March 27, 2000 Full-scale Alliance and Scheduled Merger of The Sumitomo M&F and Mitsui M&F (Addendum) BUSINESS STRATEGIES OF NEW GROUP 1.Business Portfolio Strategy (1) Carefully analyze the required capital versus income for each business area to attain a more efficient distribution of capital, thereby enhancing return on equity. (2) Construct a business portfolio from which approximately 15% of total income in FY2004 will be derived from sectors other than the domestic nonlife insurance business, with the ultimate goal in the future being at least 50%. 2.Financial and Capital Strategy (1) Curtail investments in stocks which are held mainly due to business relationship and real estate, both of which are only marginally effectual in terms of risk-to-return and instead increase pure investments, and otherwise revamp the asset portfolio for greater income from asset management. (2) Utilize the capital surplus arising from the merger for greater income and aggressively engage in or invest in new business areas such as increased insurance risk retention, reinsurance underwriting, and alternative risk transfer (ART) so as to expand income sources. (3) While ensuring adequate capital levels and taking into consideration stock price levels, investigate a plan to purchase and cancel its own shares as a means of optimizing shareholder value. 3.Nonlife Insurance Business Strategy Become Japan's top-ranked nonlife insurer in terms of growth, profitability and scale of operations, and aggressively advance into the global markets. (1) Operations Strategy In the personal market and small-to-medium business market, develop the nation's top-ranked sales network and unique products and servicesto better serve customers and expand market share. For the corporate market, derive the effects of synergism through integration to attain a predominant position in the industry and ultimately become the nation's number one commercial nonlife insurer. Revolutionize the business practices of agencies in terms of sales channels to boost competitiveness. Make optimum use of the industry's top-ranked agency network systemin terms of both functions and contents (currently comprised of 20,000 agencies, with 40,000 agencies to be connected in FY2002), and create a virtual office in which the majority of the work can be concluded on the net. Reform procedures to enable cashless collection of premiums, and standardize procedures. Diversify and expand means of interfacing with customers and make operations more efficient. Among other measures, consultation on insurance needs, the purchase of standard policies, and other comprehensive services will be provided by call centers, and electronic commerce and virtual offices that simulate interaction with agencies will be setup on the internet. While the aforementioned means will boost premium income, as a strategic means to increase profitability and reduce the combined ratio, income and cost will be managed by each of operating organization, product and client. (2) Product Strategy In the personal market where competition for product development is intensifying, position the new company as the market leader by developing and introducing new, large-scale products in the primary auto and fire insurance market, and in the health care, nursing-care and other areas of the third sector, foreseen to be the growth sector of the future. In the corporate market where deregulation is raising competition to new levels, provide comprehensive solutions to corporate clients by further strengthening product development, risk management, and underwriting capabilities, which are already the forte of the two companies with added effects of synergy arising from the merger. Moreover, provide high value-added products and services such as the securitization of natural disaster risk and weather derivatives which fuse insurance and risk management. This will entail developing beyond the boundaries of the traditional insurance sector and by making optimal use of a strong financial structure and insurance and financial technical know-how. (3) Global Strategy Make operations more efficient through the consolidation and/or closure of overseas bases of the two companies, and expand the functions of operations in the three corners of the world, namely Asia, Americas, and Europein order to provide the most sophisticated risk management services to Japanese companies expanding abroad. Also, engage in more direct underwriting in profitable overseas markets. Boost global competitiveness by taking an equity stake or making alliances with foreign insurance companies in order to establish a presence as a global player. Expand the foreign reinsurance business globally by utilizing the existing overseas subsidiaries of the two companies. (4) Claims Service Strategy Make optimum use of the country's largest network of claims handling centers and call centers to ease customer anxieties, with services ranging from emergency assistance to resolution of accident claims, 24 hours a day, 365 days a year. The customer satisfaction is always our top priority. To this end, invest in information technology to construct powerful systems to assist a full core of highly trained claims adjusters in providing individualized and meticulous accident investigation and claims services, with a special emphasis on maintaining good communications with customers throughout the claims process. (5) Information Technology Strategy Consolidate systems to reduce the current investments and expenses of two-company total of Yen 35 billion per annum by about Yen 10 billion, thereby freeing investment resources, and concentrate IT investment of about Yen 90 billion three years after the consolidation into strategic areas and into more efficient operations. Keeping in step with the advances being made by network companies, set up business-to-consumer and business-to-business internet enterprises and an integrated call center and other 24 hours a day, 365 days a year services in order to further improve customer relations. Build a new system as a support for agencies, who are business partners, that organically fuses the agency network system and customer databases. Promote joint ownership of data and improve knowledge management to speed up the introduction of scientific market analysis, greater product development capabilities, and business decision-making. 4.Life Insurance Strategy (1) The two life insurance subsidiaries established in 1996 have shown steady growth and are soon expected to turn a profit. These two subsidiaries will be consolidated as a means to boost product development and sales capability. Mergers and acquisitions will also be considered, and the expanded scale of operations therein will establish a new mainstay of income. (2) Concentrate product development on the health care, pension plan, and nursing-care sectors, foreseen to be the growth sectors of the future, in order to respond speedily to socioeconomic and market changes. (3) Utilize the conventional nonlife insurance agency network in order to promote cross sales of life insurance. To this end, train financial planners and introduce other measures to strengthen the sales capability of life insurance agents. At the same time, diversify marketing channels to create a top-ranked life insurance company owned by nonlife insurance companies. 5.Financial Services Strategy (1) In the high-growth financial services business, expand into asset management, venture capital, mutual funds, and defined contribution pension plans.Also expand into financial guarantee, asset-backed securities and real estate securitization, derivatives and other products with the application of advanced and innovative financial techniques.Promote consulting and sales of comprehensive packages of insurance products and financial products. (2) In order to dynamically pursue this type of financial services business, create stronger alliances with domestic and foreign financial institutions to speedily construct an efficient and strategic business base. 6.Risk-Related Business Strategy (1) Make an aggressive move into risk-related businesses to derive the synergistic effect of the insurance business and the financial services business. (2) Steadily increase fee income by doing risk-related consignment research and consulting on such issues as environmental measures and product liability. (3) In the health care, nursing-care, and other care businesses, and the emergency assistance business as related to automobiles, travel, and daily living for the personal market, expand existing businesses and expand into new areas. In nursing-care, actively engage in care management, home nursing services, nursing homes for the elderly, and nursing-care training centers. Actively pursue alliances with companies from other sectors for advancing into these new business areas.