors as required by the Tokyo
Stock Exchange Group to protect ordinary shareholders.
Additionally, in order to receive general management
advice concerning the Sony Financial Group, SFH has
appointed directors from outside the Group. Two of these
individuals serve concurrently as representative corporate
executive officer and corporate executive, respectively, ofSony, the parent company.
SFH’s Articles of Incorporation stipulate that there can be
up to 12 directors.
Regarding the boards of directors of Group subsidiaries,
three of SFH’s executive directors and general managers serve
concurrently as directors of subsidiaries with the aim ofincreasing the effectiveness of group strategy and ensuring
the sound business management of each company.

(Statutory Audits)
SFH’s Board of Statutory Auditors has three members, ofwhom two 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 people, andexamine SFH’s operations and financial condition. At the sametime, statutory auditors maintain close collaboration withoutside directors, the director and employees in charge ofinternal audits to enhance the supervisory function withrespect to corporate management.
SFH’s Articles of Incorporation stipulate that there can be
up to five statutory auditors.

Board of Directors
meeting

Board of Statutory
Auditors meeting

Yasushi Ikeda

Attended 13 outof 14 meetings–

Isao Yamamoto

Attended all
14 meetings–

Hiroshi Sano

Attended all
14 meetings

Attended all 12
meetings

Takemi Nagasaka

Attended 13 outof 14 meetings

Attended 11 outof 12 meetings

Hiroshi Ueda

Attended all
14 meetings

Attended all 12
meetings

Name

Outsidedirectors

Outsidestatutory
auditors(Internal Audits)
SFH performs internal audits through its Audit Department.
The Audit Department reports directly to the director in
charge of internal audits (the President and Representative
Director of SFH) and is independent of SFH’s operating divisions. It conducts internal audits from an independent andobjective standpoint.
Please see page 62 for further details.

(Accounting Audits)
The accounting firm and back-up team of the ­Certified Public
Accountants (CPAs) who acted as the accounting a­ uditors of
SFH are as follows:
Accounting firm

PricewaterhouseCoopers Aarata

Accounting audit team

Four CPAs, three others

Compensation for SFH’s Directors andStatutory Auditors
The policy for determining the compensation of executive
directors and outside directors stipulated by resolution of theBoard of Directors and the policy for determining the compensation of statutory auditors stipulated by resolution of theBoard of Statutory Auditors are as follows. Directors with noexecutive duties, except outside directors, and non-executive
statutory auditors are, in principle, paid no compensation.
The compensation of individual executive directors andoutside directors is deliberated by the Compensation Advisory
Committee and determined by resolution of the Board of
Directors based on the committee’s report. Meanwhile, thecompensation of individual statutory auditors is determinedthrough discussion by statutory auditors.
1 Executive Directors
The main responsibility of executive directors is to continuously increase corporate value as corporate managers of SFH
and the Sony Financial Group. Consequently, SFH’s basic
policy is to determine compensation for executive directors,
Sony Financial Holdings Inc. Annual Report 2013

053

Contribution to Sustainable Development

Statutory Audits, Internal Audits and Accounting
Audits (As of July 1, 2013)(Attendance of outside directors and outside statutory­auditors in meetings of the Board of Directors and theBoard of Statutory Auditors for the fiscal year ended
March 31, 2013)

Contribution to Sustainable Development
considering a balance between a fixed portion and a resultslinked portion with a focus on securing talented humanresources and ensuring that compensation serves as an­effective incentive for improving business performance.
Compen­sationCompensation consists of a fixed portion depending on
the position, such as president and representative­director, and a results-linked portion depending on theperformance of SFH and the Sony Financial Group as awhole and individual responsibilities.
The results-linked portion could range from 0% to200% of the standard amount subject to achievementof management targets for SFH and the Sony Financial
Group and discharge of responsibilities.

Level

A suitable level of compensation shall be paid in order
to secure talented individuals. In determining the level,
consideration is given to the results of third-party
surveys of the compensation levels of corporate­managers and other information.

Retirement
benefits

SFH sets aside an amount equivalent to a defined
portion of compensation for every year in office andpays the full amount upon retirement. A defined portionof the reserved amount is converted into shares of SFH
and granted, with the aggregate number of sharesconverted at the market price and paid upon retirement.

2 Outside Directors
The main responsibility of outside directors is to enhance thetransparency and objectivity of corporate management throughthe oversight and supervision of the performance of duties byexecutive directors. Consequently, SFH’s basic policy is to determine compensation for outside directors as fixed compensation
with a focus on securing talented human resources and ensuring that supervision and oversight function effectively.
Compen­sationA fixed amount is paid according to the role.

Level

A suitable level of compensation shall be paid in order
to secure talented individuals. In determining the level,
consideration is given to the results of third-party
surveys of the compensation levels of corporate­managers and other information.

Retirement
benefitsNone

3 Statutory Auditors
The main responsibility of statutory auditors is to ensure thetransparency and objectivity of corporate management byconducting operational and accounting audits. Consequently,
SFH’s basic policy is to determine compensation for statutory
auditors as fixed compensation with a focus on securing talented individuals and ensuring that the audit function is working effectively.
Compen­sationA fixed amount is paid according to the role.

Level

A suitable level of compensation shall be paid in order
to secure talented individuals. In determining the level,
consideration is given to the results of third-party
surveys of the compensation levels of statutory auditorsand other information.

Retirement
benefits

A fixed amount is paid according to the role.

054

Sony Financial Holdings Inc. Annual Report 2013

Corporate Governance• Compensation Advisory Committee
SFH has formulated the Compensation Advisory Committee
Regulations to clarify the process for determining the compensation of directors of SFH and representative directors ofsubsidiaries, and established the Compensation Advisory­Committee to deliberate these matters. Consisting of 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 as necessary, andreports the results of its deliberations to the respective boardsof directors. The above policies are also deliberated by theCompensation Advisory Committee.
• Compensation for SFH’s directors and statutory auditors
for the fiscal year ended March 31, 2013
Details of compensation for SFH’s directors and statutory auditors for the fiscal year ended March 31, 2013 are as follows:
Total amount of compensation for directors
and statutory auditors (Millions of yen)
Total amount by­compensation category

Number ofpayeesBasiccompen­sation

Provision forreserve forretirement
benefits

Directors (internal)

2

142

118

23

Directors (outside)

2

16

16

–

Statutory auditor(internal)

–

–

–

–

Statutory auditor(outside)

1

21

20

1

Total

5

180

154

25

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.

Environment Relating to the Exercise of Voting Rights
SFH does the following to make it easier for shareholders to
exercise their voting rights.
• SFH sets the meeting date to avoid dates on which othercompanies’ annual general meetings are concentrated.
• SFH posts the Notice of Convocation on its website.
• SFH provides a partial translation of the Notice of­Convocation in English.
• SFH uses an electronic voting platform.
• SFH posts the results of the voting on its website.

Internal Control
SFH has established a Basic Policy on Establishing an Internal Control System in compliance with the Companies
Act of Japan. To ensure that business execution related to important matters approved by the Board of Directors is­properly conducted, SFH has established and operates internal regulations (such as Board of Directors r­ egulations,­Executive ­Committee regulations, decision-making regulations, code of conduct, compliance manual, internal­reporting regulations).
The Sony Financial Group Internal Control
General Meeting of Shareholders

SFH
Board of Directors

Compensation Advisory Committee

Board of Statutory Auditors
Statutory Auditors
Independent
AuditorExecutive Committee

Corporate Planning
Department

Corporate­Communications &Investor Relations
Department

Corporate Control
Department

Accounting
Department• Serve concurrently as directors
and statutory auditors• Share and confirm information
Sony Life

Human Resources& General Affairs
Department• Report and confirm• Discuss in advanceSony Assurance

Business Planning
Department

Audit
Department• Convey group policies• Manage and advise• Monitor
Sony Bank

Contribution to Sustainable Development

Sony Financial Holdings Inc. Annual Report 2013055

Contribution to Sustainable Development

Corporate Governance

Relationship with Parent Company, Sony Corporation
Capital and Personnel Relationships (As of July 1, 2013)

Ensuring Independence in Business Activities

SFH is a financial holding company established as a corporate
spin-off from Sony in April 2004. In October 2007, SFH’s
shares were listed on the First Section of the Tokyo Stock
Exchange with the initial public offering conducted in Japanand overseas, after which Sony’s shareholding became 60%.
As a result of this capital relationship, SFH may be subject tothe 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 andbusiness transfers, amendments to the Articles of Incorporation, and the payment of dividends.
In order to receive general management advice concerning
the Sony Financial Group and strengthen the audit system,
SFH has appointed directors and statutory auditors from outside the Sony Financial Group. However, two of these SFH
directors and one statutory auditor serve concurrently as
representative corporate executive officer, corporate executive,
or general manager of Sony. Moreover, one statutory auditorof Sony Assurance and one statutory auditor of Sony Bank
serve concurrently as employees of Sony. Because theappointment of concurrent directors and statutory auditors isbased on requests made by the Sony Financial Group, SFH
believes that it is ­positioned 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.

Because the Sony Financial Group’s business operation has atenuous connection with the 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 has conducted its business while maintaining a high degree of independence fromthe Sony Group.
In addition, Sony, which has obtained approval from the
Financial Services Agency to remain a major shareholder ofSFH, recognizes and respects SFH’s corporate philosophy.
Furthermore, SFH conforms to the arm’s length rule stipulatedby the Insurance Business Act and the Banking Act of Japan.
* The Sony Financial Group is included in the Sony Group’s Financial Services segment.

Using the “Sony” Trade Name and Trademark
The Sony Financial Group companies have entered into royalty
agreements with Sony for the use of the “Sony” trade nameand trademark for the purpose of raising each company’s
recognition and trustworthiness. However, these agreements
can be rescinded by Sony 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 theSony ­Financial Group companies dropping. Furthermore, theSony Financial Group companies pay royalty fees to Sonybased on these agreements. The monetary amount of theseroyalty fees has no material impact on the management baseof 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.

Policy Concerning Measures to Protect Minority ­Shareholders in Transactions with Sony Corporation(Controlling Shareholder)
The Sony Financial Group’s policy is to develop business while
maintaining cooperative ties with the Sony Group. On the other
hand, the Sony Financial 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 and strategies, and operates in different
business fields than the Sony Group.

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Sony Financial Holdings Inc. Annual Report 2013

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.

Compliance
Basic Stance on ComplianceTo ensure sound and proper business operations, SFH must encourage all executives and employees to deepen theirunderstanding of SFH’s corporate philosophy, internal regulations and relevant laws and regulations, enforce compliancewith these laws and regulations, and manage its business operations transparently and properly based on a strong senseof ethics. SFH broadly defines compliance to include all of the foregoing factors. SFH thus considers compliance to be oneof its top management priorities. Accordingly, SFH has systems in place to ensure that all executives and employees are
fully aware of their duties and responsibilities under the laws and regulations.
As a financial holding company with insurance and banking subsidiaries, SFH is responsible for monitoring complianceof the Group companies and advising each of these companies on compliance issues as it deems necessary. Compliancerelated responsibility primarily lies with individual Group companies, which are responsible for establishing systems toenhance the effectiveness of compliance according to their specific industry and scale of business operations. SFH’s role isto constantly monitor and promote the Group companies’ compliance from the viewpoint of group management.

Compliance Systems at SFH and Sony Financial
Group Companies• SFH’s Compliance Systems* Compliance ManualThis manual outlines SFH’s compliance system, as well as the Group’s corporate
philosophy, which executives and employees must be aware of, and laws andregulations, which they must obey. The manual also establishes measures forhandling any breaches of laws and regulations, i.e., compliance breaches, and for
confirming the compliance status.
** Compliance Program
Formulated annually, in principle, this program defines a specific action plan for
confirming the compliance status, as well as training and other related items.

• Compliance Systems at SFH and Sony Financial Group

Companies
SFH and the Group companies are responsible for establishingeffective compliance systems according to their specific­industry and scale of business operations.

SFH holds regular Compliance Meetings with the Groupc­ ompanies to conduct prior consultations on compliancerelated issues and exchange information about the state ofcompliance promotion and legal issues. The Corporate Control
Department serves as the secretariat for these meetings,
whose members include SFH and the Group company­executives, 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 otherimportant meetings.

Internal Hotline System
An internal hotline system is in place to enable executives andemployees of SFH and the Sony Financial Group companies,
as well as temporary employees and the employees of business
partners, to report matters of concern. These matters include
business policies, operating activities or other behaviors of theSony Group, SFH and the Sony Financial Group ­companies
that they are convinced breach (or could breach) laws andregulations or the internal regulations of the Sony Group,
SFH or the Sony Financial Group companies. Informants may
choose and notify the appropriate hotline desk of those thathave been established at SFH and each Sony Financial Group­company, or the Compliance H­ otline at Sony, which is thedesk for the Sony Group. SFH implements appropriate measures to protect ­informants, while strictly managing andresponding to any information they provide.
Moreover, SFH communicates with Sony regarding appropriate responses to notifications received via the Compliance­Hotline at Sony. SFH also communicates with Sony about
notifications of issues having the potential to affect Sony
Group companies other than SFH.

Sony Financial Holdings Inc. Annual Report 2013

057

Contribution to Sustainable Development

SFH’s Board of Directors has established a Compliance
Manual* and a Compliance Program.** SFH strives to monitor
conformance and progress of compliance at all times, while
proactively putting compliance systems in place for itself and
its Group companies.
SFH’s Executive Committee has been entrusted by the
Board of Directors to direct each department to plan andenforce necessary compliance-related measures.
SFH’s Corporate Control Department is responsible foroverall control of the planning, proposal and promotion ofcompliance-related measures. This department also monitors
the compliance status of the Group companies.

• Compliance Meetings

Contribution to Sustainable Development
Conflicts of Interest Policy (Summary)
SFH has formulated a Management Policy Concerning­Conflicts of Interest and established a structure under theprovisions of the Banking Act, the Insurance Business Act, and(As of July 1, 2013)

Summary of Conflicts of Interest Policy
I. Basic Policy
The Sony Financial Group* has established a structure under theprovisions of the Banking Act, the Insurance Business Act, andthe Financial Instruments and Exchange Act of Japan to ensurethat customers’ interests are not harmed when they maketransactions with Sony Financial Group companies* in the eventof potential conflicts of interest between customers of SonyFinancial Group companies and Sony Group finance companies*
or between customers of Sony Financial Group com­panies andcustomers of Sony Group finance companies.
*	Under this policy, “Sony Financial Group companies” represents Sony Life,
Sony ­Assurance, Sony Bank, AEGON Sony Life Insurance and SA Reinsurance.
*	Under this policy, “Sony Financial Group” represents SFH and Sony Financial
Group companies.
*	Under this policy, “Sony Group finance companies” represents Sony Financial
Group companies, and other corporations and entities in which Sony Corporation controls the bodies that determine financial, sales, or business policies.
Also included are other corporations and entities engaged in the financial
services business over which Sony Corporation can exert a significant influenceon the determination of financial, sales or business policies through investment;
appointment of its directors, employees, or persons who previously held such
posts as director or officer of equivalent position; provision of financing, credit
guarantees or pledges of collateral; licensing technology; or sales or business
transactions. However, “Sony Group finance companies” currently includes
only “Sony Financial Group companies.”

II. Transactions to Be Managed
1. SFH shall put a structure in place and take all other necessary
actions to prevent customers’ interests from being harmed by thefollowing transactions (“transactions to be managed”):
1) Transactions that put the Sony Financial Group’s interest
first where there are competing interests between the SonyFinancial Group and customers2) Transactions that profit from customer information
3) Transactions that profit from competing interests between
customers4) Other transactions where the interests of customers are
deemed to be harmed by Sony Financial Group companies
2. For the purposes of this policy, the “customers” whose interests
should be protected shall be the customers of the following
businesses of Sony Financial Group companies:
1) Sony Life Insurance Co., Ltd.
Life insurance business, business of registered financial institutions, and other businesses that can be conducted by Sony Life
under relevant laws.

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Sony Financial Holdings Inc. Annual Report 2013

Corporate Governancethe Financial Instruments and Exchange Act of Japan. The
overall goal is to ensure that customers’ interests are notharmed by Sony Financial Group companies.

2) Sony Assurance Inc.
Non-life insurance business and other businesses that can be
conducted by Sony Assurance under relevant laws.
3) Sony Bank Inc.
	Banking business (including bank agency business by banking
agents), business of registered financial institutions, andother businesses that can be conducted by Sony Bank underrelevant laws.
4) AEGON Sony Life Insurance Co., Ltd.
	Life insurance business and other businesses that can be
conducted by AEGON Sony Life Insurance under relevant laws.
5) SA Reinsurance Ltd.
	Reinsurance business and other businesses that can be­conducted by SA Reinsurance under relevant local laws.

III. Structure for Management of Conflicts of Interest
1. Structure
SFH shall put a structure in place to manage conflicts of interestin the Sony Financial Group. Under this structure, the director
serving as head of the Corporate Control Department shall be
responsible for managing conflicts of interest, while the Corporate
Control Department shall be the business unit responsible formanaging conflicts of interest.
2. Actions
The director responsible for managing conflicts of interest shallorder Sony Financial Group companies to take the following
actions when he or she deems them to be necessary based onreports from Sony Financial Group companies, customer complaints,
or other sources:
1)	Sever the flow of information between divisions that havepotential conflicts of interest2)	Suspend the transaction concerned, or change the terms andconditions or method of the transaction3)	Disclose the fact or the possibilities for a conflict of interest, tocustomers4)	Take any other action deemed necessary by the business unit
responsible for managing conflicts of interest
3. Record-keeping
The division responsible for managing conflicts of interest shallmaintain records of the following items and retain them forfive years.
1)	Records that specify transactions to be managed2)	Records associated with actions taken to properly protect
customers

Basic Policy on Eradicating Anti-social Influences

Privacy Policy

SFH has formulated a Basic Group Policy on Eradicating­Anti-social Influences as follows. SFH and the Sony Financial
Group companies have built the structures to take a firm
stance on countering anti-social influences.

SFH has formulated a Privacy Policy* governing the handlingof personal information. It sets out SFH’s policies on its useof personal information within the specific purposes and its
acquisition of personal information to ensure compliance withapplicable laws and regulations. SFH has also established andobserves Rules on Information Security that set out specificsecurity control protocols.
SFH monitors how Sony Financial Group companies’­security control protocols are working. Specific group measures
include the formulation and revision of the Privacy Policy,
setting up an organization to protect personal information andappointing persons responsible, preparing a set of rules and amanual covering the handling of personal information, andeducation and training programs on the handling of personal
information and information security.
SFH and Sony Financial Group companies strive to maintainentrusted personal information so that it is accurate and upto-date to the extent necessary for the purposes of its use,
and to protect personal information through steps to prevent
unauthorized access, leakage, falsification, loss, destruction,and other incidents.

• Structures for Eradicating Anti-social Influences

SFH has put in place the following structures for strictlya­ voiding any association with anti-social elements.
• SFH has established a department for dealing with antisocial influences and appointed a person responsible forpreventing unfounded demands.
• SFH collects information on anti-social influences by­cooperating with external specialists.

Basic Group Policy on Eradicating
Anti-social Influences* Visit SFH’s website at (http://www.sonyfh.co.jp/web/index_en.html) for more
about our Privacy Policy.

Contribution to Sustainable Development

1.	The Sony Financial Group recognizes the importance ofstrictly avoiding any association with anti-social elementsfrom the perspectives of social responsibility, compliance,and corporate defense. It has therefore implemented
frameworks to shut out anti-social influences.
2.	The Sony Financial Group strictly rejects unfounded
demands by anti-social influences. Furthermore, theGroup has put in place a framework for acting firmly,
on an organizational basis, against those who makeunfounded demands.
3.	The Sony Financial Group works closely with the police
and external specialist entities, even during ordinary times,
to ensure appropriate assistance and cooperation should it
be threatened by anti-social influences.

Sony Financial Holdings Inc. Annual Report 2013059

Contribution to Sustainable Development

Corporate GovernanceRisk Management
One of SFH’s roles as a financial holding company is to further enhance and integrate group-wide risk management by
centralizing the Sony Financial Group’s management resources. SFH’s Basic Policy on Group Risk Management is as follows:

Basic Policy on Group Risk Management• As a financial holding company, SFH enhances the corporate
value of the Group by aligning risk management with groupwide strategic objectives and management policies, while tailoring operating subsidiaries’ risk management to the types of risk
inherent in their respective lines of business.

SFH and the Sony Financial Group Companies Risk
Management Structure
SFH’s Board of Directors formulates fundamental principles
for risk management and communicates them to directors,
employees, and throughout the Sony Financial Group. The
Board also identifies the types of risks specific to the subsidiaries’ scale, business, and other attributes and establishes structures designed to manage them effectively. SFH’s Executive­Committee, which is appointed by the Board of Directors,• SFH adopts all necessary supplemental measures to ensure effec-

tive risk management, after confirming each operating subsidiary
has independently and responsibly established its own risk management structure to achieve its own management objectives.
SFH• takes steps to eliminate excessive concentration of risk in
specific areas, establish appropriate controls over intra-grouptransactions and control the ripple effect of risk within the Group.

executes routine tasks pertaining to group risk management.
In more detail, subsidiaries each assess, monitor, and manage
their risks on their own. At the same time, the Corporate­Control Department, which is responsible for SFH’s risk management, controls risks through monitoring and holding Risk
Management Meetings with the subsidiaries’ risk managementd­ivisions. The Corporate Control Department also reports its
findings on the state of risk management regularly to SFH’s
Board of Directors and Executive Committee.

Risk Management Structure

SFH
Board of
Statutory Auditors

General Meeting of Shareholders

Statutory
Auditors

Board of Directors

Officer in Charge(President, Representative Director)

ReportReportReportAudit
Department
Audit

Executive Committee
Corporate Control Department(Centralized Risk Management)

Market Risk

Supervisory Department:
Corporate Control
Department

Administrative Risk

Credit Risk

Insurance
Underwriting Risk

Systems Risk

Investment Risks

Real Estate
Investment Risk

Liquidity Risk

Supervisory Department:
Corporate Communications& Investor ­Relations
Department

Supervisory Department:
Corporate Planning
Department

Reputational Risk

Going Concern Risk

Legal Risk

Confirm Report

Risk Management Meetings

Manage, advise, monitor Present risk management policies

Sony Life

Sony AssuranceSony Bank

Each company puts risk management into practice independently

060

Sony Financial Holdings Inc. Annual Report 2013

Types and Definitions of Risks
The types and definitions of risks that SFH and its subsidiaries must manage are shown in the following table:
Market Risk

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

Credit Risk

Risks associated with losses due to declines or loss in the value of assets, including off-balance-sheet items such as derivative
instruments, resulting from deterioration in the financial position of retail and corporate customers, of issuers of the debt
obligations held, or of counterparties to derivatives 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 of real estateholdings 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 reservesat settlement, as well as risks associated with losses if SFH and the 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 Sony Financial 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 or other factors.
Risks associated with losses due to significant differences between the assumptions SFH and the Group companies use toe­ stablish appropriate premium levels, including assumptions regarding the expected frequency and scale of insured eventsand future economic conditions.

Administrative Risk

Risks associated with losses due to errors, misconduct, malfunction, and other factors related to problems with our internal
administrative processes.

Systems Risk

Risks associated with losses arising from IT-system malfunction or breakdown, improper use or leakage of confidential­information stemming from IT-system problems.

Legal Risk

Risks associated with losses due to violations of applicable laws, rules and regulations occurring during the course of doing
business operations, as well as the risk of loss due to litigation. In particular, we are exposed to legal risk with respect to:• the provision of services, including the introduction of new businesses, products and services;• entry into various legal agreements, as well as the renewal, amendment, termination or rescission of agreements; and• various legal and administrative proceedings.

Reputational Risk

Risks associated with losses resulting from harm to our reputation in the market and among customers as a result of­ nethical behavior, unfair business practices, improper disclosure, or other factors.
uGoing Concern Risk

The risk that SFH and the Group companies will be unable to continue operations as a result of a deterioration in financialp­ osition, liquidity problems, system failures, scandals, accidents, and other crises.

Each Group company establishes its own framework for­managing risk as appropriate for its scale and the attributes
and type of its business, and optimizes its frameworks for thetypes of risks faced according to ­internal definitions.

As the operating and business environment changes, subsidiaries’ risk management departments review the risk types anddefinitions set forth above, amending them as appropriate for
new conditions.

Contingency Management Systemthey may be unable to continue ordinary business operations.
In case SFH determined that the reported situation is difficult
to address under the risk management system set forth in thefundamental principles for risk management, among otherguidelines, SFH shall establish a contingency response headquarters led by the President and Representative Director of
SFH and execute business continuity measures aimed at full
restoration of all operations.

SFH has established a contingency plan as the Group’s­comprehensive policy for action to prepare for situations inwhich the execution of continuous business operations by SFH
or Sony Financial Group companies is at risk due to accidents,­disruptions or other factors. The Sony Financial Group companies have developed regulations, manuals and other guidelines
reflecting their respective business volume and nature of­business ­activities. SFH has a system in place where the SonyFinancial Group companies shall report to SFH in cases whereSony Financial Holdings Inc. Annual Report 2013

061

Contribution to Sustainable Development

Insurance
Underwriting Risk

Contribution to Sustainable Development

Corporate GovernanceInternal Audits
SFH performs internal audits through its Audit Department. Reporting directly to the director in charge of internal audits(the President and Representative Director of SFH), this department operates outside the other lines of operational
reporting and, from an independent and objective standpoint, conducts internal audits to check and evaluate the appropriateness of work processes and risk management. Sony Financial Group companies each have their own internal audit
divisions to perform internal audits designed to match their specific industry, the scale of their businesses, and the typesof risk they face. SFH’s Audit Department monitors the results of both internal and external audits of the Group companies
with the aim of ensuring the soundness of management of operations. When necessary, SFH’s 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 perceive it asnecessary, as a result of the monitoring, SFH’s Audit Department may directly audit subsidiaries within the scope of­governing laws and regulations. In addition, the Audit Department works closely with the statutory auditors, as well as
external auditors such as accounting auditors, as necessary.

Internal Auditing Structure

SFH

Board ofDirectors

Officer in Charge(President, Representative Director)

Audit

ReportReportStatutory
Auditors

Executive
Committee

Audit Department
Audit

Board of­Statutory
Auditors

Operational
Departments

Directly audit, as needed
MonitorSony Life

Sony AssuranceSony BankInternal Audit DivisionInternal Audit DivisionInternal Audit Division

Audit

Operational Divisions

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Sony Financial Holdings Inc. Annual Report 2013

Audit

Operational Divisions

Audit

Operational Divisions

Contribution to Sustainable Development

CSR

Stance on 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 astrong sense of purpose. The Sony Financial Group believes that the pursuit of improvement in corporate value throughsound business activities is fundamental to fulfilling its corporate social responsibilities.
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 trustfrom local communities and customers. To this end, the Sony Financial Group is aware that it must treasure its relationships with customers, shareholders, employees, business partners, local communities and all other stakeholders, and makemanagement ­decisions mindful of the interests of each Group company.
Based on these basic approaches, the Sony Financial Group has formulated the following “Basic CSR Policy,” and every
company in the Sony Financial Group conducts various CSR activities.

Basic CSR Policy
The Sony Financial Group believes that a special commitment to the public good is demanded of a financial services company, and seeks
to achieve its corporate vision and thus give back to society by upholding the highest level of ethics and a strong sense of purpose.

Promotional Framework
The promotional framework for CSR at the Sony Financial Group centers on SFH’s Corporate Planning Department, which­promotes and manages CSR and formulates policies for the Group. The division actively shares information with SFH’s otherrelevant departments (Corporate Communications & Investor Relations Department, Corporate Control Department, Accounting­Department, Human Resources & General Affairs Department, and Audit Department), and monitors the CSR activities of­various Group companies, while promoting CSR management on a group-wide basis.

Departmental CSR Responsibilities
Corporate Communications & Investor Relations Department

Promotes external communications on Group activities

Corporate Control Department

Monitors risk management and compliance activities related to overall­business activities 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

For particularly important matters, a system is in place by which departments make reports or proposals as necessary to the
Executive Committee and the Board of Directors. At Group companies, CSR initiatives are carried out independently through­business activities.

Sony Financial Holdings Inc. Annual Report 2013

063

Contribution to Sustainable Development

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 treasure our relationships with customers, shareholders, employees, business partners, local communities and all other­stakeholders 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.

Contribution to Sustainable Development

CSR

Activity Profiles
In giving back to society through its business activities, the Sony Financial Group acts with respect for 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 to become the most highly
trusted financial services group by customers.

Utilizing Customer Feedback
Feedback received from each company’s customers via questionnaires, customer centers and websites is compiled andanalyzed at Group companies by divisions in charge of promoting customer satisfaction and raising quality, reported to
management and used to make recommendations on operational improvements and product and service enhancements.
As a result of this approach, the Sony Financial Group’s threebusinesses—life insurance, non-life insurance and banking—have received high marks in customer satisfaction surveys
conducted by outside institutions and the media.
Promotional Divisions at Group Companies
Sony Life

Co-Creation Planning Division and VOC* DivisionSony Assurance

Customer Response Service Department

Sony Bank

Customer Support Unit

* VOC=Voice of Customer• Sony LifeAs an initiative to reflect the voice of customers in management, Sony Life conducts customer awareness surveys­(customer questionnaires) targeting policyholders once a year,
along with questionnaires for Lifeplanner sales employees whocome into daily contact with customers. In addition, Sony Life
has a system in place to reflect the voice of customers (VOC)
in management. It has also set up a website that allows
employees to make improvement proposals at any time via
the Company’s intranet. Furthermore, Sony Life has established a VOC Committee to continuously improve operations
by executing improvement measures, verifying the subsequenteffects of these measures, and revising them as necessary toachieve further improvement.

• Sony AssuranceSony Assurance systematically conducts activities designed to
improve the quality of operations and enhance customer satisfaction by listening closely to the voice of customers. These activities
leverage Sony Assurance’s unique advantages as a direct insurance company that communicates directly with customers.
Specifically, Sony Assurance reports on its improvements
made in response to feedback obtained via telephone, postings
to the interactive sections of its website, post-service questionnaires or other forms of communication with customers. These
reports are published in the “Koekiku Improvement Report”
064

Sony Financial Holdings Inc. Annual Report 2013section of the Customers and Sony Assurance Communication
Site. In addition, the Customer Response Service Department
centrally manages customer feedback, and compiles and­analyzes such feedback monthly. The department reports thisfeedback to management on a quarterly basis. In particularly
important cases, the department provides detailed reports on
the causes of incidents and recommends countermeasures asnecessary, in addition to providing the relevant departmentswith this feedback, while giving them instructions on improvements and verifying the status of those improvements.
Through these measures, Sony Assurance has successfully
built a complaints-handling management system. On April 1,
2011, Sony Assurance became the first* direct non-life insurance company to issue a declaration of conformity with ISO
10002, the international standard for complaint-handlingmanagement systems. In September 2012, Sony Assurance
renewed its Customers and Sony Assurance Communication
Site so as to enable the Company to field customer complaints directly from the website. Furthermore, the Company
has established the Sony Assurance Quality Policy and has
disclosed it on the Company’s website to enhance customers’
peace of mind. In regard to daily activities designed to
improve the quality of operations directed at providing services
to customers, Sony Assurance has obtained a third party opinion for 2013 from Mr. Junzo Nabeshima, who has served as
the chair of the ­Association of Consumer Affairs Professionals(ACAP) and has held other important posts.
* Based on a survey by Sony Assurance as of March 31, 2011. Direct non-life insurance companies refer to Japanese non-life insurance companies selling insurance
products and providing services directly to customers without relying primarily on
insurance agencies.

• Sony Bank

To listen earnestly to the voice of customers, and provide evenbetter products and services, Sony Bank reviews responses toopinions and requests from customers and strives to make
improvements. The status of specific customer responses andrelated details are made available on the “Voice of Customer”
webpage of Sony Bank’s website once every three months.
Through these and other efforts to address the needs ofevery customer, in FY2012, Sony Bank placed first for six­consecutive years in the Nikkei newspaper’s 9th ­financial
institution customer satisfaction rankings.** Article in the January 20, 2013 issue of the Nikkei newspaper.

Shareholders and Other Investors
The Sony Financial Group has built internal systems for the timely disclosure of corporate information, and under thesesystems, we provide timely and accurate information on the Company to shareholders and other investors. SFH hasestablished the following IR Policy to provide ample opportunities for two-way communication between shareholders andSFH management, with the aim of maximizing shareholder value.

• Framework for Disclosure of IR Information

IR Policy• Purpose of IR Activities

SFH strives to provide various members of the investment community, including its shareholders and other investors, as well as
securities analysts, with information related to the assessmentof corporate value in a timely, accurate and fair manner. At thesame time, SFH strives to provide feedback on the views of themarkets to management in an effort to strengthen two-way
communication. Furthermore, by enhancing disclosure of businessstrategies and financial position, SFH makes efforts to win thetrust of the investment community and obtain a fair corporate
valuation from stakeholders in the markets.

• Basic Approach to IR Activities* Roles of the Disclosure Committee(1) Assist the decision-making of the President and Representative Director
regarding the design, implementation, evaluation and maintenance of thetimely disclosure system(2) Promptly and comprehensively collect material corporate information ofGroup companies. Discuss the necessity of timely disclosure along with theaccuracy, completeness, clarity and level of formality of the content oftimely disclosure, as well as the fairness and urgency of the announcement.
Provide necessary information when authorized personnel must makedecisions on the disclosure of said information.

Contribution to Sustainable Development(1) SFH will provide disclosure of straightforward informationnecessary to assessing its corporate value based on the­principles of promptness, accuracy, fairness and consistency.
(2) SFH will respond sincerely and actively to members of theinvestment community such as its shareholders and otherinvestors, as well as securities analysts, in order to establish
relationships of trust with stakeholders in the markets.
(3) SFH will promote IR activities led by top management, basedon a concerted effort by the entire Sony Financial Group.

In order to promote timely disclosure, SFH has established theRules and Regulations Related to Timely Disclosure, and set up a
Disclosure Committee (DC)*.
In the event that material information comes to light, SFH hasa framework in place whereby SFH’s directors and employees,
as well as managers responsible for the material disclosureof information (hereinafter, the “Disclosure Managers”) of its­subsidiaries, 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 madeknown to SFH’s directors and employees, as well as the DisclosureManagers of its subsidiaries.

• Quiet Period for IR Activities• Method of Disclosure of IR Information· SFH will provide timely disclosure based on the Securities
Listing Regulations for marketable securities through the Timely­Disclosure Network (TDnet) of the Tokyo Stock Exchange, and willpromptly make such information available on the SFH corporatewebsite. SFH shall, in principle, make the information publishedthrough the TDnet available on the SFH corporate website.
· SFH strives to provide fair disclosure worldwide by making a fullrange of information available on its corporate website, including
information that is not subject to timely disclosure rules.

In order to ensure fair disclosure of information and prevent the leakof material information regarding the Sony Financial Group’s business results prior to earnings announcements, SFH has establisheda quiet period for IR activities. SFH observes a quiet period for IR
activities from the second Monday of the month following theend of every quarter until the earnings announcement. During thisperiod, SFH shall not, in principle, hold individual meetings, presentations about the company and other such events, and shall refrainfrom answering inquiries regarding the settlement of accounts.

<Framework for Disclosure of IR Information>
The SonyF­ inancial
Group

Determination and occurrence of material information*
SFH directors and employees

Sony Life
Disclosure Manager

SFH

Sony Assurance
Disclosure Manager

Sony Bank
Disclosure Manager

Disclosure Committee (advisory body**)
Board of Directors / Executive Committee (Decision-making bodies)
Corporate Communications & Investor Relations Department(Department responsible for handling information)* Defined as information that has“an extremely high likelihood of
being deemed material byshareholders and other investors,
as well as other parties, on arational basis,” when making an
investment decision.
**This advisory body assists thedecision-making of the President
and Representative Director.
Comprised of members of the
Executive Committee, including
executive directors and generalmanagers from each division(Secretariat/Corporate
Communi­cations & Investor
Relations Department).

Disclosure
TDnet / Press Releases

Sony Financial Holdings Inc. Annual Report 2013065

Contribution to Sustainable Development

CSR

Investor Relations (IR) Initiatives in FY2012
SFH strives to communicate broadly to shareholders and otherinvestors in Japan and overseas to address various topics ofinterest. To this end, SFH conducted presentations and­individual meetings in various formats, as detailed below:
Earnings briefings (teleconferences withdomestic institutional investors and analysts)

4 times

Corporate Strategy Meeting

1 timeIndividual meetings with institutional­investors and analysts

Approx. 250

Overseas IR meetings(Europe, North America, Asia)

1 tour in eachregion (approx. 50
meetings in total)

Briefings for individual investors

5 timesAt the IR Forum in August 2012

Annual IR Schedule
Announcement of Full Year
Consolidated Financial Results

Announcement of 1Q­ onsolidated Financial Results
C

Announcement of 2Q ­Consolidated Financial Results

Announcement of 3Q­Consolidated Financial Results

Apr.

Jul.

Oct.

Jan.

May

Jun.

Aug.

Sept.

Annual Report (English)
Shareholder Newsletter

Disclosure Report (Japanese)

Nov.

Dec.

Feb.

Mar.

Interim Disclosure Report (Japanese)
Interim Shareholder Newsletter

Ordinary General Meeting of Shareholders

Business Partners
The Sony Financial Group promotes fair and equitable transactions with institutions that provide financial products andservices and with suppliers and vendors of goods and services, along with insurance agencies, and maintains healthy­relationships with all of its business partners to help society develop sustainably.
Fair Trade
The Sony Financial Group has established a Management
Policy Concerning Conflicts of Interest, a Basic Policy on­Eradicating Anti-social Influences and a Policy Preventing
Corruption. As stated in our code of conduct, we comply withall applicable laws and ­regulations and conduct business­activities ethically and in good faith. We engage in fair tradepractices with all business partners on this basis.
Partners (Independent Agencies)
Sony Life’s Partners (Sony Life refers to independent agencies
as “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 2,000 Partners aroundthe country as of July 1, 2013 sell policies tailored to customer

066

Sony Financial Holdings Inc. Annual Report 2013

needs based on their sophisticated insurance knowledge andconsulting capabilities as life insurance professionals, faithfully
fulfilling their responsibilities as the partners of its customers.
Partner (Independent Agency) 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
high-quality sales people. The PA certification is conferred tocarefully chosen sales people who satisfy fixed performanceand qualification requirements and possess the skills neededby life insurance sales professionals.

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 believe that in order
to raise the value provided to all stakeholders, it is essential that all employees fully demonstrate their abilities. We
therefore conduct initiatives to create pleasant and productive workplaces, such as implementing an Employee­Opinion Survey (EOS).

Sample Initiatives
Introduction offlex-time working
hours and othersystems

Established systems permitting flex-timeworking hours, as well as earlier or later startand finish times for work. Introduced a
reduced working hour system for employees
in childcare periods.

Childcare leaveand nursing careleave, etc.

Amount of leave time provided exceeds legal
requirements. Childcare leave are taken bysome male employees every year.

Telecommuting
SystemIntroduced in SFH and Sony Life.

Other Leave
Systems

Introduced volunteer leave and commemorative leave.

Human Resources Development• New Employee Training
The goal of new employee training is to teach employees ofSony Life, Sony Assurance and Sony Bank the business operations of all the Group’s companies, not just their own, as wellas the basic behavioral skills expected of corporate employees.
Training programs conducted jointly at the Group level
include business etiquette, Life-Planning Courses, explanationsof each company’s business operations and workplace tours.
Training for employees in their second year is also conductedat the Group level.

At a new employees’ training• Self-Development Program (SDP)The SDP supports the efforts of employees working independently to develop their skills by providing group training­sessions and opportunities to take correspondence courses.

• Management Skill Development ProgramThis program is conducted jointly by Sony Financial Group
companies as a part of efforts to improve the managerial
capabilities of management-level employees.

• In-House Inter-Departmental Training ProgramThis program allows employees to obtain work experience indifferent departments for a certain period of time. The program is used to increase trainees’ understanding of different
operations, or to achieve career plan objectives.

• Recruitment and Training of Global Human Resources

The Sony Financial Group has commenced the recruitment
and training of global human resources, eyeing overseas business expansion in the future. Besides recruiting non-Japaneseindividuals, the Group is conducting initiatives such as overseas training (language training in China, as well as actuary
training and underwriting training).

• Management Workshop for Nurturing Future Global­Business Leaders• Language Training Program

In FY2012, two employees took part in study abroad programs.

Sony Financial Holdings Inc. Annual Report 2013

067

Contribution to Sustainable Development

Work-life Balance
The Sony Financial Group companies conduct various initiatives
to help employees balance their careers with their private
lives. Initiatives have included introducing flex-time working
hours and enhancing vacation and leave programs. Throughthese and other initiatives, Group companies have made it
possible for employees to adopt flexible work styles.
From July 2007, Sony Life has been certified by the Directorof the Tokyo Labour Bureau of the Ministry of Health, Labour,and Welfare, as a company meeting the requirements of the
Act on Advancement of Measures to Support Raising NextGeneration Children. In August 2012, Sony Assurance became
the first direct non-life insurancecompany to receive this certification.
By continuing to help employees
balance child raising responsibilities
with work going forward, Group­companies will remain focused on
actively creating a working environment conducive to healthy childbirth
Certification logo
and child raising.

Contribution to Sustainable Development

CSR

Local Communities
Sony Life Volunteers’ ClubThe Sony Life Volunteers’ Club was established by a Sony Life
volunteer group in 1995 after the Great Hanshin-Awaji­Earthquake. Each member of the Group actively participates inrunning the club, which is funded by donations from employees.
The club continues to support the elderly victims of theearthquake. Sony Life Volunteers’ Club also supports a wide
range of activities, including hosting youth education events
at care houses,
operational
support for the“Oita International Wheelchair Marathon,”a worldwide
wheelchair­marathon tournament, andsupport for the
A “Relay For Life” event“Relay For Life.”** “Relay For Life” is a charity event held in over 5,000 communities in 20 countries
around the world. People battling cancer, their families and people 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 when it took
part in a relay held in Ashiya City, Hyogo Prefecture. In FY2012, among relays held
across Japan from Hokkaido in the north to Kyushu in the south, Sony Life participatedin relays in 27 communities. Led by Lifeplanner sales employees at regional branches,over 1,800 people participated, including the families of employees and customers.

Sony Life’s Reconstruction Assistance ClubThe “Reconstruction Assistance Club” wasvoluntarily
established bySony Life’s
employees
immediately
after the Great
East Japan Earthquake. Based on A volunteer activity of the Reconstruction Assistance Clubthe desire toprovide energy and hope to those directly affected by the disaster, branches in the affected areas have taken the lead to actively
conduct a broad range of volunteer activities. In 2012, one year
after the earthquake, a total of about 500 employee volunteers
gathered from various regions across Japan to conduct volunteer
activities including a soup kitchen and personal visits at temporary housing in Koriyama City, Fukushima Prefecture. Thereafter,a wide array of thoughtful volunteer activities was held in
Yamada Town, Iwate Prefecture; Kesennuma City, Miyagi­Prefecture; and other locations. These activities included fairs,soup kitchens and giving out meals on New Year’s Eve.
Looking ahead, all employees will continue working as one
to come up with a variety of activities and to continuously
implement them.
068

Sony Financial Holdings Inc. Annual Report 2013

“Life-Planning Courses” Offered at 470 Schools
Since FY2005, Sony Life has conducted “Life-Planning
Courses,” a hands-on learning program for school students
nationwide. Courses are instructed by Lifeplanner sales
employees. The program is designed to foster student appreciation of the importance of leading a well-planned life, andworking hard toward goals, through life planning. As of March
31, 2013, “Life-Planning Courses” had been given at 470
schools (cumulative). In recognition of these courses, Sony Life
received an Award for Excellence in the popularization type
career education sector of
the Third Career
EducationAwards*announced by
the Ministry of
Economy, Tradeand Industry in
February 2013.
A “Life-Planning Course” held by Sony Life
* The Career Education Awards were established by the Ministry of Economy, Tradeand Industry in FY2010 as a commendation system to encourage and popularize
educational support initiatives by companies and economic groups.
Cumulative total(FY2005–FY2012)

FY2012

Life-Planning
CoursesNumber ofschools

Number ofparticipating
students

100

9,684

Number ofschools

470(cumulative)

Number ofparticipating
students

43,349Support for “Special Olympics Nippon (Japan)”Since FY1996, Sony Life has supported the public interest
incorporated foundation Special Olympics Nippon to help
people with intellectual disabilities gain autonomy and more
broadly participate in society through sports, and contributeto the formation of a diversity-friendly society.
Besides support through volunteer activities, Sony Life has
donated ¥5 million a year to Special Olympics Nippon.
In February 2012, at the Special Olympics Nippon National
Winter Games Fukushima, about 900 athlete group members,
including about 600 athletes, converged on Fukushima todemonstrate
the skills andabilities they
have honed
through daily
practice.
Approximately
540 employees
from Sony Life
travelled fromaround the
A volunteer activity at the “Special Olympics Nippon
country to(Japan)”participate as volunteer staff. The volunteers played a varietyof roles acting as team assistants, ushers, security staff, andevent volunteers. The contingent from Sony Life was one of
the largest of the many companies supporting the event.
Sony Life’s employees also plan to participate as volunteer
staff in the Special Olympics Nippon National Summer Games
Fukuoka—The 6th National Summer Games in 2014. In thismanner, Sony Life has continued to expand the circle of­support every year.

Career University Establishment ProjectSony Life participates in a project sponsored by Career Cruise,
an NPO whose objective is to provide college students withcareer education, give them opportunities to think about their
futures, and support them in developing their careers. Sony
Life plans to offer a career education class in FY2013.

Sony Financial Group’s donations and grants for FY2012
Main Recipients of Donations and Other Assistance

NPO Sorabear Foundation

Amount¥13,500,000

The Eye Mate, Inc.

¥12,650,000

Purchase of green power certificates in FY2012¥ 6,265,000

Special Olympics Nippon Foundation¥ 5,000,000

Sumitomo Mitsui Banking Corporation(contribution of emissions credits of 800 tons)¥ 1,066,800

The Tokyo Philharmonic Orchestra Public Interest
Incorporated Foundation¥ 1,000,000

Others (incorporated associations, incorporated
foundations, academic societies, etc.)¥ 1,286,937

Total¥40,768,737

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

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 pursue
energy-saving and natural resource-saving activities, such as
working toward targets for reduced energy and photocopierpaper usage, and promote green procurement to raise thepercentage of eco-products used as office supplies.
* ISO 14001 certification covers the head offices of Sony Life and Sony Assurance,along with Sony Bank’s head office and the “Housing Loan Plaza.” The SonyFinancial Group conducts regular internal environmental audits of ISO
14001-­certified offices, and the audit results are reported to top management.

Use of Green PowerIn FY2005 Sony Life became the first in theJapanese life insurance industry to introduce a Green Power Certification System,
which enables companies to use green
power in their business activities to help
protect the environment by reducing CO2
emissions. In FY2007, Sony Assurance also
introduced the same system.
From FY2008, Sony Bank has utilized
the system to cover all of its power usage (excluding theSony Financial Holdings Inc. Annual Report 2013

069

Contribution to Sustainable Development

Other Volunteer Activities
Sony Life has designated the anniversary of its founding(August 10) as “Volunteer Day,” and has observed this day since
FY2003. It is a day for all employees to consider and implement
activities giving back to their communities and society.
­Volunteer activities include local cleanups and blood donation
drives. In addition, the entire month of August is designated as“Volunteering Month.” Employees around the country participate in community-based social contribution activities.
Sony Assurance participatesin fundraising
activities for theJapan Committee for UNICEF.
Sony Assurance
also collects
used stamps tohelp organizations that proA local cleanup activity on Volunteer Day
vide medicalcare overseas.

Eye Mate Fund
Since FY1997,
Sony Life has
made financial
donations every
year to the “EyeMate Fund,”established by
The Eye Mate,Inc. (“EyeA drill for teaching guide dogs how to open andMate”), whichclose doors
aims to help
visually-impaired people participate in society.
Sony Life makes a donation matching the total raised by
employees in a given year. The funds are donated to Eye Matefor training guide dogs. In FY2012, Sony Life and its employees donated a total of ¥12.65 million to Eye Mate, bringing
cumulative donations for training guide dogs to around¥179.57 million.
Looking ahead, Sony Life will help as many visuallyimpaired people as possible participate in society throughfinancial donations to Eye Mate.

Contribution to Sustainable Development
portion of power usage in outsourced operations) as a
“carbon offset bank.” Additionally, in FY2013, it plans tooffset 100% of its CO2 emissions through the use of credits
certified under the Offset Credit (J-VER) Scheme*, in place ofgreen power certificates.
Additionally, the Sony Financial Group purchases green
power certificates for biomass and other forms of green power
generation. In FY2012, the entire Group purchased green
power certificates equivalent to 1,770 MWh. In this way, eachGroup company contributes to encouraging the spread ofpower generation through natural sources such as solar andwind power, geothermal power, and biomass.
* A system for certifying and issuing credits for reducing and absorbing greenhousegas emissions in Japan, primarily designed to be used as carbon offsets. Based on
accreditation standards established by the Ministry of the Environment, (J-VER)
offset credits are validated and issued by the Offset Certification Committee.
Credits used by Sony Bank are generated through increases in CO2 absorption via
forest management activities (Forest thinning promotion). Accordingly, SonyBank’s use of credits also supports activities to nurture forestlands.

CSR

proceeds to the “Sorabear Foundation.” In FY2012, Sony Life
used collected donations to donate one solar power generator
to a nursing school in Kagawa Prefecture.
Enabling Sony Bank Customers to Support the Project for
Forest Conservation in Sumatra by Opening an AccountTo protect the World Heritage forests on the island of­Sumatra, Sony Bank supports reforestation, the ElephantPatrol program*, and other conservation activities, as well as
the activities of the World Wildlife Fund Japan (WWF Japan)
to preserve the forests of Sumatra through its Project for
Forest Conservation in Sumatra, Indonesia. Since September
2012, Sony Bank has donated 10 yen to the project each timea customer opens a new account with Sony Bank. Customers
can thus help support the effort to preserve Sumatra’s forests
simply by establishing an account with Sony Bank.
* Patrols are made by staff astride elephants, who work to uncover illegal activity
and to keep wild animals away from areas where people live.

Initiatives to Reduce Power Consumption
SFH, Sony Life, Sony Assurance, and Sony Bank work on a daily
basis to reduce power consumption. In the summer of 2011,
during power shortages stemming from the impact of theGreat East Japan Earthquake, and again in the summer of 2012,
they also instituted extended “energy conservation” holidays.

Activities with Customers
Donating to the “Sorabear Foundation”
Teaming with
Sorabear­Foundation, anon-profit­organizationthat conducts­activities to help
­prevent global
warming, Sony
Assurance has
carried out a
A nursery school to which Sorabear power generator
equipment was donated.
program toinstall solar
power generators at kindergartens since March 2009.
Sony Assurance donates one yen to the “Sorabear Foundation” for every 100 kilometers of total distance that was not
driven by its policyholders compared to the forecast distance.
The Sorabear Foundation uses the donations to provide­“Sorabear Power Generation Equipment”—solar power­generators—to kindergartens and nursery schools around thecountry. In FY2012, the program contributed two solar power
generators to nursery schools in Saga and Miyagi Prefectures.
To date, Sony Assurance has donated a total of 10 solar power
generators through this program.
Moreover, Sony Life began offering policy guides andagreements on CD-ROM for policies that have policy dates ofMarch 2, 2010 or later. Sony Life donates ¥10 for every policyholder who chooses to receive a CD-ROM instead of paper
documents when they sign up for ­insurance, and donates the070

Sony Financial Holdings Inc. Annual Report 2013

©WWF Indonesia
The Elephant Patrol program

The Project for Forest Conservation in Sumatra, Indonesia

Customers

Sony BankWWF Japan

Open a new bankaccount withSony Bank

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

Reducing CO2 Emissions by Switching to Electronic Issuanceof Documents
As an Internet bank, Sony Bank has long striven to minimize
paper usage when providing documents such as transaction
slips, passbooks and explanatory materials for products when
doing business. Furthermore, Sony Bank has also requested
customers to receive documents related to investment trusttransactions in an electronic format rather than on paper.
Through this measure, Sony Bank endeavors not only to
reduce paper usage, but also to cut CO2 emissions that would
be released during mailing of paper-based materials.

Corporate Section/Corporate Data
Corporate Information (As of March 31, 2013)
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, non-life insurance companies, banks andothers) 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: 7,841; Life insurance business: 6,293; Non-life insurance business: 1,078;
Banking business: 438; Parent: 32)

Common stock¥19,900 million

Note: The number of employees of SFH includes 13 belonging to the life insurance business, 1 belonging to the non-life insurance business, 2 belonging to the banking business,and 32 belonging to the parent.

Organizational Chart (As of July 1, 2013)
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

Corporate­Communications &Investor Relations
Department

Corporate Control
Department

Accounting
Department

Human Resources& General Affairs
Department

Business Planning
Department

Corporate Section

Organizational Chart of Business Operations (As of July 1, 2013)
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
Affiliate accounted for by the equity method

Banking BusinessSony Bank Inc.

Banking Business
SmartLink Network, Inc.

Trade name and trademark license
Sales and referrals of the other’s productsManagement control fee
Shareholding

Note: The information for each business is based on SFH’s classification of segment information. SFH’s main group companies are shown for each business.

Sony Financial Holdings Inc. Annual Report 2013071

Company Profiles for Group Companies (As of July 1, 2013)
Life Insurance BusinessBusiness

Commonstock

Name

Established

Head office

Share ownershipSony Life Insurance Co., Ltd.

August 10,
1979

1-1, Minami Aoyama 1-chome, Life insurance ¥70,000
Minato-ku, Tokyo, JapanbusinessmillionSony Financial Holdings
Inc. 100%

AEGON Sony Life InsuranceCo., Ltd.

August 29,
2007

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

Life insurance ¥10,000
businessmillionSony Life InsuranceCo., Ltd. 50%
AEGON International
B.V. 50%

SA Reinsurance Ltd.

October 29,
2009

British Bermuda

Reinsurance
business¥5,000
millionSony Life InsuranceCo., Ltd. 50%
AEGON International
B.V. 50%

Non-life Insurance Business
Name

Established

Head officeBusiness

Commonstock

Share ownershipSony Assurance Inc.

June 10,1998

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

Non-life­insurance
business¥20,000
millionSony Financial Holdings
Inc. 100%

Banking Business
Name

Established

Head officeBusiness

Commonstock

Share ownershipSony Bank Inc.

April 2,2001

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

Bankingbusiness¥31,000
millionSony Financial Holdings
Inc. 100%

September 1,
2006

Credit card
1-1, Minami Aoyama 1-chome,settlement
Minato-ku, Tokyo, Japan
services¥488
millionSony Bank Inc. 57%,
4 other companies

SmartLink Network, Inc.

072

Sony Financial Holdings Inc. Annual Report 2013

Senior Management of Three Main Subsidiaries (As of July 1, 2013)
Sony Life
Title

Name

Concurrent Positions at Main Sony Financial Group Companies
President, Representative Director of Sony Financial Holdings Inc.
Director of Sony Assurance Inc.
Director of Sony Bank Inc.

President,
Representative Director

Katsumi Ihara

Representative Director
Director

Masamitsu Shimaoka
Yuichiro Sumimoto

Director

Hirotoshi Watanabe

Senior Managing Director of Sony Financial Holdings Inc.
Director of Sony Assurance Inc.
Director of Sony Bank Inc.

Standing Statutory
Auditor

Mitsuhiro Koizumi

Statutory Auditor of Sony Financial Holdings Inc.

Statutory Auditor

Hiroshi Sano

Standing Statutory Auditor of Sony Financial Holdings Inc.
Statutory Auditor of Sony Assurance Inc.
Statutory Auditor of Sony Bank Inc.

Statutory Auditor

Nobuhiko Fujii

Standing Statutory Auditor of Sony Assurance Inc.

Director of Sony Financial Holdings Inc.
–

Sony Assurance
Title

Name

Concurrent Positions at Sony and Main Sony Financial Group Companies

President,
Representative Director

Atsuo Niwa

Director of Sony Financial Holdings Inc.

Director–

Director

Takashi Sakuma
Toshihiko Fukumoto

Director

Katsumi Ihara

President, Representative Director of Sony Financial Holdings Inc.
President, Representative Director of Sony Life Insurance Co., Ltd.
Director of Sony Bank Inc.

Director

Hirotoshi Watanabe

Senior Managing Director of Sony Financial Holdings Inc.
Director of Sony Life Insurance Co., Ltd.
Director of Sony Bank Inc.

Standing Statutory
AuditorNobuhiko Fujii

Statutory Auditor of Sony Life Insurance Co., Ltd.

Statutory Auditor

Hiroshi Sano

Standing Statutory Auditor of Sony Financial Holdings Inc.
Statutory Auditor of Sony Life Insurance Co., Ltd.
Statutory Auditor of Sony Bank Inc.

Statutory Auditor

Takayuki Nakagawa

Manager, IFRS Promotion Department,
Corporate Planning & Control Division of Sony Corporation–

Sony Bank
Name

Concurrent Positions at Sony and Main Sony Financial Group Companies

Shigeru Ishii

Director of Sony Financial Holdings Inc.

Executive Vice President,
Representative Director

Takayuki Suzuki–

Director

Katsumi Ihara

President, Representative Director of Sony Financial Holdings Inc.
President, Representative Director of Sony Life Insurance Co., Ltd.
Director of Sony Assurance Inc.

Director

Hirotoshi Watanabe

Senior Managing Director of Sony Financial Holdings Inc.
Director of Sony Life Insurance Co., Ltd.
Director of Sony Assurance Inc.

Director

Toru Hasegawa

General Manager, Corporate Planning Department of Sony Financial
Holdings Inc.

Director

Tohru Nakajima–

Standing Statutory
AuditorShinji Sugiyama–

Statutory Auditor

Hidemichi Takenaka

Senior Manager, International Planning Section, Planning and
Administration Department, Corporate Planning & Control Division ofSony Corporation

Statutory Auditor

Hiroshi Sano

Standing Statutory Auditor of Sony Financial Holdings Inc.
Statutory Auditor of Sony Life Insurance Co., Ltd.
Statutory Auditor of Sony Assurance Inc.

Sony Financial Holdings Inc. Annual Report 2013

Corporate Section

Title
President,
Representative Director073

Stock Information
Information on Common Stock, Shares Outstanding
Common Stock(Millions of yen)

Increase in
Capital Surplus(Millions of yen)

Date

April 1, 2004(Note 2)

2,000,000

2,000,000

500

500

175,877

175,877

June 25, 2004(Note 3)

100,000

2,100,000

5,000

5,500

5,000

180,877

October 10, 2007(Note 4)

75,0002,175,000

14,40019,90014,400195,277–

2,175,000–

19,900–195,277

432,825,000

435,000,000–

19,900–195,277

March 31, 2011
(Note 5)

April 1, 2011

Total Number of
Shares Issued

Increase inCommon Stock(Millions of yen)

Increase in
Issued Shares

Capital Surplus(Millions of yen)

Notes: 1.	The shares outstanding listed above are all common stock with full voting rights and no restrictions, which is the standard share for 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 amount added 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 of ¥384,000 per share. The amount added to common stockwas ¥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 shares constitutes one unit.

Stock Exchange Listing (As of July 1, 2013)
The First Section of the Tokyo Stock Exchange (Securities code: 8729)

Major Shareholders (As of March 31, 2013)
Number of
Shares Held

Percentage ofOwnership (%)

Sony Corporation

261,000,000

60.00

The Chase Manhattan Bank, N. A. London Secs Lending Omnibus Account

21,163,740

4.86

The Master Trust Bank of Japan, Ltd. (Trust Account)

12,576,600

2.89Japan Trustee Services Bank, Ltd. (Trust Account)9,160,191

2.10

Japan Trustee Services Bank, Ltd. (Trust Account 9)7,336,800

1.68State Street Bank and Trust Company 505223

6,061,768

1.39

SAJAP

3,504,900

0.80

Trust & Custody Services Bank, Ltd. (Annuity Trust Account)

3,016,200

0.69State Street Bank and Trust Company

2,898,234

0.66Sony Financial Holdings Employees’ Shareholding Association

2,569,413

0.59

Name

Distribution of Share Ownership (As of March 31, 2013)
By geographic region (foreign investors)

By shareholder type
Financial
instruments
firms
0.82%

Europe48.62%

North America
40.88%

Foreigninvestors
24.51%

Total number ofshares issued
435,000,000
Financial
institutions
11.02%
Corporations
60.22%

074

Asia
1.82%

Sony Financial Holdings Inc. Annual Report 2013

Individuals
and others
3.43%

Middle East
5.85%

Foreign investors
and corporations
domiciled in Japan
0.36%

Oceania
2.47%

Dividend Policy (As of July 1, 2013)
Dividends
For the years ended March 31

Dividend per Share

Year-end

2011

2012

2013

¥20

¥20

¥25

Interim–––

Annual

¥20

¥20

¥25

¥8,700 million¥8,700 million¥10,875 million

Dividend Payout Ratio (Consolidated)

Annual Dividend Amount

20.9%

26.5%

24.1%

Dividend on Net Assets (Consolidated)

3.1%

2.7%

2.8%

Note: SFH conducted a 200-for-1 stock split, with an effective date of April 1, 2011. Dividends per share for the fiscal year ended March 31, 2011 were calculated assuming that
this stock split was conducted on April 1, 2010.

Basic Policy on Returning Profits to Shareholders
SFH intends to meet the expectations of all shareholders by achieving steady earnings growth at the Group companies, improving capital­efficiency and properly returning profits to shareholders.
Our basic dividend policy is to maintain stable dividend payments while securing sufficient internal reserves to ensure the financial soundness of
the Group companies and invest in growing fields. Based on this policy, SFH aims for steady increases in dividends in line with earnings growthover the medium and long terms. Our medium-term target for the dividend payout ratio is 30% to 40% of consolidated net income.
Management will determine specific dividend amounts for each fiscal year by taking into account a comprehensive range of factors,­including the capital adequacy of each Group company relative to risk, 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 d­ ividend.
In regard to the decision-making entities for the payment of dividends, the General Meeting of Shareholders decides the year-end d­ ividend, while
the Board of Directors decides the interim dividend.
As regards the year-end dividend for the fiscal year ended March 31, 2013, taking into account a comprehensive range of factors, including
operating results and the business environment, SFH declared a year-end dividend of ¥25 per share, up ¥5 from the previous fiscal year, representing an annual dividend amount of ¥10.8 billion. This dividend was approved by resolution of the Ordinary General Meeting of Shareholders held on
June 25, 2013.

Share Prices
(Yen)
2,000

Corporate Section

1,500

1,000

500

0

10/4 56

7

8

9 10 11 12 11/1 2

3

4

5

6

7

8

9 10 11 12 12/1 2

3

4

5

6

7

8

9 10 11 12 13/1 2

3

4

5

6

3

4

5

6

Note: SFH conducted a 200-for-1 stock split, with an effective date of April 1, 2011. Share prices before the stock split have been retroactively adjusted.

Trading Volume(Thousand shares)
90,00060,00030,0000

10/4 56

7

8

9 10 11 12 11/1 2

3

4

5

6

7

8

9 10 11 12 12/1 2

3

4

5

6

7

8

9 10 11 12 13/1 2

Note: SFH conducted a 200-for-1 stock split, with an effective date of April 1, 2011. Trading volume before the stock split has been retroactively adjusted.
Sony Financial Holdings Inc. Annual Report 2013075

History
1970s

1979

August

Life“Sony Prudential Life Insurance Co., Ltd.” (Sony Prudential Life, currently Sony Life) is established

1980s

1981

April

Life

Sony Prudential Life commences operations with the launch of Lifeplanner system

1987

July

Life

Sony Prudential Life agrees with Prudential Financial, Inc. to terminate joint venture

1991

April

Life

Sony Pruco Life Insurance Co., Ltd. (renamed from Sony Prudential Life in September 1987) changes
name to “Sony Life Insurance Co., Ltd.” (Sony Life)

1998

June

Non-life“Sony Insurance Planning Co., Ltd.” (Sony Insurance Planning, currently Sony Assurance) is established

1998

August

Life

Sony Life establishes “Sony Life Insurance (Philippines) Corporation” as a wholly owned subsidiary in
the Philippines

1999

September

Non-life

Sony Insurance Planning changes its name to “Sony Assurance Inc.” (Sony Assurance).
Sony ­Assurance launches sales of automobile insurance (Sales commenced over the Internet in­September and ­telephone in October)

2001

April

Banking“Sony Bank Inc.” (Sony Bank) is established

2001

June

BankingSony Bank commences operations
Sony Bank launches the “MONEYKit” service site

2002

June

Non-life

Sony Assurance launches sales of medical and cancer insurance

2004

April

SFH

2007

June

Banking

2007

August

Life

Sony Life establishes “AEGON Sony Life Planning Co., Ltd.”(AEGON Sony Life Planning, currently AEGON Sony Life Insurance)

2007

OctoberSFH

SFH is listed on the First Section of the Tokyo Stock Exchange

2008

October

Life

Sony Life opens a representative office in Beijing

2009

July

Life

Sony Life opens a representative office in Taipei

2009

AugustLife

AEGON Sony Life Planning obtains life insurance business license from the Financial Services Agencyof Japan and changes its name to “AEGON Sony Life Insurance Co., Ltd.” (AEGON Sony Life Insurance)

2009

October

Life

Sony Life establishes “SA Reinsurance Ltd.” (SA Reinsurance) in British Bermuda as a reinsurancecompany specializing in variable annuities

2010

June

Banking

1990s

2000s

“Sony Financial Holdings Inc.” (SFH) is established as a financial holding company
Sony Bank establishes “Sony Bank Securities Inc.” (Sony Bank Securities) as a wholly owned subsidiary

2010sSony Bank opens its firstover-the-counter branchcalled “Housing Loan Plaza”
External view of“Housing Loan Plaza"

076

2011

April

SFH

2011

July

BankingSony Bank acquires a 57% equity interest in SmartLink Network, Inc.

2011

AugustBankingSony Bank opens a representative office in Sydney

2012

AugustBankingSony Bank transfers all Sony Bank Securities’ shares to Monex Group, with the aim of enhancing
financial products intermediary services by strengthening its business alliance with Monex Group2012

December

Life

Sony Life transfers the business of Sony Life Insurance (Philippines) Corporation, a wholly owned
subsidiary of Sony Life, to Paramount Life & General Insurance Corporation

Sony Financial Holdings Inc. Annual Report 2013

SFH conducts stock split and adopts share unit system

Financial Section
SFH Consolidated Financial Statements
078 Consolidated Balance Sheets
080	Consolidated Statements of Income andConsolidated Statements of Comprehensive Income
083 Consolidated Statements of Changes in Net Assets
085 Consolidated Statements of Cash Flows
086	Notes to the Consolidated Financial Statements(For the year ended March 31, 2013)

Financial Section SFH Consolidated Financial Statements

Sony Financial Holdings Inc. Annual Report 2013077

SFH Consolidated Financial Statements
Consolidated Balance Sheets
Sony Financial Holdings Inc.
As of March 31, 2012 and 2013
(Millions of yen)
2012

2013

Cash and due from banks �������������������������������������������������������������������������������������������������������������������������������

¥  118,877¥  104,142

Call loans and bills bought �����������������������������������������������������������������������������������������������������������������������������

66,300107,088

Monetary trusts �����������������������������������������������������������������������������������������������������������������������������������������������

303,058

324,305

Securities ���������������������������������������������������������������������������������������������������������������������������������������������������������

5,531,585

6,202,333

Loans �����������������������������������������������������������������������������������������������������������������������������������������������������������������

975,032

1,115,330

Tangible fixed assets ���������������������������������������������������������������������������������������������������������������������������������������

75,16973,217

Land ���������������������������������������������������������������������������������������������������������������������������������������������������������������

31,46931,089Buildings �������������������������������������������������������������������������������������������������������������������������������������������������������

41,906

39,696

Leased assets �����������������������������������������������������������������������������������������������������������������������������������������������

208

302

Construction in progress ���������������������������������������������������������������������������������������������������������������������������

–672

Other tangible fixed assets �����������������������������������������������������������������������������������������������������������������������

1,585

1,456

Intangible fixed assets �����������������������������������������������������������������������������������������������������������������������������������

36,63638,232

Software �������������������������������������������������������������������������������������������������������������������������������������������������������

35,66137,944

Goodwill �������������������������������������������������������������������������������������������������������������������������������������������������������

839

258

Other intangible fixed assets ���������������������������������������������������������������������������������������������������������������������

135

29

Due from reinsurers ���������������������������������������������������������������������������������������������������������������������������������������

79

110

Foreign exchanges �������������������������������������������������������������������������������������������������������������������������������������������

8,936

7,954

Other assets �����������������������������������������������������������������������������������������������������������������������������������������������������

92,416

107,345

Deferred tax assets �����������������������������������������������������������������������������������������������������������������������������������������

34,171

17,980

Customers’ liabilities for acceptances and guarantees �����������������������������������������������������������������������������

1,000

–

Reserve for possible loan losses �������������������������������������������������������������������������������������������������������������������

(1,848)(1,877)

Total Assets ���������������������������������������������������������������������������������������������������������������������������������������������������������

¥7,241,414¥8,096,164

Assets078

Sony Financial Holdings Inc. Annual Report 2013

(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 sold �������������������������������������������������������������������������������������������������������������������������������
Borrowed money ���������������������������������������������������������������������������������������������������������������������������������������������
Foreign exchanges �������������������������������������������������������������������������������������������������������������������������������������������
Bonds payable �������������������������������������������������������������������������������������������������������������������������������������������������
Other liabilities �����������������������������������������������������������������������������������������������������������������������������������������������
Reserve for employees’ bonuses �������������������������������������������������������������������������������������������������������������������
Reserve for employees’ retirement benefits �����������������������������������������������������������������������������������������������
Reserve for directors’ retirement benefits ���������������������������������������������������������������������������������������������������
Special reserves �����������������������������������������������������������������������������������������������������������������������������������������������
Reserve for price fluctuations �������������������������������������������������������������������������������������������������������������������
Reserve for financial products transaction liabilities �����������������������������������������������������������������������������
Deferred tax liabilities �������������������������������������������������������������������������������������������������������������������������������������
Deferred tax liabilities on land revaluation �������������������������������������������������������������������������������������������������
Acceptances and guarantees �������������������������������������������������������������������������������������������������������������������������
Total Liabilities �������������������������������������������������������������������������������������������������������������������������������������������������

2013¥4,963,025
48,2334,910,669
4,122
1,664
647
1,760,853
10,0002,000
35
10,00093,563
2,944
21,547354
25,38625,380
6
–
589
1,000
6,893,613¥5,601,060
53,246
5,543,540
4,273
2,431
600
1,857,302
10,0002,000
87
20,000106,365
3,085
24,216411
32,34432,344–275
536–
7,660,719

19,900195,277
98,677
313,854

19,900195,277
135,160
350,337

36,949(2,414)(1,395)(453)
32,685
1,260
347,800¥7,241,414

88,329(3,047)(1,513)–
83,767
1,339
435,444¥8,096,164

See accompanying “Notes to the Consolidated Financial Statements.”

Sony Financial Holdings Inc. Annual Report 2013

079

Financial Section SFH Consolidated Financial Statements

Net Assets
Shareholders’ equity
Common stock �������������������������������������������������������������������������������������������������������������������������������������������
Capital surplus ���������������������������������������������������������������������������������������������������������������������������������������������
Retained earnings ���������������������������������������������������������������������������������������������������������������������������������������
Total shareholders’ equity �������������������������������������������������������������������������������������������������������������������������
Accumulated other comprehensive income
Net unrealized gains on other securities, net of taxes �������������������������������������������������������������������������
Net deferred losses on hedging instruments, net of taxes �������������������������������������������������������������������
Land revaluation, net of taxes �������������������������������������������������������������������������������������������������������������������
Foreign currency translation adjustments �����������������������������������������������������������������������������������������������
Total accumulated other comprehensive income ���������������������������������������������������������������������������������
Minority interests �������������������������������������������������������������������������������������������������������������������������������������������
Total Net Assets ���������������������������������������������������������������������������������������������������������������������������������������������
Total Liabilities and Net Assets �������������������������������������������������������������������������������������������������������������������������

2012

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
Sony Financial Holdings Inc.
For the years ended March 31, 2012 and 2013

(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 sale of securities ���������������������������������������������������������������������������������������������������������������������
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 �������������������������������������������������������������������������������
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 bought �����������������������������������������������������������������������������������
Interest income on deposits with banks ���������������������������������������������������������������������������������������������
Other interest income ���������������������������������������������������������������������������������������������������������������������������
Fees and commissions �������������������������������������������������������������������������������������������������������������������������������
Other operating income �����������������������������������������������������������������������������������������������������������������������������
Gains on foreign exchange transactions, net �������������������������������������������������������������������������������������
Others �������������������������������������������������������������������������������������������������������������������������������������������������������
Other ordinary income �������������������������������������������������������������������������������������������������������������������������������
(Continued on next page)080

Sony Financial Holdings Inc. Annual Report 2013

(Millions of yen)
2012

2013

¥1,078,070
965,555
815,382
813,930
1,452
133,670
97,649
5,278
7,592
12
23,137
16,50180,094
79,172
79,141
31
873
874
23
6
(31)
48
32,42024,871
13,270
11,540
13
45
1
4,752
2,740
1,764
976
56

¥1,259,041
1,140,184
925,075
923,672
1,402
199,549
108,153
5,259
2,522
13
83,601
15,55984,711
83,61583,582
33
1,021
1,027
26
–
(33)
74
34,14525,954
13,877
12,007
13
55
0
5,260
2,815
1,874
940
114

(Millions of yen)2013

¥1,003,444
898,925
287,451
69,002
8,577
42,209163,274
2,302
2,085
471,593–
471,57617
14,167
55
2,607
1,692
–
1,373
2
2,257
6,178
105,324
20,38876,67457,67345,032
5,081
972
3,287
3,298
0
4
0
4
18,91877¥1,179,789
1,069,007
293,938
71,0659,571
46,809161,873
2,649
1,968
630,575
607
629,955
12
11,450
43
1,587
327
226
1,253
21
2,000
5,990
108,849
24,19281,704
61,401
47,153
5,656
945
4,407
3,238
0
7
3
3
20,27916(Continued on next page)

Sony Financial Holdings Inc. Annual Report 2013081

Financial Section SFH Consolidated Financial Statements

Ordinary Expenses �����������������������������������������������������������������������������������������������������������������������������������������������
Ordinary Expenses from the Life Insurance Business �������������������������������������������������������������������������������
Insurance 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 �������������������������������������������������������������������������������������������������������������������
Devaluation losses on securities �����������������������������������������������������������������������������������������������������������
Losses on derivatives, net ���������������������������������������������������������������������������������������������������������������������
Foreign exchange losses, net �����������������������������������������������������������������������������������������������������������������
Provision for reserve for possible loan losses �������������������������������������������������������������������������������������
Depreciation of real estate for rent and others ���������������������������������������������������������������������������������
Other investment expenses �������������������������������������������������������������������������������������������������������������������
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 ���������������������������������������������������������������������������������������������������������������������������

2012

Consolidated Statements of Income (Continued)(Millions of yen)

Ordinary Expenses from the Banking Business �������������������������������������������������������������������������������������������
Interest expenses �����������������������������������������������������������������������������������������������������������������������������������������
Interest expenses on deposits ���������������������������������������������������������������������������������������������������������������
Interest expenses on call money and bills sold ����������������������������������������������������������������������������������
Interest 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 Gains ���������������������������������������������������������������������������������������������������������������������������������������������
Gains on disposal of fixed assets �����������������������������������������������������������������������������������������������������������������
Reversal of reserve for employees’ retirement benefits ���������������������������������������������������������������������������
Extraordinary Losses �������������������������������������������������������������������������������������������������������������������������������������������
Losses on disposal of fixed assets �����������������������������������������������������������������������������������������������������������������
Impairment losses �������������������������������������������������������������������������������������������������������������������������������������������
Provision for special reserves �������������������������������������������������������������������������������������������������������������������������
Provision for reserve for price fluctuations ���������������������������������������������������������������������������������������������
Losses on sale of shares of subsidiaries and affiliates �������������������������������������������������������������������������������
Others ���������������������������������������������������������������������������������������������������������������������������������������������������������������
Provision 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 �����������������������������������������������������������������������������������������������������������������������������Net Income ���������������������������������������������������������������������������������������������������������������������������������������������������������

2012

2013

¥   27,844
8,798
6,879
10
95
23
1,784
4
1,416
735
16,322571
74,625
99
0
99
9,073
77
274
8,568
8,568
–
153
958
64,69328,361
3,505
31,86732,82513¥   32,812¥   29,077
7,811
6,296
10
86
61
1,355
0
1,546
2,568
16,760389
79,252
–
–
–
9,257
113
962
6,964
6,964
1,216
0
2,104
67,89029,366(6,620)22,74645,14378¥   45,064

See accompanying “Notes to the Consolidated Financial Statements.”(2) Consolidated Statements of Comprehensive Income(Millions of yen)

Income before Minority Interests ���������������������������������������������������������������������������������������������������������������������
Other Comprehensive Income
Net unrealized gains on other securities, net of taxes �����������������������������������������������������������������������������
Net deferred losses on hedging instruments, net of taxes �����������������������������������������������������������������������
Land revaluation, net of taxes �����������������������������������������������������������������������������������������������������������������������
Foreign currency translation adjustments ���������������������������������������������������������������������������������������������������
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 ���������������������������������������������������������������������
082

Sony Financial Holdings Inc. Annual Report 2013

2012

2013

¥32,825¥45,143

28,422
(855)
103
(122)
1
27,550¥60,376

51,381
(633)
(118)
453
(1)
51,082¥96,225¥60,36213¥96,14678

Consolidated Statements of Changes in Net Assets
Sony Financial Holdings Inc.
For the years ended March 31, 2012 and 2013
(Millions of yen)

Shareholders’ Equity
Common stock
Balance at the beginning of the current period �������������������������������������������������������������������������������������
Changes during the period
Total changes during the period �����������������������������������������������������������������������������������������������������������
Balance at the end of the current period
Capital surplus
Balance at the beginning of the current period �������������������������������������������������������������������������������������
Changes during the period
Total changes during the period �����������������������������������������������������������������������������������������������������������
Balance at the end of the current period �����������������������������������������������������������������������������������������������
Retained earnings
Balance at the beginning of the current period �������������������������������������������������������������������������������������
Changes during the period
Dividends from surplus ���������������������������������������������������������������������������������������������������������������������������
Net income ���������������������������������������������������������������������������������������������������������������������������������������������
Reversal of land revaluation �����������������������������������������������������������������������������������������������������������������
Total changes during the period �����������������������������������������������������������������������������������������������������������
Balance at the end of the current period �����������������������������������������������������������������������������������������������
Total shareholders’ equity
Balance at the beginning of the current period �������������������������������������������������������������������������������������
Changes during the period
Dividends from surplus ���������������������������������������������������������������������������������������������������������������������������
Net income ���������������������������������������������������������������������������������������������������������������������������������������������
Reversal of land revaluation �����������������������������������������������������������������������������������������������������������������
Total changes during the period �����������������������������������������������������������������������������������������������������������
Balance at the end of the current period �����������������������������������������������������������������������������������������������

2012

2013

¥ 19,900¥ 19,900–
19,900–19,900195,277

195,277–
195,277–
195,277

74,56598,677(8,700)32,812–
24,112
98,677(8,700)45,064
118
36,482
135,160

289,742

313,854(8,700)32,812–
24,112
313,854(8,700)45,064
118
36,482
350,337(Continued on next page)

Financial Section SFH Consolidated Financial Statements

Sony Financial Holdings Inc. Annual Report 2013083

Consolidated Statements of Changes in Net Assets (Continued)(Millions of yen)

Accumulated Other Comprehensive Income
Net unrealized gains on other securities, net of taxes
Balance at the beginning of the current period �������������������������������������������������������������������������������������
Changes during the period
Net changes of items other than shareholders’ equity ���������������������������������������������������������������������
Total changes during the period �����������������������������������������������������������������������������������������������������������
Balance at the end of the current period �����������������������������������������������������������������������������������������������
Net deferred losses on hedging instruments, net of taxes
Balance at the beginning of the current period �������������������������������������������������������������������������������������
Changes during the period
Net changes of items other than shareholders’ equity ���������������������������������������������������������������������
Total changes during the period �����������������������������������������������������������������������������������������������������������
Balance at the end of the current period �����������������������������������������������������������������������������������������������
Land revaluation, net of taxes
Balance at the beginning of the current period �������������������������������������������������������������������������������������
Changes during the period
Net changes of items other than shareholders’ equity ���������������������������������������������������������������������
Total changes during the period �����������������������������������������������������������������������������������������������������������
Balance at the end of the current period �����������������������������������������������������������������������������������������������
Foreign currency translation adjustments
Balance at the beginning of the current period �������������������������������������������������������������������������������������
Changes during the period
Net changes of items other than shareholders’ equity ���������������������������������������������������������������������
Total changes during the period �����������������������������������������������������������������������������������������������������������
Balance at the end of the current period �����������������������������������������������������������������������������������������������
Total accumulated other comprehensive income
Balance at the beginning of the current period �������������������������������������������������������������������������������������
Changes during the period
Net changes of items other than shareholders’ equity ���������������������������������������������������������������������
Total changes during the period �����������������������������������������������������������������������������������������������������������
Balance at the end of the current period �����������������������������������������������������������������������������������������������
Minority Interests
Balance at the beginning of the current period �����������������������������������������������������������������������������������������
Changes during the period
Net changes of items other than shareholders’ equity �������������������������������������������������������������������������
Total changes during the period ���������������������������������������������������������������������������������������������������������������
Balance at the end of the current period ����������������������������������������������������������������������������������������������������
Total Net Assets
Balance at the beginning of the current period �����������������������������������������������������������������������������������������
Changes during the period
Dividends from surplus �������������������������������������������������������������������������������������������������������������������������������
Net income �������������������������������������������������������������������������������������������������������������������������������������������������
Reversal of land revaluation ���������������������������������������������������������������������������������������������������������������������
Net changes of items other than shareholders’ equity �������������������������������������������������������������������������
Total changes during the period ���������������������������������������������������������������������������������������������������������������
Balance at the end of the current period ����������������������������������������������������������������������������������������������������
See accompanying “Notes to the Consolidated Financial Statements.”

084

Sony Financial Holdings Inc. Annual Report 2013

2012

2013

¥  8,525¥ 36,949

28,42428,42436,94951,38051,38088,329(1,558)(2,414)

(855)
(855)
(2,414)

(633)
(633)
(3,047)(1,499)(1,395)103
103(1,395)

(118)
(118)
(1,513)

(331)

(453)

(122)
(122)
(453)

453
453
–

5,135

32,68527,55027,55032,68551,082
51,082
83,767

–

1,260

1,260
1,260
1,260

78
78
1,339

294,877

347,800(8,700)32,812–
28,811
52,923¥347,800(8,700)45,064
118
51,16187,643¥435,444

Consolidated Statements of Cash Flows
Sony Financial Holdings Inc.
For the years ended March 31, 2012 and 2013
(Millions of yen)
2013¥     64,693
2,257
6,032
274
560
(930)
474,875
17
958
274
3,088
(87)
8,568
1
(123,395)(36,774)
8,853
5,355
78
1,179
(113,103)
111,022(503)
1828,269441,584
132,119(9,192)(1,692)(38,554)524,264¥   67,890
2,000
7,784
962
580
5,015
633,193
12
2,104
28
2,913
57
6,964
0
(135,136)(87,294)
7,855(35,508)
69
1,718(134,664)
96,408981
51
27,437
471,428
146,015(8,330)(1,966)(26,264)
580,882

(500)
6,000
(1,037,882)
563,557(48,888)
23,333–(494,379)
29,884(955)
0(14,880)346––(2,328)(1)(512,198)(4,942)5,300(973,738)
462,518(47,927)
21,144(53)(537,698)
43,184(1,599)–(11,869)
–
1,035
(30)
–
2
(550,159)

9,962(8,696)
550
(33)
1,782
(0)
13,848161,803¥   175,651

9,965(8,697)(6,500)214(5,017)47
25,752
175,651¥ 201,404

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 2013085

Financial Section SFH Consolidated Financial Statements

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 in policy reserve �������������������������������������������������������������������������������������������������������������������������
Increase in interest portion of reserve for policyholders’ dividends �������������������������������������������������
Increase in reserve for policyholders’ dividends �����������������������������������������������������������������������������������
Increase in reserve for possible loan losses �������������������������������������������������������������������������������������������
Increase in reserve for employees’ retirement benefits ���������������������������������������������������������������������
Increase (decrease) in reserve for directors’ retirement benefits �����������������������������������������������������
Increase in reserve for price fluctuations �����������������������������������������������������������������������������������������������
Increase in reserve for financial products transaction liabilities �������������������������������������������������������
Interest income and dividends ���������������������������������������������������������������������������������������������������������������
Gains on securities �����������������������������������������������������������������������������������������������������������������������������������
Interest expenses ���������������������������������������������������������������������������������������������������������������������������������������
Exchange (gains) losses ���������������������������������������������������������������������������������������������������������������������������
Losses on disposal of tangible fixed assets �������������������������������������������������������������������������������������������
Equity in losses of affiliates ���������������������������������������������������������������������������������������������������������������������
Net increase in loans �������������������������������������������������������������������������������������������������������������������������������
Net increase in deposits ���������������������������������������������������������������������������������������������������������������������������
Net (increase) decrease in foreign exchange (assets) �������������������������������������������������������������������������
Net increase in foreign exchange (liabilities) ���������������������������������������������������������������������������������������
Others, net �������������������������������������������������������������������������������������������������������������������������������������������������
Subtotal �����������������������������������������������������������������������������������������������������������������������������������������������������
Interest and dividends received ��������������������������������������������������������������������������������������������������������������
Interest paid �����������������������������������������������������������������������������������������������������������������������������������������������
Policyholders’ dividends paid �����������������������������������������������������������������������������������������������������������������
Income taxes paid �������������������������������������������������������������������������������������������������������������������������������������
Net cash provided by 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 �����������������������������������������������������������������������������������������������������������������������������������
Others ���������������������������������������������������������������������������������������������������������������������������������������������������������
Total of net cash used in investment transactions �����������������������������������������������������������������������������
Total of net cash provided by operating activities and investment transactions ���������������������������
Purchases of tangible fixed assets ���������������������������������������������������������������������������������������������������������
Proceeds from sale of tangible fixed assets �����������������������������������������������������������������������������������������
Purchases of intangible fixed assets �������������������������������������������������������������������������������������������������������
Proceeds from purchase of investments in subsidiaries resulting in change in scope of consolidation ���Proceeds from sales of investments in subsidiaries resulting in change in scope of consolidation ���Purchase of securities of a subsidiary �����������������������������������������������������������������������������������������������������
Payments for transfer of business ���������������������������������������������������������������������������������������������������������
Others ���������������������������������������������������������������������������������������������������������������������������������������������������������
Net cash used in investing activities �����������������������������������������������������������������������������������������������������Cash flows from financing activities
Proceeds from issuance of bonds �����������������������������������������������������������������������������������������������������������Cash dividends paid ���������������������������������������������������������������������������������������������������������������������������������
Balance from securitization of lease receivables ���������������������������������������������������������������������������������
Others ���������������������������������������������������������������������������������������������������������������������������������������������������������
Net 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 fiscal year �������������������������������������������������������������Cash and cash equivalents at the end of the fiscal year �������������������������������������������������������������������������

2012

Notes to the Consolidated Financial Statements (For the year ended March 31, 2013)
1. Basis of Presenting Consolidated Financial Statements
Sony Financial Holdings Inc. (“SFH”) and its domestic subsidiaries maintain their accounting records and prepare their financial statements
in Japanese yen in accordance with the provisions set forth in the Companies Act of Japan, the Insurance Business Act of Japan and the
Banking Act of Japan and in conformity with generally accepted accounting principles and practices in Japan, which differ in certain
respects from the application and disclosure requirements of generally accepted accounting principles and practices under the International
Financial Reporting Standards.

2. Principles of Consolidation(1) Scope of consolidation
Number of consolidated subsidiaries: 4
Consolidated subsidiaries: Sony Life Insurance Co., Ltd., Sony Assurance Inc., Sony Bank Inc., and SmartLink Network, Inc.
Sony Bank Inc., the banking subsidiary of SFH, transferred all the shares of Sony Bank Securities Inc. and Sony Life Insurance Co., Ltd., thelife insurance subsidiary of SFH, transferred all the shares of Sony Life Insurance (Philippines) Corporation. As a result, they are excluded
from the scope of consolidation from the year ended March 31, 2013.

Number of non-consolidated subsidiaries: 1
Non-consolidated subsidiary: LIPLA Co., Ltd.
LIPLA Co., Ltd. is excluded from the scope of consolidation for the year ended March 31, 2013 because it is so immaterial in light of the total
assets, ordinary revenues, net income or loss, retained earnings, and accumulated other comprehensive income that its exclusion from thescope of consolidation does not hinder a rational judgment of the Sony Financial Group’s financial position and results of operations.

(2) Application of the equity method
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: 1
Non-consolidated subsidiaries and affiliates that are not accounted for by the equity method: LIPLA Co., Ltd.
LIPLA Co., Ltd., the non-consolidated subsidiary, is not accounted for by the equity method because it is so immaterial in light of the net
income or loss, retained earnings, and accumulated other comprehensive income that its exclusion does not hinder a rational judgment of
the Sony Financial Group’s financial position and results 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 are stated in the following manner: Securities held for trading purposes (“trading securities”) are stated at fair value with unrealized gains and losses charged to income. The cost of such securities sold is determined by the moving-average method. Held-to-maturity
securities are stated at amortized cost (straight-line method) using the moving-average method. Available-for-sale securities whose fairvalues 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-averagemethod. Available-for-sale securities whose fair values are deemed extremely difficult to determine are stated at acquisition cost based on
the moving-average method.

(2) Derivative financial instruments
Derivative financial instruments are stated at fair value, with changes in fair value included in income for the period in which they arise,
except for derivatives that are designated by SFH and its consolidated subsidiaries (the “Companies”) as “hedging instruments.”

086

Sony Financial Holdings Inc. Annual Report 2013

(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 arecharged 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(Changes in accounting policies which are difficult to distinguish from changes in accounting estimates)
SFH and domestic subsidiaries used to adopt the declining-balance method to depreciate certain tangible fixed assets. However, for the
purpose of using uniform accounting policies with the parent company, SFH and domestic subsidiaries changed the depreciation method
to the straight-line method prospectively effective from the year ended March 31, 2013. As a result, compared with the case based on theprevious method, depreciation and depreciation of real estate for rent and others decreased by ¥422 million, and ordinary profit andincome before income taxes increased by ¥422 million.

(4) Intangible fixed assets (excluding leased assets)
Intangible fixed assets are amortized using the straight-line method. Software for internal use is amortized using the straight-line method
generally over 5 years, its estimated useful life.

(5) Leased assets
All leased assets with respect to non-ownership-transfer finance leases are amortized by the straight-line method over the 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 to bankruptcy, court-guided rehabilitation, or similar legal or formal proceedings (the “Bankrupt Borrowers”), loans to borrowers that are substantially in the same condition as
the Bankrupt Borrowers (the “Substantially Bankrupt Borrowers”) and money on deposits whose market value declined significantly, theCompanies 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 theborrowers’ 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 historical loan loss ratio
determined over certain periods. All loans are subject to asset assessment by the related operational departments in accordance with
self-assessment guidelines, and 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 services­provided during the current fiscal year.

The reserve for employees’ retirement benefits is provided for the payment of retirement benefits to employees, in the amount deemed
accrued at the fiscal year-end, based on the projected retirement benefit obligations and the fair value of plan assets at the fiscal year-end.
Unrecognized net obligation at transition is amortized using the straight-line method over 15 years. Unrecognized prior service cost isamortized 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 17 years within the employees’ average remaining service
period, commencing from the fiscal year immediately following incurrence.

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

(10) 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 pricefluctuations primarily related to stocks, bonds and foreign currency-denominated assets which are exposed to losses due to market pricefluctuations. This reserve is only used to reduce losses arising from price fluctuations on those assets.

Sony Financial Holdings Inc. Annual Report 2013087

Financial Section SFH Consolidated Financial Statements(8) Reserve for employees’ retirement benefits

(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 eachbalance sheet date, whereas components of net assets denominated in foreign currencies are translated at historical rates. The current
year’s profit and loss accounts are translated into yen using the average exchange rate for the fiscal year.

(12) Hedge accounting
SFH’s banking subsidiary applies either deferred hedge accounting or fair value hedge accounting to account for transactions it enters into
to hedge interest rate risks on financial assets. SFH’s banking subsidiary uses interest rate swaps to offset fluctuations in interest rates on
fixed-rate loans by identifying the hedged items that are grouped based on their maturity, in accordance with “Accounting and Auditing
Treatments on Application of Accounting Standard for Financial Instruments in the Banking Industry” (Industry Audit Committee of­Japanese Institute of Certified Public Accountants Statement No. 24). Interest rate swaps and others are used as hedging instruments tooffset fluctuations in the fair value of fixed-rate bonds which are classified as available-for-sale securities. Both of the above-mentioned
hedging instruments are identified so that their significant terms are nearly identical to those of the hedged items. Accordingly, suchhedges are considered as highly effective, resulting in a substitution for evaluating the effectiveness of the hedging transactions.

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

(14) Accounting for consumption taxes
The consumption taxes received and paid by the Companies, excluding loss adjustment expenses and operating, general and administrative
expenses of SFH’s non-life insurance subsidiary, are not included in income and expenses. Under the Consumption Tax Act of Japan, theconsumption taxes paid on property and equipment are not deductible from the consumption taxes received; they are recorded as “otherassets” and amortized on a 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 fulfillmentof future obligations under life insurance contracts. The policy reserve is established by the net level premium reserve method, whichassumes a constant or level amount of net insurance premiums over the term of the relevant policy when calculating the amount of thereserve required to fund all future policy claims. The net insurance premium is a portion of the premium covering insurance under-writing
risk, which is estimated based on factors such as mortality rates, investment yield, surrender rates and other factors. The net level premium
reserve for individual insurance contracts underwritten from FY1996 is calculated 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.

4. Notes to the Consolidated Balance Sheet
1 	The balance of loans includes ¥150 million in loans to bankrupt borrowers (before deductions for reserve for possible loan losses) and¥1,534 million in non-accrual delinquent loans (before deductions for reserve for possible loan losses). Loans to bankrupt borrowers
include loans that have been in arrears on principal or interest payments for a considerably long period of time or loans (before deductions for reserve for possible loan losses) on which principal or interest payments are considered unlikely to occur in the future forother reasons and on which interest income is not recognized. These loans are with reasons defined under Article 96-1-3, i through vof 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 in order to support the borrowers’ recovery from financial difficulties.
2 	The balance of loans includes ¥2,220 million in restructured loans (before deductions for reserve for possible loan losses). Restructuredloans are loans on which terms and conditions have been amended in favor of the borrowers (e.g., reduction of the original interest rate,
deferral of interest payments, extension of principal repayments or debt waiver) in order to support the borrowers’ recovery from financial
difficulties, excluding loans to bankrupt borrowers, non-accrual delinquent loans and past due loans (3 months or more).
3 	The total amount of loans to bankrupt borrowers, non-accrual delinquent loans, and restructured loans was ¥3,905 million (before
deductions for reserve for possible loan losses).

088

Sony Financial Holdings Inc. Annual Report 2013

4 	On March 31, 2002, SFH’s life insurance subsidiary revalued its land for operating purposes, as permitted by the Act on Revaluationof Land (Act No. 34, enacted March 31, 1998—the “Law”). The tax effect of the revaluation difference is accounted for differently,
depending on whether there are gains or losses; when there is a loss, a valuation allowance is fully provided for the tax effect of theloss, and when there is a gain, the tax effect is recorded in “deferred tax liabilities on land revaluation.” After excluding theseamounts, the net revaluation difference is reported as “land revaluation” in net assets. The revaluation method stipulated by Article
3-3 of the Law was based on the land appraisal in conformity with Article 2-5 of the Order for Enforcement related to the Law­(Cabinet Order No. 119, effective from March 31, 1998).
	  Difference between book value and fair value of land after revaluation as of the fiscal-year end . . . . . . . . . .  ¥(261) million	  Of the above, land classified as investment and rental property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  ¥(398) million
5 	Accumulated depreciation of tangible fixed assets as of March 31, 2013 was ¥24,801 million.
6 	The balance sheet includes ¥550,624 million of assets and liabilities in equal amounts related to separate accounts as of March 31,
2013, at SFH’s life insurance subsidiary.
7 	Securities include shares in non-consolidated subsidiaries and affiliates worth ¥7,938 million. Among this, investments in jointly
controlled companies are ¥7,830 million.
8 	Changes in the reserve for policyholders’ dividends at SFH’s life insurance subsidiary for the fiscal year ended March 31, 2013 are
as follows:	  Balance at the beginning of the fiscal year . . . . . . . . . . . . . . . . . . . ¥4,122 million
	  Policyholders’ dividends during the fiscal year . . . . . . . . . . . . . . . . ¥1,966 million
	  Increase in interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥12 million	  Provision for reserve for policyholders’ dividends . . . . . . . . . . . . . ¥2,104 million
	  Balance at the end of the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . ¥4,273 million
9 	Securities with a book value of ¥10,543 million were pledged as collateral for ¥10,000 million of call money and bills sold at March
31, 2013. In addition to the assets described above, securities with a book value of ¥67,660 million were pledged as collateral for
cash settlements, variation margins of futures markets and certain other purposes at March 31, 2013.
10 	Net assets per share was ¥997.94.
11 	Financial Instruments(1) Description of financial instruments(i) Policy on financial instruments(ii) Financial instruments and related risk
Securities and loans constitute the majority of the Sony Financial Group’s financial asset holdings. Most of its 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 holding to maturity or for available-for-sale, and they are subject to various risks,
including interest rate risk, issuer credit risk, stock price fluctuation risk and exchange rate risk. Furthermore, the Sony Financial Groupholds some of its financial assets in the shares of overseas unlisted companies, 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 to the amount of surrender payments, andmortgage loans are backed by real estate. Consequently, loan-related risks are relatively low.
Financial liabilities, meanwhile, are mainly deposits from individual customers, which are subject to interest rate risk. As some of these
deposits are denominated in foreign currencies, they are subject to exchange rate risk, as well as interest rate risk.
Derivatives transactions in the banking business are conducted primarily as one aspect of ALM. In this category, we apply hedge
accounting. Interest rate swap transactions are used to hedge against the interest rate risk of fixed-rate loans. When hedges commence,
the banking subsidiary ensures hedge effectiveness by confirming that the finance receivables to be hedged and the interest rate swaps(the hedging method used) are grouped to within 3 months of each other. Interest rate swaps and others are used as hedging instruments

Sony Financial Holdings Inc. Annual Report 2013

089

Financial Section SFH Consolidated Financial Statements

The Sony Financial Group conducts its life insurance, non-life insurance and banking businesses in accordance with the provisions of the
Insurance Business Act of Japan, the Banking Act of Japan and other relevant provisions. With regard to financial assets (except for assets
in separate accounts as stipulated in Item 1, Article 118 of the Insurance Business Act of Japan in the life insurance business), to ensure
steady investment income the Sony Financial Group holds various investment assets, including Japanese government and corporate bonds,
foreign government and corporate bonds, Japanese stocks and loans. Deposits from individual customers in the banking business accountfor nearly all of SFH’s financial liabilities. Although SFH holds financial assets as well as financial liabilities, which are subject to the risk ofinterest rate and exchange rate fluctuations, it strives to protect itself from the negative effects of these fluctuations by maintaining anappropriate balance between assets and liabilities by conducting asset-liability management (ALM) in each of its businesses. In addition,
the life insurance business and banking business conduct derivatives transactions as one aspect of its ALM.

to offset fluctuations in the fair value of fixed-rate bonds classified as available-for-sale securities. When the hedge is implemented, thebanking subsidiary determines hedge effectiveness by confirming that the cash flows of the securities to be hedged match those of thehedging method (such as interest rate swaps).
Transactions involving financial instruments are subject to liquidity risk. Liquidity risk includes cash flow risk and market liquidity risk.
Cash flow risk is the risk of our inability to make cash payments when due because of an inability to maintain sufficient cash reserves, aswell as the risk of loss if we are forced to raise funds under unfavorable conditions in order to obtain cash to meet our 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 we are forced to complete transactions under unfavorable market conditions, in eachcase due to market turmoil or other factors.

(iii) Risk management of financial instruments
SFH formulates fundamental principles for risk management and manages risks specific to its subsidiaries’ scale, business content andother attributes. Our Risk Management Guidelines establish specific conditions for managing group risks, 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 Executive­Committee on subsidiaries’ risk management conditions recognized through monitoring or by holding Risk Management Meetings.

1 Credit risk
The Sony Financial Group uses the following methods to manage the credit risk of its principal subsidiaries:(a)	SFH’s life insurance subsidiary manages issuer credit risk on securities by specifying details such as risk management methods andprocedures in regulations. The risk management division periodically reports this information to the Board of Directors and the­Executive Committee.
(b)	SFH’s 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 the­Executive Committee.
(c)	In line with various regulations for managing credit risks, SFH’s banking subsidiary manages risks involving lending to individual­customers. For each loan, the subsidiary conducts credit screenings, manages credit information, determines collateral and handles
problem assets. In this manner, the banking subsidiary operates a system to manage individual credit.
	  With regard to lending to corporate customers, for each loan, the banking subsidiary performs credit screenings, sets credit limits,manages credit information such as credit ratings by outside agencies, determines security and collateral and handles problem assets.
In this manner, the banking subsidiary operates a system to manage risk. The subsidiary manages market credit risk, such as securities
issuer credit risk and, on derivatives transactions, counterparty risk, by periodically determining credit and market value information.
	  The risk management division manages credit. The division periodically reports risk management conditions to management via
Executive Committee and Board of Directors meetings. In addition, the internal audit division conducts regular audits.

2 Market risk
The Sony Financial Group uses the following methods to manage the market risk of its principal subsidiaries:(a) The life insurance subsidiary manages various market-related risks in the following manner:
V Interest rate risk
		Interest rate risk is managed by specifying details such as risk management methods and procedures in regulations. Based on ALM
policies that are determined through such methods as deliberation by the Executive Committee, the subsidiary determines andconfirms actual risk conditions at Board of Directors meetings. The subsidiary’s risk management division maintains an overall grasp
on the interest rates and durations of financial instruments, and monitors risk through interest rate sensitivity analysis and othermethods. The division periodically reports such information to the Board of Directors and the Executive Committee.
V Exchange rate risk
		Exchange rate risk is managed by specifying details such as risk management methods and procedures in regulations. The risk­management division reports this information regularly to the Board of Directors and the Executive Committee. The subsidiary hasentered into forward foreign exchanges to hedge the exchange rate risk.
V Risk associated with equity securities		The subsidiary’s risk management division periodically analyzes the amount 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.
V Derivative transactions
		Derivative transactions are managed by specifying details such as risk management methods and procedures in regulations. The risk
management division reports this information regularly to the Board of Directors and the Executive Committee.
(b) SFH’s non-life insurance subsidiary manages various market-related risks in the following manner:
V 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.
V Price fluctuation risk
		The equity securities exposed to price fluctuation risk are held for strategic investment for the purpose of enhancing the business
partnerships. The subsidiary monitors the market environment and financial condition of business partners.

090

Sony Financial Holdings Inc. Annual Report 2013

(c)	SFH’s banking subsidiary manages various market-related risks in the following manner. The risk management division handles eachof these risks and reports risk management conditions regularly to management via Executive Committee and Board of Directors
meetings. In addition, the internal audit division conducts regular audits.
V Interest rate and exchange rate risk
		In accordance with market risk management regulations, the subsidiary manages the risk of changes in value and losses in income
resulting from changes in the value of assets and liabilities (including off-balance-sheet items), owing to fluctuations in various
market risk factors, such as interest rates, exchange rates and stock prices. Market risk management regulations specify details suchas risk management methods and procedures. Based on ALM 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 understandand confirm actual conditions and deliberate future responses and risk conditions. On a daily basis, the risk management division
maintains an overall understanding of interest and exchange rates on financial assets and liabilities, as well as their durations,­conducts monitoring that includes value at risk (VaR) and interest rate sensitivity analysis, and ensures regulatory conformance.
The subsidiary also uses ALM to conduct interest rate swaps, currency swaps, foreign exchange and other derivatives transactions tohedge against interest and exchange rate fluctuation risks.
V Market price fluctuation risk
		The subsidiary manages holdings of investment products, including securities, in accordance with market risk management regulations. Of these, the investment division, which primarily purchases securities externally, strives to reduce market price fluctuation
risk by conducting pre-screening, setting investment limits and monitoring investments on an ongoing basis.
V Derivatives transactions
		Derivatives 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.
V Quantitative information on market risk
		The principal financial instruments affected by the major risk parameters of interest rate risk and exchange rate fluctuation risk areloans, securities, deposits in the banking business and derivatives transactions.
		  The impact of such risks on these financial assets and financial liabilities was calculated using the Variance-Covariance Method todetermine gains or losses over a given period of 10 business days, assuming the fluctuation of interest and exchange rates within arational forecast band determined over an observation period of 250 business days. We then employed quantitative analysis to
manage interest rate and exchange rate fluctuation risks. The resulting risk amount with a 99% confidence interval was ¥564
­million as of March 31, 2013.
		  This amount of impact is based on the assumption that risk parameters other than interest rates and exchange rates are fixed,
and that a correlation exists between interest rates and exchange rates. However, no correlation with other risk parameters is
assumed. Moreover, in the event that fluctuations exceed the rational forecast band for interest and exchange rates, the risk impact
may exceed the amount calculated.

3 Liquidity risk(iv) 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 that are 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 not themselves indicate
the volume of market risk related to derivatives transactions.

Sony Financial Holdings Inc. Annual Report 2013

091

Financial Section SFH Consolidated Financial Statements

The Sony Financial Group uses the following methods to manage the liquidity risk of its principal subsidiaries.
(a)	At the life insurance subsidiary, in line with liquidity risk management regulations, the accounting division prepares and 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 division periodically or as needed report this information to
the Board of Directors and the Executive Committee.
(b)	SFH’s non-life insurance subsidiary establishes regulations related to liquidity risk. Its cash flow management division prepares andupdates cash flow plans. The risk management division manages liquidity risk by monitoring the situations.
(c)	SFH’s banking subsidiary manages cash flows by dividing the situation into phases, depending on the degree of pressure on cash flows.
In addition to establishing reporting methods, the subsidiary establishes and revises guidelines as necessary. To manage market liquidity
risk, the subsidiary works to understand market 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 risk management division handles the liquidity
management mentioned above, and the division reports risk management conditions regularly to management via Board of Directors
and Executive Committee meetings. In addition, the internal audit division conducts regular audits.

(2) Fair value information on financial instruments
Below is fair value information on financial instruments as of March 31, 2013, excluding securities whose fair values are deemed extremely
difficult to determine (see Note 2).
(Millions of yen)2013

As of March 31

1 Cash and due from banks ����������������������������������������������������������������������������������������������������������
2 Call loans and bills bought ��������������������������������������������������������������������������������������������������������
3 Monetary trusts
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 Call money and bills sold ����������������������������������������������������������������������������������������������������������
3 Bonds payable ����������������������������������������������������������������������������������������������������������������������������
Total Financial Liabilities ���������������������������������������������������������������������������������������������������������������
Derivative financial instruments*2
Hedge accounting not applied �������������������������������������������������������������������������������������������������
Hedge accounting applied ���������������������������������������������������������������������������������������������������������
Total Derivative Financial Instruments ���������������������������������������������������������������������������������������

Consolidatedbalance sheet
amountFair value

Difference¥  104,142
107,088¥  104,142
107,088¥––442
323,862442
323,862––

527,787
3,956,120
1,686,076
1,115,330(1,422)
1,113,908¥7,819,427¥1,857,302
10,00020,000¥1,887,302

527,787
4,514,661
1,686,076–
558,540–

1,214,326¥8,478,386¥1,858,948
10,00020,112¥1,889,060

100,418¥658,958¥  1,646–
112¥  1,758¥[171][12,675]¥[12,846]¥[171][12,675]¥[12,846]

¥–
–
¥–

*1. Excludes general and specific reserves for possible loan losses.
*2. Figures are totals resulting from derivatives transactions, which are accounted for as other assets and liabilities on the consolidated balance sheets. If the total is a debt
amount, the above figure is shown in [ ].

(Note 1) Measurement of the fair value of financial instruments
Financial Assets
1 Cash and due from banks and 2 Call loans and bills bought
The fair value is regarded as the carrying amount, as they are approximately equal.
3 Monetary trusts	In individual monetary trusts mainly for investment purposes, the fair value of securities (bonds) is the market price on financial­instrument exchanges or the price indicated by a financial institution. Please see “13. 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 “12. Fair value information on securities,” whichindicates fair values by purpose.
5 Loans
1 Loans in the banking business		The fair value of these loans is measured by estimating their future cash flows and then applying a prescribed discount rate. The
discount rate is determined by adding to the Libor-based yield curve a risk premium corresponding to the rate used to determine thegeneral reserve for possible loan losses.
2 Policy loans in the life insurance business		Policy loans are valued by discounting future cash flows to their present value.
Financial Liabilities
1 Deposits	The fair value of deposits is measured according to type by estimating the deposits’ future cash flows and then applying a prescribeddiscount rate. The discount rate is determined by adding to the Libor-based yield curve a premium corresponding to the banking­subsidiary’s cumulative default rate by rating.
2 Call money and bills sold	The fair value is regarded as the carrying amount, as they are approximately equal.

092

Sony Financial Holdings Inc. Annual Report 2013

3 Bonds payable	The fair value of bonds payable is the market price on bond and other markets.

Derivative Transactions
Please see “14. 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)
2013
Consolidatedbalance sheet
amountAs of March 31

1 Unlisted stocks in non-consolidated subsidiaries and affiliates*1 ���������������������������������������������������������������������������������������������
2 Unlisted stocks other than 1 above*1 ���������������������������������������������������������������������������������������������������������������������������������������������
3 Investment in partnership*2 �������������������������������������������������������������������������������������������������������������������������������������������������������������
Total ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

¥ 7,938
4
24,406¥32,349*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 fair value 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 ¥34 million for the year ended March 31, 2013. Impairment losses are principally recorded when the fairvalue 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)
2013

1 year or less

Cash and due from banks �����������������������������������������������������������������������������������
Call loans and bills bought ���������������������������������������������������������������������������������
Securities
Held-to-maturity securities ���������������������������������������������������������������������������
Bonds �������������������������������������������������������������������������������������������������������������
Japanese government and municipal bonds ���������������������������������������
Japanese corporate bonds ���������������������������������������������������������������������
Others �����������������������������������������������������������������������������������������������������������
Available-for-sale securities���������������������������������������������������������������������������
Bonds �������������������������������������������������������������������������������������������������������������
Japanese government and municipal bonds ���������������������������������������
Japanese corporate bonds ���������������������������������������������������������������������
Others �����������������������������������������������������������������������������������������������������������
Loans* �������������������������������������������������������������������������������������������������������������������
Total ���������������������������������������������������������������������������������������������������������������������

¥104,142
107,088

¥–
–

¥–
–

¥–
–

5,049
4,749
3,751
998
300
166,562
70,60730,40140,206
95,955
16,717¥399,559

20,03020,03018,166
1,864–
517,474
208,846
101,778
107,068
308,627
78,536¥616,042

31,12430,92428,0232,901
200
245,274
204,206
144,077
60,12941,06853,945¥330,345

3,889,229
3,834,229
3,811,310
22,91955,000616,900
616,900
616,85050–
820,807¥5,326,936

More than
5 years
to 10 years

Over
10 years* This figure excludes ¥145,019 million of loans such as policy loans that have no fixed redemption period.

(Note 4) Future return schedule of deposits and other liabilities with interest(Millions of yen)2013

As of March 31

1 year or lessMore than
1 yearto 2 years

Deposits* �����������������������������������������������������
Call money and bills sold ���������������������������
Bonds payable�����������������������������������������������
Total �������������������������������������������������������������

¥1,779,125
10,000–¥1,789,125¥18,221––¥18,221

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¥16,661––¥16,661¥ 3,356–
10,000¥13,356¥ 2,840–
10,000¥12,840¥37,095––¥37,095* Demand deposits are included in “1 year or less.”Sony Financial Holdings Inc. Annual Report 2013

093

Financial Section SFH Consolidated Financial Statements

As of March 31

More than
1 yearto 5 years12 	Fair value information on securities as of March 31, 2013:(1) Trading-purpose securities(Millions of yen)
As of March 31

2013

Valuation gains charged to income �����������������������������������������������������������������������������������������������������������������������������������������������������

¥70,801(2) Held-to-maturity securities(Millions of yen)2013

As of March 31

Consolidatedbalance sheet
amountFair value

Difference

Fair values exceeding the consolidated balance sheet amount
Bonds ���������������������������������������������������������������������������������������������������������������������������������������������
Japanese government and municipal bonds �����������������������������������������������������������������������
Japanese corporate bonds �����������������������������������������������������������������������������������������������������
Others �������������������������������������������������������������������������������������������������������������������������������������������
Subtotal ���������������������������������������������������������������������������������������������������������������������������������������
Total �������������������������������������������������������������������������������������������������������������������������������������������������

¥3,912,282
3,883,367
28,914
43,8383,956,120¥3,956,120¥4,461,903
4,429,415
32,48852,7574,514,661¥4,514,661¥549,621
546,0473,574
8,919
558,540¥558,540

Note: There were no held-to-maturity securities whose fair values do not exceed the consolidated balance sheet amounts.

(3) Available-for-sale securities(Millions of yen)2013

As of March 31

Consolidated balance sheet amount exceeding the acquisition cost
Bonds ���������������������������������������������������������������������������������������������������������������������������������������������
Japanese government and municipal bonds �����������������������������������������������������������������������
Japanese corporate bonds �����������������������������������������������������������������������������������������������������
Equity securities �������������������������������������������������������������������������������������������������������������������������
Others �������������������������������������������������������������������������������������������������������������������������������������������
Subtotal ���������������������������������������������������������������������������������������������������������������������������������������
Consolidated balance sheet amount not exceeding the acquisition cost
Bonds ���������������������������������������������������������������������������������������������������������������������������������������������
Japanese government and municipal bonds �����������������������������������������������������������������������
Japanese corporate bonds �����������������������������������������������������������������������������������������������������
Equity securities �������������������������������������������������������������������������������������������������������������������������
Others �������������������������������������������������������������������������������������������������������������������������������������������
Subtotal ���������������������������������������������������������������������������������������������������������������������������������������
Total �������������������������������������������������������������������������������������������������������������������������������������������������

Consolidatedbalance sheet
amountAcquisition
cost

Difference¥1,136,292
930,231206,060
18,394
378,134
1,532,821¥1,054,243
850,896203,347
11,591365,029
1,430,864¥ 82,048
79,335
2,713
6,803
13,104
101,956

56,87450,7706,103
3,850
92,528153,254¥1,686,076

57,392
51,235
6,157
3,898
94,186
155,477¥1,586,342

(518)
(464)
(53)
(47)
(1,657)(2,223)¥ 99,733

Note: As unlisted stocks of ¥4 million in the consolidated balance sheet amount and an investment in partnership of ¥24,406 million in the consolidated balance sheet amounthave no market prices and their fair values are deemed extremely difficult to determine, they are not included in 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)
2013
For the year ended March 31

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

094

Sony Financial Holdings Inc. Annual Report 2013

Sales

Gains on sales

Losses on sales¥ 23,343
22,954389
15,64863,243¥102,235¥  174
168
6
2,003
1,165
¥3,343¥   86
82
3
380
1,228
¥1,695

(6) Impairment of available-for-sale securities
Available-for-sale securities with market value are considered impaired if the market value decreases materially below the acquisition costand such decline is considered non-recoverable. The market value is recognized as the consolidated balance sheet amount and the writedown is accounted for as a devaluation loss for the fiscal year.
Impairment loss of ¥327 million was recognized for the year ended March 31, 2013.
“Material decline” is principally indicated when the market value declines by 30% or more below the acquisition cost.
13 	Fair value information on monetary trusts as of March 31, 2013:(1) Monetary trusts for trading(Millions of yen)2013

As of March 31

Monetary trusts for trading ���������������������������������������������������������������������������������������������������������������������������������������

Consolidatedbalance sheet
amountValuation
gains or losses
charged toincome¥442¥  –(2) Monetary trusts for holding to maturity
There is no related information to be reported.

(3) Other monetary trusts (other than trading and holding to maturity)(Millions of yen)2013

As of March 31

Consolidatedbalance sheet
amountAcquisition
cost

Difference

Items whose
consolidatedbalance sheet
amount exceeds
acquisition cost

Other monetary trusts �����������������������������������������������������������

¥323,862¥285,656¥38,206¥38,206

Items whose
consolidatedbalance sheet
amount does
not exceed
acquisition cost¥  –

Notes: 1.	The amount of jointly invested monetary trusts that is included in the table above for the year ended March 31, 2013 is ¥50 million.
2.	“Items whose consolidated balance sheet amount exceeds acquisition cost” and “Items whose consolidated balance sheet amount does not exceed acquisition cost” arethe 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 and such decline is considered
non-recoverable. Their market value is recognized as the consolidated balance sheet amount and the write-down is accounted for as adevaluation loss for the fiscal year.
No impairment loss was recognized for the year ended March 31, 2013.
“Material decline” is principally indicated when the market value declines by 30% or more below the acquisition cost.
14 	Derivative financial instruments:
The following provides a summary of contractual or notional amounts, current market or fair values and valuation gains or losses as of March
31, 2013 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.

1 Interest rate derivatives(Millions of yen)2013

As of March 31

Over-the-counter transactions
Interest rate swaps �����������������������������������������������������������������������������������������
Total ���������������������������������������������������������������������������������������������������������������������

Notional
amount total

Notional
amountover 1 year

Fair value

Valuation
losses¥20,000¥     –¥  –¥  –¥(119)¥(119)¥(119)¥(119)

Notes: 1.	The above transactions are valued at market, and valuation losses are recorded in the consolidated statements of income.
2.	Fair value of over-the-counter transactions is measured mainly using discounted present value.

Sony Financial Holdings Inc. Annual Report 2013

095

Financial Section SFH Consolidated Financial Statements(1) Derivatives to which hedge accounting is not applied2 Currency derivatives(Millions of yen)2013

As of March 31

Over-the-counter transactions
Forward foreign exchanges
Sold ���������������������������������������������������������������������������������������������������������������
Bought �����������������������������������������������������������������������������������������������������������
Foreign exchange margin transactions
Sold ���������������������������������������������������������������������������������������������������������������
Bought �����������������������������������������������������������������������������������������������������������
Currency options
Sold ���������������������������������������������������������������������������������������������������������������
Currency forward contracts
Bought �����������������������������������������������������������������������������������������������������������
Total ���������������������������������������������������������������������������������������������������������������������

Notional
amount total

Notional
amountover 1 year

Fair value

Valuation
gains (losses)¥46,40791,703¥  ––¥ (55)(297)¥ (55)(297)

47,646
10,587

–
–

(619)
916

(619)
916

1,036

–

(6)

7

7,599
¥–

–
¥  –

10
¥ (52)

10¥ (37)

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.

(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, 2013 and themethod of calculating the fair values of derivatives, classified by transaction, for each hedge accounting, to which hedge accounting isapplied. Notional amounts do not indicate market risk involved in derivative transactions.

1 Interest rate derivatives(Millions of yen)2013
As of March 31
Hedge accounting

Hedging instrument

Hedged item

Deferred hedge accounting Interest rate swaps Loans ���������������������������������������������������������
Fair value hedge accounting Interest rate swaps Available-for-sale securities (bonds) ���Total �������������������������������������������������������������������������������������������������������������������������������������������������

Notional
amount total

Notional
amountover 1 year

Fair value¥ 79,195
378,446¥–¥ 74,491
332,030¥–¥ (2,811)(19,225)¥(22,036)

Notes: 1.	SFH applies 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 using discounted present value.

2 Currency derivatives(Millions of yen)2013
As of March 31
Hedge accounting

Hedging instrument

Hedged item

Fair value hedge accounting Currency swaps
Available-for-sale securities (bonds) ���Total �������������������������������������������������������������������������������������������������������������������������������������������������
Notes: 1. SFH applies mainly fair value hedge accounting.
2. Fair value is measured mainly using discounted present value.

096

Sony Financial Holdings Inc. Annual Report 2013

Notional
amount total

Notional
amountover 1 year

Fair value¥45,300¥
–¥3,500¥
–¥9,361¥9,361

15 	Information about retirement benefit obligations as of March 31, 2013:(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 anddefined 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.

(2) Retirement benefit obligations(Millions of yen)
As of March 31

2013

Retirement benefit obligations �������������������������������������������������������������������������������������������������������������������������������������������������������������
Plan assets �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Unfunded retirement benefit obligations �������������������������������������������������������������������������������������������������������������������������������������������
Unrecognized net obligation at transition �������������������������������������������������������������������������������������������������������������������������������������������
Unrecognized net actuarial gain �����������������������������������������������������������������������������������������������������������������������������������������������������������
Unrecognized prior service cost �����������������������������������������������������������������������������������������������������������������������������������������������������������
Net retirement benefit obligations ������������������������������������������������������������������������������������������������������������������������������������������������������
Prepaid pension costs �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Reserve for employees’ retirement benefits ���������������������������������������������������������������������������������������������������������������������������������������

¥(36,369)
8,933(27,436)
828
4,491
(258)
(22,374)
1,841¥(24,216)

Note: SFH calculates retirement benefit obligations based on the simplified method.

(3) Retirement benefit expenses(Millions of yen)
For the year ended March 31

2013

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 �������������������������������������������������������������������������������������������������������������������������������������������������������
Others �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Retirement benefit expenses �����������������������������������������������������������������������������������������������������������������������������������������������������������������

¥2,955
325
(409)
414
898
(129)
360
¥4,416

Notes: 1. SFH includes the retirement benefit expenses in the service cost based on the simplified method.
2.	Others include defined contribution pension plan payments.

(4) Basis for calculating retirement benefit obligations
For the year ended March 31

2013

Straight-line or point basis
0.6–1.9%
3.0–5.6%
10 years
7–17 years
15 years

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

(2) Basis of measurement for asset retirement obligations
The amount of asset retirement obligations is calculated by estimating the usable period to be 6 to 43 years from acquisition and thenapplying a 1.5 to 2.5% discount rate.

Sony Financial Holdings Inc. Annual Report 2013

097

Financial Section SFH Consolidated Financial Statements

Method of allocating projected retirement benefits ����������������������������������������������������������������������������������������
Discount rate ����������������������������������������������������������������������������������������������������������������������������������������������������������
Expected return on plan assets ����������������������������������������������������������������������������������������������������������������������������
Prior service cost amortization period ����������������������������������������������������������������������������������������������������������������
Net actuarial gain amortization period ��������������������������������������������������������������������������������������������������������������Net obligation at transition amortization period ����������������������������������������������������������������������������������������������

(3) Changes in the balance of asset retirement obligations for the year ended March 31, 2013 were as follows:(Millions of yen)
For the year ended March 31

2013

Balance at the beginning of the current period ���������������������������������������������������������������������������������������������������������������������������������
Increase due to purchases of new assets ���������������������������������������������������������������������������������������������������������������������������������������������
Changes resulting from the passage of time �������������������������������������������������������������������������������������������������������������������������������������
Decrease due to execution of asset retirement obligations �������������������������������������������������������������������������������������������������������������
Balance at the end of the current period ���������������������������������������������������������������������������������������������������������������������������������������������

¥663
35
14
(0)
¥713

17 	Fair value information on investment and rental property:
SFH’s life insurance subsidiary owns rental office buildings in Tokyo and other cities. Income related to investment and rental property
amounted to ¥3,404 million for the year ended March 31, 2013. Its main revenues were accounted for in the life insurance business’s“interest income and dividends,” and its main expenses were accounted for in the life insurance business’s “depreciation of real estate forrent and others” and “other investment expenses.” Impairment losses amounted to ¥877 million for the year ended March 31, 2013.
Below is the consolidated balance sheet amount, net of changes, and the fair value. The fair value is measured by a licensed third-party
real estate appraisal agent or at the expected sales price.
(Millions of yen)
As of March 31

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 �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

2013¥65,460(4,360)61,099¥79,579

Note: The consolidated balance sheet amount is the acquisition cost less accumulated depreciation and impairment losses.

18 	Contracts of commitments to provide credit line and overdrafts of the life insurance subsidiary and the banking subsidiary areagreements to lend to customers, up to a prescribed amount, as long as there is no violation of any condition established in thecontracts. The amount of unused commitments at March 31, 2013 was ¥23,275 million, and the amount of unused commitments
whose original contract terms are within 1 year at March 31, 2013 was ¥17,892 million.
19 	Borrowed money includes subordinated borrowings of ¥2,000 million subject to a special contract that subordinates the fulfillmentof this obligation to other obligations.
20 	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 ¥9,661 million. Such losses are recognized as expenses during the
fiscal year in which they are contributed.

5. Notes to the Consolidated Statement of Income1 	Net income per share is calculated based on the weighted-average number of shares of common stock outstanding during theperiod. For the year ended March 31, 2013, net income per share was ¥103.60. Diluted net income per share is not disclosed for theyear ended March 31, 2013 as SFH had no potentially dilutive shares of common stock.
	  The basis for this calculation for the year ended March 31, 2013 is net income of ¥45,064 million, the entire amount of which isapplicable to common stock. The weighted-average number of shares outstanding for the year ended March 31, 2013 was 435,000
thousand shares.

098

Sony Financial Holdings Inc. Annual Report 2013

6. Notes to the Consolidated Statement of Comprehensive Income
Reclassification adjustments and income tax benefit (expense) on components of other comprehensive income for the year ended March
31, 2013 are as follows:(Millions of yen)
For the year ended March 31

2013

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

¥ 76,768(2,002)
74,765(23,383)
51,381(2,778)
1,795
(983)
350
(633)
(170)
–
(170)
52
(118)
109
344
453
–
453
(2)
0
(1)
¥ 51,082

7. Notes to the Consolidated Statement of Changes in Net Assets(Thousands of shares)
2013

For the year ended March 31

Issued shares
Common stock ������������������������������������������������������������������������������������
Total ����������������������������������������������������������������������������������������������������������
Treasury stock
Common stock ������������������������������������������������������������������������������������
Total ����������������������������������������������������������������������������������������������������������

Number ofshares as ofApril 1, 2012

Number ofshares increased
during the period

Number ofshares decreased
during the period

Number ofshares as ofMarch 31, 2013

435,000
435,000––––

435,000
435,000

–
–

–
–

–
–

–
–

Sony Financial Holdings Inc. Annual Report 2013

099

Financial Section SFH Consolidated Financial Statements

1 	Types and numbers of shares issued are as follows:2 	Information on dividends is as follows:(1) Dividends paid
Type ofsharesAggregate
amount ofdividends

Cashdividends
per share

Record date

Effective dateCommonstock¥8,700
million¥20

March 31, 2012

June 25, 2012

Type ofsharesAggregate
amount ofdividends

Source ofdividends

Cashdividends
per share

Record date

Effective dateCommonstock¥10,875
millionRetainedearnings¥25

March 31, 2013

June 26, 2013

Resolution

Ordinary General Meeting of Shareholders
held on June 22, 2012 �������������������������������������������������������
(2) Dividends to be paid in the next fiscal year
Resolution

Ordinary General Meeting of
Shareholders held on June 25, 2013 ������

8. Notes to the Consolidated Statement of Cash Flows1 	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, 2013, is as follows:(Millions of yen)
As of March 31

Cash and due from banks �����������������������������������������������������������������������������������������������������������������������������������������������������������������������
Call loans of life insurance subsidiary �������������������������������������������������������������������������������������������������������������������������������������������������
Securities of non-life insurance subsidiary maturing within 3 months of the acquisition date �������������������������������������������������Cash and cash equivalents ���������������������������������������������������������������������������������������������������������������������������������������������������������������������
2 	Cash flows from investing activities include cash flows from lending operations of the insurance business.

100

Sony Financial Holdings Inc. Annual Report 20132013

¥104,142
97,088174¥201,404

Please visit SFH’s website to view the Financial Data Book.
Beginning with the 2013 Annual Report, SFH has provided detailed ­financial data for each operating company and ­certain other information that was previously shown in the annual report ina separate publication called the Financial Data Book.
The Financial Data Book is ­available only on SFH’s website.

http://www.sonyfh.co.jp/web/en/financial_info_e/annualreport.html

Contents of the Financial Data Book
SFH Financial Data (Consolidated)
Principal Indicators of Operating
Performance
Consolidated Balance Sheets
Consolidated Statements of Income
and Consolidated Statements ofComprehensive Income
Consolidated Statements of
Changes in Net Assets
Consolidated Statements ofCash Flows

Sony Life Financial Data
(Consolidated)
Consolidated Balance Sheets
Consolidated Statements of Income
and Consolidated Statements ofComprehensive Income
Consolidated Statements of
Changes in Net Assets
Consolidated Statements ofCash Flows

Sony Assurance Financial Data
Balance Sheets
Statements of Income
Statements of Changes in Net Assets
Statements of Cash Flows
1. Loans by Borrower Category
2. Risk-monitored Loans
3. Assets and Liabilities
4. Profit and Loss
5. Fair Value Information, etc.
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 ofComprehensive Income
Consolidated Statements of
Changes in Net Assets
Consolidated Statements ofCash Flows
Sony Bank Financial Data
(Non-consolidated)
Non-consolidated Balance Sheets
Non-consolidated Statementsof IncomeNon-consolidated 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 Operation (Deposits)
3. Status of Operation (Loans)
4. Status of Operation (Securities)

Financial Section

Sony Life Financial Data
(Non-consolidated)
Non-consolidated Balance Sheets
Non-consolidated Statementsof IncomeNon-consolidated Statements of
Changes in Net Assets
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 AssetManagement (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 andRecruits
10. Average Salary

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

Sony Financial Holdings Inc. Annual Report 2013101

Glossary (in Alphabetical Order)

overseas, the internationally standardized regulations to preserve
financial soundness are a capital adequacy ratio of over 8%, andfor banks not possessing business bases overseas, in Japan acapital adequacy ratio of 4% is required.

A
ALM (Asset Liability Management) Life Non-life Banking•	A risk management method for ensuring stable delivery ofassumed interest rates through a comprehensive grasp andmanagement of the special characteristics of assets and liabilities.
Because the majority of life insurance company liabilities
consist of policy reserves accumulated based on assumed interest
rates fixed at the time of policy enrollment, a company must takethis special characteristic into consideration when using ALM.

Annualized insurance premiums Life•

	An indicator of the approximate annual premium income fromexisting policies, which is used as a performance indicator.
­Annualized insurance premiums are calculated by adjusting
differences in the payment methods since insurance premiums
can be paid monthly, annually, or in a lump sum, and by assumingthat average payments will be made over the term of the policy.

Assumed interest rate Life Non-life•	Insurance companies anticipate a certain return on invested
assets in advance and discount insurance premiums only by thisamount. This discount rate is called the assumed interest rate.

Assumed mortality rate Life•

	The mortality rate is the percentage of people who die in asingle year for a given large population.
The assumed mortality rate is the mortality rate used whencalculating the amount of insurance premiums needed to cover
future benefit payments, and represents a projection of thenumber of deaths by gender and age based on past statistics.

Assumed rate of expense Life Non-life•	In operating their businesses, insurance companies forecast theirexpenses, then discount their insurance premiums by thatamount. That discount rate is called the assumed rate of expense.

B
Benefits Life•

	Money paid by an insurance company to a beneficiary in theevent of hospitalization, surgery, or others involving the insured.

Bonus-malus system(Non-fleet driver rating system) Non-life•	A system for applying discounted or additional premiums for
non-fleet policyholders (owners/users of nine or fewer auto­
mobiles or motorcycles) based on their accident histories.
Grades range from 1 to 20, but typically start at Grade 6. The
higher the grade (larger numbers), the bigger the discount rate,
and the smaller the number, the smaller the discount.

C
Capital adequacy ratio Banking•

	An indicator of whether a bank has enough capital, includingcommon stock, versus credit risk assets (of total assets, thosewhich could become non-performing). If a bank is unable torecover a large amount of loans, it can draw on capital and write
off these loans. A sharp decrease in ­capital creates difficulties inbank management.
Capital adequacy ratio regulations ensure that banks are
soundly managed by keeping the capital adequacy ratio above acertain level. This ratio is therefore an important indicator toshow financial soundness. For banks possessing business bases

102

Sony Financial Holdings Inc. Annual Report 2013

Catastrophe reserve Non-life•	A type of policy reserve, under which, pursuant to the provisionsof the Insurance Business Act of Japan, non-life insurance companies are required to accumulate each fiscal year as an amountcalculated based on premium income to cover losses due tocatastrophic 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, and other catastrophic
events. It is structured to be accumulated over the course ofmultiple fiscal years, and reversed during the fiscal year in whicha disaster occurs.

Combined ratio Non-life•	The sum of an insurance company’s net loss ratio and net
expense ratio. Indicates an insurance company’s profitability inthe primary business operations.

Compulsory automobile liability insurance Non-life•	Compulsory automobile liability insurance is legally required forall vehicles and provides 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
are capped at ¥30 million for death, ¥40 million for serious
residual disability, and ¥1.2 million for injury. Benefits are notpaid for vehicle or property damage.

Contingency reserve Life Non-life•	Reserve to prepare for abnormal payments in the future resulting
from various factors, including insurance risk and assumed interest rate risk. Insurance companies list contingency reserve atevery account closing as one component of policy reserves in thefinancial statements.

Core profit Life•

	An indicator of profits (losses) in the primary insurance businessover 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 written Non-life•	Premiums received from policyholders, calculated by subtracting
direct surrender payments and other direct payments fromdirect ­premiums.

Duration Life•	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 avariety of types and methods for calculating duration exist, amethod expressing the weighted average maturity of the cash
flow in question is relatively widely used.

E
EV (Embedded Value) Life•

	An indicator of the corporate value of a life insurance company.
	Sony Life discloses MCEV (Market Consistent Embedded Value) inconformity with the MCEV Principles. For details on MCEV, pleasesee “MCEV Results for Sony Life” in the Financial Data Book.

Educational endowment insurance Life•

	An insurance policy designed to provide for the future educational expenses of children. 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 orserious disability benefits upon the death or serious disability of
the insured within an insurance period specified when the policy
is purchased, or to receive maturity benefits upon policy maturity.

Expense ratio Non-life•	The ratio of expenses for soliciting, maintaining, and managing­insurance to insurance premiums. Used as an indicator of business efficiency at insurance companies. The ratio is normallyderived 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 insurance Life•

	In the event the insured dies or becomes disabled, this insurance
pays an annual or monthly benefit through policy maturation in
the form of a family annuity or disability annuity.

G
General accounts Life•

	Accounts for managing financial assets not included in separate
accounts. This account guarantees 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 togross profit (sales minus purchases) and an indicator of theamount of profits a bank generates from its main services.

I
Individual annuities Life•

	Policyholders are eligible for receiving annuity payments fromfunds accumulated by paid insurance premiums at a certain age
prescribed in the policy. There are a variety of types dependingon the period for receiving the annuity, structure of the annuity,
method for paying premiums, and death protection prior toreceiving the annuity.

Individual variable annuities Life•

	Individual annuity product in which assets are invested mainly instocks and bonds, and annuity and surrender payments increaseor decrease depending on investment returns. The individual
policyholder bears the asset management risk.

Insurance Act of Japan Life Non-life•	Previously, rules concerning insurance policies were stipulated in
the Insurance Chapter of the Commercial Code, which wasenacted in 1899. In April 2010, the Insurance Act entered into
force as a new law independent of the Commercial Code.
Because no substantive amendments to rules concerning insurance policies in the Commercial Code had been made for over a
century, the Insurance Act contains substantial changes from the­standpoint of protecting policyholders and others. In addition,
the Act has been written in language reflecting modern usage,
among other revisions.

Insurance Business Act of Japan Life Non-life•	Insurance business has a public aspect, and the Insurance Business
Act, as noted in Article 1, is intended to protect policyholders andcontribute to the stable lives of citizens and to sound national
economic development by ensuring sound and appropriate­business practices and fair insurance solicitation.

Insurance claims Life Non-life•	Money paid by an insurance company to the insured upon thedeath or serious disability of the insured or policy maturity inthe case of life insurance; upon damage caused by a compensation event according to the insurance policy in the case of nonlife insurance; and upon hospitalization or surgery of the insured
in the case of third-sector insurance.

Insurance premiums Life Non-life•	Money paid by policyholders to an insurance company based on
the insurance policy. Even after submitting an insurance policy
application, no protection or compensation is provided unlesspremiums are paid.

Insured 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 thepolicyholder.

L
Lapse and surrender rate Life•

	Surrender refers to the cancellation of an insurance policy atsome point in the future. Upon termination, the policy is surrendered, and from that point protection (or coverage, in thecase of non-life insurance) is lost. On the other hand, a lapse iswhen a policyholder fails to pay premiums within the payment
grace period, causing the policy to lapse, from which point thepolicy will no longer provide protection.
The lapse and surrender rate is the ratio of 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 theyear in question, and then dividing by the amount of policies inforce at the beginning of the fiscal year.

Living benefit insurance Life•

	This insurance provides a lump-sum benefit payment when theinsured is diagnosed with one of three major diseases (cancer,
heart attack, or stroke).

Loss adjustment expenses Non-life•	Expenses incurred by an insurance company in examining an
insured event. These include personnel and non-personnel
expenses.

Sony Financial Holdings Inc. Annual Report 2013103

Loss ratio Non-life

Nursing care insurance Life•

	The ratio of insurance claims paid to premium income. Used in­analyzing the business of an insurance company and in calculating insurance premium rates. The net loss ratio is the ratio
derived by adding loss adjustment expenses to net losses paid,
then dividing by net premiums written.

M•	Insurance that pays out lump-sum or annual payments to an
insured party who has become eligible for prescribed nursing
care. Sony Life has products that provide coverage for thosecertified as requiring Level 2 or higher nursing care under the
public nursing care insurance system in Japan, or for insured
parties under 65 who have been eligible for nursing care as­predefined by Sony Life for a continuous 180 days.

Medical insurance Life Non-life•	Medical insurance provides policyholders with hospitalizationand surgical benefits in the event of hospitalization or surgery
due to illness or injury.

O
Over-the-counter (OTC) sales of insurance products
at banks Life Non-life Banking•N	A bank serves as an insurance agency to solicit insurance. There
were previously restrictions on what products could be sold, butthese restrictions were abolished in December 2007, and banks
can now sell a variety of insurance products.

	The amount by which the expected investment income fromthe assumed interest rate is not covered by the actual investment income.

P

Negative spread Life•Net fees and commissions Banking•

	Fees and commissions charged for providing services. These referto income generated by providing services, such as bank transfer
fees and investment trust sales commissions, less the costs­associated with providing these services.

Net interest income Banking•

	Net interest income accounts for the largest percentage of thefour income components of 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 thedifference between the total interest received from loans andother items (interest income) and the total interest paid fordeposits and other items (interest expenses). Net interest income
is affected by changes in interest rates (e.g., if deposit interest
rates rise while loan interest rates stay at the same levels, net
interest income will decrease), and by deposit and loan balances.

Net other operating income Banking•

	Net other operating income is derived from services other thanthe primary banking services income categories of net interest
income, net fees and commissions, and net trading income. One
example is buying and selling in dollars and other foreign currencies. In this case, after purchasing foreign currency at a certain
price, any gain from a subsequent sale at a price higher than thepurchase price would be recorded in other operating income,and any loss from a subsequent sale at a price lower than thepurchase price would be recorded in other operating expenses.

Net premiums written Non-life•	Premiums received directly from policyholders (direct premiums
written), adjusting for reinsurance premiums (subtracting directreinsurance premiums paid and adding direct reinsurance­premiums received), and subtracting deposits of premiums.

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
­business or other reasons, and claims against parties at risk ofbankruptcy. Non-performing assets also include loans for whichprincipal or interest payments are past due by three months 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.

104

Sony Financial Holdings Inc. Annual Report 2013

Policy amount in force Life•

	Total amount of protection provided by life 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 by premiums, investment income, and other sources, toprepare 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 for policy­
holders’ dividends.

Policy reserves and others Life
(Underwriting reserves) Non-life•	Reserves recorded in the liabilities section of the balance sheets
for which insurance companies are required in the Insurance
Business Act of Japan to accumulate to prepare for the paymentof future claims and other items to fulfill their obligations forpaying claims and other actions based on insurance policies.
Policy reserves and others include reserve for outstanding claims,
policy reserves, and reserve for policyholders’ dividends.

Policy reserve discount rate Life•

	The policy reserve discount rate is the calculating rate insurance­companies are required to use when accumulating policy reserves
for future insurance payments. A lowering of the rate meansthat the amount of the policy reserves insurance companies
must accumulate will increase. Since the source of funds for thepolicy reserves is primarily insurance premiums, the premium
rate may be revised as necessary in line with revision to thepolicy reserve discount rate. The policy reserve discount rateapplied to policies from April 2013 is 1.0%, half a percentage
point lower than the ­previous 1.5%.

Policyholder Life Non-life•	A person who signs up for an insurance policy with an insurancecompany and has various rights (e.g., request of changes in thepolicy details) and obligations (e.g., payment of premiums) basedon the policy.

of such unpredictable events. If this ratio falls below 200%, theFinancial Services Agency of Japan will take steps to quickly
restore ­financial soundness. New standards were applied beginning at the end of FY2011, with stricter solvency margin standards
and stricter and more elaborate standards for measuring risk.

Policyholder loans Life•

	Loans provided up to a certain level of the surrender payment onlife 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 reserve Life•	A reserve accumulated to fund dividend payments to policy­
holders pursuant to the provisions of the Insurance BusinessAct of Japan.

Surrender payments Life Non-life•	Money refunded to the policyholder in the event that the­insurance policy is surrendered or cancelled. Surrender payment
amounts vary depending on several factors, including the type of
insurance, insurance period, and years elapsed.

T

R
Term insurance Life

Reinsurance Life Non-life•	The insurance agreement that insurance companies conclude
with domestic and overseas reinsurance companies for some of
the insurance policies they underwrite, mainly large ones, inorder to ­diversify risks on insurance policies.

Reserve for outstanding claims Life
(Reserve for outstanding losses) Non-life•	Reserve for the estimated amount of unfixed insurance payments and unpaid insurance claims at the end of the fiscal year,
among payment obligations for insurance claims, surrender
value, and other benefits.

•	Term insurance entitles a beneficiary to receive benefits in theevent of death or serious disability of the insured within an
insurance period specified when the policy is purchased.

Third-sector insurance Life Non-life•	Third-sector insurance refers to insurance positioned between
life insurance (first sector) and non-life insurance (second
sector). It encompasses a variety of types of insurance, including
medical insurance, cancer insurance, nursing care insurance, andpersonal accident insurance. Regulatory easing has allowed bothlife and non-life insurance companies to handle all third-sector
insurance products from July 2001.

Reserve for price fluctuations Life Non-life•	This reserve is set aside to prepare for losses caused by price­fluctuations in stocks, bonds and other assets held by an insurance company.

Riders Life Non-life•	Riders can enlarge the scope of protection in 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 primarypolicy is canceled due to maturity, surrender, or other reasons.

U
Underwriting profit Non-life•	Underwriting profit is calculated by subtracting any underwriting
expenses (net losses paid and loss adjustment expenses, etc.)
and operating, general and administrative expenses associatedwith underwriting from under­writing income (net premiums
written, etc.) then adding or subtracting other income andexpenses (corporate taxes associated with compulsory­automobile liability insurance, etc.).

Risk segmented automobile insurance Non-life•	Automobile insurance that segments the risk factors on which
insurance premium calculations are based. The Insurance Business
Act Enforcement Regulations of Japan recognize nine risk segment­categories: age, sex, driving history, purpose of use, conditions ofuse, region, vehicle model, presence of safety equipment, andnumber of vehicles owned.

V
Variable life insurance Life•

	Insurance product in which assets are invested mainly in stocks
and bonds, and claims and surrender payments increase or
decrease depending on investment returns. The individual­policyholder bears the asset management risk.

S
W

Separate accounts Life•	Separate accounts are used for variable life insurance, variableannuities, and other insurance products to invest assets separately from the other financial assets owned by an insurancecompany in order to pay investment returns directly topolicyholders.

Whole life insurance Life•

	Insurance that pays benefits in the event the insured dies or isdisabled. Unlike term life insurance, protection continues for
entire life.

Solvency margin Life Non-life•	The solvency margin indicates payment ability. Insurance­companies accumulate policy reserves to prepare for the payment of future claims, allowing them to adequately respond torisks within a normally anticipated range. However, unforeseen
events can occur, including major disasters and substantial
declines in stock prices. The solvency margin ratio is one measure used by regulatory authorities to determine whether aninsurance company has the ability to pay in response to the risk

Sony Financial Holdings Inc. Annual Report 2013

105

SFH’s Website Information
SFH actively uses its website to provide timely disclosure and promote a
better understanding of the Sony Financial Group.
The SFH’s website offers a variety of information, as detailed below.

Annual reports and financial data are available forviewing in PDF and HTML formats, respectively.

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

On the video, Katsumi Ihara, President and­Representative Director of SFH, talks about the originof our businesses, strengths and future strategies.

http://www.sonyfh.co.jp/web/index_en.html
The following report and Financial Data Book are available for ­download in PDF format from SFH’s website:

Corporate Governance(Updated and filed on July 10, 2013)
Sony Financial Holdings Inc.
The status of Sony Financial Holdings’ corporate governance is as follows:

I. Basic Stance on Corporate Governance, Capital Structure, Company Type andOther Basic Information
1. Basic Stance (Updated)

Sony Financial Group has established its Corporate Vision and Corporate Philosophy as a basis forsetting management strategy and expediting management decision-making initiatives.

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

Corporate Governance Report

Financial Data Book

The report explains about SFH’s­corporate governance in detail.

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

<Corporate Philosophy>
Put the Customer FirstWe will provide financial products and services that satisfy customers by embracing their individual views, toensure 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 andinnovation, instead of merely following customs 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 their individualityand demonstrate their abilities to the fullest.

One goal of our corporate vision is to become one of Japan’s most trusted financial services groups.
Although the group subsidiaries are different in history, scale of operations and business characteristics,
Sony Financial Holdings works to achieve this goal in group-wide management by making the mosteffective use of the business characteristics and information available from each group subsidiary.
In taking this approach, we place the utmost importance on the soundness and accuracy of ouroperations. To this end, we have designed a management structure to ensure group-wide complianceand risk management. Each group subsidiary has designed its own management structure to ensure its

1106Sony Financial Holdings Inc. Annual Report 2013

Head office: 1-1, Minami Aoyama 1-chome, Minato-ku, Tokyo, Japan
Tel: +81-(0)3-5785-1074
URL: http://www.sonyfh.co.jp/web/index_en.html

Annual Report 2013This report uses FSC®-certified paper
and is printed with vegetable oil ink.

Printed in Japan