FY2009 3Q Conference Call for Domestic Institutional Investors and Analysts
Q&A (Executive Summary)
Date: February 12, 2010, 16:00–16:50
Respondents: Hiromichi Fujikata, Executive Vice President, Representative Director,
Sony Financial Holdings Inc.
Mitsuhiro Koizumi, Director, Sony Life Insurance Co., Ltd.
Toshihiko Fukumoto, Executive Officer, Sony Assurance Inc.
Hidehiko Nakamura, Director, Chief Financial Officer, Sony Bank Inc.
Note: The original content has been revised appropriately and edited for ease of understanding.
We presented “Guidance on the Value of Existing Business, a Component of Sony Life’s
Market Consistent Embedded Value (MCEV)” in the FY2009 3Q Conference Call.
Overview
SFH provides guidance on the value of existing business, a component of MCEV, by using theinterest swap rates as of December 31, 2009, to make calculations on in-force business as of March31, 2009. This is because numerous inquiries SFH has received regarding interest rate sensitivity forMCEV.
SFH used the interest swap rates as of December 31, 2009, to make calculations on in-force businessas of March 31, 2009 (Note: not in-force business as of December 31, 2009). This calculation shows
an increase of approximately ¥176 billion in the value of existing business, compared with thecalculation based on interest swap rates as of March 31, 2009. Please note, however, that thiscalculation merely indicates the change in the sum of the present value of certainty-equivalent profit
and the time value of options and guarantees.
The above calculation does not take into account frictional costs and non-hedgeable costs, which areother remaining components of the value of existing business.
SFH considers, adjusted net worth, another remaining component of MCEV, has increased
approximately ¥25 billion between March 31, 2009, and December 31, 2009, due primarily to a
recent rise in stock prices, offsetting the change from unrealized gain into losses on ultra long-termbonds held as held-to-maturity securities, affected by an increase in interest rates mainly in the ultra
long-term.
Note: The above calculation does not take into account changes in product mix of in-force businessand in assumptions other than interest swap rates over lapse of time. The validity of this calculation
has not been reviewed by outside specialists.

Q1. Please explain the increase in the value of existing business, particularly the rise in the sumof the present value of certainty-equivalent profit and the time value of options and guarantees,compared with the calculation as of Mach 31, 2009. I understand that the increase as ofDecember 31, 2009, amounted to approximately ¥176.0 billion, up approximately ¥36.0 billion
from the ¥140.0 billion increase as of September 30, 2009. The rate of increase for the threemonths ended December 31, 2009, was less than I had expected, compared with the rise in
implied forward rates calculated on the basis of interest swap rates. How can I analyze thevalue of existing business from the changes in the yield curve? I assume that lengthening ofasset durations does not affect the value of existing business. I would like to know what else
affects this calculation.
A1. [Sony Life]
We used interest swap rates as of December 31, 2009, to calculate the effect of the changes ininterest rates on in-force business as of March 31, 2009. MCEV as of March 31, 2010, reflects
changes in our financial position, including assets and liabilities, as well as revisions in theassumptions used in the MCEV calculations. Therefore, we consider it difficult to provide specificfactors behind changes in the value of existing business.
Q2. For the MCEV calculation as of March 31, 2009, based on the QIS4 method of Solvency II,
Sony Life’s free surplus was negative. Should I expect the negative free surplus to be zero orpositive, even if QIS4 is applied, taking into account increases in the value of existing businessand in adjusted net worth as of December 31, 2009, as well as the effect of lengthening asset
durations?
A2. [Sony Life]
We have not made any precise calculations of our free surplus at present, but we believe that thenegative free surplus would be zero or positive.
Q3. When forecasting the sensitivity of new business value, what period should we be looking
at for interest swap rates? I believe the product mix has changed since March 31, 2009, which
results in a higher percentage of medical insurance and family income insurance with a
discount rider for nonsmokers and other people in excellent health. I would like to know how
these changes in the product mix affect the new business value as of December 31, 2009,
assuming that interest swap rates remain unchanged from March 31, 2009.
A3. [Sony Life]
The period for interest swap rates depends on the product mix of new business. We have been
explaining that the average duration of in-force business on liabilities is between 30 years and 40years. New business has a longer duration than in-force business, and we assume that we should belooking at a slightly longer range in the yield span between 30 years and 40 years, but we will refrainfrom commenting on it as we do not have precise figures.
We cannot explain the impact on new business value of changes in the product mix, as we do notdisclose figures for each product’s profitability due to our policy.

Q4. Sales are brisk for family income insurance with a discount rider for nonsmokers andother people in excellent health. I assume that this rise is a result of individual customers
converting from conventional products to more reasonably priced products. Taking into
account the impact on the value of in-force policies, I would like to know whether Sony Life’s
product development strategy in this product segmentation is reasonable.
A4.

[Sony Life]We develop products considering the trends of competitors’ products, condition of the insurance
market and customers’ needs, etc. This newly introduced family income insurance was designed tooffer more reasonable prices to customers with excellent health. With regard to MCEV, thesurrendered in-force policy amount has a negative impact on MCEV. However, we think that strongsales of newly introduced products will cover the above-mentioned negative impact and contributeto the growth of MCEV.
Q5. What is the reason behind the increase in the net loss ratio for the nine months ended
December 31, 2009, in the non-life insurance business, compared with the same period of theprevious fiscal year? Also, can I assume the same reason for the higher loss ratio factored inyour operating results forecast?
A5. [Sony Assurance]
The loss ratio increased year on year, due to a rise in car accidents involving properties and vehicles,as well as owing to higher losses paid per policy. The number of accidents to be covered by bodily
injury liability insurance also increased. We anticipate a future rise in the loss ratio for the same
reasons.