Sony 2015 Annual Report Download - page 17

Sony’s Financial Services segment operates in highly regulated industries, and new rules, regulations and
regulatory initiatives by government authorities may adversely affect the flexibility and the operating results of
the Financial Services segment.
Sony’s Financial Services segment operates in industries subject to comprehensive regulation and
supervision, including the Japanese insurance and banking industries. Future developments or changes in laws,
regulations, or policies and their effects are unpredictable and may lead to increased compliance costs or
limitations on operations in the Financial Services segment. Due to Sony’s common branding strategy,
compliance failures in any of its businesses within the Financial Services segment may have an adverse impact
on the overall business reputation of the Financial Services segment. Furthermore, additional compliance costs
may adversely affect the operating results of the Financial Services segment. In addition, Sony Corporation’s
ability to receive funds from its affiliate Sony Financial Holdings in the form of financial support or loans is
restricted by guidelines issued by regulatory agencies in Japan. If these regulations change, it may further reduce
Sony Corporation’s ability to receive funds for its use.
Changes in interest rates may adversely affect the operating results and financial condition of Sony’s
Financial Services segment.
Sony’s Financial Services segment engages in asset-liability management (“ALM”) in an effort to manage
its investment assets in a manner appropriate to its liabilities, which arise from the insurance policies that Sony’s
Financial Services segment underwrites in both its life insurance and non-life insurance businesses and the
deposits, borrowings and other liabilities in its banking business. ALM considers the long-term balance between
assets and liabilities in an effort to ensure stable returns. Any failure to appropriately conduct its ALM activities,
or any significant changes in market conditions beyond what its ALM may reasonably address, may have an
adverse effect on the financial condition and operating results of the Financial Services segment. In particular,
because Sony Life Insurance Co., Ltd. (“Sony Life”)’s liabilities to policyholders generally have longer durations
than its investment assets, which are concentrated in long-term Japanese national government bonds, lower or
negative interest rates tend to reduce yields on Sony Life’s investment portfolio while guaranteed yields
(assumptions used for calculation of insurance premiums) remain generally unchanged on outstanding policies.
As a result, Sony Life’s profitability and long-term ability to meet policy commitments may be adversely
affected. In addition, declines in the yield of Sony Life’s investments resulting from changes in interest rates,
particularly those held in respect of interest rate-sensitive whole life insurance policies, may result in additional
policy reserves being recorded and the accelerated amortization of deferred acquisition costs, since the review of
actuarial assumptions used for the valuation of policy reserves and deferred acquisition costs is required at least
annually. Additional policy reserves and accelerated amortization of deferred acquisition costs may have an
adverse impact on Sony’s operating results and financial condition.
Declines in the value of equity securities may have an adverse impact on Sony’s operating results and
financial condition, particularly in Sony’s Financial Services segment.
In the Financial Services segment, declines in the yield of Sony Life’s separate account assets, resulting
from the factors such as declines in the value of equity securities, may result in additional policy reserves being
recorded and the accelerated amortization of deferred acquisition costs, since the review of actuarial assumptions
used for the valuation of policy reserves concerning minimum death guarantees for variable life insurance and
deferred acquisition costs is required at least annually. Additional policy reserves and accelerated amortization of
deferred acquisition costs may have an adverse impact on Sony’s operating results and financial condition.
For equity securities held by Sony outside of the Financial Services segment, a decrease in fair value could
result in a non-cash impairment charge. Any such charge may adversely affect Sony’s operating results and
financial condition.
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