Presentation Materials

Results of Sony Life
Life’ssMarket Consistent Embedded Value(MCEV)
as of March 31, 2014

Sony Financial Holdings Inc.
May 26,26 2014
Sony Financial Holdings Inc. All Rights Reserved

Content Highlight of MCEV

P.3

 Risk Amount Based on Economic Value

P.4

 Compliance with MCEV Principles

P.5

 MCEV Results

P.6

 Reconciliation Analysis from MCEV at the End of the Prior Year

P.10

 Sensitivity Analysis

P.16

 Appendix

P.19■Opinion of outside specialist
Sony Life requested Milliman, Inc., an external actuarial consulting firm with expert knowledge in the area of MCEV valuations, to review themethodology, assumptions and calculations and obtained an opinion from Milliman, Inc.
Please refer to the press release (“Disclosure of Market Consistent Embedded Value as of March 31, 2014”) for details.
Disclaimers:
This presentation material contains statements concerning the current plans, expectations, strategies and beliefs of the Sony Financial Group. Anystatements contained herein that pertain to future operating performance and that are not historic facts are forward-looking statements . Forwardlooking statements may include —but are not limited to—words such as “believe,” “anticipate,” “plan,” “strategy,” “expect,” “forecast,” “predict,” and“possibility” that describe future operating activities, business performance, events or conditions. Forward-looking statements, whether spoken or
written, are based on judgments made by the management of the Sony Financial Group, based on information that is currently available to it. As
such, these forward-looking statements are subject to various risks and uncertainties, and actual business results may vary substantially from theforecasts expressed or implied in forward-looking statements. Consequently, investors are cautioned not to place undue reliance on forward-looking
p disclaims any
y obligationg
to revise forward-looking
g statements in light
g of new information,, future events orstatements. The Sonyy Financial Groupother findings. The information contained in this presentation does not constitute or form part of any offer for sale or subscription of or solicitation or
invitation of any offer to buy or subscribe for any securities, nor shall it or any part of it from the basis of or be relied on in connection with any
contract or commitment whatsoever.

Sony Financial Holdings Inc. All Rights Reserved2

Highlight of MCEV(Billions of yen)

MCEV

2013.3.31

2014.3.31

Change1 064 7
1,064.7

1 221 3
1,221.3+156.6156 6Adjusted net worth

770.8

722.1

(48.7)

g business
Value of existing

293.9

499.1

+205.3(Billions of yen)

2013.3.31

2014.3.31

ChangeNew business value

41.6

55.2

+13.6

New business margin*

3.5%

5.2%

+1.7ptSony Life’s MCEV as of March 31, 2014 increased ¥156.6 billion due to the contribution of new business, thechanges in actuarial assumptions, the increase in interest rates and other factors.



New business margin as of March 31, 2014, was up 1.7pt from March 31, 2013, due mainly to the revision ofSony Life’s Insurance premium rates and higher interest rates.
* New business margin equals new business value divided by present value of premium income.

Sony Financial Holdings Inc. All Rights Reserved

3

Risk Amount Based on Economic Value (after tax)
(Billions of yen)

2013.3.31

2014.3.31*2

Insurance risk

605.6

654.5

Market-related risk

289.9

240.0

Of which, interest rate risk*1

234.2

180.9

Operational risk

26.0

26.3

Counter party risk

2.3

1.3

Variance effect(262.5)(257.8)The risk amount based on economic value*3,4

661.3

664.3

*1. Interest amount excluding the variance effect within market-related risk.
*2. Sony Life revised its method of measuring interest rate risk in Japanese yen on March 31, 2014. Please see page 25.

(Billions of yen)

MCEV

2013.3.31
1,064.7

2014.3.31
1,221.3

The risk amount based on economic value as of March 31,, 2014 amounted to ¥664.3 billion. Within Sonyy Life’s risks,,
insurance risk and market-related risk amounted to ¥654.5 billion and ¥240.0 billion, respectively.
The risk amount based on economic value as of March 31, 2014 was slightly up from March 31, 2013. However, Sony
Life has maintained high financial soundness by keeping MCEV, which is capital based on economic value, at ahigher level than the risk amount.
*3. The risk amount based on economic value refers to the total amount of Sony Life’s risks, comprehensively examined and including insurance risk and market-related risk.
*4. The solvency risk capital on an economic value basis is calibrated at VaR (99.5) over one year and based on the internal model, which is a similar but modified model based on the
EU Solvency II (QIS5) standard method.

Sony Financial Holdings Inc. All Rights Reserved

4Compliance with MCEV Principles
 Sony Life has calculated its MCEV in accordance with the calculation methodologies and assumptionsin the MCEV Principles. Notable points regarding compliance with the MCEV Principles are as follows: The reference rate used in the calculations has been defined as the government bond nominal spot rate curve

rather than the swap rate curve as stipulated in the MCEV principles.
 The calculated value of MCEV is the value for Sony Life only and not the consolidated value of Sony Financial

Holdings Inc.
Inc Group MCEV, as prescribed in the MCEV Principles, is not considered, as the calculation is for Sony Life on astandalone basis.
 With respect to Sony Life’s subsidiaries and its equity-method affiliates, Sony Life has not evaluated their life

insurance business but reflected the following values in the calculation of adjusted net worth:

AEGON Sony Life Insurance Co., Ltd. is valued at net asset value minus intangible fixed assets and Insurance Business
Law Article 113 deferred assets, multiplied by the participation rate

Other companies are valued at book value under Japanese GAAP

 None of the calculated values of MCEV are ppresented separatelypy byy segmentgof subsidiaryy or byy affiliatedcompany.
 Sony Life has calculated the adjusted net worth based on Japanese GAAP and not based on the International

Financial Reporting Standards (IFRS).

Sony Financial Holdings Inc. All Rights Reserved

5

MCEV Results(Breakdown of Adjusted Net Worth (1))(Billions of yen)

2013.3.31

2014.3.31

Adj t d nett worth
Adjusted
th

770 8
770.8

722 1
722.1

(48 7)(48.7)

Total net assets

342.3

369.2

+26.9

Reserve for price fluctuations

32.3

41.6

+9.3

Contingency reserve

59.6

63.7

+4.1

Reserve for possible loan losses

0.0

0.0

+0.0

Unrealized gains or losses on held-to-maturity maturity
securities

551.7

430.3

(121.4)

Unrealized gains or losses on land and buildings

19.4

19.4

+0.0

Unfunded pension liabilities

(5.0)

(3.2)

+1.8

Intangible fixed assets(26.1)(23.9)+2.2

Tax effect equivalent of above seven items(193.8)(162.5)

+31.3
31.3

(9.6)

(12.5)(2.9)

Valuation gain or loss on subsidiaries and affiliatedcompanies*

Change*Valuation gain or loss on subsidiaries and affiliated companies included mainly values of AEGON Sony Life Insurance Co., Ltd. in the calculation of adjusted net worth.

Sony Financial Holdings Inc. All Rights Reserved

6

MCEV Results(Breakdown of Adjusted Net Worth (2))(Billions of yen)

2013.3.31

2014.3.31

ChangeAdjusted net worth

770.8

722.1

(48.7)

Free surplus

418.5

566.2

+147.7

Required capital

352.3

156.0

(196.3)

Sony Life sets its required capital as the larger of the amount of capital required for the current solvency margin ratio of
200% or the amount of capital to cover risks based on the internal model. The latter is larger as of the end of March
2014.



The solvency risk capital on an economic value basis as of the end of March 2014 was ¥664.3 billion (after tax),
reflecting the revision of risk measure for interest rate risk in Japanese yen as described on page 25. The effective tax
rate used to adjust to the after tax basis is 30.78%.

Note:
The amount of capital to cover risks based on the internal model is defined as the total amount of technical provision and solvency risk capital on an economic value basis in excess ofstatutory policy reserves (excluding contingency reserves).
The solvency risk capital on an economic value basis is calibrated at VaR (99.5%) over one year and based on the intern al model, which is a similar but modified model based on the EU
Solvency II (QIS5) standard method.

Sony Financial Holdings Inc. All Rights Reserved

7

MCEV Results (Value of Existing Business)
Breakdown of value ofexisting business2013.3.31

2014.3.31

ChangeValue of existing business

293.9

499.1

+205.3A)) Present value of
Certainty-equivalentprofit

633.2

869.4

+236.2B) Time value of
options and guarantees(111.2)(123.1)(11.9)C) Frictional costs(13.9)

(9.2)

+4.7

D)Cost of nonhedgeable risks(214.2)(237.9)(23.7)(Billions of yen)(Billions of yen)

869.4

(123.1)

(9.2)
499 1
499.1
(237.9)

A

B

C

D

2014.3.31
Value ofexisting
business

Note: QIS5 of the EU Solvency II has set a cost of capital rate at 6%, which is used forthe cost of capital calculation. On the other hand, the CRO (Chief Risk Officer) Forumcomprised of CROs from leading insurance companies in Europe proposed that 2.5% to4.5% would be the appropriate level based on several trial calculations. Following thephilosophy of the CRO Forum’s approach, Sony Life has decided to use 2.5% for thecost of capital rate consistent with the MCEV framework considering Japanese long-term
stock risk premiums, the beta of Sony Financial Holdings Inc. and the anticipated impactof the equity risk exposure of Sony Life on the beta of Sony Financial Holdings Inc.,
Inc
which is a hedgeable risk.

Sony Financial Holdings Inc. All Rights Reserved

8

MCEV Results (Value of new Business)
2013.3.31

2014.3.31

ChangeValue of new business

41 6
41.6

55 2
55.2

+13 6
+13.6

E) Present value ofcertainty-equivalentprofit

74.1

84.9

+10.8

F) Time value of
options andguarantees(12.4)

(9.4)

+3.0

G) Frictional costs

(0.2)

(0.3)

(0.0)

H) Cost of nonhedgeable risks(19.9)(20.0)(0.1)

2013.3.31

2014.3.31

Change
g

41.6

55.2

+13.6

1,187.5

1,069.7(117.8)

3.5%

5.2%

+1.7pt(Billions of yen)

Breakdown ofvalue of new business(Billions of yen)

84.9

(9.4)

(0.3)
55.2
(20.0)

New business margin(Billions of yen)

Value of new business

E

F

G

H

2014.3.31
Value ofnewbusiness

Present value of premiumincomeNew business margin

Sony Financial Holdings Inc. All Rights Reserved

9

Reconciliation Analysis from MCEV
at the End of the Prior Year (1)Opening MCEV (MCEV as of March 31, 2013)

770.8

Value ofexisting
business
293.9

Opening adjustments(13.3)－(13.3)

Adjusted opening MCEV

757.5

293.9

1,051.4

－

+55.2

+55.2

(Billions of yen)

(1)

Adjusted
net worth

MCEV
1,064.7(2)

New business value(3)

Expected existing business contribution (risk-free rate)

+0.5

+13.1

+13.5

(4)

Expected existing business contribution (in excess of risk free rate)

+1.6

+6.7

+8.3

(5)

T
Transfers
f
from
f
value
l off existingi ti businessb i
andd required
i d capital
it l tto ffree surplusl(26 8)(26.8)

+26.8
26 8

－

(44.7)+44.7－

Of which, on new business(6)

Experience variances

+2.7

(2.2)

+0.5

(7)

Assumption changes

－

+35 5
+35.5

+35 5
+35.5

(8)

Other operating variance

－

+0.6

+0.6

(9)

Operating MCEV earnings (2)～(8) total(22.1)+135.7+113.6(10) Economic variances(12.0)

+69.0
69.0

+57.0
57.0

(11) Other non-operating variance

(1.2)

+0.6

(0.7)

Total MCEV earnings(35.4)+205.3+169.9(12) Closing adjustments

－

－

－

722.1

499.1

1,221.3

Closing MCEV (MCEV as of March 31, 2014)

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10

Reconciliation Analysis from MCEV
at the End of the Prior Year (2)(Billions of yen)

+57.0

+35.5
+8.3

(0.7)

1,221.3

+0.6

+0.5

+13.5
+55.2

1,064.7 (13.3) 1,051.4

Operating MCEV earnings
MCEV Adjustments
as ofMarch 31,2013

Adjusted
MCEV

FY13
New
businessvalue

Expected
existing
business
contribution(risk-free rate)

Expected
existingb ibusiness
contribution(in excess ofrisk-free rate)

Experiencevariances

Assumption OtherchangesSony Financial Holdings Inc. All Rights Reserved

Economic Adjustments
variances

MCEV
as of
March 31,2014

11

Reconciliation Analysis from MCEV
at the End of the Prior Year (3)Opening MCEV (MCEV as of March 31, 2013)

770.8

Value ofexisting
business
293.9

Opening adjustments(13.3)－(13.3)

Adjusted opening MCEV

757 5
757.5

293 9
293.9

1 051 4
1,051.4

－

+55.2

+55.2

(Billions of yen)

(1)

Adjusted
nett worthth(2) New business value

MCEV
1,064.7(1) Opening adjustments


These adjustments reflect changes in dividends paid to shareholders.

(2) New business valueThis figure reflects increases resulting from the acquisition of new business during the fiscal year ended March 31, 2014.

Sony Financial Holdings Inc. All Rights Reserved

12

Reconciliation Analysis from MCEV
at the End of the Prior Year (4)(Continue)(Billions of yen)

Adjusted
net worth

Value ofexisting
business

MCEV

(3)

Expected existing business contribution (risk-free rate)

+0.5

+13.1

+13.5

(4)

Expected existing business contribution (in excess of risk free rate)

+1.6

+6.7

+8.3

(5)

Transfers from value of existing business and required capital to free surplus(26 8)(26.8)

+26 8
+26.8

－

(44.7)+44.7－

Of which, on new business(3) Expected existing business contribution (risk-free rate)This figure includes the release of the portion for the fiscal year ended March 31
31, 2014 of the time value of options and guarantees
and the cost of non-hedgeable risks, in addition to the release of the expected existing business contributions at a risk-free ratefrom the opening MCEV (as of March 31, 2013).

(4) Expected existing business contribution (in excess of risk free rate)This figuregreflects the pprofit expectedpin excess of the risk-free rate ggenerated byy holdingg assets such as ordinary
y corporatepbonds,
loans, stocks and real estates.

The expected yield used for the fiscal year ended March 31, 2014 was 0.272%, which was developed by reflecting its view of themarket environment and annual investment plans for the year against the asset balance at the end of the previous fiscal year.

(5) Transfer from value of existing business and required capital to free surplus
This figure tracks changes in free surplus that emerge over the course of a fiscal year due to transferring profit earned during the
fiscal year from existing business value to free surplus and to changes in required capital.



The transfer of profit includes both the transfer of profit that was anticipated during the current fiscal year under the MCEV
calculation performed at the prior year-end and the transfer of profit that was calculated as a component of new business value forthe current fiscal year.

The value of MCEV itself does not change as a result of this transfer as the transfer merely constitutes an internal shift among
MCEV components.

Sony Financial Holdings Inc. All Rights Reserved

13

Reconciliation Analysis from MCEV
at the End of the Prior Year (5)(Continue)(6) Experience variances+2.7

Value ofexisting
business(2.2)(7) Assumption changes

－

+35.5

+35.5

(8) Other operating variance

－

+0.6

+0.6

(Billions of yen)

Adjusted
Net worth

MCEV
+0.5

(6) Experience variances

These variances show the impact on MCEV of the actual versus assumed differences in non-economic expected profit for the
fiscal year ended March 31, 2014 under the MCEV calculation as of March 31, 2013, and of the differences between actual
policies in force as of March 31, 2014, and those that were projected to be in force on March 31, 2013 using persistency
assumptions.

(7) Assumption changes
This figure primarily indicates the impact of changes in the assumptions based on experience data in mortality and morbidity rates,
lapse and surrender rates, and operating expense rates.



The impro
improvements
ements in mortality
mortalit rates,
rates lapse and surrenders rrender rates,
rates and operating expensee pense rates increased the value
al e of e
existing
istingbusiness.

(8) Other operating varianceThis represents the impact of improvements and corrections of the model used in calculating MCEV, including the impact from thepyyen. Please see p
page
g 25 for the revision of risk measure for interest rate
revision of risk measure for interest rate risk in Japaneserisk in Japanese yen.

Sony Financial Holdings Inc. All Rights Reserved

14

Reconciliation Analysis from MCEV
at the End of the Prior Year (6)(Continue)(9)O
Operatingi MCEV earningsi(2) ～(8)(8) totall(22 1)(22.1)

Value ofexisting
business+135.7135 7(10)Economic variances(12.0)

+69.0

+57.0

(11)

Other non-operating variance

(1.2)

+0.6

(0.7)

Total MCEV earnings(35.4)+205.3205.3+169.9169.9(12) Closing adjustments

－

－

－

722.1

499.1

1,221.3(Billions of yen)

Closing MCEV (MCEV as of March 31, 2014)

Adjusted
Net worth

MCEV+113.6113 6((9)) Operatingpg MCEV earnings
g ・・・・(2)～(8)( ) ( ) total(10) Economic variances

These variances show the impact of actual to assumed differences in economic assumptions, such as market interest rates and implied
volatilities that were reflected in the market environment when calculating MCEV as of March 31, 2013 on future values, and the impactof the actual to assumed difference in expected asset investment income that were assumed to be realized during the year ended
March 31, 2014 under MCEV as of March 31, 2013.

The major reasons for increases in the value of existing business include an update of economic scenarios due to the change in themarket environment such as the changes in interest rates and volatilities, accounting for an increase in the present value of certainlyequivalent profit by ¥65.4 billion, a decrease in the time value of options and guarantees by ¥17.0 billion, a decrease in the frictional
cost by ¥5.2 billion and a decrease in the cost of non-hedgeable risks by ¥1.3 billion. Another factor is an increase in expenses tied tothe increase in inflation swap rates, accounting for a decrease in the value of existing business by ¥20.0 billion.



The major reason for the decrease in the adjusted net worth was the decrease in prices of government bonds caused by the increase ininterest rates.

Overall MCEV changes are disaggregated into an increase by ¥76.9 billion as a result of the increase in interest rates and a decrease by¥20.0 billion as a result of the increase in inflation rates.

(11) Other non operating variance This figuregshows the effect of the abolition of the reconstruction specialp
corporateptax.
(12) Closing adjustments
 No items were included in closing adjustments.

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15

Sensitivity Analysis<2014.3.31>
Assumption
Base(Billions of yen)

Change in Assumption

MCEV

Change inAmountRate of
Change<2013.3.31>
MCEV(Billions of yen)

Change inAmountRate of
ChangeNo change

1 221 3
1,221.3－－

1 064 7
1,064.7－－

100bp decrease

1,003.4(217.9)

(18%)

829.6

(235.1)(22%)

100bp increase

1,256.2

+34.9

+3%

1,121.4

+56.7

+5%

Swap rates

1,393.8+172.5+14%

1,231.8+167.1+16%

Stock / Real estate market
value

10% decrease

1 204 81,204.8(16 5)(16.5)(1%)

1 047 7
1,047.7(16 9)(16.9)(2%)

Stock / Real estate implied
volatility

25% increase

1,209.7(11.6)(1%)

1,053.0(11.6)(1%)

Interest swaption
Implied volatility

25% increase

1,202.7(18.6)(2%)

1,049.9(14.8)(1%)

Maintenance expenses

10% decrease

1,240.7

+19.4

+2%

1,082.3

+17.6

+2%

Lapse and surrender rates

x 0.9

1,236.4

+15.1

+1%

1,070.1+5.5+1%

Death protection products x0.95

1,264.5

+43.2

+4%

1,104.7

+40.0

+4%

Third-sector and annuity products x0.95
x0 95

1 216 01,216.0

(5 3)
(5.3)

(0%)

1 059 81,059.8

(4 9)
(4.9)

(0%)

Morbidity rate

x 0.95

1,259.6

+38.3

+3%

1,100.2

+35.5

+3%

Required capital

Regulatory minimum

1,225.3+4.0+0%1,074.2+9.5+1%Interest rates

Mortality rates■ Changes
g in adjustedj
net worth and value of existingg business within the amount of change
g in MCEV are shown in the table below.
(Billions of yen)

Assumption

Change in Amount (adjusted net worth)

Change in Amount (value of existing business)+957.1(754.9)(1,175.0)+789.8

10% decrease(10.7)(5.8)

Stock / Real estate implied volatility 25% increase(0.9)(10.7)

Interest rates
Stock / Real estate market value

Change in Assumption
100bp decrease
100bp increase

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16

Sensitivity of New Business Value<2014.3.31><2013.3.31>(Billions of yen)
New Business
Value

Change inAmountNo change

55.2

－

－

41.6

－

－

100bp decrease(21.6)(76.8)(139%)(54.0)(95.6)(230%)

100bp increase

98.6

+43.4

+79%

94.9

+53.3

+128%

Swap rates

65.1

+10.0

+18%

54.7

+13.1

+32%

Stock / Real estatemarket value

10% decrease

55.2

(0.0)

(0%)

41.5

(0.0)

(0%)

Stock / Real estate
implied volatility

25% increase

54.7

(0.5)

(1%)

41.0

(0.6)

(1%)

Interest swaption
Implied volatility

25% increase

53.4

(1.7)

(3%)

39.5

(2.0)

(5%)

Maintenance expenses

10% decrease

56.8

+1.6

+3%

43.3

+1.8

+4%

Lapse and surrender rates

x 0.9

60.5

+5.3

+10%

45.5

+3.9

+9%

protection p
products x
Death p
0.95

58 5
58.5

+3 3
+3.3

+6%

45 1
45.1

+3 6
+3.6

+9%

Third sector and annuity
products x 0.95

54.9

(0.2)

(0%)

41.3

(0.3)

(1%)

Morbidity rates

x 0.95

56.9

+1.7

+3%

43.9

+2.4

+6%

Required capital

Regulatory minimum

55.2

+0.0

+0%

41.6

+0.0

+0%

Assumption
BaseInterest rates

Mortality rates

Change in Assumption

Rate of
Change(Billions of yen)Sony Financial Holdings Inc. All Rights Reserved

New Business Change in
ValueAmountRate of
Change17

Sensitivity and Others<Sensibility> This sensitivity represents the impact of an immediate parallel shift of the Japanese and foreign government bond yield
curves as of the end of March 2014, and the impact if swap rates were used instead of government bond yields.
 In
I eachh parallel
ll l shift
hift sensitivity,
iti it adjusted
dj t d nett worth
th changeshas theth market
k t value
l off bonds
b d andd otherth assetst changes;hthi isthisi
not applicable to the case where swap rates are used. In each of the interest rates sensitivities, the value of existing
business changes as interest rates, the discount rate, yields of new bonds to be purchased in the future as the existing
bonds mature, and the investment return on stocks, real estate, and other assets change.
 Here,, the sensitivity
y scenarios were made so that the parametersprelated to interest rate volatility
y were equalqto thosederived for the base case.
 Only the parameters related to the interest rate term structure were altered when scenarios were developed using theinterest rate model. The floor for downward changes in interest rates was set at 0%.
<Others>

Frictional costs and the cost of non-hedgeable risks do not change in the sensitivity tests, with the exception of frictionalcosts, which are changed in terms of required capital.



Values of subsidiaries and affiliated companies are not changed except in the case of the stock market value sensitivity,
where the stock value of subsidiaries and affiliated companies are altered.



The impact of changing more than one assumption at a time is not equal to the sum of impacts for each assumption.

Sony Financial Holdings Inc. All Rights Reserved

18Appendix

Sony Financial Holdings Inc. All Rights Reserved

19

Assumptions (1)Assumptions are described in the press release on and after page 15. Of the assumptions, a part of economic assumptions
are shown below.
Sony Life uses U.S. treasury yields for risk-free rates in U.S. dollars that were applied to U.S. dollar-denominated products,
which were launched in May 2013
2013.
<Risk-free rate*1>
Swap
p rates*3

Government bond yyields*2
TermJapanese yen

U.S. dollar

TermJapanese yen

U.S. dollar

As of the end of As of the end of As of the end of
Mar. 2013
Mar. 2014
Mar. 2014

As of the end of
Mar. 2013

As of the end of
Mar. 2014

As of the end of
Mar. 2014

1 year

0 06%
0.06%

0 08%
0.08%

0 11%
0.11%

1 year

0 24%
0.24%

0 18%
0.18%

0 27%
0.27%

5 year

0.13%

0.20%

1.72%

5 year

0.30%

0.33%

1.80%

10 year

0.55%

0.64%

2.72%

10 year

0.69%

0.83%

2.84%

20 year

1 40%
1.40%

1 50%
1.50%

3 37%
3.37%

20 year

1 47%
1.47%

1 61%
1.61%

3 43%
3.43%

30 year

1.54%

1.70%

3.56%

30 year

1.71%

1.84%

3.54%

40 year

1.64%

1.78%

－

40 year

1.84%

1.96%

3.56%

50 year

－

－

3.54%

Notes:
1. Sony Life has used the government bond yields as risk-free rates.
2. It is assumed that forward rates in the 41st year and beyond were equal to those in the 40th year for JGB yields and forward rates in
the 3
31st yyear and beyondywere equalqto those in the 30th yyear for U
U.S.
S Treasury
y yyields.
3. It is assumed that forward rates in 41st year and beyond were equal to those in the 40th year for swap rates in Japanese yen and forward rates in
the 51st year and beyond were equal to those in the 50th year for swap rates in U.S. dollars.

Sony Financial Holdings Inc. All Rights Reserved

20Assumptions (2)Assumptions are described in the press release on and after P15. Of the assumptions, consumption tax rate and inflation
rate in “Other assumptions” are shown below.
< Consumption tax rate and Inflation rate > Based on “The Bill to Amend the Consumption Tax Law for Reforming Tax System to Secure Revenue to Fund the Costof Social Security,” promulgated on August 22, 2012, future expenses increased, reflecting the increase in the
consumption tax rate to 8% at April, 2014 and 10% at October 1, 2015.
 Inflation rates were set as in the table below by referring to inflation swap rates and removing the effect of the increasein the consumption tax rate.
rate If the inflation rate had been set at 0%, MCEV as of March 31, 2014, would have increased by ¥62.3 billion.

< Inflation rate by projection year >Projection year

Inflation rate

2014

0.86%

2015

0.60%

2016

0 17%
0.17%

2017

0.59%

2018

0.71%

2019

0 74%
0.74%

2020

0.85%

2021

2.12%

2022

1.33%

2023 and later

1.45%

Sony Financial Holdings Inc. All Rights Reserved

21

Year on Year Comparison of JGB Yields

2.25%
2.00%
1.75%
1.50%
1.25%
1.00%
0.75%
As of the end of Mar. 2013

0.50%

As of the end of Mar. 2014

0.25%
0.00%
1 year

5 year10 year15 year

20 year

30 year

40 year(Data Source: Bloomberg)Sony Financial Holdings Inc. All Rights Reserved

22

Method of Measuring Risk Amount
Based on Economic Value (1) Market-related Risk*1

Interest rate risk*3
Fluctuations in net asset
value based on economic
value in response to theshocks in the right columns.
The same applies below.

Sony Life(Reference) EU Solvency II (QIS5)

Percentage increases or decreases differ for eachcurrency and term
term.
As for measuring interest rate risk in Japanese yen,introduced principal component analysis, where yield
curve changes are disaggregated into threecomponents, parallel shift, twist and butterfly, and theyield curve is shocked by each component
component.

Percentage increases or decreases differ for eachcurrency and term but no lower than 1%(Example)
For Yen 30-year, 30% decrease(Example)
For Yen 30-year, 34% decrease (parallel shift),
28% decrease (twist), 7% decrease (butterfly))

Equity risk

Listed equities 45%, Other securities 70%

Global 30%, Others 40%*2

Real estate risk

Actual real estate 25%

Real estate 25%

Credit risk = (market value) x (risk coefficient for eachcredit rating) x duration

Credit risk

Note that durations have caps and floors, depending
on credit ratings.

Same as on the left

(Example)
Rating A: Risk coefficient (1.4%), cap (23), floor (1)Currency risk

30% downside fluctuation

25% downside fluctuation

Notes
1. Principal
p items as of March 31, 2014.
2. Standard risk coefficients are global: 39%/other: 49%. Symmetric adjustment (an adjustment of±10% of the average value of the stock price index during a defined period in
the past) is applied; as of the QIS5 trial introduction (December 31, 2009), these were 30%/40%.
3. Sony Life revised its method of measuring interest rate risk in Japanese yen on March 31, 2014. Please see page 25 for details.

Sony Financial Holdings Inc. All Rights Reserved

23

Method of Measuring Risk Amount
Based on Economic Value (2) Insurance Risk*1

Sony Life
Mortality risk

(Reference) EU Solvency II (QIS5)

Mortality rate increases by 15% for each year Same as on the left
elapsedLongevity risk

Mortality rate decreases by 20% for eachyear elapsed

Same as on the left

L
Lapse
risk
i k

Th largestThelt amountt off these;th*2

Th largestThelt amountt off these;th•Lapse rate increases by 50% for each year

•Increases by 50% in the assumed rates of

elapsed•Lapse rate decreases by 50% for each year

lapsation for Life module, 20% for Healthmoduleelapsed•Decreases b
by 50% in the ass
assumedmed rates of•30% of policies on which surrender value islapsation for Life module, 20% for Healthmodulein excess of best estimate liability are
immediately surrendered

Expense risk

Operating expenses increase by 10% foreach year elapsed•30% of policies (70% for group annuities, etc.)

on which surrender value is in excess of best
estimate liability are immediately surrendered
Same as on the left

Rate of inflation rises by 1%
Disability risk

Rate of occurrence increases by 35% in thefirst fiscal year, rising by 25% for each year

Rate of occurrence increases by 35% in thefirst fiscal year, rising by 25% for each year

thereafter

thereafter. Recovery rate decreases by 20%.

Notes
1. Principal items as of March 31, 2014.
2. At Sony Life, lapse risk is calculated by computing and adding together the largest amount of three options for each insurance policy

Sony Financial Holdings Inc. All Rights Reserved24Sony Life: Revision of Method of Measuring
Interest Rate Risk in Japanese Yen
 For interest rate risk in Japanese yen, Sony Life revised the risk measure at the end of March 2014, having

observed significant changes in ultra-long term interest rates during the year 2013. More specifically, Sony Lifeprevious methodology
gy which measured the shock byy dropping
pp g interest rates by
y at least 1% for all
revised the pmaturities (parallel shift) and introduced principal component analysis, where yield curve changes are
disaggregated into three components, parallel shift, twist and butterfly, and the yield curve is shocked by eachcomponent, to capture the risk of yield curve changes more precisely. The risk amount would be larger than theprevious risk measure when ultra-long term interest rates are high and there is room for yield curve flattening((suchh as on D
Decemberb 31
31, 2012)
2012), while
hil ththe riski k amountt would
ld b
be smallerll ththan ththe previousirisk
i k measure whenhultra-long term interest rates are sufficiently low and there is little room for further decline in yield curve (such as
on March 31, 2014). Interest rate risk at the end of March 31, 2014, prior to revising the risk measure was¥233.6 billion (post-revision: ¥180.9 billion) and the solvency risk capital on an economic value basis was¥697 5 billion (post-revision: ¥664
¥697.5¥664.33 billion)
billion).
 Sony Life confirms its risk measure at least oncea year. Not only the above risk measure revision
for interest rate risk, Sony Life modified risk
factors specified in QIS5 standard methodology
appropriately to make them more suitable in lightof the market risk attribute to which Sony Life is
exposed, where risk factors specified in QIS5 or
its previous risk measure are considered unable
to capture enough risk amount at a 99.5%
confidence level.

Sony Financial Holdings Inc. All Rights Reserved

25

Contact:
Corporate Communications & Investor Relations Department
Sony Financial Holdings Inc.
TEL： +81-3-5785-1074

Sony Financial Holdings Inc. All Rights Reserved

26