February 18, 2000 Formation of New Comprehensive Insurance & Financial Services Group To whom it may concern: The Sumitomo Marine & Fire Insurance Co., Ltd. Mitsui Marine & Fire Insurance Co., Ltd. The Sumitomo Marine & Fire Insurance Co., Ltd. (President: Hiroyuki Uemura) and Mitsui Marine & Fire Insurance Co., Ltd. (CEO & President: Takeo Inokuchi) have been engaged in preliminary discussions about a possible business alliance for the past week. Having agreed on the following points, the two parties have agreed to enter into further negotiations as to a merger aimed at forming a new comprehensive insurance and other related financial services group. Specific details as to the integration plan are scheduled to be announced by the end of March. I. Market Environment 1. Rapidly changing insurance market Deregulation of the Japanese non-life insurance industry, particularly in terms of products and insurance premiums, has not only resulted in intensifying competition among existing players, but the entrance of mega-capitalized foreign companies and players from other industries is further intensifying competition on a daily basis. In order to satisfy the diversified and sophisticated customer needs, the non-life insurance industry has now entered into an era required improving capabilities in products development and price competitiveness. In the life insurance sector, indicators point to a saturation of the market for conventional products. Meanwhile, rapidly shifting demographics from a combination of a declining birth rate and an aging society, as well as an expanded role for private pension plans, would point to a huge expansion of non-traditional markets for this sector such as healthcare, medical care, and pension plan. Moreover, direct marketing through e-commerce and other new distribution channels are changing the face of the industry. 2. New Era of Financial Services The barriers among the financial services sectors are also shrinking, creating huge business opportunities in investment trusts, defined contribution pension plans, and other financial services-related sectors. Moreover, the new business domain using the advanced financial technology, such as financial guarantee or securitization, has grown up. The preparation for the "New Era of Financial Services" has become more important. 3. Borderless Global Competition Mega-capitalized foreign companies are crossing national borders and creating powerful businesses throughout the world. Japanese insurance companies, as well, must not only protect their presence of the domestic market, but must deploy aggressively into global markets. II. Objectives of Integration The goal is to achieve improved customer satisfaction, and enhance growth opportunity, profitability, and competitiveness through the concentration of business resources, synergism, and a reform of various aspects of operations, from which to form the strongest domestic, and a top-ranking global, comprehensive insurance and financial services group. Specific objectives are as follows: 1. To better respond to customer needs by expanding bases for production and claims handling and strengthening sales and marketing networks. 2. To attain an economy of scale by which to improve operating efficiency, and aggressively utilize surplus capital to increase profit. 3. To engage in mutually complementary product development, system development, and asset management, to build a mutually complementary sales and marketing organization, and otherwise boost competitiveness. III. Corporate Vision of New Group The goal of the integration is to realize a corporate vision as defined below from which to maximize corporate value. 1. Become a dynamic comprehensive insurance and financial services group by focusing the property, casualty and life insurance sectors as the core businesses while expanding into financial services and risk-related businesses. The goal of the core non-life insurance business will be: (i)to become the No. 1 ranked domestic non-life insurer in terms of growth, profits, and scale of operation, (ii)to become a non-life insurer with an aggressive overseas strategy actively competing in the global market. 2. Become a comprehensive insurance and financial services group, highly evaluated by customers, shareholders, and agencies, and capable of gaining public confidence. 3. Become an extremely innovative comprehensive insurance and financial services group staffed with employees of utmost creativity and vitality. IV. Integration Schedule 1. Step 1: Pre-merger alliances (1) To the extent possible, complete the integration in a short period by sharing  infrastructure resources and exchange personnel and business data. (2) To the extent possible, integrate and restructure subsidiaries and other affiliated companies before the merger. (3) Jointly undertake new businesses and product development. 2. Step 2: Merge on the possible earliest date which should be before April 1, 2002. V. Integration Ratio The two principals will confer and determine the integration ratio through independent third-party appraisals. VI. Integration Strategy Organization The following organization is to be built quickly to plan and effect an integration VII. Integration Plan Specific details of the following integration plan for the group as a whole will be announced by the end of March. 1. Post-merger Plan (1) Business Targets Plan (i) Premium budget (ii) Revenues and profit plan (iii) Numerical targets for various indicators: · For expanded operations: Market share · For improved profitability: Operating expenses ratio, Loss ratio, Combined ratio, Interest and Dividend income,After-tax profit · For more effectual use of capital: Return On Equity (2) Business Strategy of Group Individual strategies for operations, products, life insurance business, financial services business, claims services, overseas business, information technology, human resources 2. Individual Pre-merger Plans of Two Companies (1) Numerical targets for each company linked to the integration plan (premium income, operating expenses ratio, loss ratio, combined ratio, etc.) (2) Plan for pre-merger effectual alliances (joint IT investment, joint product development, etc.)