Company Presentation (Including FY2004 Earnings) 3rd June 2005 - - PowerPoint PPT Presentation

3rd June 2005 To our Investors and Analysts (Including FY2004 Earnings)

Company Presentation

• I. FY2004 Earnings Summary

Data (Attachments): FY2004 Earnings Data

• 1. Key Points

2．Premium Income 3．Claims 4．Operating Expenses 5．Asset Management 6．Capital 7．Catastrophe Reserves Ref: Fortress Re Aviation Reinsurance Data

• 8. Aioi Life: Key Earnings Points

Ref: Aioi Life Embedded Value

• II. New Mid-Term Business Plans 'IOI ACT II'
• 1. Basic Mid-Term Strategy
• 2. Mid-Term Management Targets (FY2005-FY2006)
• 3. Business Strategy
• 4. Capital Policy
• 5. Promotion of CSR Management

CONTENTS

P1 P2 P4 P5 P6 P7 P8 P9 P10 P11 P12 P14 P15 P24 P25 Ref: General Image of New Mid-Term Business Plans 'IOI ACT II' P26

• I. FY2004 Earnings Summary
• I. FY2004 Earnings Summary

1

• I. FY2004 Earnings Summary
• 1. Key Points

NB: The net loss ratio includes loss adjusting expenses

◆Last year's direct net premium result maintained, but net premium income from

• verseas reinsurance down,

leading to 1.1% fall ◆ Underwriting loss of ¥9.9BN due to the impact of natural disasters and other factors ◆ Net expense ratio improved 0.3P in spite of fall in premiums ◆ Dividend maintained at ¥8 per share

Note: Lower line excludes special factors (abolition of the state CALI reinsurance scheme and impact of the Fortress Re issue)

(Billion yen, %)

Change +/- % 836.5 827.8

• 8.7
• 1.1

758.2 757.6

• 0.5
• 0.1

471.4 498.9 27.4 5.8 417.3 431.5 14.1 3.4 279.8 274.4

• 5.4
• 1.9

279.5 274.3

• 5.1
• 1.8

13.0 (9.9)

• 22.9
• 176.1

41.5 38.0

• 3.5
• 8.5

45.3 22.3

• 22.9
• 50.6

4.9 1.2

• 3.7
• 74.8

Extraordinary Profit 19.0 17.3

• 1.7
• 9.0

Extraordinary Loss 14.0 16.0 2.0 14.2 27.3 16.1 (11.1)

• 41.0

Y8.00 Y8.00 Y0

60.8 64.6 3.8P 59.9 61.7 1.8P 33.5 33.2

• 0.3P

36.9 36.2

• 0.7P

94.3 97.7 3.4P 96.8 97.9 1.1P

Net loss ratio Net expense ratio Combined ratio FY2003 Underwriting Profit (Loss) Asset Management Profit (Loss) Ordinary Profit (Loss) Extraordinary Profit (Loss) Net Profit Dividend per share FY2004 Net Premiums Net Claims Net Operating Expenses

2

• I. FY2004 Earnings Summary
• 2. Premium Income (1) Net Premiums

■ Net Premiums by Class ■ Main Factors

（* Operating result basis)

Fire

P.A.

Motor

Third sector Savings-type P.A. Long-term fire Downturn in unit prices Reduction in overseas inward R/I premiums

Other

Liability

(Billion yen, %) [Excluding special factors] (Billion yen)

+4.5 +1.7

• 1.1
• 7.4*
• 4.6

+4.3

Amount +/- % Amount Change +/- %

Fire

83.7 3.3 88.5 4.8 5.8

Marine

5.2 0.5 5.3 0.1 2.2

P.A.

49.0

• 1.6

49.2 0.1 0.3

Motor

471.7

• 3.7

460.6

• 11.1
• 2.4

CALI

86.9 4.5 87.5 0.6 0.7

Other

61.3

• 3.9

66.3 4.9 8.0

Total

758.2

• 1.9

757.6

• 0.5
• 0.1

Class FY2003 FY2004

◆ Long-term fire insurance posts solid performance, increase in income maintained ◆ Motor insurance income continues downward, but smaller reduction ◆Increase in income achieved on total basis across all categories

3 (Billion yen %)

■ Operating Result by Class ■ Operating Result by Channel

(Billion yen, %)

◆ Smaller reduction in income in the highest-weighted Pro channel ◆Smaller increase in Toyota Group income, but rising income trend maintained

• 2. Premium Income (2) Premium result
• I. FY2004 Earnings Summary

Amount +/- % Amount Change +/- % Fire 92.3 6.0 97.1 4.8 5.2 Marine 8.5 0.3 8.5 0.0 0.1 P.A. 40.0 2.5 41.7 1.7 4.2 Motor 465.4

• 2.2

460.3

• 5.1
• 1.1

CALI 145.3 2.0 145.7 0.4 0.3 Other 62.5

• 1.4

64.4 1.8 2.9 Total 814.0

• 0.3

817.6 3.6 0.4 Class FY2003 FY2004

Amount +/- % Amount Change +/- %

290.2

• 1.9

288.8

• 1.4
• 0.5

162.4 1.1 163.8 1.4 0.9 170.3 4.3 175.9 5.6 3.3

Toyota Gp outlets

150.3 2.7 152.7 2.4 1.6

• /w Toyota Gp cos.

20.0 18.3 23.2 3.2 15.9 29.6

• 11.1

27.6

• 2.0
• 6.9

83.2 2.6 84.3 1.1 1.3 27.6

• 2.4

27.4

• 0.2
• 0.6
• /w bancassurance

4.8 23.3 4.3

• 0.5
• 10.8

50.7

• 6.8

49.8

• 0.9
• 1.8

814.0

• 0.3

817.6 3.6 0.4

Channel FY2003 FY2004 Pro Financial Other Total Motor Other dealers Corporates Toyota Group

4

■ Net Claims / Loss Ratio Trend

(excl. domestic loss adjusting costs)

◆ The impact of major natural disasters on net claims paid was ¥33.6BN, but on a total basis net claims only increased ¥14.1BN. ◆ The net loss ratio rose only 1.8P due to improvement in the loss situation, inclusive of the impact of major natural disasters.

■ Major Natural Disasters

(Unit: Billion yen)

◆ Incurred loss from major natural disasters amounted to Y53.7BN on a direct basis, but the net impact was cut to Y35.9BN thanks to cautious reinsurance coverage ◆ The motor E/I loss ratio was low and stable at 55.2%, excluding the impact of major natural disasters

■ Motor E/I Loss Ratio

(Billion yen, %) [Excluding special factors]

• I. FY2004 Earnings Summary
• 3. Claims

（％）

59.6 56.9 54.4 54.6 55.2 52.0 54.0 56.0 58.0 60.0

FY2001 FY2002 FY2003 FY2004

• Excl. major

natural disasters Paid Claims Loss ratio Paid Claims Change Loss ratio Loss ratio + / - Fire

34.1 42.4 55.8 21.7 65.0 22.6P

Marine

3.8 76.5 2.9

• 0.9

56.1

• 20.4P

P.A.

17.7 40.4 16.2

• 1.5

36.5

• 3.9P

Motor

266.6 61.3 263.8

• 2.8

62.0 0.7P

CALI

49.0 65.7 46.8

• 2.2

62.7

• 3.0P

Other

45.7 79.4 45.7 0.0 72.8

• 6.6P

Total

417.3 59.9 431.5 14.1 61.7 1.8P

FY2003 FY2004

Direct Net 53.7 35.9 Claims paid 49.7 33.6 Claims reserve 4.0 2.3 FY2004 Incurred Loss

78.1 76.9 70.7 69.8 72.1 69.6 67.8 65.8

38.1% 37.9% 36.9% 36.2%

20 40 60 80 100 120 140 160 FY2001 FY2002 FY2003 FY2004 35.0% 35.5% 36.0% 36.5% 37.0% 37.5% 38.0% 38.5%

Personnel Non-Personnel Expense ratio

5

• I. FY2004 Earnings Summary
• 4. Operating Expenses

■ Operating Expense Reduction

NB: Non-personnel expenses include donations/burden charges/taxes

(Billion yen, %) ¥BN [Excluding special factors]

◆¥5.1BN reduction in net operating expenses thanks to ongoing streamlining efforts ◆ ¥1.9BN reduction in systems costs after new business investments concluded ◆ The net expense ratio also improved 0.7P, offsetting the impact of the fall in net premiums

The expense ratio is steadily falling

Change +/- %

70.7 69.8

• 0.9
• 1.3

67.8 65.8

• 1.9
• 2.9
• /w systems expenses

22.0 20.1

• 1.9
• 8.8

138.6 135.6

• 2.9
• 2.1

140.9 138.6

• 2.2
• 1.6

279.5 274.3

• 5.1
• 1.8

36.9 36.2

• 0.7P

－

Net expense ratio FY2004 Net operating expenses FY2003 Personnel expenses Non-Personnel expenses

Underwriting-related operating expenses and SG&A

Commissions and collection costs

6

• I. FY2004 Earnings Summary
• 5. Asset Management

■ Asset Management Profit/Loss

(Unit: Billion yen)

■ Debts subject to Risk Control

(Unit: Billion yen)

◆ ¥12.4BN reduction in debts subject to risk control, due to improving debtor results and bulk sales, etc. ◆ At 3.5% of loans, significant progress in enhancing asset soundness ◆ ¥3.1BN increase in interest/dividend income, in spite of continued low interest rates ◆ Gain on sale of shares (part of gain/loss on sale of marketable securities) was ¥23.3BN, down ¥3.5BN YoY

Change 41.5 38.0

• 3.5

Interest and dividend income 35.5 38.7 3.1 Gain on sale of marketable securities 22.0 20.8

• 1.1

Valuation loss on marketable securities 0.9 1.3 0.4 Other profit/loss on assets managed 5.9 0.6

• 5.3

Transfer to profit, incl. reserve premiums

• 21.0
• 20.7

0.2

Asset Management Profit (Loss)

FY2004 FY2003

Change

24.6 12.1

• 12.4

Debts with failed companies 0.1 0.1 0.0 Debts overdue 18.3 11.4

• 6.8

Debts overdue for more than 3 months 0.6 0.3

• 0.3

Loans with eased conditions 5.5 0.2

• 5.2

352.9 343.0

• 9.9

7.0% 3.5%

• 3.5P

FY2003 FY2004

As a proportion of loans Loans Debts subject to risk control

7 (Unit: Billion yen)

■Unrealized gains/losses on securities ■ Reduction of strategic shareholdings (book value basis)

(Unit: Billion yen) (Unit: Billion yen)

◆ The solvency margin rose thanks to the steady build-up of equity capital and reduction in risk ◆ ¥17.7BN fall in unrealized stock gains

• n the sale of strategic shareholdings,

etc. ◆ ¥7.6BN fall in unrealized losses on foreign securities due to portfolio enhancements

■ Solvency Margin

◆Reduction of almost ¥130BN achieved in 2yrs ◆Strategic shareholdings realigned to further business policy

NB: Reduction and Balance figures are after adjustment for impairment

• 6. Capital
• 6. Capital
• I. FY2004 Earnings Summary

NB: Monetary receivables purchased are included under 'Other'

Change Total assets

2,597.8 2,569.1

• 28.7

Equity capital

446.8 452.0 5.2

Catastrophe reserves

194.2 194.8 0.5

Solvency margin

910.1% 951.9% 41.8P

FY2004 FY2003

Change Gvt/corp bonds

3.6 7.7 4.0

Shares

223.8 206.1

• 17.7

Foreign securities

• 14.9
• 7.2

7.6

Other

5.7 4.1

• 1.6

TOTAL

218.3 210.6

• 7.7

FY2004 FY2003

Change Reduction 96.6 32.8

• 63.8

Balance 303.6 270.8

• 32.8

Balance before change 368.9 340.8

• 28.1

FY2003 FY2004

0% 20% 40% 60% 80% 100% 120% 140% Aioi

• Co. Ａ
• Co. Ｂ
• Co. Ｃ
• Co. Ｄ
• Co. Ｅ

FY2003 FY2004

• 15.0P
• 10.5P
• 23.5P
• 18.0P
• 2.1P
• 6.7P

0% 20% 40% 60% 80% 100% 120% 140% Aioi

• Co. Ａ
• Co. Ｂ
• Co. Ｃ
• Co. Ｄ
• Co. Ｅ

FY2003 FY2004 +1.5P

• 1.4P
• 1.6P
• 2.8P

+1.1P +1.7P

8

■ Reserves by Class ■ Reserve Ratios by Class: comparison with competitors

◆¥9.2BN reduction in fire reserves due to major natural disasters, and consequently 15.0P fall in the premium reserve ratio to 64.7% ◆In order to strengthen our resilience to the risk of major natural disasters, we are looking at arranging optimum reinsurance coverages and raising catastrophe provisions

(Billion yen, %)

◆ By class, Aioi compares favorably on reserve ratio in both fire and motor insurance

Fire Motor

7．Catastrophe Reserves 7．Catastrophe Reserves

• I. FY2004 Earnings Summary

Amount Reserve ratio Amount Reserve ratio +/- % Fire 65.5 79.7 56.3 64.7

• 15.0P

Marine 3.3 64.2 3.5 65.4 1.2P P.A. 26.9 54.9 28.4 57.7 2.8P Motor 84.2 17.9 89.3 19.4 1.5P Other 14.0 19.2 17.1 24.7 5.5P FY2003 FY2004

• I. FY2004 Earnings Summary

9

■ Claims Payments

(Unit: Billion yen)

Ref: Fortress Re aviation reinsurance data

◆Solid progress in claims payments ◆An international auditor regularly examines a detail of claims payment estimates ○ Claims reserves have been increased by

¥4.2BN based on recent market loss trends

◆ Settlement concluded with Fortress Re and its directors

○ ¥10.3BN in settlement recorded as extraordinary profit

141 61 1 10 20 30 40

January 2001 January 2002 January 2003 January 2004 January 2005

¥BN FY2001 FY2002 FY2003 FY2004 FY2005

Inward R/I contracts Inward R/I contracts Claims payment estimate Claims payment estimate

FY2001 FY2002 FY2003 FY2004 Claims paid 32.2 36.2 38.9 29.0 Outstanding reserve 116.7 88.4 61.6 45.9

10

• I. FY2004 Earnings Summary
• 8. Aioi Life: Key Earnings Points

New personal policies New personal policies Personal policies in force Personal policies in force

Premium and other income Asset management profit Claims and other payments Asset management costs

Total Assets 59,467 63,091 3,345 3,902 18,102 20,036 28 76 196,486 229,243 3,623 556 1,933 47 32,756 16.7 169.5 10.7 16.6 6.1

FY2003

New policy total Personal/pensions Group/gp pensions Policies in force Personal/pensions Group/gp pensions

FY2004 Change +/- %

852.0 229.7 27.0 790.9 61.1 970.2 111.6 4,188.5 4,829.7 3,404.6 3,878.1 783.8 951.5 179.2 50.5 641.2 473.5 167.7 15.3 13.9 21.4

(Billion yen, %)

1,081.8 82.7 22.7

NB: If no increase had been made, net pretax profit for the period would have been ¥2.31BN in real terms

Solvency Margin 1,950.6 1,874.0

• 76.6P

694.4 790.9

970.2

600 700 800 900 1,000 FY2002 FY2003 FY2004 (¥BN) (¥BN)

◆ Reserves increased by ¥2.3BN in order to achieve statutory level (¥1.64BN increase over last financial year-end) ■ Solid expansion, with double-digit percentage increase in policies in force

3,050.3 3,404.6

3,878.1

2,000 2,500 3,000 3,500 4,000 FY2002 FY2003 FY2004 YoY＋22.7％ YoY＋13.9％ (Million yen, %)

• I. FY2004 Earnings Summary

11

Ref: Aioi Life Embedded Value (EV)

◆ ¥8.7BN YoY increase in EV at end FY2004 (+18.1%) ◆ Reserves are being accumulated in order to meet the statutory level, and corporate value is increasing steadily, although this will not be reflected in consolidated profits for a while

■ Corporate value rising steadily in the life operation

20 40 60 End FY2002 End FY2003 End FY2004

¥40.9BN ¥48.0BN

¥BN

Net asset value Value of policies in force 13.9 27.0 19.7 28.2

Y56.7BN

28.5 28.2

Increase in EV ¥8.7BN

Increase in EV ¥7.1BN

NB: Embedded value assumptions: solvency margin 1,000%, risk discount rate 8%

• II. New Mid-Term Plans

‘IOI ACT II’

The Will and Action to Reform

• II. New Mid-Term Plans

‘IOI ACT II’

The Will and Action to Reform

• II. New Mid-Term Business Plans 'IOI ACT II'
• 1. Basic Mid-Term Strategy (1)

■ Non-life operations ■ Life operations ■ Non-life operations ■ Life operations

D o m e s t i c P r e m i u m s O v e r s e a s P r e m i u m s Expense Ratio

¥1 trillion ¥100 billion 30% 2010-2015 Goals

• 1. Establish strategy focused on customers/markets

and lay a foundation for income growth by re-strengthening core non-life functions

• 2. Enhance productivity through reform of the
• perating structure
• 3. Strengthen earnings capability
• 4. Promote reform/invigorate HR and CSR

management

• 5. Further consolidate ties with the Toyota Group
• 1. Establish direct operations in Asia/China
• 2. Establish a new business model with a view to

dramatic growth in life revenues

• 3. Develop new fee businesses, primarily in

financial services

3 areas for expansion

Policies in force Ordinary p r o f i t s ¥10 trillion ¥10 billion Key issues to be tackled in FY2005-FY2006

5 areas to strengthen

12

◆ Establish a revenue growth capability

Develop business with a focus on the regions, swiftly and surely capture growth markets and re-consolidate core non-life functions

◆ Enhance productivity/efficiency

Reform the sales structure and maximize IT to build an efficient sales/business scheme

◆ Strengthen earnings capability

Strengthen loss improvement measures and revamp the product portfolio to enhance the overall loss ratio, and bolster asset management capability

• II. New Mid-Term Business Plans 'IOI ACT II'
• 1. Basic Mid-Term Strategy (2)

Establishing a foundation for revenue and profit growth in the domestic non-life business Widen the business scope to diversify sources of earnings Foster a continually reforming, dynamic corporate culture Build a company of top-flight quality

Enhance productivity in the domestic non-life operation to generate surplus cash for investment, and shift management resources

aggressively into growth sectors in the overseas, life and financial services operations, etc.

Further consolidate ties with the Toyota Group

Consolidate ties in all sectors, starting with the domestic non-life business

Raise staff abilities/moral based on Personnel Reform and Communication & Teamwork, and strengthen partnership with agents ◆ Bolster the financial base and enhance capital efficiency in order to generate surplus cash for investment, and boost ratings/ shareholder value ◆ Build a foundation for strong confidence in the company by promoting CSR management based on communication with stakeholders

１３ 13

１４

• II. New Mid-Term Business Plans 'IOI ACT II'
• 2. Mid-Term Management Targets (FY2005-2006)

■ Non-life operations

NB: Excludes the impact of abolition

• f the state CALI reinsurance scheme

■ Life operations

14

2004-2006 + / -

Y760.9BN Y772.0BN 798.0BN Y37.1BN

• 1.2%

1.5% 3.4% 4.9% 65.2% 60.8% 59.4%

• 5.8P

36.1% 35.9% 35.4%

• 0.7P

101.3% 96.6% 94.8%

• 6.5P

Y22.3BN Y28.0BN Y29.0BN Y6.7BN Y16.1BN Y17.0BN Y18.0BN Y1.9BN 5.2% 5.3% 5.4% 0.2P Y28.5BN Y33.3BN Y41.0BN Y12.5BN

*(1) Adj. ROE = net profits ÷ (assets - valuation difference on other marketable securities)

Overseas premiums (local direct)

FY2004 FY2006

Net operating expenses Combined ratio

• Adj. ROE*(1)

Ordinary Profit Net Profit

FY2005

Net loss ratio YoY revenue increase Net Premiums

Y970.2BN Y1,060.0BN 1,350.0BN 379.8BN 4,829.0BN 5,620.0BN 6,500.0BN 1,671.0BN

• /w personal/pensions

3,878.1BN 4,500.0BN 5,200.0BN 1,321.9BN 3.3BN 4.0BN 5.0BN 1.7BN

*(2) Before increase in statutory reserve

Real ordinary profit*(2) Policies in force New personal policies/pensions

• 3. Business Strategy (1) Establishing a revenue growth capability ①

◆ Aim to establish new gateways and consolidate functions through alliances etc to enhance access to markets ◆ Aim to establish alliances in each channel and re-consolidate core non-life functions to enhance the ability to develop markets １５

Regional retail markets

Gateway Retirees Small-midsize business

IOI

＋

Channel alliances Core non-life functions Function tie-up Sales tie- up

Expand sales channels Strengthen functions

401k

Sales staff

Chamber of Commerce (CCI)）

＋

IOI Club IOI Corporate Club

• IOI insurance products
• Toyota Asset Inv. Trust
• Nomura Asset Inv. Trust etc.

Regional financial institutions Pro etc. Housing Providers P r o d u c t s S e r v i c e s

Axa Life Nomura Securities Group

■ Regional retail market strategy

• II. New Mid-Term Business Plans 'IOI ACT II'

15

Further strengthen core non-life functions

Product development in alliance with Toyota

• 3. Business Strategy (1) Establishing a revenue growth capability ②

131.8 139.1 146.4 150.3 152.7 10.7 14.4 16.9 20.0 23.2

Group cos. Group sales outlets

(¥BN) FY2000 FY2003 FY2004

* Marketed from July 2003

◆ Develop products

allied to Toyota’s advanced technology, financing operations Support for sales

• utlets to grow

insurance revenues

◆ Acceleration of

insurance business enhancement activities

◆ Utilization of

follow-up program Expand business with Group companies

◆ Share building in

Toyota Group property/ group insurance markets

◆ Strengthen alliance

with housing providers

FY2001 FY2002

Large- scale revenue increase

Expand business with L e x u s r e t a i l e r s

Top-class coverage Provide top-class service １６ ■ Further efforts to boost revenues ■ Steady growth in sales of co-developed products ■ Promote business with group sales outlets Build/support insurance negotiations operation ◆ Provide top-class motor insurance service through 'Lexus Owners' Motor Insurance Plan' ◆ Consolidate foundation for revenue growth by co-developing competitive products/supporting sales outlets to boost insurance income

• II. New Mid-Term Business Plans 'IOI ACT II'

■ Toyota market strategy

In 4yrs +¥33.4BN revenue

New Products

(Outlets)

16

Policies Premiums Policies Premiums Increase % Convini Plan

49,000 Y5.1BN 52,000 Y5.4BN 5.9%

Nagaraku Plan*

13,000 Y1.2BN 21,000 Y1.9BN 61.1%

FY2003 FY2004

FY2001 FY2002 FY2003 FY2004 New partner outlets

98 80 96 73

New outlets (IOI coinsurer)

19 10 8 12

New outlets (IOI leader)

4 1 2 3

Vehicle change % Unit price change % FY2003

• 0.2
• 2.0

FY2004 0.5

• 1.6

Q1 0.5

• 2.6

Q2 0.6

• 2.3

Q3 0.4

• 1.2

Q4 0.4

• 0.1
• 2.2
• 2.1
• 1.7
• 0.8

＋0.3

• 2.5
• 2.0
• 1.5
• 1.0
• 0.5

0.0 0.5

FY2003 Q1 Q2 Q3 Q4

A step ahead in motor insurance

• 3. Business Strategy (1) Establishing a revenue growth capability ③

Promote switchover to Top Run Strengthen policy retention through platform strategy Modify products to meet customer needs

T o p - c l a s s s e r v i c e i n t h e s e c t o r S p e e d y a c c i d e n t r e s o l u t i o n １７

Further increase in vehicles

Unit prices up

FY2004

（％） ■ Motor insurance premium growth trend (operating result)

• II. New Mid-Term Business Plans 'IOI ACT II'

■ Motor insurance strategy

(Unit: %) ■ Growth in contracts / increase in unit prices (operating result) 17

Strengthen Strengthen composite sales composite sales Reform the Reform the product portfolio product portfolio Capture motor insurance customers Enhance profitability

Motor customers: 5million ◆ Introduce Third Sector products into platform product line-up

• 3. Business Strategy (1) Establishing a revenue growth capability ④

１８ Home Comprehensive Traders Comprehensive Construction Comp. Transportation Comp.

（sales commenced Dec 2004)

Small-midsize company market Personal market

Fire Ins. Fire Ins.

Casualty

Ins.

Casualty

Ins.

■ Platform strategy

• II. New Mid-Term Business Plans 'IOI ACT II'

FY2005 target Policies sold Increase FY2005 target Policies sold Increase

Policies

145000

Increase

Y5.2BN

Health comp. insurance 'Live Lead'

(sales commenced April 2005)

◆ ◆ Expand medical coverage for the Expand medical coverage for the three major diseases three major diseases

Third Sector market

・ New unlimited hospitalization cover ・ New lump sum benefit when entering/ transferring hospital ・ Premiu m payment waver on occurrence

Sector first New 18

FY2004 FY2005 target revenue increase new policy sales Home Comp Y1.0BN 82,000 Traders Comp Construction Comp Transportation Comp Y1.2BN 143,000

'Three in One' sales structure

Contracting agency

Dedicated agency system 'IONOS' Web-based agency system 'I-BROAD' Mobile POS system

◆Reform sales outlets

Admin Support Agent

◆ Reform channel structure

Non-independent agent ◆Administrative reform

Outsource

• corp. admin.

Umbrella agent Bring in Equip agency system

Introduce IONOS

Boost sales forces / streamline costs Boost sales forces / streamline costs

• 3. Business Strategy (2) Enhancing productivity/efficiency

１９

◆ Strengthen sales capability through reform of the business structure and streamline business expenses

Pro sales section

◆ Reform sales activities

Reform sales staff functions

Strengthen development

• f new market

Reform internal staff functions Strengthen agent guidance

P a p e r l e s s Daily settlement

◆ Reform agent operations

C a s h l e s s

Administrative promotion center Sales center

• II. New Mid-Term Business Plans 'IOI ACT II'

Dedicated sales guidance Dedicated admin. guidance

Dedicated management 19

FY2004 FY2005 target Contracting

1,717 2,150

Cooperating

124 200

Umbrella

27 50

FY2004 FY2005 target Pro sales section

11 23

• Admin. promotion center

16 30

Sales centers/teams

67 60

20

• 3. Business Strategy (3) Strengthening earnings capability ①

◆ Overall loss ratio target

59.4 64.1 65.2 60.8

55.0 60.0 65.0 70.0 FY2003 FY2004 FY2005 target FY2006 target

Major natural catastrophe loss estimate raised from the previous ¥7.5BN to ¥10.0BN in FY2005 and beyond

Continual loss improvement in motor

Reform the product portfolio Maintain top- class loss ratio in the sector

Improve overall loss ratio

Increase weighting of fire/personal premiums

Consolidate platform strategy

• More products / more convenient for the customer-

Strengthen underwriting profitability

Significantly improve the motor E/I loss ratio Continually strengthen loss improvement initiatives

Need to boost revenues further in fire/personal insurance

％

NB: Excludes the impact of abolition of the state CALI reinsurance scheme

• II. New Mid-Term Business Plans 'IOI ACT II'

■ Loss improvement

２１

• 3. Business Strategy (3) Strengthening earnings capability ②

Substantial progress in achieving asset soundness

Strategic shareholdings cut Impairment accounting for real estate Debts subject to risk control halved Strengthen functions by investment style

Strengthen asset management capability

Promote asset soundness Enlarge income sources Strengthen ALM Strategic allocation management Strengthen alternative management Cut strategic shareholdings Promote liability matching Promote liability matching Expand personal loans Expand personal loans

Cut low-income / non-working assets

Re-invest in lucrative assets Re-invest in lucrative assets

Pursue diversification by switching funds Pursue diversification by switching funds

Refine diversified currency Refine diversified currency investment investment Strengthen credit risk Strengthen credit risk management management Expand management Expand management techniques techniques Manage new financial products Strengthen alliances with external institutions, e.g. Toyota Strengthen alliances with external institutions, e.g. Toyota Asset Management Asset Management Invest in liquid and securitized products Invest in liquid and securitized products focused on new assets/risks focused on new assets/risks

• II. New Mid-Term Business Plans 'IOI ACT II'

■ Strengthening asset management capability

21

FY2004 Planned reduction Y40.0BN Reduction Y32.8BN Period-end balance Y270.8BN Y40.0BN FY2005 and beyond

Asia China

Europe

◆ Strengthen F&I/non-life business for Japanese clients through Aioi Motor & General in Europe ◆ Expand the F&I business to more countries ◆ Develop/provide new products that meet market needs

◆ Establish direct business structure through new branches ◆ Strengthen Japanese client sales ◆ Invest in PICC's insurance broker firm ◆Strengthen F&I business through Aioi Bangkok Insurance ◆ Expand the F&I business to more countries

Australia ■ Strengthen/promote F&I business allied to Toyota global strategy ◆ Strengthen F&I business in Asian markets and invest opportunistically in China

◆ Strengthen/expand the F&I business

２２

• N. America

◆Develop business specialized in Toyota Gp/Japanese cos.

• 3. Business Strategy (4) Diversifying sources of earnings ①
• II. New Mid-Term Business Plans 'IOI ACT II'

■ Proactively develop overseas businesses

◆ Local direct premium income (¥BN)

2005 target 2006 target 2004

13.8 18.0 14.7 17.1 23.0 16.2

10 20 30 40 50 1 2 3 F&I Japanese/other

22

◆Grow Embedded Value (EV)

２３

• 3. Business Strategy (4) Diversifying sources of earnings ②

Strengthen policy retention Grow new policies in force

Grow line-up of unique policies where the customer need is great

Grow the value of policies in force

Strengthen sales structure aligned with non-life channels Strengthen unique life insurance channels

Enhance business quality from the customer perspective Strengthen earnings capability Refine investment

Structural reform for streamlining

Expand net asset value

• II. New Mid-Term Business Plans 'IOI ACT II'

■ Life operations

■ For all markets

Launch of 'Super Whole Life Premium', a new variable whole life insurance product with a minimum guaranteed interest rate

■Products designed for Toyota sales outlets

Nov 2004: Launch of 'Zutto Luck' dedicated credit card payment product for TS CUBIC CARD members

■ Products designed for financial institutions

Feb 2004: 'Credit Life Insurance with Cancer Diagnosis Benefit Rider' (FY2004: 18 partner financial institutions) Apr 2005: 'Dollar Story' (Doru Monogatari), dollar-denominated fixed annuity-type personal pension insurance

• Further strengthening of policy retention structure through establishment of Customer Service Center (Apr 2004)

Service expansion through full-scale roll-out of a direct service for policy amendments New

Grow new policies in force Strengthen policy retention measures

23

Diversify Diversify i n c o m e i n c o m e s o u r c e s s o u r c e s

２４

４．Capital Policy

◆ Maximize the scope for investment in new businesses by controlling the overall risk volume ◆ Enhance capital efficiency by optimizing risk-return

Real equity capital Combined risk value (99% VaR) Minimum required capital Surplus capital Surplus capital

Allocate surplus capital Allocate surplus capital to risks associated with to risks associated with n e w b u s i n e s s e s n e w b u s i n e s s e s

Enhance capital efficiency by optimizing risk-return Reserve capital needed to continue

• perations

Enhance profits in Enhance profits in existing operations existing operations

C a p i t a l a n d R i s k C a p i t a l a n d R i s k Build a product portfolio Build a product portfolio by enhancing capital efficiency by enhancing capital efficiency

Continually enhance shareholder value Continually enhance shareholder value

Sell Sell inefficient assets inefficient assets

Establish structure for revenue/profit growth

Optimize asset portfolio

• II. New Mid-Term Business Plans 'IOI ACT II'

■ Basic approach to capital policy

24

• 5. Promotion of CSR Management

２５

Continually achieve growth / enhance corporate value Continually achieve growth / enhance corporate value

Corporate Philosophy: A spirit of A spirit of “ “Empathy/Joint Endeavor/Coexistence Empathy/Joint Endeavor/Coexistence” ”

◆ Contribute to the ongoing development of society and the economy, and to the realization

• f a secure and richer lifestyle, as a general services company that assumes risk and offers peace of mind

Bolster initiatives based on communication with stakeholders Bolster initiatives based on communication with stakeholders C u s t o m e r s S h a r e h o l d e r s A g e n t s S t a f f P a r t n e r s Regional/intl society G l

• b

a l e n v i r o n m e n t

Corporate Governance

Compliance Risk Management Information disclosure Protection of personal data

Economic

responsibility

High efficiency and continually enhanced shareholder value

• II. New Mid-Term Business Plans 'IOI ACT II'

Motor insurance with recycled parts rider Total loss vehicle net auction system

Environmental conservation through insurance

Mobile POS-based paperless business

Sector first

Social contribution through insurance

Enrich society through health/nursing care service Operate day service centers using idle company buildings Motor accident response and traffic safety initiatives

25 Environmental responsibility Social responsibility

２６

Ref: General image of mid-term basic strategy

Strengthen loss service/risk consulting functions

Reform the sales structure Life

• perations

Overseas business Enhance productivity/ efficiency Communication and teamwork

Financial services business

Fee businesses

Establish a structure for revenue/profit growth

Bolster the financial base and enhance capital efficiency

Re-consolidate strategy focused

• n clients/markets

and core non-life functions

Strengthen underwriting profitability Reform product portfolio Reform sales activities

Diversify income sources Foster a dynamic corporate culture Lay a corporate foundation for top-flight quality

Establish a capability for revenue growth Strengthen earnings capability Strengthen asset management capability Promote CSR Management Partnership with agents Personnel reform/ org. invigoration Maximize IT to build a new, efficient sales/business scheme Develop community-based business

Swiftly and surely capture growth markets Reform sales

• utlets

Loss improvement Reform agent

• perations

Reform channel structure

• II. New Mid-Term Business Plans 'IOI ACT II'

26

Strengthen ties with Toyota Group

Contact Point for Inquiries

This presentation contains statements relating to future performance, which entail certain risks and uncertainties. You should bear in mind that future performance, management policy or strategy could be subject to alteration or fluctuation due to changes in the external environment.

Ebisu 1-28-1, Shibuya-ku, Tokyo 150-8488 Tel: +81 (3) 5789-7135 Fax: +81 (3) 5489-6465 E-mail：kazuhiro-narita@ioi-sonpo.co.jp

Corporate Planning Division – IR Group