Outline of the interim settlement and result forecast by the end of - - PDF document

2003/12/2 Informational Meeting

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Outline of the interim settlement and result forecast by the end of FY2003

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・ Amounts shown herein are basically rounded off. ・ Amounts are shown after excluding refundable premium of our original automobile insurance “Modo-rich.” ・ From this interim period, premiums are posted after excluding the related amount of policies of which effective dates are after October 1st. The key ratios of the previous 1st half, such as loss ratio are also calculated based on the premiums as defined above to compare each term effectively.

December 2, 2003

We would like to explain our results for interim 2003 and our forecast for the full fiscal year. Figures that we will be citing exclude refundable premium of our original automobile insurance “Modo-rich.” Starting with the current period, we are no longer including the premiums

• f policies of which effective dates are after October 1st in interim

premiums written. Therefore, to allow prior-period comparisons, the loss ratio and other ratios for interim 2002 are expressed according to the same standard as premiums written in interim 2003.

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1,175.7 590.5 1,184.5 605.4 1.2 2.5

• 0.5

0.8 200 400 600 800 1,000 1,200

01 02interim 02 03interim

▲ 1.0 ▲ 0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0

Net Premiums written Growth rate

2

（％）

Net premiums written Net premiums written

(excluding the effect of abolition of reinsurance to government (excluding the effect of abolition of reinsurance to government related to CALI*) related to CALI*)

Increased by 2.5% from the previous 1st half .(*) All lines of insurance except automobile secured premium increase.

*CALI = Compulsory Automobile Liability Insurance

(bil yen)

*The figures are calculated based on premiums excluding the related amount of policies of which effective dates are after October 1st.

(FY)

Our results for interim 2003 are as follows. Net premiums written increased 14.9 billion yen, or 2.5% year on year, after excluding the positive effect of the abolition of reinsurance to government related to Compulsory Automobile Liability Insurance (CALI). While net premiums written declined 0.6% for automobile insurance, it increased for all other categories of insurance.

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5 8 . 8 5 7 . 2 5 4 . 8 5 7 . 8 5 8 . 4 5 7 . 2

5 2 5 4 5 6 5 8 6

3 02 97 98 99 00 01

（％） 02interim 03interim

5 4 . 7 5 5 .

Net loss ratio* Net loss ratio*

(excluding the effect of abolition of reinsurance to Government (excluding the effect of abolition of reinsurance to Government related to CALI) related to CALI)

54.7% for this interim is continuously in a superior level

• ver competitors.

(FY)

The net loss ratio fell 0.3 percentage points year on year to 54.7% in interim 2003. In the first half of the year, insurance claims paid due to natural disasters increased, and major accidents resulted in higher claims paid for fire insurance and marine insurance. As a result, total claims paid grew about 8.0 billion yen over the previous period for all categories of insurance. The increase in premiums written, however, enabled the loss ratio to improve slightly.

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34 35 36 37 38 39 40

4 02 97 98 99 00 01 （％）

3 8 . 7 3 9 . 1 3 9 . 3 7 . 3 3 6 . 4

02interim 03interim

3 5 . 3 3 4 . 5 3 5 . 3

Net operating expense ratio* Net operating expense ratio*

(excluding the effect of abolition of reinsurance to Government (excluding the effect of abolition of reinsurance to Government related to CALI) related to CALI)

Improved by 0.8 pt from the previous 1st half due to reduction in personnel and non-personnel expenses.

*Net operating expense ratio = Underwriting expenses/Net premiums written

(FY)

Our net operating expense ratio fell 0.8 percentage points year on year to 34.5%. This reflects our ongoing efforts to reduce expenses. Operating, general and administrative expenses were cut 1.7 billion yen year on year, consisting of a 900 million yen reduction in personnel expenses and a 800 million yen reduction in non-personnel expenses and taxes.

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9 2 . 5 9 7 . 8 9 6 . 3 9 3 . 5 9 5 . 7 9 4 . 2 8 8 9 9 2 9 4 9 6 9 8

5 02 97 98 99 00 （％） 01

02interim 03interim

8 9 . 2 9 . 3

Combined ratio* Combined ratio*

(excluding the effect of abolition of reinsurance to Government (excluding the effect of abolition of reinsurance to Government related to CALI) related to CALI)

Improved by 1.1 pt from the previous 1st half. Keeping advantageous position over competitors.

*Combined ratio = Net loss ratio + Net operating expense ratio

(FY)

Our combined ratio, the sum of the loss ratio and the operating expense ratio, declined a substantial 1.1 percentage points year on year to 89.2%, thanks to improvements in the loss ratio and the operating expense ratio.

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6.4 10.2 29.4 37.0 36.0 5 10 15 20 25 30 35 40 01interim 01 02interim 02 03interim

6

（ bil yen)

Underwriting profit Underwriting profit

Secured high level of underwriting profit following the previous 1st half, reflecting less than - normal year natural disaster.

(FY)

Natural disasters increased over interim 2002 but were still low when compared with an average year, and underwriting profit totaled 36.0 billion yen, a solid result as in interim 2002.

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33.6 34.8 26.8 33.1 24.4 30.5

10 20 30 40 50 60 70 80 (FY) 01interim 02interim 03interim Investment income credited to investment deposits by policyholders Net interest and dividend income

7

68.4 59.9

（ bil yen）

54.9

Gross interest and dividend income

Interest and dividend income Interest and dividend income

Gross interest and dividend income decreased by 4.9 bil yen from the preview 1st half . Net interest and dividend income also decreased by 2.4 bil yen.

Low interest rates and the yen’s appreciation in the first half made for a challenging investment environment. Gross interest and dividend income fell 4.9 billion yen year on year to 54.9 billion yen in interim 2003. Investment income credited to investment deposits by policyholders fell from 33.1 billion yen in interim 2002 to 30.5 billion yen in interim 2003, representing a decrease of 2.6 billion yen. Net interest and dividend income declined a relatively modest 2.4 billion yen year on year to 24.4 billion yen.

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• 18.9

14.0 77.4

• 5.3
• 9.9
• 21.3
• 30
• 10

10 30 50 70 (FY) 01interim 02interim 03interim

Net realized gain

• Devaluation loss

8

（ bil yen）

Net realized gain and devaluation loss of securities Net realized gain and devaluation loss of securities

Net realized gain surged to 77.4 bil yen including ETF contribution. Devaluation loss decreased to 5.3 bil yen.

With respect to capital gains or losses, the contribution of portfolio stock to an exchange-traded fund (ETF) in the interim period yielded realized gains

• f 66.0 billion yen.

Net realized gains on the sale of securities, including this transaction, totaled 77.4 billion yen in interim 2003. This represents an increase of 63.4 billion yen from interim 2002, which significantly boosted ordinary profit. Devaluation losses of securities also decreased over interim 2002. Gains or losses on marking credit derivatives to market improved in interim 2003, resulting in 4.9 billion yen being recorded as part of investment income in the profit and loss statement.

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9 (FY) 02 interim 03 interim Expenses for integration Other than above expenses

1.4

Extraordinary income/losses total

• 0.2
• 1.7

ー

• 4.7
• 7.8

Reversal/Provision Price fluctuation reserves

0.1

• 3.2

Extraordinary income/losses Extraordinary income/losses

Extra ordinary losses increased by 7.6 bil yen due to provision for price fluctuation reserve and devaluation loss of real estate.

（ bil yen） （ bil yen）

With regard to extraordinary income/losses, the burden of expenses for integration disappeared, but a provision for price fluctuation reserves in interim 2003, to which a reversal was made in fiscal 2002, and valuation losses on real estate for sale generated extraordinary losses of 7.8 billion yen, an increase of 7.6 billion yen year on year.

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1

26.3 13.8 62.6 23.6 45.0 29.9 47.7 32.4 129.4 79.2

20 40 60 80 100 120 140

(FY) 01interim 01 02interim 02 03interim

Ordinary profit Net income

（ bil yen）

Ordinary profit Ordinary profit・ ・Net Income Net Income

Ordinary profit increased to 129.4 bil yen, 2.9 times due to gains on ETF-related sales securities, etc. Net income also increased to 79.2 bil yen, 2.6 times.

As a result of these developments, ordinary profit totaled 129.4 billion yen in interim 2003. This is 84.5 billion yen more than, or about 2.9 times, the 45.0 billion yen recorded in interim 2002. Net income similarly increased about 2.6 times to 79.2 billion yen.

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11 120.2 yen 111.3 yen 1.12％ 0.89％ 7,973 yen 10,219 yen 110.0 yen 1.20％ 10,000 yen （0.71％） （1.38％）

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Result forecast by the end of FY2003 Result forecast by the end of FY2003 ◆ ◆Precondition Precondition◆ ◆

(FY) 02 03 interim 03 (est.) Exchange rate (Yen/USD) Rate of interest (10 years JGB) Stock price (Nikkei 225)

* Exchange rate, Stock price : As at March 31, 2003, September 30, 2003, and March 31, 2004. Rate of interest : Average during each term (as at March 31, 2003, September 30, 2003)

Our forecast for the full fiscal year is as follows. Regarding the premises for our forecast, we do not expect any major changes in exchange rates, interest rates, or stock prices from what they were at the end of September.

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590.5 1,184.5 605.4 1,200.0

• 0.5

2.5 0.8 1.3 200 400 600 800 1,000 1,200 1,400 (FY) 02interim 02 03interim 03(est.)

• 1.0
• 0.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0

Net premiums written Growth rate （ bil yen） （ %）

1 2

Result forecast by the end of FY2003 Result forecast by the end of FY2003 ◆ ◆Net premiums written Net premiums written◆ ◆

(excluding the effect of abolition of reinsurance to Government (excluding the effect of abolition of reinsurance to Government related to CALI) related to CALI)

Forecast 1.3% up, growing for 4 consecutive years.

We anticipate that net premiums written will increase 1.3% in fiscal 2003. This increase would become 4.1% when the positive effect of 23.0 billion yen resulting from the abolition of reinsurance to government related to CALI and the refundable premiums of “Modo-rich” are included.

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295.3 303.4 640.0 619.9 55.0 57.9 57.2 54.7 100 200 300 400 500 600 700 (FY)02interim 02 03interim 03(est.) 52 53 54 55 56 57 58 59 60 Net claims paid Net loss ratio

（ bil yen） （ %）

1 3

Result forecast by the end of FY2003 Result forecast by the end of FY2003 ◆ ◆Net loss ratio Net loss ratio◆ ◆

(excluding the effect of abolition of reinsurance to Government (excluding the effect of abolition of reinsurance to Government related to CALI) related to CALI)

Forecast small increase from FY 2002.

We anticipate the payment of 7.5 billion yen in insurance claims for natural disasters and that our net loss ratio will rise 0.7 percentage points from 57.2% in fiscal 2002 to 57.9%. We foresaw a net loss ratio of 59.2% at the start of the year, but natural disasters are expected to fall below the 18.5 billion yen we forecast at that time, and we also anticipate lower non-natural disaster losses compared with our initial forecast.

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138.6 273.4 277.8 135.2 35.3 34.9 35.3 34.5 100 200 300 400 (FY) 02interim 02 03interim 03(est.) 34.0 34.5 35.0 35.5 36.0

Operating,general and administrative expenses and loss adjustment expenses Net operating expense ratio

（ bil yen） （ %）

1 4

Result forecast by the end of FY2003 Result forecast by the end of FY2003 ◆ ◆Net operating expense ratio Net operating expense ratio◆ ◆

(excluding the effect of abolition of reinsurance to Government (excluding the effect of abolition of reinsurance to Government related to CALI) related to CALI)

Forecast 0.4 pt improvement.

We anticipate that the net operating expense ratio will decrease 0.4 percentage points year on year to 34.9%. We anticipate that the commission rate will decline 0.1 points and the underwriting expense ratio will fall 0.3 points. In addition, we expect that operating expenses including loss adjustment expenses will decrease 4.4 billion yen.

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70.4 86.1 89.5 65.7 90.3 92.8 92.5 89.2 20 40 60 80 100 (FY) 02interim 02 03interim 03(est.) 88.0 89.0 90.0 91.0 92.0 93.0 94.0 95.0

Gross profit from underwriting Combined ratio （ bil yen） （ %）

1 5

Result forecast by the end of FY2003 Result forecast by the end of FY2003 ◆ ◆Combined ratio* Combined ratio*◆ ◆

(excluding the effect of abolition of reinsurance to Government (excluding the effect of abolition of reinsurance to Government related to CALI) related to CALI)

Forecast 0.3 pt up due to increase of net loss ratio.

*Combined ratio = Net loss ratio + Net operating expense ratio

The combined ratio is expected to increase 0.3 percentage points. While the reduction of operating expenses will enable the expense ratio to decline 0.4 points, this will be exceeded by the loss ratio rising 0.7 points. The underwriting balance derived by subtracting net claims paid, loss adjustment expenses, commission and collection expenses, and operating, general and administrative expenses related to underwriting from net premiums written will fall 3.4 billion yen year on year to 86.1 billion yen as a result of higher claims paid.

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26.8 33.1 51.4 65.4 24.4 30.5 48.5 60.5 20 40 60 80 100 120 140

(FY) 02interim 02 03interim 03（ est.）

Investment income credited to investment deposits by policyholders Net interest and dividend income

59.9 116.8 109.0 54.9

Gross interest and dividend income

（ bil yen）

1 6

Result forecast by the end of FY2003 Result forecast by the end of FY2003 ◆ ◆Interest and dividend income Interest and dividend income◆ ◆

Forecast 7.8 bil yen decrease of gross interest and dividend income, and 2.9 bil yen decrease of net interest and dividend income, due to lowered interest rate, etc.

With respect to investments, gross interest and dividend income is expected to decrease 7.8 billion yen, or 6.7% year on year, to 109.0 billion yen in fiscal 2003. Investment income credited to investment deposits by policyholders will decline 4.9 billion yen year on year to 60.5 billion yen, and net interest and dividend income, the difference between gross interest and dividend income and investment income credited to investment deposits by policyholders, will fall 2.9 billion yen to 48.5 billion yen from the 51.4 billion yen recorded in fiscal 2002.

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• 7

7 . 4 1 4 . 6 9 . 7 2 9 . 9

• 5

. 5

• 5

. 3

• 5

. 3

• 9

. 9

• 60
• 40
• 20

20 40 60 80 (FY)02interim 02 03interim 03(est.) Realized gain

• Devaluation loss

（ bil yen）

1 7

Result forecast by the end of FY2003 Result forecast by the end of FY2003

◆ ◆Net realized gain Net realized gain・ ・Devaluation loss of securities Devaluation loss of securities◆ ◆ Forecast 69.7 bil yen for net realized gain, and 5.5 bil yen for devaluation loss. Devaluation loss estimate is almost equal level to interim.

With regard to realized gains or losses on the sale of securities, net realized gains of 77.4 billion yen were recorded in the first half, including gains on ETF-related sales securities. For the full year, net gains of 69.7 billion yen are anticipated. Devaluation losses of securities totaled 5.3 billion yen in the first half, and 5.5 billion yen devaluation losses of securities are expected for the full fiscal year.

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18 45.0 29.9 47.7 32.4 129.4 79.2 134.5 77.0 20 40 60 80 100 120 140

(FY) 02interim 02 03interim 03（ est.）

Ordinary profit net income

（ bil yen）

1 8

Result forecast by the end of FY2003 Result forecast by the end of FY2003 ◆ ◆Ordinary profit Ordinary profit・ ・Net income Net income◆ ◆

Big increase in both ordinary profit and net income.

Taken together, we anticipate that ordinary profit will increase 86.8 billion yen year on year to 134.5 billion yen in fiscal 2003. In addition, net income will increase 44.6 billion yen year on year to 77.0 billion yen.

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1 9

(FY) 03interim 644.2 bil yen 11.4％ 0.02 bil yen

• 0.01 bil yen

5,386.4 bil yen 12.8％ 1.1 bil yen + 0.4 bil yen

（The above is total sum of individual insurance and individual annuity）

79.2 bil yen 10.5％

Mitsui Sumitomo Mitsui Sumitomo Kirameki Kirameki Life Insurance Life Insurance

Amount of new business increased by 11.4%, and premium income also increased by 10.5% from the previous 1st half.

Change from the previous 1st half

Amount of new business Amount of in-force business

Net income Premium income Proforma net income*

*Hypothetical net income before extra reserve for Net level premium method of valuation provided.

The interim results of our life insurance subsidiary, Mitsui Sumitomo Kirameki Life Insurance, are as follows. The amount of new business for individual insurance and individual annuity increased 11.4% year on year in interim 2003. The amount of in-force business for individual insurance and individual annuity rose 12.8% year on year, or 6.9% over the end of the previous fiscal year. Premiums income grew 10.5% year on year to 79.2 billion yen, highlighting the steady expansion of business. The half-year underwriting balance, a measure of interim profit, was nearly zero due to a provision for policy reserves with Net Level Premium Method

• f Valuation.

When this provision is excluded, pro forma net income of 1.1 billion yen was recorded in interim 2003, an increase of 400 million yen year on year.

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• Net premiums

written Increase amount Growth rate Parent

6 5 . 4 1 4 . 9 2 . 5

Subsidiaries

5 2 . 0 1 6 . 2 4 5 . 2

Group

6 5 7 . 4 3 1 . 1 5 .

Net premiums written Increase amount Growth rate

North America

1 5 . 2 3 . 6 3 1 .

Europe

2 6 . 1 1 2 . 5 9 2 . 4

Asia

6 . 1 . 5 9 . 1

South America

2 . 1 - 1 . 2 -

3 6 .

Reinsurance subsidiaries

2 . 6 . 7 3 7 . 8

（ bil yen,％） （ bil yen,％）

2

Consolidated net premiums written Consolidated net premiums written

Increased by 5.0% from the previous 1st half. Overseas insurance subsidiaries posted big increase (45.2%), mainly in Europe represented by Lloyd’s direct underwriting business.

The interim results and forecasts on a consolidated basis are as follows. Consolidated net premiums written grew 5.0% year on year, after excluding the positive effect of the abolition of reinsurance to government related to CALI. Net premiums written increased 2.5% on a non-consolidated basis and 45.2% for consolidated subsidiaries, highlighting a major expansion in business. A substantial increase was recorded in Europe where our subsidiary is enjoying a strong direct underwriting business at Lloyd’s of London, and steady growth took place in other geographic segments with the exception

• f South America.

These trends are expected to continue in the second half, and we anticipate that consolidated net premiums written will increase 3.3% in fiscal 2003.

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4 4 . 7 1 3 2 . 6 1 4 5 . 4 9 . 6 8 1 . 3 2 . 8 2 9 . 5 8 . 8 1 . 5 1 . 2 1 . 1 . 9 9 20 40 60 80 100 120 140 160

(FY) 02interim 02 03interim 03（ est.)

0.96 0.97 0.98 0.99 1.00 1.01 1.02 1.03 1.04 1.05 1.06

Consolidated ordinary profit Consolidated net income Group-to-parent ratio

2 1

（ bil yen）

Consolidated result forecast by the end of FY 2003 Consolidated result forecast by the end of FY 2003 Consolidated net income Consolidated net income

Forecast 145 bil yen for consolidated ordinary profit, and 81 bil yen for consolidated net income. Forecast group-to-parent ratio to expand to 1.05.

（ ratio）

The growth of subsidiaries also contributed to consolidated income. Consolidated ordinary profit totaled 132.6 billion yen in interim 2003, exceeding non-consolidated ordinary profit by 3.2 billion yen. Consolidated net income came to 80.8 billion yen, surpassing non- consolidated net income by 1.6 billion yen. Since non-consolidated income is inflated by gains on ETF-related sales securities, the group-to-parent ratio was 1.02 in interim 2003. Even so, the profits of consolidated subsidiaries are beginning to contribute to consolidated results, and we have made a firm start toward achieving our medium-term strategic business plan of becoming No. 1 in total corporate group power. For the full fiscal year, consolidated ordinary profit will total 145.0 billion yen and consolidated net income will be 81.0 billion yen, surpassing corresponding non-consolidated figures by 10.5 billion yen and 4.0 billion yen. The group-to-parent ratio will be 1.05 in fiscal 2003.

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【 【 Cautionary Statement Cautionary Statement】 】 Any statements about Mitsui Sumitomo Insurance Co., Ltd.’s future plans, strategies, and performance contained in this material that are not historical facts are meant as, or should be considered as, forward-looking statements. These forward-looking statements are based on the Company’s assumptions and opinions in the light of the information currently available to it. The Company wishes to caution readers that a number of uncertain factors could cause actual results to differ materially from those discussed in the forward-looking statements. Such factors include, but are not limited to, (1) general economic conditions in the Company’s markets, (2) competitive conditions in the insurance business, (3) fluctuations of foreign exchange rates, and (4) government regulations, including changes in the tax rates.