Corporate Governance Policy

This policy establishes the framework and operational policy underpinning the basic views on corporate governance of the Sompo Holdings Group (hereinafter “the Group”).

1. Basic Views on Corporate Governance

We will at all times carefully consider the interests of our customers when making decisions that shape our business. We will strive to contribute to the security, health, and wellbeing of our customers and society as a whole by providing insurance and related services of the highest quality possible.
Following the principles of the Group management philosophy, the Group considers value creation for stakeholders in the administration of its business and maintains and enforces the Group Action Guidelines as the standard of behavior for the Group employees in Japan and worldwide with the business objectives of realizing sustainable business growth to increase corporate value and fulfilling its mission to be the best customer service provider both at home and abroad.
The Group considers continually improving the transparency and fairness of the Group’s corporate governance and fulfilling its corporate social responsibility as essential to maintaining strong relations of trust with stakeholders. The Board of Directors has accordingly established the Corporate Governance Policy to clarify basic policies regarding the formation of the overall vision for the governance structure and the governance framework. We continue to improve our corporate governance and aim to establish optimal systems.

2. Overall Governance Organization

The Group has elected to be a company with an Audit & Supervisory Board and maintains and promotes effective oversight and auditing functions using a system of corporate governance comprising the Board of Directors, which makes important management decisions and oversees business execution, and Audit & Supervisory Board members and an Audit & Supervisory Board that are independent from the Board of Directors.
The Board of Directors sets the Basic Policy on Internal Controls, which serves as the foundation for the Basic Policy for Group Management. These policies provide the framework for a highly transparent governance structure for the Company and Group companies.
The Group also utilizes business owner system, Group Chief Officer (hereinafter “Group CxO”) system, and executive officer system under the supervision of the Group CEO to enable agile and flexible decision-making and operation as well as ensuring the clarity of authority and responsibility.
To ensure transparency in the appointment and treatment of directors, the chairman and a majority of the members of the Nomination and Compensation Committee, an advisory organ to the Board of Directors, are outside directors.

3. Directors and the Board of Directors

(1) Role of directors and the Board of Directors

The Board of Directors performs its duties as stipulated by law, establishes important items for management, and serves a supervisory function overseeing the conditions of business execution.
The Board of Directors meeting, in principle, convenes on a monthly basis and comprises an appropriate number of members to realize swift decision-making.
Preliminary briefing sessions are held with outside directors to provide details about the discussion agenda with specific emphasis on the key agenda items. The integration of the Board of Directors meeting and preliminary briefing session, which includes communicating the opinions, questions, and other comments expressed by the outside directors at the preliminary briefing sessions to all attending directors before the Board of Directors meeting, is intended to facilitate constructive deliberations at the Board of Directors meeting and ensure the effectiveness of the Board of Directors operations. Steps including convening meetings of the outside directors and the Group CEO are implemented to facilitate open exchange of opinions between the outside directors and the chief executive.
The directors apply their accumulated knowledge and experience to the key issues for the Company to realize the proper execution of fair and effective executive management.

(2) Directors numbers, composition, and term of office

The number of directors shall not exceed 15, as stipulated in the Articles of Association. When establishing the stipulation that the number of directors shall not exceed 15, the Group took into account the need for swift and appropriate decisionmaking and the scope of duties to be performed by the Board of Directors.
Outside directors are corporate managers or other people with extensive experience and a wide range of perspectives able to apply outside viewpoints to various issues, including legal affairs, consumer needs, and overseas business development.
To ensure full clarity of responsibility related to business matters in each fiscal year, a director’s tenure ends at the close of the Ordinary General Meeting of Shareholders held within the latest fiscal year that is within one year of the appointment.

4. Audit & Supervisory Board Members and Audit & Supervisory Board

(1) Role of the Audit & Supervisory Board members and Audit & Supervisory Board

Audit & Supervisory Board members audit the work performance of the directors through such activities as auditing the construction and maintenance conditions of the Group internal control system and providing effective advice and recommendations to senior management that promotes the Group’s sustainable growth and increases the corporate value over the medium- and long-term.
The Audit & Supervisory Board establishes the audit standards, basic policy on audits, and auditing programs to make the above auditing activities functional and effective and systematically conduct auditing operations.
The Audit & Supervisory Board sets an annual meeting schedule and endeavors to realize full participation of all members and coordinates activities. Such endeavors include distributing information materials before meetings to ensure members are fully prepared to conduct thorough reviews and deliberations.

(2) Audit & Supervisory Board members numbers, composition, and term of office

The number of Audit & Supervisory Board members shall not exceed seven, as stipulated in the Articles of Association. The majority of Audit & Supervisory Board members are outside directors, which strengthens their independence from management.
The Group enhances effectiveness of monitoring by ensuring diversity among Audit & Supervisory Board members through the organic combination of informationgathering capabilities, Audit & Supervisory Board member independence, and full-time employment as well as stronger cooperation with accounting auditors and the inclusion of Audit & Supervisory Board members with accounting-related knowledge.
To ensure independence from management, and in accordance with the Companies Act, Audit & Supervisory Board members’ term of office expires at the conclusion of the General Meeting of Shareholders in the final fiscal year that ends within four years of their appointment.

5. Business Execution structure

The Group utilizes business owner system and Group CxO system under the supervision of the Group CEO to enable agile and flexible decision-making and business execution in the Group's best interest with the objective of increasing corporate value of the Group.

(1) Group CEO

Group CEO oversees overall operation of the Group as a Chief Executive Officer of the Group by strategically assigning business owners that are the heads of each business segment and Group CxOs that are the heads of each function of the Group to realize agile and flexible business operation under discontinuous changes in business environment.

(2) Business owner

The Group adopts a Group management system where the heads of each business segment (domestic P&C insurance, domestic life insurance, nursing care & healthcare, and overseas insurance) are delegated authority as business owners for business strategy proposals, investment decisions, and personnel deployment to enable agile and flexible decision-making and business execution in each business segment that is close to customers.

(3) Group CxO

Each Group CxO oversees group-wide operation of each function (Group CFO (finance), Group CRO (risk management), Group CACO (internal control and audit), Group CIO (IT), Group CDO (digital), and Group CHRO (human resource)) as a head of each function in the Group to enable agile and flexible decision-making, and group-wide business execution in the Group's best interest.

6. Nomination and Compensation Committee

The Nomination and Compensation Committee is established as an advisory body to the Board of Directors intended to improve transparency and fairness regarding director and executive officer nomination and compensation.

(1) Role of the committee

The committee sets director and executive officer appointment policy and appointment standards, determines individuals to propose as candidates, conducts director and executive officer evaluations and submits recommendations to the Board of Directors for director compensation amounts and the compensation structure, and contributes to the appointment and treatment of subsidiary directors based on the subsidiary business content and scope.
In addition, the committee conducts the Group CEO performance evaluation to improve the transparency of corporate governance.

(2) Committee structure

The committee is comprised of members appointed from the Company’s directors with outside directors representing the majority of members in order to ensure the independence and neutrality of the members. The committee chairperson is an outside director elected by the committee members.

7. Policies for Appointment of Officers

The appointment of directors, executive officers, and Audit & Supervisory Board members is conducted in accordance with the following policies for appointment of officers. Directors and executive officers are nominated by the Board of Directors based on discussions with the Nomination and Compensation Committee.
Furthermore, in the event that the Board of Directors’ appointment of an Audit & Supervisory Board member is determined by resolution at the General Meeting of Shareholders, an opportunity will be provided in advance for the Board of Directors to discuss the candidate with the Audit & Supervisory Board to seek its approval.

(1) Policies for appointment of directors and Audit & Supervisory Board members

The Company supervises and guides its subsidiaries, formulating management strategies for subsidiaries engaged mainly in the P&C insurance business, as well as comprehensive management strategies for the entire Group. The Company is responsible for the execution and realization of these strategies.
From this perspective, the Board of Directors appoints directors based on familiarity with the Company’s business, ensuring a balance between experience and achievements without bias for an area of specialization. To facilitate objective decision making with respect to management issues from a diverse and independent focus and perspective, the Board of Directors includes multiple outside directors with a wide range of knowledge and experience having backgrounds in corporate management, academia, and the legal profession.
The Audit & Supervisory Board consists of Audit & Supervisory Board members appointed on the basis of their solid knowledge of finance and accounting and in consideration of an overall balance of backgrounds in corporate management experience and the legal profession. Furthermore, the appointment of directors and Audit & Supervisory Board members is based on appointment criteria in consideration of Comprehensive Guidelines for Supervision of Insurance Companies.
The Group formulated outside director independence criteria as a standard for the appointment of outside directors and outside Audit & Supervisory Board members.

(2) Policies for appointment of executive officers

The Group formulated a “desired image for executive officers” and “Policies for appointment of executive officers” to identify the basic skills and qualifications required and define the balance between experience and achievements when appointing executive officers. In compliance with the policies, executive officers are appointed.

8. Policies for Training of Officers

To facilitate a detailed understanding of the business environment surrounding the Company, training is conducted for newly appointed outside directors and outside Audit & Supervisory Board members covering a variety of topics, including the current state of the Company and the P&C insurance industry, risk management, overseas businesses, and the life insurance business.Outside directors also continuously and practically enrich their understanding of our businesses through the various opportunities of communication with business departments. In addition, corporate officer study groups are held regularly for executive directors so they can acquire knowledge outside their areas of responsibility. Executive directors and Audit & Supervisory Board members also attend seminars and meetings held by various associations and organizations and participate in executive training.
In addition to executive officers, the aforementioned training cultivates management-oriented thinking and leadership through education programs in conjunction with outside specialized companies with the intent of cultivating the next generation of managers.

9. Policies on Decisions pertaining to Compensation for Officers

The Group regards compensation for officers as important matters from the viewpoints of improvement in business performance and corporate value, and sets policies on compensation for officers as follows:

(1) Basic policy on Compensation for Officers (Common to Group Companies)

a.The form and level of compensation for officers shall enable recruiting and retaining superior human resources as management of the Group.

b.Compensation structure shall be consistent with business strategy and promote officers' incentive to improve performance for the sake of the Group's growth.

c.Compensation shall reflect medium to long-term results and initiatives by officers as well as single-year results.

d.Objectiveness, transparency and fairness that can fulfill accountability to stakeholders shall be achieved in compensation structure for the Company and major subsidiaries through deliberation process in the Nomination and Compensation Committee inside the Group.

(2) Compensation structure for Officers

The Group sets policies on compensation for officers as follows. However, in cases there are reasonable grounds to believe that those policies should not be applied, the amount and composition of compensation are determined by the Board of Directors based on the recommendation of the Nomination and Compensation Committee.
The Nomination and Compensation Committee examines compensation budget for all directors and executive officers and makes recommendations to the Board of Directors on an annual basis. The amount of compensation for directors and executive officers are determined by the Board of Directors within the budget.

a.Composition of compensation for directors and how it is determined

Compensation for directors shall consist of monthly compensation, performance-linked compensation and performance-linked stock compensation.
With regard to monthly compensation, performance-linked compensation and performance-linked stock compensation, fixed amount shall be determined for monthly compensation, while a base amount and the number of standard point (one point = one common share) shall be determined for performance-linked compensation and performance-based stock compensation depending on whether the person in an outside or internal director, or does or does not have authority to represent the Company.
Nevertheless, performance-linked compensation and performance-linked stock compensation will not be paid to outside directors.
Compensation as a director and compensation as an executive officer shall be totaled and paid together to those directors who are serving concurrently as executive officers.
Overview of performance-linked compensation and performance-linked stock compensation are described in d. and e. below.

b.Composition of compensation for executive officers and how it is determined

Compensation for executive officers shall consist of monthly compensation, performance-linked compensation and performance-linked stock compensation. The amount and composition of compensation for the group CEO are examined and recommended by the Nomination and Compensation Committee, and determined by the Board of Directors based on the business environment and market level of compensation for executive officers, and group CEO's achievements and skills. The amount and composition of compensation for executive officers other than group CEO are determined based on the business environment and market level of compensation for executive officers and shall reflect the significance of duties, strategic positioning, achievements and skills. Fixed amount shall be determined for monthly compensation, while a base amount and the number of standard point (one point = one common share) shall be determined for performance-linked compensation and performance-linked stock compensation
Overview of performance-linked compensation and performance-linked stock compensation are described in d. and e. below.

c.Composition of compensation for Audit & Supervisory Board members and how it is determined

The form and level of compensation for Audit & Supervisory Board members shall commensurate with their duties and responsibilities and determined at a fixed amount through discussion between the Audit & Supervisory Board members depending on whether the Audit & Supervisory Board member is full-time or part-time while giving due consideration to their independence.

d. Performance-linked compensation

The Company has introduced performance-linked compensation system in order to align compensation for officers and business strategy and promote officer's incentive to improve performance for further growth of the Group. Below is overview of the system:

  • Performance-linked compensation shall be determined by reflecting single-year corporate performance and individual performance to the base amount of performance-linked compensation.
  • Performance metrics to evaluate corporate performance are adjusted consolidated profit and adjusted consolidated ROE, and coefficient is determined as a ratio of actual figures to targeted figures (projected figures in business plan). For performance metrics to evaluate individual performance, coefficient is determined depending on evaluation result in individual performance evaluation of officers.
  • Coefficient for performance-linked compensation is calculated by multiplying the above-mentioned coefficient for company performance by coefficient for individual performance, and the amount of payment is calculated by multiplying base amount of performance-linked compensation by the coefficient for performance-linked compensation.
  • For officers who serve as business owners or in charge of those businesses, sales and profit of the business are used as performance metrics to evaluate corporate performance.

e.Performance-linked stock compensation

The company had introduced performance-linked stock compensation system in order to increase the linking between compensation and increases in corporate value over the medium to long-term. Below is overview of the system:

  • Performance-linked stock compensation shall be determined by reflecting the medium to long-term stock value and consolidated performance to the number of performance-linked stock compensation standard point in comparison to the market.
  • Coefficient for stock value shall be determined by comparing 3-year growth rate of our stock value to the TOPIX growth rate.
  • Coefficient for consolidated performance shall be determined by comparing our growth rate of consolidated net income over the past 3 business years to the growth rate of peer group (global companies centering around insurance companies).
  • Coefficient for performance-linked stock compensation is calculated by multiplying the above-mentioned coefficient for stock value by coefficient for consolidated performance, and the point to provide is calculated by multiplying the number of performance-linked stock compensation standard point by the coefficient for performance-linked stock compensation.

10. Information Disclosure

The Company fulfills its responsibility to explain financial and non-financial information, including management strategies, risks, and governance, through timely, appropriate, equitable, and accurate disclosure. Disclosure systems, including internal rules, shall be established to ensure that essential information is supplied appropriately and promptly. As one aspect of this, the Disclosure Committee shall be established to discuss material issues regarding disclosure.

11. Supervision Policies for Group Companies

To improve the entire Group’s corporate value, the Company shall take steps to supervise the entire Group under the business owner system and group CxO system. To achieve the above, SOMPO HOLDINGS shall establish structures, including internal rules, to ensure its ability to conduct appropriately the business management of companies within the Group.
The Company shall formulate a common management vision and basic policies for the Group and notify these among Group companies. It shall supervise Group companies’ management through monitoring and other means. The Company shall also establish appropriate systems, including risk management systems, regulatory compliance systems, conflict of interest control systems, customer information management systems, and internal audit systems, in order to ensure effectiveness of the internal control systems of Group companies.
Group companies shall adhere to basic policies for the Group and formulate their own basic policies and business plans on the basis of the Group’s basic policies and plans.