A n n u a l R e p o r t

Transcription

1 Annual Report For the year ended March 31, 2007

2 Management Message Taro Okuda, President Kunitake Ando, Chairman Before reporting our operating results, I would like to express my deep-felt apologies for situations that came to light during the year in which we inadvertently underpaid or failed to pay certain claims, failed to provide sufficient guidance regarding the claims process, or overlooked certain other obligations, as I recognize that the payment of claims is one of the most fundamental operations of a life insurance company. We accept these events as grave errors, and we are placing the highest management priority on measures to prevent recurrence and redoubling our efforts to raise our level of service to customers. FY2006 Operating Performance Sony Life s basic mission is to work for customers financial security and stability by offering optimal life insurance products and high-quality services. In keeping with this mission, Sony Life s Lifeplanner sales employees and Partners (independent agencies) work to provide consultation and deliver optimal protection to each customer. As a result of these efforts, in FY2006 the new policy amount *1 was up 1.1% from the previous fiscal year, to 3,429.4 billion. Policy amount in force *1 has continued to grow since the start of the Company s operations, amounting to 30,244.4 billion as of March 31, 2007, up 4.0% from one year earlier. The lapse and surrender rate *2 (individual life insurance) remained low, at 5.90%. We are convinced that these favorable results arose from the satisfaction of customers with our method of offering life insurance products that are optimally tailored for each customer s life plan and our thoughtful follow-up services. Walking Beside and Remaining in Step with Our Customers We believe that the mission of a life insurance company is to reduce the uncertainty customers feel about the future by providing life insurance that is tailored to their needs, allowing them to lead secure and fulfilling lives. For this reason, we focus on lifelong consultation by selling most suitable life insurance at the start, followed by periodical check up to meet customers expectation at any time, until we fulfill the future promises made with our customers. The operations of life insurance companies are inextricably linked with stabilizing and enhancing the lives of the people. Because of their importance to the welfare of the people and the highly public role they play, life insurance companies are expected by customers and society as a whole to fulfill their corporate responsibilities earnestly, and trustworthiness is an important determinant of a life insurance company s ability to grow. To achieve a high level of trust, we carefully *1 The new policy amount and policy amount in force are the total of individual life insurance and individual annuities. *2 The lapse and surrender rate is expressed as a ratio of cancellations or lapses that is modified due to the reduction, increase and reinstatement of the total policy amount in force and divided by the total policy amount in force at the beginning of the fiscal year.

3 listen to the voice of individual customers, as well as those of society as a whole. Based on this feedback, we strive to improve our management in a host of areas. We worked on several such initiatives in FY2006. To raise the level of convenience to customers during the application process, from August 2006 we became the first life insurance company in Japan to introduce a system allowing post-contract bank transfers beginning from the initial premium. With this new service, new customers need not go to the effort of ensuring that they have the appropriate amount of cash on hand at the time of application. Before receiving the initial premium, coverage begins as soon as we have received notice of an applicant s health status. We also develop products to meet the emerging needs of an aging society. For example, in November 2006 we began offering semi-participating whole-life nursing-care insurance. In addition, during the year we opened a showroom, called Life Planning SQUARE, within the Sony building in Ginza, Tokyo, to introduce to more people the importance of life planning. At this showroom, Sony Life emphasizes the importance of Life Planning concept which Sony Life can provide in its unique way, or looking at a family s goals and future directions from a variety of perspectives to help more people enjoy the importance of this process through which we aim to help as many people as possible enjoy lives of abundance. Going forward, Sony Life will continue strengthening its service offerings to secure the trust of its customers, as well as of society at large. LIFEPLANNER VALUE Providing Lifelong Support to Meet the Changing Life Plans of Our Customers One unique characteristic of Sony Life is its provision of protection products that are optimally tailored to the life plan of each individual customer. Protection that is optimal at the time of purchase, however, may not be ideal throughout a customer s life. To continue providing financial security and stability to our customers, we ensure thorough follow-up services as long as policies are in place. We strive to offer continuous support by maintaining plans which properly meet changes of needs and environment of customers. Sony Life also intends to provide new value that goes beyond the traditional boundaries of life insurance. The starting point for our service concept is to forging strong relationships with our customers. From this basis, we provide rational protection and appropriate after-sales follow-up, enabling a wide range of support for a good life. By standing beside our customers throughout their lives and working to help them address the issues they face, the Company provides lifelong protection for its customers by delivering LIFEPLANNER VALUE as only Sony Life can. We aim to provide our customers with greater peace of mind. As one aspect of our efforts to deliver LIFEPLANNER VALUE, we have entered tie-ups with many nursing care providers throughout Japan. These relationships enable us to introduce nursing care facilities to our customers, as needed. In addition, in September 2006 Sony Life and Watami Co., Ltd., entered an agreement to collaborate in the nursing care business with the aim of providing high-quality nursing care services to enable as many people as possible to maintain happy lives as they age. The two companies have established an exploratory committee to further this cooperation. Sony Life plans to contribute to the lives of its customers by continuing to deliver LIFEPLANNER VALUE. Aiming to Provide Higher-Value-Added Products and Services As a member of the Sony Financial Holdings Group, Sony Life strives to raise synergies within the Group and provide higher-quality financial services. In January 2007 Sony Life reached a basic agreement to establish a life insurance subsidiary in Japan with AEGON N.V. of the Netherlands in the business of individual annuities. As society continues to age, we believe the time is fast approaching when such survivor protection products as individual annuity insurance will take a place alongside death protection products as a pillar of customers life plans. By focusing on the field of annuities, we aim to reinforce our support system to help customers live long lives and maintain their peace of mind. In Closing As we continue to protect our customers over the long term by providing greater peace of mind, we aim to be appreciated and trusted by our customers, and remain their life insurance company of choice. We will continue striving to create a corporate culture that contributes to our customers and society by delivering added value on an ongoing basis. We would like to thank you for your ongoing support, and encouragement of Sony Life in these endeavors. Taro Okuda President, Representative Director 1

4 CONTENTS Management Message Financial Highlights Fiscal 2006 Operating Performance Asset Management Income Assets, Liabilities and Net Assets Financial Soundness Embedded Value Working Together with Our Customers as Their Own Agents Educational Systems, Self-Development and Reciprocal Studies Providing Optimal Protection through the Life Planning Support Service (LiPSS) Providing a Range of Follow-up Services to Help Customers Live Fulfilling Lives System of Claim Payment Operations Risk Management System Personal Information Protection and Information Security Compliance Environmental Protection Initiatives Social Contribution Activities The Sony Financial Holdings Group Non-consolidated Balance Sheets Non-consolidated Statements of Income Notes to Financial Statements Details of Ordinary Profit (Core Profit) Policies and Policy Amount in Force by Product New Policies and New Policy Amount by Product Investment Summary of General Account Assets Organization Corporate History Directors and Statutory Auditors Corporate Data Lifeplanner and LIFEPLANNER VALUE are registered trademarks of

5 Financial Highlights Key Performance Indicators for Past Five Years As of March 31 (Items marked with asterisk (*) are for the years ended March 31) (Millions of yen) Policy amount in force 31,152,672 30,007,828 28,639,488 27,070,067 25,650,022 Individual life insurance in force 30,038,118 28,908,802 27,680,259 26,122,855 24,689,151 Individual annuities in force 206, , , , ,841 Group life insurance in force 908, , , , ,029 Group annuities in force 72,633 71,400 69,017 67,107 64,154 Annualized premiums from insurance in force 504, , ,874 Medical protection, living benefit protection and other products 117, , ,821 New policy amount* 3,437,215 3,401,226 3,731,597 3,748,640 3,542,249 Individual life insurance sales 3,396,867 3,361,271 3,699,791 3,713,390 3,518,350 Individual annuity sales 32,590 30,864 24,421 18,665 18,974 Group life insurance sales 7,757 9,090 7,384 16,584 4,924 Annualized premiums from new policies* 65,541 61,791 63,851 Medical protection, living benefit protection and other products 14,479 14,543 16,179 Ordinary revenues* 689, , , , ,089 Income from insurance premiums 605, , , , ,582 Investment income 78, ,438 50,089 64,767 31,493 Ordinary expenses* 674, , , , ,531 Insurance claims and other payments 219, , , , ,905 Investment expenses 8,184 4,561 5,116 3,605 14,933 Operating expenses 87,328 82,040 79,729 78,254 77,875 Ordinary profit* 14,895 24,359 17,070 30,478 18,557 Net income* 7,494 9,616 10,102 13,932 11,269 Core profit* 24,366 28,564 24,333 22,821 22,460 3 Common stock 65,000 65,000 65,000 65,000 65,000 (Thousands of shares) 65,000 65,000 65,000 65,000 65,000 Total liabilities and net assets 3,445,970 3,103,241 2,617,266 2,375,828 1,981,897 Assets in separate account 322, , , , ,189 Policy reserve 3,088,888 2,739,264 2,395,060 2,095,565 1,831,100 Loans 96,804 86,918 79,914 71,629 65,574 Securities 2,217,902 2,132,216 1,704,663 1,563,605 1,265,650 Solvency margin ratio 1,852.0.% 1,547.0.% 1,317.1.% 1,453.3.% 1,354.2.% Number of employees 5,253 5,250 5,528 5,538 5,569 Notes: 1. Policy amount in force is the total of individual life insurance, individual annuities and group life policy amounts in force. Individual annuities in force is the sum of annuity assets at the time annuity payments commence and policy reserves after annuity payments commence. 2. Group annuities in force is the amount of policy reserves. 3. New policy amount is the total of individual life insurance, individual annuity and group life insurance sales. Individual annuities are funded at the time of annuity commencement. 4. Annualized premiums, which include individual life insurance and individual annuities, are converted to one year s premium amount by multiplying individual premiums by a coefficient corresponding to the premium payment method. (Lump-sum payment policies are calculated as the premium payment times the policy period.) 5. Medical protection, living benefit protection and other products is the portion of the annualized premium recorded for medical protection benefits (hospitalization benefits, surgical benefits, etc.) and living benefit protection benefits (benefits for specific diseases, nursing care benefits, etc.).

6 Fiscal 2006 Operating Performance Policy Amount in Force We have maintained consistent growth since our establishment, with policy amount in force up 4.0% in fiscal At the end of fiscal 2006, total policy amount in force including individual life insurance and individual annuities was 30,244.4 billion, up 4.0% from a year earlier. Of this amount, individual life insurance in force expanded 3.9%, to 30,038.1 billion, and individual annuities in force grew 17.4%, to billion. We believe that these figures reflect the high level of trust we received from our policyholders, as well as high acclaim for our after-sales services. Group life insurance in force was billion, down 1.6%. Consequently, the total of individual life insurance, individual annuities and group life insurance in force was 31,152.6 billion, up 3.8% from the previous fiscal year. Policy Amount in Force (Individual life insurance + Individual annuities) (Billions of yen) 40,000 32,000 24,000 16,000 8,000 0 Policy amount in force (As of March 31) 30,244.4 billion , , , , , New Policy Amount New policy amount grew 1.1%, to 3,429.4 billion. In fiscal 2006, ended March 31, 2007, the total policy amount of new life insurance policies the sum of individual life insurance and individual annuities was 3,429.4 billion. This figures represented a 1.1% increase from the preceding year, reflecting favorable sales of products for individuals, as well as the introduction of new products, such as nursing care protection products, which launched in November Of the total, new policy amount of individual life insurance increased 1.1%, to 3,396.8 billion, and individual annuities expanded 5.6%, to 32.5 billion. At the same time, group life insurance decreased 14.7%, to 7.7 billion. Total new policy amount of individual life insurance, individual annuities and group life insurance were therefore 3,437.2 billion, up 1.1% from the previous fiscal year. The number of new individual life insurance and individual annuities during the year was 517,312, up 0.9%. New Policy Amount (Individual life insurance + Individual annuities) (Billions of yen) (Years ended March 31) 5,000 4,000 3,000 2,000 1,000 0 New policy amount 3,429.4 billion , , , , ,429.4 Ratio of Operating Expenses to Income from Insurance Premiums We continued working to raise management efficiency. Selling new policies, maintaining existing policies, making insurance payouts and other tasks incur various costs, such as personnel and administrative expenses. We refer to costs necessary to conduct our business as a life insurance company as operating expenses. In fiscal 2006, Sony Life reinforced its management base. The ratio of operating expenses to income from insurance premiums came to 14.5%, evincing ongoing success in sustaining management efficiency. Ratio of Operating Expenses to Income from Insurance Premiums (%) (Years ended March 31) % 5 0 Ratio of operating expenses

7 Lapse and Surrender Rate and Persistency Rates We continued to maintain a low lapse and The policyholder opinion research that the Company surrender rate and solid persistency rates. conducts each year indicates that policyholders are In fiscal 2006, our lapse rate for individual life insurance very satisfied with the content of the products that we on a insurance sales basis amounted to 5.90%, offer, which are tailored to customers individual life compared with 5.88% during the preceding term. plans, as well as the after-sale follow-up services that The persistency rates for individual life insurance we offer. We believe that this level of satisfaction is the policies, on a insurance sales basis, remained high. principal reason for our favorable ongoing lapse and The 13-month rate was 95.5%, the same level as in surrender rate and solid persistency rates. fiscal 2005, and the 25-month rate was 90.7%, up Note: The revised lapse and surrender rate is expressed as a ratio of cancellations or lapses that is modified due to the reduction, from 89.3%. increase or reinstatement of the total amount of policy amount in force, excluding the amount of policy amount in force at the beginning of the fiscal year. Lapse and Surrender Rate (Individual life insurance on a policy amount basis) (%) (Years ended March 31) 10 8 Persistency Rates (Individual life insurance on a policy amount basis) (%) (Years ended March 31) % 90.7% % Lapse and surrender rate th month th month Product Mix Sales of corporate products, nursingcare protection products and variable-life insurance were favorable. In fiscal 2006, more than 80% of new policies, on a insurance sales basis, were death-protection products. By product, sales of new products, such as insurance products for corporate customers and semi-participating whole-life nursing-care insurance, were robust. Sales of variable-life insurance policies increased, benefiting from their ability to provider reasonable coverage for relatively inexpensive premium amounts. Robust stock market conditions also played a role in increasing sales of these products during the term. New Policy Amount by Type of Products (Policy amount basis, fiscal 2006) Endowment/ Educational 10.2% Variable life 13.8% Other 4.3% Whole life 12.8% Term life 58.9%

8 Asset Management 6 Investment Environment During fiscal 2006, the Japanese economy continued to grow, albeit at a slower pace than during the preceding term. Real GDP grew at 1.9%, compared with 2.4% in fiscal 2005, although the rate of nominal GDP growth accelerated from 1.0% to 1.3%. Although capital investment advanced firmly, personal consumption was lackluster. Interest rates in Japan rose during the first half of the year, then retreated in the second half. The sense of recovery stemming from a cessation of the Bank of Japan s zero interest rate policy propagated outward into the general economy, causing a domestic economic rebound, and by May 2006 yields on 10-year Japanese government bonds temporarily hit 2.005%, although they later descended from this peak. A downturn in the consumer price index, coupled with lower U.S. interest rates, caused interest rates in Investment Policy Sony Life s fundamental policy on investing assets in the general account is to maintain the soundness of assets and to build an investment portfolio capable of ensuring stable medium- and long-term returns, taking into account expected returns and investment risks and responding deftly to changes in financial conditions and the investment environment. The Company places emphasis on risk management to ensure stable returns. Investment Performance As of March 31, 2007, general account assets totaled 3,123.2 billion, up 10.7%, or billion, from one year earlier. Within the general account, positions of Japanese government and corporate bond investments totaled 1,535.6 billion (accounting for 49.2% of general account assets); Japanese stocks, billion (7.8%); foreign government and corporate bonds, billion (3.2%); policy loans, 96.8 billion (3.1%); monetary trusts, billion (23.0%); cash and call loans, billion (7.6%); and real estate, 87.0 billion (2.8%) Investment Yield (%) Fiscal 2005 Fiscal 2006 Yield on investment of assets included within core profit Investment yield (general account) Note: Please refer to page 9 for information on core profit. Japan to begin declining in August At one point in March 2007, 10-year Japanese government bond yields fell to 1.545%, before rebounding to finish the year at 1.650%. A global downturn in stock prices affected the Japanese stock market as well, and the Nikkei average dipped to 14,045 in June However, robust corporate earnings and a firm U.S. stock market prompted a rally, and the Nikkei ended the fiscal year at 17,287. In the foreign exchange markets, the global stock market downturn caused the yen to continue appreciating against other currencies, but thereafter a growing gap between Japanese and U.S. interest rates caused the yen to depreciate. As of March 31, 2007, the rate of exchange was to the U.S. dollar, 0.6 lower than at the beginning of the fiscal year. In fiscal 2006, we continued to invest in line with changes in the investment environment. In response to rising interest rates in the first half of the year, we concentrated on active investment in long-term Japanese government bonds. As share prices declined, we shifted our focus to investing in convertible bonds issues linked with stocks with declining share prices. Policy loans 3.1% Other securities 0.5% Foreign stocks and others 0.7% General Account Assets (As of March 31, 2007) Real estate 2.8% Cash and call loans Other assets 2.1% 7.6% Monetary trusts 23.0% Japanese government bonds and others 49.2% Japanese stocks 7.8% Foreign government bonds and others 3.2%

9 Income Income from Insurance Premiums and Insurance Claims and Other Payments Income from insurance premiums and 86.4 billion in fiscal 2005), 25.7 billion (compared others rose, owing to such factors as with 23.5 billion in fiscal 2005) and 5.1 billion growth in the policy amount in force. (compared with 4.4 billion in fiscal 2005), respectively, totaling 89.9 billion (compared with Income from insurance premiums and others, which includes such income as premiums paid by customers, is the principal source of income for insurance claims and other payments was due in part to the billion in fiscal 2005). The decrease in insurance companies. In fiscal 2006, such factors as a steady fact that payments upon the maturity of outstanding increase in the policy amount in force caused income policies in fiscal 2005 were more than 28.0 billion from insurance premiums to rise to billion, higher than in fiscal 2006, due to a greater number of compared with billion in the preceding year. maturities in fiscal Sony Life believes that in On the other hand, insurance claims, benefits and fiscal 2006, as in past years, it was able to continue annuities that Sony Life paid to policyholders in fiscal to serve the needs of its policyholders amounted to 59.0 billion (compared with Income from Insurance Premiums and Others Insurance Claims and Other Payments (Billions of yen) (Years ended March 31) 750 (Billions of yen) (Years ended March 31) billion billion billion 59.0 billion 7 0 Income from insurance premiums Annuities Benefits Claims Investment Income and Investment Expenses Investment income came to 78.7 billion, and investment income on assets held in separate accounts investment expenses totaled 8.1 billion. declined during the period under review. Investment income, or the income received through Investment expenses, or the expenses incurred in the investment in assets, includes interest and dividend income, as well as gains on the sales of securi- items as loss on sales of securities, devaluation losses order to generate investment income, include such ties. In fiscal 2006, investment income amounted to on securities and provision for doubtful accounts billion, compared with billion in the Investment expenses were 8.1 billion in fiscal 2006, preceding term. Although investment income benefited up from 4.5 billion in fiscal 2005, owing to an increase from favorable stock market conditions in fiscal 2005, in depreciation of properties for lease. Ordinary Profit and Net Income Ordinary profit was 14.8 billion, and net income came to 7.4 billion. Ordinary profit the difference between ordinary revenues and ordinary expenses represents income derived from operating activities during the fiscal year. The principal sources of revenue for life insurance companies are income from insurance premiums and investment income. The main expenses are death and other claims, hospitalization and other benefits, annuity payments, provision for policy reserves, investment expenses and operating expenses. In fiscal 2006, ordinary profit fell 38.9%, to 14.8 billion. This decrease resulted from an increase in provisions for policy reserves, in line with cost increases. Net income is calculated by adding extraordinary gains to ordinary profit, then subtracting extraordinary losses, such as provision for reserve for price fluctuations, provision for reserve for policyholders dividends and income taxes. In fiscal 2006, net income fell 22.1%, to 7.4 billion.

10 Assets, Liabilities and Net Assets Assets As of the end of fiscal 2006, total assets amounted to 3,445.9 billion Total assets, comprising the capital received from stockholders and premiums paid by policyholders, are invested in securities, property and equipment and other assets. These assets are held in preparation for future insurance claims and benefit payments, as well as to maintain the soundness of the Company s insurance business. As of March 31, 2007, Sony Life s total assets reached 3,445.9 billion, up 11.0% from a year earlier. Total Assets (Billions of yen) (As of March 31) 3,500 2,800 2,100 1,400 3,445.9 billion Total assets , , , , , Liabilities We maintained sufficient policy reserve to cover future insurance claim payments. Policy reserve accounts for the majority of insurance reserves, which are insurance company liabilities. Policy reserve is a fund derived from income from insurance premiums and investments, held in reserve to ensure life insurance companies are able to pay future insurance claims. Policy reserve is mandatory under the Insurance Business law of Japan. Sony Life has attained a standard policy reserve level, and uses the net level premium method to build up its reserves. Under this method, we calculate operating expenses assuming a constant, or net level, throughout the premium payment period. Our policy reserve at the end of fiscal 2006 totaled 3,088.8 billion, which we consider sufficient. Policy Reserve (Billions of yen) (As of March 31) 3,500 2,800 2,100 1, Policy reserve 3,088.8 billion , , , , ,088.8 Net Assets Sony Life s common stock was 65.0 billion. Common stock is the minimum standard amount of shareholders equity a company must hold to protect its creditors, and Article 6 of the Insurance Business Law of Japan prescribes a minimum of 1.0 billion. Other regulations have also been established to ensure adequate capitalization. As of March 31, 2007, Sony Life had total common stock of 65.0 billion (wholly provided by Sony Financial Holdings since April 1, 2004).

11 Financial Soundness Core Profit Core profit reached 24.3 billion. Core profit is an indicator of the profit-earning capacity of the primary insurance business over a one-year period. The term primary insurance business refers to the management of income from insurance premiums received from policyholders, along with investment income to pay insurance claims, benefits and annuities and to make policy reserve provisions for future payments. Adding capital gains or losses, such as on sales of securities, and one-time gains and losses to core profit produces ordinary profit, which appears on the statements of income. In fiscal 2006, Sony Life s core profit decreased 14.7% year on year, to 24.3 billion, owing to a higher negative spread and increased operating expenses. Core profit of 24.3 billion Net capital gains of 22.3 billion Net other operating expenses of 31.8 billion Ordinary profit of 14.8 billion Note: Like most other life insurers that are organized as joint stock corporations, Sony Life sells life insurance that is non-profit. As no policyholder dividend is added, we are able to offer services to policyholders for lower premiums. Life insurers organized as mutual corporations, on the other hand, typically offer for-profit policies, their income from insurance premiums includes a portion of financial resources for policyholder dividends and financial resources for these dividends are included in core profits. For this reason, mutual corporations tend to show higher core profits than joint stock corporations that operate on the same scale. Negative Spread The negative spread for fiscal 2006 was 37.3 billion. Life insurance companies retain a portion of premiums received from policyholders as policy reserves in anticipation of future payments. These policy reserves are maintained by investing under the assumption that they will yield a certain rate of interest every year. This interest rate is called the assumed interest rate (for calculating policy reserves). Negative spread arises when, owing to the deterioration of the investment environment or other factors, the actual yield on investment for a portion of the policies falls below the assumed interest rate (for calculating policy reserves). Our negative spread in fiscal 2006 was 37.3 billion, up from 33.1 billion in the previous fiscal year. However, the Company has core profit of 24.3 billion, which is adequate to cover its negative spread. (See the discussion of core profit above.) Formula for Calculating Negative Spread Yield on investment on core profit *1 Average assumed interest rate (for calculating policy reserves) *2 General account policy reserves *3 Negative spread Notes: *1. Investment yield for core profit is the investment income from the general account that is included in core profit, less the provision for policyholder dividend reserves, divided by policy reserve in general account. *2. The average assumed interest rate (for calculating policy reserve) is the average of the assumed interest rates used to calculate policy reserve in general account. *3. Policy reserve in general account excludes the contingency 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 interest calculated by discounting the amount using the assumed interest rate every year. 9 Unrealized Gains on Securities Unrealized gains on our securities holdings amounted to billion. Unrealized gains and losses refer to the differences between the book values and fair values of securities. If fair value exceeds book value, a gain on sales of assets would be realized by liquidating them at market prices. For this reason, such unrealized gains act as a provision against various risks. Part of the unrealized gains and losses on securities and real estate is included in the total solvency margin the numerator of the formula for calculating the solvency margin ratio. Unrealized gains on securities in the general account stood at billion as of March 31, 2007, down from billion a year earlier. Of this total, unrealized gains on Japanese stocks were billion (compared with one year earlier); on Japanese government bonds and others, 57.1 billion (compared with 41.4 billion one year earlier); and on foreign securities, 4.2 billion (compared with 3.1 billion one year earlier). (Reference: As of March 31, 2007, Sony Life assumed unrealized gains on shares to be zero when the Nikkei Stock Average is approximately 10,183 and the TOPIX index is 1,009 points.)

12 Real Net Worth Real net worth came to billion. Real net worth refers to the value of net assets, calculated by subtracting policy reserves and other real liabilities that have no capital component from real assets, such as securities and real estate, based on their market value. If a company s real net worth is negative, the regulating authorities may order a company to halt operations if it determines an excess of real liabilities. As of March 31, 2007, Sony Life s real net worth was billion, up 5.0% from one year earlier. Real Net Worth (Billions of yen) (As of March 31) billion Real net worth Solvency Margin Ratio We maintained a high solvency margin ratio, of 1,852.0%. The solvency margin ratio indicates a company s ability to pay. Life insurance companies accumulate policy reserves against the future payment of insurance claims so they can respond sufficiently to ordinarily anticipated events. However, unforeseen events sometimes occur as a result of changes in the Non-Performing Assets Sony Life has no non-performing assets. Life insurance companies make loans as investment assets and earn interest from such loans. These comprise policy loans offered as a service to policyholders and other loans made to third parties. A company s total loan balance represents the sum of these two loan balances. Credit Rating Sony Life has been rated highly by credit rating agencies. Sony Life has requested ratings from several institutions to help policyholders and potential customers environment, such as a major disaster or a cataclysmic fall in the stock market. The solvency margin ratio is one administrative control indicator used to judge if an insurer has the ability to pay in response to such unpredictable events. As of March 31, 2007, Sony Life had a high solvency margin ratio of 1,852.0%, up percentage points from the end of the previous fiscal year. Sony Life s loan balance at the end of fiscal 2006 was 96.8 billion. Because the Company does not engage in commercial lending, its loan balance is derived solely from policy loans, which are limited to the value of recoverable surrender cash. As a consequence, the Company has no riskmonitored loans (loans for which repayment circumstances are not ordinary). make objective decisions concerning its ability to finance insurance and pay claims and benefits. 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 Insurance claims paying ability Ability to pay insurance claims Credit Rating (Ratings as of July 1, 2007) Insurance financial strength rating Financial strength rating A+ AA AA Aa3 A+ Superior A very high capacity for payment of insurance claims A very high capacity to honor the financial commitment on the obligation Strong Note: The above ratings were assigned at Sony Life s request. They are not evaluations of insurance companies overall, nor are they a guarantee of claim payments in the future. The ratings are the opinions of the respective rating agencies, based on the figures and information available to them at that time. Please refer to each agency s website for more details.

13 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. In Europe and Canada, EV is regarded as one of indices used for assessing the corporate value of a life insurance company. The value of in-force business is the present value of future after-tax profits on in-force business minus the present value of cost of capital. Cost of capital is the spread between the investment yield and the discount rate applied to the amounts of capital and surplus that will be required to maintain the assumed level of solvency margin ratio. Adjusted net worth is calculated as (a) Total net assets in the balance sheets, excluding net unrealized gains on bonds except for convertible bonds + (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). Under generally accepted accounting principles in Japan (Japanese GAAP), which apply to life insurance companies in Japan, the balance sheets do not indicate the present value of future profits on in-force business, while EV indicates the present value of future profits on in-force business, together with the Company s adjusted net worth. For this reason, Sony Life believes EV serves as a valuable supplement to the financial information provided under Japanese GAAP and is a helpful indicator used to evaluate corporate value. However, EV covers only existing in-force business as of the date of valuation, and excludes the potential value of future new business, which is considered a constituent of the economic value of an insurance company. EV as of March 31, 2007 EV as of March 31, 2007, and changes in EV compared with one year earlier, are indicated below. (Billions of yen) Increase March (Decrease) EV Value of in-force business Adjusted net worth (14.6) Value of new business in the fiscal year The value of in-force business is calculated as follows: Value of in-force business = Present value of future after-tax profits on in-force existing business Present value of cost of capital. Cost of capital is the spread between the investment yield and the discount rate applied to the amounts of 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 net assets 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 net assets 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 policies concluded during each fiscal year. In calculating value of in-force business, the present value of future after-tax profits and adjusted net worth use balance sheet and reserve figures, based on Japanese GAAP. Assumptions and methods of computing EV differ for March 31, 2005, 2006 and Major Assumptions Below are the major assumptions used to compute EV as of March 31, Embedded Value (Billions of yen) (As of March 31) 1, billion EV Category Method of Establishing 1. Discount rate 6.0% 2. Investment yield on Investment yield on new investments is based on implied forward rates, assuming new investments 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 Calculated using the cost for the maintenance and administration of policies and for (unit cost) payments of claims based on Sony Life s experience during the most recent fiscal year 6. Effective tax rate Based on the most recent effective tax rate 7. Solvency margin ratio For the purpose of calculating cost of capital, maintenance of a solvency margin ratio of 600% was assumed 1. Discount rate The 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 government bonds: 1.66%), as of the end of the fiscal year. 2. Investment yield (1) Investment yield on new investments: Investment yield on new investments assumption was calculated based on the implied forward rates computed from the yield curve of Japanese government bonds as of March 31, 2007, and assuming that the Company invests only in Japanese government bonds every year. Sony Life sets the assumed investment yield on new investments using neutral assumptions set in light of the market environment at the end of each fiscal year. Neutral assumptions are made to avoid potential complications arising from the fact that the more Sony Life invests in assets with higher expected rates of return, the higher the calculated EV. Sony Life believes that assets with higher expected rates of return have higher risks and should be adjusted by discount rates when calculating EV.

14 (2) Investment yield on existing assets: The investment yield on existing assets assumption was calculated separately for each asset based on the following assumptions: For existing bonds other than convertible bonds, Sony Life assumed holdings to maturity. For convertible bonds, Sony Life s calculations assumed that it would conduct rebalancing as of the date of evaluation as follows: After reflecting the unrealized gains from convertible bonds into its adjusted net worth, Sony Life immediately reinvests the remaining amount into Japanese government bonds. For stocks and other assets (policyholder loans, real estate, private equity funds, etc.), Sony Life assumed that it would maintain a balance at the end of the fiscal year within its own internal limits for holdings of such assets. Interest, dividends and proceeds from redemptions are calculated with the assumption that Sony Life would reinvest these proceeds into Japanese government bonds. Movement Analysis of EV from March 31, 2006 The change in EV from March 31, 2006, to March 31, 2007, is split into the following components: (Billions of yen) Item Amount 1. EV as of March 31, Shareholder dividends (6.5) 3. Release from the value of in force business EV of new policies for the year ended March 31, Difference between assumptions and actual results for the year ended March 31, 2007 (19.6) 6. Differences from changes in assumptions EV as of March 31, 2007 (Total of items 1 through 6) Note: Item (3) corresponds to reversing the discount for one year made as of March 31,2006, on the value of in-force business. 12 Impact of Changing Assumptions (Sensitivities) The impact of changing the underlying assumptions on EV at March 31, 2007, would be as follows: Amount of Increase (Decrease) EV Amount Discount rate 6.0% 5.0% % 7.0% (63.0) Solvency margin ratio 600% 500% % 700% (8.5) Investment yield: +0.25%* On total investments On new investments Investment yield: 0.25%* On total investments (56.9) On new investments (37.4) Mortality and morbidity Assumption x 1.1 (60.1) Lapse and surrender rate Assumption x 1.1 (16.3) Operating expenses (unit cost of ongoing policies) Assumption x 1.1 (5.0) * The impact of changes in investment yield assumptions is shown after taking into account the impact on policyholders dividends. (Billions of yen) Notes Regulations require that certain reserves be set aside for minimum guarantee benefit features on variable life insurance and annuity contracts issued in fiscal 2005 and thereafter. In calculating EV as of March 31, 2007, while setting aside the reserve for guaranteed minimum death benefits (GMDB) based on Japanese GAAP, Sony Life evaluated the future cash flow on GMDB for all existing variable life insurance policies using the stochastic method. This evaluation reduced EV by 4.3 billion, compared with 3.2 billion in fiscal Opinion of Outside Specialist Sony Life has obtained an opinion letter from Milliman, Inc., an independent actuarial firm that possesses insurance actuarial expertise. The opinion letter can be found on Sony Life s website ( Disclaimer Statements made in this section of the annual report contain calculations based on assumptions regarding future projections that are subject to risks and uncertainties. Actual future results might differ significantly from the assumptions used in the EV calculations. Therefore, readers are advised to be cautious and not place undue reliance on these EV calculations in assessing the corporate value of Sony Life.

15 TOPICS Construction Completed on Sony City, the New Sony Corporation Headquarters In October 2006, Sony City emerged as a new landmark building in the area around the East Exit of Tokyo s Shinagawa Station. Built as part of Sony Life s real estate investment activities and in cooperation with Sony Corporation, the new structure serves as Sony s new corporate headquarters. To maximize retention of its investment value and for reasons of environmental consideration, the building was constructed as an energy-saving structure, and extensive measures were taken to minimize its environmental impact during construction. Built to retain its newness for 100 years, Sony City features a simple, obsolescence-proof design. One of the building s most noteworthy features is its expansive floors, which at 70 meters by 100 meters encompass almost the entire area of a regulation soccer pitch. Unstymied by such building essentials as elevators and lavatories, each floor provides approximately 5,000 square meters of office space. The facility is designed to maximize communication across horizontal levels by allowing as many people as possible to be situated on a single floor. In addition to elevators, escalators facilitate traffic between floors a relatively unusual feature in an office building. The escalators that provide multifloor access as in a commercial facility allow tenants to reach their destinations quickly, ultimately enhancing business efficiency. 13

16 Working Together with Our Customers as Their Own Agents Providing Tailored Protection and Extensive After-Sale Follow-up Services Since its establishment, Sony Life has worked to provide optimal life insurance products tailored to the specific needs of each and every customer. To assist in this process, first we work together with customers to formulate individualized life plans based on their specific circumstances and dreams. These plans consider such factors as age, family composition, financial condition and children s higher education plans. We then calculate the level of insurance coverage needed over time to help customers fulfill their plans, and create an optimal insurance portfolio accordingly. These tailor-made solutions are provided by our Lifeplanner sales employees and Partners (independent agencies), who possess advanced financial knowledge and abundant experience. Lifeplanner sales employees and Partners seek to become customers exclusive providers of insurance and financial services, or their own agents, in building strong relationships of trust and helping them fulfill their lifelong dreams. Even after signing the initial insurance agreement, Lifeplanner sales employees and Partners regularly review the content of coverage according to the customer s changing lifestyle. We also offer peace of mind in the form of comprehensive follow-up services, including swift payment of hospitalization benefits and claims when unforeseen events occur. As we guide customers throughout their lives, we work to help them solve the various issues they face so they can enjoy peace of mind in their lives. 14 Educational Systems, Self-Development and Reciprocal Studies Educational System for Lifeplanner Sales Employees and Partners Sony Life provides a diverse range of educational programs designed to enable Lifeplanner sales employees and Partners to fulfill their roles as insurance and financial professionals in responding to the confidence that customers place in them. Basic Training Program (BTP) for Lifeplanner Sales Employees This program equips Lifeplanner sales employees with the basic knowledge, attitudes, skills and behavioral habits required to become life insurance professionals. It comprises various sub-programs based on Sony Life s needs-based marketing approach. These include a subprogram to acquire basic Lifeplanner skills and another covering joint activities, in which Lifeplanner sales employees visit customers together with their sales office managers. Partner Training Program (PTP) for Partners This program is designed to help Partners succeed in the life insurance business. In the program, Partners learn about our products and needs-based sales approaches derived from expertise we have accumulated over the years. Enhancing Education for Managers Our branch managers, sales office managers and other managers who oversee sales staff have an important responsibility to carefully nurture selected individuals into Lifeplanner sales employees. To help managers fulfill this responsibility, Sony Life continues to upgrade its educational system, which includes training to deepen understanding of the essence of life insurance, develop character and acquire leadership skills. Sony Life Academy The Company opened its Sony Life Academy in fiscal 2003 to train its branch general managers and the heads of its independent Agency Sales Division, as well as its head office general managers. As of March 31, 2006, 108 people had graduated from the academy, which conducts ongoing training and serves as a place for lifelong learning. In April 2007, the academy began offering a course on the basic theory of life insurance. Students of this course include sales managers of Sony Life branches throughout Japan as well as the heads of partner agencies and the leaders of headquarters administrative divisions. Participants emerge as accomplished life insurance professionals with the guidance and leadership skills required of effective managers. Four Pillars of Sony Life Academy Education Acquire knowledge, beliefs and convictions worthy of life insurance professionals Help people convey the business and sales philosophies of Sony Life to others Train people to acquire management skills Help people hone their sensitivities as human beings

17 Nurturing Financial Planners Our socioeconomic environment is undergoing major changes, owing to the advent of the informationoriented society, reforms to the social security system, diversification of financial products and a demographic shift to an older population. In these circumstances, it is vital for individuals to conduct comprehensive asset planning and risk management or financial planning geared to their specific life plans. Financial planners are professionals qualified to meet the financial planning needs of customers. A large number of Lifeplanner sales employees study financial planning to achieve higher levels of needsbased sales capabilities. Affiliated Financial Planners (AFPs) Affiliated Financial Planners: 1,899 (As of June 1, 2007) The Japan Association for Financial Planners is the sole issuing authority for the AFP license. This qualification certifies that the licensee possesses the knowledge required of a financial planner and is competent to offer advice and make proposals in response to client needs. Certified Financial Planners (CFPs ) Certified Financial Planners : 129 (As of June 1, 2007) The CFP license is an international qualification conferred by the Certified Financial Planner Board of Standards, Inc., of the United States. This is an authoritative qualification given only to financial planners who demonstrate sophisticated financial planning abilities and sound work ethics. Certified Skilled Workers of Financial Planning 1st Grade Certified Skilled Workers in Financial Planning: 104 2nd Grade Certified Skilled Workers in Financial Planning: 1,949 (As of June 1, 2007) Through the Human Resources Development Promotion Law, the Japanese government has introduced a proficiency certification system to certify levels of expertise in various fields, including financial planning. 1st, 2nd and 3rd grade Certified Skilled Workers in Financial Planning. Reciprocal Studies Advanced consulting services and after-sale followup services are linked with the satisfaction and peace of mind that Sony Life delivers to its customers. To achieve these aims, we offer a broad range of knowledge and skill training. Sony Life s employees have embraced a culture of mutual assistance in their quest to serve customers. To this end, they have taken the initiative of hosting independent training forums around the nation. Million Dollar Round Table (MDRT) MDRT, based in Chicago, is an international association of the world s best life insurance and finance professionals. The organization has some 36,000 members in 79 countries. Each year, leading insurance and financial service professionals from around the world are selected as MDRT members. These members work to develop the whole person, based on the concepts of reciprocal training and contribution to society. MDRT members have superior skills, achieve superior ethical standards and provide superior customer service. These business and regional community leaders are recognized worldwide as life insurance and financial service specialists. As of June 1, 2007, 553 Lifeplanner sales employees and Partners of Sony Life were among the largest groups forming the MDRT s chapter in Japan. MDRT Sony Chapter The MDRT Sony Chapter comprises Lifeplanner sales employees and Partners of Sony Life who have become MDRT members. The chapter holds training sessions several times a year to exchange the latest information and build their skills, with the aim of providing topquality consulting and other services to customers. Chapter members, representing our most successful Lifeplanner sales employees and Partners, also promote various volunteer activities, demonstrating their passion as conveyors of the MDRT spirit. Japan Association of Insurance and Financial Advisors (JAIFA) JAIFA was established in 1962 with the purpose of enhancing the status of life insurance salespeople through the reciprocal education of members. As a forum for mutual training, the association hosts a variety of proactive initiatives. Our Lifeplanner sales employees, sales office managers and branch managers participate in JAIFA events, and as of June JAIFA Sony Life regional chapters have been set up in regional areas to spearhead various activities. JAIFA All Sony, which comprises all the Sony JAIFA members throughout Japan typically meets twice each year to hold executive board meetings and workshops. These meetings aim to achieve a nationwide exchange of information. 15

18 Providing Optimal Protection through the Life Planning Support Service (LiPSS) When proposing protection products, Sony Life first asks customers about their lifestyles and future life plans. As each member of a family paints a picture of the life that he or she envisions for several years in the future, an image of the customer s life and way of thinking begins to form. On the basis of the picture that a customer paints of his or her future, the best way to ongoing future protection also grows clearer. However, life is long and ever-changing, and people require solid insurance coverage throughout their entire lives. Helping to bridge the gap between specific coverage and an uncertain future is our Life Planning Support Service (LiPSS) software. This software plan allowances for contingencies so that the life plan of a customer s family does not go awry even if the unexpected occurs, and clearly estimates the amount of coverage needed to offset economic risks given a customer s future lifestyle. In short, LiPSS helps ensure high-quality products that offer peace of mind. 16 Life Plan Preview Eliciting Customers Dreams and Goals through Life Planning The first step is to learn the life paths a customer and his or her family intend to follow, as well as their dreams and goals. When forecasting the future, we look at this picture as seen by every member of a family. In light of the goals for the future that a customer projects, we create a Life Plan Chart that maps out these dreams and goals on a time axis. By making specific projections far into the future and preparing a Life Plan Chart, we can assume some of the changes that a family will experience in the upcoming decades and predict the level of insurance coverage that will be needed. Life Plan Chart Considerations The relationship between the period of a child s progression through school (pre-school, elementary school, junior high school, high school and university) and the customer s own age is visible at a glance. If the child has siblings, the chart highlights periods when their school expenses will overlap. The chart provides an opportunity to consider parents who may live with the customer in their senior years, and to think specifically about the customer s own plans for his or her senior years. We consider the level of coverage that the customer will need for such events as changing jobs, striking out on his or her own or fulfilling planned dreams. Life Plan Simulation Simulation of a Family s Future Income and Expenses Next, we look at the potential changes in a family s income and expenses as they progress according to the life plan they have created. By comparing projected income and expenses on a yearly basis, we confirm whether the life plan is viable financially. By considering the balance between income and expenses and prioritizing expenditures, we prepare plans to set aside cash for school fees, advise customers of their leeway for purchasing a home and suggest the possible acceleration of mortgage payments. Income and Expenses on an Annual Basis Balance of Financial Assets

19 Next, we run a trial calculation of a family s hypothetical income and expenses in the event of the unexpected. We take an overall look at such considerations as whether the family could maintain its life plan if it needed to rely on the income of the other spouse and determine potential cash excesses or shortfalls. Income and Expenses on an Annual Basis Balance of Financial Assets Insurance Planning Consulting Services Based on Life Plans Factors that must be considered are whether, in the case of untimely death, the bereaved family would be able to live comfortably according to their life plan or whether additional money would be needed. Based on the results of the customer s life plan and these simulations, our insurance professionals Lifeplanner sales employees and Partners analyze and consider 11 financial needs* from various angles before offering advice to the customer. If any upcoming economic risks are evident, we propose protection that is optimally tailored for each individual customer. Necessary Amount of Coverage To determine the necessary amount of coverage, we consider the amount that would be needed each year to cover the potential gap between expenses and income in the event of an untimely death. This data provides the basis for determining a reasonable amount of life insurance *Eleven Categories of Financial Needs throughout Life Reserve for education Reserve for marriage Funds for home purchases Rent or loans Living expenses after retirement Reserve for emergencies Reserve for long-term healthcare Living expenses for bereaved family members Reserve for funeral and subsequent arrangements Reserve to reconfigure life Funds for inheritance measures TOPICS Sony Life Opens Life Planning SQUARE Showroom within the Sony Building in Ginza, Tokyo Sony Life recommends protection products after looking at a family s future from a variety of perspectives, an analysis process it refers to as life planning. To help more potential customers enjoy the importance of this process, in September 2006 Sony Life established the Life Planning SQUARE showroom within the Sony Building in Ginza, Tokyo and staffed the facility with specialist personnel. In addition to preparing content that helps showroom visitors feel comfortable with and enjoy life planning, in a nearby booth customers who have gained a healthy respect for the process independently explain their own experiences of Sony Life s life planning. Note: This facility does not write new life insurance polices or perform policy content change procedures.

20 Providing a Range of Follow-up Services to Help Customers Live Fulfilling Lives Sony Life s Lifeplanner sales employees stand beside their customers as they move along the paths of their lives to help them lead fulfilling lives. During the course of a long life, people typically undergo such experiences as child-rearing, purchasing a home, changing jobs or striking out on their own, becoming ill and requiring nursing. We continue to monitor a customer s evolving coverage needs as their lifestyles change. Drawing on their wealth of experience of looking closely at people s lives and a broad-ranging knowledge base, Lifeplanner sales employees provide appropriate information to their customers as particular concerns arise. If the unexpected occurs, Lifeplanner sales employees help ensure that claim payments are delivered swiftly. However, delivering claim payments is not the job of Lifeplanner sales employees. Rather, Sony Life sees it as their responsibility to be the person who takes the family s needs into consideration, serves as a consultation partner as a family moves into a new phase of their life and helps the family achieve future happiness. This is one mission of Lifeplanner sales employees. 18 Life Plans and Maintaining Coverage Changes in social circumstances or economic conditions can affect the future dreams of a customer and his or her family. By regularly checking for obstacles along the path to achieving a customer s life plans, we help customers be secure in their plans and work with them to update their plans as necessary. Such major life changes as the birth of a child or a change of employment can alter coverage needs. We consistently monitor the content of our customers protection to ensure that their life insurance coverage meets their needs to the fullest extent possible. Providing Advice Based on Specialized Knowledge and Appropriate Information Sony Life s Lifeplanner sales employees possess a wealth of economic and financial knowledge and expertise, which they provide to customers as appropriate information and useful advice. Lifeplanner sales Employees help customers meet their goals and answer their questions. These include: Home Purchases We want to set aside funds to buy a home. We want to put together an intelligent mortgage loan. We are thinking of accelerating our mortgage payments or refinancing our mortgage. Child-Rearing and Education How much will an education cost? We would like to set aside a regular amount as a reserve for education. Retirement We want to start setting aside funds for our senior years. We want to make investments to tide us over in our senior years. Other assets We would like you to introduce us to an accountant or an attorney. We would like to know more about the social insurance (medical care, pension, nursing care) system. We are looking for information about changes in tax laws and the legal code. And so on. Medical Care and Nursing Care Support We are particularly proactive in providing services in the fields of medical care and nursing care areas that typically generate many customer queries. Helping to address such issues are Sony Life s Lifeplanner sales employees, who have extensive experience in considering people s lives, as well as personnel who specialize in medical and nursing care. Medical Care Support Provide introductions and issue letters of introduction to medical institutions Offer information related to examination results, treatment methods, etc. When facing a serious illness, obtaining accurate and trustworthy information and second opinions takes on a major significance. Sony Life assists in this process by introducing customers to collaborating physicians and medical institutions. Nursing Care Support Introduce care managers Confirm care plans Introduce nursing care service providers Provide introductions to nursing care facilities, etc. We work with customers to help them find the nursing care that is best both from the standpoint of the person receiving care and for that person s family. Through its affiliations with care-giving institutions, Sony Life also helps its customers obtain special rates. Preferential Service Offerings Sony Life has forged alliances with several operators of nursing care facilities. Customers who select these providers may be eligible for discounts on up-front lump-sum payments, reduced-rate trial nursing care and other preferential treatment.

21 System of Claim Payment Operations Fundamental Policy on Payment Operations Recognizing that the payment of insurance claims is the most important function of an insurance company, Sony Life provides insurance products that promise policyholders the security of economic protection. The commitment to pay claims is a long-term agreement between the Company and its customers. We therefore regard it as our responsibility to pay claims unfailingly to customers when needed. Sony Life strives to strengthen its payment operations, reinforcing its operating systems and structures on a daily basis. Payment Operations Structure To ensure that payments to customers are assured and swift, Sony Life assigns multiple personnel to check payment approval decisions. We have also prepared reference documents highlighting points for caution when making payment assessments, created an operations manual and formed the Administrative Mistake Recurrence Prevention Study Council. We also have made organizational upgrades, such as increasing the number of personnel in the Claims Payment Management Department and enhancing their education and training. When developing new products, the New Product Development Department and the Claims Payment Management Department cooperate to ensure the appropriateness of claims and other payments, and sharing product overviews and policy stipulations. Status of Payments The following information represents the status of payments made against requests for payment received in FY2006. Claims and Benefit Payments in FY2006 (Instances) Death Disaster Claims Severe Injury Other Total Number paid 14, ,080 6,224 22,270 Benefits Hospital- Severe Death ization Surgery Injury Other (Instances) Total Number paid 1,606 70,590 46, , ,977 Note: Payments are counted by type of benefit. Payment by type of benefit counts the number of payments made in each payment category. For example, one medical treatment insurance policy on which one hospitalization benefit claim and one surgical procedure benefit claim was made would be counted as two payment types, even though both payments were made on a single policy. FY2006 Claims Outside Payment Scope, by Reason (Instances) Death Disaster Claims Severe Injury Other Total Invalid, as fraudulent Invalid, as acquired for illegal purposes Cancelled for nondisclosure reasons Cancelled for grave reason Justified exclusion Outside scope of reasons for payment Other Instances outside payment scope (Instances) Death Benefits Hospital- Severe ization Surgery Injury Other Total Invalid, as fraudulent Invalid, as acquired for illegal purposes Cancelled for nondisclosure reasons Cancelled for grave reason Justified exclusion Outside scope of reasons for payment ,024 Other Instances outside payment scope 31 1, ,396

22 Risk Management System 20 Amid the rapid liberalization and internationalization of financial markets, the activities of life insurance companies are becoming increasingly diverse and complex. For such companies, the optimal management of various risks such as investment risk, insurance underwriting risk, operational risk and legal risk becomes more and more important every year. The various transactions that life insurance companies undertake carry inherent risks that cannot be completely avoided. Moreover, simply minimizing such risks is insufficient. Instead, it is necessary to grasp the nature of each type of risk, implement suitable controls and make preparations to ensure appropriate returns that are commensurate to the related risks, while also responding flexibly to the evolution of risk management techniques. Sony Life works continuously to enhance its risk management organization. In the fiscal year ended March 31, 2007, the Company revised its risk management policies and risk categories and implemented policies to strengthen its administrative processes relating to payments to policyholders, such as the disbursement of insurance claims. We have also undertaken an evaluation of risks related to new business activities at the retail locations that our customers visit. Furthermore, Sony Life often holds meetings of its Risk Management Committee, which is composed of general managers of the several divisions responsible for the Company s risk management, to discuss various company-wide risk management issues. Sony Life also conducts stress tests and reports the results of those tests to its Executive Officers Board in order to evaluate the possible impact on its financial soundness of future unprofitability, and takes additional management and/or financial measures as necessary. As one aspect of its investment risk management activities, the Company conducts stress tests based on a worst-case scenario that exceeds normal market fluctuations, whereby interest rates, share prices and currency exchange rates all drop to historic lows. As one aspect of our insurance underwriting risk management activities, we perform stress tests during new product development that assume fluctuations in income and expenses. In its Risk Management Manual, Sony Life sets forth its fundamental approach to risk management and the methods for applying its risk management policies, with full consideration of the specific characteristics of each type of risk. Sony Life s Basic Risk Management Policy By strengthening its risk management capabilities and executing optimal risk controls, Sony Life aims to ensure the soundness and appropriateness of its operations and to protect the interests of policyholders. In this way, we will improve our reputation as a trustworthy and credible life insurance company and thus fulfill our responsibility to society. Risk Management Structure (As of July 1, 2007) General Meeting of Shareholders Board of Directors Board of Auditors Chief Actuary Executive Officers Board Internal Audit Division Risk Management Committee Risk Management Corporate Planning Division Investment risk ALM Division Insurance underwriting risk ALM Division Operational risk Other management risks Market-related risk Reinsurance risk Administrative risk Operations Administration Division Office risk General Affairs Division Credit risk Systems risk Operations Administration Division Personnel risk Personnel Division Sales Administration Division Real estate investment risk Liquidity risk ALM Division Legal risk Compliance Division Reputational risk Corporate Communications Division Management risk Corporate Planning Division Insurance subsidiary risk New Business Promotion Division Sony Life Insurance (Philippines) Corporation Business Offices

23 Specific Risk Management Definitions and Procedures Investment risks Investment risk refers to the risk of suffering losses due to fluctuations in the values of investment assets, the risk of liquidating investment assets in adverse conditions to comply with asset-liability management requirements and/or the risk of failing to ensure target investment performance. With respect to investment risks, Sony Life manages its asset allocation in accordance with internal regulations established in light of the importance of managing balance between assets and liabilities comprehensively, the specific characteristics of its liabilities and the need to maintain appropriate levels of capital. Sony Life involves its front-office and middle-office personnel in its risk monitoring activities and revises its risk management policies and procedures in light of evolving risk management practices in the life insurance industry. Market-related risk Market-related risk refers to the risk of suffering losses due to changes in the values of investment assets as a result of fluctuations in interest rates, securities values, exchange rates and/or various other risk factors. Sony Life strives to maintain an investment portfolio that will provide stable medium- to long-term returns in light of the specific characteristics of its investment assets, including stability, liquidity, profitability and other factors. In addition, Sony Life establishes limits, as it deems necessary, as a means of controlling the magnitude of potential market-related losses. Credit risk Credit risk refers to the risk of suffering losses due to the decrease or loss in value of an investment asset as a result of the deterioration in the financial conditions of issuers. Sony Life exercises care in evaluating the credit quality of issuers when investing in debt obligations and strives to diversify its portfolio to avoid risks associated with concentrating its investments in the debt obligations of a small number of issuers or within particular industries. In addition, Sony Life strives to ensure the stability of its investments through selfassessment of the credit quality of its assets in accordance with internal regulations, establishing reserves and recording write-offs as appropriate. Real estate investment risk Real estate investment risk refers to the risk of suffering losses due to reduced gains on real estate as the result of fluctuations in rental income or decreases in the value of underlying real estate assets owing to changes in market conditions. In light of the low liquidity and large capital commitments that characterize real estate investments, Sony Life establishes objective standards to evaluate real estate investments and takes care to diversify its real estate investments in terms of timing and geographical location. In addition, in an effort to ensure the quality of its real estate investment portfolio, Sony Life manages each property individually and sells off properties that produce investment returns below minimum pre-determined levels or for which unrealized losses exceed pre-determined alarm points. Insurance underwriting risk Insurance underwriting risk refers to the risk of suffering losses due to unexpected changes in economic conditions and/or insurance benefit rates. With regard to insurance underwriting risk, Sony Life conducts appropriate insurance portfolio management, such as establishing policy limits as necessary on each type of insurance in line with accumulated policy reserves and capital levels. In addition, for each product it sells, the Company maintains underwriting standards, reinsurance standards and reinsurance company selection standards, as well as criteria for the improvement or elimination of these standards. These internal regulations are clearly established and periodically reviewed. Concerning reinsurance risk, Sony Life s policies on insurance in force and reinsurance provide controls intended to ensure that, in cases where underwritten risks exceed limits on insurance in force, excess risk is adequately managed through the appropriate use of reinsurance. 21

24 22 Operational risk Administrative risk Administrative risk refers to the risk of suffering losses due to either the bankruptcy of external contractors or improper operations, or as a result of corruption or other inappropriate action by company officers, employees, insurance agents or external contractors. Sony Life strives to continually improve its internal administrative processes to reduce risk by carefully analyzing the underlying causes of failures in administrative processes, undertaking evaluations of existing risk management procedures, and developing and communicating to its employees detailed internal regulations and providing manuals governing risk management procedures. Furthermore, as part of its efforts to prevent the recurrence of past failures in administrative processes, Sony Life has implemented a self-assessment program for its internal departments and undertakes periodic audits of its administrative risk management activities. Sony Life has also developed internal regulations regarding the monitoring of third-party service providers as part of its efforts to control administrative risks relating to such providers. Systems risk System risk refers to the risk of suffering losses due to critical trouble with computer systems. System risk also includes the risk of losses due to the illegal use of computer systems. Sony Life separately manages the systems risk associated with its operation of existing information technology and other systems from those associated with the development of new information technology and other systems. Sony Life analyzes recent failures, threats and vulnerabilities affecting its existing systems infrastructure when determining its future systems needs. Sony Life also undertakes periodic testing of its systems to ensure appropriate risk management. With regard to systems risks relating to third-party service providers, Sony Life has developed internal regulations regarding the monitoring of third-party service providers. Sony Life has also developed a contingency plan to govern its response to potential disasters that may affect its ability to continue its operations. Liquidity risk Liquidity risks are classified into fund flow risks and market liquidity risks. Fund flow risk refers to the risk of suffering losses if assets must be sold in adverse conditions to secure funds. Market liquidity risk refers to the risk of suffering losses if assets must be sold in adverse conditions owing to exchange market instability. Sony Life aims to minimize its holding of lowliquidity assets and to adopt, and periodically review, internal regulations clarifying the methods for managing, reporting and settling cash payments in light of its immediate liquidity needs. Other risks Other risks include legal risks, such as the risk of loss resulting from Sony Life conducting its operations in a manner that violates applicable laws, rules or regulations, and the risk of loss resulting from Sony Life s inability to exercise certain rights as a result of it conducting its operations in an inappropriate manner, even without any violation of law. Other risks also include reputational risks, including the risk of loss resulting from negative media coverage, rumors, defamation and other forms of criticism. Sony Life strives to establish risk management policies relating to these and other risks in order to ensure its ability to conduct its operations in a sound and appropriate manner.

25 Personal Information Protection and Information Security Amid rapid innovations in information technology in recent years, computer networks have become more advanced and complex, while services are growing more diversified. Companies can now use sophisticated networks to store and handle confidential data about their customers. Protecting private information is thus becoming more important than ever. To conduct their business properly, life insurance companies need confidential information about their individual customers. To enhance convenience for customers, Sony Life uses networks as part of its policy of delivering the most advanced services. The Company places high priority on effectively managing customer information and implementing measures to ensure information security. Protecting Personal Information Initiatives to Protect Personal Information Sony Life s Information Security Policies is a document outlining the Company s stance with respect to personal information, centering on its customers. Based on these policies, we seek to ensure proper management, usage and protection of information. Following the enactment of the Law Concerning the Protection of Personal Information, we established a Privacy Policy, as well as a Committee to Promote the Security of Personal Information. Together, these address the gathering and use of personal information, as well as methods of assembling and managing it. The Company will strive more rigorously than ever to protect all personal information in its possession. Information Management System Sony Life has appointed information managers and security managers to each department that handles personal customer information. We have also established protocols to ensure effective protection of personal information and upgrade regularly our training system for employees. In addition, we have formulated a set of Customer Data Protection Rules System for Protecting Personal Information Board of Directors Executive Officers Board to ensure that personal customer information is handled appropriately, as well as a Compliance Manual and Market Conduct Compliance (MCC) Guidelines. In these ways, we are taking a comprehensive approach to protecting personal information and guaranteeing customer privacy. Providing Information to Reinsurance Companies As part of its reinsurance contracts, Sony Life provides personal information on its policyholders to reinsurers. This information may also be as part of reinsurance payment invoicing procedures. Reinsurance is a process whereby insurance companies share a portion of the risk of the policies they underwrite with other insurance companies. This procedure allows the diversification of risk inherent to insurance underwriting. Sony Life s statements of important notes to policy agreements and documents related to the provision of protection explain that such information may be provided to reinsurance companies. Customers agree to this condition when signing insurance agreements. Policy Content Storage System To ensure the sound operation of the life insurance system and guarantee the appropriate payments of benefits for death (severe injury) protection insurance, accidental death (accidental severe injury) protection insurance, and hospitalization benefits, life insurance companies are required to record information pertaining to insurance policies or riders concerning payments of death or other benefits with the Life Insurance Association of Japan. This information, which is kept for all life insurance companies is used for no other purpose than for referring to the payment of claims and hospitalization benefits on policies to which life insurance companies are party. Neither the Life Insurance Association of Japan nor other life insurers disclose this information. Payment Screening Inquiry System Upon receipt of requests for the payment of claims, pension and annuity payments or hospitalization and other benefits, after determining that an insured event did indeed occur Sony Life and other life insurers share this information with the Life Insurance Association of Japan as part of the information on the insurance policies they hold. This information is used only to make payment through the Claims and Benefits Division, to cancel insurance policies or for inquiries determining that such policies are void. Neither the Life Insurance Association of Japan nor individual life insurers use such information for any other purpose. 23 Protection of Personal Information Promotion Committee Lifeplanner Sales Group agency offices Information Manager (Branch Manager) Security Administrator Independent Agency Sales Group sales divisions Information Manager (Sales General Manager) Security Administrator <Secretariat> Operations Administration Division Headquarter divisions Information Manager (General Manager) Security Administrator Security Measures for Protecting Personal Information Standards for the Safe Management of Personal Information Sony Life has established standards for the safe management of personal information at each stage, including the gathering, use, storage and disposal of this information. The Company thoroughly trains all executives and employees, including temporary staff, on these standards.

26 24 Measures to Counter the Theft of Notebook Personal Computers (PCs) and Other Property To prevent notebook PCs containing personal customer information from being stolen in a car break-in or other type of theft, employees who take these PCs outside the Company are required to keep them nearby at all times. Customer data that is copied onto electronic storage media is protected with a special electronic encryption key. Password-protected integrated circuit (IC) cards double this security. Office Security Measures Only authorized employees are allowed access to office areas where personal information is handled, and counterfeit-resistant IC cards are used to monitor entries and exits. As a further countermeasure, the Company restricts personal items that can be brought into insurance business departments, which handle large amounts of personal customer information. Information Security Initiatives First Company in Industry to Obtain Information Security Management System (ISMS) Certification On June 27, 2003, Sony Life became the first company in Japan s life insurance industry to obtain BS7799 Part 2: 2002 and ISMS (Ver. 2.0) two ISMS certifications conferred by the Japan Audit and Certification Association for Information Security. The certifications were bestowed on the Company s departments related to insurance business administration. As BS7799 Part 2 certification content was adopted by ISO certifications and Japanese ISMS standards were enhanced on a par with ISO Information Security Management System ISMS certification indicates the reliability of a company s information security systems. This certification is provided to companies that have systems to determine the appropriate level of security based on risk self-assessments, and that have concrete plans and resources allocated to ensure the effective management of such systems. The principal concept of ISMS is for a company to maintain and improve the secrecy, completeness and accessibility of its information assets 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 are accurate and complete Accessibility: The guarantee that authorized people can have timely access to required information and related assets standards, on June 22, 2006, we shifted our certification to ISO/IEC 27001: 2005 (JIS Q 2007: 2006). Going forward, we will continue to maintain and improve our information security systems and upgrade protection of our information assets, including the personal information of our customers. Maintaining and Improving Information Security Our administrative departments constantly assess the danger of leaks and breakdowns affecting all of our information assets, including customer information, and formulate and take measures designed to minimize such dangers. To earn certification, we implemented those measures on schedule, regularly confirmed that the measures had the desired effect and built frameworks for enforcing all of the improvements required for certification. Main Initiatives Ensure understanding among all employees, including temporary staff, about the importance of the Company s information security policies and provide training to ensure widespread acceptance of such policies. Assess the dangers of leakage and destruction of all information assets and take measures to minimize such dangers. Constantly improve our information systems based on regular system audits by external specialists. ISMS Cycle ISMS targets improvements in information security through repeated 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 Plan Ongoing Act Do improvements Check

27 Compliance Compliance means conformity with relevant laws, regulations and rules. This is a crucial issue for companies seeking to fulfill their social responsibilities. Life insurance companies need to reinforce their compliance systems to maintain the long-term trust of customers. Sony Life has positioned compliance as a central management priority to protect customers and earn their confidence. Compliance Framework Sony Life has established a Compliance Committee, which reports to the Executive Officers Board, to spearhead companywide compliance programs. In addition, our compliance officers and supervisors conduct routine checks of compliance status and create plans and systems for improving overall compliance. In May 2005, we also established the Market Conduct Compliance (MCC) Committee to strengthen the compliance of sales activities. In these ways, we are striving to build a more effective compliance framework. Compliance Framework Board of Directors Executive Officers Board Compliance Programs Every fiscal year, we compile a Compliance Program that serves as an action plan for implementing compliance initiatives. Based on the program, we adopt various measures. We work to ensure all members of the Company are familiar with our Compliance Manual. We modify the manual as necessitated by changes to our compliance system, as well as enactment or revision of relevant laws. We publish a booklet, called MCC Guidelines, which contains 15 principles and serves as a Compliance Manual covering our sales activities. We use the booklet for continuous training at agency offices and independent agency sales divisions. We are also improving the MCC training curriculum for Partners. We conduct regular checks of each head office and sales division to confirm legal compliance status, and routinely reassess and augment checking and confirmation procedures. The efficacy of our compliance programs is verified through a number of means, including internal audits, surveys of employee awareness and practices and confirmation of the status of compliance of each division. As required, we take concrete measures to improve and strengthen compliance programs. If violations or suspected violations of laws or regulations are discovered, they are investigated and reported. We swiftly devise appropriate processes to prevent the reoccurrence of violations; these are added to the Compliance Manual and circulated throughout the Company. 25 Compliance Committee/ Market Conduct Compliance (MCC) Committee Lifeplanner Sales Group agency offices Compliance Manager (Branch Manager) Compliance Administrator Independent Agency Sales Group sales divisions Compliance Manager (Sales General Manager) Compliance Administrator Compliance Officers Headquarter divisions Compliance Manager (General Manager) Compliance Administrator Adapting to Changing Laws The Law on Sales of Financial Products and the Consumer Contract Act came into force in April In response, Sony Life established its MCC Guidelines, a booklet that sets forth the Company s solicitation policy in the form of 15 principles. Customers are kept informed of changes to compliance laws through posters, the Company website and other means and employees through education and training. In March 2007, we modified the guidelines to reflect revisions of relevant laws and recent changes in the environment pertaining to compliance. (Implemented May 2007) In August 2003, we reinforced our systems in response to legislation designed to prevent the concealment of funds for terrorism purposes and money laundering. Measures included more rigorous confirmation of customers identity based on the Law Concerning the Confirmation of Customer Identity and the Prevention of Improper Deposit Accounts, as well as the reporting of suspicious transactions under the Law for Punishment of Organized Crimes, Control of Crime Proceeds and Other Matters. To fulfill our social and public service responsibilities as a life insurance company and conduct our business in a fair manner, we have formulated a set of behavioral guidelines to serve as basic rules for directors and employees to observe. In February 2004, we compiled an upgraded version called the Sony Life Activity Charter. Full-scale enforcement of the Law Concerning the Protection of Personal Information began in April This law places obligations on private-sector enterprises handling personal information. We have established the Committee to Promote the Protection of Personal Information, which spearheads companywide measures to address the new legislation.

28 Environmental Protection Initiatives 26 Environmental Management System Sony Life has mounted a number of initiatives to reduce the burden it places on the environment. We have established environmental goals and objectives, and put programs in place to lead us toward these aims, and will continue with such environmentally conscious activities and initiatives. Environmental Policy Core Philosophy Sony Life works toward the realization of a sustainable society in accordance with the Sony Group Environmental Vision. As a member of the Sony Group, we adhere to this vision and make every effort to preserve the environment in all aspects of our operations. Performance Indicators 1. Based on the Sony Group s Global Environmental Management System (GEMS), we enact thorough environmental compliance, seek to enhance our environmental performance and minimize environmental risk. 2. In line with our core philosophy of providing efficient life insurance and high-quality services, we evaluate the impact of our activities, products and services, and set and implement programs to achieve our environmental goals and objectives. We aim to ensure ongoing improvements in environmental preservation and reductions in pollution. 3. We employ the following environmental preservation activities 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 the environmental awareness of all employees. Acquisition of ISO Certification and Implementation of the Green Power Certification System In March 2001, Sony Life acquired ISO certification, the international standard for environmental management systems, for its head office, and has since kept its certification up to date. In fiscal 2005, as part of plans to reduce our consumption of fuels that emit carbon dioxide and accelerate global warming, we set up a Green Power Certification system, whereby the purchase of electrical power originating from wind-powered generators is certified. This system facilitates electric-power swaps, ensuring that our electrical power is wind generated, even if the power originates at locations far from where it is used. During the term, we purchased 250,000 kilowatts of green-certified electric power, thereby reducing our CO 2 consumption by the equivalent of 97.5 tonnes per year. Protection of the global environment is a top-priority issue for the Company. Through our environmental management system, we are working constantly to protect the environment in all of our daily activities. What is ISO 14001? ISO is an international standard for environmental management systems created by the International Organization for Standardization (ISO). Certification is given to entities that review their environmental management systems annually, take action to address difficult and unprecedented issues and work continually to improve their environmental performance. The Certificate of Green Power issued by Japan Natural Energy Company Limited Environmental Consciousness at Sony City Construction on Sony City was completed in October From the initial stages, we worked with the design architects to ensure that the building would conserve energy. We also communicated with the builders to minimize the environmental impact of the building s construction. During construction, a concrete plant and a plant for eradicating chemical substances occurring naturally on the building site were erected at the site, greatly reducing the number of trucks required to transport concrete and outfill. The reuse of flushing water and resulting efficiency improvements in the transportation of construction materials helped saved the estimated equivalent of 38,000 tons of CO 2 emissions. The building also employs a variety of systems to conserve energy after construction is completed. For example, systems are used to automatically control lighting systems to maximize the use of natural light and the intake of outside air. In addition, the building employs highly efficient heat source systems and makes use of waste heat emitted by the adjoining Shibaura Water Reclamation Center. Compared with standard practices, such advanced energy conservation approaches are expected to result in a 40% savings in CO 2 emissions over the 35-year life of the building, including its construction period a 7% reduction, compared with the most recent energysaving buildings.

29 Social Contribution Activities One Love, One Trust In fiscal 2003, we established a Social Contributions Department to spearhead our social benefit initiatives. We also set up a Volunteer Activity Coordination Committee, with the aim of promoting the sharing of information from various sources, enhancing our support for volunteerism and broadening the scope of volunteer activities. As part of our efforts to be a good corporate citizen, we encourage each Sony Life employee to be active in their social contribution efforts, which we believe are instrumental in building up society s confidence and trust of Sony Life. Our rallying cry is the phrase one love, one trust, reminding us that for each voluntary contribution, or act of love, our standing within the community increases. Volunteer Day Activities In fiscal 2003, Sony Life designated August 10, the anniversary of its founding, as Volunteer Day. This is a special day when all employees are encouraged to consider and implement activities that benefit the activity. August has also been declared Volunteer Enrichment Month, in which all employees throughout Japan implement original social benefit activities in their respective communities. Principal Volunteer Day activities include regional cleaning activities and blood donation drives. Consistently performing such activities each year helps build community awareness, and over time our volunteer activities have increased. At this time of year, the Company also sponsors volunteer lectures at headquarters. These talks are designed to raise employee awareness of volunteer activities in a variety of fields. Eye Mate Fund Sony Life has contributed to the Eye Mate Fund since 1997, with the aim of helping visually impaired people participate in society. The Company donates an amount each year that matches the total raised by employees during the year. In fiscal 2006, million in employee donations and matching funds were given to Eye Mate, Inc. (formerly the Tokyo Guide Dog Association). Since 1997, Sony Life has donated million in contributions to Eye Mate, the largest class of amount of any corporate sponsor. Sony Life will continue providing Eye Mate with support to help more visually impaired people participate in society. Eye Mate, Inc. Since its introduction of the first guide dogs to Japan, this organization has been responsible for training numerous guide dogs. The assistance of properly trained Eye Mate guide dogs helps people with visual impairment participate in society by enabling them to walk about on their own. Special Olympics Nippon Support Activities Creating a Circle of Support that Expands with Each Event In February 2005, Nagano Prefecture hosted the Special Olympics World Winter Games, which drew 2,500 athletes from 84 countries. Approximately 400 Sony Life employees volunteered their time to work at these Games. Interest throughout the Company increased as word of the inspiration volunteers gained from this experience spread to other employees. As a result, some 700 employees volunteered to help with the National Summer Games Kumamoto, held in November 2006, making ours the largest single company volunteer group. In addition to helping with Olympic events, Sony Life volunteers take part in numerous other activities. Employees support the establishment of organizations throughout Japan, serve as coaches, volunteer for regular sports training activities and help with movie screenings and charity events, to name a few. In these ways, Sony Life employees actively search out times and places where they can share any special skills they may have. Special Olympics Activities Sony Life employees have commented that at their first encounter with people who have intellectual disabilities, they are unsure how to interact. As they spend more time together, however, they find themselves laughing together, sharing good time together, and their interactions grow more natural. Reflecting on these experiences, employees recognize that their initial discomfort was caused by barriers they had erected themselves. This realization, plus the courage they see demonstrated by people with disabilities, leads them to take on further challenges of their own and encourages them to persevere until they have reached their goals. By unexpected consequence, the volunteers are impressed by and learn courage from the very people they had intended to help. We plan to support Special Olympics Nippon in the future, as well. Through these activities we hope to promote greater independence for people with intellectual disabilities and help them become more active members of society. Special Olympics Nippon (Japanese only) Special Olympics Nippon is a specified non-profit organization that provides people with intellectual disabilities with ongoing year-round sports training opportunities and holds athletic competitions to demonstrate their accomplishments and give them an opportunity to participate in society. Volunteer Leave Program In fiscal 2003, Sony Life introduced a volunteer leave program, designed to facilitate the efforts of employees to participate actively in volunteer activities. We also offer a volunteer insurance so that employees can feel safe on the job front as they volunteer their time. The program applies to the following activities: Social welfare Environmental protection Community activities Disaster relief International exchange and aid 27

30 28 Leave Program for Bone Marrow Donors On April 1, 2002, Sony Life became the first life insurance company to introduce a special leave program for bone marrow donors, offering employees compensated time off, independent of their regular holidays, for the period necessary to donate bone marrow for transplants. Sony Life Volunteers Club The Sony Life Volunteers Club was established by employees at the time of the Kobe earthquake in 1995, and has continued its activities to the present day. The club operates using funds collected from employee donations, and is managed by individual employees. Ongoing Support for Earthquake Victims Sony Life volunteers provide wide-ranging support for earthquake victims, centering on support for the senior citizens who were affected by the Kobe earthquake. At the time of the disaster, employee volunteers provided meals for earthquake victims. Afterward, they provided other types of support as needed, such as helping victims find refuge in temporary housing and restoring their homes. Now more than 10 years on, Sony Life volunteers continue to support these earthquake victims by planning and inviting them to bus tours to visit hot springs and holding Christmas parties to deepen mutual relations. Applying their experience from the Kobe earthquake, Sony Life provided support for people injured in the more recent Niigata-Chuetsu earthquake. Also, in March 2007 we held the Second Niigata Rapport Hot Spring Tour to provide emotional support for the earthquake victims, particularly the elderly. Youth Educational Support The Sony Life Volunteers Club conducts a number of activities around Japan to support the children to whom we entrust the future. For example, each year the club plans beach trips and barbecues for the children who for a variety of reasons, are unable to live with their parents. Over the course of several years, the change in some children participating in these events has been noticeable. Children who were initially reticent and standoffish now clearly enjoy the outings. Activities such as these, held in different parts of Japan, give children who otherwise have little opportunity to interact with adults a new chance to participate in society. As a result, we have seen these children become more cheerful and develop a more optimistic outlook. We also support activities of the Committee to Protect Children from the Harmful Effects of Drugs. The committee s efforts to prevent child drug abuse include education programs for children and study sessions with parent-teacher associations. The committee s lectures concerning the realities of drug abuse, methods of acquiring drugs and some of the situations that children actually experience have been well-received by the community. Committee to Protect Children from the Harmful Effects of Drugs (Japanese only) This volunteer club evolved spontaneously out of efforts of residents of the city of Koganei, Tokyo, to place greater emphasis on children and the community. In 2006, the club received a certificate of appreciation from the governor of Tokyo in recognition of its grassroots efforts. Special Olympics Nippon Opening ceremony of the Special Olympics Nippon National Summer Games in Kumamoto Sony Life volunteers cheering on race participants A hot springs bus tour for some of the people affected by the Kobe earthquake Providing meals for Niigata Chuetsu earthquake victims

31 Oita International Wheelchair Marathon Each year, Sony Life employee volunteers in surrounding areas provide operational support for the Oita International Wheelchair Marathon. This major event was held for the 26th time in 2006 and attracted 293 contestants from around the world. Employees provide end-to-end support for the event, ensuring the safety of the racers as well as cheering them on. One volunteer commented, This event provided a fresh reminder of the volunteer spirit; it demonstrated the success that results from the accumulation of small individual contributions. We plan to continue supporting the marathon. Life Planning Courses by Lifeplanner Sales Employees To provide the protection products that optimally match customers lives, when proposing protection products Sony Life first asks customers about their dreams and future goals. Based on this information, we map out a specific life plan for each customer s life. We refer to this process as life planning. Sony Life s Lifeplanner sales employees teach introductory courses on life planning to students who will soon spread their wings and become full-fledged members of society. As they pass a new milestone along the long road of life, these courses are designed to build their courage and show them specifically how to turn their visions of the future into reality. Using Sony Life s proprietary simulation software, LiPSS (described in detail on pages 16 and 17), our Lifeplanner sales employees advise them, from a financial and realistic perspective, on how to achieve the specific dreams and goals they envision. Our ultimate goal in these courses is to show them how to achieve their goals independently and enjoy happy and fulfilling lives. At present, these we offer these courses mainly for high school students. We plan to continue teaching these courses as a way of actively contributing to society. 29 Sony Life Cup All Japan Ladies Tennis Tournament Since 2002, Sony Life has provided support to the Sony Life Cup All Japan Ladies Tennis Tournament, one of the largest amateur events for women tennis players in Japan, through sponsorship and volunteer activities. The tournament has been held since 1979 to promote the development of tennis as a sport with mass appeal that also helps improve women s health. This year marks the 29th staging of this traditional event, which has attracted a cumulative total of approximately 290,000 players. The event features a series of strongly contested tournaments that are held in various prefectures throughout Japan. Our Lifeplanner sales employees volunteer at the event, working alongside players to ensure its smooth operation and to cheer the athletes. We will continue to support the Sony Life Cup All Japan Ladies Tennis Tournament as part of our efforts to foster better communication with local communities. For more information about this tournament, please visit: (Japanese only)