##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF
1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended March 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 Date of event requiring this shell company report
 For the transition period from  to
 Commission file number: 333-150010
 Mitsui Sumitomo Kaijo Grupu Horudingusu Kabushiki Kaisha
 (Exact name of registrant as specified in its charter)
 Mitsui Sumitomo Insurance Group Holdings, Inc.
 (Translation of registrants name into English)
 Japan
(Jurisdiction of incorporation or organization)
    
    27-2, Shinkawa 2-chome
Chuo-ku, Tokyo 104-8252
Japan
(Address of principal executive offices)
 Tsuyoshi
Hatae, +81-3-3297-6493, t-hatae@msig.com, +81-3-3297-6920,
27-2, Shinkawa 2-chome, Chuo-ku, Tokyo
104-8252, Japan
 (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person
 Securities registered or to be registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange On Which RegisteredN/A
    
    N/A
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Common Stock
(Title of Class)
 
 Indicate the number of outstanding shares of each of the issuers classes of capital or common
stock as of the close of the period covered by the annual report.
 On April 1, 2008, the registrant was formed and issued shares of its common stock to the then
shareholders of Mitsui Sumitomo Insurance Co., Ltd. (Mitsui Sumitomo Insurance) in exchange for
the shares of Mitsui Sumitomo Insurances common stock that they held, at the exchange ratio of 0.3
shares of the registrants common stock for each share of Mitsui Sumitomo Insurances common stock.
As of March 31, 2008, 1,404,402,464 shares of Mitsui Sumitomo Insurances common stock were
outstanding, which were equivalent to 421,320,739 shares of the registrants common stock.
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
 Yes o          No þ
 If this report is an annual or transition report, indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.
 Yes þ          No o
 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
 Yes þ          No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act.
 (Check one):
 Large accelerated filer o

Accelerated filer o

Non-accelerated filer þ Indicate by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:
 U.S. GAAP  þ

International Financial Reporting Standards as issuedby the International Accounting Standards Board o

Other  o If Other has been checked in response to the previous question, indicate by check mark which
financial statement item the registrant has elected to follow.
 Item 17 o          Item 18 o
 If this is an annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
 Yes o          No þ




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##### 



TABLE OF CONTENTS
 PagePART
IItem 1.
    
    Identity of Directors, Senior Management and Advisers
    
    
    1Item 2.
    
    Offer Statistics and Expected Timetable
    
    
    1Item 3.
    
    Key Information
    
    
    1Item 4.
    
    Information on the Company
    
    
    11Item 4A.
    
    Unresolved Staff Comments
    
    
    49Item 5.
    
    Operating and Financial Review and Prospects
    
    
    49Item 6.
    
    Directors, Senior Management and Employees
    
    
    81Item 7.
    
    Major Shareholders and Related Party Transactions
    
    
    87Item 8.
    
    Financial Information
    
    
    88Item 9.
    
    The Offer and Listing
    
    
    89Item 10.
    
    Additional Information
    
    
    92Item 11.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    105Item 12.
    
    Description of Securities Other Than Equity Securities
    
    
    110PART
IIItem 13.
    
    Defaults, Dividend Arrearages and Delinquencies
    
    
    111Item 14.
    
    Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    111Item 15T.
    
    Controls and Procedures
    
    
    111Item 16A.
    
    Audit Committee Financial Expert
    
    
    111Item 16B.
    
    Code of Ethics
    
    
    111Item 16C.
    
    Principal Accountant Fees and Services
    
    
    111Item 16D.
    
    Exemption from the Listing Standards for Audit Committees
    
    
    112Item 16E.
    
    Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    112PART
IIIItem 17.
    
    Financial Statements
    
    
    112Item 18.
    
    Financial Statements
    
    
    112Item 19.
    
    Exhibits
    
    
    113Index to Consolidated Financial Statements and Financial Statement Schedule
    
    
    F-1EX-1.3 Regulations of the board of directors of the registrant (English translation)EX-1.4 Regulations of the board of corporate auditors of the registrant (English translation)EX-8.1 List of subsidiaries of the registrantEX-11.1 Charter on Professional ConductEX-12.1 Certification of the Chief Executive Officer required by Rule 13a-14(a)EX-12.2 Certification of the Chief Financial Officer required by Rule 13a-14(a)EX-13.1 Certification of the Chief Executive Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States CodeEX-13.2 Certification of the Chief Financial Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code
  Mitsui Sumitomo Insurance Group Holdings, Inc. was formed on April 1, 2008, at which time it
issued shares of its common stock to the then shareholders of Mitsui Sumitomo Insurance Co., Ltd.
in exchange for the shares of the latter companys common stock that they held. As a result,
Mitsui Sumitomo Insurance Group Holdings, Inc. is now the ultimate parent company of the
consolidated group companies of which Mitsui Sumitomo Insurance Co., Ltd. was previously the
ultimate parent company. Information of the Company as of or for a period ended a date prior to
April 1, 2008 that is disclosed in this annual report is information of Mitsui Sumitomo Insurance
and/or its consolidated group companies.
 As used in this annual report, references to the Company are to Mitsui Sumitomo Insurance
Group Holdings, Inc. when the references relate to the period on or after April 1, 2008, and to
Mitsui Sumitomo Insurance Co., Ltd. when the references relate to the period on or prior to March
31, 2008. Also, as used in this annual report, references to we, our and us are to the
Company and, except as the context otherwise requires, its subsidiaries.
 As used in this annual report, U.S. dollar or $ means the lawful currency of the United
States of America, and yen or ¥ means the lawful currency of Japan.
 As used in this annual report, U.S. GAAP means accounting principles generally accepted in
the United States, and Japanese GAAP means accounting principles generally accepted in Japan.




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##### Table of Contents



PART I
 
 Item 1.
    
    Identity of Directors, Senior Management and Advisers.
  
 Item 2.
    
    Offer Statistics and Expected Timetable.
  
 Item 3.
    
    Key Information.
 A. Selected Financial Data.
 U.S. GAAP Selected Financial Data
  Selected Financial Data Prepared in Accordance with U.S. GAAP
 Year Ended March 31,2005
    
    
    2006
    
    
    2007
    
    
    2008(Yen in millions, except per share data)Income Statement Data:Net premiums written
    
    ¥
    1,402,977
    
    
    ¥
    1,458,507
    
    
    ¥
    1,489,379
    
    
    ¥
    1,537,616Net premiums earned
    
    
    1,357,748
    
    
    
    1,422,801
    
    
    
    1,469,080
    
    
    
    1,502,685Premium income for life insurance
contracts
    
    
    156,254
    
    
    
    179,430
    
    
    
    193,551
    
    
    
    192,731Investment income, net of investment
expenses
    
    
    119,479
    
    
    
    156,102
    
    
    
    179,189
    
    
    
    185,265Net realized gains (losses) on
investments
    
    
    50,992
    
    
    
    50,199
    
    
    
    24,315
    
    
    
    (17,370
    )Total revenue
    
    
    1,684,473
    
    
    
    1,808,532
    
    
    
    1,866,135
    
    
    
    1,863,311Losses and claims incurred and provided
for
    
    
    918,771
    
    
    
    881,623
    
    
    
    909,656
    
    
    
    906,257Total expenses
    
    
    1,617,400
    
    
    
    1,627,555
    
    
    
    1,698,696
    
    
    
    1,709,552Net income
    
    
    46,694
    
    
    
    119,890
    
    
    
    113,916
    
    
    
    104,796Balance sheet data (period end):Total investments
    
    
    
    
    
    
    7,481,988
    
    
    
    7,943,462
    
    
    
    7,293,449Total assets
    
    
    
    
    
    
    9,398,714
    
    
    
    9,877,032
    
    
    
    9,326,325Total liabilities
    
    
    
    
    
    
    6,742,777
    
    
    
    6,985,891
    
    
    
    6,898,440Common stock
    
    
    
    
    
    
    137,495
    
    
    
    137,495
    
    
    
    137,495Accumulated other comprehensive income
    
    
    
    
    
    
    1,119,324
    
    
    
    1,255,766
    
    
    
    713,667Total shareholders equity
    
    
    
    
    
    
    2,652,968
    
    
    
    2,874,460
    
    
    
    2,409,299Number of shares outstanding
    
    
    
    
    
    
    1,513,184,880
    
    
    
    1,513,184,880
    
    
    
    1,404,402,464Per share data:Net income per share  basic
    
    ¥
    32.37
    
    
    ¥
    84.11
    
    
    ¥
    80.24
    
    
    ¥
    74.28Shareholders equity per share (1)
    
    
    1,432.11
    
    
    
    1,867.47
    
    
    
    2,036.89
    
    
    
    1,715.53Cash dividends per share
    
    
    8.50
    
    
    
    13.50
    
    
    
    15.00
    
    
    
    15.00Cash dividends per share (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.12Key ratios (3):Net loss ratio (4)
    
    
    67.7
    %
    
    
    62.0
    %
    
    
    61.9
    %
    
    
    60.3
    %Combined loss and expense ratio (5)
    
    
    102.7
    %
    
    
    97.6
    %
    
    
    99.1
    %
    
    
    98.7
    %
 
 Notes:(1)
    
    At period end, calculated using the number of shares then outstanding (excluding shares held
by the Company).(2)
    
    Calculating using the yen-dollar exchange rate at the date of the shareholders meeting at
which the relevant dividend payment was approved.(3)
    
    The key ratios relate to the property and casualty insurance reportable segment.(4)
    
    The ratio of losses incurred to net premiums earned.(5)
    
    Sum of the ratio of losses and loss adjustment expenses incurred to net premiums earned and
the ratio of underwriting and administrative expenses incurred to net premiums written. 1




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Japanese GAAP Selected Financial Data
  Year Ended March 31,2004
    
    2005
    
    2006
    
    2007(1)
    
    2008(1)(Yen in millions, except per share data)Income statement data:Ordinary income
    
    ¥
    2,066,500
    
    
    ¥
    2,021,917
    
    
    ¥
    2,106,874
    
    
    ¥
    2,117,072
    
    
    ¥
    2,137,603Net premiums written
    
    
    1,379,119
    
    
    
    1,407,328
    
    
    
    1,464,107
    
    
    
    1,492,808
    
    
    
    1,541,032Ordinary profit
    
    
    174,943
    
    
    
    87,577
    
    
    
    127,710
    
    
    
    91,684
    
    
    
    60,866Net income
    
    
    77,787
    
    
    
    65,725
    
    
    
    71,660
    
    
    
    60,796
    
    
    
    40,027Balance sheet data
(period end):Net assets
    
    ¥
    1,401,911
    
    
    ¥
    1,461,575
    
    
    ¥
    2,027,469
    
    
    ¥
    2,182,877
    
    
    ¥
    1,671,517Total assets
    
    
    7,126,961
    
    
    
    7,402,311
    
    
    
    8,592,873
    
    
    
    9,011,652
    
    
    
    8,397,718Per share data:Net income per share:Basic
    
    ¥
    53.94
    
    
    ¥
    45.51
    
    
    ¥
    50.27
    
    
    ¥
    42.82
    
    
    ¥
    28.37Diluted
    
    
    52.78
    
    
    
    45.51
    
    
    
    50.27
    
    
    
    42.82
    
    
    
    28.37Net assets per share
    
    
    963.51
    
    
    
    1,021.13
    
    
    
    1,427.17
    
    
    
    1,536.71
    
    
    
    1,178.48Key ratios:Equity ratio
    
    
    19.67
    %
    
    
    19.74
    %
    
    
    23.60
    %
    
    
    24.06
    %
    
    
    19.71
    %Return on equity
    
    
    6.37
    %
    
    
    4.59
    %
    
    
    4.11
    %
    
    
    2.90
    %
    
    
    2.09
    %Price earnings ratio
    
    
    20.54
    
    
    
    21.60
    
    
    
    31.85
    
    
    
    34.54
    
    
    
    35.50
 
 (1)
    
    Effective from the year ended March 31, 2007, the Company adopted Accounting Standard for
Presentation of Net Assets in the Balance Sheet (Accounting Standards Board of Japan (ASBJ)
Statement No. 5, issued on December 9, 2005) and Guidance on Accounting Standard for
Presentation of Net Assets in the Balance Sheet (ASBJ Guidance No. 8, issued on December 9,
2005). 2




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Exchange Rate Data
   Fiscal year ended March 31,
    
    High
    
    Low
    
    Average(1)
    
    Period-end2004
    
    ¥
    120.55
    
    
    ¥
    104.18
    
    
    ¥
    112.75
    
    
    ¥
    104.182005
    
    
    114.30
    
    
    
    102.26
    
    
    
    107.28
    
    
    
    107.222006
    
    
    120.93
    
    
    
    104.41
    
    
    
    113.67
    
    
    
    117.482007
    
    
    121.81
    
    
    
    110.07
    
    
    
    116.55
    
    
    
    117.562008
    
    
    124.09
    
    
    
    96.88
    
    
    
    114.31
    
    
    
    99.85Calendar year 2008March
    
    ¥
    103.99
    
    
    ¥
    96.88
    
    
    ¥
    100.76
    
    
    ¥
    99.85April
    
    
    104.56
    
    
    
    100.87
    
    
    
    102.68
    
    
    
    104.53May
    
    
    105.52
    
    
    
    103.01
    
    
    
    104.36
    
    
    
    105.46June
    
    
    108.29
    
    
    
    104.41
    
    
    
    106.92
    
    
    
    106.17July
    
    
    108.19
    
    
    
    104.64
    
    
    
    106.85
    
    
    
    108.10August
    
    
    110.48
    
    
    
    107.59
    
    
    
    109.36
    
    
    
    108.69
 
 (1)
    
    Calculated from the average of the exchange rates on the last day of each month
during the period with respect to fiscal years and from the average of daily noon buying
rate with respect to calendar years.  3




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B. Capitalization and Indebtedness.
  C. Reasons for the Offer and Use of Proceeds.
  D. Risk Factors.
  Risks Relating to Our Overall Business
 If economic conditions in Japan again worsen, our financial condition and results of operations may be adversely affected
   Deregulation, consolidation and the entry of new competitors have intensified competition in the
Japanese insurance industry
  4




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Japan is prone to natural disasters, which can result in substantial claims on non-life insurance
policies
  We may be required to augment our reserves in case of unforeseen losses
    5




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6




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We will be subject to risks associated with reinsurance
  Our investment activities entail risks
   If another Mitsui or Sumitomo company is having financial difficulties, we may be called upon,
and may decide to provide, financial support to that company
  7




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Our foreign assets and liabilities are exposed to foreign currency fluctuations
  Our financial results may be materially adversely affected by unpredictable events
  We may not succeed in executing our growth strategies outside of Japan
   
    
    The impact of economic slowdown or currency crises in economies outside Japan;
    
    Unexpected changes in or delays resulting from regulatory requirements;
    
    Exchange controls;
    
    Restrictions on foreign investment or the repatriation of profits or invested capital;
    
    Changes in the tax systems or rate of taxation;
    
    Social, political and economic risks;
    
    Natural disasters; and
    
    Unexpected spread of contagious diseases.
 8




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Business interruptions, human factors or external events may adversely affect our financial results
  System failures may adversely affect our reputation, operations and financial condition
  Unauthorized disclosure of personal information held by us may adversely affect our business
  Since we are a holding company, our ability to pay operating and financing expenses and dividends
depend on the financial performance of our principal operating subsidiaries. Our ability to pay
dividends also depends on our own dividend-paying capacity
   9




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A downgrade in the financial strength ratings of our operating subsidiaries could limit our ability
to market products, increase the number of policies being surrendered and hurt our relationships
with customers and trading counterparties
  Japanese life insurance and non-life insurance companies have been subject to increasing scrutiny
and regulatory actions in connection with under-payment and non-payment of claims and benefits
    Risks Relating to the Shares
 Investors holding less than a unit of shares will have limited rights as shareholders
  10




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Rights of shareholders under Japanese law may be more limited than under the laws of other
jurisdictions
  Because of daily price range limitations under Japanese stock exchange rules, you may not be able
to sell your shares of our common stock at a particular price on any particular trading day, or at
all
  It may not be possible for investors to effect service of process within the United States upon us
or our directors, executive officers or corporate auditors, or to enforce against us or those
persons judgments obtained in U.S. courts predicated upon the civil liability provisions of the
federal securities laws of the United States
  
 Item 4.
    
    Information on the Company.
 A. History and Development of the Company.
  11




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Mitsui Marine
        Sumitomo Marine
  12




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Merger
  Share Transfer
    13




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B. Business Overview.
 Overview
 THE JAPANESE NON-LIFE INSURANCE INDUSTRY
 History
     14




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Industry Background
    BUSINESS OF THE COMPANY
 General
  15




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Business Goals
  
    
    Seek sustainable development with corporate quality as the main source of
competitiveness.Our corporate message, For all the things
you care about, reflects our desire to have a management that is oriented towards corporate social
responsibility and that strives for quality improvement originating from the
customers viewpoint. In this way, we seek to obtain customers trust and growth.
In the non-life insurance business, we seek to respond to customers demands for
easy-to-understand products and services that meet their needs, along with a
skilled network of employees and agents. In the life insurance
business, we seek to expand our business through Mitsui Sumitomo Kirameki Life
Insurance, our wholly owned subsidiary, and Mitsui Sumitomo MetLife Insurance, a
joint venture with MetLife, Inc. We seek to continue to grow globally, especially
by expanding operations throughout Asia. In the financial services area and
risk-related management area, we seek to expand services in various fields, such
as Japanese 401k plans, alternative risk transfer, corporate financing guarantees,
and risk-management consulting services.
 
    
    Become an insurance and financial group highly rated by customers, shareholders
and agents, and capable of gaining public confidence. We seek to provide insurance
products, claims handling services, risk-consulting services and financial and
other products and services that will make us a top choice for customers. We seek
to respond to customer demands by providing insurance products that meet our
customers needs while being easy to understand. We stress corporate governance,
and also adhere to a policy of redistributing an appropriate level of profits to
our shareholders. We support the training and education of our insurance agents so
that they can effectively market new insurance, financial and other products and
services in order to gain customers confidence. We emphasize legal compliance to
be a business which the public can trust. We strive to be a good corporate citizen
and to contribute to society. We make efforts to protect the global environment and
to support volunteer work, local arts, sports and other community activities.
    
    Become an insurance and financial group staffed with employees of the highest
creativity, vitality and inventiveness.We place a high priority on innovation,
growth and speed. We will strive to establish a human resources and personnel
administration system based on process and performance under an open corporate
culture in order to heighten employee creativity, vitality and inventiveness. We
seek to respond flexibly to the changing business climate, pursue innovation, and
develop new products and services, marketing methods and business models.
 Business Strategies
  
    
    Basic Group Strategy Our first priority is to improve the quality of our
products and services. In this way, we seek to earn greater trust from customers in
order to produce growth and invest additional resources in improving corporate
quality, establishing an upward cycle for sustainable quality
  development. As part
of this cycle, we first seek to properly execute basic tasks with the quality
customers demand concerning every contact point with customers. We will also pursue
quality by striving to exceed our customers expectations.
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
    
    Quality Improvement Strategy Our quality improvement strategy is composed of
three elements. First, we seek to gather and incorporate a wide
range of comments from our stakeholders. Some of the steps we have taken in the
regard include establishing a Customer Service Department for centralized
complaint handling, and an intranet board for receiving employee suggestions.
Second, we seek to develop our employees and agents by revising our training
programs to ensure that all agents follow a cycle of essential customer services
(the basic cycle of insurance). Finally, we seek to improve our business process
and infrastructure to make for a more visitor- and employee-friendly office
environment, as well as to streamline the logistics process.
    
    Group Business Strategy Our group business strategy is based on quality
enhancement and reliable business execution in each of our five major business
activities. We seek to reinforce our operative base by strengthening corporate
governance, upgrading our legal compliance and risk control systems, and achieving
a more balanced business portfolio. Our group business strategy is also composed of
the following individual business strategies for each of our five major business
activities:
    
    Domestic non-life business strategy We seek to innovate throughout the entire
business process, including in the areas of products, sales, and claims handling.
We also seek to offer quality that exceeds our customers expectations. In
addition, we seek to secure reasonable premium margins and implement our investment
management strategy (see below under Investment Management Strategy).
    
    Product innovation strategy We seek to offer products and services that meet
our customers needs while at the same time being easy to understand. To this end,
we seek to streamline our existing lineup of products for better understandability.
For example, between fiscal 2006 and fiscal 2008, we have been seeking to reduce
the number of personal insurance products from 68 to about 15, and the number of
personal extra riders from about 1,400 to about 700. Our plan is not simply to
abolish existing products, but rather to consolidate and integrate them into new
products that will meet our customers needs. We also seek to make our products
easier for customers to understand through such methods as minimizing the use of
technical terms, breaking long sentences into short ones, and using more charts. We
also hope to make such policy information available to the policyholder on the
corporate website in a layout that is easy to understand, including a list of
eligible claims. In addition to simplifying our product line, we also seek
construct the Product Control System, which will be a document archive, gather
product data, and provide a system for inter-divisional checks and authorization in
the product-development process. The Product Control System will also share product
information with the claims handling system to facilitate quick and accurate claims
service.
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
    
    Sales innovation strategy Our sales innovation strategy seeks to enhance our
network of agents and build an efficient internal framework. We seek to streamline
our network by decreasing our total number of agents, and transitioning to a
network of skilled, large-scale agents. At the same time, we seek to strengthen our
agents training to ensure that they are able to perform their duties to customers
in a more skillful manner. We plan to issue quality improvement reports to agents
every month, as well as to encourage better use of the agency computer system by
monitoring use level. We also seek to improve our sales infrastructure, such as by making more methods of premium
collection available, developing an electronic registry for paperless signing, and
linking the customer contract database with the agency computer system.
    
    Claims handling innovation strategy We seek to improve the quality of our
claims payment to offer fair, uniform, and speedy claims payment service. We hope
to do this by strengthening our personnel system through enhanced training,
constructing a new accident report computer system, and developing software to
automatically determine the eligibility of claims. We also seek to internally check
cases of handled claims and ensure that we send notices to claimants upon payment.
    
    Life insurance business strategy Our life insurance business is conducted by
two companies, Mitsui Sumitomo Kirameki Life Insurance, our wholly owned
subsidiary; and Mitsui Sumitomo MetLife Insurance Co., Ltd., an equity-method joint
venture with MetLife, Inc.
    
    Through MS Kirameki, we seek to solidify the base for growth by sales
reinforcement, mainly through cross-sales and diversification of distribution
channels. We seek to promote cross-sales of group members products, as well as
exploring new areas of potential growth in the life market, such as by promoting
the financial consulting business, taking a strategic approach to over-the-counter
sales of insurance products at banks and increasing sales support for large-scale
life only agents. We also seek to strengthen our sales force by placing Life
Playing Leaders (We employees exclusively engaged in selling life insurance)
nationwide to guide agents, as well as by increasing the number of Loyal Member
agents, who are able to sell life insurance on their own initiative.
    
    Through Mitsui Sumitomo MetLife Insurance Co., Ltd., we seek to increase our
competitiveness in the personal annuity market by developing our sales base and
increasing customer satisfaction. To develop the sales base, we hope to open new
distribution channels, such as by proactively responding to Japan Posts upcoming
privatization, and we are also studying the feasibility of distribution through our
agents. We also seek to strengthen existing OTC channels, such as by increasing the
share within an existing bank agent as well as seeking new OTC banks. We seek to
use the product-development capabilities gained through our affiliation with
U.S.-based MetLife to introduce new products that meet the needs of the growing
market for individual annuities. In addition to developing our sales base, we seek
to increase customer satisfaction and protection, such as by enhancing the call
center system, upgrading our system infrastructure, gathering customers comments
by survey, and strengthening compliance awareness and the claim-handling system.
 18




---



##### Table of Contents




    
    Overseas business strategy We have established regional holding companies in
Asia, Europe and the Americas, with the aim of achieving growth under regionally
autonomous structures. Our top overseas priority is expanding operations in Asia,
which is a growth market. We have acquired the Asian business operations of Aviva
plc, as well as Mingtai Fire & Marine Insurance Co., Ltd. (now MSIG Mingtai
Insurance Co., Ltd.). We also seek to expand business in the growth market of the
Peoples Republic of China through our newly established subsidiary, Mitsui
Sumitomo Insurance (China) Company
Limited, and by strengthening our product development and reinsurance business
through an alliance with China Pacific Insurance. We seek to foster subsidiaries
in India, which has high potential as a market for both life and non-life
insurance. In Europe, we plan to take acceptable risks, mainly in the Lloyds
business. We established an agent solely for Lloyds management in January 2007,
which we expect to enhance our presence in the London insurance market as one of
Lloyds primary members. In the Americas we plan to increase our underwriting of
good risks to improve profitability. In the re-insurance field, we seek to
increase our underwriting of good risks.
    
    Financial services business strategy We seek to strengthen the development of
financial service products and promote sales. We seek to provide services for
defined contribution pension plans centering on Japanese 401k plans. We have
received approval to serve as an administrator, thereby allowing us to
independently offer our own integrated services. We seek to utilize financial
engineering techniques to launch risk finance services, such as weather
derivatives. We also seek to provide services that respond to financing needs
through corporate financing guarantees that utilize our high credit rating. We hope
to cultivate these businesses in the future.
    
    Risk-related business strategy We seek to satisfy the expanding needs of our
clients not only by developing new insurance products, but also by providing a
variety of quality services related to insurance products. Through InterRisk
Research Institute & Consulting, Inc., we provide an array of risk management and
consulting services. Currently, there is high demand for business continuity
management consulting, which entails providing advice on maintaining business
operations in the event that companies face unexpected disaster. We have had
inquiries about this business from not only large companies, but a high number of
small- and medium-sized businesses as well. We are also moving into fields such as
nursing care services and health and medical fields. For example, Mitsui Sumitomo
Insurance Care Network Co., Ltd. is involved in the operation of nursing care
facilities.
    
    More Balanced Earnings Structure In addition to aggregate growth, we also
seek to obtain a more balanced earnings structure by decreasing the percentage of
our earnings derived from domestic non-life insurance, and raising the percentage
of earnings derived from our other main businesses.
 19




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##### Table of Contents




    
    Investment Management Strategy We seek to build a medium-term portfolio that
will increase the fair value of our net assets by optimizing the risk-return
correlation. We seek to ease interest-rate risks by lengthening the duration of
yen-denominated assets and utilizing swaps. We seek to reduce asset-fluctuation
risks on Japanese stocks by selling part of them. We also seek to increase our
credit investments, such as personal loans, as well as to increase our alternative
investments, such as hedge funds.
 Lines of Business
  Year Ended March 31,2006
    
    
    2007
    
    
    2008(Yen in millions)Voluntary Automobile
    
    ¥
    592,275
    
    
    ¥
    609,348
    
    
    ¥
    634,948Compulsory Automobile Liability (1)
    
    
    181,757
    
    
    
    176,826
    
    
    
    165,851Fire and Allied Lines (2)
    
    
    250,760
    
    
    
    256,259
    
    
    
    274,432Personal Accident
    
    
    149,237
    
    
    
    147,133
    
    
    
    146,390Cargo and Transit
    
    
    91,798
    
    
    
    100,309
    
    
    
    108,097Hull
    
    
    25,656
    
    
    
    29,128
    
    
    
    31,799Other (3)
    
    
    243,896
    
    
    
    256,473
    
    
    
    264,215Total
    
    ¥
    1,535,379
    
    
    ¥
    1,575,476
    
    
    ¥
    1,625,732
 
 (1)
    
    Japanese law requires that all automobiles be covered by compulsory automobile liability
insurance. See Note 2(m) to our consolidated financial statements.(2)
    
    Includes earthquake insurance.(3)
    
    Major lines of insurance in this category are liability, aviation, workers compensation and
movables comprehensive all risks.  Direct
    
    
    Reinsurance
    
    
    Reinsurance
    
    
    Net Premiums Written(4)Premiums
    
    
    Premiums
    
    
    PremiumsWritten
    
    
    Assumed
    
    
    Ceded
    
    
    Amount
    
    
    %(Yen in millions, except percentages)Voluntary Automobile
    
    ¥
    634,948
    
    
    ¥
    5,504
    
    
    ¥
    15,503
    
    
    ¥
    624,949
    
    
    
    40.65
    %Compulsory Automobile Liability (1)
    
    
    165,851
    
    
    
    151,465
    
    
    
    126,060
    
    
    
    191,256
    
    
    
    12.44
    %Fire and Allied Lines (2)
    
    
    274,432
    
    
    
    52,800
    
    
    
    101,973
    
    
    
    225,259
    
    
    
    14.65
    %Personal Accident
    
    
    146,390
    
    
    
    2,072
    
    
    
    9,566
    
    
    
    138,896
    
    
    
    9.03
    %Cargo and Transit
    
    
    108,097
    
    
    
    13,321
    
    
    
    22,572
    
    
    
    98,846
    
    
    
    6.43
    %Hull
    
    
    31,799
    
    
    
    11,089
    
    
    
    21,021
    
    
    
    21,867
    
    
    
    1.42
    %Other (3)
    
    
    264,215
    
    
    
    28,629
    
    
    
    56,301
    
    
    
    236,543
    
    
    
    15.38
    %Total
    
    ¥
    1,625,732
    
    
    ¥
    264,880
    
    
    ¥
    352,996
    
    
    ¥
    1,537,616
    
    
    
    100.00
    %
 
 (1)
    
    Japanese law requires that all automobiles be covered by compulsory automobile liability
insurance. See Note 2(m) to our consolidated financial statements.(2)
    
    Includes earthquake insurance.(3)
    
    Major lines of insurance in this category are liability, aviation, workers compensation,
movables comprehensive all risks.(4)
    
    Net premiums written = (direct premiums written +
reinsurance premiums assumed - reinsurance
premiums ceded). 20




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##### Table of Contents



Voluntary Automobile
   Bodily Injury Liability
 Property Damage Liability
 Personal Injury.
 Protection against Uninsured Automobiles
 Vehicular Damage
 21




---



##### Table of Contents



Compulsory Automobile Liability
  i e
 22




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##### Table of Contents



Fire and Allied Lines (Excluding Earthquake)
    Major claims paid (Disasters)
    
    Amount of Claims Paid (Unit: Hundred Million Yen)Ranking
    
    Disaster
    
    Region
    
    Date
    
    Fire/NewProducts
    
    Automobile
    
    Marine
    
    Total1.
    
    Typhoon No. 19
    
    Through the nation
    
    Sep. 26-28, 1991
    
    
    5,225
    
    
    
    269
    
    
    
    185
    
    
    
    5,6792.
    
    Typhoon No. 18
    
    Through the nation
    
    Sep. 4-8, 2004
    
    
    3,564
    
    
    
    259
    
    
    
    51
    
    
    
    3,8743.
    
    Typhoon No. 18
    
    Kumamoto,
Yamaguchi, Fukuoka,
etc.
    
    Sep. 21-25, 1999
    
    
    2,847
    
    
    
    212
    
    
    
    88
    
    
    
    3,1474.
    
    Typhoon No. 7
    
    Mainly Kinki
    
    Sep. 22,1998
    
    
    1,514
    
    
    
    61
    
    
    
    24
    
    
    
    1,6005.
    
    Typhoon No. 23
    
    West Japan
    
    Oct. 20, 2004
    
    
    1,113
    
    
    
    179
    
    
    
    89
    
    
    
    1,3806.
    
    Typhoon No. 13
    
    Fukuoka, Saga,
Nagasaki, Miyazaki,
etc.
    
    Sep. 15-20,2006
    
    
    1,161
    
    
    
    147
    
    
    
    12
    
    
    
    1,3207.
    
    Typhoon No. 16
    
    Through the nation
    
    Aug. 30-31, 2004
    
    
    1,037
    
    
    
    138
    
    
    
    35
    
    
    
    1,2108.
    
    Sep. 2000 Flood
    
    Aichi
    
    Sep. 10-12, 2000
    
    
    447
    
    
    
    545
    
    
    
    39
    
    
    
    1,0309.
    
    Typhoon No. 13
    
    Kyushu, Shikoku,
Chugoku
    
    Sep. 3, 1993
    
    
    933
    
    
    
    35
    
    
    
    10
    
    
    
    97710.
    
    Hail
    
    Chiba, Ibaraki
    
    May 24, 2005
    
    
    372
    
    
    
    303
    
    
    
    25
    
    
    
    700
 23




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##### Table of Contents



Earthquake
     24




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##### Table of Contents



Personal Accident
  General Personal Accident.
 Income Indemnity.
 Overseas Travelers Personal Accident.
 Traffic Accident.
  25




---



##### Table of Contents



Cargo and Transit
    Hull
     26




---



##### Table of Contents



Other
  Savings-Type Insurance Products
     27




---



##### Table of Contents



Premium Rates
    Loss and Expense Ratios
  28




---



##### Table of Contents



Year Ended March 31,2005
    
    2006
    
    2007
    
    2008
    
    2008(Yen in millions, dollars in thousands, except percentages)Voluntary Automobile:Net premiums written
    
    ¥
    582,410
    
    
    ¥
    587,253
    
    
    ¥
    599,663
    
    
    ¥
    624,949
    
    
    $
    6,249,490Net premiums earned
    
    
    581,065
    
    
    
    590,052
    
    
    
    600,371
    
    
    
    621,036
    
    
    
    6,210,360Net loss incurred
    
    
    372,558
    
    
    
    370,790
    
    
    
    401,429
    
    
    
    405,656
    
    
    
    4,056,560Net loss ratio
    
    
    64.1
    %
    
    
    62.8
    %
    
    
    66.9
    %
    
    
    65.3
    %Compulsory Automobile Liability:Net premiums written
    
    ¥
    195,741
    
    
    ¥
    193,402
    
    
    ¥
    192,087
    
    
    ¥
    191,256
    
    
    $
    1,912,560Net premiums earned
    
    
    185,264
    
    
    
    193,871
    
    
    
    193,663
    
    
    
    193,572
    
    
    
    1,935,720Net loss incurred
    
    
    138,756
    
    
    
    154,440
    
    
    
    137,607
    
    
    
    133,688
    
    
    
    1,336,880Net loss ratio
    
    
    74.9
    %
    
    
    79.7
    %
    
    
    71.1
    %
    
    
    69.1
    %Fire and Allied Lines:Net premiums written
    
    ¥
    188,122
    
    
    ¥
    205,214
    
    
    ¥
    208,182
    
    
    ¥
    225,259
    
    
    $
    2,252,590Net premiums earned
    
    
    163,248
    
    
    
    180,143
    
    
    
    185,208
    
    
    
    209,396
    
    
    
    2,093,960Net loss incurred
    
    
    155,525
    
    
    
    97,810
    
    
    
    93,302
    
    
    
    114,095
    
    
    
    1,140,950Net loss ratio
    
    
    95.3
    %
    
    
    54.3
    %
    
    
    50.4
    %
    
    
    54.5
    %Personal Accident:Net premiums written
    
    ¥
    132,456
    
    
    ¥
    143,190
    
    
    ¥
    139,795
    
    
    ¥
    138,896
    
    
    $
    1,388,960Net premiums earned
    
    
    127,528
    
    
    
    133,476
    
    
    
    134,369
    
    
    
    132,171
    
    
    
    1,321,710Net loss incurred
    
    
    54,187
    
    
    
    60,089
    
    
    
    69,292
    
    
    
    73,921
    
    
    
    739,210Net loss ratio
    
    
    42.5
    %
    
    
    45.0
    %
    
    
    51.6
    %
    
    
    55.9
    %Cargo and Transit:Net premiums written
    
    ¥
    71,501
    
    
    ¥
    83,282
    
    
    ¥
    91,379
    
    
    ¥
    98,846
    
    
    $
    988,460Net premiums earned
    
    
    69,815
    
    
    
    79,963
    
    
    
    90,286
    
    
    
    97,696
    
    
    
    976,960Net loss incurred
    
    
    33,058
    
    
    
    34,722
    
    
    
    38,802
    
    
    
    35,753
    
    
    
    357,530Net loss ratio
    
    
    47.4
    %
    
    
    43.4
    %
    
    
    43.0
    %
    
    
    36.6
    %Hull:Net premiums written
    
    ¥
    14,405
    
    
    ¥
    16,564
    
    
    ¥
    19,602
    
    
    ¥
    21,867
    
    
    $
    218,670Net premiums earned
    
    
    13,616
    
    
    
    15,551
    
    
    
    18,496
    
    
    
    21,508
    
    
    
    215,080Net loss incurred
    
    
    12,199
    
    
    
    14,508
    
    
    
    16,620
    
    
    
    15,933
    
    
    
    159,330Net loss ratio
    
    
    89.6
    %
    
    
    93.3
    %
    
    
    89.9
    %
    
    
    74.1
    %Other:Net premiums written
    
    ¥
    218,342
    
    
    ¥
    229,602
    
    
    ¥
    238,671
    
    
    ¥
    236,543
    
    
    $
    2,365,430Net premiums earned
    
    
    217,212
    
    
    
    229,745
    
    
    
    246,687
    
    
    
    227,306
    
    
    
    2,273,060Net loss incurred
    
    
    152,488
    
    
    
    149,264
    
    
    
    152,604
    
    
    
    127,211
    
    
    
    1,272,110Net loss ratio
    
    
    70.2
    %
    
    
    65.0
    %
    
    
    61.9
    %
    
    
    56.0
    %Total:Net premiums written
    
    ¥
    1,402,977
    
    
    ¥
    1,458,507
    
    
    ¥
    1,489,379
    
    
    ¥
    1,537,616
    
    
    $
    15,376,160Net premiums earned
    
    
    1,357,748
    
    
    
    1,422,801
    
    
    
    1,469,080
    
    
    
    1,502,685
    
    
    
    15,026,850Net loss incurred
    
    
    918,771
    
    
    
    881,623
    
    
    
    909,656
    
    
    
    906,257
    
    
    
    9,062,570Net loss ratio
    
    
    67.7
    %
    
    
    62.0
    %
    
    
    61.9
    %
    
    
    60.3
    %Net loss adjustment expenses
incurred  unallocated
    
    ¥
    62,614
    
    
    ¥
    68,855
    
    
    ¥
    70,001
    
    
    ¥
    82,370
    
    
    $
    823,700Ratio of losses and loss
adjustment expenses incurred
to net premiums earned (A)
    
    
    72.3
    %
    
    
    66.8
    %
    
    
    66.7
    %
    
    
    65.8
    %Underwriting and
administrative expenses
incurred (1)
    
    ¥
    426,333
    
    
    ¥
    448,832
    
    
    ¥
    482,592
    
    
    ¥
    505,549
    
    
    $
    5,055,490Ratio of underwriting and
administrative expenses
incurred to net premiums
written (1)(B)
    
    
    30.4
    %
    
    
    30.8
    %
    
    
    32.4
    %
    
    
    32.9
    %Combined loss and expenses
ratios (2)
    
    
    102.7
    %
    
    
    97.6
    %
    
    
    99.1
    %
    
    
    98.7
    %Net premiums/direct premiums
written ratios
    
    
    95.4
    %
    
    
    95.0
    %
    
    
    94.5
    %
    
    
    94.6
    %
 
 (1)
    
    These data are for our property and casualty businesses only.(2)
    
    Sum of (A) and (B). 29




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##### Table of Contents



Reconciliation of Beginning and Ending Liabilities for Losses and Claims
  Year Ended March 31,2006
    
    
    2007
    
    
    2008(Yen in millions)Balance at beginning of year
    
    ¥
    937,057
    
    
    ¥
    1,056,517
    
    
    ¥
    1,153,550Less reinsurance recoverable
    
    
    234,097
    
    
    
    233,369
    
    
    
    237,719Net balance at beginning of year
    
    
    702,960
    
    
    
    823,148
    
    
    
    915,831Incurred related to:Current year insured events
    
    
    1,009,061
    
    
    
    1,049,859
    
    
    
    1,094,832Prior year insured events
    
    
    8,547
    
    
    
    14,834
    
    
    
    (7,191
    )Total Incurred
    
    
    1,017,608
    
    
    
    1,064,693
    
    
    
    1,087,641Paid related to:Current year insured events
    
    
    517,384
    
    
    
    546,938
    
    
    
    573,389Prior year insured events
    
    
    390,252
    
    
    
    437,353
    
    
    
    485,355Total paid
    
    
    907,636
    
    
    
    984,291
    
    
    
    1,058,744Adjustment in connection with
the acquisition
    
    
    10,216
    
    
    
    12,281
    
    
    
    Net balance at end of year
    
    
    823,148
    
    
    
    915,831
    
    
    
    944,728Plus reinsurance recoverable
    
    
    233,369
    
    
    
    237,719
    
    
    
    253,092Balance at end of year
    
    ¥
    1,056,517
    
    
    ¥
    1,153,550
    
    
    ¥
    1,197,820
 Changes in Historical Liabilities for Losses and Claims
    30




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##### Table of Contents



Year Ended March 31,2004
    
    2005
    
    2006
    
    2007(Yen in millions, except percentages)Total liabilities for losses and claims
    
    ¥
    434,111
    
    
    ¥
    483,572
    
    
    ¥
    525,520
    
    
    ¥
    572,729Cumulative paid as of:One year later
    
    
    238,206
    
    
    
    268,580
    
    
    
    283,053
    
    
    
    294,937Two years later
    
    
    308,374
    
    
    
    356,178
    
    
    
    373,367Three years later
    
    
    356,171
    
    
    
    403,909Four years later
    
    
    381,850Liability re-estimated as of:One year later
    
    
    444,009
    
    
    
    487,142
    
    
    
    532,518
    
    
    
    551,984Two years later
    
    
    437,203
    
    
    
    495,621
    
    
    
    519,718Three years later
    
    
    437,617
    
    
    
    487,139Four years later
    
    
    436,074Cumulative surplus (deficiency)
    
    ¥
    (1,963
    )
    
    ¥
    (3,567
    )
    
    ¥
    (5,802
    )
    
    ¥
    20,745%
    
    
    (0.5
    )%
    
    
    (0.7
    )%
    
    
    (1.1
    )%
    
    
    3.6
    %
 31




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##### Table of Contents



Operations
 Sales, Marketing and Underwriting
     Insurance Brokers
  32




---



##### Table of Contents



Claims Processing
  Investment Trust Sales and Defined Contribution Pension Plans
   Financial Guarantee
   Alternative Risk Transfer
  33




---



##### Table of Contents



Reinsurance
     Proportional reinsurance.
 Excess-of-loss reinsurance.
  
    
    Stabilize profits and maximize middle-term earnings;
    
    Increase return on equity;
    
    Improve our combined ratio and solvency ratio;
    
    Achieve cost savings and strengthen our overall competitiveness.
 34




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##### Table of Contents



Year Ended March 31,2006
    
    
    2007
    
    
    2008(Yen in millions, except percentages)Direct premiums written
    
    ¥
    1,535,379
    
    
    ¥
    1,575,476
    
    
    ¥
    1,625,732Reinsurance premiums assumed
    
    
    250,396
    
    
    
    265,857
    
    
    
    264,880Reinsurance premiums ceded
    
    
    (327,268
    )
    
    
    (351,954
    )
    
    
    (352,996
    )Net premiums written
    
    ¥
    1,458,507
    
    
    ¥
    1,489,379
    
    
    ¥
    1,537,616Retention ratio(1)
    
    
    81.7
    %
    
    
    80.9
    %
    
    
    81.3
    %
 
 (1)
    
    Retention ratio is calculated by dividing the net premiums written by the aggregate of the
direct premiums written and the reinsurance premiums assumed. Overseas Business
  
    
    Asia and Oceania Thailand Branch, Taipei Branch and Korea Branch of Mitsui
Sumitomo Insurance, Mitsui Sumitomo Insurance (China) Company Limited, Mitsui Sumitomo
Insurance Company (Hong Kong), Limited, MSIG Insurance (Hong Kong) Limited, Mitsui
Sumitomo Insurance (Singapore) Pte Ltd, MSIG Insurance (Singapore) Pte. Ltd., MSIG
Insurance (Thailand) Co., Ltd., PT. Asuransi MSIG Indonesia, MSIG Insurance (Malaysia)
Bhd., BPI/MS Insurance Corporation, FLT Prime Insurance Corporation, Philippine
Charter Insurance Corporation, United Insurance Company of Vietnam, Asia Insurance
(Cambodia) Plc., MSIG Mingtai Insurance Co., Ltd. and Cholamandalam MS General
Insurance Company Limited
 35




---



##### Table of Contents




    
    The Americas Mitsui Sumitomo Insurance USA Inc., Mitsui Sumitomo Insurance
Company of America and Mitsui Sumitomo Seguros S/A.
    
    Europe, the Middle East and Africa Mitsui Sumitomo Insurance Company (Europe),
Ltd., MSI Corporate Capital Ltd. and Mitsui Sumitomo Insurance (London) Limited
    
    Reinsurance Business Mitsui Sumitomo Reinsurance Limited and MS Frontier
Reinsurance Limited
    36




---



##### Table of Contents



Life Insurance Business
       Direct Marketing Non-Life Insurance
  37




---



##### Table of Contents



Financial Services
    Long-Term Care Services
 Yu
Life Setagaya Yu Life
Yokohama,
 Alliances with Other Financial Institutions
   38




---



##### Table of Contents



Investments
  39




---



##### Table of Contents



40




---



##### Table of Contents



As of March 31,2006
    
    
    2007
    
    
    2008(Yen in millions)Investments  other than investments
in affiliates:Securities available for sale:Fixed maturities, at fair value
    
    ¥
    3,193,503
    
    
    ¥
    3,317,804
    
    
    ¥
    3,334,185Equity securities, at fair value
    
    
    3,105,217
    
    
    
    3,312,574
    
    
    
    2,547,773Securities held to maturity:Fixed maturities, at amortized cost
    
    
    261,170
    
    
    
    384,215
    
    
    
    449,474Mortgage loans on real estate
    
    
    15,129
    
    
    
    11,511
    
    
    
    9,859Investment real estate, at cost less
depreciation
    
    
    53,034
    
    
    
    49,192
    
    
    
    43,151Policy loans
    
    
    38,615
    
    
    
    38,523
    
    
    
    39,536Other long-term investments
    
    
    721,491
    
    
    
    715,972
    
    
    
    749,385Short-term investments
    
    
    93,829
    
    
    
    113,671
    
    
    
    120,086Total investments
    
    ¥
    7,481,988
    
    
    ¥
    7,943,462
    
    
    ¥
    7,293,449Cash and cash equivalents
    
    ¥
    385,165
    
    
    ¥
    369,941
    
    
    ¥
    368,290Investments in and indebtedness from
affiliates:Investments
    
    ¥
    59,480
    
    
    ¥
    46,198
    
    
    ¥
    56,351Indebtedness
    
    
    2,164
    
    
    
    3,008
    
    
    
    2,961Total investments in and
indebtedness from affiliates
    
    ¥
    61,644
    
    
    ¥
    49,206
    
    
    ¥
    59,312
  Securities available for sale
  As of March 31,2006
    
    
    2007
    
    
    2008(Yen in millions)Japanese bonds
    
    ¥
    2,188,253
    
    
    ¥
    2,243,740
    
    
    ¥
    2,305,653Foreign bonds
    
    
    1,005,250
    
    
    
    1,074,064
    
    
    
    1,028,532Total bonds other than affiliates
    
    
    3,193,503
    
    
    
    3,317,804
    
    
    
    3,334,185Japanese equities
    
    
    2,881,991
    
    
    
    3,057,218
    
    
    
    2,276,543Foreign equities
    
    
    223,226
    
    
    
    255,356
    
    
    
    271,230Total equities other than affiliates
    
    
    3,105,217
    
    
    
    3,312,574
    
    
    
    2,547,773Securities available for sale
    
    ¥
    6,298,720
    
    
    ¥
    6,630,378
    
    
    ¥
    5,881,958
 Japanese bonds.
 41




---



##### Table of Contents



Japanese equities.
 Foreign bonds.
 Loans
  As of March 31,2006
    
    
    2007
    
    
    2008(Yen in millions)Mortgage loans on real estate
    
    ¥
    15,129
    
    
    ¥
    11,511
    
    
    ¥
    9,859Other long-term investments:Mortgage loans on vessels and
facilities
    
    
    708
    
    
    
    526
    
    
    
    277Collateral and guaranteed loans
    
    
    353,389
    
    
    
    376,405
    
    
    
    403,488Unsecured loans
    
    
    364,704
    
    
    
    337,662
    
    
    
    345,467Policy loans
    
    
    38,615
    
    
    
    38,523
    
    
    
    39,536Total
    
    ¥
    772,545
    
    
    ¥
    764,627
    
    
    ¥
    798,627
   42




---



##### Table of Contents



Short-term Investments
  As of March 31,2006
    
    
    2007
    
    
    2008(Yen in millions)Money trust
    
    ¥
    49,892
    
    
    ¥
    51,069
    
    
    ¥
    47,832Invested cash
    
    
    23,914
    
    
    
    47,410
    
    
    
    56,948Commercial paper
    
    
    10,440
    
    
    
    7,908
    
    
    
    7,620Other
    
    
    9,583
    
    
    
    7,284
    
    
    
    7,686Total
    
    ¥
    93,829
    
    
    ¥
    113,671
    
    
    ¥
    120,086
 Cash and cash equivalents
   Investment Results
  As of March 31,2006
    
    
    2007
    
    
    2008(Yen in millions)Interest income, net of investment
expenses:Interest on fixed maturities
    
    ¥
    76,713
    
    
    ¥
    89,052
    
    
    ¥
    89,704Dividends from equity securities
    
    
    60,339
    
    
    
    66,828
    
    
    
    69,050Interest on mortgage loans on
real estate
    
    
    434
    
    
    
    420
    
    
    
    328Rent from investment real estate
    
    
    6,361
    
    
    
    6,194
    
    
    
    4,926Interest on policy loans
    
    
    1,286
    
    
    
    1,326
    
    
    
    1,352Interest on other long-term
investments
    
    
    11,666
    
    
    
    12,408
    
    
    
    13,871Interest on short-term investments
    
    
    2,328
    
    
    
    2,490
    
    
    
    3,078Others
    
    
    7,646
    
    
    
    11,070
    
    
    
    12,480Gross investment income
    
    
    166,773
    
    
    
    189,788
    
    
    
    194,789Less investment expenses
    
    
    10,671
    
    
    
    10,599
    
    
    
    9,524Net investment income
    
    
    156,102
    
    
    
    179,189
    
    
    
    185,265
 43




---



##### Table of Contents



As of March 31,2006
    
    
    2007
    
    
    2008(Yen in millions)Realized gains (losses) on
investments:Fixed maturities
    
    
    3,332
    
    
    
    975
    
    
    
    6,273Equity securities
    
    
    57,348
    
    
    
    23,955
    
    
    
    10,788Other investments
    
    
    (10,481
    )
    
    
    (615
    )
    
    
    (34,431
    )Total net investment income and
realized gains on investments
    
    ¥
    206,301
    
    
    ¥
    203,504
    
    
    ¥
    167,895
 Competition
   44




---



##### Table of Contents



Regulation
   45




---



##### Table of Contents



46




---



##### Table of Contents



47




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##### Table of Contents



C. Organizational Structure.
 Subsidiaries and Affiliates
  Equity Held by Us,Country of
    
    Directly orName
    
    Incorporation
    
    Indirectly (%)
    
    Main BusinessMSIG Holdings (Americas), Inc.
    
    U.S.A.
    
    
    100.0
    %
    
    Holding CompanyMitsui Sumitomo Insurance USA Inc.
    
    U.S.A.
    
    
    100.0
    %
    
    Property and Casualty InsuranceMitsui Sumitomo Insurance Company of America
    
    U.S.A.
    
    
    100.0
    %
    
    Property and Casualty InsuranceMSIG Holdings (Europe) Limited
    
    U.K.
    
    
    100.0
    %
    
    Holding CompanyMitsui Sumitomo Insurance Company (Europe), Limited
    
    U.K.
    
    
    100.0
    %
    
    Property and Casualty InsuranceMitsui Sumitomo Insurance (London Management) Ltd
    
    U.K.
    
    
    100.0
    %
    
    Holding CompanyMitsui Sumitomo Insurance (London) Limited
    
    U.K.
    
    
    100.0
    %
    
    Property and Casualty InsuranceMSI Corporate Capital Limited
    
    U.K.
    
    
    100.0
    %
    
    Property and Casualty InsuranceMitsui Sumitomo Insurance (Singapore) Pte Ltd
    
    Singapore
    
    
    100.0
    %
    
    Property and Casualty InsuranceMSIG Holdings (Asia) Pte. Ltd.
    
    Singapore
    
    
    100.0
    %
    
    Holding CompanyMSIG Insurance (Singapore) Pte. Ltd.
    
    Singapore
    
    
    100.0
    %
    
    Property and Casualty InsuranceMitsui Sumitomo Insurance Company (Hong Kong), Limited
    
    China (Hong Kong)
    
    
    100.0
    %
    
    Property and Casualty InsuranceMSIG Insurance (Hong Kong) Limited
    
    China (Hong Kong)
    
    
    100.0
    %
    
    Property and Casualty InsuranceMSIG Mingtai Insurance Co., Ltd.
    
    Taiwan
    
    
    100.0
    %
    
    Property and Casualty InsuranceMSIG Insurance (Thailand) Co., Ltd.
    
    Thailand
    
    
    69.8
    %
    
    Property and Casualty InsurancePT. Asuransi MSIG Indonesia
    
    Indonesia
    
    
    80.0
    %
    
    Property and Casualty InsuranceMSIG Insurance (Malaysia) Bhd.
    
    Malaysia
    
    
    73.9
    %
    
    Property and Casualty InsuranceMitsui Sumitomo Seguros S/A.
    
    Brazil
    
    
    98.3
    %
    
    Property and Casualty InsuranceMitsui Sumitomo Insurance (China) Company Limited
    
    China
    
    
    100.0
    %
    
    Property and Casualty InsuranceMitsui Sumitomo Reinsurance Limited
    
    Ireland
    
    
    100.0
    %
    
    ReinsuranceMS Frontier Reinsurance Limited
    
    Bermuda
    
    
    100.0
    %
    
    ReinsuranceMitsui Sumitomo Insurance Company, Limited
    
    Japan
    
    
    100.0
    %
    
    Property and Casualty InsuranceMitsui Sumitomo Kirameki Life Insurance Company, Limited
    
    Japan
    
    
    100.0
    %
    
    Life InsuranceMitsui Direct General Insurance Company, Limited
    
    Japan
    
    
    66.5
    %(2)
    
    Property and Casualty InsuranceMITSUI SUMITOMO INSURANCE Venture Capital Co., Ltd.
    
    Japan
    
    
    100.0
    %
    
    Venture CapitalSumitomo Mitsui Asset Management Company, Limited(1)
    
    Japan
    
    
    17.5
    %
    
    Asset ManagementMitsui Sumitomo MetLife Insurance Co., Ltd. (1)
    
    Japan
    
    
    50.0
    %(3)
    
    Life insurance
 
 (1)
    
    This company is accounted for by the equity method.(2)
    
    We hold 69.6% of voting rights of this company.(3)
    
    We hold 51.0% of voting rights of this company. D. Property, Plants and Equipment.
 Property, Plants and Equipment
  48




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##### Table of Contents



Floor SpacePrincipal Facilities or
    
    
    
    
    
    (SquareSubsidiary Name
    
    Location
    
    Principal Uses
    
    Meters)Chiba New Town Center
    
    2-2-1, Otsuka, Inzai-city, Chiba
    
    Computer Center
    
    
    78,703.06Surugadai Building
    
    3-9, Kanda-Surugadai, Chiyoda-ku, Tokyo
    
    Sales Office
    
    
    75,500.62Osaka Yodoyabashi Building
    
    4-3-1, Kitahama, Tyuuou-ku, Osaka-city, Osaka
    
    Sales Office
    
    
    45,742.58Hachioji Center
    
    1-41-1, Koyasu-cho, Hachioji-city, Tokyo
    
    Computer Center
    
    
    20,193.34Nagoya Building
    
    1-2-1, Nishiki, Naka-ku, Nagoya-city, Aichi
    
    Sales Office
    
    
    15,260.80Kobe Building
    
    1-1-18, Sakaedori, Tyuuou-ku, Kobe-city, Hyougo
    
    Sales Office
    
    
    11,100.99
   
 Item 4A.
    
    Unresolved Staff Comments.
  
 Item 5.
    
    Operating and Financial Review and Prospects.
 A. Operating Results.
 You should read the following discussion of our financial condition and results of operations
together with our consolidated financial statements and other information included in this annual
report. We prepare our consolidated financial statements in accordance with U.S. GAAP, and
accordingly the following discussion is based on our U.S. GAAP financial information.
 This discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. Our actual results may differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including, but not limited to,
those set forth under Item 3.D and elsewhere in this annual report.
 49




---



##### Table of Contents



Overview
    Results of Operations
  50




---



##### Table of Contents



Year Ended March 31,2006
    
    
    2007
    
    
    2008
    
    
    2008(Yen in millions, dollar in thousands)Revenues:Net premiums written
    
    ¥
    1,458,507
    
    
    ¥
    1,489,379
    
    
    ¥
    1,537,616
    
    
    $
    15,376,160Less increase in unearned premiums
    
    
    35,706
    
    
    
    20,299
    
    
    
    34,931
    
    
    
    349,310Net premiums earned
    
    
    1,422,801
    
    
    
    1,469,080
    
    
    
    1,502,685
    
    
    
    15,026,850Premium income for life insurance
contracts
    
    
    179,430
    
    
    
    193,551
    
    
    
    192,731
    
    
    
    1,927,310Investment income, net of
investment expenses
    
    
    156,102
    
    
    
    179,189
    
    
    
    185,265
    
    
    
    1,852,650Net realized gains (losses) on
investments
    
    
    50,199
    
    
    
    24,315
    
    
    
    (17,370
    )
    
    
    (173,700
    )Total revenue
    
    
    1,808,532
    
    
    
    1,866,135
    
    
    
    1,863,311
    
    
    
    18,633,110Expenses:Losses, claims and loss
adjustment expenses:Losses and claims incurred
and provided for
    
    
    881,623
    
    
    
    909,656
    
    
    
    906,257
    
    
    
    9,062,570Related adjustment expenses
    
    
    68,855
    
    
    
    70,001
    
    
    
    82,370
    
    
    
    823,700Policyholder benefits for life
insurance contracts
    
    
    151,365
    
    
    
    156,591
    
    
    
    156,683
    
    
    
    1,566,830Amortization of policy
acquisition costs
    
    
    340,878
    
    
    
    367,224
    
    
    
    372,025
    
    
    
    3,720,250Investment income credited to
investment deposits by
policyholders
    
    
    50,840
    
    
    
    48,482
    
    
    
    48,498
    
    
    
    484,980Other expenses, net
    
    
    133,994
    
    
    
    146,742
    
    
    
    143,719
    
    
    
    1,437,190Total expenses
    
    
    1,627,555
    
    
    
    1,698,696
    
    
    
    1,709,552
    
    
    
    17,095,520Income before income taxes
    
    
    180,977
    
    
    
    167,439
    
    
    
    153,759
    
    
    
    1,537,590Income taxes:Current
    
    
    35,497
    
    
    
    43,747
    
    
    
    25,368
    
    
    
    253,680Deferred
    
    
    25,030
    
    
    
    9,208
    
    
    
    22,769
    
    
    
    227,690Total income taxes
    
    
    60,527
    
    
    
    52,955
    
    
    
    48,137
    
    
    
    481,370Minority interests
    
    
    560
    
    
    
    568
    
    
    
    826
    
    
    
    8,260Net income
    
    ¥
    119,890
    
    
    ¥
    113,916
    
    
    ¥
    104,796
    
    
    $
    1,047,960
 Fiscal Year Ended March 31, 2008 compared with the Fiscal Year Ended March 31, 2007
 Net Premiums Written.
 51




---



##### Table of Contents



Premium Income for Life Insurance Contracts.
 Investment Income.
 52




---



##### Table of Contents



Realized Gains (Losses) on Investments.
  Losses, Claims and Loss Adjustment Expenses.
      53




---



##### Table of Contents



Policyholder Benefits for Life Insurance Contracts.
 Policy Acquisition Costs.
 Investment Income Credited to Investment Deposits by Policyholders.
 Other expenses.
 Income Before Income Taxes.
 Income Taxes.
 54




---



##### Table of Contents



Net Income.
 Fiscal Year Ended March 31, 2007 compared with the Fiscal Year Ended March 31, 2006
 Net Premiums Written.
     55




---



##### Table of Contents



Premium Income for Life Insurance Contracts.
 Investment Income.
 Realized Gains (Losses) on Investments.
 56




---



##### Table of Contents



Losses, Claims and Loss Adjustment Expenses.
    Viv
Shusin
   57




---



##### Table of Contents



Policyholder Benefits for Life Insurance Contracts.
 Policy Acquisition Costs.
 Investment Income Credited to Investment Deposits by Policyholders.
 Other expenses.
 Income Before Income Taxes.
 Income Taxes.
 Net Income.
 Liabilities for Losses and Claims
  58




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##### Table of Contents



Credit Losses and Non-Performing Loans
    As of March 31,2006
    
    
    2007
    
    
    2008(Yen in millions)Recorded investment in impaired loans:Mortgage loans on real estate
    
    ¥
    1,563
    
    
    ¥
    1,160
    
    
    ¥
    1,150Mortgage loans on vessels and facilities
    
    
    8
    
    
    
    4
    
    
    
    4Collateral and guaranteed loans
    
    
    
    
    
    
    
    
    
    
    1,724Unsecured loans
    
    
    7,383
    
    
    
    3,185
    
    
    
    1,575Total
    
    ¥
    8,954
    
    
    ¥
    4,349
    
    
    ¥
    4,453Valuation allowance:Mortgage loans on real estate
    
    ¥
    335
    
    
    ¥
    259
    
    
    ¥
    254Collateral and guaranteed loans
    
    
    
    
    
    
    
    
    
    
    104Unsecured loans
    
    
    4,230
    
    
    
    692
    
    
    
    294Total
    
    ¥
    4,565
    
    
    ¥
    951
    
    
    ¥
    652
 Solvency Margin Ratio
   59




---



##### Table of Contents



As of March 31,2007
    
    2008
    
    Change(Yen in billions, except
    
    (Yen in
    
    (Percentagepercentages)
    
    billions)
    
    or points)Solvency margin total amount
    
    ¥
    3,527.6
    
    
    ¥
    2,782.9
    
    
    ¥
    (744.7
    )
    
    
    (21.1)%Risk amount
    
    
    613.5
    
    
    
    582.5
    
    
    
    (31.0
    )
    
    
    (5.1)%Solvency margin ratio
    
    
    1,150.0
    %
    
    
    955.4
    %
    
    
    
    
    
    (194.6) points
 Effects of Inflation
  Exposure to Currency Fluctuations
  Our Credit Rating
   60




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##### Table of Contents



As
of September 17, 2008Rating Agency and Category
    
    Rating (1)Standard & Poors Insurer Financial Strength Rating
    
    AALong-term
Counterparty Rating
    
    AALong-term Senior Debt Rating
    
    AAShort-term
Counterparty Rating
    
    A-1+Moodys Investors Service Insurance Financial Strength Rating
    
    Aa3Issuer Rating
    
    Aa3Commercial Paper Rating
    
    P-1
 
 (1)
    
    These ratings are entirely the opinion of the respective rating agencies and are thus not to
be construed as payment guarantees. These ratings are subject to revision by the respective
rating agencies. Critical Accounting Policies
   Insurance Reserves
 Loss, Claim and Loss Adjustment Expense Liability
   Line of Business
 As of March 31,2008(Yen in millions)Property and casualty loss, claim and loss adjustment expense liability:Voluntary automobile
    
    ¥
    325,606Compulsory automobile liability
    
    
    211,553Fire and allied lines
    
    
    134,890Personal accident
    
    
    56,466Cargo and transit
    
    
    43,669Hull
    
    
    33,795Other
    
    
    381,615Total
    
    ¥
    1,187,594
  61




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##### Table of Contents



Year Ended March 31,2006
    
    2007
    
    2008(Yen in millions, except percentages)Claims expenses
recognized in the current
year relating to prior
years, net of reinsurance
    
    ¥
    8,547
    
    
    ¥
    14,834
    
    
    ¥
    (7,191
    )Claims expenses
recognized in the current
year relating to prior
years as a percentage of
opening reserves for
losses, claims and loss
adjustment expenses, net
of reinsurance
    
    
    1.2
    %
    
    
    1.8
    %
    
    
    (0.8
    )%Claims expenses
recognized in the current
year relating to prior
years as a percentage of
net incurred losses, net
of reinsurance
    
    
    0.8
    %
    
    
    1.4
    %
    
    
    (0.7
    )%
  62




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Future Policy Benefits for Life Insurance Contracts
  Amortization of Deferred Policy Acquisition Costs
   Investment Valuation and Impairments
 Valuation of investments
 Securities Available for Sale
   63




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##### Table of Contents



Fair Value% of TotalSecuritiesFixed Maturity
    
    
    Equity
    
    
    Total
    
    
    Available forSecurities
    
    
    Securities (1)
    
    
    Securities
    
    
    Sale(Yen in millions)Investment grade
    
    ¥
    2,964,830
    
    
    ¥
    2,706,717
    
    
    ¥
    5,671,547
    
    
    
    85.6
    %Non-investment grade
    
    
    637
    
    
    
    1,096
    
    
    
    1,733
    
    
    
    0.0Not rated
    
    
    352,337
    
    
    
    604,761
    
    
    
    957,098
    
    
    
    14.4Total securities available for sale
    
    ¥
    3,317,804
    
    
    ¥
    3,312,574
    
    
    ¥
    6,630,378
    
    
    
    100.0
    %
 
 (1)
    
    We classify equity securities based upon issuers long-term bond rating.  Fair Value% of TotalSecuritiesFixed Maturity
    
    
    Equity
    
    
    Total
    
    
    Available forSecurities
    
    
    Securities (1)
    
    
    Securities
    
    
    Sale(Yen in millions)Investment grade
    
    ¥
    3,249,925
    
    
    ¥
    2,012,101
    
    
    ¥
    5,262,026
    
    
    
    89.5
    %Non-investment grade
    
    
    
    
    
    
    723
    
    
    
    723
    
    
    
    0.0Not rated
    
    
    84,260
    
    
    
    534,949
    
    
    
    619,209
    
    
    
    10.5Total securities available for sale
    
    ¥
    3,334,185
    
    
    ¥
    2,547,773
    
    
    ¥
    5,881,958
    
    
    
    100.0
    %
 
 (1)
    
    We classify equity securities based upon issuers long-term bond rating.  Gross Unrealized Losses% of TotalSecuritiesFixed Maturity
    
    
    Equity
    
    
    Total
    
    
    Available forSecurities
    
    
    Securities (1)
    
    
    Securities
    
    
    Sale(Yen in millions)Investment grade
    
    ¥
    13,046
    
    
    ¥
    332
    
    
    ¥
    13,378
    
    
    
    85.6
    %Non-investment grade
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Not rated
    
    
    1,287
    
    
    
    964
    
    
    
    2,251
    
    
    
    14.4Total securities available for sale
    
    ¥
    14,333
    
    
    ¥
    1,296
    
    
    ¥
    15,629
    
    
    
    100.0
    %
 
 (1)
    
    We classify equity securities based upon issuers long-term bond rating.  64




---



##### Table of Contents



Gross Unrealized Losses% of TotalSecuritiesFixed Maturity
    
    
    Equity
    
    
    Total
    
    
    Available forSecurities
    
    
    Securities (1)
    
    
    Securities
    
    
    Sale(Yen in millions)Investment grade
    
    ¥
    28,207
    
    
    ¥
    1,654
    
    
    ¥
    29,861
    
    
    
    48.2
    %Non-investment grade
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Not rated
    
    
    3,913
    
    
    
    28,135
    
    
    
    32,048
    
    
    
    51.8Total securities available for sale
    
    ¥
    32,120
    
    
    ¥
    29,789
    
    
    ¥
    61,909
    
    
    
    100.0
    %
 
 (1)
    
    We classify equity securities based upon issuers long-term bond rating.  Gross Unrealized Gains% of TotalSecuritiesFixed Maturity
    
    
    Equity
    
    
    Total
    
    
    Available forSecurities
    
    
    Securities (1)
    
    
    Securities
    
    
    Sale(Yen in millions)Investment grade
    
    ¥
    85,586
    
    
    ¥
    1,991,071
    
    
    ¥
    2,076,657
    
    
    
    90.5
    %Non-investment grade
    
    
    50
    
    
    
    698
    
    
    
    748
    
    
    
    0.0Not rated
    
    
    2,625
    
    
    
    216,577
    
    
    
    219,202
    
    
    
    9.5Total securities available for sale
    
    ¥
    88,261
    
    
    ¥
    2,208,346
    
    
    ¥
    2,296,607
    
    
    
    100.0
    %
 
 (1)
    
    We classify equity securities based upon issuers long-term bond rating.  Gross Unrealized Gains% of TotalSecuritiesFixed Maturity
    
    
    Equity
    
    
    Total
    
    
    Available forSecurities
    
    
    Securities (1)
    
    
    Securities
    
    
    Sale(Yen in millions)Investment grade
    
    ¥
    89,726
    
    
    ¥
    1,267,575
    
    
    ¥
    1,357,301
    
    
    
    88.9
    %Non-investment grade
    
    
    
    
    
    
    338
    
    
    
    338
    
    
    
    0.0Not rated
    
    
    483
    
    
    
    168,601
    
    
    
    169,084
    
    
    
    11.1Total securities available for sale
    
    ¥
    90,209
    
    
    ¥
    1,436,514
    
    
    ¥
    1,526,723
    
    
    
    100.0
    %
 
 (1)
    
    We classify equity securities based upon issuers long-term bond rating.  Gross Unrealized LossesFixed Maturity
    
    
    Equity
    
    
    TotalSecurities
    
    
    Securities
    
    
    Securities(Yen in millions)Less than one year
    
    ¥
    2,262
    
    
    ¥
    751
    
    
    ¥
    3,013Over one year
    
    
    12,071
    
    
    
    545
    
    
    
    12,616Total
    
    ¥
    14,333
    
    
    ¥
    1,296
    
    
    ¥
    15,629
 65




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##### Table of Contents



Gross Unrealized LossesFixed Maturity
    
    
    Equity
    
    
    TotalSecurities
    
    
    Securities
    
    
    Securities(Yen in millions)Less than one year
    
    ¥
    22,998
    
    
    ¥
    29,067
    
    
    ¥
    52,065Over one year
    
    
    9,122
    
    
    
    722
    
    
    
    9,844Total
    
    ¥
    32,120
    
    
    ¥
    29,789
    
    
    ¥
    61,909
  GrossUnrealizedLosses
    
    
    Fair Value(Yen in millions)Due in one year or less
    
    ¥
    40
    
    
    ¥
    20,872Due after one year through five years
    
    
    3,172
    
    
    
    401,550Due after five years through ten years
    
    
    4,954
    
    
    
    430,432Due after ten years
    
    
    4,410
    
    
    
    280,009Subtotal
    
    
    12,576
    
    
    
    1,132,863Securities held by overseas subsidiaries
    
    
    1,757
    
    
    
    148,054Total
    
    ¥
    14,333
    
    
    ¥
    1,280,917
  GrossUnrealizedLosses
    
    
    Fair Value(Yen in millions)Due in one year or less
    
    ¥
    2,803
    
    
    ¥
    76,156Due after one year through five years
    
    
    11,058
    
    
    
    376,324Due after five years through ten years
    
    
    10,034
    
    
    
    135,198Due after ten years
    
    
    7,148
    
    
    
    186,852Subtotal
    
    
    31,043
    
    
    
    774,530Securities held by overseas subsidiaries
    
    
    1,077
    
    
    
    34,061Total
    
    ¥
    32,120
    
    
    ¥
    808,591
  As of March 31,2007
    
    
    2008(Yen in millions)Equity securities
    
    ¥
    1,296
    
    
    ¥
    29,789Fixed maturity securities
    
    
    14,333
    
    
    
    32,120Total gross unrealized losses
    
    ¥
    15,629
    
    
    ¥
    61,909
 66




---



##### Table of Contents



Investment concentration
  Maturity profile
  Unrealized losses of fixed maturity securities
   67




---



##### Table of Contents



Investment Impairments
 Securities Available for Sale
      Valuation Allowances for Loan Losses
  68




---



##### Table of Contents



As of March 31,2006
    
    
    2007
    
    
    2008(Yen in millions)Mortgage loans on real estate
    
    ¥
    15,129
    
    
    ¥
    11,511
    
    
    ¥
    9,859Other long-term investmentsMortgage loans on vessels and facilities
    
    
    708
    
    
    
    526
    
    
    
    277Collateral and guaranteed loans
    
    
    353,389
    
    
    
    376,405
    
    
    
    403,488Unsecured loans
    
    
    364,704
    
    
    
    337,662
    
    
    
    345,467Policy loans
    
    
    38,615
    
    
    
    38,523
    
    
    
    39,536Total
    
    ¥
    772,545
    
    
    ¥
    764,627
    
    
    ¥
    798,627
      69




---



##### Table of Contents



As of March 31,2006
    
    
    2007
    
    
    2008(Yen in millions)Record investment in impaired loans:Mortgage loans on real estate
    
    ¥
    1,563
    
    
    ¥
    1,160
    
    
    ¥
    1,150Mortgage loans on vessels and facilities
    
    
    8
    
    
    
    4
    
    
    
    4Collateral and guaranteed loans
    
    
    
    
    
    
    
    
    
    
    1,724Unsecured loans
    
    
    7,383
    
    
    
    3,185
    
    
    
    1,575Total
    
    ¥
    8,954
    
    
    ¥
    4,349
    
    
    ¥
    4,453Valuation allowance:Mortgage loans on real estate
    
    ¥
    335
    
    
    ¥
    259
    
    
    ¥
    254Collateral and guaranteed loans
    
    
    
    
    
    
    
    
    
    
    104Unsecured loans
    
    
    4,230
    
    
    
    692
    
    
    
    294Total
    
    ¥
    4,565
    
    
    ¥
    951
    
    
    ¥
    652
   70




---



##### Table of Contents



Financial Instruments with No Available Market Prices
     Accounting for Deposit-Type Insurance Products
   71




---



##### Table of Contents



Business Segment Analysis
    Property and
    
    
    
    
    
    
    AdjustmentCasualty
    
    
    Life
    
    
    andInsurance
    
    
    Insurance
    
    
    Elimination
    
    
    Consolidated(Yen in millions)2006Net premiums written
    
    ¥
    1,464,107
    
    
    ¥
    
    
    
    ¥
    
    
    
    ¥
    1,464,107Net claims paid
    
    
    792,941
    
    
    
    
    
    
    
    
    
    
    
    792,941Life insurance premiums
    
    
    
    
    
    
    162,226
    
    
    
    
    
    
    
    162,226Life insurance claims
    
    
    
    
    
    
    20,912
    
    
    
    
    
    
    
    20,912Commission and collection expenses
    
    
    239,798
    
    
    
    17,873
    
    
    
    
    
    
    
    257,671Operating expenses and general and
administrative expenses
    
    
    233,692
    
    
    
    17,209
    
    
    
    (3,556
    )
    
    
    247,345Interests and dividends received, net
    
    
    90,937
    
    
    
    11,613
    
    
    
    (253
    )
    
    
    102,297Ordinary profit (loss)
    
    
    129,830
    
    
    
    (2,129
    )
    
    
    9
    
    
    
    127,710Total assets
    
    ¥
    7,800,763
    
    
    ¥
    793,107
    
    
    ¥
    (997
    )
    
    ¥
    8,592,873
 72




---



##### Table of Contents



Property and
    
    
    
    
    
    
    AdjustmentCasualty
    
    
    Life
    
    
    andInsurance
    
    
    Insurance
    
    
    Elimination
    
    
    Consolidated(Yen in millions)2007Net premiums written
    
    ¥
    1,492,808
    
    
    ¥
    
    
    
    ¥
    
    
    
    ¥
    1,492,808Net claims paid
    
    
    846,445
    
    
    
    
    
    
    
    
    
    
    
    846,445Life insurance premiums
    
    
    
    
    
    
    165,364
    
    
    
    
    
    
    
    165,364Life insurance claims
    
    
    
    
    
    
    24,850
    
    
    
    
    
    
    
    24,850Commission and collection expenses
    
    
    241,089
    
    
    
    17,003
    
    
    
    (433
    )
    
    
    257,659Operating expenses and general and
administrative expenses
    
    
    244,912
    
    
    
    20,790
    
    
    
    (2,713
    )
    
    
    262,989Interests and dividends received, net
    
    
    107,953
    
    
    
    13,856
    
    
    
    (50
    )
    
    
    121,759Ordinary profit (loss)
    
    
    94,307
    
    
    
    (2,643
    )
    
    
    20
    
    
    
    91,684Total assets
    
    ¥
    8,106,558
    
    
    ¥
    906,006
    
    
    ¥
    (912
    )
    
    ¥
    9,011,652
 Property and
    
    
    
    
    
    
    AdjustmentCasualty
    
    
    Life
    
    
    andInsurance
    
    
    Insurance
    
    
    Elimination
    
    
    Consolidated(Yen in millions)2008Net premiums written
    
    ¥
    1,541,032
    
    
    ¥
    
    
    
    ¥
    
    
    
    ¥
    1,541,032Net claims paid
    
    
    879,725
    
    
    
    
    
    
    
    
    
    
    
    879,725Life insurance premiums
    
    
    
    
    
    
    156,528
    
    
    
    
    
    
    
    156,528Life insurance claims
    
    
    
    
    
    
    31,703
    
    
    
    
    
    
    
    31,703Commission and collection expenses
    
    
    234,640
    
    
    
    14,740
    
    
    
    (395
    )
    
    
    248,985Operating expenses and general and
administrative expenses
    
    
    271,198
    
    
    
    21,560
    
    
    
    (2,416
    )
    
    
    290,342Interests and dividends received, net
    
    
    114,403
    
    
    
    16,232
    
    
    
    (20
    )
    
    
    130,615Ordinary profit (loss)
    
    
    66,591
    
    
    
    (5,724
    )
    
    
    
    
    
    
    60,867Total assets
    
    ¥
    7,388,669
    
    
    ¥
    1,009,780
    
    
    ¥
    (731
    )
    
    ¥
    8,397,718
  Direct PremiumsWritten(IncludingDeposit Premiumsfrom
    
    
    Net Premiums
    
    
    Net ClaimsPolicyholders)
    
    
    Written
    
    
    Paid(Yen in millions)2006Fire and Allied Lines
    
    ¥
    304,177
    
    
    ¥
    206,373
    
    
    ¥
    88,203Marine
    
    
    101,462
    
    
    
    84,788
    
    
    
    35,176Personal Accident
    
    
    341,536
    
    
    
    143,316
    
    
    
    56,049Voluntary Automobile
    
    
    595,745
    
    
    
    590,423
    
    
    
    364,208Compulsory Automobile Liability
    
    
    181,757
    
    
    
    193,402
    
    
    
    130,518Other
    
    
    269,308
    
    
    
    245,805
    
    
    
    118,787Total
    
    ¥
    1,793,985
    
    
    ¥
    1,464,107
    
    
    ¥
    792,941
 73




---



##### Table of Contents



Direct PremiumsWritten(IncludingDeposit Premiumsfrom
    
    
    Net Premiums
    
    
    Net ClaimsPolicyholders)
    
    
    Written
    
    
    Paid(Yen in millions)2007Fire and Allied Lines
    
    ¥
    301,692
    
    
    ¥
    208,951
    
    
    ¥
    100,229Marine
    
    
    113,006
    
    
    
    95,487
    
    
    
    38,685Personal Accident
    
    
    327,519
    
    
    
    139,531
    
    
    
    62,909Voluntary Automobile
    
    
    611,148
    
    
    
    601,354
    
    
    
    375,298Compulsory Automobile Liability
    
    
    176,826
    
    
    
    192,087
    
    
    
    134,908Other
    
    
    276,517
    
    
    
    255,398
    
    
    
    134,416Total
    
    ¥
    1,806,708
    
    
    ¥
    1,492,808
    
    
    ¥
    846,445
 Direct PremiumsWritten(IncludingDeposit
    
    
    NetPremiums from
    
    
    Premiums
    
    
    Net ClaimsPolicyholders)
    
    
    Written
    
    
    Paid(Yen in millions)2008Fire and Allied Lines
    
    ¥
    317,882
    
    
    ¥
    225,161
    
    
    ¥
    104,817Marine
    
    
    121,969
    
    
    
    104,127
    
    
    
    44,367Personal Accident
    
    
    298,155
    
    
    
    138,217
    
    
    
    70,233Voluntary Automobile
    
    
    634,948
    
    
    
    624,950
    
    
    
    391,878Compulsory Automobile Liability
    
    
    165,851
    
    
    
    191,255
    
    
    
    136,542Other
    
    
    287,460
    
    
    
    257,322
    
    
    
    131,888Total
    
    ¥
    1,826,265
    
    
    ¥
    1,541,032
    
    
    ¥
    879,725
 Fiscal Year Ended March 31, 2008 Compared to Fiscal Year Ended March 31, 2007
 Non-Life Insurance
  Fire and Allied Insurance
 Marine Insurance
 74




---



##### Table of Contents



Personal Accident Insurance
 Voluntary Automobile Insurance
 Compulsory Automobile Liability Insurance
 Other Property and Casualty Insurance
 Life Insurance
  Fiscal Year Ended March 31, 2007 Compared to Fiscal Year Ended March 31, 2006
 Non-Life Insurance
  75




---



##### Table of Contents



Fire and Allied Insurance
 Marine Insurance
 Personal Accident Insurance
 Voluntary Automobile Insurance
 Compulsory Automobile Liability Insurance
 Other Property and Casualty Insurance
 Life Insurance
  Recent Accounting Pronouncements
  76




---



##### Table of Contents



77




---



##### Table of Contents



B. Liquidity and Capital Resources.
 Liquidity
    Capital Resources
    78




---



##### Table of Contents



Cash Flows
 Year Ended March 31,2006
    
    
    2007
    
    
    2008(Yen in millions)Net cash provided by operating activities
    
    ¥
    402,040
    
    
    ¥
    325,256
    
    
    ¥
    308,007Net cash used in investing activities
    
    
    (258,459
    )
    
    
    (217,400
    )
    
    
    (197,879
    )Net cash used in financing activities
    
    
    (128,879
    )
    
    
    (132,431
    )
    
    
    (106,473
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    4,235
    
    
    
    9,351
    
    
    
    (5,306
    )Net change in cash and cash equivalents
    
    
    18,937
    
    
    
    (15,224
    )
    
    
    (1,651
    )Cash and cash equivalents at beginning of year
    
    
    366,228
    
    
    
    385,165
    
    
    
    369,941Cash and cash equivalents at end of year
    
    ¥
    385,165
    
    
    ¥
    369,941
    
    
    ¥
    368,290
 Fiscal Year Ended March 31, 2008 compared with the Fiscal Year Ended March 31, 2007
     Fiscal Year Ended March 31, 2007 compared with the Fiscal Year Ended March 31, 2006
     79




---



##### Table of Contents



C. Research and Development, Patents and Licenses, etc.
  D. Trend Information.
  E. Off-Balance Sheet Arrangements.
  F. Contractual Obligations and Commercial Commitments.
  Contractual Obligations
 Payments Due by PeriodContractual Obligations
    
    Total
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    After 5 years(Yen in millions)Losses, claims and loss
adjustment expenses (1)
    
    ¥
    1,197,820
    
    
    ¥
    678,836
    
    
    ¥
    342,738
    
    
    ¥
    114,078
    
    
    ¥
    62,168Future policy benefits
for life insurance
contracts (2)
    
    
    2,489,689
    
    
    
    105,501
    
    
    
    239,708
    
    
    
    246,634
    
    
    
    1,897,846Investment deposits by
policyholders (3)
    
    
    3,291,494
    
    
    
    361,635
    
    
    
    685,737
    
    
    
    569,758
    
    
    
    1,674,364Long-term debt
    
    
    103,085
    
    
    
    953
    
    
    
    71,346
    
    
    
    30,786
    
    
    
    Capital lease obligations
    
    
    2,038
    
    
    
    921
    
    
    
    978
    
    
    
    130
    
    
    
    9Operating leases
    
    
    6,485
    
    
    
    1,690
    
    
    
    2,220
    
    
    
    944
    
    
    
    1,631Total (4)
    
    ¥
    7,090,611
    
    
    ¥
    1,149,536
    
    
    ¥
    1,342,727
    
    
    ¥
    962,330
    
    
    ¥
    3,636,018
 
 (1)
    
    We estimate the timing of cash flows with respect to losses, claims and loss adjustment
expenses based on our historical loss development payment patterns.(2)
    
    We estimate the timing of cash flows with respect to future policy benefits for life
insurance contracts based on our historical experience and expectations of future payment
patterns. Uncertainties exist, however, particularly with respect to mortality, morbidity,
expenses, customer lapse and renewal premiums for life policies. Accordingly, our actual
experience may differ from our estimates. In addition, the amounts set forth in the table
above do not reflect our estimates of future premiums and reinsurance recoveries.The total amount of future policy benefit for life insurance contracts set forth in the table
above (¥2,489,689 million) exceeds the amount of corresponding liabilities of ¥911,165 million
reflected in our consolidated balance sheet as of March 31, 2008, as the amounts set forth in
the table above are undiscounted and do not reflect the impact of future premium revenue.(3)
    
    We estimate the timing of cash flows and our expectation of future payment patterns with
respect to investment deposits by policyholders based on our historical experience, taking
into account contractual maturity dates and expected customer lapse and withdrawal activity.
Customer lapse and withdrawal activity, however, are inherently uncertain and outside of our
control. Accordingly, our actual experience may differ from our estimates. In addition, the
amounts set forth in the table above do not reflect our estimates of future premiums and
reinsurance recoveries. The total amount of investment deposits by policyholders set forth in
the table above (¥3,291,494 million) exceeds the amount of corresponding liabilities of
¥2,119,153 million reflected in our consolidated balance sheet as of March 31, 2008, as the
amounts set forth in the table above are undiscounted and do not reflect the impact of future
premium revenue.(4)
    
    The total amount of expected future pension payments has not been included in this table as
such amount was not determinable as of March 31, 2008. We expect to contribute approximately
¥3,450 million to our pension plans for the year ending March 31, 2009. See Note 15 to our
consolidated financial statements. 80




---



##### Table of Contents



Commercial Commitments
 Amount of Commitment Expiration per PeriodOther Commercial Commitments
    
    Total
    
    
    Less than 1
year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    After 5
Years(Yen in millions)Guarantees
    
    ¥
    589
    
    
    ¥
    
    
    
    ¥
    
    
    
    ¥
    
    
    
    ¥
    589
 
 Item 6.
    
    Directors, Senior Management and Employees.
 A. Directors and Senior Management.
  Director or
    
    Number ofCurrent
    
    Corporate
    
    shares ownedTerm
    
    Auditor
    
    as of AugustName
    
    Position
    
    Date of Birth
    
    Expires
    
    Since
    
    31, 2008Directors:Yoshiaki Shin
    
    Chairman and
Director
    
    November 4, 1945
    
    June, 2009
    
    April 1, 2008
    
    
    28,788Toshiaki Egashira
    
    President and
Director
    
    November 30, 1948
    
    June, 2009
    
    April 1, 2008
    
    
    6,300Toshihiro Nakagawa
    
    Senior Managing Director
    
    July 14, 1948
    
    June, 2009
    
    April 1, 2008
    
    
    13,800Isamu Endo
    
    Senior Managing Director
    
    November 13, 1948
    
    June, 2009
    
    April 1, 2008
    
    
    3,900Hiromi Asano
    
    Director
    
    December 13, 1950
    
    June, 2009
    
    April 1, 2008
    
    
    10,444Katsuaki Ikeda
    
    Director
    
    September 8, 1951
    
    June, 2009
    
    April 1, 2008
    
    
    8,100Hitoshi Ichihara
    
    Director
    
    June 19, 1951
    
    June, 2009
    
    April 1, 2008
    
    
    5,400Yasuyoshi Karasawa
    
    Director
    
    October 27, 1950
    
    June, 2009
    
    April 1, 2008
    
    
    5,100Susumu Fujimoto
    
    Director
    
    December 5, 1948
    
    June, 2009
    
    April 1, 2008
    
    
    3,000Eiko Kono
    
    Director
    
    January 1, 1946
    
    June, 2009
    
    April 1, 2008
    
    Kenji Koroyasu
    
    Director
    
    April 16, 1942
    
    June, 2009
    
    April 1, 2008
    
    
    300Iwao Taka
    
    Director
    
    March 10, 1956
    
    June, 2009
    
    April 1, 2008
    
    
    900Toshihiko Seki
    
    Director
    
    February 28, 1941
    
    June, 2009
    
    April 1, 2008
    
    
    900Corporate Auditors:Takashi Yamashita
    
    Corporate Auditor
    
    July 7, 1946
    
    June, 2012
    
    April 1, 2008
    
    
    8,400Yoshio Iijima
    
    Corporate Auditor
    
    September 7, 1949
    
    June, 2012
    
    April 1, 2008
    
    
    4,827Sosuke Yasuda
    
    Corporate Auditor
    
    December 15, 1943
    
    June, 2012
    
    April 1, 2008
    
    Daiken Tsunoda
    
    Corporate Auditor
    
    January 29, 1967
    
    June, 2012
    
    April 1, 2008
    
    
  Yoshiaki Shin
(November 4, 1945)
    
    Chairman and Director since April 1, 2008(Chairman and Director of Mitsui Sumitomo Insurance since 2006)1995 Director of Sumitomo Marine1998 Managing Director of Sumitomo Marine2001 Managing Director of Mitsui Sumitomo Insurance2002 Senior Managing Director of Mitsui Sumitomo Insurance2005 Director and Vice President Executive Officer of Mitsui Sumitomo Insurance
 81




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##### Table of Contents



Toshiaki Egashira
(November 30, 1948)
    
    President and Director since April 1, 2008
(President and Director, and CEO of Mitsui Sumitomo Insurance since 2006)2001 Executive Officer of Mitsui Sumitomo Insurance2003 Managing Executive Officer of Mitsui Sumitomo InsuranceToshihiro Nakagawa
(July 14, 1948)
    
    Senior Managing Director since April 1, 2008In charge of Human Resources Dept., Compliance Dept., Corporate Risk Management Dept. and Internal Audit Dept.2000 Executive Officer of Sumitomo Marine2001 Executive Officer of Mitsui Sumitomo Insurance2004 Managing Executive Officer of Mitsui Sumitomo Insurance2006 Senior Executive Officer of Mitsui Sumitomo InsuranceIsamu Endo
(November 13, 1948)
    
    Senior Managing Director since April 1, 2008In charge of Corporate Planning Dept., Business Development Dept., Corporate
Communications Dept., Shareholders Relations & Legal Dept., Accounting Dept. and
Internal Audit Dept. (concerning internal audit to the departments of
which Director Mr.
Nakagawa is in charge.)2003 Executive Officer of Mitsui Sumitomo Insurance2005 Managing Executive Officer of Mitsui Sumitomo Insurance2006 Senior Executive Officer of Mitsui Sumitomo InsuranceHiromi Asano
(December 13, 1950)
    
    Director since April 1, 2008
(Director and Senior Executive Officer of Mitsui Sumitomo Insurance since 2006)2000 Executive Officer of Sumitomo Marine2001 Director of Sumitomo Marine2001 Director of Mitsui Sumitomo Insurance2004 Managing Director of Mitsui Sumitomo Insurance2005 Director and Senior Executive Officer of Mitsui Sumitomo InsuranceKatsuaki Ikeda
(September 8, 1951)
    
    Director since April 1, 2008
(Director and Managing Executive Officer of Mitsui Sumitomo Insurance since 2005)2003 Director and Executive Officer of Mitsui Sumitomo Insurance2005 Director and Managing Executive Officer of Mitsui Sumitomo InsuranceHitoshi
Ichihara
(June 19, 1951)
    
    Director since April 1, 2008
(Director and Managing Executive Officer of Mitsui Sumitomo Insurance since 2005)2004 Executive Officer of Mitsui Sumitomo Insurance2006 Director and Managing Executive Officer of Mitsui Sumitomo InsuranceYasuyoshi Karasawa
(October 27, 1950)
    
    Director since April 1, 2008
(Director and Senior Executive Officer of Mitsui Sumitomo Insurance since 2008)2004 Executive Officer of Mitsui Sumitomo Insurance2006 Director and Managing Executive Officer of Mitsui Sumitomo InsuranceSusumu Fujimoto
(December 5, 1948)
    
    Director since April 1, 2008
(Director and Managing Executive Officer of Mitsui Sumitomo Insurance since 2008)1998 Director-General of Yokohama Customs, Ministry of Finance (the MOF)1999 Deputy
Director-General, Customs and Tariff Bureau, MOF2002 Executive Director, European Bank for Reconstruction and Development2005 Advisor of Mitsui Sumitomo Insurance2007 Director of Mitsui Sumitomo InsuranceEiko
Kono
(January 1, 1946)
    
    Director since April 1, 2008
(Director of Mitsui Sumitomo Insurance since 2005)
 82




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##### Table of Contents



1984 Director of Recruit Co., Ltd.1985 Managing Director of Recruit Co., Ltd.1986 Senior Managing Director of Recruit Co., Ltd.1994 Vice President and Director of Recruit Co., Ltd.1997 President and Director of Recruit Co., Ltd.2003 Chairman and Director, and CEO of Recruit Co., Ltd.2004 Chairman and Director of Recruit Co., Ltd.2004 Corporate Auditor of Mitsui Sumitomo Insurance2005 Special Advisor, Recruit Co., Ltd.Kenji
Koroyasu
(April 16, 1942)
    
    Director since April 1, 2008
(Director of Mitsui Sumitomo Insurance since 2005)1996 Deputy Vice-Minister of Justice1997 Director of the General Affairs Department, Supreme Public Prosecutors Office1999 Director of the Criminal Affairs Department, Supreme Public Prosecutors Office1999 President, Research and Training Institute of the Ministry of Justice2001 Superintending Public Prosecutor, Sapporo High Public Prosecutors Office2002 Superintending Public Prosecutor, Nagoya High Public Prosecutors Office2003 Superintending Public Prosecutor, Osaka High Public Prosecutors Office2004 Admitted as Attorney-at-LawOf Counsel, Tokyo Eiwa Attorneys At Law2008 Of Counsel, TMI AssociatesIwao
Taka
(March 10, 1956)
    
    Director since April 1, 2008(Director of Mitsui Sumitomo Insurance since 2005)1996 Associate Professor, Reitaku University International School of Economics and Business Administration2001 Professor, Reitaku University International School of Economics and
Business Administrationand Senior Director, Reitaku University Business Ethics and Compliance Research Center2002 Professor, Reitaku University C. Hiroike School of Graduate Studies of Economics and
BusinessAdministration
and Senior Director, Reitaku University Business Ethics and
Compliance Research Center2003 Professor, Reitaku University C. Hiroike School of Graduate Studies of Economics and BusinessAdministration
and Chief Director, Reitaku University Business Ethics and Compliance Research CenterToshihiko Seki
(February 28, 1941)
    
    Director since April 1, 20081977 Associate Professor, School of Law, Tohoku University1984 Professor, School of Law, Tohoku University2000 Professor, Tohoku University Law School2004 Honorary Professor, Tohoku UniversityProfessor, Hosei University Law School2004 Admitted as Attorney-at-law2007 Director of Mitsui Sumitomo InsuranceTakashi
Yamashita
(July 7, 1946)
    
    Corporate Auditor since 2008
(Corporate Auditor of Mitsui Sumitomo Insurance since 2007)2000 Executive Officer of Mitsui Marine2001 Director of Mitsui Sumitomo Insurance2002 Managing Director of Mitsui Sumitomo Insurance2004 Senior Managing Director of Mitsui Sumitomo Insurance2005 Director and Vice President Executive Officer of Mitsui Sumitomo InsuranceYoshio
Iijima
    
    Corporate Auditor since 2008(September 7, 1949)
    
    2003 Executive Officer of Mitsui Sumitomo Insurance
 83




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##### Table of Contents



Sosuke Yasuda
(December 15, 1943)
    
    Corporate Auditor since 2008
(Corporate Auditor of Mitsui Sumitomo Insurance since 2005)1979 Registered as Certified Public Accountants1980 Representative, Sousuke Yasuda Tax Accountant Office (present)1983 Representative, Tokyo Akasaka CPA Joint Office1993 Senior Partner, Tokyo Akasaka & Co.1999 Managing Partner, Tokyo Hokuto & Co. (currently Gyosei & Co.)2001 Supervising Officer, Japan Prime Realty Investment Corporation2008 Representative Partner, Gyosei & Co.Daiken
Tsunoda
    
    Corporate Auditor since 2008(January 29, 1967)
    
    1994 Admitted to the Bar, Attorney-at-law2003 Attorney at Law, Nakamura & Tsunoda (currently, Nakamura, Tsunoda & Matsumoto)
      84




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##### Table of Contents



shikko-yaku shikko-yaku
 B. Compensation.
    C. Board Practices.
  D. Employees.
  85




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##### Table of Contents



E. Share Ownership.
  86




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##### Table of Contents



Item 7.
    
    Major Shareholders and Related Party Transactions.
 A. Major Shareholders.
        B. Related Party Transactions.
  C. Interests of Experts and Counsel.
  87




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##### Table of Contents



Item 8.
    
    Financial Information.
 A. Consolidated Statements and Other Financial Information.
 Financial Statements
  Legal or Arbitration Proceedings
  Dividend Policy
   B. Significant Changes.
  88




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##### Table of Contents



Item 9.
    
    The Offer and Listing.
 A. Offer and Listing Details.
   89




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##### Table of Contents



Price per Share of
    
    Average DailyCommon Stock on
    
    Trading
    
    
    
    
    
    
    
    
    
    Closing Nikkei StockTokyo Stock Exchange
    
    Volume of
    
    Closing TOPIX
    
    AverageHigh
    
    Low
    
    Common Stock
    
    High
    
    Low
    
    High
    
    LowFiscal Year
Ended/Ending
March 31,Annual highs and lows2004
    
    
    3,850
    
    
    
    1,690
    
    
    
    1,493,595
    
    
    
    1,179.23
    
    
    
    773.10
    
    
    
    11,770.65
    
    
    
    7,607.882005
    
    
    3,953
    
    
    
    2,840
    
    
    
    1,336,249
    
    
    
    1,217.87
    
    
    
    1,053.77
    
    
    
    12,163.89
    
    
    
    10,505.052006
    
    
    5,420
    
    
    
    3,060
    
    
    
    1,549,768
    
    
    
    1,728.16
    
    
    
    1,109.19
    
    
    
    17,059.66
    
    
    
    10,825.392007
    
    
    5,647
    
    
    
    4,087
    
    
    
    1,669,600
    
    
    
    1,816.97
    
    
    
    1,458.30
    
    
    
    18,215.35
    
    
    
    14,218.602008(1)
    
    
    5,760
    
    
    
    3,070
    
    
    
    1,887,336
    
    
    
    1,792.23
    
    
    
    1,149.65
    
    
    
    18,261.98
    
    
    
    11,787.51Quarterly highs and lows2007:First quarter
    
    
    5,647
    
    
    
    4,087
    
    
    
    1,896,677
    
    
    
    1,783.72
    
    
    
    1,458.30
    
    
    
    17,563.37
    
    
    
    14,218.60Second quarter
    
    
    5,030
    
    
    
    4,087
    
    
    
    1,358,438
    
    
    
    1,651.35
    
    
    
    1,475.28
    
    
    
    16,385.96
    
    
    
    14,437.24Third quarter
    
    
    5,200
    
    
    
    4,303
    
    
    
    1,523,158
    
    
    
    1,681.07
    
    
    
    1,532.95
    
    
    
    17,225.83
    
    
    
    15,725.94Fourth quarter
    
    
    5,390
    
    
    
    4,353
    
    
    
    1,917,122
    
    
    
    1,816.97
    
    
    
    1,656.72
    
    
    
    18,215.35
    
    
    
    16,642.252008:First quarter
    
    
    5,760
    
    
    
    4,807
    
    
    
    1,643,961
    
    
    
    1,789.38
    
    
    
    1,682.49
    
    
    
    18,240.30
    
    
    
    17,028.41Second quarter
    
    
    5,307
    
    
    
    3,750
    
    
    
    1,807,887
    
    
    
    1,792.23
    
    
    
    1,480.39
    
    
    
    18,261.98
    
    
    
    15,273.68Third quarter
    
    
    4,857
    
    
    
    3,590
    
    
    
    1,829,521
    
    
    
    1,677.52
    
    
    
    1,437.38
    
    
    
    17,458.98
    
    
    
    14,837.66Fourth quarter
    
    
    3,870
    
    
    
    3,070
    
    
    
    2,316,420
    
    
    
    1,424.29
    
    
    
    1,149.65
    
    
    
    14,691.41
    
    
    
    11,787.512009:First quarter(1)
    
    
    4,500
    
    
    
    3,400
    
    
    
    1,737,798
    
    
    
    1,430.47
    
    
    
    1,230.49
    
    
    
    14,489.44
    
    
    
    12,656.42Calendar Period2008:March
    
    
    3,870
    
    
    
    3,280
    
    
    
    2,702,719
    
    
    
    1,287.55
    
    
    
    1,149.65
    
    
    
    13,215.42
    
    
    
    11,787.51April
    
    
    4,280
    
    
    
    3,400
    
    
    
    2,243,686
    
    
    
    1,361.75
    
    
    
    1,230.49
    
    
    
    13,894.37
    
    
    
    12,656.42May
    
    
    4,500
    
    
    
    3,890
    
    
    
    1,449,205
    
    
    
    1,408.14
    
    
    
    1,341.76
    
    
    
    14,338.54
    
    
    
    13,655.34June
    
    
    4,490
    
    
    
    3,610
    
    
    
    1,506,762
    
    
    
    1,430.47
    
    
    
    1,320.10
    
    
    
    14,489.44
    
    
    
    13,481.38July
    
    
    3,890
    
    
    
    3,330
    
    
    
    1,624,895
    
    
    
    1,332.57
    
    
    
    1,249.28
    
    
    
    13,603.31
    
    
    
    12,754.56August
    
    
    3,640
    
    
    
    3,120
    
    
    
    1,346,686
    
    
    
    1,280.00
    
    
    
    1,216.42
    
    
    
    13,430.91
    
    
    
    12,666.04
 
 (1)
    
    Excludes March 26, 27, 28 and 31, 2008.  B. Plan of Distribution.
  C. Markets.
  90




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##### Table of Contents



D. Selling Shareholders.
  E. Dilution.
  F. Expenses of the Issue.
  91




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##### Table of Contents



Item 10.
    
    Additional Information.
 A. Share Capital.
  B. Memorandum and Articles of Association.
  General
    92




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##### Table of Contents



Objects and Purposes
  
    
    administration of the management of non-life insurance companies, life insurance
companies and other companies that we may own as a subsidiary under the Insurance
Business Law; and
    
    any other business incidental to the business provided for in the preceding
item.
 Dividends
 General
    Restriction on Distribution of Surplus
   93




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renketsu haito kisei
tekiyo kaisha
  94




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##### Table of Contents



Capital and Reserves
  Stock Splits
   Consolidation of Shares
  Unit Share System
  95




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##### Table of Contents




    
    to receive distributions of dividends,
    
    to receive cash or other assets in case of consolidation or split of shares,
exchange or transfer of shares or corporate merger,
    
    to be allotted rights to subscribe for free for new shares and stock acquisition
rights when such rights are granted to shareholders, and
    
    to participate in any distribution of surplus assets upon liquidation.
 Voting Rights
   96




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
    
    the determination of the matters relating to acquisition of its own shares from
a specific shareholder,
    
    the determination as to acquisition of special shares all of which may be
acquired by a corporation (zembu shutoku joukou tsuki shurui kabushiki),
    
    the determination of consolidation of the shares,
    
    the determination of discharge of a part of liabilities of directors,
corporate auditors or accounting auditors,
    
    the determination of the matters concerning distribution of surplus by property
other than cash (only in the case that no cash distribution is allowed to
shareholders as an alternative),
    
    the determination of the matters concerning amendments to the articles of
incorporation, transfer of whole or important part of business or dissolution of a
corporation,
    
    the determination of the matters concerning reorganization of a corporation.
 Subscription Rights and Stock Acquisition Rights
   97




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##### Table of Contents



Liquidation Rights
  Liability to Further Calls or Assessments
  Shareholders Register Manager
  Record Date
   Acquisition by the Company of Shares
       98




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Reports to Shareholders
  Report of Substantial Shareholdings
   Daily Price Fluctuation Limits under Japanese Stock Exchange Rules
  99




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##### Table of Contents



Selected Daily Price Limits
 Maximum DailyPrevious Days Closing Price or Special Quote
    
    Price MovementOver
    
    ¥
    2,000
    
    
    Less than
    
    ¥
    3,000
    
    
    ¥
    400Over
    
    
    3,000
    
    
    Less than
    
    
    5,000
    
    
    
    500Over
    
    
    5,000
    
    
    Less than
    
    
    10,000
    
    
    
    1,000
  C. Material Contracts.
  D. Exchange Controls.
  E. Taxation.
 United States Federal Income Taxation
  
    
    a dealer in securities;
    
    a trader in securities that elects to use a mark-to-market method of accounting for
securities holdings;
    
    a tax-exempt organization;
    
    a life insurance company;
 100




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##### Table of Contents




    
    a person liable for alternative minimum tax;
    
    a person that actually or constructively owns 10% or more of our voting stock;
    
    a person that holds shares as part of a straddle or a hedging or conversion
transaction; or
    
    a person whose functional currency is not the U.S. dollar.
    
    
    a citizen or resident of the United States;
    
    a domestic corporation;
    
    an estate whose income is subject to United States federal income tax regardless of
its source; or
    
    a trust if a United States court can exercise primary supervision over the trusts
administration and one or more United States persons are authorized to control all
substantial decisions of the trust.
  Taxation of Dividends
  101




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Taxation of Capital Gains
  Passive Foreign Investment Company (PFIC) Rules
  102




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##### Table of Contents



Japanese Taxation
  
    
    the overall tax consequences of the acquisition, ownership and
disposition of shares, including specifically the tax consequences
under Japanese law;
    
    the laws of the jurisdiction of which they are resident; and
    
    any tax treaty between Japan and their country of residence.
   103




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##### Table of Contents



F. Dividends and Paying Agents.
  G. Statement by Experts.
  H. Documents on Display.
  I. Subsidiary Information.
  104




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##### Table of Contents



Item 11.
    
    Quantitative and Qualitative Disclosures About Market Risk
  Market Risk Management
       105




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##### Table of Contents




    
    Equity price risk: common shares;
    
    Interest rate risk: bonds, loans and liabilities; and
    
    Foreign exchange rate risk: non-yen denominated equities and bonds.
  
    
    Equity price risk: options and futures;
    
    Interest rate risk: swaps, swaptions, futures and options; and
    
    Foreign exchange rate risk: forwards and others.
  Risk Exposure Estimates.
     106




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##### Table of Contents



Investment Objectives
  
    
    Maintain high-grade investment assets in order to strengthen our ability to meet
insurance payment obligations;
    
    Maintain sufficient liquidity in our investment assets to meet insurance payment
obligations, repayment of deposit-type products upon maturity and payment of
dividends on those products on a timely basis; and
    
    Achieve the highest possible returns on our investment assets while meeting the
two objectives above.
 Allocation of Investments
  107




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##### Table of Contents



Risk Management Functions
  Sensitivity Analysis and Risk Category (As of March 31, 2008)
 Equity risk
    
    10% decline
    
    -206 billion yenInterest rate risk
    
    50bp move
    
    -22 billion yenForeign exchange risk
    
    10% decline
    
    -67 billion yen
 Data Verification and Model Accuracy Confirmation.
 Other Risk Management
 Insurance Underwriting and Pricing.
   108




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##### Table of Contents



Insurance Claims and Reserves.
  Real Estate Investment Risk.
 Legal Risk.
 Operational Risk.
 Administrative risk.
 Information and system risk.
 109




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##### Table of Contents



Liquidity risk.
 
 Item 12.
    
    Description of Securities Other Than Equity Securities
  110




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##### Table of Contents



PART II
 
 Item 13.
    
    Defaults, Dividend Arrearages and Delinquencies.
  
 Item 14.
    
    Material Modifications to the Rights of Security Holders and Use of Proceeds.
  
 Item 15T.
    
    Controls and Procedures.
   
 Item 16A.
    
    Audit Committee Financial Expert.
  
 Item 16B.
    
    Code of Ethics.
  
 Item 16C.
    
    Principal Accountant Fees and Services.
 Fees Paid to the Independent Auditor
  111




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##### Table of Contents



Year Ended March 31,2007
    
    
    2008(Yen in millions)Audit fees (1)
    
    ¥
    150
    
    
    ¥
    251Audit-related fees
    
    
    36
    
    
    
    20Tax fees (2)
    
    
    25
    
    
    
    44All other fees (3)
    
    
    
    
    
    
    Total
    
    ¥
    211
    
    
    ¥
    315
 
 (1)
    
    These are fees for professional services for the audit of our annual financial statements and
services that are normally provided in connection with statutory and regulatory filings.(2)
    
    These are fees for professional tax services performed including tax compliance, tax advice
and tax planning.(3)
    
    These are fees for all other services except those separately defined above. Pre-Approval of Services Provided by KPMG
   
 Item 16D.
    
    Exemption from the Listing Standards for Audit Committees.
  
 Item 16E.
    
    Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
  
 PART III
 
 Item 17.
    
    Financial Statements.
  
 Item 18.
    
    Financial Statements.
  112




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Item 19.
    
    Exhibits.
 ExhibitNumber
    
    
    
    Description1.1
    
    
    
    Articles of Incorporation of the registrant (English translation)*1.2
    
    
    
    Share Handling Regulations of the registrant (English translation)*1.3
    
    
    
    Regulations of the board of directors of the registrant (English translation)1.4
    
    
    
    Regulations of the board of corporate auditors of the registrant (English
translation)2.1
    
    
    
    Specimen common stock certificates of the registrant (English translation)*8.1
    
    
    
    List of subsidiaries of the registrant11.1
    
    
    
    Charter on Professional Conduct12.1
    
    
    
    Certification of the Chief Executive Officer required by Rule 13a-14(a)12.2
    
    
    
    Certification of the Chief Financial Officer required by Rule 13a-14(a)13.1
    
    
    
    Certification of the Chief Executive Officer required by Rule 13a-14(b) and
Section 1350 of Chapter 63 of Title 18 of the United States Code13.2
    
    
    
    Certification of the Chief Financial Officer required by Rule 13a-14(b) and
Section 1350 of Chapter 63 of Title 18 of the United States Code
 
 *
    
    Incorporated by reference to the Registration Statement on Form F-4 (File No. 333-148157)
filed by Mitsui Sumitomo Insurance Co., Ltd. on December 19, 2007.  113




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##### Table of Contents



SIGNATURES
  MITSUI SUMITOMO INSURANCE 
GROUP HOLDINGS, INC./s/ Isamu EndoBy:
    Isamu EndoSenior Managing Director




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##### Table of Contents



MITSUI SUMITOMO INSURANCE COMPANY, LIMITED AND SUBSIDIARIES
 
 INDEX TO FINANCIAL STATEMENTS
 PageConsolidated Financial Statements:Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of March 31, 2007 and 2008
    
    
    F-3Consolidated Statements of Income for the years ended March 31, 2006, 2007 and 2008
    
    
    F-5Consolidated Statements of Comprehensive Income for the years ended March 31, 2006, 2007 and 2008
    
    
    F-6Consolidated Statements of Shareholders Equity for the years ended March 31, 2006, 2007 and 2008
    
    
    F-7Consolidated Statements of Cash Flows for the years ended March 31, 2006, 2007 and 2008
    
    
    F-8Notes to Consolidated Financial Statements
    
    
    F-10
 INDEX TO FINANCIAL STATEMENT SCHEDULES
 PageFinancial Statement Schedules:Schedule I: Summary of Investment  Other than Investments in Related Parties as of March 31, 2007 and 2008
    
    
    F-69Schedule III: Supplementary Insurance Information for the years ended March 31, 2006, 2007 and 2008
    
    
    F-71Schedule IV: Reinsurance for the years ended March 31, 2006, 2007 and 2008
    
    
    F-73Schedule V: Valuation and Qualifying Accounts for the years ended March 31, 2007 and 2008
    
    
    F-74
 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    
 F-2




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##### Table of Contents



2007
    
    
    2008(Yen in millions)ASSETSInvestments  other than investments in affiliates (Notes 4 and 16):Securities available for sale:Fixed maturities, at fair value
    
    ¥
    3,317,804
    
    
    
    3,334,185Equity securities, at fair value
    
    
    3,312,574
    
    
    
    2,547,773Securities held to maturity:Fixed maturities, at amortized cost
    
    
    384,215
    
    
    
    449,474Mortgage loans on real estate
    
    
    11,511
    
    
    
    9,859Investment real estate, at cost less accumulated depreciation
of ¥57,985 million in 2007; ¥50,327 million in 2008
    
    
    49,192
    
    
    
    43,151Policy loans
    
    
    38,523
    
    
    
    39,536Other long-term investments
    
    
    715,972
    
    
    
    749,385Short-term investments
    
    
    113,671
    
    
    
    120,086Total investments
    
    
    7,943,462
    
    
    
    7,293,449Cash and cash equivalents
    
    
    369,941
    
    
    
    368,290Investments in and indebtedness from affiliates:Investments
    
    
    46,198
    
    
    
    56,351Indebtedness (Note 16)
    
    
    3,008
    
    
    
    2,961Total investments in and indebtedness from affiliates
    
    
    49,206
    
    
    
    59,312Accrued investment income
    
    
    23,698
    
    
    
    24,798Premiums receivable and agents balances
    
    
    133,358
    
    
    
    140,562Prepaid reinsurance premiums
    
    
    201,404
    
    
    
    215,233Funds held by or deposited with ceding reinsurers
    
    
    72,963
    
    
    
    76,884Reinsurance recoverable on paid losses
    
    
    57,602
    
    
    
    58,264Reinsurance recoverable on unpaid losses
    
    
    237,719
    
    
    
    253,092Property and equipment, net of accumulated depreciation (Note 5)
    
    
    221,900
    
    
    
    245,522Deferred policy acquisition costs (Note 2(h))
    
    
    362,260
    
    
    
    360,152Goodwill (Note 7)
    
    
    70,012
    
    
    
    69,248Other assets (Note 12)
    
    
    133,507
    
    
    
    161,519Total assets
    
    ¥
    9,877,032
    
    
    
    9,326,325
  F-3




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##### Table of Contents



2007
    
    
    2008(Yen in millions,except share data)LIABILITIES AND SHAREHOLDERS EQUITYLiabilities:Losses and claims (Note 8):Reported and estimated losses and claims
    
    
    
    
    
    ¥
    1,112,289
    
    
    
    1,144,000Adjustment expenses
    
    
    
    
    
    
    41,261
    
    
    
    53,820Total losses and claims
    
    
    
    
    
    
    1,153,550
    
    
    
    1,197,820Unearned premiums
    
    
    
    
    
    
    1,439,579
    
    
    
    1,489,956Future policy benefits for life insurance contracts
    
    
    
    
    
    
    825,426
    
    
    
    911,165Investment deposits by policyholders (Notes 9 and 16)
    
    
    
    
    
    
    2,196,614
    
    
    
    2,119,153Indebtedness to affiliates
    
    
    
    
    
    
    3,262
    
    
    
    2,232Income tax payable (Note 12)
    
    
    
    
    
    
    21,430
    
    
    
    4,283Deferred tax liabilities (Note 12)
    
    
    
    
    
    
    881,165
    
    
    
    605,153Retirement and severance benefits (Note 14)
    
    
    
    
    
    
    98,447
    
    
    
    116,287Ceded reinsurance balances payable
    
    
    
    
    
    
    90,788
    
    
    
    77,423Short-term debt (Note 10)
    
    
    
    
    
    
    37,907
    
    
    
    37,604Long-term debt (Notes 10 and 16)
    
    
    
    
    
    
    70,000
    
    
    
    99,992Other liabilities
    
    
    
    
    
    
    167,723
    
    
    
    237,372Total liabilities
    
    
    
    
    
    
    6,985,891
    
    
    
    6,898,440Minority interests
    
    
    
    
    
    
    16,681
    
    
    
    18,586Shareholders equity:Common stock:Authorized  3,000,000,000 shares;
issued  1,513,184,880 shares in 2007 and 1,404,402,464 shares
in 2008 (Note 13(a))
    
    
    
    
    
    
    137,495
    
    
    
    137,495Other shareholders equity:Additional paid-in capital (Note 13(a))
    
    
    
    
    
    
    86,519
    
    
    
    86,486Retained
earnings (Note 13(b))
    
    
    
    
    
    
    1,485,823
    
    
    
    1,471,651Accumulated other comprehensive income (Note 13(c))
    
    
    
    
    
    
    1,255,766
    
    
    
    713,667Treasury stock, 101,982,776 shares in 2007, at cost
    
    
    
    
    
    
    (91,143
    )
    
    
    Total shareholders equity
    
    
    
    
    
    
    2,874,460
    
    
    
    2,409,299Commitments and contingent liabilities (Note 18)Total liabilities and shareholders equity
    
    
    
    
    
    ¥
    9,877,032
    
    
    
    9,326,325
  F-4




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##### Table of Contents



2006
    
    
    2007
    
    
    2008(Yen in millions, except per share data)Revenues:Net premiums written
    
    ¥
    1,458,507
    
    
    
    1,489,379
    
    
    
    1,537,616Less increase in unearned premiums
    
    
    35,706
    
    
    
    20,299
    
    
    
    34,931Net premiums earned (Note 11)
    
    
    1,422,801
    
    
    
    1,469,080
    
    
    
    1,502,685Premium income for life insurance contracts (Note 11)
    
    
    179,430
    
    
    
    193,551
    
    
    
    192,731Investment income, net of investment expenses (Note 4)
    
    
    156,102
    
    
    
    179,189
    
    
    
    185,265Net realized gains (losses) on investments (Note 4)
    
    
    50,199
    
    
    
    24,315
    
    
    
    (17,370
    )Total revenues
    
    
    1,808,532
    
    
    
    1,866,135
    
    
    
    1,863,311Expenses:Losses, claims and loss adjustment expenses (Note 11):Losses and claims incurred and provided for
    
    
    881,623
    
    
    
    909,656
    
    
    
    906,257Related adjustment expenses
    
    
    68,855
    
    
    
    70,001
    
    
    
    82,370Policyholder benefits for life insurance contracts (Note 11)
    
    
    151,365
    
    
    
    156,591
    
    
    
    156,683Amortization of policy acquisition costs
    
    
    340,878
    
    
    
    367,224
    
    
    
    372,025Investment income credited to investment deposits
by policyholders (Note 9)
    
    
    50,840
    
    
    
    48,482
    
    
    
    48,498Other expenses, net (Note 6)
    
    
    133,994
    
    
    
    146,742
    
    
    
    143,719Total expenses
    
    
    1,627,555
    
    
    
    1,698,696
    
    
    
    1,709,552Income before income taxes
    
    
    180,977
    
    
    
    167,439
    
    
    
    153,759Income taxes (Note 12):Current
    
    
    35,497
    
    
    
    43,747
    
    
    
    25,368Deferred
    
    
    25,030
    
    
    
    9,208
    
    
    
    22,769Total income taxes
    
    
    60,527
    
    
    
    52,955
    
    
    
    48,137Minority interests
    
    
    560
    
    
    
    568
    
    
    
    826Net income
    
    ¥
    119,890
    
    
    
    113,916
    
    
    
    104,796Earnings per share (Notes 2(p) and 13(b)):Net income:Basic
    
    ¥
    84.11
    
    
    
    80.24
    
    
    
    74.28
  F-5




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##### Table of Contents



2006
    
    
    2007
    
    
    2008(Yen in millions)Net income
    
    ¥
    119,890
    
    
    
    113,916
    
    
    
    104,796Other comprehensive income, net of tax (Note 13(c)):Foreign currency translation adjustments
    
    
    15,514
    
    
    
    10,950
    
    
    
    (4,015
    )Unrealized gains on securities
    
    
    500,810
    
    
    
    135,407
    
    
    
    (526,138
    )Net gains (losses) on derivative instruments
    
    
    (102
    )
    
    
    1
    
    
    
    (24
    )Minimum pension liability adjustment
    
    
    (791
    )
    
    
    (15
    )
    
    
    Pension liability adjustments
    
    
    
    
    
    
    
    
    
    
    (11,922
    )Other comprehensive income (loss)
    
    
    515,431
    
    
    
    146,343
    
    
    
    (542,099
    )Comprehensive income (loss)
    
    ¥
    635,321
    
    
    
    260,259
    
    
    
    (437,303
    )
  F-6




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##### Table of Contents



2006
    
    
    2007
    
    
    2008(Yen in millions, except per share data)Common stock:Balance at beginning and end of year
    
    ¥
    137,495
    
    
    
    137,495
    
    
    
    137,495Additional paid-in capital:Balance at beginning of year
    
    
    86,498
    
    
    
    86,507
    
    
    
    86,519Gain on sales of treasury stock
    
    
    9
    
    
    
    12
    
    
    
    18Retirement of treasury stock
    
    
    
    
    
    
    
    
    
    
    (51
    )Balance at end of year
    
    
    86,507
    
    
    
    86,519
    
    
    
    86,486Retained earnings:Balance at beginning of year
    
    
    1,286,353
    
    
    
    1,386,963
    
    
    
    1,485,823Net income for the year
    
    
    119,890
    
    
    
    113,916
    
    
    
    104,796Dividends paid (Note 13(b))
    
    
    (19,280
    )
    
    
    (21,308
    )
    
    
    (21,166
    )Retirement of treasury stock
    
    
    
    
    
    
    
    
    
    
    (98,657
    )Other
    
    
    
    
    
    
    6,252
    
    
    
    855Balance at end of year (Note 13(b))
    
    
    1,386,963
    
    
    
    1,485,823
    
    
    
    1,471,651Accumulated other comprehensive income (Note 13(c)):Balance at beginning of year
    
    
    603,893
    
    
    
    1,119,324
    
    
    
    1,255,766Other comprehensive income, net of tax
    
    
    515,431
    
    
    
    146,343
    
    
    
    (542,099
    )Adjustment upon adoption of SFAS No.158, net of tax
    
    
    
    
    
    
    (9,901
    )
    
    
    Balance at end of year
    
    
    1,119,324
    
    
    
    1,255,766
    
    
    
    713,667Treasury stock:Balance at beginning of year
    
    
    (64,511
    )
    
    
    (77,321
    )
    
    
    (91,143
    )Purchase of common shares
    
    
    (12,831
    )
    
    
    (13,840
    )
    
    
    (7,629
    )Sale of common shares
    
    
    21
    
    
    
    18
    
    
    
    64Retirement of treasury stock
    
    
    
    
    
    
    
    
    
    
    98,708Balance at end of year
    
    
    (77,321
    )
    
    
    (91,143
    )
    
    
    Total shareholders equity
    
    ¥
    2,652,968
    
    
    
    2,874,460
    
    
    
    2,409,299Cash dividends per share (Note 13(b))
    
    ¥
    13.50
    
    
    
    15.00
    
    
    
    15.00
  F-7




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##### Table of Contents



2006
    
    
    2007
    
    
    2008(Yen in millions)Net cash provided by operating activities (Note 19)
    
    ¥
    402,040
    
    
    
    325,256
    
    
    
    308,007Cash flows from investing activities:Proceeds from:Securities available for sale:Fixed maturities
    
    
    553,057
    
    
    
    449,649
    
    
    
    412,764Equity securities
    
    
    114,403
    
    
    
    105,222
    
    
    
    87,796Fixed maturities available for sale matured
    
    
    252,373
    
    
    
    225,542
    
    
    
    228,766Fixed maturities held to maturity matured
    
    
    6,545
    
    
    
    3,866
    
    
    
    9,345Investment real estate
    
    
    165
    
    
    
    850
    
    
    
    8,560Collection of:Mortgage loans on real estate
    
    
    4,804
    
    
    
    4,250
    
    
    
    2,445Policy loans
    
    
    34,702
    
    
    
    37,144
    
    
    
    41,974Other long-term investments
    
    
    250,612
    
    
    
    228,689
    
    
    
    180,235Purchases of:Securities available for sale:Fixed maturities
    
    
    (1,048,873
    )
    
    
    (834,568
    )
    
    
    (667,878
    )Equity securities
    
    
    (105,180
    )
    
    
    (96,805
    )
    
    
    (107,609
    )Securities held to maturity:Fixed maturities
    
    
    (8,202
    )
    
    
    (4,957
    )
    
    
    (73,191
    )Investments in:Mortgage loans on real estate
    
    
    (658
    )
    
    
    (515
    )
    
    
    (789
    )Investment real estate
    
    
    
    
    
    
    (719
    )
    
    
    (8,631
    )Policy loans
    
    
    (38,419
    )
    
    
    (37,052
    )
    
    
    (42,987
    )Other long-term investments
    
    
    (264,485
    )
    
    
    (240,871
    )
    
    
    (214,654
    )Increase (decrease) in cash received under securities
lending transactions
    
    
    26,176
    
    
    
    (20,429
    )
    
    
    6,766Decrease (increase) in short-term investments, net
    
    
    4,773
    
    
    
    (4,249
    )
    
    
    (13,361
    )Increase in investments in and
indebtedness from affiliates
    
    
    (13,570
    )
    
    
    (4,193
    )
    
    
    (9,188
    )Increase in property and equipment, net
    
    
    (13,904
    )
    
    
    (18,606
    )
    
    
    (27,532
    )Business acquired, net of cash acquired
    
    
    (10,807
    )
    
    
    (7,337
    )
    
    
    Other, net
    
    
    (1,971
    )
    
    
    (2,311
    )
    
    
    (10,710
    )Net cash used in investing activities
    
    
    (258,459
    )
    
    
    (217,400
    )
    
    
    (197,879
    )
  F-8




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##### Table of Contents



2006
    
    
    2007
    
    
    2008(Yen in millions)Cash flows from financing activities:Investment deposits funded by policyholders
    
    ¥
    341,604
    
    
    
    324,907
    
    
    
    290,741Withdrawals of investment deposits by policyholders
    
    
    (434,555
    )
    
    
    (418,195
    )
    
    
    (396,597
    )Increase (decrease) in commercial paper, net
    
    
    (2,643
    )
    
    
    (2,532
    )
    
    
    29,688Proceeds from long-term debt
    
    
    300
    
    
    
    
    
    
    
    29,991Repayment of long-term debt
    
    
    (500
    )
    
    
    
    
    
    
    Repayment of short-term debt
    
    
    
    
    
    
    (300
    )
    
    
    (30,000
    )Acquisition of treasury stock
    
    
    (12,831
    )
    
    
    (13,840
    )
    
    
    (7,629
    )Dividends paid to shareholders
    
    
    (19,377
    )
    
    
    (21,588
    )
    
    
    (21,867
    )Other, net
    
    
    (877
    )
    
    
    (883
    )
    
    
    (800
    )Net cash used in financing activities
    
    
    (128,879
    )
    
    
    (132,431
    )
    
    
    (106,473
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    4,235
    
    
    
    9,351
    
    
    
    (5,306
    )Net change in cash and cash equivalents
    
    
    18,937
    
    
    
    (15,224
    )
    
    
    (1,651
    )Cash and cash equivalents at beginning of year
    
    
    366,228
    
    
    
    385,165
    
    
    
    369,941Cash and cash equivalents at end of year
    
    ¥
    385,165
    
    
    
    369,941
    
    
    
    368,290
  F-9




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##### Table of Contents



(1)
    
    Basis of Presentation
 (a)
    
    Nature of OperationsOn October 1, 2001, Mitsui Sumitomo Insurance Company, Limited (the Company) was
formed through the merger of Mitsui Marine and Fire Insurance Company, Limited
(Mitsui) and The Sumitomo Marine & Fire Insurance Company, Limited (Sumitomo).
The merger was accounted for under the pooling-of-interest method, and, accordingly,
the consolidated financial statements and financial information prior to the merger
have been restated as if the companies had been combined for all periods presented.On April 1, 2008, the Company established a holding company, Mitsui Sumitomo
Insurance Group Holdings, Inc., through a share transfer and became its wholly owned
subsidiary. The share transfer will be accounted for as a legal reorganization of
entities under common control in a manner similar to a pooling of interests as the
proportionate shareholder interests before and after the share transfer will be
substantially the same.The Company and subsidiaries operate mainly in the Japanese domestic insurance
industry and sell a wide range of property and casualty insurance products. Also,
the Company sells life insurance products through a wholly owned subsidiary and a
joint venture company. Overseas operations are conducted mostly in Southeast Asia,
Europe and the United States of America through overseas branches and subsidiaries.(b)
    
    Basis of Financial StatementsThe Company and its domestic subsidiaries maintain their books of account in
accordance with accounting principles generally accepted in Japan (Japanese GAAP),
and its foreign subsidiaries generally maintain their books of account in accordance
with those of the countries of their domicile.Certain adjustments and reclassifications have been made in the accompanying
consolidated financial statements to conform with U.S. generally accepted accounting
principles (U.S. GAAP).The accompanying consolidated financial statements are expressed in yen.(c)
    
    Use of EstimatesThe preparation of the consolidated financial statements requires management of the
Company to make a number of estimates and assumptions relating to the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the period. Significant items subject to such
estimates and assumptions include the carrying amount of:
 F-10




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##### Table of Contents



securities, property and
equipment, investment real estate, intangibles and goodwill; valuation allowances for
receivables and deferred income tax assets; valuation of derivative instruments;
insurance-related liabilities; and assets and obligations related to employee
benefits. Actual results could differ from those estimates.
 F-11




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##### Table of Contents



(2)
    
    Summary of Significant Accounting Policies
 (a)
    
    Principles of ConsolidationThe consolidated financial statements include the accounts of the Company and its
majority-owned subsidiaries.In December 2003, the Financial Accounting Standards Board (FASB) issued Revised
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN46R).
FIN46R clarifies how to identify variable interest entities (VIEs) and how to
determine when a business enterprise should include the assets, liabilities and
non-controlling interests of VIEs in its consolidated financial statements. A company
that absorbs a majority of a VIEs expected losses, receives a majority of a VIEs
expected residual returns, or both, is the primary beneficiary and is required to
consolidate the VIEs into its financial statement. The Company or its consolidated
subsidiaries provide guarantees or similar contracts to various entities and
accordingly are considered the primary beneficiary in various VIEs. See Note 17 for
additional information required by FIN46R.All material intercompany balances and transactions have been eliminated in
consolidation.Investments in affiliates over which we exercise significant influence, but not
control, are accounted for by the equity method. The exercisability of the minority
interest rights is considered in determining whether the Companys control for
majority owned affiliates exists, and consolidation would be precluded to the extent
that the minority interest holds substantive participating rights. Under the equity
method of accounting, investments are stated at their underlying net equity value
after elimination of intercompany profits. The cost method is used when the Company
does not have significant influence.The excess of investments in affiliates over the Companys share of their net assets
at the acquisition date, included in the equity investment balance, is recognized as
equity method goodwill. Such equity method goodwill is not being amortized and is
instead tested for impairment as part of the equity method investment. The cost of
investments in affiliates as of March 31, 2007 and 2008 amounted to ¥46,198 million
and ¥56,351 million, respectively. There were no differences between the cost of
these investments and the amount of underlying equity in net assets of the investees.The proportionate share of the affiliates income which were included in other
expenses, net for the years ended March 31, 2006, 2007 and 2008 were gains of ¥4,854
million, ¥3,398 million and ¥12,312 million, respectively.The affiliates include Mitsui Sumitomo MetLife Insurance Co., Ltd. (MS MetLife),
which offers variable annuity life insurance products to individuals. MS MetLife is
a 51%-owned affiliate of the Company and is accounted for under the equity method
based on an evaluation of the rights held by the minority interest shareholders
pursuant to the joint venture agreement, which overcome the presumption that the
subsidiary should be consolidated.
 F-12




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##### Table of Contents



Summarized information from the balance sheets and statements of income of MS MetLife
as of and for the years ended March 31, 2006, 2007 and 2008 are as follows:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Investments
    
    ¥
    68,174
    
    
    
    136,118
    
    
    
    196,770Separate account assets
    
    
    1,519,624
    
    
    
    2,153,564
    
    
    
    2,288,002Deferred acquisition costs
    
    
    75,076
    
    
    
    108,617
    
    
    
    135,094Other assets
    
    
    4,662
    
    
    
    7,032
    
    
    
    10,443Total assets
    
    ¥
    1,667,536
    
    
    
    2,405,331
    
    
    
    2,630,309Policy benefits and reserves
    
    ¥
    70,663
    
    
    
    153,397
    
    
    
    223,934Separate account liabilities
    
    
    1,519,624
    
    
    
    2,153,564
    
    
    
    2,288,002Other liabilities
    
    
    25,725
    
    
    
    37,998
    
    
    
    44,304Equity
    
    
    51,524
    
    
    
    60,372
    
    
    
    74,069Total liabilities and equity
    
    ¥
    1,667,536
    
    
    
    2,405,331
    
    
    
    2,630,309Revenue
    
    ¥
    28,335
    
    
    
    41,977
    
    
    
    83,699Expenses
    
    
    17,731
    
    
    
    33,818
    
    
    
    49,093Income taxes
    
    
    3,607
    
    
    
    2,578
    
    
    
    11,895Net income
    
    ¥
    6,997
    
    
    
    5,581
    
    
    
    22,711
 Through the year ended March 31, 2006, the Company owned a 47% interest in Mitsui
Sumitomo Insurance (Malaysia) Bhd., which became a majority-owned subsidiary of the
Company in the year ended March 31, 2007 and was accordingly included in
consolidation for that year. Summarized information from the balance sheet and
statement of income of Mitsui Sumitomo Insurance (Malaysia) Bhd. as of and for the
year ended March 31, 2006 is as follows:
 2006(Yen in millions)Total assets
    
    ¥
    20,015Total liabilities
    
    
    10,430Total equity
    
    
    9,585Net income
    
    
    1,685
 F-13




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##### Table of Contents



(b)
    
    Cash EquivalentsThe Company considers all highly liquid debt instruments with an original maturity of
three months or less to be cash equivalents.(c)
    
    Investments in Equity and Fixed Maturity SecuritiesTrading securities are recorded at fair value with unrealized gains and losses
included in income. Securities available for sale are recorded at fair value with
net unrealized gains and losses reported, net of tax, in other comprehensive income.
Securities held to maturity, which the Company has positive intent and ability to
hold to maturity, are recorded at amortized cost.For investments that have experienced a decline in value below their respective cost
that is considered to be other than temporary, the declines are recorded as realized
losses on investments in the consolidated statements of income. Gains and losses on
the sale of investments are included in realized gains and losses in the consolidated
statements of income based on the trade date. The cost of investments sold is
determined on a moving-average basis.(d)
    
    Investments in LoansThe Company grants mortgage, commercial and consumer loans primarily to customers
throughout Japan. As a result of this geographic concentration of outstanding loans,
the ability of the Companys debtors to honor their contracts is much more dependent
upon the general economic conditions in Japan than those competitors with a greater
geographic dispersion of borrowing.Loans that management has the intent and ability to hold for the foreseeable future
or until maturity or pay-off generally are reported at their outstanding unpaid
principal balances adjusted for charge-offs and an allowance for credit losses.Loans are placed on a cash (non-accrual) basis when it is deemed that the payment of
interest or principal is doubtful of collection, or when interest or principal is
past due for 90 days or more.All interest accrued but not collected for loans placed on non-accrual status or
charged off is reversed against interest income. The interest on these loans is
accounted for on a cash basis until qualifying for return to accrual status. Loans
are returned to accrual status when all the principal and interest amounts
contractually due are brought current and future payments are reasonably assured.Allowance for Credit LossesThe allowance for credit losses is established as losses are estimated to have
occurred through a provision for credit losses charged to earnings. Credit losses
are charged against the allowance when management believes the uncollectibility of a
loan balance is confirmed. Subsequent recoveries, if any, are credited to the
allowance.
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The allowance for credit losses is evaluated on a regular basis by management and is
based upon managements periodic review of the collectibility of the loans in light
of historical
experience, the nature and volume of the loan portfolio, adverse situations that may
affect the borrowers ability to repay, estimated value of any underlying collateral
and prevailing economic conditions. This evaluation is inherently subjective as it
requires estimates that are susceptible to significant revision as more information
becomes available.
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##### Table of Contents



The allowance consists of specific and general components. The specific allowance is
established for loans that are classified as impaired when the discounted cash flows
or collateral value of the impaired loan is lower than the carrying value of the
loan. The general allowance covers other-than-impaired loans and is established
based on historical loss experience adjusted for qualitative factors.A loan is considered impaired when, based on current information and events, it is
probable that the Company will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. Factors considered by management in determining impairment include
payment status, collateral value, and the probability of collecting scheduled
principal and interest payments when due. Loans that experience insignificant
payment delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment shortfalls on a
case-by-case basis, taking into consideration all of the circumstances surrounding
the loan and the borrower, including the length of the delay, the reasons for the
delay, the borrowers prior payment record, and the amount of the shortfalls in
relation to the principal and interest owed. Impairment is measured on a
loan-by-loan basis for mortgage and commercial loans by either the present value of
expected future cash flows discounted at the loans effective interest rate, the
loans obtainable market price, or the fair value of the collateral if the loan is
collateral-dependent. Large groups of smaller-balance homogeneous loans are
collectively evaluated for impairment.(e)
    
    Accounts with Foreign Branches and AgentsThe amounts included in the consolidated balance sheets at March 31, 2007 and 2008
with respect to foreign branches and agents of the Company represent data within
three months before March 31, 2007 and 2008, respectively. The consolidated
statements of income likewise include amounts for the corresponding periods ended on
those dates.(f)
    
    Property and EquipmentProperty and equipment, including property classified as investment real estate, are
stated principally at cost less accumulated depreciation on buildings and furniture
and equipment. Depreciation is computed by the declining-balance method based on the
estimated useful lives of the assets. The estimated useful lives for buildings,
furniture and equipment are primarily 6 to 60 years, 2 to 20 years, respectively.The cost and accumulated depreciation with respect to assets retired or otherwise
disposed of are eliminated from the respective assets and related accumulated
depreciation accounts. Any resulting profit or loss is credited or charged to
income.
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(g)
    
    Impairment or Disposal of Long-Lived AssetsIn accordance with Statement of Financial Accounting Standard (SFAS) No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets,
such as property, plant and equipment and purchased intangibles subject to
amortization are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of
an asset to estimated undiscounted future cash flows expected to be generated by
the
asset. If the carrying amount of an asset exceeds its estimated future cash flows,
an impairment charge is recognized in the amount by which the carrying amount of the
asset exceeds the fair value of the asset. Assets to be disposed of are stated at
the lower of the carrying amount or fair value less costs to sell, and are no longer
depreciated. The fair values of the assets are determined based on either quoted
market prices or independent third party appraisals.
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##### Table of Contents



(h)
    
    Policy Acquisition CostsPolicy acquisition costs are deferred and amortized over the periods in which the
related premiums are earned or in relation to estimated gross profits with respect to
certain interest-sensitive life and annuity products. Acquisition costs include agent
commissions and certain other costs which vary with and are directly related to the
acquisition of business. Such deferred costs are limited to the excess of the
unearned premiums over the sum of expected claim costs, claim adjustment expenses and
policy maintenance expenses.Details of policy acquisition costs for the years ended March 31, 2006, 2007 and 2008
are as follows:Property and casualty insurance:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Deferred at beginning of year
    
    ¥
    315,317
    
    
    
    321,407
    
    
    
    302,677Adjustment in connection with acquisition
    
    
    1,996
    
    
    
    1,276
    
    
    
    Capitalized during year:Commissions and brokerage
    
    
    225,949
    
    
    
    223,316
    
    
    
    230,377Salaries and other compensation
    
    
    62,290
    
    
    
    60,435
    
    
    
    62,841Other underwriting costs
    
    
    44,231
    
    
    
    45,973
    
    
    
    57,937332,470
    
    
    
    329,724
    
    
    
    351,155Amortized during year
    
    
    (328,376
    )
    
    
    (349,730
    )
    
    
    (365,866
    )Deferred at end of year
    
    ¥
    321,407
    
    
    
    302,677
    
    
    
    287,966
 Life insurance:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Deferred at beginning of year
    
    ¥
    49,586
    
    
    
    55,633
    
    
    
    59,583Capitalized during year
    
    
    18,549
    
    
    
    21,444
    
    
    
    19,341Change in shadow adjustment
    
    
    
    
    
    
    
    
    
    
    (579
    )Amortized during year
    
    
    (12,502
    )
    
    
    (17,494
    )
    
    
    (6,159
    )Deferred at end of year
    
    ¥
    55,633
    
    
    
    59,583
    
    
    
    72,186
 Other underwriting costs include certain policy issuance costs supporting underwriting
functions. These costs are related to the acquisition of new business and renewals
and include technology costs to process policies, policy forms and travel.Shadow accounting adjustments to deferred policy acquisition costs, present value of
future profit and certain insurance liabilities, is recognized in equity, together
with the unrealized gains or losses.
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(i)
    
    Losses, Claims, Loss Adjustment Expenses and Policyholder BenefitsLiabilities for reported and estimated losses and claims and for related adjustment
expenses for property and casualty insurance contracts are based upon the
accumulation of case estimates for losses and related adjustment expenses reported
prior to the close of the accounting period on direct and assumed business.
Provision has also been made based upon past experience for unreported losses and
for adjustment expenses not identified with specific claims. The Company believes
that the liabilities for unpaid losses and adjustment expenses at March 31, 2007 and
2008 are adequate to cover the ultimate cost of losses and claims incurred to those
dates, but the provisions are necessarily based on estimates and no representation
is made that the ultimate liability may not exceed or fall short of such estimates.For life insurance contracts, reserves for future policy benefits are determined
principally by the net level premium method. Assumed interest rates range from
1.10% to 3.10%. Anticipated rates of mortality are based on the recent experience
of the Companys life insurance subsidiary.(j)
    
    Insurance Revenue RecognitionProperty and casualty insurance premiums are earned ratably over the terms of the
related insurance contracts. Unearned premiums are recognized to cover the
unexpired portion of premiums written. Life insurance premiums of long-duration
contracts are recognized as revenue when due from policyholders.(k)
    
    ReinsuranceReinsurance contracts are accounted for in accordance with SFAS No. 113, Accounting
and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts. Under
this statement, assets and liabilities relating to reinsurance contracts are
reported on a gross basis. SFAS No. 113 also established guidelines for determining
whether risk is transferred under a reinsurance contract. If risk is transferred,
the conditions for reinsurance accounting are met. If risk is not transferred, the
contract is accounted for as a deposit. All of the Companys reinsurance contracts
meet the risk transfer criteria and are accounted for as reinsurance.(l)
    
    Income TaxesThe Company accounts for income taxes in accordance with SFAS No. 109, Accounting
for Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are
recognized for the estimated future tax consequences of differences between the
financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment date.
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In June 2006, FASB interpretation (FIN) No. 48, Accounting for Uncertainty in
Income Taxes, an interpretation of FASB Statement No. 109, was issued. FIN No. 48
clarifies the accounting for uncertainty in income taxes by prescribing the
recognition threshold a tax position is required to
meet before being recognized in
the financial statements. It also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods, disclosure,
and transition. The Companys accounting policy is to accrue interest and penalties
related to unrecognized tax benefits as a component of income tax expense in the
consolidated statements of income. The Company adopted FIN No. 48 on April 1, 2007 and the adoption of FIN No. 48 did not
have a material effect on the Companys consolidated financial statements.
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##### Table of Contents



(m)
    
    Compulsory Automobile Liability InsuranceJapanese law requires that all automobiles be covered by liability insurance for
personal injury and that insurance companies may not refuse to issue such policies.
The law provides that the regulatory authorities should not approve any application
for upward premium rate adjustments if, in the opinion of the regulatory
authorities, such adjustments would generate underwriting profits, for the program
as a whole, or if it is deemed that the rate adjustments would compensate the
insurers for excessive underwriting costs attributable to a lack of effective cost
control on the part of the insurers. The law further stipulates that whenever
premium rates are such that, in the opinion of the regulatory authorities, such
premium revenues generate income which exceeds costs that are effectively controlled
by insurers, for the program as a whole, the regulatory authorities may order a
downward revision of premium rates.The Company is not permitted to reflect any profit or loss from underwriting
Compulsory Automobile Liability Insurance in the statutory financial statements
prepared for distribution to shareholders, unless permission has been obtained from
the Financial Services Agency of Japan. Rather, all such accumulated profits are
recorded as a liability in the statutory financial statements prepared on the
Japanese GAAP basis.In contrast, in the accompanying consolidated financial statements prepared on the
U.S. GAAP basis, Compulsory Automobile Liability Insurance is accounted for
similarly with other lines of property and casualty insurance written by the
Company, in the absence of a legal or contractual obligation to refund premium
amounts in excess of cost to policyholders. Thereby, premiums are earned over the
terms of the policies and the unexpired portion of premiums written relating to the
unexpired terms of coverage are accounted for as unearned premiums. Earned premiums
from underwriting Compulsory Automobile Liability Insurance were ¥193,871 million,
¥193,663 million, and ¥193,413 million for the years ended March 31, 2006, 2007 and
2008, respectively. Likewise, liabilities for reported and estimated losses and
claims and for related adjustment expenses are recorded based on the accumulation of
case estimates for losses and related adjustment expenses reported prior to the
close of the accounting period and on past experience for unreported losses and for
adjustment expenses not identified with specific claims. Liabilities for losses,
claims and related adjustment expenses for Compulsory Automobile Liability Insurance
were ¥119,937 million and ¥117,075 million at March 31, 2007 and 2008, respectively.(n)
    
    Foreign Currency Translation and TransactionsForeign currency financial statements of the Companys subsidiaries have been
translated in accordance with SFAS No. 52, Foreign Currency Translation. Under
this statement, assets and liabilities of the Companys subsidiaries and affiliates
located outside Japan are translated into Japanese yen at the rates of exchange in
effect at the balance sheet date. Income and expense items are translated at the
average exchange rates prevailing during the year. Gains and losses resulting from
the translation of foreign currency financial statements are excluded from the
consolidated statements of income and are accumulated in Foreign currency
translation adjustments, within accumulated other comprehensive income.
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Gains or losses resulting from foreign currency transactions have been included in
other expenses in the accompanying consolidated statements of income as gains of
¥2,095 million, ¥1,058 million and losses of ¥10,191 million for the years ended
March 31, 2006, 2007 and 2008, respectively.
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##### Table of Contents



(o)
    
    DerivativesAll derivatives are recognized on the balance sheet at their fair value in
accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities and SFAS No. 138, Accounting for Certain Derivative Instruments and
Certain Hedging Activity, an Amendment of SFAS No.133.Changes in the fair values of a derivative instrument are recorded in earnings or
equity, depending on its designation and qualification as (1) fair value hedge (a
hedge of subsequent changes in the fair value of a recognized asset or liability),
(2) cash flow hedge (a hedge of the variability of cash flows to be received or
paid related to a recognized asset or liability) or (3) foreign currency hedge
(fair value and cash flow hedges may involve foreign-currency risk). In order to
qualify as a hedge, the derivative instrument must be: (1) designated as hedge of a
specific financial asset or liability at the inception of the contract, (2)
effective at reducing the risk associated with the exposure to be hedged, and (3)
highly correlated with respect to changes in its fair value or in the related cash
flows in relation to the fair value of or cash flows related to the item to be
hedged both at inception and over the life of the contract. Through the year ended
March 31, 2007, the Company applied hedge accounting to some of its derivatives. The
Company reconsidered the cost-effectiveness of that accounting treatment and, as a
result, the Company discontinued hedge accounting for those derivatives in the year
ended March 31, 2008. Ceasing hedge accounting did not have a material effect on the
Companys reported financial position or cash flows.(p)
    
    Net Income per ShareSFAS No. 128, Earnings per Share requires dual presentation of basic and diluted
earnings per share (EPS) with an appropriate reconciliation of both computations
(see Note 13(b)). Basic EPS is computed based on the average number of shares of
common stock outstanding during each period. Diluted EPS assumes the dilution that
could occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock.(q)
    
    ReclassificationCertain immaterial reclassifications have been made to the amounts as of and for the
years ended March 31, 2006 and 2007 in the accompanying consolidated financial
statements to conform with the March 31, 2008 presentation.
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##### Table of Contents



(r)
    
    GoodwillGoodwill represents the excess of the cost of an acquired entity over the net of the
amounts assigned to assets acquired and liabilities assumed. In accordance with
SFAS No. 142, Goodwill and Other Intangible Assets, goodwill is tested for
impairment at least annually, or more often if events or circumstances indicate
there may be impairment. The impairment test is a two-step process. The first step
is to identify any potential impairment using a multiple-of-earnings approach to
estimate the fair value of the reporting units. The fair values of the reporting
units are then compared to their carrying value, including goodwill. If the carrying
amounts of the reporting units exceed their fair value, a second step is performed
to measure the amount of impairment, if any.(s)
    
    New Accounting StandardsIn September 2005, Statement of Position (SOP) 05-1, Accounting by Insurance
Enterprises for Deferred Acquisition Costs in Connection with Modifications or
Exchanges of Insurance Contracts, was issued. SOP 05-1 provides guidance on
accounting for deferred acquisition costs on internal replacements of insurance and
investment contracts other than those specifically described in SFAS No. 97. SOP
05-1 is effective for internal replacements occurring for fiscal year beginning
after December 15, 2006. The Company adopted SOP 05-1 effective for the fiscal year
ended March 31, 2008. Significant portions of the insurance contracts of the Company
are short duration contracts and the adoption of SOP 05-1 did not have a material
effect on the Companys consolidated financial statements.In September 2006, SFAS No. 157, Fair Value Measurements, was issued. SFAS No. 157
defines fair value, establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. SFAS No. 157 is effective for fiscal
years beginning after November 15, 2007. In February 2008, FASB Staff Position
(FSP) No. FAS 157-1, Application of FASB Statement No. 157 to FASB Statement No.
13 and Other Accounting Pronouncements That Address Fair Value Measurements for
Purposes of Lease Classification or Measurement under Statement 13 and FSP No. FAS
157-2, Effective Date of FASB Statement No. 157, were issued. FSP No. FAS 157-1
removes certain leasing transactions from its scope and FSP No. FAS 157-2 partially
delays the effective date of SFAS No. 157 for one year for certain nonfinancial
assets and liabilities. The effect that the adoption of SFAS No. 157 will have on
the Companys consolidated financial statements is currently evaluated.In February 2007, SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities, was issued. SFAS No. 159 provides companies with an option
to report financial instruments and certain other items at fair value that are not
currently required to be measured at fair value. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007. The effect that the adoption of SFAS
No. 159 will have on the Companys consolidated financial statements is currently
evaluated.
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##### Table of Contents



In December 2007, SFAS No. 141 (revised 2007), Business Combinations  (SFAS No.
141R) was issued. SFAS No. 141R establishes principles and requirements for how an
acquirer recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest in the acquiree and
the goodwill acquired. SFAS No. 141R also establishes disclosure requirements to
enable the evaluation of the nature and financial effects of the business
combination. SFAS No. 141R is applied prospectively to business combinations on and
after the beginning of fiscal year beginning on or after December 15, 2008. The
effect that the adoption of SFAS No. 141R will have on the Companys consolidated
financial statements is currently evaluated.In December 2007, SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51 was issued. SFAS No. 160 establishes
accounting and reporting standards for ownership interests in subsidiaries held by
parties other than the parent, the amount of consolidated net income attributable to
the parent and to the noncontrolling interest, changes in a parents ownership
interest, and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements
that clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners. SFAS No. 160 is effective for fiscal years
beginning on or after December 15, 2008. The effect that the adoption of SFAS No.
160 will have on the Companys consolidated financial statements is currently
evaluated.In March, 2008, SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities, an amendment of FASB Statement No. 133 was issued. SFAS No. 161
requires enhanced disclosures about an entitys derivative and hedging activities
and thereby improves the transparency of financial reporting. SFAS No. 161 is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008. The effect that the adoption of SFAS No. 161 will
have on the Companys consolidated financial statements is currently evaluated.In May, 2008, SFAS No. 163 Accounting for Financial Guarantee Insurance Contracts,
an interpretation of FASB Statement No. 60 was issued. SFAS No. 163 clarifies how
SFAS No. 60 applies to financial guarantee insurance contracts, including the
recognition and measurement of premium revenue and claim liabilities. SFAS No. 163
also requires expanded disclosures about financial guarantee insurance contracts.
SFAS No. 163 is effective for financial statements issued for fiscal years beginning
after December 15, 2008 except for some disclosures. The effect that the adoption of
SFAS No. 163 will have on the Companys consolidated financial statements is
currently evaluated.
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##### Table of Contents



(3)
    
    Business Developments
 On September 7, 2004, the Company signed a sales and purchase agreement with Aviva plc
incorporated in the United Kingdom to acquire Avivas general insurance operation in
Asia.With this acquisition, the Company acquired the general insurance operations in
Singapore, Hong Kong and Thailand for a cost of ¥36,669 million in the year ended March
31, 2005. The excess of the cost over the fair values of assets acquired and liabilities
assumed was allocated to goodwill. Goodwill of ¥31,132 million was recognized on the
consolidated balance sheet as of March 31, 2005.The Company acquired 80% of the outstanding shares of PT. Aviva Insurance in July 2005
and 51% of the outstanding shares of Aviva Insurance Berhad in September 2005, according
to the sales and purchase agreement with Aviva plc for a cost of ¥11,702 million. The
Company purchased another 47% of the outstanding shares of Aviva Insurance Berhad in
December 2005 for a cost of ¥9,779 million.In August 2005, the Company purchased 100% of the outstanding shares of Mingtai Fire &
Marine Insurance Co., Ltd. (Mingtai), which is the non-life insurer ranked second in
the Taiwanese non-life insurance industry in terms of gross written premiums, for a cost
of ¥30,324 million. Mingtai was renamed MSIG Mingtai Insurance Co., Ltd. effective July
1, 2008.The excess of the cost over the fair values of assets acquired and liabilities assumed
was allocated to goodwill. Goodwill of ¥16,218 million by the purchase of the outstanding shares of Aviva Insurance Berhad and goodwill of ¥6,037 million by the purchase of the
outstanding shares of Mingtai were recognized on the consolidated balance sheet as of
March 31, 2006.In March 2007, the Company subscribed new shares of common stock that Mitsui Direct
General Insurance Company, Limited (MDGI) issued to increase capital and also purchased
MDGIs outstanding shares.As a result of these transactions, the Company acquired approximately 66% of the
outstanding shares of MDGI for a cost of ¥19,898 million and MDGI became a subsidiary of
the Company. The excess of the cost over the fair values of assets acquired and
liabilities assumed was allocated to goodwill. Goodwill of ¥11,286 million was recognized
on the consolidated balance sheet as of March 31, 2007.
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##### Table of Contents



(4)
    
    Investments
 The amortized cost of fixed maturity securities or cost of equity securities and money
trusts and related fair values at March 31, 2007 and 2008 were as follows:Securities held to maturity:
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(Yen in millions)March 31, 2007:Fixed maturity securities:Governments and government agencies
and authorities other than U.S.
    
    ¥
    294,940
    
    
    
    2,405
    
    
    
    (1,192
    )
    
    
    296,153Other municipalities and political
subdivisions
    
    
    84,878
    
    
    
    414
    
    
    
    (540
    )
    
    
    84,752Other corporate bonds
    
    
    4,397
    
    
    
    5
    
    
    
    (8
    )
    
    
    4,394Total securities held to maturity
    
    ¥
    384,215
    
    
    
    2,824
    
    
    
    (1,740
    )
    
    
    385,299
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(Yen in millions)March 31, 2008:Fixed maturity securities:U.S. government and government
agencies and authorities
    
    ¥
    4,254
    
    
    
    
    
    
    
    
    
    
    
    4,254Governments and government agencies
and authorities other than U.S.
    
    
    341,388
    
    
    
    7,319
    
    
    
    (1,347
    )
    
    
    347,360Other municipalities and political
subdivisions
    
    
    1,714
    
    
    
    
    
    
    
    
    
    
    
    1,714Other corporate bonds
    
    
    102,118
    
    
    
    3,789
    
    
    
    (142
    )
    
    
    105,765Total securities held to maturity
    
    ¥
    449,474
    
    
    
    11,108
    
    
    
    (1,489
    )
    
    
    459,093
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Securities available for sale:
 Cost or
    
    
    Gross
    
    
    Gross
    
    
    CarryingAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Amount/Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(Yen in millions)March 31, 2007:Fixed maturity securities:U.S. government and government
agencies and authorities
    
    ¥
    101,017
    
    
    
    7,017
    
    
    
    (1,014
    )
    
    
    107,020U.S. municipalities and political
subdivisions
    
    
    131
    
    
    
    9
    
    
    
    
    
    
    
    140Other governments and government
agencies and authorities
    
    
    652,349
    
    
    
    19,256
    
    
    
    (1,570
    )
    
    
    670,035Other municipalities and political
subdivisions
    
    
    778,357
    
    
    
    23,041
    
    
    
    (2,689
    )
    
    
    798,709Convertibles and bonds with warrants
attached
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    78Other corporate bonds
    
    
    1,711,944
    
    
    
    38,938
    
    
    
    (9,060
    )
    
    
    1,741,822Total fixed maturity securities
    
    
    3,243,876
    
    
    
    88,261
    
    
    
    (14,333
    )
    
    
    3,317,804Equity securities
    
    
    1,105,524
    
    
    
    2,208,346
    
    
    
    (1,296
    )
    
    
    3,312,574Total securities available for sale
    
    ¥
    4,349,400
    
    
    
    2,296,607
    
    
    
    (15,629
    )
    
    
    6,630,378
 Cost or
    
    
    Gross
    
    
    Gross
    
    
    CarryingAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Amount/Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(Yen in millions)March 31, 2008:Fixed maturity securities:U.S. government and government
agencies and authorities
    
    ¥
    113,676
    
    
    
    7,520
    
    
    
    (2,005
    )
    
    
    119,191U.S. municipalities and political
subdivisions
    
    
    125
    
    
    
    3
    
    
    
    
    
    
    
    128Other governments and government
agencies and authorities
    
    
    685,783
    
    
    
    26,717
    
    
    
    (1,071
    )
    
    
    711,429Other municipalities and political
subdivisions
    
    
    716,210
    
    
    
    18,956
    
    
    
    (5,910
    )
    
    
    729,256Other corporate bonds
    
    
    1,760,302
    
    
    
    37,013
    
    
    
    (23,134
    )
    
    
    1,774,181Total fixed maturity securities
    
    
    3,276,096
    
    
    
    90,209
    
    
    
    (32,120
    )
    
    
    3,334,185Equity securities
    
    
    1,141,048
    
    
    
    1,436,514
    
    
    
    (29,789
    )
    
    
    2,547,773Total securities available for sale
    
    ¥
    4,417,144
    
    
    
    1,526,723
    
    
    
    (61,909
    )
    
    
    5,881,958
 F-28




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##### Table of Contents



Trading securities:
 Gross
    
    
    GrossUnrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(Yen in millions)March 31, 2007:Money trusts included in short-term
investments
    
    ¥
    51,298
    
    
    
    80
    
    
    
    (309
    )
    
    
    51,069
 Gross
    
    
    GrossUnrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(Yen in millions)March 31, 2008:Money trusts included in short-term
investments
    
    ¥
    50,121
    
    
    
    948
    
    
    
    (3,237
    )
    
    
    47,832
 The changes in net unrealized gains and losses on trading securities have been included
in the accompanying consolidated statements of income as losses of ¥1,237 million, ¥226
million and ¥2,060 million for the years ended March 31, 2006, 2007 and 2008,
respectively.The amortized cost and fair values of investments in fixed maturity securities held to
maturity and available for sale at March 31, 2008 by contractual maturity were as
follows:
 Securities held to maturity:
 AmortizedCost
    
    
    Fair Value(Yen in millions)Due within one year
    
    ¥
    8,162
    
    
    
    8,172Due after one year through five years
    
    
    62,265
    
    
    
    63,995Due after five years through ten years
    
    
    164,604
    
    
    
    171,556Due after ten years
    
    
    214,443
    
    
    
    215,370¥
    449,474
    
    
    
    459,093
 Securities available for sale:
 AmortizedCost
    
    
    Fair Value(Yen in millions)Due within one year
    
    ¥
    268,583
    
    
    
    273,989Due after one year through five years
    
    
    1,511,363
    
    
    
    1,539,634Due after five years through ten years
    
    
    764,341
    
    
    
    780,869Due after ten years
    
    
    731,809
    
    
    
    739,693¥
    3,276,096
    
    
    
    3,334,185
 Actual maturities may differ from contractual maturities because some issuers have the
right to call or prepay obligations with or without call or prepayment penalties.
 F-29




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##### Table of Contents



The methods of determining the fair value of the Companys fixed maturity and equity
securities are described in Note 16.Gross unrealized losses on investment securities and the fair value of the related
securities, aggregated by investment category and length of time that individual
securities have been in a continuous unrealized loss position, at March 31, 2007 and
2008, were as follows:Securities held to maturity:
 Less than 12 months
    
    
    12 months or more
    
    
    TotalMarch 31, 2007:
    
    Fair Value
    
    
    UnrealizedLosses
    
    
    Fair Value
    
    
    UnrealizedLosses
    
    
    Fair Value
    
    
    UnrealizedLosses(Yen in millions)Fixed maturities
    
    ¥
    52,772
    
    
    
    (328
    )
    
    
    80,353
    
    
    
    (1,412
    )
    
    
    133,125
    
    
    
    (1,740
    )
 Less than 12 months
    
    
    12 months or more
    
    
    TotalMarch 31, 2008:
    
    Fair Value
    
    
    UnrealizedLosses
    
    
    Fair Value
    
    
    UnrealizedLosses
    
    
    Fair Value
    
    
    UnrealizedLosses(Yen in millions)Fixed maturities
    
    ¥
    16,939
    
    
    
    (170
    )
    
    
    40,790
    
    
    
    (1,319
    )
    
    
    57,729
    
    
    
    (1,489
    )
 Securities available for sale:
 Less than 12 months
    
    
    12 months or more
    
    
    TotalMarch 31, 2007:
    
    Fair Value
    
    
    UnrealizedLosses
    
    
    Fair Value
    
    
    UnrealizedLosses
    
    
    Fair Value
    
    
    UnrealizedLosses(Yen in millions)Fixed maturities
    
    ¥
    313,774
    
    
    
    (2,262
    )
    
    
    967,143
    
    
    
    (12,071
    )
    
    
    1,280,917
    
    
    
    (14,333
    )Equity securities
    
    
    23,962
    
    
    
    (751
    )
    
    
    11,049
    
    
    
    (545
    )
    
    
    35,011
    
    
    
    (1,296
    )Total securities
    
    ¥
    337,736
    
    
    
    (3,013
    )
    
    
    978,192
    
    
    
    (12,616
    )
    
    
    1,315,928
    
    
    
    (15,629
    )
 Less than 12 months
    
    
    12 months or more
    
    
    TotalMarch 31, 2008:
    
    Fair Value
    
    
    UnrealizedLosses
    
    
    Fair Value
    
    
    UnrealizedLosses
    
    
    Fair Value
    
    
    UnrealizedLosses(Yen in millions)Fixed maturities
    
    ¥
    502,809
    
    
    
    (22,998
    )
    
    
    305,782
    
    
    
    (9,122
    )
    
    
    808,591
    
    
    
    (32,120
    )Equity securities
    
    
    249,126
    
    
    
    (29,067
    )
    
    
    9,934
    
    
    
    (722
    )
    
    
    259,060
    
    
    
    (29,789
    )Total securities
    
    ¥
    751,935
    
    
    
    (52,065
    )
    
    
    315,716
    
    
    
    (9,844
    )
    
    
    1,067,651
    
    
    
    (61,909
    )
 Unrealized losses of fixed maturities were mainly caused by changes in interest rate.
The majority of fixed securities have received high credit ratings, and the Company has
the positive ability and intent to hold these securities until a market price recovery.
 F-30




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##### Table of Contents



In evaluating the factors for securities available for sale, the Company presumes a
decline in value to be other than temporary if the fair value of securities is 20 percent
or more below its original cost for a 6-month period. In addition, the Company
recognizes losses in situations where, even though the fair value has not remained 20 percent below its original cost for
a 6-month period, it is considered that a decline of the fair value is other than
temporary.At March 31, 2007 and 2008, the Company determined the decline in value for securities
with unrealized losses was not other than temporary in nature.Gross realized and change in unrealized gains and losses from investments for the years
ended March 31, 2006, 2007 and 2008 were as follows:
 Fixed
    
    Equity
    
    OtherMaturities
    
    Securities
    
    Investments
    
    Total Gains(Yen in millions)2006:Net realized gains (losses)
    
    ¥
    3,332
    
    
    
    57,348
    
    
    
    (10,481
    )
    
    
    50,199Change in unrealized gains (losses)
    
    
    (66,874
    )
    
    
    848,821
    
    
    
    628
    
    
    
    782,575Combined realized and unrealized
gains (losses)
    
    ¥
    (63,542
    )
    
    
    906,169
    
    
    
    (9,853
    )
    
    
    832,774
 Fixed
    
    
    Equity
    
    
    OtherMaturities
    
    
    Securities
    
    
    Investments
    
    
    Total Gains(Yen in millions)2007:Net realized gains (losses)
    
    ¥
    975
    
    
    
    23,955
    
    
    
    (615
    )
    
    
    24,315Change in unrealized gains
    
    
    30,486
    
    
    
    179,805
    
    
    
    (82
    )
    
    
    210,209Combined realized and unrealized
gains
    
    ¥
    31,461
    
    
    
    203,760
    
    
    
    (697
    )
    
    
    234,524
 Fixed
    
    Equity
    
    OtherMaturities
    
    Securities
    
    Investments
    
    Total Losses(Yen in millions)2008:Net realized gains (losses)
    
    ¥
    6,273
    
    
    
    10,788
    
    
    
    (34,431
    )
    
    
    (17,370
    )Change in unrealized gains (losses)
    
    
    (15,839
    )
    
    
    (800,325
    )
    
    
    436
    
    
    
    (815,728
    )Combined realized and unrealized
losses
    
    ¥
    (9,566
    )
    
    
    (789,537
    )
    
    
    (33,995
    )
    
    
    (833,098
    )
 The net effect on accumulated other comprehensive income of unrealized gains and losses
on available-for-sale securities at March 31, 2007 and 2008 was as follows:
 Fixed
    
    
    Equity
    
    
    OtherMaturities
    
    
    Securities
    
    
    Investments
    
    
    Total Gains(Yen in millions)March 31, 2007:Unrealized gains, net
    
    ¥
    73,928
    
    
    
    2,207,050
    
    
    
    403
    
    
    
    2,281,381Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,026,400
    )¥
    1,254,981
 F-31




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##### Table of Contents



Fixed
    
    
    Equity
    
    
    OtherMaturities
    
    
    Securities
    
    
    Investments
    
    
    Total Gains(Yen in millions)March 31, 2008:Unrealized gains , net
    
    ¥
    58,089
    
    
    
    1,406,725
    
    
    
    839
    
    
    
    1,465,653Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (731,954
    )¥
    733,699
 Proceeds and gross realized gains and losses from sales of securities available for sale
for the years ended March 31, 2006, 2007 and 2008 were as follows:
 Fixed maturity securities:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Gross realized gains
    
    ¥
    7,095
    
    
    
    7,747
    
    
    
    10,251Gross realized losses
    
    
    (3,105
    )
    
    
    (6,625
    )
    
    
    (2,074
    )Net realized gains
    
    ¥
    3,990
    
    
    
    1,122
    
    
    
    8,177Proceeds from fixed maturity securities
    
    ¥
    553,057
    
    
    
    449,649
    
    
    
    412,764
 Equity securities:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Gross realized gains
    
    ¥
    62,310
    
    
    
    32,416
    
    
    
    29,436Gross realized losses
    
    
    (1,722
    )
    
    
    (874
    )
    
    
    (1,735
    )Net realized gains
    
    ¥
    60,588
    
    
    
    31,542
    
    
    
    27,701Proceeds from equity securities
    
    ¥
    114,403
    
    
    
    105,222
    
    
    
    87,796
 Bonds carried at ¥67,093 million at March 31, 2007 and ¥53,273 million at March 31, 2008,
short-term investments carried at ¥140 million at March 31, 2007 and ¥568 million at
March 31, 2008, cash equivalents carried at ¥22,420 million at March 31, 2007 and ¥3,584
million at March 31, 2008 and property and equipment carried at ¥533 million at March 31,
2008 were deposited with certain foreign government authorities and certain other parties
as required by law and/or for other purposes.The Company engages in securities lending transactions whereby certain securities from
its portfolio are loaned to other institutions for short periods and cash collateral is
obtained for some transactions. The loaned securities remain as recorded assets of the
Company and the amount of the cash collateral are recorded as cash and cash equivalents.
The carrying amount of loaned securities recorded as securities available for sale at
March 31, 2007 and 2008 were ¥156,589 million and ¥152,412 million, respectively.
 F-32




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##### Table of Contents



Mortgage loans on real estate are primarily mortgage loans on land and commercial
buildings.Policy loans are made to policyholders of long-term comprehensive insurance, long-term
family traffic accident insurance and other long-term policies with refund at maturity.
The maximum amount of loans is limited to 90% of return premiums on the policies.
 F-33




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##### Table of Contents



Other long-term investments at March 31, 2007 and 2008 included the following:
 2007
    
    
    2008(Yen in millions)Mortgage loans on vessels and facilities
    
    ¥
    526
    
    
    
    277Collateral and guaranteed loans
    
    
    376,405
    
    
    
    403,488Unsecured loans
    
    
    337,662
    
    
    
    345,467Other investments
    
    
    1,379
    
    
    
    153¥
    715,972
    
    
    
    749,385
 Mortgage loans on vessels and facilities are generally joint loans in which other
financial institutions participate. The Company participates in the hull insurance on
these vessels.Collateral loans are made generally to commercial enterprises and are secured principally
by listed stocks and/or bonds of Japanese corporations. A portion of the loans is made
jointly with other insurance companies.Guaranteed loans are made generally to commercial enterprises, and payment is guaranteed
principally by banks.Unsecured loans are made to political subdivisions and independent government agencies
and, on a selective basis, to corporate borrowers.Certain guaranteed loans with the carrying amount of ¥18,941 million and ¥21,709 million
were securitized in the years ended March 31, 2007 and 2008, respectively. The amount of
gains on the securitization were ¥210 million and ¥120 million for the years ended March
31, 2007 and 2008, respectively. There were no significant servicing assets and
liabilities associated with the securitization at March 31, 2007 and 2008.Short-term investments at March 31, 2007 and 2008 included the following:
 2007
    
    
    2008(Yen in millions)Money trusts
    
    ¥
    51,069
    
    
    
    47,832Invested cash
    
    
    47,410
    
    
    
    56,948Commercial paper
    
    
    7,908
    
    
    
    7,620Other
    
    
    7,284
    
    
    
    7,686¥
    113,671
    
    
    
    120,086
 Call loans are short-term (overnight to three weeks) loans made to money market dealers
and banks or securities houses through money market dealers. Call loans to money market
dealers are secured by Japanese government bonds. Call loans to banks or securities
houses are unsecured. The balance of call loans included in cash and cash equivalents as
of March 31, 2007 and 2008 were ¥41,600 million and ¥39,900million, respectively.
 F-34




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##### Table of Contents



The total recorded investment in impaired loans and the amount of the total valuation
allowance at March 31, 2007 and 2008 were as follows:
 2007
    
    
    2008(Yen in millions)Recorded investment in impaired loans:Mortgage loans on real estate
    
    ¥
    1,160
    
    
    
    1,150Mortgage loans on vessels and facilities
    
    
    4
    
    
    
    4Collateral and guaranteed loans
    
    
    
    
    
    
    1,724Unsecured loans
    
    
    3,185
    
    
    
    1,575¥
    4,349
    
    
    
    4,453Valuation allowance:Mortgage loans on real estate
    
    ¥
    259
    
    
    
    254Collateral and guaranteed loans
    
    
    
    
    
    
    104Unsecured loans
    
    
    692
    
    
    
    294¥
    951
    
    
    
    652
 The recorded investment in loans of nonaccrual status was approximately ¥1,560 million
and ¥2,574 million as of March 31, 2007 and 2008, respectively. The recorded investment
in loans past due 90 days or more and still accruing interest was approximately ¥1,032
million and ¥947 million as of March 31, 2007 and 2008, respectively.An analysis of activity in the total allowance for credit losses related to loans during
the years ended March 31, 2006, 2007 and 2008 is as follows:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Balance at beginning of year
    
    ¥
    14,499
    
    
    
    6,879
    
    
    
    1,650Credit to income
    
    
    (2,082
    )
    
    
    (2,907
    )
    
    
    (428
    )Principal charge-offs
    
    
    (5,538
    )
    
    
    (2,322
    )
    
    
    (124
    )Balance at end of year
    
    ¥
    6,879
    
    
    
    1,650
    
    
    
    1,098
 The total allowance for credit losses related to loans at March 31, 2007 and 2008
includes an allowance for doubtful accounts in the amount of ¥699 million and ¥446
million, respectively, relating to loans which were not categorized in the above impaired
loans. This allowance for doubtful accounts has been calculated by multiplying actual
bad debt ratios computed based on the actual bad debt amounts during the past periods
against outstanding balances.The average recorded investment in impaired loans was approximately ¥13,275 million,
¥6,651 million and ¥4,401 million in the years ended March 31, 2006, 2007 and 2008,
respectively. The Company recognized interest income from impaired loans of ¥214
million, ¥109 million and ¥94 million in the years ended March 31, 2006, 2007 and 2008,
respectively, on a cash basis.Other long-term investments include loans of ¥4 million as of March 31, 2007 and ¥8 million as of
March 31, 2008 which had been non-income producing for the twelve months preceding each balance
sheet date.
 F-35




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##### Table of Contents



The components of net investment income for the years ended March 31, 2006, 2007 and 2008
were as follows:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Interest on fixed maturities
    
    ¥
    76,713
    
    
    
    89,052
    
    
    
    89,704Dividends from equity securities
    
    
    60,339
    
    
    
    66,828
    
    
    
    69,050Interest on mortgage loans on real estate
    
    
    434
    
    
    
    420
    
    
    
    328Rent from investment real estate
    
    
    6,361
    
    
    
    6,194
    
    
    
    4,926Interest on policy loans
    
    
    1,286
    
    
    
    1,326
    
    
    
    1,352Interest on other long-term investments
    
    
    11,666
    
    
    
    12,408
    
    
    
    13,871Interest on short-term investments
    
    
    2,328
    
    
    
    2,490
    
    
    
    3,078Other
    
    
    7,646
    
    
    
    11,070
    
    
    
    12,480Gross investment income
    
    
    166,773
    
    
    
    189,788
    
    
    
    194,789Less investment expenses
    
    
    10,671
    
    
    
    10,599
    
    
    
    9,524Net investment income
    
    ¥
    156,102
    
    
    
    179,189
    
    
    
    185,265
 In accordance with the Companys internal policy, the Companys portfolio is broadly
diversified to ensure that there is no significant concentration of credit risk with any
individual counterparties or group of counterparties. The concentrations of credit risk
exceeding 10 percent of total shareholders equity as of March 31, 2007 and 2008 were as
follows:
 2007
    
    2008(Yen in millions)Japanese government
    
    ¥
    1,176,387
    
    
    
    1,232,366Toyota Motor Corporation and its affiliates
    
    
    693,070
    
    
    
    483,118
 (5)
    
    Property and Equipment
 A summary of property and equipment as of March 31, 2007 and 2008 is as follows:
 2007
    
    
    2008(Yen in millions)Land
    
    ¥
    82,267
    
    
    
    99,234Buildings
    
    
    265,194
    
    
    
    302,910Furniture and equipment
    
    
    85,197
    
    
    
    76,472Construction in progress
    
    
    10,791
    
    
    
    357443,449
    
    
    
    478,973Less accumulated depreciation
    
    
    (221,549
    )
    
    
    (233,451
    )¥
    221,900
    
    
    
    245,522
 F-36




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##### Table of Contents



(6)
    
    Impairment Losses of Long-Lived Assets
 The carrying amount of long-lived assets held for sale as of March 31, 2007 and 2008 were
¥530 million and ¥532 million, respectively. The impairment losses on long-lived assets
held for sale, included in other expenses, were ¥7 million, ¥91 million and ¥487 million
for the years ended March 31, 2006, 2007 and 2008, respectively. Such impairment losses
on long-lived assets were recognized in the property and casualty insurance segment under
SFAS No. 131.The impairment loss on long-lived assets to be held and used, which arose from investment
real estate, was included in net realized gains (losses) on investments, in the amount of
¥873 million, ¥1,038 million and ¥3,572 million for the years ended March 31, 2006, 2007
and 2008, respectively. The impairment loss on long-lived assets to be held and used,
which arose from property and equipment, was included in other expenses in the amount of
¥85 million, ¥76 million and ¥185 million for the years ended March 31, 2006, 2007 and
2008, respectively. Those impairment losses on long-lived assets were recognized in the
property and casualty insurance segment under SFAS No. 131.
 (7)
    
    Goodwill
 The change in the carrying amount of goodwill during the years ended March 31, 2006, 2007
and 2008 are as follows:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Balance at beginning of year
    
    ¥
    31,931
    
    
    
    57,695
    
    
    
    70,012Acquisition
    
    
    22,254
    
    
    
    11,286
    
    
    
    Change in foreign currency exchange rates
    
    
    3,510
    
    
    
    1,031
    
    
    
    (764
    )Balance at end of year
    
    ¥
    57,695
    
    
    
    70,012
    
    
    
    69,248
 All goodwill recognized on the consolidated balance sheets were assigned to the property
and casualty insurance segment.No impairment loss on goodwill was recorded for the years ended March 31, 2006, 2007 and
2008, respectively. See Note 3 for further information.
 F-37




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##### Table of Contents



(8)
    
    Liabilities for Losses and Claims
 Activities in the liabilities for losses and claims and claim adjustment expenses for the
years ended March 31, 2006, 2007 and 2008 are summarized as follows:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Balance at beginning of year
    
    ¥
    937,057
    
    
    
    1,056,517
    
    
    
    1,153,550Less: reinsurance recoverable
    
    
    234,097
    
    
    
    233,369
    
    
    
    237,719Net balance at beginning of year
    
    
    702,960
    
    
    
    823,148
    
    
    
    915,831Incurred related to:Current year insured events
    
    
    1,009,061
    
    
    
    1,049,859
    
    
    
    1,094,832Prior year insured events
    
    
    8,547
    
    
    
    14,834
    
    
    
    (7,191
    )Total incurred
    
    
    1,017,608
    
    
    
    1,064,693
    
    
    
    1,087,641Paid related to:Current year insured events
    
    
    517,384
    
    
    
    546,938
    
    
    
    573,389Prior year insured events
    
    
    390,252
    
    
    
    437,353
    
    
    
    485,355Total paid
    
    
    907,636
    
    
    
    984,291
    
    
    
    1,058,744Adjustment in connection with the
acquisition
    
    
    10,216
    
    
    
    12,281
    
    
    
    Net balance at end of year
    
    
    823,148
    
    
    
    915,831
    
    
    
    944,728Plus reinsurance recoverable
    
    
    233,369
    
    
    
    237,719
    
    
    
    253,092Balance at end of year
    
    ¥
    1,056,517
    
    
    
    1,153,550
    
    
    
    1,197,820
 Incurred losses presented in the above table include those related to life insurance in
the amount of ¥67,130 million, ¥85,036 million and ¥99,014 million for the years ended
March 31, 2006, 2007 and 2008, respectively, which are included in policyholder benefits
for life insurance contracts in the accompanying consolidated statements of income.
 (9)
    
    Investment Deposits by Policyholders
 Certain property and casualty insurance policies offered by the Company include a savings
feature in addition to the insurance coverage provided under the policy. In addition,
certain types of personal injury and fire insurance policies are available with a deposit
premium rider. The premium received from the policyholder is split between the insurance
coverage and the savings portion of the policy based upon rates approved by the Financial
Services Agency of Japan. Policy terms are mainly from 3 to 10 years.The key terms of this type of policy are fixed at the inception of the policy and remain
in effect during the policy period. The policyholder can terminate the savings-type
insurance contract before the maturity date with a payment of a commission to the Company
that equals the interest earned for approximately six months. The policyholder is
informed at policy inception of the maturity value related to the savings portion of the
policy. The maturity value of the policy represents the savings portion of the premium
paid by the policyholder plus credited interest. The maturity value is paid on the
policy maturity date unless a total loss as defined by the policy occurs during the
policy term. No amount is paid under the savings portion of the policy if a total loss
occurs during the policy term.
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##### Table of Contents



It is regarded as a total loss when an aggregate amount of claims paid in connection with
accidents covered by the policy occurs within any one insurance year during the policy
terms of insurance, regardless of whether claims are caused by one or more accidents, and
reaches the insured amount covered by the policy. If a total loss occurs, the policy is
immediately
terminated. The annual frequency of total loss of major savings-type insurance contracts
ranges from 0.04% to 0.26%.The contractual rate of interest credited to the policy varies by product and is
established at the beginning of the policy. The committed interest rate cannot be
changed by the Company at any time during the policy term. Committed interest rates
ranged from 0.1% to 1.5% for the years ended March 31, 2006, 2007 and 2008.Premiums paid for the indemnity portion are allocated to income ratably over the terms of
the related insurance contract. Premiums paid for the savings portion are credited to
investment deposits by policyholders. Interest credited to investment deposits by
policyholders is charged to income and presented as investment income credited to
investment deposits by policyholders in the accompanying consolidated statements of
income. When a total loss occurs, the remaining balance in investment deposits by
policyholders corresponding to the total loss contract is reversed and recorded as
premium revenue.
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##### Table of Contents



(10)
    
    Short-term Debt and Long-term Debt
 Short-term debt and long-term debt as of March 31, 2007 and 2008 consist of the
following:
 2007
    
    
    2008(Yen in millions)0.40% Japanese yen debentures, due 2007
    
    ¥
    30,000
    
    
    
    0.80% Japanese yen debentures, due 2009
    
    
    70,000
    
    
    
    70,0001.31% Japanese yen debentures, due 2012
    
    
    
    
    
    
    30,000Commercial paper
    
    
    7,908
    
    
    
    37,604107,908
    
    
    
    137,604Less current portion classified as short-term debt
    
    
    (37,907
    )
    
    
    (37,604
    )Less unamortized discount
    
    
    (1
    )
    
    
    (8
    )Total long-term debt
    
    ¥
    70,000
    
    
    
    99,992
 The Company issued ¥70,000 million of 0.80% unsecured debenture in November 2004 and
¥30,000 million of 1.31% unsecured debenture in November 2007 with bullet repayment of
maturity due December 18, 2009 and December 20, 2012, respectively.
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##### Table of Contents



(11)
    
    Reinsurance
 In the normal course of business, the Company seeks to reduce the loss that may arise
from catastrophes or other events that cause unfavorable underwriting results by
reinsuring certain levels of risk in various areas of exposure with other insurance
enterprises or reinsurers. The Company cedes a portion of the risks it underwrites and
pays reinsurance premiums based upon the risks subject to reinsurance contracts. The
Company utilizes a variety of reinsurance arrangements, which are classified into two
basic types: proportional reinsurance and excess-of-loss reinsurance. Proportional
reinsurance is the type of reinsurance where the proportion of claims incurred is
proportionate to the share of premiums received. This type of reinsurance is used as a
means to limit a loss amount on an individual-risk basis. The excess-of-loss type of
reinsurance indemnifies the ceding company against a specified level of losses on
underlying insurance policies in excess of a specified agreed amount. Excess-of-loss
reinsurance is usually arranged in layers to secure greater capacity by offering various
levels of risk exposure with different terms for reinsurers with different preferences.
Although a reinsurer is liable to the Company to the extent of the risks assumed, the
Company remains liable as the direct insurer to policyholders on all such risks. Failure
of reinsurers to honor their obligations could result in losses to the Company. However,
considering the Companys applying strict standards when choosing reinsurers in terms of
credit risk, no material amount is believed to be uncollectible and no provision has been
made for this contingency.At March 31, 2007 and 2008, there were no significant concentrations with a single
reinsurer for reinsurance receivables and prepaid reinsurance premiums.
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##### Table of Contents



The effects of reinsurance on the results of operations of property and casualty
insurance and life insurance for the years ended March 31, 2006, 2007 and 2008 were as
follows:
 Property and casualty insurance:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Premiums written:Direct
    
    ¥
    1,535,379
    
    
    
    1,575,476
    
    
    
    1,625,732Assumed
    
    
    250,396
    
    
    
    265,857
    
    
    
    264,880Ceded
    
    
    (327,268
    )
    
    
    (351,954
    )
    
    
    (352,996
    )Net premiums written
    
    ¥
    1,458,507
    
    
    
    1,489,379
    
    
    
    1,537,616
 2006
    
    
    2007
    
    
    2008(Yen in millions)Premiums earned:Direct
    
    ¥
    1,497,701
    
    
    
    1,569,975
    
    
    
    1,597,352Assumed
    
    
    250,333
    
    
    
    264,424
    
    
    
    266,471Ceded
    
    
    (325,233
    )
    
    
    (365,319
    )
    
    
    (361,138
    )Net premiums earned
    
    ¥
    1,422,801
    
    
    
    1,469,080
    
    
    
    1,502,685
 2006
    
    
    2007
    
    
    2008(Yen in millions)Losses and claims incurred:Direct
    
    ¥
    925,201
    
    
    
    918,117
    
    
    
    947,824Assumed
    
    
    199,416
    
    
    
    188,034
    
    
    
    181,236Ceded
    
    
    (242,994
    )
    
    
    (196,495
    )
    
    
    (222,803
    )Net losses and claims incurred
    
    ¥
    881,623
    
    
    
    909,656
    
    
    
    906,257
 Life insurance:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Premiums earned:Direct
    
    ¥
    179,963
    
    
    
    194,197
    
    
    
    193,392Ceded
    
    
    (533
    )
    
    
    (646
    )
    
    
    (661
    )Net premiums earned
    
    ¥
    179,430
    
    
    
    193,551
    
    
    
    192,731
 2006
    
    
    2007
    
    
    2008(Yen in millions)Policyholder benefits:Direct
    
    ¥
    151,669
    
    
    
    156,920
    
    
    
    156,714Ceded
    
    
    (304
    )
    
    
    (329
    )
    
    
    (31
    )Net policyholder benefits
    
    ¥
    151,365
    
    
    
    156,591
    
    
    
    156,683
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##### Table of Contents



(12)
    
    Income Taxes
 Total income taxes for the years ended March 31, 2006, 2007 and 2008 were allocated as
follows:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Taxes on income
    
    ¥
    60,527
    
    
    
    52,955
    
    
    
    48,137Taxes on other comprehensive income:Net unrealized gains on investments
    
    
    281,791
    
    
    
    75,566
    
    
    
    (296,550
    )Net losses on derivative instruments
    
    
    (58
    )
    
    
    1
    
    
    
    (14
    )Minimum pension liability adjustment
    
    
    (380
    )
    
    
    (8
    )
    
    
    Adjustment upon adoption of SFAS No. 158
    
    
    
    
    
    
    (5,544
    )
    
    
    Pension liability adjustments
    
    
    
    
    
    
    
    
    
    
    (6,572
    )¥
    341,880
    
    
    
    122,970
    
    
    
    (254,999
    )
 The components of income before income tax expense and income tax expense for the years
ended March 31, 2006, 2007 and 2008 were as follows:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Income before income tax expense:Domestic
    
    ¥
    173,072
    
    
    
    143,317
    
    
    
    147,619Foreign
    
    
    7,905
    
    
    
    24,122
    
    
    
    6,140Total
    
    ¥
    180,977
    
    
    
    167,439
    
    
    
    153,759Income tax expense:Current:Domestic
    
    ¥
    32,547
    
    
    
    38,473
    
    
    
    16,575Foreign
    
    
    2,950
    
    
    
    5,274
    
    
    
    8,793Total current income tax expense
    
    
    35,497
    
    
    
    43,747
    
    
    
    25,368Deferred:Domestic
    
    
    25,059
    
    
    
    8,119
    
    
    
    32,623Foreign
    
    
    (29
    )
    
    
    1,089
    
    
    
    (9,854
    )Total deferred income tax expense
    
    
    25,030
    
    
    
    9,208
    
    
    
    22,769Total income tax expense
    
    ¥
    60,527
    
    
    
    52,955
    
    
    
    48,137
 The Company and its domestic subsidiaries are subject to a number of taxes based on
income, which in the aggregate resulted in a statutory tax rate of approximately 36%.
 F-43




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The effective tax rates of the Company for the years ended March 31, 2006, 2007 and 2008
differed from the Japanese statutory income tax rates for the following reasons:
 2006
    
    2007
    
    2008Japanese statutory income tax rate
    
    
    36.0
    %
    
    
    36.0
    %
    
    
    36.0
    %Tax credit for dividends received
    
    
    (3.1
    )
    
    
    (4.3
    )
    
    
    (5.1
    )Expenses not deductible for tax purposes
    
    
    0.6
    
    
    
    0.7
    
    
    
    0.7Other
    
    
    (0.1
    )
    
    
    (0.8
    )
    
    
    (0.3
    )Effective tax rate
    
    
    33.4
    %
    
    
    31.6
    %
    
    
    31.3
    %
 The tax effects of temporary differences that gave rise to significant portions of
deferred tax assets and deferred tax liabilities at March 31, 2007 and 2008 were as
follows:
 2007
    
    
    2008(Yen in millions)Deferred tax assets:Reported and estimated losses and claims
    
    ¥
    44,300
    
    
    
    44,899Adjustment expenses
    
    
    11,161
    
    
    
    13,022Retirement and severance benefits
    
    
    36,086
    
    
    
    41,656Computer software development costs
    
    
    12,598
    
    
    
    14,037Impairment of investments
    
    
    41,708
    
    
    
    45,755Cost adjustments to investments recognized in income
    
    
    37,409
    
    
    
    37,047Other
    
    
    32,581
    
    
    
    18,585Total gross deferred tax assets
    
    
    215,843
    
    
    
    215,001Less valuation allowance
    
    
    (5,571
    )
    
    
    (7,005
    )Total net deferred tax assets
    
    
    210,272
    
    
    
    207,996Deferred tax liabilities:Unearned premiums
    
    
    113,901
    
    
    
    118,924Deferred policy acquisition costs
    
    
    125,699
    
    
    
    123,985Property and equipment
    
    
    4,042
    
    
    
    6,099Cost adjustments to investments recognized in income
    
    
    20,524
    
    
    
    19,118Unrealized appreciation of investments and derivatives
    
    
    821,116
    
    
    
    526,154Other
    
    
    3,850
    
    
    
    13,694Total gross deferred tax liabilities
    
    
    1,089,132
    
    
    
    807,974Total net deferred tax liabilities
    
    ¥
    878,860
    
    
    
    599,978
 At March 31, 2007 and 2008, other assets included deferred tax assets in the amount of
¥2,305 million and ¥5,175 million, respectively.The net change in total valuation allowance for the years ended March 31, 2006, 2007 and
2008 was an increase of ¥86 million, ¥5,346 million and ¥1,434 million, respectively.
 F-44




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##### Table of Contents



Subsequently recognized tax benefits related to the valuation allowance for deferred tax
assets as of March 31, 2008, will be allocated as follows:
 (Yen in millions)Income tax benefit that would be reported in the
consolidated statement of income
    
    ¥
    1,926Goodwill and other noncurrent intangible assets
    
    
    5,079Total
    
    ¥
    7,005
 At March 31, 2008, the Companys subsidiaries had operating loss carryforwards for tax
purposes of ¥32,078 million, which expire as follows:
 (Yen in millions)Years ending March 31:2009
    
    ¥
    3,9082010
    
    
    3,6262011
    
    
    1,6282012
    
    
    1,9952013
    
    
    1,1982014
    
    
    1,1632015
    
    
    2,409Indefinite
    
    
    16,151Total
    
    ¥
    32,078
 The Company intends to reinvest certain undistributed earnings of foreign subsidiaries
for an indefinite period of time. As of March 31, 2008, a deferred tax liability was not
recognized for ¥63,117 million of undistributed earnings of these subsidiaries where the
Company intends to reinvest indefinitely. Determining the tax liability that would arise
if these earnings were remitted is not practicable.In assessing the realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible and tax-planning strategies relating to the future reversal
of temporary differences.Management considers the scheduled reversal of deferred tax liabilities, projected future
taxable income and tax planning strategies in making this assessment. Based upon the
level of historical taxable income and projections for future taxable income over the
periods in which the deferred tax assets are deductible, management believes it is more
likely than not that the Company will realize the benefits of these deductible
differences, net of the recorded valuation allowances, at March 31, 2008.The Company and its subsidiaries adopted FASB Interpretation No. 48 (Accounting for
Uncertainty in Income Taxes an interpretation of FASB Statement No. 109) effective
April 1, 2007. The unrecognized tax benefits as of April 1,
2007 and for the twelve-month
ended March 31, 2008 were not material. The Company and its subsidiaries do not expect
that the total amounts of unrecognized tax benefits will significantly increase or
decrease within 12 months of March 31, 2008.
 F-45




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##### Table of Contents



The total amounts of penalties and interest expense related to unrecognized tax benefits
in the consolidated balance sheets as of April 1, 2007 and March 31, 2008, and in the
consolidated statements of income for the year ended March 31, 2008 were not material.The Company and its subsidiaries file tax returns in Japan and certain foreign tax
jurisdictions, and they are periodically audited by Japanese and foreign taxing
authorities. The Company has been audited by the Japanese tax authorities through the
tax year ended March 31, 2007.
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##### Table of Contents



(13)
    
    Stockholders Equity
 (a)
    
    Common Stock
 The amounts of statutory capital and surplus of the Company, on a non-consolidated
basis, as of March 31, 2007 and 2008, are presented as follows:
 2007
    
    
    2008(Yen in millions)Common stock
    
    ¥
    139,596
    
    
    
    139,596Additional paid-in capital
    
    
    93,139
    
    
    
    93,107Legal reserve
    
    
    46,488
    
    
    
    46,488Retained earnings
    
    
    548,682
    
    
    
    467,224Unrealized gain on securities, net of tax
    
    
    1,395,700
    
    
    
    862,122Deferred hedge losses, net of tax
    
    
    (4,577
    )
    
    
    528Treasury stock
    
    
    (91,143
    )
    
    
    Total statutory equity
    
    ¥
    2,127,885
    
    
    
    1,609,065
 The Companys statutory basis net income for the years ended March 31, 2006, 2007
and 2008 was ¥64,842 million, ¥55,352 million and ¥38, 366 million, respectively.The minimum capital requirement of the Insurance Business Law of Japan for a
Japanese insurance company is ¥1,000 million on a statutory basis.The Company and its domestic insurance subsidiaries are required to maintain
solvency margin ratios of 200% or higher in accordance with the solvency margin
regulations stipulated by the Japanese regulatory authorities. The solvency margin
regulations are based on factors mainly for underwriting risks, investment risks and
large catastrophe risks. The solvency margin must be supported by equity and other
resources, including unrealized gains and losses on certain investments and
catastrophe reserves based on the financial accounting standards of Japan. At March
31, 2008, the solvency margin ratio of the Company was 955.4% and those ratios of
its domestic non-life and life insurance subsidiaries were 776.8% and 2,124.0%,
respectively.The amounts of statutory net income for the years ended March 31, 2006, 2007 and
2008 and shareholders equity at March 31, 2007 and 2008 of the consolidated
insurance subsidiaries were as follows:
 2006
    
    2007
    
    2008(Yen in millions)Statutory net income :Property and casualty
    
    ¥
    2,491
    
    
    
    32,792
    
    
    
    11,453Life
    
    
    59
    
    
    
    22
    
    
    
    55Statutory shareholders equity:Property and casualty
    
    ¥
    164,502
    
    
    
    265,969
    
    
    
    257,372Life
    
    
    47,676
    
    
    
    51,980
    
    
    
    57,486
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##### Table of Contents



The amounts of undistributed retained earnings of affiliates which were accounted
for by the equity method were ¥10,850 million and ¥18, 206 million at March 31, 2007
and 2008, respectively.
 F-48




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##### Table of Contents



(b)
    
    Retained Earnings
 Article 15 of the Insurance Business Law of Japan requires insurance companies to
set aside an amount equal to 20% of all appropriations of earnings, such as cash
dividends, as legal reserve until the aggregate amount of such reserve and
additional paid-in capital reaches stated capital. This reserve is not available
for dividends but may be used to reduce a deficit or may be transferred to stated
capital. The Companys appropriations charged to unappropriated retained earnings
for the year ended March 31, 2008 were subject to the legal reserve requirement.The reserve for price fluctuation is required under Article 115 of the Insurance
Business Law of Japan. This reserve provides for possible losses arising from price
fluctuations of securities and adverse changes in foreign exchange rates. The
Company may reduce this reserve by (1) the amount of net loss resulting from sales
of securities or (2) the amount for which permission is granted by the Financial
Services Agency of Japan, for any other purpose.The amount available for dividends is based on the Companys non-consolidated
financial statements in accordance with the Japanese Corporate Law and the Insurance
Business Law of Japan and was ¥467,224 million as of March 31, 2008. The
adjustments included in the accompanying consolidated financial statements to have
them conform with U.S. GAAP, but not recorded in the books of account, have no
effect on the determination of the amount available for dividends under the Japanese
Corporate Law and the Insurance Business Law of Japan.Cash dividends and appropriations to the legal reserve charged to unappropriated
retained earnings for the years ended March 31, 2006, 2007 and 2008 represent
dividends paid out during those years and the related appropriations to the legal
reserve. Provision has neither been made in the accompanying consolidated financial
statements for the dividends of ¥9.00 per share totaling ¥12,640 million,
subsequently proposed by the Board of Directors and, on June 26, 2008, approved by
the shareholders, nor for the related appropriation to the legal reserve.The reconciliation of the basic and diluted earnings per share is not reported
because there are no diluted shares.The components of the basic net income per share are as follows:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Net income available to common shareholders
    
    ¥
    119,890
    
    
    
    113,916
    
    
    
    104,796
 2006
    
    
    2007
    
    
    2008(Number of shares in thousands)Weighted average common shares outstanding
    
    
    1,425,419
    
    
    
    1,419,672
    
    
    
    1,410,863
 2006
    
    
    2007
    
    
    2008(Yen)Earnings per share  basic
    
    ¥
    84.11
    
    
    
    80.24
    
    
    
    74.28
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##### Table of Contents



(c)
    
    Other Comprehensive IncomeChanges in accumulated other comprehensive income for the years ended March 31,
2006, 2007 and 2008 were as follows:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Foreign currency translation adjustments:Balance at beginning of period
    
    ¥
    (16,119
    )
    
    
    (605
    )
    
    
    10,345Current-period change
    
    
    15,514
    
    
    
    10,950
    
    
    
    (4,015
    )Balance at end of period
    
    
    (605
    )
    
    
    10,345
    
    
    
    6,330Unrealized gains on securities, net of tax:Balance at beginning of period
    
    
    619,887
    
    
    
    1,120,697
    
    
    
    1,256,104Current-period change
    
    
    500,810
    
    
    
    135,407
    
    
    
    (526,138
    )Balance at end of period
    
    
    1,120,697
    
    
    
    1,256,104
    
    
    
    729,966Net gains on derivative instruments, net of tax:Balance at beginning of period
    
    
    125
    
    
    
    23
    
    
    
    24Current-period change
    
    
    (102
    )
    
    
    1
    
    
    
    (24
    )Balance at end of period
    
    
    23
    
    
    
    24
    
    
    
    Minimum pension liability adjustment, net of tax:Balance at beginning of period
    
    
    
    
    
    
    (791
    )
    
    
    Current-period change
    
    
    (791
    )
    
    
    (15
    )
    
    
    Adjustment upon adoption of SFAS No.158
    
    
    
    
    
    
    806
    
    
    
    Balance at end of period
    
    
    (791
    )
    
    
    
    
    
    
    Pension liability adjustments:Balance at beginning of period
    
    
    
    
    
    
    
    
    
    
    (10,707
    )Current-period change
    
    
    
    
    
    
    
    
    
    
    (11,922
    )Adjustment upon adoption of SFAS No.158
    
    
    
    
    
    
    (10,707
    )
    
    
    Balance at end of period
    
    
    
    
    
    
    (10,707
    )
    
    
    (22,629
    )Total accumulated other comprehensive income,
net of tax:Balance at beginning of period
    
    
    603,893
    
    
    
    1,119,324
    
    
    
    1,255,766Current-period change
    
    
    515,431
    
    
    
    146,343
    
    
    
    (542,099
    )Adjustment upon adoption of SFAS No.158
    
    
    
    
    
    
    (9,901
    )
    
    
    Balance at end of period
    
    ¥
    1,119,324
    
    
    
    1,255,766
    
    
    
    713,667
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##### Table of Contents



The tax effect allocated to each component of other comprehensive income and the
reclassification adjustments for the years ended March 31, 2006, 2007 and 2008 were
as follows:
 BeforeTax
    
    
    Tax Benefit
    
    
    Net-of-TaxAmount
    
    
    (Expense)
    
    
    Amount(Yen in millions)2006:Foreign currency translation adjustments
    
    ¥
    15,514
    
    
    
    
    
    
    
    15,514Unrealized gains on securities:Unrealized holding gains arising during period
    
    
    830,784
    
    
    
    (299,062
    )
    
    
    531,722Less: reclassification adjustment for gains
realized in net income
    
    
    (48,183
    )
    
    
    17,271
    
    
    
    (30,912
    )Net unrealized gains on securities
    
    
    782,601
    
    
    
    (281,791
    )
    
    
    500,810Net losses on derivative instruments:Net gains on derivative instruments arising during period
    
    
    (9
    )
    
    
    4
    
    
    
    (5
    )Less: reclassification adjustment for gains
realized in net income
    
    
    (151
    )
    
    
    54
    
    
    
    (97
    )Net losses on derivative instruments
    
    
    (160
    )
    
    
    58
    
    
    
    (102
    )Minimum pension liability adjustment
    
    
    (1,171
    )
    
    
    380
    
    
    
    (791
    )Other comprehensive income
    
    ¥
    796,784
    
    
    
    (281,353
    )
    
    
    515,4312007:Foreign currency translation adjustments
    
    ¥
    10,950
    
    
    
    
    
    
    
    10,950Unrealized gains on securities:Unrealized holding gains arising during period
    
    
    248,550
    
    
    
    (89,095
    )
    
    
    159,455Less: reclassification adjustment for gains
realized in net income
    
    
    (37,577
    )
    
    
    13,529
    
    
    
    (24,048
    )Net unrealized gains on securities
    
    
    210,973
    
    
    
    (75,566
    )
    
    
    135,407Net losses on derivative instruments:Net losses on derivative instruments arising during period
    
    
    139
    
    
    
    (50
    )
    
    
    89Less: reclassification adjustment for gains
realized in net income
    
    
    (137
    )
    
    
    49
    
    
    
    (88
    )Net losses on derivative instruments
    
    
    2
    
    
    
    (1
    )
    
    
    1Minimum pension liability adjustment
    
    
    (23
    )
    
    
    8
    
    
    
    (15
    )Other comprehensive income
    
    ¥
    221,902
    
    
    
    (75,559
    )
    
    
    146,343
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##### Table of Contents



BeforeTax
    
    
    Tax Benefit
    
    
    Net-of-TaxAmount
    
    
    (Expense)
    
    
    Amount(Yen in millions)2008:Foreign currency translation adjustments
    
    ¥
    (4,015
    )
    
    
    
    
    
    
    (4,015
    )Unrealized gains (losses) on securities:Unrealized holding gains arising during period
    
    
    (765,548
    )
    
    
    275,355
    
    
    
    (490,193
    )Less: reclassification adjustment for gains
realized in net income
    
    
    (57,140
    )
    
    
    21,195
    
    
    
    (35,945
    )Net unrealized gains on securities
    
    
    (822,688
    )
    
    
    296,550
    
    
    
    (526,138
    )Net gains on derivative instruments:Net gains on derivative instruments arising during period
    
    
    
    
    
    
    
    
    
    
    Less: reclassification adjustment for gains
realized in net income
    
    
    (38
    )
    
    
    14
    
    
    
    (24
    )Net gains on derivative instruments
    
    
    (38
    )
    
    
    14
    
    
    
    (24
    )Pension liability adjustments:Pension liability adjustments arising during period
    
    
    (16,190
    )
    
    
    5,753
    
    
    
    (10,437
    )Less: reclassification adjustment for gains
realized in net income
    
    
    (2,304
    )
    
    
    819
    
    
    
    (1,485
    )Pension liability adjustments
    
    
    (18,494
    )
    
    
    6,572
    
    
    
    (11,922
    )Other comprehensive income
    
    ¥
    (845,235
    )
    
    
    303,136
    
    
    
    (542,099
    )
 (14)
    
    Retirement and Severance Benefits
 The Company has defined benefit plans and a defined contribution plan. Defined benefit
plans consist of an unfunded lump-sum payment benefit plan and funded non-contributory
pension plans covering substantially all employees. Under the plans, employees are
entitled to lump-sum or annuity payments based on the current rate of pay and length of
service at retirement or termination of employment for reasons other than dismissal for
cause. Directors and statutory auditors are not covered by the above plans and their
benefits are accrued as earned.On April 1, 2005, a defined contribution plan was transferred from a portion of defined
benefit plan in accordance with SFAS No.88, Employers Accounting for Settlements and
Curtailments of Defined Benefit Pension Plan and for Termination Benefits. The transfer
caused settlements and curtailments and the Company recognized a net gain of ¥2,485
million, which consists of ¥23,738 million of gain by decrease of projected benefit
obligation, ¥18,325 million of loss by decrease of plan assets at fair value, ¥3,376
million of loss by depreciation of unrecognized net loss, and ¥449 million of gain by
depreciation of unrecognized prior service cost.On March 31, 2007, the Company adopted the recognition provisions of SFAS No.158,
Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an
amendment of FASB Statements No. 87, 88, 106, and 132(R).
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SFAS No.158 requires the recognition of the overfunded or unfunded status of defined
benefit plans as an asset or liability in the statement of financial position and the
recognition of changes in that funded status
in comprehensive income in the year in which
the changes occur. Incremental effect of applying SFAS No.158 as of March 31, 2007 was
as follows:
 Before application of
    
    
    
    
    
    After application ofSFAS No.158
    
    Adjustments
    
    SFAS No.158(Yen in millions)Retirement and severance
benefits
    
    ¥
    (83,002
    )
    
    
    (15,445
    )
    
    
    (98,447
    )Deferred income taxes
    
    
    388
    
    
    
    5,544
    
    
    
    5,931Accumulated other
comprehensive income
    
    
    806
    
    
    
    9,901
    
    
    
    10,707
 The components of net periodic benefit cost for the years ended March 31, 2006, 2007 and
2008 were as follows:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Components of net periodic benefit cost:Service cost
    
    ¥
    10,896
    
    
    
    11,277
    
    
    
    11,340Interest cost
    
    
    5,239
    
    
    
    5,341
    
    
    
    5,372Expected return on plan assets
    
    
    (4,234
    )
    
    
    (4,894
    )
    
    
    (5,002
    )Amortization of prior service cost
    
    
    (2,509
    )
    
    
    (2,509
    )
    
    
    (2,509
    )Recognized actuarial loss
    
    
    1,565
    
    
    
    191
    
    
    
    205Net periodic benefit cost
    
    ¥
    10,957
    
    
    
    9,406
    
    
    
    9,406
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Reconciliations of beginning and ending balances of the benefit obligations and the fair
value of the plan assets for the years ended March 31, 2006, 2007 and 2008 were as
follows:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Change in benefit obligations:Benefit obligations at beginning of year
    
    ¥
    279,799
    
    
    
    262,327
    
    
    
    265,063Adjustment in connection with the acquisition
    
    
    3,269
    
    
    
    
    
    
    
    Service cost
    
    
    10,896
    
    
    
    11,277
    
    
    
    11,340Interest cost
    
    
    5,239
    
    
    
    5,341
    
    
    
    5,372Plan participants contributions
    
    
    3
    
    
    
    4
    
    
    
    4Actuarial loss (gain)
    
    
    (1,141
    )
    
    
    (1,618
    )
    
    
    1,688Benefits paid
    
    
    (12,000
    )
    
    
    (12,268
    )
    
    
    (11,602
    )Benefit obligation transferred to defined contribution plan
    
    
    (23,738
    )
    
    
    
    
    
    
    Benefit obligations at end of year
    
    ¥
    262,327
    
    
    
    265,063
    
    
    
    271,865Change in plan assets:Fair value of plan assets at beginning of year
    
    ¥
    159,474
    
    
    
    163,095
    
    
    
    166,616Adjustment in connection with the acquisition
    
    
    139
    
    
    
    
    
    
    
    Actual return on plan assets
    
    
    18,848
    
    
    
    4,518
    
    
    
    (9,719
    )Employer contributions
    
    
    9,067
    
    
    
    4,115
    
    
    
    3,624Plan participants contributions
    
    
    3
    
    
    
    4
    
    
    
    4Benefits paid
    
    
    (6,111
    )
    
    
    (5,116
    )
    
    
    (4,947
    )Assets transferred to defined contribution plan
    
    
    (18,325
    )
    
    
    
    
    
    
    Fair value of plan assets at end of year
    
    ¥
    163,095
    
    
    
    166,616
    
    
    
    155,578Funded status
    
    ¥
    (99,232
    )
    
    
    (98,447
    )
    
    
    (116,287
    )Unrecognized actuarial loss
    
    
    26,271Unrecognized prior service cost
    
    
    (10,739
    )Net amount recognized
    
    ¥
    (83,700
    )Amounts recognized in the balance sheets consist of:Retirement and severance benefits
    
    ¥
    (84,544
    )
    
    
    (98,447
    )
    
    
    (116,287
    )Intangible assets
    
    
    53
    
    
    
    
    
    
    
    Accumulated other comprehensive income,
gross of tax
    
    
    791
    
    
    
    
    
    
    
    Total
    
    ¥
    (83,700
    )
    
    
    (98,447
    )
    
    
    (116,287
    )Pension plans with an accumulated benefit obligation
in excess of plan assets:Projected benefit obligation
    
    ¥
    262,327
    
    
    
    265,063
    
    
    
    271,865Accumulated benefit obligation
    
    
    225,695
    
    
    
    234,207
    
    
    
    241,189Fair value of plan assets
    
    
    163,095
    
    
    
    166,616
    
    
    
    155,578
 The Company uses a measurement date of March 31 for all of its pension and severance
plans.
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##### Table of Contents



Amounts recognized in accumulated other comprehensive income, pre-tax at March 31, 2007
and 2008 were as follows:
 2007
    
    2008(Yen in millions)Net actuarial loss
    
    ¥
    24,869
    
    
    
    40,854Net prior service cost
    
    
    (8,231
    )
    
    
    (5,722
    )
 Amounts in accumulated other comprehensive income, pre-tax expected to be recognized as
components of net periodic benefit cost over the next fiscal year are as follows:
 2009(Yen in millions)Net actuarial loss
    
    ¥
    1,108Net prior service cost
    
    
    (2,509
    )
 The accumulated benefit obligation for the pension plan was ¥234,207 million and ¥241,189
million at March 31, 2007 and 2008, respectively.Weighted-average assumptions used to determine benefit obligations at March 31, 2006,
2007 and 2008 were as follows:
 2006
    
    2007
    
    2008Discount rate
    
    2.00%
    
    2.00%
    
    1.50% to 2.00%Rate of increase in future compensation
    
    4.10% to 4.60%
    
    4.10% to 4.60%
    
    4.10% to 4.60%
 Weighted-average assumptions used to determine net cost for the years ended March 31,
2006, 2007 and 2008 were as follows:
 2006
    
    2007
    
    2008Discount rate
    
    2.00%
    
    2.00%
    
    1.50% to 2.00%Expected long-term return on plan assets
    
    3.00%
    
    3.00%
    
    3.00%Rate of increase in future compensation
    
    3.90% to 4.60%
    
    4.10% to 4.60%
    
    4.10% to 4.60%
 The discount rate is determined by reference to the Moodys Aa corporate bond and Japan
government bond at the measurement date, March 31, 2006, 2007 and 2008, based on the
expected terms of benefit obligations.The Company determines its expected long-term rate of return based on the expected
long-term return of various asset categories in which it invests in consideration of the
current expectations for future returns and the historical returns of each plan asset
category.
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##### Table of Contents



The asset allocation of the Companys pension benefits at March 31, 2007 and 2008 were as
follows:
 2007
    
    2008Fixed maturities
    
    
    60.8
    %
    
    
    69.0
    %Equity securities
    
    
    33.3
    %
    
    
    24.5
    %Cash and cash equivalents
    
    
    5.9
    %
    
    
    6.5
    %
 The Companys investment policies are designed to provide long-range stability of
investment profit for ensuring adequate plan assets are available to provide future
payments of pension benefits to eligible participants. The Company endeavors to obtain
better performance more than earnings from the expected long-term rate of return on plan
assets. Plan assets are invested in individual equities and fixed maturities using the
guidelines of the model portfolio with a consideration of its performance, expected
returns and risks. The Company evaluates its plan asset allocation and can change its
portfolio allocation as needed.The amounts contributed to defined contribution plans approximated ¥1,338 million ,
¥1,406 million and ¥1,475 million for the years ended March 31, 2006, 2007 and 2008,
respectively.The Company forecasts to contribute ¥3,450 million to the defined benefit pension plans
in the year ending March 31, 2009.Expected future benefit payments for the defined benefit pension plan are as follows:
 (Yen in millions)Years ending March 31:2009
    
    ¥
    11,6092010
    
    
    10,6762011
    
    
    11,6132012
    
    
    12,2032013
    
    
    13,0352014-2018
    
    
    67,773
 (15)
    
    Derivative Financial Instruments
 The Company utilizes derivative financial instruments (a) to manage interest rate risk
and foreign exchange risk arising from its fixed maturities portfolio and (b) to generate
trading revenues and fee income. All derivatives are recognized on the consolidated
balance sheets at fair value as other assets or other liabilities.All derivative transactions are controlled in accordance with the Companys risk
management rules. Under these rules, the purpose of derivative financial instruments is
predetermined in writing, the balance of trading derivatives is limited to the extent
permitted by the internal guidelines and derivative instruments entered into for hedging
purposes require the advance approval of management. The Companys portfolio is broadly
diversified to ensure that there is no significant concentration of credit risk with any
individual counterparty or group of counterparties. The Companys policies prescribe
monitoring of creditworthiness and exposure on a counterparty-by-counterparty basis.
Back-office functions, such as settlements or monitoring, are designed independently from
the function responsible for dealings.
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##### Table of Contents



Derivatives used for interest rate risk and foreign exchange risk management
 The Company uses interest rate swaps, currency swaps and foreign exchange forward
contracts to hedge the exposure to variability in expected future cash flows arising
from fixed maturity securities available for sale. Such swaps are accounted for as
cash flow
hedges, in which changes in the fair value of the hedging derivatives are reported
in accumulated other comprehensive income. Such deferred amounts are subsequently
reclassified into net investment income when the hedged interest cash flows affect
earnings. The amounts of the hedges ineffectiveness or components of derivative
instruments gain or loss excluded from the assessment of hedge effectiveness for
the years ended March 31, 2006 and 2007 were immaterial. The Company reconsidered
the cost-effectiveness of hedge accounting treatment for those instruments and, as a
result, the Company discontinued hedge accounting in the year ended March 31, 2008.
Ceasing hedge accounting did not have a material effect on the Companys reported
financial position or cash flows.
 Derivatives trading revenues
 The Company uses a variety of derivative instruments, such as interest rate futures,
forwards and options, interest rate and currency swaps, bond futures and options,
foreign exchange forwards and options and credit derivatives, and non-derivative
instruments, such as weather derivatives, to generate trading revenues and fee
income. Changes in fair value of these derivatives are reported in net realized
gains (losses) on investments.
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##### Table of Contents



(16)
    
    Fair Value of Financial Instruments
 The estimated fair values of the financial instruments at March 31, 2007 and 2008 were as
follows:
 2007
    
    2008Carrying
    
    Estimated
    
    Carrying
    
    EstimatedAmount
    
    Fair Value
    
    Amount
    
    Fair Value(Yen in millions)Financial assets:Fixed maturities
    
    ¥
    3,702,019
    
    
    
    3,703,103
    
    
    
    3,783,659
    
    
    
    3,793,278Equity securities
    
    
    3,312,574
    
    
    
    3,312,574
    
    
    
    2,547,773
    
    
    
    2,547,773Mortgage loans on real estate
    
    
    11,511
    
    
    
    11,317
    
    
    
    9,859
    
    
    
    9,682Policy loans
    
    
    38,523
    
    
    
    38,523
    
    
    
    39,536
    
    
    
    39,536Other long-term investments
    
    
    715,972
    
    
    
    703,909
    
    
    
    749,385
    
    
    
    736,117Short-term investments
    
    
    113,671
    
    
    
    113,671
    
    
    
    120,086
    
    
    
    120,086Cash and cash equivalents
    
    
    369,941
    
    
    
    369,941
    
    
    
    368,290
    
    
    
    368,290Investments in affiliates
    
    
    46,198
    
    
    
    46,198
    
    
    
    56,351
    
    
    
    56,351Indebtedness from affiliates
    
    
    3,008
    
    
    
    2,901
    
    
    
    2,961
    
    
    
    2,808Accrued investment income
    
    
    23,698
    
    
    
    23,698
    
    
    
    24,798
    
    
    
    24,798Premiums receivable and
agents balances
    
    
    133,358
    
    
    
    133,358
    
    
    
    140,562
    
    
    
    140,562Weather derivatives
    
    
    745
    
    
    
    745
    
    
    
    453
    
    
    
    453Derivative assets:Foreign exchange contracts
    
    
    69
    
    
    
    69
    
    
    
    599
    
    
    
    599Interest rate contracts
    
    
    3,679
    
    
    
    3,679
    
    
    
    13,639
    
    
    
    13,639Bond and equity index contracts
    
    
    172
    
    
    
    172
    
    
    
    66
    
    
    
    66Credit derivatives
    
    
    1,585
    
    
    
    1,585
    
    
    
    89
    
    
    
    89Commodity contracts
    
    
    959
    
    
    
    959
    
    
    
    2,099
    
    
    
    2,099Financial liabilities:Investment deposits by
policyholders
    
    ¥
    (2,196,614
    )
    
    
    (2,453,492
    )
    
    
    (2,119,153
    )
    
    
    (2,371,996
    )Indebtedness to affiliates
    
    
    (3,262
    )
    
    
    (3,262
    )
    
    
    (2,232
    )
    
    
    (2,232
    )Short-term debt
    
    
    (37,907
    )
    
    
    (37,907
    )
    
    
    (37,604
    )
    
    
    (37,604
    )Long-term debt
    
    
    (70,000
    )
    
    
    (69,531
    )
    
    
    (99,992
    )
    
    
    (100,051
    )Weather derivatives
    
    
    (660
    )
    
    
    (660
    )
    
    
    (161
    )
    
    
    (161
    )Derivative liabilities:Foreign exchange contracts
    
    
    (9,006
    )
    
    
    (9,006
    )
    
    
    (6,275
    )
    
    
    (6,275
    )Interest rate contracts
    
    
    (2,434
    )
    
    
    (2,434
    )
    
    
    (7,269
    )
    
    
    (7,269
    )Bond and equity index contracts
    
    
    (12
    )
    
    
    (12
    )
    
    
    (212
    )
    
    
    (212
    )Credit derivatives
    
    
    (135
    )
    
    
    (135
    )
    
    
    (40,010
    )
    
    
    (40,010
    )Commodity contracts
    
    
    (958
    )
    
    
    (958
    )
    
    
    (2,097
    )
    
    
    (2,097
    )
 The methodologies and assumptions used to estimate the fair values of financial
instruments are as follows:The carrying amounts of cash and cash equivalents, policy loans, accrued investment
income, premiums receivable and agents balances and short-term debt approximate their
fair values due to the short-term maturities of these instruments.
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##### Table of Contents



(a)
    
    Investments in Fixed Maturities and Equity SecuritiesThe fair values of fixed maturity securities are estimated based on quoted market
prices for these or similar securities.The fair values of equity securities are estimated based on quoted market prices.(b)
    
    Investments in Mortgage Loans and Other Long-term InvestmentsThe fair values of loans and other long-term investments with fixed interest rates
are estimated by discounting future cash flows using estimates of market rates for
securities with similar characteristics.The carrying amounts of investments with floating interest rates approximate their
fair values. The fair value of consumer loans, which are included in other
long-term investments, in the amount of ¥356,856 million and ¥380,353 million at
March 31, 2007 and 2008, respectively, approximates the carrying amount. The
floating and fixed rates on consumer loans in the years ended March 31, 2006, 2007
and 2008 range from approximately 1.0% to 9.0%, and the remaining loan periods are
from approximately six months to 35 years.(c)
    
    Short-term InvestmentsThe fair values of short-term investments where quoted market prices are available
are estimated using quoted market prices. The carrying amounts for other
instruments approximate their fair values because of the short maturities of such
instruments.(d)
    
    Investments in and Indebtedness from AffiliatesThe fair values of loans to affiliates with fixed interest rates are estimated by
discounting future cash flows using the long-term prime rate at the end of the year.
The fair values of investments are estimated using quoted market prices for these
or similar securities. The carrying amounts for other indebtedness approximate
their fair values.(e)
    
    Investment Deposits by PolicyholdersThe fair values of investment deposits by policyholders are estimated by discounting
future cash flows using the interest rates currently being offered for similar
contracts.(f)
    
    Indebtedness to affiliates and Long-term DebtThe fair values of these financial instruments are estimated using quoted market
prices for these or similar characteristic instruments.(g)
    
    Derivative Financial InstrumentsFair values of forward and futures contracts are estimated based on the closing
market prices at the major markets.
 F-59




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##### Table of Contents



Fair values of swap contracts are estimated based on the discounted values of future
cash flows.Fair values of option contracts and credit derivative contracts are estimated based
on internally established models with consideration given to external models or
based on quotes from brokers.
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##### Table of Contents



(17)
    
    Variable Interest Entities
 The Company consolidates three entities under the provision of FIN46R.The Company holds the subordinated notes issued by VIEs formed for the purpose of
guaranteeing the obligation of the Company under the reinsurance agreements. The VIEs
hold U.S. government securities to collateralize the guarantee and the Company absorbs a
majority of the VIEs expected losses and receives a majority of the VIEs expected
residual returns. The carrying values of the VIEs investments were ¥15,008 million and
¥15,871 million at March 31, 2007 and 2008, respectively, which were included in the
consolidated balance sheets.The Company engages in certain structured transactions, mainly securitization of
independent third parties assets through a VIE. The Company provides guarantee
insurance for the VIE which is involved in the asset-backed securities business where it
helps meet customers financing needs by providing access to the commercial paper
markets. The Company guarantees the redemption of commercial paper issued by the VIE and
the Company absorbs a majority of the VIEs expected losses. The assets and liabilities
of the VIE amounted to ¥7,910 million and ¥7,623 million at March 31, 2007 and 2008,
respectively, which was included in the consolidated balance sheets.A certain consolidated subsidiary holds significant variable interests in VIEs which
transact credit derivative contracts with other entities and transfer the risk of the
referenced credit to the consolidated subsidiary through the guarantee insurance
contracts. The consolidated subsidiary also holds significant variable interests in the
VIEs which were structured by other parties for the purpose of project financing. As a
means of ensuring timely repayment of the loan, the consolidated subsidiary provides
limited credit enhancement with the VIEs through the guarantee insurance contracts. The
consolidated subsidiary does not retain a first-risk-of-loss position and does not absorb
a majority of these VIEs expected losses and the VIEs were accordingly not consolidated
in the accompanying consolidated financial statements. The maximum potential loss
associated with those VIEs is estimated to be ¥96,066 million as of March 31, 2008.
 (18)
    
    Commitments and Contingent Liabilities
 At March 31, 2007 and 2008, commitments outstanding for the purchase of property and
equipment amounted to approximately ¥22,806 million and ¥40,104 million, respectively.
At March 31, 2007 and 2008, commitments outstanding for the purchase of investment real
estate amounted to approximately ¥3,489 million and nil, respectively.The Company is contingently liable for various financial guarantees totaling ¥1,237
million as of March 31, 2007 and ¥589 million as of March 31, 2008. Fees related to
these guarantees totaling ¥72 million, ¥54 million and ¥51 million were recorded as
revenue on an accrual basis by the Company for the years ended March 31, 2006, 2007 and
2008, respectively. These guarantees are provided in the ordinary course of business and
include guarantees with respect to asset-backed securities, bonds, loans and other
financial obligations. The contractual amounts of the financial guarantees reflect the
Companys maximum exposure to credit loss in the event of nonperformance. The Companys
policy related to providing these financial guarantees limits transactions to those with
credit ratings of an investment grade or equivalent creditworthiness and limits the
amount of a guarantee on any individual transaction.
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##### Table of Contents



At March 31, 2008, the Company had a ¥3,271 million investment in a limited partnership
with overseas partners. A condition of the support agreement is that additional
investment shall be made by the limited partners, based on the pro rata share in the
partnership, should there be a shortage of funds in the partnership. Considering the
latest financial information of the partnership available to the Company as of February
29, 2008, its most recent balance sheet date, management believes the likelihood of an
additional capital requirement is remote. In addition to the above commitment, the
Company had a contract that would have provided a financial guarantee to the limited
partnership; however, the amount of potential payment based on the contract was zero as
of March 31, 2008. The obligation of the Company under the guarantee was fully
collateralized with securities, and no net exposure existed as of March 31, 2008.In the normal course of business, the Company enters into credit derivative transactions
mainly as a protection seller. The maximum potential losses associated with these
transactions were ¥444,535 million and ¥655,667 million as of March 31, 2007 and 2008,
respectively. Liabilities of ¥135 million and ¥40,010 million were recorded in
connection with these transactions as of March 31, 2007 and 2008, respectively.The Company had loan commitment agreements amounting to ¥5,972 million and ¥3,436 million
as of March 31, 2007 and 2008, respectively. The Companys policy to provide loan
commitment agreements is basically the same as that of guarantee contracts.The Company occupies certain offices and other facilities under lease arrangements. The
following is a schedule by years of future minimum rental payments required under
non-cancelable operating leases that have initial or remaining lease terms in excess of
one year as of March 31, 2008:
 (Yen in millions)Years ending March 31:2009
    
    ¥
    1,6902010
    
    
    1,2312011
    
    
    9892012
    
    
    5012013
    
    
    443Later years
    
    
    1,631Total future minimum rental payments
    
    ¥
    6,485
 Rental expenses for the years ended March 31, 2006, 2007 and 2008 were ¥12,381 million,
¥14,259 million and ¥15,422 million, respectively.
 F-62




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##### Table of Contents



(19)
    
    Reconciliation of Net Income to Net Cash Provided by Operating Activities
 2006
    
    
    2007
    
    
    2008(Yen in millions)Net income
    
    ¥
    119,890
    
    
    
    113,916
    
    
    
    104,796Adjustments to reconcile net income to
net cash provided by operating activities:Valuation allowance for credit losses
    
    
    (8,119
    )
    
    
    (4,237
    )
    
    
    (1,967
    )Impairment losses of long-lived assets
    
    
    965
    
    
    
    1,205
    
    
    
    4,244Realized gains from sales or revaluation of investments
    
    
    (59,548
    )
    
    
    (31,530
    )
    
    
    (24,616
    )Amortization of fixed maturity securities
    
    
    5,795
    
    
    
    4,212
    
    
    
    2,456Depreciation
    
    
    17,012
    
    
    
    17,445
    
    
    
    19,879Provision for retirement and severance benefits
    
    
    (4,917
    )
    
    
    (6,449
    )
    
    
    2,332Deferred income taxes
    
    
    25,030
    
    
    
    9,208
    
    
    
    22,769Proceeds from property and equipment as subrogation
of paid claim
    
    
    899
    
    
    
    
    
    
    
    Decrease (increase) in assets:Net insurance related assets
    
    
    17,011
    
    
    
    (3,041
    )
    
    
    (32,631
    )Deferred policy acquisition costs
    
    
    (8,834
    )
    
    
    17,319
    
    
    
    2,457Accrued investment income
    
    
    (4,818
    )
    
    
    (1,248
    )
    
    
    (940
    )Derivative assets
    
    
    (506
    )
    
    
    (1,462
    )
    
    
    (10,028
    )Other assets
    
    
    6,874
    
    
    
    (11,065
    )
    
    
    2,793Increase (decrease) in liabilities:Losses and claims
    
    
    99,079
    
    
    
    63,541
    
    
    
    37,243Unearned premiums
    
    
    35,643
    
    
    
    17,652
    
    
    
    35,276Future policy benefits
    
    
    88,222
    
    
    
    75,819
    
    
    
    63,921Income taxes
    
    
    17,689
    
    
    
    (8,426
    )
    
    
    (13,782
    )Derivative liabilities
    
    
    2,260
    
    
    
    1,675
    
    
    
    43,318Other liabilities
    
    
    2,298
    
    
    
    29,199
    
    
    
    4,831Interest credited to policyholders contract deposits
    
    
    50,840
    
    
    
    48,482
    
    
    
    48,498Other, net
    
    
    (725
    )
    
    
    (6,959
    )
    
    
    (2,842
    )Net cash provided by operating activities
    
    ¥
    402,040
    
    
    
    325,256
    
    
    
    308,007
 (20)
    
    Supplementary Cash Flow Information
 2006
    
    2007
    
    2008(Yen in millions)Cash paid during the year for:Interest
    
    ¥
    810
    
    
    
    795
    
    
    
    947Income taxes
    
    
    14,329
    
    
    
    51,862
    
    
    
    44,476Noncash transaction:Capital lease obligations incurred
    
    ¥
    1,179
    
    
    
    772
    
    
    
    924Acquisition of subsidiaries:Fair value of assets
    
    
    74,195
    
    
    
    34,149
    
    
    
    Fair value of liabilities
    
    
    47,225
    
    
    
    21,191
    
    
    
    Minority interests
    
    
    2,057
    
    
    
    4,345
    
    
    
    Net cash paid
    
    
    10,807
    
    
    
    7,337
    
    
    
    
 F-63




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##### Table of Contents



(21)
    
    Segment Information
 In accordance with SFAS No.131, Disclosures about Segments of an Enterprise and Related
Information, the segments reported below are the components of the Company for which
separate financial information is available that is evaluated regularly by the chief
operating decision maker of the Company in deciding how to allocate resources and in
assessing performance.The Company operates principally in two business segments: property and casualty
insurance and life insurance. The property and casualty insurance segment offers
automobile, fire, personal accident, liability and other forms of property and casualty
insurance products. The Companys financial services business, including financial
guarantees and derivatives are operated within the property and casualty insurance
segment. Life insurance operations are conducted by its wholly owned subsidiary, Mitsui
Sumitomo Kirameki Life Insurance Co., Ltd., which offers a wide range of traditional life
insurance products such as term-life, whole-life and annuity insurance, and a joint
venture company, Mitsui Sumitomo MetLife Insurance Co., Ltd., which offers variable
annuity plans that combine the appeal of fund management, insurance, and annuity
products, and fixed annuities denominated in foreign currencies.The business segment information is based on financial information prepared on a Japanese
GAAP basis with certain limited presentation differences from that utilized in the
Companys external Japanese GAAP financial reporting. Additionally, the format and
information presented in the internal management reporting are not consistent with the
consolidated financial statements prepared on a U.S. GAAP basis.Summarized financial information with respect to the business segments as of and for the
years ended March 31, 2006, 2007 and 2008 is as follows:
 Propertyand
    
    
    
    
    
    AdjustmentCasualty
    
    Life
    
    andInsurance
    
    Insurance
    
    Elimination
    
    Consolidated(Yen in millions)2006:Net premiums written
    
    ¥
    1,464,107
    
    
    
    
    
    
    
    
    
    
    
    1,464,107Net claims paid
    
    
    792,941
    
    
    
    
    
    
    
    
    
    
    
    792,941Life insurance premiums
    
    
    
    
    
    
    162,226
    
    
    
    
    
    
    
    162,226Life insurance claims
    
    
    
    
    
    
    20,912
    
    
    
    
    
    
    
    20,912Commission and collection expenses
    
    
    239,798
    
    
    
    17,873
    
    
    
    
    
    
    
    257,671Operating expenses and general and
administrative expenses
    
    
    233,692
    
    
    
    17,209
    
    
    
    (3,556
    )
    
    
    247,345Interest and dividends received, net
    
    
    90,937
    
    
    
    11,613
    
    
    
    (253
    )
    
    
    102,297Ordinary profit (loss)
    
    
    129,830
    
    
    
    (2,129
    )
    
    
    9
    
    
    
    127,710Total assets
    
    
    7,800,763
    
    
    
    793,107
    
    
    
    (997
    )
    
    
    8,592,873
 F-64




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##### Table of Contents



Propertyand
    
    
    
    
    
    AdjustmentCasualty
    
    Life
    
    andInsurance
    
    Insurance
    
    Elimination
    
    Consolidated(Yen in millions)2007:Net premiums written
    
    ¥
    1,492,808
    
    
    
    
    
    
    
    
    
    
    
    1,492,808Net claims paid
    
    
    846,445
    
    
    
    
    
    
    
    
    
    
    
    846,445Life insurance premiums
    
    
    
    
    
    
    165,364
    
    
    
    
    
    
    
    165,364Life insurance claims
    
    
    
    
    
    
    24,850
    
    
    
    
    
    
    
    24,850Commission and collection expenses
    
    
    241,089
    
    
    
    17,003
    
    
    
    (433
    )
    
    
    257,659Operating expenses and general and
administrative expenses
    
    
    244,912
    
    
    
    20,790
    
    
    
    (2,713
    )
    
    
    262,989Interest and dividends received, net
    
    
    107,953
    
    
    
    13,856
    
    
    
    (50
    )
    
    
    121,759Ordinary profit (loss)
    
    
    94,307
    
    
    
    (2,643
    )
    
    
    20
    
    
    
    91,684Total assets
    
    
    8,106,558
    
    
    
    906,006
    
    
    
    (912
    )
    
    
    9,011,652
 Propertyand
    
    
    
    
    
    AdjustmentCasualty
    
    Life
    
    andInsurance
    
    Insurance
    
    Elimination
    
    Consolidated(Yen in millions)2008:Net premiums written
    
    ¥
    1,541,032
    
    
    
    
    
    
    
    
    
    
    
    1,541,032Net claims paid
    
    
    879,725
    
    
    
    
    
    
    
    
    
    
    
    879,725Life insurance premiums
    
    
    
    
    
    
    156,528
    
    
    
    
    
    
    
    156,528Life insurance claims
    
    
    
    
    
    
    31,703
    
    
    
    
    
    
    
    31,703Commission and collection expenses
    
    
    234,640
    
    
    
    14,740
    
    
    
    (395
    )
    
    
    248,985Operating expenses and general and
administrative expenses
    
    
    271,198
    
    
    
    21,560
    
    
    
    (2,416
    )
    
    
    290,342Interest and dividends received, net
    
    
    114,403
    
    
    
    16,232
    
    
    
    (20
    )
    
    
    130,615Ordinary profit (loss)
    
    
    66,591
    
    
    
    (5,724
    )
    
    
    
    
    
    
    60,867Total assets
    
    
    7,388,669
    
    
    
    1,009,780
    
    
    
    (731
    )
    
    
    8,397,718
 F-65




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##### Table of Contents



Information on major lines of Property and Casualty insurance is as follows:
 DirectPremiums Written(including Deposit
    
    
    Net
    
    
    Netpremiums from
    
    
    Premiums
    
    
    Claimspolicyholders)
    
    
    Written
    
    
    Paid(Yen in millions)2006:Fire and Allied Lines
    
    ¥
    304,177
    
    
    
    206,373
    
    
    
    88,203Marine
    
    
    101,462
    
    
    
    84,788
    
    
    
    35,176Personal Accident
    
    
    341,536
    
    
    
    143,316
    
    
    
    56,049Voluntary Automobile
    
    
    595,745
    
    
    
    590,423
    
    
    
    364,208Compulsory Automobile Liability
    
    
    181,757
    
    
    
    193,402
    
    
    
    130,518Other
    
    
    269,308
    
    
    
    245,805
    
    
    
    118,787Total
    
    ¥
    1,793,985
    
    
    
    1,464,107
    
    
    
    792,941
 DirectPremiums Written(including Deposit
    
    
    Net
    
    
    Netpremiums from
    
    
    Premiums
    
    
    Claimspolicyholders)
    
    
    Written
    
    
    Paid(Yen in millions)2007:Fire and Allied Lines
    
    ¥
    301,692
    
    
    
    208,951
    
    
    
    100,229Marine
    
    
    113,006
    
    
    
    95,487
    
    
    
    38,685Personal Accident
    
    
    327,519
    
    
    
    139,531
    
    
    
    62,909Voluntary Automobile
    
    
    611,148
    
    
    
    601,354
    
    
    
    375,298Compulsory Automobile Liability
    
    
    176,826
    
    
    
    192,087
    
    
    
    134,908Other
    
    
    276,517
    
    
    
    255,398
    
    
    
    134,416Total
    
    ¥
    1,806,708
    
    
    
    1,492,808
    
    
    
    846,445
 DirectPremiums Written(including Deposit
    
    
    Net
    
    
    Netpremiums from
    
    
    Premiums
    
    
    Claimspolicyholders)
    
    
    Written
    
    
    Paid(Yen in millions)2008:Fire and Allied Lines
    
    ¥
    317,882
    
    
    
    225,161
    
    
    
    104,817Marine
    
    
    121,969
    
    
    
    104,127
    
    
    
    44,367Personal Accident
    
    
    298,155
    
    
    
    138,217
    
    
    
    70,233Voluntary Automobile
    
    
    634,948
    
    
    
    624,950
    
    
    
    391,878Compulsory Automobile Liability
    
    
    165,851
    
    
    
    191,255
    
    
    
    136,542Other
    
    
    287,460
    
    
    
    257,322
    
    
    
    131,888Total
    
    ¥
    1,826,265
    
    
    
    1,541,032
    
    
    
    879,725
 F-66




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##### Table of Contents



For the years ended March 31, 2006, 2007 and 2008, all the premium revenues were from
external customers and no revenue was derived from transactions with a single external
customer exceeding 10% of the Companys revenues.For the years ended March 31, 2006, 2007 and 2008, net property and casualty premiums
written in the amount of ¥1,286,632 million, ¥1,273,537 million, and ¥1,288,897 million,
respectively, were from external customers in Japan, and those in the amount of ¥177,475
million, ¥219,271 million, and ¥252,136 million, respectively, were from external
customers in foreign countries. Life insurance premiums were from external customers in
Japan for the years ended March 31, 2006, 2007 and 2008.Reconciliation to U.S. GAAPAs noted above, the measurement bases of the income and expense items covered in the
Companys internal management reporting system are different from those in the
accompanying consolidated statements of income prepared in accordance with U.S. GAAP.Reconciliation of the total amount of the Companys Japanese GAAP net income under its
internal management reporting system to net income shown on the consolidated statements
of income prepared in accordance with U.S. GAAP for the years ended March 31, 2006, 2007,
and 2008 is as follows:
 2006
    
    
    2007
    
    
    2008(Yen in millions)Japanese GAAP net income
    
    ¥
    71,660
    
    
    
    60,796
    
    
    
    40,028Adjustment:Catastrophic loss reserve
    
    
    40,064
    
    
    
    25,264
    
    
    
    25,160Other underwriting reserves
    
    
    10,896
    
    
    
    46,693
    
    
    
    47,923Reserve for price fluctuation
    
    
    3,075
    
    
    
    3,167
    
    
    
    3,254Policy acquisition cost
    
    
    7,815
    
    
    
    (18,615
    )
    
    
    (4,559
    )Revaluation of investments in securities and
related investment income
    
    
    18,564
    
    
    
    3,486
    
    
    
    (1,315
    )Derivative transactions
    
    
    (5,294
    )
    
    
    927
    
    
    
    (7,824
    )Retirement and severance benefits
    
    
    579
    
    
    
    3,186
    
    
    
    1,403Gains from equity method investments
    
    
    6,387
    
    
    
    5,709
    
    
    
    22,858Deferred income taxes
    
    
    (29,205
    )
    
    
    (25,632
    )
    
    
    (32,737
    )Other
    
    
    (4,651
    )
    
    
    8,935
    
    
    
    10,605U.S. GAAP net income
    
    ¥
    119,890
    
    
    
    113,916
    
    
    
    104,796
 F-67




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##### Table of Contents



Reconciliation of the amount of the Companys Japanese GAAP total assets under its
internal management reporting system to total assets shown on its consolidated balance
sheets prepared in accordance with U.S. GAAP as of March 31, 2007 and 2008 is as follows:
 2007
    
    
    2008(Yen in millions)Japanese GAAP total assets
    
    ¥
    9,011,652
    
    
    
    8,397,718Adjustment:Revaluation of investment in
securities
    
    
    39,495
    
    
    
    47,368Deferred policy acquisition costs
    
    
    362,260
    
    
    
    360,152Prepaid reinsurance premiums on a
gross basis
    
    
    201,404
    
    
    
    215,233Reinsurance recoverable on
losses on a gross basis
    
    
    237,719
    
    
    
    253,092The difference in consolidation scope
    
    
    20,585
    
    
    
    26,928Other
    
    
    3,917
    
    
    
    25,834U.S. GAAP total assets
    
    ¥
    9,877,032
    
    
    
    9,326,325
 (22)
    
    Subsequent events
 On April 1, 2008, the Company established a holding company, Mitsui Sumitomo Insurance
Group Holdings, Inc. (MSIGH), through a share transfer and became its wholly owned
subsidiary. The share transfer will be accounted for as a legal reorganization of
entities under common control in a manner similar to a pooling of interests as the
proportionate shareholder interests before and after the share transfer are expected to
be substantially the same. No gains or losses will be recognized upon the share transfer.On July 1, 2008, the Company transferred all of the holding shares of its subsidiaries,
Mitsui Sumitomo Kirameki Life Insurance Company, Limited and Mitsui Direct General
Insurance Company, Limited, and an affiliate, Mitsui Sumitomo MetLife Insurance Co., Ltd.
to MSIGH as dividends in-kind. This transaction will be accounted for as a combination
under common control by MSIGH. No gains or losses will be recognized by this transaction.
 F-68




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##### Table of Contents



Schedule I
 MITSUI SUMITOMO INSURANCE COMPANY, LIMITED
AND SUBSIDIARIES
 Summary of Investments  Other than Investments in Related Parties
March 31, 2008 and 2007
 Amount at whichshown in theType of investment
    
    Cost
    
    
    Value
    
    
    balance sheet(Yen in millions)March 31, 2008:Securities held to maturity:Fixed maturities:Bonds and notes:Government and government
agencies and authorities:United States
    
    ¥
    4,254
    
    
    ¥
    4,254
    
    
    ¥
    4,254Other
    
    
    341,388
    
    
    
    347,360
    
    
    
    341,388345,642
    
    
    
    351,614
    
    
    
    345,642States, municipalities and
political subdivisions:Other
    
    
    1,714
    
    
    
    1,714
    
    
    
    1,7141,714
    
    
    
    1,714
    
    
    
    1,714All other corporate bonds
    
    
    102,118
    
    
    
    105,765
    
    
    
    102,118Total fixed maturities
    
    
    449,474
    
    
    
    459,093
    
    
    
    449,474Securities available for sale:Fixed maturities:Bonds and notes:Government and government
agencies and authorities:United States
    
    
    113,676
    
    
    
    119,191
    
    
    
    119,191Other
    
    
    685,783
    
    
    
    711,429
    
    
    
    711,429799,459
    
    
    
    830,620
    
    
    
    830,620States, municipalities and
political subdivisions:United States
    
    
    125
    
    
    
    128
    
    
    
    128Other
    
    
    716,210
    
    
    
    729,256
    
    
    
    729,256716,335
    
    
    
    729,384
    
    
    
    729,384Public utilities
    
    
    159,394
    
    
    
    161,150
    
    
    
    161,150All other corporate bonds
    
    
    1,600,908
    
    
    
    1,613,031
    
    
    
    1,613,031Total fixed maturities
    
    
    3,276,096
    
    
    
    3,334,185
    
    
    
    3,334,185Equity securities:Common stocks:Public utilities
    
    
    11,421
    
    
    
    35,561
    
    
    
    35,561Banks, trust and insurance
companies
    
    
    122,522
    
    
    
    209,402
    
    
    
    209,402Industrial, miscellaneous and all
other
    
    
    948,789
    
    
    
    2,244,607
    
    
    
    2,244,6071,082,732
    
    
    
    2,489,570
    
    
    
    2,489,570Nonredeemable preferred stocks
    
    
    58,316
    
    
    
    58,203
    
    
    
    58,203Total equity securities
    
    
    1,141,048
    
    
    
    2,547,773
    
    
    
    2,547,773Total securities
    
    
    4,866,618
    
    
    ¥
    6,341,051
    
    
    
    6,331,432Mortgage loans on real estate
    
    
    9,859
    
    
    
    
    
    
    
    9,859Real estate  investment properties
    
    
    43,151
    
    
    
    
    
    
    
    43,151Policy loans
    
    
    39,536
    
    
    
    
    
    
    
    39,536Other long-term investments
    
    
    749,385
    
    
    
    
    
    
    
    749,385Short-term investments
    
    
    120,086
    
    
    
    
    
    
    
    120,086Total investments
    
    ¥
    5,828,635
    
    
    
    
    
    
    ¥
    7,293,449
 F-69




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##### Table of Contents



Schedule I
 MITSUI SUMITOMO INSURANCE COMPANY, LIMITED
AND SUBSIDIARIES
 Summary of Investments  Other than Investments in Related Parties
March 31, 2008 and 2007
 Amount at whichshown in theType of investment
    
    Cost
    
    
    Value
    
    
    balance sheet(Yen in millions)March 31, 2007:Securities held to maturity:Fixed maturities:Bonds and notes:Government and government
agencies and authorities:Other
    
    ¥
    294,940
    
    
    ¥
    296,153
    
    
    ¥
    294,940294,940
    
    
    
    296,153
    
    
    
    294,940States, municipalities and
political subdivisions:Other
    
    
    84,878
    
    
    
    84,752
    
    
    
    84,87884,878
    
    
    
    84,752
    
    
    
    84,878All other corporate bonds
    
    
    4,397
    
    
    
    4,394
    
    
    
    4,397Total fixed maturities
    
    
    384,215
    
    
    
    385,299
    
    
    
    384,215Securities available for sale:Fixed maturities:Bonds and notes:Government and government
agencies and authorities:United States
    
    
    101,017
    
    
    
    107,020
    
    
    
    107,020Other
    
    
    652,349
    
    
    
    670,035
    
    
    
    670,035753,366
    
    
    
    777,055
    
    
    
    777,055States, municipalities and
political subdivisions:United States
    
    
    131
    
    
    
    140
    
    
    
    140Other
    
    
    778,357
    
    
    
    798,709
    
    
    
    798,709778,488
    
    
    
    798,849
    
    
    
    798,849Public utilities
    
    
    180,826
    
    
    
    184,094
    
    
    
    184,094Convertibles and bonds with
warrants attached
    
    
    78
    
    
    
    78
    
    
    
    78All other corporate bonds
    
    
    1,531,118
    
    
    
    1,557,728
    
    
    
    1,557,728Total fixed maturities
    
    
    3,243,876
    
    
    
    3,317,804
    
    
    
    3,317,804Equity securities:Common stocks:Public utilities
    
    
    11,582
    
    
    
    49,100
    
    
    
    49,100Banks, trust and insurance
companies
    
    
    120,509
    
    
    
    251,902
    
    
    
    251,902Industrial, miscellaneous and all
other
    
    
    915,117
    
    
    
    2,952,940
    
    
    
    2,952,9401,047,208
    
    
    
    3,253,942
    
    
    
    3,253,942Nonredeemable preferred stocks
    
    
    58,316
    
    
    
    58,632
    
    
    
    58,632Total equity securities
    
    
    1,105,524
    
    
    
    3,312,574
    
    
    
    3,312,574Total securities
    
    
    4,733,615
    
    
    ¥
    7,015,677
    
    
    
    7,014,593Mortgage loans on real estate
    
    
    11,511
    
    
    
    
    
    
    
    11,511Real estate  investment properties
    
    
    49,192
    
    
    
    
    
    
    
    49,192Policy loans
    
    
    38,523
    
    
    
    
    
    
    
    38,523Other long-term investments
    
    
    715,972
    
    
    
    
    
    
    
    715,972Short-term investments
    
    
    113,671
    
    
    
    
    
    
    
    113,671Total investments
    
    ¥
    5,662,484
    
    
    
    
    
    
    ¥
    7,943,462
 F-70




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##### Table of Contents



Schedule III
 MITSUI SUMITOMO INSURANCE COMPANY, LIMITED
AND SUBSIDIARIES
 Supplementary Insurance Information
Years ended March 31, 2008, 2007 and 2006
 Losses,
    
    
    
    
    
    
    
    
    
    
    Claims,claims and
    
    
    
    
    
    
    
    
    
    
    losses andloss
    
    
    Unearned
    
    
    Premium
    
    
    settlement
    
    
    PremiumsLine of Business
    
    expenses
    
    
    premiums
    
    
    revenue
    
    
    expenses
    
    
    written(Yen in millions)Property and casualty:Year ended March 31, 2008:Voluntary automobile
    
    ¥
    325,606
    
    
    ¥
    237,252
    
    
    ¥
    621,036
    
    
    ¥
    405,656
    
    
    ¥
    624,949Compulsory automobile
liability
    
    
    211,553
    
    
    
    313,405
    
    
    
    193,572
    
    
    
    133,688
    
    
    
    191,256Fire and allied lines
    
    
    134,890
    
    
    
    535,143
    
    
    
    209,396
    
    
    
    114,095
    
    
    
    225,259Personal accident
    
    
    56,466
    
    
    
    100,502
    
    
    
    132,171
    
    
    
    73,921
    
    
    
    138,896Cargo and transit
    
    
    43,669
    
    
    
    39,094
    
    
    
    97,696
    
    
    
    35,753
    
    
    
    98,846Hull
    
    
    33,795
    
    
    
    14,152
    
    
    
    21,508
    
    
    
    15,933
    
    
    
    21,867Other
    
    
    381,615
    
    
    
    250,408
    
    
    
    227,306
    
    
    
    127,211
    
    
    
    236,543Total
    
    ¥
    1,187,594
    
    
    ¥
    1,489,956
    
    
    ¥
    1,502,685
    
    
    ¥
    906,257
    
    
    ¥
    1,537,616Year ended March 31, 2007:Voluntary automobile
    
    ¥
    306,800
    
    
    ¥
    223,053
    
    
    ¥
    600,371
    
    
    ¥
    401,429
    
    
    ¥
    599,663Compulsory automobile
liability
    
    
    218,218
    
    
    
    326,979
    
    
    
    193,663
    
    
    
    137,607
    
    
    
    192,087Fire and allied lines
    
    
    123,296
    
    
    
    497,494
    
    
    
    185,208
    
    
    
    93,302
    
    
    
    208,182Personal accident
    
    
    49,888
    
    
    
    91,003
    
    
    
    134,369
    
    
    
    69,292
    
    
    
    139,795Cargo and transit
    
    
    42,596
    
    
    
    35,332
    
    
    
    90,286
    
    
    
    38,802
    
    
    
    91,379Hull
    
    
    31,530
    
    
    
    12,632
    
    
    
    18,496
    
    
    
    16,620
    
    
    
    19,602Other
    
    
    372,602
    
    
    
    253,086
    
    
    
    246,687
    
    
    
    152,604
    
    
    
    238,671Total
    
    ¥
    1,144,930
    
    
    ¥
    1,439,579
    
    
    ¥
    1,469,080
    
    
    ¥
    909,656
    
    
    ¥
    1,489,379Year ended March 31, 2006:Voluntary automobile
    
    ¥
    283,073
    
    
    ¥
    207,685
    
    
    ¥
    590,052
    
    
    ¥
    370,790
    
    
    ¥
    587,253Compulsory automobile
liability
    
    
    213,934
    
    
    
    332,780
    
    
    
    193,871
    
    
    
    154,440
    
    
    
    193,402Fire and allied lines
    
    
    113,979
    
    
    
    476,242
    
    
    
    180,143
    
    
    
    97,810
    
    
    
    205,214Personal accident
    
    
    48,453
    
    
    
    85,470
    
    
    
    133,476
    
    
    
    60,089
    
    
    
    143,190Cargo and transit
    
    
    51,992
    
    
    
    32,280
    
    
    
    79,963
    
    
    
    34,722
    
    
    
    83,282Hull
    
    
    27,385
    
    
    
    10,193
    
    
    
    15,551
    
    
    
    14,508
    
    
    
    16,564Other
    
    
    310,529
    
    
    
    263,927
    
    
    
    229,745
    
    
    
    149,264
    
    
    
    229,602Total
    
    ¥
    1,049,345
    
    
    ¥
    1,408,577
    
    
    ¥
    1,422,801
    
    
    ¥
    881,623
    
    
    ¥
    1,458,507
 F-71




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##### Table of Contents



Schedule III
 MITSUI SUMITOMO INSURANCE COMPANY, LIMITED
AND SUBSIDIARIES
 Supplementary Insurance Information
Years ended March 31, 2008, 2007 and 2006
 PolicyholderLosses, claims
    
    Liability for
    
    
    
    
    
    benefits forand
    
    future policy
    
    Premium
    
    life insuranceloss expenses
    
    benefits
    
    revenue
    
    contracts(Yen in millions)Life:Year ended:March 31, 2008
    
    ¥
    10,226
    
    
    ¥
    911,165
    
    
    ¥
    192,731
    
    
    ¥
    156,683March 31, 2007
    
    
    8,620
    
    
    
    825,426
    
    
    
    193,551
    
    
    
    156,591March 31, 2006
    
    
    7,172
    
    
    
    724,844
    
    
    
    179,430
    
    
    
    151,365
 F-72




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##### Table of Contents



Schedule IV
 MITSUI SUMITOMO INSURANCE COMPANY, LIMITED
AND SUBSIDIARIES
 Reinsurance
Years ended March 31, 2008, 2007 and 2006
 Assumed
    
    
    
    
    
    PercentageCeded
    
    from
    
    
    
    
    
    of amountGross
    
    to other
    
    other
    
    Net
    
    assumedamount
    
    companies
    
    companies
    
    Amount
    
    to net(Yen in millions)Property and casualty insurance
premiums:Year ended:March 31, 2008
    
    ¥
    1,597,352
    
    
    ¥
    361,138
    
    
    ¥
    266,471
    
    
    ¥
    1,502,685
    
    
    
    17.7
    %March 31, 2007
    
    
    1,569,975
    
    
    
    365,319
    
    
    
    264,424
    
    
    
    1,469,080
    
    
    
    18.0
    %March 31, 2006
    
    
    1,497,701
    
    
    
    325,233
    
    
    
    250,333
    
    
    
    1,422,801
    
    
    
    17.6
    %Life insurance premiums:Year ended:March 31, 2008
    
    ¥
    193,392
    
    
    ¥
    661
    
    
    ¥
    
    
    
    ¥
    192,731
    
    
    
    March 31, 2007
    
    
    194,197
    
    
    
    646
    
    
    
    
    
    
    
    193,551
    
    
    
    March 31, 2006
    
    
    179,963
    
    
    
    533
    
    
    
    
    
    
    
    179,430
    
    
    
    
 F-73




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##### Table of Contents



Schedule V
 MITSUI SUMITOMO INSURANCE COMPANY, LIMITED
AND SUBSIDIARIES
 Valuation and Qualifying Accounts
Years ended March 31, 2008 and 2007
 AdditionsChargedBalance at
    
    
    to costs
    
    
    Charged
    
    
    
    
    
    
    Balance atbeginning
    
    
    and
    
    
    to other
    
    
    
    
    
    
    end ofDescription
    
    of year
    
    
    expenses
    
    
    accounts
    
    
    Deductions
    
    
    year(Yen in millions)Year ended March 31, 2008:Applied against asset accounts:Accumulated depreciation 
real estate investments
    
    ¥
    57,985
    
    
    ¥
    2,050
    
    
    ¥
    
    
    
    ¥
    (9,708
    )
    
    ¥
    50,327Valuation allowance  loans:Specific allowance
    
    
    951
    
    
    
    (175
    )
    
    
    
    
    
    
    (124
    )
    
    
    652General reserve
    
    
    699
    
    
    
    (253
    )
    
    
    
    
    
    
    
    
    
    
    446Allowance for doubtful accounts
    
    
    4,240
    
    
    
    (771
    )
    
    
    
    
    
    
    
    
    
    
    3,469Accumulated depreciation 
property and equipment
    
    
    221,549
    
    
    
    17,829
    
    
    
    
    
    
    
    (5,927
    )
    
    
    233,451Year ended March 31, 2007:Applied against asset accounts:Accumulated depreciation 
real estate investments
    
    ¥
    65,384
    
    
    ¥
    2,231
    
    
    ¥
    
    
    
    ¥
    (9,630
    )
    
    ¥
    57,985Valuation allowance  loans:Specific allowance
    
    
    4,565
    
    
    
    (1,292
    )
    
    
    
    
    
    
    (2,322
    )
    
    
    951General reserve
    
    
    2,314
    
    
    
    (1,615
    )
    
    
    
    
    
    
    
    
    
    
    699Allowance for doubtful accounts
    
    
    3,267
    
    
    
    973
    
    
    
    
    
    
    
    
    
    
    
    4,240Accumulated depreciation 
property and equipment
    
    
    219,868
    
    
    
    15,214
    
    
    
    
    
    
    
    (13,533
    )
    
    
    221,549
 F-74