Annual Report

2013
Year Ended March 31, 2013

Ⓒ1976, 2013 SANRIO CO.,LTD. APPROVAL ＮO.G540821

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Fiscal 2012
Fiscal 2012
Fiscal 2013
Social Responsibility (CSR)

Financial Highlights (Non-consolidated)2011
As of March 31,

2012

2013

2013
Millions of
U.S. dollars

Millions of yen¥46,297,750
5,675,214
3,778,639
1,143,863
284,670
5,480,612
5,216,576
35,214
194,601¥45,008,889
5,699,527
4,148,127
1,039,363
276,619
5,446,071
5,266,726
32,896
253,455¥44,309,547
6,007,231
4,633,067
907,508
271,841
5,579,488
5,343,750
66,187427,742$471,127
63,87249,2619,649
2,890
59,32456,818703
4,548

Total ordinary revenues ......................................
Premium and other income ...........................
Investment income .......................................
Total ordinary expenditures ................................
Net surplus for the year ......................................

836,916
665,844
146,400
777,90941,524754,842589,918
145,676
704,41328,778

836,736
647,798
178,808
767,395
50,822

8,896
6,887
1,901
8,159
540

Solvency margin ratio (%) ...................................
Employees ..........................................................

668.4
13,702741.1
13,502970.8
13,488——Life insurance in force ........................................
Total assets .........................................................
Securities .......................................................
Loans .............................................................
Tangible fixed assets ....................................
Total liabilities .....................................................
Policy reserves ..............................................
Subordinated bonds ......................................
Total net assets ...................................................
For the years ended March 31,

Notes 1. U.S. dollar amounts are converted from yen, for convenience only, at the rate of U.S.$1=¥94.05, the rate of exchange on March 31, 2013.
2. Yen and U.S. dollar amounts are rounded down to the nearest million yen or million dollars.
3. In the fiscal year ended March 31, 2012, standards for calculation of solvency margin and measurement of risks on assets were changed, andstricter criteria have been applied to certain calculations and measurements. The solvency margin ratios for the fiscal years ended March 31,
2012 and 2013, are based on the new standards.
4. The solvency margin ratio for the fiscal year ended March 31, 2011, was recalculated in March 2012 and restated based on the new standards.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

1

Message from the President

Yoshiteru Yoneyama
President

In fiscal 2012, ended March 31, 2013, although overall activity
in the Japanese economy remained relatively weak, activity inthe public and household sectors was firm and export demandbottomed out, leading to a gradual recovery from December
2012. In the financial and capital markets, while there wasongoing instability stemming from unease over the European
debt crisis, in mid-November the Japanese prime minister announced that he would dissolve the Lower House of the Diet,
leading to expectations of a change of government and fuelinga weakening of the yen exchange rate and a bullish mood in
the stock markets.
Against this backdrop, at Fukoku Life all executives andemployees carried out their business operations and management tasks while adhering to a “Customer-Centric” approach.
This reflects our core philosophy that all employees treat
customers as they themselves would like to be treated. Furthermore, guided by the “Personnel Pledge” that underpins
Fukoku Life’s personnel development policy, we will continue
fostering personnel capable of adopting the customer’s perspective. During the period under review, we changed the title
given to sales employees to “Customer Advisor,” underlining
our aim to provide consulting-based sales services of the highest level.
In our insurance sales activities, recognizing the majordemographic changes affecting Japanese society, including
population aging and falling birth rates, we placed particularemphasis on the sale of products in such areas as nursing
care insurance and medical insurance, for which there is asignificant level of customer need. We also launched a major
new product in April 2013, called “Mirai no Tobira” (door to
the future), which greatly enhances the flexibility of insurance
planning. Through this new product, which has been very wellreceived, we are now able to offer insurance cover planningthat meets customer needs even more closely than has been
2

FUKOKU MUTUAL LIFE INSURANCE COMPANY

possible to date.
In asset management operations, we focused on investing in domestic bonds, as we strove to maintain a high levelof safety and liquidity in the assets entrusted to us by ourcustomers. Since the global financial crisis that began in late2008, through an ongoing scaling down of our balance ofstocks and other relatively high-risk assets, we believe that
our asset portfolio has attained an appropriate level of risk
durability. To enhance profitability, we maintained a steady balance of stocks while realigning the make-up of the portfolio.
We also carried out investments in foreign bonds.
To further enhance Fukoku Life’s financial soundness, inNovember 2012 we issued ¥30.0 billion of perpetual subordinated bonds, and bolstered internal reserves through suchmeasures as making a ¥10.0 billion provision to the accumulated fund for price fluctuation, which is a voluntary reserve.
We will continue to reinforce our foundation funds, and arecommitted to providing customers with peace of mind. As acompany engaged in the highly public business of mutual life
insurance based on the spirit of mutual assistance, Fukoku
Life adheres to a management philosophy of “protecting theinterests of our policyholders.” Based on this philosophy, all
executives and employees are committed to practicing our“Customer-Centric” approach as we strive to gain the highest
possible appraisal of our customers.
In these endeavors, we look forward to your ongoingsupport and cooperation.

Yoshiteru Yoneyama
President

Fukoku Life’s Management Philosophy

ValuesOur “Customer-Centric” Values
Possessing “Customer-Centric” values means creating and providing unique services that provide
true peace of mind to customers based on the assumption that all employees treat customers as they
themselves would like to be treated.

Management
Philosophy”Values”
Code of
Conduct

Business
Policies
Tomofumi Akiyama

Yoshiteru Yoneyama

Chairman of the Board

President

Management Philosophy
Fukoku Life will continue adhering to its original management philosophy of protecting the interestsof policyholders and contributing to society. In addition, we will provide a workplace that enables
personal fulfillment so that all executives and employees find their work rewarding.
To protect the interests of ourpolicyholders

To contribute to society

Code of Conduct

Personal expression

Business Policies

A “Customer-Centric” code of conduct to bereflected in the attitudes of all executives andemployees as they carry out their daily business.

1. Foster personnel with “Customer-Centric” values

To us, “Customer-Centric” values means:

2. Reinforce sales staff structure❖ Valuing teamwork❖ Deserving the trust of each and every customer❖ Being enthusiastic and proud of our work
❖ Possessing common sense❖ Continuing to highlight the importance of life
insurance❖ Overcoming any kind of difficulty❖ Aiming to create a bright and friendly work
environment

With the aim of providing customers with peace of mind,
foster confident and proud employees who have the ability toadopt the customer’s perspective.
With the aim of providing meticulous services to customers,
reinforce the structure under which sales personnel conduct
face-to-face sales.

3. Net increase in customers
With the aim of earning the trust of more and more customers, strengthen insurance product design, provision, andfollow-up services to meet customer needs.

4. Enhance business efficiency
With the aim of achieving stable growth, improve the efficiency of the Company’s wide range of business activities.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

3

Review of Operations (Non-consolidated)

Overview
Individual Insurance
Based on our “Customer-Centric” approach, we endeavor toearn the satisfaction of customers by designing and proposing policies that they truly need and offering comprehensive
follow-up services. We believe that such an approach willtranslate into a net increase in the number of policyholders.
We particularly focused on the sale of products in suchareas as nursing care insurance and medical insurance, forwhich there is a significant level of customer need. We also
launched a new major product in April 2013, called “Mirai no
Tobira” (door to the future), which greatly enhances the flexibility of insurance planning. Through this new product, weare now able to offer insurance cover planning that meets
customer needs even more closely than was possible todate.
Sales Channels
Fukoku Life’s products are sold through two major channels:
its own salespeople —called Customer Advisors— and thebranches of financial institutions. Our nationwide sales network consists of 62 branches and around 10,600 Customer
Advisors promoting insurance and annuities to individuals
and companies. With the aid of dedicated mobile computers, introduced to enhance the consulting skills of Customer
Advisors when conducting face-to-face sales, we work hardto provide optimal products to customers. We have also
boosted our follow-up services provided after a customer
takes out a new policy. In alliance with Fukokushinrai Life Insurance Co., Ltd., a subsidiary, we sell our products throughcredit unions with close ties to local communities.

4

FUKOKU MUTUAL LIFE INSURANCE COMPANY

At the end of the period under review, our products
were being sold via 281 financial institution branches and
1,731 other agency outlets. Both Fukoku Life and Fukokushinrai Life Insurance provide ongoing support for the insurance sales activities of their partner financial institutions.
We are also developing other sales channels for suchproducts as tuition insurance and individual annuities throughvenues that include large shopping centers and the Internet.
Group Insurance
In the area of group insurance, we provide consulting services related to our corporate clients’ benefit programs. In theyear under review, we provided program and product proposals that responded to a diverse range of customer needs.
We also make socially responsible investments (SRIs)
in companies that work proactively in such areas as social
contribution and environmental protection.
Globalization
On July 1, 2011, Fukoku Life opened a representative officein Singapore, having obtained approvals from local authorities
in April. We already conduct asset management activities
in London and New York via subsidiaries, and now we haveaugmented those activities with a presence in Singapore,
which continues to advance as an international financial
center. The representative office will conduct research into
insurance and asset management markets in Asia, which is
enjoying significant, ongoing economic development.

Business Performance in Fiscal 2012
Life Insurance in Force
At fiscal year-end, life insurance in force, which comprises
individual life insurance, individual annuities, and group insurance, amounted to ¥44,309.5 billion, down 1.6% comparedwith the previous fiscal year-end. Within this amount, life
insurance for individuals declined 4.1%, to ¥24,885.1 billion,
and individual annuities edged up 1.2%, to ¥3,034.1 billion.
The year-end balance of life insurance in force for groups increased 2.1%, to ¥16,390.2 billion. Group annuities in force(policy reserve) rose 1.1%, to ¥1,994.6 billion.
Annualized Premiums for New Policies and Policies inForce
In the year under review, annualized premiums for new policies decreased 0.2%, to ¥26.8 billion. Within this amount,individual insurance was up 1.6%, to ¥20.8 billion, andindividual annuities declined 6.0%, to ¥6.0 billion. Annualized
premiums from medical insurance and living benefit insurance climbed 2.4%, to ¥8.5 billion.
Annualized premiums for policies in force edged down
0.1%, ¥410.6 billion. Within this amount, individual insurance decreased 1.4%, to ¥277.0 billion, while individual
annuities increased 2.5%, to ¥133.5 billion. Annualized premiums from medical insurance and living benefit insurance
rose 1.7%, to ¥105.3 billion.
Premium Income and Payments
In the year under review, premium and other income rose
9.8%, to ¥647.7 billion. This was mainly attributable to anincrease in premium income from group insurance. Claims
and other payments rose 7.7%, to ¥520.2 billion, due to anincrease in benefit payments for group annuity insurance.

Life insurance in force

Premium and other income(¥ trillions)(¥ billions)

48.5

47.4
15.3

15.9

2.9

2.9

30.2

FY2008

46.2

28.5

‘09

‘10

45.0

646.7

44.3

16.2

16.5

16.3

2.9

2.9

3.0

27.0

25.9

24.8

‘11

‘12

FY2008

665.8
623.7

‘09

647.7
589.9

‘10

‘11

Performance of Fukoku Life Group (Fukoku Life and Fukokushinrai Life Insurance)
The Fukoku Life Group, including Fukokushinrai Life Insurance, posted a 22.0%, or ¥12.6 billion, decline in annualized
premiums for new policies, to ¥44.7 billion, mainly due tosales adjustments for lump-sum-payment products sold via
financial institutions. Within this amount, however, annualized premiums from medical insurance and living benefit
insurance climbed 1.2%, or ¥0.1 billion, to ¥8.6 billion.
Annualized premiums for policies in force increased
2.6%, or ¥14.2 billion, to ¥552.9 billion. Annualized premiums
from medical insurance and living benefit insurance were up
1.7%, or ¥1.7 billion, to ¥107.0 billion.
The total value of premium and other income declined
9.3%, or ¥88.7 billion, to ¥862.2 billion. Individual insurance
and annuities in force generated from sales via branches offinancial institutions fell 42.4%, or ¥145.3 billion, to ¥202.2
billion. This was due to a significant decline based on sales
adjustments in lump-sum annuities sold by Fukokushinrai
Life Insurance via financial institutions.
Assets, Liabilities, and Net Assets
The outstanding balance of non-consolidated total assets, including separate accounts, edged up 5.4%, or ¥307.7 billion,
to ¥6,007.2 billion. General account assets, which constitute 98.7% of this total, rose 5.5%, to ¥5,929.6 billion. This
increase was mainly attributable to a reallocation of funds—
made available through a decrease in the balance of outstanding loans—to domestic bonds. As a result, the year-end
balance of securities stood at ¥4,633.0 billion, an increase of¥484.9 billion, or 11.6%, compared with the previous fiscal
year-end.
Total liabilities edged up 2.4%, or ¥133.4 billion, to¥5,579.4 billion.
Net assets amounted to ¥427.7 billion, up 68.7% compared with the previous fiscal year-end.
On a consolidated basis, total assets rose 7.1%, to¥7,538.8 billion, and net assets jumped 68.4%, to ¥436.5
billion.

‘12

Group insurance
Individual annuities
Individual life insurance

FUKOKU MUTUAL LIFE INSURANCE COMPANY

5

Review of Operations (Non-consolidated)

Strengthening Our Capital Base
Fukoku Life builds up its internal reserves
on an ongoing basis in order to strengthen its capital base. In the fiscal year
under review, in response to low interest rates, we used a portion of the contingency reserve to make provision for
additional policy reserves. Furthermore,
we increased the reserve for price fluctuation to bolster internal reserves. The
contingency reserve is included within
the policy reserves and is a legal reserve
set up in preparation for future risks. The
reserve for price fluctuation covers potential future losses on stocks and otherassets subject to price fluctuation risk.
The Company regards both reserves aspart of its core capital.
At fiscal year-end, the contingency
reserve totaled ¥83.4 billion after theCompany allotted ¥64.3 billion to the additional policy reserve. The Company increased the reserve for price fluctuation of securities ¥6.1 billion, to ¥41.6 billion.

sessing price fluctuation risk for securities and other assets.
We will continue making every effort to maintain a highsolvency margin ratio as one indicator of the added peace ofmind we offer our customers.

Solvency Margin
Fukoku Life’s solvency margin ratio at fiscal year-end was970.8%, up 229.7 percentage points compared with the previous fiscal year-end. This was due primarily to an increase in
net unrealized gains on available-for-sale securities driven by
an increase in stock prices and the weaker yen. The Company’s solvency margin far exceeds 200%, the level set as
an indicator of financial soundness for life insurance companies, and clearly illustrates our ability to meet a high levelof payments. From fiscal 2011, ended March 31, 2012, theCompany has applied new, more stringent standards for as-

Ratings
Fukoku Life relies on four neutral rating organizations toprovide an objective assessment of the Company’s ability
to meet insurance payments. As of July 1, 2013, we havereceived ratings of AA- from Rating and Investment Information, A- from Standard & Poor’s, A from Fitch Ratings, andA2 from Moody’s. Despite global financial crises in the autumn of 2008 and thereafter, these ratings have not changed
from year to year. Going forward, we will continue striving tomaintain and further improve our high financial ratings.

Total assets

Net assets

Solvency margin ratio(¥ billions)(¥ billions)

(%)
970.8

427.7
5,514.4

5,613.1

5,675.2

5,699.5

6,007.2
1,127.6

1,088.3

1,008.4
741.1

253.4
211.9

668.4
194.6

120.5

FY2008

6

‘09

‘10

‘11

‘12

FY2008

FUKOKU MUTUAL LIFE INSURANCE COMPANY

‘09

‘10

‘11

‘12

FY2008

‘09

‘10

‘11

‘12

The figures indicated by the blue line
for the fiscal years ended March 31,
2011, 2012 and 2013, were calculatedusing the new standards.

Investment Performance in Fiscal 2012 (General Account)
Overview
In fiscal 2012, ended March 31, 2013, the Japanese economy remained relatively weak, affected by a slowdown in the
global economy. However, from around December 2012 theeconomy began to gradually recover, underpinned by firm
public-sector investment and personal consumption as well
as a bottoming out of foreign demand. Although there wascontinuing instability in financial and capital markets owing
to wariness over the European debt crisis, market anxiety
receded after the European Central Bank (ECB) and otherinstitutions implemented support measures, and the markets
gradually regained stability in the second half of the fiscal
year. In mid-November, then-Prime Minister Noda announced
that he would dissolve the Lower House of the Diet. This announcement led to expectations of a change of government,
fuelling a weakening of the yen exchange rate and a bullishmood in the stock markets. In this environment, the Bank ofJapan implemented monetary easing policies, consisting of a
gradual increase in the scale of its Asset Purchase Program
and the adoption in January 2013 of the price stability target
of 2%.
With regard to asset management at Fukoku Life, wemainly allocated funds to domestic bonds, reflecting a shift
driven by a decrease in the loan balance and others. Regarding domestic bonds, based on an asset and liability management (ALM) perspective, we continued to build up our portfolio, mainly in super-long-term Japanese Government Bonds(JGBs). However, from late-February 2013 onward, the longterm interest rate fell below 0.7%, and in this extremely low
interest-rate environment we curbed additional purchases. In
foreign bonds, faced with low long-term interest rates in the
U.S. and Germany, we increased holdings mainly in government bonds issued by countries with high credit ratingsand comparatively high interest rates. In domestic stocks,
although the book value of our portfolio remained largely
unchanged, rising market prices led to an increase in the bal-ance as unrealized gains rose.
At fiscal year-end, total general account assets stood at¥5,929.6 billion, up ¥310.4 billion compared with a year earlier.
Investment income from general accounts increased
17.2%, to ¥168.7 billion. Interest, dividends and other income, the main components of investment income, rose
4.8%, or ¥5.5 billion, to ¥119.0 billion, mainly owing toincreased interest income from a higher balance of domestic bonds as well as increased interest income from foreign
bonds, which was attributable to the weakening of the yen.
Interest, dividends and other income, including that fromtrading securities, rose 4.5%, or ¥5.4 billion, to ¥126.5 billion. Gains from trading securities increased ¥25.6 billion,
or 199.1%, to ¥38.4 billion, due to the weaker yen, which
pushed up valuation gains on foreign currency-denominatedbonds. Gains on sales of securities fell ¥8.9 billion, or 53.0%,
to ¥7.9 billion, due mainly to decreased gains on sales ofdomestic bonds.
Investment expenses increased 9.3%, to ¥59.6 billion.
Within this total, there was a 57.5%, or 14.3 billion, decreasein losses on sales of securities, to ¥10.5 billion, mainly indomestic stocks. Losses from derivative instruments, net,mainly stemming from expenses incurred in hedging currency risk related to the weakening yen, increased ¥29.0
billion, or 507.3%, to ¥34.7 billion. However, these losses
were largely offset by valuation gains from foreign currencydenominated bonds within trading securities.
As a result, investment income, net of investment
expenses, amounted to ¥109.0 billion, up 22.0%, or ¥19.6
billion, compared with the previous fiscal year.
Domestic Bonds
Year-end holdings of domestic bonds stood at ¥2,971.6 billion, up 8.6%, or ¥234.3 billion, compared with a year earlier.
This mainly reflected a shift to bonds following a decrease in
the balance of loans.

Breakdown of general account assets(¥ billions)

Others61.1 (1.0%)

General account assets(¥ billions)

5,929.6
5,402.9

5,519.4

5,594.5

5,619.2

Ordinary loans
840.7(14.2%)

Real estate267.5 (4.5%)
Cash and deposits, and others
136.2 (2.3%) (Note)
Other securities
66.6 (1.1%)
Foreign securities
1,087.2 (18.3%)

Loans
907.5
(15.3%)

Policy loans
66.8 (1.1%)

Securities
4,557.3 (76.9%)

Domestic stocks
431.7 (7.3%)

Domestic bonds
2,971.6 (50.1%)

Total: ¥5,929.6 billion
FY2008

‘09

‘10

‘11

‘12

Note: It is including cash and deposits, call loans,monetary claims bought and money held in trust.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

7

¥159.8 billion, to ¥1,087.2 billion. This mainly reflected an increase in foreign bond holdings and a rise in fair value driven
by the weakened yen.

Domestic Stocks
Year-end holdings of domestic stocks increased 22.2%, or¥78.4 billion, to ¥431.7 billion. Although book value waslargely unchanged, there was an increase in valuation difference owing to a rise in stock prices.

Loans
The year-end balance of loans declined 12.7%, or ¥131.8
billion, to ¥907.5 billion, reflecting the sale of a portion of the
housing loan portfolio.

Foreign Securities
Year-end holdings of foreign securities grew 17.2%, orDomestic bonds

Domestic stocks

Foreign securities

Loans

Real estate(¥ billions)(¥ billions)(¥ billions)(¥ billions)(¥ billions)

2,971.6
2,737.3
2,468.8

2,565.9

1,087.2
927.3

1,143.8

862.0

‘10

281.2

273.2

267.5

‘11

‘12

FY2008 ‘09

FY2008 ‘09

‘10

‘11

‘12

907.5

431.7
352.6

353.2

‘10

‘11

246.2

1,039.3

473.2
418.8

FY2008 ‘09275.8

1,238.2 1,220.9

2,430.6

622.0
574.6

‘12

FY2008 ‘09

‘10

‘11

‘12

FY2008 ‘09

‘10

‘11

‘12

Investment Policies for Fiscal 2013
Investment Environment
In fiscal 2013, ending March 31, 2014, the Japanese economy
is expected to continue to improve driven by domestic demand.
In addition to policy effects flowing through to the real economy, growth is likely to be buoyed by households bringing forward purchases ahead of the consumption tax rate hike scheduled for April 2014. Overseas, the US economy is anticipated toremain on a moderate growth path, while Europe is expected tostay in the doldrums. Growth in the Chinese economy is foreDomestic Bonds
We will focus on liquidity while mainly building up our JGB portfolio flexibly across a wide range of maturities and also respondprudently to interest rate trends.

diversify investments with small amounts allocated to such instruments as U.S. and European stocks that are expected to returnstable dividends and exchange-traded funds (ETFs) of stocks inemerging markets.

Domestic Stocks
While keeping a steady balance of stocks, we will enhance profitability by reforming the make-up of the stock portfolio.

Loans
We intend to continue focusing on the selection of loan transactions that offer superior profitability to improve investment efficiency and maintain profitability.

Foreign Securities
In foreign bonds, we aim to flexibly manage the foreign-exchange
hedge ratio, and build up the portfolio balance while taking account of an appropriate target spread between domestic andoverseas interest rates. With regard to foreign stocks, we will

8

cast to slow.
We expect financial and capital markets to remain largely
stable, although the markets may have phases of significant
volatility, affected by such factors as the direction of the UnitedStates’ quantitative easing monetary policy and side effects
from Japan’s unprecedented monetary easing program.

FUKOKU MUTUAL LIFE INSURANCE COMPANYReal Estate
In addition to selling properties with low profitability, we will focus
on attracting tenants and raising the occupancy ratio.

Governance System

As a mutual life insurance company, Fukoku Life is engaged in the highly public business of protecting policyholders’ rights. Therefore, we are committed to establishing a management system that ensures the soundnessof operations, and to enhancing management measures,

including our risk management system and compliancemeasures. In addition, we employ our internal control
systems to ensure the efficient operation of these measures.

Establishment of Management Control Measures
The Board of Directors makes important business decisions
and monitors business execution. The two external directors bring an outside perspective to the deliberations of theBoard. In April 2009, Fukoku Life introduced an executive
officer system. Under this system, we have separated andstrengthened decision-making and business execution functions, with the Board of Directors fulfilling decision-making
and supervisory functions. We are striving to strengthen internal controls through the activities of various committees,
including the Risk Management Committee and the Compliance Committee, which are under the direct supervision of
the Board of Directors.

president of the Company, with full-time directors serving as
members. Directors also head the subcommittees, providing
a risk management structure based on the leadership of top
management. The internal auditing department verifies thatthe risk management system functions effectively.

Enhancement of Internal Control System
The Company’s Board of Directors has set the terms for thecreation of a system of internal controls to ensure the soundness of operations. We are working to enhance the efficiency of operations, strengthen risk management, and promotecompliance based on the core policies of our internal control
system.
Risk Management System
Fukoku Life’s greatest responsibility from the standpoint of“Customer-Centric” is to firmly maintain customer policies
and meet expectations over the long term. To ensure that
we fulfill these responsibilities, we must accurately understand and analyze the various risks facing the Company, andtake appropriate measures to maintain and enhance financial
soundness.
Fukoku Life has established a risk management systemwith close involvement by top management, and makes acontinual effort to enhance the sophistication of its risk management in response to the increasingly varied and complex
risks of the external business environment. In April 2013, we
substantially revised our internal rules and structures regarding risk management as part of a steady effort to implement
enterprise risk management (ERM).
ERM is conducted by the Risk Management Committee, established by the Board of Directors. Several subcommittees have been established under the Risk Management
Committee to manage the various risks that arise in business
operations, and to conduct asset and liability management(ALM). The Risk Management Committee consolidates andevaluates these risks at the corporate level, and considers
the appropriate level of acceptable risk and risk response.
Further, the Risk Management Advisory Committee, which
supports the Risk Management Committee, mainly conducts
risk management for the corporate group, along with companywide stress tests.
The Risk Management Committee is chaired by theCompliance System
As members of the community, all executives and employees undergo ongoing training in compliance-related matters
so that they not only observe laws and regulations, but also
comply with protocols and social conventions. To this end, as
well as improving and reinforcing the compliance system, wehold regular hands-on training programs.
However, we recognize that even the most robust of
systems cannot guarantee the complete elimination of improper conduct. We believe that it is important to detect any
improper conduct early, deal with it swiftly and appropriately,
and make constant improvements and work to rectify thesituation in order to prevent a recurrence.
The Compliance Committee, which is chaired by the
President, is mandated by the Board of Directors to promotecompliance-related activities. The Chief Compliance Officer
and Compliance Officers stationed at our head office ensure
the constant monitoring of compliance.
Protection of Personal Information
As an insurance company that is trusted by its customers,
Fukoku Life takes great care in the handling of personal information. We ensure compliance with the Personal Information Protection Law enacted in Japan in April 2005, as well as
related laws and guidelines. The appropriate management of
personal information is also governed by the Company’s own
privacy policy.

Board of Representative Members of Policyholders

FUKOKU MUTUAL LIFE INSURANCE COMPANY

9Corporate Social Responsibility (CSR)

Contribution to Society
Based on the highly public nature of
the life insurance business, we believethat the sound management of our corelife insurance business must be our top
priority when working to fulfill our corporate social responsibility (CSR). Furthermore, we believe that the Company
should engage in a range of activities
aimed at helping to build a better society.
In conducting CSR-related activities, ourphilosophy emphasizes the importancenot only of the Company’s CSR programs
but also the voluntary participation ofeach individual employee.

Visiting Concert

Fukoku Life Concerts
Fukoku Life holds two types of concerts throughout the country: Visiting
Concerts and Charity Concerts. Visiting Concerts give children attending schools for the disabled and disabled people living in institutions who
cannot easily get the opportunity to hear performances of classical musicin concert halls. Charity Concerts are held at concert halls as part of theCompany’s commitment to fostering community welfare.
A Visiting Concert is held after a Charity Concert has been held. Musicians who performed at the Charity Concert visit a local welfare facility
where they play music and improvise as necessary to create an enjoyable
musical occasion for residents. Since April 1993, the Company has held
234 Charity Concerts. Visiting Concerts, which were introduced in April
2003, have been held at a total of 186 welfare facilities.
Organization of concerts is handled directly by Fukoku Life employees, and employees join with musicians to plan the specific programs.
At Charity Concerts, members of the audience are asked to makedonations, which are given to local welfare groups, and goods made by
the disabled are sold from stalls in the hall foyer.
Smile Gallery
In the shopping mall located in the basement of our head office building,we opened the Smile Gallery, which displays artworks created by children
attending schools for the disabled. As well as providing an opportunity
for many people to view these works, the Smile Gallery aims to support
these children in their artistic endeavors.
Hello Kitty Hospital Visit Program
Under this program, Fukoku Life’s brand mascot Hello Kitty—which is a
popular character worldwide—makes visits to children’s hospitals to help
cheer up and encourage patients.

Smile Gallery

Post-Disaster Relief
To provide assistance for people impacted by the Great East Japan Earthquake, we arrange Visiting Concerts at schools for the disabled and otherfacilities in disaster-affected areas. We also endeavor to help economically, including by selling locally made products to executives and employees
throughout the Fukoku Life Group.
Flora Preservation
Recently in Japan, there has been an increase in forests left to growunchecked due to the lack of people willing to take over forestry businesses. One particular problem is uncontrolled groves of the vigorously
growing Moso bamboo, which not only invades forests, but also takes
over farmland and causes landslides due to the shallowness of their roots.
This bamboo problem is even found on land owned by the Company inFlora Preservation

10

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Shizuoka Prefecture. Fukoku Life has set up a forest regeneration project
to tackle this problem. The aim of the project is to not only assist forest
regeneration by felling bamboo groves, but to also return some bamboo groves to a healthy state. Since 2006, Fukoku Life’s executives andemployees have taken part in the project. In the year under review, 173
executives, employees, and their family members volunteered their time
to take part in these activities.

Verdi“Rigoletto”(C)Ken Howard / Metropolitan Opera

Other Activities
We invite universities and corporations to the new Osaka Fukoku MutualLife Insurance Building, completed in October 2010, to provide information of interest related to culture and health to local communities.
Together with Shochiku Co., Ltd., which is involved with the entertainment business, Fukoku Life is a sponsor of the Metropolitan Opera:
Live in High Definition series of screenings, which give members of thegeneral public the opportunity to see some of the finest opera performances in the world.
The Company is a proud sponsor of the Pink Ribbon Campaign,
which promotes the importance of the early detection, diagnosis, andtreatment of breast cancer. We also participate in the Hello Smile campaign aimed at providing education about prevention of cervical cancer.
Fukoku Life provides space and sales staff to support a mobile bakery business operated by disabled people. Our employees also participate
in various other initiatives, including neighborhood cleanup campaigns andcollections of PET bottle lids.

Communicating with Society
We conduct advertising campaigns
to raise awareness of Fukoku Lifeand engage in a variety of corporate
communications activities aimed atenhancing the understanding of ouroperations among a broad range ofstakeholders.

Partnership with Sanrio
The Hello Kitty character, owned by Sanrio Co., Ltd., has attained worldwide popularity. Fukoku Life has adopted this widely loved character as its
brand mascot, and features Hello Kitty in many communications media,
including Fukoku Life posters, brochures and television commercials. Fukoku Life also maintains a partnership with Sanrio in relation to two themeparks, Sanrio Puroland and Harmonyland.
Providing Information
Fukoku Life publishes a variety of materials for its stakeholders. Publications that provide information on the Company’s business activities
include the Japanese-language magazine, “Disclosure” (and abridged
versions thereof), booklets written for policyholders, and this English-language annual report. Our diverse lineup of public relations and advertising
activities include the production of a variety of publications as needed, inorder to strengthen the channels of communication between the Company, its policyholders, and its many other customers.

©’08,’13 SANRIO/SEGA TOYS S.S/W.TX.JLPC©’13 SANRIO APPROVAL No.P0508201

FUKOKU MUTUAL LIFE INSURANCE COMPANY

11

Non-consolidated Financial Statements
Non-consolidated Balance Sheets
Fukoku Mutual Life Insurance Company
As of March 31, 2011, 2012 and 2013

As of March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Assets:Cash and deposits:
Cash ..................................................................................
Bank deposits ...................................................................
Call loans ..............................................................................
Monetary claims bought .......................................................
Money held in trust ..............................................................
Securities:
Government bonds ...........................................................
Local government bonds ..................................................
Corporate bonds ...............................................................
Stocks ...............................................................................
Foreign securities .............................................................
Other securities ................................................................
Loans:
Policy loans ........................................................................
Ordinary loans ...................................................................
Tangible fixed assets:
Land ..................................................................................
Buildings ...........................................................................
Lease assets .....................................................................
Construction in progress ..................................................
Other tangible fixed assets ...............................................
Intangible fixed assets:
Software ...........................................................................
Other intangible fixed assets ............................................

¥

156
237,667
237,823—
1,424
33,169¥154
29,191
29,34565,6001,351
35,194

2013

¥

169
33,39633,56670,3001,111
31,322

$

1
355
356
747
11
333

1,695,927
149,399
615,051
379,416884,02954,814

1,991,905
158,459
614,449
377,385
947,574
58,3542,181,123
168,921652,931454,902
1,108,137
67,05023,191
1,796
6,942
4,836
11,782712

3,778,639

4,148,127

4,633,067

49,261

71,479
1,072,383

70,164
969,199

66,807840,701710
8,938

1,143,863

1,039,363

907,508

9,649

163,574
116,548
47
1,165
3,334

161,076
109,935
117
2,234
3,255

160,528
105,728
1,430
1,297
2,855

1,706
1,124
15
13
30

284,670276,619

271,841

2,890

8,318
447

8,126
446

11,378273

120
2

Reinsurance receivables .......................................................
Other assets:
Accounts receivable .........................................................
Prepaid expenses .............................................................
Accrued income ................................................................
Deposits ...........................................................................
Differential account for futures trading .............................
Derivatives ........................................................................
Suspense payments .........................................................
Lease investment assets ..................................................
Other assets .....................................................................

8,765
170

8,573
117

11,65242123
063,8591,653
23,444
2,145
73
881
4,740
—
5,070

10,577
1,249
23,784
2,058
42
1,588
6,497
—
4,606

7,479
1,155
27,005
2,055
978
3,473
3,222
868
2,780

79
12
287
21
10
36
34
9
29

Deferred tax assets ..............................................................
Allowance for possible loan losses .......................................

101,867
87,332(2,513)50,404
47,130(2,299)49,020—(2,201)

521
—
(23)

Total assets ..........................................................................

¥5,675,214¥5,699,527¥6,007,231$63,872

12

FUKOKU MUTUAL LIFE INSURANCE COMPANYAs of March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Liabilities:
Policy reserves:
Reserve for outstanding claims ........................................
Policy reserve ...................................................................
Reserve for dividends to policyholders .............................

¥ 31,053
5,132,317
53,205¥ 22,615
5,190,141
53,9695,216,576
86
35,2142013

22,673
5,268,768
52,307$ 241
56,020556

5,266,726
67
32,896

5,343,750
86
66,18756,8180703

10,85072,288
9,989
435
5,637
13,402
—
8,661
2,846
1,143

1,291
5,894
11,169435
5,301
13,577
142
6,530
2,846
1,188

8,352
2,717
11,268411
5,289
13,584
—
3,937
2,966
1,284

88
28
119
4
56
144
—
41
31
13

Reserve for employees' retirement benefits ........................
Reserve for price fluctuation of securities ............................
Deferred tax liabilities ...........................................................
Deferred tax liabilities for revaluation reserve for land .........

125,256
50,10933,432—
19,936

48,377
46,32035,488—16,19549,81344,965
41,62816,938
16,119

529
478
442
180
171

Total liabilities .....................................................................

5,480,612

5,446,071

5,579,488

59,32440,00046,000112

35,00071,000112

35,00071,000
112

372
754
1

2,249

2,325

2,399

25

20,000
3,895
—

—
3,895
11,0009,000
3,895
11,000

95
41
116

296
767
69,554289
767
57,827

4,114
767
71,08443
8755

94,51396,763
182,875

73,77976,104
182,216

99,861
102,260
208,372

1,061
1,087
2,215

9,994

67,684

215,885

2,295

365
1,366
11,726170
3,383
71,23962
3,421
219,370

0
36
2,332

194,601¥5,675,214

253,455¥5,699,527

427,742¥6,007,231

4,548$63,872

Reinsurance payables ...........................................................
Subordinated bonds ..............................................................
Other liabilities:
Corporate income tax payable ..........................................
Accounts payable .............................................................
Accrued expenses ............................................................
Unearned income .............................................................
Deposits received .............................................................
Guarantee deposits received ............................................
Differential account for futures trading .............................
Derivatives ........................................................................
Asset retirement obligations ............................................
Suspense receipts ............................................................

Net assets:
Foundation funds ...................................................................
Accumulated foundation funds redeemed ............................
Reserve for revaluation..........................................................
Surplus:
Legal reserve for future losses ..........................................
Other surplus:
Reserve for redemption of foundation funds ................
Reserve for dividend allowances ...................................
Accumulated fund for price fluctuation .........................
Reserve for advanced depreciation ofreal estate for tax purpose...........................................
Other reserves...............................................................
Unappropriated surplus .................................................

Total foundation funds, surplus and others ...........................
Net unrealized gains (losses) on available-for-salesecurities, net of tax ...........................................................
Deferred valuation gains (losses)
under hedge accounting .....................................................
Revaluation reserve for land, net of tax .................................
Total valuation and translation adjustments ...........................
Total net assets ..................................................................
Total liabilities and net assets ...........................................

¥

See notes to the non-consolidated financial statements.
FUKOKU MUTUAL LIFE INSURANCE COMPANY

13

Non-consolidated Statements of Operations
Fukoku Mutual Life Insurance Company
For the years ended March 31, 2011, 2012 and 2013

Years ended March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Ordinary revenues:
Premium and other income:Premium income ..............................................................
Reinsurance income .........................................................

¥665,618
226
665,844¥589,599
319
589,918¥647,446
352
647,798$6,884
3
6,887

899
72,78923,88314,141
252
111,965361—
30,455
—
—
3,335
—
281
—
146,400

93
76,26522,163
14,775219
113,517162
12,872
16,854
338
—
—
103
148
1,679
145,676

19
83,604
19,136
16,041
217
119,020
1,157
38,498
7,917
—
908
—
—
1,230
10,075
178,808

0
888
203
170
2
1,265
12
409
84
—
9
—
—
13
107
1,901

842
8,295
—
13,081

1,347
6,422
8,438
—

1,071
5,123
—
—

11
54
—
—

—
2,452
24,671
836,916

639
2,399
19,247754,842

1,351
2,583
10,129836,736

14
27
107
8,896

176,286
91,536
185,770
130,881
29,194335
614,005

140,375
94,983127,082
94,006
26,070278
482,797

168,766
101,437
129,048
89,34831,283
328
520,212

1,794
1,078
1,372
950
332
3
5,531

5,711
—
116
5,828

—
57,82383¥ 57,906

58
78,62776¥ 78,762

0
836
0
$ 837

Investment income:Interest, dividends and other income:Interest on deposits ......................................................
Interest and dividends on securities .............................
Interest on loans ...........................................................
Income from real estate for rent ..................................
Other interest and dividends ........................................
Gains from money held in trust, net .................................
Gains from trading securities, net ....................................
Gains on sales of securities ..............................................
Gains from redemption of securities ................................
Foreign exchange gains, net .............................................
Gains from derivative instruments, net ............................
Reversal of allowance for possible loan losses .................
Other investment income .................................................
Gains from separate accounts, net ...................................
Other ordinary revenues:
Fund receipt from annuity rider ........................................
Fund receipt from deposit of claims paid .........................
Reversal of reserve for outstanding claims .......................
Reversal of policy reserve ...............................................
Reversal of reserve for employees'
retirement benefits ........................................................
Others ...............................................................................
Total ordinary revenues .....................................................
Ordinary expenditures:
Claims and other payments:
Claims ...............................................................................
Annuities ...........................................................................
Benefits ............................................................................
Surrenders ........................................................................
Other payments ................................................................
Reinsurance premiums .....................................................
Provision for policy reserve and others:
Provision for reserve for outstanding claims ....................
Provision for policy reserve ..............................................
Interest on accumulated dividends to policyholders ........
¥

14

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2013

Years ended March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Investment expenses:
Interest expenses .............................................................
Losses from trading securities, net ...................................
Losses on sales of securities ...........................................
Losses on valuation of securities .....................................
Losses from derivative instruments, net ..........................
Foreign exchange losses, net ...........................................
Provision for allowance for possible loan losses ..............
Depreciation of real estate for rent and other assets .......
Other investment expenses .............................................
Losses from separate accounts, net .................................
Operating expenses .............................................................
Other ordinary expenditures:
Claim deposit payments ...................................................
Taxes ................................................................................
Depreciation .....................................................................
Provision for reserve for employees’
retirement benefits ..........................................................
Others ...............................................................................
Total ordinary expenditures ...............................................
Ordinary profits ...................................................................
Extraordinary gains:
Gains on disposal of fixed assets .....................................
Reversal of allowance for possible loan losses .................
Other extraordinary gains ..................................................
Total extraordinary gains ...................................................
Extraordinary losses:
Losses on disposal of fixed assets ...................................
Impairment losses ............................................................
Provision for reserve for price fluctuation of securities ....
Losses on reduction entry of real estate fortax purpose ....................................................................
Effect of applying the accounting standard for asset
retirement obligations......................................................
Total extraordinary losses ..................................................
Surplus before income taxes .............................................
Income taxes:
Current ..............................................................................
Deferred ...........................................................................
Total income taxes ..............................................................
Net surplus for the year .....................................................

¥ 1,525
5,069
20,418
5,922
—
2,654
—
5,732
5,717
3,034
50,07486,511¥

1,409—
24,925
7,986
5,725
1,874
—
6,477
6,208
—
54,60888,725

2013

¥

1,777
—
10,596
1,009
34,773
—
58
5,802
5,658
—
59,677
88,846

$

18
—
112
10
369
—
0
61
60
—
634
944

10,421
4,793
5,413

9,746
4,831
5,276

8,976
4,771
5,571

95
50
59

332
530
21,490777,90959,006—520
20,375
704,41350,429—578
19,897
767,395
69,340

—
6
211
8,159
737

16
899
—
915

4,645
—
—
4,645

60
—
193
254

0
—
2
2

96
318
6,981

160
433
2,056

348
600
6,140

3
6
65

—

9

—

—

966
8,362
51,559—2,659
52,414—
7,088
62,506—75
664

13,406(3,370)10,035¥ 41,524

8,623
15,01323,636¥ 28,778

13,553(1,870)11,683¥ 50,822

144
(19)
124
540

$

See notes to the non-consolidated financial statements.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

15

Non-consolidated Statements of Changes in Net Assets
Fukoku Mutual Life Insurance Company
For the years ended March 31, 2011, 2012 and 2013

Years ended March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Foundation funds, surplus and others:
Foundation funds
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Financing of additional foundation funds ...............
Redemption of foundation funds...........................
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Accumulated foundation funds redeemed
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Additions to accumulated foundation funds
redeemed ................................................................
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Reserve for revaluation
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Surplus:
Legal reserve for future losses
Balance at the beginning of current fiscal year ..........
Changes in the current fiscal year:
Additions to legal reserve for future losses ...........
Total changes in the current fiscal year .................
Balance at the end of current fiscal year....................
Other surplus:
Reserve for redemption of foundation funds
Balance at the beginning of current fiscal year .....
Changes in the current fiscal year:
Additions to reserve for redemption offoundation funds ............................................
Reversal of reserve for redemption offoundation funds ............................................
Total changes in the current fiscal year.............
Balance at the end of current fiscal year ...............
Reserve for dividend allowances
Balance at the beginning of current fiscal year .....
Changes in the current fiscal year:
Total changes in the current fiscal year.............
Balance at the end of current fiscal year ...............
Accumulated fund for price fluctuation
Balance at the beginning of current fiscal year .....
Changes in the current fiscal year:
Additions to accumulated fund for pricefluctuation ......................................................
Total changes in the current fiscal year.............
Balance at the end of current fiscal year ...............
Reserve for advanced depreciation ofreal estate for tax purpose
Balance at the beginning of current fiscal year .....
Changes in the current fiscal year:
Additions to reserve for advanced
depreciation of real estate for tax purpose ....
Reversal of reserve for advanced depreciation ofreal estate for tax purpose .............................
Total changes in the current fiscal year.............
Balance at the end of current fiscal year ...............

16

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2013¥40,000¥40,000¥35,000

$372

—
—
—
40,00020,000(25,000)(5,000)35,000———35,000———372

46,00046,00071,000754——
46,00025,00025,00071,000——71,000

—
—
754

112

112

112

1

—
112

—
112

—
112

—
1

2,187

2,249

2,325

24

62
62
2,249

76
76
2,325

74
74
2,399

0
0
25

15,00020,000

—

—

5,000

5,000

9,000

95

—
5,000
20,000(25,000)(20,000)
—

—
9,000
9,000

—
95
95

3,895

3,895

3,895

41

—
3,895

—
3,895

—
3,895

—
41

—

—

11,000116———

11,00011,00011,000——11,000

—
—
116

303

296

289

3

—

—

3,857

41

(7)
(7)
296

(7)
(7)
289

(32)
3,825
¥ 4,114

(0)
40
$ 43

¥

¥

Years ended March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Other reserves
Balance at the beginning of current fiscal year .....
Changes in the current fiscal year:
Total changes in the current fiscal year.............
Balance at the end of current fiscal year ...............
Unappropriated surplus
Balance at the beginning of current fiscal year .....
Changes in the current fiscal year:
Additions to reserve for dividends topolicyholders ...................................................
Additions to legal reserve for future losses ......
Payment of interest on foundation funds .........
Net surplus for the year ....................................
Additions to reserve for redemption offoundation funds .............................................
Additions to accumulated fund for pricefluctuation ......................................................
Additions to reserve for advanced
depreciation of real estate for tax purpose .....
Reversal of reserve for advanced depreciation ofreal estate for tax purpose ..............................
Reversal of revaluation reserve for land............
Total changes in the current fiscal year.............
Balance at the end of current fiscal year ...............
Total surplus
Balance at the beginning of current fiscal year ..........
Changes in the current fiscal year:
Additions to reserve for dividends to policyholders ..
Payment of interest on foundation funds ..............
Net surplus for the year.........................................
Reversal of reserve for redemption offoundation funds .................................................
Reversal of revaluation reserve for land ................
Total changes in the current fiscal year .................
Balance at the end of current fiscal year....................
Total foundation funds, surplus and others
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Financing of additional foundation funds ...................
Additions to reserve for dividends to policyholders ...
Additions to accumulated foundation
funds redeemed.......................................................
Payment of interest on foundation funds ..................
Net surplus for the year .............................................
Redemption of foundation funds ...............................
Reversal of reserve for redemption offoundation funds .....................................................
Reversal of revaluation reserve for land.....................
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................

¥

767

¥

767

2013

¥

767

$

8

—
767

—
767

—
767

—
8

54,07569,55457,827614(19,505)(62)(892)
41,524(24,381)(76)(892)
28,778(23,989)(74)(621)
50,822

(255)
(0)
(6)
540

(5,000)(5,000)(9,000)(95)—(11,000)

—

—

—

—

(3,857)

(41)

7
(592)
15,47969,554

7
837(11,727)
57,82732(55)
13,256
71,084

0
(0)
140
755

76,22996,763

76,104809(19,505)(892)
41,524(24,381)(892)
28,778(23,989)(621)
50,822

(255)
(6)
540

—
(592)
20,53396,763(25,000)
837(20,658)
76,104—(55)
26,155102,260

—
(0)
278
1,087

162,341

182,875

182,216

1,937—(19,505)

20,000(24,381)—(23,989)

—
(255)

—
(892)
41,524—25,000(892)
28,778(25,000)—(621)
50,822
—

—
(6)
540
—

—
(592)
20,533¥182,875(25,000)
837(658)¥182,216—(55)
26,155¥208,372—(0)278$2,215FUKOKU MUTUAL LIFE INSURANCE COMPANY

17

Years ended March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Valuation and translation adjustments:
Net unrealized gains (losses) on available-for-salesecurities, net of tax
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Net changes, excluding foundation funds,
surplus and others ..................................................
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Deferred valuation gains (losses) under hedge accounting
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Net changes, excluding foundation funds,
surplus and others ..................................................
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Revaluation reserve for land, net of tax
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Net changes, excluding foundation funds,
surplus and others ..................................................
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Total valuation and translation adjustments
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Net changes, excluding foundation funds,
surplus and others ...................................................
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Total net assets
Balance at the beginning of current fiscal year ...................
Changes in the current fiscal year:
Financing of additional foundation funds ........................
Additions to reserve for dividends to policyholders........
Additions to accumulated foundation
funds redeemed .............................................................
Payment of interest on foundation funds .......................
Net surplus for the year ..................................................
Redemption of foundation funds ....................................
Reversal of reserve for redemption offoundation funds...........................................................
Reversal of revaluation reserve for land .........................
Net changes, excluding foundation funds,
surplus and others .......................................................
Total changes in the current fiscal year ..........................
Balance at the end of current fiscal year .............................

18

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2013

9,994

¥ 67,684$ 719(38,297)(38,297)
9,994

57,69057,69067,684

148,200
148,200
215,885

1,575
1,575
2,295

538

365

170

1

(173)
(173)
365

(194)
(194)
170

(107)
(107)
62

(1)
(1)
0

773

1,366

3,383

35

592
592
1,366

2,016
2,016
3,383

38
38
3,421

0
0
36

49,604

11,726

71,239757(37,878)(37,878)
11,72659,51259,512
71,239148,131
148,131219,370

1,575
1,575
2,332

211,946

194,601

253,455

2,694—(19,505)

20,000(24,381)—(23,989)

—
(255)

—
(892)
41,524—25,000(892)
28,778(25,000)—(621)
50,822
—

—
(6)
540
—

—
(592)

(25,000)
837

—
(55)

—
(0)

(37,878)(17,344)¥194,601

59,51258,854¥253,455

148,131
174,287¥427,742

1,575
1,853
$4,548¥ 48,291¥

Non-consolidated Statements of Surplus
Fukoku Mutual Life Insurance Company
For the years ended March 31, 2011, 2012 and 2013

Years ended March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Unappropriated surplus .....................................................

2013¥69,554¥57,827¥71,084

$755

7

32

144

1

7

32

144

1

69,561

57,85971,228757

24,381

23,98927,762295

Legal reserve for future losses .....................................

76

74

86

0

Interest payment for foundation funds .........................

892

621

621

6

Reserve for redemption of foundation funds ..........

5,000

9,000

9,000

95

Accumulated fund for price fluctuation ...................

11,000—10,000106

Revaluation reserve for land, net of tax ....................

—

3,857

—

—

16,00012,85719,000202

16,96813,552

19,707

209

Total appropriation of surplus ...........................................

41,35037,54247,470504

Unappropriated surplus carried forward ..........................

¥28,211¥20,317¥23,758$252

Reversal of voluntary surplus reserve:
Reversal of reserve for advanced depreciationof real estate for tax purpose ........................................

Total .....................................................................................
Appropriation of surplus:
Reserve for dividends to policyholders .............................
Net surplus:

Voluntary surplus reserve:

Note: Net surplus is calculated by deducting reserve for dividends to policyholders from the sum of unappropriated surplus and reversal of voluntary surplus reserve.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

19

Notes to the Non-consolidated Financial Statements

I. Presentation of the Non-consolidated Financial
Statements
1. Basis of Presentation
The accompanying non-consolidated financial statements havebeen prepared from the accounts maintained by Fukoku MutualLife Insurance Company (the "Company") in accordance with theprovisions set forth in the Insurance Business Law of Japan andits related rules and regulations and in conformity with accounting principles generally accepted in Japan, which are different incertain respects from accounting principles generally acceptedin countries and jurisdictions other than Japan.
In addition, the notes to the non-consolidated financial
statements include information which is not required under accounting principles generally accepted in Japan but is presented
herein as additional information.
Amounts of less than one million yen have been eliminated.
As a result, total in yen shown herein do not necessarily agreewith the sum of the individual amounts.

Certified Public Accountants on November 16, 2000).
iv) Investments in subsidiaries and affiliates are stated at cost,
cost being determined by the moving average method.
v) Available-for-sale securities with fair market value are stated
at fair market value based on the market prices at the end of
fiscal year. Costs of their sales are determined by the moving average method. Net unrealized gains or losses on theseavailable-for-sale securities, net of taxes, are recorded as aseparate component of net assets.
Available-for-sale securities whose fair values are
deemed extremely difficult to obtain are stated at cost, cost
being determined by the moving average method, except for
public and corporate bonds including foreign bonds, of which
the difference between acquisition cost and face value isconsidered to be an adjustment of interest. Such bonds arestated at amortized cost under the straight-line method, cost
being determined by the moving average method.
(2) Valuation methods of derivative instruments

Derivative instruments are stated at fair market value.
2. U.S. Dollar Amounts
The translations of yen amounts into U.S. dollar amounts areincluded solely for the convenience of the reader and have been
made, as a matter of arithmetical computation only, at the rateof ¥94.05 = US$1.00, the effective rate of exchange at the balance sheet date of March 31, 2013. The translations should not
be construed as representations that such yen amounts havebeen or could in the future be, converted into U.S. dollars at thator any other rates.

II. Notes to Balance Sheets
1. Significant Accounting Policies(1) Valuation methods of securities

The valuation of securities, including bank deposits and monetary claims bought which are equivalent to securities, andsecurities managed as trust assets in money held in trust, is asfollows:i) Trading securities are stated at fair market value. Costs of
their sales are determined by the moving average method.
ii) Held-to-maturity debt securities are stated at amortized cost
under the straight-line method, cost being determined by themoving average method.
iii) Policy-reserve-matching bonds are stated at amortized cost
under the straight-line method, cost being determined by
the moving average method in accordance with "Temporary
Treatment of Accounting and Auditing Concerning Policy-reserve-matching Bonds in Insurance Industry" (Industry Audit
Committee Report No.21 issued by the Japanese Institute of

20

FUKOKU MUTUAL LIFE INSURANCE COMPANY(3) Revaluation of land

The Company revalued the land for business purposes basedon the Law for Revaluation of Land (Law No.34 promulgated on
March 31, 1998). The difference between fair value and bookvalue resulting from the revaluation, net of related taxes, is recorded as revaluation reserve for land as a separate componentof net assets and the related tax is recorded as deferred tax
liabilities for revaluation reserve for land.
Date of revaluation: March 31, 2002
Method of revaluation as prescribed for in Article 3 Paragraph
3 of the said Law:
Calculation is based on the appraisal value for property tax set
forth in Article 2 item 3 of the Enforcement Ordinance of the
Law for Revaluation of Land (Government Ordinance No.119
promulgated on March 31, 1998) and the road rate set forth in
Article 2 item 4 of the said Ordinance with certain reasonableadjustments.
(4) Depreciation of tangible fixed assets

Depreciation of tangible fixed assets is calculated by the following methods.
Tangible fixed assets (excluding lease assets): Decliningbalance method
However, buildings (excluding building attachments and structures) acquired on or after April 1, 1998 are depreciated using
Straight-line method.
Lease assets related to finance lease transactions that do nottransfer ownership: Straight-line method over the lease term
without residual valueOther tangible fixed assets acquired for ¥100,000 or more but
less than ¥200,000 are depreciated equally over three years.
(5) Foreign currency translation

Foreign currency-denominated assets and liabilities, except forinvestments in subsidiaries and affiliates, are translated into
Japanese yen at the effective exchange rate prevailing at thebalance sheet date. Investments in subsidiaries and affiliates aretranslated into Japanese yen at the exchange rate on the date ofacquisition.

(7) Reserve for employees' retirement benefits

The Company adopts accounting standards for employees'
retirement benefits (Business Accounting Council dated June
16, 1998) and accounts for the reserve for employees' retirement benefits based on the projected benefit obligation and plan
assets at the balance sheet date.
(8) Reserve for price fluctuation of securities

Reserve for price fluctuation of securities is calculated in accordance with Article 115 of the Insurance Business Law.

(6) Allowance for possible loan losses(9) Lease transactions as a lessee

Allowance for possible loan losses is provided in accordancewith the Company's standards of self-assessment and write-offs
and reserves on credit quality:

Finance lease transactions that do not transfer ownership tothe lessee whose commencement day was on or before March
31, 2008 continued to be accounted for in a manner similar toaccounting treatment for ordinary rental transactions.

i) For the credits of borrowers who are legally bankrupt such as
being in the proceedings of bankruptcy or civil rehabilitation(hereinafter called "legally bankrupt borrowers") and who aresubstantially bankrupt (hereinafter called "substantially bankrupt borrowers"), the Company provides the remaining amountof credits after the direct write-off described below and the
deductions of the amount expected to be collected throughthe disposal of collateral or the execution of guarantees.
ii) For the credits of borrowers who are not currently bankrupt
but have a high possibility of bankruptcy (hereinafter called“not currently bankrupt borrowers”), the Company provides
the amounts deemed as necessary considering the borrowers' ability to pay, within the amounts after deductions of theamount expected to be collected through the disposal of collateral or the execution of guarantees.
iii) For the credits of borrowers other than the above, the Company provides the amounts calculated by multiplying the borrowers' balance by the actual ratio of bad debt losses on defaults
during a certain past period.
All credits are assessed by the relevant departments in accordance with the Company's standards of self-assessment on
credit quality. The results of the assessment are reviewed by
the audit department, which is independent of business-related
divisions. Subsequently, the allowance for possible loan losses
are provided based on the results of these assessments.
For the credits of legally bankrupt borrowers and substantially bankrupt borrowers, the amounts remaining after deductions of collateral value or the amounts collectible through theexecution of guarantees is written-off directly from the borrower's balance as the estimated uncollectible amounts. The
amounts written-off as of March 31, 2011, 2012 and 2013 were,¥260 million, ¥287 million and ¥308 million (US$3 million), respectively.

(10) Lease transactions as a lessor
As for the finance lease transactions where the Company is alessor, the lease fee is recorded in “interest, dividends and otherincome (other interest and dividends)” at the time of receiving
lease fee. The corresponding cost of the lease transactions isrecorded in “other investment expenses”, which is calculated
by deducting an amount equivalent to the interest allocated overthe lease term from the lease fee received.
(11) Accounting for hedge activities

Hedge accounting is based on "Accounting Standards for
Financial Instruments" (ASBJ Statement No. 10 issued by the
Accounting Standards Board of Japan on August 11, 2006).
For the foreign currency forward contracts against theexchange rate fluctuations in the value of foreign currency-denominated bonds classified as available-for-sale securities, which
qualify for hedge accounting because of high correlation andeffectiveness between the hedging instruments and the hedged
items, valuation gains and losses on the foreign currency forward contracts are recorded in the statements of operations.
For the interest rate swaps against the interest rate fluctuations regarding loans, which qualify for hedge accounting
because of high correlation and effectiveness between thehedging instruments and the hedged items, valuation gains andlosses on the interest rate swaps are deferred until the maturityof the hedged transactions.
Deposits denominated in foreign currencies for which forward foreign exchange contracts are used to hedge the foreign
currency fluctuations are translated at the contract rates if theforward contracts qualify for specific hedge accounting. In thiscase, exchange differences between the exchange rate on the
trade date and the forward contract rate are allocated to eachfiscal year from the date contracted to the date settled.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

21

For judging the effectiveness of hedge used, ratio analysis
of comparing the fluctuations in the fair value or cash flows ofhedged items and hedging instruments is mostly applied.

(15) Deferred assets

Discount on bonds is amortized equally over the period forwhich interest on bonds is fixed. This amount is deducted frombonds.

(12) Accounting for consumption taxes

The Company accounts for consumption taxes by the tax-exclusion method. The consumption taxes on certain assets, which
are not deductible from consumption taxes withheld and thatare stipulated to be deferred under the Tax Law, are deferred
as prepaid expenses and amortized equally over five years.
Consumption taxes other than deferred consumption taxes arerecognized as an expense when incurred.
(13) Policy reserve

Policy reserve is based on Article 116 of the Insurance Business
Law, and the premium reserve at the end of fiscal year is calculated by the following method:
In regard to the policies subject to the standard policy
reserve, the method as prescribed by the Commissioner of Financial Services Agency (Ministry of Finance Ordinance No. 48,
1996) is applied.
In regard to the policies not subject to the standard policy
reserve, the net level premium method is applied.
As of March 31, 2013, in order to improve future income
and expenditure, the Company raised an additional policy reserve based on the provision of paragraph 5, Article 69 of the
Enforcement Regulation of the Insurance Business Law for
individual annuity insurance policies with an assumed rate of
5.00% or more for which annuity payment commenced on or
before March 31, 2013 (excluding the wife’s annuity insurance
additional rider). On raising this reserve, the Company reversed
and allocated a contingency reserve of ¥64,333 million (US$684
million) included in the policy reserve, and there is no impact onprovision for policy reserve, ordinary profits, and surplus before
income taxes.
The Company also raised an additional policy reserve of¥984 million (US$10 million) under the provision of paragraph 5,
Article 69 of the Enforcement Regulation of the Insurance Business Law based on the written opinion of an actuary provided
for in paragraph 1, Article 121 of the Insurance Business Law for
hospitalization riders with surgery benefits and long-term hospitalization benefits (sold between August 1977 and March 1981)
and non-participating tuition insurance. As a result, the provision
for policy reserve increased by ¥984 million (US$10 million) andordinary profits and surplus before income taxes decreased by¥984 million (US$10 million) compared with if the additional
reserve had not been raised.
(14) Software

The software for internal use is amortized based on straight-line
method over the estimated useful lives.

22

FUKOKU MUTUAL LIFE INSURANCE COMPANY(16) Policy-reserve-matching bonds

Of the bonds corresponding to the sub-groups of individual
insurance and annuities which are set by insurance types andinvestment policies, the bonds that are held to match the duration of liabilities are classified as policy-reserve-matching bonds
in accordance with "Temporary Treatment of Accounting and
Auditing Concerning Policy-reserve-matching Bonds in Insurance
Industry" (Industry Audit Committee Report No. 21 issued by theJapanese Institute of Certified Public Accountants on November
16, 2000).
The amounts of policy-reserve-matching bonds recordedon the balance sheets and the market value of these bonds asof March 31, 2011, 2012 and 2013, were written in Notes No. 4“Financial Instruments.”
Effective for the fiscal year ended March 31, 2013, theinsurance policy sub-groups were changed in order to enhance
ALM as follows:i) The sub-group of single premium endowment life insurance
entered since July 2002 was integrated into the sub-groups ofindividual annuities with single premium accident and death
benefits entered since October 2002 and single premium
whole life insurance entered since August 2003.
ii) The sub-groups of whole life insurance and individual annuities(excluding above mentioned individual annuities with single
premium accident and death benefits and single premium
whole life insurance) were newly established.
iii) The sub-group of group annuities (excluding defined contribution annuities with limited term and yields guaranteed) was
newly established.
There was no impact of these changes on the non-consolidated balance sheets and non-consolidated statements of operations as of March 31, 2013.
2. Accounting Changes and Error Corrections and Its Implementation(1) Effective for the fiscal year ended March 31, 2013, the Company has changed its depreciation method for its tangible
fixed assets acquired on or after April 1, 2012 in accordancewith the revision of the Corporation Tax Act.
As a result, non-consolidated ordinary revenue andsurplus before income taxes for the fiscal year ended March
31, 2013, increased by ¥29 million (US$310 thousand), bothcompared to those calculated using the previous depreciation method.
(2) Effective for the year ended March 31, 2013, lease investment assets that were previously recorded under “otherassets” on the balance sheet are presented separately inaccordance with the revision of the Enforcement Regulationof the Insurance Business Law.

(3) Effective for the year ended March 31, 2012, in accordancewith the amendment of the Enforcement Regulation of
the Insurance Business Law, the presentation of financial
statements has been changed as follows.
(a) As for the statement of operations, “reversal of
allowance for possible loan losses” which was presented
in “extraordinary gains” until previous fiscal year isincluded in “investment income”.
(b) As for the statement of changes in net assets, the item
which was presented as “balance at the end of previous
fiscal year” until previous fiscal year is presented as“balance at the beginning of current period”.
(4) Effective for the year ended March 31, 2011, the Company
adopted “Accounting Standard for Asset Retirement Obligations” (ASBJ Statement No. 18 issued by the AccountingStandards Board of Japan on March 31, 2008) and “Guidanceon Accounting Standard for Asset Retirement Obligations”(ASBJ Guidance No. 21 issued by the Accounting Standards
Board of Japan on March 31, 2008). As a result, tangible
fixed assets increased by ¥1,722 million and the amount ofasset retirement obligations recorded in balance sheet was¥2,846 million. Ordinary profit decreased by ¥157 million andsurplus before income taxes decreased by ¥1,124 million.
3. The Principal Accounting Standards Published before
March 31, 2013 but not Applied are as follows.
With the publication of the Accounting Standard for Retirement
Benefits (ASBJ Statement No. 26, May 17, 2012) and Guidance on Accounting Standard for Retirement Benefits (ASBJ
Guidance No. 25, May 17, 2012), the method for calculating
retirement benefit obligations, current service cost and others
will be changed. Application of the standard is mandatory fromthe beginning of the fiscal year commencing on or after April 1,
2014, and the Company plans to apply the standard from the
beginning of fiscal 2014.
The Company is currently evaluating the impact in the fiscal
year after the application of the standard.
4. Financial Instruments
Asset management of the general accounts other than theseparate accounts stipulated in Article 118 Paragraph 1 of the
Insurance Business Law is conducted on the principle of prudent and profitable investments, considering public and social
responsibilities of the insurance business. Based on this policy,
the Company allocates the fund, securing its liquidity, from themedium-to-long term viewpoints. The Company is diversifying
investments in assets such as foreign securities and equity securities within the acceptable range of risk in order to enhance
the profitability, although yen-denominated interest bearing
assets including debt securities such as Japanese government
bonds and loans are the cores of the portfolios. Derivatives aremainly used to mitigate the market risk regarding the securities
and loans. Major financial instruments including securities, loans
and derivatives are exposed to market risk and credit risk.
The Company manages its asset management risk by
establishing internal control systems including various rules

pursuant to the “Basic Policy for Risk Management” establishedby the Board of Directors. Specifically, the Company eliminates
excessive risk deviating from the basic principle and secures thesafety of the assets by utilizing control functions of the Financial
and Investment Risk Management Department towards theasset management sections, monitoring the status of market
risk and credit risk periodically on a daily or monthly basis. In
addition, the Company quantifies the market risk and credit risk
using value-at-risk (VaR) method in order to control the possible
maximum losses which may arise from the holding assets withina certain range of risk buffers.
The carrying amounts, fair values and their relateddifferences of major financial assets and liabilities as of March
31, 2011, 2012 and 2013 were as follows:(1) Deposits:
The fair values of deposits are based on their book values
since fair values approximate book values due to their shortmaturities.
The amount of deposits has been omitted as of March
31, 2012 and 2013, owing to decreased materiality.
(2) Call loans:
The fair values of call loans are based on their book values
since fair values approximate book values due to their shortmaturities.
Carrying amounts, fair values and related differences ofcall loans have been disclosed from the current fiscal year
since the materiality has increased.
(3) Securities including deposits and monetary claims bought
which are treated as securities based on “Accounting Standards for Financial Instruments” (ASBJ Statement No.10) andsecurities managed as trust assets in money held in trust:
The fair values of marketable securities are measured at thequoted market price at the end of fiscal year. The fair values of other securities without the quoted market price arebased on the prices reasonably calculated such as the prices
offered by the information vendors or counterparty financial
institutions.
Investments in subsidiaries and affiliates, unlisted stocks
and investments in partnerships whereby partnership assets
consist of unlisted stocks whose fair values are deemed
extremely difficult to obtain, are excluded from above securities. The carrying amounts of investments in subsidiaries andaffiliates, unlisted stocks and investments in partnerships
were ¥26,616 million, ¥8,845 million and ¥8,201 million as ofMarch 31, 2011, ¥35,969 million, ¥8,086 million and ¥7,729
million as of March 31, 2012, and ¥35,560 million (US$378
million), ¥7,738million (US$82 million), and ¥7,667 million(US$ 81 million) as of March 31, 2013, respectively.
(4) Loans and monetary claims bought treated as loans:
The fair values of policy loans are deemed to approximatebook values, considering estimated repayment period andinterest rate conditions since their repayment deadline have

FUKOKU MUTUAL LIFE INSURANCE COMPANY

23

as loans are computed by deducting the amount of the allowance for doubtful accounts from the book values before
direct write-offs.

not been set up due to the characteristics that the loan islimited to the amount of cash surrender values. Therefore,
the book values are used as the fair values of policy loans.
The fair values of floating interest rate loans among the ordinary loans and monetary claims bought treated as loans approximate the book values because the market interest rates
are reflected in future cash flows in a short period. Therefore,
the fair values of floating interest rate loans and monetaryclaims bought treated as loans are based on their book values.
The fair values of fixed interest rate loans are measured bydiscounting the future cash flows to the present values.
The fair values of loans receivable from legally bankrupt
borrowers, substantially bankrupt borrowers and not currently bankrupt borrowers and monetary claims bought treated(5) Derivative instruments:i) The fair values of the futures and options traded at theexchange are measured at the settlement price of the exchange.
ii) The fair values of options and swaps traded over the counter are based on the quoted prices offered by counterparty
financial institutions.
iii) The fair values of foreign currency forward contracts are
determined based on the spot exchange rate and forward
contract rate.
As of March 31,

2011

2012
Millions of yen

Carrying
amountDeposits:
Deposits not treated as securities ........................................
Total deposits ........................................................................
Call loans ....................................................................................
Monetary claims bought:
Claims treated as loans .........................................................
Total monetary claims bought ...............................................
Money held in trust:
Trading securities ..................................................................
Total money held in trust .......................................................
Securities:
Trading securities ..................................................................
Held-to-maturity debt securities ............................................
Policy-reserve-matching bonds .............................................
Investments in subsidiaries and affiliates ............................
Available-for-sale securities ...................................................
Total securities ......................................................................
Loans:
Policy loans ...........................................................................
Ordinary loans .......................................................................
Total loans .............................................................................
Derivative instruments:
Hedge accounting not applied...............................................
Hedge accounting applied .....................................................
Total derivative instruments ..................................................

¥¥

Fair value

Carrying
amountDifference———

Difference

237,583
237,583—¥ 237,583
237,583
—

1,424
1,424

1,424
1,424

0
0

1,351
1,351

1,374
1,374

23
23

32,16932,16932,16932,169——34,19434,19434,19434,194——228,171427,312652,180
1,393
2,347,024
3,656,081

228,171436,409
672,087868
2,347,024
3,684,560—
9,096
19,907(524)—
28,478214,053
823,530
684,9151,393
2,300,260
4,024,152

214,053
852,343
722,269854
2,300,260
4,089,780—
28,81237,354(538)—
65,62871,479
1,072,383
1,143,863

71,4791,099,281
1,170,761(0)
26,897
26,89770,164
969,199
1,039,363

70,163995,761
1,065,924(0)
26,562
26,561(6,049)(1,730)(7,780)(6,049)(1,730)(7,780)———(1,442)(3,506)(4,948)(1,442)(3,506)(4,948)

—
—
—

¥

¥

Fair value¥¥

65,600¥¥65,600¥¥—¥

As of March 31,

2013

2013

Millions of yen

Millions of U.S. dollars

Carrying
amountCall loans ....................................................................................
Monetary claims bought:
Claims treated as loans .........................................................
Total monetary claims bought ...............................................
Money held in trust:
Trading securities ..................................................................
Total money held in trust .......................................................
Securities:
Trading securities ..................................................................
Held-to-maturity debt securities ............................................
Policy-reserve-matching bonds .............................................
Investments in subsidiaries and affiliates ............................
Available-for-sale securities ...................................................
Total securities ......................................................................
Loans:
Policy loans ...........................................................................
Ordinary loans .......................................................................
Total loans .............................................................................
Derivative instruments:
Hedge accounting not applied...............................................
Hedge accounting applied .....................................................
Total derivative instruments ..................................................

24

FUKOKU MUTUAL LIFE INSURANCE COMPANY¥¥

70,300Fair value¥

70,300Difference¥—

Carrying
amountFair value

$

$

747

747

Difference

$

—

1,111
1,111

1,136
1,136

25
25

11
11

12
12

0
0

30,32230,32230,32230,322

—
—

322
322

322
322

—
—

258,193
822,875
1,037,091
1,393
2,386,795
4,506,348

258,193
902,871
1,121,931
948
2,386,795
4,670,740—
79,996
84,840(444)—
164,392

2,745
8,749
11,027
14
25,377
47,914

2,745
9,599
11,9291025,37749,662

—
850
902
(4)
—
1,747

66,807840,701
907,508

66,807
866,908
933,716(0)
26,207
26,207

710
8,938
9,649

710
9,217
9,927

(0)
278
278

331
(795)
(463)

331
(795)
(463)

—
—
—

3
(8)
(4)

3
(8)
(4)

—
—
—

¥

¥

$

$

$

5. Investment and Rental Property
The Company holds investment and rental properties such as
office buildings in Tokyo and other areas. The carrying amounts
and the fair values of investment and rental properties were
¥233,921 million and ¥284,059 million as of March 31, 2011,¥226,884 million and ¥275,039 million as of March 31, 2012,and ¥221,052 million (US$2,350 million) and ¥277,714 million(US$2,952 million) as of March 31, 2013, respectively. The fairvalue is mainly based on the value calculated by the Company inaccordance with real estate appraisal standards which includes
some adjustments using the reference prices.
The amount corresponding to asset retirement obligations
included in the carrying amount of investment and rental properties were ¥1,434 million, ¥1,355 million and ¥1,275 million(US$13 million) as of March 31, 2011, 2012 and 2013, respectively.
6. Securities Lent under Lending Agreements
The amount of securities lent under lending agreements was¥45,887 million (US$487 million) as of March 31, 2013.
7. Loans Receivable
The total amounts of credits to bankrupt borrowers, delinquentloans, delinquent loans past 3 months or more and restructuredloans, which were included in loans, were ¥3,308 million, ¥3,023
million and ¥1,759 million (US$18 million) as of March 31, 2011,2012 and 2013, respectively.
i) The balances of credits to bankrupt borrowers were ¥297 million, ¥280 million and ¥217 million (US$2 million) as of March
31, 2011, 2012 and 2013, respectively.
ii) The balances of delinquent loans were ¥774 million, ¥689
million and ¥590 million (US$6 million) as of March 31, 2011,2012 and 2013, respectively.
iii) There were no balances of delinquent loans past 3 months ormore as of March 31, 2011, 2012 and 2013.
iv) The balances of restructured loans were ¥2,236 million,¥2,053 million and ¥950 million (US$10 million) as of March
31, 2011, 2012 and 2013, respectively.
Credits to bankrupt borrowers represent loans, excluding the balances already written-off, which meet the conditions prescribedin Article 96 Paragraph 1 Item 3 and 4 of the Enforcement Regulations of the Corporate Tax Law. Moreover, accruing intereston these loans is not recorded as income after determining thatprincipal of or interest on these loans is unlikely to be collected
due to the significant delay in repayment of principal or interest
payment or for some other reasons.
Delinquent loans are credits whose accruing interest is notrecorded as income due to the same reasons as describedabove, and exclude credits to bankrupt borrowers and loans forwhich interest payments have been suspended and rescheduled
to assist and support the borrowers in the restructuring of theirbusiness.
Delinquent loans past 3 months or more are loans for whichinterest payment or repayment of principal are delinquent for

3 months or more from the due date under the terms of therelated loan agreements, excluding those loans classified as
credits to bankrupt borrowers and delinquent loans.
Restructured loans are loans for which certain concessions
favorable to borrowers, such as interest reduction or exemptions, rescheduling of due date of principal or interest payment,
waiver of claim or other terms, have been negotiated for the purpose of assisting and supporting the borrowers in the restructuring of their business. This category excludes loans classified as
credits to bankrupt borrowers, delinquent loans and delinquentloans past 3 months or more.
The direct write-offs related to loans decreased credits tobankrupt borrowers described above by ¥1 million, ¥1 millionand ¥1million (US$13 thousand) as of March 31, 2011, 2012 and2013, respectively.
The direct write-offs related to loans decreased delinquentloans described above by ¥258 million, ¥286 million and ¥288
million (US$3 million) as of March 31, 2011, 2012 and 2013,
respectively.
8. Accumulated Depreciation of Tangible Fixed Assets
Accumulated depreciation of tangible fixed assets totaled to¥137,343 million, ¥137,319 million and ¥142,941 million (US$1,519 million) as of March 31, 2011, 2012 and 2013,
respectively.
9. Separate Accounts
Total assets in separate accounts provided for in Article 118 of
the Insurance Business Law were ¥83,280 million, ¥82,053 million and ¥78,815 million (US$838 million) as of March 31, 2011,2012 and 2013, respectively. The amounts of separate accountliabilities were the same as separate account assets.
10. Receivables from/Payables to Subsidiaries
The total amounts of receivables from/payables to subsidiaries
were ¥2,675 million and ¥1,855 million as of March 31, 2011,¥2,592 million and ¥1,544 million as of March 31, 2012, and¥3,400 million (US$36 million) and ¥1,415 million (US$15 million), as of March 31, 2013, respectively.
11. Income Taxes
Deferred tax assets and deferred tax liabilities as of March 31,
2011 were ¥98,663 million and ¥8,191 million, respectively. Valuation allowance for deferred tax assets was ¥3,139 million.
Major components of deferred tax assets were ¥58,929
million of policy reserves, ¥18,144 million of reserve for employees’ retirement benefits and ¥12,105 million of reserve for pricefluctuation of securities as of March 31, 2011.
Major component of deferred tax liabilities was ¥5,673 million of net unrealized gains on available-for-sale securities as ofMarch 31, 2011.
The statutory tax rate and the actual effective tax rate forthe year ended March 31, 2011 were 36.2% and 19.5%, respectively. The major difference between the statutory tax rate andthe actual effective tax rate was (17.1%) of reserve for dividends

FUKOKU MUTUAL LIFE INSURANCE COMPANY

25

to policyholders.
Deferred tax assets and deferred tax liabilities as of March
31, 2012 were ¥83,977 million and ¥33,810 million, respectively.
Valuation allowance for deferred tax assets was ¥3,035 million.
Major components of deferred tax assets were ¥48,892
million of policy reserves, ¥14,257 million of reserve for
employees’ retirement benefits and ¥10,923 million of reservefor price fluctuation of securities as of March 31, 2012.
Major component of deferred tax liabilities was ¥30,097
million of net unrealized gains on available-for-sale securities asof March 31, 2012.
The statutory tax rate and the actual effective tax rate
for the year ended March 31, 2012 were 36.2% and 45.1%,
respectively. The major differences between the statutory
tax rate and the actual effective tax rate were 24.7% of the
reduction of deferred tax assets due to the changes in tax ratesand (16.6%) of reserve for dividends to the policyholders.

Deferred tax assets and deferred tax liabilities as of March
31, 2013 were ¥85,971 million (US$914 million) and ¥99,959
million (US$1,062 million), respectively. Valuation allowance fordeferred tax assets was ¥2,950 million (US$31 million).
Major components of deferred tax assets were ¥50,154
million (US$533 million) of policy reserves, ¥13,840 million(US$147 million) of reserve for employees’ retirement benefitsand ¥12,813 million (US$136 million) of reserve for pricefluctuation of securities as of March 31, 2013.
Major component of deferred tax liabilities was ¥95,997
million (US$1,020 million) of net unrealized gains on availablefor-sale securities as of March 31, 2013.
The statutory tax rate and the actual effective tax rate
for the year ended March 31, 2013 were 33.3% and 18.7%,
respectively. The major difference between the statutory tax
rate and the actual effective tax rate was (14.8%) of reserve fordividends to the policyholders.

12. Reserve for Dividends to Policyholders
Changes in reserve for dividends to policyholders were as follows:
Years ended March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Balance at the beginning of current fiscal year...........................................
Transfer from surplus in previous fiscal year ..............................................
Dividends paid in the current fiscal year .....................................................
Increase in interest .....................................................................................
Balance at the current fiscal year ...............................................................

13. Stocks of Subsidiaries
The amounts of stocks of subsidiaries the Company held as ofMarch 31, 2011, 2012 and 2013 were ¥28,009 million, ¥37,362
million and ¥36,953 million (US$392 million), respectively.
14. Pledged Assets and Secured Debts
Assets pledged as collateral as of March 31, 2011 were ¥23,633
million of securities. Secured debts as of March 31, 2011 were
¥4,629 million.
Assets pledged as collateral as of March 31, 2012 were¥24,300 million of securities and ¥397 million of bank deposits.
Secured debts as of March 31, 2012 were ¥4,608 million.
Assets pledged as collateral as of March 31, 2013 were¥26,930 million (US$286 million) of securities and ¥163 million(US$1 million) of bank deposits. Secured debts as of March 31,
2013 were ¥4,583 million (US$48 million).
15. Policy Reserves for the Reinsurance Contracts
Reserve for outstanding claims for the reinsurance contracts
provided in accordance with Article 71 Paragraph 1 of the Enforcement Regulation of the Insurance Business Law (hereinafter
called “reserve for outstanding claims for ceded reinsurance”)
were ¥42 million, ¥1 million and ¥1 million (US$20 thousand) as

26

FUKOKU MUTUAL LIFE INSURANCE COMPANY¥54,759
19,505(21,176)
116¥53,205¥53,205
24,381(23,700)
83¥53,969

2013¥53,969
23,989(25,727)76¥52,307

$573
255
(273)
0
$556

of March 31, 2011, 2012 and 2013, respectively.
Policy reserve for the reinsurance contracts provided in accordance with Article 71 Paragraph 1 of the Enforcement Regulation of the Insurance Business Law (hereinafter called “policy
reserve for ceded reinsurance”) were ¥31 million, ¥30 millionand ¥30 million (US$320 thousand) as of March 31, 2011, 2012
and 2013, respectively.
16. Adjustment Items for Redemption of Foundation Funds
and Appropriation of Net Surplus
The total amounts of adjustment items for redemption of foundation funds and appropriation of net surplus defined in Article
30 Paragraph 2 of the Enforcement Regulation of the Insurance Business Law were ¥11,838 million, ¥71,351 million and¥219,482 million (US$2,333 million) as of March 31, 2011, 2012
and 2013, respectively.
17. Commitment LineAs of March 31, 2011, 2012 and 2013, there were unused
commitment line agreements under which the Company is thelender of ¥4,056 million, ¥1,023 million and ¥972 million (US$10
million), respectively.

18. Subordinated Bonds
Repayments of subordinated bonds are subordinated to otherobligations.
19. Assets Denominated in Foreign Currencies
Assets denominated in foreign currencies as of March 31, 2011,2012 and 2013 totaled to ¥718,304 million, ¥791,485 million and¥980,866 million (US$10,429 million), respectively. The principal
foreign currency asset amounts were 1,799 million euros andUS$4,169 million as of March 31, 2011, 2,024 million euros andUS$4,693 million as of March 31, 2012, and 2,136 million euros
and US$ 5,007 million as of March 31, 2013 respectively.
Liabilities denominated in foreign currencies as of March 31,

2011, 2012 and 2013 totaled to ¥36,075 million, ¥33,787 millionand ¥37,079 million (US$394 million), respectively. The principal
foreign currency liability amounts as of March 31, 2011, 2012
and 2013 were 306 million euros.
20. Contribution to Policyholders Protection Corporation
The future contribution to the Life Insurance Policyholders Protection Corporation of Japan under Article 259 of the Insurance
Business Law were estimated at ¥10,770 million, ¥10,731 million and ¥10,972 million (US$116 million) as of March 31, 2011,2012 and 2013, respectively. The contributions were charged as
operating expenses in the year in which they were paid.

21. Reserve for Employees’ Retirement Benefits(1) The reserve for employees’ retirement benefits as of March 31, 2011, 2012 and 2013 were calculated as follows:
As of March 31,

2011

2012

2013

2013
Millions of
U.S. dollars

Millions of yen

a. Projected benefit obligation ....................................................................

¥(71,742)¥(72,872)¥(72,507)$(770)

b. Fair value of pension plan assets............................................................
c. Unfunded benefit obligation (a+b) .........................................................
d. Unrecognized actuarial differences ........................................................
e. Unrecognized prior service cost .............................................................
f. Reserve for employees' retirement
benefits (c+d+e) ...................................................................................

15,728(56,014)5,802
102

17,167(55,704)
10,021(636)

20,006(52,500)
8,134
(598)

212
(558)
86
(6)

¥(50,109)¥(46,320)¥(44,965)$(478)(2) Gross amount of retirement benefit expenses for the years ended March 31, 2011, 2012 and 2013 were as follows:
Years ended March 31,

2011

2012

2013

Millions of yen

Service cost ................................................................................................
Interest cost ...............................................................................................
Expected return on pension plan assets ....................................................
Amortization of actuarial differences ..........................................................
Amortization of prior service cost ...............................................................

¥3,096
1,430
(480)
1,171
34
¥5,252¥2,943
1,451
(471)
1,218
(20)
¥5,122

2013
Millions of
U.S. dollars¥2,866
1,456
(515)
1,361
(38)
¥5,131

$30
15
(5)
14
(0)
$54

(3) The assumptions used in calculation of the above information were as follows:
Years ended March 31,

2011

2012

2013

Method of attributing the projected benefits to periods of service ..................................

Straight-line
basis

Straight-line
basis

Straight-line
basis

Discount rate ....................................................................................................................
Expected rate of return on pension plan assets ...............................................................
Amortization period of actuarial differences .....................................................................
Amortization period of prior service cost ..........................................................................

2.0%
3.0%
10 years
10 years

2.0%
3.0%
10 years
10 years

2.0%
3.0%
10 years
10 years

FUKOKU MUTUAL LIFE INSURANCE COMPANY

27

III. Notes to Statements of Operations
1. Transactions with Subsidiaries
The total amounts of revenues and expenditures in connection
with subsidiaries were ¥998 million and ¥7,576 million for theyear ended March 31, 2011, ¥966 million and ¥7,682 million

for the year ended March 31, 2012, and ¥1,427 million (US$15
million) and ¥7,738 million (US$82 million) for the year ended
March 31, 2013, respectively.

2. Gains on Sales of Securities
Major items of gains on sales of securities were as follows:
Years ended March 31,

2011

2012

2013

Millions of yen

Domestic bonds .........................................................................................
Domestic stocks and others .......................................................................
Foreign securities .......................................................................................

¥19,211
11,2394¥11,747
3,780
1,326

2011

2012

2013
Millions of
U.S. dollars¥4,732
2,220
862

$50
23
9

3. Losses on Sales of Securities
Major items of losses on sales of securities were as follows:
Years ended March 31,

2013

Millions of
U.S. dollars

Millions of yen

Domestic bonds .........................................................................................
Domestic stocks and others .......................................................................
Foreign securities .......................................................................................

¥

908
13,036
6,473¥ 1,324
17,027
6,573

2011

2012

2013

¥1,208
5,729
3,429

$12
60
36

4. Losses on Valuation of Securities
Major items of losses on valuation of securities were as follows:
Years ended March 31,

2013

Millions of
U.S. dollars

Millions of yen

Domestic bonds .........................................................................................
Domestic stocks and others .......................................................................
Foreign securities .......................................................................................

5. Policy Reserves for the Reinsurance Contracts
For the year ended March 31, 2011, provision for reserve foroutstanding claims for ceded reinsurance considered in calculation of provision for reserve for outstanding claims was ¥9
million and provision for policy reserve for ceded reinsurance
considered in calculation of reversal of policy reserve was ¥1
million.
For the year ended March 31, 2012, reversal of reserve foroutstanding claims for ceded reinsurance considered in calcula-

28

FUKOKU MUTUAL LIFE INSURANCE COMPANY

¥

—
5,870
52

¥1,444
6,017
—

2013

¥

—
1,009
—

$—
10
—

tion of reversal of reserve for outstanding claims was ¥40 million
and reversal of policy reserve for ceded reinsurance consideredin calculation of provision for policy reserve was ¥1 million.
For the year ended March 31, 2013, provision for reservefor outstanding claims for ceded reinsurance considered in
calculation of provision for reserve for outstanding claims was¥0 million (US$1 thousand) and reversal of policy reserve forceded reinsurance considered in calculation of provision forpolicy reserve was ¥0 million (US$4 thousand).

6. Gains (Losses) from Trading Securities
Major items of gains (losses) from trading securities were as follows:
Years ended March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Interest, dividends and other income .........................................................
Gains (Losses) on sales of trading securities .............................................
Gains (Losses) on valuation of trading securities .......................................

¥ 6,814(8,234)(3,640)¥7,556(977)
8,474¥ 7,532
258
33,508

7. Gains (Losses) from Money Held in Trust
Gains (Losses) from money held in trust for the years ended
March 31, 2011, 2012 and 2013 included valuation losses of ¥0
million, valuation gains of ¥0 million and valuation gains of ¥0
million (US$0 thousand), respectively.

(1) Method of grouping

8. Gains (Losses) from Derivative Instruments
Gains (Losses) from derivative instruments for the years ended
March 31, 2011, 2012 and 2013 included valuation losses of¥4,346 million, valuation gains of ¥4,273 million and valuation
gains of ¥1,774 million (US$18 million), respectively.

(2) Background of recognizing the impairment losses

9. Impairment Losses of Fixed Assets
For the year ended March 31, 2013, impairment losses of fixed
assets were as follows:

2013

$ 80
2
356

Real estate and other assets used for insurance business operations are classified as one asset group as a whole. Other assets
such as real estate for rent and unused real estate are classified
as one group individually.

Profitability of certain real estate for rent dropped down significantly due to a decrease in the level of rental income and a declining trend of market prices of land. The Company reduced its
book values of such real estate for rent and unused real estate
to their recoverable amounts. The amounts reduced were recognized as impairment losses and included in the extraordinary
losses.

(3) Asset groups recognized impairment losses and losses by fixed assets
Year ended March 31,

2013
Millions of yen

Real estate for rent:
Land ............................................................................................................................................
Buildings and others ...................................................................................................................

2013
Millions of
U.S. dollars

¥183
26

$1
0

Total real estate for rent (i) ..........................................................................................................
Unused real estate:
Land ............................................................................................................................................
Buildings and others ...................................................................................................................

210

2

177
212

1
2

Total unused real estate (ii) .........................................................................................................

390

4

Total:
Land ............................................................................................................................................
Buildings and others ...................................................................................................................

361
239

3
2

Total (i)+(ii) ...................................................................................................................................

¥600

$6

(4) Calculation method of recoverable amount

Recoverable amount is based on net sales value. Net sales value is determined based on appraisal value, posted price or road rate.
(5) Changes in presentation

Impairment losses of fixed assets have been disclosed for the year ended March 31, 2013, owing to increased materiality.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

29

Report of Independent Auditors

30

FUKOKU MUTUAL LIFE INSURANCE COMPANY

FUKOKU MUTUAL LIFE INSURANCE COMPANY

31

Consolidated Financial Statements
Consolidated Balance Sheets
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
As of March 31, 2011, 2012 and 2013

As of March 31,

2011

2012

2013

2013
Millions of
U.S. dollars

Millions of yen

Assets:Cash and deposits ................................................................

¥ 314,392

Call loans ..............................................................................

—¥

73,26065,600¥72,86870,300$774
747

Monetary claims bought .......................................................

1,424

1,351

1,111

11

Money held in trust ..............................................................

33,16935,19431,322333

Securities ..............................................................................

4,681,280

5,422,669

6,108,723

64,951Loans ....................................................................................

1,146,719

1,042,359

910,657

9,682

Land ..................................................................................

163,574

161,076

160,528

1,706

Buildings ...........................................................................

116,647

110,051

105,882

1,125

Lease assets.....................................................................

47

117

1,430

15

Tangible fixed assets:

Construction in progress ..................................................

1,165

2,234

1,297

13

Other tangible fixed assets...............................................

3,427

3,348

3,089

32

284,863

276,828

272,2282,894

Intangible fixed assets:
Software ...........................................................................

8,750

8,696

12,321

131

Goodwill............................................................................

5,520

4,618

3,855

40

Lease assets.....................................................................

987

761

2,271

24

Other intangible fixed assets ............................................

453

453

279

2

15,712

14,52918,727

199

Agency receivables................................................................

4

7

6

0

Reinsurance receivables .......................................................

174

123

56

0

Other assets .........................................................................

106,524

56,062

54,698581

Deferred tax assets ..............................................................

88,745

48,211362

3

Allowance for possible loan losses .......................................

(2,665)(2,468)(2,201)(23)

Total assets ..........................................................................

¥6,670,346¥7,033,729¥7,538,862$80,158

See notes to the consolidated financial statements.

32

FUKOKU MUTUAL LIFE INSURANCE COMPANYAs of March 31,

2011

2012

2013

2013
Millions of
U.S. dollars

Millions of yen

Liabilities:
Policy reserves:¥

24,14924,663$

262¥

Policy reserve ...................................................................

6,115,914

6,510,809

6,779,259

72,081

Reserve for dividends to policyholders .............................

53,20553,96952,307556

Reserve for dividends to policyholders (subsidiary)...........

654

648

697

7

6,202,567

6,589,577

6,856,928

72,907

1,685

560

375

3

Agency payables ...................................................................

32,792¥

Reserve for outstanding claims ........................................

Reinsurance payables ...........................................................

100

88

113

1

Subordinated bonds ..............................................................

35,21432,896

66,187703

Other liabilities ......................................................................

129,127

50,59353,918573

Reserve for employees' retirement benefits ........................

50,153

46,38445,153

480

Reserve for price fluctuation of securities ............................

33,86538,183

46,625

495

Deferred tax liabilities ...........................................................

——

16,938

180

Deferred tax liabilities for revaluation reserve for land .........

19,936

16,195

16,119171

Total liabilities ....................................................................

6,472,650

6,774,480

7,102,360

75,516

Net assets:
Foundation funds ..................................................................

40,00035,00035,000372

Accumulated foundation funds redeemed ...........................

46,00071,00071,000754

Reserve for revaluation .........................................................

112

112

112

1

Consolidated surplus ............................................................

98,22877,183102,904

1,094

Total foundation funds, surplus and others ......................

184,340

183,295

209,016

2,222

10,00668,806

219,719

2,336

Net unrealized gains (losses) on available-for-salesecurities, net of tax ...........................................................
Deferred valuation gains (losses)
under hedge accounting .....................................................

365

170

62

0

Revaluation reserve for land, net of tax ................................

1,366

3,383

3,421

36

Foreign currency translation adjustment ..............................

(761)

(828)

(635)

(6)

Total accumulated other comprehensive income .............

10,977

71,532

222,569

2,366

Minority interests .................................................................

2,378

4,421

4,916

52

Total net assets ...................................................................

197,696259,249

436,502

4,641

Total liabilities and net assets ............................................

¥6,670,346¥7,033,729¥7,538,862$80,158

See notes to the consolidated financial statements.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

33

Consolidated Statements of Operations
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
For the years ended March 31, 2011, 2012 and 2013

Years ended March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Ordinary revenues:
Premium and other income ....................................................
Investment income:Interest, dividends and other income .................................
Gains from money held in trust, net ...................................
Gains from trading securities, net ......................................
Gains on sales of securities ................................................
Gains from redemption of securities ...................................
Gains from derivative instruments, net ..............................
Foreign exchange gains, net ...............................................
Reversal of allowance for possible loan losses ...................
Other investment income ...................................................
Gains from separate accounts, net .....................................
Other ordinary revenues .........................................................
Total ordinary revenues .......................................................
Ordinary expenditures:
Claims and other payments:
Claims .................................................................................
Annuities .............................................................................
Benefits ..............................................................................
Surrenders ..........................................................................
Other payments ..................................................................
Provision for policy reserve and others:
Provision for reserve for outstanding claims ......................
Provision for policy reserve ................................................
Interest on accumulated dividends to policyholders ..........
Interest on accumulated dividends topolicyholders (subsidiary)...................................................
Investment expenses:
Interest expenses ...............................................................
Losses from trading securities, net .....................................
Losses on sales of securities .............................................
Losses on valuation of securities .......................................
Losses from derivative instruments, net ............................
Foreign exchange losses, net .............................................
Provision for allowance for possible loan losses ................
Depreciation of real estate for rent and other assets .........
Other investment expenses ...............................................
Losses from separate accounts, net ...................................
Operating expenses ...............................................................
Other ordinary expenditures ...................................................
Total ordinary expenditures .................................................
Ordinary profits .....................................................................

34

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2013¥1,210,851¥ 950,986¥ 862,225$ 9,167

124,544361—
30,678
—
3,335
—
—
354
—
159,276
12,507
1,382,635

131,529162
12,872
19,630
338
—
—
57
156
1,679
166,427
20,396
1,137,810

139,897
1,157
38,498
8,290
—
—
907
—
1,230
10,075200,056
10,854
1,073,135

1,487
12
409
88
—
—
9
—
13
107
2,127
115
11,410178,21091,729189,273
138,695
29,923627,832

142,771
95,211
133,356
107,691
26,800505,831

171,223
101,713
136,427
109,133
32,179550,677

1,820
1,081
1,450
1,160
342
5,855

6,385
503,609116—
394,895
83

514
268,449
76

5
2,854
0

0
510,113

0394,9790
269,040

0
2,860

1,540
5,069
20,511
5,922
—
2,654
—
5,732
5,238
3,034
49,704
109,797
23,8691,321,317¥ 61,318

1,423—
26,405
9,222
5,725
1,876
—
6,477
5,607
—
56,740103,441
22,985
1,083,978¥ 53,832

1,801—
10,7901,009
34,773
—
74
5,802
4,820
—
59,072
99,232
22,2441,000,266¥ 72,868

19
—
114
10
369
—
0
61
51
—
628
1,055
236
10,635$ 774

Years ended March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Extraordinary gains:
Gains on disposal of fixed assets .......................................
Reversal of allowance for possible loan losses ...................
Gain on change in equity .....................................................
Other extraordinary gains ....................................................
Total extraordinary gains .....................................................
Extraordinary losses:
Losses on disposal of fixed assets .....................................
Impairment losses ..............................................................
Provision for reserve for price fluctuation of securities ......
Losses on reduction entry of real estate for tax purpose ....
Effect of applying the accounting standard for asset
retirement obligations .......................................................
Other extraordinary losses .................................................
Total extraordinary losses ...................................................
Provision for reserve for dividends topolicyholders (subsidiary) ................................................
Surplus before income taxes ...............................................
Income taxes:
Current ................................................................................
Deferred .............................................................................
Total income taxes ................................................................
Net surplus before minority interests .................................
Minority interests ..................................................................
Net surplus for the year .......................................................

¥

2013

16
957
—
6
980

¥ 4,645
—
55
—
4,700

¥

60
—
—
—
60

$

0
—
—
—
0

111
318
7,167
—

161
433
4,318
9

395
600
8,441
—

4
6
89
—

967
—
8,564

—
—
4,923

—
2
9,439

—
0
100

456
53,277440
53,168455
63,0344670

14,719(3,809)10,90942,367
168¥42,199

9,859
14,823
24,68328,485
93¥28,391

15,138(2,499)12,63950,395
128¥50,267

160
(26)
134
535
1
$534

See notes to the consolidated financial statements.

Consolidated Statements of Comprehensive Income
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
For the years ended March 31, 2011, 2012 and 2013

Years ended March 31,

2011

2012

2013

Millions of yen

Net surplus before minority interests ......................................
Other comprehensive income:Net unrealized gains (losses) on available-for-salesecurities, net of tax ....................................................
Deferred valuation gains (losses) under hedge
accounting ....................................................................
Revaluation reserve for land, net of tax ...........................
Foreign currency translation adjustment .........................
Comprehensive income attributable to:Parent company...............................................................
Minority interests ............................................................

2013
Millions of
U.S. dollars¥42,367¥28,485¥ 50,395$ 535(38,009)

58,955

151,291

1,608

(173)
—
(177)
(38,360)

(194)
2,854
(67)
61,548

(107)
(17)
193
151,359

(1)
(0)
2
1,609

3,809
196
¥ 4,006

89,784248¥90,033

201,248507¥201,755

2,139
5$2,145

See notes to the consolidated financial statements.
FUKOKU MUTUAL LIFE INSURANCE COMPANY

35

Consolidated Statements of Cash Flows
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
For the years ended March 31, 2011, 2012 and 2013

Years ended March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Cash flows from operating activities:
Surplus before income taxes ................................................. ¥53,277
Depreciation of real estate for rent and other assets ............
5,732
Depreciation ..........................................................................
5,841
Impairment losses .................................................................
318
Amortization of goodwill ........................................................
793
Increase (decrease) in reserve for outstanding claims ..........
6,385
Increase (decrease) in policy reserve ....................................
503,609
Interest on accumulated dividends to policyholders .............
116
Interest on accumulated dividends
to policyholders (subsidiary) ................................................
0
Provision for reserve for dividends
to policyholders (subsidiary) ................................................
456
Increase (decrease) in allowance for possible loan losses ....
78
Increase (decrease) in reserve for employees'
retirement benefits .............................................................
349
Increase (decrease) in reserve for pricefluctuation of securities ......................................................
7,167
Interest, dividends and other income ....................................
(124,544)(Gains) losses on securities ...................................................
161
Interest expenses ..................................................................
1,540
Foreign exchange (gains) losses, net ....................................
2,654(Gains) losses on tangible fixed assets ..................................
1,041(Increase) decrease in agency receivables ............................
(2)(Increase) decrease in reinsurance receivables .....................
106(Increase) decrease in other assets except frominvesting and financing activities ........................................
(929)
Increase (decrease) in agency payables ................................
(187)
Increase (decrease) in reinsurance payables .........................
(39)
Increase (decrease) in other liabilities except frominvesting and financing activities ........................................
985
Others ....................................................................................
18,819Subtotal .............................................................................
483,734
Interest, dividends and other income received .....................
129,665Interest paid ...........................................................................
(1,556)
Dividends to policyholders paid .............................................
(21,176)
Dividends to policyholders paid (subsidiary) ..........................
(388)
Corporate income tax (paid) refunded ...................................
(4,563)
Net cash provided by (used in) operating activities (I) .......
585,713
Cash flows from investing activities:(Increase) decrease in deposits .............................................
160
Proceeds from sales and redemption of monetaryclaims bought .....................................................................
327
Payments for increase in money held in trust .......................
(3,500)
Proceeds from decrease in money held in trust ....................
3,581
Payments for purchase of securities ..................................... (2,011,445)
Proceeds from sales and redemption of securities ...............
1,505,910
Payments for additions to loans ............................................
(124,767)
Proceeds from collections of loans .......................................
189,114
Proceeds from settlement of derivatives ..............................
7,271
Others ....................................................................................
5,654
Subtotal (IIa) .......................................................................
(427,690)(I+IIa) .................................................................................. ¥ 158,023

36

FUKOKU MUTUAL LIFE INSURANCE COMPANY¥

53,168
6,477
5,802
433
763
(8,643)394,895
83

¥

2013

63,034
5,802
6,528
600
763
514
268,449
76

$

670
61
69
6
8
5
2,854
0

0

0

0

440
(196)

455
(74)

4
(0)

(3,768)(1,231)

(13)

4,318
(131,529)
6,670
1,423
1,876
(4,496)
(2)
51

8,441
(139,897)(11,447)
1,801
(907)
174
0
67

89
(1,487)
(121)
19
(9)
1
0
0

(1,365)(1,124)
(12)

145
(184)
24

1
(1)
0

2,364
18,780346,411140,383(1,439)(23,700)(446)(19,825)
441,382(1,494)
16,632
218,275
146,798(1,392)(25,727)(406)(7,647)
329,899

(15)
176
2,320
1,560
(14)
(273)
(4)
(81)
3,507

84

(191)

(2)

73
(9,800)7,929(1,758,975)
1,066,150(101,397)
193,911(9,825)(2,328)(614,177)¥ (172,795)

220
—
5,034
(1,048,127)
638,224(94,197)
214,939(37,627)(24,962)(346,686)¥ (16,787)

2—
53(11,144)
6,786(1,001)
2,285
(400)
(265)
(3,686)$ (178)

Years ended March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Payments for purchase of tangible fixed assets ....................
Proceeds from sales of tangible fixed assets ........................
Payments for purchase of intangible fixed assets ..................
Proceeds from sales of intangible fixed assets ......................
Payments for additional acquisition of shares of
consolidated subsidiary ........................................................
Payments for stocks of subsidiaries and affiliateswith change of scope of consolidation ................................
Net cash provided by (used in) investing activities ............
Cash flows from financing activities:
Financing of subordinated bonds ...........................................
Financing of additional foundation funds ...............................
Redemption of foundation funds ...........................................
Interest payment for foundation funds ..................................
Proceeds from stock issuance to minority shareholders........
Dividends paid to minority interests .......................................
Payments for lease obligations...............................................
Net cash provided by (used in) financing activities ............
Effect of exchange rate changes on cash andcash equivalents ...................................................................
Net increase (decrease) in cash and cash equivalents .........
Cash and cash equivalents at the beginning of the year .....
Cash and cash equivalents at the end of the year ................

¥ (13,047)
116(2,737)—¥(3,226)
7,078(2,225)—2013¥(4,704)444(3,616)
173

$

(50)
4
(38)
1

(326)

—

—

—

—
(443,686)—(612,551)(330)(354,721)(3)(3,771)

—
—
—
(892)
—
(15)
(222)
(1,130)—20,000(25,000)
(892)
1,999
(12)
(252)
(4,157)30,000
—
—
(621)
—
(12)
(518)
28,847

318
—
—
(6)
—
(0)
(5)
306

(842)
140,053
173,885¥313,939(108)(175,434)
313,939¥ 138,504

67
4,091
138,504¥ 142,596

0
43
1,472
$ 1,516

See notes to the consolidated financial statements.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

37

Consolidated Statements of Changes in Net Assets
Fukoku Mutual Life Insurance Company and consolidated subsidiaries
For the years ended March 31, 2011, 2012 and 2013

Years ended March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Foundation funds, surplus and others:
Foundation funds
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Financing of additional foundation funds ...................
Redemption of foundation funds ...............................
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Accumulated foundation funds redeemed
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Additions to accumulated foundation
funds redeemed......................................................
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Reserve for revaluation
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Consolidated surplus
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Additions to reserve for dividends to policyholders ...
Payment of interest on foundation funds ..................
Net surplus for the year .............................................
Reversal of reserve for redemption offoundation funds .....................................................
Reversal of revaluation reserve for land.....................
Change of scope of consolidation ..............................
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Total foundation funds, surplus and others
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Financing of additional foundation funds ...................
Additions to reserve for dividends to policyholders ....
Additions to accumulated foundation funds
redeemed................................................................
Payment of interest on foundation funds ..................
Net surplus for the year .............................................
Redemption of foundation funds ...............................
Reversal of reserve for redemption offoundation funds .....................................................
Reversal of revaluation reserve for land.....................
Change of scope of consolidation .............................
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................

38

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2013¥ 40,000¥ 40,000¥ 35,000

$ 372

—
—
—
40,00020,000(25,000)(5,000)35,000———35,000———372

46,00046,00071,000754——
46,00025,00025,00071,000——71,000

—
—
754

112

112

112

1

—
112

—
112

—
112

—
1

77,02098,22877,183820(19,505)(892)
42,199(24,381)(892)
28,391(23,989)(621)
50,267

(255)
(6)
534

—
(592)
—
21,20898,228(25,000)
837—(21,045)
77,183—(55)
120
25,721
102,904

—
(0)
1
273
1,094

163,132

184,340

183,295

1,948—(19,505)

20,000(24,381)—(23,989)

—
(255)

—
(892)
42,199—25,000(892)
28,391(25,000)—(621)
50,267
—

—
(6)
534
—

—
(592)
—
21,208¥184,340(25,000)
837—(1,045)¥183,295

—
(55)
120
25,721¥209,016

—
(0)
1
273
$2,222

Years ended March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Accumulated other comprehensive income:Net unrealized gains (losses) on available-for-salesecurities, net of tax
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Net changes, excluding foundation funds, surplus and others
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Deferred valuation gains (losses) under hedge accounting
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Net changes, excluding foundation funds, surplus and others
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Revaluation reserve for land, net of tax
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Net changes, excluding foundation funds, surplus and others
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Foreign currency translation adjustment
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Net changes, excluding foundation funds, surplus and others
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Total accumulated other comprehensive income
Balance at the beginning of current fiscal year...............
Changes in the current fiscal year:
Net changes, excluding foundation funds, surplus and others
Total changes in the current fiscal year ......................
Balance at the end of current fiscal year ........................
Minority interests
Balance at the beginning of current fiscal year ...................
Changes in the current fiscal year:
Net changes, excluding foundation funds, surplus and others
Total changes in the current fiscal year ..........................
Balance at the end of current fiscal year .............................
Total net assets
Balance at the beginning of current fiscal year ...................
Changes in the current fiscal year:
Financing of additional foundation funds ........................
Additions to reserve for dividends to policyholders........
Additions to accumulated foundation funds redeemed..
Payment of interest on foundation funds .......................
Net surplus for the year ..................................................
Redemption of foundation funds ....................................
Reversal of reserve for redemption offoundation funds ........................................................
Reversal of revaluation reserve for land .........................
Change of scope of consolidation ..................................
Net changes, excluding foundation funds, surplus and others
Total changes in the current fiscal year ..........................
Balance at the end of current fiscal year .............................

2013¥ 48,045¥ 10,006¥ 68,806$ 731(38,038)(38,038)
10,006

58,79958,79968,806150,912150,912219,719

1,604
1,604
2,336

538

365

170

1

(173)
(173)
365

(194)
(194)
170

(107)
(107)
62

(1)
(1)
0

773

1,366

3,383

35

592
592
1,366

2,016
2,016
3,383

38
38
3,421

0
0
36

(583)

(761)

(828)

(8)

(177)
(177)
(761)

(67)
(67)
(828)

193
193
(635)

2
2
(6)

48,774

10,977

71,532760(37,796)(37,796)
10,97760,55560,55571,532

151,036
151,036
222,569

1,605
1,605
2,366

2,513

2,378

4,421

47

(134)
(134)
2,378

2,043
2,043
4,421

495
495
4,916

5
5
52

214,419

197,696259,249

2,756—(19,505)—(892)
42,199—20,000(24,381)
25,000(892)
28,391(25,000)—(23,989)—(621)
50,267
—

—
(255)
—
(6)
534
—

—
(592)
—
(37,931)(16,723)¥197,696(25,000)
837—
62,59861,553¥259,249

—
(55)
120
151,531
177,252¥436,502

—
(0)
1
1,611
1,884
$4,641FUKOKU MUTUAL LIFE INSURANCE COMPANY

39

Notes to the Consolidated Financial Statements

I. Presentation of the Consolidated Financial
Statements
1. Basis of Presentation
The accompanying consolidated financial statements have been
prepared from the accounts maintained by Fukoku Mutual Life
Insurance Company (the "Company") and its consolidated subsidiaries in accordance with the provisions set forth in the Insurance
Business Law of Japan and its related rules and regulations and in
conformity with accounting principles generally accepted in Japan,
which are different in certain respects from accounting principles
generally accepted in countries and jurisdictions other than Japan.
In addition, the notes to the consolidated financial statements include information which is not required under accounting principles generally accepted in Japan but is presented
herein as additional information.
Amounts of less than one million yen have been eliminated.
As a result, total in yen shown herein do not necessarily agreewith the sum of the individual amounts.
2. U.S. Dollar Amounts
The translations of yen amounts into U.S. dollar amounts are included solely for the convenience of the reader and have been made,as a matter of arithmetical computation only, at the rate of ¥94.05= US$1.00, the effective rate of exchange at the balance sheet
date of March 31, 2013. The translations should not be construed
as representations that such yen amounts have been or could in
the future be, converted into U.S. dollars at that or any other rates.

Fukoku Life International (U.K.) Limited
Fukoku Life International (America) Inc.
Effective for the fiscal year ended March 31, 2013, owing to
the sale of all shares of Fukoku Shinyo Hosho Company Limited,on the October 31, 2012, the Company excluded it from scopeof consolidation.
Major unconsolidated subsidiary is Fukoku Seimei Building
Company Limited.
Seven subsidiaries are excluded from the scope of consolidation, as each one of them is small in its total assets, amountof sales, net surplus for the year and surplus and is sufficiently
insignificant to reasonable judgement on its impact on the financial position and results of operation of the Company's group.
(2) Application of equity method

Unconsolidated subsidiaries (such as Fukoku Seimei building
Company Limited, etc.) are insignificant in their impact on net
surplus and surplus, and also immaterial as a whole, therefore,
application of equity method is withheld.
There are no affiliates for the years ended March 31, 2011,2012 and 2013.
(3) Fiscal year of consolidated subsidiaries

Among the subsidiaries to be consolidated, fiscal year-end ofoverseas subsidiaries is December 31. For the preparation of
consolidated financial statements, financial statements as ofthat date are used and concerning any important transaction taking place in between December 31 and the consolidated closing
date, necessary adjustments for consolidation are made.

3. Principles of Consolidation(1) Scope of consolidation(4) Amortization of goodwill

Consolidated subsidiaries for the year ended March 31, 2011 arelisted below:
Fukoku Shinyo Hosho Company Limited.
Fukoku Capital Management, Inc.
Fukokushinrai Life Insurance Company
Fukoku Information Systems Co., Ltd.
Fukoku Life International (U.K.) Limited
Fukoku Life International (America) Inc.
Consolidated subsidiaries for the year ended March 31, 2012 arelisted below:
Fukoku Shinyo Hosho Company Limited.
Fukoku Capital Management, Inc.
Fukokushinrai Life Insurance Company
Fukoku Information Systems Co., Ltd.
Fukoku Life International (U.K.) Limited
Fukoku Life International (America) Inc.
Consolidated subsidiaries for the year ended March 31, 2013 arelisted below:
Fukoku Capital Management, Inc.
Fukokushinrai Life Insurance Company
Fukoku Information Systems Co., Ltd.

Goodwill is amortized by the straight-line method over a periodof 10 years and in case of the immaterial amount of goodwill,such amount is fully charged to operating expenses when incurred.

40

FUKOKU MUTUAL LIFE INSURANCE COMPANY(5) Valuation of subsidiary's assets and liabilities on acquisition

On acquisition of a subsidiary, all of the subsidiary’s assets andliabilities that exist at the date of acquisition are recorded at theirfair value.

II. Notes to Balance Sheets
1. Significant Accounting Policies(1) Valuation methods of securities

The valuation of securities, including bank deposits and monetary claims bought which are equivalent to securities, andsecurities managed as trust assets in money held in trust, is asfollows:i) Trading securities are stated at fair market value. Costs of
their sales are determined by the moving average method.
ii) Held-to-maturity debt securities are stated at amortized cost
under the straight-line method, cost being determined by themoving average method.
iii) Policy-reserve-matching bonds are stated at amortized cost
under the straight-line method, cost being determined by
the moving average method in accordance with “Temporary
Treatment of Accounting and Auditing Concerning Policy-reserve-matching Bonds in Insurance Industry” (Industry Audit
Committee Report No.21 issued by the Japanese Institute ofCertified Public Accountants on November 16, 2000).
iv) Investments in unconsolidated subsidiaries and affiliates
which are not accounted for under the equity method arestated at cost, cost being determined by the moving averagemethod.
v) Available-for-sale securities with fair market value are stated
at fair market value based on the market prices at the end of
fiscal year. Costs of their sales are determined by the moving average method. Net unrealized gains or losses on theseavailable-for-sale securities, net of taxes, are recorded as aseparate component of net assets.
Available-for-sale securities whose fair values are
deemed extremely difficult to obtain are stated at cost, cost
being determined by the moving average method, except for
public and corporate bonds including foreign bonds, of which
the difference between acquisition cost and face value isconsidered to be an adjustment of interest. Such bonds arestated at amortized cost under the straight-line method, cost
being determined by the moving average method.
(2) Valuation methods of derivative instruments

Derivative instruments are stated at fair market value.
(3) Revaluation of land

The Company revalued the land for business purposes basedon the Law for Revaluation of Land (Law No.34 promulgated on
March 31, 1998). The difference between fair value and bookvalue resulting from the revaluation, net of related taxes, is recorded as revaluation reserve for land as a separate componentof net assets and the related tax is recorded as deferred tax
liabilities for revaluation reserve for land.
Date of revaluation: March 31, 2002
Method of revaluation as prescribed for in Article 3 Paragraph

3 of the said Law:
Calculation is based on the appraisal value for property tax set
forth in Article 2 item 3 of the Enforcement Ordinance of the
Law for Revaluation of Land (Government Ordinance No.119
promulgated on March 31, 1998) and the road rate set forth in
Article 2 item 4 of the said Ordinance with certain reasonableadjustments.
(4) Depreciation of tangible fixed assets
Depreciation of the Company's tangible fixed assets is calculated by the following methods.
Tangible fixed assets (excluding lease assets):Declining-balance method
However, buildings (excluding building attachments and structures) acquired on or after April 1, 1998 are depreciated using
Straight-line method.
Lease assets related to finance lease transactions that do nottransfer ownership: Straight-line method over the lease term
without residual value
Other tangible fixed assets acquired for ¥100,000 or more but
less than ¥200,000 are depreciated equally over three years.
(5) Foreign currency translation

Foreign currency-denominated assets and liabilities are translated into Japanese yen at the effective exchange rate prevailingat the balance sheet date.
(6) Allowance for possible loan losses

Allowance for possible loan losses is provided in accordancewith the Company's standards of self-assessment and write-offs
and reserves on credit quality:i) For the credits of borrowers who are legally bankrupt suchas being in the proceedings of bankruptcy or civil rehabilitation (hereinafter called "legally bankrupt borrowers") and whoare substantially bankrupt (hereinafter called "substantiallybankrupt borrowers"), the Company provides the remaining
amount of credits after the direct write-off described below
and the deductions of the amount expected to be collected
through the disposal of collateral or the execution of guarantees.
ii) For the credits of borrowers who are not currently bankrupt
but have a high possibility of bankruptcy (hereinafter called“not currently bankrupt borrowers”), the Company provides
the amounts deemed as necessary considering the borrowers' ability to pay, within the amounts after deductions of theamount expected to be collected through the disposal of collateral or the execution of guarantees.
iii) For the credits of borrowers other than the above, the Company provides the amounts calculated by multiplying the borrowers' balance by the actual ratio of bad debt losses on defaults
during a certain past period.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

41

All credits are assessed by the relevant departments in accordance with the Company’s standards of self-assessment on
credit quality. The results of the assessment are reviewed by
the audit department, which is independent of business-related
divisions. Subsequently, the allowance for possible loan losses
are provided based on the results of these assessments.
For the credits of legally bankrupt borrowers and substantially bankrupt borrowers, the amounts remaining after deductions of collateral value or the amounts collectible through theexecution of guarantees is written-off directly from the borrower’s balance as the estimated uncollectible amounts. The
amounts written-off as of March 31, 2011, 2012 and 2013 were¥287 million, ¥332 million and ¥308 million (US$3 million), respectively.
(7) Reserve for employees' retirement benefits

The Company and its consolidated subsidiaries adopt accounting standards for employees' retirement benefits (BusinessAccounting Council dated June 16, 1998) and account for the reserve for employees’ retirement benefits based on the projected
benefit obligation and plan assets at the balance sheet date.
(8) Reserve for price fluctuation of securities

Reserve for price fluctuation of securities is calculated in accordance with Article 115 of the Insurance Business Law.
(9) Lease transactions as a lessee
Finance lease transactions that do not transfer ownership to thelessee whose commencement day was on or before March 31,
2008 continued to be accounted for in a manner similar to accounting treatment for ordinary rental transactions.
(10) Lease transactions as a lessor
As for the finance lease transactions where the Company is alessor, the lease fee is recorded in “interest, dividends and otherincome (other interest and dividends)” at the time of receiving
lease fee. The corresponding cost of the lease transactions isrecorded in “other investment expenses,” which is calculated
by deducting an amount equivalent to the interest allocated overthe lease term from the lease fee received.
(11) Accounting for hedge activities

Hedge accounting is based on "Accounting Standards for
Financial Instruments" (ASBJ Statement No. 10 issued by the
Accounting Standards Board of Japan on August 11, 2006).
For the foreign currency forward contracts against theexchange rate fluctuations in the value of foreign currency-denominated bonds classified as available-for-sale securities, which
qualify for hedge accounting because of high correlation andeffectiveness between the hedging instruments and the hedged
items, valuation gains and losses on the foreign currency forward contracts are recorded in the statements of operations.

42

FUKOKU MUTUAL LIFE INSURANCE COMPANY

For the interest rate swaps against the interest rate fluctuations regarding loans, which qualify for hedge accounting
because of high correlation and effectiveness between thehedging instruments and the hedged items, valuation gains andlosses on the interest rate swaps are deferred until the maturityof the hedged transactions.
Deposits denominated in foreign currencies for which forward foreign exchange contracts are used to hedge the foreign
currency fluctuations are translated at the contract rates if theforward contracts qualify for specific hedge accounting. In thiscase, exchange differences between the exchange rate on the
trade date and the forward contract rate are allocated to eachfiscal year from the date contracted to the date settled.
For judging the effectiveness of hedge used, ratio analysis
of comparing the fluctuations in the fair value or cash flows ofhedged items and hedging instruments is mostly applied.
(12) Accounting for consumption taxes

The Company accounts for consumption taxes by the tax-exclusion method. The consumption taxes on certain assets, which
are not deductible from consumption taxes withheld and thatare stipulated to be deferred under the Tax Law, are deferred
as prepaid expenses and amortized equally over five years.
Consumption taxes other than deferred consumption taxes arerecognized as an expense when incurred.
(13) Policy reserve

Policy reserve is based on Article 116 of the Insurance Business
Law, and the premium reserve at the end of fiscal year is calculated by the following method:
In regard to the policies subject to the standard policy
reserve, the method as prescribed by the Commissioner of Financial Services Agency (Ministry of Finance Ordinance No. 48,
1996) is applied.
In regard to the policies not subject to the standard policy
reserve, the net level premium method is applied.
As of March 31, 2013, in order to improve future income
and expenditure, the Company raised an additional policy reserve based on the provision of paragraph 5, Article 69 of the
Enforcement Regulation of the Insurance Business Law for
individual annuity insurance policies with an assumed rate of
5.00% or more for which annuity payment commenced on or
before March 31, 2013 (excluding the wife’s annuity insurance
additional rider). On raising this reserve, the Company reversed
and allocated a contingency reserve of ¥64,333 million (US$684
million) included in the policy reserve, and there is no impact onprovision for policy reserve, ordinary profits, and surplus before
income taxes.
The Company also raised an additional policy reserve of¥984 million (US$10 million) under the provision of paragraph 5,
Article 69 of the Enforcement Regulation of the Insurance Business Law based on the written opinion of an actuary provided

for in paragraph 1, Article 121 of the Insurance Business law for
hospitalization riders with surgery benefits and long-term hospitalization benefits (sold between August 1977 and March 1981)
and non-participating tuition insurance. As a result, the provision
for policy reserve increased by ¥984 million (US$10 million) andordinary profits and surplus before income taxes decreased by¥984 million (US$10 million) compared with if the additional
reserve had not been raised.
(14) Amortization method for intangible fixed assets

Intangible fixed assets are amortized as follows:i) Software
Software for internal use is amortized based on a straight-line
method over the estimated useful lives.
ii) Lease assets
Lease assets are amortized based on a straight-line method
over the lease term.
(15) Deferred assets

Discount on bonds is amortized equally over the period forwhich interest on bonds is fixed. This amount is deducted frombonds.
(16) Policy-reserve-matching bonds

Of the bonds corresponding to the sub-groups of individual
insurance and annuities which are set by insurance types andinvestment policies, the bonds that are held to match the duration of liabilities are classified by the Company as policy-reservematching bonds in accordance with “Temporary Treatment of
Accounting and Auditing Concerning Policy-reserve-matching
Bonds in Insurance Industry” (Industry Audit Committee Report
No. 21 issued by the Japanese Institute of Certified Public Accountants on November 16, 2000).
The amounts of policy-reserve-matching bonds recordedon the balance sheets and the market value of these bonds asof March 31, 2011, 2012 and 2013 were written in Notes No. 4“Financial Instruments.”
Effective for the fiscal year ended March 31, 2013, theinsurance policy sub-groups were changed in order to enhance
ALM as follows:i) The sub-group of single premium endowment life insurance
entered since July 2002 was integrated into the sub-groups ofindividual annuities with single premium accident and death
benefits entered since October 2002 and single premium
whole life insurance entered since August 2003.
ii) The sub-groups of whole life insurance and individual annuities (excluding above mentioned individual annuities withsingle premium accident and death benefits and single premium whole life insurance) were newly established.
iii) The sub-group of group annuities (excluding defined contribution annuities with limited term and yields guaranteed) was
newly established.
There was no impact of these changes on the consolidatedbalance sheets and consolidated statements of operations as ofMarch 31, 2013.
2. Accounting Changes and Error Corrections and Its Implementation(1) Effective for the fiscal year ended March 31, 2013, the Company has changed its depreciation method for its tangible
fixed assets acquired on or after April 1, 2012 in accordancewith the revision of the Corporation Tax Act.
As a result, consolidated ordinary revenue and surplus
before income taxes for the fiscal year ended March 31,
2013, increased by ¥36 million (US$385 thousand), bothcompared to those calculated using the previous depreciation method.
(2) Effective for the year ended March 31, 2012, in accordancewith the amendment of the Enforcement Regulation of
the Insurance Business Law, the presentation of financial
statements has been changed as follows.
(a) As for the statement of operations, “reversal of allowancefor possible loan losses” which was presented in“extraordinary gains” until previous fiscal year is included
in “investment income”.
(b) As for the statement of changes in net assets, the item
which was presented as “balance at the end of previous
fiscal year” until previous fiscal year is presented as“balance at the beginning of current period”.
(3) Effective for the year ended March 31, 2011, the Company
and its consolidated subsidiaries adopted “Accounting Standard for Asset Retirement Obligations” (ASBJ Statement No.
18 issued by the Accounting Standards Board of Japan on
March 31, 2008) and “Guidance on Accounting Standard for
Asset Retirement Obligations” (ASBJ Guidance No. 21 issued by the Accounting Standards Board of Japan on March
31, 2008). As a result, tangible fixed assets increased by¥1,725 million and the amount of asset retirement obligations recorded in balance sheet was ¥2,849 million. Ordinary
profit decreased by ¥157 million and surplus before income
taxes decreased ¥1,124 million.

3. The Principal Accounting Standards Published before
March 31, 2013 but not Applied are as follows.
With the publication of the Accounting Standard for Retirement
Benefits (ASBJ Statement No. 26, May 17, 2012) and Guidanceon Accounting Standard for Retirement Benefits (ASBJ Guidance
No. 25, May 17, 2012), the treatment of unrecognized actuarial
gain or loss and unrecognized prior service cost, the method for
calculating retirement benefit obligations, current service costand others will be changed and disclosure will be enhanced.
Application of the standards concerning changes inthe treatment of unrecognized actuarial differences andunrecognized prior service cost and enhancement of disclosure
is mandatory for the consolidated financial statements pertaining
to the end of the consolidated fiscal year commencing on or

FUKOKU MUTUAL LIFE INSURANCE COMPANY

43

after April 1, 2013, and the Group plans to apply the standard
from the end of fiscal 2013.
Application of the standard concerning the change ofthe method for calculating retirement benefit obligations andcurrent service costs is mandatory from the beginning of theconsolidated fiscal years commencing on or after April 1, 2014,
and the Group plans to apply the standard from the beginning offiscal 2014.
The Group is currently evaluating the impact in the
consolidated fiscal years after the application of the standards.

4. Financial Instruments
Asset management of the Company’s general accounts otherthan the separate accounts stipulated in Article 118 Paragraph 1of the Insurance Business Law is conducted on the principle ofprudent and profitable investments, considering public and social
responsibilities of the insurance business. Based on this policy,
the Company allocates the fund, securing its liquidity, from themedium-to-long term viewpoints. The Company is diversifying
investments in assets such as foreign securities and equity
securities within the acceptable range of risk in order to enhance
the profitability, although yen-denominated interest bearing
As of March 31,

2011

2012
Millions of yen

Carrying
amountMonetary claims bought:
Claims treated as loans ......................................................
Total monetary claims bought ............................................
Money held in trust:
Trading securities ...............................................................
Total money held in trust ....................................................
Securities:
Trading securities ...............................................................
Held-to-maturity debt securities .........................................
Policy-reserve-matching bonds ..........................................
Available-for-sale securities ................................................
Total securities ...................................................................
Loans:
Policy loans ........................................................................
Ordinary loans ....................................................................
Total loans ..........................................................................
Derivative instruments:
Hedge accounting not applied ............................................
Hedge accounting applied ..................................................
Total derivative instruments ...............................................

¥

1,424
1,424

Fair value¥

Carrying
amountDifference

1,424
1,424

¥

0
0

¥

Fair value

1,351
1,351

¥

1,374
1,374

Difference

¥

23
23

32,16932,16932,16932,169——34,19434,19434,19434,194——228,171685,249
1,270,781
2,400,737
4,584,939

228,171
691,061
1,291,435
2,400,737
4,611,406—
5,811
20,654—
26,466

214,053
1,179,852
1,461,155
2,479,204
5,334,265

214,053
1,218,634
1,522,287
2,479,204
5,434,179—
38,781
61,132—
99,91474,357
1,072,361
1,146,719

74,357
1,099,209
1,173,566(0)
26,847
26,84673,176969,182
1,042,359

73,176995,689
1,068,865(0)26,506
26,506(6,049)(1,730)(7,780)(6,049)(1,730)(7,780)———(1,442)(3,506)(4,948)(1,442)(3,506)(4,948)

—
—
—

¥

¥

¥

¥

¥

¥

As of March 31,

2013

2013

Millions of yen

Millions of U.S. dollars

Carrying
amountMonetary claims bought:
Claims treated as loans ......................................................
Total monetary claims bought ............................................
Money held in trust:
Trading securities ...............................................................
Total money held in trust ....................................................
Securities:
Trading securities ...............................................................
Held-to-maturity debt securities .........................................
Policy-reserve-matching bonds ..........................................
Available-for-sale securities ................................................
Total securities ...................................................................
Loans:
Policy loans ........................................................................
Ordinary loans ....................................................................
Total loans ..........................................................................
Derivative instruments:
Hedge accounting not applied ............................................
Hedge accounting applied ..................................................
Total derivative instruments ...............................................

44

FUKOKU MUTUAL LIFE INSURANCE COMPANY

¥

¥

1,111
1,111

Fair value

¥

1,136
1,136

Carrying
amountDifference

¥

25
25

$

Fair value

11
11

$

12
12

Difference$0030,32230,32230,32230,322

—
—

322
322

322
322

—
—

258,193
1,230,032
1,888,162
2,640,657
6,017,045

258,193
1,348,605
2,036,166
2,640,657
6,283,622—
118,573
148,003—
266,577

2,745
13,07820,07628,077
63,977

2,745
14,33921,64928,077
66,811

—
1,260
1,573
—
2,834

69,956
840,701
910,657

69,956
866,908
936,865(0)26,207
26,207

743
8,938
9,682

743
9,217
9,961

(0)
278
278

331
(795)
(463)

331
(795)
(463)

—
—
—

3
(8)
(4)

3
(8)
(4)

—
—
—

¥

¥

$

$

$

assets including debt securities such as Japanese government
bonds and loans are the cores of the portfolios. Derivatives aremainly used to mitigate the market risk regarding the securities
and loans. Major financial instruments including securities, loans
and derivatives are exposed to market risk and credit risk.
The Company manages its asset management risk by
establishing internal control systems including various rules
pursuant to the “Basic Policy for Risk Management” establishedby the Board of Directors. Specifically, the Company eliminates
excessive risk deviating from the basic principle and secures thesafety of the assets by utilizing control functions of the Financial
and Investment Risk Management Department towards theasset management sections, monitoring the status of market
risk and credit risk periodically on a daily or monthly basis. In
addition, the Company quantifies the market risk and credit risk
using value-at-risk (VaR) method in order to control the possible
maximum losses which may arise from the holding assets
within a certain range of risk buffers.
The carrying amounts, fair values and their relateddifferences of major financial assets and liabilities as of March
31, 2011, 2012 and 2013, were as follows:(1) Securities including deposits and monetary claims bought
which are treated as securities based on “Accounting Standards for Financial Instruments” (ASBJ Statement No.10) andsecurities managed as trust assets in money held in trust:
The fair values of marketable securities are measured at thequoted market price at the end of fiscal year. The fair valuesof other securities without the quoted market price arebased on the prices reasonably calculated such as the prices
offered by the information vendors or counterparty financial
institutions.
Investments in unconsolidated subsidiaries and affiliates,
unlisted stocks and investments in partnerships whereby
partnership assets consist of unlisted stocks whose fairvalues are deemed extremely difficult to obtain, are excluded
from above securities. The carrying amounts of investments
in unconsolidated subsidiaries and affiliates, unlisted stocks
and investments in partnerships were ¥398 million, ¥8,847
million and ¥8,201 million as of March 31, 2011, ¥398 million,¥8,086 million and ¥7,729 million as of March 31, 2012, and¥519 million (US$5 million), ¥7,738 million (US$82 million)and ¥7,667 million (US$81 million) as of March 31, 2013,
respectively.
(2) Loans and monetary claims bought treated as loans:
The fair values of policy loans are deemed to approximatebook values, considering estimated repayment period andinterest rate conditions since their repayment deadline havenot been set up due to the characteristics that the loan islimited to the amount of cash surrender values. Therefore,

the book values are used as the fair values of policy loans.
The fair values of floating interest rate loans among theordinary loans and monetary claims bought treated as loans
approximate the book values because the market interest
rates are reflected in future cash flows in a short period.
Therefore, the fair values of floating interest rate loans andmonetary claims bought treated as loans are based on theirbook values. The fair values of fixed interest rate loans aremeasured by discounting the future cash flows to the present values.
The fair values of loans receivable from legally bankrupt
borrowers, substantially bankrupt borrowers and not currently
bankrupt borrowers and monetary claims bought treated asloans are computed by deducting the amount of the allowance for doubtful accounts from the book values before direct
write-offs.
(3) Derivative instruments:i) The fair values of the futures and options traded at theexchange are measured at the settlement price of the exchange.
ii) The fair values of options and swaps traded over the counterare based on the quoted prices offered by counterparty financial institutions.
iii) The fair values of foreign currency forward contracts are
determined based on the spot exchange rate and forward
contract rate.

5. Investment and Rental Property
The Company holds investment and rental properties such as
office buildings in Tokyo and other areas. The carrying amounts
and the fair values of investment and rental properties were¥230,127 million and ¥280,297 million as of March 31, 2011,¥223,191 million and ¥271,525 million as of March 31, 2012and ¥216,722 million (US$2,304 million) and ¥273,809 million(US$2,911 million) as of March 31, 2013, respectively. The fairvalue is mainly based on the value calculated by the Company inaccordance with real estate appraisal standards which includes
some adjustments using the reference prices.
The amount corresponding to asset retirement obligations
included in the carrying amount of investment and rental properties were ¥1,411 million, ¥1,334 million and ¥1,256 million(US$13 million) as of March 31, 2011, 2012 and 2013, respectively.
6. Securities Lent under Lending Agreements
The amount of securities lent under lending agreements was¥45,887 million (US$487 million) as of March 31, 2013.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

45

7. Loans Receivable
The total amounts of credits to bankrupt borrowers, delinquentloans, delinquent loans past 3 months or more and restructuredloans, which were included in loans, were ¥3,288 million, ¥3,019
million and ¥1,759 million (US$18 million) as of March 31, 2011,2012 and 2013, respectively.
i) The balances of credits to bankrupt borrowers were ¥280 million, ¥270 million and ¥218 million (US$2 million) as of March
31, 2011, 2012 and 2013, respectively.
ii) The balances of delinquent loans were ¥770 million, ¥683
million and ¥590 million (US$6 million) as of March 31, 2011,2012 and 2013, respectively.
iii) There were no balances of delinquent loans past 3 months ormore as of March 31, 2011, 2012 and 2013.
iv) The balances of restructured loans were ¥2,237 million,¥2,064 million, and ¥950 million (US$10 million) as of March
31, 2011, 2012 and 2013, respectively.
Credits to bankrupt borrowers represent loans, excluding the balances already written-off, which meet the conditions prescribedin Article 96 Paragraph 1 Item 3 and 4 of the Enforcement Regulations of the Corporate Tax Law. Moreover, accruing intereston these loans is not recorded as income after determining thatprincipal of or interest on these loans is unlikely to be collected
due to the significant delay in repayment of principal or interest
payment or for some other reasons.
Delinquent loans are credits whose accruing interest is
not recorded as income due to the same reasons as describedabove, and exclude credits to bankrupt borrowers and loans forwhich interest payments have been suspended and rescheduled
to assist and support the borrowers in the restructuring of theirbusiness.
Delinquent loans past 3 months or more are loans for whichinterest payment or repayment of principal are delinquent for
3 months or more from the due date under the terms of therelated loan agreements, excluding those loans classified as
credits to bankrupt borrowers and delinquent loans.
Restructured loans are loans for which certain concessions
favorable to borrowers, such as interest reduction or exemptions, rescheduling of due date of principal or interest payment,
waiver of claim or other terms, have been negotiated for the purpose of assisting and supporting the borrowers in the restructuring of their business. This category excludes loans classified as
credits to bankrupt borrowers, delinquent loans and delinquentloans past 3 months or more.
The direct write-offs related to loans decreased credits tobankrupt borrowers described above by ¥19 million, ¥12 millionand ¥1 million (US$13 thousand) as of March 31, 2011, 2012
and 2013, respectively.

46

FUKOKU MUTUAL LIFE INSURANCE COMPANY

The direct write-offs related to loans decreased delinquentloans described above by ¥262 million, ¥291 million and ¥288
million (US$3 million) as of March 31, 2011, 2012 and 2013,
respectively.
8. Accumulated Depreciation of Tangible Fixed Assets
Accumulated depreciation of tangible fixed assets totaledto ¥137,605 million, ¥137,618 million and ¥143,241 million(US$1,523 million) as of March 31, 2011, 2012 and 2013, respectively.
9. Separate Accounts
Total assets in separate accounts provided for in Article 118 of
the Insurance Business Law were ¥83,280 million, ¥82,053 million and ¥78,815 million (US$838 million) as of March 31, 2011,2012 and 2013, respectively. The amounts of separate accountliabilities were the same as separate account assets.
10. Receivables from/Payables to Unconsolidated
Subsidiaries
The total amounts of receivables from/payables to unconsolidated subsidiaries were ¥2,508 million and ¥171 million as ofMarch 31, 2011, ¥2,432 million and ¥177 million as of March 31,
2012, and ¥3,247 million (US$34 million) and ¥184 million (US$1
million) as of March 31, 2013, respectively.

11. Income Taxes
Deferred tax assets and deferred tax liabilities as of March 31,
2011 were ¥100,383 million and ¥8,381 million, respectively.
Valuation allowance for deferred tax assets was ¥3,257 million.
Major components of deferred tax assets were ¥59,538
million of policy reserves, ¥18,161 million of reserve for employees’ retirement benefits and ¥12,262 million of reserve for pricefluctuation of securities as of March 31, 2011.
Major component of deferred tax liabilities was ¥5,859 million of net unrealized gains on available-for-sale securities as ofMarch 31, 2011.
The statutory tax rate and the actual effective tax rate forthe year ended March 31, 2011 were 36.2% and 20.5%,
respectively. The major difference between the statutory tax
rate and the actual effective tax rate was (16.6%) of reserve fordividends to policyholders.
Deferred tax assets and deferred tax liabilities as of March
31, 2012 were ¥85,897 million and ¥34,529 million, respectively.
Valuation allowance for deferred tax assets was ¥3,155 million.
Major components of deferred tax assets were ¥49,440
million of policy reserves, ¥14,279 million of reserve for
employees’ retirement benefits and ¥11,752 million of reservefor price fluctuation of securities as of March 31, 2012.
Major component of deferred tax liabilities was ¥30,806

million of net unrealized gains on available-for-sale securities asof March 31, 2012.
The statutory tax rate and the actual effective tax rate
for the year ended March 31, 2012 were 36.2% and 46.4%,
respectively. The major differences between the statutory
tax rate and the actual effective tax rate were 24.9% of the
reduction of deferred tax assets due to the changes in tax ratesand (16.3%) of reserve for dividends to the policyholders.
Deferred tax assets and deferred tax liabilities as of March
31, 2013 were ¥88,575 million (US$941 million) and ¥102,048
million (US$1,085 million), respectively. Valuation allowance fordeferred tax assets was ¥3,103 million (US$32 million).
Major components of deferred tax assets were ¥50,755

million (US$539 million) of policy reserves, ¥14,351 million(US$152 million) of reserve for price fluctuation of securitiesand ¥13,859 million (US$147 million) of reserve for employees’
retirement benefits as of March 31, 2013.
Major component of deferred tax liabilities was ¥98,080
million (US$1,042 million) of net unrealized gains on availablefor-sale securities as of March 31, 2013.
The statutory tax rate and the actual effective tax rate
for the year ended March 31, 2013 were 33.3% and 20.1%,
respectively. The major differences between the statutory tax
rate and the actual effective tax rate was(14.7%) of reserve fordividends to the policyholders.

12. Reserve for Dividends to Policyholders
Changes in reserve for dividends to policyholders were as follows:
Years ended March 31,

2011

2012

2013

Millions of yen

Balance at the beginning of current fiscal year...........................................
Transfer from surplus in previous fiscal year ..............................................
Dividends paid in the current fiscal year .....................................................
Increase in interest .....................................................................................
Balance at the current fiscal year ...............................................................

¥ 54,759
19,505(21,176)116¥ 53,205¥ 53,205
24,381(23,700)
83¥ 53,969

2013
Millions of
U.S. dollars¥ 53,969
23,989(25,727)76¥ 52,307

$ 573
255
(273)
0
$ 556

13. Reserve for Dividends to Policyholders (Fukokushinrai Life Insurance Company)
Changes in reserve for dividends to policyholders were as follows:
Years ended March 31,

2011

2012

2013

2013
Millions of
U.S. dollars

Millions of yen

Balance at the beginning of current fiscal year...............................................
Dividends paid in the current fiscal year .........................................................
Increase in interest .........................................................................................
Provision for reserve for dividends to policyholders .......................................

¥585
(388)
0
456

¥654
(446)
0
440

¥648
(406)
0
455

$6
(4)
0
4

Balance at the current fiscal year ...................................................................

¥654

¥648

¥697

$7

14. Stocks of Unconsolidated Subsidiaries
The amounts of stocks of unconsolidated subsidiaries the Company held as of March 31, 2011, 2012 and 2013 were ¥398 million, ¥398 million and ¥519 million (US$5 million), respectively.
15. Pledged Assets and Secured Debts
Assets pledged as collateral as of March 31, 2011 were ¥23,633
million of securities. Secured debts as of March 31, 2011 were
¥4,629 million.
Assets pledged as collateral as of March 31, 2012 were¥24,300 million of securities and ¥397 million of bank deposits.
Secured debts as of March 31, 2012 were ¥4,608 million.
Assets pledged as collateral as of March 31, 2013 were¥26,930 million (US$286 million) of securities and ¥163 million(US$1 million) of bank deposits. Secured debts as of March 31,
2013 were ¥4,583 million (US$48 million).
16. Policy Reserves for the Reinsurance Contracts
Reserve for outstanding claims for the reinsurance contracts
provided in accordance with Article 71 Paragraph 1 of the En-

FUKOKU MUTUAL LIFE INSURANCE COMPANY

47

forcement Regulation of the Insurance Business Law (hereinafter
called "reserve for outstanding claims for ceded reinsurance")
were ¥42 million, ¥5 million and ¥1 million (US$20 thousand) as
of March 31, 2011, 2012 and 2013, respectively.
Policy reserve for the reinsurance contracts provided in accordance with Article 71 Paragraph 1 of the Enforcement Regulation of the Insurance Business Law (hereinafter called "policy
reserve for ceded reinsurance") were ¥55 million, ¥53 millionand ¥52 million (US$555 thousand), as of March 31, 2011, 2012
and 2013, respectively.

17. Commitment LineAs of March 31, 2011, 2012 and 2013, there were unused
commitment line agreements under which the Company is thelender of ¥4,056 million, ¥1,023 million and ¥972 million (US$10
million), respectively.
18. Subordinated Bonds
Repayments of subordinated bonds are subordinated to otherobligations.
19. Contribution to Policyholders Protection Corporation
The future contribution to the Life Insurance Policyholders Protection Corporation of Japan under Article 259 of the Insurance
Business Law were estimated at ¥11,285 million, ¥11,754 million and ¥12,561 million (US$133 million) as of March 31, 2011,2012 and 2013, respectively. The contributions were charged as
operating expenses in the year in which they were paid.

20. Reserve for Employees’ Retirement Benefits(1) The reserve for employees’ retirement benefits as of March 31, 2011, 2012 and 2013, were calculated as follows:
As of March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

a. Projected benefit obligation ....................................................................
b. Fair value of pension plan assets............................................................
c. Unfunded benefit obligation (a+b) ..........................................................
d. Unrecognized actuarial differences ........................................................
e. Unrecognized prior service cost .............................................................
f. Reserve for employees' retirement benefits (c+d+e) .............................

¥(71,786)
15,728(56,058)
5,802
102¥(50,153)¥(72,936)
17,167(55,768)
10,021(636)¥(46,384)

2013¥(72,695)
20,006(52,689)
8,134
(598)
¥(45,153)$(772)
212
(560)
86
(6)
$(480)(2) Gross amount of retirement benefit expenses for the years ended March 31, 2011, 2012 and 2013 were as follows:
Years ended March 31,

2011

2012

2013

Millions of
U.S. dollars

Millions of yen

Service cost ................................................................................................
Interest cost ...............................................................................................
Expected return on pension plan assets ....................................................
Amortization of actuarial differences ..........................................................
Amortization of prior service cost ...............................................................

¥3,114
1,430
(480)
1,171
34
¥5,270¥2,965
1,451
(471)
1,218
(20)
¥5,1432013¥2,892
1,456
(515)
1,361
(38)
¥5,156

$30
15
(5)
14
(0)
$54

(3) The Company’s assumptions used in calculation of the above information were as follows:
Years ended March 31,

Method of attributing the projected benefits to periods of service ................................
Discount rate ..................................................................................................................
Expected rate of return on pension plan assets .............................................................
Amortization period of actuarial differences ...................................................................
Amortization period of prior service cost ........................................................................

48

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2011

2012

2013

Straight-line
basis

Straight-line
basis

Straight-line
basis

2.0%
3.0%
10 years
10 years

2.0%
3.0%
10 years
10 years

2.0%
3.0%
10 years
10 yearsIII. Notes to Statements of Operations
1. Net Surplus before Minority Interests
Effective for the year ended March 31, 2011, net surplus before
minority interests is presented in the consolidated statementsof operations in accordance with the revision of the Enforcement Rule of the Insurance Business Law based on “AccountingStandard for Consolidated Financial Statements” (ASBJ Statement No. 22 issued by the Accounting Standards Board of Japanon December 26, 2008).
2. Transactions with Unconsolidated Subsidiaries
The total amounts of revenues and expenditures in connection with unconsolidated subsidiaries were ¥108 million and¥2,884 million for the year ended March 31, 2011, ¥96 millionand ¥2,884 million for the year ended March 31, 2012, and ¥97
million (US$1 million) and ¥3,054 million (US$32 million) for theyear ended March 31, 2013, respectively.
3. Policy Reserves for the Reinsurance Contracts
For the year ended March 31, 2011, provision for reserve foroutstanding claims for ceded reinsurance considered in calculation of provision for reserve for outstanding claims was ¥9 million and reversal of policy reserve for ceded reinsurance considered in calculation of provision for policy reserve was ¥0 million.
For the year ended March 31, 2012, reversal of reservefor outstanding claims for ceded reinsurance considered in
calculation of reversal of reserve for outstanding claims was¥36 million and reversal of policy reserve for ceded reinsurance
considered in calculation of provision for policy reserve was ¥1
million.
For the year ended March 31, 2013, reversal of reservefor outstanding claims for ceded reinsurance considered in
calculation of provision for reserve for outstanding claims was¥3 million (US$41 thousand) and reversal of policy reserve forceded reinsurance considered in calculation of provision forpolicy reserve was ¥1 million (US$12 thousand).
4. Impairment Losses of Fixed Assets
For the year ended March 31, 2013, impairment losses of fixed
assets by the Company were as follows:(1) Method of grouping

Real estate and other assets used for insurance business operations are classified as one asset group as a whole. Other assets
such as real estate for rent and unused real estate are classified
as one group individually.
(2) Background of recognizing the impairment losses

Profitability of certain real estate for rent dropped down
significantly due to a decrease in the level of rental income
and a declining trend of market prices of land. The Company
reduced its book values of such real estate for rent and unused
real estate to their recoverable amounts. The amounts reduced
were recognized as impairment losses and included in theextraordinary losses.

(3) Asset groups recognized impairment losses and losses by fixed assets
Year ended March 31,

2013

2013
Millions ofMillions of yen

Real estate for rent:
Land..........................................................................................................................................................
Buildings and others .................................................................................................................................
Total real estate for rent (i) .......................................................................................................................
Unused real estate:Land..........................................................................................................................................................
Buildings and others .................................................................................................................................

U.S. dollars

¥183
26
210

$1
0
2

177
212

1
2

Total unused real estate (ii) .......................................................................................................................

390

4

Total:
Land..........................................................................................................................................................
Buildings and others .................................................................................................................................

361
239

3
2

Total (i)+(ii) ................................................................................................................................................

¥600

$6

(4) Calculation method of recoverable amount

Recoverable amount is based on net sales value. Net sales value is determined based on appraisal value, posted price or road rate.
(5) Changes in presentation

Impairment losses of fixed assets have been disclosed for the year ended March 31, 2013, owing to increased materiality.

FUKOKU MUTUAL LIFE INSURANCE COMPANY

49

IV. Notes to Statement of Comprehensive Income
1. Other Comprehensive Income
The amounts recycled and tax effect amounts related to other comprehensive income were as follows:
Years ended March 31,

2012

2013

Millions of yen

Net unrealized gains (losses) on available-for-sale securities, net of tax
Amount incurred during the fiscal year ............................................................................
Amount recycled ..............................................................................................................
Before tax adjustment .................................................................................................
Tax effects ...................................................................................................................
Net unrealized gains (losses) on available-for-sale securities, net of tax .....................
Deferred valuation gains (losses) under hedge accounting, net of tax
Amount incurred during the fiscal year ............................................................................
Amount recycled ..............................................................................................................
Before tax adjustment .................................................................................................
Tax effects ...................................................................................................................
Deferred valuation gains (losses) under hedge accounting, net of tax........................
Revaluation reserve for land, net of tax
Amount incurred during the fiscal year ............................................................................
Amount recycled ..............................................................................................................
Before tax adjustment .................................................................................................
Tax effects ...................................................................................................................
Revaluation reserve for land, net of tax.......................................................................
Foreign currency translation adjustment
Amount incurred during the fiscal year ............................................................................
Amount recycled ..............................................................................................................
Before tax adjustment .................................................................................................
Tax effects ...................................................................................................................
Foreign currency translation adjustment .....................................................................
Total other comprehensive income ..........................................................................................

50

FUKOKU MUTUAL LIFE INSURANCE COMPANY

2013
Millions of
U.S. dollars¥69,198
14,702
83,901(24,946)
58,955¥214,928
3,637
218,566(67,274)
151,291$2,285
38
2,323
(715)
1,608

14
(330)
(316)
122
(194)

(0)
(160)
(161)
53
(107)

(0)
(1)
(1)
0
(1)

—
—
—
2,854
2,854

—
—
—
(17)
(17)

—
—
—
(0)
(0)

(67)
—
(67)
—
(67)
¥61,548

193
—
193
—
193
¥151,3592—
2—
2$1,609

V. Notes to Statements of Cash Flows
1. Scope of Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2011, 2012 and 2013
consist of "Cash," "Deposits in transfer account," "Current deposits," "Ordinary deposits," "Notice deposits," "Time deposits maturing within 3 months of the date of acquisition," "Foreign currency

deposits maturing within 3 months of the date of acquisition,""Negotiable certificate of deposits maturing within 3 months ofthe date of acquisition," "Call loans" and "Monetary claims bought
maturing within 3 months of the date of acquisition."

2. Reconciliations of Cash and Cash Equivalents
Reconciliations of cash and cash equivalents in the consolidated

statements of cash flows to the consolidated balance sheets accounts as of March 31, 2011, 2012 and 2013 were as follows:
As of March 31,

2011

2012

2013

Millions of yen

Cash and deposits ...................................................................................................
Call loans .................................................................................................................
Monetary claims bought ..........................................................................................
Time deposits maturing over 3 months of the date of acquisition ..........................
Foreign currency deposits maturing over 3 months of the date of acquisition .......
Monetary claims bought maturing over 3 months of the date of acquisition ..........
Cash and cash equivalents ......................................................................................

¥314,392
—
1,424
(200)
(252)
(1,424)¥313,939¥ 73,260
65,600
1,351
(200)
(155)
(1,351)¥138,504

2013
Millions of
U.S. dollars¥ 72,868
70,300
1,111
(200)
(371)
(1,111)¥142,596

$ 774
747
11
(2)
(3)
(11)
$1,516

3. Impact of the Sale of Shares of Fukoku Shinyo Hosho Company Limited
Owing to the sale of shares, Fukoku Shinyo Hosho Company Limited ceased to be a consolidated subsidiary of the Company. The breakdown of assets and liabilities affected by the sale as well as the proceeds from the share sale and cash decrease (net) owing to the sale
were as follows:Year ended March 31,

2013

2013
Millions ofMillions of yen

U.S. dollars

Assets...............................................................................................................................................................
[Cash and deposits] ........................................................................................................................................
Liabilities ...........................................................................................................................................................
Other extraordinaty losses ...............................................................................................................................
Proceeds from sale of shares of subsidiary......................................................................................................
Cash and cash equivalents of subsidiary ..........................................................................................................

¥978
[932]
(373)
(2)
602
(932)

$10
[9]
(3)
(0)
6
(9)

Difference: Net cash decrease owing to sale of shares of subsidiary..............................................................

¥(330)$(3)

FUKOKU MUTUAL LIFE INSURANCE COMPANY

51

Management’s Report on Internal Control over Financial Reporting

1. Matters relating to the basic framework of internal control over financial reporting
Yoshiteru Yoneyama, President of Fukoku Mutual Life Insurance Company (the “Company”), is responsible for thedesign and operation of internal control over financial reporting for the Company’s financial statements, namely, consolidated balance sheets and the related consolidated statements of operations, comprehensive income, cash flows,changes in net assets and a summary of significant accounting policies and other explanatory information for the year
ended March 31, 2012, prepared in accordance with Article 110 Paragraph 2 of the Insurance Business Law. The
Company designs and operates its internal control over financial reporting in accordance with the basic framework ofinternal control set forth in the "Standards and Practice Standards for Management Assessment and Audit concerning
Internal Control Over Financial Reporting (Council Opinions)" issued by the Business Accounting Council of the Financial Service Agency of Japan.
Internal control aims at achieving the objectives to a reasonable extent with the organized and integrated function ofindividual components of internal control as a whole. Therefore, internal control over financial reporting cannot always
ensure the prevention or detection of misstatements in the presentation of financial reporting.
2. Matters relating to the scope of assessment, the basis date of assessment and the assessment procedures
The Company performed an assessment of internal control over financial reporting for its consolidated financial statements as of the end of the fiscal years, March 31, 2013 in accordance with generally accepted assessment standards
in Japan for internal control over financial reporting.
In the assessment of internal control over financial reporting, the Company first assessed internal controls that havea material impact on overall consolidated financial reporting ("company-level controls") and, based on the results, theCompany selected the business processes to be assessed. In assessing those business processes, the Company
analyzed selected business processes, identified a key control that would have a material impact on the reliability offinancial reporting, and assessed the establishment and operation with regard to the key control. The Company assessed the effectiveness of internal control by the aforementioned procedures.
For the Company and its consolidated subsidiaries, the Company determined the scope of assessment of internal
control over financial reporting from the perspective of their materiality to the reliability of financial reporting. The materiality to the reliability of financial reporting is determined in light of their degree of quantitative and qualitative impact.
The Company rationally determined the scope of assessment of internal controls incorporated into business processes("process-level controls") based on the results of assessment of company-level controls regarding the Company andone consolidated subsidiary. Other than those indicated above, four consolidated subsidiaries were determined to beimmaterial from quantitative and qualitative perspectives. Consequently, they are excluded from the scope of assessment of company-level controls.
With respect to the scope of assessment of process-level controls, the locations or business units were selected indescending order of ordinary revenues (after elimination of inter-company transactions) in the previous fiscal year until
their combined amount reached about two-thirds of consolidated ordinary revenues. As a result, the Company was
selected as "significant locations or business units". At selected significant locations and business units (the Company),business processes related to accounting items that were closely associated with the company's business objectives,
including securities, ordinary loans and policy reserves, as well as premium and other income and claims and otherpayments, which have a material impact on the calculation of policy reserves, were determined to be within the scopeof assessment. Furthermore, at selected significant locations and business units and any other locations and business
units, added to the scope of assessment were business processes relating to important accounting items that havea high possibility of material misstatements and involve estimates and judgments, and business processes relating tobusinesses or operations dealing with high-risk transactions.
3. Matters relating to the results of the assessment
As a result of performing the assessment, the Company concluded that the design and operation of internal control
over financial reporting for the Company were effective as of March 31, 2012.
4. Supplementary Information (None)

May 21, 2013
Yoshiteru Yoneyama
President

Fukoku Mutual Life Insurance Company

52

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Report of Independent Auditors

FUKOKU MUTUAL LIFE INSURANCE COMPANY

53

54

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Corporate Organization

Domestic Offices (As of July 2, 2013)
Branch Offices
62
Field Offices
470

Secretarial Div.
Strategic Planning Dept.
Compliance Control Dept.

Employees (As of March 31, 2013)
Office Staff
2,893
Sales Representatives 10,595

Corporate Risk Management Dept.
General Affairs Dept.
Personnel Dept.

Overseas Offices (As of July 2, 2013)
Representative Offices
1

Independent Auditors

Market Planning Dept.
Retail Management Dept.

Board of Statutory
Auditors

Market Developing Dept.
Strategic Market Promotion Dept.

Assistant to the
Statutory Auditors

Group Credit Div. Related toJapan Housing Finance Agency
Wholesale Management Dept.
Pension Actuarial Div.

Board of Representative
Members of Policyholders

Board of Directors

Customer Service Headquarters
Corporate Customer Service Dept.
Individual Customer Service Dept.

Nomination Committee of
Candidates for
Representative Members

Secretariat for Nomination
Committee of Candidates for
Representative Members

Chief Actuary

Underwriting and Medical Dept.
Claims Dept.

Human Resourse
Development
Headquarters

Policy Administration Dept.
Operation and System Planning Dept.
Claim Inspection Div.

Executive Committee

Equities Dept.
Fixed Income Dept.
Loans Dept.

Council

Separate Accounts Management Div.
Investment Assets Administrative Dept.
Financial and investment Planning Dept.
Real Estate Dept.
Accounting Dept.
Actuarial Dept.
Internal Auditing Dept.
Affiliated Business Dept.
Committee for Editing History of the Company
Branch Offices

FUKOKU MUTUAL LIFE INSURANCE COMPANY

55

Corporate Information

Directors, Statutory Auditorsand Executive Offices

Chairman of the Board

Statutory Auditor (Standing)

Tomofumi Akiyama

Shuichi Maeda

President and Chief Executive Officer

Statutory Auditor (Standing)

Yoshiteru Yoneyama*

Akio Imai

Deputy President and Executive Officer

Executive Officer

Katsumasa Furuya

Tsutomu Hiruma

Director and Managing Executive Officer

Executive Officer

Kenji Hirai

Toshimitsu Furuhashi

Director and Managing Executive Officer

Executive Officer

Tadashi Akikawa

Takanobu Futaba

Director and Managing Executive Officer

Executive Officer

Hitoshi Sakai

Yasuyuki Kitamura

Director and Managing Executive Officer

Executive Officer

Toshihiro Hayashi

Kazuyoshi Hasegawa

Director

Executive Officer

Kozo Isshiki**

Kenji Sakurai

Director

Executive Officer

Kazuo Tanabe**

Kohei Kawasaki

Director and Executive Officer

Executive Officer

Toshihide Fujiwara

Osamu Suzuki

Director and Executive Officer

Toshikatsu Hayashi*Representative Director**External Directors***External Statutory Auditors

Statutory Auditor(As of July 2, 2013)

Yoshizumi Nezu***
Statutory Auditor

Mitsuo Ohashi***Statutory Auditor

Yoshikazu Sashida***56

FUKOKU MUTUAL LIFE INSURANCE COMPANY

Directory

Head Office2-2, Uchisaiwaicho 2-chome, Chiyoda-ku, Tokyo 100-0011, Japan
Phone: 81-3-3508-1101
Facsimile: 81-3-3591-6446
Fukoku Life International (U.K.) Ltd.
3rd Floor, Baltic Exchange, 38 St. Mary Axe, London, EC3A 8EX, U.K.
Phone: 44-20-7283-1331
Facsimile: 44-20-7626-7096
Fukoku Life International (America) Inc.
Times Square Tower, 7 Times Square, 35th Floor, New York, NY 10036, U.S.A.
Phone: 1-212-221-7760
Facsimile: 1-212-221-7794
Fukoku Mutual Life Insurance Company Singapore Representative Office
80 Robinson Road #16-04 Singapore 068898
Phone: 65-6220-8308
Facsimile: 65-6220-8736

Fukoku Life International (U.K.) Ltd.
From left : K.Sato, J.Doran, A.Sato, T.Keevil,
D.Hachigo

Fukoku Life International (America) Inc.
From left : A. Chang, Y. Shigeta, S. Lester,T. Ogino and M. Xu

Fukoku Mutual Life Insurance Company
Singapore Representative Office
From left : J. Lim, S. Narue and Y. Yoshida

FUKOKU MUTUAL LIFE INSURANCE COMPANY

57

▲ Tokyo Head Office▲ Osaka Fukoku Mutual Life Insurance Building

58

FUKOKU MUTUAL LIFE INSURANCE COMPANY