##### Table of Contents



---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F



| |  | (Mark One)
| |  | ----------

|  |  |                                                                                               
|- |  | ----------------------------------------------------------------------------------------------
|o |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934

OR

|  |  |                                                                                                                              
|- |  | -----------------------------------------------------------------------------------------------------------------------------
|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2003

OR

|  |  |                                                                                                                                                            
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to________________

Commission file number: 0-31376

Kabushiki Kaisha Millea Holdings

(Exact name of Registrant as specified in its charter)


Millea Holdings, Inc.

(Translation of Registrants name into English)


Japan
(Jurisdiction of incorporation or organization)

Otemachi First Square,
West 10F, 5-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004, Japan
(Address of principal executive offices)



| |  | Securities registered or to be registered pursuant to Section 12(b) of the Act:
| |  | -------------------------------------------------------------------------------

None



| |  | Securities registered or to be registered pursuant to Section 12(g) of the Act:
| |  | -------------------------------------------------------------------------------

Common Stock
American Depositary Shares represented by American Depositary Receipts



| |  | Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
| |  | ------------------------------------------------------------------------------------------

Common Stock



| |  | 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:
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

Common Stock: 1,857,048.75 shares at March 31, 2003



| |  | 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.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

x Yes       o No



| |  | Indicate by check mark which financial statement item the registrant has
elected to follow.
| |  | -------------------------------------------------------------------------------------------

o Item 17       x Item 18



---

---





---

TABLE OF CONTENTS



|                                                                                      |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|FORWARD-LOOKING STATEMENTS                                                           
|SELECTED FINANCIAL DATA                                                              
|RISK FACTORS                                                                         
|EXCHANGE RATES                                                                       
|MARKET PRICE INFORMATION                                                             
|DIVIDEND POLICY                                                                      
|MAJOR SHAREHOLDERS                                                                   
|BUSINESS                                                                             
|MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|DIRECTORS AND CORPORATE AUDITORS                                                     
|THE JAPANESE NON-LIFE INSURANCE INDUSTRY                                             
|REGULATION                                                                           
|DESCRIPTION OF COMMON STOCK                                                          
|TAXATION                                                                             
|CONTROLS AND PROCEDURES                                                              
|WHERE YOU CAN FIND MORE INFORMATION                                                  
|INDEX TO FINANCIAL STATEMENTS                                                        
|LIST OF EXHIBITS                                                                     
|CROSS REFERENCE INDEX FOR FORM 20-F                                                  
|SIGNATURES                                                                           
|EXHIBIT INDEX                                                                        
|EX-1.1 The Articles of Incorporation                                                 
|EX-1.2 The Share Handling Regulations                                                
|EX-8 Subsidiaries of Millea Holdings, Inc.                                           
|EX-12 Certifications required by Rule 13a-14(a)                                      
|EX-13 Certification required by Rule 13a-14(b)                                       



---



##### Table of Contents



TABLE OF CONTENTS

|                                                                                      |  |      |     | 
|------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                      |  | Page
|                                                                                      |  |     
|Forward-Looking Statements                                                            |  |      | 3   | 
|Selected Financial Data                                                               |  |      | 4   | 
|Risk Factors                                                                          |  |      | 6   | 
|Exchange Rates                                                                        |  |      | 12  | 
|Market Price Information                                                              |  |      | 13  | 
|Dividend Policy                                                                       |  |      | 14  | 
|Major Shareholders                                                                    |  |      | 14  | 
|Business                                                                              |  |      | 16  | 
|Managements Discussion and Analysis of Financial Condition and Results of Operations |  |      | 40  | 
|Directors and Corporate Auditors                                                      |  |      | 68  | 
|The Japanese Non-Life Insurance Industry                                              |  |      | 71  | 
|Regulation                                                                            |  |      | 73  | 
|Description of Common Stock                                                           |  |      | 77  | 
|Taxation                                                                              |  |      | 83  | 
|Controls and Procedures                                                               |  |      | 86  | 
|Where You Can Find More Information                                                   |  |      | 87  | 
|Index to Financial Statements                                                         |  |      | F-1 | 
|List of Exhibits                                                                      |  |      |     | 
|Cross Reference Index for Form 20-F                                                   |  |      |     | 
|Signatures                                                                            |  |      |     | 

We were formed on April 2, 2002 as the holding company for The Tokio
Marine and Fire Insurance Company, Limited and The Nichido Fire and Marine
Insurance Company, Limited in a statutory share transfer under Japanese law. In
connection with our formation and the completion of the statutory share
transfer:



| |  |  | Tokio Marine and Nichido Fire became our wholly owned subsidiaries;                                                                                                                                                                                                                                                     
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Tokio Marine de-registered its shares of common stock and American depositary
shares from registration under Section 12(g) of the U.S. Securities Exchange
Act of 1934, as amended, or the Exchange Act, and terminated its ongoing
reporting obligations under Section 12(g) and Section 15(d) of the Exchange
Act; and
|
| |  |  | Our shares of common stock and American depositary shares were registered under
Section 12(g) of the Exchange Act (Commission file number 0-31376).                                                                                                                                                                     

For a more detailed description of the background to our formation, you
should refer to Business  Group Overview  Formation of Millea Holdings in
this annual report.

As used in this annual report, references to Millea Holdings, we, us
and our are either to (1) Millea Holdings, Inc., (2) Millea Holdings, Inc.
and its direct and indirect subsidiaries, including Tokio Marine and Nichido
Fire, or (3) Tokio Marine, Nichido Fire and/or other operating subsidiaries of
Millea Holdings, Inc., as the context may require; references to Tokio Marine
are to The Tokio Marine and Fire Insurance Company, Limited; and references to
Nichido Fire are to The Nichido Fire and Marine Insurance Company, Limited.
Unless the context otherwise requires, references in this annual report to the
business or financial results of Tokio Marine refer to Tokio Marine and its
consolidated subsidiaries, and references to the business or financial results
of Nichido Fire refer to Nichido Fire and its consolidated subsidiaries.

As used in this annual report, 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 of America, and Japanese GAAP means
accounting principles generally accepted in Japan.

2



---



##### Table of Contents



In tables appearing in this annual report, figures may not add up to
totals due to rounding.




FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements that are based on
our current expectations, intentions, assumptions, estimates and projections
about our businesses, operations, strategies and plans, about the insurance
industry, and about capital markets around the world. Generally, these
forward-looking statements can be identified by the use of forward-looking
terminology such as may, will, expect, anticipate, estimate, plan,
intend or similar words. These statements discuss future expectations,
identify strategies, contain projections of results of operations or financial
condition, or state other forward-looking information. These forward-looking
statements are subject to various risks and uncertainties. Known and unknown
risks, uncertainties and other factors could cause the actual results to differ
materially from those contained in any forward-looking statement. We cannot
promise that the expectations expressed in these forward-looking statements
will turn out to be correct. Our actual results could be materially different
from and worse than our stated expectations. Important risks and factors that
could cause actual results to be materially different from those expectations
are set forth in Risk Factors and elsewhere in this annual report.

3



---



##### Table of Contents






SELECTED FINANCIAL DATA

The following selected consolidated financial data of Millea Holdings and
its subsidiaries as of and for each of the five years ended March 31, 2003 are
derived from the audited U.S. GAAP consolidated financial statements of Millea
Holdings for those periods. You should read the information below in
conjunction with the U.S. GAAP consolidated financial statements of Millea
Holdings, including the related notes, included elsewhere in this annual
report. For a description of the restatements that are reflected in the data
in the table below, see Managements Discussion and Analysis of Financial
Condition and Results of OperationsOverviewRecent Changes in Financial
Presentation and Prior Period Changes in Accounting Policies.

|                          |                                                                               |  |                                                                         |            |                  |  |                  |           |                  |  |                  |           |   |  |   |           |   |  |   |           |  
|------------------------- | ----------------------------------------------------------------------------- |  | ----------------------------------------------------------------------- | ---------- | ---------------- |  | ---------------- | --------- | ---------------- |  | ---------------- | --------- | - |  | - | --------- | - |  | - | --------- | -
|                          |                                                                               |  | As of and for the year ended March 31,                                 
|                          |                                                                               |  |                                                                        
|                          |                                                                               |  | 2003                                                                    |            | 2002             |  | 2001             |           | 2000             |  | 1999            
|                          |                                                                               |  | (1)                                                                     |            | (Restated)(1)(2) |  | (Restated)(1)(2) |           | (Restated)(1)(2) |  | (Restated)(1)(2)
|                          |                                                                               |  |                                                                         |            |                  |  |                  |           |                  |  |                 
|                          |                                                                               |  | (yen in millions, except share numbers, per share data and percentages)
|Statement of income data: |                                                                               |  |                                                                         |            |                  |  |                  |           |                  |  |                  |           |   |  |   |           |   |  |   |          
|                          | Net premiums written                                                          |  | ¥                                                                       | 1,898,557  |                  |  | ¥                | 1,381,483 |                  |  | ¥                | 1,323,907 |   |  | ¥ | 1,297,984 |   |  | ¥ | 1,305,138 |  
|                          | Premiums earned                                                               |  |                                                                         | 1,760,968  |                  |  |                  | 1,342,962 |                  |  |                  | 1,310,739 |   |  |   | 1,281,548 |   |  |   | 1,312,139 |  
|                          | Life premiums                                                                 |  |                                                                         | 262,486    |                  |  |                  | 209,208   |                  |  |                  | 162,905   |   |  |   | 130,128   |   |  |   | 98,817    |  
|                          | Net investment income                                                         |  |                                                                         | 108,311    |                  |  |                  | 104,681   |                  |  |                  | 127,852   |   |  |   | 143,686   |   |  |   | 93,310    |  
|                          | Total operating income                                                        |  |                                                                         | 2,178,454  |                  |  |                  | 1,648,512 |                  |  |                  | 1,657,638 |   |  |   | 1,578,225 |   |  |   | 1,475,884 |  
|                          | Total operating costs and expenses                                            |  |                                                                         | 1,977,146  |                  |  |                  | 1,539,844 |                  |  |                  | 1,524,604 |   |  |   | 1,459,136 |   |  |   | 1,409,377 |  
|                          | Income before extraordinary items and cumulative
effect of accounting changes |  |                                                                         | 129,694    |                  |  |                  | 75,252    |                  |  |                  | 88,675    |   |  |   | 81,815    |   |  |   | 138,829   |  
|                          | Extraordinary items                                                           |  |                                                                         | 248,323    |                  |  |                  |          |                  |  |                  |          |   |  |   |          |   |  |   |          |  
|                          | Cumulative effect of accounting changes, net of tax                           |  |                                                                         |           |                  |  |                  | 85,465    |                  |  |                  |          |   |  |   |          |   |  |   |          |  
|                          | Net income                                                                    |  |                                                                         | 378,017    |                  |  |                  | 160,717   |                  |  |                  | 88,675    |   |  |   | 81,815    |   |  |   | 138,829   |  
|Balance sheet data:       |                                                                               |  |                                                                         |            |                  |  |                  |           |                  |  |                  |           |   |  |   |           |   |  |   |          
|                          | Total investments                                                             |  | ¥                                                                       | 8,345,203  |                  |  | ¥                | 6,628,825 |                  |  | ¥                | 6,817,944 |   |  | ¥ | 6,778,995 |   |  | ¥ | 6,400,001 |  
|                          | Total assets                                                                  |  |                                                                         | 10,893,363 |                  |  |                  | 8,559,177 |                  |  |                  | 8,216,741 |   |  |   | 8,174,325 |   |  |   | 7,779,642 |  
|                          | Total stockholders equity                                                    |  |                                                                         | 2,824,316  |                  |  |                  | 2,509,694 |                  |  |                  | 2,586,544 |   |  |   | 2,661,770 |   |  |   | 2,447,713 |  
|                          | Common stock                                                                  |  |                                                                         | 150,000    |                  |  |                  | 101,995   |                  |  |                  | 101,995   |   |  |   | 101,995   |   |  |   | 101,995   |  
|                          | Number of shares outstanding (in thousands)                                   |  |                                                                         | 1,857.05   |                  |  |                  | 1,549,692 |                  |  |                  | 1,549,692 |   |  |   | 1,549,692 |   |  |   | 1,549,692 |  
|Per share data(3):        |                                                                               |  |                                                                         |            |                  |  |                  |           |                  |  |                  |           |   |  |   |           |   |  |   |          
|                          | Net income  basic and diluted                                                |  | ¥                                                                       | 203,558    |                  |  | ¥                | 103,709   |                  |  | ¥                | 57,221    |   |  | ¥ | 52,794    |   |  | ¥ | 89,585    |  
|                          | Cash dividends paid                                                           |  |                                                                         | 10,000     |                  |  |                  | 8,500     |                  |  |                  | 8,500     |   |  |   | 8,500     |   |  |   | 8,500     |  
|Key ratios(4):            |                                                                               |  |                                                                         |            |                  |  |                  |           |                  |  |                  |           |   |  |   |           |   |  |   |          
|                          | Net loss ratio                                                                |  |                                                                         | 54.2       | %                |  |                  | 54.9      | %                |  |                  | 59.5      | % |  |   | 58.0      | % |  |   | 53.7      | %
|                          | Combined loss and expense ratios                                              |  |                                                                         | 91.7       | %                |  |                  | 94.3      | %                |  |                  | 99.8      | % |  |   | 98.8      | % |  |   | 95.0      | %



---

|(1) |  | Our U.S. GAAP consolidated financial statements for the fiscal year ended
March 31, 2003, from which some of the data in this table are derived,
reflect the inclusion in those financial statements of the results of
operations and financial position of Nichido Fire and its consolidated
subsidiaries from and after the date of our formation on April 2, 2002.
Accordingly, the amounts shown in this table for the fiscal year ended
March 31, 2003 are not directly comparable to the amounts shown for prior
fiscal years. See Managements Discussion and Analysis of Financial
Condition and Results of Operations  Overview  Business Combination.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4



---



##### Table of Contents



|(2) |  | As described in note 2 to our U.S. GAAP consolidated financial statements
included elsewhere in this annual report, various changes we have made in
our financial statement presentation and accounting policies have resulted
in restatements of our U.S. GAAP consolidated financial statements for
fiscal years ended prior to March 31, 2003.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The following table presents certain financial information as reported in
our annual reports for the years ended March 31, 2002, or fiscal 2002, and
March 31, 2001, or fiscal 2001, respectively, and the information as
restated in our annual reports for the year ended March 31, 2002 and March
31, 2003, or fiscal 2003:                   

|                          |                                    |                                              |  |                                          |           |      |  |      |           |      |  |   |           |  |  |   |           | 
|------------------------- | ---------------------------------- | -------------------------------------------- |  | ---------------------------------------- | --------- | ---- |  | ---- | --------- | ---- |  | - | --------- |  |  | - | --------- | 
|                          |                                    |                                              |  | As of and for the year ended March 31,  
|                          |                                    |                                              |  |                                         
|                          |                                    |                                              |  | 2002                                     |           | 2001 |  | 2000 |           | 1999
|                          |                                    |                                              |  |                                          |           |      |  |      |           |     
|                          |                                    |                                              |  | (yen in millions, except per share data)
|Statement of income data: |                                    |                                              |  |                                          |           |      |  |      |           |      |  |   |           |  |  |  
|                          | Life premiums                      |                                              |  |                                          |           |      |  |      |           |      |  |   |           |  |  |   |          
|                          |                                    | As reported in our fiscal 2002 annual report |  | ¥                                        | 205,693   |      |  | ¥    | 150,543   |      |  | ¥ | 130,128   |  |  | ¥ | 98,817    | 
|                          |                                    | As restated in our fiscal 2003 annual report |  |                                          | 209,208   |      |  |      | 162,905   |      |  |   | 130,128   |  |  |   | 98,817    | 
|                          | Net investment income              |                                              |  |                                          |           |      |  |      |           |      |  |   |           |  |  |   |          
|                          |                                    | As reported in our fiscal 2002 annual report |  |                                          | 48,259    |      |  |      | 69,183    |      |  |   | 78,108    |  |  |   | 22,215    | 
|                          |                                    | As restated in our fiscal 2003 annual report |  |                                          | 104,681   |      |  |      | 127,852   |      |  |   | 143,686   |  |  |   | 93,310    | 
|                          | Total operating income             |                                              |  |                                          |           |      |  |      |           |      |  |   |           |  |  |   |          
|                          |                                    | As reported in our fiscal 2001 annual report |  |                                          | N/A       |      |  |      | 1,594,173 |      |  |   | 1,516,228 |  |  |   | 1,415,756 | 
|                          |                                    | As restated in our fiscal 2002 annual report |  |                                          | 1,588,575 |      |  |      | 1,586,607 |      |  |   | 1,512,647 |  |  |   | 1,423,887 | 
|                          |                                    | As restated in our fiscal 2003 annual report |  |                                          | 1,648,512 |      |  |      | 1,657,638 |      |  |   | 1,578,225 |  |  |   | 1,475,884 | 
|                          | Total operating costs and expenses |                                              |  |                                          |           |      |  |      |           |      |  |   |           |  |  |   |          
|                          |                                    | As reported in our fiscal 2002 annual report |  |                                          | 1,479,907 |      |  |      | 1,453,573 |      |  |   | 1,393,558 |  |  |   | 1,338,282 | 
|                          |                                    | As restated in our fiscal 2003 annual report |  |                                          | 1,539,844 |      |  |      | 1,524,604 |      |  |   | 1,459,136 |  |  |   | 1,409,377 | 
|                          | Net income                         |                                              |  |                                          |           |      |  |      |           |      |  |   |           |  |  |   |          
|                          |                                    | As reported in our fiscal 2001 annual report |  |                                          | N/A       |      |  |      | 93,517    |      |  |   | 84,107    |  |  |   | 145,848   | 
|                          |                                    | As restated in our fiscal 2002 annual report |  |                                          | N/A       |      |  |      | 88,675    |      |  |   | 81,815    |  |  |   | 138,829   | 
|Balance sheet data:       |                                    |                                              |  |                                          |           |      |  |      |           |      |  |   |           |  |  |  
|                          | Total assets                       |                                              |  |                                          |           |      |  |      |           |      |  |   |           |  |  |   |          
|                          |                                    | As reported in our fiscal 2002 annual report |  |                                          | 8,456,317 |      |  |      | 8,113,881 |      |  |   | 8,071,465 |  |  |   | 7,676,782 | 
|                          |                                    | As restated in our fiscal 2003 annual report |  |                                          | 8,559,177 |      |  |      | 8,216,741 |      |  |   | 8,174,325 |  |  |   | 7,779,642 | 
|Per share data:           |                                    |                                              |  |                                          |           |      |  |      |           |      |  |   |           |  |  |  
|                          | Net income  basic and diluted     |                                              |  |                                          |           |      |  |      |           |      |  |   |           |  |  |   |          
|                          |                                    | As reported in our fiscal 2001 annual report |  |                                          | N/A       |      |  |      | 60,345    |      |  |   | 54,273    |  |  |   | 94,114    | 
|                          |                                    | As restated in our fiscal 2002 annual report |  |                                          | N/A       |      |  |      | 57,221    |      |  |   | 52,794    |  |  |   | 89,585    | 



|(3) |  | In connection with our formation, see Business  Group Overview 
Formation of Millea Holdings, each 1,000 shares of Tokio Marine common
stock were converted into one share of our common stock. To facilitate
comparability of the per share data from year to year, the per share data
for the year ended March 31, 2003 are calculated based on 1.00 of our
shares, while the per share data for the years ended March 31, 2002, 2001,
2000 and 1999 are calculated based on 1,000 of Tokio Marines shares. The
per share data are calculated using the weighted average number of shares
outstanding for the period.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(4) |  | The key ratios relate to property and casualty insurance only. The net
loss ratio is calculated by dividing the losses incurred by the premiums
earned. The combined ratio is the sum of the ratio of loss and loss
adjustment expenses incurred to premiums earned and the ratio of
underwriting and administrative expenses incurred to premiums written. A
combined ratio under 100% represents an underwriting profit and over 100%
represents an underwriting loss.                                                                                                                                                    

5



---



##### Table of Contents






RISK FACTORS

If you own our securities, you should carefully consider the risks
described below. Our business, operating results and financial condition could
be materially adversely affected by any of these risks.

In addition, this annual report contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including the risks described below and elsewhere in this
annual report.

Risks Relating to Our Business

Continued weak economic conditions in Japan may adversely affect our financial
condition and results of operations.

We derive most of our insurance underwriting revenues from Japan. In
addition, a substantial majority of the investments in our investment portfolio
are invested in Japanese equity securities, bonds and loans. Accordingly, our
financial condition and results of operations are very dependent on economic
conditions in Japan.

The Japanese economy has experienced a significant downturn since the
early 1990s. The Nikkei Stock Average, which is one of the major benchmarks for
equity prices in Japan, reached its lowest level in twenty years in April,
2003. Production and consumption remained sluggish throughout the fiscal year
ended March 31, 2003, and asset deflation, in the form of falling land and
consumer prices, continued during the year. While equity prices have risen
since late April 2003, the Japanese economy remains unstable and there
continues to be uncertainty surrounding the economic environment.

Despite the Japanese governments announced plans to implement fiscal
recovery programs and other measures aimed at improving the economy, the
current economic climate in Japan may not improve significantly in the near
future. The length and severity of continued weakness in the Japanese economy
could have a significant impact on our financial condition and results of
operations.

A decline in the Japanese stock market, and other economic factors, may
adversely affect our results of operations and financial condition.

We invest our policyholders premiums in a portfolio of assets, including
Japanese stocks. As of March 31, 2003, equity securities available for sale
represented 30.4% of the value of our total investments other than investments
in related parties. The market values of these equity securities are
inherently volatile and, despite a significant increase in equity prices in
Japan since late April 2003, have generally been declining in recent years. We
intend to hold our equity investments for the long term, but we may incur
losses on our equity securities portfolio if the Japanese stock market again
experiences declines or if other economic factors cause the value of our equity
securities to decline. A decrease in the market value of these equity
securities could have a significant negative impact on our financial condition
and results of operations.

Fluctuations in interest rates may adversely affect our results of operations.

We are subject to interest rate risk due to our investments in fixed
income instruments, derivatives, and long term insurance liabilities. As of
March 31, 2003, fixed income instruments represented 51.9% of the value of our
total investments other than investments in related parties. An increase in
interest rates decreases the value of our fixed income portfolio and thereby
adversely affects our financial condition. An increase in interest rates also
decreases the value of our interest rate derivative positions and thereby
adversely affects our results of operations.

On the other hand, economically, an increase in interest rates decreases
the value of our long term insurance liabilities. Despite our hedging
activities to limit our exposure to changes in interest rates, we
maintain significant exposure to interest rate risk. See Managements
Discussion and Analysis of Financial Condition and Result of Operations 
Quantitative and Qualitative Disclosures about Market Risk.

6



---



##### Table of Contents



Defaults in our fixed income and loan portfolios may adversely affect our
results of operations and financial condition.

Issuers of fixed income instruments and loan borrowers have defaulted and
may continue to default on principal and interest payments with respect to
fixed income instruments and loans we hold. Economic sluggishness, the
continued long-term decline of equity market prices or real estate prices in
Japan, an increase in the number of insolvency procedures in Japan or a
combination of these events or other factors may increase defaults by issuers.
A continuation of, or an increase in, defaults may require us to record losses
on our fixed income and loan portfolios.

Our foreign assets are exposed to foreign currency fluctuations.

We are subject to foreign exchange risk primarily because some of our
assets are denominated in a currency other than the Japanese yen. Our primary
foreign currency exposures are to the U.S. dollar, the euro and the pound
sterling. If the value of a foreign currency declines relative to the yen, the
fair value and income from the assets denominated in the foreign currency would
also decline. Fluctuations in foreign exchange rates also create foreign
currency translation gains or losses.

Japan is prone to natural disasters that can result in substantial claims under
non-life insurance policies.

Japan is subject to earthquakes, typhoons, windstorms, volcanic eruptions
and other types of natural disasters, the frequency and severity of which are
inherently unpredictable. In connection with a major typhoon that occurred in
September 1991, we paid insurance claims of ¥137.3 billion under fire and
allied lines insurance. These natural disasters can have a serious impact on
property-casualty insurers, depending on the frequency, nature and scope of the
disaster, the amount of insurance coverage that the insurer has written in
respect of the disaster, the amount of claims for losses, the timing of claims,
and the extent to which the insurers liability is covered by reinsurance. In
order to mitigate the effect of disasters, we set our premium rates at levels
which we believe are adequate to accommodate the effect of disasters, and cede
certain of the relevant risks to reinsurers under reinsurance policies.
However, the occurrence of a natural disaster the severity of which we did not
predict, or for which we were not adequately reinsured, could significantly
affect our financial position and results of operations.

We may be required to augment our reserves in case of unforeseen losses.

The insurance business is unlike manufacturing and most other business in
that, at the time of a sale the writing of an insurance policy and the
payment of the premium  the cost of sale the payment of a claim for a loss
under the insurance policy  is not yet conclusively determined. Losses may
occur whose type or magnitude was not foreseen by the insurance company or the
insurance industry generally at the time the insurance policies were written.
If this type of deficiency arises with respect to our insurance liability
reserves, we would have to augment our reserves or otherwise incur a charge to
earnings, which in turn could have a material adverse effect on our results of
operations. Historically, Japanese insurance companies have not experienced
these unforeseen losses, unlike insurance companies in other countries. For
example, the U.S. insurance industry experienced significant losses with
respect to unexpected claims resulting from the harmful effects of asbestos
use. Our loss reserves could substantially increase if similar claims are made
against our insurance policies for risks which we did not anticipate.

Our financial results may be materially adversely affected by unpredictable
events.

Our business, results of operations and financial condition may be
materially adversely affected by unpredictable events and their continuous
effects. Unpredictable events include single or multiple man-made or natural
events that, among other things, cause unexpectedly large market price
movements, increases in claims or deterioration of economic conditions of
certain countries, such as the terrorist attack
on the United States on September 11, 2001 and the outbreak of Severe
Acute Respiratory Syndrome, or SARS, in Asia in 2003.

We are subject to risks associated with reinsurance.

Like many other non-life insurance companies, each of Tokio Marine and
Nichido Fire uses reinsurance to provide greater capacity to write larger
policies, and to control its exposure to extraordinary losses or catastrophes.
Reinsurance is a form of insurance that insurance companies buy for their own
protection. An insurance company, referred to as a reinsured, reduces its
possible maximum loss on risks by giving, or ceding, a portion of its liability
to

7



---



##### Table of Contents



another insurance company, referred to as a reinsurer. Reinsurance is
subject to prevailing market conditions, both in terms of price, which could
affect our profitability, and in terms of availability, which could affect the
ability of Tokio Marine and Nichido Fire to offer insurance. In addition, each
of Tokio Marine and Nichido Fire is subject to credit risk with respect to its
ability to recover amounts due from its reinsurers, as the ceding of
reinsurance does not relieve it of its liability as the direct insurer to
policyholders.

Deregulation, consolidation and the entry of new competitors has intensified
competition in the Japanese insurance industry.

Japans current Insurance Business Law was adopted in May 1995 and enacted
in April 1996. The changes from the old Insurance Business Law include
provisions designed to deregulate and increase competition in the life and
non-life insurance businesses in Japan, including a provision permitting life
insurance companies and non-life insurance companies to enter each others
business through subsidiaries. In January 2001, the entry of life and non-life
insurance companies through subsidiaries into the third sector insurance
business, such as personal accident, sickness and nursing-care insurance, was
fully allowed. Further deregulation in July 2001 allowed life and non-life
insurance companies to enter the third sector insurance business directly.
Also, an amendment to the Law Concerning The Non-Life Insurance Rating
Organization in 1998 has intensified competition in the non-life insurance
industry in Japan by allowing companies to set their own premium rates. These
measures are expected to further increase competition. Furthermore, the
government has liberalized the setting of commissions for non-life insurance
agents in 2001 and this may result in an increase in the commissions payable as
companies compete for agents.

This recent liberalization has also resulted in increased consolidation
among non-life insurance companies and the formation of business alliances
among non-life and life insurance companies. These groupings currently offer
similar insurance products and increasingly seek to compete on the basis of
lower premium rates. See Business  Competition.

In addition, we face intensified competition in premium rates resulting
from the entry into the Japanese insurance market by foreign insurance
companies and by companies who currently engage in non-insurance business
activities. These foreign insurance companies include some with global
operations. These new entrants into the Japanese non-life insurance market are
making efforts to expand their market share in areas such as automobile
insurance by offering low premium rates and using direct marketing channels
instead of traditional Japanese insurance agency channels.

Our business may be adversely affected by negative developments with respect to
other Japanese financial institutions.

Many Japanese financial institutions, including banks, non-bank lending
and credit institutions, and insurance companies, continue to experience severe
asset quality and other financial problems, in part as a result of Japans
protracted recession. This may lead to severe liquidity and solvency problems
for affected financial institutions, which could result in their being
liquidated or restructured. The continued financial difficulties of financial
institutions could adversely affect us because:



| |  |  | As of March 31, 2003, a significant portion of our investments (other than
those in related parties) was in banks and other financial institutions;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | We may be requested to participate in providing assistance to support
distressed financial institutions; and                                       
|
| |  |  | Repeated negative media coverage on Japanese insurance companies could
undermine the confidence of policyholders in general.                       

We may not succeed in executing our growth strategies outside of Japan.

To date, we have derived most of our insurance underwriting revenues from
Japan. However, our strategy includes expanding our businesses in markets
outside of Japan, in particular by targeting non-Japanese customers in local
Asian insurance markets.

8



---



##### Table of Contents



By operating and expanding our insurance businesses internationally, we
will be exposed to operating risks that do not exist or are less significant in
Japan. For example, in many of these markets, we will face barriers to entry in
the form of protective regulations or long-standing relationships between
potential customers and local insurance companies. In addition, pursuing
international growth opportunities may require us to make significant
investments long before we realize any returns on those investments.

Each of the following additional factors, among others, could affect our
future international operations:



| |  |  | The impact of economic slowdown in economies outside Japan, such as those
recently experienced by many southeast Asian countries;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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 system or rate of taxation; and                                                                               
|
| |  |  | Social, political and economic risks.                                                                                            

These and other factors could adversely affect our business, financial
condition and results of operations.

We may not succeed in executing our growth strategies in other businesses.

As part of our growth strategy, we intend to expand our domestic life
insurance business as one of our core businesses. We also intend to develop
other businesses, such as asset management, health care and senior citizen
related businesses. We may not succeed in competing in these competitive
markets, particularly against companies with well-established operations. In
addition, we may be required to make significant investments, and devote
substantial management and other resources, in order to expand these
businesses. If we are unable to compete successfully in these businesses, our
results of operations and financial condition may be adversely affected.

We may not achieve the expected benefits of integrating the management and
businesses of Tokio Marine and Nichido Fire under a single holding company.

By combining the management and businesses of Tokio Marine and Nichido
Fire under a single holding company, we seek to produce benefits that would
otherwise be difficult for the management of a single company to achieve
through its individual efforts.

The major benefits the two companies hope to realize through our formation
are:



| |  |  | Integrating existing products and services and jointly developing new products
and services;                                                                                                          
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Improving management efficiency and productivity and eliminating redundancies
in administration, information systems, sales offices and claims offices; and                                           
|
| |  |  | Strengthening competitiveness in the insurance industry by investing in new
businesses with potential for high growth and profitability and by making
strategic investments in information technology.

If Tokio Marine and Nichido Fire cannot successfully integrate their
management and businesses under a single holding company, the benefits of our
formation may not be realized fully or at all, or may take longer to realize
than expected.

We may not achieve the expected benefits of merging Tokio Marine and Nichido
Fire.

We have announced our intention to merge Tokio Marine and Nichido Fire in
October 2004. The planned merger exposes us to various merger-related risks,
including:

9



---



##### Table of Contents





| |  |  | The expected benefits and synergies of the planned merger of Tokio Marine and
Nichido Fire may not be realized fully or at all;                                                           
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Preparation for the merger will require significant management resources; and                                                                                                             
|
| |  |  | The integration of Tokio Marines and Nichido Fires information systems and
business processes may adversely affect system stability or business operations
during the transition period.

These risks and other merger-related risks may adversely affect our
financial position and results of operations.

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.

Financial strength ratings, which are intended to measure an insurers
ability to meet policyholder obligations, are an important factor affecting
public confidence in most of our products and, as a result, our
competitiveness. A downgrade, or potential downgrade, of our operating
subsidiaries financial strength ratings may limit our ability to sell our
insurance and annuity products, adversely affect our reinsurance business and
adversely affect the terms and conditions of the business we conduct with
trading counterparties.

Inadequate or failed processes or systems, human factors or external events may
adversely affect our financial results.

Operational risk is inherent in our business and can manifest itself in
various ways, including business interruptions, information systems
malfunctions or failures, regulatory breaches, human errors, employee
misconduct and external fraud. These events can potentially result in
financial loss or harm to our reputation, or otherwise hinder our operational
effectiveness. Our management attempts to control this risk and keep
operational risk at appropriate levels. Notwithstanding these control
measures, operational risk is part of the business environment in which we
operate and we may incur losses from time to time due to operational risk.

Changes in existing, or new, Japanese regulations may materially impact our
business, results of operations and financial condition.

Our insurance business is subject to detailed, comprehensive regulation
and supervision in Japan. Changes in existing, or new, insurance laws and
regulations are unpredictable and beyond our control and may affect the way we
conduct our business and the products we may offer in Japan. These changes in
existing or new insurance laws and regulations may be more restrictive or may
result in higher costs than current requirements.

Litigation and regulatory investigations may adversely affect our financial
results.

We face risks of litigation and regulatory investigation and actions in
connection with our operations. Lawsuits, including regulatory actions, may
seek recovery of very large, indeterminate amounts or limit our
operations, and their existence and magnitude may remain unknown for
substantial periods of time. A substantial legal liability or a significant
regulatory action could have a material adverse effect on our business, results
of operations and financial condition.

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.

We are a joint stock corporation organized under the laws of Japan. All
of our directors, executive officers and corporate auditors reside outside of
the United States. Many of our and their assets are located in Japan and
elsewhere outside the United States. It may not be possible, therefore, for
U.S. investors to effect service of process within the United States upon us or
these persons or to enforce against us or these persons judgments obtained in
the U.S. courts predicated upon the civil liability provisions of the federal
securities laws of the United States. We

10



---



##### Table of Contents



believe that there is doubt as to the
enforceability in Japan, in original actions or in actions to enforce judgments
of U.S. courts, of liabilities predicated solely upon the federal securities
laws of the United States.

Since we are a holding company, our ability to pay operating and financing
expenses and dividends depends on the financial performance of Tokio Marine and
Nichido Fire. Our ability to pay dividends also depends on our own
dividend-paying capacity.

As a holding company, our ability to pay operating and financing expenses
and dividends depends primarily on the receipt of sufficient funds from our two
principal operating subsidiaries, Tokio Marine and Nichido Fire. Statutory
provisions regulate Tokio Marines and Nichido Fires ability to pay dividends.
If Tokio Marine and Nichido Fire are unable to pay dividends to us in a timely
manner, and in amounts sufficient to pay our operating and financing expenses,
to declare and pay dividends and to meet our other obligations, we may not be
able to pay dividends or we may need to seek other sources of liquidity.

Under the Commercial Code of Japan, we cannot declare or pay dividends
unless we meet specified financial criteria on a parent-only basis.
Generally, we will be permitted to pay dividends only if we have retained
earnings on a non-consolidated balance sheet basis as of the end of the
preceding fiscal year (determined in accordance with Japanese GAAP).

Risks Relating to Owning Our American Depositary Shares

Foreign exchange rate fluctuations may affect the U.S. dollar value of our
American depositary shares and dividends payable to holders of our American
depositary shares.

Market prices for our American depositary shares may fall if the value of
the yen declines against the U.S. dollar. In addition, the U.S. dollar amount
of cash dividends and other cash payments made to holders of our American
depositary shares would be reduced if the value of the yen declines against the
U.S. dollar.

A holder of American depositary shares has fewer rights than a shareholder and
must act through the depositary to exercise those rights.

The rights of shareholders under Japanese law to take various actions,
including voting their shares, receiving dividends and distributions, bringing
derivative actions, examining a companys accounting books and records, and
exercising dissenters rights, are available only to holders of record on a
companys register of shareholders. Because the depositary, through its
custodian agent, is the registered holder of the shares represented by our
American depositary shares, only the depositary is able to exercise those
rights in connection with the deposited shares. The depositary will make
efforts to vote the shares represented by our American depositary shares as
instructed by the holders of those American depositary shares and will pay to
those holders the dividends and distributions collected from us. However, a
holder of American depositary shares will not be able directly to bring a
derivative action, examine our accounting books and
exercise dissenters rights through the depositary unless the depositary
specifically undertakes to exercise those rights and is indemnified to its
satisfaction by the holder of American depositary shares for doing so.

There are restrictions on the withdrawal of certificated shares from our
depositary receipts facility.

Each of
our American depositary shares represents the right to receive .005 of one share of our common stock. Although we maintain a book-entry
fractional share register, a holder of American depositary shares must
surrender for cancellation depositary receipts evidencing 200 American
depositary shares or any integral multiple thereof in order to withdraw whole
shares of our common stock in certificated form. Each depositary receipt
evidencing our American depositary shares bears a legend to that effect. In
addition, although we have implemented procedures to permit us to repurchase
fractional share interests, holders of American depositary shares receiving
fractional shares of our common stock will need to combine those interests in
order to trade whole shares of our common stock on the Tokyo Stock Exchange or
the Osaka Securities Exchange.

11



---



##### Table of Contents






EXCHANGE RATES

Fluctuations in exchange rates between the Japanese yen and the U.S.
dollar and other currencies affect the U.S. dollar and other currency
equivalents of the yen price of our shares. These fluctuations also affect the
U.S. dollar amounts received on conversion of any cash dividends. The following
table shows noon buying rates for Japanese yen per $1.00 in New York City for
cable transfers in foreign currencies as certified for customs purposes by the
Federal Reserve Bank of New York for each period indicated:

|                     |      |  |            |        | 
|-------------------- | ---- |  | ---------- | ------ | 
|                     |      |  | Average(1)
|                     |      |  |           
|Year ended March 31: |      |  |            |       
|                     | 1999 |  | ¥          | 128.10 | 
|                     | 2000 |  |            | 110.02 | 
|                     | 2001 |  |            | 111.65 | 
|                     | 2002 |  |            | 125.64 | 
|                     | 2003 |  |            | 121.10 | 

|       |                                  |  |      |        |     |  |   |        | 
|------ | -------------------------------- |  | ---- | ------ | --- |  | - | ------ | 
|       |                                  |  | High |        | Low
|       |                                  |  |      |        |    
|Month: |                                  |  |      |        |     |  |   |       
|       | March 2003                       |  | ¥    | 116.47 |     |  | ¥ | 121.42 | 
|       | April 2003                       |  |      | 118.25 |     |  |   | 120.55 | 
|       | May 2003                         |  |      | 115.94 |     |  |   | 119.50 | 
|       | June 2003                        |  |      | 117.46 |     |  |   | 119.87 | 
|       | July 2003                        |  |      | 117.24 |     |  |   | 120.55 | 
|       | August 2003                      |  |      | 116.71 |     |  |   | 120.47 | 
|       | September (through September 17) |  |      | 115.99 |     |  |   | 117.41 | 



---

|(1) |  | Average rate for each fiscal year is calculated by using the average of
the exchange rates on the last day of each month during that year.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------

The noon buying rate for Japanese yen on September 17, 2003 was $1.00 =
¥115.99.

12



---



##### Table of Contents






MARKET PRICE INFORMATION

Our common stock is listed in Japan on the First Section of the Tokyo
Stock Exchange and on the First Section of the Osaka Securities Exchange.
Trading of our shares on these exchanges began on April 1, 2002.

American depositary shares, or ADSs, representing shares of our common
stock are currently traded in the United States on the Nasdaq National Market
under the symbol MLEA. Trading of our ADSs on the Nasdaq National Market
commenced on April 2, 2002. Each ADS represents .005 of one share of our common
stock. As of March 31, 2003, outstanding ADSs represented 3.56% of our
outstanding shares.

The following table sets forth, for the periods indicated, the reported
high and low sales price per share of our common stock on the First Section of
the Tokyo Stock Exchange, as well as the high and low sales price per ADS
quoted on the Nasdaq National Market. The table also includes high and low
market price quotations from the Tokyo Stock Exchange, translated in each case
into U.S. dollars per ADS at the Federal Reserve Bank of New Yorks noon buying
rate on the relevant date.

|                                 |  |                        |           |                      |  |                        |           |     |  |      |       |     |  |   |       |  |  |   |       |  |  |   |       | 
|-------------------------------- |  | ---------------------- | --------- | -------------------- |  | ---------------------- | --------- | --- |  | ---- | ----- | --- |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                 |  | Price per share on the |           | Translated into U.S. |  | Price per ADS on the  
|                                 |  | Tokyo Stock Exchange   |           | dollars per ADS(1)   |  | Nasdaq National Market
|                                 |  |                        |           |                      |  |                       
|                                 |  | High                   |           | Low                  |  | High                   |           | Low |  | High |       | Low
|                                 |  |                        |           |                      |  |                        |           |     |  |      |       |    
|                                 |  | (yen)                  |           | (US$)                |  | (US$)                 
|Year ended March 31, 2003        |  |                        |           |                      |  |                        |           |     |  |      |       |     |  |   |       |  |  |   |       |  |  |   |       | 
|First fiscal quarter             |  | ¥                      | 1,140,000 |                      |  | ¥                      | 910,000   |     |  | $    | 45.71 |     |  | $ | 34.45 |  |  | $ | 44.50 |  |  | $ | 35.00 | 
|Second fiscal quarter            |  |                        | 1,050,000 |                      |  |                        | 900,000   |     |  |      | 44.68 |     |  |   | 37.89 |  |  |   | 43.98 |  |  |   | 37.84 | 
|Third fiscal quarter             |  |                        | 985,000   |                      |  |                        | 836,000   |     |  |      | 40.13 |     |  |   | 34.76 |  |  |   | 39.68 |  |  |   | 34.51 | 
|Fourth fiscal quarter            |  |                        | 898,000   |                      |  |                        | 706,000   |     |  |      | 37.49 |     |  |   | 30.15 |  |  |   | 37.33 |  |  |   | 29.76 | 
|Year ended March 31, 2004        |  |                        |           |                      |  |                        |           |     |  |      |       |     |  |   |       |  |  |   |       |  |  |   |       | 
|First fiscal quarter             |  | ¥                      | 943,000   |                      |  | ¥                      | 725,000   |     |  | $    | 40.11 |     |  | $ | 30.66 |  |  | $ | 39.93 |  |  | $ | 30.75 | 
|Month                            |  |                        |           |                      |  |                        |           |     |  |      |       |     |  |   |       |  |  |   |       |  |  |   |       | 
|March 2003                       |  | ¥                      | 810,000   |                      |  | ¥                      | 706,000   |     |  | $    | 34.34 |     |  | $ | 30.15 |  |  | $ | 33.75 |  |  | $ | 29.76 | 
|April 2003                       |  |                        | 789,000   |                      |  |                        | 725,000   |     |  |      | 32.76 |     |  |   | 30.66 |  |  |   | 32.89 |  |  |   | 30.75 | 
|May 2003                         |  |                        | 865,000   |                      |  |                        | 737,000   |     |  |      | 37.00 |     |  |   | 30.94 |  |  |   | 36.78 |  |  |   | 31.51 | 
|June 2003                        |  |                        | 943,000   |                      |  |                        | 848,000   |     |  |      | 40.11 |     |  |   | 35.90 |  |  |   | 39.93 |  |  |   | 35.89 | 
|July 2003                        |  |                        | 1,160,000 |                      |  |                        | 924,000   |     |  |      | 48.64 |     |  |   | 38.68 |  |  |   | 48.54 |  |  |   | 39.60 | 
|August 2003                      |  |                        | 1,280,000 |                      |  |                        | 1,080,000 |     |  |      | 53.66 |     |  |   | 45.56 |  |  |   | 53.55 |  |  |   | 45.20 | 
|September (through September 17) |  |                        | 1,440,000 |                      |  |                        | 1,170,000 |     |  |      | 62.07 |     |  |   | 50.22 |  |  |   | 58.97 |  |  |   | 49.75 | 



---

|(1) |  | U.S. dollar amounts have been translated from yen at the Federal Reserve
Bank of New Yorks noon-buying rate as of the relevant high and low
quotation date or the last available date prior thereto.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The closing price of our shares of common stock on the Tokyo Stock
Exchange as of September 17, 2003 was ¥1,390,000.

The above prices for our ADSs are based on inter-dealer prices reported by
Nasdaq and do not include retail mark-ups, retail mark-downs or commissions.

13



---



##### Table of Contents






DIVIDEND POLICY

In June 2003, we declared and paid cash dividends on shares of our common
stock in the amount of ¥10,000 per share, or ¥18,519 million in the aggregate,
in respect of our fiscal year ended March 31, 2003.

As a holding company, our ability to pay dividends in the future will
depend primarily on our receipt of sufficient funds from our two principal
operating subsidiaries, Tokio Marine and Nichido Fire. In addition, under the
Commercial Code of Japan, we cannot declare or pay dividends unless we meet
specified financial criteria on a parent-only basis. Generally, we will be
permitted to pay dividends only if we have retained earnings on a
non-consolidated balance sheet basis as of the end of the preceding fiscal year
(determined in accordance with Japanese GAAP). See Risk Factors  Risks
Relating to Our Business and Description of Common Stock  Dividends.

When apportioning profits in respect of any given fiscal year, we expect
to pay stable dividends on our common stock, subject to having retained
earnings and to providing sufficient capital to meet our business needs.




MAJOR SHAREHOLDERS

The identities of shareholders in companies listed on a Japanese stock
exchange, as well as their shareholdings, must be publicly reported in Japan
under the following circumstances:



| |  |  | Reporting by Shareholders. As explained in Regulation  Reporting of
Substantial Shareholdings, any person who becomes a beneficial owner of more
than 5% of the total issued shares of a company listed on a Japanese stock
exchange must file a public report concerning their shareholdings with the
related local finance bureau.                                       
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Reporting by Listed Companies.Under the Securities and Exchange Law, any
company whose shares are listed on a Japanese stock exchange must publicly
report information about its major shareholders. We are required to make this
disclosure, which generally includes information about a companys ten largest
shareholders of record, as of each March 31 and September 30.

Our ten largest shareholders of record as of March 31, 2003, expressed as
a percentage of the total number of our shares then outstanding, were as
follows:

|                                                        |       |             |           |                    |                     |  |     |      |  
|------------------------------------------------------- | ----- | ----------- | --------- | ------------------ | ------------------- |  | --- | ---- | -
|                                                        |       |             | Number
of |                    | Percentage of total
|Shareholder                                             |       | shares held |           | shares outstanding
|                                                        |       |             |           |                   
|The Master Trust Bank of Japan, Ltd. (Trust Account)    |       |             | 111,762   |                    |                     |  | 6.0 | %   
|Japan Trustee Services Bank, Ltd. (Trust Account)       |       |             | 77,995    |                    |                     |  | 4.2 | %   
|The Bank of Tokyo-Mitsubishi, Ltd.                      |       |             | 74,134    |                    |                     |  | 4.0 | %   
|Nats Cumco(1)                                           |       |             | 66,093    |                    |                     |  | 3.6 | %   
|State Street Bank and Trust Company                     |       |             | 52,730    |                    |                     |  | 2.8 | %   
|Meiji Life Insurance Company                            |       |             | 41,391    |                    |                     |  | 2.2 | %   
|Mizuho Corporate Bank, Ltd.                             |       |             | 30,959    |                    |                     |  | 1.7 | %   
|Trust & Custody Services Bank, Ltd.(2)                  |       |             | 28,148    |                    |                     |  | 1.5 | %   
|The Chase Manhattan Bank N.A. London SL Omnibus Account |       |             | 26,833    |                    |                     |  | 1.4 | %   
|The Mitsubishi Trust and Banking Corporation            |       |             | 26,638    |                    |                     |  | 1.4 | %   
|                                                        |       |             |           |                    |                     |  |     |     
|                                                        | Total |             |           | 536,683            |                     |  |     | 28.9 | %
|                                                        |       |             |           |                    |                     |  |     |     



---

|(1) |  | Nats Cumco is the corporate nominee holder of common stock deposited for
the issuance of ADRs.       
|--- |  | -----------------------------------------------------------------------------------------------------
|   
|(2) |  | As trustee for Mizuho Trusts retirement benefits trust account for
Mitsubishi Heavy Industries, Ltd.

None of our shareholders listed above has voting rights that are different
from voting rights of our other shareholders.

14



---



##### Table of Contents



As of March 31, 2003, we had 105,364 shareholders of record, of which
104,759 were Japanese record holders. As of the same date, 74.1% of our shares
were owned by Japanese record holders.

We are not aware of any arrangements that may result in a change of
control of us.

15



---



##### Table of Contents






BUSINESS

Group Overview

We were formed on April 2, 2002 as the holding company for Tokio Marine
and Nichido Fire. Since being formed, we have spun off various subsidiaries
of Tokio Marine and Nichido Fire, so that those subsidiaries are directly owned
by us. See  Subsidiaries and Affiliates.

Tokio Marine is the oldest and largest property and casualty insurance
company in Japan. It underwrites the full range of property and casualty
insurance coverage available in Japan, including voluntary automobile,
compulsory automobile liability, fire and allied lines, personal accident,
cargo and transit, and hull insurance. Tokio Marine underwrites some lines of
property and casualty insurance coverage overseas. It also accepts and cedes
reinsurance for certain lines of property and casualty insurance coverage.

Tokio Marine was originally founded in 1879. In 1944, it was consolidated
with The Meiji Fire and Marine Insurance Company, Limited and The Mitsubishi
Marine and Fire Insurance Company, Limited. Tokio Marine was incorporated as a
joint stock corporation (kabushiki kaisha) under the Commercial Code of Japan
on March 20, 1944.

Nichido Fire was founded in Osaka in 1914. Its original core focus was to
offer insurance coverage to individuals and households located in regional
markets throughout Japan, primarily through its own direct marketing channels.
Nichido Fires simplified fire insurance plan, which provided a refund at
maturity if no claims were made, contributed greatly to the growing popularity
of fire insurance policies among Japanese households.

Nichido Fire now underwrites the full range of property and casualty
insurance coverage available in Japan, including voluntary automobile,
compulsory automobile liability, fire and allied lines, and personal accident
insurance. It also accepts and cedes reinsurance for certain lines of property
and casualty insurance coverage.

Formation of Millea Holdings

On September 28, 2001, the boards of directors of Tokio Marine and Nichido
Fire agreed to integrate the management and businesses of the two companies
under a single holding company to be named Millea Holdings, Inc., a joint stock
corporation to be organized under the laws of Japan. The two boards also
approved the basic terms on which holders of shares of Tokio Marine common
stock and Nichido Fire common stock would receive shares of common stock of the
holding company in a statutory share transfer under Japanese law. This proposal
was approved by Tokio Marine and Nichido Fire shareholders on December 20,
2001. All required governmental and regulatory approvals were also subsequently
obtained by the two companies.

We were formed as the holding company for Tokio Marine and Nichido Fire,
and the statutory share transfer became effective, on April 2, 2002. Upon our
formation and the effectiveness of the statutory share transfer:



| |  |  | Issued and outstanding shares of Tokio Marine common stock were
converted into shares of our common stock in the ratio of 1,000 Tokio
Marine shares for 1.00 of our shares;                                                                                                                                                                                                                                  
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Issued and outstanding shares of Nichido Fire common stock were
converted into shares of our common stock in the ratio of 1,000 Nichido
Fire shares for 0.69 of our shares;                                                                                                                                                                                                                                  
|
| |  |  | Shareholders of Tokio Marine and Nichido Fire whose names appeared
in the registers of shareholders of the two companies as of March 31,
2002 were allotted our shares in amounts based on the ratios described
above, and these amounts (including fractional shares of our common
stock representing any multiple of .01 of one share) were reflected in
our registers of shares and fractional shares; and
|
| |  |  | Fractional shares of our common stock representing less than .01 of
one share that would otherwise have been allotted to former
shareholders of Tokio Marine and Nichido Fire were instead cashed out
by us.                                                                                                                                                                                                 

After the statutory share transfer became effective, former Tokio Marine
shareholders held approximately 83% of the outstanding shares of our common
stock and former Nichido Fire shareholders held approximately 17%.

16



---



##### Table of Contents



Termination of Proposed Integration of Asahi Life and Kyoei Fire

Asahi Life

On January 10, 2003, we and Asahi Mutual Life Insurance Co. jointly
announced that both companies had agreed to terminate the proposed business
integration of Asahi Life under Millea Holdings, which had initially been
announced in January 2001. The joint announcement indicated that Asahi Life
decided to postpone its plan to demutualize around 2004 because Asahi Life
believed that demutualization could adversely affect its ability to distribute
profits to policyholders and was not in the best interest of its policyholders.
Asahi Life requested us to cancel the proposed business integration of Asahi
Life under Millea Holdings, which had been conditioned on, among other things,
Asahi Lifes demutualization. In order to respect Asahi Lifes business
decision, we agreed to Asahi Lifes request.

Kyoei Fire

On August 22, 2002, we and The Kyoei Mutual Fire & Marine Insurance Co.
jointly announced that both companies had agreed to terminate the proposed
business integration of Kyoei Fire under Millea Holdings, which had initially
been announced in March 2001. The joint announcement indicated that Kyoei Fire
received an offer from the National Mutual Insurance Federation of Agricultural
Cooperatives of Japan, or JA-Kyosairen, whereby Kyoei Fire would become a
subsidiary of JA-Kyosairen. The joint announcement also indicated that Kyoei
Fire had determined that its arrangement with JA-Kyosairen would allow Kyoei
Fire to more fully utilize its strengths and special characteristics in the
future. In order to respect Kyoei Fires business decision to proceed with this
arrangement, we agreed to accept Kyoei Fires request to terminate its proposed
integration under Millea Holdings.

Recent Developments

Proposed Merger of Tokio Marine and Nichido Fire

On March 28, 2003, we, Tokio Marine and Nichido Fire jointly announced the
proposed merger of Tokio Marine and Nichido Fire. The merger is scheduled to
be completed on October 1, 2004, subject to the approval of the relevant
regulatory authorities. The English-language name of the new combined entity
will be Tokio Marine & Nichido Fire Insurance Co., Ltd., referred to as Tokio
Marine & Nichido. Tokio Marine will be the surviving company.

The objectives of the merger are to maximize the corporate value of Millea
Holdings by creating synergies, promoting a growth strategy which combines the
strengths of both companies and increasing efficiency through a larger scale of
business, and to further reduce costs. The primary business mission of Tokio
Marine & Nichido will be to provide customers with the highest quality products
and services. In order to achieve this objective, three in-house companies are
planned to be established for personal, commercial and automobile dealer
insurance operations. The in-house company system aims to improve the expertise
and flexibility in each sales channel and market, thereby maximizing the
strengths of each business. Based on this strategy, Tokio Marine & Nichido
intends to further increase customer satisfaction.

The integration of Tokio Marines and Nichido Fires products, back
offices and systems has already begun. The two companies have already
integrated their automobile insurance products, which is the largest class of
business and are continuing to integrate their products and services in fire,
personal accident and other classes of insurance business. We understand that
the integration of products, back offices and systems carries significant
management risk, and we have therefore played, and expect to continue to play,
a significant role in managing the integration.

Proposed Merger of Tokio Marine Life and Nichido Life

On March 28, 2003, we, Tokio Marine Life and Nichido Life announced the
proposed merger of Tokio Marine Life and Nichido Life. The merger is scheduled
to be completed on October 1, 2003, subject to the approval of the relevant
regulatory authorities. The English-language name of the new combined entity
will be Tokio Marine and Nichido Life Insurance Co., Ltd. Tokio Marine Life
will be the surviving company.

17



---



##### Table of Contents



Business Alliance and Capital Tie-Up Between Tokio Marine and Nisshin Fire

In March 2003, Tokio Marine agreed with The Nisshin Fire and Marine
Insurance Company, Limited to form a business alliance for products and
services and to pursue a capital tie-up. By the end of March 2005, Tokio Marine
intends to acquire approximately one-third of the total outstanding shares of
Nisshin Fire, which is a publicly traded company in Japan. We believe that this
business alliance and capital tie-up will, among other things:



| |  |  | Further strengthen the cooperative relationship between Tokio Marine and Nisshin Fire;                                                                                     
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Allow both companies to acquire relevant expertise; and                                                                                                                    
|
| |  |  | Provide support to Nisshin Fires retail sales strategy, while
opening up sales opportunities for our life insurance products through
Nisshin Fires distribution channels.

Objects and Goals

Our objects and goals, as stated in article 2 of our articles of
incorporation, are to engage in the following businesses as an insurance
holding company:



| |  |  | Management of non-life insurance companies;                                                                                                        
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Management of life insurance companies;                                                                                                            
|
| |  |  | Management of specialized securities companies;                                                                                                    
|
| |  |  | Management of foreign companies engaged in the insurance business;                                                                                 
|
| |  |  | Management of any other company which is or may become our
subsidiary in accordance with the provisions of the Insurance Business
Law of Japan; and
|
| |  |  | Any other business pertaining to the foregoing listed businesses.                                                                                  

Principal Executive Offices

Our principal executive offices are located at Otemachi First Square, West
10F, 5-1, Otemachi 1-chome, Chiyoda-ku, Tokyo 100-0004, Japan, and our
telephone number is 81-3-6212-3333.

Business Goals and Strategies

In November 2002, we announced our current medium- and long-term business
strategy. By implementing our strategy for each business segment, we aim to
maximize corporate value by seeking the optimum business portfolio and improve
our return on equity.

Domestic Property and Casualty Insurance Business

Our principal revenue base is our domestic property and casualty insurance
business. We aim to increase the revenues of this business by strengthening
our underwriting operations and further improving efficiencies by:



| |  |  | Continuing our management integration process and seeking to
further reduce expenses of Tokio Marine and Nichido Fire and realize
the synergies of both companies. Specifically, we plan to move ahead
with the integration of products, administrative operations and
systems, promote concentration of overhead divisions and integrate
claims investigation offices. We also plan to consolidate our sales
bases and concentrate and further develop our investment and
asset-liability management functions. We plan to merge Tokio Marine
and Nichido Fire on October 1, 2004, subject to receipt of necessary
governmental approvals.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Seeking to increase sales of third sector products, which we
believe is a market with significant growth potential, and increase
over-the-counter sales of insurance products through banks.                                                                                                                                                                                                                                                                                                                                                                                                                                               

18



---



##### Table of Contents





| |  |  | Developing comprehensive insurance products that cover a variety of
risks for individuals and corporate customers such as Cho Hoken and
Cho Business Insurance. See  Launch of Cho Hoken and Cho
Business Insurance.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Restructuring our sales network and seeking to build a more
efficient and higher quality sales network by expanding the number of
large-scale agents and making direct capital investment in some of our
agents.               

Domestic Life Insurance Business

We plan to expand our domestic life insurance business as one of our core
businesses. We aim to strengthen our life insurance subsidiaries and seek
revenue growth in this business by:



| |  |  | Enhancing efficiencies in business management and achieving greater
productivity. We made Tokio Marine Life and Nichido Life our direct
subsidiaries in April 2003, and we plan to merge the two life insurance
subsidiaries on October 1, 2003, subject to receipt of necessary
governmental approvals.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Shifting more of our management resources to the life insurance
business and seeking to implement the following growth strategies:                                                                                                                                                                      



| |  |  | Strengthen cross-marketing;                                                               
| | - |  | ------------------------------------------------------------------------------------------
|
| |  |  | Expand our sales channels dedicated exclusively to the distribution of life insurance; and
|
| |  |  | Promote sales through banks.                                                              

Overseas Insurance Business (Including Overseas Reinsurance Business)

To diversify geographically and realize stable revenue growth, we aim to
expand our overseas insurance business by focusing on the Asian local insurance
market, which we believe has high growth potential and profitability. We plan
to: designate a main entity to promote the Asian insurance business. Millea
Asia Pte. Ltd. was launched in December 2002 in Singapore as our Asian regional
headquarters. Millea Asia is in charge of planning our business growth
strategy in the Asian region (excluding Japan), including through mergers,
acquisitions and business tie-ups, and managing our local subsidiaries. It
intends to aggressively pursue the expansion of the business with a focus on
what we believe are growing areas, such as China, Taiwan, Thailand, Malaysia
and India.

In connection with our overseas reinsurance business, we also intend to
swap natural disaster risk and underwrite reinsurance of catastrophe risk
through Tokio Millenium Re Ltd. in order to achieve stable revenue growth by
globally diversifying our underwriting risk.

Asset Management and Other Businesses

We intend to expand our asset management business and other businesses,
which we believe have significant potential for synergies with our insurance
business.

Asset Management Business

Utilizing the expertise acquired in the investment operations of our
insurance companies, we intend to pursue the following measures to further
increase our assets and to increase revenue:



| |  |  | In the retail market, we aim to establish an investment
trust/defined contribution business. We also plan to incorporate asset
management functions into Cho Hoken in the future.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In the wholesale market, we plan to actively launch new products in
alternative investment areas such as private equity to expand our
product line-up.                             
|
| |  |  | We intend to expand our asset management operations globally
through Tokio Marine Asset Management Co., Ltd.                                                                       

19



---



##### Table of Contents



Other Businesses

We plan to selectively expand our insurance-related businesses such as
health care and senior citizen-related businesses, the risk consulting business
and comprehensive human resource-related services, as well as other existing
related businesses, where we believe opportunities for growth exist.

Property and Casualty Insurance

Property and Casualty Insurance Lines

We engage primarily in underwriting voluntary automobile, compulsory
automobile liability, fire and allied lines (including earthquake), personal
accident, cargo and transit, hull and other lines of property and casualty
insurance through Tokio Marine and Nichido Fire, principally in Japan. The
following table, prepared on a U.S. GAAP basis, shows a breakdown of our direct
premiums written by our principal lines of insurance for each of the periods
indicated:

|                                   |       |   |                      |           |         |   |         |           |  |   |         |           | 
|---------------------------------- | ----- | - | -------------------- | --------- | ------- | - | ------- | --------- |  | - | ------- | --------- | 
|                                   |       |   | Year ended March 31,
|                                   |       |   |                     
|                                   |       |   | 2003(1)              |           | 2002(1) |   | 2001(1)
|                                   |       |   |                      |           |         |   |        
|                                   |       |   | (yen in millions)   
|Automobile                         |       | ¥ | 909,341              |           |         | ¥ | 708,532 |           |  | ¥ | 695,711 |          
|Compulsory Automobile Liability(2) |       |   | 308,641              |           |         |   | 193,557 |           |  |   | 191,811 |          
|Fire and Allied Lines(3)           |       |   | 290,189              |           |         |   | 198,155 |           |  |   | 189,755 |          
|Personal Accident                  |       |   | 157,434              |           |         |   | 125,183 |           |  |   | 130,608 |          
|Cargo and Transit                  |       |   | 67,660               |           |         |   | 59,964  |           |  |   | 59,317  |          
|Hull                               |       |   | 19,173               |           |         |   | 19,451  |           |  |   | 16,554  |          
|Other(4)                           |       |   | 235,025              |           |         |   | 204,773 |           |  |   | 184,605 |          
|                                   |       |   |                      |           |         |   |         |           |  |   |         |          
|                                   | Total |   | ¥                    | 1,987,463 |         |   | ¥       | 1,509,615 |  |   | ¥       | 1,468,361 | 
|                                   |       |   |                      |           |         |   |         |           |  |   |         |          



---

|(1) |  | Our U.S. GAAP consolidated financial statements for the fiscal year ended
March 31, 2003, from which some of the data in this table are derived,
reflect the inclusion of Nichido Fire and its consolidated subsidiaries
from and after the date of our formation on April 2, 2002. Accordingly,
the amounts shown in this table for the fiscal year ended March 31, 2003
are not directly comparable to the amounts shown for prior fiscal years.
See Managements Discussion and Analysis of Financial Condition and
Results of Operations  Overview  Business Combination.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Japanese law requires that all automobiles be covered by compulsory
automobile liability insurance. See note 1 to our consolidated financial
statements.                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(3) |  | Includes earthquake insurance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(4) |  | Major Other lines of insurance are liability, aviation, workers
compensation, movables comprehensive, machinery breakdown, contractors
all-risk, and credit and guarantee insurance and surety bonds.                                                                                                                                                                                                                                                                                                                                                                        

The following table, prepared on a U.S. GAAP basis, shows a breakdown of
each key component of our property and casualty insurance premiums written for
the year ended March 31, 2003:

|                                   |       |   |                                       |           |             |   |             |         |                         |   |         |         |  |   |         |           |  |  |       |        |  
|---------------------------------- | ----- | - | ------------------------------------- | --------- | ----------- | - | ----------- | ------- | ----------------------- | - | ------- | ------- |  | - | ------- | --------- |  |  | ----- | ------ | -
|                                   |       |   | Direct                                |           | Reinsurance |   | Reinsurance |         | Net premiums written(1)
|                                   |       |   | premiums                              |           | premiums    |   | premiums    |         |                        
|                                   |       |   | written                               |           | assumed     |   | ceded       |         | Amount                  |   | %      
|                                   |       |   |                                       |           |             |   |             |         |                         |   |        
|                                   |       |   | (yen in millions, except percentages)
|Automobile                         |       | ¥ | 909,341                               |           |             | ¥ | 6,374       |         |                         | ¥ | 17,596  |         |  | ¥ | 898,119 |           |  |  | 47.31 | %     
|Compulsory Automobile Liability(2) |       |   | 308,641                               |           |             |   | 212,420     |         |                         |   | 240,178 |         |  |   | 280,883 |           |  |  | 14.79 | %     
|Fire and Allied Lines(3)           |       |   | 290,189                               |           |             |   | 36,630      |         |                         |   | 67,838  |         |  |   | 258,981 |           |  |  | 13.64 | %     
|Personal Accident                  |       |   | 157,434                               |           |             |   | 2,954       |         |                         |   | 5,311   |         |  |   | 155,077 |           |  |  | 8.17  | %     
|Cargo and Transit                  |       |   | 67,660                                |           |             |   | 4,458       |         |                         |   | 9,745   |         |  |   | 62,373  |           |  |  | 3.29  | %     
|Hull                               |       |   | 19,173                                |           |             |   | 9,390       |         |                         |   | 14,363  |         |  |   | 14,200  |           |  |  | 0.75  | %     
|Other(4)                           |       |   | 235,025                               |           |             |   | 53,121      |         |                         |   | 59,222  |         |  |   | 228,924 |           |  |  | 12.05 | %     
|                                   |       |   |                                       |           |             |   |             |         |                         |   |         |         |  |   |         |           |  |  |       |       
|                                   | Total |   | ¥                                     | 1,987,463 |             |   | ¥           | 325,347 |                         |   | ¥       | 414,253 |  |   | ¥       | 1,898,557 |  |  |       | 100.00 | %
|                                   |       |   |                                       |           |             |   |             |         |                         |   |         |         |  |   |         |           |  |  |       |       

20



---



##### Table of Contents





---

|(1) |  | Net premiums written = direct premiums written + reinsurance premiums
assumed  reinsurance premiums ceded.                                                                                           
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Japanese law requires that all automobiles be covered by compulsory
automobile liability insurance. See note 1 to our consolidated financial
statements.                                              
|   
|(3) |  | Includes earthquake insurance.                                                                                                                                                                        
|   
|(4) |  | Major Other lines of insurance are liability, aviation, workers
compensation, movables comprehensive, machinery breakdown, contractors
all-risk, credit and guarantee insurance, and surety bonds.

Voluntary Automobile

Automobile ownership in Japan has grown over the years and there is
currently no other country in the world, except the United States, where a
greater number of automobiles is owned. According to statistics published by
the Japanese Automobile Inspection and Registration Association, as of May 31,
2003, approximately 77.0 million automobiles were owned in Japan. In line with
high automobile ownership, the number of automobile accidents and the number of
persons injured or killed in automobile accidents have remained at high levels
despite various social efforts to reduce the number of accidents. To further
the public policy of reducing losses from automobile accidents, the Automobile
Liability Security Law provides for owner-operators tort liabilities that are
more strict than those under the Japanese Civil Codes general tort theory.
Over the years, the average amount of damages awarded by Japanese courts in
liability claim cases stemming from automobile accidents has increased, as has
the publics awareness of the risks involved in automobile ownership. This has
led to a substantial increase in the demand for automobile insurance offered by
Japanese non-life insurance companies, including us. According to data gathered
by The General Insurance Association of Japan, the industry-wide aggregate
amount of direct premiums written for voluntary automobile insurance in Japan
rose from ¥2,762.3 billion for the year ended March 31, 1992 to ¥3,605.4
billion for the year ended March 31, 2003.

Until 1998, automobile insurance in Japan generally consisted of one or
more of the following principal types of coverage:



| |  |  | Bodily Injury Liability covers a policyholders liability for
bodily injuries to others resulting from the ownership, use or
maintenance of an automobile. Compulsory automobile liability insurance
(discussed below) also covers bodily injury liability; however the
compulsory insurance will not pay above a certain maximum amount
determined by Japanese law. This bodily injury liability coverage
supplements the compulsory insurance scheme by paying the amount of
liability in excess of the maximum amount covered by compulsory
insurance. The per-person insured amount under this coverage is
generally unlimited.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Property Damage Liability covers liability for property damage
resulting from the ownership, use or maintenance of an automobile
included in the policy. One type of damage typically covered by this
policy is damage to anothers vehicle as a result of a collision.                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | Riders Bodily Injury covers bodily injuries of drivers and
passengers resulting from collisions or other accidents. Like the
self-incurred accident coverage, a fixed amount, without regard to the
actual amount of damage, is payable according to a pre-set payment
table.                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | Physical Damage covers physical damage to automobiles resulting
from collisions, thefts or other accidents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

In 1998, Tokio Marine introduced into the Japanese market an innovative
voluntary automobile insurance product called the Tokio Automobile Policy, or
TAP. TAP, represented a breakthrough from the pre-liberalized days of
standardized premiums and services in Japan. Our objective in developing TAP
was to create an indemnity product that met a wide range of customer
requirements. TAPs most notable feature is the offering of bodily injury
indemnity insurance. If a policyholder is injured in an automobile accident, a
full settlement is paid to the injured policyholder, regardless of who was at
fault. Together with broader coverage in connection with any physical damage to
automobiles, TAP offers wide compensation coverage that was not previously
available under conventional automobile insurance policies. TAP has proven to
be an extremely successful product, and we have

21



---



##### Table of Contents



continuously improved on it. In 2000, Tokio Marine integrated all of its
automobile insurance products into TAP, so that all of the features of a TAP
policy were available to its automobile insurance policyholders.

In 2000, Nichido Fire launched Shimpai Gomuyo, a comprehensive
automobile insurance product with bodily injury indemnity coverage similar to
TAP. In 2001, Nichido Fire integrated all of its automobile insurance products
into Shimpai Gomuyo.

In August 2003, we launched a risk-differentiated automobile product to
strengthen price-competitiveness and to meet a wide variety of customer needs.
Tokio Marines TAP Navi and Nichido Fires Shimpai Gomuyo Navi offer
insurance coverage for a premium based on characteristics of each customer such
as usage of insured automobile, status of the drivers license in the public
classification scheme and age.

We classify our customers for automobile insurance into two broad
categories: fleet customers who take out policies each covering ten or more
automobiles, and non-fleet customers who take out policies each covering less
than ten vehicles. Fleet customers generally include medium-size and large
businesses, and non-fleet customers include individual and household customers,
as well as small businesses. Different sets of premium rate tables apply to
fleet and non-fleet customers.

Compulsory Automobile Liability

Under the Automobile Liability Security Law, all automobiles operated on
public roads in Japan (with certain minor exceptions) are required to be
covered by compulsory automobile liability insurance, or CALI, which covers
liability for bodily injuries. This type of insurance coverage is required in
order to register an automobile and for periodic automobile inspections.
Generally, if an automobile is not registered, it cannot legally be operated in
Japan. Compulsory automobile liability insurance is designed to serve public
policy by ensuring that people injured in automobile accidents receive a
minimum payment for their injuries from those who are legally responsible. In
light of this public policy, licensed non-life insurance companies in Japan
cannot refuse to issue compulsory automobile liability policies except in
limited cases.

Under these compulsory insurance policies, the maximum amount of coverage
for accidents resulting in death or permanent disability is limited to ¥30
million per person. The maximum amount for accidents resulting in other
injuries is ¥1.2 million per person. Individuals who wish to purchase coverage
beyond these maximum amounts may purchase automobile insurance with a bodily
injury liability coverage on a voluntary basis (as described above). In order
to reduce inconveniences caused by being covered by compulsory and voluntary
policies, an insured can submit claims for indemnity under both the compulsory
and voluntary policies to the insurance company that wrote the voluntary
policy. Until April 1, 2002, 60% of all CALI insurance written was required by
statute to be reinsured with the government. Since April 1, 2002, all CALI
premium portfolios are reinsured with the CALI Reinsurance Pool in which all
insurers operating CALI business participate.

Fire and Allied Lines

Fire and allied lines insurance is one of the traditional lines of
insurance we write. Fire and allied lines insurance (excluding earthquake
insurance, which is described below) generally covers dwelling houses, shops,
offices, factories and warehouses and their contents against loss or damage
caused by fire, flood, storms, lightning, explosion, theft and other risks. In
addition, some policies cover personal accident, third-party liability and loss
of income caused by these kinds of events. Some of the products offered under
this insurance line are deposit-type insurance.

This type of insurance is written for individual customers to safeguard
their personal financial security and for business customers to protect their
on-going business operations. This type of insurance also provides mortgage
lenders, whether residential or commercial, with protection against loss or
damage to mortgaged properties. While the demand for this type of insurance has
been steady, its relative share of our overall business has declined as
voluntary automobile and compulsory automobile liability insurance and personal
accident insurance have grown at a faster pace, due mainly to the rapid
motorization of Japanese society.

22



---



##### Table of Contents



Under fire and allied lines insurance, insurers may be required to make
indemnity payments of a huge aggregate amount in the event of a disastrously
large windstorm, flood or other catastrophe. The following table shows
information concerning major windstorms and floods in Japan that occurred
during the last thirty years.

|                                              |  |                |  |           |         |           |  |  |         | 
|--------------------------------------------- |  | -------------- |  | --------- | ------- | --------- |  |  | ------- | 
|                                              |  |                |  | Buildings |         | Buildings
|Windstorms and floods                         |  | Date           |  | damaged   |         | flooded  
|                                              |  |                |  |           |         |          
|Typhoon No. 17 and
accompanying weather
front |  | September 1976 |  |           | 11,193  |           |  |  | 442,317 | 
|Typhoon No. 20                                |  | October 1979   |  |           | 7,523   |           |  |  | 37,450  | 
|Downpour, July 1982                           |  | July 1982      |  |           | 851     |           |  |  | 52,165  | 
|Typhoon No. 10 and
accompanying weather
front |  | August 1982    |  |           | 5,312   |           |  |  | 113,902 | 
|Typhoon No. 8 and
accompanying weather
front  |  | September 1982 |  |           | 651     |           |  |  | 136,308 | 
|Downpour, July 1983                           |  | July 1983      |  |           | 3,669   |           |  |  | 17,141  | 
|Typhoon No. 10                                |  | August 1986    |  |           | 2,683   |           |  |  | 105,072 | 
|Typhoon No. 19                                |  | September 1991 |  |           | 170,447 |           |  |  | 22,965  | 
|Downpour, August 1993                         |  | August 1993    |  |           | 824     |           |  |  | 21,987  | 
|Typhoon No. 18                                |  | September 1999 |  |           | 89,344  |           |  |  | 18,001  | 
|Hailstorm, May 2000                           |  | May 2000       |  |           | 24,692  |           |  |  | 43      | 
|Downpour, September 2000                      |  | September 2000 |  |           | 312     |           |  |  | 71,291  | 



---

|Source: |  | Non-Life Insurance in Japan Fact Book 2001-2002, The Marine and Fire
Insurance Association of Japan.
|------- |  | ------------------------------------------------------------------------------------------------------

We paid insurance claims of ¥123.2 billion under fire and allied lines
insurance with respect to Typhoon No. 19, which occurred in September 1991.
This is the largest amount we paid during the last thirty years for a single
catastrophic event. Prior to this thirty-year period 
particularly when public and non-public measures against disasters were
underdeveloped  Japan had experienced typhoons and windstorms that caused
heavier damage than those listed in the above table. For example, the Isewan
Typhoon of 1959 resulted in over 800,000 damaged buildings and over 300,000
flooded buildings.

Earthquake

Japan is subject to earthquakes. Earthquake risk, however, is not easily
underwritten by non-life insurance companies in Japan. This is because the loss
that may result from one earthquake could be disastrously large and because the
lack of adequate statistical data makes the actuarial analysis ineffective. In
1966, the Japanese government enacted the Law Concerning Earthquake Insurance,
which implemented a government-sponsored earthquake insurance program for
dwellings and their contents. The program incorporates a partial reinsurance
arrangement with the government and limits the maximum insured amount.

We write earthquake insurance under the Law Concerning Earthquake
Insurance as an extension of fire insurance coverage for dwellings and their
contents. The insured amount for earthquake coverage under these policies does
not exceed a range of 30% to 50% of the insured amount for fire insurance
coverage, up to a maximum amount of ¥50 million for the dwelling and ¥10
million for its contents. These maximum amounts are all prescribed by law. For
the year ended March 31, 2003, our direct premiums written for earthquake
insurance policies under the Law Concerning Earthquake Insurance represented
8.5% of our direct premiums written for fire and allied lines.

Under the Law Concerning Earthquake Insurance, the aggregate amount of
indemnity payable by all insurers to all policyholders for any one occurrence
is limited to ¥4,500 billion. The earthquake risks written by direct insurers,
including us, are wholly reinsured with the Japan Earthquake Reinsurance
Company Limited, or JER, a private reinsurer in Japan owned by major Japanese
non-life insurance companies, including us. This portfolio is protected by (1)
an excess of loss reinsurance cover arranged between JER and the Japanese
government and (2) another excess of loss reinsurance cover arranged among JER,
Toa Reinsurance Company, Limited, or Toa, which is another private reinsurer in
Japan, and the original direct insurers, including us, which participate in
this insurance cover

23



---



##### Table of Contents



through retrocession agreements with JER. The maximum amount to be paid by
JER for any one occurrence, net of the amount covered by reassurance ceded, is
¥380.0 billion. The maximum amount to be paid by the Japanese government for
any one occurrence is ¥3,752.7 billion. The maximum aggregate amount to be paid
by the original direct insurers and Toa for any occurrence according to the
share specified under the retrocession agreements is ¥367.3 billion. Our share
of that amount is approximately 29.3%. The Law Concerning Earthquake Insurance
requires that, if there are special needs, such as insufficient existing funds
for the payment of indemnity under earthquake insurance policies, the Japanese
government will make efforts to arrange for, or to facilitate, financings by
non-life insurance companies for these payments.

We also write earthquake insurance for buildings and structures other than
dwellings as an extension of fire insurance coverage on a private basis. This
earthquake insurance is not entitled to the reinsurance arrangements under the
Law Concerning Earthquake Insurance, and a substantial part of the risk
associated with these policies is reinsured by reinsurers.

Personal Accident

We write personal accident insurance for individual customers in Japan.
Generally, the insurance covers personal injuries to the policyholder caused by
certain types of accidents that are set forth in the policy.

Typically, a fixed amount, regardless of the actual damages sustained, is
payable according to a pre-set payment table. We offer a variety of personal
accident insurance policy products, including:



| |  | General Personal Accident covers the insured against a broad
range of accidents resulting in personal injury, whether they occur at
home or abroad. A fixed amount of indemnity is payable according to the
type of injury (e.g., death, permanent disability or hospitalization).
A general personal accident insurance policy may cover either one
particular individual or all members of a particular household.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Income Indemnity covers against the loss of income caused by an
injury or illness.                                                                                                                                                                                                                                                                                                                                  
| 
| |  | Overseas Travelers Personal Accident covers against accidents
during travel and, if the insured has elected a special policy
condition, against illness during travel.                                                                                                                                                                                                                                             
| 
| |  | Traffic Accident covers the insured against collisions with, or
accidents occurring on, automobiles, trains, planes, ships and other
types of vehicles. A traffic accident insurance policy may cover either
one particular individual or all members of a particular household.                                                                                                                                    

Some of the products under this line are offered as deposit-type
insurance. We write personal accident insurance for individual customers
primarily through our agents.

Cargo and Transit

Marine cargo insurance covers goods aboard vessels against risks during
international transportation or risks during transportation in coastal seas.
The terms of international cargo insurance are generally governed by the
Institute Cargo Clauses of the former Institute of London Underwriters,
currently the International Underwriting Association. This line of insurance is
unique in that it provides coverage against acts of war. Over 90% of insurance
premiums of our marine cargo insurance is from international cargo. Japanese
manufacturers and trading companies are our major clients for international
cargo insurance.

The marine cargo insurance business is generally conducted directly by our
personnel and not by insurance agents. Insurance premiums written are affected
primarily by levels of Japanese import and export trading activity.

Inland transit insurance is usually purchased by the owners of goods to
cover physical damage to those goods when they are transported by rail, truck
or domestic air transport and when the goods are stored on land incidental to
transit. Carriers of the goods, on the other hand, purchase inland transit
liability insurance to cover their legal and contractual liabilities that may
arise from handling the goods.

24



---



##### Table of Contents



Hull

Hull insurance is one of our traditional lines of insurance. Hull
insurance covers ocean-going and coastal vessels against loss or damage caused
by sinking, stranding, grounding, fire, collision and other maritime accidents.
The coverage includes damage to the hull, loss of earnings and liability to
others for damages. Hull war risk insurance covers vessels against loss or
damage resulting from acts of war. Hull insurance is available not only to
vessels in operation but also to vessels under construction for damages caused
during the construction period.

Our primary customers in this line are Japanese shipping companies, which
operate Japan flag vessels or flag of convenience vessels, as well as
Japanese shipbuilders. The marketing for these customers is generally conducted
by our personnel directly and not by insurance agents or brokers. Our revenues
in hull insurance are influenced by the number of vessels that are operated by
Japanese shipping companies directly and by foreign shipping companies closely
associated with Japanese shipping companies, as well as by the number of
vessels being built by Japanese shipbuilders. These are in turn influenced by
overall worldwide economic conditions and a number of global competitive
factors affecting the respective industries of our customers.

A significant portion of our hull insurance premiums received is
denominated in currencies other than the Japanese yen, primarily the U.S.
dollar.

Because accidents involving vessels can result in large losses, we
properly reinsure these risks with Japanese and overseas reinsurers.

Other Lines

Other types of property and casualty insurance we write include liability
insurance, aviation insurance, workers compensation insurance, movables
comprehensive insurance, contractors all-risk insurance, e-risk insurance,
nuclear insurance, weather insurance, event cancellation and abandonment
insurance, credit and guarantee insurance, and surety bonds. Liability
insurance is written primarily for business customers and includes product
liability insurance, directors and officers liability insurance and umbrella
liability insurance. Movables comprehensive insurance covers damages resulting
from loss, theft or destruction of various types of movable property.

Deposit-Type Insurance Products

Deposit-type insurance products combine a long-term insurance policy with
a savings feature. We and other non-life insurance companies in Japan are
permitted to attach a savings feature to almost all personal lines of insurance
other than compulsory automobile liability insurance. The premium for the
insurance portion is accounted for as premium written, and the premium for the
savings portion is accounted for as investment deposits by policyholders. For
the year ended March 31, 2003, premiums written arising from deposit-type
policies accounted for 2% of our direct premiums written for property and
casualty insurance.

These policies, which have terms ranging from two to 64 years, provide for
the repayment at maturity of the savings-related portion of the premiums
together with interest calculated on that amount at a specified rate. The
policyholder knows of the maturity value of the savings-related portion of the
policy when he or she takes out the policy. Additional payments may also be
made depending upon our investment performance during the term of the policy
and other factors. Our repayment of the savings-related portion of the premiums
and the payment of interest are conditioned on the policy remaining in effect
until maturity. Consequently, where a claim for a total loss terminates the
policy, we are released from our obligations to make payments to the
policyholder. A total loss occurs in only a small number of cases each year.
The policyholder can terminate the deposit-type insurance contract before the
maturity date by paying us a pre-determined commission.

The contractual rate of interest credited to the policy varies by product
and length of policy and is established at the beginning of the policy. We
cannot change the committed interest rate during the policy term, unless under
extraordinary circumstances where policy terms are changed pursuant to the
Insurance Business Law. Committed interest rates on newly issued policies
ranged from 0.10% to 1.60% for the year ended March 31, 2003, 0.10% to 2.00%
for the year ended March 31, 2002 and from 0.20% to 2.00% for the year ended
March 31, 2001.

25



---



##### Table of Contents



The savings-related portion of the premiums received under deposit-type
insurance is invested primarily in securities other than equity securities. The
investment return may exceed or fall short of the committed interest depending
on, among other factors, the expected rate of interest, the market interest
rates of these securities and the extent to which the terms of these securities
match the terms of the deposit-type insurance policies. We adjust from time to
time the committed interest offered on new deposit-type insurance policies to
reflect changes in the market levels of interest rates.

Launch of Cho Hoken and Cho Business Insurance

Tokio Marine and Nichido Fire launched Cho Hoken, meaning Super
Insurance, a jointly developed product, during the fiscal year ended March 31,
2003. Cho Hoken, which we believe is an innovative product in the Japanese
market, integrates property-casualty and life insurance coverage for individual
customers. We intend to offer opportunities for lifetime security to our
customers through the marketing of this product, which is a new business
approach to the Japanese insurance market. For corporate customers, we released
Cho Business Insurance, a comprehensive policy for business activities, which
was also jointly developed by Tokio Marine and Nichido Fire, during the fiscal
year ended March 31, 2003. Cho Business Insurance offers comprehensive coverage
for various risks faced by small and medium-sized corporations, including fire,
business interruption, general liability and personal accident of employees.

Third Sector Insurance Business

In the Japanese insurance industry, the third sector refers to insurance
products and services that do not fall within the traditional life and non-life
insurance areas, such as personal accident, medical and cancer insurance, and
insurance covering expenses for nursing care. Before January 2001, non-life
insurance companies were not permitted to participate in the medical and cancer
insurance business. However, since January 2001, non-life insurance companies
have been permitted to offer products in this area through life insurance
subsidiaries, and we introduced cancer insurance and medical insurance products
through Tokio Marine Life. Since July 2001, non-life insurance companies have
been permitted to offer third sector products to consumers directly, and
Tokio Marine and Nichido Fire have launched their line-up of new cancer,
medical and nursing care insurance products which were developed jointly.

In 2003, Tokio Marine Life released Medical Mini, a medical insurance
product featuring simplified terms and conditions at an affordable price,
thereby continuing to expand its business in this area.

Premium Rates

A premium under an insurance policy corresponds to the sales price of
that insurance product. There are two components of a premium: the pure
premium, which represents the cost of claims payment, and the loading, which
represents the agent commissions and certain other costs to the insurer. The
pure premium is determined by multiplying the amount insured by the applicable
premium rate, which represents the probability that the loss covered by the
insurance policy will occur. The premium rate is calculated by a formula which,
on the basis of the law of large numbers, purports to reflect the statistical
likelihood that the loss will occur. The law of large numbers is a
mathematical premise that states that the greater the number of exposures, (1)
the more accurate the prediction, (2) the less the deviation of the actual
losses from the expected losses and (3) the greater the credibility of the
prediction. Out of a large group of policyholders, an insurance company can
fairly accurately predict the number of policyholders who will suffer a loss.
The Law Concerning Non-Life Insurance Rating Organizations requires that
premium rates be reasonable and appropriate in accordance with the
mathematical principles of insurance, and that they not be unfairly
discriminatory.

Until July 1, 1998, premium rates for certain lines of non-life insurance
were established by the rating organization that dealt with that particular
line of insurance, such as the Automobile Insurance Rating Organization and the
Property and Casualty Insurance Rating Organization. Almost all non-life
insurance companies, including us, participate in the activities of these
rating organizations, although we are not required to do so. As discussed in
Regulation, the 1998 amendment to the Law Concerning Non-Life Insurance
Rating Organizations abolished this arrangement. Since 1998, the rating
organizations have served in an advisory capacity to the non-life insurance
companies. They calculate advisory or reference risk premium rates, prepare
standard forms of insurance contracts

26



---



##### Table of Contents



and collect a wide range of insurance-related data. As a result of this
liberalization, non-life insurance companies may set their own premium rates
for their products. This has had the effect of intensifying the competition in
the industry. For some lines of insurance, however, such as earthquake
insurance and compulsory automobile liability insurance, non-life insurance
companies are obligated to use standardized rates.

Reinsurance

In order to reduce our maximum potential net loss and to maximize the
return on our retained risk portfolio, we cede and hedge a portion of our
insurance risks to other insurers, reinsurers and investors by way of
reinsurance and risk financing tools.

The benefits of reinsurance include the stabilization of profits by
reducing fluctuations of loss ratios arising from large or multiple claims, the
procurement of greater capacities to write larger risks and the control over
exposure to extraordinary losses or catastrophes.

We cede to reinsurers a portion of the risks we underwrite for property
and casualty insurance. We pay reinsurance premiums to the reinsurers based
upon the risks that are subject to reinsurance. Although a reinsurer is liable
to us to the extent of the risks assumed, we remain liable as the direct
insurer to policyholders on all these risks.

We cede reinsurance to various reinsurers around the world. These
reinsurers are selected primarily for their financial security. We believe that
no material amounts are uncollectible from our current reinsurers.

We utilize a variety of reinsurance arrangements, which are classified
into two basic types: proportional reinsurance and excess-of-loss reinsurance.



| |  |  | Proportional reinsurance. This type of reinsurance involves
reinsurers sharing a proportional part of the original premiums and
losses under the reinsurance cession assumed. This type of reinsurance
is used as a means to limit a loss amount on an individual-risk basis.
In proportional reinsurance, the reinsurer customarily pays the ceding
company a ceding commission, which is generally based upon the ceding
companys cost of acquiring the business ceded and may also include the
ceding companys margin. In most cases, this type of reinsurance is
arranged in the form of a reinsurance treaty, where the ceding company
is automatically authorized to cede any business under a set of terms
and conditions previously agreed upon without obtaining a separate
prior consent to each cession from the reinsurers. If the underwriting
capacity provided by such a treaty is not sufficient, the ceding
company would have to arrange for facultative reinsurance, whereby a
separate prior consent would have to be obtained from each reinsurer.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Excess-of-loss reinsurance. This type of reinsurance indemnifies
the ceding company against a specified level of loss on underlying
insurance policies in excess of a specified agreed amount.
Excess-of-loss reinsurance is usually arranged in layers to secure
greater capacity with more competitive pricing by offering various
levels of risk exposure with different terms for reinsurers with
different preferences. This type of reinsurance is commonly used as a
means to protect against the occurrence of catastrophes, such as
earthquakes and windstorms, by capping the total accumulated amount of
losses from the retention on each individual risk after recovery of
losses from proportional reinsurance.                                                                                                                                                                                                                                                                                                                                              

Tokio Marine manages its insurance risk portfolio in a manner similar to
the concept of Value at Risk used in managing risks in the financial markets.
It takes a mathematical approach in calculating the optimal retention for most
lines of risks. Under this approach, potential fluctuations of underwriting
results are estimated in terms of risks and returns. The actual amount of risk
retained is determined by taking the amount of internal reserves into
consideration, together with the outcome of the risk and return analysis.
Based on these methods, Tokio Marine believes it adequately controls its
exposure per risk and per occurrence.

The Insurance Business Law limits the amount of any one risk that an
insurer can retain after reinsurance. These limits are computed for each major
line of insurance on the basis of a certain percentage of total assets of the
insurer. The amount we actually retained is substantially lower than the limits
set by the regulation.

27



---



##### Table of Contents



We assume reinsurance from direct insurers and professional reinsurers as
an additional source of income. The premiums we assumed from foreign insurers
and reinsurers are generally in foreign currencies, in particular U.S. dollars.

In November 1997, Tokio Marine obtained ten-year coverage from the capital
markets for up to $90 million of specified Tokyo-area earthquake risks through
a bond offering by Parametric Re Ltd., a special purpose reinsurance company in
the Cayman Islands. The Parametric Re transaction represented the first
participation in a catastrophe bond by a Japanese insurance company, and was
intended to provide us with a long-term, stable and fully collateralized
supplemental source of catastrophe coverage through the capital markets. The
Parametric Re transaction is indicative of our interest in utilizing
traditional and non-traditional resources to respond to the changing needs of
clients and the increasing deregulation in the markets.

One of the most important targets of our global risk management through
reinsurance is to increase our capital efficiency. Tokio Marine has been
purchasing traditional reinsurance to reduce our exposure to natural
catastrophe risk in Japan, where most of our natural catastrophe risk is
concentrated.

Additionally, Tokio Marine developed a new risk management method by
establishing a natural catastrophe risk exchange with other premier insurers
and reinsurers including State Farm Automobile Mutual and Swiss Re. This
exchange allows its paricipants to diversify their respective risk portfolios
and thereby to improve their capital efficiency. Tokio Marine cedes domestic
risk and assumes overseas risk through this exchange. Tokio Marine executes
these transactions (other than transactions with State Farm Automobile Mutual)
through Tokio Millennium Agency Ltd., which was launched in May 2003 as a
wholly owned subsidiary of Tokio Millennium Re Ltd.

In addition to the natural catastrophe exchange, Tokio Millennium Re and
Tokio Marine Global Re assume reinsurance to further diversify our risk
portfolio. Tokio Millennium Re specializes in natural catastrophe reinsurance
and the alternative risk transfer business. Tokio Marine Global Re assumes
traditional reinsurance mainly in South East Asia.

The following table, prepared on a U.S. GAAP basis, shows our reinsurance
premiums assumed and ceded, and retention ratio, for each of the periods
indicated:

|                             |                      |   |                                       |           |         |   |           |           |  |   |           |           | 
|---------------------------- | -------------------- | - | ------------------------------------- | --------- | ------- | - | --------- | --------- |  | - | --------- | --------- | 
|                             |                      |   | Year ended March 31,                 
|                             |                      |   |                                      
|                             |                      |   | 2003(1)                               |           | 2002(1) |   | 2001(1)  
|                             |                      |   |                                       |           |         |   |          
|                             |                      |   | (yen in millions, except percentages)
|Direct premiums written      |                      | ¥ | 1,987,463                             |           |         | ¥ | 1,509,615 |           |  | ¥ | 1,468,361 |          
|Reinsurance premiums assumed |                      |   | 325,347                               |           |         |   | 138,362   |           |  |   | 94,117    |          
|Reinsurance premiums ceded   |                      |   | (414,253                              | )         |         |   | (266,494  | )         |  |   | (238,571  | )        
|                             |                      |   |                                       |           |         |   |           |           |  |   |           |          
|                             | Net premiums written |   | ¥                                     | 1,898,577 |         |   | ¥         | 1,381,483 |  |   | ¥         | 1,323,907 | 
|                             |                      |   |                                       |           |         |   |           |           |  |   |           |          
|Retention ratio(2)           |                      |   | 82.1                                  | %         |         |   | 83.8      | %         |  |   | 84.7      | %        



---

|(1) |  | Our U.S. GAAP consolidated financial statements for the fiscal year ended
March 31, 2003, from which some of the data in this table are derived,
reflect the inclusion of Nichido Fire and its consolidated subsidiaries
from and after the date of our formation on April 2, 2002. Accordingly,
the amounts shown in this table for the fiscal year ended March 31, 2003
are not directly comparable to the amounts shown for prior fiscal years.
See Managements Discussion and Analysis of Financial Condition and
Results of Operations  Overview  Business Combination.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The retention ratio is calculated by dividing the net premiums written by
the total of direct premiums written and reinsurance premiums assumed.                                                                                                                                                                                                                                                                                                                                                                                                                                 

Property and Casualty Losses and Reserves

Loss and Expense Ratios

The following table, prepared on a U.S. GAAP basis, shows information with
respect to our loss and expense ratios for our principal lines of property and
casualty insurance for each of the periods indicated:
28Table of Contents

|                                                                                         |                                                     |                   |         |                                       |      |         |         |           |      |   |         |           |      |  
|---------------------------------------------------------------------------------------- | --------------------------------------------------- | ----------------- | ------- | ------------------------------------- | ---- | ------- | ------- | --------- | ---- | - | ------- | --------- | ---- | -
|                                                                                         |                                                     |                   |         | Year ended March 31,                 
|                                                                                         |                                                     |                   |         |                                      
|                                                                                         |                                                     |                   |         | 2003(1)                               |      | 2002(1) |         | 2001(1)  
|                                                                                         |                                                     |                   |         |                                       |      |         |         |          
|                                                                                         |                                                     |                   |         | (yen in millions, except percentages)
|Automobile:                                                                              |                                                     |                   |         |                                       |      |         |         |           |      |   |         |          
|                                                                                         | Net premiums written                                |                   | ¥       | 898,119                               |      |         | ¥       | 700,890   |      |   | ¥       | 686,666   |     
|                                                                                         | Net premiums earned                                 |                   |         | 902,491                               |      |         |         | 703,395   |      |   |         | 682,396   |     
|                                                                                         | Net loss incurred                                   |                   |         | 510,457                               |      |         |         | 391,358   |      |   |         | 428,273   |     
|                                                                                         |                                                     | Net loss ratio(2) |         |                                       | 56.6 | %       |         |           | 55.6 | % |         |           | 62.8 | %
|Compulsory Automobile Liability:                                                         |                                                     |                   |         |                                       |      |         |         |           |      |   |         |          
|                                                                                         | Net premiums written                                |                   | ¥       | 280,883                               |      |         | ¥       | 114,903   |      |   | ¥       | 110,373   |     
|                                                                                         | Net premiums earned                                 |                   |         | 174,074                               |      |         |         | 109,964   |      |   |         | 107,973   |     
|                                                                                         | Net loss incurred                                   |                   |         | 129,482                               |      |         |         | 71,895    |      |   |         | 70,218    |     
|                                                                                         |                                                     | Net loss ratio(2) |         |                                       | 74.4 | %       |         |           | 65.4 | % |         |           | 65.0 | %
|Fire and Allied Lines:                                                                   |                                                     |                   |         |                                       |      |         |         |           |      |   |         |          
|                                                                                         | Net premiums written                                |                   | ¥       | 258,981                               |      |         | ¥       | 177,635   |      |   | ¥       | 159,465   |     
|                                                                                         | Net premiums earned                                 |                   |         | 239,318                               |      |         |         | 162,627   |      |   |         | 153,695   |     
|                                                                                         | Net loss incurred                                   |                   |         | 84,363                                |      |         |         | 64,706    |      |   |         | 63,267    |     
|                                                                                         |                                                     | Net loss ratio(2) |         |                                       | 35.3 | %       |         |           | 39.8 | % |         |           | 41.2 | %
|Personal Accident:                                                                       |                                                     |                   |         |                                       |      |         |         |           |      |   |         |          
|                                                                                         | Net premiums written                                |                   | ¥       | 155,077                               |      |         | ¥       | 121,227   |      |   | ¥       | 126,068   |     
|                                                                                         | Net premiums earned                                 |                   |         | 155,603                               |      |         |         | 123,976   |      |   |         | 131,602   |     
|                                                                                         | Net loss incurred                                   |                   |         | 66,604                                |      |         |         | 53,740    |      |   |         | 56,993    |     
|                                                                                         |                                                     | Net loss ratio(2) |         |                                       | 42.8 | %       |         |           | 43.3 | % |         |           | 43.3 | %
|Cargo and Transit:                                                                       |                                                     |                   |         |                                       |      |         |         |           |      |   |         |          
|                                                                                         | Net premiums written                                |                   | ¥       | 62,373                                |      |         | ¥       | 55,293    |      |   | ¥       | 53,039    |     
|                                                                                         | Net premiums earned                                 |                   |         | 62,017                                |      |         |         | 53,864    |      |   |         | 52,990    |     
|                                                                                         | Net loss incurred                                   |                   |         | 28,939                                |      |         |         | 27,854    |      |   |         | 28,009    |     
|                                                                                         |                                                     | Net loss ratio(2) |         |                                       | 46.7 | %       |         |           | 51.7 | % |         |           | 52.9 | %
|Hull:                                                                                    |                                                     |                   |         |                                       |      |         |         |           |      |   |         |          
|                                                                                         | Net premiums written                                |                   | ¥       | 14,200                                |      |         | ¥       | 14,200    |      |   | ¥       | 13,961    |     
|                                                                                         | Net premiums earned                                 |                   |         | 14,477                                |      |         |         | 13,709    |      |   |         | 14,102    |     
|                                                                                         | Net loss incurred                                   |                   |         | 13,050                                |      |         |         | 9,327     |      |   |         | 8,584     |     
|                                                                                         |                                                     | Net loss ratio(2) |         |                                       | 90.1 | %       |         |           | 68.0 | % |         |           | 60.9 | %
|Other:                                                                                   |                                                     |                   |         |                                       |      |         |         |           |      |   |         |          
|                                                                                         | Net premiums written                                |                   | ¥       | 228,924                               |      |         | ¥       | 197,335   |      |   | ¥       | 174,335   |     
|                                                                                         | Net premiums earned                                 |                   |         | 212,988                               |      |         |         | 175,427   |      |   |         | 167,981   |     
|                                                                                         | Net loss incurred                                   |                   |         | 120,786                               |      |         |         | 117,885   |      |   |         | 124,344   |     
|                                                                                         |                                                     | Net loss ratio(2) |         |                                       | 56.7 | %       |         |           | 67.2 | % |         |           | 74.0 | %
|Total:                                                                                   |                                                     |                   |         |                                       |      |         |         |           |      |   |         |          
|                                                                                         | Net premiums written                                |                   | ¥       | 1,898,557                             |      |         | ¥       | 1,381,483 |      |   | ¥       | 1,323,907 |     
|                                                                                         | Net premiums earned                                 |                   |         | 1,760,968                             |      |         |         | 1,342,962 |      |   |         | 1,310,739 |     
|                                                                                         | Net loss incurred                                   |                   |         | 953,681                               |      |         |         | 736,765   |      |   |         | 779,688   |     
|                                                                                         |                                                     | Net loss ratio(2) |         |                                       | 54.2 | %       |         |           | 54.9 | % |         |           | 59.5 | %
|                                                                                         | Net loss adjustment expenses incurred  unallocated |                   | ¥       | 76,412                                |      |         | ¥       | 61,449    |      |   | ¥       | 53,370    |     
|Ratio losses and loss adjustment expenses incurred to
net premiums earned(A)             |                                                     |                   | 58.5    | %                                     |      |         | 59.4    | %         |      |   | 63.6    | %        
|Underwriting and administrative expenses incurred                                        |                                                     | ¥                 | 630,005 |                                       |      | ¥       | 482,590 |           |      | ¥ | 479,905 |          
|Ratio of underwriting and administrative expenses
incurred to net premiums written(3)(B) |                                                     |                   | 33.2    | %                                     |      |         | 34.9    | %         |      |   | 36.2    | %        
|Combined loss and expense ratios(4)                                                      |                                                     |                   | 91.7    | %                                     |      |         | 94.3    | %         |      |   | 99.8    | %        
|Net premiums/direct premiums written ratio                                               |                                                     |                   | 95.5    | %                                     |      |         | 91.5    | %         |      |   | 90.2    | %        



---

|(1) |  | Our U.S. GAAP consolidated financial statements for the fiscal year ended
March 31, 2003, from which some of the data in this table are derived,
reflect the inclusion of Nichido Fire and its consolidated subsidiaries
from and after the date of our formation on April 2, 2002. Accordingly,
the amounts shown in this table for the fiscal year ended March 31, 2003
are not directly comparable to the amounts shown for prior fiscal years.
See Managements Discussion and Analysis of Financial Condition and
Results of Operations  Overview  Business Combination.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Ratio of (x) net loss incurred to (y) net premiums earned.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

29



---



##### Table of Contents



|(3) |  | These data are for our property and casualty business only.
|--- |  | -----------------------------------------------------------
|   
|(4) |  | Sum of (A) and (B).                                        

Property and Casualty Reserves

When claims are made by or against a policyholder, any amounts that we pay
or expect to pay to the policyholder are referred to as losses, and the costs
of investigating, resolving and processing those claims are referred to as loss
adjustment expenses. We establish reserves for losses and loss adjustment
expenses for claims under property and casualty insurance policies and
reinsurance policies. We establish these reserves each year for each principal
line of property and casualty insurance. In accordance with U.S. GAAP, we do
not establish specific loss or loss adjustment expense reserves until an event
that causes a loss has occurred.

Loss and loss adjustment expenses fall into two categories:



| |  |  | Reserves for reported claims. These reserves are based on our
estimates of future payments that will be made in respect of claims,
including expenses related to those claims. These estimates are made on
a case-by-case basis and are based on the facts and circumstances
available at the time the reserves are established. These estimates
reflect the informed judgment of the claims personnel based on general
insurance reserving practices and knowledge of the nature and value of
a specific type of claim. These reserves are periodically adjusted in
the ordinary course of settlement and represent the estimated ultimate
costs necessary to bring all the pending reported claims to final
settlement. Consideration is given to historic trends and disposition
patterns and loss payments, pending levels of unpaid claims and types
of coverage.                                                                                                                                                                                                                                                                                                                                                    
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Reserves for incurred but not reported claims. These reserves are
established to recognize the estimated cost of losses that have
occurred but as to which we do not yet have notice. These reserves,
like reserves for reported claims, are established to recognize the
estimated costs, including expenses, necessary to bring claims arising
out of losses to final settlement. Since nothing is known about the
occurrence of the losses, we rely on our past experience to estimate
our liability in respect of incurred but not reported claims. These
reserves are estimates that involve actuarial and statistical
projections of the expected cost of the ultimate settlement and
administration of claims. The analyses are based on facts and
circumstances known at the time, predictions of future events,
estimates of future inflation and other demographic and economic
factors. Late reported claim trends, claim severity, exposure growth
and future inflation are some of the factors used in projecting reserve
requirements for incurred but not reported claims. These reserves are
reviewed and revised periodically as additional information becomes
available and actual claims are reported.

We factor in the following loss development information, among others,
when establishing reserves for incurred but not reported losses:



| |  |  | For fire and allied lines insurance: (1) substantially all losses
are paid or recognized within one year from the casualty date and (2)
substantially all underwriting risk is assumed in Japan.                                                                                                                                                                                                                                                 
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | For liability and workers compensation insurance: (1)
approximately 90% of losses are recognized within two years from the
casualty date and (2) for underwriting risk assumed outside Japan, we
make reserves based on reports from actuaries in the relevant
countries.                                                                                                                                                                       
|
| |  |  | For automobile, personal accident, cargo and transit, hull and all
other insurance: (1) except for physical damage claims under automobile
insurance, substantially all losses are paid or recognized within two
years from the casualty date, (2) for physical damage claims under
automobile insurance, approximately 90% of all losses are paid or
recognized within one year and (3) substantially all underwriting risk
is assumed in Japan.

The ultimate cost of losses and loss adjustment expenses is subject to a
number of highly variable circumstances. From when a claim is reported to when
it is finally settled, a change in circumstances may require

30



---



##### Table of Contents



established
reserves to be adjusted either upwards or downwards. Items such as changes in
the legal environment, results of litigation, changes in medical costs, costs
of automobile and home repair materials and labor rates can substantially
impact claim costs. These factors can cause actual developments to vary from
expectations, and in some cases materially. Claim reserve adjustments are
periodically reviewed and updated, using the most current information available
to management, and any adjustments resulting from changes in reserve estimates
are reflected in current results of operations.

We believe, based on information currently available to us, that our
property and casualty reserves are adequate. However, the establishment of loss
reserves is an inherently uncertain process. Accordingly, ultimate losses may
differ from our initial estimates.

Reconciliation of Beginning and Ending Reserves

The following table, prepared on a U.S. GAAP basis, is a summary
reconciliation of our beginning and ending reserves for property and casualty
insurance, including the effect of reinsurance ceded, for each of the periods
indicated:

|                                              |                               |                |           |                      |                   |         |         |         |         |   |         |         |         | 
|--------------------------------------------- | ----------------------------- | -------------- | --------- | -------------------- | ----------------- | ------- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                              |                               |                |           | Year ended March 31,
|                                              |                               |                |           |                     
|                                              |                               |                |           | 2003(1)              |                   | 2002(1) |         | 2001(1)
|                                              |                               |                |           |                      |                   |         |         |        
|                                              |                               |                |           |                      | (yen in millions)
|Balance at beginning of year                  |                               | ¥              | 875,463   |                      |                   | ¥       | 854,952 |         |         | ¥ | 821,088 |        
|                                              | Less reinsurance recoverables |                |           | 247,861              |                   |         |         | 255,696 |         |   |         | 257,221 |        
|                                              |                               |                |           |                      |                   |         |         |         |         |   |         |        
|Net balance at beginning of year              |                               |                | 627,602   |                      |                   |         | 599,256 |         |         |   | 563,867 |        
|                                              |                               |                |           |                      |                   |         |         |         |         |   |         |        
|Adjustment in connection with the acquisition |                               |                | 141,940   |                      |                   |         |        |         |         |   |        |        
|Incurred related to:                          |                               |                |           |                      |                   |         |         |         |         |   |         |        
|                                              | Current year insured events   |                |           | 1,029,655            |                   |         |         | 802,061 |         |   |         | 829,097 |        
|                                              | Prior year insured events     |                |           | 438                  |                   |         |         | (3,847  | )       |   |         | 3,961   |        
|                                              |                               |                |           |                      |                   |         |         |         |         |   |         |        
|                                              |                               | Total incurred |           |                      | 1,030,093         |         |         |         | 798,214 |   |         |         | 833,058 | 
|                                              |                               |                |           |                      |                   |         |         |         |         |   |         |        
|Paid related to:                              |                               |                |           |                      |                   |         |         |         |         |   |         |        
|                                              | Current year insured events   |                |           | 590,791              |                   |         |         | 481,710 |         |   |         | 519,627 |        
|                                              | Prior year insured events     |                |           | 417,105              |                   |         |         | 288,158 |         |   |         | 278,042 |        
|                                              |                               |                |           |                      |                   |         |         |         |         |   |         |        
|                                              |                               | Total paid     |           |                      | 1,007,896         |         |         |         | 769,868 |   |         |         | 797,669 | 
|                                              |                               |                |           |                      |                   |         |         |         |         |   |         |        
|Foreign currency translation adjustments      |                               |                | (1,987    | )                    |                   |         |        |         |         |   |        |        
|Net balance at end of year                    |                               |                | 789,752   |                      |                   |         | 627,602 |         |         |   | 599,256 |        
|                                              | Plus reinsurance recoverable  |                |           | 342,132              |                   |         |         | 247,861 |         |   |         | 255,696 |        
|                                              |                               |                |           |                      |                   |         |         |         |         |   |         |        
|Balance at end of year                        |                               | ¥              | 1,131,884 |                      |                   | ¥       | 875,463 |         |         | ¥ | 854,952 |        
|                                              |                               |                |           |                      |                   |         |         |         |         |   |         |        



---

|(1) |  | Our U.S. GAAP consolidated financial statements for the fiscal year ended
March 31, 2003, from which some of the data in this table are derived,
reflect the inclusion of Nichido Fire and its consolidated subsidiaries
from and after the date of our formation on April 2, 2002. Accordingly,
the amounts shown in this table for the fiscal year ended March 31, 2003
are not directly comparable to the amounts shown for prior fiscal years.
See Managements Discussion and Analysis of Financial Condition and
Results of Operations  Overview  Business Combination.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Prior year claims and expenses incurred, as reflected in the preceding
table, resulted principally from re-estimating and settling claims established
in earlier accident years in amounts that differed from expectations.

Operations

Sales and Marketing

In addition to our head offices, which are located in Tokyo, Tokio Marine
had 67 branches and 303 sub-branches located throughout Japan, and Nichido Fire
had 51 branches and 220 sub-branches located throughout Japan, as of March 31,
2003. Branches and sub-branches carry out ordinary insurance activities, such
as loss adjustment and claim settlement, in specified geographical areas or for
certain categories of industries, all at their own discretion within authorized
limits. Certain activities in the branches are under the control of Tokio
Marine and

31



---



##### Table of Contents



Nichido Fires head office in Tokyo, including all reinsurance
business and transactions involving amounts which exceed the branches
authorized limits.

Non-life insurance in Japan is sold primarily through a network of full-
and part-time insurance agents. As of March 31, 2003, Tokio Marine had
approximately 53,700 insurance agents, approximately 50% of whom sell our
insurance exclusively. As of the same date, Nichido Fire had approximately
25,000 insurance agents apart from approximately 1,300 employees of its direct
sales staff. These agents include corporations and individuals. Agents have
historically been compensated on a commission basis, with rates varying
according to the type of insurance and the qualifications of the agents. We
recently introduced a new compensation system that uses individual performance
criteria to a greater extent in determining compensation for agents. Insurance
agents in Japan are required to be registered with the Financial Services
Agency.

Our agents in Japan are authorized to write substantially all lines of
insurance. Approximately 93% of our total direct premiums written (including
deposits received) in the year ended March 31, 2003 originated through our
agents. Through our underwriting agents, subsidiaries and affiliates, we sell
insurance in 41 countries and territories overseas, including the United
States, where we sell insurance in all 50 states. Approximately 4% of our
direct premiums written for the year ended March 31, 2003 originated from
policies written outside of Japan.

Tokio Marine adopted an on-line agency system in 1991 and continuously
expanded this system, which allows for greater efficiency in the contract
process by allowing agents to directly input and access contract data. As of
March 31, 2003, this on-line system was available through approximately 127,000
terminals. The number of contracts whose terms were directly input by agents
using this system rose from approximately 5 million in the year ended March 31,
2000 to over 9.9 million in the year ended March 31, 2003.

We have made efforts in developing the on-line systems for agents to
increase work efficiency and strengthen sales capabilities at both insurance
companies and agents. During the fiscal year ended March 31, 2003, Tokio Marine
and Nichido Fire began to develop Millea Partners Net, a new on-line system
for agents utilizing broadband communications.

In addition to the traditional agency system used to sell insurance
products, since April 2001, as a result of insurance industry deregulation,
Japanese commercial banks have been permitted to sell certain insurance
products of their affiliated insurance companies at their branch offices. We
utilize commercial banks, with their national and regional networks of branches, as a
distribution channel for our products.

Claims Processing

Claims of policyholders are accepted for processing either by insurance
agents or directly by us at our branch offices. There is great customer demand
for quick claims processing at a nearby office. In view of the intensifying
competition among various sectors in the insurance and other financial markets
in Japan, we have focused on expediting claims processing in order to satisfy
customer needs. In 1999, Tokio Marine and Nichido Fire introduced a new system
which enables them to provide the same quality claims service to their
policyholders, even during weekends or holidays, after receiving notice of a
loss at a centralized call center. For policyholders of our overseas travel
accident insurance, we have facilities to respond to phone calls from
policyholders traveling anywhere in the world and provide appropriate services
to these customers. As of July 1, 2003, there were 218 claims handling offices
for Tokio Marine and 136 claims handling offices for Nichido Fire throughout
Japan, including their branch offices, that engage in claims processing work.

Operational Reforms of Nichido Fire

On April 25, 2002, the Financial Services Agency issued an administrative
order to Nichido Fire which, among other things, prohibited Nichido Fire from
selling automobile insurance products for a three-day period. The Financial
Services Agency, or FSA, issued this order as a result of Nichido Fires
failure to comply with applicable laws regarding FSA approval of automobile
insurance. On August 1, 2002, the FSA issued a further administrative order to
Nichido Fire after discovering that some Nichido Fire sales agencies had sold
automobile insurance during the three-day suspension period.

32



---



##### Table of Contents



In order to address the control weaknesses that resulted in these FSA
orders, Millea Holdings and Nichido Fire announced that Nichido Fire will adopt
various operational reform measures under our supervision and instruction.
These include the exchange of directors and other personnel between Nichido
Fire and Tokio Marine; the separation of Nichido Fires legal and compliance
functions, the increase of headcount in both those functions, and the ceding of
responsibility for certain compliance functions to Millea Holdings; and the
strengthening of Nichido Fires supervision of affiliated sales agencies.
Millea Holdings will continue to monitor and supervise the outcome of Nichido
Fires efforts in order to ensure future compliance with applicable regulatory
requirements.

Investments

We invest in a portfolio of assets using funds which represent either (1)
our general funds, including that portion of net premiums written that have not
been disbursed as claims payments or (2) that portion of deposit premiums by
policyholders under deposit-type insurance that are not due for refund to the
policyholders.

Our principal investment objectives are: first, to maintain the high
quality of our investment assets in order to strengthen our claim payment
capabilities; second, to maintain sufficient liquidity to timely meet the
requirements of indemnity payments and payments of maturity refunds and
dividends; and third, subject to satisfying the first two objectives, to obtain
the highest possible return on our investments. We also seek to maintain and
enhance our business relationships with major corporate customers in Japan by
investing in the equity securities of those customers on a long-term basis.

We engage in asset-liability management with respect to long-term assets
and liabilities, seeking a stable present net asset value by hedging interest
rate risk. We also seek to increase profit by investing flexibly in various
assets that we believe will produce profits commensurate with the associated
risks.

The Japanese governments regulations concerning non-life insurance
companies specify the types of assets in which they can invest, and also set
upper limits on various kinds of investments based on a percentage of the book
value of total assets. For example, investment in domestic stocks is limited to
30% of the book value of total assets, real estate to 20%, and assets in
foreign currency to 30%. Under special circumstances, the Financial Services
Agency may approve investments in excess of these limits.

Our investment portfolio consists primarily of Japanese and foreign equity
securities, Japanese and foreign bonds and loans to Japanese companies. The
following table, prepared on a U.S. GAAP basis, shows our investments as of
each date indicated:

|                                                         |                                                |                                  |                   |         |                   |           |         |         |           |           |   |         |           |           | 
|-------------------------------------------------------- | ---------------------------------------------- | -------------------------------- | ----------------- | ------- | ----------------- | --------- | ------- | ------- | --------- | --------- | - | ------- | --------- | --------- | 
|                                                         |                                                |                                  |                   |         | As of March 31,  
|                                                         |                                                |                                  |                   |         |                  
|                                                         |                                                |                                  |                   |         | 2003(1)           |           | 2002(1) |         | 2001(1)  
|                                                         |                                                |                                  |                   |         |                   |           |         |         |          
|                                                         |                                                |                                  |                   |         | (yen in millions)
|Investments  other than investments in related parties: |                                                |                                  |                   |         |                   |           |         |         |           |           |   |        
|                                                         | Securities held to maturity, at amortized cost |                                  | ¥                 | 883,336 |                   |           | ¥       | 470,188 |           |           | ¥ | 342,839 |          
|                                                         | Securities available for sale:                 |                                  |                   |         |                   |           |         |         |           |           |   |         |          
|                                                         |                                                | Fixed maturities, at fair value  |                   |         | 3,421,624         |           |         |         | 2,002,069 |           |   |         | 1,811,997 |          
|                                                         |                                                | Equity securities, at fair value |                   |         | 2,534,221         |           |         |         | 2,693,591 |           |   |         | 2,932,151 |          
|                                                         | Trading securities, at fair value              |                                  |                   | 25,936  |                   |           |         |        |           |           |   |        |          
|                                                         | Mortgage loans on real estate                  |                                  |                   | 148,655 |                   |           |         | 144,323 |           |           |   | 164,542 |          
|                                                         | Investment real estate                         |                                  |                   | 82,886  |                   |           |         | 96,967  |           |           |   | 104,786 |          
|                                                         | Policy loans                                   |                                  |                   | 29,171  |                   |           |         | 20,615  |           |           |   | 19,112  |          
|                                                         | Other long-term investments                    |                                  |                   | 559,004 |                   |           |         | 535,666 |           |           |   | 639,086 |          
|                                                         | Short-term investments                         |                                  |                   | 660,370 |                   |           |         | 665,406 |           |           |   | 803,431 |          
|                                                         |                                                |                                  |                   |         |                   |           |         |         |           |           |   |         |          
|                                                         |                                                |                                  | Total investments |         | ¥                 | 8,345,203 |         |         | ¥         | 6,628,825 |   |         | ¥         | 6,817,944 | 
|                                                         |                                                |                                  |                   |         |                   |           |         |         |           |           |   |         |          



---

|(1) |  | Our U.S. GAAP consolidated financial statements for the fiscal year ended
March 31, 2003, from which some of the data in this table are derived,
reflect the inclusion of Nichido Fire and its consolidated subsidiaries
from and after the date of our formation on April 2, 2002. Accordingly,
the amounts shown in this table for the fiscal year ended March 31, 2003
are not directly comparable to the amounts shown for prior fiscal years.
See
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

33



---



##### Table of Contents



| |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations  Overview  Business Combination.
| |  | --------------------------------------------------------------------------------------------------------------------------

Securities Available for Sale

The following table, prepared on a U.S. GAAP basis, shows our investments
in securities available for sale by type (other than in related parties) as of
each date indicated:

|                  |                |                                     |           |                   |           |         |           |           |           |   |           |           |           | 
|----------------- | -------------- | ----------------------------------- | --------- | ----------------- | --------- | ------- | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                  |                |                                     |           | As of March 31,  
|                  |                |                                     |           |                  
|                  |                |                                     |           | 2003(1)           |           | 2002(1) |           | 2001(1)  
|                  |                |                                     |           |                   |           |         |           |          
|                  |                |                                     |           | (yen in millions)
|Japanese bonds    |                | ¥                                   | 2,865,672 |                   |           | ¥       | 1,576,596 |           |           | ¥ | 1,368,793 |          
|Foreign bonds     |                |                                     | 555,952   |                   |           |         | 425,473   |           |           |   | 443,204   |          
|                  |                |                                     |           |                   |           |         |           |           |           |   |           |          
|                  | Total bonds    |                                     |           | 3,421,624         |           |         |           | 2,002,069 |           |   |           | 1,811,997 |          
|                  |                |                                     |           |                   |           |         |           |           |           |   |           |          
|Japanese equities |                |                                     | 2,343,710 |                   |           |         | 2,515,023 |           |           |   | 2,707,059 |          
|Foreign equities  |                |                                     | 190,511   |                   |           |         | 178,568   |           |           |   | 225,092   |          
|                  |                |                                     |           |                   |           |         |           |           |           |   |           |          
|                  | Total equities |                                     |           | 2,534,221         |           |         |           | 2,693,591 |           |   |           | 2,932,151 |          
|                  |                |                                     |           |                   |           |         |           |           |           |   |           |          
|                  |                | Total securities available for sale |           | ¥                 | 5,955,845 |         |           | ¥         | 4,695,660 |   |           | ¥         | 4,744,148 | 
|                  |                |                                     |           |                   |           |         |           |           |           |   |           |          



---

|(1) |  | Our U.S. GAAP consolidated financial statements for the fiscal year ended
March 31, 2003, from which some of the data in this table are derived,
reflect the inclusion of Nichido Fire and its consolidated subsidiaries
from and after the date of our formation on April 2, 2002. Accordingly,
the amounts shown in this table for the fiscal year ended March 31, 2003
are not directly comparable to the amounts shown for prior fiscal years.
See Managements Discussion and Analysis of Financial Condition and
Results of Operations  Overview  Business Combination.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Japanese bonds. We invest in Japanese government bonds, local government
bonds and corporate bonds, which generally yield higher returns on investment,
yet are nearly as liquid, when compared with deposits and savings or call
loans. We purchase Japanese bonds primarily to meet future obligations arising
from insurance and investment contracts.

Foreign bonds. We invest in government and corporate bonds of foreign
issuers with a view toward generating interest income which is generally higher
as compared with investments in Japanese bonds under recent market conditions.
We also invest with a view toward maintaining a certain degree of liquidity in
our assets in the event of a major natural disaster in Japan that temporarily
incapacitates the Japanese financial and monetary system and necessitates
indemnity payments under our policies. We manage and control foreign exchange
exposures within certain parameters, primarily by using forward exchange
contracts and currency options.

Japanese equities.As part of our investment activities, we invest in
equity securities of Japanese companies, primarily in equity securities listed
on the Tokyo Stock Exchange, consistent with our overall investment objectives.
We also seek to maintain and enhance our business relationships with major
corporate customers in Japan by investing in the equity securities of those
customers on a long-term basis.

Loans

The following table, prepared on a U.S. GAAP basis, shows our investments
in loans (other than those to related parties) as of each date indicated:

|                                            |  |   |                   |  |         |   |         |  |  |   |         |  | 
|------------------------------------------- |  | - | ----------------- |  | ------- | - | ------- |  |  | - | ------- |  | 
|                                            |  |   | As of March 31,  
|                                            |  |   |                  
|                                            |  |   | 2003(1)           |  | 2002(1) |   | 2001(1)
|                                            |  |   |                   |  |         |   |        
|                                            |  |   | (yen in millions)
|Mortgage loans on real estate               |  | ¥ | 148,655           |  |         | ¥ | 144,323 |  |  | ¥ | 164,542 | 
|Mortgage loans on vessels and facilities(2) |  |   | 22,125            |  |         |   | 25,061  |  |  |   | 29,203  | 
|Collateral and bank-guaranteed loans(2)     |  |   | 22,096            |  |         |   | 29,800  |  |  |   | 36,650  | 
|Unsecured loans(2)                          |  |   | 440,997           |  |         |   | 404,419 |  |  |   | 485,655 | 

34



---



##### Table of Contents



|             |       |  |                   |         |         |  |         |         |  |  |        |         | 
|------------ | ----- |  | ----------------- | ------- | ------- |  | ------- | ------- |  |  | ------ | ------- | 
|             |       |  | As of March 31,  
|             |       |  |                  
|             |       |  | 2003(1)           |         | 2002(1) |  | 2001(1)
|             |       |  |                   |         |         |  |        
|             |       |  | (yen in millions)
|Policy loans |       |  | 29,171            |         |         |  | 20,615  |         |  |  | 19,112 |        
|             |       |  |                   |         |         |  |         |         |  |  |        |        
|             | Total |  | ¥                 | 663,044 |         |  | ¥       | 624,218 |  |  | ¥      | 735,162 | 
|             |       |  |                   |         |         |  |         |         |  |  |        |        



---

|(1) |  | Our U.S. GAAP consolidated financial statements for the fiscal year ended
March 31, 2003, from which some of the data in this table are derived,
reflect the inclusion of Nichido Fire and its consolidated subsidiaries
from and after the date of our formation on April 2, 2002. Accordingly,
the amounts shown in this table for the fiscal year ended March 31, 2003
are not directly comparable to the amounts shown for prior fiscal years.
See Managements Discussion and Analysis of Financial Condition and
Results of Operations  Overview  Business Combination.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Included in other long-term investments in our balance sheet prepared
in accordance with U.S. GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

Most of our loans are to corporate borrowers in Japan. Since the financial
needs of major corporate borrowers are at a low level under present economic
conditions, and because these borrowers tend to look more to capital markets in
raising funds, the aggregate amount of our loans outstanding has declined over
the last few years. The increase in loans outstanding as of March 31, 2003,
when compared with loans outstanding as of March 31, 2002 results solely from
the inclusion of Nichido Fire.

We have been stressing the marketing of our loans to large enterprises. As
a result, the amount of loans outstanding to them has remained relatively
stable. On the other hand, the amount of outstanding loans to medium and small
enterprises has been decreasing due to their declining credit needs. The interest rates of
roughly half of our loans are fixed, and the remainder are variable. Maturities
of loans generally range from one to ten years.

Short-Term Investments

The following table, prepared on a U.S. GAAP basis, shows our short-term
investments by type as of each date indicated:

|                                 |       |   |                   |         |         |   |         |         |  |   |         |         | 
|-------------------------------- | ----- | - | ----------------- | ------- | ------- | - | ------- | ------- |  | - | ------- | ------- | 
|                                 |       |   | As of March 31,  
|                                 |       |   |                  
|                                 |       |   | 2003(1)           |         | 2002(1) |   | 2001(1)
|                                 |       |   |                   |         |         |   |        
|                                 |       |   | (yen in millions)
|Call loans                       |       | ¥ | 440,093           |         |         | ¥ | 403,700 |         |  | ¥ | 254,400 |        
|Commercial paper                 |       |   | 599               |         |         |   | 61,472  |         |  |   | 203,874 |        
|Deposits and other invested cash |       |   | 219,678           |         |         |   | 200,234 |         |  |   | 345,157 |        
|                                 |       |   |                   |         |         |   |         |         |  |   |         |        
|                                 | Total |   | ¥                 | 660,370 |         |   | ¥       | 665,406 |  |   | ¥       | 803,431 | 
|                                 |       |   |                   |         |         |   |         |         |  |   |         |        



---

|(1) |  | Our U.S. GAAP consolidated financial statements for the fiscal year ended
March 31, 2003, from which some of the data in this table are derived,
reflect the inclusion of Nichido Fire and its consolidated subsidiaries
from and after the date of our formation on April 2, 2002. Accordingly,
the amounts shown in this table for the fiscal year ended March 31, 2003
are not directly comparable to the amounts shown for prior fiscal years.
See Managements Discussion and Analysis of Financial Condition and
Results of Operations  Overview  Business Combination.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Call loans are short-term loans, with maturities generally ranging from
overnight to three weeks, that are made to banks, securities companies and
money market dealers. We invest in call loans in order to maintain necessary
liquidity in our investment portfolio while seeking to generate returns based
on interest rates that reflect current market conditions.

35



---



##### Table of Contents



Investment Results

The following table, prepared on a U.S. GAAP basis, shows our investment
results for each of the periods indicated:

|                                        |                                           |                                        |                                                               |         |                      |        |            |         |         |         |        |        |         |         | 
|--------------------------------------- | ----------------------------------------- | -------------------------------------- | ------------------------------------------------------------- | ------- | -------------------- | ------ | ---------- | ------- | ------- | ------- | ------ | ------ | ------- | ------- | 
|                                        |                                           |                                        |                                                               |         | Year ended March 31,
|                                        |                                           |                                        |                                                               |         |                     
|                                        |                                           |                                        |                                                               |         | 2003(1)(2)           |        | 2002(1)(2) |         | 2001(1)
|                                        |                                           |                                        |                                                               |         |                      |        |            |         |        
|                                        |                                           |                                        |                                                               |         | (yen in millions)   
|Investment income:                      |                                           |                                        |                                                               |         |                      |        |            |         |         |         |        |       
|                                        | Interest on fixed maturities              |                                        | ¥                                                             | 65,762  |                      |        | ¥          | 51,913  |         |         | ¥      | 50,541 |        
|                                        | Dividends from equity securities          |                                        |                                                               | 32,785  |                      |        |            | 29,409  |         |         |        | 30,002 |        
|                                        | Interest on mortgage loans on real estate |                                        |                                                               | 3,715   |                      |        |            | 4,219   |         |         |        | 4,569  |        
|                                        | Rent from investment real estate          |                                        |                                                               | 12,817  |                      |        |            | 12,907  |         |         |        | 14,050 |        
|                                        | Interest on policy loans                  |                                        |                                                               | 1,156   |                      |        |            | 830     |         |         |        | 757    |        
|                                        | Interest on other long-term investments   |                                        |                                                               | 11,475  |                      |        |            | 11,802  |         |         |        | 15,421 |        
|                                        | Interest on short-term investments        |                                        |                                                               | 5,677   |                      |        |            | 4,113   |         |         |        | 4,416  |        
|                                        | Others                                    |                                        |                                                               | 1,715   |                      |        |            | 7,987   |         |         |        | 27,967 |        
|                                        |                                           |                                        |                                                               |         |                      |        |            |         |         |         |        |        |        
|                                        |                                           | Gross investment income                |                                                               |         | 135,102              |        |            |         | 123,180 |         |        |        | 147,723 |        
|Less investment expenses                |                                           |                                        | 26,791                                                        |         |                      |        | 18,499     |         |         |         | 19,871 |       
|                                        |                                           |                                        |                                                               |         |                      |        |            |         |         |         |        |        |        
|                                        |                                           | Net investment income                  |                                                               |         | 108,311              |        |            |         | 104,681 |         |        |        | 127,852 |        
|                                        |                                           |                                        |                                                               |         |                      |        |            |         |         |         |        |        |        
|Realized gains (losses) on investments: |                                           |                                        |                                                               |         |                      |        |            |         |         |         |        |       
|                                        | Fixed maturities                          |                                        |                                                               | 11,553  |                      |        |            | 8,244   |         |         |        | 9,400  |        
|                                        | Equity securities                         |                                        |                                                               | (37,957 | )                    |        |            | (11,900 | )       |         |        | 53,578 |        
|                                        | Other investments                         |                                        |                                                               | (3,471  | )                    |        |            | 2,636   |         |         |        | (6,836 | )      
|                                        |                                           |                                        |                                                               |         |                      |        |            |         |         |         |        |        |        
|                                        |                                           | Realized gains (losses) on investments |                                                               |         | (29,875              | )      |            |         | (1,020  | )       |        |        | 56,142  |        
|                                        |                                           |                                        |                                                               |         |                      |        |            |         |         |         |        |        |        
|                                        |                                           |                                        | Total net investment income
and realized gains on
investments |         | ¥                    | 78,436 |            |         | ¥       | 103,661 |        |        | ¥       | 183,994 | 
|                                        |                                           |                                        |                                                               |         |                      |        |            |         |         |         |        |        |        



---

|(1) |  | Our U.S. GAAP consolidated financial statements for the fiscal year ended
March 31, 2003, from which some of the data in this table are derived,
reflect the inclusion of Nichido Fire and its consolidated subsidiaries
from and after the date of our formation on April 2, 2002. Accordingly,
the amounts shown in this table for the fiscal year ended March 31, 2003
are not directly comparable to the amounts shown for prior fiscal years.
See Managements Discussion and Analysis of Financial Condition and
Results of Operations  Overview  Business Combination.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Beginning with the year ended March 31, 2002, we changed the way in which
we present gains and losses on derivative transactions in our statement of
income as a result of our adoption of SFAS No. 133. Under this new
presentation format, we include both realized and unrealized gains/losses
on derivatives, including changes in fair values of derivative
instruments, in a separate line item called gains (losses) on
derivatives. For the years ended March 31, 2003 and 2002, gains (losses)
on derivatives amounted to ¥76,564 million and ¥(7,319) million,
respectively. These amounts reflect certain derivatives-related items that
previously had been reflected in net investment income or realized
gains (losses) on investments. Accordingly, the amounts shown in this
table for the years ended March 31, 2003 and 2002 are not directly
comparable to the amounts shown for the year ended March 31, 2001. For
further information, see notes 1(g), 4 and 15 to our consolidated
financial statements.

Other Businesses

Life Insurance Business

Following an amendment to the Insurance Business Law, which permitted
non-life and life insurance companies to enter one anothers markets through
subsidiaries, Tokio Marine established The Tokio Marine Life Insurance Company,
Limited, or Tokio Marine Life, in August 1996 to carry out its life insurance
business. In addition, Nichido Fire established The Nichido Life Insurance
Co., Ltd., or Nichido Life, in 1996. Since these two subsidiaries were
established, our life insurance business has experienced rapid growth. We had
more than one million existing policies as of March 31, 2003. In April 2003,
we made Tokio Marine Life and Nichido Life our

36



---



##### Table of Contents



direct subsidiaries and we plan
to merge the two subsidiaries on October 1, 2003, subject to receipt of
necessary governmental approvals.

We are, for the time being, focusing our sales efforts on
quasi-participating type life insurance products. We seek to position these
products to compete with existing life insurance companies by offering
competitive premium rates. Currently, our main products include comprehensive
lifetime insurance, fixed term insurance and pension insurance.

We see product innovation as a core element of our strategy, and work to
develop new products that will satisfy customer needs. For example, Tokio
Marine Lifes Nagawariis a lapse-supported whole-life insurance product which
allows us to offer lower premiums by making use of an assumed lapse rate.
Mittsu-no-Anshin, or Triple Coverage, a new type of comprehensive whole life
insurance which provides combined coverage for hospitalization, nursing care
and death benefits, won an innovative-product award in February 1998 from the
Nihon Keizai Shinbun, the Japanese daily business journal. In 1999, Tokio
Marine Life launched Nagawari Mittsu-no-Anshin, a product which combines the
characteristics of the two previously released products. In 2002, Tokio Marine
Life made revisions to Household Income Coverage insurance, a fixed term
insurance product which covers household income by monthly payment of insurance
money, available for a reasonable premium.

We utilize our property and casualty insurance businesss nationwide
network of insurance agents to sell life insurance products. We rely largely
on our property and casualty insurance business agents for marketing and sales.
We plan to further strengthen cross-selling of life and non-life insurance
products. To achieve this, in 2002, we started utilizing promoters, who are
sales support personnel to assist insurance agents in marketing life insurance
products. We also increased the number of Life Partners, our direct sales
staff for life insurance. We also aim to further strengthen other distribution
channels such as agents specializing in life products and sales through banks.

Since we began operations, we have steadily expanded our life insurance
business, actively introducing and marketing innovative products. Our total
insurance-in-force as of March 31, 2003 was ¥11.9 trillion, compared to ¥9.0
trillion as of March 31, 2002.

Overseas Operations

Our overseas business dates back to 1880, when Tokio Marine started
offering insurance products in the United Kingdom, France and the United
States. As of March 31, 2003, we maintained branch offices in the United States
and China and overseas offices in 29 other countries, territories and
jurisdictions.

We issue insurance policies in 41 countries and territories outside of
Japan. A substantial portion of these policies is for overseas subsidiaries and
affiliates of our corporate customers in Japan. Most of our overseas
underwriting business is conducted by Tokio Marine as well as by the following
principal subsidiaries and affiliates:



| |  |  | Asia and Oceania The Tokio Marine and Fire Insurance Company
(Hong Kong) Limited, The Sri Muang Insurance Co., Ltd., The Tokio
Marine and Fire Insurance Company (Singapore) Pte. Limited and Tokio
Marine Management (Australasia) Pty. Ltd.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Americas Tokio Marine Management, Inc., First Insurance
Company of Hawaii, Ltd., Tokio Marine Compañia de Seguros, S.A. de
C.V., Tokio Marine Brasil Seguradora S.A. and Tokio Millennium Re Ltd.                                        
|
| |  |  | Europe, the Middle East and Africa Tokio Marine Europe Insurance
Limited and Tokio Marine Global Re Limited.                                                                                                                                 

One of our objectives is to expand the profitability and size of our
international operations simultaneously on a coordinated basis, with particular
emphasis on Asia. We have entered into a business alliance in Korea with the
Samsung Fire & Marine Insurance Co., Ltd. and in China with The Peoples
Insurance Company of China.

In December 2002, we launched Millea Asia Pte. Ltd. as an intermediate
holding company in Singapore to facilitate the growth of our Asian insurance
business. We transferred the Asian insurance management operations of Tokio
Marine to the new company in April 2003. Millea Asia is in charge of planning
our business growth strategy in the Asian region (excluding Japan), including
through mergers, acquisitions and business tie-ups, and managing

37



---



##### Table of Contents



our local
subsidiaries. In December 2002, Millea Asia invested in Newa Insurance Co.,
Ltd., a property and casualty insurance company in Taiwan. In April 2003,
Millea Asia signed an agreement concerning an investment in Sino Life Insurance
Co., Ltd., a life insurer in China, jointly with Tokio Marine.

Subsidiaries and Affiliates

Significant Subsidiaries

The following were our significant subsidiaries as of March 31, 2003, all
of which were wholly owned and incorporated in Japan, except as otherwise
noted: The Tokio Marine and Fire Insurance Company, Limited, The Nichido Fire
and Marine Insurance Company, Limited, The Tokio Marine Life Insurance Company,
Limited, The Nichido Life Insurance Company, Limited, The Tokio Marine Career
Service Company, Limited, Tokio Marine Europe Insurance Limited (incorporated
in the United Kingdom), The Tokio Marine and Fire Insurance Company (Hong Kong)
Limited (incorporated in Hong Kong, China), Trans Pacific Insurance Company
(incorporated in New York, U.S.A.), Tokio Millennium Re Ltd (incorporated in
the Bermudas), Tokio Marine Global Re Limited (incorporated in Ireland), Tokio
Marine Asset Management Company, Limited (97.5% owned), The Tokio Marine and
Fire Insurance Company (Singapore) Pte. Limited (80% owned) (incorporated in
Singapore), Tokio Marine Brasil Seguradora S.A. (91.3% owned) (incorporated in
Brazil), Nichido Investment (Luxembourg) S.A. (incorporated in Luxembourg) and
Tokio Marine Financial Solutions Ltd. (incorporated in the Cayman Islands).

Relationships with the Mitsubishi Group

Tokio Marine is a member of the Mitsubishi Group, which has evolved over a
period of more than 100 years. The Mitsubishi Group relationship, which is
similar to that of other major Japanese corporate groups, is one of cooperation
in areas of common interest within a group of companies, each operating
independently under its own separate management. Currently there are about 30
Mitsubishi Group companies engaged in a broad range of activities, including
manufacturing, trading, natural resources, transportation, real estate,
banking, securities and life and non-life insurance. We believe that we write a
substantial majority of the non-life insurance for Mitsubishi Group companies.

Competition

There is strong competition in the Japanese non-life insurance industry.
We expect that, as deregulation of the insurance business continues,
competition will intensify at all levels.

Competition within the non-life insurance industry involves, among other
things, expansion of an agency network through the training of new insurance
agents, investment in information technology systems and the development and
marketing of new insurance products and related services. We expect competition
in premium rates and commissions to increase for our property and casualty
lines of business as a result of the continuing deregulation of the non-life
insurance industry. We believe that it is important to continue to compete on
the basis of the quality of services associated with our insurance products,
such as the giving of advice on risk management matters to business customers
and extended-hour services for automobile insurance claims processing, rather
than on premium rates being reduced.

Recent consolidation and alliances among non-life and life insurance
companies in Japan have increased competition within the industry. We represent
one of the five major non-life insurer groupings that have emerged in the
Japanese insurance industry. The others are: the Sompo Japan insurance group
(formed by Yasuda Fire and Marine Insurance and others); the Mitsui Sumitomo
insurance group (formed by Mitsui Marine and Fire Insurance and Sumitomo Marine
and Fire Insurance); the Aioi insurance group (formed by Chiyoda Fire and
Marine Insurance and Daitokyo Fire and Marine Insurance); and the Nipponkoa
insurance group (formed by Nippon Fire and Marine Insurance and Koa Fire and
Marine Insurance and others). There have also been alliances between non-life
and life insurers, such as Sompo Japan with Dai-Ichi Mutual Life and Nipponkoa
Insurance with Taiyo Life.

Major insurance companies with global operations, have already entered the
Japanese insurance market. We believe that the current strategy of these global
insurance companies focuses on marketing methods and products that are not yet
popular in Japan, such as direct marketing to individual customers and
risk-segmented automobile

38



---



##### Table of Contents



insurance. While it is probable that over time some
foreign insurers will succeed in increasing their sales of products that are
already popular with consumers in Japan, such as voluntary automobile
insurance, through direct marketing, the market share of foreign companies is
currently fairly limited. Some of the foreign insurers have already exited from
the Japanese insurance market. We do not feel these companies pose a threat to
our market position but we are closely monitoring the situation and will
respond if necessary.

Many of Japans life insurance companies have established non-life
insurance subsidiaries as permitted under the 1995 amendments to the Insurance
Business Law. Although these non-life insurance subsidiaries have yet to make
significant inroads into the non-life insurance market, we continue to monitor
the activities of these subsidiaries and their parent companies closely.

Properties

We lease real property in Tokyo for use in our operations at the holding
company level. The floor space for our office is approximately 19,800 square
feet.

Tokio Marine owns and leases real property for use in its operations.
Approximately 85% of the 6,348,299 square feet of real property that Tokio
Marine uses in its Japanese operations is owned. Tokio Marine owns two large
buildings (25 stories and 15 stories) in Marunouchi, Tokyos central business
district. Seventy percent of the total space (1,241,280 square feet) in these
two buildings is used by Tokio Marine and its subsidiaries; the rest is held
for lease to tenants.

Tokio Marine also owns and utilizes approximately 670,000 square feet of
floor space for its data center located in a suburb of Tokyo. In this center,
Tokio Marine utilizes six sets of leased computers with a total capacity of
2,400 million instructions per second, or MIPS. In addition, Tokio Marine has a
data center located in a suburb of Osaka. This center has total floor space of
approximately 260,000 square feet and is equipped with three sets of leased
computers with a total capacity of 280 MIPS. The Osaka center serves as a
backup center in case of a disaster in the Tokyo area. The Osaka center
operates in conjunction with the Tokyo center to share the data processing load
of Tokio Marine.

Nichido Fire also owns and leases real property for use in its operations.
Approximately 79% of the 2,870,324 square feet of real property that Nichido
Fire uses in its Japanese operations is owned. Its head office building (eight
stories with 65,601 square feet) is located in Tokyo. Its other major offices
in Japan are located in Osaka, Kyoto, Sapporo and Yokohama.

Employees

As of March 31, 2003, we had approximately 135 employees at the holding
company level.

As of March 31, 2003, Tokio Marine had approximately 14,400 employees on a
consolidated basis, compared with approximately 14,200 as of March 31, 2002 and
approximately 14,500 as of March 31, 2001. A majority of Tokio Marines
employees are members of a labor union, which negotiates with Tokio Marine
concerning remuneration and working conditions. We consider Tokio Marines
labor relations to be good.

As of March 31, 2003, Nichido Fire had approximately 6,700 employees on a
consolidated basis, compared with approximately 6,600 as of March 31, 2002 and
approximately 6,700 as of March 31, 2001. A majority of Nichido Fire employees
are members of a labor union, which negotiates with Nichido Fire concerning
remuneration and working conditions. We consider Nichido Fires labor relations
to be good.

Legal Proceedings

Neither we nor any of our operating subsidiaries is a party to any
material pending legal proceedings other than routine litigation incidental to
our business. In addition, we are not aware of any litigation that is
reasonably likely to have a material adverse effect on our financial position
or results of operations.

39



---



##### Table of Contents






MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with
our U.S. GAAP consolidated financial statements included in this annual report,
together with the related notes. The following discussion is based on those
U.S. GAAP consolidated financial statements. Our fiscal year end is March 31.

Our U.S. GAAP consolidated financial statements for the fiscal year ended
March 31, 2003 reflect the inclusion in those financial statements of the
results of operations and financial position of Nichido Fire and its
consolidated subsidiaries from and after the date of our formation on April 2,
2002. Consistent with U.S. GAAP and with Exchange Act requirements regarding
the presentation of our financial statements, our U.S. GAAP consolidated
financial statements for the fiscal years ended March 31, 2001 and 2002 have
not been restated to include the results of operations and financial position
of Nichido Fire and its consolidated subsidiaries for those fiscal years.
Accordingly, our U.S. GAAP financial statements for the year ended March 31,
2003 are not directly comparable to our financial statements for prior years.
See  Overview  Business Combination and  Results of Operations  Year
Ended March 31, 2003 Compared to Year Ended March 31, 2002.

Overview

Economic Conditions

Our financial condition and results of operations are generally affected
by economic conditions in Japan and, to a lesser extent, other parts of the
world in which we conduct business.

Over the last several years, the Japanese economy has faced a number of
volatile and challenging economic trends and conditions, including:



| |  |  | Stagnant economic activity, as the Japanese real gross domestic
product grew by 3.2% in the year ended March 31, 2001, decreased by
1.2% in the year ended March 31, 2002, and grew by only 1.6% in the
year ended March 31, 2003;                                                                                                                                                                                                                                                                         
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Increasing total levels of outstanding Japanese government debt and
downgradings of Japanese government bonds by the major rating agencies;                                                                                                                                                                                                                                                                                                                                                                
|
| |  |  | High levels of corporate bankruptcy filings, with 18,928 cases
filed in the year ended March 31, 2003. Total liabilities of these
insolvent companies for the year ended March 31, 2003 totaled ¥13,310
billion;                                                                                                                                                                                                                                                                                           
|
| |  |  | A very low interest rate environment, with the Bank of Japan
maintaining a policy of near zero interest rates before August 2000 and
again after March 2001;                                                                                                                                                                                                                                                                                                                                               
|
| |  |  | Declining real estate values, with government-appraised land prices
declining an average of 5.8% for residential areas and 8.0% for
commercial areas in calendar year 2002, which represented the twelfth
straight year of decline;                                                                                                                                                                                                                                                                        
|
| |  |  | Declining but volatile equity markets, with the Nikkei Stock
Average, which is an average of 225 stocks listed on the Tokyo Stock
Exchange, declining 27.6% to 7,972.71 during the year ended March 31,
2003, after declining 15.2% to 11,024.94 during the year ended March
29, 2002. This followed the Nikkei Stock Averages 36.1% decline from
20,337.32 during the year ended March 31, 2001. Subsequent to March 31,
2003, the Nikkei Stock Average increased to 10,990.11 on September 17,
2003; and
|
| |  |  | Significant exchange rate movements, as the value of the yen
against the U.S. dollar fluctuated from a high of ¥115.71 to a low of
¥133.40 in the year ended March 31, 2003, from a high of ¥115.89 to a
low of ¥134.77 in the year ended March 31, 2002, and from a high of
¥104.19 to a low of ¥125.54 in the year ended March 31, 2001. As of
September 17, 2003, the U.S. dollar exchange rate was ¥115.99.                                                                                            

The U.S. economy was able to achieve positive growth during the year ended
March 31, 2003, but experienced uncertainty against the backdrop of the war in
Iraq and concerns regarding unemployment. The U.S. Federal

40



---



##### Table of Contents



Reserve continued to cut interest rates, bringing the federal fund rates
to 1.25% as of March 31, 2003 and to 1.00% on June 25, 2003. U.S. equity
indices continued to be affected by the uncertainty surrounding the U.S.
economy, with both the Nasdaq Composite Index and the Dow Jones Industrial
Average showing declines in the year ended March 31, 2003. Subsequent to March
31, 2003, the Nasdaq Composite Index increased from 1,341.17 on March 31, 2003
to 1,883.10 on September 17, 2003 and the Dow Jones Industrial Average
increased from 7,992.13 on March 31, 2003 to 9,545.65 on September 17, 2003.

The European economy was weak throughout the year ended March 31, 2003 and
experienced little growth. Subsequent to March 31, 2003, equity values in
Europe increased significantly.

The Asian economies were negatively affected by the weak economic
conditions in the U.S. and in Europe. In the year ended March 31, 2003,
economic growth in Asia was weak.

Business Combination

We were formed as the holding company for Tokio Marine and Nichido Fire on
April 2, 2002. See Business  Formation of Millea Holdings.

For U.S. GAAP consolidated financial statement reporting purposes, our
formation was treated as a business combination of Tokio Marine and Nichido
Fire. We accounted for this business combination using the purchase method of
accounting, pursuant to which Tokio Marine was treated as having acquired
Nichido Fire.

Under the purchase method of accounting, we generated ¥317.8 billion of
negative goodwill in connection with the business combination, representing the
amount by which the net assets of Nichido Fire acquired by Tokio Marine
exceeded the deemed purchase price for those net assets. For U.S. GAAP
financial reporting purposes, we were required to allocate a portion of that
negative goodwill to various long-term assets acquired from Nichido Fire. We
were also required to recognize as an extraordinary gain the unallocated
portion of that negative goodwill. This extraordinary gain, which amounted to
¥248.3 billion, is reflected in our net income for the year ended March 31,
2003.

Our U.S. GAAP consolidated financial statements as of and for the year
ended March 31, 2003 reflect the inclusion of the operating results and
financial position of Nichido Fire and its consolidated subsidiaries from the
date of our formation on April 2, 2002. See Results of Operations. As
described above, those financial statements also reflect the effects of
accounting for the business combination by the purchase method. Accordingly,
our U.S. GAAP consolidated financial statements as of and for the year ended
March 31, 2003 are not directly comparable to our U.S. GAAP consolidated
financial statements for prior years.

Recent Changes in Financial Statement Presentation

Beginning with the year ended March 31, 2003, we made the following
changes in the presentation format of our U.S. GAAP consolidated financial
statements:



| |  |  | Investment deposits by policyholders.Beginning with the
year ended March 31, 2003, we began to present investment income in
our consolidated statement of income on a gross basis, without
deduction for any investment income attributable to policyholders in
respect of deposit-type insurance policies. In connection with this
change, we also began to show a separate expense line item in our
consolidated statement of income called income credited to
investment deposits by policyholders. In connection with these
changes in presentation, we restated our consolidated statements of
income for the years ended March 31, 2002 and 2001 to present these
line items on a basis that is comparable to our consolidated
statement of income for the year ended March 31, 2003.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Compulsory automobile liability insurance.Effective April
1, 2002, the Japanese government abolished its reinsurance program
with respect to compulsory automobile liability insurance. In
connection with this abolition, we changed our consolidated balance
sheet presentation (1) to present our liabilities for policy losses
in respect of compulsory automobile liability insurance on a gross
basis, without deduction for any reinsurance recoverable in respect
of those policy losses, and (2) to present our reinsurance
recoverable on those losses on a gross basis. This change in
presentation had the effect                                                                                                                                                                

41



---



##### Table of Contents





| |  |  | of increasing the amount of these two line items as shown on our
consolidated balance sheet. In connection with this change in
presentation, we restated our consolidated balance sheet as of March
31, 2002 to present these line items on a basis that is comparable to
our consolidated balance sheet as of March 31, 2003.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, beginning with the year ended March 31, 2003, we leveraged
various upgrades to our information systems to refine the actuarial
methodologies that we use in calculating future policy benefits, unearned
premiums, deferred acquisition costs and liabilities for losses in respect of
our property-casualty and life insurance businesses. In connection with
adopting these refined actuarial methodologies, we recalculated and restated
various line items in our consolidated statements of income for the years ended
March 31, 2002 and 2001 and our consolidated balance sheet as of March 31, 2002
to present these line items on a basis that is comparable to our consolidated
financial statements as of and for the year ended March 31, 2003. These
restatements generally had the effect of reallocating various income and
expense items between our property-casualty and life insurance business
segments. None of these restatements affected our net income or retained
earnings in respect of those prior years.

The following table shows the effects of the changes described above on
our consolidated statements of income for the years ended March 31, 2002 and
2001 and our consolidated balance sheet as of March 31, 2002:

|                      |                                                             |                   |                            |           |                     |  |                    |           |                     |  |   |           |  |  |   |           | 
|--------------------- | ----------------------------------------------------------- | ----------------- | -------------------------- | --------- | ------------------- |  | ------------------ | --------- | ------------------- |  | - | --------- |  |  | - | --------- | 
|                      |                                                             |                   | Year ended/as of March 31,
|                      |                                                             |                   |                           
|                      |                                                             |                   | 2002                       |           | 2001               
|                      |                                                             |                   |                            |           |                    
|                      |                                                             |                   | As reported in our         |           | As reclassified and |  | As reported in our |           | As reclassified and
|                      |                                                             |                   | annual report for          |           | restated in this    |  | annual report for  |           | restated in this   
|                      |                                                             |                   | the year ended             |           | annual report       |  | the year ended     |           | annual report      
|                      |                                                             |                   | March 31, 2002             |           |                     |  | March 31, 2002     |           |                    
|                      |                                                             |                   |                            |           |                     |  |                    |           |                    
|Statements of income: |                                                             | (yen in millions)
|                      | Life premiums                                               |                   | ¥                          | 205,693   |                     |  | ¥                  | 209,208   |                     |  | ¥ | 150,543   |  |  | ¥ | 162,905   | 
|                      | Net investment income                                       |                   |                            | 48,259    |                     |  |                    | 104,681   |                     |  |   | 69,183    |  |  |   | 127,852   | 
|                      | Total operating income                                      |                   |                            | 1,588,575 |                     |  |                    | 1,648,512 |                     |  |   | 1,586,607 |  |  |   | 1,657,638 | 
|                      | Policy benefits and losses for life                         |                   |                            | 172,586   |                     |  |                    | 175,016   |                     |  |   | 125,947   |  |  |   | 137,469   | 
|                      | Income credited to investment deposits by
policyholders     |                   |                            |          |                     |  |                    | 57,507    |                     |  |   |          |  |  |   | 59,509    | 
|                      | Total operating costs and expenses                          |                   |                            | 1,479,907 |                     |  |                    | 1,539,844 |                     |  |   | 1,453,573 |  |  |   | 1,524,604 | 
|Balance sheet:        |                                                             |                   |                            |           |                     |  |                    |           |                     |  |   |           |  |  |   |          
|                      | Reinsurance recoverable on losses                           |                   |                            | 174,193   |                     |  |                    | 332,687   |                     |  |   |           |  |  |   |           | 
|                      | Prepaid reinsurance premiums                                |                   |                            | 223,090   |                     |  |                    | 195,814   |                     |  |   |           |  |  |   |           | 
|                      | Deferred policy acquisition costs                           |                   |                            | 330,081   |                     |  |                    | 301,723   |                     |  |   |           |  |  |   |           | 
|                      | Total assets                                                |                   |                            | 8,456,317 |                     |  |                    | 8,559,177 |                     |  |   |           |  |  |   |           | 
|                      | Liabilities for losses, claims and loss
adjustment expenses |                   |                            | 675,764   |                     |  |                    | 875,463   |                     |  |   |           |  |  |   |           | 
|                      | Unearned premiums                                           |                   |                            | 1,280,058 |                     |  |                    | 1,177,512 |                     |  |   |           |  |  |   |           | 
|                      | Future policy benefits and losses                           |                   |                            | 494,269   |                     |  |                    | 462,597   |                     |  |   |           |  |  |   |           | 
|                      | Total policy liabilities and accruals                       |                   |                            | 2,450,091 |                     |  |                    | 2,515,572 |                     |  |   |           |  |  |   |           | 
|                      | Investment deposits by policyholders                        |                   |                            | 2,054,705 |                     |  |                    | 2,131,834 |                     |  |   |           |  |  |   |           | 
|                      | Other liabilities                                           |                   |                            | 187,550   |                     |  |                    | 147,800   |                     |  |   |           |  |  |   |           | 
|                      | Total liabilities                                           |                   |                            | 5,946,623 |                     |  |                    | 6,049,483 |                     |  |   |           |  |  |   |           | 
|                      | Total liabilities and stockholders equity                  |                   |                            | 8,456,317 |                     |  |                    | 8,559,177 |                     |  |   |           |  |  |   |           | 

42



---



##### Table of Contents



Prior Period Changes in Accounting Policies

During the fiscal year ended March 31, 2002, we changed our accounting
policy with respect to the recognition of other than temporary declines in
values of marketable equity securities. As a result of this change, we
restated our previously reported U.S. GAAP consolidated financial statements
that were contained in our annual report for the year ended March 31, 2001.
These restatements were effected in our U.S. GAAP consolidated financial
statements for the year ended March 31, 2002 by restating the comparative
information contained in those financial statements and labeling that
information as restated.

Prior to this change in accounting policy, we maintained the cost of
equity securities for U.S. GAAP reporting purposes by reinstating the
historical losses that we recognized in our Japanese GAAP financial statements
under the lower of cost or market method and by making certain other
adjustments to conform with U.S. GAAP. Under this approach, the cost of equity
securities was available on a portfolio-only basis. As a result, we were
required to make approximations to (1) determine the amount of other than
temporary declines in fair value below cost of equity securities and (2)
present gross unrealized gains and losses on equity securities at each
year-end. For U.S. GAAP reporting purposes, we presented our gross unrealized
gains as measured for Japanese GAAP reporting purposes, and our gross
unrealized losses were calculated as the difference between gross unrealized
gains and net unrealized gains.

For the year ended March 31, 2002, we began to maintain the cost of equity
securities for each security and to recognize impairment for other than
temporary declines in fair value below cost based on various qualitative and
quantitative impairment tests that we applied to individual securities. The
restatements of our U.S. GAAP consolidated financial statements for prior years
were made based on the results of similar tests that we applied for those
years.

As a result of the restatements which related to our historical
approximation of the amount of other than temporary declines, our income
before tax for the year ended March 31, 2001 was reduced by ¥7,566 million to
recognize additional impairment charges. The cumulative negative effect of
these restatements on income before tax through March 31, 2001 was ¥66,413
million. As a result of the restatements which related to our presentation of
gross unrealized gains and losses on marketable equity securities, our gross
unrealized gains and gross unrealized losses on marketable equity securities at
March 31, 2001 were reduced by ¥62,179 million and ¥128,592 million,
respectively.

The following table shows the effects of these restatements on our U.S.
GAAP consolidated financial statements and related notes for the year ended
March 31, 2001. All of these adjustments related solely to our property and
casualty segment:

|                                                        |                      |                                            |                           |  |                    |  |           |           |  |  |           |           | 
|------------------------------------------------------- | -------------------- | ------------------------------------------ | ------------------------- |  | ------------------ |  | --------- | --------- |  |  | --------- | --------- | 
|                                                        |                      |                                            | Year ended March 31, 2001
|                                                        |                      |                                            |                          
|                                                        |                      |                                            | As reported in the        |  | As restated in the
|                                                        |                      |                                            | annual report for         |  | annual report for 
|                                                        |                      |                                            | the year ended            |  | the year ended    
|                                                        |                      |                                            | March 31, 2001            |  | March 31, 2002    
|                                                        |                      |                                            |                           |  |                   
|Retained earnings:                                      |                      | (yen in millions, except per share amount)
|                                                        | at beginning of year |                                            |                           |  |                    |  | ¥         | 1,667,928 |  |  | ¥         | 1,630,265 | 
|                                                        | at end of year       |                                            |                           |  |                    |  |           | 1,748,272 |  |  |           | 1,705,767 | 
|Unrealized appreciation of securities                   |                      |                                            |                           |  |                    |  | 722,674   |           |  |  | 765,179   |          
|Realized gains on investments                           |                      |                                            |                           |  |                    |  | 63,708    |           |  |  | 56,142    |          
|Total operating income                                  |                      |                                            |                           |  |                    |  | 1,594,173 |           |  |  | 1,586,607 |          
|Income before income tax expense                        |                      |                                            |                           |  |                    |  | 140,600   |           |  |  | 133,034   |          
|Income tax expense                                      |                      |                                            |                           |  |                    |  | 47,083    |           |  |  | 44,359    |          
|Net income                                              |                      |                                            |                           |  |                    |  | 93,517    |           |  |  | 88,675    |          
|Basic and diluted net income per ADS                    |                      |                                            |                           |  |                    |  | 302       |           |  |  | 286       |          
|Gross unrealized gains on marketable equity securities  |                      |                                            |                           |  |                    |  | 1,695,874 |           |  |  | 1,633,695 |          
|Gross unrealized losses on marketable equity securities |                      |                                            |                           |  |                    |  | 145,096   |           |  |  | 16,504    |          

43



---



##### Table of Contents



Securities Available for Sale

At March 31, 2003, the fair value of our fixed maturity securities
available for sale was ¥3,422 billion and the fair value of our equity
securities available for sale was ¥2,534 billion. Changes in the fair value of
our securities available for sale can have a significant impact on our results
of operations, as we are required to recognize losses for declines in fair
value below cost that we determine to be other than temporary in nature. See
Critical Accounting PoliciesImpairment of Securities Available for Sale.

For fixed maturity securities available for sale, we use quoted market
values to determine fair value. If quoted market values are not available, we
instead use quoted market values for similar securities. For equity securities
available for sale, which include common stock and non-redeemable preferred
stock, we primarily use quoted market prices to determine fair value. As of
March 31, 2003, approximately 82% of our equity securities available for sale
were listed on Japanese or foreign stock exchanges.

The following table shows the fair value of our securities available for
sale, broken down by security rating, as of March 31, 2003:

|                     |                                     |   |                |           |                      |   |                   |           |                    |   |           |           |            |  |            |       |  
|-------------------- | ----------------------------------- | - | -------------- | --------- | -------------------- | - | ----------------- | --------- | ------------------ | - | --------- | --------- | ---------- |  | ---------- | ----- | -
|                     |                                     |   | Fair value    
|                     |                                     |   |               
|                     |                                     |   |                |           |                      |   |                   |           |                    |   |           |           |            |  | % of Total
|                     |                                     |   | Fixed maturity |           |                      |   |                   |           |                    |   |           |           | securities
|                     |                                     |   | securities     |           | Equity securities(1) |   | Total securities  |           | available for sale
|                     |                                     |   |                |           |                      |   |                   |           |                   
|                     |                                     |   |                |           |                      |   | (yen in millions) |           |                    |   |           |           |            |  |           
|Investment grade     |                                     | ¥ | 3,128,580      |           |                      | ¥ | 1,853,773         |           |                    | ¥ | 4,982,353 |           |            |  | 83.6       | %    
|Non-investment grade |                                     |   | 11,648         |           |                      |   | 69,856            |           |                    |   | 81,504    |           |            |  | 1.4        |      
|Not rated            |                                     |   | 281,396        |           |                      |   | 610,592           |           |                    |   | 891,988   |           |            |  | 15.0       |      
|                     |                                     |   |                |           |                      |   |                   |           |                    |   |           |           |            |  |            |      
|                     | Total securities available for sale |   | ¥              | 3,421,624 |                      |   | ¥                 | 2,534,221 |                    |   | ¥         | 5,955,845 |            |  |            | 100.0 | %
|                     |                                     |   |                |           |                      |   |                   |           |                    |   |           |           |            |  |            |      



---

|(1) |  | We classify equity securities based upon the issuers long-term bond
rating.
|--- |  | ----------------------------------------------------------------------------

The following table shows gross unrealized losses on our securities
available for sale, broken down by security rating, as of March 31, 2003:

|                     |                                     |   |                       |        |                      |   |                   |          |                    |   |         |          |            |  |            |       |  
|-------------------- | ----------------------------------- | - | --------------------- | ------ | -------------------- | - | ----------------- | -------- | ------------------ | - | ------- | -------- | ---------- |  | ---------- | ----- | -
|                     |                                     |   | Gross unrealized loss
|                     |                                     |   |                      
|                     |                                     |   |                       |        |                      |   |                   |          |                    |   |         |          |            |  | % of Total
|                     |                                     |   | Fixed maturity        |        |                      |   |                   |          |                    |   |         |          | securities
|                     |                                     |   | securities            |        | Equity securities(1) |   | Total securities  |          | available for sale
|                     |                                     |   |                       |        |                      |   |                   |          |                   
|                     |                                     |   |                       |        |                      |   | (yen in millions) |          |                    |   |         |          |            |  |           
|Investment grade     |                                     | ¥ | (6,050                | )      |                      | ¥ | (89,229           | )        |                    | ¥ | (95,279 | )        |            |  | 82.1       | %    
|Non-investment grade |                                     |   | (34                   | )      |                      |   | (5,482            | )        |                    |   | (5,516  | )        |            |  | 4.8        |      
|Not rated            |                                     |   | (23                   | )      |                      |   | (15,218           | )        |                    |   | (15,241 | )        |            |  | 13.1       |      
|                     |                                     |   |                       |        |                      |   |                   |          |                    |   |         |          |            |  |            |      
|                     | Total securities available for sale |   | ¥                     | (6,107 | )                    |   | ¥                 | (109,929 | )                  |   | ¥       | (116,036 | )          |  |            | 100.0 | %
|                     |                                     |   |                       |        |                      |   |                   |          |                    |   |         |          |            |  |            |      



---

|(1) |  | We classify equity securities based upon the issuers long-term bond
rating.
|--- |  | ----------------------------------------------------------------------------

The following table shows gross unrealized gains on our securities
available for sale, broken down by security rating, as of March 31, 2003:

|                     |  |   |                       |  |                      |   |                   |  |                    |   |         |  |            |  |            |   | 
|-------------------- |  | - | --------------------- |  | -------------------- | - | ----------------- |  | ------------------ | - | ------- |  | ---------- |  | ---------- | - | 
|                     |  |   | Gross unrealized gain
|                     |  |   |                      
|                     |  |   |                       |  |                      |   |                   |  |                    |   |         |  |            |  | % of Total
|                     |  |   | Fixed maturity        |  |                      |   |                   |  |                    |   |         |  | securities
|                     |  |   | securities            |  | Equity securities(1) |   | Total securities  |  | available for sale
|                     |  |   |                       |  |                      |   |                   |  |                   
|                     |  |   |                       |  |                      |   | (yen in millions) |  |                    |   |         |  |            |  |           
|Investment grade     |  | ¥ | 183,429               |  |                      | ¥ | 685,117           |  |                    | ¥ | 868,546 |  |            |  | 86.6       | %
|Non-investment grade |  |   | 110                   |  |                      |   | 8,319             |  |                    |   | 8,429   |  |            |  | 0.8        |  

44



---



##### Table of Contents



|          |                                     |  |                       |         |                      |  |                   |         |                    |  |         |           |            |  |            |       |  
|--------- | ----------------------------------- |  | --------------------- | ------- | -------------------- |  | ----------------- | ------- | ------------------ |  | ------- | --------- | ---------- |  | ---------- | ----- | -
|          |                                     |  | Gross unrealized gain
|          |                                     |  |                      
|          |                                     |  |                       |         |                      |  |                   |         |                    |  |         |           |            |  | % of Total
|          |                                     |  | Fixed maturity        |         |                      |  |                   |         |                    |  |         |           | securities
|          |                                     |  | securities            |         | Equity securities(1) |  | Total securities  |         | available for sale
|          |                                     |  |                       |         |                      |  |                   |         |                   
|          |                                     |  |                       |         |                      |  | (yen in millions) |         |                    |  |         |           |            |  |           
|Not rated |                                     |  | 18,632                |         |                      |  | 107,902           |         |                    |  | 126,534 |           |            |  | 12.6       |      
|          |                                     |  |                       |         |                      |  |                   |         |                    |  |         |           |            |  |            |      
|          | Total securities available for sale |  | ¥                     | 202,171 |                      |  | ¥                 | 801,338 |                    |  | ¥       | 1,003,509 |            |  |            | 100.0 | %
|          |                                     |  |                       |         |                      |  |                   |         |                    |  |         |           |            |  |            |      



---

|(1) |  | We classify equity securities based upon the issuers long-term bond
rating.
|--- |  | ----------------------------------------------------------------------------

The following table shows the amounts and the periods of time for which
securities available for sale have been in an unrealized loss position as of
March 31, 2003:

|                           |       |   |                       |        |                   |   |                   |          |   |   |         |          |  
|-------------------------- | ----- | - | --------------------- | ------ | ----------------- | - | ----------------- | -------- | - | - | ------- | -------- | -
|                           |       |   | Gross unrealized loss
|                           |       |   |                      
|                           |       |   | Fixed maturity        |        |                   |   |                   |          |   |   |        
|                           |       |   | securities            |        | Equity securities |   | Total securities 
|                           |       |   |                       |        |                   |   |                  
|                           |       |   |                       |        |                   |   | (yen in millions) |          |   |   |        
|Three months or less       |       | ¥ | (1,283                | )      |                   | ¥ | (86,750           | )        |   | ¥ | (88,033 | )       
|Three months to six months |       |   | (1,045                | )      |                   |   | (6,917            | )        |   |   | (7,962  | )       
|Six months to nine months  |       |   | (12                   | )      |                   |   | (4,776            | )        |   |   | (4,788  | )       
|Nine months to one year    |       |   | (2,176                | )      |                   |   | (10,363           | )        |   |   | (12,539 | )       
|Over one year              |       |   | (1,591                | )      |                   |   | (1,123            | )        |   |   | (2,714  | )       
|                           |       |   |                       |        |                   |   |                   |          |   |   |         |         
|                           | Total |   | ¥                     | (6,107 | )                 |   | ¥                 | (109,929 | ) |   | ¥       | (116,036 | )
|                           |       |   |                       |        |                   |   |                   |          |   |   |         |         

The
following table shows the amounts and the periods of time for which fixed maturity securities
available for sale have been in an unrealized loss position as of
March 31, 2003, broken down by security rating, as of that date:

|                           |       |   |                       |        |                      |   |                   |     |            |   |     |     |   |   |                |        |  
|-------------------------- | ----- | - | --------------------- | ------ | -------------------- | - | ----------------- | --- | ---------- | - | --- | --- | - | - | -------------- | ------ | -
|                           |       |   | Gross unrealized loss
|                           |       |   |                      
|                           |       |   |                       |        |                      |   |                   |     |            |   |     |     |   |   | Total         
|                           |       |   |                       |        |                      |   |                   |     |            |   |     |     |   |   | fixed maturity
|                           |       |   | Investment grade      |        | Non-investment grade |   | Not rated         |     | securities
|                           |       |   |                       |        |                      |   |                   |     |           
|                           |       |   |                       |        |                      |   | (yen in millions) |     |            |   |    
|Three months or less       |       | ¥ | (1,246                | )      |                      | ¥ | (29               | )   |            | ¥ | (8  | )   |   | ¥ | (1,283         | )     
|Three months to six months |       |   | (1,031                | )      |                      |   |                  |     |            |   | (14 | )   |   |   | (1,045         | )     
|Six months to nine months  |       |   | (12                   | )      |                      |   |                  |     |            |   |    |     |   |   | (12            | )     
|Nine months to one year    |       |   | (2,171                | )      |                      |   | (5                | )   |            |   |    |     |   |   | (2,176         | )     
|Over one year              |       |   | (1,591                | )      |                      |   |                  |     |            |   | 0   |     |   |   | (1,591         | )     
|                           |       |   |                       |        |                      |   |                   |     |            |   |     |     |   |   |                |       
|                           | Total |   | ¥                     | (6,051 | )                    |   | ¥                 | (34 | )          |   | ¥   | (22 | ) |   | ¥              | (6,107 | )
|                           |       |   |                       |        |                      |   |                   |     |            |   |     |     |   |   |                |       

The following table shows gross unrealized losses on and the fair value of
fixed maturity securities available for sale that were in an unrealized loss
position as of March 31, 2003 by contractual maturities at that date:

|                                       |       |   |                       |        |            |   |         |         | 
|-------------------------------------- | ----- | - | --------------------- | ------ | ---------- | - | ------- | ------- | 
|                                       |       |   | Gross unrealized loss |        | Fair Value
|                                       |       |   |                       |        |           
|                                       |       |   | (yen in millions)    
|Due in one year or less                |       | ¥ | (2,173                | )      |            | ¥ | 255,732 |        
|Due after one year through five years  |       |   | (3,660                | )      |            |   | 284,458 |        
|Due after five years through ten years |       |   | (217                  | )      |            |   | 26,649  |        
|Due after ten years                    |       |   | (57                   | )      |            |   | 2,590   |        
|                                       |       |   |                       |        |            |   |         |        
|                                       | Total |   | ¥                     | (6,107 | )          |   | ¥       | 569,429 | 
|                                       |       |   |                       |        |            |   |         |        

45



---



##### Table of Contents



The following table shows gross unrealized losses on our securities
available for sale as of each of the dates indicated:

|                          |                               |   |                   |          |      |   |         |         |   |   |         |         |  
|------------------------- | ----------------------------- | - | ----------------- | -------- | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                          |                               |   | As of March 31,  
|                          |                               |   |                  
|                          |                               |   | 2003              |          | 2002 |   | 2001   
|                          |                               |   |                   |          |      |   |        
|                          |                               |   | (yen in millions)
|Equity securities         |                               | ¥ | (109,929          | )        |      | ¥ | (16,308 | )       |   | ¥ | (16,504 | )      
|Fixed maturity securities |                               |   | (6,107            | )        |      |   | (429    | )       |   |   | (24     | )      
|                          |                               |   |                   |          |      |   |         |         |   |   |         |        
|                          | Total gross unrealized losses |   | ¥                 | (116,036 | )    |   | ¥       | (16,737 | ) |   | ¥       | (16,528 | )
|                          |                               |   |                   |          |      |   |         |         |   |   |         |        

Set forth below is certain other information relating to our portfolio of
securities available for sale as of March 31, 2003:



| |  |  | Investment concentration.We held investments, mainly equity
securities, in Toyota Motor Corporation and its affiliates that were valued at ¥290.2
billion, representing approximately 10% of our consolidated
stockholders equity, as of that date. No other investment in a
single company including its affiliates exceeded 10% of our consolidated stockholders equity
as of that date.                                                                                
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Concentration of gross unrealized losses.As of March 31,
2003, two of our investments in equity securities of Japanese
issuers accounted for 37.9% of our total gross unrealized losses on
securities available for sale as of that date. The
unrealized losses on these investments amounted to ¥33,852 million
and ¥10,069 million, respectively, as compared to a cost basis of
¥124,251 million and ¥61,869 million, respectively.                                      
|
| |  |  | Maturity profile.We held ¥900.3 billion of fixed maturity
securities available for sale (measured at fair value) with an
original term to maturity of ten years or longer and ¥2,521.4
billion of fixed maturity securities available for sale (measured at
fair value) with an original term to maturity of less than ten
years. Fixed maturity securities with longer maturities are more
sensitive to interest rate fluctuations than securities with shorter
maturities.
|
| |  |  | Non-traded securities.We held ¥244.6 billion of non-traded
fixed maturity and equity securities and an additional ¥53.5 billion
of other non-traded securities. We monitor various information
relating to the fair value of non-traded securities, including the
net asset values and the credit rating of each issuer.                                                                                                                                                    

In addition, during the year ended March 31, 2003, we did not record any
material loss in connection with sales of securities that were in an unrealized
loss position at March 31, 2002.

Hedging for Deposit-Type Insurance and Life Insurance Policies

We enter into interest rate swaps principally as a means of managing our
interest rate risk under deposittype insurance policies and life insurance
policies. In managing this interest rate risk, we periodically measure the
fair value of substantially all of our related assets and liabilities,
including those in respect of these derivative positions.

Since these derivative positions do not qualify for hedge accounting
treatment under Statement of Financial Accounting Standard No. 133, or SFAS No.
133, we must recognize as gains or losses in our statement of income any
changes in the fair value of these derivative positions. We may not, on the
other hand, recognize gains or losses for any change in the fair value of our
other related assets and liabilities. Accordingly, the gains or losses that we
recognize in respect of these derivative positions in our statement of income,
and the fair value of these derivative positions as reflected in our balance
sheet and related notes to our financial statements, do not provide a
comprehensive view of our financial exposure with respect to deposittype
insurance policies and life insurance policies.

As of March 31, 2003, our unrealized losses in respect of investment
deposits by policyholders totaled ¥378 billion. Of this amount, ¥352 billion
of unrealized losses were derived from deposit-type insurance policies issued
by Tokio Marine. As of the same date, we had unrealized gains of approximately
¥100 billion on fixed maturities securities held for purposes of managing Tokio
Marines interest rate risk in respect of deposit-type insurance

46



---



##### Table of Contents



policies. If low market interest
rates continue in Japan, we expect that these unrealized gains (or some portion of
them) will be available to offset future losses in respect of investment
deposits by policyholders, however, our results of operations in future fiscal years could be adversely affected by
our net financial exposure in respect of deposit-type insurance policies.

Critical Accounting Policies

The accounting policies that we follow when preparing U.S. GAAP
consolidated financial statements are fundamental to understanding our
financial condition and results of operations. Many of these accounting
policies require management to make difficult, complex or subjective judgments
regarding the valuation of assets and liabilities.

Our significant accounting policies are summarized in the notes to our
U.S. GAAP consolidated financial statements included elsewhere in this annual
report. The following is a summary of our critical accounting policies.

Impairment of Securities Available for Sale

Under U.S. GAAP, we are required to recognize an impairment loss for
other than temporary declines in the fair value of equity and fixed maturity
securities available for sale. Determinations of whether a decline is other
than temporary often involve estimating the outcome of future events.
Management judgment is required in determining whether factors exist that
indicate that an impairment loss should be recognized at any balance sheet
date. These judgments are based on subjective as well as objective factors.

The Japanese stock market has experienced significant downturns and
volatility during recent years. In view of the diversity and volume of our
shareholdings, the declining but volatile equity markets make it difficult to
determine whether the declines in the fair value of equity securities available
for sale are other than temporary.

Among the factors that management considers when determining whether
declines in the value of equity securities below their costs are other than
temporary is the likelihood that those declines will be reversed. For
marketable equity securities, management evaluates each of the securities and
considers a variety of facts, including (a) whether the value of the securities
continued to be below cost for more than 12 months, (b) whether the value of
the securities continued to be more than 20% below cost during any six-month
period and (c) whether there has been a decline in value to below 30% of cost
as measured at the end of any fiscal year. For non-marketable equity
securities and fixed maturity securities, management considers whether sharp
declines in value over a short period of time reflect fundamental valuation
issues such as credit deterioration of the issuer.

After considering these and other factors, we write down individual
securities to fair value when management determines that a decline in fair
value below the cost of those securities is other than temporary.

Valuation Allowances for Loan Losses

The valuation allowances for loan losses represent managements estimate
of probable losses in our loan portfolios. The evaluation process involves a
number of estimates and judgments. The allowance is based on two principles of
accounting:



| |  |  | SFAS No. 114, Accounting by Creditors for Impairment of a Loan,
and SFAS No. 118, Accounting by Creditors for Impairment of a Loan 
Income Recognition and Disclosures, which require that losses be
accrued based on the difference between the loan balance and the
present value of future cash flows or values that are observable in the
secondary market; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | SFAS No. 5, Accounting for Contingencies, which requires that
losses be accrued when they are probable of occurring and
quantitatively estimable.                                                                                                                                                                                                                     

We record specific allowances for loan losses when we determine that an
individual borrower is not able to keep current with payments on its loans. We
also record unallocated valuation allowances, or general allowances, for loan
losses to reflect loss contingencies underlying individual loan portfolios.
Based on our past experience, it is probable that a certain percentage of our
loans are impaired at any balance sheet date even if there is no specific loss

47



---



##### Table of Contents



information for individual loans. We calculate the amount of the general
allowance for any period by taking the aggregate loan amount for each credit
category and multiplying it by the average of each categorys overall loan loss
ratio in the past three years, and then subtracting the amount of specific
allowances for that period. The amount of the general allowance has varied from
year to year due in part to fluctuations in the historical loan loss ratios.

Valuation of Financial Instruments with No Available Market Prices

Certain assets and liabilities, including fixed maturity securities
available for sale and financial derivatives, are reflected at their estimated
fair values in our U.S. GAAP financial statements. As of
March 31, 2003, 7% of the equity securities available for sale, virtually all financial derivatives and a small portion of the fixed
maturities available for sale that
we held in our investment portfolio were not listed or quoted,
meaning there were no available market prices for these financial instruments.

For financial instruments with no available market prices, we determine
fair values for the substantial majority of our portfolios based upon
externally verifiable model inputs and quoted prices, such as exchange-traded
prices and broker-dealer quotations of other comparable instruments, and use
market interest rates in determining discount factors. All financial models,
which are used solely for pricing each financial instrument, must be validated
and periodically reviewed by qualified personnel independent of the division
that created the model.

Equity securities with no available market price are reflected at cost,
unless management determines that a lower valuation is appropriate in light of
various factors, including a significant decline in the net asset value of the
issuer relative to cost.

The fair value of derivatives is determined based upon liquid market
prices evidenced by exchange-traded prices, broker-dealer quotations or prices
of other transactions with similarly rated counterparties. If available, quoted
market prices provide the best indication of fair value. If quoted market
prices are not available for derivatives, we discount expected cash flows using
market interest rates commensurate with the credit quality and maturity of the
investment. Alternatively, we may use model pricing to determine an appropriate
fair value (for example, option pricing models). In determining fair values, we
consider various factors, including time value, volatility factors and the
values of underlying options, warrants and derivatives.

Fair value estimates are made at a specific point in time, based upon
relevant market information and information about the financial instruments.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment, and changes in assumptions made could significantly
affect these estimates. Accordingly, fair values for these financial
instruments cannot be determined with precision.

Amortization of Deferred Policy Acquisition Costs

We defer certain costs incurred in acquiring new business and amortize
(i.e., expense) these costs over the life of the related policies in proportion
to the recognition of premium revenues. We review our deferred policy
acquisition costs periodically to determine if they are likely to be offset by
future premium revenue recognition. If any of these deferred costs are not
considered recoverable, we expense those costs in the current year.

Insurance Reserves

Our insurance reserves represent estimates of future payouts that we will
make in respect of property-casualty and life insurance claims, including
expenses relating to those claims.

For property-casualty insurance reserves, these estimates are made on a
case-by-case basis, based on the facts known to us at the time reserves are
established. We periodically adjust these estimates to recognize the estimated
ultimate cost of a claim. In addition, we establish reserves in our
property-casualty business to recognize the estimated cost of losses that have
occurred but about which we do not yet have notice. When actual claims
experience differs from our previous estimates, the resulting difference will
be reflected in our reported results for the period of the change in the
estimate.

The establishment of our insurance reserves is an inherently uncertain
process, involving assumptions as to factors such as court decisions; changes
in laws, social, economic and demographic trends, inflation and other

48



---



##### Table of Contents



factors affecting claim costs; and, in our life insurance business,
assumptions regarding mortality and morbidity trends.

Accounting for Deposit-Type Insurance Products

We allocate premiums for the indemnity and investment portions of
deposit-type insurance products at inception of the policy. The premium for the
indemnity portion is calculated the same way that the premium for a traditional
indemnity policy with no savings portion is calculated. The premium for the
savings portion represents the present value of the lump-sum or annuity refund,
discounted using the committed interest rate and the total loss termination
rate. Total loss termination occurs when a full payout is made for the
indemnity portion of the contract, in which case the policy terminates without
any maturity refund being paid to the policyholder. The weighted average annual
frequency of our total loss terminations for the three-year period ended March
31, 2003 was approximately 0.05%.

Premiums for the savings portion of the contract are accounted for as an
increase to the liability for refunds captioned investment deposits by
policyholders. At the end of each fiscal year, the present value of future
payments of maturity refunds of contracts in force, net of the present value of
the savings portion of future premiums are accounted for as Investment
deposits by policy holders. The present value of future cash flows is
calculated using the committed interest rate and the total loss termination
rate, which are both set at the inception of the contracts.

Policy acquisition costs are not charged to the savings portion of the
contracts. Costs associated with policy acquisition of deposit-type products
are charged to the insurance portion and amortized over the contract period.
This is based on the observation that there is no substantial difference in the
level of policy acquisition costs depending on whether the savings feature is
incorporated.

Results of Operations

The following table, prepared on a U.S. GAAP basis, shows selected
statement of income information for us for each of the periods indicated:

|                              |                                                         |                                             |                                                   |         |                      |           |                    |         |                    |           |  |         |           |           | 
|----------------------------- | ------------------------------------------------------- | ------------------------------------------- | ------------------------------------------------- | ------- | -------------------- | --------- | ------------------ | ------- | ------------------ | --------- |  | ------- | --------- | --------- | 
|                              |                                                         |                                             |                                                   |         | Year ended March 31,
|                              |                                                         |                                             |                                                   |         |                     
|                              |                                                         |                                             |                                                   |         | 2003(1)              |           | 2002 (Restated)(1) |         | 2001 (Restated)(1)
|                              |                                                         |                                             |                                                   |         |                      |           |                    |         |                   
|                              |                                                         |                                             |                                                   |         | (yen in millions)   
|Operating income:             |                                                         |                                             |                                                   |         |                      |           |                    |         |                    |           |  |        
|                              | Property and casualty:                                  |                                             |                                                   |         |                      |           |                    |         |                    |           |  |         |          
|                              |                                                         | Net premiums written                        |                                                   | ¥       | 1,898,557            |           |                    | ¥       | 1,381,483          |           |  | ¥       | 1,323,907 |          
|                              |                                                         | Less increase in unearned premiums          |                                                   |         | 137,589              |           |                    |         | 38,521             |           |  |         | 13,168    |          
|                              |                                                         |                                             |                                                   |         |                      |           |                    |         |                    |           |  |         |           |          
|                              |                                                         |                                             | Premiums earned                                   |         |                      | 1,760,968 |                    |         |                    | 1,342,962 |  |         |           | 1,310,739 | 
|                              | Life premiums                                           |                                             |                                                   | 262,486 |                      |           |                    | 209,208 |                    |           |  | 162,905 |          
|                              | Net investment income                                   |                                             |                                                   | 108,311 |                      |           |                    | 104,681 |                    |           |  | 127,852 |          
|                              | Realized gains (losses) on investments                  |                                             |                                                   | (29,875 | )                    |           |                    | (1,020  | )                  |           |  | 56,142  |          
|                              | Gains (losses) on derivatives                           |                                             |                                                   | 76,564  |                      |           |                    | (7,319  | )                  |           |  |        |          
|                              |                                                         |                                             |                                                   |         |                      |           |                    |         |                    |           |  |         |           |          
|                              |                                                         |                                             | Total operating income                            |         |                      | 2,178,454 |                    |         |                    | 1,648,512 |  |         |           | 1,657,638 | 
|                              |                                                         |                                             |                                                   |         |                      |           |                    |         |                    |           |  |         |           |          
|Operating costs and expenses: |                                                         |                                             |                                                   |         |                      |           |                    |         |                    |           |  |        
|                              | Losses, claims and loss adjustment expenses:            |                                             |                                                   |         |                      |           |                    |         |                    |           |  |         |          
|                              |                                                         | Losses and claims incurred and provided for |                                                   |         | 953,681              |           |                    |         | 736,765            |           |  |         | 779,688   |          
|                              |                                                         | Related adjustment expenses                 |                                                   |         | 76,412               |           |                    |         | 61,449             |           |  |         | 53,370    |          
|                              |                                                         |                                             |                                                   |         |                      |           |                    |         |                    |           |  |         |           |          
|                              |                                                         |                                             | Total losses, claims and loss adjustment expenses |         |                      | 1,030,093 |                    |         |                    | 798,214   |  |         |           | 833,058   | 
|                              | Policy benefits and losses for life                     |                                             |                                                   | 223,316 |                      |           |                    | 175,016 |                    |           |  | 137,469 |          
|                              | Income credited to investment deposits by policyholders |                                             |                                                   | 56,011  |                      |           |                    | 57,507  |                    |           |  | 59,509  |          
|                              | Policy acquisition costs                                |                                             |                                                   | 571,058 |                      |           |                    | 437,012 |                    |           |  | 422,551 |          
|                              | Other operating expenses                                |                                             |                                                   | 96,668  |                      |           |                    | 72,095  |                    |           |  | 72,017  |          
|                              |                                                         |                                             |                                                   |         |                      |           |                    |         |                    |           |  |         |           |          
|                              |                                                         |                                             | Total operating costs and expenses                |         |                      | 1,977,146 |                    |         |                    | 1,539,844 |  |         |           | 1,524,604 | 
|                              |                                                         |                                             |                                                   |         |                      |           |                    |         |                    |           |  |         |           |          

49



---



##### Table of Contents



|                                                    |          |  |                                                                                                   |         |                      |         |                    |         |                    |         |        |        |   |         | 
|--------------------------------------------------- | -------- |  | ------------------------------------------------------------------------------------------------- | ------- | -------------------- | ------- | ------------------ | ------- | ------------------ | ------- | ------ | ------ | - | ------- | 
|                                                    |          |  |                                                                                                   |         | Year ended March 31,
|                                                    |          |  |                                                                                                   |         |                     
|                                                    |          |  |                                                                                                   |         | 2003(1)              |         | 2002 (Restated)(1) |         | 2001 (Restated)(1)
|                                                    |          |  |                                                                                                   |         |                      |         |                    |         |                   
|                                                    |          |  |                                                                                                   |         | (yen in millions)   
|                                                    |          |  | Income before income tax expense, extraordinary
items and cumulative effect of accounting
changes |         |                      | 201,308 |                    |         |                    | 108,668 |        |        |   | 133,034 | 
|                                                    |          |  |                                                                                                   |         |                      |         |                    |         |                    |         |        |        |   |        
|Income tax expense (benefit):                       |          |  |                                                                                                   |         |                      |         |                    |         |                    |         |        |       
|                                                    | Current  |  |                                                                                                   | 92,935  |                      |         |                    | 53,960  |                    |         |        | 12,886 |  
|                                                    | Deferred |  |                                                                                                   | (21,321 | )                    |         |                    | (20,544 | )                  |         |        | 31,473 |  
|                                                    |          |  |                                                                                                   |         |                      |         |                    |         |                    |         |        |        |   |        
|                                                    |          |  | 71,614                                                                                            |         |                      |         | 33,416             |         |                    |         | 44,359 |       
|                                                    |          |  |                                                                                                   |         |                      |         |                    |         |                    |         |        |        |   |        
|                                                    |          |  | Income before extraordinary items and cumulative
effect of accounting changes                     |         |                      | 129,694 |                    |         |                    | 75,252  |        |        |   | 88,675  | 
|Extraordinary items                                 |          |  | 248,323                                                                                           |         |                      |         |                   |         |                    |         |       |       
|Cumulative effect of accounting changes, net of tax |          |  |                                                                                                  |         |                      |         | 85,465             |         |                    |         |       |       
|                                                    |          |  |                                                                                                   |         |                      |         |                    |         |                    |         |        |        |   |        
|                                                    |          |  | Net income                                                                                        |         | ¥                    | 378,017 |                    |         | ¥                  | 160,717 |        |        | ¥ | 88,675  | 
|                                                    |          |  |                                                                                                   |         |                      |         |                    |         |                    |         |        |        |   |        



---

|(1) |  | Our U.S. GAAP consolidated financial statements for the fiscal year ended
March 31, 2003, from which some of the data in this table are derived,
reflect the inclusion of Nichido Fire and its consolidated subsidiaries
from and after the date of our formation on April 2, 2002. Accordingly,
the amounts shown in this table for the fiscal year ended March 31, 2003
are not directly comparable to the amounts shown for prior fiscal years.
See Managements Discussion and Analysis of Financial Condition and
Results of Operations  Overview  Business Combination.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Year Ended March 31, 2003 Compared to Year Ended March 31, 2002

Our consolidated statement of income for the fiscal year ended March 31,
2003 reflects the inclusion of the results of operations of Nichido Fire and
its consolidated subsidiaries from and after the date of our formation on April
2, 2002. Consistent with U.S. GAAP and with Exchange Act requirements
regarding the presentation of our financial statements, our consolidated
statements of income for the fiscal years ended March 31, 2002 and 2001 have
not been restated to reflect the inclusion of Nichido Fire and its consolidated
subsidiaries for those fiscal years. Accordingly, our results of operations
for the fiscal year ended March 31, 2003 are not directly comparable to our
results of operations for prior fiscal years. The following discussion
provides certain information regarding the magnitude of the impact of the
inclusion of Nichido Fire and its consolidated subsidiaries in our consolidated
statement of income for the year ended March 31, 2003.

Our direct premiums written for property and casualty insurance for the
fiscal year ended March 31, 2003, or fiscal 2003, were ¥1,987,463 million, an
increase of 31.7% from ¥1,509,615 million in the fiscal year ended March 31,
2002, or fiscal 2002. The inclusion of Nichido Fires results of operations in
our consolidated statement of income in fiscal 2003 accounted for an increase
of 28.1% in our direct premiums written compared to fiscal 2002. Net premiums
written for property and casualty insurance, which represent direct premiums
written plus assumed reinsurance premiums minus ceded reinsurance premiums,
were ¥1,898,557 million in fiscal 2003, an increase of 37.4% from ¥1,381,483
million in fiscal 2002. The inclusion of Nichido Fires results of operations
in our consolidated statement of income in fiscal 2003 accounted for an
increase of 28.7% in our net premiums written compared to fiscal 2002. The
remaining increase was mainly due to a decrease in premiums ceded to the
government for compulsory automobile liability insurance, reflecting the
abolition of the government reinsurance scheme.

Property and casualty insurance premiums are recognized as earned on a pro
rata basis over the terms of the policies. Unearned premiums represent the
portion of premiums written which relate to the unexpired terms of coverage.
After deducting the increase in unearned premiums of ¥137,589 million for
fiscal 2003, premiums earned in fiscal 2003 were ¥1,760,968 million, an
increase of 31.1% from fiscal 2002. The inclusion of Nichido Fires results of
operations in our consolidated statement of income in fiscal 2003 accounted for
an increase of 27.7% in our premiums earned compared to fiscal 2002. The
remaining increase was primarily attributable to an increase in net premiums
written in fiscal 2003 compared to fiscal 2002.

50



---



##### Table of Contents



Life premiums, which represent direct premiums earned plus assumed
reinsurance premiums minus ceded reinsurance premiums, were ¥262,486 million in
fiscal 2003, an increase of 25.5% from fiscal 2002. The inclusion of Nichido
Fires results of operations in our consolidated statement of income in fiscal
2003 accounted for an increase of 16.3% in our life premiums compared to fiscal
2002. The remaining increase primarily reflected a steady expansion of our
life insurance business.

Losses and claims incurred and provided for, or net loss incurred, for all
property and casualty insurance in fiscal 2003 amounted to ¥953,681 million, an
increase of ¥216,916 million, or 29.4%, from fiscal 2002. The inclusion of
Nichido Fires results of operations in our consolidated statement of income in
fiscal 2003 accounted for an increase of 27.5% in our net loss incurred
compared to fiscal 2002. The ratio of the total amount of net loss incurred to
net premiums earned  the net loss ratio  was 54.2% in fiscal 2003, a decrease
from 54.9% in fiscal 2002. This decrease was due primarily to a decrease in
unpaid losses, claims and loss adjustment expenses resulting from foreign
currency gains attributable to the appreciation of the yen, as well as to our
efforts to improve underwriting results.

Principal property and casualty insurance lines fared as follows:



| |  |  | Voluntary Automobile Insurance.Net premiums written for
automobile insurance, the largest line of our property-casualty
insurance business, increased by 28.1% in fiscal 2003 to ¥898,119
million. The inclusion of Nichido Fires results of operations in our
consolidated statement of income in fiscal 2003 accounted for an
increase of 29.3% in our net premiums written compared to fiscal 2002.
This increase was partially offset primarily due to the discount in
premium rates granted upon the renewal of policies that did not
experience any loss in the prior period. The net loss ratio increased
from 55.6% in fiscal 2002 to 56.6% in fiscal 2003, mainly due to the
high loss ratio in our overseas business in fiscal 2003 and the
inclusion of Nichido Fires results of operations in our consolidated
statement of income in fiscal 2003.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Compulsory Automobile Liability Insurance.Net premiums written
for compulsory automobile insurance increased by 144.5% in fiscal 2003
to ¥280,883 million. The inclusion of Nichido Fires results of
operations in our consolidated statement of income in fiscal 2003
accounted for an increase of 56.5% in our net premiums written compared
to fiscal 2002. The remaining increase was mainly due to a decrease in
premiums ceded to the government, reflecting the abolition of the
government reinsurance scheme. The net loss ratio increased from
65.4% in fiscal 2002 to 74.4% in fiscal 2003, mainly due to the
abolition of the government reinsurance scheme.                                                                                                                                                                                       
|
| |  |  | Fire and Allied Lines Insurance.Net premiums written for fire and
allied lines insurance amounted to ¥258,981 million in fiscal 2003, an
increase of 45.8% from fiscal 2002. The inclusion of Nichido Fires
results of operations in our consolidated statement of income in fiscal
2003 accounted for an increase of 40.8% in our net premiums written
compared to fiscal 2002. The remaining increase was mainly due to
expanding sales of these insurance products through banks. The net
loss ratio decreased from 39.8% in fiscal 2002 to 35.3% in fiscal 2003,
reflecting the foreign currency gains attributable to the appreciation
of the yen, and also reflecting the terrorist attacks in the United
States in fiscal 2002, which pushed up the loss ratio in fiscal 2002.                                                                          
|
| |  |  | Personal Accident Insurance.Net premiums written for personal
accident insurance increased by 27.9% in fiscal 2003 to ¥155,077
million. The inclusion of Nichido Fires results of operations in our
consolidated statement of income in fiscal 2003 accounted for an
increase of 25.4% in our net premiums written compared to fiscal 2002.
The remaining increase was mainly due to expanding sales of so-called
third sector insurance products, which include cancer insurance and
medical insurance products. The net loss ratio decreased from 43.3% in
fiscal 2002 to 42.8% in fiscal 2003.                                                                                                                                                                                                                                                            
|
| |  |  | Cargo and Transit Insurance.Net premiums written for cargo and
transit insurance increased by 12.8% in fiscal 2003 to ¥62,373 million.
The inclusion of Nichido Fires results of operations in our
consolidated statement of income in fiscal 2003 accounted for an
increase of 4.2% in our net premiums written compared to fiscal 2002.
The remaining increase mainly reflected an increase in premium rates
for war insurance coverage. The net loss ratio decreased from 51.7% in
fiscal 2002 to 46.7% in fiscal 2003, mainly due to our efforts to
improve underwriting results.                                                                                                                                                                                                                                                                          

51



---



##### Table of Contents





| |  |  | Hull Insurance.Net premiums written for hull insurance amounted
to ¥14,200 million in fiscal 2003, unchanged from fiscal 2002. The net
loss ratio increased from 68.0% in fiscal 2002 to 90.1% in fiscal 2003,
mainly due to an increase in large claims.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Other Insurance.Net premiums written for all other types of
property and casualty insurance, including liability insurance,
workers compensation insurance, movable comprehensive insurance,
aviation and miscellaneous pecuniary loss insurance, increased by 16.0%
in fiscal 2003 to ¥228,924 million. The inclusion of Nichido Fires
results of operations in our consolidated statement of income in fiscal
2003 accounted for an increase of 10.1% in our net premiums written
compared to fiscal 2002. The remaining increase was mainly due to an
increase in premium rates reflecting the hard insurance market.
The net loss ratio decreased from 67.2% in fiscal 2002 to 56.7% in
fiscal 2003, mainly due to the increase in premium rates and the
foreign currency gains attributable to the appreciation of the yen.

Total operating costs and expenses, which represents the sum of losses,
claims and loss adjustment expenses, policy benefits and losses for life,
income credited to investment deposits by policyholders, policy acquisition
costs and other operating expenses, amounted to ¥1,977,146 million in fiscal
2003, an increase of 28.4% from fiscal 2002. The inclusion of Nichido Fires
results of operations in our consolidated statement of income in fiscal 2003
accounted for an increase of 25.3% in our total operating costs and expenses
compared to fiscal 2002. The remaining increase was primarily attributable to
increases in policy benefits and losses for life, losses and claims incurred
and provided for and policy acquisition costs, partially offset by a decrease
in income credited to investment deposits by policyholders.

Loss adjustment expenses in fiscal 2003 were ¥76,412 million, an increase
of 24.4% from fiscal 2002. The inclusion of Nichido Fires results of
operations in our consolidated statement of income in fiscal 2003 accounted for
an increase of 26.6% in our loss adjustment expenses compared to fiscal 2002.
The ratio of losses, claims and loss adjustment expenses incurred to net
premiums earned for all classes of property and casualty insurance was 58.5% in
fiscal 2003, a decrease from 59.4% in fiscal 2002.

Policy benefits and losses for life increased by 27.6% in fiscal 2003 to
¥223,316 million. The inclusion of Nichido Fires results of operations in our
consolidated statement of income in fiscal 2003 accounted for an increase of
16.8% in our policy benefits and losses for life compared to fiscal 2002. The
remaining increase primarily reflected a steady expansion of our life insurance
business.

Future policy benefits and losses include provisions for future policy
benefits for life contracts and for unpaid life policy claims. The liabilities
for future policy benefits are computed by a net level premium method using
estimated future investment yields, withdrawals and recognized morbidity and
mortality tables. For limited-payment contracts, which provide insurance
coverage over a contract period that extends beyond the period in which
premiums are collected, gross premiums in excess of the net premiums are
deferred and recognized in income during the periods when the insurance is in
force or when future benefit payments are expected to become due. Unpaid policy
claims represent the estimated liability for reported and unreported losses on
life policies on an undiscounted basis. We believe that our estimated
provisions for future policy benefits and for losses at March 31, 2003 are
adequate to cover our life insurance liability. However, our ultimate
liability may vary from these estimates.

Income credited to investment deposits by policyholders decreased by 2.6%
in fiscal 2003 to ¥56,011 million. This decrease was primarily due to a
decline in the average committed interest rate and the decrease in the number
of investment contracts in force, which was partially offset by the inclusion
of Nichido Fires results of operations in our consolidated statement of income
in fiscal 2003. The inclusion of Nichido Fire accounted for an increase in
income credited to investment deposits by policyholders of 4.9% in fiscal 2003
compared to fiscal 2002. Excluding Nichido Fire, income
credited to investment deposits by policyholders would have decreased by 7.5%
in fiscal 2003.

We incurred policy acquisition costs in fiscal 2003 of ¥571,058 million,
an increase of 30.7% from fiscal 2002. The inclusion of Nichido Fires results
of operations in our consolidated statement of income in fiscal 2003 accounted
for an increase of 27.4% in our policy acquisition costs compared to fiscal
2002. The remaining increase

52



---



##### Table of Contents



primarily reflected an increase in the number of life insurance policies
written and an increase in net premiums written for property and casualty
insurance.

Other operating expenses increased by 34.1% in fiscal 2003 to ¥96,668
million. The inclusion of Nichido Fires results of operations in our
consolidated statement of income in fiscal 2003 accounted for an increase of
25.2% in our other operating expenses compared to fiscal 2002.

Net investment income in fiscal 2003 was ¥108,311 million, an increase of
¥3,630 million, or 3.5%, from fiscal 2002. The inclusion of Nichido Fires
results of operations in our consolidated statement of income in fiscal 2003
accounted for an increase of 19.2% in our net investment income compared to
fiscal 2002. This increase was partially offset primarily by a decrease in net
investment income reflecting the low Japanese interest rate environment.

Realized losses on investments increased to ¥29,875 million in fiscal 2003
from ¥1,020 million in fiscal 2002. The inclusion of Nichido Fires results of
operations in our consolidated statement of income in fiscal 2003 accounted for
an increase of ¥81,346 million in our realized losses on investments compared
to fiscal 2002. This increase was partially offset by realized gains of
¥93,690 million from contributing ¥92,127 million of Tokio Marines equity
securities, measured at cost, to an exchange traded fund.

Gains on derivatives in fiscal 2003 were ¥76,564 million, as compared to
losses of ¥7,319 million in fiscal 2002, reflecting gains of ¥11,688 million
for foreign exchange contracts principally to economically hedge our foreign
currency exposures and ¥68,011 million for interest rate swap agreements to
economically hedge our interest rate risk exposures. Nichido Fire recognized
losses on derivatives of ¥429 million in fiscal 2003.

Income before income tax expense, extraordinary items and cumulative
effect of accounting changes increased to ¥201,308 million in fiscal 2003 from
¥108,668 million in fiscal 2002, an increase of 85.3%.
Excluding Nichido Fire, income before income tax expense, extraordinary items and
cumulative effect of accounting changes would have increased by 126.0% in fiscal
2003.

Income tax expense for fiscal 2003 was ¥71,614 million, an increase of
114.3% compared to fiscal 2002. Excluding Nichido Fires
results of operations from our consolidated statement of income in fiscal 2003,
income tax expense would have increased by 160.4%. The effective tax rate
increased from 30.8% in fiscal 2002 to 35.6% in fiscal 2003. This increase in
the effective tax rate reflected the decrease in dividends received which are
deductible in our taxable income calculation.

Income before extraordinary items and cumulative effect of accounting
changes increased to ¥129,694 million in fiscal 2003 from ¥75,252 million in
fiscal 2002, an increase of 72.3%. The inclusion of Nichido Fires results of
operations in our consolidated statement of income in fiscal 2003 accounted for
a decrease of 38.4% in our income before extraordinary items and cumulative
effect of accounting changes compared to fiscal 2002.

Extraordinary items of ¥248,323 million were recognized in fiscal 2003
with respect to unallocated negative goodwill arising from the business
combination with Nichido Fire. We recognized no extraordinary items in fiscal
2002.

There
were no accounting changes in fiscal 2003 that resulted in any cumulative
effect of accounting changes in fiscal 2003. The cumulative effect of
accounting changes, net of tax, in fiscal 2002 amounted to ¥85,465 million due
to the adoption of SFAS No. 133, as amended, as of April 1, 2002.

As a result of the foregoing, our net income, which includes extraordinary
items of ¥248,323 million, increased to ¥378,017 million in fiscal 2003 from
¥160,717 million in fiscal 2002, an increase of 135.2%.

Year Ended March 31, 2002 Compared to Year Ended March 31, 2001

Our direct premiums written for property and casualty insurance in the
fiscal year ended March 31, 2002, or fiscal 2002, were ¥1,509,615 million, an
increase of 2.8% from ¥1,468,361 million in the fiscal year ended March 31,
2001, or fiscal 2001. Net premiums written for property and casualty insurance,
which represent direct premiums written plus assumed reinsurance premiums minus
ceded reinsurance premiums, were ¥1,381,483 million in fiscal

53



---



##### Table of Contents



2002, an increase of 4.3% from ¥1,323,907 million in fiscal 2001. The
increase in net premiums written was mainly due to an increase in the number of
policies written and in premium rates.

Property and casualty insurance premiums are recognized as earned on a pro
rata basis over the terms of the policies. Unearned premiums represent the
portion of premiums written which relate to the unexpired terms of coverage.
After deducting the increase in unearned premiums of ¥38,521 million for fiscal
2002, premiums earned in fiscal 2002 were ¥1,342,962 million, an increase of
2.5% from fiscal 2001. This increase was primarily attributable to an increase
in net premiums written in fiscal 2002 compared to fiscal 2001.

Life premiums, which represent direct premiums earned plus assumed
reinsurance premiums minus ceded reinsurance premiums, were ¥209,208 million in
fiscal 2002, an increase of 28.4% from fiscal 2001. This increase primarily
reflected an increase in the number of new policies with up-front premium
payments, which more than offset a slowing rate of increase in the number of
overall policies.

Losses and claims incurred and provided for, or net loss incurred, for all
property and casualty insurance in fiscal 2002 amounted to ¥736,765 million, a
decrease of ¥42,923 million, or 5.5%, from fiscal 2001. The ratio of the total
amount of net loss incurred to net premiums earned  the net loss ratio  was
54.9% in fiscal 2002, a decrease from 59.5% in fiscal 2001. This decrease was
due primarily to the occurrence of fewer major natural disasters during fiscal
2002 compared to fiscal 2001, as well as to our improved performance in our
largest business line, voluntary automobile insurance.

Principal property and casualty insurance lines fared as follows:



| |  |  | Voluntary Automobile Insurance.Net premiums written for
automobile insurance, the largest line of our property-casualty
insurance business, increased by 2.1% in fiscal 2002 to ¥700,890
million, reflecting expanded sales of additional coverage for personal
injury. The net loss ratio decreased from 62.8% in fiscal 2001 to 55.6%
in fiscal 2002, mainly due to the occurrence of fewer natural disasters
in fiscal 2002 compared to fiscal 2001 as well as to premium rate
increases.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Compulsory Automobile Liability Insurance.Net premiums written
for compulsory automobile insurance increased by 4.1% in fiscal 2002 to
¥114,903 million, reflecting an increase in the number of policies
written. The net loss ratio increased from 65.0% in fiscal 2001 to
65.4% in fiscal 2002, due to an increase in claim frequency.                                                                                                                                                   
|
| |  |  | Fire and Allied Lines Insurance.Net premiums written for fire and
allied lines insurance amounted to ¥177,635 million in fiscal 2002, an
increase of 11.4% from fiscal 2001, due mainly to the introduction of
insurance product sales through banks and to an increase in assumed
premiums. The net loss ratio decreased from 41.2% in fiscal 2001 to
39.8% in fiscal 2002, mainly due to a decrease in claims resulting from
natural disasters.                                           
|
| |  |  | Personal Accident Insurance.Net premiums written for personal
accident insurance decreased by 3.8% in fiscal 2002 to ¥121,227
million, due mainly to a decrease in sales of deposit-type personal
accident insurance, which reflected sluggish economic conditions in
Japan and reduced demand for foreign travel in the aftermath of the
terrorist attacks in the United States. The net loss ratio in fiscal
2002 was 43.3%, unchanged from fiscal 2001.                                  
|
| |  |  | Cargo and Transit Insurance.Net premiums written for cargo and
transit insurance increased by 4.2% in fiscal 2002 to ¥55,293 million,
mainly reflecting a rise in the amount of premiums written abroad due
to the depreciation of the yen. The net loss ratio decreased from 52.9%
in fiscal 2001 to 51.7% in fiscal 2002.                                                                                                                                                                 
|
| |  |  | Hull Insurance.Net premiums written for hull insurance amounted
to ¥14,200 million in fiscal 2002, an increase of 1.7% from fiscal
2001. The net loss ratio increased from 60.9% in fiscal 2001 to 68.0%
in fiscal 2002, due mainly to an increase in fiscal 2002 compared to
fiscal 2001 in losses caused by major shipping accidents.                                                                                                                                                     
|
| |  |  | Other Insurance.Net premiums written for all other types of
property and casualty insurance, including liability insurance,
workers compensation insurance, movable comprehensive insurance,
aviation and                                                                                                                                                                                                                                                                                  

54



---



##### Table of Contents





| |  |  | miscellaneous pecuniary loss insurance, increased by 13.2% in fiscal 2002
to ¥197,335 million, due mainly to an increase in premium rates and in
the number of policies written. The net loss ratio decreased from 74.0%
in fiscal 2001 to 67.2% in fiscal 2002, due mainly to a decrease in
losses incurred on liability insurance.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Total operating costs and expenses, which represents the sum of losses,
claims and loss adjustment expenses, policy benefits and losses for life,
policy acquisition costs and other operating expenses, amounted to ¥1,539,844
million in fiscal 2002, an increase of 1.0% from fiscal 2001. This increase was
primarily attributable to an increase in policyholder benefits and losses in
respect of life insurance policies, partially offset by a decrease in losses
and claims incurred in respect of property-casualty insurance policies.

Loss adjustment expenses in fiscal 2002 were ¥61,449 million, an increase
of 15.1% from fiscal 2001. This increase was primarily due to an increase in
personnel expenses in the adjustment and settlement function. The ratio of net
losses and loss adjustment expenses incurred to net premiums earned for all
classes of property and casualty insurance was 59.4% in fiscal 2002, a decrease
from 63.6% in fiscal 2001.

Policy benefits and losses for life increased by 27.3% in fiscal 2002 to
¥175,016 million, reflecting a steady expansion of our life insurance business.

Future policy benefits and losses include provisions for future policy
benefits for life contracts and for unpaid life policy claims. The liabilities
for future policy benefits are computed by a net level premium method using
estimated future investment yields, withdrawals and recognized morbidity and
mortality tables. For limited-payment contracts, which provide insurance
coverage over a contract period that extends beyond the period in which
premiums are collected, gross premiums in excess of the net premiums are
deferred and recognized in income during the periods when the insurance is in
force or when future benefit payments are expected to become due. Unpaid policy
claims represent the estimated liability for reported and unreported losses on
life policies on an undiscounted basis. We believe that our estimated
provisions for future policy benefits and for losses at March 31, 2002 are
adequate to cover our life insurance liability. However, our ultimate liability
may vary from these estimates.

Income credited to investment deposits by policyholders decreased by 3.4%
in fiscal 2002 to ¥57,507 million. This decrease was primarily due to a
decline in the average committed interest rate and the decrease in investment
contracts in force.

We incurred policy acquisition costs in fiscal 2002 of ¥437,012 million,
an increase of 3.4% from fiscal 2001, reflecting an increase in the number of
life insurance policies written and an increase in net premiums written for
property and casualty insurance. Other operating expenses increased by 0.1% in
fiscal 2002 to ¥72,095 million.

Net investment income in fiscal 2002 was ¥104,681 million, a decrease of
¥23,171 million, or 18.1%, from fiscal 2001. This decrease primarily reflected
a change in the presentation of reporting gains and losses on derivative
transactions. Net investment income in fiscal 2001 included realized gains and
losses related to derivative transactions in the amount of ¥20,696 million.

Net realized gains on investments decreased from ¥56,142 million in fiscal
2001 to negative ¥1,020 million in fiscal 2002. The decrease was mainly
attributable to an increase in impairment losses on equity securities,
resulting from a decline in the Japanese equity market, and the effect of
material realized gains on equity index futures in fiscal 2001.

Realized losses on derivatives in fiscal 2002 were negative ¥7,319
million, reflecting losses of ¥25,231 million for foreign exchange contracts
principally to economically hedge our foreign currency exposures and ¥9,662
million for credit default contracts as an alternative to credit insurance,
offset in part by ¥28,204 million for interest rate swap agreements to
economically hedge our interest rate risk exposures.

Income before income tax expense and the cumulative effect of accounting
changes decreased to ¥108,668 million in fiscal 2002 from ¥133,034 million in
fiscal 2001, a decrease of 18.3%.

55



---



##### Table of Contents



Income tax expense for fiscal 2002 was ¥33,416 million, a decrease of
24.7% compared to fiscal 2001. The effective tax rate decreased from 33.3% in
fiscal 2001 to 30.8% in fiscal 2002.

Income before the cumulative effect of accounting changes decreased to
¥75,252 million in fiscal 2002 from ¥88,675 million in fiscal 2001, a decrease
of 15.1%.

The cumulative effect of accounting changes, net of tax, in fiscal 2002
amounted to ¥85,465 million due to the adoption of SFAS No. 133, as amended, as
of April 1, 2001.

As a result of the foregoing, our net income, which includes the
cumulative effect of accounting changes, increased to ¥160,717 million in
fiscal 2002 from ¥88,675 million in fiscal 2001, an increase of 81.2%.

Credit Losses and Non-Performing Loans

The continuing weak economic environment in Japan during the 1990s and the
beginning of this decade have resulted in the deterioration of the financial
conditions of Japanese corporate and individual borrowers and a high number of
bankruptcy filings. A substantial portion of the affected credit extended by
Japanese financial institutions is secured by real estate as collateral. The
deterioration in credit and the continuing decline in the value of real estate
have led to a substantial increase in the amount of non-performing loans in
Japanese financial institutions portfolios. Under these circumstances,
Japanese non-life insurers, including Tokio Marine and Nichido Fire, have seen
their non-performing loans increase, although not as much as other types of
financial institutions. The main reason for this is that Japanese non-life
insurers are required to maintain high levels of liquidity compared with other
types of financial institutions, in order to be able to make claims payments,
which has meant that they have diversified their investment portfolios.

The following table, prepared on a U.S. GAAP basis, shows our recorded
investment in impaired loans and specific valuation allowances as of each of
the dates indicated:

|                                       |                                      |       |   |                   |        |         |   |         |        |  |   |        |        | 
|-------------------------------------- | ------------------------------------ | ----- | - | ----------------- | ------ | ------- | - | ------- | ------ |  | - | ------ | ------ | 
|                                       |                                      |       |   | As of March 31,  
|                                       |                                      |       |   |                  
|                                       |                                      |       |   | 2003(1)           |        | 2002(1) |   | 2001(1)
|                                       |                                      |       |   |                   |        |         |   |        
|                                       |                                      |       |   | (yen in millions)
|Recorded investment in impaired loans: |                                      |       |   |                   |        |         |   |         |        |  |   |       
|                                       | Mortgage loans on real estate        |       | ¥ | 31,483            |        |         | ¥ | 16,726  |        |  | ¥ | 20,051 |       
|                                       | Collateral and bank guaranteed loans |       |   | 11,360            |        |         |   |        |        |  |   |       |       
|                                       | Unsecured loans                      |       |   | 23,153            |        |         |   | 30,564  |        |  |   | 43,682 |       
|                                       |                                      |       |   |                   |        |         |   |         |        |  |   |        |       
|                                       |                                      | Total |   | ¥                 | 65,996 |         |   | ¥       | 47,290 |  |   | ¥      | 63,733 | 
|                                       |                                      |       |   |                   |        |         |   |         |        |  |   |        |       
|Specific valuation allowances:         |                                      |       |   |                   |        |         |   |         |        |  |   |       
|                                       | Mortgage loans on real estate        |       | ¥ | 12,862            |        |         | ¥ | 8,264   |        |  | ¥ | 9,017  |       
|                                       | Collateral and bank guaranteed loans |       |   | 4,865             |        |         |   |        |        |  |   |       |       
|                                       | Unsecured loans                      |       |   | 12,378            |        |         |   | 15,806  |        |  |   | 16,509 |       
|                                       |                                      |       |   |                   |        |         |   |         |        |  |   |        |       
|                                       |                                      | Total |   | ¥                 | 30,105 |         |   | ¥       | 24,070 |  |   | ¥      | 25,526 | 
|                                       |                                      |       |   |                   |        |         |   |         |        |  |   |        |       



---

|(1) |  | Our U.S. GAAP consolidated financial statements for the fiscal year ended
March 31, 2003, from which some of the data in this table are derived,
reflect the inclusion of Nichido Fire and its consolidated subsidiaries
from and after the date of our formation on April 2, 2002. Accordingly,
the amounts shown in this table for the fiscal year ended March 31, 2003
are not directly comparable to the amounts shown for prior fiscal years.
See Managements Discussion and Analysis of Financial Condition and
Results of Operations  Overview  Business Combination.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition to the valuation allowances reflected in the table above, we
have made additional allowances for other loans based on past loss experience
and current economic conditions. These additional allowances were ¥6,730
million at March 31, 2003.

56



---



##### Table of Contents



Cash Flows

Year Ended March 31, 2003 Compared to Year Ended March 31, 2002

Our cash flow statements for the fiscal year ended March 31, 2003 reflect
the inclusion of the results of operations and financial position of Nichido
Fire and its consolidated subsidiaries from and after the date of our formation
on April 2, 2002. Accordingly, our cash flow statements for the year ended
March 31, 2003 are not directly comparable to our cash flow statements for
prior years.

Net cash provided by operating activities was ¥466,301 million in fiscal
2003, compared to ¥346,885 million in fiscal 2002. This increase was primarily
attributable to an increase in net income and unearned premiums net of ceded
insurance.

Net cash used in investing activities was ¥417,155 million in fiscal 2003,
compared to ¥19,518 million in fiscal 2002. This increase was principally due
to an increase in the cost of fixed maturity securities purchased, partially
offset by an increase in proceeds from fixed maturity securities sold and
redeemed as well as equity securities sold.

Net cash used in financing activities was ¥31,755 million in fiscal 2003,
compared to ¥117,787 million in fiscal 2002. This decrease was mainly
attributable to an increase in cashflows from investment deposits funded by
policyholders and yields on these deposits, as well as the proceeds from
issuance of debt, which was partially offset by an increase in withdrawals of
investment deposits by policyholders.

The operating, investing and financing activities described above resulted
in net cash at March 31, 2003 of ¥339,978 million, compared to ¥322,302 million
at March 31, 2002, representing an increase of ¥17,676 million.

Year Ended March 31, 2002 Compared to Year Ended March 31, 2001

Net cash provided by operating activities was ¥346,885 million in fiscal
2002, compared to ¥313,165 million in fiscal 2001. This change was primarily
attributable to an increase in net income, future benefits for life, unearned
premiums net of ceded reinsurance and other, partially offset by the cumulative
effect of accounting changes.

Net cash used in investing activities was ¥19,518 million in fiscal 2002,
compared to ¥279,129 million in fiscal 2001. This decrease was principally due
to increases in net proceeds from short term investments and in cash received
from securities lending transactions, as well as an increase in proceeds from
fixed maturities redeemed and sold, partially offset by an increase in the cost
of fixed maturities purchased.

Net cash used in financing activities was ¥117,787 million in fiscal 2002,
compared to ¥29,754 million in fiscal 2001. This increase was mainly
attributable to a decrease in cashflows from investment deposits funded by
policyholders and yields therefrom and the absence of any long term debt
issuance, which was partially offset by a decrease in withdrawals of investment
deposits by policyholders.

The operating, investing and financing activities described above resulted
in net cash and cash equivalents at March 31, 2002 of ¥322,302 million,
compared to ¥112,431 million at March 31, 2001, representing an increase of
¥209,871 million.

Recent Accounting Pronouncements

In June
2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated retirement costs. We plan to adopt SFAS
No. 143 in
the year ending March 31, 2004. We do not expect the adoption of
SFAS No. 143
to have a material effect on our financial position or results of operations.

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, or FIN 45. FIN 45 requires that upon
issuance of certain types of guarantees, a guarantor must recognize a liability
for the fair value of an obligation assumed under a guarantee. FIN 45 also
requires additional disclosure by a guarantor in its financial

57



---



##### Table of Contents



statements about the obligations associated with guarantees issued. The
recognition provisions of FIN 45 are effective for any guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective
for financial statements for periods ending after December 15, 2002. We
adopted the disclosure requirements effective March 31, 2003. The adoption of
FIN 45 did not have a material effect on our financial statements.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, or FIN 46. The objective of FIN 46 is to improve
financial reporting by companies involved with variable interest entities.
This new model for consolidation applies to an entity (1) if that entitys
equity does not grant sufficient powers or rights to the equity holders or does
not give them sufficient decision making powers or (2) if the equity investment
at risk is insufficient to finance that entitys activities without receiving
additional subordinated financial support from other parties. FIN 46 requires
a variable interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest entitys
activities or entitled to receive a majority of the entitys residual returns
or both. FIN 46 is immediately effective for variable interest entities
created after January 31, 2003, and is effective for variable interest entities
acquired before February 1, 2003 in the first fiscal year beginning after June
15, 2003. Certain of the disclosure requirements apply in all financial
statements issued after January 31, 2003, regardless of when the variable
interest entity was established.

Effects of Inflation

Our assets are generally not significantly affected by inflation, since a
substantial portion of those assets is highly liquid. However, inflation may
result in increases in our expenses, which may not be readily recoverable in
the prices of services offered. If inflation results in rising interest rates
and has other adverse effects on the capital markets and on the value of
financial instruments, our financial position and profitability may be
adversely affected.

Exposure to Currency Fluctuations

We conduct a portion of our business in currencies other than the yen,
primarily the U.S. dollar. This business includes operations of hull and marine
cargo insurance and certain reinsurance, as well as investments in financial
products denominated in foreign currencies. If our exposure to currency
fluctuations is not properly managed, we would be exposed to risk arising from
fluctuations in exchange rates on assets and liabilities denominated in foreign
currencies. We seek to manage this exposure primarily by using forward exchange
contracts, currency options and other derivatives. We also seek to control
currency exposure by holding offsetting foreign currency positions in order to
reduce the risk of loss from currency fluctuations.

Use of Derivative Financial Instruments

We use a variety of derivative financial instruments in the normal course
of our business to reduce our exposure to fluctuations in foreign exchange,
interest rates and market values in our equity portfolios. These instruments
include foreign exchange contracts, foreign exchange forwards and futures,
currency swaps and currency option contracts, interest rate swap and swaption
agreements, equity index futures contracts, equity index option contracts and
bond futures contracts.

Integrated Risk Management

We have adopted an integrated risk management system to measure, monitor
and control risks inherent in our businesses. We use this system to establish
acceptable levels of measurable risks for each fiscal year and to ensure the
sufficiency of our shareholders equity in light of those risks. These risk
amounts are monitored to ensure they are maintained within permissible ranges
based on our economic capital model, and reported to our senior management on a
periodic basis.

As part of our integrated risk management system, our subsidiaries also
conduct risk management based on our integrated risk management policy. Tokio
Marine and Nichido Fire quantify market risks and asset-liability management
risk, which are discussed in detail below under Quantitative and Qualitative
Disclosures About Market Risk. We also identify and monitor the following
risks:



| |  |  | Property and casualty insurance risk
| | - |  | ------------------------------------

58



---



##### Table of Contents





| |   |  | Risk of loss arising from fluctuations in the loss ratio and operating
expense rate expected at the time of calculating premiums.                                                                         
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Life insurance risk                                                                                                                                                                                       
|
| |   |  | Risk of loss arising from fluctuations in the mortality rate and
operating expense rate expected at the time of calculating premiums.                                                                     
|
| |  |  | Credit risk                                                                                                                                                                                               
|
| |   |  | Risk of loss arising from a decline in the value of our assets (including
off-balance-sheet assets), or the total loss of these assets, as a result
of deterioration in the obligors financial condition.
|
| |  |  | Real estate risk                                                                                                                                                                                          
|
| |   |  | Risk of loss arising from a decline in income from rentals or in the
value of our real estate as a result of deterioration in the real estate
market.                                                     
|
| |  |  | Liquidity risk                                                                                                                                                                                            
|
| |   |  | Risks of loss arising from being forced to dispose of assets at a
significant discount to prevailing market prices because of a shortage of
funds, market disruptions or other unexpected events.         
|
| |  |  | Operations risk                                                                                                                                                                                           
|
| |   |  | Risk of direct or indirect loss resulting from inadequate or failed
internal processes and systems or from external events.                                                                               

Quantitative and Qualitative Disclosures About Market Risk

Tokio Marine

A substantial portion of the investments of Tokio Marine and its
subsidiaries are made at the Tokio Marine parent company level. Tokio Marines
subsidiaries conduct market risk management with respect to their own
investments, and report the status of their market risk situations to Tokio
Marine on a regular basis. Except as otherwise noted, the following discussion
relates to market risk management of Tokio Marine only (and not its
subsidiaries).

Market Risk Generally

Tokio Marine accumulates assets primarily because it receives premiums for
underwriting insurance policies in advance of being required to make payments
for claims under those policies. Tokio Marine funds the benefits it provides
under insurance policies with gains and income generated by its investment
portfolio and its investment portfolio assets. These investments are subject to
market risk. The following is a discussion of Tokio Marines primary market
risk exposures and how those exposures were managed as of March 31, 2003.

Investment Objectives

Tokio Marine invests premiums and deposits received from policyholders in
various investments. Its principal investment objectives are to maximize its
net asset value and maintain sufficient liquidity while controlling risk within
an acceptable range. It also seeks to safeguard the interests of policyholders
and shareholders.

Market Risk Measurement

Tokio Marines primary market risk exposures are to potential changes in
interest rates and equity prices, as well as foreign exchange rates.

59



---



##### Table of Contents



Tokio Marine defines interest rate risk as the risk of loss in the fair
values of interest rate sensitive instruments caused by changes in market
interest rates. Tokio Marine is exposed to interest rate risk due to its
investments in fixed income instruments, particularly bonds, loans and other
long-term investments. In addition, Tokio Marine is exposed to interest rate
risk due to interest rate sensitive obligations and liabilities, including
deposit-type insurance and long-term insurance policies. See - Assets to meet
future obligations. Tokio Marine risks a loss because both the market value
of fixed income instruments and the present value of its obligations and
liabilities may vary when market interest rates fluctuate. Between March 31,
2002 and March 31, 2003, there was no significant change in Tokio Marines
interest rate risk. On the other hand, Tokio Marine Lifes interest rate risk
increased as a result of the sharp decline of interest rate in Japan. The interest rate
sensitivity of the life insurance business was historically high and
significantly higher than the interest rate sensitivity of the property and
casualty insurance business, as of March 31, 2003, mainly due to the high volatility of
interest rates and the
characteristics of the long-term liabilities of life insurance
policies.

Tokio Marine has a risk of loss due to equity prices because the value of
its equity securities may decline during a sustained general fall in equity
prices. Most of Tokio Marines equity investments are intended to be held for
the long term. Tokio Marines equity holdings are primarily in the Japanese
market. Between March 31, 2002 and March 31, 2003, the level of Tokio Marines
equity price risk decreased as a result of the decrease in Japanese equity
prices and as a result of Tokio Marines disposition of ¥92,127 million of its
equity securities, measured at cost, to an exchange traded fund.

Foreign exchange rate risk is the risk of a loss in the fair values of
instruments denominated in a currency other than Tokio Marines functional
currency, which is the yen, due to fluctuations of foreign exchange rates.
Tokio Marine is exposed to foreign exchange rate risk because some of its
assets are denominated in a currency other than the yen. If the value of a
foreign currency declines relative to the yen, the fair value of assets
denominated in that foreign currency would also decline. Tokio Marines primary
exposures for foreign exchange rate risk are the U.S. dollar, euro and pound
sterling. Between March 31, 2002 and March 31, 2003, there was no significant
change in Tokio Marines foreign exchange rate risk.

We do not anticipate significant changes in the composition of Tokio
Marines primary market risk exposures or in how those exposures are managed in
future reporting periods.

Market Risk Management and Risk Exposure Estimates

As risks associated with managing assets and liabilities are becoming
increasingly diversified and complex, Tokio Marine continues to seek to enhance
its risk management systems and to adopt more sophisticated methods to manage
its various risks. Its Risk Management Department, which is independent of
Tokio Marines asset management divisions, is responsible for overseeing Tokio
Marines market risk management process. This process includes establishing
appropriate controls, policies and procedures relating to market risk; ensuring
appropriate senior management oversight of market risk-taking and risk
controlling activities; and analyzing, monitoring and reporting market risk.

Tokio Marine divides its assets under management into the following three
categories for market risk purposes, with risk management and investment
policies tailored to each category:



| |  |  | Assets to meet future obligations;
| | - |  | ----------------------------------
|
| |  |  | Risk assets; and                  
|
| |  |  | Other assets.                     

Assets to meet future obligations.Assets to meet future obligations
are intended to provide reserves for insurance policies, including deposit-type
insurance and long-term insurance policies. To ensure that Tokio Marine can
make required payments on those policies at maturity without regard to interest
rate fluctuations, both the asset and the liability must be managed
effectively. This is called asset-liability management. Tokio Marine has been
developing an advanced asset-liability management system and believes that it
maintains a well-controlled portfolio that includes various bonds, loans and
interest rate swap transactions used for hedging purposes.

60



---



##### Table of Contents



In addition, to enhance its asset-liability management capabilities with
respect to deposit-type insurance policies, Tokio Marine groups investment
deposit contracts primarily by type and duration of insurance policies. Each
month, Tokio Marine measures interest rate sensitivity for the assets and
liabilities in each of these groups. Based upon these measurements, Tokio
Marine utilizes interest rate swaps in an effort to control the interest rate
sensitivity in the assets and the liabilities in each group of investment
deposits. At March 31, 2003, Tokio Marine had ¥3.0 trillion notional amount of
interest rate swaps outstanding to hedge its exposure in respect of
deposit-type insurance policies.

In addition to using a corporate rating system, Tokio Marine has developed
its own model for estimating credit risk, the Value-at-Credit Risk model, which
we believe has enhanced Tokio Marines ability to manage its credit risk
portfolio. To manage liquidity risk, Tokio Marine aims to ensure sufficient
liquidity by maintaining various ways to raise funds quickly for the prompt
payment of insurance claims.

The following tables show the effect of changes in interest rates on the
present value of the surplus in Tokio Marines asset-liability portfolio
(parent company and Tokio Marine Life only) as of March 31, 2003 and March 31,
2002.

|                                                          |  |                      |      |     |  |    |   |     |  |   |    |  |  |   |     |  
|--------------------------------------------------------- |  | -------------------- | ---- | --- |  | -- | - | --- |  | - | -- |  |  | - | --- | -
|                                                          |  | As of March 31, 2003
|                                                          |  |                     
|                                                          |  | Yield
curve shift(1)
|                                                          |  |                     
|                                                          |  | -1%                  |      | ±0% |  | 1% |   | +2%
|                                                          |  |                      |      |     |  |    |   |    
|                                                          |  | (yen in billions)   
|General Policy Account                                    |  | ¥                    | (30  | )   |  | ¥  | 0 |     |  | ¥ | 2  |  |  | ¥ | (5  | )
|Deposit-Type Insurance Account                            |  |                      | (33  | )   |  |    | 0 |     |  |   | 29 |  |  |   | 51  |  
|                                                          |  |                      |      |     |  |    |   |     |  |   |    |  |  |   |     |  
|Asset-Liability Portfolio (Tokio Marine non-consolidated) |  | ¥                    | (63  | )   |  | ¥  | 0 |     |  | ¥ | 32 |  |  | ¥ | 47  |  
|                                                          |  |                      |      |     |  |    |   |     |  |   |    |  |  |   |     |  
|Asset-Liability Portfolio (Tokio Marine Life)             |  | ¥                    | (139 | )   |  | ¥  | 0 |     |  | ¥ | 93 |  |  | ¥ | 149 |  
|                                                          |  |                      |      |     |  |    |   |     |  |   |    |  |  |   |     |  

|                                                          |  |                      |     |     |  |    |   |     |  |   |    |   |  |   |     |  
|--------------------------------------------------------- |  | -------------------- | --- | --- |  | -- | - | --- |  | - | -- | - |  | - | --- | -
|                                                          |  | As of March 31, 2002
|                                                          |  |                     
|                                                          |  | Yield curve shift(1)
|                                                          |  |                     
|                                                          |  | -1%                  |     | ±0% |  | 1% |   | +2%
|                                                          |  |                      |     |     |  |    |   |    
|                                                          |  | (yen in billions)   
|General Policy Account                                    |  | ¥                    | (6  | )   |  | ¥  | 0 |     |  | ¥ | (5 | ) |  | ¥ | (13 | )
|Deposit-Type Insurance Account                            |  |                      | (52 | )   |  |    | 0 |     |  |   | 50 |   |  |   | 90  |  
|                                                          |  |                      |     |     |  |    |   |     |  |   |    |   |  |   |     |  
|Asset-Liability Portfolio (Tokio Marine non-consolidated) |  | ¥                    | (58 | )   |  | ¥  | 0 |     |  | ¥ | 45 |   |  | ¥ | 77  |  
|                                                          |  |                      |     |     |  |    |   |     |  |   |    |   |  |   |     |  
|Asset-Liability Portfolio (Tokio Marine Life)             |  | ¥                    | (47 | )   |  | ¥  | 0 |     |  | ¥ | 23 |   |  | ¥ | 28  |  
|                                                          |  |                      |     |     |  |    |   |     |  |   |    |   |  |   |     |  



---

|(1) |  | Based on the then-prevailing yield curve for Japanese government bonds on
each of the dates indicated.
|--- |  | ------------------------------------------------------------------------------------------------------

Risk assets.Risk assets are those investments which purely pursue high
profitability compared to risk amount. Tokio Marines risk assets include
bonds, stocks and foreign currency positions in the currencies of
industrialized nations.

Tokio Marine measures the risks that result from its risk asset portfolio
utilizing the expected shortfall method, at a 99% confidence level over a
one-year period. Under this method, Tokio Marine estimates the expected loss in the fair value of its risk portfolio based on the occurrence of losses that are outside of the 99% confidence interval, as compared to the value-at-risk of that portfolio, which is estimated based on the occurrence of a loss at the 99% confidence level. Like the value-at-risk, the expected shortfall method
takes into account market factors to which the market value of the portfolio
position is exposed (interest rates, equity prices and foreign exchange rates),
the sensitivity of the position to changes in those market factors, and the
volatilities and correlation of those factors. This method also makes
assumptions about market behavior. Tokio Marines standard forecast assumes a
normal distribution. The expected shortfall for the risk assets
portfolio, at a 99% confidence level, is
calculated based on an adverse market movement that exceeds the standard
deviation by a factor of 2.67, while the value-at-risk for the risk assets
portfolio, at a 99% confidence level, is calculated based on an adverse market movement that exceeds the
standard deviation by a factor of 2.33.

61



---



##### Table of Contents



The following tables summarize the expected shortfall for Tokio Marines
risk asset portfolio for the years ended March 31, 2003 and March 31, 2002:

|                 |  |                                                 |        |      |  |     |                      |  |  |   |        |  |  |   |        | 
|---------------- |  | ----------------------------------------------- | ------ | ---- |  | --- | -------------------- |  |  | - | ------ |  |  | - | ------ | 
|                 |  | Year ended March 31, 2003                      
|                 |  |                                                
|                 |  | Expected shortfall for risk assets portfolio(1)
|                 |  |                                                
|Risk category    |  | Average                                         |        | High |  | Low | As of March 31, 2003
|                 |  |                                                 |        |      |  |     |                     
|                 |  | (yen in millions)                              
|Interest rate    |  | ¥                                               | 1,194  |      |  | ¥   | 2,394                |  |  | ¥ | 145    |  |  | ¥ | 145    | 
|Foreign exchange |  |                                                 | 2,830  |      |  |     | 4,197                |  |  |   | 162    |  |  |   | 3,257  | 
|Equities         |  |                                                 | 10,915 |      |  |     | 11,471               |  |  |   | 10,437 |  |  |   | 10,437 | 

|                 |  |                                                 |        |      |  |     |                      |  |  |   |        |  |  |   |        | 
|---------------- |  | ----------------------------------------------- | ------ | ---- |  | --- | -------------------- |  |  | - | ------ |  |  | - | ------ | 
|                 |  | Year ended March 31, 2002                      
|                 |  |                                                
|                 |  | Expected shortfall for risk assets portfolio(1)
|                 |  |                                                
|Risk category    |  | Average                                         |        | High |  | Low | As of March 31, 2002
|                 |  |                                                 |        |      |  |     |                     
|                 |  | (yen in millions)                              
|Interest rate    |  | ¥                                               | 3,664  |      |  | ¥   | 5,166                |  |  | ¥ | 2,978  |  |  | ¥ | 2,978  | 
|Foreign exchange |  |                                                 | 4,519  |      |  |     | 5,172                |  |  |   | 4,116  |  |  |   | 4,116  | 
|Equities         |  |                                                 | 16,058 |      |  |     | 19,766               |  |  |   | 14,252 |  |  |   | 14,252 | 



---

|(1) |  | Calculated over a one-month period and based on a 99% confidence level.
|--- |  | -----------------------------------------------------------------------

Other assets.Other assets are those held mainly for the purpose of
operating the insurance business. The profitability of these assets is
determined in an integrated manner with the profitability of insurance
operations.

At March 31, 2003, the market value of Japanese equity securities in this
portfolio was ¥1,829.5 billion, which accounted for 32.8% of Tokio Marines
total investments across all portfolios. Consequently, Tokio Marines net asset
value tends to fluctuate considerably in accordance with price movements in the
domestic stock market.

We estimated that a ten percent downward movement in the level of the
Nikkei Stock Average would have caused a loss in the fair value of our other
assets of ¥183.0 billion and ¥251.5 billion as of March 31, 2003 and March 31,
2002.

Limitations of Market Risk Management

Certain of the statements contained in this discussion of Tokio Marines
market risk may constitute forward looking statements. These statements
inherently are subject to a variety of risks and uncertainties that could cause
actual results to differ materially from those set forth in those statements.
These risks and uncertainties include, among other things:



| |  |  | Changes in the composition of Tokio Marines financial instruments
that are subject to market risk, including as a result of ordinary
financing and investment decisions or as a result of changes in
strategy or regulation;                                              
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Changes in the volatility of particular instruments or groups of
instruments, including, without limitation, as a result of economic
developments in Japan or elsewhere, or changing political conditions,
or the increasing liquidity of international securities markets;
|
| |  |  | Deviations of the actual behavior of particular markets from those
that are indicated by statistical models used by Tokio Marine; and                                                                                                                                      
|
| |  |  | Deviations of actual loss experience from the results that might be
indicated by statistical analysis.                                                                                                                                                                     

Nichido Fire

A substantial portion of the investments of Nichido Fire and its
subsidiaries are made at the Nichido Fire parent company level. Nichido Fires
subsidiaries conduct market risk management with respect to their own
investments,

62



---



##### Table of Contents



and report the status of their market risk situations to Nichido
Fire on a regular basis. Except as otherwise noted, the following discussion
relates to market risk management of Nichido Fire only (and not its
subsidiaries).

In order to manage its business, Nichido Fire must understand risk,
quantify uncertainty and manage for anticipated events. As a non-life insurer,
Nichido Fires primary risk exposures arise in the underwriting and pricing of
its insurance products, the investing of assets and the matching of invested
assets and insurance liabilities. As discussed in further detail below, Nichido
Fires investing activities generally subject it to market-related factors such
as changes in interest rates, currency exchange rates, equity price levels and
other market factors. While insurance underwriting and pricing risks impact the
frequency and severity of the insurance claims to which Nichido Fires
insurance operations are subject, the amount and timing of Nichido Fires
insurance claims generally do not vary significantly based on these same
market-related factors.

Market Risk Generally

Nichido Fire accumulates assets primarily because it receives premiums for
underwriting insurance policies in advance of being required to make payments
for claims under those policies. Nichido Fire funds the benefits it provides
under insurance policies with gains and income generated by its investment
portfolio. These investments are subject to market risk, which Nichido Fire
defines as the risk of loss arising from adverse changes in market rates and
prices that may cause a loss in the fair value of an investment to occur. The
fair value of a financial instrument is the amount at which it could be
exchanged in a current transaction between willing counterparties, other than
in a forced or liquidation sale. Market risk is directly influenced by
volatility and liquidity in the markets in which the relevant assets are
traded.

Nichido Fires primary market risk exposures are to potential changes in
interest rates and equity prices, as well as foreign exchange rates. The
composition of Nichido Fires investments varies by line of insurance business.
The following is a discussion of Nichido Fires primary market risk exposures
and how those exposures are currently managed as of March 31, 2003.

Investment Objectives

Nichido Fire seeks to assume prudent levels of risk in order to maximize
returns while seeking to safeguard the interests of its policyholders and
shareholders. Nichido Fire invests premiums and deposits received from
policyholders in various investments. Nichido Fire acquires market-sensitive
instruments primarily for long-term investment purposes rather than for trading
purposes.

Nichido Fire has the following primary investment objectives:



| |  |  | Maintain high-grade investment assets in order to meet insurance payment obligations;                                                                                                                                     
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Maintain sufficient liquidity in its investment assets to meet
insurance payment obligations, repayment of deposit-type insurance
products upon maturity and payment of dividends on those products on a
timely basis; and
|
| |  |  | Achieve the highest possible returns on its investment assets while
meeting the above objectives.                                                                                                                         

Market Risk Management Process

Nichido Fires Financial Risk Management Department is responsible for
overseeing Nichido Fires market risk management process. This process includes
establishing appropriate controls, policies and procedures relating to market
risk; ensuring appropriate senior management oversight of market risk-taking
activities; and analyzing, monitoring and reporting market risk.

Nichido Fire believes that, in terms of the asset allocation of its
investments, and to meet its investment objectives, the most important goal is
to make investments that best match different risk profiles that arise from the
specific nature of liabilities corresponding to the assets in each of its
general fund and deposit-type insurance fund reserves. For the general fund
reserve, Nichido Fire diversifies its investments among yen-denominated assets,
Japanese equities, foreign currency-denominated bonds and others, to obtain a
stable income source and relatively

63



---



##### Table of Contents



high return at the same time. For the
deposit-type insurance fund reserve, in light of the fact that payments upon
maturity and dividend payments must be made in yen, investments are made
primarily in highly liquid and relatively low-risk assets. In particular, with
respect to deposit-type insurance reserves, in order to deal with the risk that
a large amount may become due at any time and the risk that the market interest
rate may be below the assumed rate of interest, Nichido Fires Financial
Planning Department, independent from the activities of the Financial Risk
Management Department, quantifies and analyzes the risks arising from the
mismatch of its assets and liabilities.

Market Risk Measurement

Nichido Fires material market risk exposures in its investment portfolio
relate to interest rates, equity prices and foreign exchange rates. Nichido
Fire does not have a material trading portfolio, and does not hold physical or
derivative commodity positions.

The carrying value of Nichido Fires investment portfolio as of March 31,
2003 was ¥1.5 trillion, of which 87% was invested in equity securities and
fixed maturities. These investments are characterized on Nichido Fires balance
sheet as securities available for sale or as securities held to maturity.

For the purpose of market risk management, Nichido Fire defines interest
rate risk as the risk of loss in the fair values of interest rate sensitive
instruments caused by changes in market interest rates. Nichido Fire is exposed
to interest rate risk due to its investments in fixed income instruments,
particularly bonds, loans and other long-term investments. Nichido Fire risks a
loss because these instruments may decline in value when market interest rates
rise. Nichido Fire makes its investments in interest rate sensitive instruments
in accordance with the asset-liability matching policies established by its
Financial Planning Department. In addition, the amount of deposit-type
insurance fund reserves was relatively stable during the years ended March 31,
2003 and March 31, 2002. Accordingly, between March 31, 2002 and March 31,
2003, there was no significant change in Nichido Fires interest rate risk.

Nichido Fire has a risk of loss due to equity prices because the value of
its equity securities may decline during a sustained general fall in equity
prices. Most of Nichido Fires equity investments are intended to be held for
the long term. Nichido Fires equity holdings are primarily in the Japanese
market. The value of Nichido Fires equity portfolio tends to fluctuate
considerably in accordance with price movements in the domestic stock market.

Foreign exchange rate risk is the risk of a loss in the fair values of
instruments denominated in a currency other than Nichido Fires functional
currency, which is the yen. Nichido Fire is exposed to foreign exchange risk
because some of its assets are denominated in a currency other than the yen. If
the value of a foreign currency declines relative to the yen, the fair value of
assets denominated in that foreign currency would also decline. Nichido Fires
primary exposures for foreign exchange rate risk are the U.S. dollar and euro.
Between March 31, 2002 and March 31, 2003, there was no significant change in
Nichido Fires foreign exchange rate risk.

We do
not anticipate significant changes in the composition of Nichido
Fires primary market
risk exposures or in how those exposures are managed in future reporting
periods.

Risk Exposure Estimates

Nichido Fire uses a risk modelling technique known as sensitivity
analysis to analyze the implications of changes in market conditions on
investments it holds. Nichido Fire defines sensitivity analysis as the
measurement of potential loss in future earnings, fair values or cash flows of
market sensitive instruments resulting from one or more selected hypothetical
changes in interest rates and other market rates or prices over a selected
period of time.

In Nichido Fires sensitivity analysis model, a hypothetical change in
market rates is selected that Nichido Fire expects to reflect reasonably
possible near-term changes in those rates. For these purposes, Nichido Fire
defines near-term to mean a period of up to one year from the date of its
most recent consolidated financial statements. Actual results may differ from
the hypothetical change in market rates assumed in the following discussion,

64



---



##### Table of Contents



especially since this sensitivity analysis does not reflect the results of any
actions that Nichido Fire would take to mitigate these hypothetical losses in
fair value.

Interest rate risk.For purposes of interest rate risk management,
Nichido Fire seeks to match specific asset categories with groups of
liabilities. The following tables show the effect of interest rate fluctuations
on the present value of the surplus in Nichido Fires asset-liability portfolio
(parent company and Nichido Life only) particular groups of assets and
liabilities as of March 31, 2003 and March 31, 2002:

|                                                          |  |                      |       |     |  |                   |     |     |  |   |      |  |  |   |      | 
|--------------------------------------------------------- |  | -------------------- | ----- | --- |  | ----------------- | --- | --- |  | - | ---- |  |  | - | ---- | 
|                                                          |  | As of March 31, 2003
|                                                          |  |                     
|                                                          |  | Yield curve shift(1)
|                                                          |  |                     
|                                                          |  | -1%                  |       | ±0% |  | 1%                |     | +2%
|                                                          |  |                      |       |     |  |                   |     |    
|                                                          |  |                      |       |     |  | (yen in billions) |     |     |  |  
|General Policy Account                                    |  | ¥                    | (3.3  | )   |  | ¥                 | 0.0 |     |  | ¥ | 3.5  |  |  | ¥ | 6.4  | 
|Deposit-Type Insurance Account                            |  |                      | (7.1  | )   |  |                   | 0.0 |     |  |   | 12.8 |  |  |   | 23.5 | 
|                                                          |  |                      |       |     |  |                   |     |     |  |   |      |  |  |   |      | 
|Asset-Liability Portfolio (Nichido Fire non-consolidated) |  | ¥                    | (10.4 | )   |  | ¥                 | 0.0 |     |  | ¥ | 16.3 |  |  | ¥ | 29.9 | 
|                                                          |  |                      |       |     |  |                   |     |     |  |   |      |  |  |   |      | 
|Asset-Liability Portfolio (Nichido Life)                  |  | ¥                    | (26.4 | )   |  | ¥                 | 0.0 |     |  | ¥ | 19.7 |  |  | ¥ | 33.2 | 
|                                                          |  |                      |       |     |  |                   |     |     |  |   |      |  |  |   |      | 

|                                                          |  |                      |       |     |  |                   |     |     |  |   |      |  |  |   |      | 
|--------------------------------------------------------- |  | -------------------- | ----- | --- |  | ----------------- | --- | --- |  | - | ---- |  |  | - | ---- | 
|                                                          |  | As of March 31, 2002
|                                                          |  |                     
|                                                          |  | Yield curve shift(1)
|                                                          |  |                     
|                                                          |  | -1%                  |       | ±0% |  | 1%                |     | +2%
|                                                          |  |                      |       |     |  |                   |     |    
|                                                          |  |                      |       |     |  | (yen in billions) |     |     |  |  
|General Policy Account                                    |  | ¥                    | (5.7  | )   |  | ¥                 | 0.0 |     |  | ¥ | 4.9  |  |  | ¥ | 9.1  | 
|Deposit-Type Insurance Account                            |  |                      | (9.7  | )   |  |                   | 0.0 |     |  |   | 12.7 |  |  |   | 23.4 | 
|                                                          |  |                      |       |     |  |                   |     |     |  |   |      |  |  |   |      | 
|Asset-Liability Portfolio (Nichido Fire non-consolidated) |  | ¥                    | (15.4 | )   |  | ¥                 | 0.0 |     |  | ¥ | 17.6 |  |  | ¥ | 32.5 | 
|                                                          |  |                      |       |     |  |                   |     |     |  |   |      |  |  |   |      | 
|Asset-Liability Portfolio (Nichido Life)                  |  | ¥                    | (13.7 | )   |  | ¥                 | 0.0 |     |  | ¥ | 10.1 |  |  | ¥ | 17.2 | 
|                                                          |  |                      |       |     |  |                   |     |     |  |   |      |  |  |   |      | 



---

|(1) |  | Based on the then-prevailing yield curve for Japanese government bonds on
each of the dates indicated.
|--- |  | ------------------------------------------------------------------------------------------------------

Equity price and foreign exchange rate risks.A ten percent uniform
upward and downward movement in stock prices is assumed for calculating the
fair value sensitivity of equity securities held by Nichido Fire. Foreign
exchange rate risk is estimated by assuming a ten percent increase and decrease
in all non-yen exchange rates against the yen. Consequently, the fair value
sensitivity shown below illustrates the effect on fair values if,
simultaneously and uniformly, all non-yen currencies gained or lost ten percent
of their value relative to the yen.

The following table shows the sensitivity of Nichido Fires investments to
changes in equity prices and foreign exchange values, by category of market
risk, as of March 31, 2003 and March 31, 2002:

|                              |  |                      |       |     |  |      |     |  |  |   |      | 
|----------------------------- |  | -------------------- | ----- | --- |  | ---- | --- |  |  | - | ---- | 
|                              |  | As of March 31, 2003
|                              |  |                     
|                              |  | Percentage change   
|                              |  |                     
|                              |  | -10%                 |       | ±0% |  | +10%
|                              |  |                      |       |     |  |     
|                              |  | (yen in billions)   
|Equity price risk(1)          |  | ¥                    | (41.8 | )   |  | ¥    | 0.0 |  |  | ¥ | 41.8 | 
|Foreign exchange rate risk(2) |  |                      | (20.4 | )   |  |      | 0.0 |  |  |   | 20.4 | 

|                              |  |                      |       |     |  |      |     |  |  |   |      | 
|----------------------------- |  | -------------------- | ----- | --- |  | ---- | --- |  |  | - | ---- | 
|                              |  | As of March 31, 2002
|                              |  |                     
|                              |  | Percentage change   
|                              |  |                     
|                              |  | -10%                 |       | ±0% |  | +10%
|                              |  |                      |       |     |  |     
|                              |  | (yen in billions)   
|Equity price risk(1)          |  | ¥                    | (57.6 | )   |  | ¥    | 0.0 |  |  | ¥ | 57.6 | 
|Foreign exchange rate risk(2) |  |                      | (18.8 | )   |  |      | 0.0 |  |  |   | 18.8 | 

65



---



##### Table of Contents





---

|(1) |  | For equity price risk, a ten percent uniform upward or downward movement
in the benchmark Nikkei Stock Average as of March 31, 2003 (¥7,972)
and March 31, 2002 (¥11,024) was assumed for calculating the market value
of Nichido Fires portfolio.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | For foreign exchange risk assets, a ten percent upward or downward change
in foreign currencies against the yen as of March 31, 2003 and March 31,
2002 was assumed for calculating the market value of Nichido Fires
portfolio.                  

Limitations of Market Risk Management

Certain of the statements contained in this discussion of Nichido Fires
market risk may constitute forward looking statements. These statements
inherently are subject to a variety of risks and uncertainties that could cause
actual results to differ materially from those set forth in those statements.
These risks and uncertainties include, among other things:



| |  |  | Changes in the composition of Nichido Fires financial instruments
that are subject to market risk, including as a result of ordinary
financing and investment decisions or as a result of changes in
strategy or regulation;                                              
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Changes in the volatility of particular instruments or groups of
instruments, including, without limitation, as a result of economic
developments in Japan or elsewhere, or changing political conditions,
or the increasing liquidity of international securities markets;
|
| |  |  | Deviations of the actual behavior of particular markets from those
that are indicated by statistical models used by Nichido Fire, which of
necessity rely on a number of assumptions and approximations; and                                                               
|
| |  |  | Deviations of actual loss experience from the results that might be
indicated by statistical analysis.                                                                                                                                                                     

Liquidity and Capital Resources

Liquidity

In the insurance industry, liquidity generally refers to the ability of an
enterprise to generate adequate amounts of cash from its normal operations,
including its investment portfolio, in order to meet its financial commitments,
which are principally obligations under its insurance or reinsurance contracts.

The liquidity of a property-casualty insurers operations is generally
affected by the frequency and severity of losses under its policies, as well as
by the persistency of its products. Future catastrophic events, the timing and
effect of which are inherently unpredictable, may also increase liquidity
requirements for a property-casualty insurers operations.

The liquidity of a life insurers operations is generally affected by
trends in actual mortality experience relative to the assumptions with respect
thereto included in the pricing of its life insurance policies, by the extent
to which minimum returns or crediting rates are provided in connection with its
life insurance products, and by the level of surrenders and withdrawals.

Our principal sources of liquidity include insurance premiums and deposit
premiums received, investment income and cash provided from maturing or
liquidated investments and funds that we may raise from time to time by issuing
debt or equity securities. In addition, our investments held in liquid
securities represent potential sources of liquidity.

As a holding company, we currently conduct all of our operations through
our direct and indirect subsidiaries, including Tokio Marine and Nichido Fire.
Virtually all of our consolidated assets are held by, and all of our
consolidated earnings and cash flows are attributable to, our direct and
indirect subsidiaries. As a result, our liquidity and ability to pay expenses
and meet obligations at the holding company level, as well as our ability to
pay cash dividends on our shares, are dependent upon our ability to receive
dividends from our subsidiaries. While we expect

66



---



##### Table of Contents



that our subsidiaries will
contribute cash to us from time to time, their ability to do so is governed not
only by their profitability but also by a number of different regulations that
are subject to change. See Risk Factors  Risks Relating to Our Business.

We are not aware of any developments which would materially increase our
demand for liquidity.

Capital Resources

Our capital requirements consist principally of capital expenditures and
debt repayment.

We made capital expenditures of ¥11.5 billion in the year ended March 31,
2003, ¥3.7 billion in the year ended March 31, 2002 and ¥8.0 billion in the
year ended March 31, 2001, in each case primarily for real estate for
operational and lease purposes and for information technology systems
development and equipment. At March 31, 2003, we had no material commitments
for capital expenditure.

Our debt outstanding amounted to ¥177,880 million as of March 31, 2003, of
which the current portion amounted to ¥9,331 million. Debt outstanding at March
31, 2003 was comprised of the following:

|                                     |                        |  |           |                   |  |   |         |         | 
|------------------------------------ | ---------------------- |  | --------- | ----------------- |  | - | ------- | ------- | 
|                                     |                        |  | Due       | (Yen in millions)
|                                     |                        |  |           |                  
|Loans, 0.05% to 4.75%                |                        |  | 2007-2016 |                   |  | ¥ | 4,673   |        
|Equity linked notes, 1.00% to 21.00% |                        |  | 2004      |                   |  |   | 4,331   |        
|Fixed rate notes, 0.07%              |                        |  | 2004      |                   |  |   | 5,000   |        
|Floating rate notes, 0.06%           |                        |  | 2005      |                   |  |   | 2,000   |        
|Credit linked notes, 2.56% to 11.75% |                        |  | 2007      |                   |  |   | 25,373  |        
|Unsecured bonds, 1.47% to 2.78%      |                        |  | 2006-2021 |                   |  |   | 135,984 |        
|Other notes                          |                        |  | 2011      |                   |  |   | 519     |        
|                                     |                        |  |           |                   |  |   |         |        
|                                     | Total debt outstanding |  |           |                   |  |   | ¥       | 177,880 | 
|                                     |                        |  |           |                   |  |   |         |        

These borrowings were made primarily for general corporate purposes, and
there were no restrictions on the use of proceeds from these borrowings.

We also maintain investment deposits by policyholders, which are
liabilities that must be returned to the policyholders under long-term
insurance coverage unless there has been a substantial settlement under the
policy. Investment deposits by policyholders amounted to ¥2,716,526 million at
March 31, 2003.

It is our policy to fund our capital requirements principally from cash
flow from operating activities and external sources, such as issuances of
debentures. In the future, we intend to explore funding opportunities from
diversified external sources within the framework of applicable regulations.

At the holding company level, we intend to finance our capital
requirements, investments and working capital needs primarily with a
combination of dividends and advances from our subsidiaries and access to the
international and domestic capital markets. We believe that dividends and
advances provided by our subsidiaries, together with the proceeds from any
capital markets offerings, will provide sufficient funds to meet our operating
and capital requirements and to implement our corporate strategy.

Effective as of August 19, 2003, we reduced our statutory additional paid in capital
in the amount of ¥500 billion pursuant to Article 289, section 2 of the
Japanese Commercial Code and transferred that amount to our capital surplus.
This transfer will enable us, among other things, to repurchase our own shares
of common stock. At our general shareholders meeting on June 27, 2003, our
shareholders approved a share buyback of up to 120,000 shares of our common
stock with an aggregate value of no more than ¥100 billion. As of September 9,
2003, we had repurchased 28,347 shares for an aggregate purchase price of
¥32,489 million.

67



---



##### Table of Contents






DIRECTORS AND CORPORATE AUDITORS

Personal Data

Our current directors and corporate auditors were elected to their
respective positions with us at the June 2003 ordinary general meeting of our
shareholders. The term of office for each of our directors and corporate
auditors will expire at the close of the ordinary general meeting of
shareholders convened in 2004 and 2007, respectively. As of June 27, 2003, we
reduced the size of our board of directors from 13 directors to 11 directors
and the size of our board of corporate auditors from 5 corporate auditors to 4
corporate auditors.

The following table shows information about our directors and corporate
auditors as of August 31, 2003:

|                  |  |                                                                      |  |                   |  |                  |       | 
|----------------- |  | -------------------------------------------------------------------- |  | ----------------- |  | ---------------- | ----- | 
|                  |  |                                                                      |  |                   |  | Number of Shares
|                  |  |                                                                      |  |                   |  | Owned as of     
|Name              |  | Position                                                             |  | Date of Birth     |  | August 31, 2003 
|                  |  |                                                                      |  |                   |  |                 
|Tomio Higuchi     |  | Chairman and Representative Director                                 |  | October 22, 1942  |  |                  | 33.53 | 
|Kunio Ishihara    |  | President and Representative Director                                |  | October 17, 1943  |  |                  | 49.84 | 
|Katsuo Handa      |  | Executive Vice President and Representative Director                 |  | June 29, 1944     |  |                  | 25.33 | 
|Yukiteru Noji     |  | Senior Managing Director and Representative Director                 |  | May 4, 1942       |  |                  | 12.93 | 
|Yasuo Yaoita      |  | Managing Director and General
Manager of Merger Planning
 Department |  | November 13, 1947 |  |                  | 28.47 | 
|Shoji Ueno        |  | Director                                                             |  | February 5, 1944  |  |                  | 32.02 | 
|Yasuo Tago        |  | Director                                                             |  | January 13, 1944  |  |                  | 15.59 | 
|Minoru Makihara   |  | Director                                                             |  | January 12, 1930  |  |                  | 21.00 | 
|Masamitsu Sakurai |  | Director                                                             |  | January 8, 1942   |  |                  |      | 
|Haruo Shimada     |  | Director                                                             |  | February 21, 1943 |  |                  |      | 
|Toshiro Yagi      |  | Director                                                             |  | November 1, 1947  |  |                  | 17.61 | 
|Takehisa Kikuchi  |  | Standing Corporate Auditor                                           |  | December 5, 1941  |  |                  | 62.49 | 
|Sadao Yamamoto    |  | Standing Corporate Auditor                                           |  | March 1, 1940     |  |                  | 15.45 | 
|Iwao Hanaoka      |  | Corporate Auditor                                                    |  | January 5, 1934   |  |                  | 5.07  | 
|Shigemitsu Miki   |  | Corporate Auditor                                                    |  | April 4, 1935     |  |                  |      | 

Tomio Higuchijoined Nichido Fire in 1965. He became a director of Nichido
Fire in 1993, a managing director in 1995, a senior managing director in 1998,
vice president in 2000 and president and senior general manager of marketing
and sales promotion headquarters in 2001. He has served as chairman of our
board of directors since April 2002. He also serves as president of Nichido
Fire.

Kunio Ishiharajoined Tokio Marine in 1966. He became a director of Tokio
Marine in 1995, a managing director in 1998, a senior managing director in 2000
and president in 2001. He has served as our president since April 2002. He also
serves as president of Tokio Marine.

Katsuo Handajoined Tokio Marine in 1968. He became a director of Tokio
Marine in 1995, a managing director in 1998 and a senior managing director in
2001. He has served as our executive vice president since June 2003.

Yukiteru Nojijoined Nichido Fire in 1965. He became a director of Nichido
Fire in 1995 and a managing director in 1998. He has served as our senior
managing director since June 2003.

Yasuo Yaoitajoined Tokio Marine in 1970. He became a director of Tokio
Marine in 2000. He has served as our managing director since April 2002.

Shoji Uenojoined Tokio Marine in 1967. He became a director of Tokio
Marine in 1993, a managing director in 1996, a senior managing director in 1999
and an executive vice president in 2001. He has served as one of our directors
since April 2002. He also serves as an executive vice president of Tokio Marine
and as president of The Tokio Marine Research Institute.

68



---



##### Table of Contents



Yasuo Tagojoined Nichido Fire in 1966. He became a director of Nichido
Fire in 1996, a managing director in June 1998, a senior managing director in
2002 and an executive vice president in 2003. He has served as one of our
directors since April 2002. He also serves as an executive vice president of
Nichido Fire.

Minoru Makiharajoined Mitsubishi Corporation in 1956. He became president
of Mitsubishi Corporation in 1992 and has served as the chairman of its board
of directors since 1998. He served as a director of Tokio Marine from 1993
through 2002. He has served as one of our directors since April 2002.

Masamitsu Sakuraijoined Ricoh Co., Ltd. in 1966. He became a director of
Ricoh Co., Ltd. in 1992 and has served as its president since 1996. He has
served as one of our directors since April 2002.

Haruo Shimadajoined the faculty of economics at Keio University as a
research assistant in 1967. He became an associate professor in 1975 and has
been a professor since 1982. He has served as one of our directors since April
2002.

Toshiro Yagijoined Tokio Marine in 1971. He became a director of Tokio
Marine in 2001 and a managing director in 2003. He has served as one of our
directors since June 2003. He also serves as a managing director of Tokio
Marine.

Takehisa Kikuchijoined Tokio Marine in 1964. He became a director of
Tokio Marine in 1992, a managing director in 1995 and a senior managing
director in 1998. He has served as one of our standing corporate auditors since
April 2002. He became a corporate auditor of Tokio Marine in 2002.

Sadao Yamamotojoined Nichido Fire in 1963. He became a director of
Nichido Fire in 1994 and a managing director in 1997. He has served as one of
our standing corporate auditors since April 2002.

Iwao Hanaokabecame an attorney-at-law and joined Kaneko Law Office
(currently Kaneko Iwamatsu Law Office) in 1959. He served as a corporate
auditor of Nichido Fire from 2000 through 2002. He has served as one of our
corporate auditors since April 2002.

Shigemitsu Mikijoined The Mitsubishi Bank, Ltd. in 1958. He became a
director of The Mitsubishi Bank, Ltd. in 1986 and has served as president of
The Bank of Tokyo-Mitsubishi, Ltd. since 2000. He served as a corporate auditor
of Tokio Marine from 2000 through 2002. He has served as one of our corporate
auditors since April 2002. He also serves as president of Mitsubishi Tokyo
Financial Group, Inc.

There are no family relationships between any of our directors and
corporate auditors. None of our directors or corporate auditors has any service
contract with us or any of our subsidiaries that provides for benefits upon
termination of service as a director or corporate auditor.

Compensation and Benefits

The aggregate compensation, including bonuses, that was paid by Millea and
its subsidiaries during the year ended March 31, 2003 to our directors and
corporate auditors was ¥622 million. The total amount that we set aside or
accrued during the year ended March 31, 2003 to provide pension, retirement or
similar benefits to our directors and corporate auditors was ¥136 million.

Board Practices

Our board of directors has the authority to determine the fundamental
policy for the administration of the boards affairs and supervises the
execution by the directors of their duties. Our articles of incorporation
provide for not more than fifteen directors. Directors are elected at general
meetings of shareholders, and the normal term of office of directors is one
year, although they may serve any number of consecutive terms. Our board of
directors elects from among its members one or more representative directors,
who have the authority individually to represent us. From among its members,
the board of directors also elects a chairman, a president and one or more
executive vice presidents, senior managing directors and managing directors.

69



---



##### Table of Contents



The Commercial Code of Japan provides that a director may not vote on an
agenda item in which he or she has a special interest. There is no compulsory
retirement age for directors. There is no requirement that a director hold
shares in order to qualify him or her as a director.

Our articles of incorporation provide for not more than six corporate
auditors, one or more of whom may serve as a standing (or full-time) corporate
auditor. Corporate auditors are elected at general meetings of shareholders.
The normal term of office of a corporate auditor is four years. Corporate
auditors may serve any number of consecutive terms. The corporate auditors form
the board of corporate auditors. Corporate auditors are under a statutory duty
to review the administration of our affairs by the directors, examine the
financial statements and business reports to be submitted by the board of
directors to the general meetings of shareholders and report their opinions
thereon to the shareholders. Corporate auditors are required to attend meetings
of the board of directors and are entitled to express their opinions, but they
are not entitled to vote. Corporate auditors also have a statutory duty to
provide their report to the board of corporate auditors, which is required to
submit its auditing report to the directors. The board of corporate auditors
also determines matters relating to the duties of the corporate auditors, such
as auditors policy and methods of investigation of our affairs.

70



---



##### Table of Contents






THE JAPANESE NON-LIFE INSURANCE INDUSTRY

History

Tokio Marine, originally founded in 1879, was the first Japanese private
non-life insurance company. Following the enactment of the Insurance Business
Law in 1900, Japanese non-life insurance business prospered, mainly as a result
of the rapid expansion of the Japanese economy during World War I. However,
this period was followed by a recession, the great earthquake in Tokyo in 1923
and the financial crisis of 1929, which resulted in Japanese non-life insurance
companies incurring substantial losses. This led them to reorganize and form
various cartels and co-operative associations. During World War II, under the
guidance of the Japanese government, the industry was again reorganized and the
number of companies was reduced from 48 in 1940 to 16 in 1945.

By the end of World War II, Japanese non-life insurance companies had lost
almost all overseas business and incurred substantial deficits. Nevertheless,
Japanese non-life insurance business grew rapidly as the Japanese economy
expanded since the late 1950s. In the 1980s, non-life insurance business grew
significantly due to sales of automobile insurance and sales to individuals of
insurance policies with a refund at maturity, which was seen as an attractive
form of investment. In recent years, moderate non-life insurance business
growth has been achieved mainly due to the steady growth of sales of automobile
insurance.

The growth of automobile insurance business, from both voluntary and (with
the introduction in 1955 of the Automobile Liability Security Law) compulsory
automobile liability insurance, contributed significantly to the growth of
non-life insurance business after World War II. This not only resulted in a
substantial volume of business for the non-life insurance industry but also, by
introducing individuals to various insurance policies, provided new
opportunities for the industrys future expansion. In recent years, growth in
automobile insurance business has slowed down while deregulation of the
industry has led to diversification of the Japanese non-life insurance
companies other business activities.

Industry Background

The growth of non-life insurance business is closely related, among other
things, to the growth in the construction and automobile industries and the
volume of foreign trade, as well as to the emergence of new kinds of risk
resulting from social and economic development, and the increasing public
awareness of insurance and liability compensation. In addition, in the last 15
years, insurance policies with a refund at maturity marketed to individuals
have become attractive vehicles for personal investment in Japan. Premium
income from personal insurance business now accounts for about three-quarters
of the industrys total non-life premium income.

Until 1996, non-life insurance companies were prohibited from engaging in
the life insurance business under Japanese law. However, under the new
Insurance Business Law which was enacted on April 1, 1996, non-life insurance
companies are allowed to establish subsidiaries to engage in the life insurance
business and life insurance companies are allowed to establish subsidiaries to
engage in non-life insurance business.

Life and non-life insurance companies were mutually allowed to enter the
so-called third sector insurance business through subsidiaries beginning in
January 2001 and directly beginning in July 2001. The third sector refers to
insurance products and services that do not fall within the traditional life
and non-life insurance areas, such as personal, accident, medical and cancer
insurance and insurance covering expenses for nursing care. Deregulation of
this segment of the insurance industry in Japan is expected to expand the size
of the market by raising awareness of consumers to availability of these
products.

The new Insurance Business Law of 1996 also permitted the establishment of
insurance brokerage operations, although these brokerage activities have not
had any substantial influence on the Japanese insurance market to date.

There have been several amendments to the Insurance Business Law since its
enactment in 1996. The most significant amendments were enacted as part of the
Financial System Reform Act of 1998 and served to further deregulate the
insurance industry. For a summary of the more significant 1998 amendments to
the Insurance Business Law, see Regulation  Insurance Industry Regulations.

71



---



##### Table of Contents



According to the Financial Services Agency, as of June 1, 2003, the
Japanese non-life insurance industry consisted of 30 licensed Japanese
companies. In addition, 24 foreign insurance companies conduct non-life
insurance business in Japan under license from the Japanese government.

72



---



##### Table of Contents






REGULATION

Insurance Industry Regulations

General Regulatory Scheme

The Japanese non-life insurance market is regulated by the Insurance
Business Law, as amended from time to time, as well as by cabinet orders,
ministerial ordinances and various rules and regulations made by the Financial
Services Agency and relevant ministries. Under the Insurance Business Law, all
non-life insurance companies must be either joint stock corporations or mutual
companies, and they must each obtain a license from the Prime Minister. The
Insurance Business Law also contains detailed provisions regarding, among other
things, accounting principles and restrictions relating to the investment of
insurance companies funds. The Insurance Business Law provides for the
registration of insurance agents and insurance brokers with the relevant local
finance bureau and regulates their soliciting activities. Foreign insurance
companies that intend to conduct non-life insurance business in Japan are also
subject to the Insurance Business Law and are required to obtain a license from
the Prime Minister.

The Financial Services Agency supervises non-life insurance companies and
their business operations. Certain methods of operations, general policy
conditions, and the basis of calculation of premiums and reserves for unexpired
risks must be approved by the Financial Services Agency. This Agency may, at
any time, require insurance companies to submit reports and other documents and
may carry out inspections at the companies offices. The Financial Services
Agencys practice is to inspect and audit the business operations of insurance
companies regularly.

Insurance Holding Company Regulations

Under the Insurance Business Law of Japan, an insurance holding company is
prohibited from carrying on business other than the administration of the
management of its subsidiaries and other incidental business. An insurance
holding company may have as its subsidiaries life and non-life insurance
companies, banks (including trust banks and long-term credit banks), securities
companies and foreign subsidiaries engaged in the insurance, banking or
securities business. In addition, an insurance holding company may have as its
subsidiaries companies engaged in businesses relating or incidental to the
businesses of the companies mentioned above, such as credit card companies,
leasing companies and investment advisory companies. The provisions of the Act
Concerning Prohibition of Private Monopolization and Maintenance of Fair Trade,
or the Anti-Monopoly Law, that prohibit an insurance company from holding more
than 10% of another companys voting rights without the prior approval of the
Fair Trade Commission, do not apply to an insurance holding company.

The Financial Services Agency supervises insurance holding companies under
the Insurance Business Law. The Financial Services Agency may, at any time,
require an insurance holding company or its subsidiaries to submit reports and
other documents and may carry out inspections at the companies offices if the
Financial Services Agency deems such action necessary to secure the sound and
appropriate operation of the business of the subsidiary insurance companies. In
addition, if a bank or a securities company is a subsidiary of an insurance
holding company, the insurance holding company is also subject to supervision
by the Financial Services Agency under either the Banking Law or the Securities
Exchange Law, as applicable.

Limitations on Investments for Insurance Companies

The Insurance Business Law, ministerial ordinances and the regulations
thereunder specify the types of investments that Japanese non-life insurance
companies may make and the percentage of their total assets (calculated on the
basis of Japanese accounting principles) which can be invested in each type of
investment. Under these provisions, Tokio Marines and Nichido Fires
investment portfolios must, in general, be held in the form of securities, real
estate, monetary claims, gold bullion, loans, loaned securities, investments in
partnerships, cash on deposit, money trusts, monetary claims trusts, securities
trusts, real estate trusts, financial derivatives, or other investments
enumerated in the Insurance Business Law Enforcement Regulations. Investments
in stocks and assets denominated in foreign currencies are each limited to 30%
of total assets. The aggregate investment in real estate is limited to 20% of
total assets, and investments in claims, loans and loaned securities are
limited to 10% of total

73



---



##### Table of Contents



assets. In 1998, a limit on investments in any one company (including its
affiliates) was set at 10% of total assets. Loans to and guarantees in favor of
any one company (including its affiliates) are limited to 3% of total assets.

Under the Anti-Monopoly Law, no insurance company can acquire or hold more
than 10% of the total outstanding stock of any other company in Japan without
obtaining the prior approval of the Fair Trade Commission, except in certain
circumstances. Additionally, the Insurance Business Law prohibits an insurance
company from acquiring or holding more than 10% of the total outstanding stock
of any other company in Japan except of other life or non-life insurance
companies, banks, securities companies, foreign insurance companies, foreign
banks, foreign securities companies, companies which exclusively operate
businesses that provide support to the insurance company and its subsidiaries
or finance-related businesses enumerated in the Insurance Business Law,
companies that cultivate certain new business fields defined in the Insurance
Business Law Enforcement Regulations, and holding companies that exclusively
hold the foregoing companies.

Limitations on Dividend Distributions for Insurance Companies

The Insurance Business Law prescribes certain financial requirements that
must be met before an insurance company can distribute dividends to its
shareholders. Until the aggregate amount of additional paid-in capital and
legal reserve is equal to the amount of stated capital of an insurance company,
the insurance company must credit to its legal reserve an amount equivalent to
at least one-fifth of the amount to be appropriated from the profit for each
fiscal period and an amount equal to one-fifth of the cash distribution each
time a distribution of money as an interim dividend is made pursuant to the
Commercial Code. Under the Commercial Code, a company is permitted to
distribute profits by way of year-end dividends out of the excess of its net
assets over the aggregate of:



| | (1) |  | its stated capital;                                                                                           
| | --- |  | --------------------------------------------------------------------------------------------------------------
|
| | (2) |  | its additional paid-in capital;                                                                               
|
| | (3) |  | its accumulated legal reserve;                                                                                
|
| | (4) |  | the legal reserve to be set aside in respect of the fiscal period
concerned; and                              
|
| | (5) |  | other matters specified in the Implementation Ordinance of the
Commercial Code and the Insurance Business Law.

In the case of interim dividends, net assets are calculated based on the
non-consolidated balance sheet as of the last closing of our accounts.
Pursuant to an amendment to the Commercial Code which became effective on
September 25, 2003, net assets are adjusted to reflect: (i) any subsequent
payment by way of appropriation of retained earnings and the related transfer
to legal reserve; (ii) any subsequent transfer of retained earnings to stated
capital; (iii) any subsequent reduction of stated capital or legal reserve;
(iv) the total purchase price of shares authorized pursuant to a resolution of
a general meeting of shareholders; (v) the total purchase price of shares
authorized pursuant to the articles of incorporation; and (vi) other matters
specified in the Implementation Ordinance of the Commercial Code and the
Insurance Business Law. Interim dividends may not be paid where there is a
risk that at the end of the financial year net assets might be less than the
aggregate of the amounts referred to in (1) through (5) above. For more
information on share repurchases, see Description of Common Stock  Repurchase
by Millea Holdings of Shares.

Recent Changes to Insurance Laws

A number of measures have been implemented under the Insurance Business
Law over the past several years in order to provide greater protections to
policyholders. Under amendments to the Insurance Business Law passed in 1998,
an early warning measure was introduced. This early warning measure is based on
a non-life insurance companys solvency margin ratio. When the solvency margin
ratio of a non-life insurance company falls below a certain prescribed ratio,
regulators can require that the insurance company take certain actions, such as
reducing certain business operations or refraining from making certain
investments. Also in 1998, the Non-Life Insurance Policyholders Protection
Corporation was established to provide assistance to policyholders in the event
a non-life insurance company becomes insolvent. All non-life insurance
companies operating in Japan, including foreign insurers, are obligated to
become members of this organization. The organization aids policyholders by
rendering

74



---



##### Table of Contents



financial assistance to an insurance company that assumes the affected
policies, by assuming the policies itself or through other methods stipulated
in the Insurance Business Law.

Other amendments to the Insurance Business Law passed in 1998 permitted
non-life and life insurance companies to enter the banking business through
their subsidiaries from October 1999 and permitted banks to enter the non-life
and life insurance businesses through their subsidiaries from October 2000.
These 1998 amendments also abolished the requirements that non-life insurance
companies obtain approvals from the Financial Services Agency for certain
changes to methods of operations, general policy conditions or the basis of
calculations of premiums and reserves for unexpired risks from those previously
approved by the Prime Minister of Japan. A notification requirement was
introduced instead.

Amendments to the Law Concerning the Non-Life Insurance Rating
Organizations were also passed in 1998. These amendments abolished the
requirement that non-life insurance companies use the premium rates established
by the rating organizations. Today, with the exception of earthquake insurance
and compulsory automobile liability insurance, non-life insurance companies may
set their own premium rates for insurance policies.

These recent changes in insurance industry-related laws have contributed
to increased competition among non-life insurance companies.

In April 2001, the Consumer Contracts Law and the Law on Sales of
Financial Products were enacted, which regulate soliciting and selling
activities of non-life insurance products. Recent amendments to the Insurance
Business Law which became effective in April 2000 allow non-life insurance
companies to sell some of their products (including credit insurance provided
in connection with housing loans made by banks) through banks branch offices.

The most recent amendments to the Insurance Business Law enacted on August
24, 2003 allow insurance companies which may find it difficult to continue
operating their insurance businesses to change the terms of their insurance
policies, including reducing insurance payments. This is subject to obtaining
approval from the Prime Minister of Japan and shareholders of the insurance
company, implementing procedures to protect the interests of policyholders and
other conditions and procedures prescribed in the Insurance Business Law.

Foreign Exchange Regulations

General Description

The Foreign Exchange and Foreign Trade Law of Japan, frequently referred
to as the Foreign Exchange Law, and the cabinet orders and ministerial
ordinances thereunder govern the issuance of shares by companies and the
acquisition and holding of shares by non-residents of Japan and foreign
investors, as defined by the Foreign Exchange Law.

Non-residents of Japan are:



| | (1) |  | individuals who do not reside in Japan; and                   
| | --- |  | --------------------------------------------------------------
|
| | (2) |  | corporations whose principal offices are not located in Japan.

Generally, branches and offices of non-resident corporations which are
located in Japan are regarded as residents of Japan while branches and offices
of Japanese corporations located outside Japan are regarded as non-residents of
Japan.

Foreign investors are:



| | (1) |  | individual not resident in Japan;                                                                                   
| | --- |  | --------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | corporations organized under the laws of foreign countries or whose
principal offices are located outside Japan; and

75



---



##### Table of Contents





| | (3) |  | corporations organized in Japan not less than 50% of the issued
shares of which are directly or indirectly held by (1) and/or (2), or a
majority of the officers (or officers having the power of
representation) of which are non-resident individuals.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dividends and Proceeds of Sale

Under the Foreign Exchange Law, dividends paid on, and the proceeds of
sales in Japan of, shares held by non-residents of Japan may, in general, be
converted into any foreign currency and repatriated abroad.

Acquisition of Shares

Under the Foreign Exchange Law, in general, a non-resident who acquires
shares from a resident of Japan is not subject to any prior filing requirement,
although the Minister of Finance of Japan may require a prior approval for any
such acquisition in certain limited circumstances.

If a foreign investor acquires shares of a listed company and, together
with parties who have a special relationship with that foreign investor, holds
10% or more of the issued shares of the company as a result of the acquisition,
the foreign investor must file a report of the acquisition with the Minister of
Finance and any other competent Minister within 15 days from and including the
date of such acquisition. In certain limited circumstances, however, a prior
notification of such acquisition must be filed with the Minister of Finance and
any other competent Minister, who may then modify or prohibit the proposed
acquisition. The acquisition of shares of Millea Holdings by non-residents by
way of a stock split is not subject to any notification or reporting
requirements.

Reporting of Substantial Shareholdings

Under the Securities and Exchange Law of Japan, if any person becomes,
beneficially and solely or jointly, a holder of more than 5% of the total
issued shares of a public company, that shareholder must file a report
concerning the shareholders shareholdings with the relevant local finance
bureau within five business days. If there is any subsequent change of 1% or
more in the above shareholding, the shareholder must file a similar report. For
these purposes, the total number of issued shares and the number of shares held
by the shareholder include shares to be issued on the exercise of warrants to
subscribe for new shares or on the conversion of bonds or debentures with
warrants to subscribe for new shares. The shareholder also must file a copy of
the relevant report with the issuer of the shares and the stock exchanges on
which the shares are listed.

Under the current Insurance Business Law, if a company wishes to acquire a
majority of the total outstanding shares of a Japanese insurance company, or if
a person wishes to set up a company holding a majority of the total outstanding
shares of a Japanese insurance company, that party may be required to obtain
prior approval of the Prime Minister.

Under the Insurance Business Law, a shareholder of an insurance company or
insurance holding company that holds more than 5% of the total voting rights of
the insurance company or insurance holding company is required to file a report
of its holdings with the Prime Minister within five days after the acquisition
of the shares and other reports concerning the changes in the reported matters
(including any increase or decrease of more than 1% in the shareholding ratio).
In addition, a shareholder of an insurance company that holds more than 20% (in
some cases, 15%) of the total voting rights of the insurance company is
required to obtain the approval of the Prime Minister in advance of acquiring
that percentage of shares.

76



---



##### Table of Contents






DESCRIPTION OF COMMON STOCK

The following information relates to shares of our common stock, including
summaries of certain provisions of our articles of incorporation, the
Commercial Code of Japan relating to joint stock corporations (known in
Japanese as kabushiki kaisha) and certain relevant regulations under the
Insurance Business Law.

Shares and Share Capital

Our authorized share capital is 7,000,000 shares of common stock, of which
1,857,048.75 shares were issued as of March 31, 2003. Since recent amendments
to the Commercial Code of Japan have abolished the concept of par value, the
stock issued by us does not have any par value.

We acquired 5,118.83 shares of our own stock for approximately ¥5,038
million in response to requests by holders of fractional shares (see 
Fractional Shares below) during the year ended March 31, 2003. Under the
Commercial Code, we may transfer these shares by resolution of the board of
directors. However, we cannot transfer these shares at a specially favorable
price, as described in  Voting Rights below.

Under the Commercial Code, the transfer of shares is effected by delivery
of share certificates, but, in order to assert shareholders rights against us,
the transferee must have his or her name and address registered on our register
of shareholders. Shareholders are required to file their names, addresses and
seal impressions with The Mitsubishi Trust and Banking Corporation, the
transfer agent for our common stock. Foreign shareholders may file a specimen
signature in lieu of a seal impression. Non-resident shareholders are required
to appoint a standing proxy in Japan or file a mailing address in Japan.
Japanese securities firms and commercial banks customarily offer the service of
standing proxy, and render related services on payment of their standard fee.

The central clearing system of share certificates under the Law Concerning
Central Clearing of Share Certificates and Other Securities in Japan applies to
our common stock. Under this system, shareholders may deposit certificates for
shares with the Japan Securities Depositary Center, Inc., the sole depositary
under the central clearing system, through institutions which have accounts
with the Japan Securities Depositary Center. These institutions are normally
securities companies.

The shares deposited with the Japan Securities Depositary Center will be
registered in the Japan Securities Depositary Centers name in our register of
shareholders. With information provided by the Japan Securities Depositary
Center and by the institutions that have accounts with the Japan Securities
Depositary Center, we prepare a register of beneficial shareholders that lists
the names of those who beneficially own the deposited shares. This register of
beneficial shareholders is updated on pre-established record dates and on
other dates when it is necessary to determine who owns the shares and can thus
exercise rights relating to those shares. Delivery of share certificates is not
required to transfer deposited shares between accounts at an institution or
between accounts at the Japan Securities Depositary Center.

In general, the beneficial shareholders of deposited shares registered in
the register of beneficial shareholders are entitled to the same rights and
benefits with respect to those shares as the holders of shares registered in
the register of shareholders. The registered beneficial shareholders may
exercise the rights attached to the beneficially owned shares, such as voting
and receiving dividends (if any) and convocation notices of shareholders
meetings directly from us. The shares held by a person as a registered
shareholder and those held by the same person as a registered beneficial
shareholder are aggregated for these purposes.

New shares issued with respect to deposited shares, including those issued
upon a stock split, automatically become deposited shares. Beneficial
shareholders may at any time withdraw their shares from deposit and receive
share certificates.

Dividends

Following approval at a general shareholders meeting, dividends are
distributed to shareholders (or pledgees) appearing in the register of
shareholders and to the holders of fractional shares appearing on the register
of fractional shares as of the close of business on March 31 of the relevant
year. Dividends are distributed in cash. Our articles of

77



---



##### Table of Contents



incorporation provide that we are relieved of the obligation to pay any
dividends that are unclaimed for five years after the payment date.

The Commercial Code provides that, until the aggregate amount of our legal
reserve and additional paid-in capital is at least one-quarter of our stated
capital, we may not make any distribution of profits by way of annual cash
dividends or interim dividends unless we set aside in our legal reserve an
amount equal to at least one-tenth of any amount that we pay out as an
appropriation of retained earnings, including any payment by way of annual
dividends and bonuses to directors and corporate auditors, or equal to
one-tenth of any interim dividend. The Commercial Code permits us to distribute
profits by way of dividends out of the excess of our net assets, on a
non-consolidated basis, over the aggregate of:



| | (1) |  | our stated capital;                                                                                                                           
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | our additional paid-in capital;                                                                                                               
|
| | (3) |  | our accumulated legal reserve;                                                                                                                
|
| | (4) |  | the legal reserve to be set aside in respect of the dividends
concerned and proposed payment by way of appropriation of retained
earnings; and
|
| | (5) |  | other matters specified in the Implementation Ordinance of the
Commercial Code.                                                               

In the case of interim dividends, net assets are calculated based on the
non-consolidated balance sheet as of the last closing of our accounts.
Pursuant to an amendment to the Commercial Code which became effective on
September 25, 2003, net assets are adjusted to reflect: (i) any subsequent
payment by way of appropriation of retained earnings and the related transfer
to legal reserve; (ii) any subsequent transfer of retained earnings to stated
capital; (iii) any subsequent reduction of stated capital or legal reserve;
(iv) the total purchase price of shares authorized pursuant to a resolution of
a general meeting of shareholders; (v) the total purchase price of shares
authorized pursuant to the articles of incorporation; and (vi) other matters
specified in the Implementation Ordinance of the Commercial Code. Interim
dividends may not be paid where there is a risk that at the end of the
financial year net assets might be less than the aggregate of the amounts
referred to in (1) through (5) above. For more information on share
repurchases, see Description of Common Stock  Repurchase by Millea Holdings
of Shares.

We may, by resolution of the board of directors, pay interim dividends in
cash to the shareholders (or pledgees) on the register of shareholders and to
the holders of fractional shares appearing on the register of fractional shares
as of the close of business on September 30 of each year.

The amounts of capital and other items discussed in this section are in
accordance with Japanese GAAP.

The Commercial Code does not provide for stock dividends. However, the
Commercial Code does provide that our shareholders may, by resolution, transfer
any amount which is distributable as dividends to stated capital, and the board
of directors may, by resolution, issue additional shares by way of a stock
split; thus, the same effect as a stock dividend can be achieved.

In Japan, the ex-dividend date and the record date used to determine the
shareholders who will receive a dividend, if paid, are determined before the
date the company decides the amount of the dividends, if any, to be paid.

For information as to Japanese taxes on dividends, see Taxation.

Stock Splits (Free Share Distributions)

Under the Commercial Code, our board of directors is permitted to declare
a stock split without needing to ensure there is a minimum net asset value per
share (based on our most recent non-consolidated balance sheet) following the
stock split. In addition, in connection with any stock split, our board of
directors may increase our authorized number of shares to account for the stock
split, and amend our articles of incorporation accordingly, without the need
for shareholder approval. For example, if each share becomes three shares by
way of a stock split,

78



---



##### Table of Contents



we can increase our authorized number of shares by up to three times the
existing number and do not need to obtain shareholder approval for that
increase.

Fractional Shares

The holder of any fractional share constituting one one-hundredth of one
share of our common stock or any integral multiple thereof is registered in the
register of fractional shares. Any fractional interest representing less than
one one-hundredth of one share will not be registered, but entitles the holder
to receive cash in lieu of that fractional interest. Certificates are not be
issued for fractional shares and fractional shares do not carry voting rights.
Our articles of incorporation provide that any registered holder of fractional
shares has the right to receive dividends and interim dividends.

A holder of fractional shares may at any time require us to purchase its
shares. These shares will be purchased at (a) the closing price of the shares
reported by the Tokyo Stock Exchange on the day when the request to purchase is
made or (b) if no sale takes place on the Tokyo Stock Exchange on that day,
then the price at which sale of shares is effected on the Tokyo Stock Exchange
immediately thereafter. In such case, we will request payment of an amount
equal to the brokerage commission applicable to the shares purchased pursuant
to our share handling regulations. However, because holders of ADSs
representing less than one share are not able to withdraw the underlying shares
from deposit, these holders will not be able to exercise this right as a
practical matter.

Our articles of incorporation also provide that a holder of fractional
shares may require us to sell any fractional shares we may have to the holder
so that the holder can raise its fractional ownership to a whole share. These
shares will be sold at (a) the closing price of the shares reported by the
Tokyo Stock Exchange on the day when the request to sell becomes effective or
(b) if no sale has taken place on the Tokyo Stock Exchange on that day, then
the price at which sale of shares is effected on the Tokyo Stock Exchange
immediately thereafter. In connection with a sale, we will request payment of
an amount equal to the brokerage commission applicable to the shares sold
pursuant to our share handling regulations. However, because holders of ADSs
representing less than one share are not able to withdraw the underlying shares
from deposit, these holders will not be able to exercise this right as a
practical matter.

Voting Rights

A shareholder is entitled to one vote per share, subject to the
limitations on voting rights set forth in this section and in  Fractional
Shares. Except as otherwise provided by law or by our articles of
incorporation, a resolution can be adopted at a shareholders meeting by the
holders of a majority of the shares having voting rights present at the
meeting. Shareholders may exercise their voting rights by voting card or proxy,
provided that the person acting as proxy is a shareholder of us with voting
rights and is present at the meeting. The Commercial Code and our articles of
incorporation provide that the quorum for election of directors and corporate
auditors shall not be less than one-third of the total number of outstanding
shares having voting rights. Our articles of incorporation provide that our
shareholders are not entitled to cumulative voting in the election of
directors. Under the Commercial Code, cumulative voting is not applicable to
the election of corporate auditors.

A corporate shareholder, more than one-quarter of whose shares with voting
rights will be directly or indirectly owned by us, may not exercise its voting
rights in respect of our shares. We have no voting rights with respect to the
shares of our common stock we own.

The Commercial Code and our articles of incorporation provide that a
quorum of not less than one-third of outstanding shares with voting rights must
be present at a shareholders meeting to approve any material corporate action
such as:



| |  |  | The reduction of our stated capital;                                                                    
| | - |  | --------------------------------------------------------------------------------------------------------
|
| |  |  | The removal of a director or corporate auditor;                                                         
|
| |  |  | The establishment of a 100% parent-subsidiary relationship by way
of a share exchange or share transfer;
|
| |  |  | Our dissolution, merger or corporate split;                                                             

79



---



##### Table of Contents





| |  |  | The transfer of the whole or an important part of the business;                                                                                                                                                                                                                                            
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The taking over of the whole business of any other company;                                                                                                                                                                                                                                                
|
| |  |  | The issuance of new shares at a specially favorable price (or any
issuance of warrants to subscribe for new shares with specially
favorable conditions, or bonds or debentures with warrants to
subscribe for new shares with specially favorable conditions) to
persons other than shareholders; and
|
| |  |  | The discharge of certain directors or corporate auditors
liabilities that are owed to us.                                                                                                                                                                                                                

The quorum necessary to adopt any of the resolutions listed above at a
shareholders meeting was reduced from a majority to not less than one-third of
outstanding shares with voting rights by the amendment of our articles of
incorporation in 2003.

At least two-thirds of the shares having voting rights represented at the
meeting must be voted to approve these actions. In addition, the Insurance
Business Law requires the approval of the Financial Services Agency for certain
transfers of our business, or certain takeovers of whole or important parts of
other businesses, or for certain corporate splits.

General Meetings of Shareholders

The ordinary general meeting of our shareholders is held in Tokyo, Japan
within three months after the close of each fiscal year beginning with the
fiscal year ending March 31, 2003. Notice of a shareholders meeting stating
the place, time and purpose of the meeting and a summary of the matters to be
acted upon must be sent to each shareholder having voting rights (or, in the
case of a non-resident shareholder, to his mailing address or proxy in Japan)
at least two weeks prior to the date set for the meeting. In addition, we may
hold an extraordinary general meeting of shareholders whenever necessary by
giving at least two weeks advance notice to shareholders, as well as giving
prior public notice concerning the record date for establishing which
shareholders are entitled to exercise rights at the meeting.

Under the Commercial Code, any shareholder holding at least 300 shares or
1% of the total number of shares having voting rights for six months or more
may propose a matter to be considered at a general meeting of shareholders by
submitting a written request to a representative director at least eight weeks
prior to the date set for such meeting. Accordingly, holders of at least 300 of
our shares or 1% of the total number of our shares having voting rights will be
able to propose a matter for consideration at a general meeting.

Liquidation Rights

In the event of our liquidation, the assets remaining after payment of all
taxes, liquidation expenses and debts will be distributed among the
shareholders in proportion to the respective number of shares which they hold.

Issue of Additional Shares of Common Stock and Pre-Emptive Rights

Holders of our shares have no pre-emptive rights. Authorized but unissued
shares may be issued at any time and upon any terms, subject to the limitations
as to the issuance of new shares at a specially favorable price mentioned
above in  Voting Rights. However, if the board of directors resolves to give
shareholders subscription rights to new shares, the subscription rights must be
given on uniform terms to all shareholders who own shares on a designated
record date. At least two weeks prior to this record date, public notice of the
record date must be made. Each of the shareholders to whom subscription rights
are given must also be given at least two weeks prior notice of the date on
which the subscription rights expire. Under the Commercial Code, we may issue
warrants to subscribe for new shares (hereafter referred to as subscription
warrants) as warrants on their own or attached to bonds or debentures to any
persons by resolution of the board of directors. Holders of our shares of
common stock have no pre-emptive rights under our articles of incorporation
when we issue warrants to subscribe for new shares. However, the board of
directors may resolve to give shareholders subscription rights in connection
with a particular issue of warrants to subscribe for new shares. In the case of
an issue of warrants to subscribe for new shares, public or individual notice
must be given to each of the shareholders at least two weeks prior to the date
of payment (or issue of the warrants if warrants are issued without
consideration).

80



---



##### Table of Contents



Rights to subscribe for new shares, subscription warrants and bonds or
debentures with subscription warrants to shareholders may be transferable or
non-transferable by resolution of the board of directors. Whether we will make
rights to subscribe for new shares, subscription warrants or bonds or
debentures with subscription warrants generally transferable in any future
rights offering will depend upon the circumstances at the time of the offering.

Actions Necessary to Change the Rights of Shareholders

The Commercial Code of Japan prescribes most of the basic rights of a
shareholder of a Japanese company, including the right to vote and the right to
receive dividends upon a resolution of a general meeting of shareholders. These
rights cannot be changed by the articles of incorporation. Those rights which
may be changed by the articles of incorporation may only be changed by an
amendment to the articles of incorporation. Under the Commercial Code of Japan
and our articles of incorporation, amendments to a companys articles of
incorporation require, in principle, the affirmative vote of more than
two-thirds of the voting rights present at a shareholders meeting of which
shareholders holding not less than one-third of the outstanding shares having
voting rights are present.

Dilution

It is possible that, in the future, market conditions and other factors
might make rights to subscribe for new shares, subscription warrants or bonds
or debentures with subscription warrants to shareholders desirable at a price
substantially below their then current market price. In this case, shareholders
who do not exercise and are unable otherwise to realize the full value of their
subscription rights will suffer dilution of their equity interest in us.

Reports to Shareholders

We will furnish to shareholders notices of shareholders meetings, annual
business reports, including financial statements, all of which will be in
Japanese. In addition, we will send an English-language annual report to
Citibank, N.A., the depositary for the ADSs, for distribution to ADS holders.

Record Date

Under our articles of incorporation, the close of business on March 31 is
the record date for the determination of shareholders having rights at annual
shareholders meetings and shareholders eligible to receive our year-end
dividend, if paid. The close of business on September 30 is the record date for
our interim dividends, if paid. In addition, after giving at least two weeks
prior public notice, our board of directors may, by resolution at any time, set
a record date in order to determine shareholders who are entitled to certain
rights pertaining to the common stock.

Repurchase by Millea Holdings of Shares

Under the Commercial Code, we may acquire our own shares for any purpose,
subject to the authorization of shareholders at an ordinary general
shareholders meeting. An acquisition by us of our own shares is subject to the
restriction that the aggregate amount of the purchase price must not exceed the
amount of retained earnings available for annual dividend payments, less the
sum of any amount paid or to be paid by way of appropriation of retained
earnings and any transfer of retained earnings to stated capital.

A resolution approved at our ordinary general meeting of shareholders held
on June 27, 2003 authorizes us to acquire up to 120,000 shares (representing
approximately 6.5% of shares issued and outstanding) with an aggregate purchase
price of ¥100 billion prior to the closing of our ordinary general meeting of
shareholders to be held in 2004.

In the case of shares listed on a Japanese stock exchange or traded in the
over-the-counter market, the acquisition must be made through the market or by
way of a tender offer by the close of the following ordinary general
shareholders meeting, unless acquisition of the shares from a specified person
is authorized by a special shareholders resolution.

81



---



##### Table of Contents



Under the recent amendments to the Commercial Code, a company will be able
to acquire its own shares by a resolution of its board of directors if its
articles of incorporation so provide and only to the extent authorized in its
articles of incorporation. To date, our articles of incorporation do not have a
provision to such effect.

None of our subsidiaries can acquire our common stock, except as permitted
by the Commercial Code. Any shares of our common stock that are acquired by our
subsidiaries under one of these permitted exceptions, including shares that
were acquired by Tokio Marine and Nichido Fire in connection with the
transactions relating to our formation, must be sold or otherwise transferred
to a third party within a reasonable period thereafter.

Liability to Further Calls or Assessments

All shares of our common stock are fully paid and non-assessable.

Limitations on Owning or Voting Shares by Foreign Shareholders

No provision of applicable law or of our articles of incorporation imposes
any foreign ownership limitations with respect to our shares or any limitations
on the rights of non-Japanese persons or entities to vote our shares.

Transfer Agent

The Mitsubishi Trust and Banking Corporation is the transfer agent for our
common stock. As the transfer agent, it keeps the registers of our shareholders
and our fractional shareholders at its office at 4-5, Marunouchi 1-chome,
Chiyoda-ku, Tokyo 100-8212, Japan and makes transfers relating to record
ownership upon presentation of the certificates representing the transferred
shares.

82



---



##### Table of Contents






TAXATION

Japanese Taxation

The discussion of Japanese taxation set forth below is intended only as a
summary and does not purport to be a complete analysis or discussion of all the
potential Japanese tax consequences that may be relevant to the ownership of
our shares or American depositary shares by a person who is not a resident of
Japan.

A non-resident of Japan or a non-Japanese corporation is generally subject
to a Japanese withholding tax on cash dividends. Stock splits, in general, are
not subject to Japanese withholding tax since they are characterized merely as
an increase in the number of shares (as opposed to an increase in the value of
the shares) from a Japanese tax perspectives. Due to the 2001 Japanese tax
legislation effective from April 1, 2001, a conversion of retained earnings or
legal earned reserve into stated capital is not deemed a dividend payment to
shareholders for Japanese tax purposes and therefore such a conversion does not
trigger Japanese withholding taxation.

Pursuant to the tax treaty between the United States and Japan (the
Treaty) as currently in force, a Japanese withholding tax at the rate of 15%
is imposed, in general, on dividend payments made by a Japanese corporation to
a U.S. resident or corporation, unless the recipient of the dividend has a
permanent establishment in Japan and the shares with respect to which such
dividends are paid are effectively connected with such permanent
establishment. (Note that a renewal of the Treaty is now under negotiation
between the US and Japanese governments). For Japanese tax purposes,
generally, the treaty rate supersedes the tax rate under domestic tax law.
However, due to the so-called preservation doctrine under Article 4(2) of the
Treaty, and/or due to Article 3-2 of the Special Measurement Law for the Income
Tax Law, Corporation Tax Law and Local Taxes Law with respect to the
Implementation of Tax Treaties, if the tax rate under domestic tax law is lower
than the treaty rate, as it currently is for the period from April 1, 2003 to
December 31, 2003, then the domestic tax rate applies.

The amount of such withholding tax imposed on dividends payable to the
holders of our shares or ADSs who reside in a country other than the United
States is dependent upon the provisions of such treaties or agreements as may
exist between such country and Japan. In the absence of any treaty or
agreement, the rate of Japanese withholding tax imposed on dividends paid by
Japanese companies is currently 10% which is applicable for the period from
April 1, 2003 to December 31, 2003. (Note that different favorable dividend
withholding tax rates will be available for the period from January 1, 2004 to
March 31, 2008).

Gains derived from the sale outside Japan of our shares or American
depositary shares by a non-resident of Japan or a non-Japanese corporation, or
from the sale of our shares within Japan by a non-resident of Japan as an
occasional transaction or by a non-Japanese corporation not having a permanent
establishment in Japan, are in general not subject to Japanese income or
corporation taxes. Japanese inheritance and gift taxes at progressive rates may
be payable by an individual who has acquired our shares or American depositary
shares as a distributee, legatee or donee.

United States Taxation

The following are the material United States federal income tax
consequences of the ownership and disposition of our common stock or ADSs by
U.S. holders. It applies to you only if you hold our common stock or ADSs as
capital assets. This section does not apply to you if you are a member of a
special class of holders subject to special rules, including:



| |  |  | Dealers or traders in securities or currencies;                                                                                                        
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Financial institutions;                                                                                                                                
|
| |  |  | Insurance companies;                                                                                                                                   
|
| |  |  | Tax-exempt entities;                                                                                                                                   
|
| |  |  | U.S. holders that hold our common stock or ADSs, as part of a
straddle or conversion transaction or other arrangement involving more
than one position;

83



---



##### Table of Contents





| |  |  | U.S. holders that own, or are deemed for United States federal
income tax purposes to own, ten percent or more of the total combined
voting power of all our classes of voting stock;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Persons subject to United States federal alternative minimum tax;                                                                                                                    
|
| |  |  | Partnerships or other entities classified as partnerships for United States federal income tax purposes;                                                                             
|
| |  |  | U.S. holders that have a principal place of business or tax home outside the United States; or                                                                                     
|
| |  |  | U.S. holders whose functional currency is not the United States dollar.                                                                                                            

For purposes of this discussion, you are a U.S. holder if you are a
beneficial owner of our common stock or ADSs, that, for United States federal
income tax purposes, is:



| |  |  | A citizen or resident of the United States;                                                                                                                    
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | A corporation, or other entity taxable as a corporation, organized
under the laws of the United States or of any political subdivision of
the United States; or
|
| |  |  | An estate or trust the income of which is includible in gross
income for United States federal income tax purposes regardless of its
source.                   

This summary does not address all of the United States federal income tax
consequences that may be relevant to you in light of your particular
circumstances. Please consult your own tax advisors regarding the application
of the United States federal income tax laws to you as a result of your
ownership of our common stock or ADSs, as well as the consequences arising
under state or local tax laws or the laws of Japan or any other non-United
States taxing jurisdiction. This summary is based on the United States Internal
Revenue Code of 1986, as amended, which we refer to as the Code, Treasury
Regulations, administrative announcements and judicial decisions currently in
effect, changes to any of which may affect the tax consequences described
herein, possibly with retroactive effect. This discussion is also based in part
on representations by the depositary bank and assumes that the obligations
under the deposit agreement relating to our ADSs and any related agreements
will be performed in accordance with their respective terms. For United States
federal income tax purposes, a holder of our ADSs will be treated as the holder
of the shares of our common stock represented by those ADSs. The U.S. Treasury
has expressed concerns that parties to whom ADSs are pre-released may be taking
actions that are inconsistent with the claiming of foreign tax credits by U.S.
holders of ADSs. Accordingly, the analysis of the creditability of Japanese
taxes described below and the availability of the reduced tax rate on dividends
for certain noncorporate holders described below could be affected by future
actions that may be taken by the U.S. Treasury.

Taxation of Dividends

Subject to the discussion under  Passive Foreign Investment Company
Considerations below, dividends you receive on our common stock or ADSs,
including the amount of any Japanese taxes withheld, other than certain pro
rata distributions of our common stock or rights to acquire our common stock to
all shareholders (including ADS holders), will be includible in the income of a
U.S. holder as ordinary dividend income to the extent of our current or
accumulated earnings and profits (as determined for United States federal
income tax purposes). You will not be entitled to a dividends-received
deduction for dividends you receive from us. The amount you will be required to
include in income for any dividend paid in Japanese yen will be equal to the
U.S. dollar value of the Japanese yen received, calculated by reference to the
exchange rate in effect on the date of receipt by the depositary bank in the
case of U.S. holders of our ADSs, or by the shareholder in the case of U.S.
holders of our common stock, regardless of whether the payment is in fact
converted into U.S. dollars at that time. If the Japanese yen received in the
distribution are not converted into U.S. dollars on the date of receipt, you
will have a basis in the Japanese yen equal to their U.S. dollar value on the
date of receipt. Any gain or loss on a subsequent conversion or other
disposition of the Japanese yen will be generally treated as U.S. source
ordinary income or loss.

Subject to applicable limitations and restrictions, Japanese taxes
withheld from dividend distributions by us at the rate provided in the
Convention Between the United States of America and Japan for the Avoidance of
Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on
Income will be eligible for credit against

84



---



##### Table of Contents



your United States federal income tax liability. The limitation on foreign
taxes eligible for credit is calculated separately with respect to specific
classes of income. For this purpose, dividends distributed by us will
constitute passive income or, in the case of certain U.S. holders, financial
services income.

Under recently enacted legislation, dividends received by noncorporate
U.S. holders of our shares or ADSs may be subject to U.S. federal income tax at
lower rates than other types of ordinary income if certain conditions are met.
You should consult your own tax advisor regarding the application of this new
legislation to your particular circumstances.

Taxation Upon Sale or Other Disposition of Our Common Stock or ADSs

Subject to the discussion under  Passive Foreign Investment Company
Considerations below, gain or loss you realize on the sale, exchange or other
disposition of our common stock or ADSs will be subject to United States
federal income tax as capital gain or loss in an amount equal to the difference
between the amount realized on the disposition and your adjusted tax basis in
the our common stock or ADSs. The gain or loss will generally be U.S. source
income or loss. You should consult your own tax advisor about the treatment of
capital gains, which may be taxed at lower rates than certain types of ordinary
income for non-corporate taxpayers, and capital losses, the deductibility of
which may be limited.

Deposits and withdrawals of our common stock by a U.S. holder in exchange
for our ADSs will not result in realization of gain or loss for United States
federal income tax purposes.

Passive Foreign Investment Company Considerations

Special adverse United States federal income tax rules apply if a U.S.
holder owns stock or ADSs of a company in any taxable year during which the
company is treated as a passive foreign investment company, or PFIC.

Based upon certain estimates of our management and the nature of the
business activities conducted by the Millea Holdings corporate group, we
believe that we are not a PFIC for the 2003 taxable year and we believe that we
will not be a PFIC in future taxable years. However, since the determination of
whether we are a PFIC is based on the composition of our income and assets and
the value of our assets from time to time, there can be no assurance that we
will not be considered a PFIC for any taxable year.

In general, if we are treated as a PFIC for any taxable year during which
a U.S. holder owned our common stock or ADSs, gain recognized by the U.S.
holder on a sale or other disposition of the our common stock or ADSs would be
allocated ratably over the U.S. holders holding period therefor. The amounts
allocated to the taxable year of the sale or other disposition and to any
taxable year before the company became a PFIC would be taxed as ordinary
income. The amount allocated to each other taxable year would be subject to tax
at the highest rate in effect for individuals or corporations, as appropriate,
and an interest charge would be imposed on the amount allocated to such taxable
year. Further, any distribution in respect of our common stock or ADSs
generally in excess of 125% of the average of the annual distributions on such
securities received by the U.S. holder during the preceding three years or the
U.S. holders holding period, whichever is shorter, would be subject to
taxation as described above. Under certain circumstances, a mark to market
election may be available to a U.S. holder, which generally could result in
different United States federal income tax consequences to the holder.

Information Reporting and Backup Withholding

Dividends paid on our common stock or ADSs to you, or proceeds from your
sale, exchange or other disposition of our common stock or ADSs, may be subject
to information reporting requirements. Those dividends or proceeds from sale or
disposition may also be subject to backup withholding unless you:



| |  |  | Are a corporation or come within certain other exempt categories,
and, when required, demonstrate this fact; or                                                                                                                                                                       
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Provide a correct taxpayer identification number on a properly
completed United States Internal Revenue Service Form W-9 or substitute
form, certify that you are not subject to backup withholding and
otherwise comply with applicable requirements of the backup withholding
rules.

85



---



##### Table of Contents



Any amount withheld under these rules will be creditable against your
United States federal income tax liability if you provide the required
information to the United States Internal Revenue Service. If you are required
to and do not provide a correct taxpayer identification number, you may be
subject to penalties imposed by the United States Internal Revenue Service.




CONTROLS AND PROCEDURES

As of March 31, 2003, we, under the supervision and with the participation
of our management, including our principal executive officer and principal
financial officer, performed an evaluation of the effectiveness of our
disclosure controls and procedures. Based on this evaluation, our principal
executive officer and principal financial officer concluded that our disclosure
controls and procedures are effective for gathering, analyzing and disclosing
the information we are required to disclose in the reports we file under the
Securities Exchange Act of 1934, within the time periods specified in the SECs
rules and forms. Our management necessarily applied its judgment in assessing
the costs and benefits of those controls and procedures, which by their nature
can provide only reasonable assurance regarding managements control
objectives.

There have been no changes in our internal controls over financial
reporting that occurred during the period covered by this annual report that
have materially affected, or are reasonably likely to materially affect, our
internal controls over financial reporting.

86



---



##### Table of Contents






WHERE YOU CAN FIND MORE INFORMATION

We are subject to the information requirements of the Securities and
Exchange Act of 1934. In accordance with those requirements, we file with the
SEC annual reports on Form 20-F within six months of our fiscal year end, and
provide to the SEC other material information on Form 6-K. You may read and
copy any document that we file with the SEC at the SECs public reference room
at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-732-0330 for further information on the operation of its public reference
room. You may also view any document that we file with the SEC in electronic
format by accessing the SECs home page (http://www.sec.gov).

Prior to our formation in April 2002, Tokio Marine and Nichido Fire filed
a registration statement on Form F-4 with the SEC under the Securities Act of
1933 (registration number 333-14152 with respect to Tokio Marine and
registration number 333-14152-01 with respect to Nichido Fire) covering shares
of our common stock to be issued to Tokio Marine and Nichido Fire shareholders
in connection with our formation. Tokio Marine and Nichido Fire also filed a
related registration statement on Form F-6 with the SEC to register the
American depositary shares representing our shares (registration number
333-14154 with respect to Tokio Marine and registration number 333-14154-01
with respect to Nichido Fire). You should refer to these registration
statements and their exhibits and schedules, which are also available at the
SECs public reference room identified above, if you would like to find out
more about our formation or our American depositary shares.

87



---



##### Table of Contents






INDEX TO FINANCIAL STATEMENTS

|                      |                                    |                                                                                                   |  |      |      | 
|--------------------- | ---------------------------------- | ------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                      |                                    |                                                                                                   |  | Page
|                      |                                    |                                                                                                   |  |     
|Millea Holdings, Inc. |                                    |                                                                                                   |  |     
|                      | Consolidated Financial Statements: |                                                                                                   |  |      |     
|                      |                                    | Independent Auditors Report                                                                      |  |      | F-2  | 
|                      |                                    | Consolidated Balance Sheets as of March 31, 2003 and 2002                                         |  |      | F-3  | 
|                      |                                    | Consolidated Statements of Income for the Years Ended March 31, 2003, 2002 and 2001               |  |      | F-5  | 
|                      |                                    | Consolidated Statements of Stockholders Equity for the Years Ended March 31,
2003, 2002 and 2001 |  |      | F-6  | 
|                      |                                    | Consolidated Statements of Cash Flows for the Years Ended March 31, 2003, 2002 and
2001           |  |      | F-7  | 
|                      |                                    | Consolidated Statements of Comprehensive Income for the Years Ended March 31,
2003, 2002 and 2001 |  |      | F-9  | 
|                      |                                    | Notes to Consolidated Financial Statements                                                        |  |      | F-10 | 

INDEX TO SCHEDULES

|         |  |                                                                                                  |      |     
|-------- |  | ------------------------------------------------------------------------------------------------ | ---- | ----
|Schedule |  |                                                                                                  |      |     
|Number   |  |                                                                                                  | Page
|         |  |                                                                                                  |     
|I        |  | Summary of Investments  Other than Investments in Related
Parties as of March 31, 2003 and 2002 |      | F-42
|III      |  | Supplementary Insurance Information for the years ended
March 31, 2003, 2002 and 2001            |      | F-46
|IV       |  | Reinsurance for the years ended March 31, 2003, 2002 and 2001                                    |      | F-47
|V        |  | Valuation and Qualifying Accounts for the years ended March
31, 2003, 2002 and 2001              |      | F-48

F-1



---



##### Table of Contents



Independent Auditors Report

The Board of Directors and Stockholders
Millea Holdings, Inc.:

We have audited the accompanying consolidated financial statements of
Millea Holdings, Inc. (a successor United States Securities and Exchange
Commission registrant of The Tokio Marine and Fire Insurance Company, Limited)
and subsidiaries as listed in the accompanying index. In connection with our
audits, we also have audited the financial statement schedules listed in the
accompanying index. These consolidated financial statements and financial
statement schedules are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Millea
Holdings, Inc. and subsidiaries as of March 31, 2003 and 2002, and the results
of their operations and their cash flows for each of the years in the
three-year period ended March 31, 2003, in conformity with accounting
principles generally accepted in the United States of America.

Also in our opinion, the related financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly, in all material respects, the information set forth
therein.

As discussed in note 1(g) of the notes to the consolidated financial
statements, the Company changed its method of accounting for derivative
instruments and hedging activities in the year ended March 31, 2002. As
discussed in note 2 of the notes to the consolidated financial statements, the
accompanying consolidated financial statements for each of the years in the
two-year period ended March 31, 2002 have been restated.

/s/ KPMG
Tokyo, Japan
September 4, 2003

F-2



---



##### Table of Contents



MILLEA HOLDINGS, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets

March 31, 2003 and 2002

|                                                                         |                                |                                                                             |                             |         |                   |            |         |         |            |           | 
|------------------------------------------------------------------------ | ------------------------------ | --------------------------------------------------------------------------- | --------------------------- | ------- | ----------------- | ---------- | ------- | ------- | ---------- | --------- | 
|                                                                         |                                |                                                                             |                             |         | (Yen in millions)
|                                                                         |                                |                                                                             |                             |         |                  
|Assets                                                                   |                                | 2003                                                                        |                             | 2002   
|                                                                         |                                |                                                                             |                             |        
|                                                                         |                                |                                                                             |                             |         |                   |            |         |         | (Restated)
|                                                                         |                                |                                                                             |                             |         |                   |            |         |         | (note 2)  
|Investments  other than investments in related parties (notes 2 and 4): |                                |                                                                             |                             |         |                   |            |         |        
|                                                                         | Securities held to maturity:   |                                                                             |                             |         |                   |            |         |         |           
|                                                                         |                                | Fixed maturities, at amortized cost (fair value ¥1,028,732 million in 2003; |                             |         |                   |            |         |         |            |          
|                                                                         |                                |                                                                             | ¥476,405 million in 2002)   |         | ¥                 | 883,336    |         |         |            | 470,188   | 
|                                                                         | Securities available for sale: |                                                                             |                             |         |                   |            |         |         |           
|                                                                         |                                | Fixed maturities, at fair value (amortized cost ¥3,225,560
million in 2003; |                             |         |                   |            |         |         |            |          
|                                                                         |                                |                                                                             | ¥1,926,920 million in 2002) |         |                   | 3,421,624  |         |         |            | 2,002,069 | 
|                                                                         |                                | Equity securities, at fair value (cost ¥1,842,812 million in 2003;          |                             |         |                   |            |         |         |            |          
|                                                                         |                                |                                                                             | ¥1,366,562 million in 2002) |         |                   | 2,534,221  |         |         |            | 2,693,591 | 
|                                                                         | Trading securities:            |                                                                             |                             |         |                   |            |         |         |           
|                                                                         |                                | Fixed maturities, at fair value (cost ¥26,076 million in 2003)              |                             |         | 25,936            |            |         |         |           |          
|                                                                         | Mortgage loans on real estate  |                                                                             |                             | 148,655 |                   |            |         | 144,323 |           
|                                                                         | Investment real estate         |                                                                             |                             | 82,886  |                   |            |         | 96,967  |           
|                                                                         | Policy loans                   |                                                                             |                             | 29,171  |                   |            |         | 20,615  |           
|                                                                         | Other long-term investments    |                                                                             |                             | 559,004 |                   |            |         | 535,666 |           
|                                                                         | Short-term investments         |                                                                             |                             | 660,370 |                   |            |         | 665,406 |           
|                                                                         |                                |                                                                             |                             |         |                   |            |         |        
|                                                                         |                                |                                                                             | Total investments           |         |                   | 8,345,203  |         |         |            | 6,628,825 | 
|                                                                         |                                |                                                                             |                             |         |                   |            |         |        
|Cash and cash equivalents                                                |                                |                                                                             | 339,978                     |         |                   |            | 322,302 |        
|Premiums receivable and agents balances                                 |                                |                                                                             | 176,010                     |         |                   |            | 163,861 |        
|Reinsurance recoverable on losses (note 5)                               |                                |                                                                             | 450,345                     |         |                   |            | 332,687 |        
|Prepaid reinsurance premiums (note 5)                                    |                                |                                                                             | 300,847                     |         |                   |            | 195,814 |        
|Deferred policy acquisition costs (note 6)                               |                                |                                                                             | 422,480                     |         |                   |            | 301,723 |        
|Property and equipment, net of depreciation (note 7)                     |                                |                                                                             | 204,078                     |         |                   |            | 200,422 |        
|Derivative assets (note 15)                                              |                                |                                                                             | 341,279                     |         |                   |            | 207,212 |        
|Other assets                                                             |                                |                                                                             | 313,143                     |         |                   |            | 206,331 |        
|                                                                         |                                |                                                                             |                             |         |                   |            |         |        
|                                                                         |                                |                                                                             | Total assets                |         | ¥                 | 10,893,363 |         |         |            | 8,559,177 | 
|                                                                         |                                |                                                                             |                             |         |                   |            |         |        

Millea Holdings consolidated financial statements for the prior period
represent the financial results of Tokio Marine, as predecessor to Millea
Holdings. Certain reclassifications have been made to the prior years
consolidated financial statements and related notes to conform to the 2003
presentation. See accompanying notes to consolidated financial statements.

F-3



---



##### Table of Contents



MILLEA HOLDINGS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets  (Continued)

March 31, 2003 and 2002

|                                                        |                                                     |                                                                                                                                                         |                                                 |                                              |           |                   |            |           |           |            |           | 
|------------------------------------------------------- | --------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | -------------------------------------------- | --------- | ----------------- | ---------- | --------- | --------- | ---------- | --------- | 
|                                                        |                                                     |                                                                                                                                                         |                                                 |                                              |           | (Yen in millions)
|                                                        |                                                     |                                                                                                                                                         |                                                 |                                              |           |                  
|Liabilities
and Stockholders Equity                    |                                                     | 2003                                                                                                                                                    |                                                 | 2002                                        
|                                                        |                                                     |                                                                                                                                                         |                                                 |                                             
|                                                        |                                                     |                                                                                                                                                         |                                                 |                                              |           |                   |            |           |           | (Restated)
|                                                        |                                                     |                                                                                                                                                         |                                                 |                                              |           |                   |            |           |           | (note 2)  
|Liabilities:                                            |                                                     |                                                                                                                                                         |                                                 |                                              |           |                   |            |          
|                                                        | Policy liabilities and accruals:                    |                                                                                                                                                         |                                                 |                                              |           |                   |            |           |          
|                                                        |                                                     | Losses, claims and loss adjustment expenses (note 8)                                                                                                    |                                                 | ¥                                            | 1,131,884 |                   |            |           | 875,463   |           
|                                                        |                                                     | Unearned premiums (note 5)                                                                                                                              |                                                 |                                              | 1,761,155 |                   |            |           | 1,177,512 |           
|                                                        |                                                     | Future policy benefits and losses                                                                                                                       |                                                 |                                              | 713,418   |                   |            |           | 462,597   |           
|                                                        |                                                     |                                                                                                                                                         |                                                 |                                              |           |                   |            |          
|                                                        |                                                     |                                                                                                                                                         |                                                 | Total policy liabilities and accruals        |           |                   | 3,606,457  |           |           |            | 2,515,572 | 
|                                                        |                                                     |                                                                                                                                                         |                                                 |                                              |           |                   |            |          
|                                                        | Investment deposits by policyholders                |                                                                                                                                                         |                                                 | 2,716,526                                    |           |                   |            | 2,131,834 |          
|                                                        | Income tax liability (note 9)                       |                                                                                                                                                         |                                                 | 437,560                                      |           |                   |            | 575,700   |          
|                                                        | Retirement and severance benefits (note 10)         |                                                                                                                                                         |                                                 | 324,003                                      |           |                   |            | 237,982   |          
|                                                        | Ceded reinsurance balances payable                  |                                                                                                                                                         |                                                 | 113,370                                      |           |                   |            | 87,691    |          
|                                                        | Debt outstanding (note 11)                          |                                                                                                                                                         |                                                 | 177,880                                      |           |                   |            | 110,000   |          
|                                                        | Derivative liabilities (note 15)                    |                                                                                                                                                         |                                                 | 203,011                                      |           |                   |            | 93,692    |          
|                                                        | Cash received under securities lending transactions |                                                                                                                                                         |                                                 | 248,214                                      |           |                   |            | 149,212   |          
|                                                        | Other liabilities (note 11)                         |                                                                                                                                                         |                                                 | 242,026                                      |           |                   |            | 147,800   |          
|                                                        |                                                     |                                                                                                                                                         |                                                 |                                              |           |                   |            |          
|                                                        |                                                     |                                                                                                                                                         |                                                 | Total liabilities                            |           |                   | 8,069,047  |           |           |            | 6,049,483 | 
|                                                        |                                                     |                                                                                                                                                         |                                                 |                                              |           |                   |            |          
|Stockholders equity:                                   |                                                     |                                                                                                                                                         |                                                 |                                              |           |                   |            |          
|                                                        | Common stock:                                       |                                                                                                                                                         |                                                 |                                              |           |                   |            |           |          
|                                                        |                                                     | authorized 7,000,000 shares in 2003 and 2,500,000,000
shares in 2002issued and outstanding 1,857,048.75
shares in 2003 and 1,549,692,481 shares in 2002 |                                                 |                                              | 150,000   |                   |            |           | 101,995   |           
|                                                        | Other stockholders equity:                         |                                                                                                                                                         |                                                 |                                              |           |                   |            |           |          
|                                                        |                                                     | Additional paid-in capital                                                                                                                              |                                                 |                                              | 343,413   |                   |            |           | 52,917    |           
|                                                        |                                                     | Retained earnings (notes 2 and 13)                                                                                                                      |                                                 |                                              | 2,214,947 |                   |            |           | 1,853,312 |           
|                                                        |                                                     | Accumulated other comprehensive income:                                                                                                                 |                                                 |                                              |           |                   |            |           |           |           
|                                                        |                                                     |                                                                                                                                                         | Unrealized appreciation of securities           |                                              |           | 227,198           |            |           |           | 553,640    |          
|                                                        |                                                     |                                                                                                                                                         | Foreign currency translation adjustments        |                                              |           | (15,254           | )          |           |           | (4,549     | )        
|                                                        |                                                     |                                                                                                                                                         | Minimum pension liability adjustments (note 10) |                                              |           | (88,326           | )          |           |           | (47,621    | )        
|                                                        |                                                     |                                                                                                                                                         |                                                 |                                              |           |                   |            |          
|                                                        |                                                     |                                                                                                                                                         |                                                 | Total accumulated other comprehensive income |           |                   | 123,618    |           |           |            | 501,470   | 
|                                                        |                                                     | Treasury stock, at cost, 7,903 shares in 2003                                                                                                           |                                                 |                                              | (7,662    | )                 |            |           |          |           
|                                                        |                                                     |                                                                                                                                                         |                                                 |                                              |           |                   |            |          
|                                                        |                                                     |                                                                                                                                                         |                                                 | Total stockholders equity                   |           |                   | 2,824,316  |           |           |            | 2,509,694 | 
|                                                        |                                                     |                                                                                                                                                         |                                                 |                                              |           |                   |            |          
|Commitments and contingent liabilities (notes 5 and 14) |                                                     |                                                                                                                                                         |                                                 |                                              |           |                   |            |          
|                                                        |                                                     |                                                                                                                                                         |                                                 | Total liabilities and stockholders equity   |           | ¥                 | 10,893,363 |           |           |            | 8,559,177 | 
|                                                        |                                                     |                                                                                                                                                         |                                                 |                                              |           |                   |            |          

Millea Holdings consolidated financial statements for the prior period
represent the financial results of Tokio Marine, as predecessor to Millea
Holdings. Certain reclassifications have been made to the prior years
consolidated financial statements and related notes to conform to the 2003
presentation. See accompanying notes to consolidated financial statements.

F-4



---



##### Table of Contents



MILLEA HOLDINGS, INC.
AND SUBSIDIARIES

Consolidated Statements of Income

Years ended March 31, 2003, 2002 and 2001

|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |            |  |           |           | 
|-------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------- | ------------------------------------------------------------ | ------------------------------------------- | ------------------------------------------------------------------------------------------------- | - | ------------------------- | --------- | ------- | - | ---------- | --------- | ---------- |  | --------- | --------- | 
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   | (Yen in millions,        
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   | except per share amounts)
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                          
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   | 2003                      |           | 2002    |   | 2001      
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |           
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   | (Restated) |           | (Restated)
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   | (note 2)   |           | (note 2)  
|Operating income:                                                                                                                            |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|                                                                                                                                             | Property and casualty:                                  |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |            | 
|                                                                                                                                             |                                                         |                                                              | Net premiums written (note 5)               |                                                                                                   | ¥ | 1,898,557                 |           |         |   | 1,381,483  |           |            |  | 1,323,907 |          
|                                                                                                                                             |                                                         |                                                              | Less increase in unearned premiums          |                                                                                                   |   | 137,589                   |           |         |   | 38,521     |           |            |  | 13,168    |          
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|                                                                                                                                             |                                                         |                                                              |                                             | Premiums earned (note 5)                                                                          |   |                           | 1,760,968 |         |   |            | 1,342,962 |            |  |           | 1,310,739 | 
|                                                                                                                                             | Life premiums (note 5)                                  |                                                              |                                             | 262,486                                                                                           |   |                           |           | 209,208 |   |            |           | 162,905    | 
|                                                                                                                                             | Net investment income (note 4)                          |                                                              |                                             | 108,311                                                                                           |   |                           |           | 104,681 |   |            |           | 127,852    | 
|                                                                                                                                             | Realized gains (losses) on investments (notes 2 and 4)  |                                                              |                                             | (29,875                                                                                           | ) |                           |           | (1,020  | ) |            |           | 56,142     | 
|                                                                                                                                             | Gains (losses) on derivatives                           |                                                              |                                             | 76,564                                                                                            |   |                           |           | (7,319  | ) |            |           |           | 
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|                                                                                                                                             |                                                         |                                                              |                                             | Total operating income                                                                            |   |                           | 2,178,454 |         |   |            | 1,648,512 |            |  |           | 1,657,638 | 
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|Operating costs and expenses:                                                                                                                |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|                                                                                                                                             |                                                         | Losses, claims and loss adjustment expenses (notes 5 and 8): |                                             |                                                                                                   |   |                           |           |         |   |            |           |            |  |          
|                                                                                                                                             |                                                         |                                                              | Losses and claims incurred and provided for |                                                                                                   |   | 953,681                   |           |         |   | 736,765    |           |            |  | 779,688   |          
|                                                                                                                                             |                                                         |                                                              | Related adjustment expenses                 |                                                                                                   |   | 76,412                    |           |         |   | 61,449     |           |            |  | 53,370    |          
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|                                                                                                                                             |                                                         |                                                              |                                             | Total losses, claims and loss adjustment expenses                                                 |   |                           | 1,030,093 |         |   |            | 798,214   |            |  |           | 833,058   | 
|                                                                                                                                             | Policy benefits and losses for life                     |                                                              |                                             | 223,316                                                                                           |   |                           |           | 175,016 |   |            |           | 137,469    | 
|                                                                                                                                             | Income credited to investment deposits by policyholders |                                                              |                                             | 56,011                                                                                            |   |                           |           | 57,507  |   |            |           | 59,509     | 
|                                                                                                                                             | Policy acquisition costs (note 6)                       |                                                              |                                             | 571,058                                                                                           |   |                           |           | 437,012 |   |            |           | 422,551    | 
|                                                                                                                                             | Other operating expenses                                |                                                              |                                             | 96,668                                                                                            |   |                           |           | 72,095  |   |            |           | 72,017     | 
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|                                                                                                                                             |                                                         |                                                              |                                             | Total operating costs and expenses                                                                |   |                           | 1,977,146 |         |   |            | 1,539,844 |            |  |           | 1,524,604 | 
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|                                                                                                                                             |                                                         |                                                              |                                             | Income before income tax expense, extraordinary items
and cumulative effect of accounting changes |   |                           | 201,308   |         |   |            | 108,668   |            |  |           | 133,034   | 
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|Income tax expense (benefit) (note 9):                                                                                                       |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|                                                                                                                                             | Current                                                 |                                                              |                                             | 92,935                                                                                            |   |                           |           | 53,960  |   |            |           | 12,886     | 
|                                                                                                                                             | Deferred                                                |                                                              |                                             | (21,321                                                                                           | ) |                           |           | (20,544 | ) |            |           | 31,473     | 
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|                                                                                                                                             |                                                         |                                                              | 71,614                                      |                                                                                                   |   |                           | 33,416    |         |   |            | 44,359    |           
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|                                                                                                                                             |                                                         |                                                              |                                             | Income before extraordinary items and
cumulative effect of accounting changes                     |   |                           | 129,694   |         |   |            | 75,252    |            |  |           | 88,675    | 
|Extraordinary items (note 3)                                                                                                                 |                                                         |                                                              | 248,323                                     |                                                                                                   |   |                           |          |         |   |            |          |           
|Cumulative effect of accounting changes, net of tax (note 1(g))                                                                              |                                                         |                                                              |                                            |                                                                                                   |   |                           | 85,465    |         |   |            |          |           
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|                                                                                                                                             |                                                         |                                                              |                                             | Net income                                                                                        |   | ¥                         | 378,017   |         |   |            | 160,717   |            |  |           | 88,675    | 
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|Amounts per American Depositary Share, each representing 0.005 shares
of common stock in 2003 and 5 shares of common stock in 2002 and 2001: |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|                                                                                                                                             |                                                         |                                                              |                                             | Basic and diluted:                                                                                |   |                           |           |         |   |            |           |            |  |           |           | 
|                                                                                                                                             |                                                         |                                                              |                                             | Income before extraordinary items and cumulative
effect of accounting changes                     |   | ¥                         | 349       |         |   |            | 244       |            |  |           | 286       | 
|                                                                                                                                             |                                                         |                                                              |                                             | Extraordinary items                                                                               |   |                           | 669       |         |   |            |          |            |  |           |          | 
|                                                                                                                                             |                                                         |                                                              |                                             | Cumulative effect of accounting changes, net of tax                                               |   |                           |          |         |   |            | 275       |            |  |           |          | 
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|                                                                                                                                             |                                                         |                                                              |                                             | Net income                                                                                        |   | ¥                         | 1,018     |         |   |            | 519       |            |  |           | 286       | 
|                                                                                                                                             |                                                         |                                                              |                                             |                                                                                                   |   |                           |           |         |   |            |           |           
|                                                                                                                                             |                                                         |                                                              |                                             | Cash dividends declared                                                                           |   | ¥                         | 50.00     |         |   |            | 42.50     |            |  |           | 42.50     | 
|Weighted average and diluted common shares in thousands                                                                                      |                                                         |                                                              | 1,857                                       |                                                                                                   |   |                           | 1,549,692 |         |   |            | 1,549,692 |           

Millea Holdings consolidated financial statements for the prior periods
represent the financial results of Tokio Marine, as predecessor to Millea
Holdings. Certain reclassifications have been made to the prior years
consolidated financial statements and related notes to conform to the 2003
presentation. See accompanying notes to consolidated financial statements.

F-5



---



##### Table of Contents



MILLEA HOLDINGS, INC.
AND SUBSIDIARIES

Consolidated Statements of Stockholders Equity

Years ended March 31, 2003, 2002 and 2001

|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |           |          |            |           | 
|--------------------------------------- | ------------------------------------------------------------------------------------------------------- | ---------------------------- | ----------------------------------------------------- | -------------------------- | -------- | ----------------- | --------- | --------- | -------- | ------- | --------- | --------- | -------- | ---------- | --------- | 
|                                        |                                                                                                         |                              |                                                       |                            |          | (Yen in millions)
|                                        |                                                                                                         |                              |                                                       |                            |          |                  
|                                        |                                                                                                         |                              |                                                       |                            |          | 2003              |           | 2002      |          | 2001   
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |        
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |           |          | (Restated)
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |           |          | (note 2)  
|Common stock:                           |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        | Balance at beginning of year                                                                            |                              | ¥                                                     | 101,995                    |          |                   |           | 101,995   |          |         |           | 101,995   |         
|                                        | Adjustment in connection with the acquisition                                                           |                              |                                                       | 48,005                     |          |                   |           |          |          |         |           |          |         
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        | Balance at end of year                                                                                  |                              |                                                       | 150,000                    |          |                   |           | 101,995   |          |         |           | 101,995   |         
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|Additional paid-in capital:             |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        | Balance at beginning of year                                                                            |                              |                                                       | 52,917                     |          |                   |           | 52,917    |          |         |           | 52,917    |         
|                                        | Excess of cost of shares transferred over the amount of
common stock in connection with the acquisition |                              |                                                       | 289,780                    |          |                   |           |          |          |         |           |          |         
|                                        | Gains on sales of treasury stock                                                                        |                              |                                                       | 716                        |          |                   |           |          |          |         |           |          |         
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        | Balance at end of year                                                                                  |                              |                                                       | 343,413                    |          |                   |           | 52,917    |          |         |           | 52,917    |         
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|Retained earnings:                      |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        | Balance at beginning of year                                                                            |                              |                                                       | 1,853,312                  |          |                   |           | 1,705,767 |          |         |           | 1,630,265 |         
|                                        | Net income for year                                                                                     |                              |                                                       | 378,017                    |          |                   |           | 160,717   |          |         |           | 88,675    |         
|                                        | Dividends paid (note 13)                                                                                |                              |                                                       | (16,382                    | )        |                   |           | (13,172   | )        |         |           | (13,173   | )       
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        | Balance at end of year                                                                                  |                              |                                                       | 2,214,947                  |          |                   |           | 1,853,312 |          |         |           | 1,705,767 |         
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|Accumulated other comprehensive income: |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        | Unrealized appreciation of securities:                                                                  |                              |                                                       |                            |          |                   |           |           |          |         |           |           |         
|                                        |                                                                                                         | Balance at beginning of year |                                                       |                            | 553,640  |                   |           |           | 765,179  |         |           |           | 926,189  |           
|                                        |                                                                                                         | Change during year           |                                                       |                            | (326,442 | )                 |           |           | (211,539 | )       |           |           | (161,010 | )         
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        |                                                                                                         | Balance at end of year       |                                                       |                            | 227,198  |                   |           |           | 553,640  |         |           |           | 765,179  |           
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        | Foreign currency translation adjustments:                                                               |                              |                                                       |                            |          |                   |           |           |          |         |           |           |         
|                                        |                                                                                                         | Balance at beginning of year |                                                       |                            | (4,549   | )                 |           |           | (21,666  | )       |           |           | (28,311  | )         
|                                        |                                                                                                         | Change during year           |                                                       |                            | (10,705  | )                 |           |           | 17,117   |         |           |           | 6,645    |           
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        |                                                                                                         | Balance at end of year       |                                                       |                            | (15,254  | )                 |           |           | (4,549   | )       |           |           | (21,666  | )         
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        | Minimum pension liability adjustments (note 10):                                                        |                              |                                                       |                            |          |                   |           |           |          |         |           |           |         
|                                        |                                                                                                         | Balance at beginning of year |                                                       |                            | (47,621  | )                 |           |           | (17,648  | )       |           |           | (21,285  | )         
|                                        |                                                                                                         | Change during year           |                                                       |                            | (40,705  | )                 |           |           | (29,973  | )       |           |           | 3,637    |           
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        |                                                                                                         | Balance at end of year       |                                                       |                            | (88,326  | )                 |           |           | (47,621  | )       |           |           | (17,648  | )         
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        |                                                                                                         |                              | Accumulated other comprehensive income
at end of year |                            |          | 123,618           |           |           |          | 501,470 |           |           |          | 725,865    |          
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        | Treasury stock:                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |           |         
|                                        |                                                                                                         | Balance at beginning of year |                                                       |                            |         |                   |           |           |         |         |           |           |         |           
|                                        |                                                                                                         | Change during year           |                                                       |                            | (7,662   | )                 |           |           |         |         |           |           |         |           
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        |                                                                                                         | Balance at end of year       |                                                       |                            | (7,662   | )                 |           |           |         |         |           |           |         |           
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          
|                                        |                                                                                                         |                              |                                                       | Total stockholders equity |          | ¥                 | 2,824,316 |           |          |         | 2,509,694 |           |          |            | 2,586,544 | 
|                                        |                                                                                                         |                              |                                                       |                            |          |                   |           |           |          |         |           |          

Millea Holdings consolidated financial statements for the prior periods
represent the financial results of Tokio Marine, as predecessor to Millea
Holdings. See accompanying notes to consolidated financial statements.

F-6



---



##### Table of Contents



MILLEA HOLDINGS, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended March 31, 2003, 2002 and 2001

|                                      |                                                                                   |                                                         |                                           |         |                   |         |      |         |            |         |            |         |         |         | 
|------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------- | ----------------------------------------- | ------- | ----------------- | ------- | ---- | ------- | ---------- | ------- | ---------- | ------- | ------- | ------- | 
|                                      |                                                                                   |                                                         |                                           |         | (Yen in millions)
|                                      |                                                                                   |                                                         |                                           |         |                  
|                                      |                                                                                   |                                                         |                                           |         | 2003              |         | 2002 |         | 2001      
|                                      |                                                                                   |                                                         |                                           |         |                   |         |      |         |           
|                                      |                                                                                   |                                                         |                                           |         |                   |         |      |         | (Restated) |         | (Restated)
|                                      |                                                                                   |                                                         |                                           |         |                   |         |      |         | (note 2)   |         | (note 2)  
|Cash flows from operating activities: |                                                                                   |                                                         |                                           |         |                   |         |      |         |            |         |            |        
|                                      | Net income                                                                        |                                                         | ¥                                         | 378,017 |                   |         |      | 160,717 |            |         |            | 88,675  |        
|                                      | Adjustments to reconcile net income to net cash provided
by operating activities: |                                                         |                                           |         |                   |         |      |         |            |         |            |         |        
|                                      |                                                                                   | Increase in losses, claims and loss adjustment          |                                           |         |                   |         |      |         |            |         |            |         |         |        
|                                      |                                                                                   |                                                         | expense reserve, net of ceded reinsurance |         |                   | 21,090  |      |         |            | 28,346  |            |         |         | 35,389  | 
|                                      |                                                                                   | Increase in unearned premiums, net of ceded reinsurance |                                           |         | 136,405           |         |      |         | 38,411     |         |            |         | 13,192  |        
|                                      |                                                                                   | Increase in future policy benefits for life             |                                           |         | 169,982           |         |      |         | 139,926    |         |            |         | 113,873 |        
|                                      |                                                                                   | Increase in liability for current income taxes          |                                           |         | 1,126             |         |      |         | 38,494     |         |            |         | 2,532   |        
|                                      |                                                                                   | Deferred income taxes                                   |                                           |         | (22,796           | )       |      |         | 27,489     |         |            |         | 31,473  |        
|                                      |                                                                                   | Provision for retirement and severance benefits         |                                           |         | (6,045            | )       |      |         | 12,893     |         |            |         | 7,150   |        
|                                      |                                                                                   | Increase in deferred policy acquisition costs           |                                           |         | (21,094           | )       |      |         | (24,338    | )       |            |         | (22,488 | )      
|                                      |                                                                                   | Depreciation                                            |                                           |         | 15,076            |         |      |         | 15,530     |         |            |         | 17,159  |        
|                                      |                                                                                   | Extraordinary items  unallocated negative goodwill     |                                           |         | (248,323          | )       |      |         |           |         |            |         |        |        
|                                      |                                                                                   | Cumulative effect of accounting changes                 |                                           |         |                  |         |      |         | (133,498   | )       |            |         |        |        
|                                      |                                                                                   | Changes in derivative assets and liabilities  net      |                                           |         | (24,748           | )       |      |         | 19,978     |         |            |         |        |        
|                                      |                                                                                   | Increase in other liabilities                           |                                           |         | 62,255            |         |      |         | 7,689      |         |            |         | 18,654  |        
|                                      |                                                                                   | Other  net                                             |                                           |         | 5,356             |         |      |         | 15,248     |         |            |         | 7,556   |        
|                                      |                                                                                   |                                                         |                                           |         |                   |         |      |         |            |         |            |        
|                                      |                                                                                   |                                                         | Net cash provided by operating activities |         |                   | 466,301 |      |         |            | 346,885 |            |         |         | 313,165 | 
|                                      |                                                                                   |                                                         |                                           |         |                   |         |      |         |            |         |            |        
|Cash flows from investing activities: |                                                                                   |                                                         |                                           |         |                   |         |      |         |            |         |            |        
|                                      | Proceeds from investments sold or matured:                                        |                                                         |                                           |         |                   |         |      |         |            |         |            |         |        
|                                      |                                                                                   | Fixed maturities sold                                   |                                           | 542,909 |                   |         |      | 335,280 |            |         |            | 296,843 |        
|                                      |                                                                                   | Fixed maturities redeemed                               |                                           | 730,057 |                   |         |      | 436,752 |            |         |            | 261,102 |        
|                                      |                                                                                   | Equity securities                                       |                                           | 421,892 |                   |         |      | 94,796  |            |         |            | 125,080 |        
|                                      |                                                                                   | Mortgage loans on real estate                           |                                           | 37,393  |                   |         |      | 35,953  |            |         |            | 20,093  |        
|                                      |                                                                                   | Investment real estate                                  |                                           | 12,025  |                   |         |      | 16,306  |            |         |            | 8,095   |        
|                                      |                                                                                   | Policy loans                                            |                                           | 25,606  |                   |         |      | 22,403  |            |         |            | 21,991  |        
|                                      |                                                                                   | Other long-term investments                             |                                           | 400,245 |                   |         |      | 211,793 |            |         |            | 307,232 |        

F-7



---



##### Table of Contents



MILLEA HOLDINGS, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash
Flows  (Continued)

Years ended March 31, 2003, 2002 and 2001

|                                                             |                                                                            |                                             |                                                                            |          |                   |          |         |          |            |   |            |          |          |   | 
|------------------------------------------------------------ | -------------------------------------------------------------------------- | ------------------------------------------- | -------------------------------------------------------------------------- | -------- | ----------------- | -------- | ------- | -------- | ---------- | - | ---------- | -------- | -------- | - | 
|                                                             |                                                                            |                                             |                                                                            |          | (Yen in millions)
|                                                             |                                                                            |                                             |                                                                            |          |                   |         
|                                                             |                                                                            |                                             |                                                                            |          | 2003              |          | 2002    |          | 2001      
|                                                             |                                                                            |                                             |                                                                            |          |                   |          |         |          |           
|                                                             |                                                                            |                                             |                                                                            |          |                   |          |         |          | (Restated) |   | (Restated)
|                                                             |                                                                            |                                             |                                                                            |          |                   |          |         |          | (note 2)   |   | (note 2)  
|                                                             | Cost of investments purchased:                                             |                                             |                                                                            |          |                   |          |         |          |            |   |            |          |         
|                                                             |                                                                            | Fixed maturities                            |                                                                            | ¥        | (2,312,877        | )        |         |          | (1,125,166 | ) |            |          | (650,427 | )
|                                                             |                                                                            | Equity securities                           |                                                                            |          | (207,260          | )        |         |          | (185,518   | ) |            |          | (188,261 | )
|                                                             |                                                                            | Mortgage loans on real estate               |                                                                            |          | (25,924           | )        |         |          | (14,981    | ) |            |          | (16,706  | )
|                                                             |                                                                            | Investment real estate                      |                                                                            |          | (951              | )        |         |          | (1,972     | ) |            |          | (6,633   | )
|                                                             |                                                                            | Policy loans                                |                                                                            |          | (28,696           | )        |         |          | (23,906    | ) |            |          | (23,649  | )
|                                                             |                                                                            | Other long-term investments                 |                                                                            |          | (256,205          | )        |         |          | (107,670   | ) |            |          | (107,957 | )
|                                                             | Short-term investments  net                                               |                                             |                                                                            | 26,662   |                   |          |         | 138,025  |            |   |            | (318,604 | )       
|                                                             | Securities and indebtedness of related parties                             |                                             |                                                                            | 2,497    |                   |          |         | 6,671    |            |   |            | 175      |         
|                                                             | Additions to property and equipment                                        |                                             |                                                                            | (13,208  | )                 |          |         | (7,496   | )          |   |            | (7,503   | )       
|                                                             | Increase in cash received under securities lending transactions            |                                             |                                                                            | 74,812   |                   |          |         | 149,212  |            |   |            |         |         
|                                                             | Cash and cash equivalents acquired in connection with business
combination |                                             |                                                                            | 153,868  |                   |          |         |         |            |   |            |         |         
|                                                             |                                                                            |                                             |                                                                            |          |                   |          |         |          |            |   |            |         
|                                                             |                                                                            | Net cash used in investing activities       |                                                                            |          | (417,155          | )        |         |          | (19,518    | ) |            |          | (279,129 | )
|                                                             |                                                                            |                                             |                                                                            |          |                   |          |         |          |            |   |            |         
|Cash flows from financing activities:                        |                                                                            |                                             |                                                                            |          |                   |          |         |          |            |   |            |         
|                                                             | Investment deposits funded by policyholders and yields therefrom           |                                             |                                                                            | 499,110  |                   |          |         | 290,046  |            |   |            | 355,677  |         
|                                                             | Withdrawals of investment deposits by policyholders                        |                                             |                                                                            | (549,433 | )                 |          |         | (394,661 | )          |   |            | (432,258 | )       
|                                                             | Proceeds from issuance of debt                                             |                                             |                                                                            | 41,896   |                   |          |         |         |            |   |            | 60,000   |         
|                                                             | Dividends to stockholders                                                  |                                             |                                                                            | (16,382  | )                 |          |         | (13,172  | )          |   |            | (13,173  | )       
|                                                             | Increase in treasury stock                                                 |                                             |                                                                            | (6,946   | )                 |          |         |         |            |   |            |         |         
|                                                             |                                                                            |                                             |                                                                            |          |                   |          |         |          |            |   |            |         
|                                                             |                                                                            | Net cash used in financing activities       |                                                                            |          | (31,755           | )        |         |          | (117,787   | ) |            |          | (29,754  | )
|                                                             |                                                                            |                                             |                                                                            |          |                   |          |         |          |            |   |            |         
|Effect of exchange rate changes on cash and cash equivalents |                                                                            |                                             | 285                                                                        |          |                   |          | 291     |          |            |   | 248        |         
|                                                             |                                                                            |                                             |                                                                            |          |                   |          |         |          |            |   |            |         
|Net change in cash and cash equivalents                      |                                                                            |                                             | 17,676                                                                     |          |                   |          | 209,871 |          |            |   | 4,530      |         
|Cash and cash equivalents at beginning of year               |                                                                            |                                             | 322,302                                                                    |          |                   |          | 112,431 |          |            |   | 107,901    |         
|                                                             |                                                                            |                                             |                                                                            |          |                   |          |         |          |            |   |            |         
|Cash and cash equivalents at end of year                     |                                                                            | ¥                                           | 339,978                                                                    |          |                   |          | 322,302 |          |            |   | 112,431    |         
|                                                             |                                                                            |                                             |                                                                            |          |                   |          |         |          |            |   |            |         
|Supplemental information of cash flows:                      |                                                                            |                                             |                                                                            |          |                   |          |         |          |            |   |            |         
|                                                             | Cash paid during the year for:                                             |                                             |                                                                            |          |                   |          |         |          |            |   |            |          |         
|                                                             |                                                                            | Interest                                    |                                                                            | ¥        | 2,508             |          |         |          | 2,075      |   |            |          | 1,142    |  
|                                                             |                                                                            | Income taxes                                |                                                                            | ¥        | 73,196            |          |         |          | 15,466     |   |            |          | 10,354   |  
|                                                             | Noncash investing and financing activities (note 3):                       |                                             |                                                                            |          |                   |          |         |          |            |   |            |          |         
|                                                             |                                                                            | Fair value of assets acquired               |                                                                            | ¥        | 2,108,703         |          |         |          |           |   |            |          |         |  
|                                                             |                                                                            | Liabilities assumed                         |                                                                            |          | (1,606,945        | )        |         |          |           |   |            |          |         |  
|                                                             |                                                                            | Negative goodwill                           |                                                                            |          | (317,841          | )        |         |          |           |   |            |          |         |  
|                                                             |                                                                            | Fair value of shares issued for acquisition |                                                                            |          | (337,785          | )        |         |          |           |   |            |          |         |  
|                                                             |                                                                            |                                             |                                                                            |          |                   |          |         |          |            |   |            |         
|                                                             |                                                                            |                                             | Cash and cash equivalents acquired in connection with
business combination |          | ¥                 | (153,868 | )       |          |            |  |            |          |          |  | 
|                                                             |                                                                            |                                             |                                                                            |          |                   |          |         |          |            |   |            |         

Millea Holdings consolidated financial statements for the prior periods
represent the financial results of Tokio Marine, as predecessor to Millea
Holdings. Certain reclassifications have been made to the prior years
consolidated financial statements and related notes to conform to the 2003
presentation. See accompanying notes to consolidated financial statements.

F-8



---



##### Table of Contents



MILLEA HOLDINGS, INC.
AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

Years ended March 31, 2003, 2002 and 2001

|                                               |                                           |                                          |          |                   |          |      |          |         |          |   |          |            |          |  
|---------------------------------------------- | ----------------------------------------- | ---------------------------------------- | -------- | ----------------- | -------- | ---- | -------- | ------- | -------- | - | -------- | ---------- | -------- | -
|                                               |                                           |                                          |          | (Yen in millions)
|                                               |                                           |                                          |          |                  
|                                               |                                           |                                          |          | 2003              |          | 2002 |          | 2001   
|                                               |                                           |                                          |          |                   |          |      |          |        
|                                               |                                           |                                          |          |                   |          |      |          |         |          |   |          | (Restated)
|                                               |                                           |                                          |          |                   |          |      |          |         |          |   |          | (note 2)  
|Net income                                     |                                           | ¥                                        | 378,017  |                   |          |      | 160,717  |         |          |   | 88,675   |           
|                                               |                                           |                                          |          |                   |          |      |          |         |          |   |          |           
|Other comprehensive income (loss), net of tax: |                                           |                                          |          |                   |          |      |          |         |          |   |          |           
|                                               | Unrealized appreciation of securities:    |                                          |          |                   |          |      |          |         |          |   |          |            |         
|                                               |                                           | Unrealized holding losses                |          |                   | (216,114 | )    |          |         | (197,773 | ) |          |            | (122,012 | )
|                                               |                                           | Less: reclassification adjustments       |          |                   | (110,328 | )    |          |         | (13,766  | ) |          |            | (38,998  | )
|                                               |                                           |                                          |          |                   |          |      |          |         |          |   |          |           
|                                               |                                           |                                          | (326,442 | )                 |          |      | (211,539 | )       |          |   | (161,010 | )         
|                                               |                                           |                                          |          |                   |          |      |          |         |          |   |          |           
|                                               | Foreign currency translation adjustments: |                                          |          |                   |          |      |          |         |          |   |          |            |         
|                                               |                                           | Foreign currency translation adjustments |          |                   | (10,181  | )    |          |         | 17,117   |   |          |            | 4,736    |  
|                                               |                                           | Less: reclassification adjustments       |          |                   | (524     | )    |          |         |         |   |          |            | 1,909    |  
|                                               |                                           |                                          |          |                   |          |      |          |         |          |   |          |           
|                                               |                                           |                                          | (10,705  | )                 |          |      | 17,117   |         |          |   | 6,645    |           
|                                               |                                           |                                          |          |                   |          |      |          |         |          |   |          |           
|                                               | Minimum pension liability adjustments     |                                          |          | (40,705           | )        |      |          | (29,973 | )        |   |          | 3,637      |         
|                                               |                                           |                                          |          |                   |          |      |          |         |          |   |          |           
|Other comprehensive loss                       |                                           |                                          | (377,852 | )                 |          |      | (224,395 | )       |          |   | (150,728 | )         
|                                               |                                           |                                          |          |                   |          |      |          |         |          |   |          |           
|Comprehensive income (loss)                    |                                           | ¥                                        | 165      |                   |          |      | (63,678  | )       |          |   | (62,053  | )         
|                                               |                                           |                                          |          |                   |          |      |          |         |          |   |          |           

Millea Holdings consolidated
financial statements for the prior period
represent the financial results of Tokio Marine, as predecessor to Millea
Holdings. See accompanying notes to consolidated financial statements.

F-9



---



##### Table of Contents



MILLEA HOLDINGS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2003, 2002 and 2001

1.     Basis of Presentation and Significant Accounting Policies

(a)  Basis of Presentation
Millea Holdings, Inc. (Millea Holdings), incorporated in Japan, is a holding
company engaged in property and casualty and life insurance operations.
Through its subsidiaries, Millea Holdings writes marine, fire and casualty,
automobile and allied lines of insurance principally covering risks located in
Japan and hull and cargo risks for Japanese business and sells a variety of
life insurance products mainly in the Japanese market.

Millea Holdings was established on April 2, 2002 as a result of the business
combination of The Tokio Marine and Fire Insurance Company, Limited (Tokio
Marine) with The Nichido Fire and Marine Insurance Company, Limited (Nichido
Fire), by which both Tokio Marine and Nichido Fire have become wholly owned
subsidiaries of Millea Holdings in a statutory share exchange under Japanese
law. Millea Holdings is a successor registrant of Tokio Marine to the United
States Securities and Exchange Commission. See note 3 Business Combination
for further detail.

The consolidated financial statements of Millea Holdings and its subsidiaries
(collectively referred to as the Company) are presented herein in accordance
with accounting principles generally accepted in the United States of America
(U.S. GAAP), which differ in certain respects from Japanese accounting
principles (Japanese GAAP). Millea Holdings consolidated financial
statements for the prior periods represent the financial results of Tokio
Marine, as predecessor to Millea Holdings.

(b)  Principles of Consolidation
The accompanying consolidated financial statements include all significant
majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. Other subsidiaries
and affiliates, which are not significant, are accounted for primarily by
the equity method. At March 31, 2003 and 2002, investments in related
parties which were presented as other assets amounted to ¥11,775 million
and ¥14,272 million, respectively.

(c)  Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with U.S. GAAP. Actual results could differ from these estimates.

(d)  Investments  Other than Investments in Related Parties
Fixed maturities held to maturity, which the Company has the intent and
ability to hold to maturity, are stated at amortized cost. Declines in
fair value below amortized cost that are determined to be other than
temporary are charged to earnings.

Fixed maturities available for sale are stated at fair value. When quoted
market value is not available, quoted market value for similar securities is
utilized instead. Declines in fair value below amortized cost that are
determined to be other than temporary are charged to earnings.

Trading securities are held to meet short-term investment objectives.
These securities are recorded on a trade date basis and carried at current
market values. Unrealized gains and losses are recognized in earnings.

F-10



---



##### Table of Contents



Equity securities, which include common and nonredeemable preferred
stocks, are stated at their fair value based primarily on quoted market prices.
Stocks listed on Japanese or foreign stock exchanges represent approximately
82% and 86% of the investment in stocks at March 31, 2003 and 2002,
respectively. Declines in fair value below cost that are determined to be
other than temporary are charged to earnings.

The cost of securities sold is determined on the weighted moving-average
basis.

Mortgage loans on real estate and loans which are included in other
long-term investments are principally carried at the unpaid balance of the
principal amount. Commercial loans are identified as impaired and placed on a
cash basis when it is determined that the payment of interest or principal is
doubtful of collection except when the loan is well secured and in the process
of collection. Accrued interest on impaired loans is reversed and charged
against current earnings, and interest is thereafter included in earnings only
to the extent actually received in cash. When there is doubt regarding the
ultimate collectibility of principal, all cash receipts are thereafter applied
to reduce the recorded investment in the loan. Impaired commercial loans are
written down to the extent that principal is judged to be uncollectible.
Impaired collateral-dependent loans where repayment is expected to be provided
solely by the underlying collateral and there are no other available and
reliable sources of repayment are written down to the lower of cost or
collateral value. Cash-basis loans are returned to an accrual status when all
contractual principal and interest amounts are reasonably assured of repayment
and there is a sustained period of repayment performance in accordance with the
contractual terms.

Policy loans are made to policyholders of long-term insurance with refund
at maturity, such as long-term comprehensive insurance and long-term family
personal traffic accident insurance, etc. The maximum amount of loans is
limited to 90% of return premiums on the policies. Policy loans are carried at
cost.

Gains and losses incurred on the sale or impairment of investments are
included in realized gains and losses in the consolidated statements of income.
Unrealized appreciation or depreciation, net of taxes, in the value of
securities available for sale is accounted for as a component of accumulated
other comprehensive income.

(e)  Investment Real Estate, Property and Equipment
Investment real estate, property and equipment are stated at cost less
accumulated depreciation on buildings and furniture and fixtures.
Depreciation is computed principally by the declining-balance method based
on estimated useful lives. The estimated useful lives of buildings and
equipment range as follows:

|                       |  |          |  |      
|---------------------- |  | -------- |  | -----
|Reinforced concrete    |  | 38 to 50 |  | years
|Brick and block        |  | 41       |  | years
|Wood                   |  | 24       |  | years
|Wood and mortar        |  | 22       |  | years
|Steel                  |  | 11 to 34 |  | years
|Building equipment     |  | 3 to 18  |  | years
|Furniture and fixtures |  | 2 to 15  |  | years

Maintenance and repairs are charged against income as incurred.
Improvements are capitalized to property and equipment.

The cost and accumulated depreciation with respect to assets retired or
otherwise disposed of are eliminated from the asset and related accumulated
depreciation accounts. Any resulting profit or loss is credited or charged to
income.

(f)  Cash Equivalents
Cash equivalents include cash deposited in demand deposits at banks.

(g)  Derivatives
In June 1998, the U.S. Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS)
No. 133, Accounting for
Derivative Instruments and Hedging Activities.

F-11



---



##### Table of Contents



SFAS No. 133 was subsequently amended
by SFAS No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an amendment of SFAS
No. 133.

SFAS No. 133, as amended, establishes accounting and reporting standards
for derivative instruments, including derivative instruments embedded in other
contracts, and hedging activities. SFAS No. 133, as amended, requires that all
derivatives be recorded on the consolidated balance sheet at their respective
fair values. The Company adopted SFAS No. 133, as amended, on April 1, 2001.
All changes in the fair value of derivatives are recognized currently in
earnings as gains (losses) on derivatives from the year ended March 31, 2002.
For the year ended March 31, 2001, the realized gains and losses related to
derivative transactions were included in net investment income and realized
gains (losses) on investments.

In
accordance with the transition provisions of SFAS No. 133, the Company
recorded a net-of-tax cumulative-effect-type adjustment of ¥85,465 million to
net income on April 1, 2001. Of this adjustment, ¥93,907 million was
attributable to the increase in the fair value of interest rate swaps used in
the Companys asset liability management process, partly offset by a net
decrease in fair value for other outstanding derivative instruments on April 1,
2001.

The Company occasionally purchases a financial instrument that contains a
derivative instrument that is embedded in the financial instrument. The
Company bifurcates an embedded derivative where: (1) the economic
characteristics of the embedded instrument are not clearly and closely related
to those of the remaining components of the financial instrument; and (2) a
separate instrument with the same terms as the embedded instrument meets the
definition of a derivative under SFAS No. 133. When bifurcated, the embedded
derivative is carried at fair value, and changes in its fair value are included
currently in earnings.

(h)  Premium Revenues
Property and casualty insurance premiums are recognized as earned on a pro rata
basis over the terms of the policies. Unearned premiums represent the
portion of premiums written relating to the unexpired terms of coverage.

Life premiums for long-duration contracts are recognized when due from
policyholders. Life premiums for short-duration contracts are recognized over
the period to which the premiums relate on a pro rata basis.

(i)  Policy Acquisition Costs
Costs that vary with and are primarily related to the acquisition of insurance
policies are capitalized and charged to expense in proportion to premium
revenue recognized. Deferred policy acquisition costs are reviewed to
determine if they are recoverable from future income and, if not recoverable,
are charged to expense.

(j)  Losses, Claims and Loss Adjustment Expenses
The net liabilities stated for reported and estimated property and casualty
losses and claims and for related loss adjustment expenses are based upon
the accumulation of (1) case estimates for losses and related loss
adjustment expenses reported prior to the close of the accounting period
on the direct business written by the Company and (2) estimates received
from ceding reinsurers. The loss adjustment expenses represent
administrative expenses in connection with settling or disposing of
claims, which include out-of-pocket expenses as well as allocated
personnel cost. Provision has been made for unreported losses and for
loss adjustment expenses not identified with specific claims based upon
past experience. These liabilities are adjusted regularly based on
experience. The Company believes that the liabilities for unpaid losses
and loss adjustment expenses at March 31, 2003 and 2002 are adequate to
cover the ultimate net cost of losses and claims incurred to those dates.
However, the liabilities are necessarily based on estimates and management
makes no representation that the ultimate liability may not exceed or fall
short of such estimates.

(k)  Future Policy Benefits and Losses
Future policy benefits and losses include provisions for future policy benefits
for life contracts and for unpaid life policy claims.

F-12



---



##### Table of Contents



The liabilities for future policy benefits are computed by a net level
premium method using estimated future investment yields, withdrawals and
recognized morbidity and mortality tables. For limited-payment contracts ,
which provide insurance coverage over a contract period that extends beyond the
period in which premiums are collected, gross premiums in excess of the net
premium are deferred and recognized in income in a constant relationship with
insurance in force or with the amount of expected future benefit payments.

Unpaid
policy claims represent the estimated liability for reported and
unreported losses on life policies on an undiscounted basis.

The
Company believes that the estimated liabilities for future policy
benefits and for losses at March 31, 2003 and 2002 are adequate to cover the
life insurance liability. However, the ultimate liability may vary from such
estimates.

(l)  Investment Deposits by Policyholders
The Company sells certain property and casualty and life insurance products
that do not subject the Company to significant risks arising from policyholder
mortality or morbidity. These contracts are referred to as investment
contracts. For investment contracts the Company records associated liabilities
under investment deposits by policyholders.

Specifically, the Company sells certain long-term property and casualty
insurance policies, such as long-term comprehensive insurance and long-term
family personal traffic accident insurance, etc. which include a savings
feature in addition to the insurance coverage provided under the policy. These
policies are issued for periods of two to sixty-four years.

The key terms of such policies (deposit-type insurance), which include
the contractual rates of interest, are fixed at the inception of the policy and
remain in effect during the policy period. At inception, policyholders can
choose to pay premiums on the policy either in a lump-sum or in annual,
semi-annual or monthly installments. The policy allows policyholders to later
change the mode for payment with the Companys approval. In addition, the
policy allows policyholders during the payment phase to change the allocation
of annuity payments he or she receives if certain conditions established by the
Company are met. In practice, these options are rarely used by policyholders.
Policyholders can terminate the contract before the maturity date with a
payment of a pre-determined commission to the Company.

Premiums for insurance and savings portions of the contract are allocated
at inception. The premium for the insurance portion is calculated the same way
that the premium for a traditional indemnity policy with no savings portion is
calculated. The premium for the savings portion represents the present value
of the lump-sum or annuity refund for a fixed period, discounted using the
committed interest rate and the total loss termination rate, which are both
set at the inception of the contracts. Total loss termination is an
exceptional event that takes place when a full payout is made for the insurance
portion of the policy, and in this case, the contract terminates without any
maturity refund being paid to the policyholder. The weighted average annual
frequency of total loss termination is approximately 0.05%.

In the case of a total loss, deposit premiums under the contract are
designed to be used for maturity refunds on the other policies for which a
total loss has not occurred. These deposit premiums are not used to fund
indemnity claims in the case of a total loss. All payments made to the
policyholder in a total loss situation are funded by using liabilities
established for the insurance portion of the contract.

The premium for the insurance portion is recognized as revenue over the
period of the contract, generally in proportion to the amount of insurance
protection provided. The premium for the savings portion of the contract is
accounted for as an increase to liabilities for refunds captioned investment
deposits by policyholders. At the end of each fiscal year, the present value
of future payments of maturity refunds of contracts in force less the present
value of the savings portion of future premiums is accounted for as refund
provisions.

F-13



---



##### Table of Contents



Policy acquisition costs are not charged to the savings portion of the
contract. Costs associated with policy acquisition of deposit-type policies
are charged to the insurance portion and amortized over the contractual period.
The possibility of a premium deficiency, relevant only to the insurance
portion, is monitored through combined loss and expense ratio. The Company did
not recognize any premium deficiency for such policies for the years ended
March 31, 2003, 2002 and 2001.

See note 12 for fair value information of investment deposits by
policyholders.

(m)  Reinsurance
Amounts recoverable from reinsurers are estimated in a manner consistent with
the claim liability associated with the reinsured business. The Company
evaluates and monitors the financial condition of its reinsurers under
voluntary reinsurance arrangements to minimize its exposure to significant
losses from reinsurers insolvencies.

(n)  Compulsory Automobile Liability Insurance
Japanese law provides that all automobiles are to be covered by specified
amounts of liability insurance for personal injury and that insurance
companies are to accept such coverage on a non-profit basis. In
compliance with this law, which came into effect on April 1, 1966, the
Company has not reflected any profit or loss from underwriting such
compulsory automobile liability insurance in financial statements prepared
for distribution to stockholders under the Japanese Commercial Code. In
the accompanying consolidated financial statements, which are presented in
accordance with U.S. GAAP, gains or losses from underwriting compulsory
automobile liability insurance have been credited or charged to income.

(o)  Foreign Currency Translation
Assets and liabilities of the subsidiaries located outside Japan are translated
into Japanese yen at the rates of exchange in effect at the balance sheet
date. Revenues and expenses of the subsidiaries are translated at
weighted average exchange rates during the year. Gains and losses
resulting from translation of financial statements are excluded from the
consolidated statements of income and are accumulated as foreign currency
translation adjustments in stockholders equity.

Gains (losses) resulting from foreign currency transactions in the amount
of ¥(4,016) million in 2003, ¥5,288 million in 2002 and ¥7,022 million in 2001
were credited or charged to income.

(p)  Impairment of Long-Lived Assets
Effective April 1, 2002, the Company adopted SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. As required by SFAS No. 144,
long-lived assets and certain identifiable intangibles 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 such assets are considered to be impaired,
the amount of impairment to be recognized is the amount by which the
carrying amount of the assets exceeds the fair value of the assets.

(q)  Earnings per American Depositary Share
Basic earnings per American Depositary Share (ADS) are computed by dividing
net income available to common stockholders by the weighted-average number of
shares of common stock outstanding for respective period and multiplying by
five to account for the common stock to ADS ratio of (a) five common shares to
a thousand ADS in fiscal 2003 and (b) five common shares to one ADS in and
before fiscal 2002.

(r)  New Accounting Standards
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated retirement costs. The Company will adopt SFAS No. 143 in the
year ending March 31, 2004. The Company does not expect the adoption of SFAS
No. 143 to have a material effect on its financial position or results of
operations.

F-14



---



##### Table of Contents



In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires that upon
issuance of certain types of guarantees, a guarantor must recognize a liability
for the fair value of an obligation assumed under a guaranty. FIN 45 also
requires additional disclosures by a guarantor in its financial statements
about the obligations associated with guarantees issued. The recognition
provisions of FIN 45 are effective for any guarantees issued or modified after
December 31, 2002. The adoption of FIN 45 did not have a material effect on the
Companys financial statements. The disclosure requirements are effective for
financial statements for the periods ending after December 15, 2002. The
Company adopted the disclosure requirements effective March 31, 2003. See note 14 for further information.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, (FIN 46). The objective of FIN 46 is to improve
financial reporting by companies involved with variable interest entities.
This new model for consolidation applies to an entity which either (1) the
powers or rights of the equity holders do not give them sufficient decision
making powers or (2) the equity investment at risk is insufficient to finance
that entitys activities without receiving additional subordinated financial
support from other parties. FIN 46 requires a variable interest entity to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entitys activities or entitled to receive a
majority of the entitys residual returns or both. FIN 46 is immediately
effective for variable interest entities created after January 31, 2003, and is
effective for variable interest entities acquired before February 1, 2003 in
the first fiscal year beginning after June 15, 2003. Certain of the disclosure
requirements apply in all financial statements issued after January 31, 2003,
regardless of when the variable interest entity was established. See note 4
for further information.

F-15



---



##### Table of Contents



2.     Restatements and Reclassifications

Fiscal Year 2003 Restatements and Reclassifications

The Company has made certain adjustments to its 2002 and 2001 consolidated
financial statements as contained herein to reflect refinements of its
actuarial methodologies effected in connection with information system
improvements and the consolidation of Nichido Fire as of April 2, 2002. Such
restatement adjustments had no net effect on previously reported net income for
the years ended March 31, 2002 and 2001. The restatements however resulted in
changes to the intersegment allocation of income and retained earnings;
increasing the property and casualty segment retained earnings by ¥12,479
million and decreasing life segment retained earnings by a corresponding amount
as of March 31, 2002.

The following table shows the effects of the restatements and
reclassifications on the Companys consolidated financial statements as of
March 31, 2002, and for each of the years in the two-year period ended March
31, 2002.

|                      |                                                             |  |                   |           |                 |  |               |           |                 |  |  |           |  |  |  |           | 
|--------------------- | ----------------------------------------------------------- |  | ----------------- | --------- | --------------- |  | ------------- | --------- | --------------- |  |  | --------- |  |  |  | --------- | 
|                      |                                                             |  | (Yen in millions)
|                      |                                                             |  |                  
|                      |                                                             |  | 2002              |           | 2001           
|                      |                                                             |  |                   |           |                
|                      |                                                             |  | As reported in    |           |                 |  |               |           | As reported in  |  |  |           | 
|                      |                                                             |  | March 2002        |           | As restated and |  | March 2002    |           | As restated and
|                      |                                                             |  | annual report     |           | reclassified    |  | annual report |           | reclassified   
|                      |                                                             |  |                   |           |                 |  |               |           |                
|Statements of income: |                                                             |  |                   |           |                 |  |               |           |                 |  |  |           |  |  |  |          
|                      | Life premiums                                               |  | ¥                 | 205,693   |                 |  |               | 209,208   |                 |  |  | 150,543   |  |  |  | 162,905   | 
|                      | Net investment income                                       |  |                   | 48,259    |                 |  |               | 104,681   |                 |  |  | 69,183    |  |  |  | 127,852   | 
|                      | Total operating income                                      |  |                   | 1,588,575 |                 |  |               | 1,648,512 |                 |  |  | 1,586,607 |  |  |  | 1,657,638 | 
|                      | Policy benefits and losses for life                         |  |                   | 172,586   |                 |  |               | 175,016   |                 |  |  | 125,947   |  |  |  | 137,469   | 
|                      | Income credited to investment
deposits by policyholders     |  |                   |          |                 |  |               | 57,507    |                 |  |  |          |  |  |  | 59,509    | 
|                      | Total operating costs and expenses                          |  |                   | 1,479,907 |                 |  |               | 1,539,844 |                 |  |  | 1,453,573 |  |  |  | 1,524,604 | 
|Balance sheet:        |                                                             |  |                   |           |                 |  |               |           |                 |  |  |           |  |  |  |          
|                      | Reinsurance recoverable on losses                           |  |                   | 174,193   |                 |  |               | 332,687   |                 |  |  |           |  |  |  |           | 
|                      | Prepaid reinsurance premiums                                |  |                   | 223,090   |                 |  |               | 195,814   |                 |  |  |           |  |  |  |           | 
|                      | Deferred policy acquisition costs                           |  |                   | 330,081   |                 |  |               | 301,723   |                 |  |  |           |  |  |  |           | 
|                      | Total assets                                                |  |                   | 8,456,317 |                 |  |               | 8,559,177 |                 |  |  |           |  |  |  |           | 
|                      | Liabilities for losses, claims and
loss adjustment expenses |  |                   | 675,764   |                 |  |               | 875,463   |                 |  |  |           |  |  |  |           | 
|                      | Unearned premiums                                           |  |                   | 1,280,058 |                 |  |               | 1,177,512 |                 |  |  |           |  |  |  |           | 
|                      | Future policy benefits and losses                           |  |                   | 494,269   |                 |  |               | 462,597   |                 |  |  |           |  |  |  |           | 
|                      | Total policy liabilities and accruals                       |  |                   | 2,450,091 |                 |  |               | 2,515,572 |                 |  |  |           |  |  |  |           | 
|                      | Investment deposits by policyholders                        |  |                   | 2,054,705 |                 |  |               | 2,131,834 |                 |  |  |           |  |  |  |           | 
|                      | Other liabilities                                           |  |                   | 187,550   |                 |  |               | 147,800   |                 |  |  |           |  |  |  |           | 
|                      | Total liabilities                                           |  |                   | 5,946,623 |                 |  |               | 6,049,483 |                 |  |  |           |  |  |  |           | 
|                      | Total liabilities
and stockholders equity                  |  |                   | 8,456,317 |                 |  |               | 8,559,177 |                 |  |  |           |  |  |  |           | 

The actuarial refinements effected the calculations of: future policy
benefits; unearned premiums; life and non-life deferred acquisition costs; the
liability for losses, claims and loss adjustment expenses; and, associated
reinsurance and deferred tax balances.

F-16



---



##### Table of Contents



These adjustments primarily consisted of (a) a decrease in property and
casualty net unearned premiums by ¥39,412 million and a proportional decrease
in deferred policy acquisition costs by ¥18,458 million and (b) an increase in
the liabilities for life insurance contracts by ¥9,599 million and a decrease
in deferred policy acquisition costs by ¥9,900 million at March 31, 2002.
Property and casualty unearned premiums were adjusted with the amounts as
prorated at more frequent intervals to absorb potential time lag in the current
reporting cycle of policies written through agents. Liabilities for life
insurance contracts were adjusted with the amounts estimated by modified
factors incorporating the recent market trends and managements prospect of
Japanese economic climate. In conjunction with this adjustment, conforming
changes were made to life deferred policy acquisition costs by consistent
application of similar assumptions.

These adjustments also included a change in the presentation of the effect
of ceded reinsurance mainly on compulsory automobile liability insurance
(CALI) to gross up policy liabilities and reinsurance recoverable by ¥158,494
million at March 31, 2002. Following the abolition of the CALI government
reinsurance scheme effective April 1, 2002, the Company has changed the
presentation of liabilities for losses on CALI and recoveries from reinsurance
to present them on the gross basis of the effect of ceded reinsurance through
the current pool arrangement. The prior year-end balances of these accounts
were revised to present them in gross amounts comparable to fiscal 2003.

Presentation in the consolidated statements of income of investment income
was changed to show it on the gross basis of income credited to investment
deposits for policyholders for deposit-type insurance policies and report
related charges under a separate expense item captioned income credited to
investment deposits by policyholders. This change resulted in the
reclassifications to increase investment income for the years ended March 31,
2002 and 2001 by ¥56,422 million and ¥58,669 million, respectively, with
corresponding increases in operating costs and expenses for the respective
years.

Certain other reclassifications have also been made to the prior years
consolidated financial statements to conform to the 2003 presentation.

Fiscal Year 2002 Restatements

During the fiscal year ended March 31, 2002, the Company changed its accounting
policy with respect to the recognition of other than temporary declines in
values of marketable equity securities. The above noted change in accounting
policy necessitated the restatement of the Companys previously reported
consolidated financial statements as contained in its annual report as of March
31, 2001 and for each of the years in the three-year period then ended. Such
restatements were effectuated in connection with the Companys March 2002
financial reporting by restating the comparative financial statement
information contained therein and labeling such information as restated.

The following table shows the effects of the restatements on the Companys
consolidated financial statements and related notes for the year ended March
31, 2001. All adjustments relate solely to the Companys property and casualty
segment.

F-17



---



##### Table of Contents



|                                                        |                      |  |                          |           |                |  |           |           | 
|------------------------------------------------------- | -------------------- |  | ------------------------ | --------- | -------------- |  | --------- | --------- | 
|                                                        |                      |  | (Yen in millions,       
|                                                        |                      |  | except per share amount)
|                                                        |                      |  |                         
|                                                        |                      |  | 2001                    
|                                                        |                      |  |                         
|                                                        |                      |  | As reported in           |           | As restated in
|                                                        |                      |  | March 2001               |           | March 2002    
|                                                        |                      |  | annual report            |           | annual report 
|                                                        |                      |  |                          |           |               
|Retained earnings:                                      |                      |  |                          |           |                |  |           |          
|                                                        | at beginning of year |  | ¥                        | 1,667,928 |                |  |           | 1,630,265 | 
|                                                        | at end of year       |  |                          | 1,748,272 |                |  |           | 1,705,767 | 
|Unrealized appreciation of securities                   |                      |  | 722,674                  |           |                |  | 765,179   |          
|Realized gains on investments                           |                      |  | 63,708                   |           |                |  | 56,142    |          
|Total operating income                                  |                      |  | 1,594,173                |           |                |  | 1,586,607 |          
|Income before income tax expense                        |                      |  | 140,600                  |           |                |  | 133,034   |          
|Income tax expense                                      |                      |  | 47,083                   |           |                |  | 44,359    |          
|Net income                                              |                      |  | 93,517                   |           |                |  | 88,675    |          
|Basic and diluted net income per ADS                    |                      |  | 302                      |           |                |  | 286       |          
|Gross unrealized gains on marketable equity securities  |                      |  | 1,695,874                |           |                |  | 1,633,695 |          
|Gross unrealized losses on marketable equity securities |                      |  | 145,096                  |           |                |  | 16,504    |          

Previously, the Company had maintained the cost of equity securities in a
manner to reinstate historical losses arising from the application of the lower
of cost or market method recognized in the financial statements prepared in
accordance with Japanese GAAP and make certain other adjustments to conform
with U.S. GAAP. Under this approach, the cost of equity securities was
available on a portfolio basis, which necessitated approximation to determine
the amount of other than temporary declines in fair value below cost of equity
securities and to present gross unrealized gains and losses on equity
securities at each year-end. In fact, the Company presented gross unrealized
gain amounts as measured under Japanese GAAP, and gross unrealized losses were
calculated as the difference between the gross unrealized gains and the net
unrealized gains.

Currently, the Company maintains the cost of equity securities for each
security and recognizes impairment for other than temporary declines based on
the qualitative and quantitative impairment tests applied to individual
securities. The restatements were made based on the results of similar tests
applied to the year ended March 31, 2001 or before.

As a result, cumulative effect on income before tax of the restatements as
of March 31, 2001 was ¥66,413 million and their income statement effect before
tax for the year ended March 31, 2001 was ¥7,566 million to recognize
additional impairment charges.

Based on the newly maintained costs for each of marketable equity
securities, gross unrealized gains and gross unrealized losses on marketable
equity securities at March 31, 2001 were also restated from ¥1,695,874 million
and ¥145,096 million, respectively, reflecting results under Japanese GAAP, to
¥1,633,695 million and ¥16,504 million, respectively.

F-18



---



##### Table of Contents



3.     Business Combination

On April 2, 2002, Tokio Marine completed its business combination with Nichido
Fire by way of the creation of a holding company, Millea Holdings, by which
each of the companies has become a wholly owned subsidiary of Millea Holdings
in a statutory share exchange under Japanese law.
Nichido
Fire, incorporated in Japan, is a property and casualty insurer
which writes marine, fire and casualty, automobile and allied lines of
insurance principally covering risks located in Japan and hull and cargo risks
for Japanese business. Under the holding company structure, Tokio Marine and
Nichido Fire have been integrating their respective products, information
technology systems, property and casualty claims investigation functions and
sales office functions to realize the potential synergies available from
integration of their property and casualty insurance businesses.The
combination was accounted for by the purchase method in a manner that
Tokio Marine had acquired Nichido Fire. The results of operations of Nichido
Fire as well as those of Tokio Marine have been included in the financial
statements of the Company for the year ended March 31, 2003.In
connection with the share exchange, holders of Tokio Marine shares
received 1.00 share of Millea Holdings common stock for each 1,000 shares of
Tokio Marine common stock they held, and holders of Nichido Fire shares
received 0.69 of one share of Millea Holdings common stock for each 1,000
shares of Nichido Fire common stock they held. Upon the share exchange, Millea
Holdings issued 307,356.26 common stock shares, representing approximately 17%
of the voting interests of the holding company, to the stockholders of Nichido
Fire.The
value of common stock issued to the stockholders of Nichido Fire was
¥337,785 million, based on the share exchange ratio determined by the
respective share values of Tokio Marine and Nichido Fire on September 28, 2001.

The allocation of the purchase price is summarized as follows:

|                                     |                     |                     |           |                   |         | 
|------------------------------------ | ------------------- | ------------------- | --------- | ----------------- | ------- | 
|                                     |                     |                     |           | (Yen in millions)
|                                     |                     |                     |           |                  
|Investments                          |                     | ¥                   | 1,661,867 |                  
|Other assets                         |                     |                     | 600,704   |                  
|                                     |                     |                     |           |                  
|                                     | Assets acquired     |                     |           | 2,262,571         |        
|Policy liabilities and accruals      |                     |                     | 709,655   |                  
|Investment deposits by policyholders |                     |                     | 635,015   |                  
|Other liabilities                    |                     |                     | 262,275   |                  
|                                     |                     |                     |           |                  
|                                     | Liabilities assumed |                     |           | 1,606,945         |        
|                                     |                     |                     |           |                  
|                                     |                     | Net assets acquired |           |                   | 655,626 | 
|Total purchase price                 |                     |                     | 337,785   |                  
|                                     |                     |                     |           |                  
|                                     |                     | Negative goodwill   |           | ¥                 | 317,841 | 
|                                     |                     |                     |           |                  
|                                    
|

Unallocated negative goodwill arising from the combination was recognized
as extraordinary gain in the results of operations of the Company for the year
ended March 31, 2003 as follows:

|                                                                              |            |   |         |                   |  | 
|----------------------------------------------------------------------------- | ---------- | - | ------- | ----------------- |  | 
|                                                                              |            |   |         | (Yen in millions)
|                                                                              |            |   |         |                  
|Income before extraordinary items and cumulative
effect of accounting changes |            | ¥ | 129,694 |                  
|Extraordinary items  unallocated negative goodwill                           |            |   | 248,323 |                  
|                                                                              |            |   |         |                   | 
|                                                                              | Net income |   | ¥       | 378,017           | 
|                                                                              |            |   |         |                   | 

F-19



---



##### Table of Contents



The following sets forth results of operations for the year ended March
31, 2002 on a pro forma basis combining those of Nichido Fire. The unaudited
pro forma condensed combined statement of income gives effect to the
combination as if it had occurred at beginning of the year ended March 31,
2002. The unaudited pro forma condensed combined statement of income does not
reflect the transaction costs that have been incurred, nor does it reflect any
realized or anticipated synergies or cost savings. Also, it does not reflect
unallocated negative goodwill.

|                                    |                                                       |                                                       |   |                          |     | 
|----------------------------------- | ----------------------------------------------------- | ----------------------------------------------------- | - | ------------------------ | --- | 
|                                    |                                                       |                                                       |   | (Yen in millions,       
|                                    |                                                       |                                                       |   | except per share amount)
|                                    |                                                       |                                                       |   |                         
|                                    |                                                       |                                                       |   | 2002                    
|                                    |                                                       |                                                       |   | (Unaudited)             
|Pro forma statement of income data: |                                                       |                                                       |   |                         
|                                    | Total operating income                                |                                                       | ¥ | 2,013,935                |    
|                                    | Income before cumulative effect of accounting changes |                                                       |   | 54,471                   |    
|                                    | Net income                                            |                                                       |   | 139,936                  |    
|                                    | Earning per ADS  Basic and Diluted:                  |                                                       |   |                          |    
|                                    |                                                       | Income before cumulative effect of accounting changes |   |                          | 147 | 
|                                    |                                                       | Net income                                            |   |                          | 377 | 

F-20



---



##### Table of Contents



4.     Investments

The following summarizes the Companys investments in fixed maturities held to
maturity at March 31, 2003 and 2002:

|      |                  |                                                          |                                         |   |                   |         |            |  |            |         |       |  |        |        |   |  |           |           | 
|----- | ---------------- | -------------------------------------------------------- | --------------------------------------- | - | ----------------- | ------- | ---------- |  | ---------- | ------- | ----- |  | ------ | ------ | - |  | --------- | --------- | 
|      |                  |                                                          |                                         |   | (Yen in millions)
|      |                  |                                                          |                                         |   |                  
|      |                  |                                                          |                                         |   |                   |         |            |  | Gross      |         | Gross |  |        |        |  
|      |                  |                                                          |                                         |   | Amortized         |         | unrealized |  | unrealized |         | Fair 
|      |                  |                                                          |                                         |   | cost              |         | gains      |  | losses     |         | value
|      |                  |                                                          |                                         |   |                   |         |            |  |            |         |      
|2003: |                  |                                                          |                                         |   |                   |         |            |  |            |         |       |  |        |        |   | 
|      | Bonds and notes: |                                                          |                                         |   |                   |         |            |  |            |         |       |  |        |        |   |  |          
|      |                  | Other government and government
agencies and authorities |                                         | ¥ | 866,971           |         |            |  | 144,512    |         |       |  |       |        |   |  | 1,011,483 |          
|      |                  | Other corporate bonds                                    |                                         |   | 16,365            |         |            |  | 884        |         |       |  |       |        |   |  | 17,249    |          
|      |                  |                                                          |                                         |   |                   |         |            |  |            |         |       |  |        |        |   | 
|      |                  |                                                          | Total fixed maturities held to maturity |   | ¥                 | 883,336 |            |  |            | 145,396 |       |  |        |       |   |  |           | 1,028,732 | 
|      |                  |                                                          |                                         |   |                   |         |            |  |            |         |       |  |        |        |   | 
|2002: |                  |                                                          |                                         |   |                   |         |            |  |            |         |       |  |        |        |   | 
|      | Bonds and notes: |                                                          |                                         |   |                   |         |            |  |            |         |       |  |        |        |   |  |          
|      |                  | Other government and government
agencies and authorities |                                         | ¥ | 453,453           |         |            |  | 9,421      |         |       |  | (3,904 | )      |   |  | 458,970   |          
|      |                  | Other corporate bonds                                    |                                         |   | 16,735            |         |            |  | 701        |         |       |  | (1     | )      |   |  | 17,435    |          
|      |                  |                                                          |                                         |   |                   |         |            |  |            |         |       |  |        |        |   | 
|      |                  |                                                          | Total fixed maturities held to maturity |   | ¥                 | 470,188 |            |  |            | 10,122  |       |  |        | (3,905 | ) |  |           | 476,405   | 
|      |                  |                                                          |                                         |   |                   |         |            |  |            |         |       |  |        |        |   | 

The following summarizes the Companys investments in fixed maturities
available for sale at March 31, 2003 and 2002:

|      |                  |                                                          |                                           |   |                   |           |            |  |            |         |       |  |        |        |   |  |           |           | 
|----- | ---------------- | -------------------------------------------------------- | ----------------------------------------- | - | ----------------- | --------- | ---------- |  | ---------- | ------- | ----- |  | ------ | ------ | - |  | --------- | --------- | 
|      |                  |                                                          |                                           |   | (Yen in millions)
|      |                  |                                                          |                                           |   |                  
|      |                  |                                                          |                                           |   |                   |           |            |  | Gross      |         | Gross |  |        |        |  
|      |                  |                                                          |                                           |   | Amortized         |           | unrealized |  | unrealized |         | Fair 
|      |                  |                                                          |                                           |   | cost              |           | gains      |  | losses     |         | value
|      |                  |                                                          |                                           |   |                   |           |            |  |            |         |      
|2003: |                  |                                                          |                                           |   |                   |           |            |  |            |         |       |  |        |        |   | 
|      | Bonds and notes: |                                                          |                                           |   |                   |           |            |  |            |         |       |  |        |        |   |  |          
|      |                  | U.S. government and government
agencies and authorities  |                                           | ¥ | 140,150           |           |            |  | 6,635      |         |       |  | (1,280 | )      |   |  | 145,505   |          
|      |                  | U.S. states, municipalities and
political subdivisions   |                                           |   | 44                |           |            |  | 20         |         |       |  |       |        |   |  | 64        |          
|      |                  | Other government and government
agencies and authorities |                                           |   | 1,935,175         |           |            |  | 142,252    |         |       |  | (4,124 | )      |   |  | 2,073,303 |          
|      |                  | Other municipalities and political
subdivisions          |                                           |   | 244,826           |           |            |  | 19,601     |         |       |  | (109   | )      |   |  | 264,318   |          
|      |                  | Public utilities                                         |                                           |   | 88,322            |           |            |  | 4,649      |         |       |  | (5     | )      |   |  | 92,966    |          
|      |                  | Convertibles and bonds with warrants attached            |                                           |   | 70,622            |           |            |  | 6,724      |         |       |  | (26    | )      |   |  | 77,320    |          
|      |                  | Other corporate bonds                                    |                                           |   | 746,421           |           |            |  | 22,290     |         |       |  | (563   | )      |   |  | 768,148   |          
|      |                  |                                                          |                                           |   |                   |           |            |  |            |         |       |  |        |        |   | 
|      |                  |                                                          | Total fixed maturities available for sale |   | ¥                 | 3,225,560 |            |  |            | 202,171 |       |  |        | (6,107 | ) |  |           | 3,421,624 | 
|      |                  |                                                          |                                           |   |                   |           |            |  |            |         |       |  |        |        |   | 
|2002: |                  |                                                          |                                           |   |                   |           |            |  |            |         |       |  |        |        |   | 
|      | Bonds and notes: |                                                          |                                           |   |                   |           |            |  |            |         |       |  |        |        |   |  |          
|      |                  | U.S. government and government
agencies and authorities  |                                           | ¥ | 43,313            |           |            |  | 7,593      |         |       |  | (5     | )      |   |  | 50,901    |          
|      |                  | U.S. states, municipalities and
political subdivisions   |                                           |   | 109               |           |            |  | 65         |         |       |  |       |        |   |  | 174       |          
|      |                  | Other government and government
agencies and authorities |                                           |   | 903,702           |           |            |  | 16,657     |         |       |  | (160   | )      |   |  | 920,199   |          
|      |                  | Other municipalities and political
subdivisions          |                                           |   | 299,885           |           |            |  | 23,979     |         |       |  | (32    | )      |   |  | 323,832   |          

F-21



---



##### Table of Contents



| |  |  |                                               |                                           |  |                   |           |            |  |            |        |       |  |      |      |   |  |         |           | 
| |  |  | --------------------------------------------- | ----------------------------------------- |  | ----------------- | --------- | ---------- |  | ---------- | ------ | ----- |  | ---- | ---- | - |  | ------- | --------- | 
| |  |  |                                               |                                           |  | (Yen in millions)
| |  |  |                                               |                                           |  |                  
| |  |  |                                               |                                           |  |                   |           |            |  | Gross      |        | Gross |  |      |      |  
| |  |  |                                               |                                           |  | Amortized         |           | unrealized |  | unrealized |        | Fair 
| |  |  |                                               |                                           |  | cost              |           | gains      |  | losses     |        | value
| |  |  |                                               |                                           |  |                   |           |            |  |            |        |      
| |  |  | Public utilities                              |                                           |  | 34,192            |           |            |  | 2,808      |        |       |  |     |      |   |  | 37,000  |          
| |  |  | Convertibles and bonds with warrants attached |                                           |  | 102,074           |           |            |  | 9,420      |        |       |  |     |      |   |  | 111,494 |          
| |  |  | Other corporate bonds                         |                                           |  | 543,645           |           |            |  | 15,056     |        |       |  | (232 | )    |   |  | 558,469 |          
| |  |  |                                               |                                           |  |                   |           |            |  |            |        |       |  |      |      |   | 
| |  |  |                                               | Total fixed maturities available for sale |  | ¥                 | 1,926,920 |            |  |            | 75,578 |       |  |      | (429 | ) |  |         | 2,002,069 | 
| |  |  |                                               |                                           |  |                   |           |            |  |            |        |       |  |      |      |   | 

The amortized cost and fair value of fixed maturities by contractual
maturity at March 31, 2003 are as follows. Actual maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

|                                     |                                        |   |                   |           |       |  |           |           | 
|------------------------------------ | -------------------------------------- | - | ----------------- | --------- | ----- |  | --------- | --------- | 
|                                     |                                        |   | (Yen in millions)
|                                     |                                        |   |                  
|                                     |                                        |   | Amortized         |           | Fair 
|                                     |                                        |   | cost              |           | value
|                                     |                                        |   |                   |           |      
|Fixed maturities held to maturity:   |                                        |   |                   |           |       |  |           |          
|                                     | Due in one year or less                |   | ¥                 | 2,005     |       |  |           | 2,020     | 
|                                     | Due after one year through five years  |   |                   | 6,361     |       |  |           | 6,528     | 
|                                     | Due after five years through ten years |   |                   | 57,532    |       |  |           | 59,859    | 
|                                     | Due after ten years                    |   |                   | 817,438   |       |  |           | 960,325   | 
|                                     |                                        |   |                   |           |       |  |           |          
|                                     |                                        | ¥ | 883,336           |           |       |  | 1,028,732 |          
|                                     |                                        |   |                   |           |       |  |           |          
|                                    
|                                     |                                        |   | (Yen in millions)
|                                     |                                        |   |                  
|                                     |                                        |   | Amortized         |           | Fair 
|                                     |                                        |   | cost              |           | value
|                                     |                                        |   |                   |           |      
|Fixed maturities available for sale: |                                        |   |                   |           |       |  |           |          
|                                     | Due in one year or less                |   | ¥                 | 515,921   |       |  |           | 519,646   | 
|                                     | Due after one year through five years  |   |                   | 1,276,382 |       |  |           | 1,303,718 | 
|                                     | Due after five years through ten years |   |                   | 661,183   |       |  |           | 698,003   | 
|                                     | Due after ten years                    |   |                   | 767,209   |       |  |           | 895,421   | 
|                                     | With no contractual maturity           |   |                   | 4,865     |       |  |           | 4,836     | 
|                                     |                                        |   |                   |           |       |  |           |          
|                                     |                                        | ¥ | 3,225,560         |           |       |  | 3,421,624 |          
|                                     |                                        |   |                   |           |       |  |           |          

Proceeds from sales of investments in fixed maturities prior to their
scheduled maturity dates were ¥536,061 million, ¥335,280 million and ¥296,843
million for the years ended March 31, 2003, 2002 and 2001, respectively. Gross
gains of ¥9,849 million and gross losses of ¥5,046 million in 2003, gross gains
of ¥12,247 million and gross losses of ¥3,181 million in 2002 and gross gains
of ¥20,656 million and gross losses of ¥11,076 million in 2001 were realized on
those sales.

Bonds carried at ¥53,138 million at March 31, 2003 and ¥38,634 million at
March 31, 2002 were pledged as collateral primarily to reinsurance companies.

Bonds carried at ¥172,513 million at March 31, 2003 and ¥146,447 million
at March 31, 2002 were used as collateral for the Bank of Japans instant gross
settlement system for transactions of checking accounts and Japanese government
bonds.

Bonds carried at ¥245,541 million at March 31, 2003 and ¥147,839 million
at March 31, 2002 were loaned to financial institutions under securities
lending transactions.

Bonds carried at ¥109,102 million at March 31, 2003 and ¥94,313 million at
March 31, 2002 were deposited primarily with United States and other foreign
government authorities as required by law.

Bonds carried at ¥15,726 million at March 31, 2003 were pledged as
collateral for letters of credit.

Bonds carried at ¥1,874 million at March 31, 2003 and ¥1,387 million at
March 31, 2002 were pledged as collateral for Life Insurance Policyholders
Protection Corporation of Japan, a corporation established to protect
policyholders from losses in case of bankruptcies of life insurance companies.

F-22



---



##### Table of Contents



With respect to marketable equity securities, gross unrealized gains were
¥801,338 million and gross unrealized losses were ¥109,929 million at March 31,
2003, and gross unrealized gains were ¥1,343,337 million and gross unrealized
losses were ¥16,308 million at March 31, 2002.

Proceeds from sales of investments in equity securities were ¥413,591
million, ¥94,796 million and ¥125,080 million for the years ended March 31,
2003, 2002 and 2001, respectively. Gross gains of ¥110,562 million and gross
losses of ¥29,918 million in 2003, gross gains of ¥39,329 million and gross
losses of ¥2,269 million in 2002, and gross gains of ¥61,630 million and gross
losses of ¥13,566 million in 2001 were realized on those sales.

Equity
securities carried at ¥44,000 million at March 31, 2003, and ¥50,498 million
at March 31, 2002 were deposited with securities brokers primarily as a
collateral for futures transactions entered into by the Company.

Equity securities carried at ¥37,127 million at March 31, 2003 and ¥41,565 million at
March 31, 2002 were loaned to financial institutions under securities lending
transactions.

Equity securities carried at ¥6,790 million at March 31, 2003 and ¥5,824 million at
March 31, 2002 were deposited with United States government authorities as
required by law.

In January 2003, the FASB released FIN No. 46, which clarifies when an
enterprise should consolidate an entity that meet the definition of a Variable
Interest Entity (VIE) if that enterprise has a variable interest that will
absorb a majority of the VIEs expected losses, receive a majority of the VIEs
expected residual returns, or both. A VIE is a entity in which equity
investors do not have the characteristics of a controlling financial interest
or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other
parties, and may include many types of special purpose entities. The Company
provides equity investments in VIEs that are designed to be bankruptcy remote
from the Company as an alternative to real estate investment. Investments in
such VIEs amounted to ¥42,711 million at March 31, 2003. The Companys risk
exposure is limited to the amount of these investments.

Mortgage loans on real estate are primarily mortgage loans on commercial
buildings.

Accumulated depreciation of investment real estate amounted to ¥79,538
million and ¥83,155 million at March 31, 2003 and 2002, respectively.

Other long-term investments include:

|                                         |  |                   |         |      |  |  |         | 
|---------------------------------------- |  | ----------------- | ------- | ---- |  |  | ------- | 
|                                         |  | (Yen in millions)
|                                         |  |                  
|                                         |  | 2003              |         | 2002
|                                         |  |                   |         |     
|Mortgage loans on vessels and facilities |  | ¥                 | 22,125  |      |  |  | 25,061  | 
|Collateral and bank-guaranteed loans     |  |                   | 22,096  |      |  |  | 29,800  | 
|Unsecured loans                          |  |                   | 440,997 |      |  |  | 404,419 | 
|Money trust                              |  |                   | 73,786  |      |  |  | 76,386  | 
|                                         |  |                   |         |      |  |  |         | 
|                                         |  | ¥                 | 559,004 |      |  |  | 535,666 | 
|                                         |  |                   |         |      |  |  |         | 

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 to commercial enterprises and are secured
principally by listed stocks and/or bonds of Japanese corporations. Certain of
these loans are made jointly with other insurance companies.

Bank-guaranteed loans are made to commercial enterprises.

F-23



---



##### Table of Contents



Unsecured loans within authorized limits are made on a selective basis to
corporate borrowers. These loans are generally term loans, which had
contractual maturities ranging from 2003 through 2038 at
March 31, 2003.
Interest rates of these loans varied from 0.04% to 12.00% at March 31, 2003,
and 0.10% to 12.00% at March 31, 2002.

Money trust is a type of portfolio investment in which trust banks are
entrusted with investments in securities or other financial instruments.

Short-term investments consist primarily of call loans and other
investments maturing within one year. Short-term investments amounting to
¥1,243 million at March 31, 2003 and ¥220 million at March 31, 2002 were
deposited with the United States government authorities and other foreign
government authorities as requited by law.

Details of net investment income were as follows:

|                              |                         |   |                   |         |      |  |        |         |  |  |        |         | 
|----------------------------- | ----------------------- | - | ----------------- | ------- | ---- |  | ------ | ------- |  |  | ------ | ------- | 
|                              |                         |   | (Yen in millions)
|                              |                         |   |                  
|                              |                         |   | 2003              |         | 2002 |  | 2001  
|                              |                         |   |                   |         |      |  |       
|Fixed maturities              |                         | ¥ | 65,762            |         |      |  | 51,913 |         |  |  | 50,541 |        
|Equity securities             |                         |   | 32,785            |         |      |  | 29,409 |         |  |  | 30,002 |        
|Mortgage loans on real estate |                         |   | 3,715             |         |      |  | 4,219  |         |  |  | 4,569  |        
|Investment real estate        |                         |   | 12,817            |         |      |  | 12,907 |         |  |  | 14,050 |        
|Policy loans                  |                         |   | 1,156             |         |      |  | 830    |         |  |  | 757    |        
|Other long-term investments   |                         |   | 11,475            |         |      |  | 11,802 |         |  |  | 15,421 |        
|Short-term investments        |                         |   | 5,677             |         |      |  | 4,113  |         |  |  | 4,416  |        
|Other                         |                         |   | 1,715             |         |      |  | 7,987  |         |  |  | 27,967 |        
|                              |                         |   |                   |         |      |  |        |         |  |  |        |        
|                              | Gross investment income |   |                   | 135,102 |      |  |        | 123,180 |  |  |        | 147,723 | 
|Less investment expenses      |                         |   | 26,791            |         |      |  | 18,499 |         |  |  | 19,871 |        
|                              |                         |   |                   |         |      |  |        |         |  |  |        |        
|                              | Net investment income   |   | ¥                 | 108,311 |      |  |        | 104,681 |  |  |        | 127,852 | 
|                              |                         |   |                   |         |      |  |        |         |  |  |        |        

Effective for the year ended March 31, 2002, the Company changed the
presentation of reporting gains and losses on derivative transactions to gains
(losses) on derivatives as described in note 1(g). The above table includes
net gains on derivative transactions in the amount of ¥20,696 million for the
year ended March 31, 2001.

At March 31, 2003 and 2002, accrued investment income, included in other
assets, amounted to ¥22,030 million and ¥15,365 million, respectively.

F-24



---



##### Table of Contents



Net realized and change in unrealized gains or losses on fixed maturities,
equity securities and other investments for the years ended March 31, 2003,
2002 and 2001 were as follows:

| |                  |                      |       |   |                   |         |            |  |             |          |           |  |        |        |   |  |          |          |  
| | ---------------- | -------------------- | ----- | - | ----------------- | ------- | ---------- |  | ----------- | -------- | --------- |  | ------ | ------ | - |  | -------- | -------- | -
| |                  |                      |       |   | (Yen in millions)
| |                  |                      |       |   |                  
| |                  |                      |       |   | Fixed             |         | Equity     |  | Other       |          | Net gains
| |                  |                      |       |   | maturities        |         | securities |  | investments |          | (losses) 
| |                  |                      |       |   |                   |         |            |  |             |          |          
| | 2003:           
| |                  | Realized             |       | ¥ | 11,553            |         |            |  | (37,957     | )        |           |  | (3,471 | )      |   |  | (29,875  | )       
| |                  | Change in unrealized |       |   | 120,915           |         |            |  | (635,620    | )        |           |  | (1,026 | )      |   |  | (515,731 | )       
| |                  |                      |       |   |                   |         |            |  |             |          |           |  |        |        |   |  |         
| |                  |                      | Total |   | ¥                 | 132,468 |            |  |             | (673,577 | )         |  |        | (4,497 | ) |  |          | (545,606 | )
| |                  |                      |       |   |                   |         |            |  |             |          |           |  |        |        |   |  |         
| | 2002:           
| |                  | Realized             |       | ¥ | 8,244             |         |            |  | (11,900     | )        |           |  | 2,636  |        |   |  | (1,020   | )       
| |                  | Change in unrealized |       |   | (38,293           | )       |            |  | (290,162    | )        |           |  | (3,764 | )      |   |  | (332,219 | )       
| |                  |                      |       |   |                   |         |            |  |             |          |           |  |        |        |   |  |         
| |                  |                      | Total |   | ¥                 | (30,049 | )          |  |             | (302,062 | )         |  |        | (1,128 | ) |  |          | (333,239 | )
| |                  |                      |       |   |                   |         |            |  |             |          |           |  |        |        |   |  |         
| | 2001 (Restated): |                      |       |   |                   |         |            |  |             |          |           |  |        |        |   |  |         
| |                  | Realized             |       | ¥ | 9,400             |         |            |  | 53,578      |          |           |  | (6,836 | )      |   |  | 56,142   |         
| |                  | Change in unrealized |       |   | 75,634            |         |            |  | (351,656    | )        |           |  | 4,438  |        |   |  | (271,584 | )       
| |                  |                      |       |   |                   |         |            |  |             |          |           |  |        |        |   |  |         
| |                  |                      | Total |   | ¥                 | 85,034  |            |  |             | (298,078 | )         |  |        | (2,398 | ) |  |          | (215,442 | )
| |                  |                      |       |   |                   |         |            |  |             |          |           |  |        |        |   |  |         

Trading losses for the year ended March 31, 2003 that relate to trading
securities still held at March 31, 2003 amounted to ¥140 million.

The Company recognized impairment losses on certain of its investment real
estate in the amount of ¥5,034 million in the year ended March 31, 2003.
Considering the decline of Japanese real estate market, tests for impairment
were performed as of March 31, 2003 for any significant assets where the
Company observed possible decline in the fair value below the carrying amount
of the asset. For those assets, the Company recognized impairment losses for
the amount by which the carrying amount exceeded the fair value estimated
primarily based on recent transactions involving sales of similar assets and
charged them to realized gains (losses) on other investments for the year ended
March 31, 2003 in the property and casualty segment.

The Company changed the presentation of reporting gains and losses on
derivative transactions in the year ended March 31, 2002 and the above table
includes gains and losses on derivative transactions in the amount of ¥9,901
million for the year ended March 31, 2001.

On April 1, 2000, the Company transferred certain of its fixed maturities
available for sale to held to maturity category. This transfer was based on
the Companys review of investment policies to match the duration of securities
portfolio with certain life insurance liabilities with relatively long
duration. The related unrealized gains on these securities at the time of
transfer in the amount of ¥9,088 million are being amortized from accumulated
other comprehensive income into investment income over the remaining terms of
the securities. Unamortized amounts of those unrealized gains were ¥7,719
million and ¥8,175 million at March 31, 2003 and 2002, respectively.

Securities available for sale are carried in the consolidated financial
statements at fair value. Changes in unrealized gains and losses, net of
taxes, on securities available for sale shown above are included in other
comprehensive income.

The Companys investments in Toyota Motor Corporation and its affiliates
amounting to ¥290,199 million and ¥284,345 million at March 31, 2003 and 2002,
respectively, exceeded 10% of stockholders equity.

The recorded investments in impaired loans and related specific valuation
allowances, which were established for all impaired loans, at March 31, 2003
and 2002 were as follows:

F-25



---



##### Table of Contents



| |       |                                      |   |                   |        |            |  |        |        | 
| | ----- | ------------------------------------ | - | ----------------- | ------ | ---------- |  | ------ | ------ | 
| |       |                                      |   | (Yen in millions)
| |       |                                      |   |                  
| |       |                                      |   | Total             |        | Valuation 
| |       |                                      |   | recorded          |        | allowances
| |       |                                      |   | investment        |        |  specific
| |       |                                      |   |                   |        |           
| | 2003: |                                      |   |                   |        |            |  |        |       
| |       | Mortgage loans on real estate        |   | ¥                 | 31,483 |            |  |        | 12,862 | 
| |       | Collateral and bank-guaranteed loans |   |                   | 11,360 |            |  |        | 4,865  | 
| |       | Unsecured loans                      |   |                   | 23,153 |            |  |        | 12,378 | 
| |       |                                      |   |                   |        |            |  |        |       
| |       |                                      | ¥ | 65,996            |        |            |  | 30,105 |       
| |       |                                      |   |                   |        |            |  |        |       
| | 2002: |                                      |   |                   |        |            |  |        |       
| |       | Mortgage loans on real estate        |   | ¥                 | 16,726 |            |  |        | 8,264  | 
| |       | Unsecured loans                      |   |                   | 30,564 |            |  |        | 15,806 | 
| |       |                                      |   |                   |        |            |  |        |       
| |       |                                      | ¥ | 47,290            |        |            |  | 24,070 |       
| |       |                                      |   |                   |        |            |  |        |       

In addition, based on the Companys past experience that it is probable
that a certain percentage of its loans not covered by specific valuation
allowances are impaired at the balance sheet date even in the absence of
specific loss information, the Company established unallocated valuation
allowances in order to incorporate loss contingencies underlying the loan
portfolio comprehensively. In determining the amount of required allowances,
the Company classifies loans into three categories based on their current
credit quality, and applies historical loan loss ratios for these respective
categories. The outstanding unallocated valuation allowances were ¥6,730
million and ¥8,675 million at March 31, 2003 and 2002, respectively.

The activity in valuation allowances for the years ended March 31, 2003,
2002 and 2001 is as follows:

|                                              |  |                   |        |      |  |      |        |   |  |  |        |  
|--------------------------------------------- |  | ----------------- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | -
|                                              |  | (Yen in millions)
|                                              |  |                  
|                                              |  | 2003              |        | 2002 |  | 2001
|                                              |  |                   |        |      |  |     
|Balance at beginning of year                  |  | ¥                 | 32,745 |      |  |      | 38,919 |   |  |  | 38,219 |  
|Adjustment in connection with the acquisition |  |                   | 9,129  |      |  |      |       |   |  |  |       |  
|Charges to income                             |  |                   | 1,091  |      |  |      | (502   | ) |  |  | 1,731  |  
|Principal charge-offs                         |  |                   | (6,130 | )    |  |      | (5,672 | ) |  |  | (1,031 | )
|                                              |  |                   |        |      |  |      |        |   |  |  |        |  
|Balance at end of year                        |  | ¥                 | 36,835 |      |  |      | 32,745 |   |  |  | 38,919 |  
|                                              |  |                   |        |      |  |      |        |   |  |  |        |  

During the years ended March 31, 2003, 2002 and 2001, the average recorded
investment in impaired loans amounted to ¥63,674 million, ¥55,512 million and
¥67,880 million, respectively, and interest income recognized and received in
cash on those loans amounted to ¥1,309 million, ¥747 million and ¥1,361
million, respectively. At March 31, 2003 and 2002, the carrying amount of
loans that were non-income producing during the preceding twelve months
amounted to ¥12,148 million and ¥6,527 million, respectively.

The Company manages its investments to limit credit risks by diversifying
its portfolio among various investment types and industry sectors. The Company
monitors creditworthiness of counterparties to all financial instruments by
using controls that include credit approvals, limits and other monitory
procedures. Collateral often includes pledges of assets, such as stocks and
other assets and guarantees.

5.     Reinsurance

In the ordinary course of business, the Company cedes risks to other insurers
and reinsurers. Reinsurance enables the Company to reduce its exposure to
large losses in all aspects of its insurance business, although it does not
relieve the Company of its obligations as direct insurer of the risks
reinsured.

Prepaid reinsurance premiums represent the portion of premiums ceded to
reinsurers applicable to the unexpired terms of the reinsurance contracts in
force. Reinsurance recoverable on losses represents estimates of amounts that
will be recovered from reinsurers on reported and unreported losses and claims
and loss adjustment expenses.

F-26



---



##### Table of Contents



The Company is exposed to contingent liability with respect to reinsurance
which would become an actual liability to the extent that any reinsurer failed
to meet its obligations to the Company. Because of the large amount of funds
held by the Company under reinsurance treaties and the Companys favorable
historical results with the reinsurers involved, no material amounts were
considered uncollectible and no material provisions were made for this
contingency.

The effect of ceded reinsurance on the consolidated statements of income
for the years ended March 31, 2003, 2002 and 2001 is as follows:

|                       |                          |         |                         |   |                   |           |      |  |           |           |  |  |           |           | 
|---------------------- | ------------------------ | ------- | ----------------------- | - | ----------------- | --------- | ---- |  | --------- | --------- |  |  | --------- | --------- | 
|                       |                          |         |                         |   | (Yen in millions)
|                       |                          |         |                         |   |                  
|                       |                          |         |                         |   | 2003              |           | 2002 |  | 2001     
|                       |                          |         |                         |   |                   |           |      |  |          
|Property and casualty: |                          |         |                         |   |                   |           |      |  |           |           |  | 
|                       | Premiums written:        |         |                         |   |                   |           |      |  |           |           |  |  |          
|                       |                          | Direct  |                         | ¥ | 1,987,463         |           |      |  | 1,509,615 |           |  |  | 1,468,361 |          
|                       |                          | Assumed |                         |   | 325,347           |           |      |  | 138,362   |           |  |  | 94,117    |          
|                       |                          | Ceded   |                         |   | (414,253          | )         |      |  | (266,494  | )         |  |  | (238,571  | )        
|                       |                          |         |                         |   |                   |           |      |  |           |           |  | 
|                       |                          |         | Net premiums written    |   | ¥                 | 1,898,557 |      |  |           | 1,381,483 |  |  |           | 1,323,907 | 
|                       |                          |         |                         |   |                   |           |      |  |           |           |  | 
|                       | Premiums earned:         |         |                         |   |                   |           |      |  |           |           |  |  |          
|                       |                          | Direct  |                         | ¥ | 1,952,534         |           |      |  | 1,436,884 |           |  |  | 1,449,523 |          
|                       |                          | Assumed |                         |   | 190,135           |           |      |  | 128,786   |           |  |  | 92,236    |          
|                       |                          | Ceded   |                         |   | (381,701          | )         |      |  | (222,708  | )         |  |  | (231,020  | )        
|                       |                          |         |                         |   |                   |           |      |  |           |           |  | 
|                       |                          |         | Premiums earned         |   | ¥                 | 1,760,968 |      |  |           | 1,342,962 |  |  |           | 1,310,739 | 
|                       |                          |         |                         |   |                   |           |      |  |           |           |  | 
|                       | Losses, claims incurred: |         |                         |   |                   |           |      |  |           |           |  |  |          
|                       |                          | Direct  |                         | ¥ | 1,064,457         |           |      |  | 838,246   |           |  |  | 889,295   |          
|                       |                          | Assumed |                         |   | 174,561           |           |      |  | 110,858   |           |  |  | 92,823    |          
|                       |                          | Ceded   |                         |   | (285,337          | )         |      |  | (212,339  | )         |  |  | (202,430  | )        
|                       |                          |         |                         |   |                   |           |      |  |           |           |  | 
|                       |                          |         | Losses, claims incurred |   | ¥                 | 953,681   |      |  |           | 736,765   |  |  |           | 779,688   | 
|                       |                          |         |                         |   |                   |           |      |  |           |           |  | 
|Life:                  |                          |         |                         |   |                   |           |      |  |           |           |  | 
|                       | Premiums earned:         |         |                         |   |                   |           |      |  |           |           |  |  |          
|                       |                          | Direct  |                         | ¥ | 263,361           |           |      |  | 209,469   |           |  |  | 163,016   |          
|                       |                          | Assumed |                         |   | 0                 |           |      |  | 0         |           |  |  | 1         |          
|                       |                          | Ceded   |                         |   | (875              | )         |      |  | (261      | )         |  |  | (112      | )        
|                       |                          |         |                         |   |                   |           |      |  |           |           |  | 
|                       |                          |         | Premiums earned         |   | ¥                 | 262,486   |      |  |           | 209,208   |  |  |           | 162,905   | 
|                       |                          |         |                         |   |                   |           |      |  |           |           |  | 

F-27



---



##### Table of Contents



6.     Deferred Policy Acquisition Costs

The following sets forth the policy acquisition costs deferred for amortization
against future income and the related amortization charged to income for
property and casualty and life insurance operations:

|                       |                                               |                                 |                                |         |                   |         |         |         |            |         |            |         |         |         | 
|---------------------- | --------------------------------------------- | ------------------------------- | ------------------------------ | ------- | ----------------- | ------- | ------- | ------- | ---------- | ------- | ---------- | ------- | ------- | ------- | 
|                       |                                               |                                 |                                |         | (Yen in millions)
|                       |                                               |                                 |                                |         |                  
|                       |                                               |                                 |                                |         | 2003              |         | 2002    |         | 2001      
|                       |                                               |                                 |                                |         |                   |         |         |         |           
|                       |                                               |                                 |                                |         |                   |         |         |         | (Restated) |         | (Restated)
|Property and casualty: |                                               |                                 |                                |         |                   |         |         |         |            |         |            |        
|                       | Deferred at beginning of year                 |                                 | ¥                              | 221,914 |                   |         |         | 214,019 |            |         |            | 211,267 |        
|                       | Adjustment in connection with the acquisition |                                 |                                | 99,663  |                   |         |         |        |            |         |            |        |        
|                       | Incurred during year:                         |                                 |                                |         |                   |         |         |         |            |         |            |         |        
|                       |                                               | Commissions and brokerage       |                                |         | 287,460           |         |         |         | 227,168    |         |            |         | 215,447 |        
|                       |                                               | Salaries and other compensation |                                |         | 147,207           |         |         |         | 115,911    |         |            |         | 116,310 |        
|                       |                                               | Other underwriting costs        |                                |         | 112,099           |         |         |         | 83,795     |         |            |         | 84,589  |        
|                       |                                               |                                 |                                |         |                   |         |         |         |            |         |            |        
|                       |                                               |                                 | 546,766                        |         |                   |         | 426,874 |         |            |         | 416,346    |        
|                       |                                               |                                 |                                |         |                   |         |         |         |            |         |            |        
|                       |                                               |                                 | 868,343                        |         |                   |         | 640,893 |         |            |         | 627,613    |        
|                       | Foreign currency translation adjustments      |                                 |                                | (331    | )                 |         |         |        |            |         |            |        |        
|                       | Deferred at end of year                       |                                 |                                | 323,865 |                   |         |         | 221,914 |            |         |            | 214,019 |        
|                       |                                               |                                 |                                |         |                   |         |         |         |            |         |            |        
|                       | Policy acquisition costs                      |                                 |                                | 544,147 |                   |         |         | 418,979 |            |         |            | 413,594 |        
|                       |                                               |                                 |                                |         |                   |         |         |         |            |         |            |        
|Life:                  |                                               |                                 |                                |         |                   |         |         |         |            |         |            |        
|                       | Deferred at beginning of year                 |                                 |                                | 79,809  |                   |         |         | 63,366  |            |         |            | 43,630  |        
|                       | Incurred during year                          |                                 |                                | 45,717  |                   |         |         | 34,476  |            |         |            | 28,693  |        
|                       |                                               |                                 |                                |         |                   |         |         |         |            |         |            |        
|                       |                                               |                                 | 125,526                        |         |                   |         | 97,842  |         |            |         | 72,323     |        
|                       | Deferred at end of year                       |                                 |                                | 98,615  |                   |         |         | 79,809  |            |         |            | 63,366  |        
|                       |                                               |                                 |                                |         |                   |         |         |         |            |         |            |        
|                       | Policy acquisition costs                      |                                 |                                | 26,911  |                   |         |         | 18,033  |            |         |            | 8,957   |        
|                       |                                               |                                 |                                |         |                   |         |         |         |            |         |            |        
|                       |                                               |                                 | Total policy acquisition costs |         | ¥                 | 571,058 |         |         |            | 437,012 |            |         |         | 422,551 | 
|                       |                                               |                                 |                                |         |                   |         |         |         |            |         |            |        

7.     Property and Equipment

A summary of property and equipment is as follows:

|                              |                            |   |                   |         |      |  |         |         | 
|----------------------------- | -------------------------- | - | ----------------- | ------- | ---- |  | ------- | ------- | 
|                              |                            |   | (Yen in millions)
|                              |                            |   |                  
|                              |                            |   | 2003              |         | 2002
|                              |                            |   |                   |         |     
|Land                          |                            | ¥ | 88,778            |         |      |  | 93,954  |        
|Buildings                     |                            |   | 225,200           |         |      |  | 228,457 |        
|Furniture and equipment       |                            |   | 67,372            |         |      |  | 40,755  |        
|Construction in progress      |                            |   | 6,404             |         |      |  | 24      |        
|                              |                            |   |                   |         |      |  |         |        
|                              | Total at cost              |   |                   | 387,754 |      |  |         | 363,190 | 
|Less accumulated depreciation |                            |   | 183,676           |         |      |  | 162,768 |        
|                              |                            |   |                   |         |      |  |         |        
|                              | Net property and equipment |   | ¥                 | 204,078 |      |  |         | 200,422 | 
|                              |                            |   |                   |         |      |  |         |        

F-28



---



##### Table of Contents



8.     Liability for Unpaid Losses and Claims and Loss Adjustment Expenses

The table below is a reconciliation of beginning and ending property and
casualty insurance balances for unpaid losses and claims and loss adjustment
expenses for the years ended March 31, 2003, 2002 and 2001:

|                                              |                               |                |           |                   |           |      |         |            |         |            |         |         |         | 
|--------------------------------------------- | ----------------------------- | -------------- | --------- | ----------------- | --------- | ---- | ------- | ---------- | ------- | ---------- | ------- | ------- | ------- | 
|                                              |                               |                |           | (Yen in millions)
|                                              |                               |                |           |                  
|                                              |                               |                |           | 2003              |           | 2002 |         | 2001      
|                                              |                               |                |           |                   |           |      |         |           
|                                              |                               |                |           |                   |           |      |         | (Restated) |         | (Restated)
|                                              |                               |                |           |                   |           |      |         |            |         |           
|Balance at beginning of year                  |                               | ¥              | 875,463   |                   |           |      | 854,952 |            |         |            | 821,088 |        
|                                              | Less reinsurance recoverables |                |           | 247,861           |           |      |         | 255,696    |         |            |         | 257,221 |        
|                                              |                               |                |           |                   |           |      |         |            |         |            |         |        
|Net balance at beginning of year              |                               |                | 627,602   |                   |           |      | 599,256 |            |         |            | 563,867 |        
|                                              |                               |                |           |                   |           |      |         |            |         |            |         |        
|Adjustment in connection with the acquisition |                               |                | 141,940   |                   |           |      |        |            |         |            |        |        
|Incurred related to:                          |                               |                |           |                   |           |      |         |            |         |            |         |        
|                                              | Current year                  |                |           | 1,029,655         |           |      |         | 802,061    |         |            |         | 829,097 |        
|                                              | Prior years                   |                |           | 438               |           |      |         | (3,847     | )       |            |         | 3,961   |        
|                                              |                               |                |           |                   |           |      |         |            |         |            |         |        
|                                              |                               | Total incurred |           |                   | 1,030,093 |      |         |            | 798,214 |            |         |         | 833,058 | 
|                                              |                               |                |           |                   |           |      |         |            |         |            |         |        
|Paid related to:                              |                               |                |           |                   |           |      |         |            |         |            |         |        
|                                              | Current year                  |                |           | 590,791           |           |      |         | 481,710    |         |            |         | 519,627 |        
|                                              | Prior years                   |                |           | 417,105           |           |      |         | 288,158    |         |            |         | 278,042 |        
|                                              |                               |                |           |                   |           |      |         |            |         |            |         |        
|                                              |                               | Total paid     |           |                   | 1,007,896 |      |         |            | 769,868 |            |         |         | 797,669 | 
|                                              |                               |                |           |                   |           |      |         |            |         |            |         |        
|Foreign currency translation adjustments      |                               |                | (1,987    | )                 |           |      |        |            |         |            |        |        
|Net balance at end of year                    |                               |                | 789,752   |                   |           |      | 627,602 |            |         |            | 599,256 |        
|                                              | Plus reinsurance recoverables |                |           | 342,132           |           |      |         | 247,861    |         |            |         | 255,696 |        
|                                              |                               |                |           |                   |           |      |         |            |         |            |         |        
|Balance at end of year                        |                               | ¥              | 1,131,884 |                   |           |      | 875,463 |            |         |            | 854,952 |        
|                                              |                               |                |           |                   |           |      |         |            |         |            |         |        

Prior year claims and expenses incurred in the preceding table resulted
principally from settling claims established in earlier accident years for
amounts that differed from expectations.

The reinsurance recoverables referred to above are reconciled to the
balance sheet carrying amounts as follows:

|                       |               |                                         |     |                   |         |      |   |         |         | 
|---------------------- | ------------- | --------------------------------------- | --- | ----------------- | ------- | ---- | - | ------- | ------- | 
|                       |               |                                         |     | (Yen in millions)
|                       |               |                                         |     |                  
|                       |               |                                         |     | 2003              |         | 2002
|                       |               |                                         |     |                   |         |     
|Property and casualty: |               |                                         |     |                   |         |      |   |        
|                       | Unpaid losses |                                         | ¥   | 342,132           |         |      |   | 247,861 |        
|                       | Paid losses   |                                         |     | 107,885           |         |      |   | 84,826  |        
|Life                   |               |                                         | 328 |                   |         |      |  |        
|                       |               |                                         |     |                   |         |      |   |        
|                       |               | Total reinsurance recoverable on losses |     | ¥                 | 450,345 |      |   |         | 332,687 | 
|                       |               |                                         |     |                   |         |      |   |        

9.     Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to 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.

F-29



---



##### Table of Contents



Total income taxes for the years ended March 31, 2003, 2002 and 2001 were
allocated as follows:

|                                                                              |                                                                      |   |                   |          |      |  |         |          |   |  |            |         |  
|----------------------------------------------------------------------------- | -------------------------------------------------------------------- | - | ----------------- | -------- | ---- |  | ------- | -------- | - |  | ---------- | ------- | -
|                                                                              |                                                                      |   | (Yen in millions)
|                                                                              |                                                                      |   |                  
|                                                                              |                                                                      |   | 2003              |          | 2002 |  | 2001   
|                                                                              |                                                                      |   |                   |          |      |  |        
|                                                                              |                                                                      |   |                   |          |      |  |         |          |   |  | (Restated)
|                                                                              |                                                                      |   |                   |          |      |  |         |          |   |  |           
|Income before extraordinary items and
cumulative effect of accounting changes |                                                                      | ¥ | 71,614            |          |      |  | 33,416  |          |   |  | 44,359     |        
|Cumulative effect of accounting changes                                       |                                                                      |   |                  |          |      |  | 48,033  |          |   |  |           |        
|Other comprehensive income:                                                   |                                                                      |   |                   |          |      |  |         |          |   |  |            |        
|                                                                              | Unrealized appreciation (depreciation) of
securities during the year |   |                   | (188,667 | )    |  |         | (118,901 | ) |  |            | (89,605 | )
|                                                                              | Minimum pension liability adjustments                                |   |                   | (22,613  | )    |  |         | (16,860  | ) |  |            | 2,046   |  
|                                                                              |                                                                      |   |                   |          |      |  |         |          |   |  |            |        
|                                                                              |                                                                      | ¥ | (139,666          | )        |      |  | (54,312 | )        |   |  | (43,200    | )      
|                                                                              |                                                                      |   |                   |          |      |  |         |          |   |  |            |        

The Company is subject to a number of taxes based on income, which in the
aggregate resulted in a normal tax rate of approximately 36% in 2003, 2002 and
2001.

The effective tax rates of the Company for the years ended March 31, 2003,
2002 and 2001 differ from the Japanese normal income tax rates for the
following reasons:

|                                         |                    |  |      |      |      |  |      |      |   |  |            |      |  
|---------------------------------------- | ------------------ |  | ---- | ---- | ---- |  | ---- | ---- | - |  | ---------- | ---- | -
|                                         |                    |  | 2003 |      | 2002 |  | 2001
|                                         |                    |  |      |      |      |  |     
|                                         |                    |  |      |      |      |  |      |      |   |  | (Restated)
|                                         |                    |  |      |      |      |  |      |      |   |  |           
|Japanese normal income tax rate          |                    |  | 36.0 | %    |      |  | 36.0 | %    |   |  | 36.0       | %   
|Tax credit for dividends received        |                    |  | (3.0 | )    |      |  | (7.1 | )    |   |  | (4.7       | )   
|Expenses not deductible for tax purposes |                    |  | 0.9  |      |      |  | 1.2  |      |   |  | 1.2        |     
|Other                                    |                    |  | 1.7  |      |      |  | 0.7  |      |   |  | 0.8        |     
|                                         |                    |  |      |      |      |  |      |      |   |  |            |     
|                                         | Effective tax rate |  |      | 35.6 | %    |  |      | 30.8 | % |  |            | 33.3 | %
|                                         |                    |  |      |      |      |  |      |      |   |  |            |     

F-30



---



##### Table of Contents



The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at March 31,
2003 and 2002 are presented below:

|                               |                                                           |                                                                                             |         |                   |          |      |         |            |          |  
|------------------------------ | --------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------- | ----------------- | -------- | ---- | ------- | ---------- | -------- | -
|                               |                                                           |                                                                                             |         | (Yen in millions)
|                               |                                                           |                                                                                             |         |                  
|                               |                                                           |                                                                                             |         | 2003              |          | 2002
|                               |                                                           |                                                                                             |         |                   |          |     
|                               |                                                           |                                                                                             |         |                   |          |      |         | (Restated)
|Deferred tax assets:           |                                                           |                                                                                             |         |                   |          |      |         |           
|                               | Net unpaid and unreported losses                          |                                                                                             | ¥       | 84,817            |          |      |         | 70,102     |         
|                               | Future policy benefits and losses                         |                                                                                             |         | 13,501            |          |      |         | 9,315      |         
|                               | Retirement and severance benefits                         |                                                                                             |         | 47,689            |          |      |         | 34,467     |         
|                               | Minimum pension liability adjustments                     |                                                                                             |         | 50,707            |          |      |         | 28,094     |         
|                               | Valuation allowance for credit losses                     |                                                                                             |         | 12,743            |          |      |         | 9,985      |         
|                               | Property, equipment and other assets                      |                                                                                             |         | 49,910            |          |      |         | 10,603     |         
|                               | Derivatives                                               |                                                                                             |         | 33,995            |          |      |         | 24,160     |         
|                               | Operating loss carryforwards for tax purposes             |                                                                                             |         | 10,311            |          |      |         |           |         
|                               | Other                                                     |                                                                                             |         | 33,036            |          |      |         | 11,788     |         
|                               |                                                           |                                                                                             |         |                   |          |      |         |           
|                               |                                                           | Total deferred tax assets                                                                   |         |                   | 336,709  |      |         |            | 198,514  |  
|                               |                                                           |                                                                                             |         |                   |          |      |         |           
|Deferred tax liabilities:      |                                                           |                                                                                             |         |                   |          |      |         |           
|                               | Net unearned premiums                                     |                                                                                             |         | (47,552           | )        |      |         | (24,929    | )       
|                               | Deferred policy acquisition costs                         |                                                                                             |         | (151,996          | )        |      |         | (108,334   | )       
|                               | Fair value adjustments to securities recognized in income |                                                                                             |         | (88,828           | )        |      |         | (3,046     | )       
|                               | Derivatives                                               |                                                                                             |         | (89,134           | )        |      |         | (74,977    | )       
|                               | Other                                                     |                                                                                             |         | (12,225           | )        |      |         | (9,466     | )       
|                               |                                                           |                                                                                             |         |                   |          |      |         |           
|                               |                                                           | Total deferred tax liabilities                                                              |         |                   | (389,735 | )    |         |            | (220,752 | )
|                               |                                                           |                                                                                             |         |                   |          |      |         |           
|                               |                                                           | Net deferred tax liabilities before deferred taxes on
unrealized appreciation of securities |         |                   | (53,026  | )    |         |            | (22,238  | )
|                               | Deferred taxes on unrealized appreciation of securities   |                                                                                             |         | (321,037          | )        |      |         | (509,704   | )       
|                               |                                                           |                                                                                             |         |                   |          |      |         |           
|                               |                                                           | Net deferred tax liabilities                                                                |         |                   | (374,063 | )    |         |            | (531,942 | )
|Income taxes currently payable |                                                           |                                                                                             | (63,497 | )                 |          |      | (43,758 | )         
|                               |                                                           |                                                                                             |         |                   |          |      |         |           
|                               |                                                           | Income tax liability                                                                        |         | ¥                 | (437,560 | )    |         |            | (575,700 | )
|                               |                                                           |                                                                                             |         |                   |          |      |         |           

Operating loss carryforwards for tax purposes of consolidated subsidiaries
at March 31, 2003 amounted to ¥28,641 million and are available through 2008 to
offset against future taxable income of such subsidiaries.

The Company has not provided a valuation allowance for the deferred tax
assets at March 31, 2003 and 2002. Management believes that it is more likely
than not that the Company will realize the benefit of the deferred tax assets.
While there are no assurances that this benefit will be realized, the Company
expects sufficient taxable income in the future, based on its historical record
and expected future results to realize the benefit of the deferred tax assets.

10.     Retirement and Severance Benefits

Employees of the Company are covered by the defined retirement and severance
benefit plans described below.     The
Company has an unfunded lump-sum payment retirement plan covering
substantially all employees. Under the plan, employees are entitled to
lump-sum payments based on points, which are accumulated each year by the
employees rank, length of service and certain other factors, upon retirement
or termination of employment for reasons other than dismissal for cause.
Directors and statutory auditors are covered by a separate plan. It is not the
policy of management to fund the retirement and severance benefits described
above.

F-31



---



##### Table of Contents



The Company also has a funded pension plan covering substantially all
employees who meet age and service requirements. The plan covers a portion of
the welfare pension plan administered by the Japanese government.

In accordance with SFAS No. 87, Employers Accounting for Pensions, the
net periodic benefit costs of the funded pension plan in 2003, 2002 and 2001
were calculated using the unit credit actuarial cost method.

Reconciliations of beginning and ending balances of the benefit
obligations and the fair value of the plan assets are as follows:

|                                                     |                                                |  |                   |          |      |  |  |          |  
|---------------------------------------------------- | ---------------------------------------------- |  | ----------------- | -------- | ---- |  |  | -------- | -
|                                                     |                                                |  | (Yen in millions)
|                                                     |                                                |  |                  
|                                                     |                                                |  | 2003              |          | 2002
|                                                     |                                                |  |                   |          |     
|Change in benefit obligation:                        |                                                |  |                   |          |      |  |  |         
|                                                     | Benefit obligation at beginning of year        |  | ¥                 | 430,950  |      |  |  | 338,858  |  
|                                                     | Adjustment in connection with the acquisition  |  |                   | 40,690   |      |  |  |         |  
|                                                     | Service cost                                   |  |                   | 19,148   |      |  |  | 15,494   |  
|                                                     | Interest cost                                  |  |                   | 10,874   |      |  |  | 11,389   |  
|                                                     | Plan participants contributions               |  |                   | 2,593    |      |  |  | 2,115    |  
|                                                     | Amendments                                     |  |                   | (24,793  | )    |  |  | 39,576   |  
|                                                     | Actuarial loss                                 |  |                   | 75,182   |      |  |  | 35,808   |  
|                                                     | Benefits paid                                  |  |                   | (21,710  | )    |  |  | (12,290  | )
|                                                     | Foreign currency translation adjustments       |  |                   | (3       | )    |  |  |         |  
|                                                     |                                                |  |                   |          |      |  |  |         
|                                                     | Benefit obligation at end of year              |  | ¥                 | 532,931  |      |  |  | 430,950  |  
|                                                     |                                                |  |                   |          |      |  |  |         
|Change in plan assets:                               |                                                |  |                   |          |      |  |  |         
|                                                     | Fair value of plan assets at beginning of year |  | ¥                 | 144,710  |      |  |  | 137,667  |  
|                                                     | Adjustment in connection with the acquisition  |  |                   | 7,599    |      |  |  |         |  
|                                                     | Actual return on plan assets                   |  |                   | 1,443    |      |  |  | (377     | )
|                                                     | Employer contributions                         |  |                   | 24,146   |      |  |  | 9,345    |  
|                                                     | Plan participants contributions               |  |                   | 2,593    |      |  |  | 2,115    |  
|                                                     | Benefits paid                                  |  |                   | (4,932   | )    |  |  | (4,040   | )
|                                                     |                                                |  |                   |          |      |  |  |         
|                                                     | Fair value of plan assets at end of year       |  | ¥                 | 175,559  |      |  |  | 144,710  |  
|                                                     |                                                |  |                   |          |      |  |  |         
|                                                     | Funded status                                  |  | ¥                 | (357,372 | )    |  |  | (286,240 | )
|                                                     | Unrecognized net actuarial loss                |  |                   | 196,049  |      |  |  | 126,365  |  
|                                                     | Unrecognized prior service cost                |  |                   | 5,742    |      |  |  | 31,340   |  
|                                                     |                                                |  |                   |          |      |  |  |         
|                                                     | Net amount recognized                          |  | ¥                 | (155,581 | )    |  |  | (128,535 | )
|                                                     |                                                |  |                   |          |      |  |  |         
|Amounts recognized in the balance sheets consist of: |                                                |  |                   |          |      |  |  |         
|                                                     | Accrued benefit liability                      |  | ¥                 | (324,003 | )    |  |  | (237,982 | )
|                                                     | Intangible asset                               |  |                   | 27,567   |      |  |  | 31,409   |  
|                                                     | Accumulated other comprehensive income         |  |                   | 140,855  |      |  |  | 78,038   |  
|                                                     |                                                |  |                   |          |      |  |  |         
|                                                     | Net amount recognized                          |  | ¥                 | (155,581 | )    |  |  | (128,535 | )
|                                                     |                                                |  |                   |          |      |  |  |         
|Significant actuarial assumptions:                   |                                                |  |                   |          |      |  |  |         
|                                                     | Discount rate                                  |  |                   | 1.5      | %    |  |  | 2.5      | %
|                                                     | Rate of salary increase                        |  |                   | 0.6-1.7  | %    |  |  | 1.8      | %
|                                                     | Expected long-term return on plan assets       |  |                   | 1.3-2.0  | %    |  |  | 2.3      | %

F-32



---



##### Table of Contents



The components of net periodic benefit cost for the years ended March 31,
2003, 2002 and 2001 are as follows:

|                                         |                                    |                           |   |                   |        |      |  |        |        |  |  |        |        | 
|---------------------------------------- | ---------------------------------- | ------------------------- | - | ----------------- | ------ | ---- |  | ------ | ------ |  |  | ------ | ------ | 
|                                         |                                    |                           |   | (Yen in millions)
|                                         |                                    |                           |   |                  
|                                         |                                    |                           |   | 2003              |        | 2002 |  | 2001  
|                                         |                                    |                           |   |                   |        |      |  |       
|Components of net periodic benefit cost: |                                    |                           |   |                   |        |      |  |        |        |  |  |       
|                                         | Service cost                       |                           | ¥ | 19,148            |        |      |  | 15,494 |        |  |  | 15,301 |       
|                                         | Interest cost                      |                           |   | 10,874            |        |      |  | 11,389 |        |  |  | 9,060  |       
|                                         | Expected return on plan assets     |                           |   | (3,108            | )      |      |  | (3,192 | )      |  |  | (3,831 | )     
|                                         | Amortization of prior service cost |                           |   | 805               |        |      |  | 2,397  |        |  |  | (217   | )     
|                                         | Recognized actuarial loss          |                           |   | 7,162             |        |      |  | 4,398  |        |  |  | 3,310  |       
|                                         |                                    |                           |   |                   |        |      |  |        |        |  |  |       
|                                         |                                    | Net periodic benefit cost |   | ¥                 | 34,881 |      |  |        | 30,486 |  |  |        | 23,623 | 
|                                         |                                    |                           |   |                   |        |      |  |        |        |  |  |       

11.     Debt Outstanding

Debt outstanding at March 31, 2003 and 2002 comprised the following:

|                                     |                        |  |           |  |      |   |                   |         |  |  |         |         | 
|------------------------------------ | ---------------------- |  | --------- |  | ---- | - | ----------------- | ------- |  |  | ------- | ------- | 
|                                     |                        |  |           |  |      |   | (Yen in millions)
|                                     |                        |  |           |  |      |   |                  
|                                     |                        |  | Due       |  | 2003 |   | 2002             
|                                     |                        |  |           |  |      |   |                  
|Loans, 0.05% to 4.75%                |                        |  | 2007-2016 |  |      | ¥ | 4,673             |         |  |  |        |        
|Equity linked notes, 1.00% to 21.00% |                        |  | 2004      |  |      |   | 4,331             |         |  |  |        |        
|Fixed rate notes, 0.07%              |                        |  | 2004      |  |      |   | 5,000             |         |  |  |        |        
|Floating rate notes, 0.06%           |                        |  | 2005      |  |      |   | 2,000             |         |  |  |        |        
|Credit linked notes, 2.56% to 11.75% |                        |  | 2007      |  |      |   | 25,373            |         |  |  |        |        
|Unsecured bonds, 1.47% to 2.78%      |                        |  | 2006-2021 |  |      |   | 135,984           |         |  |  | 110,000 |        
|Other notes                          |                        |  | 2011      |  |      |   | 519               |         |  |  |        |        
|                                     |                        |  |           |  |      |   |                   |         |  |  |         |        
|                                     | Total debt outstanding |  |           |  |      |   | ¥                 | 177,880 |  |  |         | 110,000 | 
|                                     |                        |  |           |  |      |   |                   |         |  |  |         |        

The proceeds of these debts were used primarily for general corporate purposes.

Maturities of debt outstanding at March 31, 2003 are as follows:

|           |                        |   |                   |         | 
|---------- | ---------------------- | - | ----------------- | ------- | 
|           |                        |   | (Yen in millions)
|           |                        |   |                  
|2004       |                        | ¥ | 9,331             |        
|2005       |                        |   | 2,000             |        
|2006       |                        |   | 30,000            |        
|2007       |                        |   | 36,702            |        
|2008       |                        |   | 654               |        
|Thereafter |                        |   | 99,193            |        
|           |                        |   |                   |        
|           | Total debt outstanding |   | ¥                 | 177,880 | 
|           |                        |   |                   |        

The Company leases certain property and equipment under noncancelable
lease agreements. At March 31, 2003, obligations under capital leases which
were presented as other liabilities amounted to ¥8,006 million. Of this
amount, the obligations due within one year amounted to ¥4,616 million.

F-33



---



##### Table of Contents



12.     Fair Values of Financial Instruments

SFAS No. 107, Disclosures about Fair Value of Financial Instruments requires
disclosure of estimated fair value for all financial instruments. See note 15
for discussion of fair value of derivative financial instruments. The carrying
amounts and the fair values of the Companys nonderivative financial
instruments at March 31, 2003 and 2002 are as follows:

| |                                          |  |                   |            |            |  |        |            |            |  |  |            |   |  |  |            |  
| | ---------------------------------------- |  | ----------------- | ---------- | ---------- |  | ------ | ---------- | ---------- |  |  | ---------- | - |  |  | ---------- | -
| |                                          |  | (Yen in millions)
| |                                          |  |                  
| |                                          |  | 2003              |            | 2002      
| |                                          |  |                   |            |           
| |                                          |  | Carrying          |            |            |  |        |            | Carrying   |  |  |            |  
| |                                          |  | amount            |            | Fair value |  | amount |            | Fair value
| |                                          |  |                   |            |            |  |        |            |           
| | Policy loans                             |  | ¥                 | 29,171     |            |  |        | 29,171     |            |  |  | 20,615     |   |  |  | 20,615     |  
| | Mortgage loans on real estate            |  |                   | 148,655    |            |  |        | 152,379    |            |  |  | 144,323    |   |  |  | 145,869    |  
| | Mortgage loans on vessels and
facilities |  |                   | 22,125     |            |  |        | 21,637     |            |  |  | 25,061     |   |  |  | 25,082     |  
| | Collateral and bank-guaranteed loans     |  |                   | 22,096     |            |  |        | 24,190     |            |  |  | 29,800     |   |  |  | 29,768     |  
| | Unsecured loans                          |  |                   | 440,997    |            |  |        | 449,412    |            |  |  | 404,419    |   |  |  | 406,169    |  
| | Money trust                              |  |                   | 73,786     |            |  |        | 73,786     |            |  |  | 76,386     |   |  |  | 76,386     |  
| | Short-term investments                   |  |                   | 660,370    |            |  |        | 660,370    |            |  |  | 665,406    |   |  |  | 665,406    |  
| | Investment deposits by policyholders     |  |                   | (2,716,526 | )          |  |        | (3,094,290 | )          |  |  | (2,131,834 | ) |  |  | (2,362,170 | )
| | Debt outstanding                         |  |                   | (177,880   | )          |  |        | (189,307   | )          |  |  | (110,000   | ) |  |  | (115,257   | )

The Company started disclosing fair values of investment deposits by
policyholders this year.

The following methods and assumptions were used by the Company in
estimating the fair values of its nonderivative financial instruments:

Cash and cash equivalents, accrued investment income (included in other
assets), premiums receivable and agents balances, reinsurance recoverable on
losses and ceded reinsurance balances payable
The carrying amounts approximate fair values due to the short maturity of
these instruments.

Fixed maturities and equity securities
The carrying amounts and fair values of fixed maturities and equity securities
are disclosed in note 4.

Policy loans
The carrying amounts of floating-rate policy loans approximate their fair
values as the interest rates charged on those instruments are designed so that
they would be adjusted periodically to reflect changes in overall market
interest rates.

Mortgage loans on real estate, other long-term investments and short-term
investments
The fair values for these financial instruments are estimated based on the
quoted market prices for these or similar instruments. For financial
instruments for which quoted market prices are not available, fair values are
estimated using discounted cash flow analysis and interest rates currently
being offered for similar loans to borrowers with similar credit ratings or for
similar deposits.

Investment deposits by policyholders
The fair values of investment deposits by policyholders were estimated using
discounted cash flow calculations based on market interest rates currently
prevailing for similar contracts with similar maturities. The cash flows used
in fair value calculation were based on the best estimate assumptions of lapse
rates and other factors.

F-34



---



##### Table of Contents



Debt outstanding
The fair values for debt outstanding are estimated using their market prices.
For debt outstanding on which quoted market prices are not available, the fair
values are estimated using discounted cash flow analysis, based on the
Companys current borrowing rate for similar types of borrowings.

Limitations
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instruments. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

13.     Statutory Capital and Dividend Availability

Millea Holdings is subject to regulatory restrictions on the amount of
dividends distributable to its stockholders. The amount of retained earnings
available for dividends is based on the amount recorded on the Millea Holdings
non-consolidated statutory books of account in accordance with Japanese GAAP.
Millea Holdings had retained earnings in the amount of ¥44,567 million, net of
treasury stock in the amount of ¥5,038 million as of March 31, 2003. 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.

Provision has not been made in the accompanying consolidated balance sheet
as of March 31, 2003 for dividends subsequently proposed to Millea Holdings
stockholders by the Board of Directors in the aggregate amount of ¥18,519
million.

The insurance subsidiaries of Millea Holdings incorporated in Japan are
required to maintain adequate solvency margins for Japanese regulatory
authorities. At March 31, 2003, these subsidiaries had sufficient capital
surplus in their respective statutory stockholders equity to satisfy the
solvency margin requirements.

In the parent company only financial statements prepared in conformity
with Japanese GAAP, Millea Holdings reported net income of ¥49,605 million in
2003, ¥39,182 million in 2002 and ¥43,140 million in 2001, and stockholders
equity of ¥2,206,053 million at March 31, 2003 and ¥1,803,976 million at March
31, 2002.

The
amounts of statutory net income (loss) for the years ended March 31,
2003, 2002 and 2001, and stockholders equity at March 31, 2003 and 2002 of the
consolidated insurance subsidiaries were as follows:

|                                |                       |  |                   |           |      |  |      |        |  |  |  |       | 
|------------------------------- | --------------------- |  | ----------------- | --------- | ---- |  | ---- | ------ |  |  |  | ----- | 
|                                |                       |  | (Yen in millions)
|                                |                       |  |                  
|                                |                       |  | 2003              |           | 2002 |  | 2001
|                                |                       |  |                   |           |      |  |     
|Statutory net income (loss):    |                       |  |                   |           |      |  |      |        |  |  |  |      
|                                | Property and casualty |  | ¥                 | 112,615   |      |  |      | 12,703 |  |  |  | 2,443 | 
|                                | Life                  |  |                   | (966      | )    |  |      | 1      |  |  |  | 1     | 
|Statutory stockholders equity: |                       |  |                   |           |      |  |      |        |  |  |  |      
|                                | Property and casualty |  |                   | 2,006,678 |      |  |      | 67,285 |  |  |  |       | 
|                                | Life                  |  |                   | 46,160    |      |  |      | 27,437 |  |  |  |       | 

14.     Commitments and Contingent Liabilities

At March 31, 2003, commitments outstanding for the purchase of property and
equipment approximated ¥14,547 million.

F-35



---



##### Table of Contents



The Company occupies certain offices and other facilities and uses certain
equipment under cancelable lease arrangements. Rental expenses for the years
ended March 31, 2003, 2002 and 2001 aggregated ¥14,694 million, ¥17,427 million
and ¥18,515 million, respectively.

The Company enters into credit default swap transactions to earn
investment returns. The maximum potential amount of future payments represents
the notional amounts that could be lost under the credit default swaps if there
were a total default by the guaranteed parties, without consideration of
possible recoveries under recourse provisions or from collateral held or
pledged. At March 31, 2003, the Companys maximum potential amount of future
payments under the credit default swaps was approximately ¥1,889,836 million.
At March 31, 2003, the carrying amount of the liabilities related to these
credit default swaps was ¥16,356 million. Other property will be available to
the Company to cover losses, or, the Company will cover losses, net of some
collateral; however, the value of such property or collateral has not been
determined.

See
also note 15 for the discussion on credit default swaps, which had
been accounted for as guarantees prior to the adoption of SFAS No. 133.

Guarantees are used in various transactions to enhance credit standing of
the Companys customers and third parties. They represent irrevocable
assurances that the Company will make payment in the event that the customer
fails to fulfill its obligation arising from guarantees of the indebtedness of
third parties, the corporate loans and bonds, etc., to third parties. The
Company is obliged to pay the outstanding liabilities when the guaranteed
parties fail to pay principal and/or interest in accordance with the
contractual terms. The maximum exposure under these guarantees as of March 31,
2003 was approximately ¥22,409 million. At March 31, 2003, the Company did not
recognize any liabilities for these remote loss contingencies. In
some cases, those liabilities are secured by the guaranteed parties
operating assets. Once the
Company assumes the guaranteed parties obligation, the Company acquires the
right of the collateral.

In the ordinary course of business, the Company is involved in various
legal proceedings. Although there can be no assurances, as of March 31, 2003,
the Company believes, based on information currently available, that the
ultimate resolution of these legal proceedings would not be likely to have a
material adverse effect on its results of operations, financial condition or
liquidity.

15.     Derivative Financial Instruments

The Company utilizes derivative financial instruments in its normal course of
business (a) to manage interest rate risk, (b) to manage foreign exchange risk
and (c) for other purposes. Although some types of these derivatives
economically hedge the Companys risk exposure, they do not qualify for hedge
accounting under SFAS No.  133. All derivatives are recognized on the
consolidated balance sheets at fair value as derivative assets or derivative
liabilities, with the changes in fair value recognized currently in earnings
as gains (losses) on derivatives.

(a)  Derivatives used for interest rate risk management
The Company uses interest rate swaps to manage interest rate exposures arising
from mismatches between assets and liabilities (including duration mismatches).
The Companys insurance liabilities that bear credited interest rates, mainly
those relating to deposit-type insurance and life insurance, are exposed to the
risk of declines in interest rates. The Companys strategy is to match the
interest rate characteristics and duration of those liabilities with those of
invested assets through its asset liability management, including the use of
interest rate swaps. An interest rate swap is an agreement, generally, to
exchange fixed and floating rate interest payments without exchange of the
underlying principal.

Upon adoption of SFAS No. 133 at April 1, 2001, the interest rate swaps
used for this purpose do not qualify for hedge accounting, and the Company
recognized a net-of-tax cumulative-effect-type gain of ¥93,907 million on April
1, 2001.

(b)  Derivatives used for foreign exchange risk management
The Company is exposed to foreign currency exposures arising mainly from
foreign currency fixed maturity investments and foreign currency
receivables/payables in relation to hull and marine cargo insurance and

F-36



---



##### Table of Contents



certain reinsurance. The Company uses foreign exchange derivatives, such as
foreign exchange forwards and cross-currency swaps, to effectively manage those
foreign currency exposures. A foreign exchange forward is an agreement to
exchange different currencies at a specific future date. A cross-currency swap
is an agreement to exchange coupon payments in one currency for coupon payments
in another currency, where the principal amount of each currency is generally
exchanged at the beginning and end of the term.

(c)  Derivatives used for other purposes
The Company enters into credit default swaps as an alternative to credit
insurance it provides. A credit default swap is a contract that provides the
buyer with protection against the risk of a default by the reference entity in
return for periodic payments to the seller. Prior to the adoption of SFAS
No.  133, the Company had treated credit default swaps as guarantees. In
accordance with SFAS No.  133, the Company now accounts for them as derivatives,
which are recognized at fair value.

The
Company uses bond futures, equity index futures and other instruments
to manage market risks.

The
Company uses foreign exchange forwards, bond futures, equity index
options, equity index futures and other instruments to earn investment returns.

The carrying amounts and the fair values of the Companys derivative
financial instruments at March 31, 2003 and 2002 are as follows:

|      |                           |                   |   |                 |         |             |  |          |          |  
|----- | ------------------------- | ----------------- | - | --------------- | ------- | ----------- |  | -------- | -------- | -
|      |                           |                   |   | Yen in millions
|      |                           |                   |   |                
|      |                           |                   |   | Assets          |         | Liabilities
|      |                           |                   |   |                 |         |            
|2003: |                           |                   |   |                 |         |             |  |         
|      | Interest rate swaps       |                   | ¥ | 315,171         |         |             |  | (162,019 | )       
|      | Foreign exchange forwards |                   |   | 177             |         |             |  | (2,127   | )       
|      | Currency swaps            |                   |   | 14,881          |         |             |  | (15,329  | )       
|      | Credit default swaps      |                   |   | 9,563           |         |             |  | (23,050  | )       
|      | Bond futures              |                   |   | 26              |         |             |  | (56      | )       
|      | Equity index futures      |                   |   | 633             |         |             |  |         |         
|      | Other                     |                   |   | 828             |         |             |  | (430     | )       
|      |                           |                   |   |                 |         |             |  |         
|      |                           | Total derivatives |   | ¥               | 341,279 |             |  |          | (203,011 | )
|      |                           |                   |   |                 |         |             |  |         
|2002: |                           |                   |   |                 |         |             |  |         
|      | Interest rate swaps       |                   | ¥ | 202,390         |         |             |  | (53,348  | )       
|      | Foreign exchange forwards |                   |   | 582             |         |             |  | (15,633  | )       
|      | Currency swaps            |                   |   | 216             |         |             |  | (9,883   | )       
|      | Credit default swaps      |                   |   | 3,639           |         |             |  | (14,061  | )       
|      | Bond futures              |                   |   | 61              |         |             |  | (354     | )       
|      | Equity index options      |                   |   | 211             |         |             |  | (168     | )       
|      | Equity index futures      |                   |   | 113             |         |             |  | (214     | )       
|      | Other                     |                   |   |                |         |             |  | (31      | )       
|      |                           |                   |   |                 |         |             |  |         
|      |                           | Total derivatives |   | ¥               | 207,212 |             |  |          | (93,692  | )
|      |                           |                   |   |                 |         |             |  |         

The following methods and assumptions were used by the Company in
estimating the fair values of its derivative financial instruments:

Interest rate swaps
The fair values of interest rate swaps are based on the estimated present
values the Company would receive or pay to terminate agreements, taking into
consideration current interest rates and the current creditworthiness of the
counterparties.

F-37



---



##### Table of Contents



Foreign exchange forwards and currency swaps
The fair values of foreign exchange derivatives including forwards and currency
swaps are estimated by obtaining current market quotes from banks.

Credit default swaps
The fair values of credit default swaps are estimated by obtaining current
market quotes from counterparties, if available. If quoted market prices are
not available, as is the case primarily with credit default swaps on pools of
multiple reference assets, then the fair value is based upon estimates
calculated by the Companys internal model reflecting prevailing market
conditions and certain other factors relating to the structure of the
transaction.

Equity index futures and options, and bond futures
The fair values of equity index futures, equity index options and bond futures
are based on the official market quotes.

Limitations
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instruments. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

16.     Business Segments

The Company is organized according to products and services which it offers.
This structure is considered in the identification of its two reportable
segments. These segments and their respective operations are as follows:

Property and Casualty
Property and Casualty segment writes marine, fire and casualty, automobile and
allied lines of insurance principally covering risks located in Japan and hull
and cargo risks for Japanese businesses. The Company evaluates the results of
this segment based upon premium income and underwriting results.

Life
Life insurance products primarily include whole-life insurance. The Company
evaluates the results of this segment based upon amounts of policies and net
income.

F-38



---



##### Table of Contents



The accounting policies of the business segments are the same as those
described in the notes to consolidated financial statements. The effects of
the elimination of certain intersegment transactions are included in the
Property and Casualty segment result. The following are income and asset data
for the Companys business segments for the years ended March 31, 2003, 2002
and 2001. See note 2 for discussion of restatements and reclassifications.

|                              |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |           |           |  |           | 
|----------------------------- | ------------------------------------------------------- | ---------------------------------- | --------- | -------------------------------------------------------- | --------- | ----------------- | --------- | ------- | - | ------------ | ---------- | --------- | --------- |  | --------- | 
|                              |                                                         |                                    |           |                                                          |           | (Yen in millions)
|                              |                                                         |                                    |           |                                                          |           |                  
|                              |                                                         |                                    |           |                                                          |           | Property and      |           |         |   |              |            |           |           | 
|                              |                                                         |                                    |           |                                                          |           | Casualty          |           | Life    |   | Consolidated
|                              |                                                         |                                    |           |                                                          |           |                   |           |         |   |             
|2003:                         |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          
|Operating income:             |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          
|                              | Property and casualty:                                  |                                    |           |                                                          |           |                   |           |         |   |              |            |           |          
|                              |                                                         | Net premiums written               |           | ¥                                                        | 1,898,557 |                   |           |         |  |              |            |           | 1,898,557 | 
|                              |                                                         | Less increase in unearned premiums |           |                                                          | 137,589   |                   |           |         |  |              |            |           | 137,589   | 
|                              |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          
|                              |                                                         |                                    |           | Premiums earned                                          |           |                   | 1,760,968 |         |   |              |           |           |           |  | 1,760,968 | 
|                              | Life premiums                                           |                                    |           |                                                         |           |                   |           | 262,486 |   |              |            | 262,486   |          
|                              | Net investment income                                   |                                    |           | 93,129                                                   |           |                   |           | 15,182  |   |              |            | 108,311   |          
|                              | Realized losses on investments                          |                                    |           | (28,310                                                  | )         |                   |           | (1,565  | ) |              |            | (29,875   | )        
|                              | Gains on derivatives                                    |                                    |           | 55,044                                                   |           |                   |           | 21,520  |   |              |            | 76,564    |          
|                              |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          
|                              |                                                         |                                    |           | Total operating income                                   |           |                   | 1,880,831 |         |   |              | 297,623    |           |           |  | 2,178,454 | 
|                              |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          
|Operating costs and expenses: |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          
|                              | Losses, claims and loss adjustment expenses             |                                    |           | 1,030,093                                                |           |                   |           |        |   |              |            | 1,030,093 |          
|                              | Policy benefits and losses for life                     |                                    |           |                                                         |           |                   |           | 223,316 |   |              |            | 223,316   |          
|                              | Income credited to investment deposits by policyholders |                                    |           | 54,111                                                   |           |                   |           | 1,900   |   |              |            | 56,011    |          
|                              | Policy acquisition costs                                |                                    |           | 544,147                                                  |           |                   |           | 26,911  |   |              |            | 571,058   |          
|                              | Other operating expenses                                |                                    |           | 85,859                                                   |           |                   |           | 10,809  |   |              |            | 96,668    |          
|                              |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          
|                              |                                                         |                                    |           | Total operating costs and expenses                       |           |                   | 1,714,210 |         |   |              | 262,936    |           |           |  | 1,977,146 | 
|                              |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          
|                              |                                                         |                                    |           | Income before income tax expense and
extraordinary items |           |                   | 166,621   |         |   |              | 34,687     |           |           |  | 201,308   | 
|                              |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          
|Income tax expense (benefit): |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          
|                              | Current                                                 |                                    |           | 83,022                                                   |           |                   |           | 9,913   |   |              |            | 92,935    |          
|                              | Deferred                                                |                                    |           | (25,237                                                  | )         |                   |           | 3,916   |   |              |            | (21,321   | )        
|                              |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          
|                              |                                                         |                                    | 57,785    |                                                          |           |                   | 13,829    |         |   |              | 71,614     |          
|                              |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          
|                              |                                                         |                                    |           | Income before extraordinary items                        |           |                   | 108,836   |         |   |              | 20,858     |           |           |  | 129,694   | 
|Extraordinary items           |                                                         |                                    | 248,323   |                                                          |           |                   |          |         |   |              | 248,323    |          
|                              |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          
|                              |                                                         |                                    |           | Net income                                               |           | ¥                 | 357,159   |         |   |              | 20,858     |           |           |  | 378,017   | 
|                              |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          
|Total investments             |                                                         | ¥                                  | 7,119,333 |                                                          |           |                   | 1,225,870 |         |   |              | 8,345,203  |          
|                              |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          
|Total assets                  |                                                         | ¥                                  | 9,513,060 |                                                          |           |                   | 1,380,303 |         |   |              | 10,893,363 |          
|                              |                                                         |                                    |           |                                                          |           |                   |           |         |   |              |            |          

F-39



---



##### Table of Contents



|                                                    |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |         |           |  |           | 
|--------------------------------------------------- | ------------------------------------------------------- | ---------------------------------- | --------- | ---------------------------------------------------------------------------- | --------- | ----------------- | --------- | ------- | - | ------------ | --------- | ------- | --------- |  | --------- | 
|                                                    |                                                         |                                    |           |                                                                              |           | (Yen in millions)
|                                                    |                                                         |                                    |           |                                                                              |           |                  
|                                                    |                                                         |                                    |           |                                                                              |           | Property and      |           |         |   |              |           |         |           | 
|                                                    |                                                         |                                    |           |                                                                              |           | Casualty          |           | Life    |   | Consolidated
|                                                    |                                                         |                                    |           |                                                                              |           |                   |           |         |   |             
|2002 (Restated):                                    |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        
|Operating income:                                   |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        
|                                                    | Property and casualty:                                  |                                    |           |                                                                              |           |                   |           |         |   |              |           |         |          
|                                                    |                                                         | Net premiums written               |           | ¥                                                                            | 1,381,483 |                   |           |         |  |              |           |         | 1,381,483 | 
|                                                    |                                                         | Less increase in unearned premiums |           |                                                                              | 38,521    |                   |           |         |  |              |           |         | 38,521    | 
|                                                    |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        
|                                                    |                                                         |                                    |           | Premiums earned                                                              |           |                   | 1,342,962 |         |   |              |          |         |           |  | 1,342,962 | 
|                                                    | Life premiums                                           |                                    |           |                                                                             |           |                   |           | 209,208 |   |              |           | 209,208 |          
|                                                    | Net investment income                                   |                                    |           | 94,386                                                                       |           |                   |           | 10,295  |   |              |           | 104,681 |          
|                                                    | Realized gains (losses) on investments                  |                                    |           | (1,384                                                                       | )         |                   |           | 364     |   |              |           | (1,020  | )        
|                                                    | Gains (losses) on derivatives                           |                                    |           | (20,847                                                                      | )         |                   |           | 13,528  |   |              |           | (7,319  | )        
|                                                    |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        
|                                                    |                                                         |                                    |           | Total operating income                                                       |           |                   | 1,415,117 |         |   |              | 233,395   |         |           |  | 1,648,512 | 
|                                                    |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        
|Operating costs and expenses:                       |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        
|                                                    | Losses, claims and loss adjustment expenses             |                                    |           | 798,214                                                                      |           |                   |           |        |   |              |           | 798,214 |          
|                                                    | Policy benefits and losses for life                     |                                    |           |                                                                             |           |                   |           | 175,016 |   |              |           | 175,016 |          
|                                                    | Income credited to investment deposits by policyholders |                                    |           | 56,422                                                                       |           |                   |           | 1,085   |   |              |           | 57,507  |          
|                                                    | Policy acquisition costs                                |                                    |           | 418,979                                                                      |           |                   |           | 18,033  |   |              |           | 437,012 |          
|                                                    | Other operating expenses                                |                                    |           | 63,751                                                                       |           |                   |           | 8,344   |   |              |           | 72,095  |          
|                                                    |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        
|                                                    |                                                         |                                    |           | Total operating costs and expenses                                           |           |                   | 1,337,366 |         |   |              | 202,478   |         |           |  | 1,539,844 | 
|                                                    |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        
|                                                    |                                                         |                                    |           | Income before income tax expense and
cumulative effect of accounting changes |           |                   | 77,751    |         |   |              | 30,917    |         |           |  | 108,668   | 
|                                                    |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        
|Income tax expense (benefit):                       |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        
|                                                    | Current                                                 |                                    |           | 50,070                                                                       |           |                   |           | 3,890   |   |              |           | 53,960  |          
|                                                    | Deferred                                                |                                    |           | (27,806                                                                      | )         |                   |           | 7,262   |   |              |           | (20,544 | )        
|                                                    |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        
|                                                    |                                                         |                                    | 22,264    |                                                                              |           |                   | 11,152    |         |   |              | 33,416    |        
|                                                    |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        
|                                                    |                                                         |                                    |           | Income before cumulative effect of
accounting changes                        |           |                   | 55,487    |         |   |              | 19,765    |         |           |  | 75,252    | 
|Cumulative effect of accounting changes, net of tax |                                                         |                                    | 56,727    |                                                                              |           |                   | 28,738    |         |   |              | 85,465    |        
|                                                    |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        
|                                                    |                                                         |                                    |           | Net income                                                                   |           | ¥                 | 112,214   |         |   |              | 48,503    |         |           |  | 160,717   | 
|                                                    |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        
|Total investments                                   |                                                         | ¥                                  | 6,068,201 |                                                                              |           |                   | 560,624   |         |   |              | 6,628,825 |        
|                                                    |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        
|Total assets                                        |                                                         | ¥                                  | 7,823,947 |                                                                              |           |                   | 735,230   |         |   |              | 8,559,177 |        
|                                                    |                                                         |                                    |           |                                                                              |           |                   |           |         |   |              |           |        

F-40



---



##### Table of Contents



|                              |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |         |           |           | 
|----------------------------- | ------------------------------------------------------- | ---------------------------------- | ---------------------------------- | ------- | ----------------- | --------- | ------- | ------- | ------------ | ------- | --------- | ------- | --------- | --------- | 
|                              |                                                         |                                    |                                    |         | (Yen in millions)
|                              |                                                         |                                    |                                    |         |                  
|                              |                                                         |                                    |                                    |         | Property and      |           |         |         |              |         |           |         |          
|                              |                                                         |                                    |                                    |         | Casualty          |           | Life    |         | Consolidated
|                              |                                                         |                                    |                                    |         |                   |           |         |         |             
|2001 (Restated):              |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |        
|Operating income:             |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |        
|                              | Property and casualty:                                  |                                    |                                    |         |                   |           |         |         |              |         |           |         |          
|                              |                                                         | Net premiums written               |                                    | ¥       | 1,323,907         |           |         |         |             |         |           |         | 1,323,907 |          
|                              |                                                         | Less increase in unearned premiums |                                    |         | 13,168            |           |         |         |             |         |           |         | 13,168    |          
|                              |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |        
|                              |                                                         |                                    | Premiums earned                    |         |                   | 1,310,739 |         |         |              |        |           |         |           | 1,310,739 | 
|                              | Life premiums                                           |                                    |                                    |        |                   |           |         | 162,905 |              |         |           | 162,905 |          
|                              | Net investment income                                   |                                    |                                    | 115,594 |                   |           |         | 12,258  |              |         |           | 127,852 |          
|                              | Realized gains on investments                           |                                    |                                    | 55,859  |                   |           |         | 283     |              |         |           | 56,142  |          
|                              |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |        
|                              |                                                         |                                    | Total operating income             |         |                   | 1,482,192 |         |         |              | 175,446 |           |         |           | 1,657,638 | 
|                              |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |        
|Operating costs and expenses: |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |        
|                              | Losses, claims and loss adjustment expenses             |                                    |                                    | 833,058 |                   |           |         |        |              |         |           | 833,058 |          
|                              | Policy benefits and losses for life                     |                                    |                                    |        |                   |           |         | 137,469 |              |         |           | 137,469 |          
|                              | Income credited to investment deposits by policyholders |                                    |                                    | 58,669  |                   |           |         | 840     |              |         |           | 59,509  |          
|                              | Policy acquisition costs                                |                                    |                                    | 413,594 |                   |           |         | 8,957   |              |         |           | 422,551 |          
|                              | Other operating expenses                                |                                    |                                    | 66,048  |                   |           |         | 5,969   |              |         |           | 72,017  |          
|                              |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |        
|                              |                                                         |                                    | Total operating costs and expenses |         |                   | 1,371,369 |         |         |              | 153,235 |           |         |           | 1,524,604 | 
|                              |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |        
|                              |                                                         |                                    | Income before income tax expense   |         |                   | 110,823   |         |         |              | 22,211  |           |         |           | 133,034   | 
|                              |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |        
|Income tax expense:           |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |        
|                              | Current                                                 |                                    |                                    | 9,952   |                   |           |         | 2,934   |              |         |           | 12,886  |          
|                              | Deferred                                                |                                    |                                    | 26,301  |                   |           |         | 5,172   |              |         |           | 31,473  |          
|                              |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |        
|                              |                                                         |                                    | 36,253                             |         |                   |           | 8,106   |         |              |         | 44,359    |        
|                              |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |        
|                              |                                                         |                                    | Net income                         |         | ¥                 | 74,570    |         |         |              | 14,105  |           |         |           | 88,675    | 
|                              |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |        
|Total investments             |                                                         | ¥                                  | 6,417,143                          |         |                   |           | 400,801 |         |              |         | 6,817,944 |        
|                              |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |        
|Total assets                  |                                                         | ¥                                  | 7,735,940                          |         |                   |           | 480,801 |         |              |         | 8,216,741 |        
|                              |                                                         |                                    |                                    |         |                   |           |         |         |              |         |           |        

F-41



---



##### Table of Contents



Schedule I

MILLEA HOLDINGS, INC.
AND SUBSIDIARIES

Summary of Investments  Other than Investments in Related Parties

March 31, 2003

|                               |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |        |           |                 |           | 
|------------------------------ | ------------------------------ | --------------------------------------- | --------------------------------------------- | --------------------------------------------------- | --------- | ----------------- | --------- | ------ | --------- | ------- | --------- | ------ | --------- | --------------- | --------- | 
|                               |                                |                                         |                                               |                                                     |           | (Yen in millions)
|                               |                                |                                         |                                               |                                                     |           |                  
|                               |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |        |           | Amount at which
|                               |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |        |           | shown in the   
|Type of investment             |                                | Cost                                    |                                               | Value                                               |           | balance sheet    
|                               |                                |                                         |                                               |                                                     |           |                  
|Securities held to maturity:   |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |       
|                               | Fixed maturities:              |                                         |                                               |                                                     |           |                   |           |        |           |         |           |        |          
|                               |                                |                                         | Bonds and notes:                              |                                                     |           |                   |           |        |           |         |           |        |           |                 |          
|                               |                                |                                         |                                               | Government and government agencies and authorities: |           |                   |           |        |           |         |           |        |           |                 |           | 
|                               |                                |                                         |                                               | Other                                               |           | ¥                 | 866,971   |        |           |         | 1,011,483 |        |           |                 | 866,971   | 
|                               |                                |                                         |                                               | All other corporate bonds                           |           |                   | 16,365    |        |           |         | 17,249    |        |           |                 | 16,365    | 
|                               |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |       
|                               |                                |                                         |                                               | Total fixed maturities held to maturity             |           |                   | 883,336   |        |           |         | 1,028,732 |        |           |                 | 883,336   | 
|                               |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |       
|Securities available for sale: |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |       
|                               | Fixed maturities:              |                                         |                                               |                                                     |           |                   |           |        |           |         |           |        |          
|                               |                                |                                         | Bonds and notes:                              |                                                     |           |                   |           |        |           |         |           |        |           |                 |          
|                               |                                |                                         |                                               | Government and government agencies and authorities: |           |                   |           |        |           |         |           |        |           |                 |           | 
|                               |                                |                                         |                                               | United States                                       |           |                   | 140,150   |        |           |         | 145,505   |        |           |                 | 145,505   | 
|                               |                                |                                         |                                               | Other                                               |           |                   | 1,935,175 |        |           |         | 2,073,303 |        |           |                 | 2,073,303 | 
|                               |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |       
|                               |                                |                                         | 2,075,325                                     |                                                     |           |                   | 2,218,808 |        |           |         | 2,218,808 |       
|                               |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |       
|                               |                                |                                         |                                               | States, municipalities and political subdivisions:  |           |                   |           |        |           |         |           |        |           |                 |           | 
|                               |                                |                                         |                                               | United States                                       |           |                   | 44        |        |           |         | 64        |        |           |                 | 64        | 
|                               |                                |                                         |                                               | Other                                               |           |                   | 244,826   |        |           |         | 264,318   |        |           |                 | 264,318   | 
|                               |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |       
|                               |                                |                                         | 244,870                                       |                                                     |           |                   | 264,382   |        |           |         | 264,382   |       
|                               |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |       
|                               |                                |                                         | Public utilities                              |                                                     |           | 88,322            |           |        |           | 92,966  |           |        |           | 92,966          |          
|                               |                                |                                         | Convertibles and bonds with warrants attached |                                                     |           | 70,622            |           |        |           | 77,320  |           |        |           | 77,320          |          
|                               |                                |                                         | All other corporate bonds                     |                                                     |           | 693,321           |           |        |           | 715,048 |           |        |           | 715,048         |          
|                               |                                |                                         | Redeemable preferred stock                    |                                                     |           | 53,100            |           |        |           | 53,100  |           |        |           | 53,100          |          
|                               |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |       
|                               |                                |                                         |                                               | Total fixed maturities available for sale           |           |                   | 3,225,560 |        |           |         | 3,421,624 |        |           |                 | 3,421,624 | 
|                               |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |       
|Equity securities:             |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |       
|                               | Common stocks:                 |                                         |                                               |                                                     |           |                   |           |        |           |         |           |        |          
|                               |                                | Public utilities                        |                                               |                                                     | 42,994    |                   |           |        | 62,389    |         |           |        | 62,389    |                
|                               |                                | Banks, trust and insurance companies    |                                               |                                                     | 296,261   |                   |           |        | 293,903   |         |           |        | 293,903   |                
|                               |                                | Industrial, miscellaneous and all other |                                               |                                                     | 1,414,698 |                   |           |        | 2,089,070 |         |           |        | 2,089,070 |                
|                               |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |       
|                               |                                |                                         | 1,753,953                                     |                                                     |           |                   | 2,445,362 |        |           |         | 2,445,362 |       
|                               |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |       
|                               | Nonredeemable preferred stocks |                                         |                                               | 88,859                                              |           |                   |           | 88,859 |           |         |           | 88,859 |          
|                               |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |       
|                               |                                |                                         |                                               | Total equity securities                             |           |                   | 1,842,812 |        |           |         | 2,534,221 |        |           |                 | 2,534,221 | 
|                               |                                |                                         |                                               |                                                     |           |                   |           |        |           |         |           |       

(Continued)

F-42



---



##### Table of Contents



Schedule I

MILLEA HOLDINGS, INC.
AND SUBSIDIARIES

Summary of Investments  Other than Investments in Related Parties

March 31, 2003

|                    |                               |                   |                  |                                                     |  |                   |            |  |  |       |           |         |  |                 |           | 
|------------------- | ----------------------------- | ----------------- | ---------------- | --------------------------------------------------- |  | ----------------- | ---------- |  |  | ----- | --------- | ------- |  | --------------- | --------- | 
|                    |                               |                   |                  |                                                     |  | (Yen in millions)
|                    |                               |                   |                  |                                                     |  |                  
|                    |                               |                   |                  |                                                     |  |                   |            |  |  |       |           |         |  | Amount at which
|                    |                               |                   |                  |                                                     |  |                   |            |  |  |       |           |         |  | shown in the   
|Type of investment  |                               | Cost              |                  | Value                                               |  | balance sheet    
|                    |                               |                   |                  |                                                     |  |                  
|Trading securities: |                               |                   |                  |                                                     |  |                   |            |  |  |       |           |        
|                    |                               | Fixed maturities: |                  |                                                     |  |                   |            |  |  |       |           |         |  |                
|                    |                               |                   | Bonds and notes: |                                                     |  |                   |            |  |  |       |           |         |  |                 |          
|                    |                               |                   |                  | Government and government agencies and authorities: |  |                   |            |  |  |       |           |         |  |                 |           | 
|                    |                               |                   |                  | Other                                               |  |                   | 24,877     |  |  |       | 24,577    |         |  |                 | 24,577    | 
|                    |                               |                   | Public utilities |                                                     |  | 1,199             |            |  |  | 1,359 |           |         |  | 1,359           |          
|                    |                               |                   |                  |                                                     |  |                   |            |  |  |       |           |        
|                    |                               |                   |                  | Total trading fixed maturities                      |  |                   | 26,076     |  |  |       | 25,936    |         |  |                 | 25,936    | 
|                    |                               |                   |                  |                                                     |  |                   |            |  |  |       |           |        
|                    |                               |                   | 5,977,784        |                                                     |  |                   | 7,010,513  |  |  |       | 6,865,117 |        
|                    |                               |                   |                  |                                                     |  |                   |            |  |  |       |           |        
|                    | Mortgage loans on real estate |                   |                  | 148,655                                             |  |                   |            |  |  |       |           | 148,655 | 
|                    | Investment real estate        |                   |                  | 82,886                                              |  |                   |            |  |  |       |           | 82,886  | 
|                    | Policy loans                  |                   |                  | 29,171                                              |  |                   |            |  |  |       |           | 29,171  | 
|                    | Other long-term investments   |                   |                  | 559,355                                             |  |                   |            |  |  |       |           | 559,004 | 
|                    | Short-term investments        |                   |                  | 660,370                                             |  |                   |            |  |  |       |           | 660,370 | 
|                    |                               |                   |                  |                                                     |  |                   |            |  |  |       |           |        
|                    |                               |                   |                  | Total investments                                   |  |                   | ¥7,458,221 |  |  |       |           |         |  |                 | 8,345,203 | 
|                    |                               |                   |                  |                                                     |  |                   |            |  |  |       |           |        



(Continued)

F-43



---



##### Table of Contents



Schedule I

MILLEA HOLDINGS, INC.
AND SUBSIDIARIES

Summary of Investments  Other than Investments in Related Parties

March 31, 2002

|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |        |           |                 |           | 
|------------------------------ | ------------------------------ | --------------------------------------------- | --------- | --------------------------------------------------- | --------- | ----------------- | --------- | ------ | --------- |  | --------- | ------ | --------- | --------------- | --------- | 
|                               |                                |                                               |           |                                                     |           | (Yen in millions)
|                               |                                |                                               |           |                                                     |           |                  
|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |        |           | Amount at which
|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |        |           | shown in the   
|Type of investment             |                                | Cost                                          |           | Value                                               |           | balance sheet    
|                               |                                |                                               |           |                                                     |           |                  
|Securities held to maturity:   |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |       
|                               |                                | Fixed maturities:                             |           |                                                     |           |                   |           |        |           |  |           |        |           |                
|                               |                                |                                               |           | Bonds and notes:                                    |           |                   |           |        |           |  |           |        |           |                 |           | 
|                               |                                |                                               |           | Government and government agencies and authorities: |           |                   |           |        |           |  |           |        |           |                 |           | 
|                               |                                |                                               |           | Other                                               |           | ¥                 | 453,453   |        |           |  | 458,970   |        |           |                 | 453,453   | 
|                               |                                |                                               |           | All other corporate bonds                           |           |                   | 16,735    |        |           |  | 17,435    |        |           |                 | 16,735    | 
|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |       
|                               |                                |                                               |           | Total fixed maturities held to maturity             |           |                   | 470,188   |        |           |  | 476,405   |        |           |                 | 470,188   | 
|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |       
|Securities available for sale: |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |       
|                               |                                | Fixed maturities:                             |           |                                                     |           |                   |           |        |           |  |           |        |           |                
|                               |                                |                                               |           | Bonds and notes:                                    |           |                   |           |        |           |  |           |        |           |                 |           | 
|                               |                                |                                               |           | Government and government agencies and authorities: |           |                   |           |        |           |  |           |        |           |                 |           | 
|                               |                                |                                               |           | United States                                       |           |                   | 43,313    |        |           |  | 50,901    |        |           |                 | 50,901    | 
|                               |                                |                                               |           | Other                                               |           |                   | 903,702   |        |           |  | 920,199   |        |           |                 | 920,199   | 
|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |       
|                               |                                |                                               | 947,015   |                                                     |           |                   | 971,100   |        |           |  | 971,100   |       
|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |       
|                               |                                |                                               |           | States, municipalities and political subdivisions:  |           |                   |           |        |           |  |           |        |           |                 |           | 
|                               |                                |                                               |           | United States                                       |           |                   | 109       |        |           |  | 174       |        |           |                 | 174       | 
|                               |                                |                                               |           | Other                                               |           |                   | 299,885   |        |           |  | 323,832   |        |           |                 | 323,832   | 
|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |       
|                               |                                |                                               | 299,994   |                                                     |           |                   | 324,006   |        |           |  | 324,006   |       
|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |       
|                               |                                | Public utilities                              |           |                                                     | 34,192    |                   |           |        | 37,000    |  |           |        | 37,000    |                
|                               |                                | Convertibles and bonds with warrants attached |           |                                                     | 102,074   |                   |           |        | 111,494   |  |           |        | 111,494   |                
|                               |                                | All other corporate bonds                     |           |                                                     | 490,545   |                   |           |        | 505,369   |  |           |        | 505,369   |                
|                               |                                | Redeemable preferred stock                    |           |                                                     | 53,100    |                   |           |        | 53,100    |  |           |        | 53,100    |                
|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |       
|                               |                                |                                               |           | Total fixed maturities available for sale           |           |                   | 1,926,920 |        |           |  | 2,002,069 |        |           |                 | 2,002,069 | 
|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |       
|                               | Equity securities:             |                                               |           |                                                     |           |                   |           |        |           |  |           |        |          
|                               | Common stocks:                 |                                               |           |                                                     |           |                   |           |        |           |  |           |        |          
|                               |                                | Public utilities                              |           |                                                     | 27,362    |                   |           |        | 58,332    |  |           |        | 58,332    |                
|                               |                                | Banks, trust and insurance companies          |           |                                                     | 199,838   |                   |           |        | 274,397   |  |           |        | 274,397   |                
|                               |                                | Industrial, miscellaneous and all other       |           |                                                     | 1,075,156 |                   |           |        | 2,296,656 |  |           |        | 2,296,656 |                
|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |       
|                               |                                |                                               | 1,302,356 |                                                     |           |                   | 2,629,385 |        |           |  | 2,629,385 |       
|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |       
|                               | Nonredeemable preferred stocks |                                               |           | 64,206                                              |           |                   |           | 64,206 |           |  |           | 64,206 |          
|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |       
|                               |                                | Total equity securities                       |           |                                                     | 1,366,562 |                   |           |        | 2,693,591 |  |           |        | 2,693,591 |                
|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |       
|                               |                                |                                               | 3,763,670 |                                                     |           |                   | 5,172,065 |        |           |  | 5,165,848 |       
|                               |                                |                                               |           |                                                     |           |                   |           |        |           |  |           |       

(Continued)

F-44



---



##### Table of Contents



Schedule I

MILLEA HOLDINGS, INC.
AND SUBSIDIARIES

Summary of Investments  Other than Investments in Related Parties

March 31, 2002

|                              |  |                   |         |                   |            |               |  |  |  |  |         |                 |           | 
|----------------------------- |  | ----------------- | ------- | ----------------- | ---------- | ------------- |  |  |  |  | ------- | --------------- | --------- | 
|                              |  |                   |         | (Yen in millions)
|                              |  |                   |         |                  
|                              |  |                   |         |                   |            |               |  |  |  |  |         | Amount at which
|                              |  |                   |         |                   |            |               |  |  |  |  |         | shown in the   
|Type of investment            |  | Cost              |         | Value             |            | balance sheet
|                              |  |                   |         |                   |            |              
|Mortgage loans on real estate |  |                   | 144,323 |                   |            |               |  |  |  |  | 144,323 |                
|Investment real estate        |  |                   | 96,967  |                   |            |               |  |  |  |  | 96,967  |                
|Policy loans                  |  |                   | 20,615  |                   |            |               |  |  |  |  | 20,615  |                
|Other long-term investments   |  |                   | 534,991 |                   |            |               |  |  |  |  | 535,666 |                
|Short-term investments        |  |                   | 665,406 |                   |            |               |  |  |  |  | 665,406 |                
|                              |  |                   |         |                   |            |               |  |  |  |  |         |                
|                              |  | Total investments |         |                   | ¥5,225,972 |               |  |  |  |  |         |                 | 6,628,825 | 
|                              |  |                   |         |                   |            |               |  |  |  |  |         |                



See accompanying independent auditors report.

F-45



---



##### Table of Contents



Schedule III

MILLEA HOLDINGS, INC.
AND SUBSIDIARIES

Supplementary Insurance Information

Years ended March 31, 2003, 2002 and 2001

Property and casualty:

|            |                           |  |                   |            |          |  |         |           |            |  |          |           |            |  |         |           |  |  |  |           | 
|----------- | ------------------------- |  | ----------------- | ---------- | -------- |  | ------- | --------- | ---------- |  | -------- | --------- | ---------- |  | ------- | --------- |  |  |  | --------- | 
|            |                           |  | (Yen in millions)
|            |                           |  |                  
|            |                           |  |                   |            |          |  |         |           |            |  |          |           |            |  | Claims, |           |  |  | 
|            |                           |  | Losses,           |            |          |  |         |           |            |  |          |           | losses and |  |         |           | 
|            |                           |  | claims and loss   |            | Unearned |  | Premium |           | settlement |  | Premiums
|            |                           |  | expenses          |            | premiums |  | revenue |           | expenses   |  | written 
|            |                           |  |                   |            |          |  |         |           |            |  |         
|Year ended: |                           |  |                   |            |          |  |         |           |            |  |          |           |            |  |         |           |  |  |  |          
|            | March 31, 2003            |  |                   | ¥1,131,884 |          |  |         | 1,760,981 |            |  |          | 1,760,968 |            |  |         | 1,030,093 |  |  |  | 1,898,557 | 
|            | March 31, 2002 (Restated) |  |                   | 875,463    |          |  |         | 1,177,506 |            |  |          | 1,342,962 |            |  |         | 798,214   |  |  |  | 1,381,483 | 
|            | March 31, 2001 (Restated) |  |                   | 854,952    |          |  |         | 1,095,198 |            |  |          | 1,310,739 |            |  |         | 833,058   |  |  |  | 1,323,907 | 

Life:

|            |                           |  |                   |          |          |  |         |     |            |  |  |         |                   |  |  |         | 
|----------- | ------------------------- |  | ----------------- | -------- | -------- |  | ------- | --- | ---------- |  |  | ------- | ----------------- |  |  | ------- | 
|            |                           |  | (Yen in millions)
|            |                           |  |                  
|            |                           |  | Future policy     |          |          |  |         |     |            |  |  |         | Benefits, claims,
|            |                           |  | benefits, losses, |          |          |  |         |     |            |  |  |         | losses and       
|            |                           |  | claims and        |          | Unearned |  | Premium |     | settlement
|            |                           |  | loss expenses     |          | premiums |  | revenue |     | expenses  
|            |                           |  |                   |          |          |  |         |     |           
|Year ended: |                           |  |                   |          |          |  |         |     |            |  |  |         |                   |  |  |        
|            | March 31, 2003            |  |                   | ¥713,418 |          |  |         | 174 |            |  |  | 262,486 |                   |  |  | 223,316 | 
|            | March 31, 2002 (Restated) |  |                   | 462,597  |          |  |         | 6   |            |  |  | 209,208 |                   |  |  | 175,016 | 
|            | March 31, 2001 (Restated) |  |                   | 322,671  |          |  |         | 47  |            |  |  | 162,905 |                   |  |  | 137,469 | 

See accompanying independent auditors report.

F-46



---



##### Table of Contents



Schedule IV

MILLEA HOLDINGS, INC.
AND SUBSIDIARIES

Reinsurance

Years ended March 31, 2003, 2002 and 2001

|                                      |                         |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |     |            |     |  
|------------------------------------- | ----------------------- | ------------------------------- | -------------- | ---------- | ----------------- | --------- | --------- | ------- | ---------- | ------- | ---------- | - | ------- | ------- | ------- | ---------- | --------- | --------- |  | --- | ---------- | --- | -
|                                      |                         |                                 |                |            | (Yen in millions)
|                                      |                         |                                 |                |            |                  
|                                      |                         |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |     | Percentage
|                                      |                         |                                 |                |            |                   |           |           |         | Ceded      |         | Assumed    |   |         |         |         |            | of amount
|                                      |                         |                                 |                |            | Gross             |           | to other  |         | from other |         |            |   |         |         | assumed
|                                      |                         |                                 |                |            | amount            |           | companies |         | companies  |         | Net amount |   | to net 
|                                      |                         |                                 |                |            |                   |           |           |         |            |         |            |   |        
|Year ended March 31, 2003:            |                         |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |    
|                                      | Life insurance in force |                                 | ¥              | 12,122,086 |                   |           |           | 200,220 |            |         |            |  |         |         |         | 11,921,866 |           |           |  | 0.0 | %         
|                                      |                         |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |    
|                                      | Premiums:               |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |     |           
|                                      |                         | Life insurance                  |                | ¥          | 263,361           |           |           |         | 875        |         |            |   | 0       |         |         |            | 262,486   |           |  |     | 0.0        | %  
|                                      |                         | Property and casualty insurance |                |            | 1,952,534         |           |           |         | 381,701    |         |            |   | 190,135 |         |         |            | 1,760,968 |           |  |     | 10.8       | %  
|                                      |                         |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |    
|                                      |                         |                                 | Total premiums |            | ¥                 | 2,215,895 |           |         |            | 382,576 |            |   |         | 190,135 |         |            |           | 2,023,454 |  |     |            | 9.4 | %
|                                      |                         |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |    
|Year ended March 31, 2002 (Restated): |                         |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |    
|                                      | Life insurance in force |                                 | ¥              | 9,037,201  |                   |           |           | 86,058  |            |         |            |  |         |         |         | 8,951,143  |           |           |  | 0.0 | %         
|                                      |                         |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |    
|                                      | Premiums:               |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |     |           
|                                      |                         | Life insurance                  |                | ¥          | 209,469           |           |           |         | 261        |         |            |   | 0       |         |         |            | 209,208   |           |  |     | 0.0        | %  
|                                      |                         | Property and casualty insurance |                |            | 1,436,884         |           |           |         | 222,708    |         |            |   | 128,786 |         |         |            | 1,342,962 |           |  |     | 9.6        | %  
|                                      |                         |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |    
|                                      |                         |                                 | Total premiums |            | ¥                 | 1,646,353 |           |         |            | 222,969 |            |   |         | 128,786 |         |            |           | 1,552,170 |  |     |            | 8.3 | %
|                                      |                         |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |    
|Year ended March 31, 2001 (Restated): |                         |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |    
|                                      | Life insurance in force |                                 | ¥              | 7,687,235  |                   |           |           | 52,295  |            |         |            | 3 |         |         |         | 7,634,943  |           |           |  | 0.0 | %         
|                                      |                         |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |    
|                                      | Premiums:               |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |     |           
|                                      |                         | Life insurance                  |                | ¥          | 163,016           |           |           |         | 112        |         |            |   | 1       |         |         |            | 162,905   |           |  |     | 0.0        | %  
|                                      |                         | Property and casualty insurance |                |            | 1,449,523         |           |           |         | 231,020    |         |            |   | 92,236  |         |         |            | 1,310,739 |           |  |     | 7.0        | %  
|                                      |                         |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |    
|                                      |                         |                                 | Total premiums |            | ¥                 | 1,612,539 |           |         |            | 231,132 |            |   |         | 92,237  |         |            |           | 1,473,644 |  |     |            | 6.3 | %
|                                      |                         |                                 |                |            |                   |           |           |         |            |         |            |   |         |         |         |            |           |           |  |    



See accompanying independent auditors report.

F-47



---



##### Table of Contents



Schedule V

MILLEA HOLDINGS, INC.
AND SUBSIDIARIES

Valuation and Qualifying Accounts

Years ended March 31, 2003, 2002 and 2001

|                           |                                 |                                                    |                    |             |                   |              |            |          |                  |            |          |         |         |        |   |  |                |   |  |  |       |       |  |  |         |        | 
|-------------------------- | ------------------------------- | -------------------------------------------------- | ------------------ | ----------- | ----------------- | ------------ | ---------- | -------- | ---------------- | ---------- | -------- | ------- | ------- | ------ | - |  | -------------- | - |  |  | ----- | ----- |  |  | ------- | ------ | 
|                           |                                 |                                                    |                    |             | (Yen in millions)
|                           |                                 |                                                    |                    |             |                  
|                           |                                 |                                                    |                    |             |                   |              |            |          | Additions        |            |          |         |         |        |   |  |               
|                           |                                 |                                                    |                    |             |                   |              |            |          |                  |            |          |         |         |        |   |  |               
|                           |                                 |                                                    |                    |             | Balance at        |              | Assumed by |          |                  |            |          |         | Charged |        |   |  |                |   |  |  |      
|                           |                                 |                                                    |                    |             | beginning         |              | business   |          | Charged to costs |            | to other |         |         |        |   |  | Balance at end
|Description                |                                 | of year                                            |                    | combination |                   | and expenses |            | accounts |                  | Deductions |          | of year
|                           |                                 |                                                    |                    |             |                   |              |            |          |                  |            |          |        
|Year ended March 31, 2003: |                                 |                                                    |                    |             |                   |              |            |          |                  |            |          |         |         |        |   |  |                |   |  |  |       |       |  | 
|                           | Applied against asset accounts: |                                                    |                    |             |                   |              |            |          |                  |            |          |         |         |        |   |  |                |   |  |  |       |       |  |  |        
|                           |                                 | Accumulated
depreciation  real estate investments |                    | ¥           | 83,155            |              |            |          |                 |            |          |         | 3,650   |        |   |  | 2,646          |   |  |  | 9,913 |       |  |  | 79,538  |       
|                           |                                 | Valuation allowance  loans:                       |                    |             |                   |              |            |          |                  |            |          |         |         |        |   |  |                |   |  |  |       |       |  |  |         |       
|                           |                                 |                                                    | Specific allowance |             |                   | 24,070       |            |          |                  | 4,896      |          |         |         | 7,270  |   |  |                |  |  |  |       | 6,130 |  |  |         | 30,106 | 
|                           |                                 |                                                    | General allowance  |             |                   | 8,675        |            |          |                  | 4,233      |          |         |         | (6,179 | ) |  |                |  |  |  |       |      |  |  |         | 6,729  | 
|                           |                                 | Allowance for doubtful accounts                    |                    |             | 4,681             |              |            |          | 2,541            |            |          |         | 975     |        |   |  |               |   |  |  |      |       |  |  | 8,197   |       
|                           |                                 | Accumulated depreciation
 property and equipment  |                    |             | 162,768           |              |            |          |                 |            |          |         | 11,426  |        |   |  | 13,393         |   |  |  | 3,911 |       |  |  | 183,676 |       
|                           |                                 |                                                    |                    |             |                   |              |            |          |                  |            |          |         |         |        |   |  |                |   |  |  |       |       |  | 
|Year ended March 31, 2002: |                                 |                                                    |                    |             |                   |              |            |          |                  |            |          |         |         |        |   |  |                |   |  |  |       |       |  | 
|                           | Applied against asset accounts: |                                                    |                    |             |                   |              |            |          |                  |            |          |         |         |        |   |  |                |   |  |  |       |       |  |  |        
|                           |                                 | Accumulated depreciation
 real estate investments |                    | ¥           | 83,249            |              |            |          |                 |            |          |         | 4,187   |        |   |  | 2,954          |   |  |  | 7,235 |       |  |  | 83,155  |       
|                           |                                 | Valuation allowance  loans:                       |                    |             |                   |              |            |          |                  |            |          |         |         |        |   |  |                |   |  |  |       |       |  |  |         |       
|                           |                                 |                                                    | Specific allowance |             |                   | 25,526       |            |          |                  |           |          |         |         | 4,216  |   |  |                |  |  |  |       | 5,672 |  |  |         | 24,070 | 
|                           |                                 |                                                    | General allowance  |             |                   | 13,393       |            |          |                  |           |          |         |         | (4,718 | ) |  |                |  |  |  |       |      |  |  |         | 8,675  | 
|                           |                                 | Allowance for doubtful accounts                    |                    |             | 4,695             |              |            |          |                 |            |          |         |        |        |   |  |               |   |  |  | 14    |       |  |  | 4,681   |       
|                           |                                 | Accumulated depreciation
 property and equipment  |                    |             | 157,612           |              |            |          |                 |            |          |         | 11,343  |        |   |  | (2,954         | ) |  |  | 3,233 |       |  |  | 162,768 |       
|                           |                                 |                                                    |                    |             |                   |              |            |          |                  |            |          |         |         |        |   |  |                |   |  |  |       |       |  | 
|Year ended March 31, 2001: |                                 |                                                    |                    |             |                   |              |            |          |                  |            |          |         |         |        |   |  |                |   |  |  |       |       |  | 
|                           | Applied against asset accounts: |                                                    |                    |             |                   |              |            |          |                  |            |          |         |         |        |   |  |                |   |  |  |       |       |  |  |        
|                           |                                 | Accumulated depreciation
 real estate investments |                    | ¥           | 76,102            |              |            |          |                 |            |          |         | 4,772   |        |   |  | 4,361          |   |  |  | 1,986 |       |  |  | 83,249  |       
|                           |                                 | Valuation allowance  loans:                       |                    |             |                   |              |            |          |                  |            |          |         |         |        |   |  |                |   |  |  |       |       |  |  |         |       
|                           |                                 |                                                    | Specific allowance |             |                   | 17,959       |            |          |                  |           |          |         |         | 8,598  |   |  |                |  |  |  |       | 1,031 |  |  |         | 25,526 | 
|                           |                                 |                                                    | General allowance  |             |                   | 20,260       |            |          |                  |           |          |         |         | (6,867 | ) |  |                |  |  |  |       |      |  |  |         | 13,393 | 
|                           |                                 | Allowance for doubtful accounts                    |                    |             | 5,994             |              |            |          |                 |            |          |         |        |        |   |  |               |   |  |  | 1,299 |       |  |  | 4,695   |       
|                           |                                 | Accumulated depreciation
 property and equipment  |                    |             | 155,770           |              |            |          |                 |            |          |         | 12,423  |        |   |  | (4,361         | ) |  |  | 6,220 |       |  |  | 157,612 |       
|                           |                                 |                                                    |                    |             |                   |              |            |          |                  |            |          |         |         |        |   |  |                |   |  |  |       |       |  | 







See accompanying independent auditors report.

F-48



---



##### Table of Contents






LIST OF EXHIBITS

Millea Holdings is filing the following exhibits (or incorporating them by
reference) as part of this annual report:

|               |  |                                                                                                                                                                                                                                                           |  |  |  | 
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit Number |  | Description                                                                                                                                                                                                                                               |  |  |  | 
|               |  |                                                                                                                                                                                                                                                           |  |  |  | 
|1.1            |  | English translation of the articles of incorporation of Millea Holdings, Inc.                                                                                                                                                                            
|1.2            |  | English translation of the share handling regulations of Millea Holdings, Inc.                                                                                                                                                                           
|2(a)           |  | English translation of the specimen stock certificate of Millea Holdings,
Inc., incorporated by reference from the annual report on Form 20-F/A
(Commission file number 0-31376) filed on September 27, 2002.                                            
|8              |  | List of subsidiaries of Millea Holdings, Inc.                                                                                                                                                                                                            
|12             |  | Certifications required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule
15d-14(a) (17 CFR 240.15d-14(a)) under the Securities Exchange Act of 1934,
as amended.                                                                                         
|13             |  | Certification required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) or Rule
15d-14(b) (17 CFR 240.15d-14(b)) under the Securities Exchange Act of 1934,
as amended, and by Section 1350 of Chapter 63 of Title 18 of the United
States Code (18 U.S.C. 1350).





---



##### Table of Contents






CROSS REFERENCE INDEX FOR FORM 20-F

|        |  |      |  |                                                                                                                         |  |     
|------- |  | ---- |  | ----------------------------------------------------------------------------------------------------------------------- |  | ----
|        |  |      |  |                                                                                                                         |  | Page
|        |  |      |  |                                                                                                                         |  |     
|        |  |      |  | Part I                                                                                                                  |  |     
|        |  |      |  |                                                                                                                         |  |     
|Item 1. |  |      |  | Identity of Directors, Senior Management and Advisers                                                                   |  |     
|        |  |      |  | Not required because this Form 20-F is filed as an annual report                                                        |  |     
|Item 2. |  |      |  | Offer Statistics and Expected Timetable                                                                                 |  |     
|        |  |      |  | Not required because this Form 20-F is filed as an annual report                                                        |  |     
|Item 3. |  |      |  | Key Information                                                                                                         |  |     
|        |  | 3.A. |  | Selected Financial Data                                                                                                 |  |     
|        |  |      |  | Selected Financial Data                                                                                                 |  | 4   
|        |  | 3.B. |  | Capitalization and Indebtedness                                                                                         |  |     
|        |  |      |  | Not required because this Form 20-F is filed as an annual report                                                        |  |     
|        |  | 3.C. |  | Reasons for the Offer and Use of Proceeds                                                                               |  |     
|        |  |      |  | Not required because this Form 20-F is filed as an annual report                                                        |  |     
|        |  | 3.D. |  | Risk Factors                                                                                                            |  |     
|        |  |      |  | Risk Factors                                                                                                            |  | 6   
|Item 4. |  |      |  | Information on the Company                                                                                              |  |     
|        |  | 4.A. |  | History and Development of the Company                                                                                  |  |     
|        |  |      |  | Business                                                                                                                |  | 16  
|        |  | 4.B. |  | Business Overview                                                                                                       |  |     
|        |  |      |  | Business                                                                                                                |  | 16  
|        |  |      |  | The Japanese Non-Life Insurance Industry                                                                                |  | 71  
|        |  |      |  | Regulation                                                                                                              |  | 73  
|        |  | 4.C. |  | Organizational Structure                                                                                                |  |     
|        |  |      |  | Major Shareholders                                                                                                      |  | 14  
|        |  |      |  | Business                                                                                                                |  | 16  
|        |  | 4.D. |  | Property, Plants and Equipment                                                                                          |  |     
|        |  |      |  | Business                                                                                                                |  | 16  
|Item 5. |  |      |  | Operating and Financial Review and Prospects                                                                            |  |     
|        |  | 5.A. |  | Operating Results                                                                                                       |  |     
|        |  |      |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations                                   |  | 40  
|        |  | 5.B. |  | Liquidity and Capital Resources                                                                                         |  |     
|        |  |      |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations  Liquidity and Capital Resources |  | 66  
|        |  | 5.C. |  | Research and Development, Patents and Licenses, Etc.                                                                    |  |     
|        |  |      |  | None                                                                                                                    |  |     





---



##### Table of Contents



|        |  |      |  |                                                                                                                                      |  |     
|------- |  | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | ----
|        |  |      |  |                                                                                                                                      |  | Page
|        |  |      |  |                                                                                                                                      |  |     
|        |  | 5.D. |  | Trend Information                                                                                                                    |  |     
|        |  |      |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations                                                |  | 40  
|        |  | 5.E. |  | Off-balance Sheet Arrangements                                                                                                       |  |     
|        |  |      |  | Not required because this annual report does not include
financial statements for a fiscal year ending on or after June
15, 2003     |  |     
|        |  | 5.F. |  | Tabular Disclosure of Contractual Obligations                                                                                        |  |     
|        |  |      |  | Not required because this annual report does not include
financial statements for a fiscal year ending on or after
December 15, 2003 |  |     
|Item 6. |  |      |  | Directors, Senior Management and Employees                                                                                           |  |     
|        |  | 6.A. |  | Directors and Senior Management                                                                                                      |  |     
|        |  |      |  | Directors and Corporate Auditors  Personal Data                                                                                     |  | 68  
|        |  | 6.B. |  | Compensation                                                                                                                         |  |     
|        |  |      |  | Directors and Corporate Auditors  Compensation and Benefits                                                                         |  | 69  
|        |  | 6.C. |  | Board Practices                                                                                                                      |  |     
|        |  |      |  | Directors and Corporate Auditors  Board Practices                                                                                   |  | 69  
|        |  | 6.D. |  | Employees                                                                                                                            |  |     
|        |  |      |  | Business                                                                                                                             |  | 16  
|        |  | 6.E. |  | Share Ownership                                                                                                                      |  |     
|        |  |      |  | Directors and Corporate Auditors  Personal Data                                                                                     |  | 68  
|Item 7. |  |      |  | Major Shareholders and Related Party Transactions                                                                                    |  |     
|        |  | 7.A. |  | Major Shareholders                                                                                                                   |  |     
|        |  |      |  | Major Shareholders                                                                                                                   |  | 14  
|        |  | 7.B. |  | Related Party Transactions                                                                                                           |  |     
|        |  |      |  | None                                                                                                                                 |  |     
|        |  | 7.C. |  | Interests of Experts and Counsel                                                                                                     |  |     
|        |  |      |  | Not required because this Form 20-F is filed as an annual report                                                                     |  |     
|Item 8. |  |      |  | Financial Information                                                                                                                |  |     
|        |  | 8.A. |  | Consolidated Statements and Other Financial Information                                                                              |  |     
|        |  |      |  | Dividend Policy                                                                                                                      |  | 14  
|        |  |      |  | Index to Financial Statements                                                                                                        |  | F-1 
|        |  |      |  | Index to Schedules                                                                                                                   |  | F-1 
|        |  | 8.B. |  | Significant Changes                                                                                                                  |  |     
|        |  |      |  | None                                                                                                                                 |  |     
|Item 9. |  |      |  | The Offer and Listing                                                                                                                |  |     
|        |  | 9.A. |  | Offer and Listing Details                                                                                                            |  |     
|        |  |      |  | Market Price Information                                                                                                             |  | 13  
|        |  | 9.B. |  | Plan of Distribution                                                                                                                 |  |     





---



##### Table of Contents



|         |  |       |  |                                                                                                                                                    |  |     
|-------- |  | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|         |  |       |  |                                                                                                                                                    |  | Page
|         |  |       |  |                                                                                                                                                    |  |     
|         |  |       |  | Not required because this Form 20-F is filed as an annual report                                                                                   |  |     
|         |  | 9.C.  |  | Markets                                                                                                                                            |  |     
|         |  |       |  | Market Price Information                                                                                                                           |  | 13  
|         |  | 9.D.  |  | Selling Shareholders                                                                                                                               |  |     
|         |  |       |  | Not required because this Form 20-F is filed as an annual report                                                                                   |  |     
|         |  | 9.E.  |  | Dilution                                                                                                                                           |  |     
|         |  |       |  | Not required because this Form 20-F is filed as an annual report                                                                                   |  |     
|         |  | 9.F.  |  | Expenses of the Issue                                                                                                                              |  |     
|         |  |       |  | Not required because this Form 20-F is filed as an annual report                                                                                   |  |     
|Item 10. |  |       |  | Additional Information                                                                                                                             |  |     
|         |  | 10.A. |  | Share Capital                                                                                                                                      |  |     
|         |  |       |  | Not required because this Form 20-F is filed as an annual report                                                                                   |  |     
|         |  | 10.B. |  | Memorandum and Articles of Association                                                                                                             |  |     
|         |  |       |  | Business                                                                                                                                           |  | 16  
|         |  |       |  | Directors and Corporate Auditors  Board Practices                                                                                                 |  | 69  
|         |  |       |  | Description of Common Stock                                                                                                                        |  | 77  
|         |  | 10.C. |  | Material Contracts                                                                                                                                 |  |     
|         |  |       |  | None                                                                                                                                               |  |     
|         |  | 10.D. |  | Exchange Controls                                                                                                                                  |  |     
|         |  |       |  | Regulation  Foreign Exchange Regulations                                                                                                          |  | 75  
|         |  | 10.E. |  | Taxation                                                                                                                                           |  |     
|         |  |       |  | Taxation                                                                                                                                           |  | 83  
|         |  | 10.F. |  | Dividends and Paying Agents                                                                                                                        |  |     
|         |  |       |  | Not required because this Form 20-F is filed as an annual report                                                                                   |  |     
|         |  | 10.G. |  | Statement by Experts                                                                                                                               |  |     
|         |  |       |  | Not required because this Form 20-F is filed as an annual report                                                                                   |  |     
|         |  | 10.H. |  | Documents on Display                                                                                                                               |  |     
|         |  |       |  | Where You Can Find More Information                                                                                                                |  | 87  
|         |  | 10.I. |  | Subsidiary Information                                                                                                                             |  |     
|         |  |       |  | Not required because this Form 20-F is filed as an annual report                                                                                   |  |     
|Item 11. |  |       |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                         |  |     
|         |  |       |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations  Quantitative and Qualitative
Disclosures About Market Risk |  | 59  
|Item 12. |  |       |  | Description of Securities Other than Equity Securities                                                                                             |  |     
|         |  |       |  | Not required because this Form 20-F is filed as an annual report                                                                                   |  |     
|Part II  |  |       |  |                                                                                                                                                    |  |     
|Item 13. |  |       |  | Defaults, Dividend Arrearages and Delinquencies                                                                                                    |  |     
|         |  |       |  | None                                                                                                                                               |  |     





---



##### Table of Contents



|          |  |  |  |                                                                                                           |  |     
|--------- |  |  |  | --------------------------------------------------------------------------------------------------------- |  | ----
|          |  |  |  |                                                                                                           |  | Page
|          |  |  |  |                                                                                                           |  |     
|Item 14.  |  |  |  | Material Modifications to the Rights of Security Holders and
Use of Proceeds                              |  |     
|          |  |  |  | None                                                                                                      |  |     
|Item 15.  |  |  |  | Controls and Procedures                                                                                   |  |     
|          |  |  |  | Controls and Procedures                                                                                   |  | 86  
|Item 16.  |  |  |  | Reserved                                                                                                  |  |     
|          |  |  |  | Not applicable                                                                                            |  |     
|Item 16A. |  |  |  | Audit Committee Financial Expert                                                                          |  |     
|          |  |  |  | Not required because this annual report does not cover a fiscal
year ending on or after July 15, 2003     |  |     
|Item 16B. |  |  |  | Code of Ethics                                                                                            |  |     
|          |  |  |  | Not required because this annual report does not cover a fiscal
year ending on or after July 15, 2003     |  |     
|Item 16C. |  |  |  | Principal Accountant Fees and Services                                                                    |  |     
|          |  |  |  | Not required because this annual report does not cover a fiscal
year ending on or after December 15, 2003 |  |     
|Item 16D. |  |  |  | Exemptions from Listing Standards for Auditing Committees                                                 |  |     
|          |  |  |  | Not required because this annual report does not cover a fiscal
year ending on or after July 31, 2005     |  |     
|Part III  |  |  |  |                                                                                                           |  |     
|Item 17.  |  |  |  | Financial Statements                                                                                      |  |     
|          |  |  |  | Not applicable                                                                                            |  |     
|Item 18.  |  |  |  | Financial Statements                                                                                      |  |     
|          |  |  |  | Index to Financial Statements                                                                             |  | F-1 
|          |  |  |  | Index to Schedules                                                                                        |  | F-1 
|Item 19.  |  |  |  | Exhibits                                                                                                  |  |     
|          |  |  |  | List of Exhibits                                                                                          |  |     

The Securities and Exchange Commission has not approved or disapproved of
this annual report or passed upon the adequacy or accuracy of this annual
report.





---



##### Table of Contents






SIGNATURES

The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

|                         |  |                       |                    |                        |  | 
|------------------------ |  | --------------------- | ------------------ | ---------------------- |  | 
|                         |  | MILLEA HOLDINGS, INC.
|                         |  |                       |                    | (Registrant)           |  | 
|                         |  |                       |                    |                        |  | 
|                         |  |                       |                    |                        |  | 
|                         |  | By:                   | /s/ KUNIO ISHIHARA
|                         |  |                       |                   
|                         |  |                       | Name:              | Kunio Ishihara         |  | 
|                         |  |                       | Title:             | President and Director |  | 
|                         |  |                       |                    |                        |  | 
|Date: September 29, 2003 |  |                       |                    |                        |  | 





---



##### Table of Contents






EXHIBIT INDEX

|               |  |                                                                                                                                                                                                                                                           |  |  |  | 
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit Number |  | Description                                                                                                                                                                                                                                               |  |  |  | 
|               |  |                                                                                                                                                                                                                                                           |  |  |  | 
|1.1            |  | English translation of the articles of incorporation of Millea Holdings, Inc.                                                                                                                                                                            
|1.2            |  | English translation of the share handling regulations of Millea Holdings, Inc.                                                                                                                                                                           
|2(a)           |  | English translation of the specimen stock certificate of Millea Holdings,
Inc., incorporated by reference from the annual report on Form 20-F/A
(Commission file number 0-31376) filed on September 27, 2002.                                            
|8              |  | List of subsidiaries of Millea Holdings, Inc.                                                                                                                                                                                                            
|12             |  | Certifications required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule
15d-14(a) (17 CFR 240.15d-14(a)) under the Securities Exchange Act of 1934,
as amended.                                                                                         
|13             |  | Certification required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) or Rule
15d-14(b) (17 CFR 240.15d-14(b)) under the Securities Exchange Act of 1934,
as amended, and by Section 1350 of Chapter 63 of Title 18 of the United
States Code (18 U.S.C. 1350).