Products — Doing it Differently the Sony Life

Products -- Doing it Differently: the Sony Life Way July, 2012 Katsuki Yoshimoto General Manager, Investment Planning Division & New Business Development Division Sony Life Insurance Co. , Ltd. Co-Managing Director, SA Reinsurance Ltd. 1

1. Introdutction of Sony Life Business 2. Extract from Annual Report – Corporate History 3. Long standing low interest rate and MCEV 4. Other consideration 2

Origin of Sony Life Mr. Morita, having a financial institution within the structure of Sony Group was important to reinforce the business. Morita also thought that Japanese consumers were not satisfied with existing life insurance companies. Making innovative changes in the industry was a big business opportunity and also a contribution to society. Akio Morita’s Vision/Dream 3

Sony’s Financial Service Sector SONY Consolidated Op. Profit (FY 2010) 118. 8 bln. ($1. 5 bln. or 48% of SONY Gp. ) Mission of Sony Life To work for customers’ financial security and stability by offering optimal life insurance products and high-quality services. 4

Overview of Sony Life Overview (As of March 31, 2011) Name Sony Life Insurance co. , Ltd Chairman / President Taro Okuda / Katsumi Ihara Established Aug 1979 Capital JPY 70 bn (USD 0. 88 bn) Share ownership Sony Financial Holdings Inc. 100% Employee 5, 921　(Lifeplanners: 4, 017) Credit Rating Moody’s: Aa 3, S&P: A+, R&I: AA, JCR: AA, History Aug 1979 53. 5 59. 0 8. 6 9. 2 9. 5 11. 0 11. 2 0. 18 0. 49 0. 40 1. 00 0. 91 For the years ended March 31 Ordinary revenues Ordinary profit USD 1=JPY 80 Sony Life’s Product Portfolio （2011） 30 years anniversary from start operation Dec 2011 47. 6 AEGON Sony Life started operation in Japan Apr 2011 45. 7 Total assets Established Taipei Representative Office Dec 2009 43. 0 As of March 31 Established Beijing Representative Office July 2009 2011 Sony Financial Holdings was listed on the Tokyo Stock Exchange Oct 2008 2010 Opened Life Planning SQUARE Oct 2007 2009 Sony Corporation established Sony Financial Holdings Inc. Sony Life became 100% subsidiary of Sony Financial Holdings Inc. Sep 2006 2008 Sony Life Insurance (Philippines) Corporation established Apr 2004 2007 Agreement reached with Prudential to terminate joint venture contract Aug 1998 (in USD billion) Sony Prudential Life Insurance established (Started operation in 1981) July 1987 Highlights of Sony Life operating performance Total asset exceeded 5 trillion yen 5

Remarkable Growth of Sony Life Akio Morita’s dream came true! New Policy Amount* (Individual Life Insurance) (Trillions of yen) ＊excluding the impact of the conversion Policy Amount in Force (Individual Life Insurance) (Trillions of yen) Total of all insurers Sony Life's share FY 2010 7. 4% FY 2010 4. 0% (excl. Japan Post Insurance) (FY) Japan Post Insurance commenced operations at its privatization in October, 2007 (FY) Source: Statistics of Life Insurance Business in Japan , Materials officially disclosed by individual insurers 6

Sony Financial Holdings Group Since 2004 Since 1979 Main Sales channels Main products Target customers Scale 1 100% n Sales through consultation n Lifeplanner (sales employees) n Partners (independent agencies) n Death protection life insurance n Medical insurance n Variable life, etc. n Individuals Since 1998 100% n Direct sales n Call-Center n Internet Since 2001 100% n Internet n Medical and cancer insurance n Deposits (JPY, foreign currencies) n Mortgage loans n Investment trusts, and others n Individuals n # of Policies inforce: 1. 38 mil n Accounts: 859. 0 thousand n Common Stock 3： JPY 20. 0 bn n Common Stock 3： JPY 31. 0 bn n Total assets： JPY 109. 3 bn n Total assets： JPY 1, 760. 0 bn n Automobile insurance (risk segmented) n Corporate n # of Policies in force 2： 5. 35 mil n Common Stock 3： JPY 70. 0 bn n Total assets： JPY 4723. 3 bn 1　As of March 31, 2011 , figures for Sony Bank are non-consolidated basis, which does not include those of Sony Bank Securities. Life’s policies in force are for individual life insurance and individual annuities. 3　The amounts of common stock above include capital surplus. 2　Sony 7

Sony Life’s Market Position (FY 2010) Individual Life Insurance *including Japan Post ◆New Policy Amount (2010) Result ◆Policy Amount in Force Result Ranking Insurer 1 (1) A 68, 442 (107. 0) 10. 9 (0. 1) 1 (1) α 1, 707, 917 (94. 6) 19. 4 (▲ 0. 6) 1(1) θ 52, 990 2 (2) B 65, 776 (104. 8) 10. 4 (▲ 0. 1) 2 (2) β 1, 443, 613 (95. 9) 16. 4 (▲ 0. 3) 2(4) Sony Life 12, 577 3 (3) C 59, 053 (99. 9) 9. 4 (▲ 0. 6) 3 (3) γ 1, 091, 259 (94. 0) 12. 4 (▲ 0. 5) 3(2) Б 12, 452 Sony Life 41, 662 (103. 7) 6. 6 (▲ 0. 2) 4 (4) δ 923, 837 (94. 8) 10. 5 (▲ 0. 3) 4(5) Д 12, 373 4 (5) (JPY 100 mil) Share ◆Net Increase Ranking Insurer Share (JPY 100 mil) Ranking Insurer Result 5(10) D 40, 135 (168. 9) 6. 4 (2. 4) 5 (5) ε 353, 296 (98. 3) 4. 0 (0. 0) 5(3) Е 11, 683 6 (4) E 38, 947 (83. 6) 6. 2 (▲ 1. 7) 6 (7) Sony Life 344, 218 (103. 8) 3. 9 (0. 2) 6(10) Ж 6, 815 7 (6) F 34, 403 (101. 0) 5. 5 (▲ 0. 3) 7 (6) ζ 310, 593 (91. 7) 3. 5 (▲ 0. 2) 7(9) И 6, 499 8 (7) G 28, 194 (100. 6) 4. 5 (▲ 0. 2) 8(10) η 273, 490 (101. 8) 3. 1 (0. 1) 8(26) К 4, 901 9 (9) H 27, 332 (112. 0) 4. 3 (0. 2) 9 (9) θ 270, 750 (94. 9) 3. 1 (▲ 0. 1) 9(6) Л 4, 796 10(11) I 26, 686 (113. 6) 4. 2 (0. 3) 10(8) ι 269, 566 (90. 7) 3. 1 (▲ 0. 2) 10(8) Ю 4, 210 Source: Statistics of Life Insurance Business in Japan , Materials officially disclosed by individual insurers 8

Li. PSS : Life Planning Support Service 1. Life Planning Chart 2. Cash Flow Analysis 3. Financial Asset Analysis 4. Needs for Protection 9

Extract from Annual Report Corporate History 10

Corporate History and Insurance Products 1979 June Preliminary authorization obtained from the Ministry of Finance Aug Sony Prudential Life Insurance Co. , Ltd. , established with capital of ¥ 400 million as a joint venture between Sony Corporation and Prudential Insurance Company of America 1981 Feb Business license obtained from the Ministry of Finance 1986 Oct Variable life insurance launched 1987 July Agreement reached with Prudential to terminate joint venture contract 1989 Apr Cancer insurance launched June Individual life insurance in force exceeded ¥ 1 trillion Oct Independent agency system introduced 1991 Apr Corporate name changed to Sony Life Insurance Co. , Ltd. June Individual life insurance in force exceeded ¥ 2 trillion July Began handling group annuity insurance 1992 Apr Comprehensive medical insurance launched 1993 Feb Individual life insurance in force exceeded ¥ 3 trillion 1994 Dec Individual life insurance in force exceeded ¥ 5 trillion 1995 Dec All sales employees provided with personal computers 1996 Mar Individual life insurance in force exceeded ¥ 8 trillion Dec Individual life insurance in force exceeded ¥ 10 trillion 1998 Jan Individual life insurance in force exceeded ¥ 13 trillion 1999 Mar Individual life insurance in force exceeded ¥ 16 trillion 11

Corporate History and Insurance Products 1999 Nov Variable annuity insurance launched Non-smoker preferred risk insurance launched 2000 Jan Individual life insurance in force exceeded ¥ 18 trillion Sep Cancer rider launched Oct Individual life insurance in force exceeded ¥ 20 trillion 2001 Apr Long-term comprehensive medical insurance launched July Individual life insurance in force exceeded ¥ 22 trillion Sept Comprehensive long-term medical insurance coverage launched, including features for hospitalization and surgical procedures 2002 Apr Nursing needs rider launched 2003 July Variable life term insurance product launched Separate accounts associated with variable life insurance product, proliferated with Japan Equity Growth Fund and World Core Equity Fund Sept Individual life insurance in force exceeded ¥ 24 trillion Oct Began selling insurance products through bank channels 2003 Jan Increasing term life insurance product Excellent Value Plan Launched July Rider to cover initial period of hospitalization launched Individual life insurance in force exceeded ¥ 25 trillion 12

Corporate History and Insurance Products 2004 Mar Individual life insurance in force exceeded ¥ 26 trillion Dec Individual life insurance in force exceeded ¥ 27 trillion 2005 June Individual life insurance in force exceeded ¥ 28 trillion July “LIFEPLANNER VALUE” registered as a trademark Feb Commenced sales of Increasing Term Life Insurance (Low Surrender Payments, Non-Profit) Nov Began selling semi-participating whole life nursing-care insurance Commenced sales of semi-participating lump-sum nursing care policy rider Began selling income protection insurance to cover three major diseases 2007 Mar Individual life insurance in force exceeded ¥ 30 trillion 2008 Apr Whole-life cancer insurance (08) offered Oct Sales of level premium term life insurance plan and rider with no surrender value 2009 April Sales of cancer hospitalization insurance Sales of advanced medical treatment rider Sales of hospitalization surgical benefits rider Nov Commenced sales of discount rider for nonsmokers and others in excellent health 2010 Nov Sales of whole life nursing-care insurance (reduced surrender value) and lump-sum payment nursing-care rider Began offering discount rider for nonsmokers and others in excellent health for decreasing term life insurance 2011 May Sales of income protection insurance to cover three major diseases (Type II) 13

Long standing low interest rate And MCEV 14

10 year swap rate historical chart 15

MCEV ( Market Consistent Embedded Value ) • 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. • If one had kept using historical average interest rate instead of market consistent interest rate for pricing in Japan, one would have had a big hidden loss in his liability. • Sony Life decided to use disciplined pricing approach based on MCEV. • For the new business sensitive to interest rate, we have to revise the pricing, when market interest rate goes down. • At the same time, Sony Life does not want to lose the value we straggle to earn through competition. There is a larger incentive to lock in the value (i. e. ALM matching) than before. • Some people could say “One would have regretted on his or her decision ALM matching, if the interest rate had gone up. Hindsight is 20/20. Interest rate have come down to the historical low. Why do we need to do ALM matching at the bottom of the market. ” 16

Business Cycle of Insurance Company • When a manufacturing company develop a product, they calculate the cost with talking to the supplier. When they actually produce the product, they will buy the raw material from the supplier at the planned cost. This is a usual business cycle. • When we develop a product, we calculate the cost with observing the financial market. When we actually sell the product, we buy financial asset at the market rate. This is also a usual business cycle. ALM matching means “doing business as usual”. • One may strongly believe that the interest rate will go up, since the interest rate is at the historical low. He or she can bet on the possibility of rising interest rate, but that is another business cycle other than insurance business. • Interest rate risk to an insurance company is similar to foreign exchange risk to an exporting company. 17

Suspicion to Model • Some people could say “Stock market priced insurance companies below EV. Investors are suspicious about the valuation based on EV. ” • Usage of mathematical models is also questioned in derivatives. • Headline News suggest that we are far from perfect modeling. JP Morgan in 2012 - 2 billion USD loss from Credit Derivative MUFG Morgan Stanley in 2011 – 80 billion JPY ( 1 billion USD) loss from Interest Rate Derivative • Extract from an annual report of a Bank “XXX uses mathematical risk models to help estimate its exposure to market risk. …. may provide a greater sense of security than warranted; therefore, reliance on these models should be limited. ” 18

Suspicion to Model • But it does not mean one should use old mathematical technique rather than new technique nor completely give up the usage of the model and rely on intuition. • One just have to go back to the basics and develop the better model. • In the meantime, one should be aware of the limitation of the model. • Much more important thing is to take action rather than to keep hesitating. • Risk is opportunity. Better solution is the hedge embedded in the insurance product. • EV=Economic Value? • Libor vs. OIS, Collateralized vs. Uncollateralized. 19

Other consideration 20

Other consideration in Product Development Process • Service vs. Product. Service is invisible. Product is visible. • Importance of reputation and brand. • Product lifecycle. Business model lifecycle. • Vertical integration vs. Horizontal integration. Independent Agency Channel. • Independent Agency Channel / Bancassurance makes insurance company more product oriented company than service oriented company? • Internet channel. Out of box thinking. Possibility of no life experience employee? • Innovator’s dilemma. Speed of high-end and low-end market overlapping. • Importance of timing of entrant. PDA, EV car. What will be the enabler for our industries? • Decision making. Committee? Belief without evidence? 21

Non traditional important products • Health products – impact of National Health Insurance, TPP? • Nursing Care products – impact of National Nursing Care Insurance • Corporate products – Tax change • No (or low ) surrender value products – Lapse assumption • Preferred Risk Products – Higher price sensitivity due to more information flow • Variable Annuity Products – Bank’s dedication, Risk asset performance • Foreign Currency Products – Bank’s dedication, Foreign investment information 22

Thank you very much! 23