Annual Report 2005

Annual Report

2005
For the year ended March 31, 2005

Sony Financial Holdings Group
This annual report is printed on recycled paper.
Printed in Japan

The Sony Financial Holdings Group (SFH Group) is a financial services group
comprising the financial holding company Sony Financial Holdings Inc. (SFH),
which is wholly owned by Sony Corporation, and three core subsidiaries—
Sony Life Insurance Co., Ltd. (Sony Life), Sony Assurance Inc. (Sony Assurance)
and Sony Bank Inc. (Sony Bank). By integrating the diverse functions that are
inherent to such financial services as savings, investment, borrowing andprotection, the SFH Group aims to earn high levels of trust from its customers
by providing high-value-added products and quality services that meet theirindividual economic needs.

We create new financial services
by generating ideas fromthe fundamentals.
On April 1, 2004, the Sony Financial Holdings Group was
founded, becoming Japan’s first financial group to offer both
insurance and banking services under one umbrella.

Sony Financial Holdings GroupThe design of the symbol used in the corporate logo of each company in the SFH
Group employs “Sony blue” and green to express credibility and a sense of speed.

Contents
Message from Management ......................................... 2
Sony Financial Holdings Group .................................... 6
Sony Life .................................................................. 8
Sony Assurance ..................................................... 12
Sony Bank .............................................................. 16
Corporate Governance ................................................ 20
Compliance .................................................................. 20
Risk Management ........................................................ 21
Privacy Policy ................................................................ 22
Internal Auditing ......................................................... 23
Corporate Data ............................................................ 24
Financial Data .............................................................. 32
Consolidated Capital Adequacy Ratio ....................... 40
Solvency Margin Ratio ................................................ 41(Reference) Financial Data of Subsidiaries ................ 42

Sony Financial Holdings |1

Sony Financial Holdings

Message from Management

We offer high-value-added products andquality services to our customers by integrating
the functions offered by life insurance,
non-life insurance and banking businesses.
Tamotsu Iba

Teruhisa Tokunaka

Kunitake Ando

Chairman, Director

President, Representative Director

Chairman, Representative Director(Appointed June 27, 2005)

2 | Sony Financial Holdings

Background to Sony Financial
Holdings’ Establishment
April 2004 marked the founding of SonyFinancial Holdings, a financial holding company that has Sony Life, Sony Assurance andSony Bank under its umbrella. SFH is wholly
owned by Sony Corporation and is Japan’s firstcompany to hold both insurance and banking
businesses under one umbrella.
In Japan, the financial business environment
is rapidly changing, due to such factors as adeclining birthrate, an aging population andadvances in information technology, and thosefactors are prompting diversification in customers’ lifestyles and needs for financial services and products. We think it is necessary
to respond quickly and appropriately to theseSony Financial Holdings

In April 2004, Sony Financial Holdings was founded as Japan’s first financial
holding company providing both insurance and banking services under one
umbrella. While each subsidiary offers high-value-added products and quality services in its own right, as a group we transcend the boundaries of life
insurance, non-life insurance and banking, integrate the diverse functions
that are inherent to such financial services as savings, investment, borrowing and protection, and aim to become one of the most trusted financial
services groups.

changes. Also, unlike other businesses in theSony Group, growth in financial services businesses such as life insurance, non-life insurance
and banking brings a concurrent increase in

Leading Up to Establishment● March 30, 2004

● April 1, 2004

Sony Corporation received
approval from the Financial
Services Agency in Japan toestablish a financial holding
company as an insurance holding
company under the Insurance
Business Law of Japan and asa bank holding company underthe Banking Law of Japan.
Sony Financial Holdings Inc. wasestablished and began operations
as Japan’s first financial holding
company to hold both insurance
and banking businesses under
one umbrella.

Corporate Vision and Philosophy of the SFH Group
Corporate Vision
The SFH Group aims to integrate the diverse functions that are inherent to such financial services as savings,
investment, borrowing and protection; offer high-value-added products and quality services that meet
individual customers’ economic needs; and become one of the most trusted financial services groups.

Corporate Philosophy
Customer-Oriented
We consider each customer’s input carefully and provide services to their satisfaction, helping them lead
lives that are abundant and trouble-free.
Contributing to Society
We understand that financial services businesses have a certain public nature. As we pursue our vision,
we contribute to society by maintaining high ethical standards and levels of responsibility. We also fulfill
our other obligations as a member of society and good corporate citizen.
Pursuing Originality
We always generate ideas from the fundamentals, and pursue originality and innovation while remaining
unfettered by convention.
Corporate Culture with a Spirit of Freedom and Open-Mindedness
Our ideal for the financial services business recognizes the importance of each employee’s contribution.
Our corporate culture features a spirit of freedom and open-mindedness and takes full advantage ofindividuality and ability.

Sony Financial Holdings |3

Sony Financial Holdings

Financial Highlights (Consolidated)Year ended March 31(Millions of yen, unless otherwise indicated)2005

Ordinary revenues
Ordinary profit
Net income
Net income per share (yen)Common stock
Number of shares outstanding (shares)
Net assets
Total assets
Net assets per share (yen)Consolidated capital adequacy ratio (%)

653,259
12,2696,375
3,069.93
5,500
2,100,000
182,817
3,282,269
87,056.14
12.17

Note: SFH’s consolidated capital adequacy ratio is subject to the capital adequacy
guidelines established by the Financial Services Agency in Japan and which closely
follow the risk-adjusted approach proposed by the Bank for International Settlements(BIS). The insurance subsidiaries are excluded from the calculation of SFH’s
consolidated capital adequacy ratio in accordance with the above guidelines.

the volume of assets deposited by customers.
For these reasons, SFH was established toconcentrate the specialized knowledge andoperational resources needed to develop andoffer high-value-added products and quality
services. With SFH at its hub, the SFH Grouptranscends the boundaries of life insurance,
non-life insurance and banking, integrates thediverse functions that are inherent to such financial services as savings, investment, borrowing
and protection, and aims to become one of
the most trusted financial services groups.
While maintaining the management independence of each subsidiary, the organizational
structure of SFH—whose board includes thepresident of each of its three subsidiaries—isdesigned to plan and implement integrated
and comprehensive groupwide financial
business strategies.

Corporate Strategy that Enhances
Customer Trust
When formulating groupwide strategies, SFH
places its highest priority on protecting customer interests and ensuring the managementsoundness of each subsidiary. We carefully
monitor each subsidiary’s management in a
respectful manner and promote management

4 | Sony Financial Holdings

control activities from the viewpoint of adding
new group management control functions andencouraging creativity.

SFH Group Consolidated
Performance in Fiscal 2004
Although the Japanese business environment
remained severe, with only a slight ongoingrecovery in the domestic economy and continued low interest rates, each subsidiary in the
SFH Group steadily expanded its operations infiscal 2004, ended March 31, 2005.
To offer higher quality services to customers,
Sony Life promoted new sales process management to support the sales activities of Sony
Life’s highly trained life insurance professionals,
Lifeplanners, and the thorough implementationof needs-based sales solutions. As a result,despite a decline in the total insurance inforce in the life insurance industry in Japan,
Sony Life’s total for individual life insurance
and individual annuities in force increased
6% year on year, to ¥27,823.4 billion as ofMarch 31, 2005.
Based on its new corporate slogan, “Feelthe difference—a difference that will change
insurance,” Sony Assurance endeavored toprovide products and services that customers

provision and delivery of products and services, to bring about greater group synergy.
In June 2004, Sony Bank began selling Sony
Life’s individual annuity products, and in
October 2004 Sony Bank began to offer Sony
Assurance’s fire insurance to customers taking
out Sony Bank’s housing loans. Furthermore,in December 2004 Sony Life’s Lifeplanners
started introducing Sony Bank’s housing loans.

Sony Financial Holdings

recognize as clearly distinctive from othercompanies’ offerings. In fiscal 2004, sales ofSony Assurance’s mainstay automobile insurance
and medical and cancer insurance policies grewsteadily, and net premiums written increased
23% year on year, to ¥37.8 billion. Especiallyfor automobile insurance, Sony Assurance
ranked top for direct premiums written among
direct-type non-insurance companies in Japanfor the third consecutive fiscal year.
In fiscal 2004, Sony Bank developed its
activities by focusing on the thorough enhancement of strategic products, furthering tie-ups
with financial services companies within theSony Group and preparing new revenue
streams. In particular, Sony Bank extended its
lineup of services involving such flagship products as foreign currency deposits and housing
loans. As a result, as of March 31, 2005, thenumber of accounts at Sony Bank totaled 367
thousand, up 98 thousand during the year,
and deposits continued to rise, to ¥546.7
billion. In June 2004, SFH took steps to enhanceSony Bank’s financial condition by injecting¥10.0 billion in equity, with the proceeds
raised through an allotment of SFH shares
to Sony Corporation.
We believe our subsidiaries’ financial results
during fiscal 2004 reflect customer confidence
in the SFH Group. We will continue striving toreinforce our level of trust with customers andenhance corporate value through the ongoingand stable growth of the SFH Group.

Future Growth of the SFH GroupSFH is preparing for its initial public offeringwith the goal of diversifying financing opportunities to promote the further growth of theSFH Group. On June 27, 2005, Kunitake Ando,a founding member of Sony Life who served as
Director, President and Representative Corporate
Executive Officer of Sony Corporation until
June 22, 2005, will join our management
team as Chairman and Representative Directorof SFH. Under this new management team,
we will continue to enhance the SFH Group’s
management fundamentals and expand its
business. We thank all our stakeholders foryour ongoing support and look forward to
your cooperation in the years ahead.
June 6, 2005

Tamotsu Iba
Chairman, Director

Tie-ups within the SFH Group
Even before the inception of the SFH Group,Sony Life, Sony Assurance and Sony Bank had
formed certain tie-ups and benefited fromthem. For instance, in May 2001 Sony Life
started to sell Sony Assurance’s automobile
insurance products through its Lifeplanner
sales channel, and in March 2002 Sony Life
began underwriting group credit life insurance
for housing loans extended by Sony Bank.
In fiscal 2004, the first full fiscal year for the
SFH Group, SFH streamlined and enhanced theSFH Group’s structure and reinforced tie-ups,
mainly those involving subsidiaries’ mutual

Teruhisa Tokunaka
President, Representative Director

Sony Financial Holdings |5Sony Life

Sony Financial Holdings

Sony Financial Holdings Group

Aiming to become
one of the most trusted andappealing integrated
financial services groups
Life
Insurance
Sony Life Insurance Co., Ltd.

Sony Assurance

Established: August 10, 1979
Head office: 1-1, Minami Aoyama
1-chome, Minato-ku,
Tokyo, Japan
Common stock: ¥65.0 billion
Employees: 5,528
URL:
http://www.sonylife.co.jp/(Japanese only)

Sony Life

Sony Financial Holdings Inc.
Established: April 1, 2004
Head office: 1-1, Minami AoyamaSony1-chome, Minato-ku,
Tokyo, Japan
Assurance
Common stock: ¥5.5 billion
Employees: 12
URL:
http://www.sonyfh.co.jp/english/

Bank
Sony Bank Inc.

Sony Bank

Established: April 2, 2001
Head office: 9-11, Akasaka 2-chome,
Minato-ku, Tokyo, Japan
Common stock: ¥23.75 billion
Employees: 100
URL:
http://sonybank.net/(Japanese only)

Non-Life
Insurance

Sony Assurance Inc.

Sony Bank

Established: June 10, 1998
Head office: 37-1, Kamata 5-chome,
Ota-ku, Tokyo, Japan
Common stock: ¥20.0 billion
Employees: 480
URL:
http://www.sonysonpo.co.jp/(Japanese only)(As of March 31, 2005)

By integrating the diverse functions that are inherent to suchfinancial services as savings, investment, borrowing and protection, the SFH Group aims to earn high levels of trust from its
customers by providing high-value-added products and quality
services that meet their individual economic needs.

6 | Sony Financial Holdings

Sony Financial Holdings

Teruhisa Tokunaka

Akiyoshi Kawashima

Shinichi Yamamoto

President,
Representative Director
Sony Bank Inc.

President,
Representative Director
Sony Financial Holdings Inc.

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

President,
Representative Director
Sony Assurance Inc.

Sony Life

Shigeru Ishii

Sony Assurance

Three SFH Group subsidiaries—Sony Life, Sony Assurance and Sony Bank—offer financial
services to customers, and each company is highly regarded for its consistent response
to customer needs through new services that are unhindered by industry conventions.
Sony Life provides consulting sales through its Lifeplanners and Partners, Sony Assurance
conducts direct marketing by telephone and via the Internet, and Sony Bank is dedicatedto offering Internet-based services.
While the three companies continually work to strengthen their own businesses,
they also enhance group synergies by reinforcing mutual tie-ups in the areas of offering
products and services, sharing and mutually cultivating sales channels and infrastructure,and planning and implementing brand strategies. The three companies also continue
to offer attractive, high-value-added products and services that conventional financial
institutions are not prepared to provide.
As the holding company of these three subsidiaries, SFH strives to build up intra-groupservices and integrate functions while maintaining each company’s managerial independence.
By putting these comprehensively integrated financial strategies into practice, we aim toenhance the corporate value of the SFH Group.

Sony Bank

Sony Financial Holdings |7

Sony Life Insurance Co., Ltd.

Sony Life

Through finely tuned consulting and after-sales follow-up, Sony Life
provides protection to optimally match each customer’s needs. Sony Lifeembraces a new style of providing life insurance.
Sony Life delivers life insurance products that are optimally tailored for each customer’slife plan. This approach is based on Sony Life’s basic mission, “to work for customers’
economic protection and stability by offering reasonable life insurance products andhigh-quality services.” Particularly nowadays, as personal values in lifestyles and family
situations become more diverse, Sony Life believes careful consulting is an essential
supporting element of people’s varied lives. Taking each family’s specific situation into
consideration, Lifeplanners* (sales employees) and Partners (independent agencies) workwith customers to structure individual life plans that turn their dreams into reality. They
then calculate the amount needed to provide lifelong protection, and tailor an optimallife insurance plan for each customer. After a sale, Lifeplanners and Partners continuously
review protection details along with changes in a policyholder’s lifestyle, and continue tooffer lifelong security by fulfilling after-sales commitments, such as promptly delivering
hospitalization benefits or insurance benefits in the event that a policyholder faces a
problem. For Lifeplanners and Partners, one of the most important missions is to deliverinsurance benefits to policyholders when the unexpected occurs, thereby fulfilling theoriginal purpose of the insurance. To achieve this mission, Lifeplanners and Partners
continuously provide after-sales service that responds promptly to changes not onlyin policyholders’ family situations but also in the social and economic environment.
* “Lifeplanner” is a registered trademark of Sony Life Insurance Co., Ltd.

History● 1979AugustSony Prudential Life Insurance Co., Ltd. established as a joint venture between Sony
Corporation and the Prudential Insurance Company of America (Prudential)● 1981 February
Business license obtained from the Ministry of Finance in Japan
April
Commenced operations and introduced Lifeplanner system
Initial structure
Head office: 52 employees, reporting to the Chairman
Branches:
Four offices (Shinjuku, Ueno, Omiya, Yokohama), 27 Lifeplanners
Products:
Five main products, including whole life insurance, and five riders● 1987 July
Agreement reached with Prudential to terminate joint venture contract
September Corporate name changed to Sony Pruco Life Insurance Co., Ltd.
● 1989 October
Independent agency system established● 1991 April
Corporate name changed to Sony Life Insurance Co., Ltd.
● 1998 AugustSony Life Insurance (Philippines) Corporation established● 1999 December
Total assets exceeded ¥1 trillion● 2001 March
Standard policy reserves achieved by an increase in capital of ¥50.0 billion, resulting incommon stock of ¥65.0 billion
May
Sales of Sony Assurance’s automobile insurance launched through Lifeplanner marketing
channel● 2002 March
Commenced underwriting of group credit life insurance for housing loans extended bySony Bank● 2004 April
Sony Corporation established Sony Financial Holdings Inc., and Sony Life became a 100%
subsidiary of Sony Financial Holdings
December Commenced introduction of Sony Bank’s housing loans through Lifeplanner marketing
channel

8 | Sony Financial Holdings

Products and Services that Prioritize Customer
SecuritySony Life delivers tailor-made life insurance products that are optimized for each customer. To ensure security for its customers, Sony
Life provides an extensive lineup of products and services that allows
quality consulting and after-sales follow-up. Held in particularly highregard is its “quick claims service,” which streamlines claims payment
procedures, enabling policyholders to receive benefits either on the
day or two working days after claims are made. To protect customers
from potential economic burdens in the event of illness or injury, infiscal 2004 Sony Life began offering policyholders optional riders toprovide exemptions from future premium payments and to provide
lifestyle security. These riders have proven popular.

Pays insurance
benefits of

up to ¥3 million
on the dayof the claim

Benefits of less than ¥3 million are
paid in full on the day of the claim.
For total benefits of more than
¥3 million, the first ¥3 million is paid.
Quick Claims Service
Pays insurance
benefits of

up to ¥5 million
two business days
after the claim

Benefits of less than ¥5 million are paidin full two business days after the claim.
For total benefits of more than
¥5 million, the first ¥5 million is paid.
Note: These service options may not
be available on some policies.

Sony Life

Reciprocal Studies

On-the-Day Claims Service

Embracing a spirit of mutual assistance in their quest to serve customers, Sony Life’s employees have taken the initiative by hosting
independent training forums throughout the nation.
The Million Dollar Round Table (MDRT) is an international association of leading insurance and investment financial services professionals throughout the world. As of June 14, 2005, MDRT had
32,750 worldwide members, of whom 491 were Lifeplanners andPartners of Sony Life, making our membership one of the largest
from Japan.
The Japan Association of Insurance and Financial Advisors (JAIFA)
was established in 1962 to enhance the status of life insurance salespeople through the reciprocal education of its members. This association hosts a variety of initiatives as a forum for mutual training. Sony
Life’s Lifeplanners, sales office managers, branch managers and Partners participate in JAIFA, and JAIFA regional chapters have been set
up in regional areas to spearhead various activities.

Nurturing Financial Planners
To improve needs-based sales skills, many of Sony Life’s Lifeplanners
and Partners pursue independent study as financial planners, who areprofessionally qualified to meet the financial needs of customers. Sony
Life is one of the life insurance industry leaders in terms of the numberof qualified financial planners. As of June 1, 2005, Sony Life had atotal of 2,300 qualified Affiliated Financial Planners licensed by theJapan Association for Financial Planners and 149 Certified Financial
Planners holding the international qualification conferred by the Certified Financial Planner Board of Standards, Inc., of the United States.
In addition, Sony Life employees qualified as a 1st Grade or 2nd Grade
Certified skilled worker of Financial Planning—qualifications given by
the Japanese government as a proficiency certification system to certify
levels of expertise according to the Human Resources Development
Promotion Law—reached 119 and 1,653, respectively.

Sony Financial Holdings |9

Financial Highlights

Sony Life

Years ended March 31

Consolidated basis
Income from insurance premiums
Investment income
Ordinary revenues
Ordinary profit (loss)
Net income (loss)
Common stock
Number of shares outstanding(thousands of shares)
Net assets
Total assets
Assets in separate accountSecurities
Loans
Policy reserve
Nonconsolidated basis
Insurance in force
Individual life insurance in force
Group annuities in force
New insurance sales
New individual life insurance sales
Annualized premiums for new policies
Tertiary-sector productsCore profit
Solvency margin ratio (%)
Number of employees(Millions of yen, unless otherwise indicated)

2001

2002

2003

2004

2005

434,622
27,411
462,905(60,190)(39,441)
65,000505,950
33,201
539,805
19,821
11,96665,000491,606
31,575524,195
18,417
11,19965,000514,859
64,890581,129
30,27013,74365,000551,642
50,254604,288
17,148
10,16865,00065,00090,0431,450,314
91,268946,587
43,011
1,314,616

65,00085,0201,729,359
106,150
1,046,085
54,4711,600,136

65,00094,712
1,981,896
118,189
1,265,549
65,582
1,831,115

65,000131,848
2,375,249
164,461
1,562,929
71,637
2,095,591

65,000140,4672,616,658
200,996
1,703,923
79,9192,395,099

22,208,779 24,252,921 25,650,022 27,070,067 28,639,488
21,455,896 23,408,050 24,689,151 26,122,855 27,680,259
25,60764,06464,154
67,10769,0174,430,322 3,939,732 3,542,249 3,748,640 3,731,597
4,368,191 3,893,199 3,518,350 3,713,390 3,699,791————
63,851————
16,17910,29826,754
22,46022,821
24,333
1,905.9.
1,493.5.
1,354.2.
1,453.3.
1,317.1.
5,655
5,721
5,569
5,538
5,528

Notes: 1. Insurance in force above is the total of individual life insurance in force, individual annuities in force and group life insurance inforce. Individual annuities in force is the sum of annuity assets at the time annuity payments commence and policy reserves after
annuity payments commence.
2. Group annuities in force equals the amount of policy reserves.
3. New insurance sales is the total of new policies for individual life insurance, individual annuities and group life insurance. New
insurance sales for individual annuities equals the amount of annuity assets at the time annuity payments commence.

Review of Operations in Fiscal 2004
In fiscal 2004, the life insurance industry showed some signs of recovery, helped by higher sales oftertiary-sector products and variable individual annuities, but the industry’s total insurance in force
continued to decline. Despite this environment, Sony Life posted a 6% increase year on year in the
total for individual life insurance and individual annuities in force, ending the fiscal year at ¥27,823.4
billion and continuing the steady growth that Sony Life has posted since its inception. Likewise, the total
number of individual life insurance policies and individual annuity policies in force climbed 9% year on
year, to 3,559,581 policies. Sony Life’s lapse rate remained low, improving 1.10 percentage points during
the year, to 6.32%. Sony Life believes that these favorable results underscored customers’ appreciation ofSony Life’s unique needs-based sales approach by Lifeplanners and Partners, as well as an increasing
focus in companywide training on the importance of after-sales follow-up.
The amount of new policies remained largely unchanged compared with the previous year, but Sony
Life posted a steady increase in the number of new policies. Our analysis suggests that these results reflect
strong customer interest in medical protection products. In keeping with its desire to ensure economic
security and protection, however, Sony Life will continue to concentrate on death protection products,
which are core to its life insurance offerings.

10 | Sony Financial HoldingsFinancial Stability
POINT

1 Sony Life maintained a high solvency margin ratio of 1,317.1%.

Solvency margin indicates a company’s “ability to pay.” Life insurance companies accumulate policy
reserve against the future payment of insurance claims so they can respond sufficiently to ordinarily
anticipated events. But unforeseen events sometimes occur as a result of changes in the environment,such as a major earthquake or a cataclysmic fall in the stock market. The solvency margin ratio is one
administrative control indicator used to determine if an insurer has the ability to pay claims in response
to such unpredictable events. As of March 31, 2005, Sony Life maintained an extremely high solvency
margin ratio of 1,317.1%.
POINT

Sony Life has obtained high ratings from several rating agencies for its insurance and finance capability
and insurance claims payment capabilities, as outlined below.
(Rating request: As of June 2005)

A.M. Best Company, Inc.

Insurance company rating

Rating and Investment Information, Inc.

Rating for insurance claim
payment capabilities

Japan Credit Rating Agency, Ltd.
Standard & Poor’sA+(Superior)claim payment capabilities extremely high,AA (Insurancewith outstanding elements)
Rating for insurance claim
AA (High probability for execution of obligations)payment capabilities
Rating based on insurance
and finance capability

A+(Strong)

Note: The above ratings were assigned at Sony Life’s request. They are not evaluations of insurance companies overall, nor are they a guaranteeof claim payments in the future. These ratings are based on rating agencies’ opinions given the numbers and information available at a
specific point in time, and may be changed in the future. Please refer to the respective web site of each agency for more details.

POINT

3 Sony Life has no non-performing assets.

Because Sony Life does not engage in commercial lending, its loan balance is derived solely from policy
loans, which are limited to the value of recoverable surrender cash. For this reason, the company has
no risk-monitored loans (loans for which repayment circumstances are not ordinary). All figures listed as“Loans by Borrower Category under the Financial Reconstruction Law” are classified as normal loans.

Major Performance Indicators
Total Assets(Consolidated)

Individual Life Insurance in Force(Nonconsolidated)

Solvency Margin Ratio(Nonconsolidated)(Total of individual life insurance andindividual annuities)(Trillions of yen)
3

(Trillions of yen)
30

(%)
2,000

2

20

1,500

1

10

1,000

0

01

02

03

04

05

(As of March 31)

0

01

02

03

04

05

(As of March 31)

0

01

02

03

04

05

(As of March 31)

Sony Financial Holdings | 11

Sony Life

2Sony Life has obtained high ratings from various rating agencies,
including an A+ rating from Standard & Poor’s.

Sony Assurance Inc.
Sony Assurance operates on the business model of a “direct insurance
provider,” communicating with customers directly over the telephoneor via the Internet. Through such direct communication, Sony
Assurance provides rational and quality insurance services.
Sony Assurance entered the non-life insurance market in autumn 1999 with the businessmodel of a “direct insurance provider.” Centering on two flagship products—automobile
insurance and medical and cancer insurance—Sony Assurance contacts customers directly
over the telephone or via the Internet.
One advantage of being a direct insurance provider is the ability to communicate directlywith customers. These one-to-one relationships provide a clear understanding of customers’
opinions and needs, which Sony Assurance can reflect in its product and service offerings.
Sony Assurance enhances the quality of its products and offers finely tuned services basedon this input. Another major advantage is that Sony Assurance can provide products andservices with inexpensive premiums because its operations are highly concentrated. By
capitalizing on the merits of the direct business model, Sony Assurance has recorded asteady expansion in its business from the time of its establishment.
Sony Assurance operates under the slogan, “Feel the difference—a difference that willchange insurance.” Sony Assurance sees continuous creativity in various business domains
as a permanent challenge, and seeks to provide customers with valuable products that are
distinctive—offering a difference that could only come from Sony Assurance.

Sony Assurance

History● 1998 June
● 1999 September

October● 2000 January

June
July
December● 2001 April● 2002 June

● 2003 June

October● 2004 April

July
NovemberSony Insurance Planning Co., Ltd. established
Licensed by the Financial Reconstruction Commission to conduct non-life insurance businessCorporate name changed to Sony Assurance Inc.
Began writing automobile insurance policies via the Internet
Began writing automobile insurance policies over the telephone
Led the industry by providing settlement and contact operations on weekends and holidays
Led the industry by offering automobile insurance quotations via i-mode*-equipped
mobile phones
Began offering Oritemo coverage clause for automobile insurance
Led the industry in introducing model of car as a risk-segmented category for automobile
insurance
Claims Service Center establishedBegan offering medical and cancer insurance
Sapporo Customer Center opened
Capital expanded to ¥40.0 billion (common stock of ¥20.0 billion plus capital surplus of¥20.0 billion)
Launched Mobile Gateway web site for policyholders with mobile phones
Sony Corporation established Sony Financial Holdings Inc., and Sony Assurance became a
100% subsidiary of Sony Financial Holdings
Opened Sony Assurance Community Site
Introduced Kurikoshi discount on automobile insurance* i-mode is a registered trademark of NTT DoCoMo, Inc.

12 | Sony Financial Holdings

Providing a Valuable “Difference” to Customers
Sony Assurance values customer input very highly. Sony Assurance aims to facilitate better direct communication with customers so it can reflect their express needs through valuable offerings with “theSony Assurance difference.”
Sony Assurance
Community Site

Web Site for Mobile
Phone AccessThis site shares Sony
Assurance’s solutions,customer experiences andcustomer comments in aquestion-and-answer format.

Sony Assurance provides the
Mobile Gateway web site,which is accessible via mobile
phone, making it easier forcustomers to contact Sony
Assurance whenever theyneed to, and to locate
relevant information conveniently if an unforeseen
incident occurs.

Customer Centers

Service Centers

Designed to facilitate smoothcommunication, this center isstaffed by people who provide
quick and easy-to-understandanswers to customers’ questions, ensuring that Sony
Assurance provides optimal
customer solutions.

Sony Assurance’s service
center staff communicate
directly with customers, providing empathetic supportand helping to resolve problems in the event of an
untoward situation.

Continued High Regard for Sony Assurance Automobile Insurance

Popular Half-Price Clauses for Medical and Cancer Insurance Policyholders
from Age 60
Sony Assurance’s medical and cancer insurance provides sufficient protection against cancer, which isoften associated with high medical care costs and extensive treatment periods. To provide such insurancewith low premiums, such features as death protection or premium returns upon policy cancellation arelimited. Sony Assurance’s medical and cancer insurance has two types of protection period. Premiumson whole-life “SURE” policies remain fixed for life even as a policyholder ages, whereas the 10-year
renewable version has low initial premiums that rise at the time of renewal. Whole-life SURE policies
also come in two types—SURE Basic, which features inexpensive premiums and limited coverage, andSURE Wide, which provides much more extensive protection. Also, Sony Assurance led the industry inintroducing half-price clauses for policyholders who have reached their 60th birthday. For a slight increasein monthly premiums, this clause halves policy premiums once a policyholder reaches 60 years of age.
This option is widely popular with Sony Assurance’s policyholders, approximately 70%* of whom have
opted for this additional coverage.
* This ratio is among policyholders under the age of 57, which is the maximum age at which the clause can be added. Participation rates
are based on data as of March 31, 2005.
Information on this page is for the Japanese domestic market only.
Sony Financial Holdings | 13

Sony Assurance

To more closely tailor its automobile insurance to individual customers, Sony Assurance takes into
account each customer’s driving characteristics, with risk-segmented categories such as the distancedriven each year, driving purpose, model of car, number of years since first registering car ownership,
driver’s age and type of driver’s license. Because of Sony Assurance’s direct sales approach, which resultsin cost reductions through operational concentration and efficiency, Sony Assurance can pass savingson to its customers in the form of reasonable premiums.
Sony Assurance has designed an original add-on contract called the Oritemo coverage clause, whichindemnifies people who are out with their insured cars against such things as personal injury or damage to personal belongings—even if they are not physically inside the vehicle at the time the problem
occurs. Also, as distance driven each year is one risk-segmented category, Sony Assurance offers aunique system of providing refunds for drivers whose distance driven in a year falls below the distancestipulated in their insurance policies. This Kurikoshi discount, which is applied to the next year’s insurance premium, has proven popular with customers.

Financial Highlights

Years ended March 31

Net premiums written
Underwriting profits
Ordinary revenues
Ordinary profit (loss)
Net income (loss)
Net loss ratio (%)
Net expense ratio (%)
Interest and dividends
Yield on investment assets(income yield) (%)
Yield on assets(actual yield) (%)
Common stock
Number of shares outstanding (shares)
Net assets
Total assets
Securities
Loans
Underwriting reserve
Stockholders’ equity ratio (%)
Solvency margin ratio (%)
Number of employees(Millions of yen, unless otherwise indicated)

2001

2002

2003

2004

2005

7,529
(8,786)
7,600(5,641)(5,660)34.5.
123.2.
70

16,371(6,025)
16,488(4,097)(4,114)
42.3.
59.0.
114

24,062(4,386)24,299(4,185)(11,386)
46.7.
47.8.
186

30,785(2,129)31,066(1,941)(1,330)
49.1.
40.4.
215

37,849(3,048)38,159(2,806)(1,981)
51.9.
34.6.
274

0.68.

0.67.

0.93.

0.72.

0.77.

—
10,000200,000
10,877
18,999
9,805
—
4,669
57.3.
2,357.7.
197

0.68.
15,000300,000
16,75831,62618,009
—
8,845
53.0.
1,647.2.
330

0.88.
15,000300,000
5,372
25,873
17,346—
12,43220.8.
734.1.
370

0.63.
20,000400,000
14,061
40,121
27,747—
16,89535.0.
1,383.5.
423

0.79.
20,000400,000
12,086
46,68532,932—23,09425.9.
1,095.2.
480Sony Assurance

Review of Operations in Fiscal 2004
In fiscal 2004, Sony Assurance adopted “Feel the difference—a difference that will change insurance”
as its new corporate slogan. Under this slogan, Sony Assurance launched a host of initiatives with thegoal of providing customers with a level of service that clearly distinguishes it from other companies.
For example, in November 2004 Sony Assurance led the industry by introducing a Kurikoshi discounton its automobile insurance. If annual driving distance—one risk-segmented category—falls below the
distance assumed when the policy is first written, policyholders are offered a discount on their policy
premiums the following year. Simultaneously, Sony Assurance instituted the Koetemo Anshin Service,
which eliminates the need for policyholders to pay additional premiums or contact the insurer if they
happen to exceed their originally assumed annual driving distance.
During the year, Sony Assurance saw a steady increase in the number of policyholders for both of its
mainstay products—automobile and medical and cancer insurance—and net premiums written increased
23%, to ¥37,849 million. The number of policies in force—the sum of automobile insurance and medical
and cancer insurance policies—exceeded 650,000 as of March 31, 2005. Owing to such factors as thefrequent occurrence of natural disasters during the period, however, claims paid increased, resulting inan ordinary loss of ¥2,806 million. The combined ratio for the year improved 3.0 percentage points, to86.5%, comprising a net expense ratio of 34.6% and a net loss ratio of 51.9%. As of March 31, 2005,
Sony Assurance’s solvency margin ratio was 1,095.2%. As 200% is the general standard, Sony Assurance’s
high solvency margin ratio indicates an abundant ability to pay claims.

14 | Sony Financial HoldingsFinancial Stability
POINT

1

Sony Assurance maintained a solvency margin ratio of 1,095.2%,
indicating a substantial ability to pay claims.

Non-life insurers set aside reserves to pay claims as a matter of course. It is essential for insurers tomake doubly certain that their reserves are adequate to pay claims even when unforeseen events, suchas a major disaster or substantial decline in asset values, occur. The solvency margin ratio indicates aninsurer’s ability to pay if faced with such unpredictable risks. An insurer is generally assumed to haveadequate ability to respond to such conditions if the solvency margin ratio exceeds 200%. As of
March 31, 2005, Sony Assurance had a solvency margin ratio of 1,095.2%, significantly exceeding
the standard 200% and indicating a superior ability to pay claims.
POINT

2 Sony Assurance has no non-performing assets.

Sony Assurance has no risk-monitored loans (loans for which repayment circumstances are notordinary). Furthermore, no loans are listed in the “Loans by Borrower Category under the Financial
Reconstruction Law.”

Sony Assurance

Major Performance Indicators
Net Premiums Written

Number of Policies in ForceNet Expense Ratio,
Net Loss Ratio
and Combined Ratio(Total automobile insurance andmedical and cancer insurance policies)(Billions of yen)
40

(Thousands of policies)
800

(%)
200

30

600

150

20

400

100

10

200

50

0

01

02

03

04

05

(Years ended March 31)

0

01

02

03

04

05

(As of March 31)

0

01

02

03

04

05

(Years ended March 31)
Net expense ratio
Net loss ratio
Combined ratio

Sony Financial Holdings | 15

Sony Bank Inc.
By capitalizing on its strength as an Internet bank that targets
individual customers, Sony Bank offers highly convenient financial
products and services.
In June 2001, Sony Bank commenced operations as an Internet bank for individuals. Sony
Bank was established in the belief that Japan’s financial institutions may have offered too
few financial service alternatives for individuals and that the Internet could be used as atool to provide highly convenient financial services.
In the ensuing four years, Sony Bank has developed new products and services in aproactive, yet flexible manner based on its consistent policy of providing financial services—primarily for asset management—to independent individuals. Sony Bank’s product andservice lineups have expanded gradually, now including yen deposits, foreign currency
deposits, investment trusts, personal loans extended through ATM cards, housing loans andspecial-purpose loans, as well as MONEYKit GLOBAL (cash card service settled in U.S. dollars)
and annuities and insurance products. By taking advantage of the special characteristicsof the Internet, Sony Bank offers unique services, such as the three interfaces provided tomatch the individual investment needs of each customer.
Customers have supported these initiatives, and the number of accounts at Sony Bankand balance on deposits have steadily increased each year. By continuously maximizing its
use of information technology, Sony Bank aims to keep providing diverse high-end
financial services and products that meet the needs of an expanding customer base.

HistorySony Bank● 2001 April

Sony Bank Inc. established and registeredObtained banking business operating license from the Prime Minister of Japan
June
Commenced operations and opened the MONEYKit service site
Products comprised ordinary yen deposits, yen time deposits, investment trusts and personalloans extended through ATM cards
September Began handling foreign currency deposits
December Launched MONEYKit–PostPet service● 2002 March
Began offering housing loans
June
Began offering special-purpose loans● 2003 July
Launched MONEYKit GLOBAL service
December Launched MONEYKit–ACTIVE service● 2004 April
Sony Corporation established Sony Financial Holdings Inc., and Sony Bank became asubsidiary of Sony Financial Holdings
June
Commenced sales of individual annuities offered by Sony Life Insurance Co., Ltd.
Increased capital by ¥10.0 billion, raising common stock to ¥23.75 billion
October
Commenced sales of fire insurance offered by Sony Assurance Inc.

16 | Sony Financial Holdings

Sony Bank’s Transaction Channel
Service Site h t t p : / / m o n e y k i t . n e t /(Japanese only)
Before
login

After
login

As well as providing a login gateway
to the service site, this screen provides
an overview of Sony Bank’s productofferings.

Any time after
logging in,
the customer
can move freely
among thethree available
interfaces.

The main tool of this interface
is the piggybank-type Hoshii
Mono Chokinbako. Users create
separate savings accounts fordifferent purposes, then selecta PostPet for each to encouragethem along on the way.

This “money toolbox”
interface assists customers
as they consider, researchand carry out transactions.

This “action toolbox” interface
supports customers’ “SelfActivity” for property
formation.

Sony Bank’s Products and Services
Sony Bank offers a variety of products and services.
● Yen deposits (ordinary deposits, time deposits)● Personal loans extended through ATM cards● Foreign currency deposits (ordinary deposits, time deposits)● Special-purpose loans● MONEYKit GLOBAL● Housing loans● Investment trusts● Annuities and insuranceSony Bank’s foreign currency deposits, which allow transactions essentially 24 hours a day, 365 days ayear, use interest and exchange rates that are closely linked with markets. Sony Bank offers these deposits
in eight currencies—U.S. dollar, euro, sterling pound, Australian dollar, New Zealand dollar, Canadiandollar, Swiss franc and Hong Kong dollar. Account holders can trade funds using U.S. dollars instead of
yen to trade directly into other currencies, enter into foreign exchange contracts on their foreign currency
time deposits, place limit orders on foreign currency deposit transactions, create foreign currency time
deposits with special agreements and perform various other transactions.
Sony Bank’s housing loans allow customers to go through the entire process from application throughto contract without ever setting foot in a bank branch. Using the Internet, customers can easily change
the type of interest and make early payments. Sony Bank offers floating interest rates, as well as fixedinterest rates on specific periods of two, three, five, seven, 10, 15, 20 or more than 20 years.

Affiliated ATMs (As of July 2005)● All ATMs operated by Sumitomo Mitsui Banking Corporation

V● “@BANK” ATMs at the am/pm convenience store chain (except those in Kyushu)● ATMs operated by the Bank of Tokyo–Mitsubishi, Ltd. (except some ATMs located in hospitals and schools)● Nationwide ATMs operated by Japan Post

Information on this page is for the Japanese domestic market only.
Sony Financial Holdings | 17

Sony Bank

Customers can withdraw and deposit cash or transfer funds through automated teller machines (ATMs)
operated by organizations affiliated with Sony Bank.

Financial Highlights

Years ended March 31

Total income
Income (loss) before income taxes
Net income (loss)
Common stock
Number of shares outstanding (shares)
Net assets
Total assets
Deposits
Loans
Securities
Capital adequacy ratio (%)
Number of employees(Millions of yen, unless otherwise indicated)

2002

2003

2004

2005

1,043
(4,132)(4,136)18,750375,000
33,198
154,875
106,472
634
111,963
36.62.
60

4,012(4,466)(4,470)18,750375,000
29,201
320,414
248,721
22,464
211,573
18.95.
72

7,406(2,202)(2,206)18,750375,000
27,111
489,432
378,850
63,023
333,42110.29.
78

11,353(1,659)(1,663)23,750475,000
35,318618,459546,717
126,385
321,600
11.97.
100

Sony Bank

Review of Operations in Fiscal 2004
Sony Bank continued to expand its product and service offerings in fiscal 2004. In June 2004, Sony
Bank added the New Zealand dollar to its list of available currencies for foreign currency deposits, andin December 2004 it began offering limit orders on foreign currency deposit transactions as well as
foreign currency time deposits with special agreements. Sony Bank also added 17 new funds to its
investment trust offerings, bringing the total to 40. In November 2004, Sony Bank launched a newservice for housing loans, involving special agreements with partially fixed interest rates. This service
allows borrowers to partially set various fixed rates from time to time on their floating-rate loans. Sony
Bank also added a function that enables customers to switch to floating interest rates or to other fixed
rates of interest even during the period to which the initially fixed interest rate applies. This wealth ofoptions has greatly enhanced the appeal of Sony Bank’s housing loans.
As of March 31, 2005, deposited assets, the total of deposits and investment trusts, were ¥576.3 billion,up ¥181.0 billion compared with the previous year. Of this amount, yen deposits totaled ¥387.6 billion,
an increase of ¥115.9 billion, and foreign currency deposits were ¥159.1 billion, growing ¥51.8 billion.
Investment trusts amounted to ¥29.6 billion, ¥13.2 billion higher than a year earlier. Surging 50% during
the year, foreign currency deposits accounted for 28% of total deposited assets. Sony Bank’s number ofaccounts grew by 98 thousand during the year, to 367 thousand accounts, with average deposited assets
per account of ¥1.56 million. Sony Bank’s loan balance doubled, to ¥126.3 billion at fiscal year end,
buoyed by a ¥62.3 billion increase in housing loans.
Also, in June 2004, Sony Bank strengthened its financial base through a capital infusion of ¥10.0 billion.
During the fiscal year ended March 31, 2005, total income was 1.5 times the previous year’s level, at¥11.3 billion, and gross operating profit was 1.4 times the level of the previous year, at ¥5.3 billion.
General and administrative expenses increased 19%, to ¥6.9 billion. As a result, loss before income
taxes improved ¥0.5 billion from the previous year, to ¥1.6 billion. Notably, in the fourth quarter offiscal 2004, Sony Bank turned positive net income on a quarterly basis for the first time.

18 | Sony Financial HoldingsFinancial Stability
POINT

Sony Bank had a capital adequacy ratio of 11.97% (domestic
criteria).

1

The capital adequacy ratio is used to indicate a bank’s financial stability. For banks that operate only inJapan, a 4% capital adequacy ratio is used as a minimum standard. Based on domestic criteria, SonyBank’s nonconsolidated capital adequacy ratio at March 31, 2005, stood at 11.97%, up 1.68 percentage
points from a year earlier.
POINT

Sony Bank obtained an A– long-term credit rating from Standard& Poor’s.

2

As of July 1, 2005, Sony Bank has received an “A–” long-term credit rating and a short-term credit ratingof “A–2” from Standard & Poor’s.
POINTSony Bank’s Self-Assessment demonstrates financial health, as
outlined below.

3

Risk-Monitored Loans

Problem Loans based on the Financial
Reconstruction Law

As of March 31(Millions of yen)

As of March 31(Millions of yen)

2005

2005

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

—
0
—
—

Bankrupt and quasi-bankrupt loans
Doubtful loans
Sub-standard loans
Normal loans—
0—133,152

Total

0

Total

133,153

Major Performance Indicators
Number of Accounts(Thousands)
400

Deposited Assets

Loans(Billions of yen)
600

(Billions of yen)
150

400

100

200

50

300

Sony Bank

200

100

0

02

03

04

05

(As of March 31)

0

02

03

04

05

(As of March 31)
Investment trusts
Foreign currency deposits
Yen deposits

0

02

03

04

05

(As of March 31)
Other loans
Housing loans

Sony Financial Holdings | 19

Sony Financial Holdings

Corporate Governance
The SFH Group positions its corporate visionand philosophy, mentioned in the preceding
pages, as the basic policy for setting management strategy and expediting management
decision-making initiatives. One facet of ourcorporate vision is our goal to “become oneof the most trusted financial services groups.”
Although subsidiaries in the SFH Group eachhave different histories, scales of operations
and business characteristics, SFH works toachieve this goal by making the most effective
use of the operating characteristics and information available within the SFH Group, to thefullest extent permissible under the law. In taking
this approach, we place utmost importance on
the soundness and accuracy of our operations.
To this end, we have designed a management
structure to ensure groupwide compliance andrisk management.

SFH’s Board of Directors* comprises eight
directors who are also directors of subsidiaries
within the SFH Group, plus one outside director.
This structure is designed to ensure and expand
the trustworthiness of the SFH Group.
The Board of Statutory Auditors* comprises
four statutory auditors. Based on the audit policy
and plans stipulated by the Board of Statutory
Auditors, statutory auditors are responsible
for attending important meetings, including
Board of Directors meetings, and for examining
operating and financial conditions and auditing
the duties executed by directors.
We carefully monitor each subsidiary’s management in a respectful manner and promotemanagement control activities by adding newgroup management control functions andencouraging creativity.
* As of July 1, 2005

Corporate Governance Structure
Shareholders

SFH Group
SFH
Board of Statutory Auditors
Board of Directors

Sony Life
President

Statutory Auditors

Sony Bank

Sony Assurance
President

President

Compliance
Compliance is an essential part of ensuring thata company fulfills its responsibilities to society.
Given the characteristics of financial services, towhich maintaining trust-based relationships
with customers is integral, the SFH Group isfurther enhancing its compliance structure.
At SFH, the Board of Directors is assigned the
duty of establishing our compliance program,creating a compliance manual and confirming
the progress of such programs. As a result, theBoard monitors and seeks to strengthen theGroup’s compliance activities. The Corporate
Control Department of SFH has overall control

20 | Sony Financial Holdingsof compliance activities, including checking
the compliance of each division, conducting
training, operating our internal hotline systems
and ensuring adherence to relevant laws
and statutes.
In addition, in its role as a financial holding
company SFH provides subsidiaries with a variety of compliance-related information, ensures
the operation of groupwide internal hotline
systems and holds group compliance liaison
conferences. We support subsidiaries in verifying and enhancing the compliance situation
and raise groupwide compliance levels.

Risk Management

SFH’s Policy on Group Risk Management
1 As a financial holding company, we enhance the corporate value of the SFH Group by basing our risk management structure on the SFH Group’s management policy and strategic objectives as well as by performing risk
management that responds to the various characteristics of each business and each risk category.
2 SFH confirms that the SFH Group’s subsidiaries, as independent entities, are individually responsible forestablishing risk management structures to achieve their own management targets and institutes any
necessary countermeasures.
3 As a financial holding company, SFH eliminates any excessive concentration of risk in any specific area, provides
appropriate control of intra-group transactions and manages risk propagation inside the SFH Group.

SFH’s Board of Directors formulates the fundamental principles for risk management activities and transmits these requirements todirectors and employees throughout SFH andits subsidiaries. The Board then recognizes thepresence or types of risks that differ according
to each subsidiary’s scale, business and characteristics, and establishes structures to appropriately manage the various risks. SFH’s Executive
Committee, delegated by the Board of Directors,
executes daily activities pertaining to group risk
management. Specifically, while each subsidiaryevaluates, monitors and manages each risk,
the Corporate Control Department—which has
overall control of SFH’s risk management—
coordinates with the risk management

departments of those subsidiaries. The department also submits periodic reports to SFH’s
Board of Directors and Executive Committee
on the risk management conditions recognizedthrough monitoring or holding Risk Management Meetings. The Audit Department, on theother hand, conducts internal audits to verify
the appropriateness and effectiveness of theoverall risk management structure.
The types of risk that SFH and its subsidiaries
manage are indicated as below.
● Market-related risk

● Processing risk

● Credit risk

● Systems risk

● Real estate● Legal risk

investment risk
● Liquidity risk
● Insurance
underwriting risk

● Reputational risk
● Business continuity risk

Risk Management Structure
SFH

President andRepresentative Director

Board of Directors
Reporting

ReportingExecutive Committee

Reporting

Audit Department
AuditsCorporate Control Department(Centralized risk management)

Market-related
risk

Asset
investment
risks

Legal risk

Credit risk

Insurance
underwriting risk

Processing risk

Real estate
investment risk

Liquidity risk

Systems risk

Confirmation

Sony Life

Reporting

Risk Management Meetings

Reputational risk
Business
continuity risk

Control, advice,monitoring

Sony Assurance

Present risk management
policies

Sony Bank

Each company puts risk management into practice autonomously

Sony Financial Holdings | 21

Sony Financial Holdings

One of SFH’s roles as a financial holding company is to concentrate management resources andstrengthen groupwide risk management in an integrated manner. The SFH Group’s policy on risk
management is described below.

Sony Financial Holdings

Privacy Policy
In the course of providing products and services,
SFH’s subsidiaries handle personal and private
information about their customers. SFH exercises
the utmost caution to ensure that this information is managed appropriately and only forthe express purpose for which the customers
have entrusted it to us. For its basic policy on

the handling of personal information, SFH
adheres to the privacy policy established bySony Corporation.
Note: In the SFH Group, subsidiaries handle personal andprivate information on their customers. SFH itself does
not gather information from customers for the purposeof conducting business and is not a “business entity that
handles personal information,” as defined in Article 2.3of the Personal Information Protection Act.

Excerpt from Sony Group Privacy Policy*
The primary objective of each Sony Group company (hereafter “Sony”) is to provide great
products and services focusing on customers’ needs, through innovative ideas as well as soundbusiness practices. Sony is committed to meeting the high expectations of its customers and tobeing the “most trustworthy partner for customers” in the broadband era of the 21st century.
Sony understands that customers entrust Sony with their Personal Information with the
expectation that it will be used only for specific purposes. Sony respects the customers’
expectations and places a high priority on properly protecting such Personal Information andlimiting its use to such purposes.
We hereby declare that we do our best to protect Personal Information of our customers,
keeping the following policies always in mind.
* This Privacy Policy is for Sony Corporation and its subsidiaries in Japan and Sony Ericsson Mobile Communications Japan, Inc.

Policies regarding Handling of Personal Information(Compliance)
1. Sony will comply with the applicable laws, regulations, ministerial guidelines and this Privacy
Policy in handling Personal Information (information which can identify a specific individual).
(Use within Specific Purpose(s))
2. Sony will specify the purpose(s) of use as muchas possible and use Personal Information only
within the scope Sony has notified or made public, except for cases in which Sony has obtainedin advance consent from the individual who
provides his/her Personal Information (hereafter“the individual”) and for cases permitted
under the related laws or regulations.
(Notification/Publication of Purpose(s) of
Use etc.)
3. Sony will endeavor to clearly notify necessary
information such as purpose(s) of use, names
of user(s) as well as contact details and toobtain consent when asking for Personal Information. Sony may record in writing or in voice
the contents of transactions and inquiries.
Such information will be used only for purposes of responding adequately and swiftlyto the requests from the individual.
(Personal Information of Minors)
4. Sony will make special consideration for thehandling of minors’ Personal Information,e.g. to notify clearly in advance to ask a childunder fifteen (15) years old to provide Personal
Information only upon guardian’s consent.
(Security Control Measures)
5. Sony will endeavor to maintain entrusted Personal Information to be accurate and updated
to the extent necessary for the purpose(s) of its
use. Sony will take necessary and appropriate
security control measures in line with existing
technical standards to protect entrusted Personal Information from unauthorized access,modification, and leakage, etc.

22 | Sony Financial Holdings(Supervision of Subcontractor(s))
6. Sony may subcontract the processing of entrusted
Personal Information to a third party to the extent
necessary to fulfill the purpose(s) of its use. Suchthird party will be selected after confirming sufficient level of information security, and Sony will
exercise necessary and adequate supervision to
the party by such means as making contracts.
(Providing to Third Parties)
7. Without the consent of the individual, Sony will
not provide Personal Information to any third
party other than joint-users clearly notified at thetime of collection, except for cases permitted
under the related laws or regulations. Sony will
not provide Personal Information to any third
party, based on the “Opt-Out System” (Article
23.2 of the Personal Information Protection Act),
without acknowledgment by the individual.
(Request(s) for Review etc.)
8. Sony will, based on the provisions of the related
laws or regulations, swiftly respond to request(s)from the individual such as to review, correct,
stop receiving further product or service information from Sony, or to delete Personal Informationof their own after confirming their identity. Pleasecontact the appropriate customer center to which
you have provided your Personal Information.
(Response to Complaint(s))
9. Sony will set up necessary internal organizations
to address adequately and swiftly complaint(s)from individuals about its handling of Personal
Information.
(Continuous Improvement of Internal System)
10. Sony will continuously endeavor to improve
internal compliance systems including updating this Privacy Policy through establishmentof internal rules, education to employees andappropriate internal audit to handle entrusted
Personal Information properly.

Internal Auditing
While subsidiaries also perform internal
audit activities that are designed to match their
specific industry, scale of business and the typesof risk they entail, SFH’s Audit Department
conducts monitoring based on the results ofaudit reports provided by subsidiaries and, if
necessary, may conduct audit activities ofsubsidiaries directly.
Statutory auditors, on the other hand, audit
the execution of duties by directors by attending important meetings, including Board of
Directors meetings, and evaluating businessand financial conditions.

Internal Auditing Structure
SFH

AuditsPresident andRepresentative Director

Board of Directors

Board of
Statutory
Auditors

Reporting

ReportingStatutory
Auditors

Executive
Committee

Audit Department

AuditsOperational
Departments

Direct audits, as needed

Monitoring

Sony Life

Sony AssuranceSony BankInternal Audit Department

Internal Audit Department

Internal Audit Department(Internal Inspections Division)(Internal Audit Department)(Internal Audit Department)

AuditsOperational Departments

AuditsOperational Departments

AuditsOperational Departments

Sony Financial Holdings | 23

Sony Financial Holdings

SFH performs internal audits through its Audit
Department. Reporting directly to the president
and representative director, this department
operates outside the other lines of operational
reporting and, from an independent andobjective position, verifies the appropriatenessand effectiveness of SFH’s internal controls,
including governance processes, complianceand risk management. As its suggestions for
improving management contribute to thesound and appropriate operations of SFH andits subsidiaries, this department endeavors to
perform highly effective internal audit activities.

Corporate Data
Sony Financial Holdings Inc. (SFH)

Sony Financial Holdings

Company Information(As of July 1, 2005)

Company name:
Established:
Head office:Business:Sony Financial Holdings Inc.
April 1, 2004
1-1, Minami Aoyama 1-chome, Minato-ku, Tokyo, Japan
Management control of subsidiaries (life insurance companies,
non-life insurance companies, banks and others) specified by
the Insurance Business Law of Japan and the Banking Law ofJapan and all duties incidental to that role.
Common stock:¥5,500 million
Number of shares outstanding: 2,100,000 shares
Share ownership:
Sony Corporation 100%

Information on Common Stock, Shares and Shareholders(As of March 31, 2005)

Historical Data on Common Stock and Number of Shares Outstanding
Common stock (millions of yen)

Number of shares outstanding (shares)

500
5,500
5,500

2,000,000
2,100,000
2,100,000

Number of shares held (shares)

Percentage ownership

2,100,000

100%

April 1, 2004
June 25, 2004
March 31, 2005

Information on Ownership of SharesSony Corporation

Senior Management(As of July 1, 2005)

Directors and Statutory Auditors
Title

Chairman,
Representative Director
President,
Representative Director
Executive Vice President,
Representative Director
Director
Director
Director

Director
Director
DirectorStanding Statutory
Auditor
Statutory Auditor
Statutory Auditor
Statutory Auditor

24 | Sony Financial Holdings

Name

Other concurrent responsibilities

Advisor to Sony Corporation,
Chairman and Director of Sony Life Insurance Co., Ltd.
Director of Sony Life Insurance Co., Ltd.,
Teruhisa Tokunaka
Director of Sony Assurance Inc.
Director of Sony Life Insurance Co., Ltd.,
Hiromichi Fujikata
Director of Sony Assurance Inc.
Director of Sony Bank Inc.
Shinji Sugiyama
Advisor to Sony Corporation, Director of Sony Bank Inc.
Tamotsu Iba
Executive Deputy President, Representative Corporate
Katsumi Ihara
Executive Officer and a member of the Board of Sony
Corporation
Akiyoshi Kawashima President and Representative Director of Sony Life
Insurance Co., Ltd.
President and Representative Director of Sony
Shinichi Yamamoto
Assurance Inc.
President and Representative Director of Sony Bank Inc.
Shigeru Ishii
Statutory Auditor of Sony Life Insurance Co., Ltd.,
Hiroshi Sano
Statutory Auditor of Sony Assurance Inc.
Senior General Manager, Accounting Department ofTakemi Nagasaka
Sony Corporation
Standing Statutory Auditor of Sony Bank Inc.
Hiroshi Ueda
Standing Statutory Auditor of Sony Assurance Inc.
Masamitsu Kaneda
Kunitake Ando

Number of Senior Management and Employees

Senior Management

Employees

Sony Financial Holdings(As of March 31, 2005)

Total

SFH

12

12

24

SFH and its subsidiaries

44

6,190

6,234

Notes: 1. Senior management includes directors and statutory auditors; executive officers of subsidiaries arecounted as employees.
2. Employee figures exclude directors who are also employees, temporary workers, workers on shortterm contracts and seconded employees.

Organizational Chart(As of July 1, 2005)

Shareholders’ Meeting

Board of Statutory Auditors
Statutory Auditors

Board of Directors
Audit Department
Executive Committee

Corporate Planning Department

Corporate Control Department

Business Development Department

Information on Subsidiaries(As of March 31, 2005)

Company nameHead office

Established

Commonstock(millionsof yen)Ownership (%)
Business
SFH

Minami Aoyama,Sony Life Insurance
August 10,
Life
Minato-ku, Tokyo,
65,000100
Co., Ltd.
1979
insurance
Japan
Sony Life Insurance
937 million
Makati City,
August 26,
Life(Philippines)
Philippine(100)
Philippines
1998
insurance
Corporation
pesos
Kamata,June 10,Non-life
Sony Assurance Inc. Ota-ku, Tokyo,
20,000100
1998
insuranceJapan
Akasaka,
April 2,
Sony Bank Inc.
Minato-ku, Tokyo,
23,750Banking 84.2
2001
Japan

Sony
Life

Sony
Assurance

Sony
Bank

—

—

—

100

—

—

—

—

—

—

—

—

Note: Ownership figures in parentheses indicate indirect ownership.

Sony Financial Holdings | 25

Sony Life Insurance Co., Ltd.

Company Information(As of July 1, 2005)

Company name:Sony Life Insurance Co., Ltd.
Established:
August 10, 1979
Head office:1-1, Minami Aoyama 1-chome, Minato-ku, Tokyo, Japan
Business:
Life insurance
Common stock:¥65,000 million
Number of shares outstanding: 65,000,000 shares
Share ownership:
Sony Financial Holdings Inc. 100%

Senior Management(As of July 1, 2005)

Sony Life

Directors and Statutory Auditors
Title

Name

Chairman, Director

Kunitake Ando

President,
Representative Director
Executive Deputy
President, Director
Executive Deputy
President, Director
Director
Director
DirectorStanding Statutory
Auditor
Statutory Auditor
Statutory Auditor

Other concurrent responsibilities

Advisor to Sony Corporation, Chairman and Representative
Director of Sony Financial Holdings Inc.
Akiyoshi Kawashima Director of Sony Financial Holdings Inc.
Akihiko Nakamura
Taro Okuda
Masamitsu Shimaoka
Teruhisa Tokunaka
President and Representative Director of Sony Financial
Holdings Inc., Director of Sony Assurance Inc.
Hiromichi Fujikata
Executive Vice President and Representative Director ofSony Financial Holdings Inc., Director of Sony Assurance Inc.
Fumio Mitani
Yoshiaki Yamauchi
Hiroshi Sano

Director of Sony Corporation
Standing Statutory Auditor of Sony Financial Holdings Inc.,
Statutory Auditor of Sony Assurance Inc.

Number of Senior Management and Employees(As of March 31, 2005)

Employees

TotalSony Life

Senior Management

10

5,528

5,538

Sony Life and subsidiary

15

5,604

5,619

Notes: 1. Senior management includes directors and statutory auditors; executive officers of subsidiaries arecounted as employees.
2. Employee figures exclude directors who are also employees, temporary workers, workers on shortterm contracts and seconded employees.

26 | Sony Financial HoldingsOrganizational Chart(As of July 1, 2005)
General Meeting of Shareholders
Board of Directors
Compensation Advisory Committee
Executive Management Board

Board of Auditors
Chief Actuary

Executive Officers Board
Compliance Committee
Market Conduct Compliance (MCC) Committee
Protection of Personal Information Promotion Committee
Risk Management Committee
Disciplinary Committee
Environment Committee
Personnel Development Committee
SLQ Committee
Investment Committee
Agency Office
Agency Office
Agency Office
Agency Office

Independent Agency Sales Group

Independent Agency Sales Division
Independent Agent Planning &Promotion DivisionMarket Development Division

Sales Planning Group

Sales Planning & Administration
Division
Sales Education & Training DivisionMarketing Information Support
Division
Product Development Division
Office Administration Division

Total Administration Control Group

Business Administration Control
Division
Compliance Division
Operations Administration Division

Investment Group
Business Process Reengineering Group

Investment Division
Information System Division 1
Information System Division 2
Operations Planning Division
General Operation Division
Lifeplanner Planning & Promotion
Division
Corporate Marketing Development
Division
Direct Marketing Division
Underwriting Division
Policyholders’ Service Division
Claims & Benefits Division
Real Estate Division
Chief Medical Officer
Medical DivisionCorporate Communications DivisionInternational & Business
Development Division
Knowledge Management Division
Actuarial Division
ALM DivisionCorporate Planning Division
Accounting Division
Investment Administration Division
Customer Center
Internal Inspections Division
Personnel Division
General Affairs Division
Health Promotion Center Division
Representative Office for East Asia

Sony Financial Holdings | 27

Sony Life

Lifeplanner Sales Group 1
Lifeplanner Sales Group 2
Lifeplanner Sales Group 3
Lifeplanner Sales Group 4

Sony Assurance Inc.

Company Information(As of July 1, 2005)

Company name:Sony Assurance Inc.
Established:
June 10, 1998
Head office:37-1, Kamata 5-chome, Ota-ku, Tokyo, Japan
Business:
Non-life insurance
Common stock:¥20,000 million
Number of shares outstanding: 400,000 shares
Share ownership:
Sony Financial Holdings Inc. 100%

Senior Management(As of July 1, 2005)

Sony Assurance

Directors and Statutory Auditors
Title

Name

President,
Representative Director
Director
Director

Shinichi Yamamoto

Director

Hiromichi Fujikata

Standing Statutory
Auditor
Statutory Auditor

Masamitsu Kaneda

Statutory Auditor

Masaya Takahashi

Yuro Fujiyama
Teruhisa Tokunaka

Hiroshi Sano

Other concurrent responsibilities

Director of Sony Financial Holdings Inc.

President and Representative Director of Sony Financial
Holdings Inc., Director of Sony Life Insurance Co., Ltd.
Executive Vice President and Representative Directorof Sony Financial Holdings Inc., Director of Sony Life
Insurance Co., Ltd.
Statutory Auditor of Sony Financial Holdings Inc.
Standing Statutory Auditor of Sony Financial Holdings Inc.,
Statutory Auditor of Sony Life Insurance Co., Ltd.
Deputy General Manager, Accounting Department ofSony Corporation

Number of Senior Management and Employees(As of March 31, 2005)

Senior Management

Sony Assurance

8

Employees

Total

480

488

Note: Employees figure excludes directors who are also employees, temporary workers, workers on short-term
contracts and seconded employees.

28 | Sony Financial HoldingsOrganizational Chart(As of July 1, 2005)

Shareholders’ Meeting
Board of Directors

Board of Auditors

Executive Management Board
Chief Actuary

Customer Center

Sapporo Customer Center

Customer Service OfficeClaims Service Department

Claims Service Center

Direct Marketing Department

Medical & Fire Service Center

Tie-up Marketing Department

Physical Damage Service Center

Web Site Planning Department

Hokkaido Service Center

Business Operation Control Department

Tohoku Service Center

Product Planning Department

Shutoken Service Center 1

Corporate Planning & Control Department

Shutoken Service Center 2

Corporate Communications Department

Shutoken Service Center 3

Accounting Department

Shutoken Service Center 4

Finance Department

Chubu Service Center 1

Investment Administration Department

Chubu Service Center 2

Information System Planning Department

Kansai Service Center 1

Personnel & General Affairs Department

Kansai Service Center 2

Internal Audit Department

Kansai Service Center 3

Environmental Management Office

Chugoku & Shikoku Service Center
Kyushu Service CenterSony AssuranceSony Financial Holdings | 29

Sony Bank Inc.

Company Information(As of July 1, 2005)

Company name:Sony Bank Inc.
Established:
April 2, 2001
Head office:9-11, Akasaka 2-chome, Minato-ku, Tokyo, Japan
Business:
Banking
Common stock:¥23,750 million
Number of shares outstanding: 475,000 shares
Share ownership:
Sony Financial Holdings Inc.
84.2%
Sumitomo Mitsui Banking Corporation 12.6%
LabMorgan Investment Corporation(a unit of JPMorgan)
3.2%

Senior Management(As of July 1, 2005)

Directors and Statutory Auditors
Title

President,
Representative Director
Director
Director
Director
Director
Director
Director
DirectorStanding Statutory
Auditor
Statutory Auditor
Statutory Auditor

Name

Shigeru Ishii

Other concurrent responsibilities

Director of Sony Financial Holdings Inc.

Hidehiko Nakamura
Masahiko Tokuyama
Tamotsu Iba
Advisor to Sony Corporation,
Director of Sony Financial Holdings Inc.
Hiroki Totoki
Senior Executive Vice President of Sony Communication
Network Corporation
Shinji Sugiyama
Director of Sony Financial Holdings Inc.
Tetsuya Kawano
Representative in Japan and Director of J.P. Morgan
Securities Asia Pte. Limited, Tokyo Branch
Tohru Nakajima
Partner, Nagashima Ohno & Tsunematsu
Hiroshi Ueda
Fumio Kado
Junichi Yoshikawa

Deputy General Manager, Accounting Department ofSony Corporation
Corporate Control Department of Sony Financial
Holdings Inc.

Number of Senior Management and Employees(As of March 31, 2005)

Senior Management

Sony Bank

9

Employees

Total

100

109

Sony Bank

Note: Employees figure excludes directors who are also employees, temporary workers, workers on short-term
contracts and seconded employees.

30 | Sony Financial HoldingsOrganizational Chart(As of July 1, 2005)

Shareholders’ Meeting
Board of Statutory Auditors
Board of Directors
Internal Audit Department
Executive Committee

Corporate Planning & Administration Department

Planning & Administration Group
Financial Accounting Group
General Accounting Group

Compliance Department
Credit Control Department

Planning & Administration Group

Public Relations Department

Public Relations Group

Human Resources & General Affairs Department

Human Resources Group
General Affairs Group

Sales Planning Department

Marketing Group

Securities Business Department

Securities Business Group

Contents Design Department

Contents Design Group

Business Promotion Department

Business Promotion Group

Customer Office

Customer Center

Loan Business Department

Adviser Group

Control & Administration Department

Operations Planning Group
Market & Investment Trust Operations Group
Business Operation
Loan Operations Group
Risk Management Group

Treasury & Investment Department
System Department

Planning & Administration Group
System Development GroupSony Bank
Sony Financial Holdings | 31

Financial Data (Unaudited)Sony Financial Holdings Inc. (SFH)

Sony Financial Holdings

Consolidated Balance Sheet
As of March 31(Millions of yen)

2005

Assets:Cash and due from banks
Call loans and bills bought
Commercial paper and other debt purchased
Monetary trusts
Securities
Loans
Property and equipment
Due from agencies
Due from reinsurers
Foreign exchanges
Other assets
Deferred tax assets
Reserve for possible loan losses

75,811
303,796
1,998
515,229
2,058,456
206,305
51,6685252
4,659
62,562
1,710(187)

Total assets

3,282,269

Liabilities:
Policy reserve and others:
Reserve for outstanding claims
Policy reserve
Reserve for policyholders’ dividends
Due to agencies
Due to reinsurers
Deposits
Call money and bills sold
Foreign exchanges
Other liabilities
Reserve for employees’ bonuses
Reserve for employees’ retirement benefits
Reserve for directors’ retirement benefits
Reserve for price fluctuations
Deferred tax liabilities

2,444,293
25,363
2,418,194
735
1,155
781
546,717
24,60013
45,543
1,495
10,492
77
12,672
6,029

Total liabilities

3,093,875

Minority interests:
Minority interests

5,576

Stockholders’ equity:
Common stock:
Authorized —5,000,000 shares
Issued—2,100,000 shares
Capital surplus
Retained earnings
Land revaluation
Net unrealized gains on other securities, net of taxes
Foreign currency translation adjustments

180,877(59,232)(768)
56,817(374)

Total stockholders’ equity

182,817

Total liabilities, minority interests and stockholders’ equity
See notes to the consolidated financial statements.

32 | Sony Financial Holdings

5,500

3,282,269

Consolidated Statement of Income(Millions of yen)

2005

Ordinary revenues

653,259

Ordinary revenues from the life insurance business:
Income from insurance premiums
Insurance premiums
Ceded reinsurance commissions
Investment income
Interest and dividends
Income from monetary trusts, net
Income from trading securities, net
Gains on sale of securities
Gains on redemption of securities
Other investment income
Gains on separate accounts, net
Other ordinary income

603,775
551,447
550,141
1,306
50,25425,755
7,170
3,962
3,344
2,393
4
7,623
2,072

Ordinary revenues from the non-life insurance business:
Underwriting income
Net premiums written
Interest and dividends on deposits of premiums
Investment income
Interest and dividends
Gains on sale of securities
Transfer to interest and dividends on deposits of premiums
Other ordinary income

38,14937,862
37,849
13
275
274
14
(13)
10

Ordinary revenues from the banking business:
Interest income
Interest on loans
Interest and dividends on securities
Other interest income
Fees and commissions
Other operating income
Other ordinary income

11,335
6,563
1,560
4,416
587
799
3,946
25
(Continued)

Sony Financial Holdings | 33

Sony Financial Holdings

For the year ended March 31

Sony Financial Holdings

For the year ended March 31(Millions of yen)

Ordinary expenses

640,9902005

Ordinary expenses from the life insurance business:
Insurance claims and other payments
Insurance claims
Annuity payments
Insurance benefits
Surrender payments
Other payments and reinsurance premiums
Provision for policy reserve and others
Provision for policy reserve
Interest portion of reserve for policyholders’ dividends
Investment expenses
Interest expenses
Losses on sale of securities
Devaluation losses on securities
Losses on redemption of securities
Losses from derivatives, net
Foreign exchange losses, net
Provision for reserve for possible loan losses
Depreciation of real estate for rent and others
Other investment expenses
Operating expenses
Other ordinary expenses

587,052
194,141
62,136
3,173
22,698
101,6494,482
299,508
299,508
0
5,115
133
330
217
1,146
342
58
118
558
2,209
79,682
8,603

Ordinary expenses from the non-life insurance business:
Underwriting expenses
Net losses paid
Loss adjustment expenses
Net commission and brokerage fees
Provision for reserve for outstanding losses
Provision for underwriting reserve
Investment expenses
Losses on sale of securities
Losses on redemption of securities
Operating, general and administrative expenses
Other ordinary expenses

40,66628,546
17,463
2,191
725
1,967
6,198
21
20
1
12,0970

Ordinary expenses from the banking business:
Interest expenses
Interest on deposits
Other interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Other ordinary expenses

13,272
2,855
2,559
295
479
2,452
6,902
582

Ordinary profit
Extraordinary gains
Gains on sale of property and equipment
Extraordinary losses
Losses on sale and disposal of property and equipment
Provision for reserve for price fluctuations
Provision for reserve for policyholders’ dividends
Income before income taxes
Income taxes:
Current
Deferred
Minority interests
Net income
See notes to the consolidated financial statements.

34 | Sony Financial Holdings

12,269
0
0
516
74
442
519
11,233
13,570(8,428)284
6,375

Consolidated Statement of Surplus(Millions of yen)

2005

Capital Surplus:
Balance at beginning of year
Additions:Issuance of stocks
Establishment of SFH
Balance at end of year—
180,877
5,000
175,877
180,877

Retained Earnings:
Balance at beginning of year
Additions:
Net income
Adjustment of retained earnings for newly consolidated subsidiaries
Deductions:
Cash dividends paid
Adjustment of retained earnings for newly consolidated subsidiaries
Balance at end of year—
24,051
6,375
17,67583,2836,500
76,783(59,232)

See notes to the consolidated financial statements.

Sony Financial Holdings | 35

Sony Financial Holdings

For the year ended March 31

Sony Financial Holdings

Consolidated Statement of Cash Flows
For the year ended March 31(Millions of yen)

2005

Cash flows from operating activities:
Income before income taxes
Depreciation of real estate for rent and others
Depreciation and amortization
Amortization of goodwill
Increase in reserve for outstanding claims
Increase in policy reserve
Interest portion of reserve for policyholders’ dividends
Provision for reserve for policyholders’ dividends
Increase in reserve for possible loan losses
Increase in reserve for employees’ retirement benefits
Increase in reserve for price fluctuations
Interest and dividends
Net (gains) losses on securities
Interest expenses
Net foreign exchange (gains) losses
Net (gains) losses on sale or disposal of property and equipment
Net (increase) decrease in loans
Net increase (decrease) in deposits
Net (increase) decrease in call loans and bills bought
Net increase (decrease) in call money and bills soldNet (increase) decrease in foreign exchanges (assets)
Net increase (decrease) in foreign exchanges (liabilities)
Others, net
SubtotalInterest and dividends received
Interest paid
Policyholders’ dividends
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Investments in monetary trusts, net
Purchases of securities
Proceeds from sale and redemption of securities
Investments in loans
Collections of loans
Others, net
Subtotal
Purchases of property and equipment
Proceeds from sale of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from borrowings
Repayments of borrowings
Proceeds from issuance of stocks
Cash dividends paid
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

11,233
558
2,781
459
1,762
305,707
0
519
98
1,877
442
(32,593)(15,189)
2,988(5,427)
71(63,361)
168,060(86,729)(40,400)
1,488
7(3,879)250,474
41,612(2,413)(568)(14,954)274,150(94,487)(1,083,349)
906,646(37,146)
28,653(1,151)(280,835)(5,358)1(286,192)15(15)
10,000(6,500)3,500(2)(8,544)
262,513
253,969

Notes: 1. The reconciliation of “Cash and cash equivalents” in the consolidated statement of cash flows to “Cash and due from banks” inthe consolidated balance sheet is as follows:
Cash and due from banks:¥ 75,811 million
Call loans of domestic life insurance subsidiary:¥176,100 million
Securities of non-life insurance subsidiary:¥ 32,932 million
Securities other than cash equivalents of non-life insurance subsidiary: ¥ (30,874) million
Cash and cash equivalents:¥253,969 million
2. Cash flows from investing activities include cash flows from lending operations of the insurance business.

36 | Sony Financial Holdings

Notes to the Consolidated Financial Statements

1.

Basis of Presenting Consolidated Financial Statements
Sony Financial Holdings Inc. (the “Company”) and its domestic subsidiaries maintain their accounting records and prepare
their financial statements in Japanese yen in accordance with the provisions set forth in the Commercial Code of Japan, theInsurance Business Law of Japan and the Banking Law of Japan and in conformity with generally accepted accounting
principles and practices in Japan, which are different in certain respects as compared to the application and disclosure
requirements of generally accepted accounting principles and practices in the United States of America. The Company’s
overseas subsidiary maintains its accounting records and prepares its financial statements in conformity with generally
accepted accounting principles and practices prevailing in its country of domicile.
The accompanying consolidated financial statements are prepared based on the consolidated financial statements of theCompany and its subsidiaries (the “Companies”) which were filed with the Financial Services Agency as required by the
Insurance Business Law and the Banking Law. For the convenience of readers, the preparation is modified in certain respects
from the original Japanese disclosed financial information.

2.

Principles of Consolidation(1) Scope of consolidation
The number of consolidated subsidiaries: 4
Consolidated subsidiaries:
Sony Life Insurance Co., Ltd.
Sony Life Insurance (Philippines) Corporation
Sony Assurance Inc.
Sony Bank Inc.
(2) Application of the equity method
Not applicable(3) Fiscal year of consolidated subsidiaries
The financial statements of Sony Life Insurance (Philippines) Corporation are prepared with a fiscal year end of
December 31. Appropriate adjustments are made for material transactions between December 31 and March 31, thedate of the consolidated financial statements. All the other subsidiaries prepare their respective financial statementswith a fiscal year end of March 31, the same as the date of the consolidated financial statements.
(4) Valuation of assets and liabilities of consolidated subsidiaries
A portion of the assets and liabilities of consolidated subsidiaries are computed at fair value as of the respective dates
when the subsidiaries were initially consolidated.
(5) Amortization of goodwill
Goodwill is charged to income directly when incurred.
(6) Appropriation of retained earnings
The consolidated statement of surplus is based on the appropriation of retained earnings approved at the shareholders’meeting during the consolidated fiscal year.

3.

Summary of Significant Accounting Policies(1) Securities
Securities (including commercial paper and other debt purchased and monetary trusts) are stated in the following manner:
Securities held for trading purposes (”trading securities”) are stated at fair value. The cost of securities sold isdetermined by the moving-average method. Held-to-maturity securities are stated at amortized cost (straight-line
method) using the moving-average method. Other securities designated as available-for-sale securities with fair value
are stated at fair value at fiscal year end, and its cost of securities sold is determined by the moving-average method.
Other securities designated as available-for-sale securities with no available fair value are stated at amortized cost (straightline method) or at acquisition cost using the moving-average method. Net unrealized gains and losses on other securities
above are reported, net of applicable income taxes, as a separate component of stockholders’ equity.
(2) Derivative financial instruments
Derivative financial instruments are stated at fair value.
(3) Property and equipment
Primarily, depreciation is computed by the straight-line method for buildings and by the declining-balance method forother property and equipment.
(4) Software for internal use
Capitalized software for internal use is amortized using the straight-line method over its estimated useful life of five years.
(5) Deferred charges
Stock issuance costs are fully charged to income when incurred.
(6) Reserve for possible loan losses
The reserve for possible loan losses is established in accordance with each company’s Self-Assessment Guidelines andWrite-offs and Reserve Guidelines. With respect to loans to borrowers subject to bankruptcy, court-guided rehabilitationor similar legal or formal proceedings, the Companies provide a specific reserve in the amount of the loan balance lessamounts collectable from collateral, guarantees and by other means. For other loans, the Companies provide a generalreserve by applying the historical loan loss ratio determined over a certain period. Each loan is subject to asset assessmentby the operational departments in accordance with each company’s Self-Assessment Guidelines, and the results of theassessment are reviewed by the internal audit departments, which are independent from the operational departments,
before the reserve amount is finally determined.
(7) Reserve for employees’ bonuses
The reserve for employees’ bonuses is provided for the payment of bonuses to employees, in the amount of estimatedbonuses, which are attributable to the current fiscal year.
(8) Reserve for employees’ retirement benefits
The reserve for employees’ retirement benefits is provided for the payment of retirement benefits to employees, in theamount deemed accrued at the fiscal year end, based on the projected retirement benefit obligation at the fiscal year end.
(9) Reserve for directors’ retirement benefits
The reserve for directors’ and statutory auditors’ retirement benefits of the domestic life insurance subsidiary is provided
based on its internal regulations and calculated as the amount that would be payable if all eligible directors and statutory
auditors were to resign at the fiscal year end.
Sony Financial Holdings | 37

Sony Financial Holdings

For the year ended March 31, 2005

Sony Financial Holdings(10) Reserve for price fluctuations
Pursuant to requirements under the Insurance Business Law, the reserve for price fluctuations is provided for pricefluctuations primarily related to stocks, bonds and foreign currency denominated assets which are exposed to losses due tomarket price fluctuations. This reserve may only be used to reduce deficits arising from price fluctuations on those assets.
(11) Translation of foreign currencies
Assets and liabilities denominated in foreign currencies are translated into Japanese yen at the foreign exchange rates in
effect at the fiscal year end.
(12) Lease transactions
Finance leases that have not been deemed to transfer ownership of the leased property to the lessees are accounted for
as operating lease transactions.
(13) Hedge accounting
As for the hedge accounting method applied to hedging transactions for interest rate risk generated by financial assets
and liabilities, the banking subsidiary applies deferred hedge accounting or fair value hedge accounting. Interest rate
swaps are used as hedging instruments to offset fluctuations in interest rates on fixed-rate loans by identifying thehedged items via their grouping according to their maturity, in accordance with the “Treatment for Accounting and
Auditing of Application of Accounting Standard for Financial Instruments in the Banking Industry” (Industry Audit
Committee of Japanese Institute of Certified Public Accountants No. 24). Interest rate swaps and others are used as
hedging instruments to offset fluctuations in the fair value of fixed-rate bonds, which are classified as other securities.
Both of the above-mentioned hedging instruments are identified so that their significant terms are nearly identical tothose of the hedged items. Accordingly, such hedges are considered as highly effective, resulting in a substitution forevaluating the effectiveness of the hedging transactions.
(14) Accounting for consumption taxes
The consumption taxes received or paid by the Company and its domestic subsidiaries, excluding loss adjustment
expenses and operating, general and administrative expenses of the non-life insurance subsidiary, are not included inincome and expenses. Under the Consumption Tax Law of Japan, the consumption taxes paid on property and equipment,
which is not deductible from the consumption taxes received, are deferred as “other assets” and amortized over a fiveyear period on a straight-line basis, while other non-deductible consumption taxes are charged as expenses in the
period in which the consumption taxes are paid.
(15) Policy reserve
Pursuant to Article 116 of the Insurance Business Law, the domestic life insurance subsidiary maintains a policy reserve
for the fulfillment of future obligations under life insurance contracts, and the policy reserve is calculated in thefollowing manner.
a. Policies subject to the standard policy reserve apply the method stipulated by the Financial Services Agency (Ministryof Finance Directive 48, 1996).
b. Policies not subject to the standard policy reserve apply the net level premium method.
(16) Application of consolidated tax provision
The consolidated tax provision, under which Sony Corporation is the parent company, is applied to the Company and its
domestic subsidiaries wholly owned by Sony Corporation.
4.

The balance of loans included the following “Risk-monitored loans” stipulated in the Banking Law.
Bankrupt loans:¥ — million
Non-accrual delinquent loans:¥ 0 million
Past due loans (3 months or more): ¥ — million
Restructured loans:¥ — million”Non-accrual delinquent loans” are loans on which accrued interest income is not recognized, excluding “Bankrupt loans”
and loans on which interest payments are deferred in order to support the borrowers’ recovery from financial difficulties.

5.

The domestic life insurance subsidiary revalued its land for operating purposes, as permitted by the Land Revaluation Law(Law No.34, promulgated on March 31, 1998—the “Law”). The net revaluation losses are reported as “land revaluation” instockholders’ equity and the tax effect of this revaluation of land is accounted for in full in valuation reserve. The date of therevaluation was March 31, 2002, and the revaluation method stipulated by Article 3-3 of the Law was based on the land
appraisal in conformity with Article 2-5 of the Law Enforcement Order related to the Law (Government Ordinance No. 119,effective from March 31, 1998). The difference between the fair value and the book value of land for operating purposes at the
fiscal year end was ¥334 million.

6.

Accumulated depreciation of property and equipment: ¥5,012 million.

7.

The balance sheet included ¥200,996 million of assets and liabilities in equal amounts related to separate accounts, as
stipulated in Article 118 of the Insurance Business Law.

8.

Net assets per share: ¥87,056.14
The basis for this calculation is net assets of ¥182,817 million, of which the entire portion is applicable to common shares.
The number of shares outstanding at fiscal year end was 2,100 thousand.

9.

Net income per share: ¥3,069.93
The basis for this calculation is net income of ¥6,375 million, of which the entire portion is applicable to common shares. The
weighted-average number of shares outstanding was 2,076 thousand.

10. The Company and its subsidiaries have office and computer equipment taken on lease contracts that are not included inproperty and equipment stated in the consolidated balance sheet.
11. The movement of the reserve for policyholders’ dividends at the domestic life insurance subsidiary for the fiscal year is as follows:
Balance at beginning of year:¥783 million
Policyholders’ dividends during the year:¥568 million
Increase in interest:¥ 0 million
Provision for reserve for policyholders’ dividends: ¥519 million
Balance at end of year:¥735 million

38 | Sony Financial Holdings

13. The fair value information on securities as of March 31, 2005, is as follows. In addition to “Securities” in the consolidatedbalance sheet, commercial paper and other debt purchased in “Commercial paper and other debt purchased” are included in
the amounts of the following table.
Trading securities
Consolidated balance sheet amount(Millions of yen)
Valuation gains/losses charged to income

188,934

3,749

Held-to-maturity securities with fair value(Millions of yen)
Consolidatedbalancesheet amount

Fair valueNet
unrealized
gains/losses

Unrealized
gains

Unrealized
losses

25,58522,0383,547
1,827
27,413

26,03722,4093,627
1,892
27,929

451
371
80
64
516

465
384
80
64
529

13
13
0
—
13

Acquisition
cost

Consolidatedbalancesheet amountNet
unrealized
gains/losses

Unrealized
gains

Unrealized
losses1,418,336
838,119580,216
34,817
305,535
1,758,688

1,467,374
855,449
611,925
53,243
313,457
1,834,075

49,03817,33031,70818,426
7,922
75,38650,374
17,34133,032
18,984
9,014
78,372

1,335
11
1,324
557
1,092
2,985

Bonds
Japanese government and municipal bonds
Japanese corporate bonds
Other
Total
Other securities with fair value(Millions of yen)

Bonds
Japanese government and municipal bonds
Japanese corporate bonds
Stocks
Other
Total

Other securities sold in the year ended March 31, 2005:
Sales amount

Gains on sales

291,490

4,091(Millions of yen)
Losses on sales

444

Other securities with no available fair value:(Millions of yen)
Consolidated balance sheet amount

Stocks
Other
Total

5
10,026
10,031

The future redemption schedule of other securities with maturities and held-to-maturity securities is as follows:(Millions of yen)
1 year or less

Bonds
Japanese government and municipal bonds
Japanese corporate bonds
Other
Total

238,132
104,899
133,232
49,278287,411More than 1 year More than 5 years
to 5 years
to 10 years

647,812310,208
337,603
170,746
818,558

Over 10 years

572,071
450,971
121,100
48,985621,057

34,944
11,40823,535
6,414
41,359

14. The fair value information on monetary trusts as of March 31, 2005, is as follows:
Monetary trusts for trading purposes
Consolidated balance sheet amount(Millions of yen)
Valuation gains/losses charged to income

123,010(1,096)

Other monetary trusts

Other monetary trusts(Millions of yen)
Acquisition
cost

Fair valueNet
unrealized
gains/losses

379,546392,218

12,672

Unrealized
gains

Unrealized
losses

13,592920

Note: Jointly invested monetary trusts of ¥50 million are included in the above table.

15. All figures in the consolidated financial statements and notes are stated in millions of yen by discarding fractional amounts ofless than ¥1 million.

Sony Financial Holdings | 39

Sony Financial Holdings

12. The assets pledged as collateral consisted of the following.
Assets pledged as collateral:
Securities:¥39,417 million
Liabilities corresponding to the assets above:
Call money and bills sold:¥24,600 million
In addition to the assets presented above, the banking subsidiary pledged securities of ¥15,955 million as collateral fordomestic exchange settlements and derivative transactions, initial margins for futures markets.

Sony Financial Holdings

Consolidated Capital Adequacy Ratio(domestic criteria)

The consolidated capital adequacy ratio is subject to the capital adequacy guidelines issued by
the Financial Services Agency in Japan which closely follow the risk-adjusted approach proposedby the Bank for International Settlements (BIS).
The following table presents the consolidated capital adequacy ratio of Sony Financial
Holdings Inc. under the guidelines.

As of March 31(Millions of yen)

2005

Tier I capital(Core capital)[A]

181,326
Common stock

5,500

Capital surplus

180,877

Retained earnings(10,462)

Minority interests

5,576

Unrealized losses on other securities

164

Tier II capital(Supplementary capital)[B]

Deductions[C]

145,881

Total capital[A+B–C] [D]35,489Risk-adjusted assets[E]291,684

Consolidated capital
adequacy ratio

44
General reserve for possible loan losses

[D/E]

44

On-balance item

291,194

Off-balance item490
12.17.%

Note: Pursuant to “Defining the Standards on the Consolidated Capital Adequacy Ratio under the Provision of Article 52-25 of the
Banking Law (Ministry of Finance Directive 62, 1998)”, insurance subsidiaries are excluded from calculation of the consolidated
capital adequacy ratio.

40 | Sony Financial Holdings

Solvency Margin Ratio

Sony Life Insurance Co., Ltd.
As of March 31(Millions of yen)

2004

2005

[A]

370,746

416,666

Equity (less certain items) (Note)
Reserve for price fluctuations
Contingency reserve
Reserve for possible loan losses
Net unrealized gains/losses on other securities (before taxes)(✕ 90%, if gains; ✕ 100%, if losses)
Net unrealized gains/losses on real estate(✕ 85%, if gains; ✕ 100%, if losses)
Subordinated debt
Deductible items
Other

74,411
12,22517,700078,013
12,66634,451072,75579,897(1,674)——
195,328(401)——
212,039[B]

51,022

63,269

R1
R2
R3
R4

28,806
10,40430,0191,384

44,855
10,494
31,622
1,739

1,453.3.%

1,317.1.%

Total solvency margin

Total risk

R12 + (R2 + R3)2 + R4

Insurance risks
Assumed interest risks
Asset management risks
Business management risks
Solvency margin ratio { [A] / ([B] ✕ 1/2)} ✕ 100 (%)

Note: Equity represents stockholders’ equity on the balance sheets less estimated appropriation paid in cash, deferred assets, and net
unrealized gains/losses on other securities.

Sony Assurance Inc.
As of March 31(Millions of yen)

2004

2005

[A]

16,615

15,845Equity (less certain items) (Note)
Reserve for price fluctuations
Special catastrophe reserves
Reserve for possible loan losses
Net unrealized gains/losses on other securities (before taxes)
Net unrealized gains/losses on real estate
Subordinated debt
Deductible items
Other

14,046
5
2,543
—
20
—
—
—
—

12,065
6
3,742
—
30
—
—
—
—

[B]

2,401

2,893

R1
R2
R3
R4
R5

2,118
—
182
75
200

2,495
—
188
89
301

1,383.5.%

1,095.2.%

Total solvency margin

Total risk

R12 + (R2 + R3)2 + R4+ R5Ordinary insurance risks
Assumed interest risks
Asset management risks
Business management risks
Major catastrophe risks
Solvency margin ratio { [A] / ([B] ✕ 1/2)} ✕ 100 (%)

Note: Equity represents stockholders’ equity on the balance sheets less estimated appropriation paid in cash, deferred assets, and net
unrealized gains/losses on other securities.

Sony Financial Holdings | 41

Sony Financial Holdings

The domestic insurance subsidiaries of Sony Financial Holdings Inc. are required to maintainan adequate solvency margin ratio by the Japanese regulatory authorities.
The following tables present the solvency margin ratio of Sony Life Insurance Co., Ltd. andSony Assurance Inc.

(Reference)

Financial Data of Subsidiaries
Sony Life Insurance Co., Ltd. and Sony Life Insurance (Philippines) Corporation

Consolidated Balance Sheets

Sony Life

As of March 31(Millions of yen)

2004

2005

Assets:Cash and deposits
Call loans
Monetary trusts
Securities
Loans
Property and equipment
Due from agencies
Due from reinsurers
Other assets
Reserve for possible loan losses

66,388175,000
419,224
1,562,929
71,637
46,4760960
32,738(107)

51,620176,100
515,229
1,703,923
79,91950,793
5
184
39,024(142)

Total assets

2,375,249

2,616,658

Liabilities:
Policy reserve and others:
Reserve for outstanding claims
Policy reserve
Reserve for policyholders’ dividends
Due to agencies
Due to reinsurers
Other liabilities
Reserve for employees’ retirement benefits
Reserve for directors’ retirement benefits
Reserve for price fluctuations
Deferred tax liabilities

2,114,288
17,913
2,095,591
783
1,038
524
95,9678,366
46
12,225
10,943

2,413,543
17,7082,395,099
735
1,155
625
32,090
10,20477
12,666
5,826

Total liabilities

2,243,400

2,476,191

Stockholders’ equity:
Common stock
Capital surplus
Retained earnings
Land revaluation
Net unrealized gains on other securities, net of taxes
Foreign currency translation adjustments

65,000865
15,512(768)
51,577(337)

65,000865
19,181(768)
56,564(374)

Total stockholders’ equity

131,848

140,467

2,375,249

2,616,658

Total liabilities, minority interests and stockholders’ equity

42 | Sony Financial Holdings

(Reference)

Consolidated Statements of Income
For the years ended March 31

Ordinary revenues

Ordinary expenses
Insurance claims and other payments
Insurance claims
Annuity payments
Insurance benefits
Surrender payments
Other payments and reinsurance premiums
Provision for policy reserve and others
Provision for reserve for outstanding claims
Provision for policy reserve
Interest portion of reserve for policyholders’ dividends
Investment expenses
Interest expenses
Losses on sale of securities
Devaluation losses on securities
Losses on redemption of securities
Losses from derivatives, net
Foreign exchange losses, net
Provision for reserve for possible loan losses
Depreciation of real estate for rent and others
Other investment expenses
Operating expenses
Other ordinary expenses
Ordinary profit
Extraordinary gains
Gains on sale of property and equipment
Extraordinary losses
Losses on sale and disposal of property and equipment
Provision for reserve for price fluctuations
Other extraordinary losses
Provision for reserve for policyholders’ dividends
Income before income taxes
Income taxes:
Current
Deferred
Minority interests
Net income

2004

2005

581,129604,288514,859
64,89024,488
7,951
154
2,353
3,991
2,245
1
23,702
1,379

551,642
50,25425,755
7,170
3,962
3,344
2,393
—
4
7,623
2,390

550,859

587,139

191,542
59,2102,435
19,836105,227
4,833
269,131
4,652
264,478
0
3,606
4
928
—
704
—
21
24
612
1,309
78,372
8,205

194,141
62,136
3,173
22,698
101,649
4,483
299,508—
299,508
0
5,115
133
330
217
1,146
342
58
118
558
2,209
79,816
8,557

30,27017,148

4

0

4

0

6,332

515

67
6,264
1

74
441
—

644
23,297519
16,113

14,966(5,394)17
13,743

13,934(7,989)—
10,168Sony Financial Holdings | 43

Sony Life

Income from insurance premiums
Investment income
Interest and dividends
Income from monetary trusts, net
Income from trading securities, net
Gains on sale of securities
Gains on redemption of securities
Gains from derivatives, net
Other investment income
Gains on separate accounts, net
Other ordinary income(Millions of yen)(Reference)

Consolidated Statements of Cash Flows

Sony LifeFor the years ended March 31

Cash flows from operating activities:
Income before income taxes
Depreciation of real estate for rent and others
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in reserve for outstanding claims
Increase in policy reserve
Interest portion of reserve for policyholders’ dividends
Provision for reserve for policyholders’ dividends
Increase (decrease) in reserve for possible loan losses
Increase in reserve for employees’ retirement benefits
Increase in reserve for directors’ retirement benefits
Increase in reserve for price fluctuations
Interest and dividends
Net (gains) losses on securities
Interest expenses
Net foreign exchange (gains) losses
Net (gains) losses on sale or disposal of property andequipment
Net (increase) decrease in due from agencies
Net (increase) decrease in due from reinsurers
Net (increase) decrease in other assets(excluding those for investing and financing activities)
Net increase (decrease) in due to agencies
Net increase (decrease) in due to reinsurers
Net increase (decrease) in other liabilities(excluding those for investing and financing activities)
Others, net
SubtotalInterest and dividends received
Interest paid
Policyholders’ dividends
OthersIncome taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Investments in monetary trusts, net
Purchases of securities
Proceeds from sale and redemption of securities
Investments in loans
Collections of loans
Others, net
Subtotal
Purchases of property and equipment
Proceeds from sale of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from borrowings
Repayments of borrowings
Cash dividends paid
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

44 | Sony Financial Holdings(Millions of yen)

2004

2005

23,297
612
695
171
4,652
264,478
0
644
(46)
1,645
46
6,264
(24,488)(30,814)4
21

16,113
558
717
—
(205)
299,508
0
519
118
1,838
31
441
(25,755)(15,286)
133
58

63
1
(229)

71
(5)
775

(18,281)
1,038
92(1,119)117
101(2,051)(6,644)
221,176
30,912
(4)
(569)
961
(498)
251,976

3,755(4,965)277,522
29,866
(133)
(568)
888
(15,029)292,545(85,170)(584,576)
409,713(29,578)
24,424(557)(265,745)(697)
2(266,440)(94,487)(632,025)
441,467(37,146)
28,653(1,151)(294,689)(5,023)
1(299,712)——(9,391)(9,391)(20)(23,876)
265,265
241,38815(15)(6,500)(6,500)(2)(13,668)
241,388
227,720(Reference)Sony Assurance Inc.

Nonconsolidated Balance Sheets
As of March 31(Millions of yen)

2004

2005

Assets:Cash and deposits
Securities
Property and equipment
Other assets
Deferred tax assets

4,512
27,747
96
6,487
1,277

4,036
32,932
95
7,924
1,696

Total assets

40,121

46,685

Liabilities:
Policy reserves
Other liabilities
Reserve for employees’ retirement benefits
Reserve for employees’ bonuses
Reserve for price fluctuations

22,583
2,949
185
335
5

30,750
3,267
225
348
6

Total liabilities

26,05934,598Stockholders’ equity:
Common stock
Capital surplus
Retained earnings
Net unrealized gains on other securities, net of taxes

20,00020,000(25,953)
15

20,00020,000(27,934)
21

Total stockholders’ equity

14,061

12,086

Total liabilities and stockholders’ equity

40,121

46,685

Sony AssuranceSony Financial Holdings | 45

(Reference)

Nonconsolidated Statements of Income
For the years ended March 31

Ordinary revenues
Underwriting income
Net premiums written
Interest and dividends on deposits of premiums
Investment income
Interest and dividends
Gains on sale of securities
Transfer to interest and dividends on deposits of premiums
Other ordinary income
Ordinary expenses
Underwriting expenses
Net losses paid
Loss adjustment expenses
Net commissions and brokerage fees
Provision for reserve for outstanding losses
Provision for underwriting reserve
Foreign exchange losses, net
Other underwriting expenses
Investment expenses
Losses on sale of securities
Losses on redemption of securities
Operating, general and administrative expenses
Other ordinary expenses
Ordinary loss

Sony Assurance

Extraordinary gains
Reversal of reserve for price fluctuations
Extraordinary losses
Losses on sale and disposal of property and equipment
Provision for reserve for price fluctuations
Loss before income taxes
Income taxes:
Current
Deferred
Net loss46 | Sony Financial Holdings(Millions of yen)

2004

2005

31,06638,15930,79330,785
7
212
215
4
(7)
60

37,862
37,849
13
275
274
14
(13)
21

33,00740,96621,097
13,101
2,022
625
881
4,463
3
—
31
27
4
11,85424

28,606
17,463
2,191
784
1,967
6,198
—
0
21
20
1
12,338
0

1,941

2,806

5

—

5

—

1

1

1
—

—
1

1,937

2,807

(60)
(546)
1,330

(402)
(424)
1,981

(Reference)

Nonconsolidated Statements of Cash Flows
For the years ended March 31

Cash flows from operating activities:
Income (loss) before income taxes
Depreciation and amortization
Increase in reserve for outstanding losses
Increase in underwriting reserve
Increase (decrease) in reserve for possible loan losses
Increase in reserve for employees’ retirement benefits
Increase in reserve for employees’ bonuses
Increase (decrease) in reserves for price fluctuations
Interest and dividends
Net (gains) losses on securities
Net foreign exchange (gains) losses
Net (gains) losses on sale or disposal of property andequipment
Net (increase) decrease in other assets(excluding those for investing and financing activities)
Net increase (decrease) in other liabilities(excluding those for investing and financing activities)
SubtotalInterest and dividends received
Income taxes received (paid)
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of securities
Proceeds from sale and redemption of securities

Purchases of property and equipment

2004

2005

(1,937)
420
881
4,463
(1)
83
14
(5)
(215)
33
3

(2,807)
499
1,967
6,198
—
39
13
1
(274)
7
—

1

—

(1,584)(1,577)

168

311

2,326

4,380

392
14

623
77

2,733

5,081

(21,098)
10,770(16,823)
11,290(10,327)(5,533)

(22)

(23)

Net cash used in investing activities(10,350)(5,557)

Cash flows from financing activities:
Proceeds from issuance of stocks

10,000—Net cash provided by financing activities

10,000—Effect of exchange rate changes on cash and cash equivalents——

Net increase (decrease) in cash and cash equivalents

2,382

(475)

Cash and cash equivalents at beginning of year

4,186

6,569

Cash and cash equivalents at end of year

6,569

6,094

Sony Financial Holdings | 47

Sony Assurance

Subtotal(Millions of yen)(Reference)Sony Bank Inc.

Nonconsolidated Balance Sheets
As of March 31(Millions of yen)

2005

Assets:Cash and due from banks
Call loans
Commercial paper and other debt purchased
Securities
Loans
Foreign exchanges
Other assets
Premises and equipment
Reserve for possible loan losses

14,13940,966
20,949333,42163,023
6,147
10,245602(63)

19,773
127,696
1,998
321,600
126,385
4,659
15,648741(44)

Total assets

489,432

618,459

Liabilities:
Deposits
Call money
Bills sold
Foreign exchanges
Other liabilities
Reserves for employees’ bonuses
Reserves for employees’ retirement benefits
Deferred tax liabilities

378,850
65,000—6
18,03399
39
291

546,717—
24,60013
11,403140
62202

Total liabilities

462,321583,140

Stockholders’ equity:
Common stock
Capital surplus
Retained earnings
Net unrealized gains on other securities, net of taxes

18,75018,750(10,813)424

23,75013,750(2,477)295

Total stockholders’ equity

27,11135,318

Total liabilities and stockholders’ equity

489,432

618,459

Sony Bank

2004

48 | Sony Financial Holdings

(Reference)

Nonconsolidated Statements of Income
For the years ended March 31(Millions of yen)

2004

Total income
Interest income
Interest on loans
Interest and dividends on securities
Other interest income
Fees and commissions
Other operating income
Other income
Total expenses
Interest expenses
Interest on deposits
Other interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses
Loss before income taxes
Income taxes:
Current
Net loss

2005

7,406

11,353

4,520
990
3,237
292
524
2,357
4

6,563
1,560
4,416
587
817
3,946
25

9,608

13,013

1,136
1,001
135
521
1,988
5,823
139

2,855
2,559
295
677
2,452
6,905
123

2,202

1,659

3
2,206

3
1,663

Sony Bank
Sony Financial Holdings | 49

(Reference)

Nonconsolidated Statements of Cash Flows
For the years ended March 31(Millions of yen)

2004

2005

(2,202)
1,544
45
40(4,520)
1,136
1,192
6,415
(40,559)
129,873(9,625)30,300
(349)
6
6,317
(845)
(2,447)(1,659)
1,553
66
(19)
(6,563)2,855
89(5,485)(63,361)
168,060(86,729)(40,400)
1,488
7
11,122(2,279)(2,233)116,323(23,489)(3)(3)

Net cash provided by (used in) operating activities

116,319(23,493)

Cash flows from investing activities:
Purchases of securities
Proceeds from sale of securities
Proceeds from redemption of securities
Purchases of premises and equipment(458,844)
46,931
301,566(104)(434,500)
132,877
321,011(260)

Net cash provided by (used in) investing activities(110,450)

19,127

Cash flows from financing activities:
Proceeds from issuance of stocks—

10,000Net cash provided by financing activities—

10,000Effect of exchange rate changes on cash and cash equivalents——

Cash flows from operating activities:
Income (loss) before income taxes
Depreciation and amortization
Impairment losses
Increase (decrease) in reserve for possible loan losses
Interest income
Interest expenses
Net (gains) losses on securities
Net foreign exchange (gains) losses
Net (increase) decrease in loans
Net increase (decrease) in deposits
Net (increase) decrease in call loans
Net increase (decrease) in call money
Net (increase) decrease in foreign exchanges (assets)
Net increase (decrease) in foreign exchanges (liabilities)
Interest received
Interest paid
Others, net
Subtotal
Income taxes paid

5,868

5,633

Cash and cash equivalents at beginning of year

8,270

14,139Cash and cash equivalents at end of year

14,13919,773

Sony Bank

Net increase in cash and cash equivalents

50 | Sony Financial Holdings

Head office: 1-1, Minami Aoyama 1-chome, Minato-ku, Tokyo, Japan
Phone:+81-(0)3-5785-1070
URL:
http://www.sonyfh.co.jp/english/
Produced in July 2005 by Corporate Planning Department of SFH

Annual Report 2005

Annual Report

2005
For the year ended March 31, 2005

Sony Financial Holdings Group
This annual report is printed on recycled paper.
Printed in Japan