October 7, 2005 MS Quarterly News (2nd Quarter, 2005) We, Mitsui Sumitomo Insurance Co., Ltd. ("MSI"), are pleased to issue a quarterly newsletter with a summary of the topics during the second quarter ended September 30th, 2005, as set below. Performance (preliminary for the second quarter, from April to September 2005 with long term medical insurance included in Personal Accident and consequently Total) Total premium revenues grew 5.6 percent on a year-on-year basis as with an increase marked in every line. The increased premium revenues amounted to Y35.7 bn, far greater than Y24.3bn reported for fiscal 2004 (on a sales basis). The automobile line consolidated its activities platform and was rewarded for it with about 70,000 policies of "MOST First Class," a new product, for the two month since its launch in August. The fire line met good demands from corporate clients, and in addition, "Home Pikaichi" with a broad and rich coverage for natural disaster sold well. "ViV Shushin," a mainstay product of the personal accident line, marked its sales 2.4 times as high as that reported for the previous year. The miscellaneous line saw strong demands commercial liability insurances. The cargo and hull lines continued to increase new customers successfully.   Q2, fiscal 2005 (Jul to Sep . '05) Fiscal year to date (Apr to Sep . '05) Lines of insurance Premiums (sales basis) (in million yen) Growth rate (%) Premiums (sales basis) (in million yen) Growth rate (%) Voluntary Automobile 135,612 0.3 288,289 1.6 CALI* 43,481 10.6 84,477 11.3 Fire 50,996 10.1 101,376 11.2 Personal Accident 35,647 13.9 64,789 11.9 Miscellaneous 39,531 2.0 88,398 3.1 Cargo and Transit 15,418 5.4 31,589 5.5 Hull 6,385 15.7 13,875 10.2 Total 327,071 5.2 672,792 5.6 *CALI: Compulsory Automobile Liability Insurance Selected News Releases (July - September 2005) announcement date in parenthesis (1)  New Products and Services   *  Web-based consultation opened for car risk managers (July 1)     "Libero" was set up on July 1, 2005, which is a website of automobile-related risk management consultation dedicated for managers and staff responsible for their company cars. Opened in response to questions from some of them, asking for the best solution, this risk management consultation service is accessible anywhere any time by using the Internet. It also offers a forum of the members and tips useful to prevent a car accident.   *  Health and medical consultation service upgraded generously for individual customers (July 13)     "Seikatsu Support Service," free telephone consultation service for our individual policyholders, was upgraded in July, 2005. The new services include service capability working around the clock, 365 days a year and medical capacity holding 200 contracted doctors with no booking required. Further upgrading measures are now taken, including increasing contracted hospitals for complete medical checkup and adding institutions for the PET (positron emission tomography) scanning, which is effective for the early cancer detection.   *  "MAT-LOCS," office theft risk assessment service launched (July 24)     MSI developed the industry-first service with an easy assessment system on office theft risks.This web-based system is accessible 24 hours a day, 365 days a year and named "MAT-LOCS," short for "Money Anti-Theft LOCS*."Its service is already available free of charge at the website dedicated for it since July.This anti-theft service offers a check list and preventive suggestions based on the psychological and behavioral aspects of illegal intruders, dependent on the criminal situation in the surroundings of an office in question and its preventive measures currently taken. *LOCS: the generic name given collectively to logistics operational risk assessment services by MSI   *  Income insurance extended out to hospitalization for bone-marrow transplantation (July 26)     MSI revised terms and conditions of disability income insurance effective October 1 which compensates an insured in case he/she has become injured or sick and is forced to be absent from work. Under the new terms and conditions, the insurance will cover extensively income of an insured during his/her hospitalization in case he/she is a donor in bone-marrow transplantation and required to be in hospital. Since 2000, MSI has organized a marrow donor registry program in cooperation with the Japan Marrow Donor Program foundation to advocate marrow donation. This revision is part of our socially responsible product development and promotion which help donor customers financially, and likewise, we will continuously seek for CSR-based operation within our core business of non-life insurance as well as outside.   *  Inter-Risk Research issued analysis report on "risk information disclosure" made by major companies (August 1)     Inter-Risk Research Institute & Consulting Inc. ("IRR"), MSI's risk management consultation arm, created the "ERM Survey Panel" to study, develop consultation service of and deliver information on enterprise risk management (ERM) as it is gradually more popular for companies to adopt. The panel comprises six working groups which study specific aspects in depth. For the first step, IRR made a survey on risk information disclosure stated in yukashoken hokokusho, Japanese 10-k-like form, in terms of Japanese major companies, and summarized an analysis report based on it. It analyzes some industrial features, reveals certain characteristics in wording and raises recommendation what corporate risk disclosure is to be like.   *  Hospitals increased for complete medical checkup in intermediary networking for policyholders (August 10)     Contracted hospitals increased to as many as 1,045 for policyholders' complete medical checkup under "Seikatsu Support Service", and simultaneously, specific information of on these hospitals was much enriched in quality. This upgraded service is available since July. MSI is the only insurer, life or non-life, in Japan that has a nationwide network comprising more than 1,000 hospitals for complete medical checkup.   *  MSI Care Network building nursery home "Yu Life Setagaya" to expand elder care business (August 15)     MSI and its elder care unit, Mitsui Sumitomo Insurance Care Network Co., Ltd., will build a private-pay nursing home named "Yu Life Setagaya," expecting to open it in July 2006. The three-storey building is located within a residential zone with amenity of quietness near the Roka Park in Setagaya ward, Tokyo and will accommodate 96 private rooms. The MSI group continues to develop its comprehensive care service business, centering around the operation of private-pay nursery homes. And thereby, we devote ourselves in creating enriched longevity communities amid the super-aging society.   *  Online data service of premium direct debit starting (August 16)     Effective September 2005, MSI started providing its corporate and public clients of group insurance with data of premiums to be directly collected from payrolls of employee policyholders working for them via the Internet. MSI is the first service provider in this function among the major non-life insurers. Conventionally, the monthly data is recorded and delivered in document, magnetic tape or floppy disc from an insurer to its institutional user clients. This online service will benefit the clients by speedy direct debit process, instant data transfer, low information leakage risk from the data, environment-friendly paperless processing and so on.   *  New savings-type personal accident insurance with higher premium refund, "Super Hareyaka Sedai," on sale (August 17)     Targeting elderly people aged 70 years or higher, new savings-type personal accident insurance named "Super Hareyaka Sedai " was launched on September 1. "Hareyaka Sedai," which is designed only for people aged 70 years or higher, has been on sale since September 2004. The new modification offers an upgraded savings function in addition to the conventional insurance function in order to meet elderly beneficiaries' needs of both protection and savings. The new product is designed to monthly revise its committed interest rate linked to market interest rate, thereby enabling a higher premium refund.   *  "e-JIBAI" CALI system tying up with governmental car ownership registry, with new members (August 26)     "e-JIBAI" is the shared computer system eleven non-life insurers jointly developed for the administration of compulsory automobile liability insurance (CALI). Starting its operation with part of the framework in October 2004 and adding functions one by one, it has worked well so far for the ten months. It will interface a one-stop service of the car ownership registry provided by the Government, which is to be in full operation in December 2005. It also plans to interface external systems of third parties such as car makers. Elsewhere, e-JIBAI welcomed two new members, Zenrosai, or National Federation of Workers and Consumers Insurance Cooperatives, and Daido Fire and Marine, and is now jointly managed by 13 institutions made of 12 non-life insurers and a cooperative.   *  New liability insurance "IT Protector" released (September 2)     "IT Protector" is now on sale. This liability insurance is a new type with consultation service in addition. It offers a brief risk assessment as well as compensate a beneficiary engaged in an IT business such as computer networking and software development for damage the beneficiary is legally responsible for in case it is caused by an accident during work.   *  New commercial credit insurance pays out more (September 21)     MSI has launched a new commercial credit insurance, which secures receivables of a corporate customer. It offers generously extended coverage, for example, full extent coverage of loss on a receivable claim in order to better fit the needs from corporate customers who want to tighten credit control. Commercial credit insurance, particularly a line item which was introduced in 2004 and targeted small- and medium-sized businesses, has been increasing in the number of policies written. MSI makes a further effort to offer items which meet customers' needs better in shortening a credit decision process and broadening coverage, using its world-class underwriting capacity and business experiences.   *  New auto loan "Precoloan" developed (September 30)     MSI has developed a new personal auto loan named "Precoloan" and released it in October 2005. It features a preferred interest rate which is 0.3 percent lower than the normal rate applicable and is applicable for an excellent borrower policyholder who is graded 7th or higher in his/her auto insurance. When it is available to employees of a corporate customer, it helps the company raise employee drivers' awareness of accident prevention with the financial benefit of preferred rate as well as contributes itself to bettering fringe benefits there. MSI intends to positively promote it to employees of its corporate clients. (2)  Life Insurance, Alliances and Overseas Operations   *  MetLife Inc. took over CitiInsurance' stake in MSI Citi Life (July 4) Individual annuity-specialized unit changes name (September 30)     MetLife Inc. ("MetLife") announced July 1 that MetLife acquired CitiInsurance International Holdings Inc. ("CitiInsurance") in accordance with the purchase agreement concluded between MetLife and Citigroup on January 31, 2005. More precisely, MetLife International Holdings Inc. ("MLI"), an immediate subsidiary of MetLife, now owns CitiInsurance as a result, thereby placing it under the umbrella of the MetLife group. Mitsui Sumitomo CitiInsurance Life Insurance Co., Ltd. ("MSI Citi") is owned 51 percent by MSI and 49 percent by CitiInsurance. Although there is no immediate change in its shareholders of MSI Citi., it is now a joint venture of MSI and MetLife. MSI announced that the annuity joint venture with MetLife of the U.S. would change its name to Mitsui Sumitomo MetLife Insurance Co., Ltd. ("MSI MetLife") effective October 1, 2005. The renamed company would renew its logo mark, brand slogan and communication symbol and positively conduct a marketing campaign. It aims to be always in a position that represents and leads the individual annuity insurance market which is expected to continuously expand.   *  Cashless application with mobile terminal extended to life insurance (July 14)     MSI and Mitsui Sumitomo Kirameki Life Insurance Company, Limited ("MSI Kirameki") have extended the premium settlement function of the group's advanced mobile terminal, making it applicable to life insurance items in addition. The terminal, named "Mobile MS1," was originally developed for agents to use for non-life insurance application processing. The cashless life insurance application started in July 2005. An applicant does not have to pay premium in cash nor stamp his/her family seal on a bank transfer application form, so it is safer, easier and more reliable way of premium settlement.   *  MSI obtained automobile insurance license in China (July 27)     China Insurance Regulatory Commission granted a product license for automobile insurance to MSI on July 22, 2005. MSI is the first Japanese non-life insurer that has obtained that sort of license. It allows MSI to enter into the car insurance market in China with about five million cars and a value of one trillion yen-worth premiums. While MSI will accept reinsurance ceded by Chinese local car insurers for the time being, it intends to build up a service platform and a policy administrative system necessary for its own handling without delay.   *  Variable annuity assets reached one trillion yen level at MSI Citi (August 2)     The balance of the account segregated for variable annuity assets broke through the one-trillion-yen line at MSI Citi. As of July 31, variable annuity insurance totaled 104,290 in the number of policies written and the balance of its assets reached Y1,018.1 bn. MS Citi has successfully grown up since October 2002 when it was opened as an insurer specialized in variable annuity, starting its business with offering its products on the distribution channels of agent financial institutions. Although MSI Citi is the second largest in the balance of variable annuity assets, its record of two years and 10 months to reach one trillion yen in assets is the fastest. Besides, MSI Citi also started handling fixed annuity insurance in January 2005, and this line is faring well to increase sales volume as well as extend agent channels.   *  MSI Kirameki totally renewed application data processing (August 22)     MSI Kirameki renewed its application data processing by adopting agent's direct input and centralized image input to input data on new life insurance applications, and introduced it in July 2005. The new processing method is aimed to facilitate increasing customer satisfaction by improvements in speed, correctness and efficiency such as sooner issuing policies.   *  Share transfer completed for acquiring Mingtai of Taiwan (September 2)     The share transfer procedure duly finished on September 2, 2005 in accordance with the agreement dated April 22, 2005 that MSI shall purchase equities of 100 percent stake in Mingtai Fire & Marine Insurance Co., Ltd. ("Mingtai") from First Financial Holding Co., Ltd. The deal cost T$8.4 bn, roughly equivalent to Y28.8 bn. Mingtai is the second largest non-life insurer in Taiwan. Together with this acquisition and the businesses in the region purchased from Aviva plc. prior to it, the MSI group has expanded its Asian operation to a Y108 bn worth size in annual gross premium income, the highest among the foreign affiliate non-life insurers in the region.   *  MSI awarded General Insurance Company of the Year in 9th Asia Insurance Industry Award (September 27)     MSI was awarded "General Insurance Company of the Year" as "the most active insurer company in Asian insurance market for 2004" at the celebration of the 9th Asia Insurance Industry Award held in Singapore on September 26, 2005. This is granted for MSI's advancing to the top of the foreign affiliate non-life insurers in the region via acquisitions such as the purchase of the entire Asian operation. from Aviva plc. of the U.K. as well as in recognition of its social contribution activities of offering technical co-operations in insurance products and services in the countries of the region. MSI is Japan's first non-life insurance company that is honored with the prize. (3)  Other Business-Related Topics   *  IRR holding open seminar on "Stakeholder-focused Risk Management" (August 16)     IRR held a free open seminar titled "Stakeholder-focused Risk Management - for a new coordinate axis" on September 16, 2005. "Risk Management Approach in Aspect of Stakeholders" was developed by IRR in cooperation with Hakuhodo Inc., and practical information was provided in its demonstration at the seminar.   *  New TV commercial of ViV Shushin medical insurance, "Moments in My Life," on air (August 19)     A new TV commercial was produced for ViV Shushin of medical insurance, which is one of our main product lines along with the automobile line, and is on air nationwide since August 20. It continues to feature Miss Hitomi Kuroki, an actress. For this year is the 25th anniversary of her actress career, with highlight on her dearest pictures of childhood and thereafter backed by her own singing, it impresses audience that ViV Shushin is a whole-life medical insurance.   *  Internal investigation on payout failures reported (September 20)     MSI internally investigated paid-out cases in the past, checking each paid amount closely with the terms and conditions of the specific policy. It is revealed that there are failures among the investigated cases during the past three years to include certain expense-portions payable in the payout amounts informed to the specific policyholders. MSI reported a summarized result of the investigation on these miscalculated cases in the past three years. We at MSI sincerely apologize for these errors which happened in the payout handling as a basic component in the business process of non-life insurance administration and customers' mistrust to us caused by them. Taking it serious, we will do take preventive measures never to make such an error in the payout handling again and strive to restore the trust of customers.   lines Follow-up payments (case):A Follow-up payments (thousand yen) Automobile 22,223 1,346,743 Fire 946 92,065 PA* 972 129,901 Miscellaneous 62 5,003 Marine 8 695 Total 24,211 1,574,407 Information only Accidents (case):B Estimated underpayments (case):C Underpayment ratio(%):c/B/B Follow-up ratio(%):A/C 2,662,527 22,855 0.86 97.2 317,291 1,042 0.33 90.8 1,703,958 1,114 0.07 87.3 661,771 72 0.01 86.1 77,600 8 0.01 100.0 5,423,147 25,091 0.46 96.5 *Personal accident data as of September 20, 2005 (4)  Environmental and Social Contribution Activities   *  Charity winter holidays' card click-voting started (July 5)     MSI, in cooperation with Kids Earth Fund, a non-profit organization, managed a click-voting campaign on MSI's corporate website (http://www.ms-ins.com) July 1 to 31 in order to select pictures for charity winter holidays' cards. This is part of a program which supports children suffering from warfare and disastrous situation across the world with revenues from sale of the cards. Out of ten candidate pictures drawn by Croatian children, five were selected by the poll to be used in the patterns of the cards. Then after printing, sales of the cards has begun at our corporate website since September.   *  2nd lecture of Citizens' Environmental Course held (August 11)     The second lecture of the Citizens' Environmental Course which deals environmental issues and community contribution initiatives was given open to public, particularly residents in the neighborhood of the MSI Surugadai Building and people interested in urban greenery activities. Following the first lecture which had stressed importance of urban greens on the theme of "cooling and cultivating urban spaces," the second one dealt some effective countermeasures on the subject of "how to put up with heat-island effect in Tokyo."   *  MSI issued "CSR Report 2005" (August 15)     The report contains the current status and facing issues of our CSR efforts as well as envisages our future vision. MSI commenced to issue a CSR report in fiscal 2004. The 2005 issue is enriched in content and characteristic in some respects. We not only gathered opinions from the all categories of stakeholders such as customers and shareholders, but disclosed improvements we made in response to the third party's opinion about the 2004 issue. We also bettered it visually by coloring. Amateur Sports     *  Women's Judo     The 35th All Japan Corporate Individual Judo Championships (at Amagasaki City Memorial General Gymnasium in Hyogo-pref., Japan, August 28-29) Rie Iwafuji (57kg-class) and Yoshie Ueno (63kg-class) achieved their third consecutive championships respectively in their classes of the games. Hitomi Kaiyama (70kg-class) won the silver medal, and Emi Yamagishi (48kg-class) and Hiromi Okada (78kg-class) were the bronze medalists. World Judo Championships 2005, Cairo (Cairo, Egypt, September 10) Yuki Yokosawa (52kg-class) won the silver medal. Masae Ueno, Yuki Yokosawa, Rie Iwafuji and Yoshie Ueno who joined in Japan's women team fought in every match in the national team games and won the bronze medals, beating Chinese team by 3-2 in the third-place play-off. The 8th Junior All Japan Women's Judo Championships (Saitama-Prefectural Budokan, Saitama-pref., Japan September 17) Emi Yamagishi (48kg-class), Chiaki Shimizu (70kg-class) and Hiromi Okada (78kg-class) participated and all three won the championships in their classes.     *  Women's Marathon and Track     The 48th Sapporo International Half-Marathon (Sapporo, Hokkaido, Japan, July 3) Miki Oyama, Miki Ohira and Shiori Ishiyama joined in the race and did well to finish 9th, 13th and 24th, respectively. The 53rd All Japan Corporate Team Track and Field Championships (Kagawa-Prefectural Marugame Stadium, Kagawa, Japan, September 23-24) Miki Oyama and Ayumi Hashimoto tried their best in the 5,000 meter and 10,000 meter races, respectively.