Sony 2003 Annual Report Download - page 102

Consolidated Financial Information 2003
16
Financial Services
Financial Services revenue for the fiscal year ended March 31, 2003 increased by 28.3 billion yen, or 5.5
percent, to 540.5 billion yen compared with the previous fiscal year. Operating income increased by 1.2 billion yen, or
5.4 percent, to 23.3 billion yen and the operating income margin was flat, compared with the previous fiscal year, at
4.3 percent.
At Sony Life Insurance Co., Ltd. (“Sony Life”), revenue increased by 19.5 billion yen, or 4.4 percent, to 466.6
billion yen and operating income increased by 1.8 billion yen, or 6.4 percent, to 29.6 billion yen compared with the
previous fiscal year*. Insurance revenue increased as insurance-in-force from individual life insurance products
increased due to the maintenance of a lower than industry average rate of contract cancellation, despite a decrease
in newly acquired insurance-in-force brought about by a decrease in disposable family incomes due to continued
weak economic conditions. The increase in revenue also resulted from an improvement in the valuation gains and
losses from investments in the general account which occurred because loss recorded due to the devaluation of
Argentine government bonds held in that account decreased significantly compared with the previous fiscal year. On
the other hand, the increase in Sony Life’s revenue was partially offset by a deterioration of valuation gains and
losses from investments in the separate account, which resulted from the stock market downturn. Operating income
increased because of the increase in insurance revenue that accompanied the increase in insurance-in-force from
individual life insurance products and the improvement in valuation gains and losses from investments in the general
account mentioned above. Valuation gains and losses from investments in the separate account accrue directly to
the account of policyholders and, therefore, do not affect operating income.
At Sony Assurance Inc. (“Sony Assurance”), revenue increased due to higher insurance revenue brought about
by an expansion in automobile insurance-in-force reflecting greater customer awareness of the benefit of flexible
insurance policies which take into account mileage driven. Regarding profit performance, an operating loss was
recorded in the fiscal year ended March 31, 2003, as was the case in each of the previous three fiscal years. The loss
was recorded because essential investments necessary for the expansion of the business put pressure on profitability.
These investments were for advertising and for computer systems necessary to develop new products and establish
customer claims service centers. However, an increase in insurance revenue and a decrease in the expense ratio
(the ratio of operating expenses to premiums) and the loss ratio (the ratio of insurance payouts to premiums) caused
losses to decrease.
At Sony Finance International, Inc. (“Sony Finance”), a leasing and credit financing business subsidiary in
Japan, revenue decreased slightly due to a decrease in rent revenue despite an increase in leasing revenue. In
terms of profitability, a loss was recorded, compared with an operating income in the previous fiscal year, due to an
increase in operating expenses in connection with the issuance of credit cards that utilize contact-free IC card
technology.
Sony Bank Inc. (“Sony Bank”), which started business in June 2001, recorded a loss, as was also recorded in
the previous fiscal year, primarily due to start-up expenses.
*The revenue and operating income at Sony Life reported here are calculated on a U.S. GAAP basis. Therefore, they