SONY LIFE · PDF file*Sony Financial Holdings Inc. is the financial holding company of Sony...
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2006 Annual Report For the year ended March 31, 2006
Transcript of SONY LIFE · PDF file*Sony Financial Holdings Inc. is the financial holding company of Sony...
2006Annual Report
For the year ended March 31, 2006
Offer ing value that goes beyond l i fe insurance —to “Li feplanner Value®”
The roles of life insurance aren’t simply to protect you against
unforeseen events and illness or to provide for you in old age.
Life insurance gives you and your family a chance to rethink
your dreams and help them come true.
We stand by you throughout your life, propose appropriate
solutions at life’s various stages and help you realize your
dreams. That is the mission of the Lifeplanner® sales ®
employees of Sony Life. We are the bridge to the dreams
you and your family hold dear.
Breakthrough Insurance
Creating new value in life insurance
A long life visits numerous changes on each of us.
As your “own agent,” we help you meet these changes ”
flexibly and with the best possible solutions.
It is the mission of our Lifeplanner® sales employees to do so. ®
The face that you see in happy times and sad, in good
times and bad—that is your Lifeplanner®.
Who is your Lifeplannerur L ®?
Who is your Lifeplannerr ®?
Aiming to become each customer’s “own agent”
Note: “Lifeplanner” and “Lifeplanner Value” are registered trademarks of Sony Life.
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Profile
Sony Life Insurance Co., Ltd., is a wholly owned subsidiary of Sony Financial Holdings Inc.* and a prominent
member of the Sony Group. Sony Life’s philosophy of providing tailor-made solutions to the specific insurance
needs of each customer has supported annual growth every year since operations commenced in 1981. A sound
operational and financial structure is demonstrated by financial strength ratings from overseas and domestic
rating agencies, including Standard & Poor’s, which has assigned Sony Life an A+ rating (as of June 2006) and
describes the Company as offering “strong” insurer financial strength. Sony Life fosters a sales force with
a high level of financial planning knowledge through its exclusive Lifeplanner® sales employee system and
an independent agent system. Sony Life was the first company in Japan to introduce tailor-made insurance
products based on consulting expertise, and its needs-based marketing methods are rapidly becoming the
de facto industry standard.
*Sony Financial Holdings Inc. is the financial holding company of Sony Life Insurance Co., Ltd., Sony Assurance Inc. (“Sony Assurance”) and Sony Bank Inc. (“Sony Bank”), and
is 100% owned by Sony Corporation.
CONTENTS
Financial Highlights 3
Key Performance Measures 3
Message from Management 4
The Sony Financial Holdings Group 6
Tie-ups within the SFH Group and the Sony Group 7
Working as Our Customers’ “Own Agents” 8
Acting as a Good Corporate Citizen 11
Financial Review 20
Balance Sheets 28
Statements of Income 30
Notes to Financial Statements 31
Details of Operating Income (Core Profit) 33
Investment Summary of General Account Assets 34
Organization 38
Corporate History 39
Directors and Statutory Auditors 40
Corporate Data 41
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Financial HighlightsFiscal Years Ended March 31
Thousands ofMillions of yen U.S. dollars (Note 1)
2006 2005 2004 2003 2002 2006
Insurance premiums ¥ 579,267 ¥ 550,304 ¥ 512,700 ¥ 489,548 ¥ 503,871 $ 4,951,001
Investment income 108,438 50,089 64,767 31,493 33,112 926,828
Ordinary revenues 696,426 604,093 580,972 524,089 539,699 5,952,366
Ordinary profit 24,359 17,070 30,478 18,557 19,898 208,201
Core profit 28,564 24,333 22,821 22,460 26,754 244,145
Net income 9,616 10,102 13,932 11,269 12,004 82,196
Common stock 65,000 65,000 65,000 65,000 65,000 555,556
Total assets 3,103,241 2,617,266 2,375,828 1,981,897 1,729,077 26,523,429
Assets in separate account 280,682 200,996 164,461 118,189 106,150 2,398,992
Policy reserve 2,739,264 2,395,060 2,095,565 1,831,100 1,600,130 23,412,515
Loans 86,918 79,914 71,629 65,574 54,463 742,896
Securities 2,132,216 1,704,663 1,563,605 1,265,650 1,046,054 18,224,075
Solvency margin ratio 1,547.0% 1,317.1.% 1,453.3.% 1,354.2.% 1,493.5.% —
Number of employees 5,250 5,528 5,538 5,569 5,721 —
Notes: 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥117=U.S.$1.00, the approximate Tokyo ForeignExchange Market rate as of March 31, 2006.
2. U.S. dollar figures are based on non-truncated yen amounts.
New Insurance Sales
Key Performance Measures
Insurance in ForceBillions of yen Percentage change
As of March 31 2006 2005 2006 2005
Individual life insurance in force ¥28,909 ¥27,680 +4.4 +6.0
Individual annuities in force 176 143 +22.7 +19.6
Group life insurance in force 923 816 +13.1 –1.4
Group annuities in force 71 69 +3.5 +2.8
Notes: 1. Individual annuities in force is the sum of annuity assets at the time annuity payments commence and policy reserves after annuitypayments commence.
2. Group annuities in force is the amount of policy reserves.
Billions of yen
New insurance sales Net increase+ Net increase from conversion New insurance sales from conversion
Fiscal years ended March 31 2006 2005 2006 2005 2006 2005
Individual life insurance sales ¥3,361 ¥3,700 ¥3,361 ¥3,700 ¥— ¥—
Individual annuity sales 31 24 31 24 — —
Group life insurance sales 9 7 9 7 — —
Group annuity sales 2 — 2 — — —
Notes: 1. Individual annuity sales (New insurance sales + Net increase from conversion) equals the amount of annuity assets at the time annuitypayments commence.
2. Group annuity sales is equal to the first premium income.
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Message from Management
Sony Life commenced operations in 1981 with the
philosophy of meeting individual needs by “providing
optimum life insurance products and services of the
highest quality.” Thanks to the support and trust our
customers have placed in us, in April 2006 we cel-
ebrated our 25th anniversary of operations. We will
continue to do our utmost to merit this support by
raising the level of services we provide.
Operating Results in Fiscal 2005
During the year, the Japanese life insurance industry
showed signs of recovery, helped by increased sales
of tertiary-sector products and variable individual
annuities, but the industry’s total insurance in force
continued to decline. In this environment, Sony Life
posted a 4.5% increase in insurance in force, to
¥29,084.5 billion, buoyed by protection products,
and continuing the steady increase that Sony Life has
achieved in each of the 25 years since its start of
operations. Our lapse and surrender rate remained
Kunitake Ando,Chairman and Director
low, improving 0.51 percentage point, to 5.88%. We
believe these favorable results were derived from the
satisfaction of customers with the consulting-based
sales approach by Lifeplanner® sales employees and
Partners (independent agencies), the Company’s
method of tailoring products to provide ample protec-
tion to each customer and its increasing focus on
after-sale follow-up.
A Management Style that Emphasizes
Listening and Providing Ongoing Protection
to Customers
The life insurance business involves the protection of
customers over a long period of time. In addition to
communicating face to face through its Lifeplanner®
sales employees, Sony Life considers earning the
ongoing trust of customers and society as a whole
to be one of its most important missions. We have
introduced a number of initiatives to propel ourselves
toward this goal.
Taro Okuda,President and Representative Director
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For example, in a move designed to enhance cus-
tomer convenience, in June 2005 we commenced
holiday operations at our customer center. Along with
the Notice of Coverage that we send out each year to
policyholders, we included a Customer Request Card
to elicit requests from customers. We also conducted
a customer opinion survey to try to uncover custom-
ers’ true feelings about Sony Life. Through such
broad-ranging activities, we seek out valued customer
thoughts and opinions, which we then incorporate into
our management and use to enhance our services.
To protect customers and fulfill the vital public role
that the life insurance industry plays in society, we
accord compliance a high priority among our man-
agement policies. However, I believe this particular
area still requires a keen individual focus from each
of Sony Life’s employees and executives.
Sony Life’s Mission and Lifeplanner Value®
Creating New Value in Life Insurance and
Aiming to Become Each Customer’s “Own Agent”
Through its consulting-based sales approach, Sony
Life has taken on the challenge of changing the very
face of life insurance. We see it as our mission to
provide the life insurance that is most appropriate for
each of our customers, whose satisfaction from this
approach has enabled us to continue expanding our
business each year since the time we began opera-
tions. Rather than simply resting on our laurels,
though, we take our mission as an ongoing challenge.
We also consider exactly what kind of value cus-
tomers expect Sony Life to deliver after concluding
insurance contracts, as clients may have unstated
needs of which they are themselves unaware. Sony
Life believes in remaining closely in tune with its cus-
tomers, serving as a trusted advisor in time of need.
Such approaches enable us to provide value to cus-
tomers who take out Sony Life policies, and envision-
ing that value is the first step toward making changes.
We seek to understand our customers’ goals and
work to develop life plans to ensure that these
develop beyond the state of mere dreams. Naturally,
a customer’s life plan undergoes many changes even
after their insurance policy commences. To maintain
optimum levels of protection, we review these levels
as their situations change. Aiming to do the best
for our customers, we work together with them to
address a variety of issues. Through this sort of
service, Sony Life’s Lifeplanner® sales employees act
as each customer’s “own agent,” guiding them past
life’s milestones.
Lifeplanner Value® is what customers experience
as a result of their communications with Lifeplanner®
sales employees. In a sense, this value derives from
the customer’s realization that their Lifeplanner® is a
person who will remain by their side throughout life.
The Sony Financial Holdings Group
Working to Provide Higher Quality Financial Services
Since its inception in April 2004, the Sony Financial
Holdings Group has worked to enhance group syner-
gies. Sony Life’s Lifeplanner® sales employees now
sell Sony Assurance’s products; Sony Life’s individual
annuities are offered for sale on Sony Bank’s web site;
and a host of other measures are in place to offer higher
quality financial services and to raise corporate value.
Previously available only in certain regions, from
April 1, 2005, Sony Life’s Lifeplanner® sales employ-
ees have begun introducing Sony Bank’s mortgage
loans nationwide throughout Japan.
Sony Life will continue to strengthen its ties with
other companies under the SFH umbrella. As we
increase group synergy, we will promote comprehen-
sive financial services, working to provide customers
with even higher value-added products and services.
In Conclusion
To guarantee our ability to protect customers for
many years to come, we will strive to heighten our
compliance, financial soundness and profitability.
Furthermore, by enhancing the security and added
value that we provide our customers, we aim to earn
increasing levels of trust and confidence and remain
their life insurance company of choice. I thank you for
your support and encouragement of Sony Life in
these endeavors.
Taro Okuda
President and Representative Director
Sony Life Insurance Co., Ltd.
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With the establishment of the financial holding com-pany Sony Financial Holdings Inc. in April 1, 2004,Sony Life, together with Sony Assurance and SonyBank, became subsidiaries of this holding company.
In terms of history and scale of business, Sony Lifeaccounts for the major portion of the Sony FinancialHoldings Group (SFH Group). To provide high-value-added products and quality services to each of ourcustomers in a swift and more precise manner, wehave reinforced tie-ups with Sony Assurance andSony Bank, two highly distinctive financial institutions.In fiscal 2005, collaboration within the SFH Groupcontinued to expand steadily. For example, the volumeof new mortgage loans handled by our Lifeplanner®
sales employees accounted for more than 10% of thetotal increase in Sony Bank’s mortgage loans duringthe year. Lifeplanner® sales employees also madesteady progress in sales of Sony Assurance’s auto-mobile insurance. The number of policies sold byLifeplanner® sales employees accounted for approxi-mately 10% of the total number of new automobileinsurance policies for Sony Assurance during the year.
In addition to tie-ups within the SFH Group, we willfurther strengthen cooperation with other companies
Shigeru IshiiPresident and
Representative DirectorSony Bank Inc.
Shinichi YamamotoPresident and
Representative DirectorSony Assurance Inc.
Taro OkudaPresident and
Representative DirectorSony Life Insurance Co., Ltd.
Teruhisa TokunakaPresident and
Representative DirectorSony Financial Holdings Inc.
One Team, One DreamAiming to Become One of the Most Trusted Financial Services Groups
The Sony Financial Holdings Group
in the Sony Group, which provides diverse productsand services. We also will keep delivering value-added products and services that are innovativeand that match customers’ needs.
Sony Financial Holdings is preparing for a futureinitial public offering (IPO), with the goal of diversifyingfinancing opportunities to promote the further growthof the SFH Group and to enhance the group’s corpo-rate value. By reinforcing the business fundamentalsand increasing transparency, the SFH Group willcontinue to secure the trust of customers.
SFH Group Management
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Tie-ups within the SFH Group and the Sony Group
Tie-ups with Sony Assurance● Lifeplanner® Sales Employees Sell Sony
Assurance’s Products
In March 2001, Sony Life obtained authorization toact as an agent for Sony Assurance, and in May2001 our Lifeplanner® sales employees started sellingnon-life insurance products.
Sales of non-life insurance products are handled byLifeplanner® sales employees with relevant qualifica-tions. In fiscal 2005, the number of policies sold byour Lifeplanner® sales employees accounted forapproximately 10% of the total number of new auto-mobile insurance policies issued by Sony Assurance.
By extending our offerings beyond life insurance toinclude non-life insurance products that cover variousrisks in our daily lives, Sony Life will continue to providecomprehensive risk management for its customers.
Tie-ups with Sony Bank● Underwriting Group Credit Life Insurance for
Sony Bank’s Mortgage Loans
In March 2002, Sony Life began underwriting groupcredit life insurance for mortgage loans extended bySony Bank. This insurance applies to customerstaking out mortgage loans, and claims on this insur-ance are used to repay mortgage loans when unfore-seen events prevent customers from makingmortgage repayments.
● Sony Life’s Individual Annuities Sold by Sony Bank
In June 2004, Sony Bank started selling single-premium individual annuities developed by Sony Life.
With this launch, Sony Bank expanded its productlineup beyond those of a bank primarily focused onasset management, consequently responding todiverse customer needs in a more effective manner.At the same time, Sony Life has also benefited interms of expanded sales channels, which furtherenhanced customer convenience.
● Lifeplanner® Sales Employees Introduce Sony
Bank’s Mortgage Loans
In December 2004, Sony Life’s Lifeplanner® salesemployees began introducing Sony Bank’s mortgageloans in certain regions of Japan, with these activitiesexpanding nationwide in April 2005. This offeringenabled our Lifeplanner® sales employees to consultwith customers in a more concrete way on their requestsor inquiries regarding home-purchasing funds.
In fiscal 2005, the volume of new mortgageloans handled by our Lifeplanner® sales employeesaccounted for more than 10% of the total increaseof Sony Bank’s mortgage loans.
Tie-ups among the Sony Group’s FourFinancial Companies● Initiation of Benefit Provision to ANA Mileage
Club Card Members
Sony Life (from late April 2006), jointly with SonyAssurance and Sony Bank (both from March 2006),started offering members of the ANA eLIO Card—which Sony Finance International Inc. issues inaffiliation with All Nippon Airways Co., Ltd. (ANA)—ANA airline mileage and other cardmember benefits.By cooperating with Sony Group companies, we willcontinue to enhance our services and respond tocustomers’ needs.
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With Our Customers. For Our Customers.
Helping People Fulfill Their Lifelong Dreams.
Working as Our Customers’ “Own Agents”
Working Together with Customers asTheir “Own Agents”
Since its establishment, Sony Life has worked toprovide optimal life insurance products tailored tothe specific needs of each and every customer.
To assist in this process, first we work togetherwith customers to formulate individualized life plansbased on their specific circumstances and dreams.These plans consider such factors as age, familycomposition, financial condition and children’s highereducation plans. We then calculate the level of insur-ance coverage needed over time to help customersfulfill their plans, and create an optimal insurance port-folio accordingly. These tailor-made solutions are pro-vided by our Lifeplanner® sales employees and Partners(independent agencies), who possess advancedfinancial knowledge and abundant experience.
Lifeplanner® sales employees and Partners seek tobecome customers’ exclusive providers of insuranceand financial services, or their “own agents,” in build-ing strong relationships of trust and helping themfulfill their lifelong dreams. Even after signing the initialinsurance agreement, Lifeplanner® sales employeesand Partners regularly review the content of coverageaccording to the customer’s changing lifestyle. Wealso offer peace of mind in the form of comprehen-sive follow-up services, including swift payment ofhospitalization benefits and claims when unforeseenevents occur.
Educational Systems, Reciprocal Studiesand Self-Development
Educational System for Lifeplanner® Sales
Employees and Partners
Sony Life provides a diverse range of educationalprograms designed to enable Lifeplanner® salesemployees and Partners to fulfill their roles as insur-ance and financial professionals in responding tothe confidence that customers place in them.
● Basic Training Program (BTP) for Lifeplanner®
Sales Employees
This program equips Lifeplanner® sales employeeswith the basic knowledge, attitudes, skills and behav-ioral habits required to become life insurance profes-sionals. It comprises various sub-programs based onSony Life’s needs-based marketing approach. Theseinclude a subprogram to acquire basic Lifeplanner®
skills and another covering joint activities, in whichLifeplanner® sales employees visit customers togetherwith their sales office managers.
● Partner Training Program (PTP) for Partners
This program is designed to help Partners succeedin the life insurance business. In the program, Part-ners learn about our products and needs-basedsales approaches derived from expertise we haveaccumulated over the years.
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Enhancing Education for Managers
Our branch managers, sales office managers andother managers who oversee sales staff have animportant responsibility to carefully nurture selectedindividuals into Lifeplanner® sales employees. To helpmanagers fulfill this responsibility, Sony Life continuesto upgrade its educational system, which includestraining to deepen understanding of the essenceof life insurance, develop character and acquireleadership skills.
● Sony Life Academy
The Company opened its Sony Life Academy in fiscal2003 to train its branch general managers and theheads of its independent Agency Sales Division, aswell as its head office general managers. After oneyear of basic training, followed by ongoing coursework,participants emerge as accomplished life insuranceprofessionals with the guidance and leadership skillsrequired of effective managers.
Four Pillars of Sony Life Academy Education
● Acquire knowledge, beliefs and convictions worthy of lifeinsurance professionals
● Help people convey the business and sales philosophiesof Sony Life to others
● Train people to acquire management skills● Help people hone their sensitivities as human beings
Reciprocal Studies
Sony Life’s employees have embraced a culture ofmutual assistance in their quest to serve customers.To this end, they have taken the initiative of hostingindependent training forums around the nation.
● Million Dollar Round Table (MDRT)
MDRT, based in Chicago, is an international asso-ciation of the world’s best life insurance and financeprofessionals. Based on the concept of reciprocaltraining and contribution to society, MDRT seeks tohelp improve the capabilities of its members, with toppriority on providing the best returns for clients. Asof June 1, 2006, there were 35,000 MDRT membersworldwide, of whom 563 were Lifeplanner® salesemployees and Partners of Sony Life.
MDRT Sony Chapter
The MDRT Sony Chapter comprises Lifeplanner®
sales employees and Partners of Sony Life who havebecome MDRT members. The chapter holds trainingsessions several times a year to exchange the latestinformation and build their skills, with the aim of pro-viding top-quality consulting and other services tocustomers. Chapter members, representing our mostsuccessful Lifeplanner® sales employees and Partners,also promote various volunteer activities, demonstratingtheir passion as conveyors of the MDRT spirit.
● Japan Association of Insurance and Financial
Advisors (JAIFA)
JAIFA was established in 1962 with the purpose ofenhancing the status of life insurance salespeoplethrough the reciprocal education of members. Asa forum for mutual training, the association hosts avariety of proactive initiatives. Our Lifeplanner® salesemployees, sales office managers, branch managersand Partners participate in JAIFA events, and JAIFASony regional chapters have been set up in regionalareas to spearhead various activities.
MDRT ® Sony Chapter training(Fukuoka, April 2006)
JAIFA Sony regional chapter training(Chiba, April 2006)
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Affiliated Financial Planners (AFPs)
Affiliated Financial Planners: 1,940(As of June 1, 2006)
The Japan Association for Financial Planners is thesole issuing authority for the AFP license. This qualifi-cation certifies that the licensee possesses the knowl-edge required of a financial planner and is competentto offer advice and make proposals in response toclient needs.
Certified Financial Planners® (CFPs®)
Certified Financial Planners®: 129(As of June 1, 2006)
The CFP® license is an international qualificationconferred by the Certified Financial Planner® Board ofStandards, Inc., of the United States. This is an authori-tative qualification given only to financial planners whodemonstrate sophisticated financial planning abilitiesand sound work ethics.
Certified Skilled Workers of Financial Planning
1st Grade Certified Skilled Workers inFinancial Planning: 104
2nd Grade Certified Skilled Workers inFinancial Planning: 1,933
(As of June 1, 2006)Through the Human Resources Development Promo-tion Law, the Japanese government has introduceda proficiency certification system to certify levels ofexpertise in various fields, including financial planning.This law recognizes three levels of financial planningexpertise.
Providing Optimal Protection throughthe Life Planning Support Service (LiPSS)
When proposing protection products, Sony Life firstasks customers about their lifestyle and future lifeplans. By envisioning the life plans of customers andtheir families, Lifeplanner® sales employees and Part-ners can map out simulations of their future financialneeds. Sony Life has developed its own simulation,called LiPSS, to explain funding complexities easilyto its customers.
Sony Life puts the many events that people com-monly experience throughout their lives into 11 majorcategories* from a financial standpoint, and it providesestimates based on these categories. For example,after listening to parents, Lifeplanner® sales employeesand Partners can design plans to help parents financetheir children’s education. In addition, Sony Life mighthelp a family determine the timing of purchasing, thetype of house they can afford or even provide adviceon the advance repayment of mortgage loans.
Every person has different circumstances, dreamsand concerns. By analyzing the details, Sony Life canhelp customers envision their future. In this way,Lifeplanner® sales employees and Partners help cus-tomers see how they should respond to differentsituations and what level of financing will be required,and then they propose protection plans that aretailored to each customer’s needs.
Nurturing Financial Planners
Our socioeconomic environment is undergoing majorchanges, owing to the advent of the information-oriented society, reforms to the social security sys-tem, diversification of financial products and ademographic shift to an older population. In thesecircumstances, it is vital for individuals to conductcomprehensive asset planning and risk manage-ment—or financial planning—geared to their specificlife plans. Financial planners are professionals quali-fied to meet the financial planning needs of custom-ers. A large number of Lifeplanner® sales employeesstudy financial planning to achieve higher levels ofneeds-based sales capabilities. In fact, Sony Life isan industry leader in terms of its number of qualifiedfinancial planners.
*Eleven Categories of Financial Needs throughout Life
● Rent or loans● Reserve for education● Reserve for marriage● Reserve for emergencies● Funds for home
purchases● Living expenses after
retirement
● Reserve for long-termhealthcare
● Reserve to reconfigure life● Living expenses for
bereaved family members● Reserve for funeral and
subsequent arrangements● Funds for inheritance
measures
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Fulfilling Our Social Responsibilities
Risk Management
Amid the rapid liberalization and internationalizationof financial markets, the activities of life insurancecompanies are becoming increasingly diverse andcomplex. For such companies, the optimal manage-ment of various risks—such as investment risk, insur-ance underwriting risk, operational risk, system riskand legal risk—becomes more and more importantevery year. The various transactions executed by lifeinsurance companies generally carry risks, whichcannot be avoided completely. Moreover, minimizingsuch risks is insufficient. Instead, we must grasp thenature of each type of risk, implement suitable con-trols and make preparations to ensure returns thatare reasonable and in proportion to the risks. Wemust also respond flexibly to the evolution of riskmanagement techniques.
Sony Life works continuously to enhance its riskmanagement organization. In fiscal 2005, westrengthened the management conditions of claimspayment and risk management conditions of ouroverseas subsidiary, Sony Life Insurance (Philippines)Corporation.
We also set up the Investment Committee torealize stable investment profits over the mediumto long term by securing our soundness as a lifeinsurance company.
Acting as a Good Corporate Citizen
Furthermore, we have often held the Risk Manage-ment Committee, which is composed of generalmanagers of the several divisions responsible for theCompany’s risk management, to discuss variousCompanywide risk management issues.
We have been conducting stress tests and report-ing the results to the Executive Officers Board tocheck the possible impacts of future unprofitability onour financial soundness and take additional manage-ment and/or financial measurers as the need arises.As one aspect of our investment risk management,we conduct stress tests based on a worst-casescenario that exceeds normal market fluctuations,whereby interest rates, share prices and currencyexchange rates all are at historic lows. For insuranceunderwriting risk management, we also performstress tests during new product development,assuming income and expense fluctuations.
In its Risk Management Manual, the Company setsforth its fundamental approach to risk managementand the methods for applying its risk managementpolicies, with full consideration for the specificcharacteristics of each type of risk.
Sony Life’s Basic Risk Management Policy
By strengthening our risk management capabilities andexecuting optimal risk controls, we aim to ensure the sound-ness and appropriateness of our operations and protect theinterests of policyholders. In this way, we will improve ourreputation as a trustworthy and credible life insurancecompany and thus fulfill our responsibility to society.
Risk Management Organization (As of July 1, 2006)
Office RiskGeneral Affairs Division
General Meeting of Shareholders
Board of Directors Board of Auditors
Internal Inspections Division
Executive Officers Board
Risk Management Committee
Investment RiskALM Division
Personnel RiskPersonnel Division
Sales Administration Division
Legal RiskCompliance Division
Reputation RiskCorporate Communications
Division
Management RiskCorporate Planning Division
Insurance Subsidiary RiskNew Business Promotion
Division
Sony Life Insurance(Philippines) Corporation
Business Offices
Liquidity RiskALM Division
Insurance Underwriting RiskALM Division
Operational RiskOperations Administration
Division
System RiskOperations Administration
DivisionOther Management Risks
Chief Actuary
Market Risk
Credit Risk
Real EstateInvestment Risk
Risk ManagementCorporate Planning Division
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Personal Information Protection andInformation Security
Amid rapid innovations in information technology inrecent years, computer networks have become moreadvanced and complex, while services are growingmore diversified. Companies can now use sophisti-cated networks to store and handle confidential dataabout their customers. Protecting private informationis thus becoming more important than ever.
To conduct their business properly, life insurancecompanies need confidential information about theirindividual customers. To enhance convenience forcustomers, Sony Life uses networks as part of itspolicy of delivering the most advanced services. TheCompany places high priority on effectively managingcustomer information and implementing measures toensure information security.
Protecting Personal Information
● Information Management System
Sony Life has appointed information managers andsecurity managers to each department that handlespersonal customer information. We have also estab-lished protocols to ensure effective protection ofpersonal information and upgrade regularly our train-ing system for employees. In addition, we have for-mulated a set of Customer Data Protection Rules, aswell as a Compliance Manual and Market Conduct
Compliance (MCC) Guidelines. In these ways, we aretaking a comprehensive approach to protecting per-sonal information and guaranteeing customer privacy.
● Gathering Personal Information
Our policy is to gather only information that is neces-sary for our business, based on clear disclosure ofour intentions. When collecting information, we obtainconsent from customers and strictly adhere to theInsurance Business Law, the Law Concerning theProtection of Personal Information and other regula-tions. We use fair and appropriate means to gatherinformation.
● Using and Managing Personal Information
We limit the use of personal information to the scoperequired to conduct our business, and only people inauthorized departments are allowed to handle suchinformation. Customer data is not disclosed to out-side parties, except in certain circumstances, such aswhen specific consent has been obtained from thecustomer, legislation mandates disclosure, the cus-tomer benefits from disclosure or disclosure isdeemed necessary in the public interest. Sony Lifehas appropriate mechanisms in place to update andaccurately maintain its personal information data-base. We are also working to create systems thataddress various threats to such information, includingunauthorized access, loss, duplication, destruction,tampering or leakage.
Customer Data
Prevent unauthorized access, loss, duplication, destruction, tampering or leakage of information.
Limit usage to the scope required
by our business.
Ensure information remains accurate
and up to date.
Use fair and appropriate means to gather information.
Gathering
Storing
UsingManaging
System for Protecting Personal Information
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When we entrust the handling—inputting, storingand saving—of personal information to our businesspartners, we enter consignment contracts with thoseparties. The contracts specify various items for main-taining and handling personal information, includingsecrecy obligations and prohibition of duplication. Wealso perform comprehensive prior checks to confirmthe security level of business partners.
● Disclosure and Revision of Personal Information
When a customer makes a request to disclose infor-mation he or she has supplied, or to correct or deleteerroneous information, we first confirm that the personmaking the request and the customer are one andthe same. Special circumstances notwithstanding,our policy is to grant such requests. In principle, weinsist that the requester and the policyholder be thesame person.
● Law Concerning the Protection of Personal
Information
Sony Life’s Information Security Policies is a docu-ment outlining the Company’s stance with respect topersonal information, centering on our customers.Based on these policies, we seek to ensure propermanagement, usage and protection of information.Following the enactment of the Law Concerning theProtection of Personal Information, we established aPrivacy Policy, as well as a Committee to Promotethe Security of Personal Information. Together, theseaddress the gathering and use of personal informa-tion, as well as methods of assembling and managingit. The Company will strive more rigorously than everto protect all personal information in its possession.
● Security Measures for Protecting Personal
Information
Standards for the Safe Management of
Personal Information
Sony Life has established standards for the safemanagement of personal information at each stage,including the gathering, use, storage and disposal ofthis information. The Company thoroughly trains allexecutives and employees, including temporary staff,on these standards.
Measures to Counter the Theft of Notebook Personal
Computers (PCs) and Other Property
To prevent notebook PCs containing personal cus-tomer information from being stolen in a car break-inor other type of theft, employees who take these PCsoutside the Company are required to keep themnearby at all times. Customer data that is copied ontoelectronic storage media is protected with a specialelectronic encryption key. Password-protected inte-grated circuit (IC) cards double this security.
Office Security Measures
Only authorized employees are allowed access tooffice areas where personal information is handled,and counterfeit-resistant IC cards are used to monitorentries and exits. As a further countermeasure, theCompany restricts personal items that can be broughtinto insurance business departments, which handlelarge amounts of personal customer information.
Policy Content Storage System
To ensure the stable operation of the life insurance system,insurance companies are required to register with the LifeInsurance Association of Japan information on all policiesand riders that involve claims and benefit payments, includ-ing hospitalization benefits, for death (severe injury) protec-tion insurance and accidental death (accidental severeinjury) protection insurance.
The association uses this information as a reference forwriting policies and disbursing claims payments and hospi-talization benefits, but for no other purposes. Furthermore,the Life Insurance Association of Japan and each life insur-ance company is prohibited from publicizing informationthat has been received in this manner.
14
First Company in Industry to Obtain Information
Security Management System (ISMS) Certification
On June 27, 2003, Sony Life became the first com-pany in Japan’s life insurance industry to obtainBS7799–Part 2: 2002 and ISMS (Ver. 2.0)—two ISMScertifications conferred by the Japan Auditand Certification Association for Information Security.The certifications were bestowed on the Company’sdepartments related to insurance business adminis-tration. In addition, on June 22, 2006, we receivedISO 27001 certification and shifted to this interna-tional standard for information security managementsystems. Going forward, we will continue to maintainand improve our information security systems andupgrade protection of our information assets, includingthe personal information of our customers.
● Obtaining Certification
Sony Life has positioned the maintenance andimprovement of information security as a centralmanagement priority. For this reason, we have builtand are operating a framework for guaranteeinginformation security by our administrative depart-ments (Insurance Administration Department, Infor-mation System Department and Customer Center)that gather customer data and other information.
Plan
Ongoingimprovements
Check
DoAct
ISMS Cycle
ISMS targets improvements in information security throughrepeated implementation of the cycle described below:● Plan: Formulate specific plans and policies for
information security● Do: Implement measures outlined in the security plans● Check: Monitor the results of implementation● Act: Undertake regular reassessments and
improvements
● Maintaining and Improving Information Security
Our administrative departments constantly assessthe danger of leaks and breakdowns affecting all of ourinformation assets, including customer information, andformulate and take measures designed to minimizesuch dangers. To earn certification, we implementedthose measures on schedule, regularly confirmed thatthe measures had the desired effect and built frame-works for enforcing all of the improvements requiredfor certification.
Main Initiatives
● Ensure understanding among all employees,including temporary staff, about the importance ofthe Company’s information security policies andprovide training to ensure widespread acceptanceof such policies.
● Assess the dangers of leakage and destructionof all information assets and take measures tominimize such dangers.
● Constantly improve our information systems basedon regular system audits by external specialists.
Information Security Management System
ISMS certification indicates the reliability of a company’sinformation security systems. This certification is provided tocompanies that have systems to determine the appropriatelevel of security based on risk self-assessments, and thathave concrete plans and resources allocated to ensure theeffective management of such systems. The principal con-cept of ISMS is for a company to maintain and improve thesecrecy, completeness and accessibility of its informationassets in a well-balanced manner.● Secrecy: The guarantee that information can
only be accessed by authorized people● Completeness: The guarantee that information and
information-processing methods areaccurate and complete
● Accessibility: The guarantee that authorized peoplecan have timely access to requiredinformation and related assets
15
Compliance
Compliance means conformity with relevant laws,regulations and rules. This is a crucial issue for com-panies seeking to fulfill their social responsibilities.Life insurance companies need to reinforce theircompliance systems to maintain the long-term trustof customers. Sony Life has positioned complianceas a central management priority to protect customersand earn their confidence.
Compliance Framework
Sony Life has established a Compliance Committee,which reports to the Executive Officers Board, tospearhead Companywide compliance programs.In addition, our compliance officers and supervisorsconduct routine checks of compliance status andcreate plans and systems for improving overallcompliance. In May 2005, we also established theMarket Conduct Compliance (MCC) Committeeto strengthen the compliance of sales activities. Inthese ways, we are striving to build a more effectivecompliance framework.
Board of Directors
Executive Officers Board
Compliance Committee/Market Conduct Compliance (MCC) Committee
Agency OfficesIndependent
Agency Sales Divisions
Headquarter Divisions
Compliance Officers
Compliance Manager(Agency Manager)
Compliance Administrator
Compliance Manager(Sales General Manager)Compliance Administrator
Compliance Manager(General Manager)
Compliance Administrator
Compliance Framework
Compliance Programs
● Every fiscal year, we compile a Compliance Program,which serves as an action plan for implementing compli-ance initiatives. Based on the program, we adopt variousmeasures.
● We work to ensure all members of the Company arefamiliar with our Compliance Manual. We modify the manualas necessitated by changes to our compliance system,as well as enactment or revision of relevant laws.
● We publish a booklet, called MCC Guidelines, whichcontains 15 principles and serves as a compliancemanual covering our sales activities. We use the bookletfor continuous training at agency offices and indepen-dent agency sales divisions. We are also improving theMCC training curriculum for Partners.
● We conduct regular checks of each head office and salesdivision to confirm legal compliance status, and routinelyreassess and augment checking and confirmationprocedures.
● The efficacy of our compliance programs is verifiedthrough a number of means, including internal audits,surveys of employee awareness and practices and con-firmation of the status of compliance of each division.As required, we take concrete measures to improve andstrengthen compliance programs.
● If violations or suspected violations of laws or regulationsare discovered, they are investigated and reported. Weswiftly devise appropriate processes to prevent the reoc-currence of violations; these are added to the ComplianceManual and circulated throughout the Company.
Adapting to Changing Laws
● The Law on Sales of Financial Products and the Con-sumer Contract Act came into force in April 2001. Inresponse, Sony Life established its MCC Guidelines, abooklet that sets forth the Company’s solicitation policy inthe form of 15 principles. Customers are kept informedof changes to compliance laws through posters, the Com-pany web site and other means, and employees througheducation and training. In May 2004, we modified theguidelines to reflect revisions of relevant laws and recentchanges in the environment pertaining to compliance.
● In August 2003, we reinforced our systems in responseto legislation designed to prevent the concealment offunds for terrorism purposes and money laundering. Mea-sures included more rigorous confirmation of customers’identity based on the Law Concerning the Confirmation ofCustomer Identity and the Prevention of Improper DepositAccounts, as well as the reporting of suspicious transac-tions under the Law for Punishment of Organized Crimes,Control of Crime Proceeds and Other Matters.
● To fulfill our social and public service responsibilities as alife insurance company and conduct our business in a fairmanner, we have formulated a set of behavioral guide-lines to serve as basic rules for directors and employeesto observe. In February 2004, we compiled an upgradedversion called the Sony Life Activity Charter.
● Full-scale enforcement of the Law Concerning the Pro-tection of Personal Information began in April 2005. Thislaw places obligations on private sector enterpriseshandling personal information. We have established theCommittee to Promote the Protection of Personal Infor-mation, which spearheads Companywide measures toaddress the new legislation.
16
Acquisition of ISO 14001 Certification
and Implementation of the Green Power
Certification System
In March 2001, Sony Life acquired ISO 14001 certifi-cation, the international standard for environmentalmanagement systems, for its head office, and hassince kept its certification up to date. In fiscal 2005,as part of plans to reduce our consumption of fuelsthat emit carbon dioxide and accelerate global warm-ing, we set up a Green Power Certification system,whereby the purchase of electrical power originatingfrom wind-powered generators is certified. This sys-tem facilitates electric-power swaps, ensuring thatour electrical power is wind generated, even if thepower originates at locations far from where it isused. During the term, we purchased 250,000 kilo-watts of “green-certified” electric power, therebyreducing our CO2 consumption by the equivalent of92.5 tonnes per year. Protection of the global envi-ronment is a top-priority issue for the Company.Through our environmental management system, weare working constantly to protect the environment inall of our daily activities.
Certificate documenting our ISO 14001compliance, issued by the certifyinginstitution BVQI Japan Co., Ltd.
The Certificate of Green Powerissued by Japan Natural EnergyCompany Limited
Environmental Policy
Core PhilosophyWe believe that preservation of the global environment isa vital topic for all people of the world. As a member of theSony Group, we adhere to the Sony Group EnvironmentalVision and make every effort to preserve the environmentin all aspects of our operations.
Performance Indicators1. Based on the Sony Group’s Global Environmental Man-
agement System (GEMS), we enact thorough environ-mental compliance, seek to enhance our environmentalperformance and minimize environmental risk.
2. In line with our core philosophy of providing efficient lifeinsurance and high-quality services, we evaluate the impactof our activities, products and services, and set and imple-ment programs to achieve our environmental goals andobjectives. We aim to ensure ongoing improvements inenvironmental preservation and reductions in pollution.
3. We employ the following environmental preservation activi-ties Companywide and at every stage of our activities,products and services:● Use documents effectively and take paper quality into
consideration.● Recycle paper documents and office supplies.● Reduce electric power consumption.● Prioritize the purchase of goods and products that have
a low environmental impact. (Employ green purchasing.)● Consider the development of environmentally conscious
products and services.4. We continue to improve our environmental management
system by conducting internal environmental audits.5. We conduct environmental training and other activities
that raise employees’ environmental awareness.6. We communicate our environmental policy both inside
and outside the Company.
What is ISO 14001?
ISO 14001 is an international standard for environmentalmanagement systems created by the International Organi-zation for Standardization (ISO). Certification is given toentities that review their environmental management sys-tems annually, take action to address difficult and unprec-edented issues, and work continually to improve theirenvironmental performance.
Environmental Protection Initiatives
Environmental Management System
Sony Life has mounted a number of initiatives toreduce the burden it places on the environment. Wehave established environmental goals and objectives,and put programs in place to lead us toward theseaims, and will continue with such environmentallyconscious activities and initiatives.
17
Social Contribution Activities
“One Love, One Trust”
In fiscal 2003, we established a Social ContributionsDepartment to spearhead our social benefit initiatives.We also set up a Volunteer Activity CoordinationCommittee, with the aim of promoting the sharing ofinformation from various sources, enhancing our sup-port for volunteerism and broadening the scope ofvolunteer activities. Sony Life has designated August10, the anniversary of its founding, as Volunteer Day.This is a special day when all employees are encour-aged to consider and implement activities that benefitthe community. August has also been declared Vol-unteer Enrichment Month, in which all employeesthroughout Japan implement original social benefitactivities in their respective communities. Our rallyingcry is the phrase “one love, one trust,” reminding usthat for each voluntary contribution, or “act of love,”our standing within the community increases.
Volunteer Leave Program
In fiscal 2003, Sony Life introduced a volunteer leaveprogram, designed to facilitate the efforts of employ-ees to participate actively in volunteer activities. Theleave program applies to the following activities:
Leave Program for Bone Marrow Donors
On April 1, 2002, Sony Life became the first life insur-ance company to introduce a special leave programfor bone marrow donors, offering employees com-pensated time off, independent of their regular holi-days, for the period necessary to donate bonemarrow for transplants.
Support for Special Olympics Nippon
Since 1996, Sony Life has given financial support forSpecial Olympics Nippon, a non-profit organizationthat provides people with intellectual disabilities withindependence and opportunities to participate in thecommunity through sports. We also volunteer to runthe events.
In February 2005, Nagano Prefecture hosted theSpecial Olympics World Winter Games, which drew2,500 athletes from 84 countries. Approximately 400Sony Life employees volunteered their time to work atthe Games, making ours one of the largest singlecompany volunteer groups.
Sony Life also helps increase awareness andunderstanding of Special Olympics Nippon’s activitiesby supporting charity concerts, movie screenings andother initiatives. We plan to offer our full support forthe National Summer Games Kumamoto, which arescheduled for November 2006. Through our supportof Special Olympics Nippon, we hope to promotegreater independence for people with intellectualdisabilities and help them become more activemembers of society.
Alpine ski competition at the Special Olympics World Winter Gamesin Nagano
● Social welfare ● Disaster relief● Environmental protection ● International exchange● Community activities and aid
Japan Marrow Donor Program
Established in December 1991 under the auspices of theMinistry of Health and Welfare (now called the Ministry ofHealth, Labour and Welfare), this organization handles bonemarrow donor registrations and operates a bone marrowbank that is used for transplants.
Special Olympics Nippon
Special Olympics Nippon is a specified non-profit organiza-tion that provides people with intellectual disabilities withongoing year-round sports training opportunities and holdsathletic competitions to demonstrate their accomplishmentsand give them an opportunity to participate in society.
One section of the Special Olympics Nippon home pageintroduces Sony Life’s social contributions through this society.For further details, see the following web site:http://www.son.or.jp/tokutoku/sonylife/index.html(Japanese only)
18
Eye Mate Fund
Sony Life has contributed to the Eye Mate Fund since1997, with the aim of helping visually impaired peopleparticipate in society. The Company donates anamount each year that matches the total raised byemployees during the year. In fiscal 2005, ¥9.72million in employee donations and matching fundswere given to Eye Mate, Inc. (formerly the TokyoGuide Dog Association). Since 1997, Sony Life hasdonated more than ¥100 million in contributions,which are used in training guide dogs.
Sony Life will continue providing Eye Mate with sup-port to help more visually impaired people participatein society.
A Sony Life employee’s son experiencing walking practice
A hot springs bus tour for some of the peopleaffected by the Kobe earthquake
Providing meals for people affected by the NiigataChuetsu earthquake
Eye Mate, Inc.
Since its introduction of the first guide dogs to Japan, thisorganization has been responsible for training numerousguide dogs. The assistance of properly trained Eye Mateguide dogs helps people with visual impairment participatein society by enabling them to walk about on their own.
Some Sony Life Volunteers’ Club Activities
● Support for people affected by the Kobe earthquakein 1995 (Hyogo Prefecture)
● Support for people affected by the Niigata Chuetsuearthquake (Niigata Prefecture)
● Care facility support (Tokyo and Kanagawa prefectures)● Operational support for the Yokohama Handy Tennis
Competition (Kanagawa Competition)● Bone marrow donor registrations and activities to support
the Munakata Yurix 24-hour EKIDEN marathon (FukuokaPrefecture)
● Operational support for the Oita International WheelchairMarathon (Oita Prefecture)
● Operational support and everyday training support forSpecial Olympics Nippon (nationwide)
● Blood donor activities (nationwide)
Sony Life Volunteers’ Club
The Sony Life Volunteers’ Club was established by itsemployees at the time of the Kobe earthquake in 1995,and has continued its activities to the present day. Theclub operates using funds collected from employeedonations, and is managed by individual employees.
The club promotes a variety of volunteer activitiesthat center on providing ongoing support to the eld-erly victims of the Kobe earthquake. The club alsoprovides ongoing support to elderly people affectedby the Niigata Chuetsu earthquake in 2004. In March2006, the club organized a hot springs bus tour forthese people, to help keep their spirits up.
The club also conducts voluntary activities at carefacilities, as well as youth educational support activi-ties that are designed to protect children from drugs.The Sony Life Volunteers’ Club, whose primary mem-bership is Lifeplanner® sales employees, activelyconducts a wide range of social contribution activitiesto put employees into direct contact, conduct ongo-ing activities and create trust-based relationships withpeople in regional communities.
19
Since 2002, Sony Life has provided support to theSony Life Cup All Japan Ladies Tennis Tournament,one of the largest amateur events for womentennis players in Japan, through sponsorship andvolunteer activities.
The tournament has been held since 1979 topromote the development of tennis as a sport withmass appeal that also helps improve women’shealth. This year marks the 28th staging of thistraditional event, which has attracted a cumulativetotal of approximately 27,000 players. The eventfeatures a series of strongly contested tourna-ments that are held in various prefectures through-out Japan. Our Lifeplanner® sales employeessupport as volunteers at the event, working along-side players to ensure its smooth operation and tocheer the athletes. We will continue to support theSony Life Cup All Japan Ladies Tennis Tournamentas part of our efforts to foster better communica-tion with local communities.
For more information about this tournament,please visit:http://zenkokuladies.jp/(Japanese only)
Sony Life Cup All Japan Ladies Tennis Tournament
Expanding Operations in Southeast Asia
Sony Life Insurance (Philippines) Corporation
Owing to the deregulation of financial markets in thePhilippines, the life insurance market in that nation isexpected to expand significantly. Sony Life Insurance(Philippines) Corporation was established in 1998with capital participation from the Sony Group andcommenced operations in November 1999. To rein-force its business foundation, Sony Life increasedthat company’s capital in December 2003, beforetransforming it into a wholly owned subsidiary inMarch 2004.
Tailoring its activities to local conditions, Sony LifeInsurance (Philippines) Corporation is expanding itsoperations using consulting methods cultivated inJapan, and is steadily building a high-quality marketingorganization. The Company also responds steadily todiverse local needs, as indicated by the start of its salesof dollar-denominated products. Fulfilling its socialresponsibilities as a life insurance company, Sony LifeInsurance (Philippines) Corporation places importanceon compliance with all regulations and is upgradingits control systems to minimize business risk.
20
Growth and Profitability
● New Insurance Sales
New insurance sales totaled ¥3,392.1 billion.In fiscal 2005, ended March 31, 2006, the total value of new lifeinsurance policies sold—the sum of individual life insurance andindividual annuities—was ¥3,392.1 billion. This represented an 8.9%decrease from the preceding year, affected by an April 2005 rise invariable life insurance premiums. Of this total, individual life insur-ance sales fell 9.1%, to ¥3,361.2 billion, while individual annuitiessales expanded 26.4%, to ¥30.8 billion. At the same time, group lifeinsurance sales surged 23.1%, to ¥9.0 billion. Total sales of indi-vidual life insurance, individual annuities and group life insurancewas therefore ¥3,401.2 billion, down 8.9%. The number of newindividual life insurance and individual annuity policies sold duringthe year was 512,947, down 4.1%.
● Insurance in Force
We have maintained consistent growth since ourestablishment, with insurance in force up 4.5% infiscal 2005.At the end of fiscal 2005, total insurance in force—including individuallife insurance and individual annuities—was ¥29,084.5 billion, up4.5% from a year earlier. Of this amount, individual life insurance inforce expanded 4.4%, to ¥28,908.8 billion, and individual annuitiesin force grew 22.7%, to ¥175.7 billion. We believe that these figuresreflect the high level of trust we received from our policyholders, aswell as high acclaim for our after-sales services.
Group life insurance in force was ¥923.2 billion, up 13.1%. Con-sequently, the total of individual life insurance, individual annuitiesand group life insurance in force was ¥30,007.8 billion, up 4.8%.
● Ratio of Operating Expenses to Insurance Premiums
Our ratio of operating expenses to insurance premiums continuesto improve each year, thanks to efficient management.Selling new policies, maintaining existing policies, making insurancepayouts and other tasks incur various costs, such as personnel andadministrative expenses. We refer to costs necessary to conductour business as a life insurance company as operating expenses.
In fiscal 2005, Sony Life held its ratio of operating expenses toinsurance premiums to 14.2%. This reflects ongoing cost reductionsand management rationalization efforts. Going forward, we willcontinue working to raise our management efficiency.
Financial Review
New Insurance Sales(Individual life insurance + Individual annuities)
2002 2003 2004 2005 2006
(Billions of yen)5,000
4,000
3,000
2,000
1,000
0
3,537.33,916.6
3,732.0 3,724.23,392.1
(Years ended March 31)
Insurance in Force(Individual life insurance + individual annuities in force)
2002 2003 2004 2005 2006
30,000
24,000
18,000
12,000
6,000
0
23,496.624,792.9
26,242.627,823.4
(Billions of yen)29,084.5
(As of March 31)
Ratio of Operating Expenses toInsurance Premiums
2002 2003 2004 2005 2006
25
20
15
10
5
0
(%)
16.515.9 15.3 14.5 14.2
(Years ended March 31)
21
● Lapse and Surrender Rate and Persistency Rates
We continued tomaintain a low lapseand surrender rate andsolid persistency rates.In fiscal 2005, our lapserate for individual life insur-ance on a policy amountbasis continued to improve,declining 0.51 percentagepoint, to 5.88%.
The persistency ratesfor individual life insurancepolicies, on a policyamount basis, remainedhigh. The 13-month ratewas 95.5%, up from 94.6% in fiscal 2004, and the 25-month ratewas 89.3%, up from 87.6%.
Note: The lapse and surrender rate is expressed as a ratio of cancellations or lapses thatis modified due to the reduction, increase or reinstatement of the total amount ofinsurance in force.
● Product Mix
Sales of term life insurance (non-smoker preferred riskinsurance) and living benefit life insurance were favorable.In fiscal 2005, more than 80% of new policies, on a policy amountbasis, were death protection products. Sales were strong for suchmainstay term life insurance products as non-smoker preferred riskinsurance. Sales of living benefit life insurance also expanded, reflectingsteadily increasing demand for insurance to cover three major diseases(cancer, acute myocardial infarctions and cerebral embolisms).
● Insurance Premiums and Claims
Both insurance premiums and insurance payments increasedin line with the rise in in force.Owing to the growth in insurance in force, insurance premiums infiscal 2005 rose to ¥579.2 billion, from ¥550.3 billion in fiscal 2004.
Insurance claims, annuity payments and insurance benefitstotaled ¥114.4 billion, up from ¥88.0 billion in fiscal 2004, indicatingour assistance to policyholders. By payment type, claims totaled¥86.4 billion (up from ¥62.1 billion), benefits were ¥23.5 billion (upfrom ¥22.6 billion) and annuity payments amounted to ¥4.4 billion(up from ¥3.1 billion).
● Asset Management
Our policy is to invest assets efficiently, while respondingflexibly to changes in the investment environment.Sony Life’s fundamental policy on investing assets in general accountis to maintain the soundness of assets and to build an investmentportfolio capable of ensuring stable medium- and long-term returns,taking into account expected returns and investment risks and respond-ing deftly to changes in financial conditions and the investment envi-ronment. The Company places emphasis on risk management toensure stable returns.
New Insurance Sales by Type(Policy amount basis, fiscal 2005)
Whole life15.5%Endowment/
Educational11.0%
Variable life9.9%
Other3.3%
Term life60.3%
Payments by Type
2002 2003 2004 2005 2006
(Billions of yen)
Death and other claimsHospitalization and other benefitsPension and annuity payments
125
100
75
50
25
0
34.0
59.2
16.6
19.8
1.1
40.2
2.0
2.4
62.1
3.1
19.1
22.6
86.4
4.4
23.5
(Years ended March 31)
Persistency Rates(Individual life insurance on a policy amount basis)
2002 2003 2004 2005 2006
100
80
60
40
20
0
(%)
13th month25th month
93.9 93.7 93.7 94.6
85.7 86.4 87.6
95.5
89.387.0
Lapse and Surrender Rate(Individual life insurance on a policy amount basis)
2002 2003 2004 2005 2006
10
8
6
4
2
0
(%)
7.74 7.997.56
6.395.88
(Years ended March 31)(Years ended March 31)
22
In fiscal 2005, Sony Life followed its strategy of investing inresponse to changes in the investment environment. During the firsthalf of the fiscal year, when the equity markets were lackluster, theCompany invested mainly in convertible bonds. When interest ratestrended upward in the second half, we shifted our investments tolonger-term Japanese government bonds.
Investment Performance
As of March 31, 2006, general account assets totaled ¥2,822.5 billion,up 16.8%, or ¥406.2 billion, from one year earlier. Within the generalaccount, positions of Japanese government, municipal and Japanesecorporate bonds totaled ¥1,499.5 billion (accounting for 53.1% ofgeneral account assets), foreign government and corporate bonds¥89.0 billion (3.2%), Japanese stocks ¥250.7 billion (8.9%), policy loans¥86.9 billion (3.1%), monetary trusts ¥658.3 billion (23.3%), cash andcall loans ¥71.5 billion (2.5%), and real estate ¥75.5 billion (2.7%).
● Core Profit
Core profit reached ¥28.5 billion.Core profit is an indicator of the profit-earning capacity of the pri-mary insurance business over a one-year period. The term “primaryinsurance business” refers to the management of insurance premi-ums received from policyholders, along with investment income topay insurance claims, annuities and benefits and to make policyreserve provisions for future payments.
Adding capital gains or losses, such as on sales of securities, andone-time gains and losses to core profit produces ordinary profit,which appears on the statements of income. In fiscal 2005, Sony Life’score profit increased 17.4% year-on-year, to ¥28.5 billion, owing to animprovement in gains and losses from general account investments.
● Ordinary Profit and Net Income
Ordinary profit was ¥24.3 billion; net income came to¥9.6 billion.
Ordinary Profit
Ordinary profit—the difference between ordinary revenues andordinary expenses—represents income derived from operatingactivities during the fiscal year. The principal sources of revenue forlife insurance companies are insurance premiums and investmentincome. The main expenses are death and other claims, hospitaliza-tion and other benefits, annuity payments, provision for policyreserves, investment expenses and operating expenses.
In fiscal 2005, ordinary profit expanded 42.7%, to ¥24.3 billion.This rise resulted from the steady growth in insurance premiums andhigher investment income.
Net Income
Net income is calculated by adding extraordinary gains to ordinaryprofit, then subtracting extraordinary losses, such as provision forreserve for price fluctuations, provision for policyholders’ dividendreserve and income taxes. In fiscal 2005, net income fell 4.8%, to¥9.6 billion, as we expanded our reserves for price fluctuations intandem with changes in our composition of assets.
Note: Like most other life insurers that are organized asjoint stock corporations, Sony Life sells life insur-ance that is non-profit. As no policyholder dividendis added, we are able to offer services to policy-holders for lower premiums. Mutual corporations,on the other hand, typically offer for-profit policies;their insurance premiums include a portion of fi-nancial resources for policyholder dividends; and,financial resources for these dividends are includedin core profits. For this reason, mutual corporationstend to show higher core profits than joint stockcorporations that operate on the same scale.
Core profit of ¥28.5 billion
Net capital gains of ¥21.4 billion
Net other operating expenses of ¥25.6 billion
Ordinary profit of ¥24.3 billion
General Account Assets(As of March 31, 2006)
Foreign government and corporate bonds 3.2%
Foreign stocks and others 0.5%
Other securities 0.6%
Real estate 2.7%Other assets 2.1%
Policy loans 3.1%
Cash and call loans2.5%
Japanese stocks 8.9%
Japanese government, municipal, and Japanese corporate bonds53.1%
Monetarytrusts23.3%
23
Total Assets
(Billions of yen)
2002 2003 2004 2005 2006
3,500
2,800
2,100
1,400
700
0
1,729.01,981.8
2,375.82,617.2
3,103.2
(As of March 31)
Policy Reserve
2002 2003 2004 2005 2006
(Billions of yen)3,000
2,400
1,800
1,200
600
0
1,600.11,831.1
2,095.5
2,395.0
2,739.2
(As of March 31)
Solvency Margin Ratio
2002 2003 2004 2005 2006
(%)2,500
2,000
1,500
1,000
500
0
1,493.51,354.2
1,453.31,317.1
1,547.0
(As of March 31)
Financial Stability and Soundness
● Total Assets
As of the end of fiscal 2005, total assets amounted to¥3.1 trillion.Total assets, comprising the capital received from shareholders andpremiums paid by policyholders, are invested in securities, propertyand equipment and other assets. These assets are held in prepara-tion for future insurance claims and benefit payments, as well as tomaintain the soundness of the Company’s insurance business. Asof March 31, 2006, Sony Life’s total assets reached ¥3,103.2 billion,up 18.6% from a year earlier, exceeding ¥3 trillion for the first timesince operations began 25 years ago.
● Policy Reserve
We maintained sufficient policy reserve to cover futureinsurance claim payments.Policy reserve is a fund derived from insurance premiums andinvestments, held in reserve to ensure life insurance companies areable to pay future insurance claims. Policy reserve is mandatoryunder the Insurance Business Law of Japan.
Since attaining standard policy reserve at the end of fiscal 2000,Sony Life has used the “net level premium method” to build up itsreserves. Under this method, we calculate operating expensesassuming a constant, or “net level,” throughout the premium pay-ment period. Our policy reserve at the end of fiscal 2005 totaled¥2,739.2 billion, which we consider sufficient.
● Solvency Margin Ratio
We maintained a high solvency margin ratio, of 1,547.0%.The solvency margin ratio indicates a company’s “ability to pay.”Life insurance companies accumulate policy reserves against thefuture payment of insurance claims so they can respond sufficientlyto ordinarily anticipated events. However, unforeseen events some-times occur as a result of changes in the environment, such as amajor disaster or a cataclysmic fall in the stock market. The sol-vency margin ratio is one administrative control indicator used tojudge if an insurer has the ability to pay in response to suchunpredictable events.
As of March 31, 2006, Sony Life had a high solvency marginratio of 1,547.0%, up 229.9 percentage points from the end ofthe previous fiscal year.
24
● Unrealized Gains on Securities
Unrealized gains on our securities holdings amounted to¥202.8 billion.Unrealized gains and losses refers to the differences between thebook values and fair values of securities. If fair value exceeds bookvalue, a gain on sales of securities would be realized by liquidatingthem at market prices. For this reason, such securities act as a provi-sion against various risks. Part of the unrealized gains and losses onsecurities and real estate is included in the total solvency margin—thenumerator of the formula for calculating the solvency margin ratio.
Unrealized gains on securities in the general account stood at ¥202.8billion as of March 31, 2006, up from ¥88.0 billion a year earlier.
(Reference: As of March 31, 2006, Sony Life assumed unrealized gains on shares tobe zero when the Nikkei Stock Average is approximately ¥9,171 and the TOPIX indexis 929 points.)
● Non-Performing Assets
Sony Life has no non-performing assets.Life insurance companies make loans as investment assets andearn interest from such loans. These comprise policy loans offeredas a service to policyholders and other loans made to third parties.A company’s total loan balance represents the sum of these twoloan balances.
Sony Life’s loan balance at the end of fiscal 2005 was ¥86.9 bil-lion. Because the Company does not engage in commercial lending,its loan balance is derived solely from policy loans, which are limitedto the value of recoverable surrender cash.
As a consequence, the Company has no risk-monitored loans(loans where repayment circumstances are not ordinary). Moreover,all figures listed in loans by debtor category are classified asperforming loans.
● Credit Rating
Sony Life has been rated highly by credit rating agencies.Sony Life has requested ratings from several agencies to help policy-holders and potential customers make objective decisions concerningits ability to finance insurance and pay claims and benefits.
Note: The above ratings were assigned at Sony Life’s request. They are not evaluations of insurance companies overall, nor are they a guarantee ofclaim payments in the future. The ratings are the opinions of the respective rating agencies, based on the figures and information available tothem at that time. Please refer to each agency’s web site for more details.
A+AAAAAa3A+
A.M. Best Company, Inc.
Rating and Investment Information, Inc.
Japan Credit Rating Agency, Ltd.
Moody’s Investors Service, Inc.
Standard & Poor’s
Financial strength rating
Insurer financial strength rating
Insurance claim paying ability
Ability to pay insurance claim
Strong
Superior
A very high degree of capacity for paymentof insurance claimsA very high level of capacity to honorthe financial commitment on the obligation
Offering excellent financial securityInsurance financial strength rating
Credit Rating (Ratings as of June 2006)
25
Formula for Calculating Negative Spread
Notes: 1. “Investment yield for core profit” is theinvestment income from general account thatis included in core profit, less the provision forpolicyholder dividend reserves, divided by policyreserve in general account.
2. The “average assumed interest rate (for cal-culating policy reserve)” is the average ofthe assumed interest rates used to calculatepolicy reserve in general account.
3. “Policy reserve in general account” is policyreserve in general account, excluding thecontingency reserve, calculated as follows:(Policy reserves at beginning of term +Policy reserves at end of term –Expected interest*) x 1/2
* “Expected interest” is the amount of interestcalculated by discounting the amount usingthe assumed interest rate every year.
Yield on investment on core profit 1
Average assumed interest rate(for calculating policy reserves) 2
General account policy reserves 3
Negative spread
● Negative Spread
The negative spread for fiscal 2005 was ¥33.1 billion.Life insurance companies retain a portion of premiums received frompolicyholders as policy reserves in anticipation of future payments.These policy reserves are maintained by investing under the assump-tion that they will yield a certain rate of interest every year. This inter-est rate is called the “assumed interest rate (for calculating policyreserves).” Negative spread arises when, owing to the deteriorationof the investment environment or other factors, the actual yield oninvestment for a portion of the policies falls below the assumedinterest rate (for calculating policy reserves).
Our negative spread in fiscal 2005 was ¥33.1 billion, down from¥34.5 billion in the previous fiscal year. The Company has adequateother income sources to cover its negative spread, however. (Seethe analysis on core profit on page 22.) Sony Life will continue work-ing to streamline operations to maintain and generate sufficientincome to cover the negative spread.
● Capital
Sony Life’s capital was ¥65.0 billion.Capital is the minimum standard amount of shareholders’ equitya company must hold to protect its creditors, and Article 6 of theInsurance Business Law of Japan prescribes a minimum of ¥1.0billion. Other regulations have also been established to ensureadequate capitalization. As of March 31, 2006, Sony Life had totalcapital of ¥65.0 billion (wholly provided by Sony Financial Holdingssince April 1, 2004).
● Real Net Worth
Real net worth totals ¥614.9 billion.Real net worth refers to the net asset amount that results from sub-tracting real liabilities—excluding such factors as policy reserves andcapital—from the fair market value of such real assets as securitiesand real estate. If this number is negative, the regulating authoritiesmay judge a company to have real liabilities in excess of assets andorder a company to halt operations.
As of March 31, 2006, Sony Life had real net worth of ¥614.9billion, up 44.0% from one year earlier.
Real Net Worth
2002 2003 2004 2005 2006
(Billions of yen)750
600
450
300
150
0
296.5 319.4
381.5426.9
614.9
(As of March 31)
Embedded Value
● Meaning of Embedded Value
Embedded value (EV) is calculated as the sum of the“value of in-force business” and “adjusted net worth.” InEurope and Canada, EV is regarded as a valuable sourceof information for assessing the corporate value of a
life insurance company. Sony Life discloses EV at fiscalyear-end as an indicator of the value of its business.
The value of in-force business is the present value offuture after-tax profits on existing business minus thecost of capital. Cost of capital is the spread betweenthe investment yield and the discount rate applied tothe amounts of capital and surplus that will be requiredto maintain the assumed level of solvency margin ratio.
26
Adjusted net worth is calculated as (a) Total equityin the balance sheets, excluding net unrealized gainon bonds except for convertible bonds + (b) Reservefor price fluctuations + (c) Contingency reserve +(d) Reserve for possible loan losses + (e) Net unrealizedgains on land – (f) Unfunded employees’ retirementbenefits liability – (g) Deferred tax assets for (b), (c),(d), (e) and (f).
Under generally accepted accounting principles inJapan (Japanese GAAP), which applies to life insurancecompanies in Japan, the balance sheets exclude future
profits on existing business, while EV indicates thepresent value of future profits on existing business,together with the Company’s adjusted net worth. Forthis reason, EV serves as a valuable supplement tothe financial information provided under JapaneseGAAP and is a helpful indicator used to evaluatecorporate value. However, EV covers only existing in-force business as of the date of valuation, andexcludes the potential value of future new business,which is considered a constituent of the economicvalue of an insurance company.
● EV as of March 31, 2006
EV as of March 31, 2006, and changes in EV compared with one year earlier, areindicated below.
(Billions of yen) March 31 2004 2005 2006 Increase (Decrease)
EV 492.0 539.3 776.1 236.8 Value of in-force business 381.7 409.6 499.8 90.2 Adjusted net worth 110.2 129.7 276.3 146.6
Value of new business in the fiscal year 38.9 38.1 34.2 (3.8)
■ The value of in-force business as follows:Value of in-force business = Present value of future after-tax profits on existing business – Cost of capital.Cost of capital is the spread between the investment yield and the discount rate applied to the amountsof capital and surplus that will be required to maintain the assumed level of solvency margin ratio.
■ Adjusted net worth is calculated as follows:Adjusted net worth = (a) Total equity in the balance sheets* + (b) Reserve for price fluctuations +(c) Contingency reserve + (d) Reserve for possible loan losses + (e) Net unrealized gains on land –(f) Unfunded employees’ retirement benefits liability – (g) Deferred tax assets for (b), (c), (d), (e) and (f).* Total equity in the balance sheets excludes net unrealized gain on bonds except for convertible bonds.
■ “Value of new business in the fiscal year” refers only to that portion of EV derived from new policiesconcluded during each fiscal year.
■ In calculating “value of in-force business,” the present value of future after-tax profits and adjusted networth use balance sheet and reserve figures, based on Japanese GAAP.
■ Assumptions and methods of computing EV differ for March 31, 2004, 2005 and 2006.
Embedded Value
2004 2005 2
of yen)
492.0539.3
(Years ended March 31)
● Principal Assumptions
Below are the principal assumptions used to compute EV as of March 31, 2006.
Category Method of Establishing
1. Discount rate 6.5% 2. Investment yield on new investments Investment yield is based on implied forward rates, assuming Sony Life
makes all new investments only in Japanese government bonds. 3. Mortality and morbidity rates Based on the Company’s experience over the three most recent fiscal years 4. Lapse and surrender rate Based on the Company’s experience over the three most recent fiscal years 5. Operating expenses (unit cost) The unit cost for the maintenance and administration of policies and for
payments of claims is based on Sony Life’s experience during the mostrecent fiscal year.
6. Effective tax rate Based on the most recent effective tax rate 7. Required solvency margin ratio For the purpose of calculating cost of capital, the required solvency margin
ratio of 600% was assumed.
1. Discount rateThe discount rate was set by adding the Company’s assumed risk premium (4.5%) to the risk-free rate (the yield on 10-year Japanese governmentbonds: approximately 1.77%), as of the end of the fiscal year.
2. Investment yield(1) Investment yield on new investments:
Investment yield on new investments was calculated based on the implied forward rates computed from the yield curve of Japanese govern-ment bonds as of March 31, 2006, and assuming that the Company invests only in Japanese government bonds every year. Sony Life sets theassumed investment yield on new investments at the end of each fiscal year with the assumption that future market conditions will be neutral.This assumption is made to avoid potential complications arising from the fact that the more Sony Life invests in assets with higher expectedreturns, the higher is the calculated EV. Sony Life believes such assets contain higher risks and should be adjusted when calculating EV.
(2) Investment yield on existing assets:Investment yield on existing assets was calculated separately for each asset with the following assumptions:■ For existing bonds other than convertible bonds, Sony Life assumes holdings to maturity.■ For convertible bonds, Sony Life’s calculations assume that the Company will conduct rebalancing as of the date of evaluation as follows:
After taking unrealized gains from convertible bonds into account when adjusting net worth, Sony Life purchases straight bonds correspondingto the marked-to-market bond portions while immediately reinvesting the remaining amount into Japanese government bonds.
■ For stocks and other assets (policyholder loans, real estate, private equity funds, etc.), Sony Life is assumed to maintain a balance at the endof the fiscal year within the limits of its internal holdings.
Interest, dividends and proceeds from redemptions are calculated with the assumption that Sony Life reinvests these proceeds intoJapanese government bonds.
27
● Notes
Regulations require that certain reserves be set aside for minimum guarantee benefit features on variable lifeinsurance and annuity contracts issued in fiscal 2005 and thereafter. In calculating EV as of March 31, 2006, whilesetting aside the reserve for guaranteed minimum death benefits (GMDB) based on Japanese GAAP, Sony Lifeevaluated the future cash flow on GMDB for all existing variable life insurance policies using the stochastic method.This evaluation reduced EV by ¥3.2 billion.
For calculating EV as of March 31, 2006, Sony Life changed the method of accounting for existing convertiblebonds at fiscal year-end. In calculating EV as of March 31, 2005, Sony Life assumed that convertible bonds wouldbe held to maturity with stock prices remaining unchanged from March 31, 2005. As is described above, Sony Lifecalculated EV as of March 31, 2006, assuming the rebalancing of convertible bonds as of the date of evaluation.This increased EV by ¥25.9 billion.
● Opinion of Outside Specialist
Sony Life has obtained an opinion letter from Milliman, Inc., an independent actuarial firm that possesses insuranceactuarial expertise. The opinion letter can be found on Sony Life’s web site (http://www.sonylife.co.jp/).
DisclaimerStatements made in this section of the annual report contain calculations based on assumptions regarding future projections that are subject to risksand uncertainties. It should be noted that actual future results might materially differ from the assumptions used in the EV calculations. Therefore,readers are advised to be cautious and not place undue reliance on EV calculations.
● Impact of Changing Assumptions (Sensitivities)
The impact of changing the underlying assumptions on EV at March 31, 2006, is as follows:(Billions of yen)
Amount of Increase (Decrease) EV Amount
Discount rate 6.5%→5.5% 57.1 833.26.5%→7.5% (47.1) 729.0
Solvency margin ratio 600%→500% 11.6 787.7600%→700% (12.9) 763.2
Investment yield: +0.25%* On total assets 48.3 824.4On new assets 30.3 806.4
Investment yield: –0.25% On total assets (49.7) 726.4On new assets (30.6) 745.5
Mortality and morbidity Assumption x 1.1 (52.4) 723.7 Lapse and surrender rate Assumption x 1.1 (15.9) 760.1 Operating expenses (unit cost of ongoing policies) Assumption x 1.1 (4.0) 772.1* The impact of changes in investment yield assumptions is also reflected in policyholders’ dividends.
● Breakdown of Changes in EV
The change in EV from March 31, 2005, to March 31, 2006, is split into the following components:(Billions of yen)
Item Amount
1. EV as of March 31, 2005 539.3 2. Shareholder dividends (6.5) 3. Release from the value of existing policies in force* 24.7 4. EV of new policies for the year ended March 31, 2006 34.2 5. Difference between assumptions and actual experience for the year ended March 31, 2006 137.2 6. Differences from changes in assumptions 47.2 7. EV as of March 31, 2006 (Total of items 1 through 6) 776.1
Notes: Reversal of discount rate on the value of in-force business for the year:The amount in item 5 includes an ¥87.8 billion increase in unrealized gains on securities other than bonds.The amount in item 6 includes a ¥25.9 billion increase due to changes in the method of valuing convertible bonds.
28
Balance SheetsAs of March 31
Thousands ofMillions of yen U.S. dollars (Note 1)
Assets 2006 2005 2004 2003 2002 2006
Cash and depositsCash on hand ¥ 63 ¥ 167 ¥ 104 ¥ 124 ¥ 192 $ 542Cash in banks 31,370 51,443 66,276 130,025 226,583 268,124
31,433 51,611 66,381 130,149 226,775 268,666
Call loans 55,900 176,100 175,000 135,100 77,800 477,778
Monetary trusts 658,351 515,229 419,224 320,941 248,750 5,626,935
SecuritiesJapanese government bonds 1,054,410 712,158 397,522 127,767 73,228 9,012,059Municipal bonds 53,252 54,504 167,941 199,989 214,794 455,153Japanese corporate bonds 487,933 629,561 660,699 665,179 532,471 4,170,375Japanese stocks 278,860 74,249 57,939 41,658 40,908 2,383,427Foreign securities 164,092 179,239 235,443 219,601 180,853 1,402,497Other securities 93,665 54,949 44,058 11,455 3,798 800,564
2,132,216 1,704,663 1,563,605 1,265,650 1,046,054 18,224,075
LoansPolicy loans 86,918 79,914 71,629 65,574 54,463 742,896Other loans — — — — 0 —
86,918 79,914 71,629 65,574 54,463 742,896
Property and equipment (net of accumulated depreciation)
Land 32,855 32,855 32,855 32,780 32,707 280,820Buildings 11,869 12,159 12,281 12,819 13,106 101,452Furniture and equipment 160 161 161 189 188 1,369Construction in progress 30,853 5,586 1,145 500 280 263,707
75,739 50,763 46,444 46,289 46,283 647,348
Due from agencies 0 5 0 2 3 2
Due from reinsurers 335 184 960 730 654 2,866
Other assetsOther receivables 23,910 19,746 18,354 1,591 6,406 204,366Prepaid expenses 703 749 730 973 992 6,012Accrued income 22,244 13,225 8,823 7,850 8,856 190,120Money on deposits 11,938 2,835 3,122 3,118 2,744 102,042Derivative assets 39 — — — — 338Advance payments 1,484 351 334 320 222 12,688Others 2,067 2,028 1,323 1,426 1,690 17,675
62,389 38,936 32,688 15,281 20,912 533,241
Deferred tax assets — — — 2,330 7,540 —
Allowance for doubtful accounts (44) (142) (107) (153) (163) (378)
Total assets ¥3,103,241 ¥2,617,266 ¥2,375,828 ¥1,981,897 ¥1,729,077 $26,523,429
Notes: 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥117=U.S.$1.00, the approximate Tokyo Foreign Exchange Market rate asof March 31, 2006.
2. U.S. dollar figures are based on non-truncated yen amounts.
29
Thousands ofMillions of yen U.S. dollars (Note 1)
Liabilities and shareholders’ equity 2006 2005 2004 2003 2002 2006
Policy reserve and othersReserve for outstanding claims ¥ 18,415 ¥ 17,705 ¥ 17,913 ¥ 13,260 ¥ 10,082 $ 157,399Policy reserve 2,739,264 2,395,060 2,095,565 1,831,100 1,600,130 23,412,515Reserve for policyholders’ dividends 1,584 735 783 709 720 13,542
2,759,264 2,413,501 2,114,262 1,845,070 1,610,933 23,583,456Due to agencies 1,415 1,155 1,038 786 754 12,102Due to reinsurers 782 625 524 432 419 6,686Other liabilities
Accrued income taxes 1,586 1,272 2,168 105 64 13,562Other payables 30,279 14,504 81,287 14,020 6,091 258,800Accrued expenses 9,170 8,751 8,658 7,515 8,139 78,382Unearned income 250 244 158 221 232 2,137Deposits received 308 323 334 333 627 2,636Deposits received for guarantees 2,252 2,153 2,018 2,851 2,791 19,255Borrowed securities 9,764 — — — — 83,459Derivative liabilities — 0 — — — —Policy suspense and other suspense 2,089 4,824 1,327 2,810 3,179 17,860
55,702 32,075 95,953 27,858 21,126 476,091Reserve for employees’ retirement benefits 10,632 10,204 8,366 6,720 4,981 90,874Reserve for directors’ and auditors’ retirement benefits 109 77 46 — — 937Reserve for price fluctuations 20,109 12,666 12,225 5,960 5,632 171,873Deferred tax liabilities 36,685 5,817 10,933 — — 313,548Deferred tax liabilities for land revaluation 706 — — — — 6,041
Total liabilities 2,885,408 2,476,124 2,243,350 1,886,829 1,643,847 24,661,608
Common stock 65,000 65,000 65,000 65,000 — 555,556Capital surplus 865 865 865 865 — 7,393
Capital reserve 865 865 865 865 — 7,393Retained earnings
Earned reserve 4,478 3,178 1,878 — — 38,278General reserves — 40 3 4 — —
Special depreciation reserve — 40 3 4 — —Unappropriated retained earnings 18,055 16,197 13,932 11,269 — 154,320
Net income 9,616 10,102 13,932 11,269 — 82,19622,533 19,417 15,814 11,274 — 192,598
Land revaluation (1,475) (768) (768) (768) — (12,612)Net unrealized gain on other securities, net of taxes 130,909 56,629 51,567 18,697 — 1,118,886
Total shareholders’ equity 217,833 141,142 132,478 95,068 — 1,861,821Total liabilities and shareholders’ equity 3,103,241 2,617,266 2,375,828 1,981,897 — 26,523,429
Common stock — — — — 65,000 —Additional paid-in capital — — — — 25,625 —Land revaluation — — — — (768) —Retained earnings (Accumulated deficit)
General reserves — — — — 5 —Special depreciation reserve — — — — 5 —
Unappropriated retained earnings (Undisposed deficit) — — — — (24,761) —
— — — — (24,755) —Unrealized gain on securities — — — — 20,128 —
Total shareholders’ equity — — — — 85,230 —Total liabilities and shareholders’ equity ¥ — ¥ — ¥ — ¥ — ¥1,729,077 $ —
30
Statements of IncomeFiscal Years Ended March 31
Thousands ofMillions of yen U.S. dollars (Note 1)
2006 2005 2004 2003 2002 2006Ordinary revenues:Income from insurance premiums and others
Insurance premiums ¥579,267 ¥550,304 ¥512,700 ¥489,548 ¥503,871 $4,951,001Reinsurance income 1,249 1,306 2,125 2,034 2,062 10,679
580,516 551,610 514,825 491,582 505,934 4,961,680Investment income
Interest and dividends 26,581 25,595 24,377 23,746 25,021 227,190Interest on bank deposits 10 9 16 34 57 92Interest and dividends on securities 19,640 19,349 17,202 17,600 20,352 167,871Interest on loans 3,607 3,357 3,141 2,820 2,350 30,831Rental income from real estate 3,313 2,828 3,966 3,246 2,225 28,324Other interest and dividends 8 51 50 44 36 72
Income from monetary trusts, net 19,558 7,170 7,951 891 733 167,170Income from trading securities, net — 3,962 154 — — —Gain on sales of securities 6,546 3,339 2,343 2,289 4,262 55,953Gain on redemption of securities 5,342 2,393 3,991 4,560 2,931 45,661Gain from derivatives, net 825 — 2,245 3 109 7,058Foreign exchange gain, net 59 — — — 3 508Other investment income 0 4 0 1 50 2Gain on separate accounts, net 49,524 7,623 23,702 — — 423,286
108,438 50,089 64,767 31,493 33,112 926,828Other ordinary income
Income for annuity riders 5,466 1,037 251 96 195 46,724Income for deferred payment of claims 1,401 729 878 373 344 11,981Reversal of reserves for outstanding claims — 207 — — — —Others 602 418 249 543 112 5,153
7,471 2,392 1,379 1,013 653 63,858Total ordinary revenues 696,426 604,093 580,972 524,089 539,699 5,952,366
Ordinary expenses:Insurance claims and other payments
Insurance claims 86,477 62,136 59,210 40,291 34,052 739,121Annuity payments 4,437 3,173 2,435 2,016 1,177 37,931Insurance benefits 23,582 22,698 19,836 19,188 16,608 201,557Surrender payments 113,637 101,649 105,227 104,435 74,991 971,259Refund to policyholders 1,663 2,046 2,370 2,620 1,696 14,217Reinsurance premiums 2,083 2,436 2,462 2,353 2,800 17,810
231,881 194,141 191,542 170,905 131,327 1,981,895Provision for policy reserve and others
Provision for reserve for outstanding claims 709 — 4,652 3,177 970 6,068Provision for policy reserve 344,204 299,494 264,464 230,970 285,515 2,941,915Interest on policyholders’ dividend reserves 1 0 0 0 0 12
344,915 299,494 269,117 234,148 286,486 2,947,995Investment expenses
Interest expenses 9 133 4 2 3 77Losses on trading securities, net 647 — — 149 388 5,533Loss on sales of securities 267 330 928 465 43 2,284Devaluation losses on securities — 217 — 2,538 7,309 —Losses on redemption of securities 212 1,146 704 797 1,130 1,818Losses from derivatives, net — 342 — — — —Foreign exchange losses, net — 59 21 3 — —Provision for doubtful accounts 6 118 24 — — 52Depreciation of real estate for rent and others 523 558 612 723 592 4,476Other investment expenses 2,895 2,208 1,308 1,358 902 24,746Losses on separate accounts, net — — — 8,894 851 —
4,561 5,116 3,605 14,933 11,221 38,986Operating expenses 82,040 79,729 78,254 77,875 82,989 701,200Other ordinary expenses
Payments of deferred claims 647 486 399 213 126 5,533Taxes other than income taxes 5,517 5,425 5,199 4,944 5,092 47,162Depreciation 789 704 672 769 888 6,744Provision for retirement benefits 1,681 1,837 1,646 1,739 1,668 14,373Provision for directors’ retirement benefits 31 31 46 — — 272Others 0 55 10 0 0 5
8,668 8,541 7,973 7,667 7,776 74,089Total ordinary expenses 672,067 587,023 550,493 505,531 519,800 5,744,165
Ordinary profit 24,359 17,070 30,478 18,557 19,898 208,201Extraordinary gains:
Gain on sales of properties — 0 2 0 0 —Reversal of reserve for possible loan losses — — — 3 76 —
— 0 2 3 76 —Extraordinary losses:
Loss on sales of properties 72 74 67 40 36 617Impairment loss 5 — — — — 44Provision for reserve for price fluctuations 7,442 441 6,264 327 281 63,614Others — — 1 — 18 —
7,520 515 6,332 368 335 64,275Provision for policyholders’ dividend reserve 1,491 519 644 583 601 12,751Income before income taxes 15,347 16,035 23,504 17,609 19,038 131,175Income taxes—current 17,027 13,922 14,966 317 64 145,534Income taxes—deferred (11,296) (7,989) (5,394) 6,023 6,969 (96,555)
Net income 9,616 10,102 13,932 11,269 12,004 82,196Earning (Deficit) at beginning of the year 8,438 6,095 — — (36,766) 72,124Unappropriated retained earnings at the end of the year (Accumulated deficit at the end of the year) ¥ 18,055 ¥ 16,197 ¥ 13,932 ¥ 11,269 ¥ (24,761) $ 154,320
Notes: 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥117=U.S.$1.00, the approximate Tokyo Foreign Exchange Market rate asof March 31, 2006.
2. U.S. dollar figures are based on non-truncated yen amounts.
31
Notes to Financial StatementsAs of March 31
Significant Accounting Policies—As of March 31, 2006
1. Basis of Presentation of Financial StatementsThe accompanying financial statements have been preparedbased on the accounts maintained by Sony Life Insurance Co.,Ltd. (“the Company”), in accordance with the provisions set forth inthe Insurance Business Law of Japan, and in conformity withaccounting principles and practices generally accepted in Japan,which are different in certain respects as to the application anddisclosure requirements of International Accounting Standards.
2. Valuation of Securities (Including Securities Managed as TrustAssets of Monetary Trusts)Trading securities are stated at market value, and sales cost isdetermined by the moving-average method. Shares of subsidiaries(shares issued by subsidiaries that fall under Article 2–12 of theInsurance Business Law of Japan) are stated at cost. Other securitiesfor which market prices are available are stated at market value basedon market prices as of March 31, and sales cost is determined bythe moving-average method. Other securities for which marketprices are unavailable, such as public and corporate bonds (includingforeign bonds) for which the difference between acquisition costand face amount is due to adjustment of interest to maturity, arestated at amortized cost (straight-line method) determined by themoving-average method. Remaining other securities are stated atcost determined by the moving-average method. Unrealized gainsor losses on other securities are reported as a separate componentof shareholders’ equity.
3. Standards of Valuation of DerivativesDerivatives are stated at market value.
4. Depreciation of Property and EquipmentDepreciation of property and equipment is computed by thedeclining balance method, except for buildings acquired afterApril 1, 1998, which are computed by the straight-line method.
5. Translation of Foreign CurrenciesAssets and liabilities denominated in foreign currency (excludingshares of subsidiaries) are translated into Japanese yen usingexchange rates at the balance sheet date. Shares of subsidiariesare translated into Japanese yen using exchange rates at the timeof acquisition.
6. Basis for Recording Allowances(1) Allowance for doubtful accounts
Allowance for doubtful accounts is calculated as follows basedon the self-assessment rule for assets and the rules for write-offand allowance.
For debt in which the debtors are legally and formally bank-rupt by such measures as filing under the Civil RehabilitationLaw or the Bankruptcy Law and are substantially bankrupt interms of their business operations, for debt in which the debtorsare actually bankrupt and for such debt as deposited money,of which the collectible amount has remarkably decreased, theallowance amount is calculated as the principal balance lessthe amounts collectible from foreclosing collateral and from theloan’s third-party guarantors.
For other kinds of debt, the reserve amount is calculated inaccordance with historical credit loss ratios and other factors.
For debt in which debtors are currently not bankrupt in termsof their business operations but have been determined to havea high likelihood of going into bankruptcy (hereinafter, “debtorsin danger of bankruptcy”), the amount remaining after deduct-ing the amount of collateral that is expected to be recoverableand guarantee amounts that are determined to be recoverable,the necessary allowance amount is calculated by taking intoconsideration overall ability of the debtor to pay. For debt otherthan that described above, the reserve amount is calculated inaccordance with historical credit loss ratios over a specificperiod of time.
For all debt, the allowance amount is calculated in accor-dance with the self-assessment rule for assets and rules forwrite-off and allowance conducted by the appropriate divisionand audited by an independent audit division.
(2) Reserve for Employees’ Retirement BenefitsBased on the accounting standards for retirement benefits(Opinion Concerning the Establishment of Accounting Standardfor Retirement Benefits, Business Accounting Council, June 16,1998), reserve for employees’ retirement benefits is providedbased on the estimated amount of retirement benefit liabilitiesat the balance sheet date.
The retirement benefit system for internal employees hasbeen revised. Whereas the previous system was according tobase salary, the new system is based on the number of pointsreceived through certain qualifications. In line with this revision,the periodic disbursement method for the expected accruedbenefit amount was changed from a fixed amount over aspecific period of time to point-based standard. This revisioncaused a ¥1,291 million decrease in past service obligations(reduction of obligation), which will be amortized over a 10-yearperiod beginning with the year under review.
(3) Reserve for Directors’ and Auditors’ Retirement BenefitsThe Company provides a reserve for directors’ and auditors’retirement benefits based on amounts necessary at the endof the year according to internal rules. This is an allowancedefined by Article 43 of the Japanese Commercial CodeEnforcement Regulations.
7. Basis for Reserve for Price FluctuationsReserve for price fluctuations is provided for according to Article115 of the Insurance Business Law.
8. Others(1) Accounting for consumption taxes and regional consumption tax
Consumption taxes are excluded from expenses. Regardingconsumption taxes relative to assets, deferred consumption taxesunder Japanese income tax regulations are included in prepaidexpenses and amortized over five years based on the straight-linemethod, and others are charged to expenses as incurred.
(2) Method for calculating policy reservePolicy reserve is provided for according to Article 116 of theInsurance Business Law and calculated as follows.a. Reserves for policies subject to standard policy reserves
are calculated in accordance with the method determinedby the Financial Services Agency (Ministry of FinanceDirective 48, 1996).
b. Other reserves are calculated in accordance with the netlevel premium method.
(3) Amortization of softwareAmortization of software for internal use, which is included inother assets (others), is calculated by the straight-line methodover the useful lives.
9. Accounting Standards for the Impairment of Fixed AssetsBeginning with the fiscal year under review, the Company adoptedaccounting for the impairment of fixed assets according to theOpinions on Accounting Standards for the Impairment of FixedAssets by the Business Accounting Council on August 9, 2002, andthe Guidance for the Application of the Impairment of Fixed Assets(Business Accounting Standards Guidance No. 6, October 31, 2003).This resulted in a decrease of ¥5 million in net income before incometaxes. Accumulated impairment losses are written off directly fromthe values of the relevant assets.
Balance Sheets—As of March 31, 2006
1. LoansLoans do not include any loans to borrowers under bankruptcyproceedings, loans past due for three months or more, orrestructured loans.
2. Land RevaluationBased on the Land Revaluation Law (Law No. 34, promulgated onMarch 31, 1998—the “Law”), the Company revalued its business-use land. Regarding valuation differences, in the event of revalua-tion losses the tax-equivalent portion is recognized in the valuationreserve. In the event of revaluation gains, the tax-equivalent portionof the revaluation is recorded in the “deferred tax liabilities for landrevaluation” in liabilities. After excluding these amounts, the netrevaluation difference is reported as “land revaluation” instockholders’ equity.
The date of the revaluation was March 31, 2002, and therevaluation method as stipulated by Article 3, Clause 3 of the Lawwas based on an appraisal as stipulated by Article 2, Clause 5 ofthe Law Enforcement Order related to the Law (GovernmentOrdinance No. 119, effective from March 31, 1998).
3. Accumulated Depreciation of Property and EquipmentAccumulated depreciation of property and equipment amountedto ¥4,240 million.
4. Separate AccountsThe amount of total assets for separate accounts was ¥280,682million. The amount of total liabilities was the same.
32
5. Net AssetsNet assets, as defined by Paragraph 1–3 of Article 17–3 of theInsurance Business Law Enforcement Regulations, totaled¥136,853 million.
6. Receivables and Payables Due to/from Majority ShareholdersTotal receivables due from majority shareholders amounted to¥129 million, and total payables were ¥13,226 million.
7. Receivables and Payables Due to/from SubsidiariesTotal payables due to subsidiaries amounted to ¥0 million. Therewere no total receivables due from subsidiaries.
8. Leased Computer EquipmentThe Company has computer equipment taken on lease contractsthat is not included in property and equipment on the balance sheets.
9. Reserve for Policyholders’ DividendsThe movement of reserve for policyholders’ dividends was as follows:Balance at the beginning of the year ¥ 735 millionPayments made in the year ¥ 644 millionIncrease by interest earned ¥ 1 millionProvision for reserves made in the year ¥1,491 millionBalance at the end of the year ¥1,584 million
10. Assets Pledged as CollateralThe amount of assets pledged as collateral was ¥14,067 million.There was no debt with collateral.
11. Assets and Liabilities Denominated in Foreign CurrenciesAssets denominated in foreign currencies amounted to ¥105,753million, which mainly comprised US$494 million, EUR162 millionand GBP77 million. Liabilities denominated in foreign currenciesamounted to ¥4 million (US$0 million, PHP0 million).
12. Policyholder Protection Fund and Organization(1) The Company’s estimated future contribution to the former Policy-
holder Protection Fund, which has been superseded by the LifeInsurance Policyholder Protection Corporation, in accordance withParagraph 5, Article 140 of the Financial Reconstruction Law was¥461 million at March 31, 2006. The contribution will be recordedin operating expenses in the year in which it is paid.
(2) The Company’s estimated future contribution to the Life Insur-ance Policyholder Protection Corporation, as provided in Article259 of the Insurance Business Law, was ¥6,289 million atMarch 31, 2006. The contribution will be recorded in operatingexpenses in the year in which it is paid.
13. Retirement Benefit Obligation(1) Breakdown of retirement benefit obligation
Retirement benefit obligation ¥(14,478) millionPension assets ¥ 1,264 millionFunded status ¥(13,213) millionUnrecognized transition obligation ¥ 3,729 millionUnrecognized actuarial gain ¥ (14) millionUnrecognized prior service obligations ¥( 1,162) millionReserve for employees’ retirement benefits ¥(10,632) million
(2) Basis for calculation of retirement benefit obligationAllocation of projected retirement benefits
Point standard for internal employeesPeriod definition standard for sales employees
Discount rate 1.4%Amortization period of transition obligation 15 yearsExpected rate of investment return —Amortization period of actuarial differences:
Sales employees 7 yearsInternal employees 10 years
The processing period for prior service obligations is 10 yearsfor internal employees.
14. Shares of SubsidiariesShares of subsidiaries amounted to ¥3,047 million.
15. Taxes(1) Deferred tax assets totaled ¥38,368 million and deferred tax
liabilities were ¥74,887 million. Valuation allowance totaling¥165 million was excluded from deferred tax assets. Deferredtax assets consisted mainly of insurance reserves of ¥24,198million, reserve for price fluctuations of ¥7,281 million andreserve for employees’ retirement benefits of ¥3,849 million.Deferred tax liabilities arose mainly due to unrealized gain onother securities of ¥74,310 million.
(2) The effective tax rate for the year under review was 36.21%.The difference between the legal effective tax rate and theactual tax burden after the application of tax effect accountingwas minimal.
(3) Sony Life is treated for tax purposes as a consolidated entitywith Sony Corporation as its consolidated parent company.
16. The amount of ¥278 million is set forth as a reinsurance provisionagainst a corresponding portion of claims for outstanding reserves,as set forth in Item 3, Provision 73 of the Insurance Business Lawand as set forth in Item 1, Provision 71. Furthermore, the corre-sponding policy reserve is ¥955 million, as set forth in Item 1,Provision 71 of this same law.
17. Units smaller than those stated herein have been rounded off.
Statements of Income—From April 1, 2005 to March 31, 2006
1. Total income from transactions with majority shareholders was ¥63million, while total expenses amounted to ¥2,115 million.
2. Gain on sales of securities consisted of ¥231 million from Japanesegovernment bonds and other securities and ¥6,314 million fromstocks and others.
3. Loss on sales of securities consisted of ¥105 million from Japanesegovernment bonds and other securities and ¥161 million fromstocks and others.
4. When calculating the provision for outstanding claims, the amountdeducted as the ceded provision for outstanding claims was ¥252million, and when calculating the provision for policy reserves, theadded amount of the returned portion of ceded policy reserveswas ¥108 million.
5. Losses on trading securities, net, was the net result of gain onsales of ¥130 million and valuation loss of ¥778 million.
6. Income from monetary trusts included ¥3,907 million in valuation gains.
7. Gain from derivatives, net, includes a valuation loss of ¥11 million.
8. Other investment expenses mainly consisted of ¥2,590 million inexpenses related to real estate for investment purposes.
9. Net income per share was ¥147.95. The basis for this calculationis net income of ¥9,616 million, of which the entire portion is appli-cable to shares of common stock, and an average of 65,000,000shares of common stock outstanding during the period.
10. Retirement benefit cost totaled ¥2,011 million, and consisted ofthe following:Service cost ¥1,608 millionInterest cost ¥ 190 millionExpected investment income ¥ — millionAmortization of transition obligation ¥ 414 millionAmortization of actuarial gain ¥ (72) millionAmortization of prior service obligations ¥ (129) million
11. During the year under review, the Company recorded impairmentlosses on fixed assets, as described below.(1) Method of grouping assets
Real estate that is dedicated to use in the insurance businessconstitutes a single asset group. In rental real estate and idleassets, each individual property constitutes a single asset group.
(2) Recognition of impairment lossesIn the fiscal year under review, the book value of idle assets forwhich no future use is expected was written down to their recov-erable value. The resulting decreases in value were accounted foras impairment losses and considered an extraordinary loss.
(3) Breakdown of asset groups and types for which impairmentlosses were recognizedUse Category Impairment lossIdle assets Buildings, etc. ¥5 million
(4) Method of computing recoverable valueThe recoverable value is considered to be the net sale valueof idle assets, as estimated by a third party.
12. Units smaller than those stated herein have been rounded off.
33
Details of Oridnary Profit (Core Profit)Fiscal Years Ended March 31
Millions of yen
2006 2005
Core profit (A) ¥28,564 ¥24,333
Capital gains 22,316 10,555
Income from monetary trusts, net 14,884 3,253
Income from trading securities, net — 3,962
Gain on sales of securities 6,546 3,339
Gain from derivatives, net 825 —
Foreign exchange gain, net 59 —
Others — —
Capital losses 914 949
Loss from monetary trusts, net — —
Losses on trading securities, net 647 —
Loss on sales of securities 267 330
Devaluation losses — 217
Losses from derivatives, net — 342
Foreign exchange losses, net — 59
Others — —
Net capital gains (B) 21,401 9,605
Core profit + capital gains (A + B) 49,966 33,939
Other operating income — —
Reinsurance income — —
Reversal of risk — —
Others — —
Other operating expenses 25,606 16,868
Reinsurance payments — —
Provision for contingency reserves 22,090 16,750
Provision for individual doubtful accounts 5 118
Write-off of loans — —
Others 3,511 —
Net other operating loss (C) (25,606) (16,868)
Ordinary profit (A + B + C) ¥24,359 ¥17,070
Notes: 1. In fiscal 2005, core profit (A) includes an income gain of ¥4,674 million in income from monetary trusts. Other operating expenses include a ¥3,511 million increasein policy reserve.
2. Core profit (A) for fiscal 2005 includes income gains of ¥3,917 million income from monetary trusts.
34
Investment Summary of General Account Assets
Millions of yen / Percentage
Amount Percentage of total
As of March 31 2006 2005 2006 2005
Cash and call loans ¥ 71,598 ¥ 214,266 2.5 8.9
Repurchase agreement account — — — —
Purchased monetary trusts — — — —
Trading securities — — — —
Monetary trusts 658,351 515,229 23.3 21.3
Securities 1,870,288 1,517,858 66.3 62.8
Japanese government and corporate bonds 1,499,591 1,321,447 53.1 54.7
Stocks 250,718 53,248 8.9 2.2
Foreign securities 102,720 131,068 3.6 5.4
Public and corporate bonds 89,095 122,782 3.2 5.1
Stocks and others 13,624 8,285 0.5 0.3
Other securities 17,257 12,093 0.6 0.5
Loans 86,918 79,914 3.1 3.3
Policy loans 86,918 79,914 3.1 3.3
Other loans — — — —
Property and equipment 75,579 50,602 2.7 2.1
Deferred tax assets — — — —
Other assets 59,866 38,541 2.1 1.6
Provision for possible loan losses (44) (142) (0.0) (0.0)
Total assets ¥2,822,559 ¥2,416,269 100.0 100.0
(Foreign currency assets) 46,973 46,240 1.7 1.9
Note: Monetary trusts for investment and securities held for trading purposes and other securities are posted at a price equivalent to present market value.
1. Breakdown of Assets
Millions of yen
Amount
Years ended March 31 2006 2005
Cash and call loans ¥(142,668) ¥ (17,845)
Repurchase agreement account — —
Purchased monetary trusts — —
Trading securities — —
Monetary trusts 143,121 96,005
Securities 352,430 108,780
Government and corporate bonds 178,143 163,017
Stocks 197,470 14,486
Foreign securities (28,347) (68,640)
Public and corporate bonds (33,686) (71,081)
Stocks and others 5,339 2,441
Other securities 5,164 (83)
Loans 7,004 8,284
Policy loans 7,004 8,284
Other loans — —
Property and equipment 24,977 4,319
Deferred tax assets — —
Other assets 21,325 5,395
Provision for possible loan losses 98 (35)
Total assets ¥ 406,289 ¥204,902
(Foreign currency assets) 733 4,268
Note: Monetary trusts for investment and securities held for trading purposes and other securities are posted at a price equivalent to present market value.
2. Change in Assets
35
Millions of yen
Years ended March 31 2006 2005
Interest expense ¥ 9 ¥ 133
Loss on sales of securities owned — —
Investment loss on securities owned — —
Loss on monetary trusts, net — —
Losses on trading securities, net 647 —
Loss on sales of securities 267 330
Loss on sales of government bonds and others 105 4
Loss on sales of stocks and others 161 326
Loss on sales of foreign securities — —
Loss on sales of other securities — —
Devaluation losses on securities — 217
Valuation loss on government bonds and others — —
Valuation loss on stocks and others — 217
Valuation loss on foreign securities — —
Losses on redemption of securities 212 1,146
Losses from derivatives, net — 342
Foreign exchange loss — 59
Provision for possible loan losses 6 118
Write-off of loans — —
Depreciation of properties for lease 523 558
Other investment expenses 2,895 2,208
Total ¥4,561 ¥5,116
4. Investment Expenses (General Account)
Millions of yen
Years ended March 31 2006 2005
Interest and dividends ¥26,581 ¥25,595
Interest on bank deposits 10 9
Interest and dividends on securities 19,640 19,349
Interest on loans 3,607 3,357
Rental income from real estate 3,313 2,828
Other interest and dividends 8 51
Gain on sales of securities owned — —
Investment income from securities owned — —
Income from monetary trusts, net 19,558 7,170
Income from trading securities, net — 3,962
Gain on sales of securities 6,546 3,339
Gain on sales of government bonds and others 231 482
Gain on sales of stocks and others 6,314 2,497
Gain on sales of foreign securities — 359
Gain on sales of other securities — —
Gain on redemption of securities 5,342 2,393
Gain from derivatives, net 825 —
Foreign exchange gain, net 59 —
Other investment income 0 4
Total ¥58,914 ¥42,466
3. Investment Income (General Account)
36
5. Yields on Investment Assets
(a) Yield by Asset Class (General Account)Percentage
Years ended March 31 2006 2005
Cash and call loans 0.01 0.01
Securities — —
Monetary trusts 3.51 1.59
Government and corporate bonds 1.19 1.31
Stocks 11.05 17.57
Foreign securities 5.67 3.14
Loans 4.39 4.43
Property and equipment 0.33 0.39
Total assets in general account 2.22 1.70
Notes: 1. The denominator of yield calculations is the daily average balance on a book value basis. The numerator is the yield calculated by subtracting investmentexpenses from investment income in operating income (expenses).
2. The above yield calculations do not include valuation gains in accordance with Article 112 of the Insurance Business Law.
(b) Yield on Overseas Investments (General Account)Percentage
Years ended March 31 2006 2005
Yield on overseas investments 5.67 3.13
Note: Overseas investments is the sum of foreign-currency and yen-denominated assets.
(c) Valuation Gain (Loss) on Securities Held for Trading PurposesMillions of yen
Valuation gain (loss)Amount in balance sheets included in statements of income
Years ended March 31 2006 2005 2006 2005
Securities held for trading purposes ¥59,649 ¥87,370 ¥3,907 ¥(1,042)
Note: “Securities held for trading purposes” includes monetary trusts and other items.
37
(d) Market Value Information for Listed Marketable SecuritiesMillions of yen
Book Market Net gain Gain or loss Book Market Net gain Gain or loss
value value or loss Gain Loss value value or loss Gain Loss
As of March 31, 2006 and 2005 2006 2005
Bonds to be held until
maturity — — — — — — — — — —
Bonds corresponding to
policy reserves — — — — — — — — — —
Shares of subsidiaries and
affiliated companies — — — — — — — — — —
Other securities ¥2,186,863 ¥2,389,702 ¥202,839 ¥222,866 ¥20,026 ¥1,766,699 ¥1,854,708 ¥88,009 ¥91,180 ¥3,170
Government and
corporate bonds 1,927,403 1,968,806 41,402 60,193 18,790 1,591,361 1,651,629 60,268 62,312 2,044
Stocks 160,589 311,061 150,471 150,848 376 38,253 57,863 19,609 20,221 611
Foreign securities 90,694 93,820 3,125 3,984 859 128,909 133,944 5,034 5,549 514
Government and
corporate bonds 90,622 93,577 2,955 3,814 859 128,836 133,746 4,910 5,424 514
Stocks and others 72 242 169 169 — 72 197 124 124 —
Other securities 8,175 16,015 7,839 7,839 — 8,175 11,272 3,097 3,097 —
Total ¥2,186,863 ¥2,389,702 ¥202,839 ¥222,866 ¥20,026 ¥1,766,699 ¥1,854,708 ¥88,009 ¥91,180 ¥3,170
Government and
corporate bonds 1,927,403 1,968,806 41,402 60,193 18,790 1,591,361 1,651,629 60,268 62,312 2,044
Stocks 160,589 311,061 150,471 150,848 376 38,253 57,863 19,609 20,221 611
Foreign securities 90,694 93,820 3,125 3,984 859 128,909 133,944 5,034 5,549 514
Government and
corporate bonds 90,622 93,577 2,955 3,814 859 128,836 133,746 4,910 5,424 514
Stocks and others 72 242 169 169 — 72 197 124 124 —
Other securities 8,175 16,015 7,839 7,839 — 8,175 11,272 3,097 3,097 —
Notes: 1. The above table includes securities such as CDs which are regarded appropriate to treat as securities defined by Securities and Exchange Law.2. The above table includes monetary trusts except securities held for trading purposes. Its book value for the fiscal year ended March 31, 2006 was ¥499,575 million
and net gain was ¥35,591 million.3. The book value represents the value after accounting for depreciation and impairment losses, but before determining the fair market value.
Millions of yen
As of March 31, 2006 and 2005 2006 2005
Bonds to be held until maturity — —
Unlisted foreign bonds — —
Other — —
Bonds corresponding to policy reserves — —
Shares of subsidiaries and affiliated companies ¥ 3,047 ¥3,047
Other securities 10,326 5,101
Unlisted domestic stock, excluding over-the-counter stocks 5 5
Unlisted foreign stock, excluding over-the-counter stocks 159 116
Unlisted foreign bonds 1,125 —
Others 9,036 4,980
Total ¥13,374 ¥8,149
The following table shows book value of securities without market value at March 31, 2006 and 2005:
38
OrganizationAs of July 1, 2006
Compliance CommitteeMarket Conduct Compliance (MCC) CommitteeProtection of Personal Information Promotion CommitteeRisk Management CommitteeDisciplinary CommitteeEnvironment CommitteePersonnel Development CommitteeSLQ CommitteeInvestment Committee
Lifeplanner Sales Group 1Lifeplanner Sales Group 2Lifeplanner Sales Group 3Lifeplanner Sales Group 4
Independent Agency Sales Group
Sales Administration Group
Investment Group
Business Process Reengineering Group
Total Administration Control Group
General Meeting of Shareholders
Executive Management Board Executive Officers Board
Board of Auditors
Chief ActuaryCompensation Advisory Committee
Board of Directors
Agency OfficeAgency OfficeAgency OfficeAgency Office
Independent Agency Sales DivisionIndependent Agents Planning DivisionIndependent Agents Sales Promotion DivisionMarket Development Division
Sales Administration DivisionSales Education & Training Administration DivisionProduct Development DivisionOffice Administration Division
Business Administration Control DivisionCompliance DivisionOperations Administration Division
Investment Division
Information System Division 1Information System Division 2Operations Planning DivisionGeneral Operation Division
Lifeplanner Planning & Promotion Division
Lifeplanner Education & Training Division
Marketing Division
Knowledge Management Division
Underwriting Division
Policyholders’ Service Division
Claims & Benefits Division
Real Estate Division
Chief Medical Officer
Medical Division
Corporate Communications Division
International & Business Development Division
Actuarial Division
ALM Division
Corporate Planning Division
Customer Relation Planning Division
Accounting Division
Investment Administration Division
Customer Center
Internal Audit Division
Personnel Division
General Affairs Division
Health Promotion Center Division
Representative Office for East Asia
39
Corporate History
1979 June Preliminary authorization obtained from theMinistry of Finance
Aug Sony Prudential Life Insurance Co., Ltd.,established with capital of ¥400 million as a jointventure between Sony Corporation and PrudentialInsurance Company of America
Sept Head office established at 1-1, Minami Aoyama1-chome, Minato-ku, Tokyo
Dec Capital increased to ¥1.2 billion1980 Sept Capital increased to ¥3.0 billion1981 Feb Business license obtained from the Ministry
of Finance1982 Feb Capital increased to ¥4.5 billion1986 Sept Capital increased to ¥5.5 billion
Oct Variable life insurance launched1987 July Agreement reached with Prudential to terminate
joint venture contractSept Corporate name changed to Sony Pruco Life
Insurance Co., Ltd.Equity interest: Sony Corporation 50%; Pruco Inc.30%; Career Development International Co., Ltd.10%; Mitsui Bank, Ltd. 5%; The Mitsui Trust &Banking Co., Ltd. 5%
1988 Oct Capital increased to ¥11.0 billion1989 Apr Cancer insurance launched
June Individual life insurance in force exceeded¥1 trillion
Aug Tenth anniversary of foundingOct Independent agency system introduced
1990 Dec Capital increased to ¥18.0 billion1991 Apr Corporate name changed to Sony Life Insurance
Co., Ltd.June Individual life insurance in force exceeded
¥2 trillionJuly Began handling group annuity insuranceNov Capital increased to ¥22.0 billion
1992 Apr Comprehensive medical insurance launched1993 Feb Individual life insurance in force exceeded
¥3 trillionSept Equity interest: Sony Corporation 50%; Sony
Corporation of America 30%; Career DevelopmentInternational Co., Ltd. 10%; The Sakura Bank,Ltd. 5%; The Mitsui Trust & Banking Co., Ltd. 5%
1994 Sept Equity interest: Sony Corporation 60%; SonyCorporation of America 30%; Career DevelopmentInternational Co., Ltd. 10%
Dec Individual life insurance in force exceeded¥5 trillion
1995 Dec All sales employees provided with personalcomputers
1996 Mar Individual life insurance in force exceeded¥8 trillionEquity interest: Sony Corporation 100%
Dec Individual life insurance in force exceeded¥10 trillion
1997 Feb Total assets exceeded ¥500.0 billionJuly Capital increased to ¥50.0 billion
1998 Jan Individual life insurance in force exceeded¥13 trillion
Aug Sony Life Insurance (Philippines) Corporationestablished
Nov Total assets exceeded ¥800 billion1999 Mar Individual life insurance in force exceeded
¥16 trillionApr Mutual fund launchedAug Twentieth anniversary of foundingSept Cumulative deficit cleared
Capital decreased to ¥40.0 billionNov Variable annuity insurance launched
Non-smoker preferred risk insurance launchedDec Total assets exceeded ¥1 trillion
2000 Jan Individual life insurance in force exceeded¥18 trillion
Feb Sales of Global Wrap mutual fund launchedthrough Lifeplanner® marketing channel
Sept Whole-Life Insurance launchedCancer rider launched
Oct Individual life insurance in force exceeded¥20 trillion
2001 Mar Standard policy reserves achieved by increasingcapital by ¥50.0 billionCapital increased to ¥65.0 billionISO 14001 certification acquired
Apr Long-term comprehensive medical insurancelaunched
May Sales of Sony Assurance’s products startedthrough Lifeplanner® sales employees
June Sales structure for mutual funds expandedthrough Lifeplanner®
July Individual life insurance in force exceeded¥22 trillion
Sept Comprehensive long-term medical insurancecoverage launched, including features forhospitalization and surgical procedures
2002 Mar Commenced group credit life insurance service formortgage loan borrowers from Sony Bank Inc.
Apr Nursing needs rider launchedMay Registration of legal entity for management of
defined contribution plans completedJuly Variable life term insurance product launched
Separate accounts associated with variable lifeinsurance product, proliferated with Japan EquityGrowth Fund and World Core Equity Fund
Sept Individual life insurance in force exceeded¥24 trillion
Oct Began selling insurance products through bankchannels
2003 Jan Increasing term life insurance product ExcellentValue Plan launched
May Sony Life Academy for executive training openedTotal assets exceeded ¥2 trillionThe Book 1 completed
June ISMS certification obtainedJuly Rider to cover initial period of hospitalization
launchedIndividual life insurance in force exceeded¥25 trillion
Nov The Book 2 completed2004 Mar Individual life insurance in force exceeded
¥26 trillionApr Sony Corporation established Sony Financial
Holdings Inc.Sony Life became 100% subsidiary of SonyFinancial Holdings Inc.
May Insurance with special exemption from payment ofpremiums launched
June Sony Bank began selling Sony Life’s individualannuities
Dec Individual life insurance in force exceeded¥27 trillionCommenced introduction of Sony Bank mortgageloans through Lifeplanner® sales channel
2005 June Individual life insurance in force exceeded¥28 trillion
July “Lifeplanner Value®” registered as a trademarkNov Commenced sales of Long-Term, Level Term Life
Insurance (Disability Compensation, Non-Profit)2006 Jan Total assets exceeded ¥3 trillion
Feb Commenced sales of Increasing Term Life Insurance(Low Surrender Payments, Non-Profit)
40
Directors and Statutory AuditorsAs of July 1, 2006
FOUNDER
Akio Morita
Taro Okuda
President,
Representative Director,
Sony Life Insurance Co., Ltd.
Director,
Sony Financial Holdings Inc.
Akihiko Nakamura
Executive Deputy President,
Sony Life Insurance Co., Ltd.
Masamitsu Shimaoka
Senior Executive Vice President,
Sony Life Insurance Co., Ltd.
BOARD OF DIRECTORS
Kunitake Ando
Chairman,
Sony Life Insurance Co., Ltd.
Chairman and Representative
Director,
Sony Financial Holdings Inc.
Director,
Sony Assurance Inc.
Hiromichi Fujikata
Executive Vice President,
Representative Director,
Sony Financial Holdings Inc.
Director,
Sony Assurance Inc.
OFFICERS
Taro Okuda
President
and Representative Director
Akihiko Nakamura
Executive Deputy President,
Total Administration Control
Group, Investment Group
Hisakazu Takeuchi
Senior Executive Vice President,
Lifeplanner Sales Group,
Lifeplanner Planning & Promotion
Division, Lifeplanner Education &
Training Division, Marketing
Division, Knowledge
Management Division
Takeshi Honda
Senior Executive Vice President,
Investment Group
Mitsuhiro Koizumi
Senior Executive Vice President,
Sales Administration Group
Masamitsu Shimaoka
Senior Executive Vice President,
Business Process Reengineering
Group, Corporate Planning Division
Shigeru Arakawa
Executive Vice President,
Independent Agency Sales
Group, Chairman of the
Board of Sony Life Insurance
(Philippines) Corporation
Tohru Hanatsuya
Executive Vice President,
Chief Actuary,
Actuarial Division, ALM Division
Hideki Yamada
Executive Vice President,
Underwriting Division,
Policyholders’ Service Division,
Claims & Benefits Division,
Accounting Division, Investment
Administration Division,
Customer Center
Taketoshi Nonaka
Executive Vice President,
Personnel Division, General
Affairs Division, Health Promotion
Center Division
Hirotoshi Watanabe
Executive Vice President
Corporate Communications
Division, International & Business
Development Division,
Representative Office
for East Asia
Tominaga Ozawa
Senior Vice President,
Real Estate Division
Toshirou Maeda
Senior Vice President,
Chief Medical Officer,
Medical Division
Kazuhiro Wakayama
Senior Vice President,
Lifeplanner Sales Group 4
Masao Hagiwara
Senior Vice President,
Lifeplanner Sales Group 1
Mafumi Hashimoto
Senior Vice President,
Lifeplanner Sales Group 2
Yoshihiko Kaiya
Senior Vice President,
Lifeplanner Sales Group 3
Yuichiro Sumimoto
Senior Vice President,
Independent Agency Sales
Group
Kiyoshi Watanabe
Senior Vice President,
Total Administration Control
Group
Jun Shirai
Senior Vice President,
Internal Audit Division
Tomohito Tsuchiya
Senior Vice President, Customer
Relation Planning Division
(Corporate Planning Department,
investment planning by request)
STANDING STATUTORY
AUDITOR
Fumio Mitani
STATUTORY AUDITORS
Yoshiaki Yamauchi
Hiroshi Sano
41
Corporate DataAs of March 31, 2006
Sony Life Insurance Co., Ltd.
Head Office
1-1, Minami Aoyama 1-chome, Minato-ku, Tokyo 107-8585, Japan
E-mail: [email protected]
Established: August 1979
Common Stock: ¥65,000 million
Employees: 5,250 (including 3,826 Lifeplanner®)
Total Assets: ¥3,103,241 million
Fiscal Year: April 1 to March 31
Representative Office for East Asia
Chief Representative Officer: Hiromitsu Onodera
35th Floor, PB Com Tower
6795 Ayala Avenue Corner V.A. Rufino Street, 1226
Makati City, Philippines
Tel: +63-2-819-1801
Sony Life Insurance (Philippines) Corporation
Chairman of the Board: Shigeru Arakawa
President and Chief Executive Officer: Akira Yazawa
35th Floor, PB Com Tower
6795 Ayala Avenue Corner V.A. Rufino Street, 1226
Makati City, Philippines
Tel: +63-2-819-6001
Sony Financial Holdings Group
This business report is printed on recycled paper.Printed in Japan
