2020
Annual Report

April 1, 2019 March 31, 2020

Introduction

Corporate Section

Mission, Vision & Values

1

Corporate Profile

History

2

Profiles of Group Companies

Value Creation Story

4(Main subsidiaries)

51

Financial and Non-financial Highlights

8

Stock Information

52

Message from the President & CEO

10

Strategy and Review

50

Reference Materials
Review of Operations / Organizational Chart

Sony Financial Group

14

of Business Operations

54

Sony Life

18

Financial Highlights

55

Sony Assurance

20

SFH Consolidated Financial Statements

56Sony Bank

22

Significant Basic Items for the Preparation

Nursing Care Business24of the Consolidated Financial Statements 64
Notes to the Consolidated Financial

SFG’s Value Creation
Sustainability, Value Creation and Our
Foundation for Creating Value

26

68

Segment Information

88

Other Financial Data

90

Relationship with Parent Company, Sony

Initiatives to Strengthen Our Foundation
for Creating Value

Statements

28

Corp.

92

Glossary

93

Financial Data Book Contents

96

Editorial Policy
SFH refers to “Guidance for Collaborative Value
Creation” published by the Ministry of Economy,
Trade and Industry when organizing and examining matters to be listed in this report, in order tomake this report a starting point for dialogue withshareholders and investors.

Company Name Abbreviations
The following abbreviations for company names are used in this report.
Sony Financial Group ……………………………
Sony Financial Holdings Inc. ……………………
Sony Life Insurance Co., Ltd. ……………………
AEGON Sony Life Insurance Co., Ltd. …………
SA Reinsurance Ltd. ………………………………
Sony Life With Insurance Co.,Ltd. ………………
Sony Life Business Partners Co., Ltd. …………
Sony Assurance Inc. ………………………………
Sony Bank Inc. ……………………………………
Sony Payment Services Inc.………………………
SmartLink Network Hong Kong Limited …………
SmartLink Network Europe B.V. …………………
Sony Lifecare Inc. …………………………………
Lifecare Design Inc. ………………………………
Proud Life Inc. ……………………………………
Sony Financial Ventures Inc. ……………………
Sony Corporation …………………………………

SFG
SFH
Sony LifeAEGON Sony Life Insurance
SA ReinsuranceSony Life With InsuranceSony Life Business Partners
Sony AssuranceSony Bank
Sony Payment Services
SmartLink Network Hong Kong
SmartLink Network Europe
Sony Lifecare
Lifecare Design
Proud Life
Sony Financial Ventures
Sony Corp.

Disclaimer
This annual report contains statements concerning the current plans, expectations, strategies and beliefs of the SFG. Any statements contained herein thatare not historical facts are forward-looking statements or pro forma information. Forward-looking statements may include—but are not limited to—words
such as “believe,” “anticipate,” “plan,” “strategy,” “expect,” “assume,” “forecast,” “predict,” “propose,” “intend” and “possibility” that describe future
operating activities, business performance, events or conditions. Forward-looking statements, whether spoken or written, may also be included inother materials released to the public. These forward-looking statements andpro forma information are based on assumptions, decisions and judgments
made by the management of SFG companies, and are based on informationthat is currently available to them. As such, they are subject to various risks
and uncertainties, and actual business results may vary substantially from theforecasts expressed or implied in forward-looking statements. Consequently,
investors are cautioned not to place undue reliance on forward-looking
statements. SFG companies are under no obligation to revise forward-looking
statements or pro forma information in light of new information, future eventsor other findings. The information contained in this annual report does notconstitute or form part of any offer for sale or subscription of or solicitation or
invitation of any offer to buy or subscribe to any securities, nor shall it or any
part of it form the basis of or be relied on in connection with any contract orcommitment whatsoever in Japan or abroad.
● The SFG refers to the financial group that comprises SFH, Sony Life,

Sony Assurance, Sony Bank, Sony Lifecare, Sony Financial Ventures, aswell as their subsidiaries and affiliates.
● Unless otherwise indicated, figures less than the indicated unit in thismaterial have been truncated, while ratios and percentage changes havebeen rounded off.
● “Lifeplanner,” “LiPSS” and “Karte” are registered trademarks of Sony Life,“GOOD DRIVE” is a registered trademark of Sony Assurance. Company
names and product names that appear in this report, other than thosementioned above, are trademarks or registered trademarks of therespective company.
● Fiscal 1996–fiscal 2020 represent the fiscal years ended / ending March
31, 1997–2021.

Sony Financial Holdings Inc. Annual Report 2020

1

History

Sony Financial Group creates new
financial businesses without being
constrained by existing frameworks
Akio Morita, the founder of Sony Corp., visited Chicago in the late 1950s to open a sales office for transistor radios.
He was shocked to discover that the massive skyscraper towering over the streets was owned by the largest life insurancecompany in America at that time.
This is said to be the inspiration of his dream for Sony Group to have its own financial institution and to build a magnificent
skyscraper of its own one day.
His entrepreneurial spirit drove him to adapt to the diversifying needs of customers and solve the problems facing society himself.
The Sony Spirit to “do what has never been done before” has been passed down from one generation to the next, and theSony Group has taken advantage of financial liberalization and deregulation to create a new financial business without being
constrained by existing frameworks.

1998
1979
1946

Sony Insurance PlanningCo., Ltd. was established(currently Sony Assurance)

Sony Prudential Life
Insurance Co., Ltd. wasestablished (currently Sony
Life)

Tokyo Telecommunication
Engineering Corporation
was established (currently
Sony Corp.)“Do what has never been
done before”

Note: Akio Morita (left) and Masaru
Ibuka (right), the founders ofSony Corporation(photographed in 1967)

1940

1970

1980

1990

1977

1989

1996

■

Japan achieves
the longest life
expectancy inthe world for both
men and women■

Nikkei Stock
Average reaches
historic high of¥38,915

Revision to the Insurance
Business Act
・Ban removed on mutual entry intolife and non-life insurance fields
・Reviewed accounting calculation
system・Introduced product/rate
notification system

■

1997
■

2

Sony Financial Holdings Inc. Annual Report 2020

Licensed to offer risk-segmented
automobile insurance

1998■

Revision to the Act on Non-life Insurance
Rating Organization of Japan (Introductionof reference loss cost rates system)

Late 1990s–■■

Internet spreads with release of Windows 95
Financial Big Bang occurs in Japan

The Origin of Our Corporate Logo
The logo used by the Sony Financial Group, uses the “S” in “Sony” as a motif.
Combining Sony blue 90, the corporate color of Sony Corporation, to represent
our origin, with green, which invokes the image of “safety” required of financeCorporateLogobusinesses, the logo expresses:
1. “Innovation” that overturns the image of existing finance businesses;
2. “Intelligence” that invokes new business models; and3. “Speed” to respond to the digital network society.

2018

2014

Sony Financial Ventures
was establishedSony Lifecare was established2001
Sony Bank was established2004
SFH was established(2007 SFH was listed on the First Section ofTokyo Stock Exchange)

Become the most trusted financial
services group by invoking emotion
through the power of technology
and high-value-added products
and services that meet every
customer’s needs

2000
2000
Enactment of the nursing careinsurance system■ Removal of ban on companies
from other industries entering
the banking industry■

2001
Removal of ban on sales of insurance
products at banks■ Revision to the Banking Act (removal of
ban on companies from other industries
entering the banking industry)
■

2010
2007
■

Enactment of the Financial
Instruments and Exchange Act

2008■

Collapse of Lehman Brothers

2010■

Enactment of the
Insurance Act

2011■

Occurrence of the Great
East Japan Earthquake

2012■

Economic policies enacted
by the second Abeadministration (Abenomics)

2016
Introduction of negative interest
rates■ Full enactment of revisions to
the Insurance Business Act
・Comparative recommendation
regulations
・Fulfillment of obligation to
grasp intentions■

Sony Financial Holdings Inc. Annual Report 20203

Value Creation Story

Sony Financial Group’s value creation story
Sony Financial Group aims to enhance its corporate value and contribute to the development of a sustainable society,under its corporate philosophy, consisting of its “Mission, Vision & Values.”
By making the most of our strengths and possibilities as a group, we will create new value of financial businesses
without being constrained by existing frameworks.

MissionCreate a sustainable
society where people
feel a sense ofenrichment

VisionBecome the mosttrusted financial
services group by
invoking emotion
through the power oftechnology andhigh-value-added
products and services
that meet every
customer’s needs

Sony Financial Group
Holding Company

Sony Financial HoldingsLife insurance business[Strengths] ● Tailor-made insurance product design and sales
approach that match life planning of each individual
customer based on consulting (consulting sales)● Maintaining optimal coverage through inspectionsof and advice on post-contract life plans andcoverage, adjusted to changes in environment
surrounding the customer (consulting follow-up)● Securing financial soundness through ALM opera-tion adjusted to long-term liability characteristics

Non-life insurance business

Customer first
Originality
Integrity & Fairness
Diversity

Sony Assurance[Strengths] ● Reasonable insurance premiums according toeach customer’s risk
● High-quality accident response, customer center,
and website services
Banking business

ValuesSony Life

Sony Bank[Strengths] ● Safe, reliable and highly convenient services,leveraging the advantages of an Internet bank
● Extensive lineup of high-quality products● Business operation with high customer satisfaction

Nursing care businessSony Lifecare[Strengths] ● Capture a wide range of needs by expanding ourlineup● Propose nursing care service suitable for eachresident▶P14

Sustainability

SFG’s Corporate
Philosophy

4Sony Financial Holdings Inc. Annual Report 2020

SFG’s BusinessesSignificant Social andEnvironmental Changes(Significant Business Challenges)
Demographic changes

Globally low interest rates

Value Creation

Offer lifestyles
that featuresafety and peaceof mind

Rapid progress oftechnological innovation
Financial regulatory changes▶P6

Contribute toa healthy, longlived society

Important Items for Strengthening
Our Foundation

Corporate
Governance

Human
Resources
Respecting
Diversity

Make lifestyles
more convenient▶P27

SFG’s Materiality

SFG’s Value ProvisionSony Financial Holdings Inc. Annual Report 2020

5

Value Creation Story

Analysis of social and environmental changes, andidentification of significant business challenges
Identification process for significant business challenges

Extraction and organizing of candidates for significant
business challenges

STEP.1

Select candidates from among the social and environmental changes
that are highly related to SFG’s businesses

Evaluation from SFG’s perspective and the perspectivesof stakeholders

STEP.2

Conduct an evaluation from the perspective of SFG and those of its
stakeholders

Identification of significant business challenges

STEP.3

Identify significant business challenges based on the results of theevaluation, with approval of management
Strengthen initiatives in these areas

Significant Challenges
Demographic changes(Population decline, aging
population and declining
birthrate, changes inhousehold structure,
uncertainty about social
security)
Globally low interest rates

Risk● Shrinking markets due to population

decline● Reduced demand for SFG’s main

products

Opportunity● Expand the range of target customers through anenhanced product lineup● Expand opportunities to provide products and services

that capture changes in customer needs● Increased in mortality and morbidity rate

● Increase in demand for nursing care-related services● Difficulty in acquiring human resources,● Enhanced productivity through the use of technology

and soaring personnel expenses● Reductions in product lineup due todeclining product profitability and revision
and abolition of some products● Construct product portfolios that are resilient to changes

in interest rates● Diversify investment options● Decline in investment income

Rapid progress oftechnological innovation● Changes in customer needs and behavior(Advent of the data
economy, widespread
adoption of AI,
advancement ofautonomous driving
technologies)● Obsolescence of existing businesses withfor systems development, personal
information protection, and information
security measures● Emergence of new insurance needs in response to new

Financial regulatorychanges● Increases in required capital and costs to● Further enhance SFG’s existing strength in “customer-

patterns
the rise of new business models● Higher requirements and increasing costs

comply with regulation● Increased competition due to deregulation

6

Sony Financial Holdings Inc. Annual Report 2020

● Increase operational efficiency and enhance capacity torespond to customer needs through the use oftechnology● Enhance marketing, product development, risk

management and other functions through data utilization
risks● Alliances with other industries and external companies

first” service● Adopt new approaches and business domains

Significant Social and Environmental
Changes(Significant Business Challenges)
Demographic changes● Population decline ● Aging population and declining birthrate● Changes in household structure ● Uncertainty about social security

Globally low interest rates
Rapid progress of technological innovation● Advent of the data economy ● Widespread adoption of AI

Impact on SFG● Advancement of autonomous driving technologies

Financial regulatory changes

Requests from stakeholders

Value Creation

Main Initiatives

Offer lifestyles
that featuresafety andpeace of mind

● We utilize a wide range of information to support theContribute toa healthy,
long-lived
society
Make lifestyles
moreconvenient

life of each customer by offering appropriate advice,products and services.
● We aim to contribute to a safe and secure society

featuring next-generation mobility by providing newtechnology-enabled insurance products and services.

● We will provide products and services that anticipatea long-lived society, providing economic security andpromoting wealth-building.

● We will make life more convenient by improving

access to financial services and promoting
innovation.

Sony Financial Holdings Inc. Annual Report 20207

Financial and Non-financial Highlights

Financial Highlights

Business Volume KPISony Life(Non-consolidated)

Sony AssuranceSony Bank(Non-consolidated)

Policy amount in force*1

Direct premiums written

Retail balance*2(Trillions of yen)(Billions of yen)(Trillions of yen)

43.1

45.3

49.5 51.4

47.2

99.0

94.3

107.0

119.1
112.1

3.2

2016

2017

2018

2019

2020

2016

2017

Note: As of March 31

2018

2019

2020

2016

Note: For the years ended March 31

3.6

2017

4.2

3.9

2018

2019

4.5

2020

Note: As of March 31*1 Sum of individual life insurance and individual annuities*2 Sum of deposits, investment trusts, and personal loans
Since March 31, 2018, also includes financial products intermediary services and mediated discretionary investment contracts

Financial Soundness Indicators (As of March 31, 2020)
Sony Life(Non-consolidated)

Sony AssuranceSony Bank(Non-consolidated)

Solvency margin ratio

Solvency margin ratio

Capital adequacy ratio(Domestic standard)

2,476.3%

872.3%

8.85%

Note: Figures less than the indicated unit have been truncatedProfitability Indicators (As of March 31, 2020)8Sony Financial Holdings(Consolidated)

Sony Life(Non-consolidated)

Sony AssuranceSony Bank(Consolidated)

Consolidated adjusted ROECore ROEV

Adjusted ROE

ROE

5.3%

4.9%

14.7%

7.8%

Sony Financial Holdings Inc. Annual Report 2020

Credit Ratings (As of July 1, 2020)
Credit Rating Agencies

Sony Financial Holdings

Sony Life

Sony Bank

Issuer rating
AA-

Insurance claims paying
abilityAAーJapan Credit Rating Agency (JCR)ーーLong-term issuer ratingAA-

S&P Global Ratings Japan (S&P)

ーRating and Investment Information (R&I)

Insurer financial strength Counterparty credit rating
ratingLong-term A
A+
Short-term A-1

Non-financial Highlights

Number of employees (As of March 31, 2020)

Number of Lifeplanner sales employees (As of March 31, 2020)

Consolidated

Sony Life

11,487
Life insurance business

8,739

Non-life insurance business

1,347Banking business

644

Others690

Parent67

5,146
Number of MDRT members
Sony Life

1,191

Sony Financial Holdings Inc. Annual Report 20209

Message from the President & CEO

Contribute to a sustainable society where
people feel a sense of enrichment

President & CEO, Representative Director

10Sony Financial Holdings Inc. Annual Report 2020

On behalf of the Sony Financial Group, I wish to express our deep appreciation to all stakeholders for the
support and interest you continue to extend as we navigate today’s dynamic financial landscape.
My name is Masashi Oka, and I assumed the role of President & CEO, Representative Director of SonyFinancial Holdings, in June 2020. I believe that my greatest mission is to leverage the business foundation andstrengths that the Sony Financial Group (SFG) has built over time, to bring about its further growth and development. As a deeply trusted financial services group, we will help create a society where people feel a uniquesense of enrichment, by providing high-value-added products and services that closely match the needs ofeach individual customer, developing alliances with the Sony Group, and leveraging technology.

Response to changes in the environment due to the spread of COVID-19
First of all, I would like to express our respectful condolences for the victims of the COVID-19 pandemic, andtheir families. At the same time, we pray for the early recovery of those who are currently battling the virus.
Moreover, I would like to express our deepest respect for healthcare workers and others who are striving tomaintain social systems every day.
COVID-19 spread across the globe in a matter of months, affecting our lives in various ways. Nations implemented distinct entry and exit restrictions, and many closed off borders and locked down cities. In Japan, astate of emergency was declared, and residents were requested to refrain from leaving home for nonessential
and nonurgent reasons, and from leaving home at night. These measures have inevitably caused a pronounced slowdown in economic activity, and there are fears of a global recession even more serious than the
period after the collapse of Lehman Brothers.
Economic activity is expected to recover gradually, as the pandemic is stamped out due to the untiring
efforts of people around the world. Even then, however, not everything will return to “the way it was.” On thecontrary, people’s lifestyles and values, even the structure of societies themselves, are anticipated to change
significantly with this experience.
It seems inevitable that the needs of our customers will also change. In this context, it is absolutely necessary for us to respond without delay to avoid being left behind by social and environmental changes.
In the life insurance field, for example, we are witnessing an increase in consciousness of protection,
wealth-building, health improvement and disease prevention needs, in addition to changes in behavior suchas an increase in non-face-to-face and non-contact processes. The consulting services provided by specialized and trustworthy Lifeplanner sales employees, who constitute one of Sony Life’s strengths, are becoming
ever more important. Sony Life has also commenced providing remote consulting services. We must continue
to ensure that these services, provided by customer-focused, highly professional Lifeplanner sales employees,
provide peace of mind even via an online forum, with easily accessible consultation and detailed explanations.
Sony Assurance and Sony Bank have also pursued customer convenience through a direct business model,
and enhanced their non-face-to-face services, such as online and telephone services. Now is the time for us
to provide customers with the full value of these enhanced services.
We are responding swiftly and appropriately to these great changes, and will continue to take on the challenges to achieve the next stage of growth.

Sony Financial Holdings Inc. Annual Report 202011

Message from the President & CEO

Progress of the medium-term business planThis fiscal year marks the culmination of the three-year medium-term business plan that commenced in
2018. Under the theme of taking on the challenge of new growth, we have grasped as “opportunities” thechanges visible from a long-term perspective of ten years or more. In addition to organic growth under the
existing business models, we have implemented a range of measures to lay the groundwork for future
growth, aiming to enhance corporate value. The impact of COVID-19, with market declines and the suspension of economic activities due to the declaration of a state of emergency, has been even greater thanoriginally anticipated. Although the targets for some of our performance indicators have become unattainable in this challenging environment, we are making smooth progress overall in areas such as expanding
the number of policyholders and users, improving customer satisfaction, and developing new products andservices.
Sony Life has promoted customer-first business operations, and increased its policy amount in force by
3.8% year on year, to ¥51.4 trillion yen as of March 31, 2020. In order to offer greater value to our customers, we are working to amplify the unique strengths of our Lifeplanner sales employees by raising their levelof service even higher and introducing a system for more deeply assessing their value to customers. We arealso leveraging life planning tools and information to evolve our services, to provide consulting sales andfollow-up in line with customer needs at any time.
As for Sony Assurance, the number of policies in force for mainstay automobile insurance exceeded 2
million as of March 31, 2019. In terms of sales, it has firmly maintained its status as the number-one direct
automobile insurer in Japan since fiscal 2002. In March 2020, it launched a smartphone-only pay-how-youdrive (PHYD) automobile insurance product that leverages AI, called “GOOD DRIVE”. This new product wasmade possible by applying the Sony Group’s proprietary AI, sensing, and cloud computing technologies, inaddition to the insight into insurance product and service development that Sony Assurance has accumulated over its history. Sony Assurance will continue to pursue enhanced CX (customer experience), andactively utilize advanced technologies across a broad range of domains, including products, services, andmarketing.
Sony Bank is working to perceive customer needs and enhance customer convenience through a wide
range of services, including launching an alliance with the ANA Group in the foreign currency business,
entrusting intermediary operations of its mortgage loans to JAPAN POST BANK, and introducing commission-free sales of all investment trust funds, as well as an “English online banking service” targeting foreign
residents in Japan.

12Sony Financial Holdings Inc. Annual Report 2020

New initiatives aimed at the next stage of growth from a medium- tolong-term perspective
We are engaged in new initiatives aimed at the next stage in our growth, based on a medium- to long-term
perspective of changes in the social environment, including demographic changes, globally low interest
rates, rapid progress of technological innovation, and financial regulatory changes, as well as extensive
discussion across the Group on the nature and sustainability of the business model in each business domain, and an analysis of risks and countermeasures.
Group Collaboration
Sony Corp. recently implemented a tender offer for the shares of SFH. By transitioning to a wholly-owned subsidiaryof Sony Corp., we believe we will be able to further collaborate within the Sony Group and generate new synergies.
We will leverage the service development structure and corporate functions of the Sony Group for the swift andflexible implementation of bold new management initiatives, and develop financial services that closely match thechanging business environment and the increasingly diverse needs of our customers.
We have promoted technological collaboration within the Sony Group through initiatives such as information-exchange meetings with Sony Corp.’s R&D Center, aimed at leveraging technology in the finance domain and solving
business issues. The partition separating finance and other sectors has been disappearing in recent years. In thiscontext, we want to apply advanced tools such as AI to change the finance business with the power of technology.
At the same time, we will explore new collaboration with the Sony Group’s entertainment, electronics, and otherbusinesses, and strive to provide even more convenient services.
Sustainability
At SFG, we take care to act fairly with high ethical standards and a sense of purpose, based on our Mission
and Code of Conduct. We give due consideration to the impact of our business activities on the interests ofour stakeholders, including customers, shareholders, employees, business partners, and local communities,
as well as the global environment; we work to build trust through dialogue with all our stakeholders; and we
aim to contribute to the development of a sustainable society.
SFG develops diverse businesses, aiming for sustainable value creation. While the activity domains andmodels of our businesses vary greatly, they all share the qualities of leveraging technology and providing
high-value-added products and services that closely match the needs of our individual customers. Throughour businesses, we strive to offer lifestyles that feature safety and peace of mind, contribute to a healthy,
long-lived society, and make lifestyles more convenient. We also recognize the importance of the foundationthat supports value creation. We are working to strengthen this foundation, identifying corporate governanceand human resources that respect diversity as matters of highest priority.

Contribute to a sustainable society where people feel a sense of enrichment
The speed of change in the business environment is anticipated to accelerate. We will not be left behind. On thecontrary, we will act to spearhead change, engaging in management from a long-term perspective to create
sustainable social and economic value. We will continue to respond to the needs and expectations of all our
stakeholders, and help create a society where people feel a unique sense of enrichment.
We look forward to your continued support and interest in our efforts.

Sony Financial Holdings Inc. Annual Report 202013

Strategy and Review

Sony Financial GroupSony Financial Group Medium-term Business Plan: Fiscal 2018 Fiscal 2020

Theme
Under the theme of taking on the challenge of new growth:- achieve organic growth from existing business models- make strategic moves from a long-term perspective to secure further growth,

taking full advantage of changes 10 years or more from now
PointsCustomer-first
Further promote the customer-firstbusiness operation

14

Sony Financial Holdings Inc. Annual Report 2020

Response to Changes
Establish a foundation that allows us to takefull advantage of changes (technologicaladvancements, social or regulatory changes,
and others.) to secure further growthGroup’s Growth Strategy
Over the mid-to-long term, market contraction, smaller profit margins and intensifying competition are forecast for Japan’s financial services market due to factors
including low birth rate, aging population, and persistently low interest rates.
Moreover, with technological innovations such as rapid advances in Fintech andthe spread of AI, players from other industries are entering the financial industry. In
addition, greater emphasis is being placed on the proper execution of fiduciary
duty in the management of financial institutions.
Since the time of its establishment, SFG has differentiated itself by pursuing abusiness model unlike those of conventional financial institutions, and has
provided high-value-added products and services to meet every customer’s
needs. Going forward, we consider it important to strengthen collaboration

Masashi Oka

within the Group and respond to the diverse needs of our customers, to create a

President & CEO, Representative Director
Sony Financial Holdings Inc.

safe and secure society.

Organic Growth through Stronger Existing Businesses
Key strategies based on “customer-first” business operations are: 1) Further enhance consulting-based sales and follow-up
by Lifeplanner sales employees, and raise customer satisfaction; 2) Achieve sustainable growth in automobile insurance anddiversify non-life insurance portfolio; 3) Strengthen foreign currency deposits and mortgage loans; and 4) Ensure steadypost-startup progress of the nursing care business.

Life insurance business

Non-life insurance
business

Banking businessNursing care business▶P18 Sony Life

▶P20 Sony Assurance▶P22 Sony Bank

▶P24 Nursing Care
Business

Group Synergies
We engaged in collaboration with each of the companies in the Sony Group, sharing technologies and challenges to create
new, high-value-added financial services. As one of our recent initiatives, we have launched a PHYD automobile insurance
leveraging the Sony Group’s technologies, such as AI. By providing incentive by paying back insurance premiums to customers whose driving demonstrates a low risk of accidents, we aim to contribute to reducing customer’s accident risk, andrealizing a society with a low incidence of traffic accidents. We will continue to strengthen Group collaboration, and aspire totransform the finance business through the power of technology.
Strengthening SFG’s core competence in “providing products and services to meet every customer’s needs” is a key
challenge for our future growth. We will speed up the generation of synergy with other Sony Group companies throughstrategies that concentrate on a “customer-first” and “response to changes”. We will support its customers’ total financial
needs with appealing, high-value-added products and services that conventional financial institutions cannot provide.

Sony Financial Holdings Inc. Annual Report 202015

Group ERM
A group-oriented ERM (Enterprise Risk Management) framework has been introduced into SFG. It aims to balance andoptimize capital, risk and return by extending comprehensive risk management structures already in place at each company
throughout the whole organization and to instill the idea of improved capital efficiency in management across the Group. ThisERM framework will help SFG achieve stable growth and maximize medium- to long-term corporate value. The Group is
working to build a PDCA cycle through the formulation, implementation and monitoring of business plans based on risk
appetite. Furthermore, we are trying to raise Group ERM even higher while keeping related regulatory trends in sight.
ERM Diagram

Operation Cycle of Group ERM

ReturnCapital policy
Dividend policy

Capital efficiency(profitability)

CapitalCapital efficiency (profitability)
indicators● Sony Life: Core ROEV
● Sony Assurance: Adjusted ROE● Sony Bank: ROE

STEP.1

Set risk-taking policy andrisk tolerance (risk appetite)

STEP.2

Formulate business plan(measures and strategies,
revenue plan, stress tests,
and others.)

STEP.3Operate business andexecute measures

STEP.4

Manage progress and track
status through monitoring

STEP.5

Take necessary measuresaccording to changes insoundness and profitability

Risk

Soundness

Soundness indicators● Insurance business: Solvency margin ratio● Banking business: Capital adequacy ratio● Management on a regulatory basis andon the basis of economic value

Consolidated Group ESR
SFG has designated consolidated Group ESR
under its “Basic Policy on Group ERM,” and(%)● Invest in growth, take on additionalrisk and expand shareholder returns
250

utilizes it as a key indicator to guide management judgement based on a balanced consideration of revenues, risks and capital.
Consolidated Group ESR is an indicator of● Consider investing in growth, taking

on additional risk and adopting aflexible response to shareholder
returns

Consolidated
Group ESR

Comfortablezone

Approx.

capital sufficiency with respect to the Group’s
180

risk amount. Currently the target level ofconsolidated Group ESR is between 180% and250% from the viewpoint of ERM to ensure
financial soundness and capital efficiency.

● Recover capital levels by reducing

risk and retaining profit

100● Consider shoring up capital,

review shareholder returns

Note: We use consolidated Group ESR (an internal management indicator) to assist in making comprehensive management decisions
The indicator refers to the calculation methods used for European Solvency II and ICS, with some simplification
No third-party verification is conducted with respect to the calculation process or the appropriateness of its results

16

Sony Financial Holdings Inc. Annual Report 2020220%

Consolidated Adjusted ROE
SFH focuses on consolidated adjusted ROE as a profit indicator for the whole Group. Since each company differs by industry
such as insurance and banking, we assess profitability and capital efficiency using “Adjusted ROE” based on adjusted profit
and adjusted capital, which takes into account the characteristics of each business.
FY2017
Actual

FY2018Actual

FY2019ActualConsolidated adjusted ROE*

6.1%

6.7%

5.3%

(Sony Life) Core ROEV*

5.9%

6.4%

4.9%

(Sony Assurance) Adjusted ROE

16.1%

15.2%

14.7%

(Sony Bank) ROE

5.5%

7.3%

7.8%

* The figures for fiscal 2017 exclude the impact of a revision in the insurance risk management method and others for Sony Life

Calculation of Consolidated Adjusted ROE
Group companies’ adjusted ROE and ROE as well as consolidated adjusted ROE are presented below.
Calculation of Sony Life’s core ROEV:

New business value + Expected existing business contribution
MCEV*1 as of the beginning of the fiscal year less dividends paid
plus MCEV*1 as of the end of the fiscal year, divided by two

Calculation of Sony Assurance’s adjusted ROE:

Net income (loss) + Provision amount for catastrophe reserve and its provision
amount for reserve for price fluctuations, in each case after taxes
The average amount of net assets plus the sum of catastrophe reserve andits reserve for price fluctuations during the fiscal year, in each case after taxes

Calculation of Sony Bank’s ROE:

Profit (loss) attributable to owners of the parent
The average amount of net assets during the fiscal year

Calculation of Consolidated adjusted ROE for the fiscal year:
Consolidated adjusted ROE = Consolidated adjusted profit divided by consolidated adjusted capitalSony Life: New business value plus expected existing business contribution + Sony Assurance: Net income (loss) plus provision
amount for catastrophe reserve and its provision amount for reserve for price fluctuations, in each case after taxes +Sony Bank: Profit (loss) attributable to owners of the parent
Sony Life: MCEV*1 as of the beginning of the fiscal year less dividends paid plus MCEV*1 as of the end of the fiscal year, divided
by two + Sony Assurance: The average amount of net assets plus the sum of catastrophe reserve and its reserve for pricefluctuations during the fiscal year, in each case after taxes + Sony Bank: The average amount of net assets during the fiscal year

*1 Sony Life discloses Market Consistent Embedded Value (“MCEV”). Sony Life’s MCEV is calculated in compliance with the European Insurance CFO Forum Market
Consistent Embedded Value Principles©*2(“MCEV Principles”), the international standard in disclosing MCEV published by the CFO Forum comprising CFOs frommajor insurance companies in Europe*2 Copyright© Stichting CFO Forum Foundation 2008

Sony Financial Holdings Inc. Annual Report 202017

Sony Life
Since Sony Life started operations, we have continued to grow by designingand selling tailor-made insurance products to suit the individual life plan of
every customer’s needs, via consulting sales and consulting follow-up, andproviding customers with optimal coverage.
Our policy amount in force in the Japanese life insurance market has
grown to exceed ¥50 trillion, but we are currently confronted with greatchanges in the business environment, including low birth rate and an aging
population, as well as increasingly diverse customer needs.
Moving forward, we will continue to conduct business while putting thecustomer first through even higher quality service, and achieve steady growth.

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

● We will work for customer’s financial security and stability by offering optimal life insurance products andVisionhigh-quality service.
● Main products: Death protection insurance (term life insurance, U.S. dollar-denominated insurance, variable

Overview

life insurance), living benefit insurance, educational endowment insurance, medical insurance● Main sales channels: Lifeplanner sales employees, partners (independent agencies)● Tailor-made insurance product design and sales approach that match life planning of each individual

customer based on consulting (consulting sales)
Strengths● Maintaining optimal coverage through inspections of and advice on post-contract life plans and coverage,

adjusted to changes in environment surrounding the customer (consulting follow-up)● Securing financial soundness through ALM operation adjusted to long-term liability characteristics

Risk● Shrinking domestic insurance market; decline

in demand for death protection insurance
Offer lifestyles that featuresafety and peace of mind

Value
Creation

Opportunity● Increase in new protection andwealth-building needs● Support customers in achieving their life plans, through high quality consult-ing sales and consulting follow-up by our Lifeplanner sales employees● Provide a diverse range of insurance products such as annuities, to provide

Contribute to a healthy,
long-lived society

for a plentiful retirement for our customers● Support customers’ health by providing healthcare and medical informationand services
Policy Amount in Force*1■: Sony Life■: Life insurance industry■: Sony Life’s market share

5.5%¥51.4 trillion
CAGR*2 4~5%

March 31,2001

*1 Sum of individual life insurance and individual annuities*2 CAGR: Compound Annual Growth Rate

18

Sony Financial Holdings Inc. Annual Report 2020

March 31,2020

Review of Results for Fiscal 2019
In order to realize our vision to “protect customers all across Japan throughout their lives,” Sony Life has worked to provide
necessary coverage to customers through consulting sales, and inspect and optimize coverage through consulting follow-up.
In order to further expand the value we provide, we launched a U.S. dollar-denominated level premium plan term life insurance product targeting corporate customers in August 2019, and introduced an guaranteed lapse cancelation provision, toprovide relief from insurance policy lapse due to circumstances such as forgetting to pay insurance premiums, in September
2019. In addition, we began operation of “Hokenseisakusho,” a shop-style insurance agency, in January 2020, in response to
the changing preferences and behavior of customers contemplating life insurance. We also acquired Sony Life With Insurance*
which provide variable annuities and SA Reinsurance, both joint ventures, as wholly-owned subsidiaries in January 2020.
* The trade name was changed from AEGON Sony Life Insurance Co., Ltd. to Sony Life With Insurance Co.,Ltd. on April 1, 2020

Trends of Key Indicators
Policy Amount in Force*1
Trillions of yen

49

47

Number of Lifeplanner sales
employees*2

MCEV/Core ROEV*3

Billions of yen

■

51

5,142

5,164

5,146
5.9

1.6

March 31, March 31, March 31,
2018
2019
2020

Ordinary Profit(Life Insurance Business)■: MCEV (trillions of yen)
: Core ROEV (%)

March 31, March 31, March 31,
2018
2019
2020

78.2

6.4

4.9
1.7

94.3

54.1

1.7

FY2017 FY2018 FY2019

FY2017 FY2018 FY2019*1 Sum of individual life insurance and individual annuities*2 The figure includes the number of contracted Lifeplanner sales employees and those rehired on a fixed-term contract basis after retirement*3 Results for fiscal 2017 exclude impact from revisions in the insurance risk measurement method and others

Initiatives for Fiscal 2020

Response to Changes

Customer-first

Furtherstrengthen
our businessfoundation

Pursue quality in the Lifeplanner channel
In addition to implementing a strict recruiting process, Sony Life will set a higher standard ofservice and provided value, and evaluate the behavior (processes) of Lifeplanner sales employees based on that standard from multiple perspectives, in order to improve quality evenfurther. In addition, we will work to execute deeper consulting sales and follow-up utilizing
tools such as “LiPSS” and “Karte.” We will further enhance the value provided by Lifeplanner
sales employees by pursuing higher quality.
Achieve steady growth in the independent agency channel
In addition to expanding support to fit the characteristics of our partners, we will strengthen
our relationship with high-quality partners by introducing a compensation system that evaluates the quality of partners.

Provide newvalue

Expand coverage
We will promote the enhancement of product capabilities and expand coverage, centered ondeath protection products. As our medium-term product strategy, we will promote new
product development in anticipation of environmental changes, such as arrival of the era of
the 100-year lifespan.
Evolve customer-first service (Fintech)
We will develop tools that utilize life planning data and AI, and in both the consulting sales andconsulting follow-up phases, we will aim to support objective proposals to the customers andimprove quality of services.

Steadily growcorporate
value

Realize growth in profit on the basis of economic value
We will aim for medium-term profit growth on an economic value basis, while striving toconduct customer-first business operations and strengthen our compliance system.

Sony Financial Holdings Inc. Annual Report 202019

Sony AssuranceContinued growth is forecast for the direct insurance businesses, with theirfeatures such as online procedures that match the needs of customers seeking
reasonable insurance premiums and convenience. As a leading company indirect automobile insurance, Sony Assurance will strive to provide products andservices that meet the expectations of our customers. In addition, we will endeavor to achieve further growth and embed our stable business foundation byfocusing not only on our mainstay automobile insurance products, but also on
expanding sales of other products such as medical insurance and fire insurance.
We will continue to adapt to changes in the business environment and customer value perceptions, and endeavor to maximize customer value throughimprovements in customer experience (CX), by leveraging technology andoffering services only people can provide.

Atsuo Niwa
President, Representative Director
Sony Assurance Inc.

Vision● As a leader from the present into the future, in the Sony spirit of freedom and open-mindedness, we will

constantly aspire to create and innovate, to bring about new lifestyles.
● Direct insurance company for individuals

Overview● Main products: Automobile insurance, medical insurance, overseas travel insurance, fire insurance● Main sales channel: Internet

Strengths● Reasonable insurance premiums according to each customer’s risk
● High-quality accident response, customer center, and website services● Rise in loss ratios and reinsurance premiums

Risk

due to more frequent and serious natural
disasters
Offer lifestyles that featuresafety and peace of mind

Value
Creation

Opportunity● Increase in insurance needs to protect

against natural disasters● Leverage advanced technologies to contribute to realizing a safe society witha low incidence of traffic accidents● Contribute to safe and secure homes

Contribute to a healthy,
long-lived society● Provide protection to match customer needs through our medical insurance

Make lifestyles moreconvenient● Develop new products in response to social change, including autonomous

business

vehicles and Mobility as a Service (MaaS)

Automobile Insurance Market and Market Share ofMajor Direct Non-life Insurers

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

For the years ended March 31,■: Direct premiums written (total of all non-life insurers and shown as theautomobile insurance market) (left scale: billions of yen)
: Market share of major direct non-life insurers (right scale: %)For the years ended March 31,
Billions of yen

■

5,000

10.0

4,000

8.0

3,000

6.0

2,000

4.0

120

Sony Assurance

100
80
60

1,000

2.0

0

0.0

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

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

20Sony Financial Holdings Inc. Annual Report 2020

40
20
0

A
C

B
G

E

F

D
H

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Note: The graph was prepared by Sony Assurance from data officiallydisclosed by individual non-life insurers
Amounts for fiscal 2019 are based on published data available up toJune 25, 2020

Review of Results for Fiscal 2019
We worked on marketing to communicate Sony Assurance’s features in an easily understandable way, in addition to utilizing customer feedback to strengthen our product appeal, and enhancing service quality from contract procedures to insurance claims
payment. As a result, we succeeded in growing sales of automobile insurance and each of our other products such as medical
insurance, fire insurance and overseas travel insurance and others.
In automobile insurance, we established a new “Accident-free Discount” in April 2019, and in March 2020 we launched a payhow-you-drive (PHYD) automobile insurance called “GOOD DRIVE,” which provides up to 30% cash-back on insurance premiums by leveraging AI, for customers whose driving demonstrates a low risk of accidents. In addition, we introduced the “signlanguage/conversation-in-writing service,” which provides policy and accident response for customers with hearing or speaking
disabilities, and the “foreign language accident response service,” which provides response in 18 languages other than Japanese.

Trends of Key Indicators
Direct premiums written

Sum of two ratios*1

Billions of yen

%

107.0

112.1

Ordinary profit/Adjusted
ordinary profit*2■: Ordinary profit (billions of yen)■: Adjusted ordinary profit (billionsof yen)

119.1
89.2

89.1

89.3

10.0
6.5

FY2017 FY2018 FY2019

FY2017 FY2018 FY2019

10.5
6.8

11.2

Adjusted ROE*3
%

16.1

15.2

14.7

8.0

FY2017 FY2018 FY2019

FY2017 FY2018 FY2019*1 Sum of two ratios = E.I. loss ratio + Net expense ratio*2 Adjusted ordinary profit = Ordinary profit + Provision for catastrophe reserve
Net income (loss) + Provision amount for catastrophe reserve and its provision amount for reserve for price fluctuations, in each case after taxes*3 Calculation of Adjusted ROE = The average amount of net assets plus the sum of catastrophe reserve and its reserve for price fluctuations during the fiscal year, in each case after taxes

Initiatives for Fiscal 2020

Response to Changes

Customer-firstContinue to grow, andexpand share of,automobile insurance

While further improving our product capability and service quality, in order to better
appeal to customers, we will continue our initiatives to build trust and confidence inautomobile insurance through marketing to improve our brand value.

Accelerate growth by
expanding businesscategories

In 2018, we strengthened the product capability of medical insurance and launchedoverseas travel insurance and fire insurance. In these categories, we will pursue business expansion by utilizing marketing expertise accumulated in automobile insurance.

Maximize customervalue

We will maintain our position as No. 1 non-life insurer for customer satisfaction bypromoting CX improvements and providing high quality service. Furthermore, we will
pursue improved CX by combining service only people can provide with leading-edge
technology.

Leverage technology

In the areas of product development, marketing, contract processes, and customer
support, we will continue to actively leverage leading-edge technologies such as
Fintech to improve CX and operation efficiency.

Sony Financial Holdings Inc. Annual Report 202021

Sony Bank
As an Internet bank, Sony Bank has made the most of technology to continue
growing since its establishment. However, as online financial transactions
have become commonplace and more business operators from various
industries have entered the financial industry, our business environment ischanging rapidly. In these circumstances, we will establish a foundation as adigital bank that has ideas unique to Sony Bank and the latest technology
only possible in the Sony Group. We aim to achieve sustainable growth byproviding optimal products and services for “Saving, Investing and Spending”
to meet the needs of our increasingly diverse range of customers.

Yuichiro Sumimoto
President, Representative Director
Sony Bank Inc.

Vision● We aim to be a bank that delivers optimal solutions for “Saving, Investing and Spending” using the latest

technologies, to help customers live their lives with confidence, in this era of the 100-year lifespan.
● Internet bank for individuals● Main products: Mortgage loans with the freedom to change interest rate types and make advance repayments

Overview

Foreign currency deposits featuring attractive exchange costs“Sony Bank WALLET” cash card with Visa debit function in 11 currencies● Main sales channels: Internet, “CONSULTING PLAZA” and banking agencies● Safe, reliable and highly convenient services, leveraging the advantages of an Internet bankStrengths● Extensive lineup of high-quality products● Business operation with high customer satisfaction

Risk● Shrinking domestic market for mortgage loans● Persistence of the low interest rate environment

Offer lifestyles that featuresafety and peace of mind

Value
CreationContribute to a healthy,
long-lived society

Make lifestyles moreconvenient

22Sony Financial Holdings Inc. Annual Report 2020

Opportunity● Increase in demand for asset

management products and services● Attentive support for customers purchasing a house, provided by our dedi-

cated loan advisors● Support for customers’ medium- to long-term wealth-building and asset

management, through the provision of asset management seminars andindividual consultation, as well as services leveraging APIs and data
● Even more convenient financial transactions, such as seamless payments

regardless of currency through the “Sony Bank WALLET,” as well as
contactless and mobile payment capabilities

Review of Results for Fiscal 2019
In order to respond to our customers’ diverse wealth-building and asset management needs, we launched our “Electronic
Closing Service” for mortgage loans in June 2019, followed by entrusting of intermediary operations on its mortgage loans toJAPAN POST BANK Co., Ltd. in October 2019, and a mortgage loan product specifically designed for freelance IT professionals in February 2020. We also provided a range of other products and services. In September 2019, we commenced issuingthe “ANA Mileage Club / Sony Bank WALLET” through an alliance with All Nippon Airways Co., Ltd., and in November, webegan offering foreign currency-denominated time deposits that earn ANA mileage. In January 2020, we introduced free salescommission for all investment trust funds offered.
In addition, we worked to enhance customer convenience, through measures such as the introduction of an “AI-powered
Automated Chat Service” on the Sony Bank service site from August 2019, and the issue of “Sony Bank WALLET” featuring a“Visa Contactless Payments” function from September 2019.

Trends of Key Indicators
Retail balance*(Non-consolidated)

Gross operating profit(Consolidated)

Ordinary profit(Consolidated)

Trillions of yen

Billions of yen

Billions of yen

4.2

3.9

4.5

24.6

March 31, March 31, March 31,
2018
2019
2020

28.3

31.3

FY2017 FY2018 FY2019

9.5

ROE (Consolidated)
%

10.6

7.1

FY2017 FY2018 FY2019

7.3

7.8

5.5

FY2017 FY2018 FY2019* Sum of deposits, investment trusts, financial products intermediary services, mediated discretionary investment contracts and personal loans

Initiatives for Fiscal 2020

Response to Changes

Customer-firstStrengthen
product appeal
and improve
service

Mortgage Loans
We have worked to maintain our interest rate competitiveness, while improving conveniencethrough features such as fully-online completion of contract procedures, and enhancing our
product lineup and group credit life insurance. We will continue to aim for stable, sustainablegrowth through strengthen product appeal and collaboration with banking agencies andothers.
Foreign Currency Deposits
In order to expand our customer base and balance of foreign currency deposits, we will
strengthen alliances by issuing tie-up cards pivoting on the “Sony Bank WALLET” which offers
accessible foreign currency functionality, as well as services targeting foreign residents in Japan.

Leverage
Fintech andimprovebusiness

We will strengthen our foundation as a digital bank by responding to the rapid advancetoward a cashless society, through measures such as improving convenience with touchpayment support for “Sony Bank WALLET” and enhancing collaboration with QR payment
players. In addition, we will engage in operational improvements to enhance productivity,
through the promotion of digitalization and the leveraging RPA.

Improveproposalmaking
capability

We will propose products that are tailored to individual customers and advertise our convenience, and we will work to provide valuable products and services from both digital andreal perspectives. On the digital side, we aim to provide customer-first financial advice bydeveloping digital consulting tools. In terms of real contact, we will strengthen our proposal
function in the “CONSULTING PLAZA”.

Sony Financial Holdings Inc. Annual Report 202023

Nursing Care Business● Through our nursing care services we aim to protect the dignity of the elderly, and achieve a society where

Visionpeople can feel a sense of enrichment for their whole lives.
● Responding to the diversification of demand by developing nursing care homes under two brands:“SONARE” for the upper/middle zone and “Hanakotoba” for the volume zone
Overview● Establishing new homes in the Tokyo metropolitan area (Tokyo, Chiba, Saitama, Kanagawa), where further

market expansion is expected● At “SONARE,” implementing “lifecare plans” tailored to the needs of each individual

Strengths● Capture a wide range of needs by expanding our lineup● Propose nursing care service suitable for each resident● Difficulty in acquiring human resources● Reduction in compensation for nursing careRisk

workers due to financial difficulties in social
security

Opportunity● Increase and diversification in theneeds for nursing care-related services● Provide reasonably priced, high quality products and services, from a lineup

Offer lifestyles that featuresafety and peace of mind

matching the increasingly diverse needs of the nursing care homes market● Provide safe and reliable nursing care services with links to the local

community, through the regional development of in-home care and nursing
services, and services offered in collaboration with the region

Value
CreationContribute to a healthy,
long-lived society● Realize life care plans where customers can live with a sense of enrichment inaccordance with their needs, through collaboration between Life Managers
and other various occupations

Market Environment
Sony Lifecare predicts a mid- to long-term increase in the population in need of nursing care in its main area of development,
the Tokyo metropolitan area. Due to increased needs, the establishment of nursing homes is proceeding steadily, and Sony
Lifecare expects demand to grow steadily for the foreseeable future.
Long-term estimates of people in major metro areas
needing nursing care
People 1k: Tokyo metropolitan area (Tokyo, Chiba, Saitama, Kanagawa): Kansai region: Tokai region

People requiring long-term care and number of homes
for the elderly* (nationwide)
■

■

■

2,406

6,036
1,459

1,251

1,078

1,038

874

2020

2025

2030

Forecast
Note: Study by Tamura Planning & Operating

24

Sony Financial Holdings Inc. Annual Report 2020

33
1,967

622

2015

7,674

6,793

1,962
1,383

: Percentage of homes for the elderly catering to people
requiring long-term care (%): People requiring long-term care (People 1k)■: Homes for the elderly (Homes 1k)
■

■

2035

2040

33
2,256

2015

2020

34
2,581

2025

Forecast* Homes for the elderly include homes for those who are independentGrowth Strategy
In order to respond to the expansion and diversification of demand for nursing homes, Sony Lifecare will capture the demandby developing a lineup around two brands: “SONARE” for the upper/middle zone run by Lifecare Design, and “Hanakotoba”
for the volume zone run by Proud Life. In addition, we will work to further improve the quality of management by creatingsynergy including sharing of knowledge between both series, and effectively utilizing Group management resources.

Lifecare Design [“SONARE” and others.]
Our “SONARE” brand opened its first home four years ago, and now operates five homes in total. Using the expertise accumulated at existing homes, we will establish the “SONARE” brand and proceed with opening new homes.

Proud Life [“Hanakotoba” and others.]
With “Hanakotoba” brand, in addition to our business foundation with our 26 existing homes, we aim for new growth byramping up our new home construction, which we recommenced last year for the first time in around 5 years.

Upper/middle zone

Volume zone

Cultivate the expertise we haveaccumulated to establish the “SONARE”
brand and step up the pace of building
new homes

Upper(Operating 351 rooms as of March 31, 2020)

Broaden our business foundation withthe establishment of new homes in
addition to existing “Hanakotoba”
series homes(Operating 1,381 rooms as of March 31,

Middle2020)

Create synergy

Volume“SONARE Hamadayama”(Opened in November 2019)“Hanakotoba Plus Nerima Nakamura”(Opened in December 2019)

Hanakotoba“Hanakotoba Plus Nishiarai“(Opened in July 2020)

Number of Group-operated homes■: Lifecare Design (“SONARE,” others)■: Proud Life (“Hanakotoba,” others)

29

30

3

4

26

26

2018

2019

33
6

“Hanakotoba Tsurumi Terao”(Planning to open in November
2020)

27

2020

“SONARE Komazawa Park”(Planning to open in December
2020)

Note: As of March 31

Sony Financial Holdings Inc. Annual Report 2020

25

SFG’s Value Creation

Sustainability, Value Creation and Our Foundation for Creating Value
Approach to Sustainability
The Sony Financial Group’s mission is to “create a sustainable society where people feel a sense of enrichment.” Furthermore,
our Code of Conduct outlines “It is the core corporate responsibility of us to society to pursue its corporate value enhancement through our business activities and contribute to developing a sustainable society”.
With the highest level of ethics and a strong sense of purpose, we give due consideration to the impacts of our businessactivities on the interests of our stakeholders, including customers, shareholders, employees, business partners and local
communities, as well as the global environment. Through dialogue, we also strive to build trust with our stakeholders.
Based on these principles, we will keep striving to increase corporate value by engaging in business activities that generate
both social and economic value to contribute to developing a sustainable society.

Contributing toward the development of a sustainable society
Customer-firstSocialvalue

Response to changes

Economic
value
Stakeholders

Corporate activities

Enhance corporate value

Value Creation and Our Foundation for Creating ValueSFG develops diverse businesses, aiming for sustainable value creation. While the domains and business models of thesebusinesses vary greatly, they share the qualities of providing high-value-added products and services that meet every customer’s needs, and leveraging technology. We will continue to create value through our businesses, and strengthen thefoundation that supports our value creation.

Value Creation
Offer lifestyles that feature safety
and peace of mind
Contribute to a healthy, long-lived society
Make lifestyles more convenient

Important Items for Strengthening Our Foundation
Corporate Governance

26

Sony Financial Holdings Inc. Annual Report 2020

Human Resources
Respecting Diversity

Identification of Important Items for Strengthening Our Foundation
SFG also recognizes the importance of the foundation that supports value creation. We carried out analysis based on the following process, incorporating not only SFG’s perspective but those of its stakeholders as well, and identified “corporate governance”
and “human resources respecting diversity” as the most significant matters in terms of strengthening our foundation.

Identification Process
STEP.1

Extraction and organizing of candidates for important items for strengthening our foundation

We selected the items most relevant to SFG as candidates for important items for strengthening our foundation. In selecting
these candidate items, we referred to the GRI Sustainability Reporting Standards, which are global standards for sustainability
reporting, as well as the SDGs (Sustainable Development Goals), worldwide goals for a sustainable society, and the assessment items provided by external agencies such as MSCI and FTSE.
STEP.2

Evaluation of each item from SFG’s perspective and the perspectives of stakeholders(ordering by level of priority)
Important Items for Strengthening Our Foundation

Corporate Governance● Corporate governance● Information security● Risk management● ComplianceImpact on SFG

Human Resources Respecting Diversity

Requests from stakeholders● SFG’s perspective: We evaluated importance from standpoints including business continuity, such as legal and regulatorycompliance at SFG, and Group business growth. This was accomplished through debate within an internal, cross-departmental project aimed at sustainability initiatives, and led by the President, Representative Director.
● Stakeholder perspectives: We evaluated importance based on assessment criteria provided by external assessment

agencies, requests by investors, and information published by the media, and others.
STEP.3

Identification of important items for strengthening our foundation

After debate based on the evaluation in STEP.2 within the internal project, including senior management, we identified two
important items to prioritize for strengthening our foundation.
We will continue to engage in dialogue with our stakeholders regarding these important items for strengthening our foundation, and review them as necessary, based on changes in the impact of SFG’s management strategies and business activities.
At the same time, we will proceed with the establishment of long-term targets and action plans, and continue to promote
initiatives aimed at sustainability.

Sony Financial Holdings Inc. Annual Report 202027

Initiatives to Strengthen Our Foundation for Creating Value
Corporate Governance
At SFG, we have established our “Mission, Vision & Values,” and engage in fulfilling our Mission through business activities. We
regard strengthening corporate governance as one of the most significant challenges for management in supporting this endeavor.

Basic Policy on Corporate Governance(Basic Stance on Corporate Governance)
SFH strives to meet the expectations and earn the trust of stakeholders, realize the Group’s sustainable growth and increase
corporate value over the medium to long term by making effective use of the Group’s various management resources and byrealizing its corporate philosophy. Furthermore, as a financial holding company, SFH is aware of the highly public nature of its
financial business. Accordingly, SFH has in place a governance structure that emphasizes ensuring of soundness and appropriateness of the Group’s management.

Corporate Governance Structure Chart (As of July 1, 2020): Inside Director/Inside Audit & Supervisory Board Member: Outside Director/Outside Audit & Supervisory Board Member (★★marks indicate chairpersons)General Meeting of
Shareholders

SFH
Audit & Supervisory Board*2 ★
Audit & Supervisory Board
Members

Nomination Advisory ★
Committee*3★

Board ofDirectors*2

Independent
Auditors*1★
Compensation
Advisory Committee*4

Executive Committee

Business Execution Departments

Share and confirm
information

Report andconfirm

Discuss inadvance

Audit Department

Serve concurrently as
directors and audit &supervisory board members
Convey Group policies

Manage, advise,monitorSubsidiaries and others*1 Compensation and others for independent auditors: ¥135 million (including ¥29 million for statutory audits)*2 SFH provides the independence standard for appointment of outside officers and outside audit & supervisory board members in the “Basic Policy on the Selectionof Director and Audit & Supervisory Board Member Candidates”*3 The Nomination Advisory Committee members: Shiro Kuniya (Chairperson), Shogo Ikeuchi, Masashi Oka and Shiro Kambe*4 The Compensation Advisory Committee members: Kaoru Takahashi (Chairperson), Shiro Kuniya and Masashi Oka▶“The Basic Policy on the Selection of Director and Audit & Supervisory Board Member Candidates” on SFH’s website,
https://www.sonyfh.co.jp/en/company/data/nomination_policy.pdf

28Sony Financial Holdings Inc. Annual Report 2020

Status of Initiatives by the Board of Directors, Committees and Audit &Supervisory Board
Board of Directors
Chairperson

Masashi Oka

Composition

The ratio of outside directors: 40%

Main roles

The Board of Directors recognizes the responsibility it has been entrusted with and strives to realize sustainable growth of
SFG and increase corporate value over the medium to long term. In addition to items stipulated in laws and regulations
and the Articles of Incorporation, the Board of Directors makes important decisions regarding management of SFG suchas formulation of SFG’s management policies and management plans; appointment and dismissal of directors and Audit& Supervisory Board members of subsidiaries in which SFH holds shares directly; entry into new businesses andwithdrawal from businesses; and organizational restructuring. The Board of Directors also supervises overall management of the Group.

The Board of Directors continued to conduct deep deliberations centering on overall Group governance, Group growthstrategies, business plans, sustainability and important matters related to Group subsidiaries. The board also received
Operational status, topics
periodic reports concerning the state of progress of SFH’s non-consolidated and consolidated business plans, as well as(FY2019)
the status of compliance activities, risk management and internal audits. In these ways, the board conducted appropriate supervision of overall Group management.
Meetings held and theaverage attendance rate
(FY2019)

17 times
92%

Nomination Advisory Committee
Members

Chairperson: Shiro Kuniya (Outside Director); Shogo Ikeuchi (Outside Director); Masashi Oka; Shiro Kambe

Composition

Half are outside directors

Main roles

The Nomination Advisory Committee deliberates and reports on the appointment and dismissal of SFH’s directors, audit& supervisory board members and the Group companies’ presidents, as well as the succession planning of SFH and theGroup companies’ presidents.

Operational status, topics The Nomination Advisory Committee decided on director candidates for SFH and made reports regarding the appoint(FY2019)
ment of directors and the selection of representative directors for the SFH’s three main subsidiaries.
Meetings held and theaverage attendance rate
(FY2019)

Five times
95%

Compensation Advisory Committee
Members

Chairperson: Kaoru Takahashi (Outside Director); Shiro Kuniya (Outside Director); Masashi Oka

Composition

Majority are outside directors

Main roles

The Compensation Advisory Committee deliberates the policy and total amount of compensation for SFH’s directors andthe Group companies’ representative directors who are to be proposed at a General Meeting of Shareholders. The
committee also deliberates the amount of compensation for individual directors and the Group companies’ representative
directors, within the limits set by a resolution at a General Meeting of Shareholders. It reports the results of its deliberations
to the Board of Directors. Members of this committee do not participate in deliberations on their own compensation.

The Compensation Advisory Committee decided on individual levels of compensation for SFH’s directors and executive
Operational status, topics
officers, and approved the levels of individual compensation for SFH’s three main subsidiaries’ representative directors. It(FY2019)also engaged in considering a review of the indicators for the results-linked portion.
Meetings held and theaverage attendance rate
(FY2019)

Five times
93%

Audit & Supervisory Board
Chairperson

Yasuyuki Hayase (Outside Audit & Supervisory Board Member)

Composition

Majority are outside audit & supervisory board members

Main roles

The Audit & Supervisory Board, an organization independent from the Board of Directors, audits the suitability andappropriateness of directors’ performance of their duties by calling for business reports of the Group companies basedon laws and regulations, surveying their operational and financial status, and exercising their right to appoint and dismiss
the independent auditors.

The Audit & Supervisory Board received reports on directors’ performance of their duties, including their business
Operational status, topics
management of the Group companies. Primarily, they confirmed the status of development and operation of the Group’s(FY2019)
internal control structure and made suggestions, as appropriate.
Meetings held and theaverage attendance rate
(FY2019)

17 times
98%

Sony Financial Holdings Inc. Annual Report 2020

29

Initiatives to Strengthen Our Foundation for Creating Value

Profiles of Directors and Audit & Supervisory Board Members (As of July 1, 2020)
Directors

Status of attendance

Masashi Oka

Hiroaki Kiyomiya

President & CEO, Representative Director

Managing Director

Executive Duties

Executive Duties

Main concurrent positions

Main concurrent positions

・Director, Sony Life Insurance Co., Ltd.
・Director, Sony Assurance Inc.
・Director, Sony Bank Inc.
・President, Representative Director,
Sony Financial Ventures Inc.

・D
 irector, Sony Life Insurance Co., Ltd.
・Director, Sony Assurance Inc.
・Director, Sony Bank Inc.

Attended all 13 meetings of the Board of Directors and all 5
meetings of the Compensation Advisory Committee

Status of attendance Attended all 17 meetings of the Board of Directors
Length of service in office Five years

Length of service in office One year

Biography

Biography

He has many years of business experience at a major financial institution, andalso has a high level of insight on corporate management gained through servingas CEO for the Americas of that institution and CFO of a global technology
company. He had served as Outside Director of SFH since June 2019.

He was in charge of actuarial affairs, accounting and investment management, and others at Sony Life Insurance Co., Ltd.
for many years. He has been involved in management as
Managing Director of SFH since June 2015.

Hiroyuki Tsubota

Hiroki Totoki

Director

Director

Executive Duties

Main concurrent positions

Main concurrent positions

・Director, Sony Life Insurance Co., Ltd.
・Director, Sony Assurance Inc.
・Director, Sony Lifecare Inc.
・Director, Sony Financial Ventures Inc.

・Director, Executive Deputy President,
CFO, Representative Corporate
Executive Officer, Sony Corporation
・Director, Recruit Holdings Co., Ltd.

Status of attendance−

Status of attendance Attended 10 out of 13 meetings of the Board of Directors

Length of service in office−

Length of service in office One year

Status of attendanceBiography

Biography

He was in charge of human resources, corporate strategy, andothers of Sony Corp. and Sony Group companies in Japan andoverseas for many years. He has been involved in management
as Executive Officer of SFH since January 2020.

He has experience in executing the development and launch of new
businesses as a founding member of Sony Bank and extensive
expertise in finance. He has been involved in management serving
as Corporate Executive Officer of Sony Corp. since April 2016.

Shiro Kambe

Naomi Matsuoka

Director

Director

Main concurrent positions

Main concurrent positions

・Senior Executive Vice President,
Corporate Executive Officer, Sony
Corporation

・Senior Vice President, Sony
Corporation

Attended 13 out of 17 meetings of the Board of Directors andall 5 meetings of the Nomination Advisory Committee

Status of attendance Attended 11 out of 13 meetings of the Board of Directors
Length of service in office One year

Length of service in office Five years

Sony Financial Holdings Inc. Annual Report 2020

Biography

Biography

30

He was in charge of legal, compliance, corporate communications and CSR, and others of Sony Corp. for many years. He has
been involved in management as Corporate Executive Officer ofSony Corp. since June 2014.

She has extensive expertise and business experience at financial
institutions cultivated through serving as Chief Transformation Officer of amajor insurance holding company, and has been involved in management
as Senior Vice President of Sony Corp. since November 2018.

Directors

Shiro Kuniya*

Takatoshi Ito*

Director

Director

Outside Officer

Independent Officer

Outside Officer

Independent Officer

Main concurrent positions

Main concurrent positions

・Managing Partner, Oh-Ebashi LPC &Partners
・Director, NEXON Co., Ltd.
・Director, Takeda Pharmaceutical
Company Ltd.

・Professor, School of International andPublic Affairs, Columbia University
・Senior Professor, National Graduate
Institute for Policy Studies
・Director, Chi-X Japan Limited

Attended 16 out of 17 meetings of the Board of Directors, all
Status of attendance 5 meetings of the Nomination Advisory Committee, and 4 outof 5 meetings of the Compensation Advisory Committee

Status of attendance Attended all 17 meetings of the Board of Directors
Length of service in office Two years

Length of service in office Seven years

Reason forappointment

Reason forappointment

He has specialized knowledge and experience as a lawyer
and an attorney licensed in the U.S. state of New York.

He possesses extensive knowledge and experience as anexpert on subjects including macroeconomics, financial
policy, international finance and Japanese economic theory.

Shogo Ikeuchi*

Kaoru Takahashi*

Director

Director

Outside Officer

Independent Officer

Outside Officer

Independent Officer

Main concurrent positions

Main concurrent positions

・Advisor, Recruit Holdings Co., Ltd.

・Director, Hulic Co., Ltd.

Status of attendance Attended all 13 meetings of the Board of Directors and 3 outof 4 meetings of the Nomination Advisory Committee
Length of service in office One year−−

Reason forappointment

Reason forappointment

He has many years of experience in promoting new businessdevelopment and overseas expansion at a global company, and has ahigh level of insight on corporate management gained through serving
as head in charge of corporate planning and human resources.

Status of attendance
Length of service in office

He has many years of business experience in a major P&C
insurance group, and has a high level of insight on corporate
management gained through serving as President and Chief
Executive Officer of the group’s life insurance company.

Sony Financial Holdings Inc. Annual Report 202031

Initiatives to Strengthen Our Foundation for Creating Value

Audit & Supervisory Board Members

Yasuyuki Hayase*

Hirotoshi Korenaga

Standing Audit & Supervisory Board
MemberAudit & Supervisory Board Member

Outside Officer

Status of attendance

Independent Officer

Main concurrent positions

Main concurrent positions

・Audit & Supervisory Board Member,Sony Life Insurance Co., Ltd.
・Audit & Supervisory Board Member,Sony Assurance Inc.
・Audit & Supervisory Board Member,Sony Bank Inc.

・Senior Vice President, Sony
Corporation

Attended all 17 meetings of the Board of Directors and all 17
meetings of the Audit & Supervisory Board

Length of service in office Five years

Status of attendance

Attended 13 out of 17 meetings of the Board of Directors and
16 out of 17 meetings of the Audit & Supervisory Board

Length of service in office Seven years

Biography

Reason forappointment

He has many years of business experience at a financial
institution.

He has been working in accounting for many years within theSony Group. He has concurrently served as SFH’s Audit &Supervisory Board Member since June 2013.

Yoshimichi Makiyama*
Audit & Supervisory Board Member
Outside Officer

Independent Officer

Main concurrent positions
・Partner, Ripple Partners (law office)・Director, Filmination Co., Ltd.

Status of attendance

Attended 16 out of 17 meetings of the Board of Directors andall 17 meetings of the Audit & Supervisory Board

Length of service in office Five years

Reason forappointment

He has specialized knowledge and experience as a lawyer
and an attorney licensed in the U.S. state of New York.

* Independent officers as set forth in Article 436-2 of the Securities Listing Regulations of the Tokyo Stock Exchange

・Directors appointed as of June 23, 2020: Hiroyuki Tsubota and Kaoru Takahashi
・Directors who retired as of June 23, 2020: Shigeru Ishii and Yutaka Ito
・The status of attendance at the meetings of the Board of Directors, the Audit & Supervisory Board, the Nomination Advisory Committee and the Compensation
Advisory Committee are the results for fiscal 2019
・The status of attendance of Hiroki Totoki, Naomi Matsuoka, Masashi Oka and Shogo Ikeuchi are for the meetings of the Board of Directors held after their appointment as Directors of SFH in June 2019
・The length of service in office is as of the General Meeting of Shareholders held on June 23, 202032

Sony Financial Holdings Inc. Annual Report 2020

About the Board of Directors

Board of Directors

Nomination Advisory Committee

Aiming for sustainable enhancement of SFG’s corporate value, SFH has welcomed a new management leader, with in-depth
understanding of the global finance business and extensive management experience across industry borders, to strengthen
the management structure.
Under this new leader, SFH’s Board of Directors, composed of SFH’s senior management, outside directors, and senior
management from Sony Corp., will continue to promote the further growth of each business, as well as aiming to strengthen
governance of SFG as a whole, and realize further synergies.
We have four independent outside directors* (one-third or more of the Board of Directors) and have appointed a female
director, thereby increasing the diversity of the Board of Directors and enhancing its effectiveness, in order to strengthen its
supervisory function and gain comprehensive advice on SFG’s management.
Regarding the Boards of Directors of the Group’s subsidiaries, SFH’s President & CEO, Representative Director, executive
directors and executive officers serve concurrently as directors of the Group’s subsidiaries, with the aim of increasing theeffectiveness of the Group’s governance and ensuring the sound business management of each company.

* SFH designates outside directors as independent officers, whose placements are required by the Tokyo Stock Exchange, for the protection ofgeneral shareholders▶P92 Relationship with Parent Company, Sony Corp.

(Appointment and Dismissal of Directors)
SFH has formulated the “Basic Policy on the Selection of Director and Audit & Supervisory Board Member Candidates.” Reflecting this policy, SFH selects as director and audit & supervisory board member candidates who have suitable knowledge, experience, capacity for judgment and other characteristics suiting them to conduct decision-making and perform management
oversight in relation to the overall Group management. To reinforce the transparency and objectivity of the process of selecting
director and audit & supervisory board member candidates, the Nomination Advisory Committee deliberates on candidates in
response to inquiries by the Board of Directors. After receiving the committee’s reports, the Board of Directors decides on candidates to propose at the General Meeting of Shareholders. The Nomination Advisory Committee deliberates on the appointment
and dismissal of the president and other executive directors based on the aforementioned policy, an assessment of corporate
operating performance and other items. The committee then reports to the Board of Directors, which makes a decision.
Appointment of the President & CEO, Representative Director
Regarding the appointment of a successor to lead management, SFH resolved internally to select Masashi Oka as the next President & CEO,
Representative Director as a result of consideration by the Board of Directors, after receiving a report concerning deliberations on the candidates by the Nomination Advisory Committee in response to inquiries by the Board of Directors. Masashi Oka possesses the three elements
necessary for SFG’s future: “finance,” “customer perspective” and “technology.” He combines these with extensive experience and insight into
corporate transformation. For these reasons, he has been judged an appropriate person to lead management of SFG’s diverse businesses.

(Director and Audit & Supervisory Board Member Training)
Upon their appointment, SFH provides opportunities for directors and audit & supervisory board members to acquire knowledge related to laws and regulations, corporate governance and other areas necessary for appropriately fulfilling their roles
and responsibilities. In particular, when outside officers and audit &supervisory board members are newly appointed, SFH creates opportunities to provide the information necessary to promote an understandingof SFG’s businesses, management strategy, management issues andother areas. SFH also creates such opportunities as necessary following
their appointment.
Example of an Initiative in Fiscal 2019
From November 2019 to February 2020, we arranged opportunities
for SFH’s directors and audit & supervisory board members to carryout on-site inspections of the business facilities of each company in
the Sony Financial Group.

Inspection of provisional screening for
mortgage loans using AI at Sony Bank▶“Basic Policy on Corporate Governance,” and “Basic Policy on Establishing an Internal Control System” on SFH’s website,
https://www.sonyfh.co.jp/en/sustainability/governance.html▶P1

Sony Financial Group Mission, Vision & Values▶P92

Relationship with Parent Company, Sony Corporation

Sony Financial Holdings Inc. Annual Report 202033

Initiatives to Strengthen Our Foundation for Creating Value

Evaluation of Effectiveness of the Board of Directors (FY 2019)

Board of Directors

SFH’s Board of Directors conducts self-evaluations, evaluating the effectiveness of its own decision-making and oversight, as
well as its operation of meetings at least once a year.

Evaluation outline and process● Outline: An independent third-party evaluation company assessed the effectiveness of the Board of Directors with a ques-tionnaire given to all directors and audit & supervisory board members.
● Question items:“Composition and operation of the Board of Directors,” “Management and business strategies,” “Corporate ethics and risk
management,” “Evaluation and compensation of management,” “Matters related organizational and business restructuring,”“Dialogue with shareholders and others,” and “Self-evaluations.” In addition, an evaluation was conducted regarding responses to items that were raised as issues in the previous year’s evaluation of effectiveness.
● Evaluation results:

・As in fiscal 2018, a high level of effectiveness has been achieved.
・The governance structure has been further strengthened by measures implemented last year, such as the separation of“supervision and execution,” increasing the proportion of outside directors (attaining a proportion of one third or more), andthe appointment of a female director.
・As SFH is a listed subsidiary, the Board of Directors recognizes minority shareholder protection and arm’s-length rules. In
decision-making and information management, the board has continued to ensure management independence from
Parent Company and conduct sufficient management with a high degree of fairness and transparency.
・The Board of Directors endeavors to obtain and understand the details of its meeting agenda and other information inadvance. The Board of Directors strives to contribute to its own decision-making and supervision. Furthermore, the Boardof Directors has sufficient knowledge regarding the various laws, regulations and rules related to SFG, SFH responsibilities
and duties as a listed company, and corporate governance.
Status of major improvements based on the evaluation of effectiveness of the Board of Directors
Main issues in FY 2018
● Continuing discussions on the Group’s

growth strategies, considering theGroup’s overall optimization andlessons learned from the past

Main initiatives in FY 2019

Future responses● Strengthening of the governance● Continuing consideration of medium-

related to the Group’s management
and businesses

structure through measures such as
the separation of “supervision andexecution,” increasing the proportion ofoutside directors (attaining a proportionof one third or more), and the appointment of a female director● Continuing consideration concerning● More opportunities for study or training● More opportunities for study or training

incentive compensation plans for
management● Further improvements in the operationof the Board of Directors

related to the Group’s management
and businesses, such as on-site
inspections of the business facilities ofthree major subsidiaries and nursing
care business companies● Earlier advance distribution of meeting

to long-term challenges and strategy,
including digital transformation andsustainability response● Consideration of a review of themethods for sharing discussions by the
Nomination Advisory Committee andthe Compensation Advisory Committee, and the mechanism of incentive
compensation● Further improvements in the operationof the Board of Directors● Further improvements in contingency

materials, to improve the operation of
the Board of Directors

Policy for Determining Compensation

Board of Directors

management response at SFH and its
subsidiaries, including response to
COVID-19
Compensation Advisory Committee

SFH sets the “Policy for Determining the Compensation of Directors” and the “Policy for Determining the Compensation of
Audit & Supervisory Board Members.” SFH has also created the “Compensation Advisory Committee Regulations” andestablished the Compensation Advisory Committee (please see page 29) as its deliberative body.

Basic policy● Compensation of executive directors is determined according to the position, in consideration of the balance between afixed portion and a portion linked to short-term and medium- to long-term results, to ensure that compensation serves as
an effective incentive for improving the business performance of the entire Group.
● In principle, directors with no executive duties, excluding outside directors, are paid no compensation.
● Outside directors are paid fixed compensation according to their roles. Audit & supervisory board members are paid fixedcompensation according to their respective roles of standing audit & supervisory board members and non-standing audit &supervisory board members.
34

Sony Financial Holdings Inc. Annual Report 2020

Process● For the amount of compensation of individual executive directors and outside directors, the Compensation Advisory Com-mittee, composed of a majority of outside directors and chaired by an outside director, carries out deliberations in responseto the Board of Directors, and directors who are entrusted by the Board of Directors decide the amount based on a reportfrom the Compensation Advisory Committee.
● The amount of compensation for individual audit & supervisory board members is determined by deliberation of audit &supervisory board members.

Compensation structure● Executive directors: Compensation comprises a fixed portion depending on the position, a results-linked portion dependingon the entire SFG’s performance and individual responsibilities, and a medium- to long-term incentive portion in the form of
a stock compensation.
〈Fixed portion〉As an executive’s level of seniority increases, the fixed portion decreases as a percentage of annual compensation,
while the results-linked portion makes up a growing percentage (Fixed portion: 62%-71%; Results-linked portion: 38%-29%).
〈Results-linked portion〉The results-linked portion can range from 0% to 200% of the standard amount (100%) (The result for
fiscal 2019: 116%). Indicators for the results-linked portion include meeting expectations and earning the trust of all stakeholders by realizing sustainable growth of SFG and increasing corporate value over the medium to long term, as measured byquantitative indicators (consolidated performance results and key performance results at the Group companies compared withplanned levels) and qualitative indicators (strengthening of the internal control and the Group’s foundation and medium- tolong-term growth strategy). The Compensation Advisory Committee confirms the calculation results of the results-linked
portion based on indicators, and reports the amount of compensation for individual executive directors to the Board of Directors.
Indicators for the results-linked portion
Indicator
Quantitative

Qualitative

WeightPlan

ActualConsolidated ordinary profit

vs. plan30%¥98.4 billion¥111.8 billion

Consolidated adjusted ROE

vs. plan20%

5.8%(~6.0%)

5.3%

Business volume at main three subsidiaries*

vs. plan

20%

—

—

30%

—

—

Internal control / strengthening of the foundation
Medium- to long-term growth strategy* Business volume at main three subsidiaries
CompanySony Life
Sony AssuranceSony Bank

Policy amount in force

Indicator
vs. plan

Weight
70%

Plan¥52 trillion

Actual¥51.4 trillion

Net premiums written

vs. plan

15%¥119.5 billion¥119.3 billion

Retail balance

vs. plan15%¥4.5 trillion¥4.5 trillion〈Medium- to long-term incentive portion〉The medium- to long-term incentive portion, which accounts for approximately 20%
of total annual compensation, comprises restricted stock compensation, which has a restriction on transfer for a certain period
following acquisition, and stock-type compensation stock options, which can be exercised following retirement.
● Outside directors: A fixed amount is paid according to the role.
● Audit & supervisory board members: A fixed amount is paid according to the role of standing audit & supervisory board

members and non-standing audit & supervisory board members.
Graphs representing the compensation
structure

Compensation for SFH’s Directors and Audit & Supervisory Board Members for
Fiscal 2019*1■: Fixed portion ■: Results-linked portion■: Medium- to long-term incentive portion

Total amount of Total amount by compensation category (Millions of yen)*2 Numberofcompensation
Fixed
Results-linked
Stock
Restricted stock(Millions of yen) compensation compensation
options
compensation payees

President, Representative Director

5

3

2

Directors (excluding Representative Director)

5.5

2.5

Directors (outside)10

2

Directors (internal)
Directors (outside)
Audit & Supervisory
Board Members (internal)
Audit & Supervisory
Board Members (outside)
Total

187
37

95
37

53
－

31
－

7
－

3
5

－

－

－

－

－

－

31

31

－

－

－

2

256

163

53

31

7

10

*1 Compensation refers to compensation, bonuses and other financial benefits received from SFH in
consideration of execution of duties*2 Compensation categories refer to fixed compensation, results-linked compensation, stock options,

restricted stock compensation, and bonuses and others. SFH has not payed bonuses as compensation
for directors and audit & supervisory board members prior to and including fiscal 2019Sony Financial Holdings Inc. Annual Report 2020

35

Initiatives to Strengthen Our Foundation for Creating Value

Messages from an Outside Director

New Initiatives Aimed at
SFG’s Next Stage of Growth
We interviewed Director Ikeuchi, who has
experience in new business development andoverseas expansion, about the challenges
that SFG faces in promoting new initiatives
for the next stage of its growth, and the nature ofoverseas expansion and M&A activity
in response to these challenges.

Shogo Ikeuchi
Outside Director

Q
A

Q
A
36

You have many years of experience in corporate planning and overseas business development in
the Recruit Group. How do you view the finance industry in the current challenging environment,in the context of various factors such as the economic environment and demographic changes?
The finance industry is experiencing structural change, such as population decline, aging population and declining
birthrate, in the context of persistently low interest rates. While the market itself continues to shrink, I think that technologies such as Fintech, including digitalization and the evolution of AI, will bring about great change in the financebusiness. The magnitude of this change is enormous, when considered over the space of a decade, and I feel that it
will necessitate full-scale collaboration with industries we have not worked with before as well as venture companies
and others. I think that it may be necessary to incorporate, far beyond such initiatives as implemented in Dejima, Nagasaki, businesses from totally different ecosystems into the SFG.

A movement towards overseas expansion is continuing, in the finance industry as elsewhere, in
response to the shrinking domestic markets in Japan, caused by an aging population anddeclining birthrates, and a decreasing population. SFG has attempted several overseas expansions in the past. What do you consider to be the factors that define success or failure of overseas expansion in the finance industry?
In order to accomplish overseas expansion, it is necessary to clarify what it is that SFG really wants to achieve: its
purpose and goals. I think that the lack of clear objectives may be the reason why many Japanese companies haveproduced lackluster results from overseas expansion. First of all, it is necessary for us, as managements, to have aclear idea of the kind of company we want to be 10 or 20 years down the road, and why. Without clarifying this, I don’t

Sony Financial Holdings Inc. Annual Report 2020

think that we can really expect to gain any great benefit from taking the challenge to expand overseas. For example, I
think that we need a clear and definite vision of who we want to target, what new value we will create, and what kind ofservices and products we will provide in the global market for life insurance in 2040. If we want to build an overwhelming competitive advantage in technology-driven products and services, we will require world-class engineers, to implement product development methods that may differ completely from our present methods. In this case, the whole
nature of management itself may be transformed into something new.

Q
A

Seeking means to grow through M&A activities in Japan and overseas is an important option interms of management strategy. However, due to issues such as the selection of acquisition
targets and the acquisition process, the chance of success is quite low, and it is said that only
20–30% of such acquisitions succeed. On the other hand, there is a growing awareness of theimportance of PMI*1 after acquisition rather than before acquisition. Please tell us if there wasanything in particular you aimed for through the M&A process.
I myself have experienced quite a number of failures, and there are several things that I have learned from them. 1) I
have utilized a “two-step approach,” where a small, minority investment is initially made in the M&A target, allowing theacquirer to evaluate value improvement in the context of the M&A target’s business operations, and proceed to a 100%
acquisition only where specific, quantitative results can be observed. This stepped investment enables the acquirer toconfirm the accuracy of value improvement, and reduce its impairment risk. 2) Another effective method is to first create
CVC,*2 invest in a venture company with advanced technology and a new business model, work together with the
management team until you are completely confident in the investment, before acquiring 100% stake in the company.
This method, however, depends on the overwhelming autonomy and involvement of existing business divisions in orderto succeed. 3) I regard it as vital that the person envisaging the M&A strategy and planning the acquisition must be thesame person responsible for PMI after acquisition. In other words, it is not possible to overcome the various conflictthat arise after acquisition if the officer in charge does not have an overwhelming sense of purpose and a strong commitment to see the matter through from beginning to end.

*1
*2

Q
A

Post-merger integration
Corporate venture capital

Director Ikeuchi, you oversaw the successful acquisition by the Recruit Group of a technology-focused job information company in the U.S. What are the important aspects of implementing governance for the acquired company? Also, what are the important issues in SFG’s consideration of growth strategies, such as overseas expansion?
I think that the most important issue is whether or not consensus has actually been achieved with the acquisition target
regarding the long-term vision. We engage in thorough discussions with the target’s management team regarding what we
aim to achieve, and what values are important to us. If these aspects are left ambiguous, then there is a risk that we will
discover after the event that we have each been working towards different objectives. If we are able to share the same clear
vision, then all that is left is to establish and monitor a small number of KPIs. As a rule, I do not interfere with business
operations or personnel authority. If the company continually falls short of the KPIs, then it is time for a management change.
I feel that the establishment of priority-driven, long-term growth scenarios is the first task for SFG’s management. It isnecessary to determine one or two substantial management agenda that we really want to achieve during the next decade. I also think it is important to evolve into a management structure and executory structure that enable concrete
achievement of these growth scenarios. I have a strong impression of “Sony as a trailblazer of innovation.” I believe that
SFG has the will and the ability to innovate itself significantly during the next decade. I would like to use my own ability as
an outside director to participate in this innovation.

Sony Financial Holdings Inc. Annual Report 2020

37

Initiatives to Strengthen Our Foundation for Creating Value

Customer-first Business Operation Policy (Summary)
Based on its vision and philosophy, SFG pursues business operations from a customer-first perspective.
SFH has clarified this initiative as its “customer-first business operation policy,” and Sony Life, Sony Assurance and Sony
Bank will each go further to establish business operation policies fine-tuned to respective activities.
The policy that SFH has set as well as the policies in place at Group companies will be reviewed periodically, taking into accountsuch factors as changes in the operating environment. In addition, SFH, as a financial holding company, will confirm that thecontent of the “customer-first business operation policy” is appropriate, and will monitor the activities at Group companies, basedon their policies, to ensure proper business operations. SFH will offer whatever support and guidance is necessary, as required.
At the same time, Group companies will verify the status of their own initiatives on customer-first business operations andregularly report to the Board of Directors or other oversight structures and will also provide status updates on a regular basis.

Adoption of Japan’s Stewardship CodeSony LifeAs an institutional investor, Sony Life has announced its adoption of Japan’s Stewardship Code: a set of principles
guiding the responsibilities of institutional investors. Sony Life discloses the basic policy and process for the exercise
of voting rights of domestic listed shares, as well as final shareholder voting results and others.
▶Please see “Basic Stance on Japan’s Stewardship Code” and “Exercise of Voting Rights by Sony Life” on Sony Life’s website.
(Japanese only): https://www.sonylife.co.jp/company/management/jsc/

38

Sony Financial Holdings Inc. Annual Report 2020

Risk GovernanceOne of SFH’s roles as a financial holding company is to further enhance and integrate Groupwide risk management by centralizing the Group’s management resources. SFH has formulated the “Basic Policy on Group Risk Management” and develops a risk management structure by aligning it with Groupwide strategic objectives and management policies. In addition,
SFH seeks to enhance the corporate value of the Group by tailoring operating subsidiaries’ risk management to the types ofrisks inherent in their respective lines of business.
▶“Risk Management” on SFH’s website, https://www.sonyfh.co.jp/en/sustainability/risk_management.html

Approach to Risk Management by SFH and Group Companies
SFH has formulated the “Fundamental Principles for Risk Management” and communicates them to directors, employees,
and throughout the SFG. It also identifies the scope and types of risks of the Group companies, and establishes structuresdesigned to manage such risks effectively. SFH’s department in charge of risk management controls risks through monitoringand holding Risk Management Meetings with the subsidiaries’ risk management divisions. It also reports its findings on thestate of risk management regularly to SFH’s Board of Directors and Executive Committee.
The Group companies optimize types and definitions of their risks according to scale, characteristics and business model. They
have established risk management frameworks, with the aim of autonomously assessing, monitoring, and managing these risks.

Risk Management Structure of SFG (As of July 1, 2020)
SFH
Board of Directors

ReportReportAudit & Supervisory
Board

Audit
Department

Executive Committee

Audit

Audit

Risk Management Department(Centralized Risk Management)

Supervisory Department: Risk Management Department
Liquidity Risk

Investment Risks● Market-related

Risk● Credit Risk
● Real Estate
Investment Risk

Confirm

Insurance
Underwriting Risk

Operational Risks

Supervisory Department:
Legal & ComplianceDepartment

Supervisory Department:
Corporate Communications
Department

Legal Risk

Reputational Risk

● Administrative

Risk● Systems Risk

Business
Continuity Risk

ReportRisk Management Meetings

Manage, advise, monitor

Present risk
management policies

Subsidiaries and others
Each company autonomously puts risk management into practiceSony Financial Holdings Inc. Annual Report 2020

39

Initiatives to Strengthen Our Foundation for Creating Value

Group ERM
SFG has introduced its ERM framework.
▶P14 Strategy and Review, Sony Financial Group

Contingency Management System
SFH has established a contingency plan as part of the Group’s comprehensive policy on business continuity for times whenordinary business operations of SFH or Group companies are at risk due to accidents, system failures or other factors. Group
companies have developed regulations, manuals and other guidelines reflecting their respective business volume and natureof business activities. SFH has a system in place whereby Group companies report to SFH when they are unable to continue
ordinary business operations. If SFH determines that a reported situation is difficult to address under the risk management
system set forth in the Fundamental Principles for Risk Management, among other guidelines, SFH shall establish a contingency response headquarters led by the President, Representative Director of SFH and execute business continuity measures aimed at the full restoration of all operations.

Overview of Types and Definitions of Risks
Type

Definition

Market-related
Risk

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

Real Estate
Investment Risk

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

Liquidity Risk

Risks associated with losses are as follows:● Cash Flow Risk: Risks associated with losses due to our inability to make cash payments because of failure to

maintain sufficient cash reserves at settlement, as well as risks associated with losses if SFH and Group companies are forced to raise funds under unfavorable conditions in order to fulfill cash payment obligations.
● Market Liquidity Risk: Risks associated with losses due to the Group’s inability to conduct market transactions, inparticular from an inability to unwind the Group’s market position at a given time, as well as risks associated withlosses if the Group is forced to complete transactions under unfavorable market conditions, in each case due tomarket turmoil or other factors.
Insurance
Underwriting Risk

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

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

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

Legal Risk

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

Reputational Risk

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

Business
Continuity Risk

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

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

40

Sony Financial Holdings Inc. Annual Report 2020

Initiatives on Cyber Security
SFG regards an IT-system as critical infrastructure and resources to achieve its corporate vision, to provide high-value-added
products and services. It is thus essential to stably maintain and provide this IT-system at all times. SFG has positioned
dealing with the threat of cyber-attacks and appropriately managing information assets as a priority issue that top management should take the lead in addressing, and the entire Group has been working on information security measures.
The policy and details of information security measures are periodically reported at meetings of the Executive Committee
and the Board of Directors of SFH or each of its subsidiaries, and SFH monitors the status of responses to information
security threats and development of personal information management system and others of each company and confirms theappropriateness of such measures.
SFG has established an information security policy and various related regulations according to each company’s businesses, and makes necessary revisions according to changes in the operating environment and other factors. SFG also provides
necessary training on information security matters that all executives and employees should be aware of to ensure a thoroughdissemination of such matters.

Characteristics of the IT Environment
SFG has diverse functions, and each Group company has a different business model according to its business category. The
IT-system of each Group company has established an independent optimal environment, in accordance with its business model.
This ensures that even if a Group company experienced a website attack, unauthorized login, or virus or malware infection,
the IT-systems of other Group companies would not be affected.

Development of Cyber Security System –CSIRT*CSIRT members of Sony Life, Sony Assurance, and Sony Bank, which are SFG’s
primary companies, are working to imple-

External information
security organization

ment various measures to tackle cyber-at-● Implementation of joint training and others● Proactive involvement of top management

tacks, and the entire Group, centering on● Establishment of a cyber security

framework

SFH, is actively sharing information. In
addition, the Group has continuously been

● Information provision

SFG companies

developing systems to counter threats● Establishment of a multi-layered protection● Responses to security incidents● Security assessment

through collaboration with an external● Establishment of regulations, training andinformation security organization.

others* Computer Security Incident Response Team

SFH

● Monitoring● Information sharing and others

Privacy Policy
SFH has formulated a “Privacy Policy” governing the handling of personal information. It sets out SFH’s policies on the acquisition and use of personal information for specific purposes. SFH has also established “Rules Concerning Protection of
Personal Information,” which set out specific security control protocols. SFH monitors the effectiveness of each Group companies’ security control protocols.
▶“Privacy Policy” on SFH’s website, https://www.sonyfh.co.jp/en/privacy_policy/public.html

Sony Financial Holdings Inc. Annual Report 2020

41

Initiatives to Strengthen Our Foundation for Creating Value

Compliance
Basic Stance on Compliance
SFH’s broad definition of compliance is that it enforces compliance with the laws, regulations and social norms and manages
business operations transparently and properly based on a strong sense of ethics. SFH considers compliance one of its top
management priorities and, accordingly, it has systems in place to ensure that all executives and employees are fully aware of
their duties and responsibilities.
While Group companies are responsible for establishing systems to enhance the effectiveness of compliance according to their
specific industry and scale of business operations, SFH, as a financial holding company, undertakes the ongoing monitoring andpromotion of the Group companies’ compliance by providing advice, as needed, from the viewpoint of Group management.
▶“Compliance” on SFH’s website, https://www.sonyfh.co.jp/en/sustainability/compliance.html

Compliance System of SFG (As of July 1, 2020)
SFH
Audit & Supervisory
Board

Board of Directors

Audit

Executive Committee
ReportDirector in Charge
ReportDirect andadviseDirect andadviseLegal & Compliance Department
Control over the planning and implementation ofcompliance measures

ReportReportCompliance Meetings*

Audit Department
Internal
audit

Advise and monitor

Subsidiaries and others* Held biannually for the purpose of confirming the status of compliance promotion at SFG companies
It is composed of directors and general managers, etc. in charge of compliance at each SFG company, and reports on the results of important discussions to theBoard of Directors

Compliance Activities at SFG
SFH has established “the Sony Financial Group Code of Conduct” (hereinafter referred to as the “SFG Code of Conduct”) that
all executives and employees must observe. In addition, SFH’s Board of Directors is responsible for establishing and maintaining SFH’s compliance system by formulating a Compliance Manual*1 and a Compliance Program*2, as well as working proactively to ensure its proper operation.
Group companies have also adopted their Code of Conducts based on the SFG Code of Conduct, while putting in placeand developing their compliance systems on their own. SFH provides guidance and support to ensure proper operation of
the compliance systems at Group companies.
*1 The Compliance Manual outlines SFH’s compliance system, as well as the Group’s corporate philosophy, which executives and employees must understand*2

The manual also establishes measures for handling behavior that conflicts with laws and regulations or behavior that raises compliance issues, and for confirming
compliance status
The Compliance Program is drafted annually, in principle, and defines a specific action plan for confirming compliance status, conducting training and for other related items▶“Sony Financial Group Code of Conduct” on SFH’s website, https://www.sonyfh.co.jp/en/company/data/code_of_conduct.pdf

42Sony Financial Holdings Inc. Annual Report 2020

Specific Initiatives for Thorough Compliance
SFG strives to ensure thorough implementation of compliance measures through regular dissemination of messages from top
management, and works on various measures to promote compliance, including training for all executives and employees.
Primary domains of focus of compliance initiatives
・ Fostering an ethical corporate culture ・ Fair competition
・ Internal hotline system
・ Information security

・ Personal information protection

・ Prevention of bribery and corruption

・ Proper conduct in the workplace(Prevention of harassment, respect forhuman rights, and others.)

・ Anti-money laundering and countering financing
of terrorism
・ Eradication of anti-social forces
・ Prevention of insider trading

・ Appropriate management of conflicts of interest
with customers

Internal Hotline System
If executives and employees of SFG, as well as temporary employees and the employees of business partners, think thatbusiness policies, operating activities or other activities of the companies breach (or could breach) applicable laws andregulations, they can report their concerns by choosing and notifying either hotline desk at SFH or at their own Sony Financial
Group company, or the Sony Group hotline desk. A total of 64 reports were received by the hotline desk at SFH and Group
companies in fiscal 2019, the majority of them related to the workplace environment, the organization’s management and thecourse of business operations. SFH implements appropriate measures to protect those who contact these desks, while
strictly managing and responding to the information provided.

Anti-money Laundering and Countering Financing of Terrorism
SFG gives high priority to anti-money laundering and countering financing of terrorism as an important management, and has
formulated the “Basic Group Policy on Anti-money Laundering and Countering Financing of Terrorism.” SFG gives the necessary authorization and allocates resources in a top-down manner, and proactively instills an awareness regarding anti-money
laundering and countering financing of terrorism among all executives and employees.

Basic Group Policy on Eradicating Anti-social Forces
SFH has formulated the “Basic Group Policy on Eradicating Anti-social Forces,” whereby SFH and Group companies include
setting up an organizational unit responsible for dealing with anti-social forces, appointing a person responsible for refusing
unreasonable demands and gathering information on anti-social forces in collaboration with external specialized agencies.
The Group works uniformly in its effort to eradicate anti-social forces.
▶“Basic Group Policy on Eradicating Anti-social Forces” on SFH’s website, https://www.sonyfh.co.jp/en/sustainability/compliance.html

Prevention of Insider Trading
SFH has established the “Basic Group Policy on the Prevention of Insider Trading,” whereby a structure for the prevention of
insider trading has been developed at SFH and Group companies. SFH monitors whether such a framework is adequately inplace and working effectively in the prevention of insider trading at Group companies, and takes actions as necessary.
Conflicts of Interest Policy (Summary)SFH formulated the “Conflicts of Interest Policy” to ensure that customers’ interests are not harmed by Group companies. The
director in charge of the Legal & Compliance Department, as the manager responsible for managing conflicts of interest, shallrequire Group companies to take the following actions when he/she deems them necessary based on reports from Group
companies, customer complaints or other sources.
・ Sever the flow of information between divisions that havepotential conflicts of interest・ Suspend the transaction concerned, or change the terms
and conditions or method of the transaction

・ Disclose the fact or the possibilities of a conflict of interest
to customers

・ Take other actions deemed necessary

SFH shall retain records that specify transactions to be managed and that are associated with actions taken to properly protect
customers, for five years.
▶“Conflicts of Interest Policy” on SFH’s website, https://www.sonyfh.co.jp/en/company/data/conflicts_of_interest_policy.pdf

Sony Financial Holdings Inc. Annual Report 2020

43

Initiatives to Strengthen Our Foundation for Creating Value

Human Resources Respecting Diversity
Approach to Human Resources Management
SFG regards human resources management as one of the most significant challenges for management, in order to accomplish sustainable corporate growth in this dramatically-changing business environment, with demographic changes and the rapid progress oftechnological innovation. SFG strives to foster an organizational culture that supports a spirit of freedom and open-mindedness, andcreate an organizational structure where diverse, self-disciplined employees can actively work with motivation. It believes that thepersonal growth of each employee enables the development and provision of products and services that meet the increasingly diverse
needs of society, and will contribute to stakeholders and lead to sustainable growth for SFG. In addition, SFG facilitates personnel
exchanges and joint training among Group companies to create synergies for the Group. To this end, SFG conducts annual Employee
Opinion Surveys to gauge the awareness and opinions of employees, and grasp the characteristics of each company, disparities in theiremployees’ awareness, and issues of the entire Group. The causes are analyzed, and improvement measures implemented.

Initiative 1

Initiatives for Human Resource Development

SFG has more than 11,000 employees who are actively working in various business domains such as life insurance, non-life insurance, banking, andnursing care and others. Each Group company has established an education and training system from a medium- to long-term perspective, in orderto support employee personal growth and career development, and provides compulsory training programs according to job type and position level,
as well as elective training programs for skills enhancement and personal development, and others. In addition, SFG focuses efforts on the training ofmanagement-level employees, who play the primary role in the cultivation of employees, and is continuously strengthening human resource development through the expansion of training programs and others. In addition, SFG participates in the leader training programs, female leader training
programs and technical exchange meetings provided for the Sony Group’s employees by Sony Corp. In this manner, SFG works on human resource
development, including expanding perspectives, self-transformation and personal network building, through collaboration with Sony Corp.

Example of Initiatives at Sony Life
Lifeplanner sales employees at Sony Life, who account for nearly half of the employees of SFG, take a three-year B.T.P. (Basic
Training Program) to develop the customer-first attitude and knowledge, skills and conduct required of a professional Lifeplanner
sales employee. This B.T.P. is designed to nurture Lifeplanner sales employees to listen to their customers’ cherished thoughts,
propose reasonable life insurance to safely protect them at all times, and provide life-long support through high-quality services,even after the contract has been executed. Going forward, we will work to increase the quality of our new employees throughstrict selection of recruits by strengthening the recruitment process. We will also endeavor to strengthen and enhance educationand training, including initial training, through the provision of environments for continual learning such as the introduction of online
education, and the monitoring of education and training environments at branch offices.

Example of Initiatives at Sony Assurance
At Sony Assurance, we have established an inter-workplace exchange program, where employees limited to specific areas can apply,
in response to internal job application, to be transferred to another area temporarily, and an in-house job challenge program, where
employees can apply to be transferred to another division. By providing employees with experience at new workplaces, we aim toincrease their career awareness and motivation, and to revitalize the divisions that receive them through personnel exchange.

Example of Initiatives at Sony BankAt Sony Bank, we have implemented a Data Science Boot Camp, where new recruits participate together with senior employees, in orderto foster a data-driven corporate culture, and respond to diverse customer needs. We are working to develop human resources who canleverage data science, through study meetings, group work, andpresentations held all through the year. We also hold monthly study
meetings for all employees, aimed at building opportunities for fellowship and sharing knowledge, where employees share their diverse
knowledge and skills, and exchange opinions on products and services.

44

Sony Financial Holdings Inc. Annual Report 2020

Data Science Boot Camp

Study meeting for all employees

Initiative 2

Diversity

Policy on Diversity
SFG places significant emphasis on a spirit of diversity, to better address diverse customer value perceptions and needs aswell as various changes in the environment, and to generate new value. Based on this approach, SFG strives to develop a
workplace environments in which diversity is respected and every employee can actively work with motivation, as well as tocreate opportunities for employees’ personal growth.

Specific Measures
SFG implements various initiatives to allow diverse human resources, including female and employees with disabilities andemployees who are dealing with a range of situations, including childcare and nursing care, to work actively and demonstrate
their individual abilities.

1. Promotion of women’s empowerment
SFG provides career-design training for young female employees, discussion
sessions on returning to work and orientation sessions for employees
returning from childcare leave, and leadership training for female leaders/managers. We also provide management training for the superiors of female
employees, with the aim of improving awareness and enhancing theirunderstanding regarding the career development of female employees.

Percentage of females in management
positions*
FY201812.4%

FY2019➡

12.7%* The average figures for SFH, its three main subsidiaries and three nursing care business companies
For Sony Life, only head office employees are included

Example of Initiatives at Sony LifeAt Sony Life, we have implemented roundtable discussions for returning employees,
where employees who are returning to work after childcare leave can gather to share
information, as well as their anxieties and strategies for balancing work and childcare,
together with other employees who have already been through the same experience. The
roundtable discussions provide a new forum for exchange between returning employees.

Roundtable discussion for returning
employees from child-care leave

Example of Initiatives at Sony BankAt Sony Bank, we have held Unconscious Bias Seminars for all employees, where they could learn about the meaning of unconscious bias, the harmful effects of bias on communication, and basic rules of conduct, through lectures by experts as well asgroup work. Many employees have expressed their empathy with the issue.

Sony Financial Holdings Inc. Annual Report 2020

45

Initiatives to Strengthen Our Foundation for Creating Value

2. Support for employees to continue working
SFG has established in-house systems designed to support employees who are raising children to continue working, such as
childcare leave, special leave, and reduced work hour system. We provide various types of support to employees, such as
working primarily by telecommuting, depending on the job characteristics and individual situations of each employee, andallowing employees to take a leave of absence when it becomes difficult to continue working due to the need to provide
nursing care for a family member, or transfer of their spouse to a remote location. In addition, even in cases where employees
leave work due to uncontrollable circumstances, SFG has a re-employment system in place to support a career restart,
according to a change of life plans.

Example of Initiatives at Sony Assurance
At Sony Assurance, we have introduced a re-employment system, to re-employ former employees who have retired due tomarriage, childbirth, childcare, nursing care, or a spouse’s job relocation, and a workplace transfer system, where employees
limited to a specific area can apply to change job positions to another area. We support employees with the desire and ability tocontinue to work for even longer.

3. Employment of people with disabilities
SFG has been actively promoting the employment of people with disabilities, and such employees are actively working invarious fields.

Example of Initiatives at Sony LifeAt Sony Life, we have established a special subsidiary, Sony Life Business Partners.
Based on the vision “for a future where people with disabilities can shine in their own
way,” this subsidiary aims to ensure that employees always experience growth andfulfilment through work, by encouraging them to respect each others’ individuality,
make full use of and extend their abilities, and be imaginative and creative. Sony Life
Business Partners is steadily taking on new operations in addition to existing
operations, which consists primarily of printing, filing, and data entry contracted out
by each department of Sony Life, and is contributing to the productivity improvement of the entire company. It also stimulates communication between people withdisabilities and employees at each workplace, promoting understanding.

46

Sony Financial Holdings Inc. Annual Report 2020

Sony Life Business Partners:
Employees engaged in data entry at a
communal working desk

Initiative 3

Work-life Balance

Policy on Work-life BalanceWith an eye toward promoting corporate growth, as well as developing workplace environments in which employees can feel
job satisfaction and experience personal growth through their work, while also leading fulfilling lives, SFG promotes productivity and efficiency improvement through the active promotion of workstyle reform.

Specific Measures
1. Expanding flexible workstyles and vacation leaves,and promoting the acquisition of vacation leaves
SFG has introduced flexible working hours whereby employees set theirown start and finish times according to busy and slow times at work, andseveral Group companies have abolished core time (times of day when

Percentage of annual vacation leaveacquired*
FY2018FY2019employees must be at work) and are actively promoting a flexible working

64.2%

style, according to their circumstances. We have expanded vacation leave* The average figures for SFH, its three main subsidiar-programs by providing accumulated vacation leave and special vacation

➡

70.0%

ies and three nursing care business companies
For Sony Life, only head office employees are included

leave programs, in addition to an annual vacation leave program, and areencouraging the acquisition of annual vacation leave for a five-day continuous period, in order to enhance employees’ work-life balance.

2. Telecommuting and mobile work
SFG is promoting the introduction and expansion of telecommuting and mobile work systems, and supporting all of its
employees to secure the time to enrich their lives while improving their work productivity, by expanding the range of eligible
employees, diversifying work locations, and facilitating more efficient allocation of time through flexible working hours.

3. Initiatives for reducing overtime work
SFG strives to ensure appropriate working times, initiating regular commu-

Average monthly overtime per employee*

nication from human resources divisions to departments with high work-

FY2018loads, confirming appropriate numbers of employees and requesting

21.12 hours ➡ 19.64 hours

reviews of work allocation.

FY2019* The average figures for SFH, its three main subsidiaries and three nursing care business companies
For Sony Life, only head office employees are included

Example of Initiatives at Sony Life
Sony Life has designated every Wednesday as a work-life balance day, ensuring that employees leave work on time throughannouncements from an executive to encourage them to go home, and turning off floor lights to make it customary to finish workon time. Approximately 90% of employees go home by 6:30 pm on work-life balance days.

Sony Financial Holdings Inc. Annual Report 2020

47

Initiatives to Strengthen Our Foundation for Creating Value

Communication with Stakeholders
With the highest level of ethics and a strong sense of purpose, SFG seeks to become the most trusted financial services
group by invoking emotion through the power of technology and high-value-added products and services that meet every
customer’s needs. SFG reflects opinions obtained through communication with stakeholders in operational improvement andquality enhancement of products and services to achieve sustainable growth and corporate value improvement.

Initiatives for Stakeholder Engagement

Customers

At SFG, feedback received from its customers in various situations is compiled and analyzed by divisions incharge of promoting customer satisfaction and raising quality. This feedback is shared with each division
within the Group and reported to management, and used to make recommendations on operational improvements and product and service enhancements.
▶“Responsibility to Customers” on SFH’s website,
https://www.sonyfh.co.jp/en/sustainability/stakeholder/customer.html▶P38 Customer-first Business Operation Policy (Summary)Shareholders andinvestors

Employees

Business partners

We share opinions obtained through dialogue with shareholders and other investors with top management
and utilize them in developing management strategies. Top management also participates actively in dialogue
with shareholders and other investors in an effort to further enhance corporate value.
▶P48 Dialogue with Shareholders and Investors

By creating workplaces that allow diverse employees to work comfortably, through measures such as theimplementation of Employee Opinion Surveys (EOS) and providing personnel training from a medium- to longterm perspective, we generate new value from diverse perspectives and aim to enhance of corporate value.
▶“Human Resources Development” on SFH’s website,
https://www.sonyfh.co.jp/en/sustainability/stakeholder/employee.html▶P44 Human Resources Respecting Diversity

We seek to promote fair and equitable transactions with business partners, including insurance agencies andalliance partners. We also provide education programs. Through these activities, we aim to achieve corporate
value enhancement for both SFG and its business partners.
▶“Activities with Business Partners” on SFH’s website,
https://www.sonyfh.co.jp/en/sustainability/stakeholder/business_partner.html

We strive to contribute to realizing a sustainable society and environment through our business activities andsocial contribution activities.
Local communities/
Environment▶“Activities with Local Communities” on SFH’s website,
https://www.sonyfh.co.jp/en/sustainability/stakeholder/community.html▶“Environmental Initiatives” on SFH’s website,
https://www.sonyfh.co.jp/en/sustainability/stakeholder/eco.html▶P49 Environmental Protection▶“Approach to Sustainability” on SFH’s website, https://www.sonyfh.co.jp/en/sustainability/approach.html

Dialogue with Shareholders and Investors
For constructive dialogue with shareholders and other investors, SFH has formulated the “Investor Relations (IR) Policy,”
established the department in charge of IR activities and assigned a corporate executive to oversee IR activities. The department in charge of IR strives to disclose corporate information in a timely, accurate and fair manner to shareholders and otherinvestors, as well as to facilitate sufficient dialogue with them, while sharing information appropriately with SFH’s businessexecution departments and Group companies.
Investor Relations (IR) Initiatives in Fiscal 2019
・ Earnings briefings (teleconferences with institutional investors
and analysts) �������������������� Four times

・ Early dispatch of the Notice of Convocation for the
General Meeting of Shareholders

・ Corporate strategy meeting ��������������� One time・ Setting the date of the General Meeting of Shareholders
to avoid dates on which other companies’ General
Meetings of Shareholders are concentrated

・ Overseas IR meetings (UK, USA, Hong Kong, Singapore)������������������������Total Three times

・ Use of an electronic voting platform・ Individual meetings with institutional investors and analysts��Approx. 130(ESG meetings ������������������� Two times)

・ Briefings for individual investors ������������� Six times
・ Small meetings for institutional investors and analysts ��� Three times

48

Facilitating the Exercise of Voting Rights

Sony Financial Holdings Inc. Annual Report 2020

・ Providing a partial translation of the Notice ofConvocation in English
・ Utilizing the SFH website to disclose the Notice ofConvocation for General Meeting of Shareholders andfinal shareholder voting results

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

SFG’s Policy on Environmental Initiatives
SFG strives to provide value to stakeholders through our business activities, and to take actions in consideration of protecting
the global environment, in all aspects of its corporate activities as a member of the Sony Group, by observing the Sony Group
Environmental Vision for realizing a sustainable society.

Initiatives for the “One Blue Ocean Project”
SFG participates in the “One Blue Ocean Project,” a project involving the whole Sony Group to continually address the issueof ocean plastics pollution, and is engaged in the following activities.
Usage reduction

Collection and cleaning

・ Reduce or eliminate the use of disposable plastics at kiosks, automatic vending
machines and meeting rooms on the company premises

・ Clean-up activities at rivers, coastlines andin the community

・ Reduce the use of plastic products in offices, and actively use recycled materials

Use of Green PowerSony Life became the first Japanese life insurance company to introduce a “Green Power Certification System,”
which enables companies to use green power in their business activities and thus reduce CO2 emissions. Sony
Assurance and Sony Bank adopt the “Green Certification (Heat) System*” to help reduce CO2 emissions. Sony
Bank offsets 100% of CO2 emissions caused by its power usage (excluding the portion of power usage inoutsourced operations) as a “Carbon Offset Bank.”
In this way, each Group company contributes to the wider use of natural sources of power such as solar and wind power,
geothermal power, and biomass. In fiscal 2019, SFG as a whole purchased green certificates (heat) and green certificates(biomass) equivalent to 1,444t-CO2.
* The “Green Certification (Heat) System” is a system certified by the government whereby a company can issue certificates for the environmental value of heatgenerated from renewable energy with the approval of a third-party institution (Green Energy Certification Center), and trade these as “green certificates (heat)”

Acquisition of ISO14001 Certification
Sony Life, Sony Assurance and Sony Bank* have acquired ISO14001 certification, the international standard for environmental
management systems. All three companies promote energy-saving and natural resource-saving activities such as targets for reduced energy and photocopier paper usage, and green procurement to raise the percentage of eco-products used in office supplies.
* Includes the head offices of Sony Life , Sony Assurance and Sony Bank, and CONSULTING PLAZA
They conduct regular internal environmental audits of ISO14001-certified offices, and the audit results are reported to top management

Reducing CO2 Emissions by Switching to Paperless Contract Procedures and Electronic
Issuance of Documents
SFG has been striving to conserve paper resources and cut down on CO2 emissions related to postal mailings by shifting topaperless documentation for certain contract procedures and transactions.
Sony Life has adopted paperless application procedures that enable customers to use electronic signatures to complete
contract application procedures as well as various post-contract procedures. In addition, Sony Life has reduced the use of
paper through the promotion of online guidance of contract term and conditions.
Sony Assurance has made it possible to apply for automobile insurance policies, medical insurance policies, fire insurance
policies and overseas travel insurance policies online, thereby avoiding the need for printing and mailing of insurance application forms and other documents. Also of note, Sony Assurance promotes reduction in the use of paper resources, exemplified by a “paperless insurance certificate discount” of up to ¥500 on automobile and fire insurance premiums whencustomers who buy a policy online opt not to have certificates of insurance and other documents printed and mailed.
As an Internet bank, Sony Bank promotes paperless transactions by principally providing information on web pages and using
electronic document delivery for delivering transaction slips, passbooks, explanations of products and delivery of forms to customers.
For reference: SFG’s electricity consumption and CO2 emissions*
Total electricity consumption FY2019

4,903.0 MWh

Total CO2 emissions (equivalent value) FY2019

880.80 t-CO

2

* Includes the head office of Sony Life, Sony Assurance, head office of Sony Bank, and CONSULTING PLAZASony Financial Holdings Inc. Annual Report 2020

49Corporate Section

Corporate Profile (As of March 31, 2020)

Name

Sony Financial Holdings Inc.

Established

April 1, 2004

Head office

1-9-2, Otemachi, Chiyoda-ku, Tokyo, Japan
Management control of subsidiaries (life insurance companies, non-life insurance companies, banks andBusinessothers) specified by the Insurance Business Act of Japan and the Banking Act of Japan and all duties
incidental to that role

Number of
employees

Commonstock

SFH: 84(Consolidated: 11,487, Life insurance business: 8,739, Non-life insurance business: 1,347,
Banking business: 644, Others: 690, Parent: 67)¥19,994 million

Notes: 1. The number of employees of SFH includes 9 belonging to the life insurance business, 1 belonging to the non-life insurance business, 7 belonging to thebanking business, and 67 belonging to the parent
2. The number of employees stated in “Others” is the number of employees belonging to the nursing care business and venture capital business at subsidiaries

Organizational Chart
Sony Financial Holdings
General Meeting of Shareholders
Audit & Supervisory Board
Board of Directors
Audit Department
Executive Committee

Business Execution Departments

Sony Life

Sony AssuranceSony Bankand other Group subsidiaries

50

Sony Financial Holdings Inc. Annual Report 2020

Sony Lifecare

Sony Financial
VenturesProfiles of Group Companies (Main subsidiaries) (As of July 1, 2020)■ Life Insurance BusinessCommon stock

Name

Established

Head officeBusinessSony Life Insurance Co., Ltd.

August 10,
1979

Chiyoda-ku,
Tokyo, Japan

Life insurance
business

70,000Sony Financial Holdings Inc. 100%

Sony Life With Insurance August 29,
2007
Co.,Ltd.

Shibuya-ku,
Tokyo, Japan

Life insurance
business

21,500Sony Life Insurance Co., Ltd. 100%

British Bermuda

Reinsurance
business

15,900Sony Life Insurance Co., Ltd. 100%

October 29,
2009

SA Reinsurance Ltd.

(Millions of yen)

Share ownership■ Non-life Insurance Business
Name

Established

Head officeBusinessSony Assurance Inc.

June 10,1998

Ota-ku, Tokyo,
Japan

Non-life insurance
business

Name

Established

Head officeBusinessSony Bank Inc.

April 2,
2001

Chiyoda-ku,
Tokyo, Japan

Banking businessCommon stock(Millions of yen)

20,000Share ownershipSony Financial Holdings Inc. 100%■ Banking BusinessCommon stock(Millions of yen)

31,000Share ownershipSony Financial Holdings Inc. 100%

September 1, Minato-ku,
2006
Tokyo, Japan

Credit card settlement
services

488

Sony Bank Inc. 57%,
Four other companies

SmartLink Network
Hong Kong Limited

February 27,
2013

Hong Kong,
China

Credit card settlement
services

13

Sony Payment Services Inc. 100%

SmartLink Network
Europe B.V.

August 1,
2019

Netherlands

Credit card settlement
services

10Sony Payment Services Inc. 100%

Sony Payment Services
Inc.

■ Nursing Care BusinessCommon stock

Name

Established

Head officeBusinessSony Lifecare Inc.

April 1,
2014

Shibuya-ku,
Tokyo, Japan

Management control ofcompanies handling thenursing care business, andother duties incidental tothat role

2,625Sony Financial Holdings Inc. 100%

Shibuya-ku,
Tokyo, Japan

Planning, development
and operation ofnursing care homes

2,295Sony Lifecare Inc. 100%

Yokohama,
Kanagawa
Prefecture, Japan

Management, operation and planning of
nursing care homes3Sony Lifecare Inc. 100%

Lifecare Design Inc. October 5,
1999

Proud Life Inc.

July 3,
2006(Millions of yen)

Share ownership■ Other (Venture Capital Business)
Name

Established

Head officeBusinessSony Financial Ventures Inc.

July 10,2018

Chiyoda-ku,
Tokyo, Japan

Venture capitalbusiness

Common stock(Millions of yen)

10

Share ownershipSony Financial Holdings Inc. 100%

Sony Financial Holdings Inc. Annual Report 2020

51

Stock Information

Information on Common Stock, Shares Outstanding
Date

Increase in
Issued Shares

Total Numberof Shares
IssuedIncrease inCommon Stock(Millions of yen)

Common Stock(Millions of yen)

Increase in
Capital Surplus(Millions of yen)

Capital Surplus(Millions of yen)

24,422435,087,405

31

19,994

31

195,371

April 1, 2019 – March 31, 2020

Note: Issue price and amount added to common stock for increases due to new shares issued as restricted stock compensation (third-party allocation) are as follows:
Issue price: ¥2,564 per share
Amount added to common stock: ¥1,282 per share

Stock Exchange Listing (As of March 31, 2020)
The First Section of the Tokyo Stock Exchange (Securities code: 8729)

Major Shareholders (As of March 31, 2020)
Name

Percentage of Ownership(excluding treasury
Number of Shares Heldstocks) (%)

Sony Corporation

283,050,000

65.06

JP MORGAN CHASE BANK 385632

21,698,728

4.98

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

14,255,200

3.27

SSBTC CLIENT OMNIBUS ACCOUNT

9,483,551

2.18Japan Trustee Services Bank, Ltd. (Trust Account)9,172,500

2.10

JP MORGAN CHASE BANK 385635

3,996,708

0.91

GOLDMAN, SACHS & CO. REG

3,545,322

0.81

THE BANK OF NEW YORK MELLON 140042

3,356,149

0.77

Japan Trustee Services Bank, Ltd. (Trust Account 5)3,301,400

0.75

JP MORGAN CHASE BANK 385151

2,730,852

0.62

Notes: 1. Capital Research & Management Company reported in the Change Report Pertaining to Report of Possession of Large Volume it submitted on August 22,
2019 that, as of August 15, 2019, it owned 29,047,200 shares of SFH (6.68% of total number of shares issued). However, we did not include the firm’s nameamong the Major Shareholders above as we could not confirm the beneficial share ownership as of March 31, 2020
2. The tender offer for the shares and the stock acquisition rights of SFH as announced by Sony Corp. on May 19, 2020 was completed on July 13, 2020. As aresult, Sony Corp. holds 406,626,238 shares of SFH (ratio of the number of shares held to the total number of issued shares (excluding treasury shares):93.47%) as of July 20, 2020

▶P85 Significant subsequent event

Shareholding by Shareholder Type (As of March 31, 2020)
0.72%
Financial instruments firms

Total number of shares issued

9.36%
Financial institutions

435,087,405

65.19%
Corporations

52

22.50%
Foreign investors

Sony Financial Holdings Inc. Annual Report 2020

2.23%
Individuals and others

Dividends (As of June 23, 2020)
Dividend per Share

70.0 yen
60.0
55.0

55.0

FY2015FY2016

62.5

40.0
30.0
25.0
20.0

20.0

FY2010FY2011FY2012FY2013

FY2014FY2017FY2018FY2019Notes: 1. Although a stock split was conducted during fiscal 2011, the dividend per share figures are calculated assuming that the stock split was conducted at the
beginning of fiscal 2010
2. SFH resolved at the meeting of its board of directors held on May 19, 2020 not to declare a dividend for the fiscal year ending March 2021 on the condition of
the completion of the tender offer for the common shares and the stock acquisition rights of SFH conducted by Sony Corp. (the “Tender Offer”). As stated in
the “Announcement Regarding the Result of Tender Offer for Shares, Etc. in Sony Financial Holdings Inc. by Sony Corporation, the Controlling Shareholder”,
dated July 14, 2020, SFH will not declare a dividend for the fiscal year ending March 2021 due to the completion of the Tender Offer on July 13, 2020

Total Shareholder Return(%)

SFH<Comparative indicator: TOPIX>

FY2015FY2016FY2017FY2018FY201977.3<87.3>

98.3<98.0>

109.0<111.2>120.1<103.1>110.2<90.9>

Share Price (As of June 30, 2020)
Yen
3,000
2,500
2,000
1,500
1,000
500
0
2015

2016

2017

2018

2019

2020

Sony Financial Holdings Inc. Annual Report 202053

Reference Materials

Review of Operations / Organizational Chart of Business Operations
Review of Operations
On a consolidated basis, ordinary revenues increased 9.3% year on year, to ¥1,781.4 billion, owing to increases
in ordinary revenues from all the businesses: life insurance, non-life insurance and banking businesses. Ordinary
profit increased 19.2% year on year, to ¥111.8 billion, owing to increases in ordinary profit from all the abovebusinesses. Profit attributable to owners of the parent was up 19.9% year on year, to ¥74.4 billion.
Segment results are described below.

Life Insurance Business
Ordinary revenues increased 9.6% year on year, to ¥1,604.7 billion, due primarily to higher insurance premium
revenue, mainly from single premium insurance. Ordinary profit rose 20.7% year on year, to ¥94.3 billion, due
chiefly to a decrease in costs related to the acquisition of new policies and a rise in profit in tandam with expansion of the policy amount in force, which more than offset higer operating expenses.
Non-life Insurance Business
Ordinary revenues increased 5.8% year on year, to ¥121.7 billion, due mainly to an increase in net premiums written for mainstay automobile insurance. Ordinary profit increased 17.0% year on year, to ¥8.0 billion, due mainly
to a reversal of a portion of reserves for some products that made provisions in the fiscal year ended March 31,
2019 and in addition that reversal of catastrophe reserves were recorded in the fiscal year ended March 31, 2020.
Banking Business
Ordinary revenues expanded 9.2% year on year, to ¥50.2 billion, and ordinary profit was up 11.4% year on year,to ¥10.6 billion, due to increases in such income as interest on loans in line with a growing number of newly executed mortgage loans.

Sony Financial Group Organizational Chart of Business Operations (As of July 1, 2020)

Life Insurance BusinessSony Life Insurance Co., Ltd.

Life Insurance BusinessSony Life With Insurance Co.,Ltd.

Life Insurance Business
SA Reinsurance Ltd.
Non-life Insurance
BusinessSony Assurance Inc.

Sony Corporation(Parent Company)

Sony Financial
Holdings Inc.

Consolidated subsidiaries
Sales and referrals of the others’ products
Shareholding

54

Sony Financial Holdings Inc. Annual Report 2020

Banking BusinessSony Bank Inc.

Nursing Care
BusinessSony Lifecare Inc.

Banking Business
SmartLink Network
Hong Kong Limited

Banking BusinessSony Payment
Services Inc.
Nursing Care Business
Lifecare Design Inc.

Banking Business
SmartLink Network
Europe B.V.

Nursing Care Business
Proud Life Inc.

Venture Capital BusinessSony Financial Ventures Inc.

Venture Capital Business
SFV · GB L.P.

Financial Highlights■ Sony Financial Holdings (Consolidated)
Millions of yen

Ordinary revenues

2016

2017

2018

2019

2020

1,362,044

1,381,667

1,503,630

1,629,182

1,781,420

71,103

66,326

66,84393,856

111,880

Ordinary profit
Profit attributable to owners of the parent

43,355

41,621

51,89562,07474,429Comprehensive income

71,10521,43352,20757,41562,192

Total assets

10,352,114

11,471,845

12,401,446

13,468,215

15,125,710

Net assets

604,377

601,139

625,406

656,846

691,978

Consolidated capital adequacy ratio(Domestic standard)*1 *2

10.70%

14.39%

17.18%

16.50%

16.28%

Consolidated solvency margin ratio*1 *3

1,637.1%

1,632.9%

1,748.7%

1,726.3%

71 1
1,680.3%

2016

2017

2018

2019

2020

1,230,141

1,243,739

1,351,076

1,464,218

1,580,117

60,79260,18056,33879,812

88,720■ Sony Life (Non-consolidated)
Millions of yen

Ordinary revenues
Ordinary profit
Net income

37,09635,18545,13449,60256,743

Total assets

8,035,408

8,873,613

9,567,689

10,380,148

11,237,124

482,195

473,589

492,787

513,930

539,582

2,722.8%

2,568.8%

2,624.3%

2,590.5%

2,476.3%

Net assets
Non-consolidated solvency margin ratio* *1

3■ Sony Assurance
Millions of yen

2016

2017

2018

2019

2020
121,728

Ordinary revenues

96,905102,333

110,092

115,102

Ordinary profit

4,680

4,996

6,574

6,897

8,072

Net income

2,586

3,515

4,821

4,999

5,808
234,870

Total assets

172,323

186,537

204,362

219,643

Net assets

28,30529,40933,18934,79837,785

Non-consolidated solvency margin ratio*1 *3

693.5%

730.8%

782.1%

813.0%

872.3%■ Sony Bank (Non-consolidated)
Millions of yen

2016

2017

2018

2019

2020

Ordinary revenues

34,89235,10536,27041,707

Ordinary profit

5,857

4,634

6,557

8,698

9,589

Net income

3,912

3,176

4,474

6,025

6,642

45,383

Total assets

2,126,564

2,424,236

2,635,028

2,860,925

3,079,472

Net assets

77,42881,33285,72987,27977,338Non-consolidated capital adequacy ratio (Domestic
standard)*1 *2 *3

9.89%

9.75%

10.45%

9.58%

8.85%

*1 Calculated based on rules in force at the respective dates.
*2 Capital adequacy ratio has been calculated by applying foundation internal ratings-based (FIRB) approach from March 31, 2017.
*3 Figures less than the indicated unit in this material have been truncated.

Sony Financial Holdings Inc. Annual Report 2020

55

SFH Consolidated Financial Statements

Consolidated Balance Sheets
Sony Financial Holdings Inc.
As of March 31, 2019 and 2020
Millions of yen
2019

2020

AssetsCash and due from banks

415,894549,964

Call loans and bills bought

93,700—

Monetary claims purchased

4,916

6,006

291,324

38,067

Securities

10,373,188

11,909,172

Loans

1,942,546

2,187,792

104,128

109,372

Land

63,10665,562

Buildings

30,89930,072

Leased assets

6,536

10,669

77

66

3,508

3,002

43,90954,590Software43,32750,461

Goodwill

551

4,097

Other intangible fixed assets

30

32

Due from reinsurers

1,341

4,936

Foreign exchanges

8,471

3,019

159,361

221,762

Net defined benefit asset

3,476

3,391

Deferred tax assets

27,556

39,210Reserve for possible loan losses(1,602)(1,575)

13,468,215

15,125,710

Money held in trust

Tangible fixed assets

Construction in progress
Other tangible fixed assets
Intangible fixed assets

Other assets

Total Assets

56

Sony Financial Holdings Inc. Annual Report 2020

Millions of yen
2019

2020

9,479,071

10,731,488

78,285

81,2389,396,241

10,645,842

4,544

4,407

2,073

2,471

Liabilities
Policy reserves and others
Reserve for outstanding claims
Policy reserves
Reserve for policyholders’ dividends
Due to agencies

5,769

5,745

2,302,313

2,440,783

Call money and bills sold

130,611

151,256

Borrowed money

203,871

241,826244

684

Due to reinsurers
Deposits

Foreign exchanges
Bonds payable

20,00020,000

Other liabilities

578,477

747,676

Reserve for employees’ bonuses

4,377

4,297

Net defined benefit liability

34,081

34,170Reserve under the special laws

50,34353,060Reserve for price fluctuations

50,34353,060

Deferred tax liabilities

24

160

Deferred tax liabilities on land revaluation

109

109

12,811,368

14,433,732

Common stock

19,96319,994

Capital surplus

191,193

191,224

Retained earnings

319,886

367,127

(55)

(55)

530,987

578,291

128,800

114,868

Net deferred gains (losses) on hedging instruments, net of taxes(1,077)(373)

Land revaluation, net of taxes(2,439)(2,439)Remeasurements of defined benefit plans, net of taxes(1,470)(835)

123,812111,221

Stock acquisition rights

149

215

Non-controlling interests

1,896

2,250

Total Liabilities

Net Assets
Shareholders’ equity

Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income
Net unrealized gains (losses) on available-for-sale securities, net of taxes

Total accumulated other comprehensive income

Total Net Assets
Total Liabilities and Net Assets

656,846

691,978

13,468,215

15,125,710

Sony Financial Holdings Inc. Annual Report 202057

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
Sony Financial Holdings Inc.
For the years ended March 31, 2019 and 2020
Millions of yen(1) Consolidated Statements of Income

2019

2020

Ordinary Revenues

1,629,182

1,781,420

1,461,632

1,602,154

1,134,048

1,338,848

1,130,676

1,331,441

3,372

7,407

278,950

208,620

166,953

181,812

4,490

4,086

—

317

Ordinary Revenues from the Life Insurance Business
Income from insurance premiums
Insurance premiums
Ceded reinsurance commissions
Investment income
Interest income and dividends
Income from money held in trust, net
Gains on trading securities, net
Gains on sale of securities

6,107

3,637

Gains on derivatives, net—

18,766

13,455—

Foreign exchange gains, net
Other investment income
Gains on separate accounts, net
Other ordinary income
Ordinary Revenues from the Non-life Insurance Business
Underwriting income
Net premiums written
Interest and dividends on deposits of premiums

1—

48,63354,685

115,101

121,727

113,173

119,746

113,101

119,352

72

74

—

320

1,857

1,935

1,372

1,337

Gains on sale of securities

557

672

Transfer to interest and dividends on deposits of premiums

(72)

(74)

69

44

45,76649,99731,92633,950Interest income on loans

17,47318,729Interest income and dividends on securities

Reversal of reserve for outstanding losses and claims
Investment income
Interest income and dividends

Other ordinary income
Ordinary Revenues from the Banking Business
Interest income

14,382

15,148Interest income on call loans and bills bought

10Interest income on deposits with banks

62

61

7

10

fees and commissions received

9,398

12,101Other operating income

3,926

3,515

3,599

3,258

326

256

515

430

6,681

7,541

6,681

7,541

Other interest income

Gains on foreign exchange transactions, net
OthersOther ordinary income
Other
Other ordinary income

58—
87,943

Sony Financial Holdings Inc. Annual Report 2020

Millions of yen

Ordinary Expenses
Ordinary Expenses from the Life Insurance Business

2019

2020

1,535,325

1,669,540

1,386,074

1,510,288

457,252

521,198

Insurance claims

92,997

98,533

Annuity payments

13,48915,036

Insurance benefits

131,824

157,074

Surrender payments

204,351

231,772

3,659

3,732

Insurance claims and other payments

Other payments

10,92915,048704,780

678,724

2,433

2,444

702,346

676,28000Investment expenses

24,65091,944

Interest expenses

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

1,604

5,064

Losses on trading securities, net

126—

Losses on sale of securities

34

50

Losses on valuation of securities

4,026

6,316

Losses on derivatives, net

13,925

—

—

4,884

329

43

Foreign exchange losses, net
Provision for reserve for possible loan losses
Depreciation of real estate for rent and others

1,599

1,637

Other investment expenses

3,003

2,812

—

71,133Operating expenses

146,776

157,537

Other ordinary expenses

52,61460,883

107,413112,785

Losses on separate accounts, net

Ordinary Expenses from the Non-life Insurance Business

77,92581,797Net losses paid

56,60860,315

Loss adjustment expenses

8,220

9,001

Net commission and brokerage fees

1,214

1,141

Provision for reserve for outstanding losses and claims

1,139

—

Provision for underwriting reserves

10,741

11,338Underwriting expenses

10

Losses on sale of securities

0—

Other investment expenses

1

029,48230,9834

5

Investment expenses

Operating, general and administrative expenses
Other ordinary expenses(Continued on next page)

Sony Financial Holdings Inc. Annual Report 202059

Consolidated Statements of Income (Continued)

Millions of yen
2019

2020

34,135
8,566
6,744
88
312
0
12
1,400
7
5,883
485
18,786
414
7,702
7,702
93,856
0
0
−
−
2,367
92
67
2,207
2,207
−
2,146
89,34331,871(4,853)27,01862,325250
62,074

Ordinary Expenses from Banking Business
Interest expenses
Interest expenses on deposits
Interest expenses on call money and bills soldInterest on payables under repurchase agreements
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
Other
Other ordinary expenses
Ordinary profit
Extraordinary Gains
Gains on disposal of fixed assets
Gains on step acquisitions
Other extraordinary gains
Extraordinary Losses
Losses on disposal of fixed assets
Impairment losses
Provision for reserve under the special laws
Provision for reserve for price fluctuations
Other extraordinary losses
Provision for Reserve for Policyholders’ Dividends
Income Before Income Taxes
Income Taxes-Current
Income Taxes-Deferred
Total Income Taxes
ProfitProfit Attributable to Non-controlling Interests
Profit Attributable to Owners of the Parent

37,483
9,194
7,274
268
348
2
13
1,280
6
7,077
126
20,902
181
8,982
8,982
111,880
264
0
248
16
3,139
120
21
2,695
2,695
301
2,422
106,583
37,747(5,925)31,822
74,761
331
74,429Millions of yen(2) Consolidated Statements of Comprehensive Income
Profit2019

2020

62,32574,761(5,215)
(174)
456
23
(4,909)57,415(13,907)
703
658
(23)
(12,569)
62,192

57,167248

61,838353

Other Comprehensive Income
Net unrealized gains (losses) on available-for-sale securities, net of taxes
Net deferred gains (losses) on hedging instruments, net of taxes
Remeasurements of defined benefit plans, net of taxes
Share of other comprehensive income of affiliates accounted for using equity method
Total other comprehensive income
Comprehensive Income
Details:
Comprehensive income attributable to owners of the parent
Comprehensive income attributable to non-controlling interests

60

Sony Financial Holdings Inc. Annual Report 2020

Consolidated Statements of Changes in Net Assets
Sony Financial Holdings Inc.
For the years ended March 31, 2019 and 2020
Millions of yen
2019
Shareholders’ equity
Commonstock

Retainedearnings

19,927

191,157

283,911(55)

494,941

Issuance of new shares

35

35

—

—

71

Dividends from surplus——(26,099)—(26,099)

Purchase of treasury stock

—

—

—

—

—

Profit attributable to owners of the parent——

62,074—62,074

Net changes of items other than shareholders’ equity

—

—

—

—

—

Total changes during the period

35

35

35,975—36,046

Balance at the end of the period

19,963

191,193

319,886(55)

530,987

Balance at the beginning of the period

Treasury
stock

Total
shareholders’equityCapitalsurplus

Changes during the period

Millions of yen
2019
Accumulated other comprehensive incomeNet
unrealized
gains (losses)
on availablefor-salesecurities,
net of taxes

Net deferredgains (losses)on hedging
instruments,
net of taxes

Landrevaluation,
net of taxes

133,991(902)(2,439)(1,929)128,719

97

1,648

625,406

Issuance of new shares

—

—

—

—

—

—

—

71

Dividends from surplus

—

—

—

—

—

—

—

(26,099)

Purchase of treasury stock

—

—

—

—

—

—

—

—

Profit attributable toowners of the parent

—

—

—

—

—

—

—

62,074

Net changes of items otherthan shareholders’ equity(5,191)

(174)

—

458

(4,907)52

248(4,606)

Total changes during the period(5,191)

(174)

—

458

(4,907)52

248

31,439Balance at the end of the period

128,800(1,077)(2,439)(1,470)123,812

149

1,896

656,846

Balance at the beginning of
the period

Total
Remeasureaccumulated
ments ofother
definedbenefit plans, comprehensive
incomenet of taxes

Stockacquisitionrights

Noncontrollinginterests

Total net
assetsChanges during the period(Continued on next page)

Sony Financial Holdings Inc. Annual Report 202061

Consolidated Statements of Changes in Net Assets (Continued)

Millions of yen
2020
Shareholders’ equity
Commonstock

Retainedearnings

19,963

191,193

319,886(55)

530,987

Issuance of new shares

31

31

—

—

62

Dividends from surplus——(27,189)—(27,189)

Purchase of treasury stock

—

—

—

(0)

(0)

Profit attributable to owners of the parent——

74,429—74,429Net changes of items other than shareholders’ equity

—

—

—

—

—

Total changes during the period

31

3147,240(0)47,303

Balance at the end of the period

19,994

191,224

367,127(55)

578,291

Balance at the beginning of the period

Treasury
stock

Total
shareholders’equityCapitalsurplus

Changes during the period

Millions of yen
2020
Accumulated other comprehensive incomeNet
unrealized
gains (losses)
on availablefor-salesecurities,
net of taxes

Net deferredgains (losses)on hedging
instruments,
net of taxes

Landrevaluation,
net of taxes

128,800(1,077)(2,439)(1,470)123,812

149

1,896

656,846

Issuance of new shares

—

—

—

—

—

—

—

62

Dividends from surplus

—

—

—

—

—

—

—

(27,189)

Purchase of treasury stock

—

—

—

—

—

—

—

(0)

Profit attributable toowners of the parent

—

—

—

—

—

—

—

74,429Net changes of items otherthan shareholders’ equity(13,931)

703

—

635

(12,591)65

353(12,171)

Total changes during the period(13,931)

703

—

635

(12,591)

65

353

35,131

Balance at the end of the period

114,868(373)(2,439)(835)

111,221

215

2,250

691,978

Balance at the beginning of theperiodTotal
Remeasureaccumulated
ments ofother
definedbenefit plans, comprehensive
incomenet of taxes

Stockacquisitionrights

Noncontrollinginterests

Total net
assetsChanges during the period

62

Sony Financial Holdings Inc. Annual Report 2020

Consolidated Statements of Cash Flows
Sony Financial Holdings Inc.
For the years ended March 31, 2019 and 2020
Millions of yen
2019
Cash flows from operating activities
Income before income taxes
Depreciation of real estate for rent and others
Depreciation and amortization
Impairment losses
Amortization of goodwill
Increase (decrease) in reserve for outstanding claims
Increase (decrease) in policy reserve
Interest portion of reserve for policyholders’ dividends
Provision for (reversal of) reserve for policyholders’ dividends
Increase (decrease) in reserve for possible loan losses
Increase (decrease) in net defined benefit liability
Increase (decrease) in reserve for price fluctuations
Interest income and dividends(Gains) losses on securities
Interest expenses
Losses (gains) on derivatives
Exchange (gains) losses(Gains) losses on disposal of tangible fixed assets
Losses (gains) on step acquisitions
Equity in (gains) losses of affiliates
Net (increase) decrease in loans
Net increase (decrease) in deposits
Net increase (decrease) in borrowed money (excluding subordinated borrowings)
Net increase (decrease) in call money and bills soldNet (increase) decrease in call loans and bills bought
Net (increase) decrease in foreign exchange (assets)
Net increase (decrease) in foreign exchange (liabilities)
Others, net
SubtotalInterest and dividends received
Interest paid
Policyholders’ dividends paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Investments in money held in trust
Proceeds from money held in trust
Purchases of securities
Proceeds from sale and redemption of securities
Investments in loans
Collections of loans
Net increase (decrease) in payables under repurchase agreements
Net gains (losses) from the settlement of derivative financial instruments
Net increase (decrease) in collateral for securities lending transactions
Others, net
Total of net cash provided by (used in) investment transactions
Total of net cash provided by (used in) operating activities and investment transactions
Purchases of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchases of intangible fixed assets
Purchase of securities of non-consolidated subsidiaries
Proceeds from purchases of shares of subsidiaries resulting in change in scope of consolidation
Purchase of securities of affiliates
Others, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from debt borrowing
Repayments of debt
Cash dividends paid
Purchases of treasury stock
Others, net
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 period
Cash and cash equivalents at the end of the period

2020

89,343
1,599
11,29767
32
3,573
713,088
0
2,146
449
1,630
2,207
(200,253)(94,790)
10,69813,925(17,258)
78−
1,748(147,727)
143,031
30,00054,902461
874
1621,467642,611
205,869(10,221)(3,086)(32,251)
802,921106,583
1,637
12,98621
622,105
687,618
0
2,422
(26)
1,735
2,695
(217,102)
54,681
14,984(18,766)
26,169124(248)
11(235,023)
140,591
37,92341,448(1,090)5,452
440
48,385715,825
217,591(15,689)(2,558)(36,441)
878,726(1,044)
4,522(1,219,208)
526,015(63,716)
30,341
48,1407,389
27,166124(640,270)
162,651(1,255)
1(17,794)
(50)
−
(300)
(147)
(659,815)(1,284)
4,047(1,360,076)
489,737(71,794)
35,463
188,364(2,378)(73,475)
421(790,973)
87,752(4,357)
0(18,799)(1,900)8,537(2,750)(200)(810,444)

4,640(4,712)(26,095)−(476)(26,645)0
116,461
393,133
509,594

6,400(6,367)(27,187)(0)(551)(27,707)(204)
40,370509,594549,964

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 2020

63

Significant Basic Items for the Preparation of the Consolidated Financial Statements(For the year ended March 31, 2020)

1 Principles of Consolidation(1) Scope of consolidation
Consolidated subsidiaries: 13 companies
Company names
Sony Life Insurance Co., Ltd.
Sony Life With Insurance Co.,Ltd.*SA Reinsurance Ltd.
Sony Assurance Inc.
Sony Bank Inc.
Sony Payment Services Inc.
SmartLink Network Hong Kong Limited
SmartLink Network Europe B.V.
Sony Lifecare Inc.
Lifecare Design Inc.
Proud Life Inc.
Sony Financial Ventures Inc.
SFV·GB L.P.
Non-consolidated subsidiaries:
There are no main non-consolidated subsidiaries. Non-consolidated subsidiaries are excluded from the scope of consolidation for the current
year because they are immaterial in light of the total assets, ordinary revenues, net income or loss (amounts equivalent to the Group’s interestsin these companies), retained earnings (amounts equivalent to the Group’s interests in these companies) and accumulated other comprehensive
income (amounts equivalent to the Group’s interests in these companies) and their exclusion from the scope of consolidation does not hinder arational judgment of the Sony Financial Group’s financial position and results of operations.
Change in the scope of consolidation:
The credit card settlement services company SmartLink Network Europe B.V. was newly established and included in the scope of consolidationfrom the fiscal year ended March 31, 2020. The business performance of this company is included under “Banking business” in the consolidated statements of income.
In addition, Sony Life With Insurance Co.,Ltd.* and SA Reinsurance Ltd., which had been affiliates accounted for by the equity method in theprevious fiscal year, became wholly-owned subsidiaries through an additional acquisition of shares, and have been included in the scope of consolidation for the fiscal year ended March 31, 2020. The business performance of both companies is included under “Life insurance business” inthe consolidated statements of income.

(2) Application of the equity method
Affiliates accounted for by the equity method:
Not applicableNon-consolidated subsidiaries and affiliates that are not accounted for by the equity method:
There are no main non-consolidated subsidiaries or affiliates.
Non-consolidated subsidiaries and affiliates are not accounted for by the equity method because they are immaterial in light of the net income
or loss (amounts equivalent to the Group’s interests in these companies) and retained earnings (amounts equivalent to the Group’s interests inthese companies) and their exclusion does not hinder a rational judgment of the Sony Financial Group’s financial position and results of operations.
Change in the scope of application of the equity method:
Sony Life With Insurance Co.,Ltd.* and SA Reinsurance Ltd., which had been affiliates accounted for by the equity method in the previous fiscal
year, became wholly-owned subsidiaries through an additional acquisition of shares, and have been excluded from the scope of application of
the equity method for the fiscal year ended March 31, 2020.

(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) Accounting standards for overseas subsidiaries
Practical Issues Task Force No. 18 “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries, etc. for
Consolidated Financial Statements” (September 14, 2018) has been applied, and necessary adjustments have been made concerning overseas
subsidiaries in preparing the consolidated financial statements.

(5) Amortization of goodwill
Goodwill is equally amortized using the straight-line method over a period of up to 20 years.

* The trade name was changed from AEGON Sony Life Insurance Co., Ltd. to Sony Life With Insurance Co.,Ltd. on April 1, 2020.

2 Note on Going Concerns
There is no related information to be reported.

64

Sony Financial Holdings Inc. Annual Report 2020

3 Summary of Significant Accounting Policies(1) Securities
Securities, including cash and due from banks, monetary claims purchased which are equivalent to securities, and securities managed as assets
of money held in trust, are stated in the following manner: Securities held for trading purposes (“trading securities”) are stated at fair value withunrealized gains and losses charged to income. The cost of such securities sold is determined by the moving-average method. Held-to-maturity
securities and policy-reserve-matching bonds held in accordance with the “Temporary Treatment of Accounting and Auditing concerning PolicyReserve-Matching Bonds in the Insurance Industry” (The Japanese Institute of Certified Public Accounts Industry Audit Committee Report No.
21, issued on November 16, 2000; hereinafter “the Industry Audit Committee Report No. 21”) are stated at amortized cost (straight-line method)using the moving-average method. Available-for-sale securities whose fair values are readily determinable are stated at fair value in the consolidated balance sheets based on market prices prevailing at each balance sheet date, with unrealized gains (losses), net of taxes, included in net
assets and acquisition costs calculated using the moving-average method. Available-for-sale securities whose fair values are deemed extremely
difficult to determine are stated at acquisition cost based on the moving-average method.
Net unrealized gains (losses) on available-for-sale securities, net of taxes, are recorded as a separate component of net assets. However, forforeign currency-denominated bonds held by some consolidated subsidiaries, foreign currency translation differences related to changes in fairvalues in original currencies are recognized into net assets as net unrealized gains (losses) on available-for-sale securities, net of taxes, while theremaining changes are recognized in foreign exchange gains (losses).
The overview of risk management policies of policy-reserve-matching bonds is as follows:
Among the bonds corresponding to sub-segments (according to insurance class, years to maturity, etc.) for individual life insurance andindividual annuity sold by domestic life insurance subsidiaries, SFH records those held with the purpose of controlling the duration of insurance
liabilities as policy-reserve-matching bonds, in accordance with the Industry Audit Committee Report No. 21.

(2) Derivative financial instruments
Derivative financial instruments are stated at fair value, with changes in fair value included in income for the period in which they arise, except forderivatives that are designated by SFH and its consolidated subsidiaries (the “Companies”) as “hedging instruments.”(3) Tangible fixed assets (excluding leased assets)
All tangible fixed assets, including real estate for lease, are initially recorded at cost. Subsequent expenses related to asset improvements arecapitalized or are recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with theitem will flow to the Companies and the cost of the item can be measured reliably. All other repairs and maintenance charges are charged toincome when incurred. Depreciation is computed by the straight-line method over the estimated useful lives of the assets as follows:• Buildings: 3 to 50 years• Other tangible fixed assets: 2 to 20 years(4) Intangible fixed assets (excluding leased assets)
Intangible fixed assets are amortized using the straight-line method. Software for internal use is amortized using the straight-line method generally over 5 years, its estimated useful life.

(5) Leased assets
All leased assets with respect to non-ownership-transfer finance leases are amortized by the straight-line method 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 andwrite-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, the Companies provide a reserve in the amount
expected to be uncollectible after deducting amounts expected to be collectible from collateral, guarantees and other means. For loans to borrowers that are not yet bankrupt but are highly likely to be bankrupt in the future (the “potentially bankrupt borrowers”), the Companies provide
a reserve in the amount deemed necessary by comprehensively considering the borrowers’ solvency of the remaining amount after deducting
amounts expected to be collectible from collateral, guarantees and other means. For other loans, the Companies provide a reserve in theamount calculated by multiplying the loans by a historical loan loss ratio determined over certain periods.
All loans are subject to asset assessment by the related operational departments in accordance with self-assessment guidelines, and theassessment results are reviewed by the departments responsible for asset inspection that are independent from the operational departments.
The amount of reserve is provided based upon the above results.

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

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

(9) Accounting for retirement benefits
1) Method of attributing projected retirement benefits
In the calculation of retirement benefit obligations, the Companies mainly apply the benefit formula basis in attributing projected retirement benefits to the periods until the end of the current fiscal year.

Sony Financial Holdings Inc. Annual Report 2020

65

2) Amortization method of prior service cost and net actuarial gain or loss
Unrecognized prior service cost is generally amortized using the straight-line method within the employees’ average remaining service period at
incurrence.
Unrecognized net actuarial gain or loss is generally amortized using the straight-line method over 7 to 16 years within the employees’ average remaining service period, commencing from the fiscal year immediately following incurrence.
3) Adoption of a simplified method at small enterprises, etc.
For calculating net retirement benefit liabilities and retirement benefit expenses, the parent company and some consolidated subsidiaries apply asimplified method that treats amounts required for voluntary resignation at fiscal year-end as retirement benefit obligations.
(Additional information)
From October 1, 2019, pursuant to a revision of defined benefit pension plans by SFH and some of its consolidated subsidiaries, all employees,
excluding those who had retired prior to the revision, were transferred to defined contribution pension plans. ASBJ Guidance No. 1 “Accounting
for Transfer between Retirement Benefit Plans” (December 16, 2016) and Practical Issues Task Force No. 2 “Practical Solution on Accounting forTransfer between Retirement Benefit Plans” (February 7, 2007) were applied in accounting for the transfer between plans, and partial termination
processing was carried out for the portion transferred to defined contribution pension plans.
As a result, others under extraordinary gains of ¥16 million were recorded for the fiscal year ended March 31, 2020.

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

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

(12) Cash and cash equivalents in the Consolidated Statements of Cash Flows
Cash equivalents consist of highly liquid investments without significant market risks, such as demand deposits and short-term investments withan original maturity of 3 months or less.

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

(14) Policy reserves
Pursuant to Article 116 of the Insurance Business Act of Japan, SFH’s life insurance subsidiary maintains a policy reserve for the fulfillment of
future obligations under life insurance contracts. The policy reserve is established by the net level premium reserve method, which assumes aconstant or level amount of net insurance premiums over the term of the relevant policy when calculating the amount of the reserve required
to fund all future policy claims. The net insurance premium is a portion of the premium covering insurance underwriting risk, which is estimatedbased on factors such as mortality rates, investment yield, surrender rates and other factors. The net level premium reserve for individual insurance contracts underwritten from fiscal 1996 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 fiscal 1996 is calculated using mortality and interest rates approved by the supervisor of insurance business in Japan.

(15) Accounting standards, etc. not yet applied(Accounting standards, etc. concerning the calculation of fair value)• ASBJ Statement No. 30 “Accounting Standard for Fair Value Measurement” (July 4, 2019)• ASBJ Guidance No. 31 “Implementation Guidance on Accounting Standard for Fair Value Measurement” (July 4, 2019)1) Overview
The International Accounting Standards Board (IASB) and the United States Financial Accounting Standards Board (FASB) have developed
accounting standards concerning the measurement of fair value. In May 2011, they announced “Fair Value Measurement” (published as IFRS
13 by the IASB, and as Topic 820 by the FASB). IFRS 13 is applicable to fiscal years commencing on or after January 1, 2013, and Topic 820 isapplicable to fiscal years beginning on or after December 15, 2011. In view of this situation, the Accounting Standards Board of Japan (ASBJ)
developed the Accounting Standard for Fair Value Measurement, which was published together with the Implementation Guidance.
The basic policy of the ASBJ when developing the Accounting Standard for Fair Value Measurement was to adopt, as a rule, all the provisions of IFRS 13. This approach was taken from the perspective of enhancing the comparability of financial statements of companies in Japan

66

Sony Financial Holdings Inc. Annual Report 2020and overseas, by adopting a unified calculation method.
However, in consideration of the methods practiced in Japan until that time, provisions were made for alternative treatment of individual
items, where this did not significantly impair the comparability of the financial statements.
2) Scheduled date of adoption
Scheduled for adoption from the beginning of the fiscal year ending March 31, 2022.
3) Effect of the adoption of this accounting standard
SFH is currently evaluating the effect of adopting Accounting Standard for Fair Value Measurement, etc. on the consolidated financial statements.

4 Change in Presentation Method(Notes to the Consolidated Statements of Cash Flows)
Net increase (decrease) in payables under repurchase agreements, which was included in “total of net cash provided by (used in) investment
transactions: others, net,” within “cash flows from investing activities” for the previous fiscal year, has increased in quantitative materiality, and isthus presented as a separate item for the fiscal year ended March 31, 2020. The consolidated financial statements for the previous fiscal year
have been restated in order to reflect this change in presentation method.
As a result, “total of net cash provided by (used in) investment transactions: others, net” of ¥48,264 million, within “cash flows from investing
activities” in the Consolidated Statements of Cash Flows for the previous fiscal year, has been restated as net increase (decrease) in payables
under repurchase agreements of ¥48,140 million, and others, net of ¥124 million.

Sony Financial Holdings Inc. Annual Report 202067

Notes to the Consolidated Financial Statements (For the year ended March 31, 2020)
1 Notes to the Consolidated Balance Sheets

1. Securities with a book value of ¥576,357 million and loans of ¥378,240 million were pledged as collateral for the ¥257,580 million of collateralfor securities lending transactions, ¥39,000 million of call money and bills sold, the ¥237,923 million of borrowed money and payables under repurchase agreements of ¥309,613 million at March 31, 2020. In addition to the assets described above, securities with a book value of ¥14,451
million, cash collateral paid for financial instruments of ¥37,975 million and initial margins of futures markets of ¥17,820 million were pledged ascollateral for cash settlements, variation margins of futures markets and certain other purposes at March 31, 2020.

2. The consolidated balance sheet amount of securities loaned for consumption under the loan agreement was ¥201,717 million.
3. Securities include shares in non-consolidated subsidiaries and affiliates worth ¥2,091 million. These do not include any investments in jointly
controlled companies.

4. The balance of loans includes ¥187 million in loans to bankrupt borrowers (before deductions for reserve for possible loan losses) and ¥1,116

million in non-accrual delinquent loans (before deductions for reserve for possible loan losses). Loans to bankrupt borrowers include loans thathave 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 for other reasons and on which interest income
is not recognized. These loans are with reasons defined under Article 96, Paragraph 1, Item 3, i through v of the Order for Enforcement of the
Corporation Tax Act (Enforcement Order 97 of 1965) or Article 96, Paragraph 1, Item 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 aredeferred in order to support the borrowers’ recovery from financial difficulties.

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

6. The balance of loans includes ¥814 million in restructured loans (before deductions for reserve for possible loan losses). Restructured loans areloans 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, excludingloans to bankrupt borrowers, non-accrual delinquent loans and past due loans (3 months or more).

7. The total amount of loans to bankrupt borrowers, non-accrual delinquent loans and restructured loans was ¥2,117 million (before deductions forreserve for possible loan losses).

8. In terms of loan participation, the participating principals that were accounted for as loans to the original obligor in accordance with “Accounting
and Presentation of Loan Participation” (Accounting Standards Committee of the Japanese Institute of Certified Public Accountants, Statement
No. 3, November 28, 2014) include the consolidated balance sheet amount of ¥5,601 million.

9. Accumulated depreciation of tangible fixed assets as of March 31, 2020 was ¥43,582 million.
10. The balance sheet includes ¥1,792,190 million in assets and liabilities in equal amounts related to separate accounts as stipulated in Article 118of the Insurance Business Act of Japan as of March 31, 2020, at SFH’s life insurance subsidiary.

11. There are no monetary claims against directors or audit & supervisory board members arising from transactions with directors or audit & supervisory board members of the insurance holding company.

12. There are no monetary obligations to directors or audit & supervisory board members arising from transactions with directors or audit & supervisory board members of the insurance holding company.

13. Changes in the reserve for policyholders’ dividends at SFH’s life insurance subsidiary for the fiscal year ended March 31, 2020 are as follows:
Balance at the beginning of the period¥4,544 million

Policyholders’ dividends during the period¥2,558 million

Increase in interest¥0 million

Provision for reserve for policyholders’ dividends¥2,422 million

Balance at the end of the period¥4,407 million

14. On March 31, 2002, SFH’s life insurance subsidiary revalued its land for operating purposes, as permitted by the Act on Revaluation of Land

(Act No. 34, enacted March 31, 1998 — the “Law”). The tax effect of the revaluation difference is accounted for differently, depending on whether there are gains or losses; when there is a loss, a valuation allowance is fully provided for the tax effect of the loss, and when there is a gain,
the tax effect is recorded in “deferred tax liabilities on land revaluation.” After excluding these amounts, the net revaluation difference is reported
as “land revaluation” in net assets. The revaluation method stipulated by Article 3, Paragraph 3 of the Law was based on the land appraisal inconformity with Article 2, Item 5 of the Order for Enforcement Related to the Law (Cabinet Order No. 119, effective from March 31, 1998).

68

Sony Financial Holdings Inc. Annual Report 2020

15. Contracts for commitments to provide credit lines and overdrafts of the life insurance subsidiary and the banking subsidiary are agreements tolend to customers, up to a prescribed amount, as long as there is no violation of the conditions stipulated in the contracts. The amount of unused commitments at March 31, 2020 was ¥18,228 million, and the amount of unused commitments whose original contract terms are within 1
year at March 31, 2020 was ¥18,228 million.

16. 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 ¥11,665 million. Such losses are recognized as expenses during the fiscal year in which they
are contributed.

17. Net assets per share were ¥1,584.90.
18. Financial instruments:(1) Description of financial instruments
1) Policy on financial instruments
Group companies conduct the life insurance, non-life insurance and banking businesses, etc., in accordance with the provisions of the Insurance
Business Act of Japan, the Banking Act of Japan and other relevant provisions. With regard to financial assets (except for assets in separate accounts as stipulated in Item 1, Article 118 of the Insurance Business Act of Japan in the life insurance business), to ensure steady investment income
the Companies hold various investment assets, including Japanese government and corporate bonds, stocks and loans. Deposits from individual
customers in the banking business account for nearly all of the Companies’ financial liabilities. Although Group companies hold financial assets aswell as financial liabilities, which are subject to the risk of interest rate and exchange rate fluctuations, they strive to protect themselves from the negative effects of these fluctuations by maintaining an appropriate balance between assets and liabilities by conducting asset-liability management (ALM)
in each of the businesses. Furthermore, derivative transactions are used to control risks in the life insurance business and banking business.
2) Financial instruments and related risks
Securities, loans, deposits and derivative transactions constitute the majority of Group companies’ financial instruments. They are subject tomarket risk, which is the risk of incurring losses when their values change due to fluctuations in interest rates, foreign exchange rates, stock
prices, etc., as well as credit risk, which is the risk of incurring losses when the value of assets declines or disappears due to a deterioration in
financial or other conditions of an entity to which credit is provided. In addition, they are subject to market liquidity risk, which is the risk of loss
due to an inability to conduct market transactions, as well as the risk of loss if the companies are forced to complete transactions under unfavorable market conditions, in each case due to market turmoil or other factors.
Most of the securities holdings are in Japanese and foreign government bonds and Japanese and foreign corporate bonds. Other holdings
include Japanese and foreign stocks, and investments in partnership.
The majority of loans are policy loans in the life insurance business, and individual mortgage loans in the banking business. However, policy loans
are limited to the amount of surrender payments, and mortgage loans are backed by real estate. Consequently, loan-related risks are relatively low.
Deposits are mainly those from individual customers, some of which are denominated in foreign currencies.
The life insurance business uses several derivative transactions such as interest rate swap transactions, currency futures trading, forward
foreign exchange transactions, stock index futures trading, total return swap transactions for stocks, bond futures trading and commodity
futures trading, mainly to hedge the market risk for financial assets and liabilities and, as a matter of policy, does not use derivative transactions
for speculative purposes. Hedge accounting is not applied to derivative transactions used in the life insurance business.
The banking business uses several derivative transactions, and it uses interest rate swaps, etc., to hedge the market risk for financial assets andliabilities. In this category, hedge accounting is applied. Interest rate swaps, etc., are used to hedge against the interest rate risk of fixed-rate loans
and deposits. Currency swaps are used to hedge against the exchange rate risk of bonds denominated in foreign currencies. In hedge accounting,hedge effectiveness is assessed based on the requirements stipulated in the “Accounting Standards for Financial Instruments” and other standards.
3) Risk management of financial instruments
SFH formulates fundamental principles for risk management and manages risks specific to its subsidiaries’ scale, business content and otherattributes.
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 Executive Committee on subsidiaries’ risk
management conditions recognized through monitoring or by holding Risk Management Meetings.
(i) Credit risk
Group companies use the following methods to manage the credit risk of principal subsidiaries:(a) At the life insurance subsidiary, the risk management division manages issuer credit risk on securities and counterparty risks by specifying details such as risk management methods and procedures in regulations. The risk management division periodically reports suchinformation to the Board of Directors and the Executive Committee.
(b) The non-life insurance subsidiary ascertains issuer credit information and market values on securities in line with various regulations for asset
management risk. The risk management division reports on the situation regularly to the Board of Directors and the Executive Committee.
(c) The banking subsidiary has formulated and conformed to various regulations for managing credit risks, and controls credit risk depending on the nature of each type of financial asset. In respect of individual loans, the subsidiary has developed a framework for managing
individual credit, including credit screenings, management of credit information, setting of collateral and the handling of problem assets
on a case-by-case basis.
In respect of corporate loans or bonds payable, the subsidiary has developed a framework for managing corporate credit and market credit, including credit screenings, credit limit control, the management of credit information, credit ratings, the setting of guarantees
or collateral and handling of problem assets on a case-by-case basis.
The subsidiary manages market credit risk, such as securities issuer credit risk and, on derivative transactions, counterparty risk, by
periodically assessing market value information.

Sony Financial Holdings Inc. Annual Report 2020

69

The aforementioned credit risk management is carried out by the risk management division and the screening division. These
divisions periodically report risk management conditions to management via the Board of Directors and the Executive Committee. In
addition, the internal audit division conducts regular audits.
(ii) Market risk
Group companies use the following methods to manage the market risk of principal subsidiaries:(a) The life insurance subsidiary manages various market-related risks in the following manner:• Interest rate risk
Interest rate risk is managed by the risk management division based on the regulations for interest rate risk management that specify details
such as risk management methods and procedures. Based on ALM policies that are determined through such methods as deliberation by
the Executive Committee, the subsidiary determines and confirms actual risk conditions with the Board of Directors. The division maintains
an overall understanding of the interest rates and durations of financial instruments, and monitors them based on the analysis of the quantityof risk using value at risk (“VaR”), and it periodically reports such information to the Board of Directors and the Executive Committee.
• Exchange rate risk
Exchange rate risk is managed by the risk management division based on the regulations for exchange rate risk management thatspecify details such as risk management methods and procedures. The division periodically reports such information to the Board of
Directors and the Executive Committee.
• Equity market price fluctuation risk
Equity market price fluctuation risk is managed by the risk management division based on the regulations for equity market price fluctuation risk management that specify details such as risk management methods and procedures. The division periodically reports suchinformation to the Board of Directors and the Executive Committee.
• Derivative transactions
Derivative transactions are managed by the risk management division based on the regulations for derivative transactions that specify
details such as risk management methods and procedures. The division periodically reports such information to the Board of Directors
and the Executive Committee.
(b) The non-life insurance subsidiary manages various market-related risks in the following manner:• Interest rate risk
Regulations on asset management risk specify the details such as risk management methods and procedures based on risk management policies determined by the Board of Directors. The risk management division monitors individual risks and reports on the situation
regularly to the Board of Directors and the Executive Committee.
• Price fluctuation risk
Equity securities are held for strategic investments for the purpose of enhancing business partnerships. In accordance with regulations
on asset management risk, the risk management division monitors the market environment and financial conditions, and reports on thesituation regularly to the Board of Directors and the Executive Committee.
(c) The banking subsidiary manages various market-related risks in the following manner. The risk management division handles each ofthese risks and periodically reports risk management conditions to the Board of Directors and the Executive Committee. In addition, theinternal audit division conducts regular audits.
• Interest rate and exchange rate risk
By formulating and conforming with market risk management regulations, the subsidiary manages the risk of loss from changes in thevalue of assets and liabilities (including off-balance-sheet items) as well as from changes in income from assets and liabilities, owing tofluctuations in various market risk factors, such as interest rates, exchange rates and stock prices. Market risk management regulations
specify details such as risk management methods and procedures. Based on ALM and risk management policies that are determinedthrough such methods as deliberation by the Board of Directors, an ALM committee and a risk management committee meet—typicallyonce each month—to understand and confirm actual conditions and deliberate future responses and risk conditions. On a daily basis,the risk management division maintains an overall understanding of interest and exchange rates on financial assets and liabilities, aswell as their durations, conducts monitoring that includes VaR and interest rate sensitivity analysis and ensures regulatory conformance.
The subsidiary also conducts interest rate swaps, currency swaps, foreign exchange and other derivative transactions to hedge againstinterest and exchange rate fluctuation risks.
• Market price fluctuation risk
The subsidiary manages the holding of investment products, including securities, in accordance with market risk management regulations as well as market credit risk. The investment division purchases securities externally, and risks associated with changes in themarket price of such securities are managed through prior screening by the screening division, the setting and control of investment
limits by the risk management division, and continuous monitoring by each responsible division.
• Derivative transactions
Derivative transactions are executed in accordance with regulations on market risk. The subsidiary also separates and conducts internal
checks of individual departments’ execution of transactions, evaluation of hedge effectiveness and operations management.
• Quantitative information on market risk
The principal financial instruments affected by the major risk parameters of interest rate risk and exchange rate fluctuation risk are loans,securities, deposits in the banking business and derivative transactions.
The impact of such risks on these financial assets and liabilities was calculated using the historical simulation method to determine
gains or losses over a given period of 20 business days, assuming the fluctuation of interest and exchange rates within a rational
forecast band determined over an observation period of 250 business days. The Companies then employed quantitative analysis to
manage interest rate and exchange rate fluctuation risks. The resulting risk amount with a 99% confidence interval was ¥2,523 million
as of the end of this fiscal year.
This amount of impact is based on the assumption that risk parameters other than interest rates and exchange rates are fixed. In
the event that fluctuations exceed the rational forecast band for interest and exchange rates, the risk impact may exceed the amountcalculated. The aforementioned market risk management is carried out primarily by the risk management division. The division periodically reports risk management conditions to the Board of Directors and the Executive Committee. In addition, the internal audit division
conducts regular audits.

70

Sony Financial Holdings Inc. Annual Report 2020

(iii) Liquidity risk
Group companies use the following methods to manage the liquidity risk of principal subsidiaries.
(a) At the life insurance subsidiary, in line with liquidity risk management regulations, the accounting division prepares and updates cash flowplans 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 such information to the Board of
Directors and the Executive Committee.
(b) The non-life insurance subsidiary establishes regulations related to liquidity risk. Its cash flow management division prepares andupdates cash flow plans. The risk management division manages liquidity risk by monitoring the situations and reports on the situations
regularly to the Board of Directors and the Executive Committee.
(c) The banking subsidiary has formulated and conformed with regulations for managing liquidity risk and manages a variety of liquidity risks.
Concerning the management of cash flow risks, cash flows are classified into phases based on the degree of pressure, and methods forrisk management and reporting are set out for each phase, while guidelines are formulated and reviewed as necessary. To manage
market liquidity risk, the subsidiary works to 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 aforementioned liquidity risk management is carried out by the risk management division. The division periodically reports risk management conditions to the Board of
Directors and the Executive Committee. In addition, the internal audit division conducts regular audits.
4) Supplementary explanation of the fair value of financial instruments
Market prices of financial instruments are considered to indicate their fair values, 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 thecircumstances, the resulting values may differ if measured using different assumptions.

(2) Fair value information on financial instruments
Below is fair value information on financial instruments as of March 31, 2020, excluding securities whose fair values are deemed extremely
difficult to determine (see Note 2).
Millions of yen
2020

As of March 31,

1) Cash and due from banks

Consolidatedbalance sheet
amountFair value

Difference

549,964

549,964—

38,06738,067—2) Money held in trust
Other money held in trust3) Securities
Trading securities

1,704,731

1,704,731—

Held-to-maturity securities

7,432,871

9,874,634

2,441,763

855,937

997,896

141,958

1,902,844

1,902,844—

Policy-reserve-matching bonds
Available-for-sale securities
4) Loans
Reserve for possible loan losses*1
Loans (after deduction for reserve for possible loan losses)

2,187,792(838)
2,186,953

2,439,250

252,297

Total Financial Assets

14,671,370

17,507,390

2,836,019

1) Deposits

1,926

2,440,783

2,442,709

2) Call money and bills sold

151,256

151,256—

3) Borrowed money

241,826

242,053

2264) Bonds payable

20,00019,957(43)5) Payables under repurchase agreements

309,613309,613—

6) Collateral for securities lending transactions

257,580

257,580—

3,421,060

3,423,170

2,110

Total Financial Liabilities
Derivative financial instruments*2
Hedge accounting not applied

18,267

18,267—

Hedge accounting applied[18,406][18,406]

—

[139]

[139]

—

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

Sony Financial Holdings Inc. Annual Report 2020

71

(Note 1) Calculation of the fair value of financial instruments
Financial Assets
1) Cash and due from banks
The fair value is regarded as the carrying amount, as they are approximately equal.
2) Money held in trust
In individual money held in trust mainly for investment purposes, the fair value of bonds is the market price on financial instrument exchanges
or the price indicated by a financial institution.
Please see “20. Fair value information on money held in trust,” which indicates fair values by purpose.
3) 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 “19. Fair value information on securities,” which indicates fair values by purpose.
4) Loans(i) Loans in the banking business
The fair value of these loans is calculated by type, by estimating their future cash flows and then applying a prescribed discount rate. The
discount rate is determined by adding to the LIBOR-based yield curve a premium corresponding to the allowance rate of general provision
for loan losses.
(ii) Policy loans in the life insurance business
The fair value of policyholder loans is valued by discounting future cash flows to their current value.
(iii) General loans
The fair value of general loans is regarded as the carrying amount, as they are approximately equal.

Financial Liabilities
1) Deposits
The fair value of deposits is calculated by type, 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 premium corresponding to the banking subsidiary’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.
3) Borrowed money
The present value of borrowed money is calculated by discounting the future cash flows of the principal and interest with the LIBOR-based
yield curve.
4) Bonds payable
The fair value of bonds payable is the market price or the price indicated by a financial institution.
5) Payables under repurchase agreements
The fair value is regarded as the carrying amount, as they are approximately equal.
6) Collateral for securities lending transactions
The fair value is regarded as the carrying amount, as they are approximately equal.

Derivative Transactions
Please see “21. 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 “3) Securities” of Financial
Assets in (Note 1) above.
Millions of yen
2020

As of March 31,

Consolidatedbalance sheet
amount1) Unlisted stocks in non-consolidated subsidiaries and affiliates*1

2,0912) Unlisted stocks other than those in 1) above*1

1,8723) Investment in partnership*2

8,823

Total

12,787*1 Unlisted stocks have no market prices and their fair values are deemed extremely difficult to determine.
*2 Assets included in “investment in partnership” are stocks in unlisted companies.

Note: Unlisted stocks and investment in partnership are considered impaired if their actual value decreases materially below the acquisition cost and suchdecline is considered non-recoverable. Their actual value is recognized as the consolidated balance sheet amount and the write-down is accounted
for as a devaluation loss (hereinafter, “impairment”) for the fiscal year.
¥244 million of impairment losses for unlisted stocks, and ¥32 million of impairment losses for investment in partnership were recognized for the year
ended March 31, 2020.
Impairment losses are principally recorded when their actual value as of the end of the fiscal year has declined by 50% or more from the acquisition cost.

72

Sony Financial Holdings Inc. Annual Report 2020

(Note 3) Future redemption schedule of monetary claims and securities with maturities
Millions of yen
2020
1 year or less

As of March 31,

Cash and due from banks

More than 1 year More than 5 years
to 5 years
to 10 years

Over 10 years

549,964

—

—

—

6,069

199,050

243,310

7,652,770

6,069

198,950

243,310

6,242,390

5,287

196,900

243,010

5,768,810

782

2,050

300

473,580—100—

1,410,380

—

—

3,220

948,749

—

—

3,220

725,430

Japanese government and local government bonds

—

—

—

610,630

Japanese corporate bonds

—

—

3,220

114,800———

223,319

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

OthersAvailable-for-sale securities

143,747

424,176

548,121618,201

47,034

195,118

491,702331,650

Japanese government and local government bonds

32,274

134,031491,202331,650

Japanese corporate bonds

14,76061,087500—

96,713229,057

56,419286,551

Japanese government and corporate bonds

OthersLoans*

6,041

33,20966,2891,855,922

Total

705,824

656,436

860,941

11,075,643* This figure excludes ¥208,069 million with no fixed redemption such as policyholder loans, and ¥17,394 million in overdrafts.
(Note 4) The future return schedule of deposits and other liabilities with interest
Millions of yen
2020

As of March 31,

1 year or lessMore than
1 year to
2 years

More than
2 years to
3 years

More than
3 years to
4 years

More than
4 years to
5 years

More than
5 years

Deposits*

2,347,387

44,351

20,295

10,504

3,246

14,998Call money and bills sold

151,256

—

—

—

—

—

Borrowed money

38,591

50,122

93,11260,000————10,000—10,000—

Payables under repurchase agreements

309,613

—

—

—

—

—

Collateral for securities lending transactions

257,580

—

—

—

—

—

3,104,428

94,474

123,40770,504

13,24614,998

Bonds payable

Total* Demand deposits are included in “1 year or less.”

19. Fair value information on securities as of March 31, 2020:* In addition to “Securities” on the consolidated balance sheets, the figures in the following tables include beneficiary certificates of investment
trust in “Monetary claims purchased.”(1) Trading securities
Millions of yen
As of March 31,

2020

Valuation gains (losses) charged to income(127,385)

Sony Financial Holdings Inc. Annual Report 202073

(2) Held-to-maturity securities
Millions of yen
2020

As of March 31,

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

Consolidatedbalance sheet
amountFair value

Difference

6,445,701
6,070,344
375,357
739,398
7,185,100

8,607,080
8,170,507
436,572
1,026,338
9,633,419

2,161,378
2,100,163
61,215286,9392,448,318

242,353
135,711
106,6425,417
247,771
7,432,871

236,219
134,319
101,8994,996
241,215
9,874,634(6,134)(1,391)(4,743)(420)(6,555)2,441,763(3) Policy-reserve-matching bonds
Millions of yen
2020

As of March 31,

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

Consolidatedbalance sheet
amountFair value

Difference

718,722
616,023
102,698
109,078
827,801

812,955
691,191
121,763
157,243
970,198

94,23275,16819,064
48,165
142,397

28,136
5,663
22,47328,136855,937

27,697
5,642
22,054
27,697
997,896

(438)
(20)
(418)
(438)
141,958(4) Available-for-sale securities
Millions of yen
2020

As of March 31,

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

Consolidatedbalance sheet
amountAcquisition cost

1,118,644
1,072,860
45,783
10,458295,828
1,424,930

979,544934,096
45,4484,666
259,026
1,243,237

139,099
138,763
335
5,792
36,801
181,693

92,483
61,406
31,077323
391,112483,919
1,908,850

92,68061,491
31,189361
407,309
500,351
1,743,589

(196)
(84)
(112)
(37)
(16,196)(16,431)
165,261

Difference

Note: As the unlisted stocks of ¥1,872 million (consolidated balance sheet amount) and investment in partnership of ¥8,823 million (consolidated balance
sheet amount) have no market prices and their fair values are not readily determinable, they are not included in the table above.

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

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

74

Sony Financial Holdings Inc. Annual Report 2020

(7) Available-for-sale securities sold during the period
Millions of yen
2020
Total gains on
sales
138
137
1
4,111
266
4,516

Sales
9,081
6,582
2,499
9,048
26,801
44,931For the year ended March 31,

Japanese government and corporate bonds
Japanese government and local government bonds
Japanese corporate bonds
Equity securities
Others
Total

Total losses on
sales
2
—
2
50
123
176

(8) Impairment of available-for-sale securities
Available-for-sale securities with fair value are considered impaired if the fair value decreases materially below the acquisition cost and suchdecline is considered non-recoverable. The fair value is recognized as the consolidated balance sheet amount and the write-down is accounted
for as a devaluation loss for the fiscal year.
¥6,316 million of impairment losses for available-for-sale securities (including ¥6,316 million of foreign securities) was recognized for the year
ended March 31, 2020.
“Material decline” is indicated when the fair value declines by 30% or more from the acquisition cost.

20. Fair value information on money held in trust as of March 31, 2020:(1) Money held in trust for trading
There is no related information to be reported.

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

(3) Other money held in trust (other than for trading, held-to-maturity or policy-reserve-matching)
Millions of yen
2020

As of March 31,

Other money held in trust

Consolidatedbalance sheet
amount38,067

Acquisition cost
37,562Difference
505

Items whose consolidatedbalance sheet amountexceeds acquisition cost
688

Items whose consolidatedbalance sheet amount does
not exceed acquisition cost
(183)

Notes: 1. The amount of jointly invested monetary trusts that is included in the table above as of March 31, 2020 is ¥40 million.
2. “Items whose consolidated balance sheet amount exceeds acquisition cost” and “Items whose consolidated balance sheet amount does notexceed acquisition cost” are the breakdown of the difference.

(4) Impairment of other money held in trust
Securities with fair values that are included in other money held in trust are considered impaired if their fair value decreases materially below theacquisition cost and such decline is considered non-recoverable.
No impairment loss was recognized for the year ended March 31, 2020.
“Material decline” is indicated when the fair value declines by 30% or more from the acquisition cost.

21. Derivative financial instruments:(1) Hedge accounting not applied
Below is a summary of contractual or notional amounts, current market or fair values, valuation gains or losses, and the method of calculating
the fair values of derivatives, classified by transaction, to which hedge accounting is not applied. Notional amounts do not indicate exposure tomarket risk.
1) Interest rate derivatives
Millions of yen
2020

Notional amount
total

Notional amountover 1 year

Fixed-rate receivable /Floating-rate payable

435,378

430,878(1,093)(1,093)

Floating-rate receivable /Fixed-rate payable

75,66475,564

(124)

(124)

18,70018,700

(56)

25

—

—

(1,273)(1,192)As of March 31,

Over-the-countertransactions

Fair value

Valuation gains(losses)Interest rate swaps

Interest swaption
Sold
Total

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

Sony Financial Holdings Inc. Annual Report 202075

2) Currency derivatives
Millions of yen
2020

Notional amount
total

Notional amountover 1 yearSold

18,428—

13

13

Bought

66,325—74

74

81,901—

91

91

Bought168,750

—

497

497

Foreign exchange margintransaction

Sold

43,373

—

2,215

2,215

Bought18,706

—

755

755

Currency options

Sold

459

—

(4)

(0)

Bought

473

—

6

4

Currency forward contracts Bought

10,652—(1,534)(1,534)

—

—

2,115

2,118

As of March 31,

ListedOver-the-countertransactions

Currency futures

Forward foreign exchanges Sold

Total

Valuation gains(losses)

Fair value

Notes: 1. The above transactions are valued at market, and the valuation gains or losses are recorded in the consolidated statements of income.
2. The fair value for exchange-traded transactions is the closing price on the Exchange at the end of the fiscal year.
The fair value for over-the-counter transactions is calculated using the discounted cash flow and option pricing models.

3) Stock derivatives
Millions of yen
2020

Notional amount
total

Notional amountover 1 yearSold

63,354

—

(871)

(871)

Sold

103,408—

18,28018,280——17,40917,409As of March 31,

ListedStock index futures

Over-the-countertransactions

Total return swap

Total

Valuation gains(losses)

Fair value

Notes: 1. The above transactions are valued at market, and the valuation gains or losses are recorded in the consolidated statements of income.
2. The fair value for exchange-traded transactions is the closing price on the Exchange at the end of the fiscal year.
The fair value for the over-the-counter transactions is stated at the share prices at the end of the fiscal year and other methods.

4) Bond derivatives
Millions of yen
2020
As of March 31,

ListedBond futures

Sold

Total

Notional amount
total

Notional amountover 1 year

Valuation gains(losses)

56,546

—

15

15

—

—

15

15

Fair value

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

5) Commodity derivatives
Millions of yen
2020
As of March 31,

ListedCommodity futures

Total

Sold

Notional amount
total

Notional amountover 1 year

Valuation gains(losses)

1,465

—

0

0

—

—

0

0

Fair value

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

76

Sony Financial Holdings Inc. Annual Report 2020

(2) Hedge accounting is applied
The following provides a summary of contractual or notional amounts, current market or fair values, valuation gains or losses, and the methodof calculating the fair values of derivatives, classified by transactions, to which hedge accounting is applied Notional amounts do not indicate
exposure to credit loss.
1) Interest rate derivatives
Millions of yen
2020
As of March 31,
Hedge accounting

Deferred hedge accounting

Hedged item

Notional
amount over
1 yearFair value

260,075

201,539(50)

223,013

184,346(14,849)——(14,900)

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

Fair value hedge accounting

Notional
amount total

Deposits, loans

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

Available-for-salesecurities (bonds)

Total

Notes: 1. Deferred hedge accounting is applied in accordance with the Industry Audit Committee, Statement No. 24, along with fair value hedge accounting.
2. Fair value is calculated using the discounted cash flow and other methods.

2) Currency derivatives
Millions of yen
2020
As of March 31,
Hedge accounting

Hedged item

Notional
amount total

Notional
amount over
1 yearFair value

Deferred hedge accounting

Currency swaps

Available-for-sale securities (bonds)

22,753—(352)

Fair value hedge accounting
Total

Currency swaps

Available-for-sale securities (bonds)

31,000—21,000—(3,154)(3,506)

Notes: 1. Deferred hedge accounting is applied in accordance with the Industry Audit Committee No. 25, along with fair value hedge accounting.
2. Fair value is calculated using the discounted cash flow and other methods.

22. Information about retirement benefit obligations as of March 31, 2020:(1) Overview of retirement benefit plans
The life insurance subsidiary provides a lump-sum retirement benefit plan to sales staff and a defined benefit corporate pension plan and defined
contribution pension plan to internal office staff. The non-life insurance subsidiary provides a lump-sum retirement benefit plan and a defined
contribution pension plan. SFH and its banking subsidiary mainly provide a lump-sum retirement benefit plan. SFH and some consolidated
subsidiaries calculate retirement benefit obligations based on the simplified method.

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

Balance at the beginning of the period of retirement benefit obligations
Service cost2020
46,893
5,051

Interest cost
Net actuarial gain arising during the period
Retirement benefits paid
Effect of the transfer between plans
Balance at the end of the period of retirement benefit obligations

78
(769)
(3,595)(316)
47,342

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

Balance at the beginning of the period of plan assets

2020
16,445

Expected return on plan assets

165

Net actuarial gain arising during the period(674)

Employer contribution

1,470

Retirement benefits paid

(422)

Effect of the transfer between plans
Balance at the end of the period of plan assets(247)
16,737

Sony Financial Holdings Inc. Annual Report 2020

77

3) Reconciliation of the ending balances of retirement benefit obligations and plan assets, and net defined benefit liability and net
defined benefit asset recorded on the consolidated balance sheets.
Millions of yen
As of March 31,

2020

Funded retirement benefit obligations

13,190Plan assets(16,737)

Unfunded retirement benefit obligations

34,326Net liabilities and assets recorded on the consolidated balance sheets

30,779Net defined benefit liability

34,170(3,546)

Net defined benefit asset(3,391)

Net liabilities and assets recorded on the consolidated balance sheets

30,7794) Components and amounts of retirement benefit expenses
Millions of yen
For the year ended March 31,

Service cost

2020
5,051

Interest cost

78

Expected return on plan assets(165)

Amortization of net actuarial gain

769

OthersRetirement benefit expenses related to defined benefit plans

88
5,822

Gains (losses) on transfer to a defined contribution pension plan

16

Note: SFH includes retirement benefit expenses in “Others” based on the simplified method.

5) Remeasurements of defined benefit plans (before tax deductions)
The breakdown of items recorded as remeasurements of defined benefit plans (before tax deductions) is as follows:
Millions of yen
For the year ended March 31,

2020

Net actuarial gain

918

Total

918

6) Accumulated remeasurements of defined benefit plans (before tax deductions)
The breakdown of items recorded as accumulated remeasurements of defined benefit plans (before tax deductions) is as follows:
Millions of yen
As of March 31,

2020

Unrecognized net actuarial gain

(1,172)

Total(1,172)

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

2020

Bonds

70

Equity securities

26

Others

4

Total

100

(ii) Method of setting the long-term rate of expected return on plan assets
The long-term rate of expected return on plan assets is determined by taking into account the current and expected allocation of plan assets
and the current long-term return rate and the long-term return rate that is expected in the future based on the various assets that comprise theplan assets.
8) Basis for calculating actuarial gain or loss
Main basis for calculating actuarial gain or loss as of March 31, 2020
Discount rate
0.1%–0.6%
Long-term rate of expected return on plan assets
1.0%–2.6%

78

Sony Financial Holdings Inc. Annual Report 2020

9) Reconciliation of beginning and ending balances of net defined benefit liability of the plan based on the simplified method
Millions of yen
2020

For the year ended March 31,

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

156

Retirement benefit expenses

16

Retirement benefits paid(0)

Contribution to the plan

(3)

Others5

Balance at the end of the period of net defined benefit liability

174(3) Defined contribution plans
The amount of contribution required for defined contribution plans by the Companies was ¥398 million.

23. Information on stock options, etc., as of March 31, 2020:(1) Expenses and line items associated with stock options, etc.
Operating expenses, etc.

¥126 million(2) Description and volume of stock options as well as their changes
1) Description of stock options
The first series of stock acquisition rights of SFH

Category and number of eligible
recipients

4 executive directors of SFH

Number of stock options granted
by type of share*

Common stock 52,900 shares

Grant dateAugust 8, 2016

Vesting conditions

Options rights are to be vested upon grant.
However, if the recipient loses the position of executive director of the Company prior to the Ordinary
General Meeting of Shareholders in 2017, he/she can exercise the number of stock options calculated bymultiplying the number of stock options granted, by the number of months he/she serves as executive
director from July 2016 up to the month of losing his/her position, and dividing the value by 12. The rest of
the stock options granted shall no longer be exercisable on or after the date of the recipient losing his/her
position, and is cancelled.

Eligible period of service

From June 24, 2016 to the date of the Ordinary General Meeting of Shareholders in 2017

Exercise period

From August 9, 2016 to August 8, 2046
However, eligible recipients of stock acquisition rights may exercise all (but not part) of the stock acquisition rights held by him/her only during the period from the day immediately following the date on whichsuch holder loses any and all of his/her office(s) as executive director of SFH and its subsidiaries up to tendays (in the event that the tenth day is a holiday, the following business day) thereafter.

Category and number of eligible
recipients

3 executive directors of SFH
7 executive directors of SFH subsidiaries

Number of stock options granted
by type of share*

Common stock 41,700 shares

Grant dateAugust 7, 2017

Vesting conditions

Options rights are to be vested upon grant.
However, if the recipient loses the position of executive director of the Company and its subsidiaries prior
to the Ordinary General Meeting of Shareholders in 2018, he/she can exercise the number of stock
options calculated by multiplying the number of stock options granted, by the number of months he/sheserves as executive director from July 2017 up to the month of losing his/ her position, and dividing thevalue by 12. The rest of the stock options granted shall no longer be exercisable on or after the date of therecipient losing his/her position, and is cancelled.

Eligible period of service

From June 21, 2017 to the date of the Ordinary General Meeting of Shareholders in 2018

Exercise period

From August 8, 2017 to August 7, 2047
However, eligible recipients of stock acquisition rights may exercise all (but not part) of the stock acquisition rights held by him/her only during the period from the day immediately following the date on whichsuch holder loses any and all of his/her office(s) as executive director of SFH and its subsidiaries up to tendays (in the event that the tenth day is a holiday, the following business day) thereafter.

The second series of stock acquisition rights of SFH

Sony Financial Holdings Inc. Annual Report 2020

79

The third series of stock acquisition rights of SFH

Category and number of eligible
recipients

3 executive directors of SFH
6 executive directors of SFH subsidiaries

Number of stock options granted
by type of share*

Common stock 31,600 shares

Grant dateAugust 7, 2018

Vesting conditions

Options rights are to be vested upon grant.
However, if the recipient loses the position of executive director of the Company and its subsidiaries prior
to the Ordinary General Meeting of Shareholders in 2019, he/she can exercise the number of stock
options calculated by multiplying the number of stock options granted, by the number of months he/sheserves as executive director from July 2018 up to the month of losing his/ her position, and dividing thevalue by 12. The rest of the stock options granted shall no longer be exercisable on or after the date of therecipient losing his/her position, and is cancelled.

Eligible period of service

From June 22, 2018 to the date of the Ordinary General Meeting of Shareholders in 2019

Exercise period

From August 8, 2018 to August 7, 2048
However, eligible recipients of stock acquisition rights may exercise all (but not part) of the stock acquisition rights held by him/her only during the period from the day immediately following the date on whichsuch holder loses any and all of his/her office(s) as executive director of SFH and its subsidiaries up to tendays (in the event that the tenth day is a holiday, the following business day) thereafter.

Category and number of eligible
recipients

3 executive directors of SFH
8 executive directors of SFH subsidiaries

Number of stock options granted
by type of share*

Common stock 28,800 shares

Grant dateAugust 6, 2019

Vesting conditions

Options rights are to be vested upon grant.
However, if the recipient loses the position of executive director of the Company and its subsidiaries prior
to the Ordinary General Meeting of Shareholders in 2020, he/she can exercise the number of stock
options calculated by multiplying the number of stock options granted, by the number of months he/sheserves as executive director from July 2019 up to the month of losing his/her position, and dividing thevalue by 12. The rest of the stock options granted shall no longer be exercisable on or after the date of therecipient losing his/her position, and is cancelled.

Eligible period of service

From June 21, 2019 to the date of the Ordinary General Meeting of Shareholders in 2020

Exercise period

From August 7, 2019 to August 6, 2049
However, eligible recipients of stock acquisition rights may exercise all (but not part) of the stock acquisition rights held by him/her only during the period from the day immediately following the date on whichsuch holder loses any and all of his/her office(s) as executive director of SFH and its subsidiaries up to tendays (in the event that the tenth day is a holiday, the following business day) thereafter.

The fourth series of stock acquisition rights of SFH* Stock options have been converted and stated as number of shares.
2) Volume of stock options and their changes
Stock options that existed in the year ended March 31, 2020, are presented as follows, and have been converted and stated as number of shares.
(i) Number of stock options
The first series of stockacquisition rights of
SFH

The second series ofstock acquisition rights
of SFH

The third series of stockacquisition rights of
SFH

At the end of the previous year

—

—

—

—

Granted

———28,800Lapsed————Vested

———28,800————

Before vesting(shares)Number of unvested stock options
After vesting(shares)At the end of the previous year

35,70034,00031,600—

Vested

———28,800Exercised

—

—

—

—

Lapsed————35,70034,00031,60028,800

Number of unexercised stock options

80

The fourth series ofstock acquisition rights
of SFHSony Financial Holdings Inc. Annual Report 2020

(ii) Unit price information
The first series of stockacquisition rights of
SFH

The second series ofstock acquisition rights
of SFH

The third series of stockacquisition rights of
SFH

The fourth series ofstock acquisition rights
of SFH

Exercise price

¥1

¥1

¥1

¥1

Average share price at the time of exercise

—

—

—

—

¥1,236¥1,695¥2,003¥2,316

Fairly assessed value on the grant date(3) Method for estimating the fair value of stock options
The method for estimating the fair value of stock options that were granted in the year ended March 31, 2020 is as follows:
1) Assessment method used
Black-Scholes model2) Main basic values and their estimation method
The fourth series of stockacquisition rights of SFH

Volatility of share price*1

30.377%

Expected remaining period*2

3.9 years

Expected dividend*3¥62/share(0.267%)

Risk-free rate*4*1 Calculated based on the past share prices during the period corresponding to the expected remaining period of 3.9 years in * .
*2 Calculated by weighting and averaging the expected period of service by the amount to be granted.
*3 Based on the actual dividends for the fiscal year ended March 31, 2019.
*4 Calculated using the average compound yield of long-term JGB with the remaining period approximate to the expected remaining period of 3.9 years in *2.
2(4) Method for estimating the number of stock options vested
As it is difficult, as a general rule, to reasonably estimate the number of stock options to lapse in the future, SFH adopts a method that onlyreflects the actual number lapsed.

(5) Description of restricted stock compensation
The first series of restricted stock compensation of SFH

Category and number of
eligible recipients

3 executive directors of SFH
4 executive officers of SFH
7 executive directors of SFH subsidiaries
30 executive officers of SFH subsidiaries

Number of shares granted

Common stock 27,513 shares

Grant dateAugust 7, 2017

Transfer restriction period

From August 7, 2017 to August 7, 2020

Cancellation conditions

On the condition that the recipient has maintained his/her position of executive director, etc., of SFH continuously during the transfer restriction period, the transfer restriction shall be cancelled at the expiration of thetransfer restriction period.
If the recipient loses his/her position of executive director, etc., prior to the expiration of the transfer restriction
period for reasons that the Board of Directors of SFH deems justifiable, he/she can cancel the transfer restriction
for the number of allocated stock calculated by multiplying the number of allocated stock by the number ofmonths he/she serves as executive director, etc., from the month of the appointment of his/her respective
position up to the month of losing his/her position, and dividing the value by 12. SFH shall acquire the allocatedstock not subject to the cancellation of the transfer restriction free of charge immediately after the cancellation.

Fairly assessed value on the
grant date

¥2,020Category and number of
eligible recipients

3 executive directors of SFH
4 executive officers of SFH
6 executive directors of SFH subsidiaries
33 executive officers of SFH subsidiaries

The second series of restricted stock compensation of SFH

Number of shares granted

Common stock 27,770 shares

Grant dateAugust 7, 2018

Transfer restriction period

From August 7, 2018 to August 7, 2021

Cancellation conditions

On the condition that the recipient has maintained his/her position of executive director, etc., of SFH continuously during the transfer restriction period, the transfer restriction shall be cancelled at the expiration of thetransfer restriction period.
If the recipient loses his/her position of executive director, etc., prior to the expiration of the transfer restriction
period for reasons that the Board of Directors of SFH deems justifiable, he/she can cancel the transfer restriction
for the number of allocated stock calculated by multiplying the number of allocated stock by the number ofmonths he/she serves as executive director, etc., from the month of the appointment of his/her respective
position up to the month of losing his/her position, and dividing the value by 12. SFH shall acquire the allocatedstock not subject to the cancellation of the transfer restriction free of charge immediately after the cancellation.

Fairly assessed value on the
grant date

¥2,091

Sony Financial Holdings Inc. Annual Report 2020

81

The third series of restricted stock compensation of SFH

Category and number of
eligible recipients

3 executive directors of SFH
5 executive officers of SFH
8 executive directors of SFH subsidiaries
31 executive officers of SFH subsidiaries

Number of shares granted

Common stock 24,422 shares

Grant dateAugust 6, 2019

Transfer restriction period

From August 6, 2019 to August 6, 2022

Cancellation conditions

On the condition that the recipient has maintained his/her position of executive director, etc., of SFH continuously during the transfer restriction period, the transfer restriction shall be cancelled at the expiration of thetransfer restriction period.
If the recipient loses his/her position of executive director, etc., prior to the expiration of the transfer restriction
period for reasons that the Board of Directors of SFH deems justifiable, he/she can cancel the transfer restriction
for the number of allocated stock calculated by multiplying the number of allocated stock by the number ofmonths he/she serves as executive director, etc., from the month of the appointment of his/her respective
position up to the month of losing his/her position, and dividing the value by 12. SFH shall acquire the allocatedstock not subject to the cancellation of the transfer restriction free of charge immediately after the cancellation.

Fairly assessed value on the
grant date

¥2,564

24. Information on tax effect accounting as of March 31, 2020:(1) Breakdown of major factors giving rise to deferred tax assets and deferred tax liabilities
Millions of yen
2020

As of March 31,

Deferred tax assets
Tax loss carried forward*2

7,710

Policy reserves and others

49,051

Reserve for price fluctuations

14,856

Net defined benefit liability

8,656

Write-down of securities

4,113

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

5,369

Depreciation and amortization

4,735

Net deferred gains (losses) on hedging instruments, net of taxes

245

Others8,875

Subtotal of deferred tax assets

103,615

Valuation allowance on tax loss carried forward*2(7,710)

Valuation allowance on total deductible temporary differences(6,269)Subtotal of valuation allowance*1(13,979)

Total deferred tax assets

89,635

Deferred tax liabilities
Net unrealized gains (losses) on available-for-sale securities(48,539)

Others(2,047)

Total deferred tax liabilities(50,586)

Net deferred tax assets (liabilities)

39,049*1 Valuation allowance increased mainly due to the change in the scope of consolidation and the additional recognition of valuation allowance for losses on
valuation of securities in Sony Life Insurance Co., Ltd., a subsidiary of the Company.
*2 Tax loss carried forward and the deferred tax assets by carry forward period.
Millions of yen
As of March 31, 2020

More than 1
year to 2
1 year or lessyears

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

920

1,020

1,132

589

488

3,559

7,710

Valuation allowance(920)(1,020)(1,132)

(589)

(488)

(3,559)(7,710)

Deferred tax assets

—

—

—

—

—

—

—

* Tax loss carried forward is calculated by multiplying statutory effective tax rate.

82

Total

Tax loss carried forward

Sony Financial Holdings Inc. Annual Report 2020

(2) Breakdown of major factors giving rise to a significant difference between the statutory effective tax rate and theeffective income tax rate after application of tax effect accounting%
2020

As of March 31,

Statutory effective tax rate

30.6

(Adjustments)
Difference in tax rate of subsidiaries(2.4)

Increase (decrease) in valuation allowance

2.1

Others(0.5)

Effective income tax rate after application of tax effect accounting

29.9

25. Information on business combinations, etc. as of March 31, 2020:
Sony Life Insurance Co., Ltd. (hereinafter “Sony Life”), a wholly-owned consolidated subsidiary of SFH, acquired 50% of the issued shares ofboth Sony Life With Insurance Co.,Ltd.* (“Sony Life With”) and SA Reinsurance Ltd. (“SA Re”; the two acquirees are hereinafter collectively
referred to as “the two joint ventures”), and the two joint ventures became wholly-owned subsidiaries of SFH and Sony Life.

1. Overview of business combinations(1) Names and businesses of acquirees(i) Name of acquiree
Sony Life With Insurance Co.,Ltd.*Business
Life insurance business(ii) Name of acquiree
SA Reinsurance Ltd.
Business
Reinsurance business(2) Main reason for business combination
The aim is to accelerate management decision making and streamline business operation by acquiring the two joint ventures as wholly-owned subsidiaries.
(3) Date of business combinations
January 29, 2020
(4) Legal form of business combinations
Acquisition of shares for a monetary consideration(5) Name of acquirees after the business combinations(i) Sony Life With*
Sony Life With Insurance Co.,Ltd.*(ii) SA Re
The company name remained unchanged after the business combination.
(6) Proportion of voting rights acquired(i) Sony Life With*
Proportion of voting rights held immediately prior to acquisition
50.0%
Proportion of voting rights acquired on the date of the business combination
50.0%
Proportion of voting rights held after acquisition
100.0%(ii) SA Re
Proportion of voting rights held immediately prior to acquisition
50.0%
Proportion of voting rights acquired on the date of the business combination
50.0%
Proportion of voting rights held after acquisition
100.0%(7) Basis for determining the acquirer
The determination is based on the fact that Sony Life acquired all of the voting rights of the two joint ventures, which were affiliates
accounted for by the equity method, through the acquisition of shares for a monetary consideration.
* The trade name was changed from AEGON Sony Life Insurance Co., Ltd. to Sony Life With Insurance Co.,Ltd. on April 1, 2020.

2. Period for which the financial results of the acquirees are included in the consolidated statements of income
From February 1, 2020 to March 31, 2020
The gains and losses of the acquirees for the period from April 1, 2019 to January 31, 2020 are recorded on the consolidated statements ofincome as equity in (gains) losses of affiliates.

3. Details of the acquisition cost and consideration paid for the acquirees (total for the two companies above) by type
Fair value of the equity interests before the business combinations, as of the date of the business combinations¥13,932 million

Fair value of the additional shares acquired on the date of the business combination¥18,750 million

Acquisition cost

¥32,682 million

4. Details and amounts of main expenses associated with the acquisitions
Advisory cost, etc. ¥250 million

5. Difference between the acquisition cost of the acquirees and the total of the cost of each transaction leading up to
the acquisition
Gains on step acquisitions ¥248 million

Sony Financial Holdings Inc. Annual Report 2020

83

6. Amount of goodwill arising from the acquisitions, reason for the goodwill, and method and period of amortization(i) Amount of goodwill¥3,609 million(ii) Reason for the goodwill
Expected profitability improvements from accelerating management decision making and streamlining business operation.
(iii) Method and period of amortization
Straight-line amortization over 20 years

7. Assets acquired and liabilities assumed on the date of the business combinations, and their main components
Total assets¥600,480 million[including cash and due from banks ¥27,287 million][including securities¥530,851 million]

Total liabilities¥572,354 million[including policy reserves and others ¥567,173 million]

8. Approximate amounts and calculation method of the effect of the business combinations on the consolidated
statements of income for the fiscal year ended March 31, 2020, if the business combinations had been completed
on the first day of the said fiscal year
Ordinary revenues¥90,909 million

The effect on ordinary profit and profit attributable to owners of the parent is immaterial.
(Calculation method of the approximate amount)
The approximate amount has been calculated as the difference between the ordinary revenues, ordinary profit and profit attributable toowners of the parent for the fiscal year ended March 31, 2020, if the business combinations had been completed on the first day of the said
fiscal year, and the amounts of ordinary revenues, ordinary profit and profit attributable to owners of the parent presented in the consolidated
statements of income. In addition, the approximated amount includes the amortization of goodwill recognized at the time of the businesscombinations, as if the business combinations had been completed on the first day of the fiscal year ended March 31, 2020.
Audit attestation has not been obtained for these amounts.

26. 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 obligation to restore sites to their original states under the lease agreement of commercial
properties, as well as 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 and others.

(2) Basis of measurement for asset retirement obligations
The amount of asset retirement obligations is calculated by estimating the usable period to be 15 to 50 years from acquisition and then applying a 0.1% to2.3% discount rate.

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

Balance at the beginning of the period

2020
2,176

Increase due to purchase of tangible fixed assets

155

Changes resulting from the passage of time

16

Decrease due to performance of asset retirement obligations(34)

Increase due to a change in the scope of consolidation

30

Other increases (decreases)*(69)

Balance at the end of the period

2,273* Other increases (decreases) consist of a decrease due to the cancellation of a lease agreement, as a result of the purchase of a building that was leased
by a consolidated subsidiary.

27. Fair value information on investment and rental property:
Some consolidated subsidiaries own rental office buildings in Tokyo and other areas. Income related to investment and rental property amounted to ¥5,823 million for the year ended March 31, 2020. Below is the consolidated balance sheet amount, net of changes during the period,
and the fair value at the end of the current period.
Millions of yen
For the year ended March 31,

2020

Consolidated balance sheet amount
Balance at the beginning of the period
Changes during the period(293)

Balance at the end of the period

83,698Fair value at the end of the period

201,714

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

84

83,991

Sony Financial Holdings Inc. Annual Report 2020

28. A subsequent event is as follows:(Tender offer for the shares, etc. of SFH by Sony Corporation)
SFH resolved at the meeting of its Board of Directors held on May 19, 2020 to express its opinion in support of the tender offer for SFH’s
common shares (the “Company’s Common Shares”) and stock acquisition rights to be conducted by Sony Corporation (the “Tender Offeror”),
the controlling shareholder (parent company) of SFH (the “Tender Offer”), and to recommend that the shareholders and the holders of the stockacquisition rights of SFH tender the SFH’s common shares and the stock acquisition rights in the Tender Offer. The resolution of the Board of
Directors stated above was made on the assumption that the Tender Offeror intends to make SFH its wholly-owned subsidiary through theTender Offer and a series of subsequent procedures and that SFH’s Common Shares will be delisted.

1. Outline of Tender Offeror
(1)
(2)
(3)
(4)

Name
Head office
Name and title of representative
Description of businessSony Corporation
7-1 Konan 1-chome, Minato-ku, Tokyo
Kenichiro Yoshida, Representative Corporate Executive Officer
Game & Network Services, Music, Pictures, Electronic Products & Solutions (Mobile Communications/
Imaging Products & Solutions/Home Entertainment & Sound), Imaging & Sensing Solutions, Financial
Services, and All Other businesses(5) Common stock¥880,213 million (As of March 31, 2020)(6) Date of incorporation
May 7, 1946
(7) Major shareholders and share holding ratios (as of December 31, 2019)
Citibank As Depositary Bank For Depositary Receipt Holders (Standing proxy: MUFG Bank, Ltd.)

10.07%The Master Trust Bank of Japan, Ltd. (Trust Account)

6.85%

Japan Trustee Services Bank, Ltd. (Trust Account)

5.61%

JP Morgan Chase Bank 380055 (Standing proxy: Mizuho Bank, Ltd.)

2.30%

Japan Trustee Services Bank, Ltd. (Trust Account 5)

2.09%

State Street Bank West Client - Treaty 505234 (Standing proxy: Mizuho Bank, Ltd.)

1.99%

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

1.99%

GIC Private Limited - C (Standing proxy: MUFG Bank, Ltd.)

1.87%

SSBTC Client Omnibus Account (Standing proxy: The Hongkong and Shanghai Banking Corporation Limited)

1.86%

J.P. Morgan Bank Luxembourg S.A. 1300000 (Standing proxy: Mizuho Bank, Ltd.)

1.84%(8) Relationship between the Tender Offeror and SFH• Capital relationship: The Tender Offeror holds 283,050,000 Company’s Common Shares (share holding ratio: 65.04%).
• Personnel relationship: Three of the Company’s ten directors hold positions as director, corporate executive officer or executive officerof the Tender Offeror and other two of them worked at the Tender Offeror. Also, one of the Company’s three audit & supervisory board
members holds a position as an employee of the Tender Offeror. In addition to the above, three employees of Group companies(Note 1) are seconded to Other Tender Offeror Group Companies (Note 2), and 16 employees of Other Tender Offeror Group Companies are seconded to Group companies as of March 31, 2020.
• Business relationship: Group companies have executed trade name and trademark license agreements with the Tender Offeror
regarding the use of the trademarks, etc. in which “Sony” is used. Under those agreements, Group companies pay brand royalties to
the Tender Offeror. In addition, Sony Life Insurance Co., Ltd. leases its headquarters building to the Tender Offeror as part of its asset
management, and receives the rent based on the real estate appraisal.
• Status as related party: The Tender Offeror is the Company’s parent company, and therefore a related party of the Company.
Notes: 1. “Group companies” means the Company and its 13 consolidated companies (as of March 31, 2020).
Notes: 2. “Other Tender Offeror Group Companies” means companies which constitute the Tender Offeror Group, excluding thecompanies which constitute Group companies. “Tender Offeror Group” means the Tender Offeror, its 1,529 subsidiaries, andits 155 affiliates, out of which there are 1,490 consolidated subsidiaries (including variable interest entities) and 140 equity
method affiliates (as of March 31, 2020).

2. Outline of the Tender Offer(1) Period of the tender offer, etc.
From Wednesday, May 20, 2020, to Monday, July 13, 2020 (39 business days)(2) Price for purchase, etc.
1) ¥2,600 per common share2) Stock acquisition rights• Stock acquisition rights issued pursuant to the resolution approved at the meeting of the Company’s Board of Directors held on July22, 2016 (partially amended by the resolution approved at the meeting of the Company’s Board of Directors held on May 31, 2017):¥259,900 per unit
• Stock acquisition rights issued pursuant to the resolution approved at the meeting of the Company’s Board of Directors held on July13, 2017: ¥259,900 per unit
• Stock acquisition rights issued pursuant to the resolution approved at the meeting of the Company’s Board of Directors held on July17, 2018: ¥259,900 per unit
• Stock acquisition rights issued pursuant to the resolution approved at the meeting of the Company’s Board of Directors held on July18, 2019: ¥259,900 per unit
(3) Number of shares to be purchased under the tender offer
Number of shares to be purchased:
152,130,036
Minimum number of shares to be purchased: 7,070,000
Maximum number of shares to be purchased:(4) Date of commencement of the tender offer
Wednesday, May 20, 2020

Sony Financial Holdings Inc. Annual Report 202085

2 Notes to the Consolidated Statements of Income
Profit attributable to owners of the parent per share is calculated based on the weighted-average number of shares of common stock outstanding
during the period. Profit attributable to owners of the parent per share for the year ended March 31, 2020 was ¥171.09. The basis for this calculation for the year ended March 31, 2020 is profit attributable to owners of the parent of ¥74,429 million, the entire amount of which is applicable tocommon stock. The weighted-average number of shares outstanding for the year ended March 31, 2020 was 435,041 thousand shares.
Diluted net income per share attributable to owners of the parent was ¥171.04. There was no adjustment to profit attributable to owners of
the parent for a basis for calculation, and common stock reflecting the dilutive shares increased by 115 thousand shares.

3 Notes to the Consolidated Statements of Comprehensive Income
Reclassification adjustments and income tax benefit (expense) on components of other comprehensive income for the year ended March 31,
2020 are as follows:
Millions of yen
2020

For the year ended March 31,

Net unrealized gains (losses) on available-for-sale securities, net of taxes:
Gains (losses) arising during the period(20,899)

Reclassification adjustments

535

Pre-tax amount(20,364)

Income tax benefit (expense)

6,457

Net unrealized gains (losses) on available-for-sale securities, net of taxes(13,907)

Net deferred gains (losses) on hedging instruments, net of taxes:
Gains (losses) arising during the period

2,086

Reclassification adjustments(1,071)Pre-tax amount

1,014

Income tax benefit (expense)(310)

Net deferred gains (losses) on hedging instruments, net of taxes

703

Remeasurements of defined benefit plans, net of taxes:
Gains (losses) arising during the period

148

Reclassification adjustments

769

Pre-tax amount

918

Income tax benefit (expense)(259)

Remeasurements of defined benefit plans, net of taxes

658

Share of other comprehensive income of affiliates accounted for using equity method
Reclassification adjustments(23)

Total other comprehensive income(12,569)

4 Notes to the Consolidated Statements of Changes in Net Assets

1. Types and numbers of shares issued are as follows
Thousands of shares
2020

For the year ended March 31,

Issued shares
Common stock
Total
Treasury stock
Common stock
Total

Number of shares
increased during
the period

Number of shares
decreased during
the period

Number of shares
as of March 31,
2020

435,062435,062

24
24

—
—

435,087
435,087

37
37

0
0

—
—

37
37

Number of shares
as of April 1, 2019

Notes: 1. The increase of 24 thousand shares in common stock (of shares outstanding) was due to allocation of restricted stock by resolution of theBoard of Directors.
2. The increase of 0 thousand shares in common stock (of treasury stock) was due to repurchase of fractional shares constituting less than one
trading unit.

86

Sony Financial Holdings Inc. Annual Report 2020

2. Information on stock acquisition rights is as follows:
SFH

Detail of stock acquisition rights

Balance as of March 31, 2020
(Millions of yen)

Stock acquisition rights as stock options

215

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

Type of shares

Aggregate amountof dividends

Cash dividends
per share

Record date

Effective dateOrdinary General
Meeting of Shareholders
held on June 21, 2019

Common stock¥27,189 million¥62.5

March 31, 2019

June 24, 2019(2) Dividends to be paid in the next fiscal year
Resolution

Type of shares

Aggregate amountof dividends

Source ofdividends

Cash dividends
per share

Record date

Effective dateOrdinary General
Meeting of Shareholders
held on June 23, 2020

Common stock¥30,453 million

Retained earnings¥70.0

March 31, 2020

June 24, 2020

5 Notes to the Consolidated Statements of Cash Flows

1. Cash and cash equivalents in the statement of cash flows is equal to cash and due from banks as stated in the consolidated balance sheet asof March 31, 2020.
Millions of yen
2020

For the year ended March 31,

Cash and due from banks

549,964

Cash and cash equivalents

549,964

2. Details of assets and liabilities of companies newly included in the scope of consolidation through the acquisition of shares
Details of the assets acquired and liabilities assumed through the acquisition of Sony Life With Insurance Co.,Ltd.* and SA Reinsurance Ltd. (hereinafter collectively referred to as “the two joint ventures”) as consolidated subsidiaries through the acquisition of shares, at the time of consolidation,and the relationship between the amount paid for acquisition of the two joint ventures and the net inflow due to their acquisition, are as follows.

* The trade name was changed from AEGON Sony Life Insurance Co., Ltd. to Sony Life With Insurance Co.,Ltd. on April 1, 2020.
Millions of yen
Assets600,480[Including cash and due from banks][27,287][Including securities][530,851]

Goodwill

3,609

Liabilities(572,354)[Including policy reserves and others][(567,173)]

Other

946

Amount paid to acquire shares of the two joint ventures

32,682

Amount paid prior to gaining control(29,450)

Equity method valuation prior to gaining control

15,766

Gains on step acquisitions
Cash and cash equivalents held by the two joint ventures
Difference: inflow from the acquisition of the two joint ventures(248)(27,287)
8,537

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

Sony Financial Holdings Inc. Annual Report 202087

Segment Information
1 Outline of Reportable Segments
The Sony Financial Group’s reportable segments are components of the Group whose operating results are regularly reviewed by the Board of
Directors to make decisions about resources to be allocated to the segments and assess their performance, for which discrete financial information
is available.
SFH is the financial holding company of Sony Life Insurance Co., Ltd., Sony Assurance Inc., Sony Bank Inc., Sony Lifecare Inc., and SonyFinancial Ventures Inc., and pursues financial group strategies. The subsidiaries make their own business plans and engage in business activities fromwhich they may earn revenues and incur expenses, under the Insurance Business Law of Japan, the Banking Law of Japan, and other regulations.
The Sony Financial Group consists of three reportable segments: the life insurance business, the non-life insurance business and the banking
business.

• The life insurance business consists of Sony Life Insurance Co., Ltd., Sony Life With Insurance Co.,Ltd.* and SA Reinsurance Ltd.
• The non-life insurance business consists of Sony Assurance Inc.
• The banking business consists of Sony Bank Inc., Sony Payment Services Inc., SmartLink Network Hong Kong Limited, andSmartLink Network Europe B.V.
* The trade name was changed from AEGON Sony Life Insurance Co., Ltd. to Sony Life With Insurance Co.,Ltd. on April 1, 2020.

2 Calculation Method for Amounts of Ordinary Revenues, Income, Assets, Liabilities and Other Items by Each

Reportable Segment
Accounting of reported business segments is roughly the same as described in page 64 through page 67 “Significant Basic Items for the
Preparation of the Consolidated Financial Statements” of this report.
Intersegment ordinary revenues are based on third-party transaction prices.

3 Information on Amounts of Ordinary Revenues, Income, Assets, Liabilities and Other Items by Each

Reportable Segment
Millions of yen
2019
Reportable Segments
Life insurance
business

Non-life insurance
business
Banking business

Total

Other*1

Total

Ordinary revenues*

2(1) External customers(2) Intersegment
Total

1,461,632

115,101

45,766

1,622,500

6,681

2,735

1

252

2,988

—

1,629,182
2,988

1,464,367

115,102

46,018

1,625,488

6,681

1,632,170

Segment profit

78,213

6,897

9,597

94,708(1,021)

93,687

Segment assets

10,380,274

219,672

2,878,879

13,478,825

22,636

13,501,462

Other
7,847

2,457

2,489

12,794631

13,425

166,953

1,372

31,926200,2522

200,255

Interest expenses

1,604

—

8,643

10,248507

10,755Equity in earnings (losses) of affiliates(1,748)——(1,748)—(1,748)Investments in affiliates

10,969——10,969—10,969

Increase in tangible fixed assets andintangible fixed assets*4

9,496

5,790

3,977

19,264

1,141

20,406

Depreciation*3
Interest income and dividends*1 “Other” represents the nursing care business and the venture capital business, which are business segments not included in reportable segments.
*2 Ordinary revenues stated herein are equivalent to net sales of a regular entity.
*3 Depreciation includes amortization of long-term prepaid expenses, etc.
*4 Increase in tangible fixed assets and intangible fixed assets includes an increase in long-term prepaid expenses, etc.

88Sony Financial Holdings Inc. Annual Report 2020

Millions of yen
2020
Reportable Segments
Life insurance
business

Non-life insurance
business
Banking business

Other*1

Total

Total

Ordinary revenues*

2(1) External customers

1,602,154

121,727

49,997

1,773,879

7,541

2,601

1

275

2,877

—

2,877

1,604,756

121,728

50,272

1,776,757

7,541

1,784,298(2) Intersegment
Total

1,781,420

Segment profit

94,382

8,072

10,690113,145(1,441)

111,704

Segment assets

11,796,918

234,884

3,096,574

15,128,377

25,18815,153,565

Other
Depreciation*3
Interest income and dividends

9,174

2,476

2,765

14,416726

15,142

181,812

1,337

33,950217,100

3

217,103

Interest expenses

5,064

—

9,270

14,334705

15,040Equity in earnings (losses) of affiliates

(11)

—

—

(11)

—

(11)

Increase in tangible fixed assets andintangible fixed assets*4

17,216

7,143

2,715

27,075

4,652

31,727*1 “Other” represents the nursing care business and the venture capital business, which are business segments not included in reportable segments.
*2 Ordinary revenues stated herein are equivalent to net sales of a regular entity.
*3 Depreciation includes amortization of long-term prepaid expenses, etc.
*4 Increase in tangible fixed assets and intangible fixed assets includes an increase in long-term prepaid expenses, etc.
4 Differences between the Reportable Segments Total and the Amount in the Consolidated Financial

Statements, and the Main Components of Such Differences (Matters Related to Reconciliation)1

Total ordinary revenues of reportable segments and ordinary revenues in the consolidated statements of income
Millions of yen

Totals of reportable segments

2

2019

2020

1,625,488

1,776,757

Other

6,681

7,541

Adjustments for intersegment transactions(2,988)(2,877)

Ordinary revenues in statement of income

1,629,182

1,781,420

Total income of reportable segments and ordinary profit in the consolidated statements of income
Millions of yen
2019

2020

Totals of reportable segments

94,708113,145

Other(1,021)(1,441)

Amount not allocated to reportable segments
Ordinary profit in statement of income

3

169

176

93,856

111,880

Total assets of reportable segments and the amount of assets in the consolidated balance sheets
Millions of yen

Totals of reportable segments

2019

2020

13,478,825

15,128,377

Other

22,63625,188Adjustments for intersegment transactions(66,653)(72,023)

Amount not allocated to reportable segments
Assets in balance sheets

4

33,40644,16813,468,215

15,125,710

Total other items of reportable segments and the amount of the items equivalent thereto in the consolidated
financial statements
Millions of yen
Reportable Segments Total

Other
2019

Amounts in the Consolidated
Financial Statements

Reconciliation

2019

2020

2019

Depreciation

12,794

14,416

631

726

40

49

13,46615,191

Interest income and dividends

200,252

217,100

2

3

(0)

(0)

200,255

217,103

Interest expenses

10,24814,334

507

705

(77)

(75)

10,678

14,964Equity in earnings (losses) of affiliates(1,748)

(11)

—

—

—

—

(1,748)(11)

Investments in equity-method affiliates

10,969

—

—

—

—

—

10,969—

Increase in tangible fixed assets andintangible fixed assets

19,26427,075

1,141

4,652

69

94

20,47531,822

2020

2019

2020

2020

Sony Financial Holdings Inc. Annual Report 202089

Other Financial Data
■ Sony Financial Holdings (Consolidated)
Risk-monitored Loans
Millions of yen
As of March 31,

2019

2020

Category
Bankrupt loans

180

187

1,220

1,116

Past-due loans (3 months or more)——

Restructured loans

800

814

2,201

2,117

Non-accrual delinquent loans

Total

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

2019

2020

1,481,117

1,600,316

Common stock, etc.

505,148

546,010

Reserve for price fluctuations

50,34353,060Contingency reserve

98,736110,973

Catastrophe reserve

24,63627,860483

507

157,692

141,225

51,154

65,673(2,090)(1,172)——(A) Total consolidated solvency margin

General reserve for possible loan losses
Net unrealized gains (losses) on available-for-sale securities and net deferred gains or losses on
hedging instruments, net of taxes (before tax deductions) x 90% (100% if losses)
Net unrealized gains (losses) on real estate x 85% (100% if losses)
Total amount of unrecognized net actuarial gain (loss) and unrecognized prior service cost (before
subtracting tax effects)
Amount excluded from deferred tax assets
Unallotted portion of reserve for policyholders’ dividends

245

152

Deferred tax assets (after deducting amount excluded)

95,400105,303

Subordinated debt and surplus components of premium reserve

510,406

550,766

Total solvency margin of small-amount short-term insurers
Deductible items(B) Total consolidated risk[{(R12+R52)+R8+R9}2+(R2+R3+R7)2]+R4+R6——(11,040)(45)

171,586

191,526

Insurance risk (R1)

24,57424,564

Ordinary insurance risk (R5)

13,181

13,711

Major catastrophe risk (R6)

1,105

1,100

Third-sector insurance risk (R8)

8,527

8,459

—

—

34,18636,769Insurance risk of small-amount short-term insurers (R9)Assumed interest rate risk (R2)
Minimum guarantee risk (R7)

22,141

24,069Asset management risk (R3)

103,438

118,623

6,618

7,271

1,726.3%

1,680.3%
71 1

Business management risk (R4)
Consolidated solvency margin ratio (A)/{(1/2)x(B)} x 100

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

90

Sony Financial Holdings Inc. Annual Report 2020

■ Sony Life (Non-consolidated)
Risk-monitored Loans
Billions of yen
As of March 31,

2019

2020

Category
Bankrupt loans—

0.0

Non-accrual delinquent loans

0.0

0.0

Past-due loans (3 months or more)——

Restructured loans

—

—

0.0

0.0

Total

■ Sony Assurance
Risk-monitored Loans
The company does not have any risk-monitored loans (loans for which repayment conditions are not ordinary).

■ Sony Bank (Non-consolidated)
Risk-monitored Loans
Billions of yen
As of March 31,

2019

2020

Category
Bankrupt loans

0.1

0.1

Non-accrual delinquent loans

1.2

1.1

Past-due loans (3 months or more)―—

Restructured loans

0.8

0.8

2.2

2.1

Total

Sony Financial Holdings Inc. Annual Report 202091

Relationship with Parent Company, Sony Corp. (As of July 1, 2020)
The relationship between SFH and its parent company, Sony Corp., is as described below.

●Capital Relationship●Personnel Relationship

SFH is a financial holding company, established in April 2004
as a corporate spin-off from Sony Corp. In October 2007,
SFH’s shares were listed on the First Section of the Tokyo
Stock Exchange with the initial public offering conducted inJapan and overseas. Sony Corp. later made additionalpurchases of SFH shares, bringing its shareholding to
65.06% (excluding treasury stocks) as of March 31, 2020. As
a result, regardless of the intentions and interests of othershareholders, Sony Corp. may have an impact on all mattersrequiring shareholder approval such as the appointment anddismissal of SFH directors and audit & supervisory board
members, mergers and other organizational restructuring,material asset and business transfers, amendments to the
Articles of Incorporation and the payment of dividends.
Sony Corp. announced on May 19, 2020 that it would
conduct a tender offer for the shares and the stock acquisition rights of SFH, with the intention of making SFH its
wholly-owned subsidiary. The board of directors of SFH
determined that becoming a wholly-owned subsidiary ofSony Corp. would create synergies, thereby contributing toincreasing its corporate value and shareholders’ interests,
and therefore expressed its opinion in support of the Tender
Offer and recommended that the shareholders and theholders of the stock acquisition rights tender their shares andstock acquisition rights in the Tender Offer. The Tender Offer
was completed on July 13, 2020. As a result, Sony Corp.
holds 406,626,238 shares of SFH (share holding ratio:
93.47% (excluding treasury shares)) as of July 20, 2020.
Accordingly, Sony Corp. will conduct procedures for acquiring
all of SFH’s shares (excluding SFH’s shares held by Sony
Corp. and the treasury shares held by SFH).

SFH’s three directors and one audit & supervisory board
member serve concurrently as directors, corporate executive
officers or senior vice presidents of Sony Corp. Moreover,Sony Corp. has seconded six employees to SFH. Based on
the above-stated Ensuring Independence in Business Activities, SFH believes that concurrent directors and audit &supervisory board member are positioned to make independent management decisions. From the standpoint of further
enhancing independence from the parent company, SFH has
appointed four outside directors and two outside audit &supervisory board members who have no special relationshipwith the Sony Group and designated them as independent
directors and/or independent audit & supervisory board
members based on rules set forth by the Tokyo Stock
Exchange regulations, respectively.

●Ensuring Independence in Business Activities
Because SFG’s business operations have a tenuous connection with the Sony Group’s business domains except for
Financial Services, and because SFG operates its businessprimarily in accordance with the Insurance Business Act andthe Banking Act of Japan, under the supervision of the
Financial Services Agency (FSA) of Japan, SFH believes thatSFG conducts its business with a certain degree of independence from the Sony Group. In addition, Sony Corp., which
has obtained approval from FSA to remain a major SFH
shareholder, recognizes and respects SFH’s corporate
philosophy.

92

Sony Financial Holdings Inc. Annual Report 2020

●Using the “Sony” Trade Name and Trademark
SFH and Group companies have entered into royalty agreements with Sony Corp. for the use of the “Sony” trade nameand trademark, etc. However, these agreements can be
rescinded by Sony Corp. under certain conditions, such as its
share of voting rights in SFH falling below a majority, or SFH’s
percentage ownership of the voting rights of SFG companies
dropping. Furthermore, SFG pays royalty fees to Sony Corp.
based on these agreements. The amount paid in fiscal 2019was ¥3,164 million and the amount of these royalty fees has
no material impact on the management base of SFG.
SFG believes that the use of the “Sony” trade name andtrademark confers certain advantages, including stronger
brand recognition, enhanced trustworthiness and higher
employee motivation and awareness.

●Transactions with Sony Corp.
SFH is a listed subsidiary of Sony Corp. For this reason, SFH
has set out a Policy Concerning Measures to Protect Minority
Shareholders in Transactions with the Controlling Shareholder
to protect the interests of minority shareholders.

Glossary (in Alphabetical Order)A
ALM (asset liability management)
A method for maximizing and stabilizing net
asset value, which is calculated by deducting the value of liabilities from the value of
assets, through the comprehensive grasp
and management of assets and liabilities inconsideration of their special characteristics.

Annualized insurance premiums
An indicator of the approximate annual
premium income from existing 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, andby assuming that average payments will bemade over the term of the policy.

Assumed interest rate
Insurance companies anticipate a certain
return on invested assets in advance anddiscount insurance premiums only by thisamount. This discount rate is called theassumed interest rate.

Catastrophe reserve
A type of policy reserve, under which,pursuant to the provisions of the Insurance
Business Act of Japan, non-life insurancecompanies are required to accumulate eachfiscal year as an amount calculated basedon premium income to cover losses due
to catastrophic events. In consideration of
the special need for the non-life insurance
business to cover a wide range of risks, thecatastrophe reserve acts as a provision
against the risk of large insurance claims
resulting from earthquakes, typhoons andother disaster occurs. It is structured to beaccumulated over the course of multiple
fiscal years, and reversed during the fiscal
year in which a disaster occurs.

Combined ratio
The sum of a net loss ratio and net expense
ratio. Indicator of non-life insurance company’s profitability in the primary business
operations.

Compulsory automobile liability
insurance

The mortality rate is the percentage of people who die in a single year for a given large
population. The assumed mortality rate is
the mortality rate used when calculating
the amount of insurance premiums needed to cover future benefit payments, andrepresents a projection of the number ofdeaths by gender and age based on paststatistics.

Compulsory automobile liability insurance islegally required for all 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 not paid for vehicle or property damage.

Assumed rate of expense

Contingency reserve

Assumed mortality rate

In operating their businesses, insurancecompanies forecast their expenses, andthen incorporate this amount in their insurance premiums. This expense rate is called
the assumed rate of expense.

C
Capital adequacy ratio
The ratio of capital to total assets. An indicator of whether a bank has enough capital,
including common stock, versus credit
risk assets (of total assets, those which
could become non-performing). If a bank isunable to recover a large amount of loans,it can draw on capital and write off theseloans. A sharp decrease in capital creates
difficulties in bank management.
Capital adequacy ratio regulations ensurethat banks are soundly managed by keeping the capital adequacy ratio above a certain level. This ratio is therefore an important
indicator to show financial soundness. Forbanks possessing business bases overseas, the internationally standardized regulations to preserve financial soundness area capital adequacy ratio of over 8%, andfor banks not possessing business bases
overseas, in Japan a capital adequacy ratio
of 4% is required.

Reserve to prepare for possible contingencies, including insurance risk and assumed
interest rate risk.

Core profit
An indicator of profit (loss) in the primary life
insurance business over a one-year period.
It is derived by subtracting from ordinary
profit any income earned from operations
other than the primary life insurance
business. Profit categories subtracted fromordinary profit include gains (losses) on thesale of securities and one-time gains (losses), such as profit from the sale of assets
owned by the life insurance company.

D
Direct premiums written
Premiums received from policyholders,
calculated by subtracting direct surrender
payments and other direct payments fromdirect premiums.

Duration
A sensitivity index indicating the extent towhich the present value of future cash flow
(interest income, repayment of principal,
receipt of premiums, payment of insurance
benefits and dividends, etc.) from eligible
assets (managed assets) and liabilities(policy liabilities) will be affected by interest

rate fluctuations. While a variety of types
and methods for calculating duration exists,
a method expressing the weighted average
maturity of the cash flow in question isrelatively widely used.

E
Earned/incurred (E.I.) loss ratio
An indicator that represents the loss ratio
incurred during the current period thattakes into account the provision and reversal of reserve for outstanding losses andordinary underwriting reserves calculatedusing the following formula:
Earned/incurred (E.I.) loss ratio = (Net losses paid + Provision for reserve for outstanding losses + Loss adjustment expenses) /Earned premiums (excluding earthquake
insurance and compulsory automobile
liability insurance)

Endowment insurance
Endowment insurance entitles a beneficiary
to receive death or serious disability benefits
upon the death or serious disability of theinsured within an insurance period specified
when the policy is purchased, or to receive
maturity benefits upon policy maturity.

ERM (enterprise risk management)
An approach to accomplishing corporate
strategic goals and sustainable growth incorporate value by conducting integrated
recognition and control of all risks a company faces and seeking to optimize the risk
from a company-wide perspective.

ESR (economic solvency ratio)
ESR is one of the financial soundness
indicators, which measures whether anorganization possesses sufficient capital in
relation to its risks. Sony Life computes its
ESR by dividing MCEV by the risk amountbased on economic value. For details on
MCEV and the risk amount based on economic value, please see “Sony Life MCEV”
in the Financial Data Book.

EV (embedded value)
An indicator of the corporate value of a life
insurance company. Sony Life discloses
MCEV (market consistent embedded value)in conformity with the MCEV Principles. For
details on MCEV, please see “Sony Life
MCEV” in the Financial Data Book.

Expense ratio
The ratio of expenses to insurance premiums. Used as an indicator of business efficiency at insurance companies. Expenses
are used for soliciting, maintaining andmanaging insurance as well as for payment
of insurance claims.

F
Foreign currency-denominatedinsurance
Insurance product in which insurance
premiums are invested in foreign currency.

Sony Financial Holdings Inc. Annual Report 202093Sony Life sells U.S. dollar-denominatedinsurance, in which policyholders pay
the Japanese yen equivalent of the U.S.
dollar-denominated insurance premiums
and select the Japanese yen or U.S. dollar
when they receive insurance claims.

Foundation internal ratings-based
approach
The amount of credit risk assets is calculated mainly by the standard approach or internal rating based approach for computing
the capital adequacy ratio. The standard
approach calculates the amount of credit
risk assets by using the risk weight set by
authorities. On the other hand, the internal rating based approach calculates theamount of credit risk assets by using thedefault rate, etc. as estimated internally byfinancial institutions that practice advanced
risk management. This approach includes afundamental internal rating based approachthat partly uses the values set by authorities
for loss rates at the time of default, and an
advanced internal rating based approachthat uses the values estimated internally byfinancial institutions in every situation.

G
General accounts
Accounts for managing financial assets notincluded in separate accounts. This accountguarantees policyholders a certain assumed
interest rate, while the life insurance company bears the asset management risk.

Gross operating profit
The total income from the four components
of banking services income: net interest
income, net fees and commissions, net
trading income and net other operating
income. Equivalent to gross profit (sales
minus purchases) and an indicator of theamount of profits a bank generates from its
main services.

Investment crowd funding
Investment crowd funding is an arrangementthat uses the Internet to link venture companies’ fund-raising needs for their projects
with investors’ money management needs.
Unlike donation-type and purchase-type
crowd funding, which do not involve monetary return, investors can receive dividends.
Meanwhile, investment crowd funding has
the feature of investment products associated with risks, whereby dividends may not be
paid or the investment value may fall below
the amount invested due to the performanceof venture companies, etc.

L
Lapse and surrender rate
Surrender refers to the cancellation of an
insurance policy at some point in the future.
Upon surrender, the policy is terminated,
and from that point protection or coverage
is lost. On the other hand, a lapse is whena policyholder fails to pay premiums within
the payment grace period, causing thepolicy to lapse, from which point the policy
will no longer provide protection.
The lapse and surrender rate is the ratioof lapses and surrenders to policies inforce at the beginning of the fiscal year. It
is calculated by adding the total of lapses
and surrenders for the year in question, andthen dividing by the amount of policies inforce at the beginning of the fiscal year.

Living benefit insuranceThis insurance provides a lump-sum benefit
payment when the insured is diagnosed
with a disease such as one of the three major diseases (cancer, heart attack or stroke).

Loss adjustment expenses

Individual annuities

Expenses incurred by an insurancecompany in examining an insured event.
These include personnel and non-personnel
expenses.

Policyholders are eligible for receiving
annuity payments from funds accumulated
by paid insurance premiums at a certain
age prescribed in the policy. There are avariety of types depending on the period forreceiving the annuity, structure of the annuity, method for paying premiums and death
protection prior to receiving the annuity.

The ratio of insurance claims paid to premium income. Used in analyzing the businessof an insurance company and in calculating
insurance premium rates. The net loss ratiois the ratio derived by adding loss adjustment expenses to net losses paid, thendividing by net premiums written.

I

Individual variable annuities
Individual annuity product in which assets
are invested mainly in stocks and bonds,
and annuity and surrender payments
increase or decrease depending on investment returns. The individual policyholder
bears the asset management risk.

Insurance premiums
Money paid by policyholders to an insurance company based on the insurance

94

policy. Even after submitting an insurance
policy application, no protection or compensation is provided unless premiums are paid.

Sony Financial Holdings Inc. Annual Report 2020

Loss ratio

M
MDRT (Million Dollar Round Table)
A global, independent association of theworld’s leading life insurance and financial
services professionals with 72,000 members
from 70 countries and territories. MDRT
members demonstrate exceptional professional knowledge and strict ethical conduct.
Through their outstanding client services,

MDRT members are recognized as leadersof the business and local communities. They
are also internationally recognized as professionals in the life insurance and financial
services business.

N
Net fees and commissions
Fees and commissions charged for providing services. These refer to income generated by providing services, such as banktransfer fees and investment trust salescommissions, less the costs associatedwith providing these services.

Net interest income
Net interest income accounts for the largest
percentage of the four income componentsof gross operating profit. Banks generally
use the deposits received from individuals
and the funds raised in interbank markets
to provide loans to individuals and companies and to invest in securities. Net interest
income is the difference between the totalinterest received from loans and otheritems (interest income) and the total interest
paid for deposits and other items (interest
expenses). Net interest income is affectedby changes in interest rates (e.g., if depositinterest rates rise while loan interest rates
stay at the same levels, net interest income
will decrease), and by deposit and loanbalances.

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

Net premiums written
Premiums received directly from policyholders (direct premiums written), adjusting forreinsurance premiums (subtracting reinsurance premiums paid and adding directreinsurance premiums received).

Non-performing assets
Non-performing assets are claims against
parties in bankruptcy, claims against parties
in effective bankruptcy due to poor businessor other reasons, and claims against parties
at risk of bankruptcy. Non-performing assets
also include loans for which principal 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.

O
Over-the-counter (OTC) sales of
insurance products at banks
A bank serves as an insurance agency tosolicit insurance.

P
Policy amount in force
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(Underwriting reserves)
Reserves that insurance companies accumulate in advance, funded by premiums,
investment income, and other sources, toprepare for future liabilities resulting frominsurance policies, including payments ofclaims, annuities and benefits.

Policy reserves and others(Underwriting reserves)
Reserves recorded in the liabilities sectionof the balance sheets for which insurancecompanies are required in the Insurance
Business Act of Japan to accumulate toprepare for the payment of future claims
and other items to fulfill their obligations forpaying claims and other actions based on
insurance policies. Policy reserves and others include “reserve for outstanding claims”
and “policy reserves.”

Policyholder loans
As one of the asset management operations of life insurance companies, loans provided up to a certain level of the surrender
payment on life insurance policies. In general, policyholders retain insurance protection
and rights to receive dividends during theperiod of the policyholder loan. However,policyholder loans may not be available
depending on the type of insurance.

Policyholders’ dividend reserve
A reserve accumulated to fund dividend
payments to policyholders pursuant to the provisions of the Insurance Business Act of Japan.

Positive spread
The amount by which the actual investment
income is higher than the expected investment income from the assumed interest rate.

R
Reference loss cost rates
Non-life insurance premium rates comprise
net insurance premium rates used for paying insurance claims and loading insurance
premium rates used for operating insurance
businesses. Net insurance premium rates
calculated by the General Insurance Rating
Organization of Japan are called reference
loss cost rates. Member insurers of theorganization can use the rates as the basis
for calculating their own insurance premium
rates.

Reinsurance
The insurance agreement that insurancecompanies conclude with domestic andoverseas reinsurance companies for someof the insurance policies they underwrite inorder to diversify risks on insurance policies.

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

Reserve for price fluctuations
This reserve is set aside to prepare forlosses caused by price fluctuations instocks, bonds and other assets held by aninsurance company.

RidersStandard Mortality Table
The Institute of Actuaries of Japan preparesa table that compiles data including mortality rates and average life expectancies bygender and age. Of these data, mortality
rates are verified by the Commissioner ofFinancial Services Agency of Japan, andthen used as the assumed mortality rates incalculating standard policy reserves required
under the Insurance Business Act of Japan.

Standard yield
The standard yield is the calculating rateinsurance companies are required to use
when accumulating policy reserves for
future insurance payments.

Surrender payments
Money refunded to the policyholder in theevent that the insurance policy is surrendered or cancelled. Surrender payment
amounts vary depending on several factors,
including the type of insurance, insurance
period and years elapsed.

Riders can enlarge the scope of protectionin the primary policy by adding provisions
to the primary coverage. Riders do notconstitute a policy by themselves. Multiple
riders can be added to the primary policy.
Riders are canceled when the primary policy is canceled due to maturity, surrender orother reasons.

T

ROEV (return on embedded value)U

ROEV is an indicator that refers to the growthpotential of corporate value. The amount of
increase of EV (embedded value), an indicatorof a life insurance company’s corporate
value, is deemed to be profit that takes into
account the unique aspects of life insurance
accounting. Core ROEV is the growth rate of
EV that excludes any fluctuation effects of theinvestment yield and discounted rate.

S
Separate accounts
Separate accounts are used for variable
life insurance, variable annuities and otherinsurance products to invest assets separately from the other financial assets owned
by an insurance company in order to pay
investment returns directly to policyholders.

Solvency margin
The solvency margin indicates payment
ability. Insurance companies accumulate
policy reserves to prepare for the paymentof future claims, allowing them to adequately respond to risks within a normallyanticipated range. However, unforeseen
events can occur due to changes in theenvironment such as major disasters andsubstantial declines in stock prices. The
solvency margin ratio is one measure usedby regulatory authorities to determine howmuch an insurance company is able to pay
in response to the risk of such unpredictable events.

Term insurance
Term insurance entitles a beneficiary toreceive benefits in the event of death orserious disability of the insured within an
insurance period specified when the policy
is purchased.

Underwriting profit
Underwriting profit is calculated by subtracting any underwriting expenses (netlosses paid and loss adjustment expenses,etc.) and operating, general and administrative expenses associated with underwritingfrom underwriting income (net premiums
written, etc.), then adding or subtracting
other income and expenses (income taxes
associated with compulsory automobile
liability insurance, etc.)

V
Variable life insurance
Insurance product in which assets areinvested mainly in stocks and bonds, andclaims and surrender payments increase or
decrease depending on investment returns.
The individual policyholder bears the asset
management risk. The minimum insurance
payment is guaranteed, regardless ofinvestment performance.

W
Whole life insurance
Insurance that pays benefits in the eventthe insured dies or is disabled. Unlike termlife insurance, protection continues for an
entire life.

Sony Financial Holdings Inc. Annual Report 202095

Financial Data Book Contents

2020
Financial Data Book

April 1, 2019 March 31, 2020

Please visit SFH’s website to view the Financial Data Book.
Detailed financial data for each operating company is presented in the
Financial Data Book and it is only disclosed on the website.

https://www.sonyfh.co.jp/en/financial_info/annualreport005_0344787452008.indd

22020/09/24

19:09:06

SFH Financial Data (Consolidated)

Sony Assurance Financial Data

Principal Indicators of Operating Performance

Balance Sheets

Consolidated Balance Sheets

Statements of Income

Consolidated Statements of Income and Consolidated Statementsof Comprehensive Income

Statements of Changes in Net Assets

Consolidated Statements of Changes in Net Assets

1. Loans by Borrower Category

Consolidated Statements of Cash Flows

2. Risk-monitored Loans

Statements of Cash Flows

3. Assets and Liabilities

Sony Life Financial Data (Non-consolidated)

4. Profit and Loss

Balance Sheets

5. Fair Value Information, etc.

Statements of Income
Statements of Changes in Net Assets

Sony Assurance Performance Indicators

1. Loans by Borrower Category

1. Principal Indicators of Operating Performance

2. Risk-monitored Loans

2. Underwriting Performance

3. Accounting Indicators

3. Asset Management

4. Reconciliation to Core Profit and Non-consolidated Ordinary Profit

4. Non-consolidated Solvency Margin Ratio

5. Fair Value Information on Securities (General Account)
6. Fair Value Information on Securities (Company Total)

Sony Bank Financial Data (Consolidated)
Consolidated Balance Sheets

Sony Life Financial Data (Consolidated)

Consolidated Statements of Income

Consolidated Balance Sheet

Consolidated Statements of Comprehensive Income

Consolidated Statement of Income

Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows

Sony Life Performance Indicators (Non-consolidated)
1. Key Performance Indicators for Past Five Years

Sony Bank Financial Data (Non-consolidated)

2. Key Performance Indicators

Balance Sheets

3. Indicators for Insurance Policies

Statements of Income

4. Indicators Related to Asset Management (General Account)

Statements of Changes in Net Assets

5. Status of Insurance Claims Paying Ability

1. Loans by Borrower Category

6. Balance of Separate Account Assets

2. Risk-monitored Loans

7. Investment Progress of Separate Account Assets in Individual
Variable Life Insurance and Individual Variable Annuities

3. Profit and Loss

8. Status of Individual Variable Life Insurance and Individual Variable
Annuities
9. Number of Agencies
10. Number of Employees and Recruits
11. Average Salary

4. Fair Value Information

Sony Bank Performance Indicators (Non-consolidated)
1. Key Performance Indicators
2. Status of Operations (Deposits)
3. Status of Operations (Loans)
4. Status of Operations (Securities)

Sony Life MCEVMCEV Results for Sony Life as of March 31, 2020

96

Sony Financial Holdings Inc. Annual Report 2020

Sony Financial Group