6-K 1 k00797e6vk.htm MILLEA HOLDINGS, INC. MILLEA HOLDINGS, INC.
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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

Dated December 2, 2004

Commission File Number: 0-31376

MILLEA HOLDINGS, INC.

(Translation of Registrant’s name into English)
Otemachi First Square, 1-5-1 Otemachi, Chiyoda-ku
Tokyo 100-0004, Japan
(Address of principal executive offices)

Indicate by check mark whether the Registrant files or will file
annual reports under cover of Form 20-F or Form 40-F:
Form 20-F þ  Form 40-F o

Indicate by check mark whether the Registrant by furnishing
the information contained in this form is also thereby furnishing
the information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
Yes No þ

 


Table of Documents Submitted

FORWARD-LOOKING STATEMENTS

     The information contained in this Form 6-K includes certain forward-looking statements that are based on our current expectations, assumptions, estimates and projections about our businesses and operations. These statements contain projections of results of operations or financial condition. These forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may materially differ from those contained in the forward-looking statements as a result of various factors. Important factors that might cause a material difference include, but are not limited to: general economic conditions in Japan or elsewhere; business conditions in the insurance industry in Japan or elsewhere; the regulatory environment, new legislation, competition with other insurance companies, changing technology and evolving insurance industry standards; changes in the composition of our subsidiaries’ financial instruments that are subject to market risk, including without limitation as a result of ordinary financing and investment decisions or as a result of changes in strategy or regulation; changes in the volatility of particular instruments or groups of instruments, including without limitation as a result of economic developments in Japan or elsewhere, or changing political conditions, or the increasing liquidity of international securities markets; deviations of the actual behavior of particular markets from those that are indicated by statistical models used by our subsidiaries, which of necessity rely on a number of assumptions and approximations; and deviations of actual loss experience from the results that might be indicated by statistical analysis. For a discussion of these and other factors which may have a material impact upon our financial condition, results of operation and liquidity, see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 20-F for the fiscal year ended March 31, 2004.

 


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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
  KABUSHIKI KAISHA MILLEA HOLDINGS
(Millea Holdings, Inc.)
 
 
December 2, 2004  By:   /s/ Tetsuya Unno    
    General Manager of Corporate Legal   
    and Risk Management Department   
 

 


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Item 1
[English translation]

November 29, 2004

Summary of Consolidated Business Results of Millea Holdings, Inc. under Japanese GAAP
for the Six Months Ended September 30, 2004

     
Company Name: Millea Holdings, Inc.
Securities Code Number: 8766
Stock Exchange Listings: Tokyo and Osaka
Head Office: Tokyo, Japan
Representative: Kunio Ishihara, President, Millea Holdings, Inc.
Contact:  
Mitsuru Muraki, Corporate Planning Dept., Millea Holdings, Inc. Phone 03-6212-3341
   
Satoshi Tsujigado, Corporate Finance Dept., Millea Holdings, Inc. Phone: 03-6212-3344

1. Consolidated Business Results for the Six Months ended September 30, 2004
(from April 1, 2004 to September 30, 2004)

(1)   Consolidated Results of Operations

(Yen in millions except per share data and percentages)

                         
    For the six months ended
   
    September 30,
2004

  September 30,
2003

  For the year ended
March 31, 2004

Ordinary income
    1,390,356       1,383,265       2,775,718  
(change from corresponding period of the previous year)
    0.5 %     (2.4 )%     (5.2 )%
Operating profit
    7,965       100,215       191,748  
(change from corresponding period of the previous year)
    (92.1 )%     (21.2 )%     90.1 %
Net income
    (7,131 )     59,537       111,421  
(change from corresponding period of the previous year)
    %     (28.5 )%     96.8 %
Net income per common share — Basic (yen)
    (4,031.48 )     32,331.22       61,132.02  
Net income per common share — Diluted (yen)
                 

Notes: 1.   Investment income and expenses on equity method:

         
For the six months ended September 30, 2004
  424 million yen
For the six months ended September 30, 2003
  (863) million yen
For the year ended March 31, 2004
  42 million yen

2.   Average number of shares outstanding:

         
For the six months ended September 30, 2004
  1,768,843 shares
For the six months ended September 30, 2003
  1,841,478 shares
For the year ended March 31, 2004
  1,822,308 shares

3.   Change in accounting method: None

4.   Percentage figures show increase or decrease in ordinary income, operating profit and net income from the previous period.

(2)   Consolidated Financial Conditions

(Yen in millions except per share data and percentages)

                         
    For the six months ended
    September 30,
2004

  September 30,
2003

  For the year ended
March 31, 2004

Total assets
    11,129,315       10,372,419       11,006,256  
Stockholders’ equity
    2,186,405       2,019,322       2,310,823  
Ratio of Stockholders’ equity to total assets
    19.6       19.5       21.0  
Stockholders’ equity per share (yen)
    1,245,877.97       1,109,026.87       1,292,354.74  

Note: Number of shares issued:

         
At September 30, 2004
  1,754,911 shares
At September 30, 2003
  1,820,805 shares
At March 31, 2004
  1,788,056 shares

 


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(3)   Consolidated Cash Flows

(Yen in millions)

                         
    For the six months ended
   
    September 30,
2004

  September 30,
2003

  For the year ended
March 31, 2004

Cash flows from operating activities
    302,503       206,577       350,863  
Cash flows from investing activities
    (281,681 )     (21,259 )     45,103  
Cash flows from financing activities
    (60,249 )     12,188       (21,366 )
Cash and cash equivalents at end
    1,272,214       1,140,887       1,312,141  

(4)   Scope of Consolidation and Application of Equity Method

         
The number of consolidated subsidiaries:
    15  
The number of non-consolidated subsidiaries accounted for by the equity method:
    None  
The number of affiliates accounted for by the equity method:
    1  

(5)   Change in the Scope of Consolidation and Application of Equity Method

 
Consolidated subsidiaries. Newly included: 0 Excluded: 1
Companies accounted for by the equity method. Newly included: 0 Excluded: 0

2. Consolidated Business Forecast for the year ending March 31, 2005
(from April 1, 2004 to March 31, 2005)

(Yen in millions)

                 
Ordinary income
  Ordinary profit
  Net income
2,910,000     130,000       60,000  

Net income per share forecasted for the year ending March 31, 2005: 34,189.75 yen

 


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Attachment

The Millea Group

     Millea Holdings, Inc. (Millea Holdings) was formed on April 2, 2002 as the holding company for The Tokio Marine and Fire Insurance Company, Limited (Tokio Marine) and The Nichido Fire and Marine Insurance Company, Limited (Nichido Fire) in a statutory share transfer under Japanese law.

     The Millea Group’s businesses include its property and casualty business and its life insurance business.

     Principal subsidiaries of Millea Holdings are as follows.

      Millea Holdings, Inc. (Insurance holding company)

      Property and casualty business

      Property and casualty business

  *   The Tokio Marine and Fire Insurance Company, Limited
 
  *   The Nichido Fire and Marine Insurance Company, Limited
 
  *   Trans Pacific Insurance Company
 
  *   Tokio Marine Europe Insurance Limited
 
  *   Tokio Marine Global Re Limited
 
  *   The Tokio Marine and Fire Insurance Company (Singapore) Pte. Limited
 
  *   The Tokio Marine and Fire Insurance Company (Hong Kong) Limited
 
  *   Tokio Marine Brasil Seguradora S.A.
 
  *   Tokio Millennium Re Ltd.
 
  #   First Insurance Company of Hawaii, Ltd.

      Other business

  *   Millea Asia Pte. Ltd.

      Life insurance business

  *   Tokio Marine & Nichido Life Insurance Co., Ltd.
 
  *   Tokio Marine & Nichido Financial Life Insurance Co., Ltd.

      Other businesses

      Securities investment advisory business and securities investment trusts business

  *   Tokio Marine Asset Management Co., Ltd.

      Derivatives business

  *   Tokio Marine Financial Solutions Ltd.

      Staffing business

  *   Tokio Marine & Nichido Career Service Co., Ltd.

  *   Consolidated subsidiaries
 
  #   Investment accounted for by the equity method

(Note)   On October 1, 2004, The Tokio Marine and Insurance Company, Limited and The Nichido Fire and Marine Insurance Company, Limited merged and became Tokio Marine & Nichido Fire Insurance Co., Ltd.


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Management Policies

1. Management policies

In November 2003, Millea Holdings formulated the “Millea Group Corporate Philosophy” to be upheld by all officers and employees of the Group.

    “Millea Group Corporate Philosophy”
 
    The Millea Group is committed to the continuous enhancement of corporate value, with customer trust at the base of all its activities.
 
  By providing customers with the highest quality products and services, we will spread safety and security to all around us.
 
  For fulfilling our responsibility to shareholders, we will pursue global development of sound, growing and profitable businesses.
 
  For promoting the creativity of each and every employee, we will foster a corporate culture which encourages free and open communications.
 
  While demonstrating responsible management as a good corporate citizen, we will make a positive contribution to society.

2. Policy on profit distribution

With respect to the appropriation of profit, we seek to pay stable dividends on the common stock, taking into consideration the business results and expected future environment of the Company, subject to having retained earnings and to providing sufficient capital to meet our business needs.

3. Policy on reduction in the size of minimum investment unit

We believe that there is currently no need to reduce the size of the minimum investment unit of Millea Holdings shares in light of their liquidity and from a cost-benefit point of view. However, taking into consideration the needs of investors, we intend to study further whether such reduction would be necessary in the future.

4. Management objectives

The Group intends to further increase earnings of the domestic property and casualty insurance business and to expand the life insurance, overseas insurance and asset management businesses, thereby seeking to improve profitability and growth potential in a stable and continuous manner. The group aims to achieve an ROE level of around 6%, and adjusted earnings of approximately 160 billion yen by FY2005.

(Note) The above targeted ROE and earnings are based on “adjusted earnings”, which are calculated by the following method.

  Adjusted ROE = Adjusted earnings / Adjusted capital
 
  Adjusted Earnings

 


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  (a)   Property and casualty insurance business
 
      Adjusted earnings = Net income + Provision for extraordinary reserves + Provision for reserves for price fluctuation – Gains (losses) from assets under asset liability management – Gains (losses) from stocks and properties – Other extraordinary items
 
  (b)   Life insurance business
 
      Adjusted earnings = Increase in embedded value (sum of value of in-force business and shareholder equity of a life insurance company)
 
  (c)   Overseas insurance business and other businesses
 
      Net income as shown in financial statements

  Adjusted Capital

  (a)   Property and casualty insurance business
 
      Adjusted capital = Capital + Extraordinary reserves (net of tax) + Reserves for price fluctuation (net of tax)
 
  (b)   Life insurance business
 
      Adjusted capital = Embedded value
 
  (c)   Overseas insurance business and other businesses
 
      Capital as shown in financial statements

    Targeted Group ROE in FY2005 was announced in November 2003 as a medium- to long-term corporate strategy of Millea Holdings.

5. Mid- to long-term business strategies

The Group aims to meet the “safety and security” needs of all of its customers. While continuing to enhance the strengths and special characteristics of each Group company, we plan to continue to take on new challenges to increase earnings from our core insurance businesses and to expand our operations into new areas that we believe offer significant growth potential and profitability. We will also seek to optimize the allocation of our management resources throughout the Group in order to build the optimum business portfolio that delivers strong profitability, growth potential and high capital efficiency. By pursuing the above, we aim to maximize the corporate value of the entire Group.

(1) Enhance earnings from the core businesses

The Group will work to generate greater earnings from its core domestic property and casualty and life insurance businesses. In our domestic property and casualty insurance business, we merged Tokio Marine and Nichido Fire in October 2004. The merged company adopts an in-house company system and intends to pursue customer-oriented business development with a focus on its growth strategy under the medium-term business plan called the “Nextage 2005”.

Specifically, we will endeavor to improve products, back office and computer system drastically and to consolidate our sales networks to optimize the merits of the merger based on overwhelmingly solid business base. With these measures, we intend to further bolster our competitiveness and improve our earnings.

The Group management strategy also focuses on the expansion of the domestic life insurance business. We acquired all outstanding shares of Skandia Life Insurance Company (Japan) Limited in February 2004. (The company was renamed Tokio Marine & Nichido Financial Life Insurance Co., Ltd. in April 2004.) We intend to strengthen the earnings potential and further promote the development of the domestic life insurance business.

 


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(2) Expand business domains

The Group will endeavor to transform its current earnings structure, centered on its domestic property and casualty insurance business, to secure new sources of revenues and to diversify business risks.

While aggressively promoting the expansion of the domestic life insurance business, we will also seek to develop other businesses that can generate strong synergies with both our domestic P&C and life insurance businesses. These businesses will include the overseas insurance business, the asset management business and health care and senior citizen-related businesses.

(3) Improve capital efficiency

We closely monitor and manage our capital and risk through the integrated risk management system. In addition, we introduced a capital allocation system to reallocate capital to businesses with high profitability, thereby aiming to improve the Group’s capital efficiency. We intend to invest surplus capital in sustainable new businesses with high profitability and growth potential. We intend to use excess surplus capital for measures that improve capital efficiency, including share buy backs.

Through the above initiatives, we aim to build an optimum business portfolio, which will enable us to seek continuous growth of profit and improvement in ROE. We aim to enhance the corporate value of the Group and become a leading insurance group not only in Japan, but also in the global market.

6. Fundamental policies and implementation of corporate governance

The Company has adopted the following business management system in an effort to establish a stable and transparent corporate governance system and to allow speedy decision-making processes.

Board of Directors/Board of Corporate Auditors

At present, the Board of Directors of the Company consists of 13 directors including 3 outside directors. The tenure of all directors is one year. The Board of Corporate Auditors consists of 5 corporate auditors including 3 outside corporate auditors. There are no special interests between such outside directors/outside auditors and the Company.

Corporate structure for compliance

The Company has established the Compliance Committee, which formulates the annual business policy as well as various measures and actions to promote compliance throughout the Millea Group. The Committee also monitors implementation of such policies and measures. Significant matters relating to the Group’s compliance are reviewed and determined by the Management Meeting and the Board of Directors of the Company, and the Company thereby ensures a thorough enhancement of compliance in each company of the Group.

In addition, in order to improve compliance, the Company has created the “Millea Group Code of Conduct”, which provides for fundamental rules to be observed by all officers and employees of the Group and the Company makes such code of conduct available to the public. Moreover, the Company has established a reporting system by implementing a “hotline” internally and externally for use by any officers or employees of the Group who may wish to report or consult on compliance-related issues.

 


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Risk management system

The Company organizes the Risk Management Committee and comprehensively manages the risks faced by the Millea Group quantitatively and qualitatively. In addition, significant matters relating to risk management, such as establishing risk management policies and integrated risk management policies throughout the Group, have been reviewed and determined by the Management Meeting and the Board of Directors of the Company.

Internal audit system

The Company develops fundamental policies relating to internal auditing, requires each company of the Group to establish an effective internal auditing systems, and monitors performances of the internal audits conducted by each company as well as the status of the internal management structure within each company. Significant matters relating to internal audit results are reported to the Compliance Committee as well as the Board of Directors and the Company, thereby ensuring an appropriate and sound business management system.

Business results and financial condition

1. Business results

(1) Consolidated results of operations for the six months ended September 30, 2004

During the six months ended September 30, 2004, the Japanese economy showed moderate recovery as capital investment increased due to improvement in exports and company profits, and consumer spending remained stable.

Under these conditions, as a result of our efforts to improve performance centered on the property and casualty and life insurance businesses, our operating results for the six months ended September 30, 2004 were as follows:

Compared to the six months ended September 30, 2003, ordinary income increased by 7 billion yen to 1,390.3 billion yen, the main components of which were 1,299.7 billion yen in underwriting income and 75.8 billion yen in investment income.

Compared to the six months ended September 30, 2003, ordinary expenses increased by 99.3 billion yen to 1,382.3 billion yen, which mainly comprised of underwriting expenses of 1,170.4 billion yen, investment expenses of 22.7 billion yen, and underwriting and general administrative expenses of 185.4 billion yen.

As a result, ordinary profit decreased by 92.2 billion yen to 7.9 billion yen. Net income, comprised of ordinary profit plus extraordinary profit minus extraordinary losses, income taxes and deferred income taxes amounted to net loss of 7.1 billion yen.

The results from our principal business segments were as follows:

In the property and casualty insurance business, while there was an increase in net premiums written, such increase was offset by a decrease in deposit premiums from policyholders resulting in a 20.2 billion yen decrease in ordinary income to 1,180.8 billion yen.

 


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On the other hand, ordinary expenses increased in the amount of 71.8 billion yen to 1,175.0 billion yen due to a significant increase in net claims paid and loss reserves for numerous natural disasters such as typhoons. As a result, ordinary profit decreased 92.1 billion yen to 5.8 billion yen.

In the life insurance business, there was a 26.0 billion yen increase in ordinary income to 207.4 billion yen due mainly to increased life insurance premiums, but ordinary expenses increased 26.7 billion yen to 206.2 billion yen owing partly to an increase in the amount set aside for policy reserve. As a result, ordinary profit was 1.1 billion yen, a decrease of 0.7 billion yen from the previous term.

(2) Consolidated business forecast for the fiscal year ending March 31, 2005

Our consolidated business forecast for the fiscal year ending March 31, 2005 is 2,910 billion yen in ordinary income, 130 billion yen in ordinary profit and 60 billion yen in net income. Our forecast is primarily based on the following assumptions.

  With regard to net premiums written, the forecast is based on our own projection taking into consideration the results of the six months ended September 30, 2004 and of previous years.
 
  With regard to net claims incurred, we anticipate payment of natural disaster-related claims such as typhoons in the amount of 130 billion yen for domestic property and casualty insurance companies.
 
  With regard to interest rates, exchange rates and equity market conditions, we assume there will not be significant change from market rates and conditions as of September 30, 2004.

2. Financial condition

As of September 30, 2004, consolidated total assets were 11,129.3 billion yen. This represents an increase of 123.0 billion yen due partly to an increase in the assets of life insurance subsidiaries.

Cash flows for the six months ended September 30, 2003 were as follows. Net cash provided by operating activities was 302.5 billion yen, an increase of 95.9 billion yen compared to the six months ended September 30, 2003, due mainly to an increase in property and casualty and life insurance premiums. Net cash used in investing activities increased 260.4 billion yen to 281.6 billion yen mainly as a result of increased acquisition of securities. Due largely to a decrease in the finance by bond lending transactions, net cash used in financing activities increased 72.4 billion yen to 60.2 billion yen.

As a result, the amount of cash and cash equivalents as of September 30, 2004 was 1,272.2 billion yen, a decrease of 39.9 billion yen from March 31, 2004.

 


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The equity ratios and market-value basis equity ratios are shown below.

(%)

                                         
    Six months ended   Six months ended   Six months ended   Fiscal year ended   Fiscal year ended
    September 30,
2004

  September 30,
2003

  September 30,
2002

  March 31,
2004

  March 31,
2003

Equity ratios
    19.6       19.5       19.6       21.0       18.1  
Market-value basis equity ratios
    22.4       22.1       18.4       26.3       13.7  

Note 1.   The “equity ratio” is defined by “stockholders’ equity” / “total assets” x 100.
 
Note 2.   The “market-value basis equity ratio” is defined by “market capitalization” / “total assets” x 100.
 
Note 3.   As the Group’s main business is insurance, the following items are not stated: “interest coverage ratio” and “term of debt retirement.”

 


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Summary of Consolidated Business Results for the Six Months Ended September 30, 2004

                                 
    (Yen in millions, except percentages)
    Six months ended   Six months ended   Increase/   % of net
Item / Period
  September 30, 2004
  September 30, 2003
  Decrease
  change
Ordinary income and expenses:
                               
Underwriting income
    1,299,761       1,293,914       5,846       0.5  
Net premiums written
    966,599       961,346       5,253       0.5  
Investment deposits funded
    111,736       132,903       (21,166 )     (15.9 )
Life insurance premiums
    186,579       164,020       22,559       13.8  
Underwriting expenses
    1,170,449       1,083,658       86,790       8.0  
Net claims paid
    500,472       463,003       37,469       8.1  
Loss adjustment expenses
    38,877       39,730       (853 )     (2.1 )
Agency commissions and brokerage
    168,298       165,402       2,895       1.8  
Maturity refunds to policyholders
    154,143       177,782       (23,639 )     (13.3 )
Life insurance claims
    15,978       13,840       2,137       15.4  
Investment income
    75,853       75,418       434       0.6  
Interest and dividend income
    73,227       71,584       1,643       2.3  
Profit on sale of securities
    27,188       24,462       2,726       11.1  
Investment expenses
    22,711       9,346       13,364       143.0  
Losses on sale of securities
    4,868       4,081       786       19.3  
Devaluation losses on securities
    7,028       1,503       5,525       367.5  
Underwriting and general administrative expenses
    185,408       186,713       (1,304 )     (0.7 )
Other ordinary income and expenses
    10,920       10,602       318       3.0  
Equity in earnings (losses) of affiliated companies
    424       (863 )     1,288        
Ordinary profit
    7,965       100,215       (92,250 )     (92.1 )
 
   
 
     
 
     
 
     
 
 
Extraordinary income and losses:
                               
Extraordinary income
    834       723       111       15.4  
Extraordinary losses
    21,603       13,428       8,174       60.9  
Extraordinary income and losses
    (20,768 )     (12,704 )     (8,063 )      
 
   
 
     
 
     
 
     
 
 
Income or loss before income taxes
    (12,802 )     87,511       (100,314 )     (114.6 )
Income taxes — current
    20,281       26,100       (5,818 )     (22.3 )
Income taxes — deferred
    (26,076 )     1,789       (27,865 )     (1557.4 )
Minority interests
    123       84       38       45.6  
Net income or loss
    (7,131 )     59,537       (66,668 )     (112.0 )
 
   
 
     
 
     
 
     
 
 

 


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Consolidated premiums and claims paid by line for the six months ended September 30, 2004

Net premiums written

                                         
    (Yen in millions, %)
    For the six months ended   For the six months ended    
    September 30, 2004
  September 30, 2003
  % of net
    Amount       Amount       change
    (A)
  Ratio
  (B)
  Ratio
  ((A)-(B))/(B)
Fire and allied lines
    123,489       12.8       121,960       12.7       1.3  
Hull and cargo
    36,506       3.8       33,376       3.5       9.4  
Personal accident
    83,811       8.7       84,063       8.7       (0.3 )
Voluntary automobile
    429,905       44.5       440,569       45.8       (2.4 )
Compulsory automobile liability
    168,397       17.4       168,630       17.5       (0.1 )
Other
    124,489       12.9       112,745       11.7       10.4  
 
   
 
     
 
     
 
     
 
     
 
 
Total
    966,599       100.0       961,346       100.0       0.5  
 
   
 
     
 
     
 
     
 
     
 
 

Net claims paid

                                         
    (Yen in millions, %)
    For the six months ended   For the six months ended    
    September 30, 2004
  September 30, 2003
  % of net
    Amount       Amount       change
    (A)
  Ratio
  (B)
  Ratio
  ((A)-(B))/(B)
Fire and allied lines
    48,067       9.6       40,320       8.7       19.2  
Hull and cargo
    14,872       3.0       21,615       4.7       (31.2 )
Personal accident
    29,003       5.8       33,219       7.2       (12.7 )
Voluntary automobile
    254,000       50.8       246,121       53.2       3.2  
Compulsory automobile liability
    89,868       18.0       62,573       13.5       43.6  
Other
    64,660       12.9       59,153       12.8       9.3  
 
   
 
     
 
     
 
     
 
     
 
 
Total
    500,472       100.0       463,003       100.0       8.1  
 
   
 
     
 
     
 
     
 
     
 
 

Direct premiums written including deposit premiums from policyholders

                                         
    (Yen in millions, %)
    For the six months ended   For the six months ended    
    September 30, 2004
  September 30, 2003
  % of net
    Amount       Amount       change
    (A)
  Ratio
  (B)
  Ratio
  ((A)-(B))/(B)
Fire and allied lines
    154,919       14.4       162,826       14.7       (4.9 )
Hull and cargo
    38,248       3.6       37,221       3.4       2.8  
Personal accident
    173,758       16.1       188,674       17.0       (7.9 )
Voluntary automobile
    433,808       40.3       446,421       40.2       (2.8 )
Compulsory automobile liability
    151,784       14.1       155,551       14.0       (2.4 )
Other
    123,874       11.5       119,033       10.7       4.1  
 
   
 
     
 
     
 
     
 
     
 
 
Total
    1,076,393       100.0       1,109,728       100.0       (3.0 )
 
   
 
     
 
     
 
     
 
     
 
 
Deposit premiums from policyholders
    111,736       10.4       132,903       12.0       (15.9 )
 
   
 
     
 
     
 
     
 
     
 
 

Note 1. Numbers are after elimination of inter-segment transactions. The numbers before elimination of inter-segment transactions are as follows. For the six months ended September 30, 2004; net premiums written 966,622 million yen, net claims paid 500,472 million yen, direct premiums written 1,076,416 million yen. For the six months ended September 30, 2003; net premiums written 961,363 million yen, net claims paid 463,003 million yen, direct premiums written 1,109,745 million yen.

Note 2. “Direct premiums written including deposit premiums from policyholders” are direct premiums after deduction of cancellation return and other return. ( includes deposit premiums from policyholders)

 


Table of Contents

Consolidated Interim Financial Statements
Consolidated Interim Balance Sheet

(Yen in millions except percentages)

                                                 
    As of September 30, 2004
  As of September 30, 2003
  As of September 30, 2004
    Amount
  Ratio
  Amount
  Ratio
  Amount
  Ratio
            %           %           %
Assets
                                               
Cash, deposits and savings
    639,132       5.74       687,558       6.63       667,862       6.07  
Call loans
    477,600       4.29       548,100       5.28       561,100       5.10  
Guarantee deposits for bond loan transaction
    58,314       0.52       6,226       0.06       30,750       0.28  
Monetary receivables bought
    268,311       2.41       77,751       0.75       106,848       0.97  
Money trust
    80,998       0.73       55,963       0.54       63,784       0.58  
Securities
    7,926,897       71.23       7,203,051       69.44       7,837,556       71.21  
Loans
    577,444       5.19       680,099       6.56       588,695       5.35  
Property and equipment
    360,562       3.24       372,388       3.59       370,171       3.36  
Other assets
    718,691       6.46       748,593       7.22       764,822       6.95  
Deferred tax assets
    25,197       0.23       22,335       0.22       23,477       0.21  
Consolidated adjustment account
    15,714       0.14                   17,460       0.16  
Customers’ liabilities under acceptances and guarantees
    1,368       0.01       14,637       0.14       2,117       0.02  
Reserve for bad debts
    (20,917 )     (0.19 )     (44,287 )     (0.43 )     (28,389 )     (0.26 )
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total assets
    11,129,315       100.00       10,372,419       100.00       11,006,256       100.00  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Liabilities
                                               
Underwriting funds
    7,396,748       66.46       6,828,979       65.84       7,113,800       64.63  
Outstanding claims
    793,237               701,766               718,691          
Underwriting reserves
    6,603,511               6,127,213               6,395,109          
Bonds issued
    212,859       1.91       191,009       1.84       199,056       1.81  
Other liabilities
    751,035       6.75       856,386       8.26       749,209       6.81  
Reserve for retirement benefits
    185,023       1.66       187,039       1.80       186,903       1.70  
Reserve for employees’ bonuses
    23,318       0.21       23,651       0.23       20,641       0.19  
Reserve under the special law
    69,775       0.63       59,411       0.57       65,939       0.60  
Reserve for price fluctuation
    69,775               59,411               65,939          
Deferred tax liabilities
    153,640       1.38       33,814       0.33       204,146       1.85  
Consolidated adjustment account
    147,745       1.33       156,187       1.51       151,966       1.38  
Acceptances and guarantees
    1,368       0.01       14,637       0.14       2,117       0.02  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total liabilities
    8,941,514       80.34       8,351,117       80.51       8,693,781       78.99  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Minority interest
    1,394       0.01       1,979       0.02       1,651       0.02  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Stockholders’ equity
                                               
Common stock
    150,000       1.35       150,000       1.45       150,000       1.36  
Additional paid-in capital
    214,779       1.93       306,363       2.95       306,366       2.78  
Retained earnings
    845,262       7.59       820,225       7.91       872,093       7.92  
Unrealized gains on investments, net of taxes
    1,045,786       9.40       796,349       7.68       1,092,930       9.93  
Foreign currency translation adjustments
    (22,758 )     (0.20 )     (12,582 )     (0.12 )     (23,859 )     (0.22 )
Treasury stock
    (46,664 )     (0.42 )     (41,033 )     (0.40 )     (86,707 )     (0.79 )
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total stockholders’ equity
    2,186,405       19.65       2,019,322       19.47       2,310,823       21.00  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total liabilities, minority interest and stockholders’ equity
    11,129,315       100.00       10,372,419       100.00       11,006,256       100.00  
 
   
 
     
 
     
 
     
 
     
 
     
 
 

 


Table of Contents

Consolidated Interim Statement of Income

(Yen in millions except percentages)

                                                 
    For the six months ended   For the six months ended   For the year ended
    September 30, 2004
  September 30, 2003
  March 31, 2004
    Amount
  Ratio
  Amount
  Ratio
  Amount
  Ratio
Ordinary income and expenses
                                               
Ordinary income
    1,390,356       100.00       1,383,265       100.00       2,775,718       100.00  
Underwriting income
    1,299,761       93.48       1,293,914       93.54       2,578,091       92.88  
Net premiums written
    966,599               961,346               1,943,609          
Deposit premiums from policyholders
    111,736               132,903               254,200          
Investment income on deposit premiums from policyholders
    33,630               34,317               68,094          
Life insurance premiums
    186,579               164,020               310,892          
Reversal of reserve for outstanding claims
                  985                        
Investment income
    75,853       5.46       75,418       5.45       160,973       5.80  
Interest and dividends received
    73,227               71,584               138,532          
Profit on investment in money trust
    764               739               2,947          
Profit on sales of securities
    27,188               24,462               55,233          
Profit on redemption of securities
    652               1,496               1,669          
Profit on derivative transactions
    5,714               10,578               28,554          
Transfer of investment income on deposit premiums
    (33,630 )             (34,317 )             (68,094 )        
Other ordinary income
    14,742       1.06       13,932       1.01       36,653       1.32  
Amortization of goodwill
    2,387               4,220               8,404          
Investment income under the equity method
    424                             42          
Ordinary expenses
    1,382,390       99.43       1,283,049       92.76       2,583,969       93.09  
Underwriting expenses
    1,170,449       84.18       1,083,658       78.34       2,169,566       78.16  
Net claims paid
    500,472               463,003               956,952          
Loss adjustment expenses
    38,877               39,730               76,260          
Agency commissions and brokerage
    168,298               165,402               333,593          
Maturity refunds to policyholders
    154,143               177,782               422,588          
Dividends to policyholders
    14               36               70          
Life insurance claims
    15,978               13,840               28,095          
Provision for outstanding claims
    78,202                             17,865          
Provision for underwriting reserves
    213,664               220,745               327,703          
Investment expenses
    22,711       1.63       9,346       0.68       39,856       1.44  
Loss on investment in money trust
    293               2,412               2,149          
Loss on trading securities
    58               306               678          
Loss on sales of securities
    4,868               4,081               20,804          
Loss on revaluation of securities
    7,028               1,503               10,786          
Loss on redemption of securities
    1,393               16               3,741          
Loss on investment in special account
    7,916                                      
Underwriting and general administrative expenses
    185,408       13.34       186,713       13.50       367,492       13.24  
Other ordinary expenses
    3,821       0.27       3,330       0.24       7,053       0.25  
Interest paid
    1,155               1,269               2,789          
Loss on bad debts
    24               0               242          
Investment loss under equity method
                  863                        
Amortization of deferred assets under Article 133 of Insurance Business Law
    293                                      
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Ordinary profit
    7,965       0.57       100,215       7.24       191,748       6.91  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Extraordinary gains and losses
                                               
Extraordinary gains
    834       0.06       723       0.05       2,951       0.11  
Profit on sales of properties
    562               723               2,951          
Other extraordinary income
    272                                      
Extraordinary losses
    21,603       1.55       13,428       0.97       30,481       1.10  
Loss on sales of properties
    2,802               569               1,715          
Provision for reserve under the special law
    3,836               6,837               13,363          
Provision for reserve for price fluctuation
    3,836               6,837               13,363          
Extra write-off against profit on sales of properties
    0               0               0          
Merger related costs
    4,202               1,654               8,308          
Loss on revaluation of stock of subsidiaries
                  4,275               5,794          
Revaluation loss on properties
    10,761                                      
Other extraordinary losses
                  90               1,297          
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Income or loss before income taxes
    (12,802 )     (0.92 )     87,511       6.33       164,218       5.92  
Income taxes — current
    20,281       1.46       26,100       1.89       49,898       1.80  
Income taxes — deferred
    (26,076 )     (1.88 )     1,789       0.13       2,729       0.10  
Minority interest
    123       0.01       84       0.01       169       0.01  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Net income or loss
    (7,131 )     (0.51 )     59,537       4.30       111,421       4.01  
 
   
 
     
 
     
 
     
 
     
 
     
 
 

 


Table of Contents

Consolidated Interim Statement of Additional paid-in capital and Retained earnings

(Yen in millions)

                         
    For the six months ended      For the six months ended      For the year ended
    September 30, 2004
  September 30, 2003
  March 31, 2004
Additional paid-in capital:
                       
Additional paid-in capital at beginning of period
    306,366       306,624       306,624  
Increase in Additional paid-in capital
    4              
Profit on sales of treasury stocks
    4              
Decrease in Additional paid-in capital
    91,590       260       257  
Aggregate purchase price of shares to be cancelled
    91,590              
Loss on sales of treasury stocks
          260       257  
Additional paid-in capital at end of period
    214,779       306,363       306,366  
 
   
 
     
 
     
 
 
Retained earnings:
                       
Retained earnings at beginning of period
    872,093       776,909       776,909  
Increase in Retained earnings
    201       61,827       113,695  
Net income
          59,537       111,421  
Increase in connection with newly consolidated subsidiaries
          413       413  
Increase in connection with merger of subsidiaries
    201       5       5  
Other increases
          1,870       1,853  
Decrease In Retained earnings
    27,032       18,511       18,511  
Net loss
    7,131              
Dividends
    19,668       18,491       18,491  
Directors’ bonuses
    20       20       20  
Other decreases
    212              
Retained earnings at end of period
    845,262       820,225       872,093  
 
   
 
     
 
     
 
 


Notes: 1.   All of directors’ bonuses are for directors.
 
2.   Other decreases relate to revaluation of assets in accordance with accounting standard of the foreign countries where consolidated subsidiaries or equity method-applied affiliates are located.

 


Table of Contents

Consolidated Interim Statement of Cash Flows

(Yen in millions)

                         
    For the six months ended      For the six months ended      For the year ended
    September 30, 2004
  September 30, 2003
  March 31, 2004
I. Cash flows from operating activities:
                       
Income before income taxes
    (12,802 )     87,511       164,218  
Depreciation
    8,963       8,701       17,894  
Amortization of goodwill
    (2,387 )     (4,220 )     (8,404 )
Increase (decrease) in outstanding claims
    78,219       (984 )     17,898  
Increase (decrease) in underwriting reserves
    211,687       219,214       324,857  
Increase (decrease) in reserve for bad debts
    (7,483 )     (2,671 )     (18,502 )
Increase (decrease) in reserve for retirement benefits
    (1,879 )     (1,955 )     (2,130 )
Increase (decrease) in reserve for employees’ bonuses
    2,678       4,021       970  
Increase (decrease) in reserve for price fluctuation
    3,836       6,837       13,363  
Interest and dividend income
    (73,227 )     (71,584 )     (138,532 )
Net loss (profit) on investment securities
    14,636       (16,653 )     (15,439 )
Interest expenses
    1,155       1,269       2,789  
Loss (gain) on foreign exchange
    (396 )     399       (2,068 )
Loss (profit) related to properties
    13,002       (63 )     (202 )
Investment loss (income) under the equity method
    (424 )     863       (42 )
Loss (profit) on investment in special account
    7,916              
Decrease (increase) in other assets
    12,328       51,577       62,193  
  (other than investing and financing activities)
                       
Increase (decrease) in other liabilities
    (33,988 )     (92,434 )     (100,524 )
  (other than investing and financing activities)
                       
Others
    6,037       2,203       9,617  
Sub-total
    198,598       192,031       327,957  
Interest and dividends received
    82,273       88,404       163,705  
Interest paid
    (1,650 )     (1,475 )     (2,885 )
Income taxes paid (refunded)
    22,639       (72,382 )     (137,913 )
Others
    643              
Net cash provided by operating activities
    302,503       206,577       350,863  
 
   
 
     
 
     
 
 
II. Cash flows from investing activities:
                       
Net increase (decrease) in deposit and savings
    513       (650 )     (4,053 )
Purchases of monetary receivables bought
    (43,792 )     (7,866 )     (33,259 )
Proceeds from sales and redemption of monetary receivables bought
    15,239       16,953       35,378  
Increase in money trust
    (24,747 )     (3,618 )     (30,893 )
Decrease in money trust
    8,759       21,055       41,894  
Purchases of investment securities
    (1,312,452 )     (897,529 )     (1,862,822 )
Proceeds from sales and redemption of securities
    1,084,942       821,373       1,802,288  
Loans made
    (113,720 )     (93,888 )     (192,104 )
Proceeds from collection of loans receivable
    116,392       120,330       303,243  
Increase in cash received under securities lending transactions
    (5,251 )     9,610       11,690  
Others
    (781 )     (122 )     (215 )
Subtotal (II(a))
    (274,899 )     (14,354 )     71,146  
Subtotal (I+II(a))
    27,603       192,222       422,009  
Purchases of property and equipment
    (8,363 )     (8,747 )     (18,447 )
Proceeds from sales of property and equipment
    1,582       1,842       5,699  
Payments related to acquisition of subsidiaries
                (13,295 )
Net cash provided by (used in) investing activities
    (281,681 )     (21,259 )     45,103  
 
   
 
     
 
     
 
 
III. Cash flows from financing activities:
                       
Proceeds from borrowing
    2,000       3,320       11,820  
Payments of borrowing
    (4,650 )     (2,023 )     (8,837 )
Proceeds from issuance of bond
    33,257       26,596       50,514  
Redemption of bond
    (19,484 )     (7,869 )     (21,440 )
Increase (decrease) in the deposits received for bond loan transaction
    531       42,484       43,974  
Acquisition of the Company’s own shares
    (51,543 )     (33,780 )     (79,451 )
Dividends paid
    (19,646 )     (18,459 )     (18,483 )
Dividends paid by subsidiaries to minority shareholders
    (19 )     (34 )     (35 )
Others
    (693 )     1,955       572  
Net cash provided by financing activities
    (60,249 )     12,188       (21,366 )
 
   
 
     
 
     
 
 
IV. Effect of exchange rate changes on cash and cash equivalents
    (663 )     948       (4,890 )
 
   
 
     
 
     
 
 
V. Net increase (decrease) in cash and cash equivalents
    (40,090 )     198,455       369,709  
 
   
 
     
 
     
 
 
VI. Cash and cash equivalents at beginning of period
    1,312,141       932,064       932,064  
 
   
 
     
 
     
 
 
VII. Net increase in cash and cash equivalents due to newly consolidated subsidiaries
          9,923       9,923  
 
   
 
     
 
     
 
 
VIII. Net increase in cash and cash equivalents due to merger of subsidiaries
    163       444       444  
 
   
 
     
 
     
 
 
IX. Cash and cash equivalents at end of period
    1,272,214       1,140,887       1,312,141  
 
   
 
     
 
     
 
 

 


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Basis of Presentation and Significant Accounting Policies

1. Scope of consolidation

(1) Number of consolidated subsidiaries — 15 companies

    The Tokio Marine and Fire Insurance Company, Limited (“Tokio Marine”)  
    The Nichido Fire and Marine Insurance Company, Limited (“Nichido Fire”)  
    Tokio Marine & Nichido Life Insurance Co., Ltd. (“Tokio Marine & Nichido Life”)  
    Tokio Marine & Nichido Financial Life Insurance Co., Ltd. (“Tokio Marine & Nichido Financial Life”)  
    Tokio Marine Asset Management Company, Limited  
    Tokio Marine & Nichido Career Service Co., Ltd.  
    Trans Pacific Insurance Company  
    Tokio Marine Europe Insurance Limited  
    Tokio Marine Global Re Limited  
    Millea Asia Pte. Ltd.  
    The Tokio Marine and Fire Insurance Company (Singapore) Pte. Limited  
    The Tokio Marine and Fire Insurance Company (Hong Kong) Limited  
    Tokio Marine Brasil Seguradora S.A.  
    Tokio Millennium Re Ltd.  
    Tokio Marine Financial Solutions Ltd.

Nichido Investment (Luxembourg) S.A. was excluded from the scope consolidation since it was liquidated during the six months ended September 30, 2004.

Skandia Life Insurance Company (Japan) Limited was renamed Tokio Marine & Nichido Financial Life Insurance Co., Ltd. during the six months ended September 30, 2004.

(2)   Names of major non-consolidated subsidiaries
The Tokio Marine Claims Research Co., Ltd. and European Nichido Insurance Company Limited are included in the Millea Group’s non-consolidated subsidiaries.
Each non-consolidated subsidiary is small in scale in terms of its total assets, sales, net income or loss for the period, and retained earnings. As such non-consolidated subsidiaries are not considered so material as to affect any reasonable determination as to the Group’s financial condition and results of operations, these companies are excluded from the scope of consolidation.

2. Application of the equity method

(1)   (Number of affiliates applying the equity method — 1 company
          (Name of company)
          First Insurance Company of Hawaii, Ltd.
 
(2)   The non-consolidated subsidiaries (The Tokio Marine Claims Research Co., Ltd., European Nichido Insurance Company Limited, etc.) and other affiliates (Tokio Marine Malayan Insurance Co., Inc., etc.), which are not subject to the equity method, have not been accounted for by the equity method as such companies have a minor effect on the Company’s consolidated net income or loss for the current period as well as retained earnings, respectively, and also are considered less material as a whole.

 


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(3)   Millea Holdings owns 26.9% of the total voting rights of Japan Earthquake Reinsurance Co., Ltd. through domestic property and casualty insurance consolidated subsidiaries. Millea Holdings does not include Japan Earthquake Reinsurance Co., Ltd. in its affiliates since it believes that it does not have a significant material effect on any policy making decisions of Japan Earthquake Reinsurance’s operations, etc., taking into account the high public nature of the company.
 
(4)   With regard to any companies which are accounted for by the equity method recorded with a different closing date from that of the consolidated financial statements, the financial statements of the relevant companies for their six months are used for presentation in the consolidated financial results.

3. Closing date of consolidated subsidiaries

The closing date of a fiscal year for 1 domestic consolidated subsidiary and 9 overseas consolidated subsidiaries is June 30. Since the difference in the closing date does not exceed three months, the financial statements of the relevant consolidated subsidiaries as of June 30 are used for presentation in the accompanying consolidated financial statements. As for any significant transactions taking place during the period between the subsidiaries’ closing date and the consolidated closing date, necessary adjustments are made for the purpose of consolidation.

4. Accounting policies

(1)   Valuation standards and methods for marketable securities  
   a.   Trading securities are valued by the mark-to-market method, and costs of their sales are calculated based on the moving-average method.  
   b.   Held-to-maturity debt securities are recorded by using the amortized cost method based on the moving-average method (straight-line depreciation method).  
   c.   Debt securities earmarked for policy reserve are stated at amortized cost under the straight-line method in accordance with the Industry Audit Committee Report No. 21 “Temporary Treatment of Accounting and Auditing Concerning Securities Earmarked for Policy Reserve in Insurance Industry” issued by the Japanese Institute of Certified Public Accountants (the “JIPCA”), November 16, 2000.  
    The summary of the risk management policy concerning debt securities earmarked for policy reserve is as follows. In order to adequately manage interest rate risk related to assets and liabilities, the Company has established as a subsection “the dollar-denominated policy reserve for insurance policies during the period of deferment regarding individual annuity insurance denominated in U.S. dollars with a policy cancellation refund based on market interest rate”, and the Company’s policy is to match the duration of the policy reserve in such subsection with the duration of debt securities earmarked for policy reserve within a certain range.  
   d.   Other securities with market value are recorded by the mark-to-market method based upon the market price on the closing date.  
    The total amount of unrealized gains/losses on the securities are directly added to shareholders’ equity, and net income taxes and costs of sales are calculated based on the moving-average method.  
   e.   Other securities not stated at market value are either stated at cost or amortized cost under the straight-line method, cost being determined by the moving average method.  
   f.   Investments in non-consolidated subsidiaries and affiliates that are not subject to the equity method are stated at cost determined by the moving-average method.

 


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   g.   The valuation of the securities held in individually managed money trusts that are mainly invested in securities for trading is accounted for by the mark-to-market method.
 
(2)   Valuation of derivative financial instruments
Derivative financial instruments are accounted for by the mark-to-market method.
 
(3)   Depreciation method of property and equipment
Depreciation of property and equipment owned by Millea Holdings and its domestic consolidated subsidiaries is computed by the declining balance method. However, depreciation of the buildings (excluding auxiliary facilities attached to such buildings, etc.) that were acquired on or after April 1, 1998 is calculated by the straight-line method.
 
(4)   Accounting policies for significant reserve and allowance

a. Reserve for bad debts
In order to provide reserve for losses from bad debts, general allowance is accounted for pursuant to the rules of asset self-assessment as well as the related rules of asset write-off and allowance by domestic consolidated insurance subsidiaries as follows:
For claims to any debtor who has legally or in practice become insolvent (due to bankruptcy, special liquidation or suspension of transactions with banks based on the rules governing clearing houses, etc.) and for receivables from any debtor who has substantially become insolvent, reserve is provided based on the amount of such claims, with the net amount expected to be collectible through the disposal of collateral or execution of guarantees.
For claims to any debtor who is likely to become insolvent in the near future, reserve is provided based on the amount considered to be necessary based on the overall solvency assessment of the relevant debtor, out of the net amount of such claims considered to be collectible through the disposal of collateral or execution of guarantee is deducted from such claims.
For claims other than those described above, the amount of claims multiplied by the default rate, which is computed based on historical loan loss experience in certain previous periods, is included in the accompanying consolidated financial statements.
For specified overseas claims, any estimated losses arising from political or economic situation in the counterpart countries are accounted for as reserve for specified overseas claims in the accompanying consolidated financial statements.
In addition, all claims are assessed by the asset accounting department and the asset management department in accordance with the rules for self-assessment of asset quality. Subsequently the asset auditing departments, which are independent from such asset-related departments, conduct audits of their assessment results, and reserve for bad debts is accounted for based on such assessment results as stated above.

b. Reserve for retirement benefits
To provide for the employees’ retirement benefits, domestic consolidated subsidiaries have recorded the amount recognized to be incurred at the end of the six months based on the projected retirement benefit obligations and related pension assets at the end of the six months.
Prior service costs are charged to expenses from the following consolidated fiscal year by using the straight-line method based upon a certain term (15 years) within the average remaining service years of the employees when incurred.
Actuarial differences are charged to expenses from the following consolidated fiscal year by using the straight-line method based upon a certain term (10-15 years) within the average remaining service years of the employees when incurred.

(Additional information)

 


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On June 1, 2004, pursuant to the new law concerning defined benefit plans, Tokio Marine obtained approval from the government for an exemption from the obligation to pay benefits for future employee service, with regard to the substitutional portion of its pension plan to be transferred to the government. Transfer amount (minimum reserve) measured as of September 30, 2004 is 39,747 million yen. The amount of gains expected is 35,123 million yen (extraordinary gains) when applying article 44-2 of the Accounting Committee Report No. 13 “Guideline for practice concerning accounting for retirement benefits (preliminary report)” (issued by the JIPCA on September 14, 1999, last revised on September 2, 2003), assuming that the transfer amount (minimum reserve) was paid as of September 30, 2004.

c. Reserve for employees’ bonuses
To provide for payment of bonuses to employees, Millea Holdings and its consolidated domestic subsidiaries account for reserve for employees’ bonuses based on the expected amount to be paid.

d. Reserve for price fluctuation
Domestic insurance consolidated subsidiaries account for such reserve under Article 115 of the Insurance Business Law in order to provide for possible losses or damages arising from price fluctuation of stock, etc.

(5) Accounting for consumption tax, etc.
For Millea Holdings and its domestic consolidated subsidiaries, consumption tax, etc. is accounted for by the tax-excluded method. However, any business expenses and general administrative costs incurred by domestic consolidated insurance subsidiaries are accounted for by tax-included method. In addition, any non-qualified consumption tax, etc, for deduction in respect of assets is included in other assets (the suspense payments) and is amortized evenly over the next five years.

(6) Accounting for significant lease transactions
Millea Holdings and its domestic consolidated subsidiaries account for finance lease transactions other than those that are deemed to transfer the ownership of the leased properties to lessees in the same accounting procedure as normal lease transactions.

(7) Accounting for significant hedging activities
a. Interest rate
To mitigate interest rate fluctuation risks associated with long-term insurance policies, Tokio Marine and Tokio Marine & Nichido Life have been engaged in asset liability management (“ALM”) that controls such risks by evaluating and analyzing financial assets and insurance liabilities simultaneously.

As for interest rate swap transactions that are used to manage such risks, Tokio Marine and Tokio Marine & Nichido Life have been engaged in deferral hedge treatment and evaluated hedge effectiveness based upon the Industry Audit Committee Report No.26, “Accounting and Auditing Treatments related to Adoption of Accounting for Financial Instruments in the Insurance Industry” (issued by the JICPA , September 3 , 2002 — hereinafter called “Report No. 26”).

Hedge effectiveness is evaluated by verifying the interest rate conditions influencing calculation of a logical price for both the hedged instruments and the hedging tools. As for any deferred hedge gains based on the Industry Audit Committee’s Report No.16, “Accounting and Auditing Treatments related to Adoption of Accounting for Financial Instruments in the Insurance Industry” (issued by the JICPA, March 31, 2000) prior to application of the Report No. 26, Tokio Marine has allocated such deferred hedge gains as of the end of March 2003 into gain or loss over the remaining period until hedging tools reach maturity (1-17 years) by using the straight-line method, and Tokio Marine & Nichido Life has allocated such deferred hedge gains as of the end of March 2002 into gain or loss over the

 


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remaining period until hedge tools reach maturity (6-10 years) by using the straight-line method, respectively, in accordance with the transitional measures in the Report No. 26. The amount of deferred hedge gains under this transitional treatment as of September 30, 2004 is 120,593 million yen and the amount allocated to gains or losses for the six months ended September 30, 2004 is 12,690 million yen.

In addition, Tokio Marine applies the deferred hedge accounting for interest rate swap transactions which are used to hedge any interest rate risk related to the company’s own bonds, while Tokio Marine & Nichido Life applies the deferred hedge accounting for interest rate swap transactions to hedge any price fluctuation risks of bonds and debentures, respectively. Hedge effectiveness is evaluated by the rate analysis that compares any change in the market value of the hedged instruments with that of the related hedging tools.

b. Foreign exchange
With regard to some of Tokio Marine’s currency swap and forward contract transactions, which are conducted to hedge foreign exchange risk associated with the assets denominated by foreign currencies, (a) gains or losses on both hedged instruments and hedging tools are recognized in the same accounting period and/or (b) hedging transactions are translated at contracted rates (on condition that relating forward contracts qualify for hedge accounting). As for the treatment described in (a) above, hedge effectiveness is not evaluated since hedged instruments and hedging tools share the same important conditions and thus believed to be highly hedge effective.

(8) Income taxes — deferred
The amount of income taxes and deferred income taxes for the six months ended September 30, 2004 of Tokio Marine is based on the provision for and reversal of reserve for extra write-off against profit of sales of fixed assets by a certain method which is intended to be adopted for the fiscal year ended March 31, 2005.

(9) Accounting for deferred assets prescribed in Article 113 of the Insurance Business Law
Calculation of depreciation and amortization of any deferred assets prescribed in Article 113 of the Insurance Business Law for Tokio Marine & Nichido Financial Life is made in accordance with the relevant provision of laws, regulations and its Articles of Incorporation.

(10) Accounting Standards of overseas subsidiaries
The Company complies with any accounting policies prescribed in the region or country in which the relevant consolidated subsidiaries are located.

5. Scope of funds included in the consolidated statements of cash flows

The fund (cash and cash equivalents) included in the consolidated statements of cash flows consist of cash on-hand, demand deposits and short-term investments with original maturities or redemption of 3 months or less at the date of acquisition.

 


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Notes for consolidated balance sheet

1.   Accumulated depreciation of fixed property and other tangible assets amounts to 317,821 million yen and advanced depreciation of such assets is 25,956 million yen. The amount of advanced depreciation deducted from the acquisition cost of fixed property and other tangible assets newly purchased after the receipt of subsidy from the government for the six months ended September 30, 2004 is 0 million yen.
 
2.   Of all of accruing loans and receivables, the total amount of loans to borrowers in bankruptcy, delinquent receivables, delinquent loans three months or more past due, and restructured loans is 25,882 million yen. The breakdown is shown as follows.

(1) The amount of loans to borrowers in bankruptcy is 2,387 million yen.
Loans are generally placed on non-accrual status when substantial doubt is judged to exist as to the ultimate collectibility either of principal or interest if they are past due for a certain period or for other reasons (However, any part of bad debt written-off is excluded. Hereinafter called “non-accrual status loans”). Loans to borrowers in bankruptcy represent non-accrual loans after the partial charge-off of claims deemed uncollectible, which are defined in Article 96, paragraph 1, subparagraph 3 (a) to (e) and Subparagraph 4 of the Enforcement Ordinance of the Corporation Tax Law (Ordinance No. 97, 1965).

(2) The amount of past due loans is 11,463 million yen. Past due loans are non-accrual status loans other than loans to borrowers in legal bankruptcy, and loans on which interest payments are deferred in order to assist business restructuring or financial recovery of the borrowers.

(3) The amount of accruing loans contractually past due for three months or more is 10 million yen. Loans contractually past due for three months or more are defined as loans on which any principal or interests payments are delayed for three months and more from the date following the due date. Loans classified as loans to borrowers in bankruptcy and delinquent receivables are excluded.

(4) The amount of restructured loans is 12,021 million yen. Restructured loans are loans on which concessions (e.g. reduction of the stated interest rate, deferral of interest payment, extension of the maturity date, forgiveness of debt) are granted to borrowers in financial difficulties to assist them in their corporate restructuring or financial recovery, improving their ability to repay creditors. Restructured loans do not include loans classified as loans to borrowers in bankruptcy, past due loans or loans past due for three months or more.

3.   The value of security pledged assets totals 374,664 million yen in securities and 1,031 million yen in savings deposits. Collateralized debt obligations are held to the value of 2,137 million yen in outstanding claims, 24,316 million yen in underwriting reserve, and 333 million yen in other debts.
 
4.   Securities received from bond lending transactions are 59,416 million yen at market value.
 
5.   Gains or losses on hedge instruments are calculated in net value terms and included in other liabilities. The amount of deferred gross gains and losses on future hedge before calculating in net value terms totals 95,113 million yen and 175,914 million yen, respectively.
 
6.   Marketable securities include securities lent under loan agreements of 254,408 million yen.
 
7.   The outstanding balance of committed loans unexecuted is as follows.

 


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    (Yen in millions)
Total loan commitments
    16,680  
Balance of committed loans unexecuted
    3,691  
 
   
 
 
Loan commitments unexecuted
    12,988  
 
   
 
 

8.   Other assets include deferred assets as prescribed in Article 113 of the Insurance Business Law in the amount of 881 million yen.

Notes for consolidated statement of income

1.   Major components of business expenses

         
    (Yen in millions)
Agency commissions, etc.
    156,903  
Salaries
    61,736  

Business expenses consist of damage survey costs, operating costs and general administrative expenses, and commissions and brokerage and collection costs, as shown in the accompanying consolidated statement of income.

2.   Other extraordinary gains include temporary income as a result of partial termination of retirement benefits of Nichido Fire due to its merger with Tokio Marine.

Notes for consolidated interim statement of cash flows

1.   Differences between cash and cash equivalents at the end of the year and the amounts disclosed in the consolidated balance sheet are provided as follows:

         
    (As of September 30, 2004)
    (Yen in millions)
Cash, deposits and savings
    639,132  
Call loans
    477,600  
Monetary receivables bought
    268,311  
Securities
    7,926,897  
Time deposits with initial term over three months to maturity
    (12,438 )
Monetary receivables bought not included in cash equivalents
    (110,727 )
Securities not included in cash equivalents
    (7,916,561 )
 
   
 
 
Cash and cash equivalents
    1,272,214  
 
   
 
 

2.   Cash flows from investing activities include cash flows arising from asset management relating to the insurance business.

 


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Segment Information

1. Segment information by lines of business

(From April 1, 2004 to September 30, 2004)

(Yen in millions)

                                                 
    Property and                    
    casualty
  Life
  Others
  Total
  Elimination
  Consolidated
Ordinary income and ordinary profit/loss
                                               
Ordinary income
                                               
(1)Ordinary income from transactions with external customers
    1,176,218       207,357       10,023       1,393,599       (3,242 )     1,390,356  
(2)Ordinary income arising from internal segment transactions
    4,642       79       6,632       11,354       (11,354 )      
Total ordinary income
    1,180,861       207,436       16,656       1,404,954       (14,597 )     1,390,356  
Ordinary expenses
    1,175,015       206,252       15,739       1,397,007       (14,617 )     1,382,390  
Ordinary profit/loss
    5,845       1,184       916       7,946       19       7,965  

Notes:
  1.   The segments are classified based on the characteristics of operation of reporting company and its subsidiaries.  
  2.   Major operations of each segment are as follows;  
      Property and casualty :Underwriting property and casualty insurance and related investment activities  
      Life :Underwriting life insurance and related investment activities  
      Others : Securities investment advisory, securities investment trusts business, derivatives business and staffing business  
  3.   Major component of the “Elimination” for “Ordinary income from transactions with external customers” is the transferred amount due to the amortization of goodwill in the amount of 1,621 million yen, which is included in ordinary expenses relating to life segment.

(From April 1, 2003 to September 30, 2003)

(Yen in millions)

                                                 
    Property and                    
    casualty
  Life
  Others
  Total
  Elimination
  Consolidated
I. Ordinary income and ordinary profit/loss
                                               
Ordinary income
                                               
(1)Ordinary income from transactions with external customers
    1,194,345       181,338       7,621       1,383,306       (40 )     1,383,265  
(2)Ordinary income arising from internal segment transactions
    6,803       70       5,994       12,869       (12,869 )      
Total ordinary income
    1,201,149       181,409       13,616       1,396,175       (12,909 )     1,383,265  
Ordinary expenses
    1,103,195       179,471       12,689       1,295,357       (12,307 )     1,283,049  
Ordinary profit/loss
    97,953       1,938       926       100,818       (602 )     100,215  

Notes:
  1.   The segments are classified based on the characteristics of operation of reporting company and its subsidiaries.  
  2.   Major operations of each segment are as follows;  
      Property and casualty :Underwriting property and casualty insurance and related investment activities  
      Life :Underwriting life insurance and related investment activities  
      Others : Securities investment advisory, securities investment trusts business, derivatives business and staffing business  
  3.   Major component of the “Elimination” set for “Ordinary income from transactions with external customers” is for the reclassification of provision of allowance for bad debts of 29 million yen which is included in ordinary income of life insurance segment.

 


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(From April 1, 2003 to March 31, 2004)

(Yen in millions)

                                                 
    Property and                    
    casualty
  Life
  Others
  Total
  Elimination
  Consolidated
Ordinary income and ordinary profit/loss
                                               
Ordinary income
                                               
(1)Ordinary income from transactions with external customers
    2,410,978       346,977       17,802       2,775,759       (40 )     2,775,718  
(2)Ordinary income arising from internal segment transactions
    12,236       144       11,985       24,367       (24,367 )      
Total ordinary income
    2,423,215       347,122       29,787       2,800,126       (24,408 )     2,775,718  
Ordinary expenses
    2,232,907       346,620       28,246       2,607,774       (23,804 )     2,583,969  
Ordinary profit/loss
    190,308       502       1,541       192,352       (603 )     191,748  

Notes:
  1.   The segments are classified based on the characteristics of operation of reporting company and its subsidiaries.  
  2.   Major operations of each segment are as follows;  
                Property and casualty : Underwriting property and casualty insurance and related investment activities  
                Life : underwriting life insurance and related investment activities  
                Others : Securities investment advisory, securities investment trusts business, derivatives business and staffing business  
  3.   Major component of the “Elimination” for “Ordinary income from transactions with external customers” is the transferred amount due to the reclassification of provision of allowance for bad debts in the amount of 39 million yen, which is included in ordinary expenses relating to life segment.

2. Segment information by location

Segment information by location is omitted since the “business in Japan” constitutes more than 90 percent of the aggregated amount of the ordinary income of all segments.

3. Segment information on overseas sales

Since overseas sales and ordinary income constitutes less than 10% of the consolidated sales and consolidated ordinary income respectively, segment information on overseas sales is omitted.

Lease Transactions

Information on this item will be disclosed through EDINET.

 


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Securities

1. Bonds held to maturity with market value

(Yen in millions)

                                                                         
    As of September 30, 2004
  As of September 30, 2003
  As of March 31, 2004
Type
  Carrying value
  Market value
  Difference
  Carrying value
  Market value
  Difference
  Carrying value
  Market value
  Difference
Bonds
    1,104,862       1,068,242       (36,619 )     1,022,666       1,033,460       10,794       1,102,599       1,088,552       (14,047 )

2. Debt securities earmarked for policy reserve

                                                                         
    As of September 30, 2004
  As of September 30, 2003
  As of March 31, 2004
Type
  Carrying value
  Market value
  Difference
  Carrying value
  Market value
  Difference
  Carrying value
  Market value
  Difference
Foreign Securities
    71,082       71,620       538                         13,891       13,657       (234 )

3. “Other securities” with market value

(Yen in millions)

                                                                         
    As of September 30, 2004
  As of September 30, 2003
  As of March 31, 2004
Type
  Acquisition cost
  Carrying value
  Difference
  Acquisition cost
  Carrying value
  Difference
  Acquisition cost
  Carrying value
  Difference
Bonds
    2,755,399       2,749,363       (6,035 )     2,597,558       2,618,929       21,371       2,660,274       2,669,106       8,831  
Stocks
    1,246,025       2,869,758       1,623,732       1,335,707       2,557,382       1,221,675       1,294,248       2,985,564       1,691,315  
Foreign securities
    490,605       494,175       3,569       571,359       568,778       (2,580 )     481,927       481,904       (22 )
Others
    162,473       173,599       11,125       149,020       153,625       4,605       146,370       155,108       8,738  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total
    4,654,503       6,286,896       1,632,392       4,653,644       5,898,717       1,245,072       4,582,821       6,291,684       1,708,862  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 

     Notes for figures as of September 30, 2004.
  1.   “Others” include foreign mortgage securities (acquisition cost Yen 59,735 million, carrying value Yen 63,102 million, difference Yen 3,366 million) which are presented as monetary receivables bought.  
  2.   Impairment loss amounting to Yen 5,355 million were recognized for “Other securities” with market value. Impairment loss is accounted for principally if market value of each security decreases equal to or more than 30% of its book value at the end of the period.

     Notes for figures as of September 30, 2003.
  1.   “Others” include foreign mortgage securities (acquisition cost Yen 50,216 million, carrying value Yen 52,123 million, difference Yen 1,906 million) which are presented as monetary receivables bought.  
  2.   Impairment loss amounting to Yen 671 million were recognized for “Other securities” with market value. Impairment loss is accounted for principally if market value of each security decreases equal to or more than 30% of its book value at the end of the period.

     Notes for figures as of March 31, 2004.
  1.   “Others” include foreign mortgage securities (acquisition cost Yen 51,153 million, carrying value Yen 53,668 million, difference Yen 2,514 million) which are presented as monetary receivables bought.  
  2.   Impairment loss amounting to Yen 978 million were recognized for “Other securities” with market value. Impairment loss is accounted for principally if market value of each security decreases equal to or more than 30% of its book value at the end of the period.

 


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4. Carrying values of securities which are not valued at market value

As of September 30, 2004

(1) Bonds held to maturity

          None

(2) Debt securities earmarked for policy reserve

          None

(3) Other securities

(Yen in millions)

         
Bonds
    5,607  
Stocks
    139,870  
Foreign securities
    64,150  
Others
    360,997  

Note:     “Others” include negotiable deposits (Yen 135,000 million) which are included in “Cash, deposits and savings” and commercial papers (Yen 167,835 million) which are included in “Monetary receivables bought” on the balance sheet.

As of September 30, 2003

(1) Bonds held to maturity

          None

(2) Other securities

(Yen in millions)

         
Bonds
    599  
Stocks
    133,384  
Foreign securities
    62,781  
Others
    337,577  

Note:     “Others” include negotiable deposits (Yen 265,002 million) which are included in “Cash, deposits and savings” and foreign mortgage securities (Yen 6,462 million) which are included in “Monetary receivables bought”.

As of March 31, 2004

(1) Bonds held to maturity

          None

(2) Debt securities earmarked for policy reserve

          None

(3) Other securities

(Yen in millions)

         
Bonds
    652  
Stocks
    130,659  
Foreign securities
    56,354  
Others
    248,238  

Note:     “Others” include negotiable deposits (Yen 165,000 million) which are included in “Cash, deposits and savings” and commercial papers (Yen 26,944 million) which are included in “Monetary receivables bought” on the balance sheet.

 


Table of Contents

Money trusts

1. Money trusts held to maturity

     None

2. Money trusts other than that held to maturity or that held for trading purposes

(Yen in millions)

Notes for figures as of September 30, 2004:
  1.   There are no money trusts valued at market value.
 
  2.   Money trusts in the amount of 17,978 million yen are carried at their original cost as at September 30, 2004.

Notes for figures as of September 30, 2003:
  1.   There are no money trusts valued at market value.
 
  2.   Money trusts in the amount of 101 million yen are carried at their original cost as at September 30, 2003.

Notes for figures as of March 31, 2004:
  1.   There are no money trusts valued at market value.
 
  2.   Money trusts in the amount of 7,822 million yen are carried at their original cost as at March 31, 2004.

 


Table of Contents

Contract amount, fair value and unrealized gains and losses of derivative financial instruments

(1) Foreign currency-related instruments

(Yen in millions)

                                                                         
    As of September 30, 2004
  As of September 30, 2003
  As of March 31, 2004
    Contract   Fair value   Unrealized   Contract   Fair value   Unrealized   Contract   Fair value   Unrealized
    amount
   
  gain/(loss)
  amount
   
  gain/(loss)
  amount
   
  gain/(loss)
Over-the-counter transactions:
                                                                       
Foreign exchange forwards
                                                                       
Short
                                                                       
USD
    99,205       (1,439 )     (1,439 )     93,599       1,320       1,320       84,797       1,899       1,899  
GBP
    1,741       (22 )     (22 )     1,562       (1 )     (1 )     2,611       46       46  
EUR
    27,947       (387 )     (387 )     35,124       800       800       25,496       134       134  
CAD
    3,827       (208 )     (208 )     6,167       239       239       6,561       (128 )     (128 )
AUD
                      766       17       17                    
Long
                                                                       
USD
    34,865       305       305       15,623       (535 )     (535 )     12,141       (42 )     (42 )
GBP
    340       (2 )     (2 )     176       8       8       1,731       (17 )     (17 )
EUR
    5,167       59       59       12,582       (24 )     (24 )     2,547       34       34  
AUD
                      394       (19 )     (19 )                  
Currency swaps
                                                                       
Pay Foreign/ Rec. Yen
                                                                       
USD
    385,650       3,648       3,648       387,800       (3,302 )     (3,302 )     375,536       9,641       9,641  
EUR
    45,801       (243 )     (243 )     7,704       (181 )     (181 )     43,397       (25 )     (25 )
AUD
    27,630       (3,639 )     (3,639 )     20,000       (2,274 )     (2,274 )     20,000       (3,198 )     (3,198 )
Pay Yen/ Rec. Foreign
                                                                       
USD
    193,113       (2,150 )     (2,150 )     254,982       8,883       8,883       209,343       (12,449 )     (12,449 )
EUR
    24,715       463       463       5,241       597       597       37,273       658       658  
AUD
                      3,000       123       123       3,000       129       129  
Pay Foreign/ Rec. Foreign
                                                                       
Pay EUR/Rec. USD
    1,574       (2 )     (2 )     1,641       33       33       1,604       (85 )     (85 )
Pay AUD/Rec. USD
                      3,193       (19 )     (19 )     3,192       (46 )     (46 )
Pay USD/Rec. EUR
                      6,329       (172 )     (172 )                  
Currency options
                                                                       
Short
                                                                       
Call
                                                                       
USD
    5,987                       3,540                                        
 
    53       56       (2 )     7       4       3                    
EUR
    2,073                       3,382                                        
 
    10       6       4       7       4       3                    
CAD
                          3,908                                        
 
                      14       2       12                    
AUD
                          800                                        
 
                      1       0       1                    
Put
                                                                       
USD
    3,377                       3,787                                        
 
    57       48       9       11       29       (17 )                  
GBP
    2,915                                                              
 
    17       0       16                                      
EUR
    11,855                                                              
 
    51       0       50                                      
AUD
    732                                                              
 
    5       0       5                                      
Long
                                                                       
Call
                                                                       
USD
    7,945                       75                       75                  
 
    44       45       0       4       8       4       4       2       (1 )
EUR
    1,371                                                              
 
    10       8       (2 )                                    
Put
                                                                       
USD
    3,531                       39,574                       256                  
 
    82       71       (10 )     200       486       285       (15 )     0       (15 )
GBP
    1,960                       16,335                                        
 
    16       1       (15 )     173       241       68                    
EUR
    10,271                       637                                        
 
    87       8       (78 )     2       2       (0 )                  
CAD
                          2,497                                        
 
                      10       45       35                    
AUD
    755                       373                                        
 
    10       0       (10 )     1       3       2                    
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total
    904,357       (3,372 )     (3,653 )     930,802       6,322       5,891       829,567       (3,445 )     (3,465 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 


Notes: 1.   The fair value of foreign exchange forwards agreements is based on the futures’ market price.
 
2.   The fair value of currency swap transactions is calculated by discounting future cash flows to the present value based on the interest rate as of period end.
 
3.   The fair value of foreign currency options contracts is based on an option pricing model.
 
4.   For foreign currency options, option premiums are shown beneath the contract amount of the option.
 
5.   Forward transactions translated at contracted rate the relating forward contracts of which qualify for hedge accounting are not included.


Table of Contents

(2) Interest rate-related instruments

(Yen in millions)

                                                                         
    As of September 30, 2004
  As of September 30, 2003
  As of March 31, 2004
    Contract   Market/Fair   Unrealized   Contract   Market/Fair   Unrealized   Contract   Market/Fair   Unrealized
    amount
  value
  gain/(loss)
  amount
  value
  gain/(loss)
  amount
  value
  gain/(loss)
Market transactions:
                                                                       
Interest futures
                                                                       
Long
    15,262       (90 )     (90 )     1,580       (1 )     (1 )     1,291       (11 )     (11 )
Short
    15,459       14       14       32,779       147       147       1,285       14       14  
Interest futures options
                                                                       
Long
                                                                       
Call
    65,352                       130,996                                        
 
    16       3       13       24       39       (15 )                  
Put
    21,488                                                              
 
    2       0       2                                      
Short
                                                                       
Call
    21,654                       145,198                                        
 
    9       11       1       51       105       54                    
Put
                          25,256                                        
 
                      7       2       (4 )                  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Over-the-counter transactions:
                                                                       
Interest options
                                                                       
Long
                                                                       
Cap
    62,499                       64,589                       63,501                  
 
    470       283       187       226       36       189       458       295       163  
Swaption
    21,112                                             13,000                  
 
          535       (535 )                             247       (247 )
Short
                                                                       
Cap
    42,591                       27,739                       36,139                  
 
    392       279       (112 )     127       5       (122 )     360       260       (99 )
Floor
    4,313                       5,826                       3,929                  
 
    94       50       (43 )     139       204       65       92       118       25  
Swaption
    4,000                       4,000                       4,000                  
 
          228       228       102       246       144             151       151  
Interest rate swap
                                                                       
Pay.float/Rec.fix
    4,810,791       117,385       117,385       4,150,438       225,983       225,983       4,175,414       164,920       164,920  
Pay.fix/Rec.float
    3,330,565       (56,639 )     (56,639 )     3,198,108       (137,740 )     (137,740 )     3,079,367       (85,055 )     (85,055 )
Pay.float/Rec.float
    342,494       663       663       256,027       (156 )     (156 )     220,280       (16 )     (16 )
Pay.fix/Rec.fix
    7,200       39       39       2,106       29       29       1,200       30       30  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total
    8,764,785       62,764       61,113       8,044,648       88,903       88,573       7,599,411       80,956       79,876  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 


Notes: 1.   The fair value of the interest rate future option transactions at the end of period is based on the closing price at major stock exchanges.
 
2.   The fair value of interest options transactions is based on an option pricing model.
 
3.   The fair value of the interest rate swap transactions at the end of period is calculated by discounting future cash flows to the present value based on the interest rate at the date.
 
4.   For interest options, option premiums are shown beneath the contract amount of the option.
 
5.   Interest rate swaps to which hedge accounting is applied are as follows. (Yen in millions)

(Yen in millions)

                                                                         
    As of September 30, 2004
  As of September 30, 2003
  As of March 31, 2004
    Contract   Market/Fair   Unrealized   Contract   Market/Fair   Unrealized   Contract   Market/Fair   Unrealized
    amount
  value
  gain/(loss)
  amount
  value
  gain/(loss)
  amount
  value
  gain/(loss)
Deferred hedge accounting in accordance with bulletin No. 26
    535,100       2,719       (34,236 )     523,700       7,420       (42,075 )     422,900       12,760       (22,509 )
 
                    40,304                       49,495                       37,752  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Other deferred hedge accounting
    53,100       3,729       3,729       53,500       3,627       3,627       53,100       3,743       3,743  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total
    588,200       6,448       9,798       577,200       11,047       11,047       476,000       16,504       18,986  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 

 


Table of Contents

6. Deferred hedge gains on the balance sheets include the following interest rate swap transactions to which hedge accounting is not applied.

(Yen in millions)

                         
    As of September 30, 2004
Deferred hedge gains

  As of September 30, 2003
Deferred hedge gains

  As of March 31, 2004
Deferred hedge gains

Balance of deferred hedge gains in accordance with bulletin No. 16 relating to interest rate swaps which are not covered by bulletin No. 26
    80,288       96,339       95,530  
Other deferred hedge accounting
    (9,285 )     1,744       (14,819 )
 
   
 
     
 
     
 
 
Total
    71,002       98,083       80,710  
 
   
 
     
 
     
 
 

     Bulletin No. 26: Accounting and Auditing Treatments related to Adoption of Accounting for Financial Instruments in the Insurance industry (Japanese institute of Certified Public Accountants, September 3, 2002)

     Bulletin No. 16: Tentative Accounting and Auditing Treatments related to Adoption of Accounting for Financial Instruments in the Insurance industry (Japanese institute of Certified Public Accountants, March 31, 2000)

 


Table of Contents

(3) Equity-related instruments

(Yen in millions)

                                                                         
    As of September 30, 2004
  As of September 30, 2003
  As of March 31, 2004
    Contract   Market/Fair   Unrealized   Contract   Market/Fair   Unrealized   Contract   Market/Fair   Unrealized
    amount
  value
  gain/(loss)
  amount
  value
  gain/(loss)
  amount
  value
  gain/(loss)
Market transactions:
                                                                       
Equity index futures
                                                                       
Short
    32,597       901       901       13,952       269       269       26,458       (1,041 )     (1,041 )
Long
    9,345       (202 )     (202 )     7,913       (319 )     (319 )     1,531       15       15  
Equity index options
                                                                       
Short
                                                                       
Call
    7,490                       1,100                                        
 
    80       20       59       25       20       5                    
Put
    7,553                                                              
 
    130       98       32                                      
Long
                                                                       
Call
    24,445                       1,460                                        
 
    390       62       (328 )     28       20       (7 )                  
Put
    13,437                                                              
 
    105       61       (44 )                                    
Over-the-counter transactions:
                                                                       
Equity index options
                                                                       
Short
                                                                       
Call
    17,586                                             12,357                  
 
    338       (894 )     1,233                         254       126       127  
Put
    539                                             539                  
 
    33       13       20                         33       17       15  
Long
                                                                       
Call
    17,606                                             12,377                  
 
    305       (902 )     (1,207 )                       220       116       (103 )
Put
    617                                             617                  
 
    65       35       (30 )                       65       37       (28 )
Equity options
                                                                       
Short
                                                                       
Call
                          1,535                                        
 
                            36       (36 )                  
Put
    3,360                       3,759                       1,345                  
 
    146       376       (230 )     126       107       19       79       108       (29 )
Long
                                                                       
Call
    171                       1,706                       171                  
 
    34       34             34       70       36       34       34        
Put
    3,360                       3,759                       1,345                  
 
    63       376       312       69       124       55       41       108       66  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total
    138,111       (19 )     517       35,187       330       22       56,744       (476 )     (977 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 


Notes: 1.   The market value of the equity index futures and equity index options (market transaction) as of the end of period is based on the quoted final price of the primary stock exchanges.
 
2.   The fair value of equity index options other than market transactions and option contracts on individual equities is based on quotation from futures market, brokers and counter monetary facilities, or on an option pricing model.
 
3.   For option contracts, the option premiums are shown below the respective contractual amount as of the commencement date.
 
4.   The synthetic option is classified into transactions such as short or long by receiving or paying option premium at at the time of the contract.

 


Table of Contents

(4) Bond-related instruments

(Yen in millions)

                                                                         
    As of September 30, 2004
  As of September 30, 2003
  As of March 31, 2004
    Contract   Market value   Unrealized   Contract   Market value   Unrealized   Contract   Market value   Unrealized
    amount
   
  gain/(loss)
  amount
   
  gain/(loss)
  amount
   
  gain/(loss)
Market transactions:
                                                                       
Bond futures
                                                                       
Short
    77,827       (533 )     (533 )     30,809       (574 )     (574 )     21,529       5       5  
Long
    30,144       199       199       20,746       574       574       12,167       83       83  
Bond futures option
                                                                       
Short
                                                                       
Call
                          6,562                                        
 
                      14       35       (20 )                  
Put
    36,770                       1,326                                        
 
    51       50       1       2       1       1                    
Long
                                                                       
Call
    13,675                       7,276                                        
 
    134       166       31       20       39       18                    
Put
    6,979                                                              
 
    20       22       2                                      
Over-the-counter transactions:
                                                                       
Bond option
                                                                       
Short
                                                                       
Call
                          1,983                                        
 
                      10       14       (4 )                  
Put
    4,894                                                              
 
    5       9       (4 )                                    
Long
                                                                       
Put
                          1,983                                        
 
                      11       6       (4 )                  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total
    170,291       (84 )     (303 )     70,688       97       (9 )     33,696       89       89  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 


Notes: 1.   The market value of the bond futures and the bond options as of the end of period is based on the quoted final price at the primary stock exchanges.
 
2.   The fair value of over-the-counter bond options is quotated from counter monetary facilities.
 
3.   For option contracts, the option premiums are shown below the respective contractual amount as of the commencement date.

(5) Weather-related instruments

(Yen in millions)

                                                                         
    As of September 30, 2004
  As of September 30, 2003
  As of March 31, 2004
    Contract   Fair value   Unrealized   Contract   Fair value   Unrealized   Contract   Fair value   Unrealized
    amount
   
  gain/(loss)
  amount
   
  gain/(loss)
  amount
   
  gain/(loss)
Over-the-counter transactions:
                                                                       
Weather derivatives
                                                                       
Short
    3,658                       1,743                       3,627                  
 
    99       1,030       (931 )     41       19       22       95       53       41  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total
    3,658       1,030       (931 )     1,743       19       22       3,627       53       41  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 


Notes: 1.   The fair value of weather derivatives is based on the elements of an individual contract relating to the transactions including weather conditions and contract term.
 
2.   The option premiums are shown below the respective contractual amount as of the commencement date.

 


Table of Contents

(6) Credit-related instruments

(Yen in millions)

                                                                         
    As of September 30, 2004
  As of September 30, 2003
  As of March 31, 2004
    Contract   Fair value   Unrealized   Contract   Fair value   Unrealized   Contract   Fair value   Unrealized
    amount
   
  gain/(loss)
  amount
   
  gain/(loss)
  amount
   
  gain/(loss)
Over-the-counter transactions:
                                                                       
Credit derivatives
                                                                       
Short
    1,958,359       1,603       1,603       2,119,618       (5,843 )     (5,843 )     1,981,668       (167 )     (167 )
Long
    418,194       (5,935 )     (5,935 )     417,076       (3,893 )     (3,893 )     400,337       (6,221 )     (6,221 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total
    2,376,554       (4,332 )     (4,332 )     2,536,695       (9,736 )     (9,736 )     2,382,005       (6,389 )     (6,389 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 


Notes:   The fair value of the credit derivative transactions at the end of period is calculated mainly using internal evaluation model.

(7) Commodity-related instruments

(Yen in millions)

                                                                         
    As of September 30, 2004
  As of September 30, 2003
  As of March 31, 2004
    Contract   Fair value   Unrealized   Contract   Fair value   Unrealized   Contract   Fair value   Unrealized
    amount
   
  gain/(loss)
  amount
   
  gain/(loss)
  amount
   
  gain/(loss)
Over-the-counter transactions:
                                                                       
Commodity swaps
                                                                       
Pay Commodity indexes/Rec. fixed price
    31,853       (3,416 )     (3,416 )     3,390       65       65       25,946       (1,119 )     (1,119 )
Pay fixed price/Rec. Commodity indexes
    39,042       3,742       3,742       3,557       (6 )     (6 )     24,109       1,400       1,400  
Pay variable indexes/Rec. Commodity indexes
    3,641       125       125       1,711       34       34       3,347       156       156  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total
    74,537       451       451       8,659       92       92       53,404       437       437  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 


Notes:   The fair value of the Commodity swap transactions at the end of period is calculated mainly using internal evaluation model.

(8) Others

(Yen in millions)

                                                                         
    As of September 30, 2004
  As of September 30, 2003
  As of March 31, 2004
    Contract   Fair value   Unrealized   Contract   Fair value   Unrealized   Contract   Fair value   Unrealized
    amount
   
  gain/(loss)
  amount
   
  gain/(loss)
  amount
   
  gain/(loss)
Over-the-counter transactions:
                                                                       
Derivative including the inflation indexed bonds
                                                                       
Pay fix/Rec. variable consumer price index
    9,500                                                              
 
    795       676       (119 )                                    
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Total
    9,500       676       (119 )                                    
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 


Notes: 1.   The fair value of the derivative including the inflation indexed bonds at the end of period is calculated mainly using internal evaluation model.
 
2.   The option premiums are shown below the respective contractual amount as of the commencement date.

 


Table of Contents

Interim Financial Statements of Tokio Marine and its Consolidated Subsidiaries

Consolidated Interim Balance Sheets

(Yen in millions except percentages)

                                                 
    As of September 30, 2004
  As of September 30, 2003
  As of March 31, 2004
    Amount
  Ratio
  Amount
  Ratio
  Amount
  Ratio
Assets
            %               %               %  
Cash, deposits and savings
    282,175       3.82       420,982       5.88       296,418       4.01  
Call loans
    477,600       6.47       548,100       7.66       521,100       7.06  
Monetary receivables bought
    263,457       3.57       73,182       1.02       100,849       1.37  
Money trust
    53,451       0.72       26,629       0.37       34,012       0.46  
Securities
    4,939,314       66.92       4,621,596       64.58       5,050,398       68.38  
Loans
    551,664       7.47       627,415       8.77       555,222       7.52  
Property and equipment
    271,528       3.68       274,165       3.83       273,556       3.70  
Other assets
    554,916       7.52       582,615       8.14       573,722       7.77  
Deferred tax assets
    342       0.00       474       0.01       458       0.01  
Customers’ liabilities under acceptances and guarantees
    1,368       0.02       14,637       0.20       2,117       0.03  
Reserve for bad debts
    (14,652 )     (0.20 )     (33,017 )     (0.46 )     (21,984 )     (0.30 )
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total assets
    7,381,167       100.00       7,156,780       100.00       7,385,873       100.00  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Liabilities
                                               
Underwriting funds
    4,586,938       62.14       4,430,559       61.91       4,439,888       60.11  
Outstanding claims
    651,537               574,484               585,299          
Underwriting reserves
    3,935,401               3,856,075               3,854,589          
Straight Bonds
    187,859       2.55       166,009       2.32       174,056       2.36  
Other liabilities
    555,126       7.52       701,793       9.81       572,806       7.76  
Reserve for retirement benefits
    160,142       2.17       159,321       2.23       161,198       2.18  
Reserve for employees’ bonuses
    18,478       0.25       18,970       0.27       15,504       0.21  
Reserve under the special law
    63,888       0.87       54,971       0.77       60,838       0.82  
Reserve for price fluctuation
    63,888               54,971               60,838          
Deferred tax liabilities
    130,486       1.77       23,947       0.33       168,933       2.29  
Consolidated adjustment account
    369       0.01       389       0.01       379       0.01  
Acceptances and guarantees
    1,368       0.02       14,637       0.20       2,117       0.03  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total liabilities
    5,704,657       77.29       5,570,602       77.84       5,595,725       75.76  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Minority interest
    1,394       0.02       1,307       0.02       1,333       0.02  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Stockholders’ equity
                                               
Common stock
    101,994       1.38       101,994       1.43       101,994       1.38  
Additional paid-in capital
    38,782       0.53       38,782       0.54       38,782       0.53  
Retained earnings
    575,162       7.79       681,979       9.53       649,443       8.79  
Unrealized gains on investments, net of taxes
    977,607       13.24       772,109       10.79       1,018,156       13.79  
Foreign currency translation adjustments
    (18,432 )     (0.25 )     (9,996 )     (0.14 )     (19,563 )     (0.26 )
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total stockholders’ equity
    1,675,115       22.69       1,584,870       22.15       1,788,814       24.22  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total liabilities, minority interest and stockholders’ equity
    7,381,167       100.00       7,156,780       100.00       7,385,873       100.00  
 
   
 
     
 
     
 
     
 
     
 
     
 
 

     Note: Certain reclassifications are made to previous periods’ presentation to conform to that of current period.

 


Table of Contents

Consolidated Interim Statements of Income

(Yen in millions except percentages)

                                                 
    For the six months ended
  For the year ended
    September 30, 2004
    September 30, 2003
  March 31, 2004
    Amount
  Ratio
  Amount
  Ratio
  Amount
  Ratio
Ordinary income and expenses
            %               %               %  
Ordinary income
    944,681       100.00       952,422       100.00       1,925,889       100.00  
Underwriting income
    889,812       94.19       892,901       93.75       1,795,985       93.25  
Net premiums written
    770,458               758,185               1,538,297          
Deposit premiums from policyholders
    90,971               106,697               202,091          
Investment income on deposit premiums from policyholders
    27,215               27,584               54,909          
Life insurance premiums
    184               372               607          
Investment income
    46,229       4.89       49,244       5.17       103,935       5.40  
Interest and dividends received
    52,384               49,532               95,523          
Profit on investment in money trusts
    296               210               475          
Profit on sales of securities
    16,720               18,838               36,955          
Profit on redemption of securities
    591               1,495               1,668          
Profit on derivative transactions
    2,526               5,981               22,311          
Transfer of investment income on deposit premiums
    (27,215 )             (27,584 )             (54,909 )        
Other ordinary income
    8,639       0.91       10,275       1.08       25,968       1.35  
Depreciation of consolidated adjustment account
    9               9               19          
Investment income under the equity method
    424                             42          
Ordinary expenses
    940,691       99.58       873,829       91.75       1,766,160       91.71  
Underwriting expenses
    800,488       84.74       734,842       77.16       1,482,874       77.00  
Net claims paid
    391,183               362,046               748,976          
Loss adjustment expenses
    30,239               31,497               59,801          
Agency commissions and brokerage
    122,315               121,149               245,398          
Maturity refunds to policyholders
    109,615               128,273               320,841          
Dividends to policyholders
    12               30               57          
Life insurance claims
    119               298               477          
Provision for outstanding claims
    65,853               2,444               16,162          
Provision for underwriting reserves
    80,816               86,507               86,085          
Investment expenses
    8,829       0.93       4,450       0.47       22,732       1.18  
Loss on investment in money trusts
    60               1,332               1,567          
Loss on trading securities
    58               299               672          
Loss on sales of securities
    1,208               790               5,305          
Loss on revaluation of securities
    5,408               1,015               10,291          
Loss on redemption of securities
    1,392               9               3,732          
Underwriting and general administrative expenses
    129,008       13.66       132,040       13.86       256,425       13.31  
Other ordinary expenses
    2,364       0.25       2,494       0.26       4,128       0.21  
Interest paid
    912               1,000               2,233          
Loss on bad debts
    20               0               207          
Investment loss under the equity method
                  863                        
Ordinary profit
    3,989       0.42       78,592       8.25       159,728       8.29  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Extraordinary gains and losses
                                               
Extraordinary gains
    470       0.05       371       0.04       2,339       0.12  
Profit on sales of properties
    470               371               2,339          
Extraordinary losses
    7,837       0.83       11,689       1.23       22,511       1.17  
Loss on sales of properties
    722               439               1,196          
Provision for reserve under the special law
    3,049               5,944               11,811          
Provision for reserve for price fluctuation
    3,049               5,944               11,811          
Extra write-off against profit on sales of properties
    0               0               0          
Merger related costs
    2,099               1,028               3,738          
Loss on revaluation of stock of subsidiaries
                  4,275               4,753          
Revaluation loss on properties
    1,965                                      
Other
                  0               1,011          
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Income or loss before income taxes
    (3,377 )     (0.36 )     67,275       7.06       139,556       7.25  
Income taxes — current
    14,412       1.53       22,589       2.37       42,009       2.18  
Income taxes — deferred
    (15,829 )     (1.68 )     (385 )     (0.04 )     4,907       0.25  
Minority interest
    93       0.01       (1 )     (0.00 )     75       0.00  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Net income or loss
    (2,053 )     (0.22 )     45,073       4.73       92,564       4.81  
 
   
 
     
 
     
 
     
 
     
 
     
 
 

 


Table of Contents

Consolidated Interim Statements of Retained Earnings

(Yen in millions)

                         
    For the six months ended
  For the year ended
    September 30, 2004
  September 30, 2003
  March 31, 2004
Additional paid-in capital
                       
Additional paid-in capital at beginning of
    38,782       38,782       38,782  
Additional paid-in capital at end of
    38,782       38,782       38,782  
Retained earnings
                       
Unappropriated retained earnings at beginning of
    649,443       780,159       780,159  
Increase in unappropriated retained earnings
          45,073       92,564  
Net income
          45,073       92,564  
Decrease in unappropriated retained earnings
    74,280       143,252       223,279  
Net loss
    2,053              
Dividends
    72,014       103,999       184,010  
Other decreases
    212       39,252       39,269  
Unappropriated retained earnings at end of
    575,162       681,979       649,443  

     Note: Certain reclassifications are made to previous periods’ presentation to conform to the presentation for the current six months.

 


Table of Contents

Consolidated Interim Statements of Cash Flows

(Yen in millions)

                         
    For the six months ended
  For the year ended
    September 30, 2004
  September 30, 2003
  March 31, 2004
I. Cash flows from operating activities:
                       
Income or loss before income taxes
    (3,377 )     67,275       139,556  
Depreciation
    7,038       6,440       13,319  
Amortization of goodwill
    (9 )     (9 )     (19 )
Increase (decrease) in outstanding claims
    65,870       2,445       16,195  
Increase (decrease) in underwriting reserves
    80,819       86,504       86,085  
Increase (decrease) in reserve for bad debts
    (7,342 )     (3,395 )     (14,362 )
Increase (decrease) in reserve for retirement benefits
    (1,056 )     (2,353 )     (477 )
Increase (decrease) in reserve for employees’ bonuses
    2,977       4,088       627  
Increase (decrease) in reserve for price fluctuation
    3,049       5,944       11,811  
Interest and dividend income
    (52,384 )     (49,532 )     (95,523 )
Net loss (profit) on securities
    (9,244 )     (14,830 )     (14,019 )
Interest expenses
    912       1,000       2,233  
Loss (profit) on foreign exchange
    458       363       (2,473 )
Loss (profit) related to properties
    2,218       69       (131 )
Investment loss (income) under the equity method
    (424 )     863       (42 )
Decrease (increase) in other assets (other than investing and financing activities)
    17,628       55,057       64,876  
Increase (decrease) in other liabilities (other than investing and financing activities)
    (25,222 )     (82,474 )     (90,824 )
Others
    5,588       1,686       5,766  
Sub-total
    87,498       79,142       122,597  
Interest and dividends received
    58,925       62,935       113,234  
Interest paid
    (1,408 )     (1,209 )     (2,330 )
Income taxes paid
    (3,534 )     (56,477 )     (96,144 )
Net cash provided by operating activities
    141,481       84,389       137,357  
 
   
 
     
 
     
 
 
II. Cash flows from investing activities:
                       
Net increase in deposit and savings
    (23 )     (525 )     (4,003 )
Purchases of monetary receivables bought
    (42,892 )     (7,186 )     (30,759 )
Proceeds from sales and redemption of monetary receivables bought
    14,100       16,808       34,829  
Increase in money trust
    (24,747 )           (9,292 )
Decrease in money trust
    5,543       16,406       18,346  
Purchases of securities
    (527,920 )     (379,520 )     (860,914 )
Proceeds from sales and redemption of securities
    519,861       480,789       953,324  
Loans made
    (85,774 )     (57,455 )     (123,902 )
Proceeds from collection of loans receivable
    84,165       77,949       213,007  
Increase in cash received under securities lending transactions
    (952 )     17,609       25,381  
Other
    (2 )     (82 )     (128 )
II(a) Subtotal
    (58,641 )     164,793       215,888  
Subtotal (I+II(a))
    82,839       249,183       353,245  
Purchases of property and equipment
    (6,188 )     (7,743 )     (15,873 )
Proceeds from sales of property and equipment
    602       1,013       4,010  
Net cash provided by (used in) investing activities
    (64,227 )     158,063       204,025  
 
   
 
     
 
     
 
 
III. Cash flows from financing activities:
                       
Proceeds from borrowing
    2,000       3,320       11,820  
Payments of borrowing
    (4,604 )     (2,000 )     (8,802 )
Proceeds from issuance of bond
    33,257       26,596       50,514  
Redemption of bond
    (19,484 )     (7,869 )     (21,440 )
Dividends paid by the Tokio Marine
    (72,041 )     (104,032 )     (184,046 )
Dividends paid by subsidiaries to minority shareholders
    (19 )     (34 )     (35 )
Other
    (693 )     1,955       572  
Net cash provided by (used in) financing activities
    (61,586 )     (82,064 )     (151,418 )
 
   
 
     
 
     
 
 
IV. Effect of exchange rate changes on cash and cash equivalents
    (188 )     1,034       (3,370 )
 
   
 
     
 
     
 
 
V. Net increase (decrease) in cash and cash equivalents
    15,478       161,423       186,594  
 
   
 
     
 
     
 
 
VI. Cash and cash equivalents at beginning of
    903,436       763,983       763,983  
 
   
 
     
 
     
 
 
VII. Net decrease in cash and cash equivalents due to reorganization of subsidiaries
          (47,141 )     (47,141 )
 
   
 
     
 
     
 
 
VIII. Cash and cash equivalents at end of
    918,914       878,265       903,436  
 
   
 
     
 
     
 
 

     Note: Certain reclassifications are made to previous periods’ presentation to conform to that of current period.

 


Table of Contents

Interim Financial Statements of Nichido Fire and its Consolidated Subsidiaries

Consolidated Interim Balance Sheets

(Yen in millions except percentages)

                                                 
    As at September 30, 2004
  As at September 30, 2003
  As at March 31, 2004
    Amount
  Ratio
  Amount
  Ratio
  Amount
  Ratio
Assets
            %               %               %  
Cash, deposits and savings
    171,807       9.66       124,004       6.95       152,091       8.26  
Call loans
                            40,000       2.17  
Monetary receivables bought
    4,854       0.27       4,569       0.26       5,998       0.33  
Money trust
    27,546       1.55       29,334       1.64       29,771       1.62  
Securities
    1,294,293       72.78       1,299,192       72.87       1,305,020       70.91  
Loans
    100,627       5.66       133,842       7.51       111,801       6.08  
Property and equipment
    69,422       3.90       80,523       4.52       78,890       4.29  
Other assets
    116,152       6.53       122,795       6.89       122,981       6.68  
Reserve for bad debts
    (6,183 )     (0.35 )     (11,431 )     (0.64 )     (6,275 )     (0.34 )
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total Assets
    1,778,520       100.00       1,782,830       100.00       1,840,280       100.00  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Liabilities
                                               
Underwriting funds
    1,256,565       70.65       1,269,849       71.23       1,264,370       68.71  
Outstanding claims
    131,574               119,402               123,281          
Underwriting reserves
    1,124,991               1,150,447               1,141,088          
Straight bonds
    25,000       1.40       25,000       1.40       25,000       1.36  
Other liabilities
    38,599       2.17       41,620       2.33       45,164       2.45  
Reserve for retirement benefits
    24,170       1.36       27,194       1.53       25,074       1.36  
Reserve for employees’ bonuses
    3,514       0.20       3,786       0.21       3,984       0.22  
Reserve under the special law
    5,110       0.29       4,012       0.22       4,507       0.24  
Reserve for price fluctuation
    5,110               4,012               4,507          
Deferred tax liabilities
    15,489       0.87       1,914       0.11       28,519       1.55  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total Liabilities
    1,368,450       76.94       1,373,377       77.03       1,396,620       75.89  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Minority interest
                0       0.00       0       0.00  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Stockholders’ Equity
                                               
Common stock
    50,550       2.84       50,550       2.84       50,550       2.75  
Additional paid-in capital
    34,187       1.92       34,187       1.92       34,187       1.86  
Retained earnings
    109,752       6.17       123,616       6.93       118,373       6.43  
Unrealized gains on investments, net of taxes
    215,578       12.13       202,382       11.35       240,701       13.08  
Foreign currency translation adjustments
                (1,284 )     (0.07 )     (154 )     (0.01 )
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total Stockholders’ Equity
    410,069       23.06       409,452       22.97       443,659       24.11  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total Liabilities, Minority Interest and Stockholders’ Equity
    1,778,520       100.00       1,782,830       100.00       1,840,280       100.00  
 
   
 
     
 
     
 
     
 
     
 
     
 
 

     Notes: Certain reclassifications are made to previous periods’ presentation to conform to that of current period.

 


Table of Contents

Consolidated Interim Statements of Income

(Yen in millions except percentages)

                         
    For the six months ended
  For the year ended
    September 30, 2004
  September 30, 2003
  March 31, 2004
    Amount
  Amount
  Amount
Ordinary income and expenses
                       
Ordinary income
    275,741       257,024       530,928  
Underwriting income
    233,337       239,252       478,709  
Net premiums written
    193,272       200,374       401,114  
Deposit premiums from policyholders
    20,765       26,205       52,109  
Investment income on deposit premiums from policyholders
    6,415       6,732       13,185  
Reversal of reserves for outstanding claims
          2,996        
Reversal of underwriting reserves
    12,809       2,942       12,301  
Other underwriting income
    74              
Investment income
    41,328       16,786       50,131  
Interest and dividends received
    10,841       12,834       23,645  
Profit on investment in money trust
    468       529       2,472  
Profit on sales of securities
    36,304       9,443       37,122  
Profit on redemption of securities
    14       1       2  
Profit on derivative transactions
          686        
Other investment income
    115             73  
Transfer of investment income on deposit premiums from policyholders
    (6,415 )     (6,732 )     (13,185 )
Other ordinary income
    1,075       985       2,087  
Ordinary expenses
    248,840       235,467       483,342  
Underwriting expenses
    204,810       190,313       388,951  
Net claims paid
    108,358       100,161       206,426  
Loss adjustment expenses
    8,458       8,292       16,482  
Agency commissions and brokerage
    30,998       32,071       62,972  
Maturity refunds to policyholders
    44,527       49,508       101,746  
Dividends to policyholders
    1       6       12  
Provision for outstanding claims
    12,348             882  
Other underwriting expenses
    117             427  
Investment expenses
    6,028       3,628       12,180  
Loss on investment in money trust
    233       1,080       582  
Loss on trading securities
          6       6  
Loss on sales of securities
    2,914       2,329       10,364  
Loss on revaluation of securities
    455       202       727  
Loss on derivative transactions
    1,975             481  
Other investment expenses
    449             17  
Underwriting and general administrative expenses
    36,858       40,678       79,026  
Other ordinary expenses
    1,143       847       3,183  
Interest paid
    243       264       512  
Reserve for bad debts
    130       107        
Loss on bad debts
    4             35  
Other
    765             2,636  
Ordinary profit
    26,900       21,557       47,586  
 
   
 
     
 
     
 
 
Extraordinary gains and losses
                       
Extraordinary gains
    664       725       995  
Profit on sales of properties
    391       725       995  
Other extraordinary gains
    272              
Extraordinary losses
    15,404       1,497       5,156  
Loss on sales of properties
    2,143       89       785  
Provision for reserve under the special law
    603       765       1,259  
Provision for reserve for price fluctuation
    603       765       1,259  
Merger related costs
    2,102             3,006  
Revaluation loss on properties
    10,555              
Other
          642       104  
 
   
 
     
 
     
 
 
Income before income taxes
    12,160       20,786       43,425  
Income taxes — current
    1,876       133       3,056  
Income taxes — deferred
    1,085       7,062       12,022  
Minority interest
    0       0       0  
 
   
 
     
 
     
 
 
Net income
    9,198       13,589       28,346  
 
   
 
     
 
     
 
 

 


Table of Contents

Consolidated Interim Statements of Retained Earnings

(Yen in millions)

                         
    For the six months ended
   
    September 30, 2004
  September 30, 2003
  For the year ended
March 31, 2004

Additional paid-in capital
                       
Additional paid-in capital at beginning of
    34,187       34,187       34,187  
Additional paid-in capital at end of
    34,187       34,187       34,187  
Retained earnings
                       
Unappropriated retained earnings at beginning of
    118,373       146,050       146,050  
Increase in unappropriated retained earnings
    9,399       13,589       28,346  
Net income
    9,198       13,589       28,346  
Increase in connection with merger
    201              
Decrease in unappropriated retained earnings
    18,020       36,023       56,023  
Dividends
    18,000       26,000       46,000  
Directors’ bonus
    20       20       20  
Others
          10,002       10,002  
Unappropriated retained earnings at end of
    109,752       123,616       118,373  
 
   
 
     
 
     
 
 

     Notes: Certain reclassifications are made to previous periods’ presentation to conform to that of current period.

 


Table of Contents

Consolidated Interim Statements of Cash Flows

(Yen in millions)

                         
    Six months ended
  For the year ended
    September 30, 2004
  September 30, 2003
  March 31, 2004
I. Cash flows from operating activities:
                       
Income before income taxes
    12,160       20,786       43,425  
Depreciation
    1,754       2,090       4,234  
Increase (decrease) in outstanding claims
    12,348       (2,996 )     882  
Increase (decrease) in underwriting reserves
    (12,809 )     (2,942 )     (12,301 )
Increase (decrease) in reserve for bad debts
    (91 )     105       (5,050 )
Increase (decrease) in reserve for retirement benefits
    (904 )     488       (1,630 )
Increase (decrease) in reserve for employees’ bonuses
    (470 )     (21 )     176  
Increase (decrease) in reserve for price fluctuation
    603       765       1,259  
Interest and dividend income
    (10,841 )     (12,834 )     (23,645 )
Net loss (profit) on securities
    (32,947 )     (6,894 )     (26,023 )
Interest expenses
    243       264       512  
Loss (gain) on foreign exchange
    (81 )     24       (51 )
Loss (profit) related to properties
    12,306       (192 )     (104 )
Decrease (increase) in other assets (other than investing and financing activities)
    3,625       (1,052 )     798  
Increase (decrease) in other liabilities (other than investing and financing activities)
    (5,991 )     (3,221 )     (1,814 )
Other
    402       517       4,371  
 
   
 
     
 
     
 
 
Sub-total
    (20,694 )     (5,113 )     (14,961 )
Interest and dividends received
    11,558       13,791       26,366  
Interest paid
    (242 )     (263 )     (511 )
Income taxes paid
    (2,579 )     8,933       8,175  
 
   
 
     
 
     
 
 
Net cash provided by operating activities
    (11,957 )     17,347       19,067  
II. Cash flows from investing activities:
                       
Net increase in deposit and savings
    983       (1,000 )     (1,000 )
Purchases of monetary receivables bought
    (900 )     (680 )     (2,500 )
Proceeds from sales and redemption of monetary receivables bought
    1,138       144       548  
Increase in money trust
          (3,618 )     (21,600 )
Decrease in money trust
    3,215       4,648       23,547  
Purchases of securities
    (439,476 )     (243,261 )     (491,923 )
Proceeds from sales and redemption of securities
    437,241       228,820       547,845  
Loans made
    (18,286 )     (29,002 )     (50,311 )
Proceeds from collection of loans receivable
    26,079       37,370       76,768  
Others
    25       (7 )     (13 )
II(a) Subtotal
    10,020       (6,585 )     81,361  
Subtotal (I+II(a))
    (1,936 )     10,761       100,429  
Purchases of property and equipment
    (1,700 )     (838 )     (2,319 )
Proceeds from sales of property and equipment
    1,017       830       1,727  
 
   
 
     
 
     
 
 
Net cash provided by (used in) investing activities
    9,337       (6,594 )     80,769  
III. Cash flows from financing activities:
                       
Dividends paid by the Nichido Fire
    (18,000 )     (26,000 )     (46,000 )
Dividends paid by subsidiaries to minority shareholders
    (0 )           (0 )
Others
    (45 )     (23 )     (35 )
 
   
 
     
 
     
 
 
Net cash provided by (used in) financing activities
    (18,045 )     (26,023 )     (46,036 )
IV. Effect of exchange rate changes on cash and cash equivalents
    (243 )     (40 )     (179 )
 
   
 
     
 
     
 
 
V. Net increase (decrease) in cash and cash equivalents
    (20,909 )     (15,310 )     53,621  
VI. Cash and cash equivalents at beginning of
    192,525       149,726       149,726  
 
   
 
     
 
     
 
 
VII. Net decrease in cash and cash equivalents due to reorganization of subsidiaries
          (10,822 )     (10,822 )
 
   
 
     
 
     
 
 
VIII. Net increase in cash and cash equivalents due to merger
    163              
 
   
 
     
 
     
 
 
IX. Cash and cash equivalents at end of
    171,779       123,593       192,525  
 
   
 
     
 
     
 
 

     Notes: Certain reclassifications are made to previous periods’ presentation to conform to that of current period.

 


Table of Contents

Item 2

[English translation]

November 29, 2004

Summary of Non-Consolidated Business Results of Millea Holdings, Inc. under Japanese GAAP for the Six Months Ended September 30, 2004

Company Name: Millea Holdings, Inc.

Securities Code Number: 8766

Stock Exchange Listings: Tokyo and Osaka

Head Office: Tokyo, Japan

Representative: Kunio Ishihara, President, Millea Holdings, Inc.

Contact: Mitsuru Muraki, Corporate Planning Dept., Millea Holdings, Inc. Phone 03-6212-3341

     Satoshi Tsujigado, Business Management Dept., Millea Holdings, Inc. Phone: 03-6212-3344

Interim dividends system: Established

New unit system: None

1. Non-Consolidated Business Results for the six months ended September 30, 2004

(from April 1, 2004 to September 30, 2004)

(1) Non-consolidated results of operations

(Yen in millions except per share amounts and percentages)

                         
    For the six months ended   For the six months ended   For the year ended
    September 30, 2004
  September 30, 2003
  March 31, 2004
Operating income
    91,514       131,646       233,617  
Ratio
    (30.5 )%     158.0 %     341.4 %
Operating profits
    90,324       130,516       231,455  
Ratio
    (30.8 )%     165.9 %     364.1 %
Ordinary profits
    90,317       130,507       231,431  
Ratio
    (30.8 )%     165.7 %     363.2 %
Net income
    89,923       130,283       230,871  
Ratio
    (31.0 )%     165.2 %     365.4 %
Net income per share of common stocks (yen)
    50,837.37       70,737.79       126,681.20  

The amounts less than respective unit are rounded down and the rates less than respective unit are rounded off.

Notes:

a. Average number of shares outstanding

     For the six months ended September 30, 2004: 1,768,843 shares

     For the six months ended September 30, 2003: 1,841,782 shares

     For the year ended March 31, 2004: 1,822,461 shares

b. Change in accounting method: None

c. Percentage figures show increase or decrease in ordinary income, operating profit and net income from the previous period.

(2) Dividends payment

Dividends paid per share

For the six months ended September 30, 2004: None

For the six months ended September 30, 2003: None

For the year ended March 31, 2004: 11,000 yen

 


Table of Contents

(3) Non-consolidated financial conditions

(Yen in millions except per share amounts and percentages)

                         
    For the six months ended   For the six months ended   For the year ended
    September 30, 2004
  September 30, 2003
  March 31, 2004
Total assets
    2,349,078       2,275,293       2,330,236  
Stockholders’ equity
    2,348,446       2,274,818       2,329,735  
Ratio of stockholders’ equity to total assets
    100.0 %     100.0 %     100.0 %
Stockholders’ equity per share (yen)
    1,338,213.45       1,249,346.96       1,302,942.88  

Notes:

a. Number of shares outstanding

As of September 30, 2004: 1,754,911 shares

As of September 30, 2003: 1,820,805 shares

As of March 31, 2004: 1,788,056 shares

b. Number of treasury stocks outstanding

As of September 30, 2004: 32,137 shares

As of September 30, 2003: 36,242 shares

As of March 31, 2004: 68,992 shares

2. Non-consolidated business forecast for the year ending March 31, 2005

(from April 1, 2004 to March 31, 2005)

(Yen in millions)

         
Operating income
    113,000  
Ordinary profits
    110,000  
Net income
    110,000  
Annual cash dividends per share (yen)
    11,000.00  
Cash dividends per share by the year end (yen)
    11,000.00  

Notes:

Expected net income per share (yen): 62,681.22

 


Table of Contents

Non-Consolidated Interim Balance Sheet

(Yen in millions except percentages)

                                                 
    As of September 30, 2004
  As of September 30, 2003
  As of March 31, 2004
    Amount
  Ratio
  Amount
  Ratio
  Amount
  Ratio
Current assets:
            %               %               %  
Cash, deposits and savings
    113,013               75,381               110,516          
Receivables
    17,726               25,933               45,740          
Others
    161               80               108          
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total Current assets
    130,901       5.57       101,395       4.46       156,366       6.71  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Non-current assets:
                                               
Tangible fixed assets
    254               298               273          
Intangible fixed assets
    0               0               0          
Investments and other assets:
                                               
Investments in subsidiaries (stock)
    2,217,902               2,173,575               2,173,574          
Others
    19               22               20          
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total Non-current assets
    2,218,177       94.43       2,173,897       95.54       2,173,870       93.29  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total Assets
    2,349,078       100.00       2,275,293       100.00       2,330,236       100.00  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Liabilities and Stockholders’ equity
                                               
Liabilities:
                                               
Current liabilities
                                               
Reserve for bonus
    143               134               134          
Others
    489               340               366          
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total Current liabilities
    632       0.03       474       0.02       500       0.02  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total Liabilities
    632       0.03       474       0.02       500       0.02  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Stockholders’ equity:
                                               
Common stock
    150,000       6.39       150,000       6.59       150,000       6.44  
Capital surplus
                                               
Additional paid-in capital
    1,511,485               1,511,485               1,511,485          
Others
    408,418               500,002               500,005          
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total Capital surplus
    1,919,904       81.73       2,011,487       88.41       2,011,490       86.32  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Retained earnings
                                               
Voluntary reserve
    214,994               4,994               4,994          
Unappropriated retained earnings
    110,212               149,370               249,958          
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total retained earnings
    325,207       13.84       154,364       6.78       254,952       10.94  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Treasury stock
    (46,664 )     (1.99 )     (41,033 )     (1.80 )     (86,707 )     (3.72 )
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total stockholders’ equity
    2,348,446       99.97       2,274,818       99.98       2,329,735       99.98  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total Liabilities and Stockholders’ equity
    2,349,078       100.00       2,275,293       100.00       2,330,236       100.00  
 
   
 
     
 
     
 
     
 
     
 
     
 
 

 


Table of Contents

Non-Consolidated Interim Statement of Income

(Yen in millions except percentages)

                                                 
    For the six months ended   For the six months ended   For the year ended
    September 30, 2004
  September 30, 2003
  March 31, 2004
    Amount
  Ratio
  Amount
  Ratio
  Amount
  Ratio
Operating income:
            %               %               %  
Dividends received from subsidiaries
    90,014               130,046               230,417          
Fees received from subsidiaries
    1,500               1,600               3,200          
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total Operating income
    91,514       100.00       131,646       100.00       233,617       100.00  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Operating expenses:
                                               
General and administrative expenses
    1,190       1.30       1,130       0.86       2,162       0.93  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Operating profit
    90,324       98.70       130,516       99.14       231,455       99.07  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Non-operating income
    16       0.02       6       0.01       14       0.01  
Non-operating expenses
    22       0.02       15       0.01       38       0.02  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Ordinary profit
    90,317       98.69       130,507       99.14       231,431       99.06  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Extraordinary losses
    0       0.00       35       0.03       35       0.01  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Income before income taxes
    90,317       98.69       130,472       99.11       231,396       99.05  
Income taxes-current
    431               157               523          
Income taxes-deferred
    (37 )             31               1          
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total income taxes
    393       0.43       188       0.14       524       0.22  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Net income
    89,923       98.26       130,283       98.96       230,871       98.82  
Unappropriated retained earnings at the beginning of the period
    20,289               19,086               19,086          
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Unappropriated retained earnings at the end of the period
    110,212               149,370               249,958          
 
   
 
     
 
     
 
     
 
     
 
     
 
 

Notes to the non-consolidated financial statements

Basis for presentation and principals of financial statements

1. Valuation of securities

Investments in subsidiaries are stated at cost determined by the moving-average method.

2. Depreciation for fixed assets

Depreciation of tangible fixed assets other than buildings(excluding auxiliary facilities attached to the building) is computed using the declining-balance method principally over the following useful lives.

           
 
Equipment and furnitures
  3 to 15 years  
 
Buildings
  8 to 18 years  

3. Reserve

In order to prepare for employees’ bonus payments, Millea Holdings accrues for reserve for employees’ bonuses based on the estimated amount of payment attributable to the six months ended September 30, 2004.

4. Lease transactions

Finance lease transactions other than those which are deemed to transfer the ownership of the leased property to lessees are accounted for by a method similar to that applicable to the ordinary lease transactions.

5. Consumption taxes

Consumption Taxes and local consumption taxes are accounted for by the tax-segregated method.

 


Table of Contents

Notes to non-consolidated balance sheet
     
1.  
Accumulated depreciation of tangible fixed assets amounted to 131 million yen.
   
 
2.  
For the six months ended September 30, 2004, the cancellation of shares held by the Company as treasury stock was implemented by
   
decreasing capital surplus as follows.
   
Number of shares to be cancelled: 70,000 shares
   
Aggregate purchase price of shares: 91,590 million yen

Notes to non-consolidated statement of income
     
1.  
Depreciation expenses
   
 
   
Tangible Fixed Assets:          20 million yen

Lease Transactions

     Information on this item will be disclosed through EDINET.

Securities

     Investments in subsidiaries are non-marketable securities.