March 15, 2010
Teruhisa Tokunaka, President and Representative Director
Sony Financial Holdings Inc.
(Code No. 8729 TSE 1st Section)

Impact of Asset Management Policy Changes and Other Factors on Sony
Life’s Market Consistent Embedded Value
Sony Financial Holdings Inc. announced that its wholly-owned subsidiary, Sony Life Insurance Co., Ltd.
(“Sony Life”) implemented changes to its asset management policy and other factors, which affects Sony Life’s
market consistent embedded value (“MCEV”).
Contents

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Preface
BackgroundPrincipal Revisions
Impact on MCEVReference: Sony Life’s MCEVFor inquiries:
Corporate Communications & Investor Relations Dept.
Sony Financial Holdings Inc.
Telephone: +81-3-5785-1074 (9:00–17:30 JST)
Email: press@sonyfh.co.jp
Website of Sony Financial Holdings Inc.
http://www.sonyfh.co.jp/index_en.html

(1) Preface
Sony Life has mitigated the mismatch risk from the asset–liability duration gap1 in line with its practice ofrisk management on an economic value basis.
In accordance with the above practice, Sony Life has decided to change its asset management policy
for interest rate-sensitive whole life insurance2 and semi-participating insurance3. These products provide
mechanisms that return interest gains as dividends to policyholders. In terms of the asset management forthese products, the mitigation of the mismatch risk from the asset–liability duration gap is considered to beconducive to providing long-term, stable returns to policyholders. From this perspective, Sony Life haschanged its policy and will make stable investments only in bonds from fiscal 2010, reflecting the change in
its asset management policy to fit the corresponding liability characteristics by replacing all partial
investments in stock and other risk assets with bonds.
The above policy change will be reflected in the evaluation of MCEV as of March 31, 2010.
Moreover, a partial change will be made to the assumptions in the calculation of third-sector products
including medical and other insurance. We expect these changes to have a significant effect on Sony Life’s
MCEV. As MCEV is one important indicator of corporate value for the life insurance business, we will
provide the following announcement outlining the details and amount affected.
1. Fluctuation risk of the difference between assets and liabilities (net assets on an economic value basis) arising from different interest ratesensitivities between assets and liabilities.
2. Type of insurance product in which the policyholder’s insurance benefit increases in response to asset management performance.
3. Type of insurance product that pays out policyholder dividends every five years, in the event that investment profit on policy reserves andothers are higher than expected.

(2) BackgroundIn terms of interest rate-sensitive whole life insurance and semi-participating insurance, Sony Life had
mainly conducted bond-based asset management, but part of its assets had also been invested in risk assets,including stocks.
Meanwhile, Sony Life has recognized it necessary to mitigate the mismatch risk from theasset–liability duration gap for ensuring financial health in its practice of risk management on an economic
value basis from the previous fiscal year. Accordingly, Sony Life has increased its investment ratio of
ultralong-term bonds and drastically reduced its holding ratio of stocks and other risk assets within thegeneral account in an attempt to revise its asset portfolio. As a result, investment income primarily consistsof interest income from bonds, and the volatility risk on the rate of return on the held assets has been
mitigated by the reduction in risk assets.
In terms of the invested assets for the above two products, Sony Life has regarded it necessary tomitigate the mismatch risk from the asset–liability duration gap for ensuring financial health. Sony Life also
believes that continued investment in long-term bonds contributes to providing policyholders with stable
returns over the long-term. Therefore, Sony Life has decided to change its asset management policy toinvest in no stocks or other risk assets, but only in bonds from fiscal 2010.
If a company’s management policy changes or if it accumulates detailed data pertaining to its
assumptions, including mortality rates, that company should reflect those changes by revising theassumptions it uses to calculate MCEV. In terms of the March 31, 2010, calculation of MCEV, in addition
to incorporating the abovementioned asset management policy, Sony Life will change the assumptions of
the calculation including mortality rates for third-sector products.
(3) Principal Revisions● Changes to asset management policy for interest rate-sensitive whole life insurance
No investments will be made in stocks or other risk assets, but only in bonds from fiscal 2010, aiming at
a stable asset management.
● Changes to asset management policy for semi-participating insurance
From FY2010, Sony Life will invest in no stocks or other risk assets. Rather, the company will aim toachieve stable asset management by investing only in bonds. In accordance with this change, Sony Lifechanged its calculation method of dividends to policyholders from fiscal 2010, from its method of
adding gains/losses on sale of securities to interest income and dividends as dividend resources, to amethod of providing dividends based on interest income, which is unaffected by fluctuations in asset
market value.
● Changes to mortality rates and other assumptions for third-sector products
Sony Life will switch over to mortality rates based on its detailed data for third-sector products fromthose for first-sector products, which were focused on providing death protection insurance. Sony Life2

will also revise certain assumptions, reflecting the real trend from its accumulated detailed data,including the negative impact on some products for which morbidity rates are confirmed to beworsening.
(4) Impact on MCEVIn terms of interest rate-sensitive whole life insurance and semi-participating insurance, Sony Life will beable to minimize the fluctuation risk on the held assets and volatility in policyholder dividends, by switchingover to investing in bonds from risk assets in its asset portfolio, and providing returns to policyholders basedon returns on bonds held. As a result, the MCEV subtractive component, time value of options andguarantees, is reduced, which results in an increase in MCEV and mitigates its fluctuations.
In terms of mortality rates for third-sector products, Sony Life confirmed that third-sector products
mortality rates are low, by comparing its accumulated data for third-sector products with those for first
sector products. As a result of reflecting these changes, MCEV decreased as shown in the sensitivity dataincluded in the Disclosure of Market Consistent Embedded Value as of March 31, 2009, on June 1, 2009.
The worsening trend in morbidity rates within third-sector products will also decrease MCEV as the amountof future payouts is expected to increase.
The result of these calculations is as follows.
Note: Please keep in mind that the validity of these calculations has not been verified by outside specialists. MCEV as of March 31, 2010
calculated in accordance with the European Insurance CFO Forum Market Consistent Embedded Value Principles©4 (MCEVprinciples) is scheduled to be announced at the end of May 2010.

(Billions of yen)

Impact on MCEV
Reflection in asset management policy and dividendpolicy
Changes to assumptions in the calculation for
third-sector products

228.9(41.3)

Total

187.6

Of which, new business value

19.2

The impact on MCEV has been calculated from the perspective of how much the reflection of changes in Sony
Life’s asset management policy and dividend policy, as well as its changes to the assumptions in the calculation
for third-sector products, mentioned above, might affect MCEV as of March 31, 2009, calculated based onpolicies in force and market conditions, including interest swap rates as of March 31, 2009. Furthermore, this
impact will be in a table showing “Reconciliation analysis from MCEV at the end of the prior year” in MCEV
disclosure materials as of March 31, 2010.

4. Copyright © Stichting CFO Forum Foundation 20083ReferenceSony Life’s MCEV
The table below shows Sony Life’s MCEV as of March 31, 2009, as announced on June 1, 2009.
(Billions of yen)
As of March 31,2009

As of March 31,
2008

400.9816.5(415.6)

Adjusted net worth195.4

248.5(53.1)

Value of existing businesses

205.4

568.0

(362.5)

15.4

48.2

(32.9)MCEV

Of which, new business value

ChangeNote: Please see the Disclosure of Market Consistent Embedded Value as of March 31, 2009 section of theSony Financial Holdings website for further details.
URL: http://www.sonyfh.co.jp/en/news_e/article_e/090601_01.pdf

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