Investment Regulation

In order to ensure the sound operation of the insurance business and to protect policyholders' interests, asset investment by insurance companies is regulated under the Insurance Business Law. The Enforcement Regulation of the Insurance Business Law stipulates the kinds of investable assets and their scope of investment as follows:

1. Scope of Investment

Paragraph 2 of Article 97 of the Insurance Business Law and Article 47 of the Enforcement Regulation provide that an insurance company should invest money received as premiums or any other assets within the following range:

(1) Japanese securities, such as government bonds, local government bonds, bonds issued by juridical persons organized under special laws or ordinances, debentures, stocks, investment trusts, or commercial paper (CP), etc. and/or foreign securities, such as government bonds, local government bonds, stocks, beneficiary certificates, or negotiable certificates of deposit, etc. of foreign countries

(2) real estate

(3) monetary claims

(4) short-term corporate bonds stipulated in Paragraph 6 of Article 98 of the Insurance Business Law

(5) gold bullion

(6) money loans (including call loans)

(7) loans secured on securities

(8) investment related to union contract stipulated in Article 667 of the Civil Code or anonymous union contract stipulated in Article 535 of the Commercial Code

(9) bank deposits or postal savings

(10) money trusts, monetary claims in trust, securities trust, or real estate in trust

(11) over-the-counter trading in securities derivatives, transactions of securities index futures, securities options, or foreign market certificate futures stipulated in the Financial Instruments and Exchange Law

(12) financial futures transactions stipulated in the Financial Instruments and Exchange Law

(13) trading in derivatives stipulated in Paragraph 1 (8) of Article 98 of the Insurance Business L aw

(14) foreign exchange futures transactions

(15) any other methods equivalent to those mentioned above.

2. Limits on Investment of Assets

Paragraph 1 of Article 97-2 of the Insurance Business Law and Article 48 of the Enforcement Regulation provide that, when an insurance company invests its assets, the ratios of the respective kinds of assets to the total assets or the assets equivalent to special accounts for maturity-refund type insurance, etc., shall not exceed those stated below.

A. Assets other than those equivalent to special accounts for maturity-refund type insurance, etc., are as follows.

(1) Japanese stocks (including item (8)) mentioned in the above: 30%

(2) real estate: 20%

(3) assets in foreign currency: 30%

(4) bonds, giving loans, and lending securities: 10%

(5) assets invested similar to items (1) to (10) mentioned in the above: 3%

B. Assets equivalent to special accounts for maturity-refund type insurance, etc., are as follows:

(1) Japanese stocks: 30%

(2) assets in foreign currency: 30%

However, if approved by the Commissioner of the Financial Services Agency, the above-mentioned ra tios shall not apply.

In addition, Paragraph 2 of Article 97-2 of the Insurance Business Law and Articles 48-3 of the E nforcement Regulation provide that, in investing assets of an insurance company into one and the same person/group or the major shareholders (*), the ratios of respective kinds of assets to the total assets or the assets equivalent to special accounts for maturity-refund type insurance, etc., shall not exceed those stated below.

C. Regarding assets other than those equivalent to special accounts for maturity-refund type insurance, etc., the aggregate of the following assets shall not exceed 10% of total assets. (The following item (2) and/or (4) shall not exceed 3% of the total assets.)

(1) corporate bonds and stocks issued by one and the same person/group

(2) loans and lending securities to one and the same person/group

(3) deposits with one and the same person/group

(4) guarantee of obligation for one and the same person/group

(5) assets related to trading in derivatives with one and the same person/group

D. Regarding the assets equivalent to special accounts for maturity-refund type insurance, etc., the aggregate of the same asset items as mentioned in the above C. (1) to (5) sh all not exceed 10% of the total of the special account assets.

E. In addition, as regards assets other than those equivalent to special accounts for maturity-refund type insurance, etc., the aggregate of the following assets shall not exceed 6% of total assets. (The following item (2) and/or (4) shall not exceed 2% of total assets.)

(1) corporate bonds and stocks issued by the major shareholders or one and the same major shareholder

(2) loans and lending securities to the major shareholders or one and the same major shareholder

(3) deposits with the major shareholders or one and the same major shareholder

(4) guarantee of obligation for the major shareholders or one and the same major shareholder

(5) assets related to trading in derivatives with the major shareholders or one and the same major shareholder

F. Regarding the assets equivalent to special accounts for maturity-refund type insurance, etc., the aggregate of the same asset items as mentioned in the above E. (1) to (5) sh all not exceed 6% of the total of the special account assets.

(*) Any person or company that holds more than, in principle, 20% of the total shares of an insurance company or an insurance holding company.