CSR Report 2007Progress toward enhancement of corporate quality

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To the readerIn October 2004, the Mitsui Sumitomo Insurance Group (MSIG) released the MSIG Charter on Professional Conduct to serve as a behavioral code for all our employees. In keeping with the Charter, we heed the views of our customers and all other stakeholders, and are taking all sorts of measures to offer even better insurance products and services.

We prepared this booklet to serve as a key tool of communication by both reporting on the facts of our stance and activities toward such betterment and allowing us to collect feedback from all stakeholders on what we must do to further improve the Company.

Please do not hesitate to give us your frank opinions and thoughts on the perspectives and activities described in this booklet, so that we may reflect them in our future approaches.

Contents

To the reader/Editorial policies/Contents 1

Message from the Chairman 2

Message from the President 3

Profile of MSIG 5

Basic perspectives

Mission Statement and Charter on Professional Conduct 6

New Challenge 10, the Group medium-term management plan 7

Special feature: Progress toward enhancement of corporate quality

Approaches to business improvement 9

Sure attainment of “Tozen quality” 11

Breeding a new corporate culture with the participation of all employees 13

From the stakeholder perspective 15

Management system

MSI management 17

Approaches for each type of stakeholder

As a company trusted by society

Responsibility to customers 19

Responsibility to shareholders 23

Responsibility to the environment 24

Responsibility to local communities and the international community 27

As a company growing together with its partners

Responsibility to agents 29

Responsibility to business partners 32

Responsibility to employees 33

CSR accounting 35

Third-party opinion/MSI comment 37

Editorial policies

• ThisbookletconsistsofreportsonactivitiesineachofthesevencategoriesofstakeholderdefinedintheMSIGCharteronProfessionalConduct.

• ThespecialfeaturesetsfortheffortsforimprovementofourbusinessprocessandenhancementofourcorporatequalityfollowingtheadministrativemeasurestakeninJune2006.

• Withanemphasisonreadability,wereducedthevolumeofinformationinordertomakethisreportmorecompact.Moredetailedinformationcanbefoundonourwebsiteandinvariousotherreports.

•MSIwebsiteURL http://www.ms-ins.com/english/

•Variousotherreports: Corporatebrochure(J),disclosurereports(J), andannualreports (alsoavailableforviewingonourwebsite)

*(J):Japaneseonly

Report scope

PeriodFiscal2006(1April,2006to31March,2007)• Thereportalsopresentssomeinformationon

activitiesafterApril2007.

Scope of the entityMitsuiSumitomoInsuranceCompany,Limited.

• ThereportalsopresentssomeinformationontheactivitiesoftheGroupcompanies.

• Inthisreport,MitsuiSumitomoInsuranceisreferredtoas“MSI”orthe“Company”,andtheMitsuiSumitomoInsuranceGroup,as“MSIG”orthe“Group”.

Publication November2007

Previous publication January2007

Next publication November2008(planned)

Inquiries

• CSRSection,CorporatePlanningDepartmentMitsuiSumitomoInsuranceCompany,Limited.

27-2,Shinkawa2-chome,Chuo-ku,Tokyo104-8252,JapanTel:+81332974632Fax:+81332976888Mail:aaa703_csr@ms-ins.net

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Message from the Chairman

The “Tsukuru Kawaru culture” at the foundation of the CompanyEver since our establishment in October 2001, we at Mitsui Sumitomo Insurance Group have endeavored to practice management mindful of corporate social responsibility (CSR) in accordance with our ultimate mission of becoming an insurance and financial group that is highly rated and trusted by our customers and society as a whole, and with the MSIG Charter on Professional Conduct, which is at the foundation of activity by all of our employees. In June 2004, we began to participate in the United Nations Global Compact, a step that indicated our resolve to fulfill CSR to all parties inside and outside the Company.

In June 2006, however, the authorities ordered us to suspend certain operations and took other tough action against us in response to our nonpayment of claims under whole life medical insurance policies, etc. There also surfaced additional problems due to errors involving insurance premiums, and it became clear that we had not adequately discharged our responsibilities as regards insurance product explanations to customers at the time of sales and claim payment. Each of these problems was caused mainly by the rapid expansion of the scope of compensation and services in the atmosphere of fierce competition to develop new products following deregulation of the insurance sector. This led to a big increase in the number of special clauses and made insurance products extremely complex.

Taking this situation very seriously, we embarked on programs for reform of our corporate governance, claim payment administration system, and compliance system. In February 2007, all suspensions that had been imposed on our business activities were lifted. In April, we formulated New Challenge 10, our medium-term management plan clearly incorporating the practice of CSR-oriented management by MSIG.

In the process of formulation, we launched a project centered around younger employees, under the banner “Tsukuru Kawaru (Create and Change)”. In this project, each and every one of our employees strove to view operations from the

customers’ viewpoint, find problems, and take actions to resolve them, all on their own initiative. The more than 1,500 proposals we received from many employees were reflected in New Challenge 10 as indicative of the vision for the Group, the strategy for attaining this vision, and the values we must cherish. As a result of this approach to management planning from the bottom upward, we have nurtured a corporate culture characterized by viewing things from the customers’ viewpoint, spontaneous thought and action, and communication and teamwork. I call this our “Tsukuru Kawaru culture”, and intend to promote its spread throughout the Group.

In our “Tsukuru Kawaru culture”, all of our employees listen to customers’ voice, think for themselves about what customers want, and take actions to improve their work in response. To build ties of trust between the Group and society, we must see that this culture takes solid root as the foundation of activities by all Group members. I am determined to take every and all opportunities for communication with our employees toward the end of having this culture shared in common by all of them.

What is the United Nations Global Compact?TheGlobalCompactisaninternationalprogramthatsupports10principlesinfourareas—humanrights,labor,environment,andanti-corruption—withparticipationfromleadingcompaniesalongwithinternationalorganizations,labor,andcivilsociety.

YoshiakiShinChairman/ChairmanoftheCSRCommittee

Message from

the Chairman

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Message from the President

Working to enhance quality from the customers’ viewpoint and set in motion a spiral of trust and growth

LastyearwasaverydifficultoneforMSI,whosebusinessisgroundedintrustamongallsectorsofsociety.Pleasetellmeaboutyourbasicstanceonthereformthroughreviewofallbusinessprocesses.

The spiral of quality, trust, and growth

In keeping with our Mission Statement formulated at the time of our establishment in 2001, we have striven to practice CSR-oriented management and emphasized fulfillment of our responsibilities to our customers and all of the other stakeholders of MSIG. Nevertheless, we did not have a fully

sufficient strategy to raise levels of customer satisfaction, and were not able to live up to their expectations. As such, we ended up causing a lot of trouble to our precious customers.

Out of deep regret over this situation, besides making a review of all business processes from the customers’ viewpoint, we put together New Challenge 10, a medium-term management plan running from this April (2007) to 2010, and embarked on approaches to its ends. This basic strategy is aimed at achieving growth by constantly placing top priority on higher quality and retaining the trust of society at large. We are taking up the challenge of setting in motion an upward spiral whereby our approaches to enhance our corporate quality heighten our credibility and lead to further growth as a result.

Pursuit of two types of quality from the customers’ viewpoint

We see two steps to enhancing corporate quality. The first is to offer insurance products and services adapted to customer needs, and to win contracts for them only after thoroughly explaining them so they are clearly understood by the customers. In the event of an accident, we must deal promptly and politely with the customer, pay fair and due claims, and otherwise see that the customer is satisfied. We call this level of insurance product and service quality expected of insurance companies as a matter of course the “Tozen (desirable) quality”, and are erecting systems for its attainment in all processes.

The second step is that of “Kando (outstanding) quality”. We define this as the kind of quality that will deeply impress customers, who would never have expected such generous support or such excellent insurance products and services from an insurance company. But even services that were once unexpected may be expected by the customer the next time. As the requisite level of quality always rises, our quest will be a very difficult one, but we are mounting an all-out effort to continue supplying insurance products and services that keep impressing customers.

InApril2007,MSIGlaunchedNewChallenge10,itslatest

medium-termmanagementplan.Forthepublicationof

thiseditionoftheCSRreport,weinterviewedMr.Toshiaki

Egashira,PresidentofMSI,tolearnabouthisdetermination

forreformandhisaspirationsforcorporatequality.

Interview date: 23 May, 2007

Interviewer: Ayako Sonoda, President of Cre-en Inc.

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Message from

the President

Shareholders

Agents Businesspartners

EnvironmentLocalcommunities

andtheinternational

communityCustomers

Tsukuru Kawaru activitiesWorkplaceMeetingsManagementMeetingsProposalProject

Strengtheningmanagementplatform

CorporategovernanceCorporatebrandstrategy

Riskmanagement/ComplianceCapitalpolicy

Organizationalstructure

ActivitiestobuildbondsoftrustwiththesevencategoriesofstakeholderActivitiestobuildbondsoftrustwiththesevencategoriesofstakeholder

Conditioningtheassessmentmechanism

Plan

Check

Act Do

Activelyreflectingstakeholders’views

Explain

Reflect

Do Communicate

Employees

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Pleasedescribethemindsetofpeopleonthefrontlineswhodeterminethesuccessorfailureofthereform,andthespecificsofthereformofcorporateculture.

Toward a company with a high degree of openness and frankness

In July 2006, when we began to improve our business process, we also announced the preparation of a new vision by all employees of the Group. Early August saw the institution of the New Vision Promotion Headquarters, which I chaired. As a mechanism for reflecting the views of all employees while drafting the new vision, we initiated the “Tsukuru Kawaru (Create and Change) Project”.

To hear the views of personnel working closest to the customers, I myself and other officers visited our locations across the country in this project for frank discussion with employees. We also created many occasions and opportunities for participation by all employees and exchange of views including in the context of the Proposal Project. These interchange activities made me keenly aware of the importance of communication across layers and departmental borders.

It was the project members that created our corporate message, “For all the things you care about”, which is a simple expression of the spirit behind the MSIG Charter on Professional Conduct, the code of behavior for achievement of our Mission Statement. I think this excellent message has a close affinity to our top priority on quality and the customers’ viewpoint orientation, and am determined to promote its spread.

Joining hands with employees and agents

The MSIG Charter on Professional Conduct sets forth the responsibility we must discharge to seven categories of stakeholder, i.e., customers, shareholders, agents, business partners, employees, local & international communities, and the environment. While being one category of MSIG stakeholders, our employees are also the principals working to enhance corporate quality. Only if they do a good job, we can discharge our responsibility to the other six categories of stakeholder.

For the English term “human resources”, the Group uses Japanese characters literally meaning “human treasures” instead of the usual ones meaning “human material” to underscore its dedication to prizing each and every employee. To enable all employees to exercise their full potential, we are conditioning personnel arrangements in all aspects, including assessment, education, and welfare. I hope we can take even better care of our employees into the future.

I should add that more than 90% of our insurance policies are concluded through agents. This is why agents are precious partners of ours. With each of them, we have ties of mutual support in pursuit of mutual growth and prosperity. Because agents are also in the position of dealing directly with customers, we are going to put even more resources into training for them in the interest of enhanced quality. Here, too, we want to set in motion a spiral of quality, trust, and growth.

CSR-orientedmanagementinMSIG

WhatdoyouyourselfregardastheessenceofCSR-orientedmanagement?

Enhancement of corporate quality = CSR

Business should naturally become CSR-oriented if each and every employee looks at things from the other’s viewpoint and does his or her job with an understanding of the positions and situations of customers and other stakeholders. We consider it the social responsibility of our Group to enhance not only the quality of our insurance products and services but also that of our employees, agents, and other components of our overall corporate value. I am convinced that this will make us even more trusted by society as a whole.

ToshiakiEgashiraPresidentandCEO

Message from

the President

Domestic non-life insurance business

MitsuiSumitomoInsuranceCompany,Limited.

Net premiums written Consolidated Consolidated

(Yen in billions)

300

600

900

1,200

1,500

20062002

1,303.9

2003

1,379.1

2004

1,407.3

2005

1,464.1 1,492.8

Net income

(Yen in billions)

20

40

60

80

20062002

32.8

2003

77.7

2004

65.7

2005

71.660.7

Net loss ratio / Net expense ratio Non-Consolidated

(%)

50

55

60

65

2006(FY) (FY) (FY)2002

54.9

2003

55.0

2004

63.8

2005

59.9

63.1

30

35

40

33.8 32.231.2 30.9 30.8

0 0

Domesticnon-lifeinsurancebusiness

Overseasbusiness Financialservicesbusiness

Risk-relatedbusiness

Lifeinsurancebusiness

Overseas business

Life insurance business

MitsuiSumitomoKiramekiLifeInsuranceCompany,Limited.

MitsuiSumitomoMetLifeInsuranceCo.,Ltd.

Financial services business

SumitomoMitsuiAssetManagementCompany,Limited.

MITSUISUMITOMOINSURANCEVentureCapitalCompany,Limited.

Risk-related business

InterRiskResearchInstitute&Consulting,Inc.

MITSUISUMITOMOINSURANCECareNetworkCompany,Limited.

AmericanAppraisalJapanCo.,Ltd.

Consolidated Group

management

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Profile of MSIG

Corporatedata

Financialhighlights

Companyname : MitsuiSumitomoInsuranceCompany,Limited.

HeadOffice : 27-2,Shinkawa2-chome,Chuo-ku,Tokyo104-8252,Japan

Established : October21,1918

Paid-incapital : ¥139.6billion

Numberofemployees : 13,414

Numberofdomesticagents : 53,668

(asofMarch31,2007) Domesticandglobalnetwork

Domesticnetwork(asofJune27,2007) Globalnetwork(asofJune27,2007)

Salesnetwork

Divisions....................................................20

Salesdepartmentsandbranches.......133 Overseasrepresentativeoffices...281

Salessectionsandsub-branches.......710 Subsidiaries/Affiliates...................54

Claimservicesnetwork (includingtworeinsurancesubsidiaries)

Departments.............................................26

Claimservicecenters...........................277

Claimsspecialists.................roughly7,100

BusinessesofMSIG

Profile of MSIG

Overseasdepartmentsandbranches/Generalrepresentativeoffice..........5

Mission Statement

Charter on Professional Conduct

New Challenge 10

Corporate Message

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Basic perspectives

Mission Statement and Charter on Professional Conduct

Mission Statement

Through our insurance and financial services businesses, we commit ourselves to the following:• Bringing security and safety to people and businesses around the world and making a lasting

contribution to the enrichment of society• Providing the finest products and services and realizing customer satisfaction• Continuously improving our business, thereby meeting our shareholders’ expectations and

earning their trust

Charter on Professional Conduct (preamble)

We, at the Mitsui Sumitomo Insurance Group, aspire to be a company that enjoys the trust of all

members of society and inspires pride among its employees.

To this end, acting in the best interests of the insurance and financial services community, we:• Accept, as life’s mission, the provision of superior solutions to social concerns and risks;• Place top priority on fair, impartial, and ethical conduct; and• Constantly work to ensure adequate transparency through internal and external communication

and extensive disclosure of information.

The preamble noted above is followed by statements of the responsibility to be fulfilled for each of the seven categories of stakeholder (customers,

shareholders, agents, business partners, employees, local & international communities, and the environment). The Charter also stipulates the proper

aspirations for each and every employee under a section entitled “Our Conduct”.

At the core of all MSIG business activities are our Mission Statement clearly

setting forth our ultimate mission and our Charter on Professional Conduct, the

code of behavior for all Group employees in action toward this mission.

Corporate MessageWith all our hearts, if we truly care about every person and every little thing on earth, we can fill

our world with love.

Our Corporate Message, which is a simple expression of the spirit behind our Charter on Professional Conduct, is a manifestation of our renewed

resolve. It clearly proclaims to all external parties “For all the things you care about”.

Basic perspectives

Mission Statement

Charter on Professional Conduct Corporate Message

Basic group strategy

Quality improvement strategy

Group business strategy

Key actions for 5 major businesses

Staff Hatz-ratz and strengthening management platform

New Challenge 10

Throughqualityimprovementoriginatedfromthecustomers’viewpoint,trust,andgrowthtowards

CSR-orientedmanagement

FurtherQuality

Improvement

Growth

Trust

QualityStartingPoint

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New Challenge 10 is our medium-term management plan that runs for the four-year period from fiscal 2007 to fiscal

2010. Aimed at going back to the basics and being a company which adheres to the customers’ viewpoint with

corporate quality as the main source of competitiveness, it was prepared with the participation of all MSIG employees.

Basic perspectives

New Challenge 10, the Group medium-term management plan

Quality improvement strategy, “A step of quality improvement, a step for professionalism”

Wehavepositionedthefollowingthreeitemsasimportantelementsforenhancementofqualityinalltypesofbusiness,andaremakingeffortsrelatedtoeach.

Besidesdeepeningourorientationofabsorbingtheviewsofcustomersandsocietyatlargeandreflectingtheminourmanagement,wearegoingtoimproveandstrengthenschemestothisend.

Weareactivelyworkingforcontributiontolocalandinternationalcommunitiesaswellaspreservationandimprovementoftheglobalenvironment.

Reflect comments collected widely from stakeholders

Ouremployeesandagentswillgrowbylearningandthinkingforthemselves,andpursuingchallenginggoalswithconfidenceandprideasprofessionals.Weprizeteamworkrestingonopenandfrankcommunication.

Develop employees and foster agents

Tofurnishourcustomerswithhigh-qualityservices,wearevigorouslyconstructingabusinesssystemforconditioningandimprovementofourbusinessprocesses,andsureandproperexecutionofbusiness.

Improve business process and infrastructure

Basic group strategy

FirmlygroundedinourMissionStatementandCharteronProfessionalConduct,NewChallenge10portraysthetargetedshapeoftheGroupasof2010,strategyforattainingit,andthevaluestobecherishedbyallGroupemployees.

ByexecutingNewChallenge10,wehopetoevolveasoneoftheworld’stopinsuranceandfinancialgrouptakingcorporatequalityasthesourceofitscompetitivenessandconstantlyadvancing.

Positioning and structure of New Challenge 10

Ourstrategytakesenhancementofqualityfromthecustomers’viewpointasthestartingpointofallourbusinessactivities.WeaspiretoCSR-orientedmanagementbysettinginmotionanpositivegrowthcyclewherebythetrustweinstillincustomersleadsinturntothegrowthofourbusiness,andtheexpandedresourcesresultingfromthisgrowthareinvestedforafurtherenhancementofquality.Wearecommittedtoachievingthelevelofqualityrequiredformeetingtheneedsofcustomers—“Tozen(desirable)quality”,andcontinuallypursuingahigherlevelthatgreatlyexceedstheirexpectations—“Kando(outstanding)quality”,byassistingthegrowthofeachandeveryoneofouremployeesandagents.

Basic perspectives

Grow

th

Cust

omer

trus

t

Cust

omer

sat

isfa

ctio

n

Impr

ovem

ent o

f qua

lity

Staff Hatz-ratz

Administration/system innovation

Claimshandling

innovation

Salesinnovation

Productinnovation

Business process innovation

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Wewillmakecontinuousefforttostrengthenourmanagementplatform,whichwillhelpmakingqualityimprovementandgrowingfivemajorbusinesses.

Strengthening management platform

Ouremployeesaretheoneswhomustenhancecorporatequality,andweareactivelymakingarrangementsthatwillmotivatethemtoworktothebestoftheirability.

Staff Hatz-ratz (encouraging staff)

Key actions for 5 major businesses

Group business strategy

MSIGisdevelopingbusinessinthefivecorefieldsofdomesticnon-lifeinsurance,lifeinsurance,overseasbusiness,financialservices,andrisk-relatedbusiness.Ineachofthesefields,wearemakingapproachestoimprovementofqualityandpromotionofbusiness(byheighteninggrowthandprofitability),andmobilizing

ourGroup-widesynergyinoureffortstoprovidethemaximumvaluetoourcustomers.Wehopetomaintainawell-balancedbusinessportfolioandareaimingatacaliberaffordingprospectsfortheworld’shighestlevelsofprofitaswell.

Ineachbusiness,wearestrivingtoimprovequality,andstrengthengrowthandprofitability.

Creating ideal working conditions

Providing more challenging opportunities

• Conditioningofofficeenvironment• Improvementofbusinessprocesses• Constructionofmechanismstostimulatecommunication

• Provisionofadiversityofoptionsandopportunities• Dialoguebetweenofficersandemployees,and

reflectionofemployeeviewsinmanagement

Developing indispensable personnelDevelopingemployeeswhothinkandactontheirowninitiative,andconstantlytakeupthechallengeofloftygoals

Organizational structureConsiderationofneworganizationalandstaffingsystemsmatchingtherevisedbusinessprocesses

Steadyexecutionofmeasuresforreturntoshareholders,stabilizationofequity,andreductionofcross-shareholdingsaimedatobtainingfundsfornewbusinessinvestment

Tightening of corporate governance

Establishment of corporate brand

Tightening of compliance and improvement of risk

management

Capital policy

Risk-related businessWearealsogoingtodevelopbusinessinriskmanagementandrelatedareastorespondtothediverserisksfacedbycustomersbymeansofnon-insuranceservices.

WedevelopdiversebusinessrelatedtofinancingthroughtheCompanyandMSIGmembers,bolstercapabilitiesfordevelopingandsellingfinancialservices,andprovideoptimalsolutionstoourcustomers.

Financial service business

WeplantoestablishathreeregionalstructureconsistingofAsia,Europe,andtheAmericas,andtightenourgovernanceofbusiness.Atthesametime,wewillstrivetoexpandcorporatevaluebyfurthersolidifyingourdominanceintheASEANregion,strategicallydevelopingbusinessinthegrowthmarketsofChinaandIndia,whileestablishingreinsurancesubsidiaries,andinvestinginnewlyemergingcountriesofferinghighgrowth.

Overseas business

Wearegoingtopromoteourgroup’slifeinsurancebusinessthroughtwocompanies,KiramekiLifeInsuranceandMSIMetLife.Theformercompanyengagesincross-sellingastheircorebusiness,andthelatterisaprofessionalplayerinindividualannuitymarketexpandingitsbusinessmainlythroughover-the-countersales.

Life insurance business

Throughbusinessprocessinnovationatpointsofcontactwithcustomers(e.g.,productdevelopment,sales,andclaimshandling),weintendtoimprovequalityandofferinsuranceproductsandservicesthatareeasyforcustomerstounderstand.

Domestic non-life insurance business

Basic perspectives

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Special feature: Progress toward enhancement of corporate quality

Approaches to business improvement

The following sorts of problem occurred in connection with payment of claims and sale of insurance products.

There were some cases of improper refusal to make payments attached to whole life medical insurance and other insurance products offering compensation for illness.

The company failed to pay items for consolations, rental car expenses, and other supplementary coverage incidental to the basic coverage paid under policies for automobile insurance, coverage for vehicle and bodily injury liability, and fire insurance.

In some cases, improper procedures were taken for contracts (e.g., advance payment of premiums by agents on the customer’s behalf when selling insurance products and improper use of seals of the customer’s name).

Occurrence of problems

In June 2006, we were ordered to suspend certain business operations and received other administrative measures due to nonpayment of claims and other problems. Subsequently, a different problem related to errors involving insurance premiums came to light, but all suspensions that had been imposed on our business were lifted in February 2007. This section presents our approaches to date in line with our Business Improvement Plan.

We believe these problems arose because of insufficient systems in the following areas.

Proper payment of insurance claimsProduct development reflecting the voices of customers, employees, and agentsSolicitation administration system with top priority on protection of policyholdersCompliance system performing the function of internal controlCheck of the propriety of business operation (governance)

Causes

In the process of unearthing problems in sales of insurance products, we discovered that excessive premiums had been paid under some fire insurance policies. In response, we voluntarily made our own investigation of policies with a high possibility of premium miscalculations. As a result, we found that the Company had received excessive premiums under fire insurance policies due to premium calculations based on mistaken appraisals of building structures by employees and agents, failure to apply the proper discount rate to highly fireproof housing, and errors in setting insurance amounts (over-insurance).

Policies with errors (as of March 2007)

• Misappraisal of structures and failure to apply discounts: 7,738 cases

• Improper insurance amounts (over-insurance): 1,420 cases

We are steadily returning the premium overpayments to the customers involved in these cases.

Occurrence of problems

Errors involving premiums uncovered in our voluntary investigation

As we see it, the problems were caused by insufficient arrangements for solicitation administration system with top priority on protecting policyholders under circumstances including, inadequate sales-related education and training for employees and agents, and shortcomings in the system for internal checking, while insurance products become more complex.

Tasks Itemsofbusinessimprovement Measurestaken Pagereference

1Properpaymentofclaims

Checkforproperpaymentofinsuranceclaims

ThenewlyinstitutedtheClaimsHandlingExaminationDepartmentconstantlycheckstheproprietyofoperations. P12 ,17

TheClaimsPaymentExaminationCouncil,whichiscomposedmainlyofexternalexperts,makeschecksfromathird-partystandpoint.

P12 ,17

Preventionoffailuretopaysupplementarycoverageitems,etc.

Wearebeefinguptheschemeforcheckingbymeansofsystems. P12

WeexpandedthestaffoftheClaimsHandlingsectionandtightenededucation. P12 ,22

Properpaymentofclaimsunderwholelifemedicalinsuranceandotherinsuranceproductsofferingcompensationforillness

WeinstitutedtheLong-termMedicalServiceCenterandtheMedicalSupportOfficetoconsolidateoperationsforpaymentofwholelifemedicalinsurance.Wearealsocheckingallcasesinwhichadecisionwasmadeagainstpaymentofclaimsonthegroundsofpreexistingcondition.

P12

Forthrightconsultationandhandlingofcomplaintsregardingpaymentofclaims

WeinstitutedtheClaimsHandlingConsultingSection,whichhandlesinquiriesfromcustomersaboutclaimpayments,andtheClaimsPaymentObjectionOffice,whichconsistsofexternalattorneys.

P12,19

2Reviewandimprovementoftheproductdevelopmentsystem

Developmentofsimpleinsuranceproductsreflectingcustomers’voice

Weestablishedin-houserulesandrevisedtheproductdevelopmentsystem.1)ArrangementsforcollectingopinionsfromcustomersandotherpartiesinsideandoutsidetheCompany2)ClosercoordinationbetweentheProductDevelopmentsectionandotherconcernedsections3)CheckingbytheCorporateQualityControlDepartment

P17,P19–22

Wepreparedamanualforproductionofpamphlets,puttogetherafullerassortmentofdocumentsdescribingproducts,checkedrelateddocuments,andtookothermeasurestoconditionarrangementsforpropercontracting.

P22

Aftersellingproducts,weconductcustomersurveysandmonitoring. P19,21

3Reconstructionofthesolicitationadministrationsystemwithtoppriorityonprotectionofpolicyholders

Provisionofinsuranceproductsmeetingcustomers’needsatfairpremiums

IntheinterestoffullexplanationofImportantNoticeandsureconfirmationofcustomerinclinations,weconstructedasolicitationadministrationsystemandimprovedthebusinesssystem.

P11,P29–31

Webolsterededucationforemployeesandagents.1)Simultaneoustrainingforemployeesandagentstostrengthencompliance(formeasuresto

establishthecompliancesystem,see 4 below)2)Agentguidanceandtrainingforsureexecutionofthe“basicinsurancecycle”3)Nationwidepostingofstaffforagenteducation

P29–30

4Establishmentofthecompliancesystem

ReinforcementofthecapabilitiesoftheCompliancesection

WestrengthenedtheindependenceandauthorityoftheComplianceDepartment,andcentralizedtheexaminationandhandlingofimproprietiesthathaveorcouldoccurinsideoroutsideJapan.

P17–18

Increaseinthecomplianceconsciousnessofemployeesandagents

Werevisedorganizationalevaluationsystemforthesalessectionbyswitchingfromstandardsemphasizingsalestoothersemphasizingenhancementofcorporatequalityandcomplianceefforts.

P18

Weinstatedanemployeeevaluationsystemthatemphasizescomplianceandarestrictlydiscipliningemployeesandagentsforviolations.

P18

5Improvementandreinforcementofgovernance

Establishmentandreinforcementofsystemsforcheckingandconfirmingproperbusinessoperations

OurnewlyinstitutedCorporateQualityControlDepartmentadoptedtheviewsofexternalexpertinstitutionsandotherpartiesincheckingthestateofallsortsofbusinessoperationsandmakingproposalsforimprovement.

P17,P21–22

WebolsteredoursystemforhandlingcomplaintsbynewlyinstitutingtheCustomerServiceDepartmentandClaimsHandlingConsultingSection.

P19–20

WestrengthenedtheindependenceoftheInternalAuditsectionandexpandeditsstaff. P17–18

Checking,fromanexternalperspective,toseewhethertheprocessforcheckingbusinessoperationsisbeingproperlyconducted

ThenewlyinstitutedAuditCommitteeandCouncilonPromotionofCustomers’Viewpoint,whicharecomposedmainlyofpersonnelfromoutsidetheCompany,makeproposalstotheBoardofDirectors.

P15,P17–18

Reinforcementofmanagementsystemofoverseaslocations

WetightenedmanagementandsupervisionbytheHeadOfficeandconstructedasystemforcheckingandmakingimprovements.

P18

Firmgraspoffront-lineissuesandviewsbythemanagementteam

Welaunchedthe“Tsukuru Kawaru(CreateandChange)Project”forparticipationbyallemployeesacrossorganizationalandlayerboundaries,andmadeimprovementsinthebusinessprocessbasedonproposalsfromthefrontlines.

P13–14

1

2

3

4

5

Causes

In April 2007, we launched the Shikkari Kakunin (thorough confirmation) campaign for checking and sure confirmation of policy contents. When errors are found, we are taking procedures to correct the contents or return excess premiums, as appropriate (see page 11).

Response to customers

Problems cited in administrative measures

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Special feature

The table below presents the approaches we have taken thus far under our Business Improvement Plan.

Business improvement items and approaches* Activities from July 2006–July 2007

Tasks Itemsofbusinessimprovement Measurestaken Pagereference

1Properpaymentofclaims

Checkforproperpaymentofinsuranceclaims

ThenewlyinstitutedtheClaimsHandlingExaminationDepartmentconstantlycheckstheproprietyofoperations. P12 ,17

TheClaimsPaymentExaminationCouncil,whichiscomposedmainlyofexternalexperts,makeschecksfromathird-partystandpoint.

P12 ,17

Preventionoffailuretopaysupplementarycoverageitems,etc.

Wearebeefinguptheschemeforcheckingbymeansofsystems. P12

WeexpandedthestaffoftheClaimsHandlingsectionandtightenededucation. P12 ,22

Properpaymentofclaimsunderwholelifemedicalinsuranceandotherinsuranceproductsofferingcompensationforillness

WeinstitutedtheLong-termMedicalServiceCenterandtheMedicalSupportOfficetoconsolidateoperationsforpaymentofwholelifemedicalinsurance.Wearealsocheckingallcasesinwhichadecisionwasmadeagainstpaymentofclaimsonthegroundsofpreexistingcondition.

P12

Forthrightconsultationandhandlingofcomplaintsregardingpaymentofclaims

WeinstitutedtheClaimsHandlingConsultingSection,whichhandlesinquiriesfromcustomersaboutclaimpayments,andtheClaimsPaymentObjectionOffice,whichconsistsofexternalattorneys.

P12,19

2Reviewandimprovementoftheproductdevelopmentsystem

Developmentofsimpleinsuranceproductsreflectingcustomers’voice

Weestablishedin-houserulesandrevisedtheproductdevelopmentsystem.1)ArrangementsforcollectingopinionsfromcustomersandotherpartiesinsideandoutsidetheCompany2)ClosercoordinationbetweentheProductDevelopmentsectionandotherconcernedsections3)CheckingbytheCorporateQualityControlDepartment

P17,P19–22

Wepreparedamanualforproductionofpamphlets,puttogetherafullerassortmentofdocumentsdescribingproducts,checkedrelateddocuments,andtookothermeasurestoconditionarrangementsforpropercontracting.

P22

Aftersellingproducts,weconductcustomersurveysandmonitoring. P19,21

3Reconstructionofthesolicitationadministrationsystemwithtoppriorityonprotectionofpolicyholders

Provisionofinsuranceproductsmeetingcustomers’needsatfairpremiums

IntheinterestoffullexplanationofImportantNoticeandsureconfirmationofcustomerinclinations,weconstructedasolicitationadministrationsystemandimprovedthebusinesssystem.

P11,P29–31

Webolsterededucationforemployeesandagents.1)Simultaneoustrainingforemployeesandagentstostrengthencompliance(formeasuresto

establishthecompliancesystem,see 4 below)2)Agentguidanceandtrainingforsureexecutionofthe“basicinsurancecycle”3)Nationwidepostingofstaffforagenteducation

P29–30

4Establishmentofthecompliancesystem

ReinforcementofthecapabilitiesoftheCompliancesection

WestrengthenedtheindependenceandauthorityoftheComplianceDepartment,andcentralizedtheexaminationandhandlingofimproprietiesthathaveorcouldoccurinsideoroutsideJapan.

P17–18

Increaseinthecomplianceconsciousnessofemployeesandagents

Werevisedorganizationalevaluationsystemforthesalessectionbyswitchingfromstandardsemphasizingsalestoothersemphasizingenhancementofcorporatequalityandcomplianceefforts.

P18

Weinstatedanemployeeevaluationsystemthatemphasizescomplianceandarestrictlydiscipliningemployeesandagentsforviolations.

P18

5Improvementandreinforcementofgovernance

Establishmentandreinforcementofsystemsforcheckingandconfirmingproperbusinessoperations

OurnewlyinstitutedCorporateQualityControlDepartmentadoptedtheviewsofexternalexpertinstitutionsandotherpartiesincheckingthestateofallsortsofbusinessoperationsandmakingproposalsforimprovement.

P17,P21–22

WebolsteredoursystemforhandlingcomplaintsbynewlyinstitutingtheCustomerServiceDepartmentandClaimsHandlingConsultingSection.

P19–20

WestrengthenedtheindependenceoftheInternalAuditsectionandexpandeditsstaff. P17–18

Checking,fromanexternalperspective,toseewhethertheprocessforcheckingbusinessoperationsisbeingproperlyconducted

ThenewlyinstitutedAuditCommitteeandCouncilonPromotionofCustomers’Viewpoint,whicharecomposedmainlyofpersonnelfromoutsidetheCompany,makeproposalstotheBoardofDirectors.

P15,P17–18

Reinforcementofmanagementsystemofoverseaslocations

WetightenedmanagementandsupervisionbytheHeadOfficeandconstructedasystemforcheckingandmakingimprovements.

P18

Firmgraspoffront-lineissuesandviewsbythemanagementteam

Welaunchedthe“Tsukuru Kawaru(CreateandChange)Project”forparticipationbyallemployeesacrossorganizationalandlayerboundaries,andmadeimprovementsinthebusinessprocessbasedonproposalsfromthefrontlines.

P13–14

*Formoredetailsonthestatusofapproachestobusinessimprovement,pleaseseethesectionon“PressRelease”onourwebsite.ht tp: //www.ms-ins.com/english/news/index.html

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Special feature: Progress toward enhancement of corporate quality

Sure attainment of “Tozen quality”

In our interpretation, “Tozen quality” at the time of sales, which constitutes the initial contact with the customer, lies in polite explanation of the policy contents and sure confirmation that they are understood. To this end, we commenced our Shikkari Kakunin campaign together with agents in April 2007, and are confirming and checking the contents of all insurance policies for individuals.

While steadily implementing our Business Improvement Plan, we have mounted a company wide effort to enhance quality from the customers’ viewpoint. As a first step, we have accorded top priority to sure provision of “Tozen (desirable) quality” when selling insurance products and handling claims as key occasions of contact with the customer.

Shikkari Kakunin (thorough confirmation) campaign

The actual work of explaining policies to customers and confirming contents is done by agents. To see that the campaign activities are executed surely and smoothly, we conducted training for all agents handling the subject insurance (see page 30). We also installed call centers, especially to handle inquiries from customers.

In addition, we are preparing documents providing explanations customers can readily understand, and are taking steps to make the products themselves simpler (see page 21–22).

Toward sure execution of the campaign activities

On the occasion of contracting, we make a confirmation, together with the customer, as to whether the policy is the best for the customer’s wants and whether the premiums are appropriate.

More specifically, we perform the following two procedures.1. We indicate the policy section explaining Important Notice

and give simple descriptions of the major cases in which claims are not paid and other items to bear in mind when contracting.

2. We have customers fill out policy confirmation sheets to see that the policy contents are in accordance with their wishes and that premium levels are proper. Response in the event of policy errors

• We correct the policy conditions. • If the premiums are too high, we return the excess payments.

Types of insurance • Automobile insurance • Fire insurance • Casualty, medical, and long-term care insurance • Personal liability insurance

Specific approaches

WhyitisnecessarytoconfirmpolicyconditionsInsurance premiums vary with diverse conditions. In the case of fire insurance, for example, they vary depending on the following factors.• Location of the building• Structure of the building (materials and construction methods for members such as pillars, walls, and roofs)

• Use of the building (residence only, store, office, etc.)Insurance premiums tend to be relatively high for

buildings that are in typhoon-prone areas or make extensive use of fire (restaurants, etc.). Conversely, they tend to be lower for housing that has outer walls made of fireproof materials, even if the basic structure is wooden. In other words, to offer policies with proper premiums, we must confirm these various conditions together with the customer.

“Tozen (desirable) quality” and “Kando (outstanding) quality”

Inpromotingapproachestoenhancingquality,weviewedqualityasconsistingoftwostages,“Tozen”and“Kando”.

Wedefinedtheformerasthelevelofqualitythatcustomersexpectingoodsandservicesasamatterofcourse,andthe

latterasalevelgoingfarbeyondwhattheyexpect.

“Tozenquality”insalesofinsuranceproducts

Conditioning of schemes and systems

Report of cases from customers

Filing of claims by customers

Payment to customers

• Increase in claims handling staff• Instatement of a new system for receiving claims

• Accurate apprehension of the details of the accident• Apprehension of the particulars of the customer policy conditions, without omission

• Apprehension of the coverage to be paid, without default• Plain explanation to customers

• Prompt and proper payment of claims

• Construction of the internal system to prevent payment defaults• Revision of documents

• Sharing of know-how from good precedents• Making and practice of rules governing basic items in dealing with customers• Implementation of customer surveys

Education and consciousness renewal for employees and agents

• Monitoring and checking by organization (internal and external) independent of the Claims Handling section• Presentation of detailed breakdowns and itemizations

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In fiscal 2006, we revised the scheme of claim payment based on the Business Improvement Plan (see page 9–10).

In the first place, we defined “Tozen quality” in claim payment as follows.• Sure confirmation of policy contents and accident situation• Determination of coverage subject to payment, without default• Plain explanation of the claim payments to the customer• Prompt and proper payment

To deliver this “Tozen quality”, we are taking diverse approaches in the aspects of both conditioning schemes and systems, and reforming consciousness of employees and agents.

For proper payment of claims

Conditioning of schemes and systems

Education and consciousness renewal for employees and agents

Fuller arrangements for checking system Wearesteadilyequippingclaimpaymentsystemswithadditional

functionstopreventnonpayment.InOctober2007,wewillplaceintooperationasystemenablingsuredeterminationofthecoveragetobepaidfrominformationontheaccidentsituationandthepolicy.

Increased staffing and education in the Claims Handling section Infiscal2006,weincreasedthenumberofemployeesinthe

sectionbymorethan400andinstructedeachtoprovidecustomerswithunderstandableexplanations.Wealsoincreasedthenumberassignedexclusivelytoeducation,establishedcoursesregardingmedicalknowledge,andotherwiseaugmentedprovisionsforeducatingthepeopleinchargeofhandlingclaims.

Monitoring and checking of the propriety of claim payments ThenewlyinstitutedtheClaimsHandlingExaminationDepartment

independentoftheClaimsHandlingsectionmakesmonthlychecksfornonpaymentandothererrors,andsendspersonneltosome250businesssitesacrossthecountrytoexamactivitiesatthem.

Institution of a unit especially for payment of illness compensation products •TheLong-termMedicalServiceCenterisinchargeofallclaim

paymentsforwholelifemedicalinsurance. •Withthecooperationofconsultantphysicians,ourMedical

SupportOfficecheckstoseethatproperdecisionshavebeenmadeinallcasesofjudgmentsthatconditionspreexistedthestartofinsuranceresponsibility.

Examination by the Claims Payment Examination Council Withamembershipincludingattorneysandphysicians,our

newlyinstitutedClaimsPaymentExaminationCouncilexamstheproprietyofdecisionsnottopayclaimsinmajorcases,inadvanceofafinaldecision.

Sound handling of inquiries and complaints about claim payments

•StaffassignedexclusivelytoourClaimsHandlingConsultingSectionhandlecustomerinquiriesandcomplaintsaboutclaimpayments.

•Wealsoinstatedprovisionsenablingcustomerstofileappealswiththirdparties(outsideattorneys)incasesofdecisionsagainstpaymentofmoneyinresponsetoclaims.

Special feature

Good Job campaign •Wehaveestablishedandarepromotingbasicrulesofconductin

dealingwithcustomerssothatallpersonnelprovideuniformservices. •Forprovisionofeasy-to-understandinformationandexplanations

tocustomers,wehaveinvitedoutsideinstructorstoleadongoingseminarsondealingswithcustomersatallofourbusinesssitesnationwide.Wearealsopreparingglossariesofterminologytoassistexplanationsthatareeasierforcustomerstounderstand.

•Weareworkingforthesharingofgoodprecedentcasesinwhichcustomerswerefullysatisfiedwithourclaimshandlingbyallemployeesandagents,inordertobuildupourstoreofknow-howandheightenourservicelevel.

Implementation of customer surveys on claims handling •Whenpayingclaimsandatothertimes,weconductcustomer

surveysandreflecttheirviewsinoureffortstoimprovethebusinessprocessandenhancequality.

•FavorablecommentsfromthesurveysaresharedwithintheCompanyandhelptoheightenemployeemoraleandbetterfutureapproaches.

“Tozenquality”atthetimeofclaimpayment

Reformintheaspectsofbothschemesandconsciousness

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Special feature: Progress toward enhancement of corporate quality

Breeding a new corporate culture with the participation of all employees

In the “Tsukuru Kawaru Project”, we collected the views and suggestions of front-line employees, mainly through management meetings for exchange of opinion between these employees, and Management and Workplace Meetings held at each workplace. The more than 1,500 proposals submitted by many employees were each discussed in the Project Secretariat and reflected in New Challenge 10.

To prepare New Challenge 10 with the participation of all employees, the Group employees and officers launched the “Tsukuru Kawaru (Create and Change) Project” in the summer of 2006. The Project has also led to gradual change in our corporate culture.

Tsukuru Kawaru Project

In each workplace, discussions were held on areas requiring reform and approaches to be taken in the workplace, based on feedback from customers and agents.

Workplace Meetings

The Chairman, President, and executive officers in charge of the Head Office held free discussions with employees at 120 business sites nationwide.

Management Meetings

Examples of suggestions from employees

• “We should formulate a corporate message that is a simpler expression of the Mission Statement and the Charter on Professional Conduct” (see page 6).

• “Insurance terminology should be put in terms that are easier for customers to understand” (see page 21).

• “The company ought to construct a scheme for reflection of the views of customers and agents in the process of product development” (see page 21).

• “We should give call centers more capabilities so they can provide fuller services to customers” (see page 22).

Bringing employee ideas into realityComposed of 19 employee representatives from across the country as well as other members, the Project Secretariat examined the proposals received through the Project for a period of five months.

We held repeated discussions in subcommittee meetings under each theme to ascertain the problems and ideas behind each proposal, and find ways to translate them into specific measures. The conclusions were compiled into a final proposal manifesting our resolve to make a new start, under the watchwords “Make changes to our corporate culture and structure, and change ourselves”.

“For all the things you care about”, the Corporate Message succinctly expressing the spirit behind our Charter on Professional Conduct, was also born from the Project discussions.

The contents of the final proposal underwent discussion by the executive officers, and many of the suggestions in it were incorporated into New Challenge 10.

Proposal Project

Serious discussion for thinking and

acting on our own initiative

We set up the Proposal Project corner on the corporate intranet. Through it, employees displayed the results of discussions at workplace meetings and made suggestions to each other.

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Change in the corporate culture

Effects of the Project born on the front lines —Comments by personnel working in claims handling and sales—

We asked personnel in Sales and Claims Handling section, which are in firsthand contact with customers and agents, for their thoughts on the changes at MSI.

Special feature

The Project occasioned the start of various approaches by each workplace to resolve problems, and bred a corporate culture keyed by characterized by viewing things from customers’ viewpoint, spontaneous thought and action, and communication and teamwork.

To see that this culture takes firm root and promote the spread of New Challenge 10, we are conducting the “Tsukuru Kawaru activities” again in fiscal 2007.

CorporateQualityMonth

We must never forget that our failure to act from the customers’ viewpoint led to the administrative measure against us and loss of customer confidence in us. To this end, and to firmly anchor the culture of constant striving for enhancement of quality by all employees, we decided to designate each July as Corporate Quality Month (it was in July 2006 that we were compelled by the

authorities to suspend operations for two weeks).In 2007, we conducted a variety of activities that reaffirm the

importance of continually taking action to recover credibility. These included Workplace Meetings for discussion on New Challenge 10, study meetings led by outside teachers on the subject of developing agents and personnel who impress and satisfy the customer, and movies on prevention of traffic accidents.

The Project is the driving force of higher motivationThe in-house atmosphere feels more open, and the Head Office, closer. The Project strengthened motivations to practice the customers’ viewpoint and helped to change things in workplaces. The rapid progress in coordination between the Sales and Claims Handling section was a big plus. I was particularly happy to hear a sales person say that claims handling were now completely integrated with sales.

I hope the Company will continue with its efforts to absorb the views in the field, because that is where we may expect the ideas needed for reconstruction of the business to be.

Hiroaki OnishiDeputy ManagerOmiya Automobile Service Center. 1stSaitama Claims Department

Planning and execution of our own trainings for agents by sales branchesIn fiscal 2006, we held an extended number of more than 40 training programs independently under the banner of developing professional agents, which we regard as the mission of Sales section. Although we felt the need to do so formerly as well, we were always too busy with the daily routine. The business suspension prompted us to be more aware of the customers we encounter through agents. Now, our Sales Branch is making a concerted effort to instruct agents. For example, if we think documents are hard to understand, we currently make an improvement proposal to the Head Office. Instead of just waiting, I intend to actively convey views from the sales site to management.

Sachie ShikadaLeader, operational staffSakata Sub-Branch, Yamagata Branch

An atmosphere for airing negative as well as positive opinions Formerly, information was given to employees as a part of trainings or on a bulletin board. But now, we are also learning about the Company’s thinking and perspective, and this is heightening our awareness of what each of us must do. There are also more opportunities for exchange of opinion between operational staff and career-track staff. The atmosphere in the Company is conducive to speaking out. In short, the Project set in motion a renewal of employee mindsets.

What is now lacking is the margin needed to absorb the feelings of customers. I hope we will have a system to streamline work that has been increased due to proper provision of services as soon as possible.

Norie MiyajimaChief, operational staffShizuoka Automobile Service Center. 1stShizuoka Claims Department

Tetsu YamazakiDeputy ManagerSaga Sub-Branch, Saga Branch

I felt the change when we had the Management Meeting together with the President. The fact that we were given the chance to freely voice our views regardless of position and, moreover, get a reply from the President made me realize the management was really listening to opinions in the sales site. This led to our own “Hachidori (hummingbird) Project”, which is aimed at deepening awareness of the need for thinking and acting by ourselves and doing what we can. I want to create an atmosphere that will encourage our employees and agents as well to have the courage to take action on good ideas instead of shrinking from the prospect, and to think and act by themselves.

Change of mind

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From the stakeholder perspective

Insurance is not a matter of unilateral provision of goods and services by the insurance company. It must be constructed together with the policyholder.

As I see it, non-life insurance companies came in for administrative measures last year mainly because, while claiming to put the customer first, their management actually were more concerned about the authorities and competitors, and neglected their customers as a result.

I hope the companies will take these measures as a good opportunity to reconsider the essence of insurance and its worth in society, with attention to the keener awareness of insurance among consumers.

I would give very high marks to MSI for its steps after the measure. It is taking the complaints and opinions from customers and society at large to heart, and shows a determination to do what it can and steadily makes improvements. A case in point is its institution of the Council on Promotion of Customers’ Viewpoint, in which outsiders like myself examine business operations from the standpoint of consumers and offer advice for improvement to the Board

A wide-ranging reflection of the views of stakeholders is one of the pillars of our strategy for enhancement of quality in New Challenge 10. In this spirit, we are making proactive efforts to obtain feedback from our customers and society as a whole, and to reflect it in our policies and business. This section presents the views of two experts on our approaches since the summer of 2006.

I have high hopes for the provision, together with agents, of insurance services that bring the Company closer to consumers.

Mr. Kazuyoshi HottaProfessor, Faculty of Business and Commerce, Keio UniversityChairman of the Council on Promotion of Customers’ Viewpoint

of Directors. The progress reports we are given on each such proposal also evidence MSI’s efforts to get closer to customers.

The Council meetings strongly impressed me with the need to take specific and coordinated initiatives adapted to the various workplaces and workflows in response to all kinds of complaints, both major and minor. Although some initiatives have been implemented for improvement and a fair amount of progress has been made in respect of consciousness renewal and systemic conditioning, I believe that measures have not yet taken root at some workplaces and that, in many areas, qualitative improvements have not reached a level that is apparent to customers. Improvement of the quality of business activities at agents, which play the critical role of dealing directly with customers, undoubtedly is a key factor in this connection as well.

I hope that MSI fully realizes the immensity of the loss of trust, a huge blow which cannot be adequately expressed in numbers, and goes solidly ahead with its endeavors to enhance quality. As it was the first to embark on reform, I am also counting on MSI to function as a reform pioneer showing the way for others in the industry.

Special feature: Progress toward enhancement of corporate quality

HoldingoftalkswithcustomersVarious business sites are taking action of their own for direct feedback from customers. Our Tohoku Division and Kanazawa Branch invited customers to their offices for talks with them. At these sessions, they described our efforts to enhance quality and obtained customer comments and requests concerning our products and services. Besides words of reprimand and encouragement, the customers offered specific suggestions, such as adopting perspectives on quality control from other industries.

TalkswithcustomersattheTohokuDivision

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Special feature

In June 2006, I made the following comment in a survey report to investors concerning MSI: “In spite of negative effects over the short term (due to the administrative measure), the Company should take this as a golden opportunity to build a management system that makes a clean break with the past while promoting the conversion to financial systems and frameworks oriented to the new age”. I also noted that the subjects of the measure were on the surface, and expressed my hopes that management would get a firm grasp of the factors under the surface at the root of the problem, and take sure action on them.

With the progress of deregulation, the management environment surrounding non-life insurance companies has undergone a landmark shift, from one requiring awareness of watchdog agencies and rivals to one in which genuine protection of consumers is both a vital management priority and the source of competitiveness. Today, when standards have not yet been established in many respects in the wake of deregulation, a primary requisite for sure execution of management attuned to the coming times is the solid reconstruction of the fundamental

The real test of the reform still lies ahead. MSI needs unswerving management while fulfilling its accountability obligations.

Mr. Ryuji KakimotoSecurities AnalystDirector, Equity Research Department, Credit Suisse Securities (Japan) LimitedCertified Member of the Security Analysts Association of Japan

core and reform of the corporate culture.This kind of reform, however, is not going to change

everything in the space of a year. In my opinion, the full fruits are going to appear only after continued implementation of effective initiatives for five or ten years.

This is exactly why the management must make unflagging efforts to convey to investors, and particularly those inclined to make mid-and-long term investments, the Company’s perception of the issues, mid-and-long term vision and strategy, and ambitions, all in their own words, in order to persuade them of its merits and win their understanding and support. MSI should make a stronger pitch to us on the investor side about its resolve, specific action it is taking, and how it is going to change.

From now on, corporate management is going to find it increasingly important to engage in smooth communication with the whole spectrum of stakeholders. Whether dealing with customers or investors, it will always be essential for companies to know the other parties, stand in their shoes, and get a firm grasp of their expectations and intentions.

PublicationoftheCSRReportleafletWe prepared a 12-page leaflet edition of the CSR Report to describe our efforts to improve our business in response to the views of various stakeholders. In the interest of a wider readership, the text is in the format of answers to questions and comments we actually received, and describes our approaches in plain and simple language.

To obtain a copy, please contact our CSR Section (see “Inquiries” on page 1). *Japanese only

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We are working to increase levels of transparency and soundness in our management, in order to be an insurance and financial group that is trusted and highly rated by all stakeholders.

MSI management

Management system

The Company’s corporate governance framework

Managem

ent systemM

SI managem

ent

Appointment and supervision

Management CommitteeChairman,President,VicePresidentExecutiveOfficers,SeniorExecutiveOfficers,ManagingExecutiveOfficers

Exec

utio

n of

ope

ratio

ns

Repo

rts

Aud

its

General Meeting of Shareholders

Appointment

Board of Corporate Auditors

CorporateAuditors:5

(Includingthreeoutsidecorporateauditors)

Acc

ount

ing

Aud

itor

Task-specific Committee Meetings•CSRCommitteeMeeting

•BrandCommitteeMeeting

•RiskManagementCommitteeMeeting

•DisclosureCommitteeMeeting,etc.

Council on Group’s Business Strategy

(IncludingGroupcompany’sofficers)

Council on Promotion of

Customers’ Viewpoint

(Includingoutsidemembers)

AppointmentReports AppointmentReports AppointmentProposals

Internal Audit Department(Supervisory Section)

InternalAuditDivision

Aud

its

Repo

rts

Appointment Appointment

Repo

rts

Aud

its

Corporate Quality Control DepartmentThe Department checks the suitability of the business operating system as a whole and prepares measures for improvement, also incorporating the opinions of outside experts. It makes reports to the Audit Committee on the results of its checking (see page 21).

Customer Service DepartmentThe Department collects complaints and other feedback from customers, manages and analyzes them in an integrated manner, and drafts measures to improve operations (see page 19–20).

Claims Handling Examination Department (Claims Payment Examination Council)The Department monitors and checks the appropriateness of the handling of claims. The Council examines the suitability of decisions against payment of claims (see page 12).

Compliance DepartmentThe Department prepares and promotes measures and policies related to compliance with laws and regulations among employees and agents. It also centrally manages the examination and processing of actual or potential cases of misconducts inside and outside Japan (see page 18).

Internal Audit Department (Supervisory Section)The Department performs internal audits (see page 18). The Office examines the audit results.

Audit CommitteeBased on reports from the Audit Department, Corporate Quality Control Department, and Compliance Department, the Committee members, who consist mainly of outside directors, check the suitability of overall business operations and make reports to the Board of Directors (see page 18).

Organizational units that were newly instituted or revised in FY2006, to make management more transparent and sound

Board of DirectorsDirectors:13

Includingfouroutsidedirectors

Man

agem

ent d

ecis

ion

mak

ing

and

supe

rvis

ion

Nominating Committee

Remuneration Committee

Audit Committee

Executive Officers: 35(Includingofficerswhoarealsodirectors)

Domestic departments and branches

Overseas departments and branches

Head Office departments

Council on Promotion of Customers’ ViewpointThe Council analyzes the customer views collected at the Customer Service Department, and submits proposals to the Board of Directors on policies for customer protection and increased convenience for customers (see page 15, 18, and 19).

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In the interest of both prompt decision-making and proper monitoring, we instated the system of executive officers and appoint outside directors. Through this system, we made a clear division of roles between the directors (or Board of Directors), who make decisions on and supervise important management matters for the Group as a whole, and executive officers, who are responsible for executing the business, while strengthening the capabilities of both.

Corporate governance framework

In August 2006, when we instituted the Audit Committee, which is an internal committee of the Board of Directors and has a majority of outside directors, we also decided to have outside directors make up the majority of the membership of the preexisting Nominating Committee and Remuneration Committee. In June 2007, we increased the number of outside corporate directors to four. Besides bolstering the monitoring and auditing capabilities of management, these steps heightened the transparency of management and improved governance through active disclosure of information and other items.

In October 2006, we established the Council on Promotion of Customers’ Viewpoint, which includes outside members, as an advisory body to the Board of Directors. The Council was convened three times in fiscal 2006 and made proposals to the Board on various measures for protection of customers and improvement of their convenience.

Checkfromoutsiders’perspective

We strengthened the system for performance of internal auditing with a high quality. Specifically, besides greatly increasing the number of auditors in the Internal Audit Division, we instituted the Supervisory Section in the department to examine audit results. For performance, we reviewed the internal audit manual and expanded the scope of auditing. The review had the participation of outside consultants who checked items from a third-party perspective.

For overseas business sites, we not only reinforced audits by our Head-Office Internal Audit Division, but also strengthened Head-Office monitoring by instating a rule for report to the Head Office (including complaints) and the holding of hearings by the Head Office.

Strengtheningoftheinternalauditsystem

To promote balanced CSR measures and raise the level of activities, we established the CSR Committee, which is chaired by the Chairman and has a membership of concerned officers and managers of Head-Office departments and are working to have these activities take root.

We instituted the CSR Section within the Corporate Planning Department to serve as a dedicated CSR unit. In addition to its full-time chief and personnel, the Section has members who also work in other departments (i.e., Customer Service, Human Resources, General Affairs, Corporate Communications, and Compliance) and assist the planning and execution of interdepartmental approaches.

CSR promotion system

We are also working to enhance quality on the Group level while actively publicizing our efforts to build up the corporate brand. In June 2007, we instituted the Brand Committee Meeting particularly for studies of communication, with parties outside the Company.

In fiscal 2006, we promoted in-house communication through the Workplace Meetings and Management Meetings held as part of the “Tsukuru Kawaru (Create and Change) Project” organized for the purpose of formulating New Challenge 10 (see page 13). In fiscal 2007, we are going to explore issues involved in the promotion of New Challenge 10 and study solutions for them in the context of a similar framework.

We prepared our Compliance Manual based on the MSIG Charter on Professional Conduct and have given all employees instructions in related matters, including explanation of laws and regulations and acts in violation of laws and regulations, and procedure for reporting upon discovery of acts in violation of laws and regulations.

Every fiscal year, we prepare the Compliance Program, which is a practical company wide plan regarding compliance promotion system, education and training, and other agenda.

Promotion of compliance

We established the Compliance Department for centralized control of matters of legal compliance inclusive of overseas sites, and made arrangements for swift and sure decision and execution of measures. Similarly, we appointed regional compliance managers at major business sites across the country. It is the role of these managers to tighten compliance with laws and regulations in their respective blocks and give instructions to the general managers of departments and branches as necessary regarding response to violations and measures to prevent recurrence.

The Audit Committee checks the suitability of operations by the Compliance Department and reports the results to the Board of Directors.

Promotionalsystem

Our Sales section and Claims Handling section make their own checks to prevent and correct legal violations and procedural errors. The Compliance Department monitors the findings of similar voluntary checks and the status of improvement by sites nationwide, and provides guidance for further improvement.

We furnish compliance training for all agents and employees to instill an awareness to fully discharge responsibilities to customers. At the same time, to motivate solid efforts on the compliance front, we raised the points for them in the context of the performance assessments for units and individual employee, and switched to standards placing more emphasis on compliance. Furthermore, we took strict action against employees and agents who violated laws and regulations, and otherwise reinforced restraints for legal transgressions.

Mainapproaches

Managem

ent systemM

SI managem

ent

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We place top priority on provision of products and services whose value is recognized by customers as a matter of course. As a first step, we are making sure to get the views of customers and all other stakeholders, and to accurately reflect each and every one in our business.

Responsibility to customers

As a company trusted by society

In addition to the Customer Desk, which accepts inquiries and consultation requests from customers, we established the Claims Handling Consulting Section for consultation concerning payment of claims in September 2006. The Section handles about 260,000 cases of consultation and complaint of all sorts, and reports customer feedback quickly and accurately to the management and concerned departments.

In addition, we conduct questionnaire surveys with customers on the occasion of product sales and claims handling to ascertain whether business was properly executed.

We consider those customer views expressing dissatisfaction to be complaints, and have made it a rule for employees receiving them to register them in a database on our intranet. We are actively collecting information on complaints because we consider them vital information for earning customer trust and further enhancing quality. Our chief objective is by no means merely to reduce or eradicate them.

Newly instituted in September 2006, our Customer Service Department centrally manages and analyzes customer feedback collected through telephones or surveys, identifies issues, and makes corresponding proposals to concerned departments.

Held once every two months, the Council serves as a stakeholder meeting with outside experts to obtain views from the customers’ viewpoint. Its membership includes three outside experts in the fields of consumer problems and insurance, and the meetings are based on complaints and other customer feedback compiled by the Customer Service Department. It confers on measures to improve levels of protection and convenience for customers, and submits proposals to the Board of Directors.

As a company trusted by society

Responsibility to customers

Constructionofadatabaseforcomplaints

ProposalofimprovementsbytheCustomerServiceDepartment

RegularholdingoftheCouncilonPromotionofCustomers’Viewpoint

Systemformakingthemostofcustomerfeedback

ClaimsHandlingConsultingSection

CustomerDesk

Agents

Salessectionsandsub-branches,Claims

handlingservicecenters

Offices for absorbing customer feedback

(Complaints section)

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Centralized collection, management, and analysis of customer feedback

Proposalsfromemployees

Complaintdatabase

Customersurvey(enclosewiththepolicy)

Customer Service Department

MSIGmembers

Cust

omer

feed

back

To make the most of customer feedback

Systemforabsorbingtheviewsofcustomers

0

5,000

10,000

15,000

20,000

25,000

05 06

9,592

22,037

Complaintanalysis(overall)

Contract/Sales activities18.6%

Maintenance and safekeeping of contracts, and collection of premiums24.9%

Claims handling34.8%

Management of customers’ personal information1.0%

Other20.7%

(FY)

(Cases)

�0

From the Customer Service Department

Socustomerswillsaywe’vereallychanged

In June 2007, we revised the MSIG Basic Policy on Complaint Response to bolster our system for response to complaints. The revision was announced to all parties inside and outside the Company by the President. In addition, we formulated a new set of Basic Rules for the Complaint Response Management System, which stipulates detailed matters.

The new basic policy clearly states that it applies not just to domestic non-life insurance but to all of the five major businesses in the Group, and is grounded in the Mission Statement, Charter on Professional Conduct, and New Challenge 10. It also stipulates the institution of a chief executive for complaint response (i.e., the President) and a position responsible for management of complaint response (i.e., the executive officer in charge of the Customer Service Department), and proper performance of the PDCA cycle in the area of complaint response.

On 1 July 2007, MSI and Kirameki Life Insurance became the first companies in Japan’s insurance industry to proclaim their intention to construct and properly operate a complaint response management system in conformance with ISO10002 (Quality management—Customer satisfaction—Guidelines for complaints handling in organizations).

We are going to continue with efforts to raise the degree of customer satisfaction by effectively translating complaints and other feedback into measures for improvement of our business.

—Proper operation of the complaint response management system—

In fiscal 2006, the number of complaints we received numbered 22,037, up a remarkable 230% from fiscal 2005. Those concerning claims handling accounted for 7,668, or 35% of the total.

While it derived partly from the administrative measure, this big increase was also caused by the active collection of complaints, and their registration on the complaint database, by all employees in accordance with the aforementioned basic policy.

Thenumberandbreakdownofregisteredcomplaints

COLUMN

As a company trusted by society

Responsibility to customers

Casesofimprovementbasedoncustomerfeedback

BasicPolicyonComplaintResponse

StatementofvoluntaryconformancewithISO10002

Increaseinthenumberofcomplaints

Claims handling

Cust

omer

IwanttoknowwhatcompensationIcanreceiveundermypolicyintheeventofanaccident.

MSI

BeginninginFebruary2007,uponreceivingreportsofaccidents,wenotifycustomersinwritingofthebenefitstheycouldpossiblyreceive,incorrespondencewiththeirpolicytypeandaccidentsituations.

Cust

omer

Pleaseprovideaccurateinformationonnegativeaspectsforme,suchascasesinwhichclaimswouldnotbepaid.

MSI

WerevisedImportantNoticebyputtingmoreemphasisoninformationaboutdrawbacksforcustomersandusingsimplerlanguage(seepage22).

Cust

omer

IwouldlikeMSItoredesigntheinsurancepolicyenvelopessotheystandoutamongothermailarticles.

MSI Wealteredtheenvelopedesigntomakesurethatitcatches

theeyesofcustomers.

Sales

Business procedures

Outline of the Basic Policy on Complaint Response

Reinforcement of the complaint response system

The administrative measure in 2006 prompted us to rearrange our organization for better response to customer complaints. Efforts to carefully listen to customers and do a better job for them are gradually taking root among all of the employees. As I see it, this led to the Company’s proclamation of voluntary conformance with ISO10002.

Nevertheless, we still have a long way to go until customers really see how we have changed or are trying to change.

I am going to redouble my efforts to see that our employees realize we are actually reflecting customer feedback in our business and our customers say we’ve really changed.

ShigekiNakazonoManagerCustomerServiceDepartment

��

Development of new insurance products must be preceded by in-depth studies of all pertinent matters, including judgmental standards and procedures required for proper sales and claims handling, followed by the preparation of sales tool and regulations/manuals, and full education about them for employees and agents. To this end, we revised in-house rules and reviewed the product development system.

We revised the Policy on Product Development and Product Development Management Rules, and established rules in the direction of better coordination among all concerned sections (e.g., Development, Claims Handling, and Administration/System) in the entire process from development to sales and post-sales monitoring. The Corporate Quality Control Department newly instituted in 2006 plays the role of checking the correctness of management in each step of the product development process after the fact, and instructing sections to make improvements as necessary.

We have also decided to submit, and make reports on, products designed for individuals in general to the Management Committee for its consideration, regardless of the sales volume.

Product development system coordinated with related sections

Forpersonalinsurance

Things we have changed or are trying to change based on customer feedback

We have erected a system for reflecting the views of customers, employees, and agents in the process of product development.

Views of customersBesides monitoring complaints from customers, the Corporate Quality Control Department conducts customer surveys on items such as contracting procedures and product provisions, and feeds the responses back to the product development side. Views of agentsTo probe customer needs and prepare effective sales tools when developing new products, we instated a system of product monitoring agents. As part of the reform, we increased the number of monitors from 46 to 114. Views of employeesOur intranet bulletin board displays all kinds of proposals for improvement posted by employees based on feedback from customers and agents. Each contribution is taken into account by our Product Development section when modifying products and sales tools.

Systemforincorporatinginternalandexternalopinions

We instituted the Underwriting Division as a unit to be in general charge of the Product Development section in each category (e.g., automobile insurance, fire insurance, and

Productinnovation

Revamping insurance product assortmentsIn fiscal 2007, we are conducting a review of product assortments, inclusive of the prospect of decreasing the total, while making sure to retain functions required to meet customer needs.

Translation of insurance terminology into plain languageWe are changing terms and phrases that have been hard for customers to understand, beginning with pamphlets and application forms.

Examples

In April 2007, we began confirming and checking policy contents to see that customers are given full explanations of policies and completely understand them when contracting (see page 11). We have also launched a campaign for full execution of requisite work by agents at the time of sale (see page 29).

For proper contracting procedures

Whole life medical insurance offers lifelong coverage. In its case, it is even more important for customers to get a good grasp of the product and make an accurate statement of their health condition at the time of sale. For this reason, we decided to have such insurance sold only by canvassers who have been certified for such sales under our independent program.

Responsibility to customers

Saleofwholelifemedicalinsurance

On the subject of proper sale of insurance products, see page 11.

casualty insurance). In fiscal 2006, the Division embarked on a program of product innovation. It is the aim of this program to develop products that are easy for customers to understand and for agents to explain, by heeding the views of the former about the complexity of policy terms and those of the latter about description difficulties. The Division is also working to streamline rules and procedures, and build a new system to support higher quality and convenience.

As a company trusted by society

Numberofproducts 15

Number of special coverage items about 700

68

about 1,400

End of FY2008FY2006

Alteration of the policy Change in policy contentsChange

Objective of the insurance Subject of the insuranceChange

Provide surety Provide compensationChange

��

Some customers have told us that our insurance documents are hard to understand and to read. In response, we are trying to make pamphlets, application forms, and explanatory material easier to read and understand.

Especially as for the documents to explain Important Notice to customers at the time of sale in a both comprehensible and precise manner, we drew on the advice of experts in the field of consumer issues and the findings of interviews with the general public. Specifically, we made use of illustrations and tables, and underscored points requiring particular attention. We also invited outside experts to lead seminars for personnel in charge of preparing documents for customers.

ExcerptfromImportantNotice

In fiscal 2008, we intend to instate arrangements that will make payment of premiums even more convenient, through means such as credit cards and convenience store services. Beginning in fiscal 2008, we are also going to lengthen the service hours at the Customer Centers for receiving requests for change of policy items and otherwise improve the center services.

Claims handling from the customers’ viewpoint

We are conducting the Good Job campaign toward the ends of making us more trusted and preferred as an insurance company, thanks to services in claims handling that emphasize care in customer contact and are provided from the customers’ viewpoint.

Training in customer dealingsWe provide training for all personnel in the Claims Handling section to increase their capabilities for dealing with customers. The aim is to enhance their skills in areas such as reassuring customers distraught by accidents, getting accurate descriptions of the accident circumstances from them, and explaining claim payments to them in simple terms.

Each year, we also hold a role-playing contest related to dealing with customers. Contestants from across the

country vie with each other in communication skills as part of their endeavors to improve services and place the minds of their customers at ease. Interchange among employees of the Claims Handling sectionWe established a program enabling employees of the Claims Service section to work at a different workplace for a certain period. The purpose is to promote the sharing of all kinds of information and know-how related to services in response to accidents, for improvement of the service level. In fiscal 2006, 50 employees went to different workplaces under this program.

To extensively reflect customer views in claims handling, we send customer surveys to customers when paying claims. The surveys enable us to ascertain their degree of satisfaction with our services and matters such as whether or not they readily understood explanations of the payments.

On the subject of proper claims handling, see page 12.

COLUMN

I-Stopcampaignsticker

Responsibility to customers

Documentsthatareeasytounderstand

Towardhigherlevelsofcustomerconvenience

GoodJobcampaign

Customersurveys

Atrainingsession

To prevent accidents

Approachestotrafficsafety

To prevent traffic accidents, we are conducting the I-Stop campaign for sure stopping when necessary and exercise of caution on the road. The campaign makes an appeal for such practice by means of special stickers and posters, with a view to promoting their spread in society as a whole.

We also hold traffic safety classes, show movies on the theme of eradicating drunken driving, and take other action for traffic safety nationwide.

As a company trusted by society

��

We energetically engage in investor relations (IR) activities that are grounded in swift, accurate, and fair presentation of MSIG’s business situation and strategies, and are aimed at living up to the trust and expectations of our shareholders and investors. We are making good use of the feedback we have obtained through communication for the improvement of the corporate quality.

Responsibility to shareholders

Our management always seeks to take as many opportunities as they can, to face and communicate with shareholders and investors, such as company seminars and one-on-one meetings, where they explain the Group’s business results and strategies, answer questions, and listen to the voice of the participants.

Hands-onIRactivitiesbythemanagement

We increased the dividend per share by ¥1 to make it ¥14 for fiscal 2006. We will strive to meet the expectations of our shareholders through efforts to maintain the increasing trend of dividend and continue buy-back of shares.

Distributiontoshareholders

Operationofeffectiveinvestorsmeetings

Further enriching disclosure

In fiscal 2006, we bolstered our approach to individual investors. We held company seminars in Nagoya and Tokyo, both intended for individual investors. We plan to hold more such presentations on certain occasions in sites other than major cities to explain business and strategies of our Group and obtain as much understanding from individual investors as possible.

We gauge the perception of individual shareholders by sending out questionnaires every December. We make good use of valuable feedback thus obtained for company management.

IRactivitiesforindividualinvestors

Responsibility to shareholders

As a company trusted by society

As a way to facilitate due disclosure and effective operation of investor meetings held every year, we listen ahead of time to the opinions of shareholders, investors, and analysts.

As a result of such exchange of ideas in fiscal 2006, we started to extract such data as many analysts requested to disclose, and show them on our website as soon as the financial results are announced. We also began to show these items in the hand-out materials of the investors meeting.

In fiscal 2007, we prepared a video* to help investors understand the concept underlying New Challenge 10, our medium-term management plan.

*The video can be viewed on our website, as follows.MSI website > Investor Relations > IR Events > Earnings Announcements > Informational Meeting (June 1, 2007) New Challenge 10, MOVIE

In fiscal 2006, we redesigned the contents of our IR website for the convenience of users, including the launch of a new independent site exclusively for individual investors. We also improved the convenience of data use, where you can download tables of financial data over the last five years in the Excel format.

MSI won the “2006 Internet IR Best Company Prize” arranged by Daiwa IR* for the renewed website, as the sole winner from the insurance industry.*Daiwa IR: Daiwa Investor Relations Co., Ltd.

Majorredesigningofwebsitecontents

Seminarforindividualinvestors

As a company trusted by society

Putting priority on dialogue with shareholders and investors

��

As a company trusted by society

Global environmental problems face all of humankind alike. To help bequeath a beautiful earth to succeeding generations, we are committed to doing all we can for the global environment through our main business, in our daily routine, and in collaboration with communities, in accordance with the MSIG Environmental Policy.

Responsibility to the environment

MSIG Environmental PolicyRecognizing global environmental problems as major management issues, we prepared the MSIG Environmental Policy around the same time as our establishment in October 2001, and have mounted Group-wide approaches to those problems in line with our four action guidelines.

MSIG Environmental Policy

Basic philosophyBased on the MSI Group’s management philosophy of endeavoring to contribute to the enrichment of society by bringing security and safety to the world, we shall strive to protect and improve the global environment and shall promote steady and sustainable initiatives in accordance with the action guidelines described below.

Action guidelines1) Global environmental protection through insurance and financial

services business2)Reduction of environmental impact of business activities3) Advancement of environmental management systems4)Harmonious coexistence with society through environmental

awareness activitiesThis environmental policy shall be made familiar to all executives and regular employees at all Group companies and be disclosed to the general public.

Established October 1, 2001

Today, we are facing various environmental problems. The major ones are global warming, which is inviting an increase in the frequency of abnormal weather and is otherwise having an immense impact on the global environment; environmental pollution, which is destroying habitats for human, plant, and animal life in many regions; and expanding volumes of waste, which are behind higher concentrations of dioxins and illegal dumping.

Our activities through main business on this front include the provision of products and risk consulting services related to compensation for economic loss arising from various types of environmental problems, supply of premium discounts and financial products for steps that help to preserve and improve the global environment, and promotion of provisions to support the spread of environmental efforts.

Responsibility to the environment

Throughmainbusiness

Our employees receive environmental education to enhance their environmental awareness, and engage in activities for observance of environmental laws and regulations. In our business activities, we are taking action to reduce CO2 (carbon dioxide) generated from consumption of electricity or gasoline and other fuels, conserve paper (one of our most familiar and important resources), and recycle waste to decrease disposal volumes.

Indailybusinessactivities

We conduct environmental activities with a constant awareness of the need for harmonization with society. We contribute to the local residents through the green tracts attached to our Surugadai Building, and share environmental perspectives with the public through the environmental seminars and citizens’ lectures we hold. We are also involved in a project for revival of tropical forests in Indonesia.

Harmoniouscoexistencewithsociety

We have instated an environmental management system in conformance with ISO14001, the international standard for such systems, to steadily do what we can to protect the global environment. As of March 2007, all 346 of our domestic business sites, including those of 14 Group companies, had been certified under this standard.

The Group environmental management system is characterized by a combination of two types of activities; those undertaken by all employees in common (mainly energy- and resource-conserving efforts) and those executed through main business (such as development of environment-friendly products by Head-Office departments). These activities have received high evaluation from external ISO audit organizations.

Advancement of environmental management systems

InternationalcoordinationWe were involved in the drafting of the Insurance Industry Initiative for Environment in the United Nations Environment Programme in 1995, and have always led efforts in the environmental aspect by global insurance companies. As this exemplifies, we pursue global activities, and coordinate them with those of international environmental groups.

As a company trusted by society

Profile of approaches

ISO14001certificate

The tree of MSIG environmental activitiesWe depicted the environmental activities of the Group in the form of a single tree.

To see that the branches of this tree get even greener and longer, we are promoting our environmental management system and steadily executing each and every one of the various activities.

Project for tropical

reforestation

Measures to reduce waste

• Use of recycled parts to repair cars• Automobile physical damage

excess repair expense optional policy

• “Support One” with automatic coverage for disposal fee

Measures to prevent environmental pollution

• Spread of eco-inspection and eco-maintenance

• Provision of environmental risk consulting services

• Soil decontamination insurance

Measures to mitigate global warming

• Coastal hull insurance• Support for Eco Action 21

certification acquisition• Discount for eco-friendly cars• Eco fund “Umi to Sora (Sea and Sky)”

Harmonious coexistence with society

Through main

business

��

As a company trusted by society

Responsibility to the environment

Surveying the level of contribution to biodiversity through monitoring activitiesIn April 2005, we joined with the Indonesian government in commencing work for the rehabilitation and regeneration of the Paliyan Wildlife Sanctuary, which had been ruined by illegal logging. We are also furnishing economic assistance to the local community by planting fruit trees as well, for forest recovery rooted in harmonization with the community. Thus far, we have planted some 190,000 trees over an area of 209 hectares.

To scientifically determine the degree of forest recovery in this project, we commissioned study and research regarding habitat for plant and animal species to Gadjah Mada University. Through this commission, the university will assess the project from the aspect of biodiversity.

Project for tropical reforestation

Measures to mitigate global warming

Coastal hull insurance—product design with concern for the environmentTo support environmental effort in the shipping industry, we applied underwriting with a preferential deductible in ship owner liability insurance for environment-friendly ships (e.g., “super eco ships”), and began selling such policies in April 2006. In fiscal 2006, such policies accounted for 35% of all our coastal hull policies.

Support for certification under Eco Action 21Eco Action 21 is a simplified type of environmental ISO certification that is attracting a lot of attention because it not only makes enterprises friendlier to the environment but also increases their credibility and levels of management efficiency. At present, 52 members of the Advance Club (our agent’s organization for excellent service and repair shops, see page 31) are working to obtain such certification. In fiscal 2006, we held 112 seminars on the environment to support their efforts.

Measures to reduce waste

Extensive use of recycled parts in automobile repairWe are encouraging environment-friendly repair of automobiles. Upon confirming the customers’ inclinations, we encourage repair of damaged parts that can be repaired and the use of recycled parts for this purpose. In fiscal 2006, the rate of recycled part use reached 3.5%.

Measures to prevent environmental pollution

Spread of environment-friendly eco-inspection and eco-maintenanceEco-inspections and eco-maintenance apply environment-friendly technology to curtail vehicle emissions of hazardous gases while reducing emissions of CO2, which is causing global warming, by improving fuel efficiency. Through the Advance Club, we are working for the spread of such inspection and maintenance.

ThePaliyanWildlifeSanctuaryinIndonesia.Thepreservewasoncealushtropicalforestinhabitedbymonkeys

Through main business

Harmonious coexistence with society

ShortlyafteroccurrenceoftheearthquakethatstruckcentralJavainMay2006,wesentmanyshoestocommunitiesintheprojectvicinitysotheirchildrencouldgotoschoolwithouthurtingtheirfeetonrubble.MSIGemployeesandfirmsinvariouscountriescollectedabout¥10millionindonationsthatstrengthenedtieswiththesecommunities. Donationofshoestoelementaryschools

Proper waste treatment and

disposal

Participation in UNEP

Holding of environmental

seminars

Surugadai building rooftop

garden

Environmental education

In our daily business activities

Reduction of environmental

impact

��

Reduction of environmental impact

As a company trusted by society

Responsibility to the environment

Steady decrease in CO2 emissionsIn fiscal 2006, we prepared new explanatory materials for proper contracting work, and consequently used more paper than in fiscal 2005, however we managed to make a substantial reduction in our usage of electricity and gasoline, and thereby to lower CO2 emissions.

Although we expect our use of paper to continue increasing, we plan to redouble our efforts to curtail this increase by digitization of printed matter.

Surugadai building rooftop garden

Thoughrarelyseeninthecity,falconshavebeenspottedintherooftopgreenery

Thespacealsoservesasavenueofcommunicationforlocalresidents

We hold citizens’ environmental lectures on subjects related to the green space on the grounds of the Surugadai Building, seminars at the Eco-Products Exhibition (Japan’s largest all-around environmental exhibition), and summertime environmental classes for parents and their children. Through these programs, we highlight the benefits of greenery in urban space for members of the general public.

Holding of environmental seminars

Working to enrich communities through greening in cooperation with residents We have greened some 5,200 m2, or about 43%, of the grounds of our Surugadai Building. On the rooftop of the low-rise portion, we deposited earth to a depth averaging 1m and planted about 130 types of plants, mainly bayberry and other evergreens. The rooftop is open to residents of the surrounding area, and serves as an urban oasis that has added beauty to the Surugadai neighborhood in Kanda district, Tokyo.

We also let residents use a gardening parcel divided into 20 plots, free of charge. The parcel has become a center for the exchange of seedlings and harvested vegetables, and for communication on gardening techniques.

In our daily business activities

Major environmental impacts and their change

Electricity77,832,376 kWh

Gas2,724,398 m3

Heavy oil12,143

Gasoline4,868,065

Heat supply78,944,890 MJ

Paper8,183 t

Water199,992 m3

Ener

gy

Electricity usage volume(ten thousand kWh)

04 05 06 07 target

8,429 8,214

7,783 7,783

5,000–

Gasoline usage volume(k )

04 05 06 07 target

5,5515,121

4,868 4,722

3,000–

Paper usage volume(t)

04 05 06 07 target

6,188 6,061

8,183

9,400

5,000–

ChangeintotalCO2emissions

• Total emissions volume was calculated by multiplying emissions per person by the total number of Group employees.

• We have used the emissions coefficient specified by the fiscal 2005 Tokyo Global Warming Prevention Plan.

• Electricity usage volume was calculated from actual usage volume at four main buildings (Shinkawa, Surugadai, Chiba New Town, Hachioji) and electricity fees by using average electricity unit price of ¥18 per 1 kWh at other buildings.

• Gasoline usage volume was calculated based on monthly gasoline bills and the nationwide average retail price for each month. As to the company cars which gasoline bills cannot be calculated, we used the average usage volume.

Main measures for reduction in fiscal 2006

• We prepared energy conservation plans for each of our 52 buildings, attached human sensors to staircase lights, installed energy-conserving inverter air conditioners, and reduced electricity usage by about 5%.

• For company cars, we actively switched to fuel-efficient, low-emission vehicles, which now account for over 90% of the entire fleet. The amount of gasoline consumption declined by 5% from the previous year.

• Toward the goal of zero emissions (i.e., elimination of final disposal of waste) at our Shinkawa and Surugadai buildings, we increased our rate of waste recycling to over 90%.

(ton-CO2)

04 05 06

57,40855,233

53,273

50,000–

Environmental education

In fiscal 2006, 19,028 of our regular employees, temporary employees, and part-time employees received environmental education. Through interviews with employees (about 400) in the course of internal environmental audits, we endeavored to raise awareness of the environment of each interviewee.

(FY)

MajorcausesofCO2emissionsinFY2006

��

To be an entity needed by communities

Companies and their employees must be aware of social problems and participate in activities to resolve them. Besides a matter of corporate social responsibility, we regard such participation as a precious opportunity for each and every employee to acquire more compassion for others.

Responsibility to local communities and the international community

Promotion of corporate activities for contributing to society

MSIG is acting on the two agenda noted in its policy for social contribution; promotion of corporate activities and support for the activities of employees and agents.

In our corporate efforts of social contribution, we are forging ahead with both activities in our business and activities outside our business. The former are currently confined to insurance premium discounts for welfare vehicles, technical assistance related to non-life insurance in other countries, and the like. We intend to step up activities in this domain.

Social contribution activities by employees are steadily taking root. Proactive involvement by employees in activities meeting local needs is a key step for building ties of trust with communities. We believe that performance of jobs while acquiring more experience will broaden employee chances to find openings for social contribution through the business.

TechnicalassistantforASEANcountriesinthefieldofnon-lifeinsurance

EmployeevolunteersplantingtreesinHeiwaPark(HiroshimaBranch)

EmployeevolunteersplantingtreesatthebaseofMt.Unzen-Fugen(NagasakiBranch)

The MSIG Guidelines for Societal Contribution Activities

In accordance with the MSIG Charter on Professional Conduct, as a member of local and international communities, the Group shall contribute to the sustainable development of those communities and support the social contribution activities of employees and agents.

1) Promotion of corporate activities for contributing to society The Company contributes to the development of society in all points

of contact with local communities and international communities.2) Support of employee and agent activities for contributing to society The Company will strive to be a good company by supporting

employees’ and agents’ voluntary contributions to society and promoting awareness of their roles in society.

Ever since obtaining a business license in Thailand in 1954, we have provided our insurance technology and know-how to ASEAN members through their insurance authorities and associations. In March 2007, we implemented a two-week technical assistant program of training in non-life insurance for members of insurance authorities in Cambodia, Laos, and Myanmar, on commission from the Japan International Cooperation Agency (JICA).

AudioproductpamphletsWe incorporated SP codes enabling the visually impaired and elderly customers to hear about the contents of product pamphlets with Speechio, a dedicated reading device. In fiscal 2006, our agents and we donated Speechio units and software for preparing the SP codes to social welfare councils in various parts of the country. We are going to continue our efforts to issue voice-recorded product pamphlets.

Responsibility to local communities and the international community

—Social contribution activities through the business—

As a company trusted by society

Ceremonymarkingcompletionofthetraining

Employmentforthephysicallychallengedatacoffeeshopinacompanybuilding

On the first floor of our Nagoya building is “Cafe Iris”, a coffee shop that employs the physically challenged. We operate it in collaboration with Space 21, an NPO which has been supporting the intellectually challenged and people with hearing impairments since 1993. We offer the space, equipment, and utilities free of charge, and the NPO uses revenue from the business to fund its activities.

—Social contribution activities outside the business—

As a company trusted by society *“Speechio”and“SPcode”

areregisteredtrademarksofKOSAIDOCo.,Ltd.

��

In fiscal 2006, 178 (90.4%) of our departments and branches across the country deployed such campaigns. The social activity supporters led activities in line with local needs.

Annualsocialcontributioncampaignsatdepartmentsandbranches

Support of employee and agent activities for contributing to society

Support for welfare, culture, arts, and sportsTo help enrich society, we are also involved in the field of welfare services for the elderly people and in support for cultural and artistic activities.

MSI Welfare Foundation

(established in 1975) Informationalactivitiesand

researchgrantsinthefieldsoftrafficsafetyandwelfareservicesforelderlypeople

MSI Cultural Foundation (established in 1988) Assistanceactivitiesinthefields

ofmusicandlocalperformingarts

Shirakawa Hall (established in 1994) OperationofahallinNagoyaespecially

forconcertsofclassicalmusic

Foundationceremonyforpresentationofresearchgrants

Concertforlocalresidentsofprovincialcities

IkuyoNakamichiinaprogramintroducingchildrentoclassicalmusic

MasaeUeno YukiYokosawa ReikoTosa YokoShibui

Catchphrase MayumiYamauchi(judotournamentforthevisuallyimpaired)

Responsibility to local communities and the international community

Eachdepartmentandbranchappointsonesocialactivitysupporterandundertakesanannualsocialcontributioncampaignorotheractivities.

AidforchildrenoftheworldthroughcharityChristmascards

Volunteeractivitiestosendhand-knitsweaterstochildrenaroundtheworld

Our main programs for support of such activities are as follows.

Social activity supporter program

Eachmonth,concernedemployeesdonatelessthan¥100ontheirpaychecksplusavoluntaryamountinmultiplesof¥100.Thesedonationsgotoabout100NPOsnationwide(¥7millioninfiscal2006)andarealsousedtodefraythecostofemployeevolunteeractivities.

Smile Heart Club, an employee group for social contribution

MSImatchesthedonationsmadetoNPOsoftheSmileHeartClub(andthereforedonated¥7millioninfiscal2006).WealsomatchedthedonationscollectedbyemployeesasrelieffordisastersinsideoroutsideJapan(¥7.77millioninfiscal2006).

Matching gift program

EmployeeswhohaveputinatleastoneyearofcontinuousserviceswiththeCompanycantakepaidleavesnolongerthantheirpaidvacationsforactivitiesinfieldssuchaswelfare,marrowdonations,environmentalimprovement,anddisasterrelief.Thosewhohaveworkedcontinuouslyforatleastthreeyearscantakeleavesoffromsixmonthstotwoyearsandfourmonthsforvolunteeractivities.

Volunteer leave and days off provisions Training of female judo and track & field athletes

Weareworkingfortheadvancementofsportsoutofourthoughttoassistthedevelopmentofworld-classJapaneseathletes,andtostrengthenandpopularizejudoandtrack&fieldsportsinJapanandtherestoftheworld.

Support of sports for the physically challenged (Mitsui Sumitomo Kirameki Life Insurance) Inordertohelptoimprovethequalityoflifeforthephysically

challenged,wearebackingathletesinvolvedinsportsforthephysicallychallenged.

InNovember2006,theKanagawaClaimsDepartmentheldacharityconcertinwhichemployeesexhibitedtheirskillsinsinging,makingmusic,anddancing.TheproceedsfromtheconcertweredonatedtoanNPOworkingforafree-of-bullyingsociety.

Charity concert

As a company trusted by society

Inthefallof2006,theSapporoBranchbeganhavingitssalesvehiclesmakepatrolsonceaweekforcommunitysafety.ThevehiclesareregisteredwiththeHokkaidoPoliceHeadquartersandequippedwithrevolvingbluelights.Inaddition,allofitssalesvehiclesbearsafetystickerstohelpthecreationofsafeenvironmentforchild-raising.

Patrol for community safety

��

To be presences that are trusted by customers

We consider our responsibility to agents to assist the expansion of their business by supporting them to be a presence trusted by our customers. We support agents in a variety of aspects, including the provision of fuller programs for their education, development of IT systems that are easy to use, and creation of products that are easy to understand.

Agents play an important role as the link between MSIG and the customer through activities such as consulting, procedural work, and receipt of reports on accidents and other occurrences.

We are committed to supporting our agents in all areas so that they will enjoy the trust among customers.

In fiscal 2007, we launched a campaign for quality improvement toward accurate execution of the “basic insurance cycle” by all agents.

In this campaign, we are making a concerted effort with agents to improve service quality by, for example, checking various indicators of quality in the sales process on the basis of “monthly sales process quality reports”, and hammering out specific measures for qualitative improvement at each agent.

Campaignforqualityimprovement

• Recommend an insurance that fits a customer’s risk or need, with giving an appropriate explanation, etc.

• Check whether a contract fits the customer’s risk or need

• Prepare an accurate application form• Ensure the applicant’s own signing and seal• Explain payment methods that fits the

customer’s need

Ensure expiration notice to all customers whose expiration dates come soon, etc.

Properly and without fail change on the policy upon a notice from the customer

Give an explanation of Important Notice to all customers without fail

As a company growing together with its partners

Responsibility to agents

As a company grow

ing together with its partners

Responsibility to agents

Basicinsurancecycleatagents

*Examplesofindicatorsofsalesprocessquality • Averagenumberofdaysforearlycontractrenewal:

An indicator of the performance as regards early and accurate customer notification of policy expiration and encouragement of renewal

• Accurateapplicationrate: An indicator of skill at preparing accurate application

forms based on customers’ intent

AccidentReporting

Support for improvement of business qualityIt is vital for us and our agents to put the customer first in all stages related to insurance sales. We have defined the whole chain of work in such sales as the “basic insurance cycle at agents” (see the diagram below), and are supporting its sure execution in all aspects.

Basicinsurancecycleatagents

Offer,explanation,estimation

Identificationofneeds

ExplanationofImportantNotice

ConfirmationofintentPolicymaintenance

Expirationnotice,renewaladvice

Signing,declarationbythecustomerPr

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CUP is a learning program with working options in the two basic categories of insurance sales and agency management. It enables development of practical skills needed for insurance sales in a variety of fields, including in-house administrative work, IT system utilization, insurance knowledge, and market cultivation, by means such as lectures and e-Learning through the Internet. We also offer a Base Program for persons starting up an agency business and the Professional Agent Manager College program for agents hoping to expand their business.

AgentCareerUpProgram(CUP)

Full provisions for training and education

Absorption of agents’ feedback and reflection in activities

To provide customers with better products and services, it is important for us to listen to the voice of agents, who are in contact with customers on a daily basis. Through our agent product monitor program, suggestion box, and other schemes, we gather agents’ feedback and link them to many improvements. In November 2006, we implemented a questionnaire survey with all agents to explore types of automobile insurance that would be easy for customers to understand, and fed the results back into the development of the next round of products.

Number of agents registered for the MSA* product monitor program: 114 (as of March 2007) Number of proposals received through the MSA suggestion box: 110 (since October 2006)

*MSA (see page 31)

If agents are to be preferred by customers, they must accumulate a substantial store of expertise and know-how to meet diverse needs, and give their business a stable foundation. We provide all sorts of support for training and education in step with development stage of agents.

We implement training in the “basic insurance cycle” in the form of seminars to reconfirm the expectations of and responsibility to customers at each stage of the basic cycle.

In the interest of strict compliance, an absolute necessity in execution of insurance business, we have made arrangements for on-going instruction based on the latest information, by means including e-Learning system through the Dairiten (Agent) MS1 system (see page 31) as well as seminars.

Trainingprogramsinthe“basicinsurancecycle”andcompliance

We apply an agent grading system we developed ourselves to support agent attempts to expand their business. The system has five ranks topped by “new expert”, and is applied with reference to clear standards. Many agents are aiming for qualitative improvement and quantitative expansion of their business in order to earn a higher rank.

We have also prepared finer ranking system in correspondence with the attributes of the agent, such as “Professional New Expert Grade System” for dedicated insurance agents and “Dealer Expert Grade System” for car dealer agents.

Number of agents ranked “new expert”: 1,213 (as of March 2007)

Agentgradingsystem

As a company grow

ing together with its partners

Responsibility to agents

With business sites in all parts of Japan, MSI Agency Service (MSAS) has staff with a significant business experience at MSI and is devoted to agent education. It also offers in-depth advice for business expansion and enterprise organization, services in agency diagnosis and support for promotion to the “new expert” rank, consultation on merger, and practical training.

Number of business sites nationwide: 9 (as of April 2007) Number of staff: 143 (as of August 2007)

MSIAgencyServiceCompany,Limited(MSAS)

Our Insurance Consultant (ic) System furnishes support to people who want to set up a new agency business. The purpose is to develop dedicated agents equipped with expert knowledge of non-life and life insurance as well as solid management style. As of March 2007, a total of 450 prospect agents were registered under the system to receive practical and intensive instruction in agency business for a fixed period (of up to 36 months). System graduates are doing business across the country as excellent agents.

icSystem(forsupportofbusinessestablishment)

Trainingforagents

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Support for daily work at agents with ITExtensive use of IT is an indispensable infrastructure for the conduct of agency business. We support IT use by agents through our capabilities for IT system development, which are on the highest levels in the industry, and related provisions for support.

Dairiten(Agent)MS1andMS1Mail

Dairiten MS1, a network system linking MSI with agents, represents the finest electronic infrastructure in the insurance industry and is utilized by about 35,000 agents. Endowed with functions for premium calculation, preparation of accurate applications, input and management of policy information, and distribution of the latest news, it furnishes agents with a system environment for smooth performance of routine work. It also helps agents make timely and apt proposals using functions resting on the customer data base built from information on application forms and other items, in areas such as marketing through suggestion of insurance products matching customers’ needs and management of information on policy expiration.

Dairiten MS1 Mail is in extensive use as the information network linking MSI with agents. It affords swift and sure communication under a security system for perfect protection of customer information.

Anshin Otodokebin

A communication tool, Anshin Otodokebin is used by agents to send direct mail and facsimile messages to their customers. It allows them to tell customers about new products and give them information and news on insurance both simply and promptly. By making effective use of it, agents can engage in closer communication with their customers.

Number of agents installing Anshin Otodokebin: 3,212 (as of March 2007) Number of transmissions: 155,222 (in the year ended March 2007)

MobileMS1paymentterminal

Customers can use this mobile terminal for paperless registration of account transfers, debit card payment, and credit card payment. By taking full advantage of it, agents can accommodate the varied needs of customers regarding payment method. Moreover, they can also streamline work with the cashless features and create additional time for devotion to customer services. Because the payment procedures can be executed on the spot both swiftly and surely, they can also gain higher levels of customer trust.

As a company grow

ing together with its partners

Responsibility to agents

AnAnshin Otodokebinpostcard

Agents that are making efforts to reform their activities can become very powerful forces by sharing information for mutual refinement of capabilities within a single organization. We are doing our utmost to support the organization activities of such agents on their own initiative.

MSIG agent association (MSA: Mitsui Sumitomo Agency)

MSA is an agent association where agents exchange information in their quest to be the agents that customers choose. They share know-how for business quality improvement and insurance sales through mutual enlightenment.

Number of MSA members: 3,453 (as of March 2007)

Electronicapplicationsystem

We initiate a new business process (electronic application system) in October 2007, by expanding upon the mobile terminal technology of Mobile MS1, which made us the first in the insurance industry to offer digitization of all contracting procedures (from application to premium receipt). It will enable performance of contracting procedures without paper application forms or seals, on a laptop computer or PDA.

Advance Club (AC) for service and repair shop agentsThe AC is an organization of service and repair shop agents that are taking up the challenge of a new style of vehicle work. It is systematically promoting the spread of environment-friendly eco-inspection and eco-maintenance, and improvement of related services.

Number of AC members: 1,736 agents (as of March 2007) Number of shops practicing eco maintenance: about 600 (as of March 2007)

MSAannualmeeting ACannualmeeting

Support for interagency communication

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Insurance policyunderwriting

Premiums

Shifting of a portion of the policy responsibility to other insurance companies

Reinsurance

Reinsurance premiums

Reinsurance claimsClaims

MSI

In the event of occurrence of major natural disasters

and accidents

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To heighten the quality of insurance products and services we provide to customers and win their trust, we must interact and collaborate with experts in a diversity of fields. We are forging ties of trust with our business partners in Japan and overseas with a view to mutual advancement.

Responsibility to business partners

Forstablebusinessoperation

In the event of major natural disasters and accidents in Japan or other countries, it may be impossible for a single insurance company to pay a huge amount of claims. To disperse risks attending such cases and preserve a sufficient underwriting capability, companies may engage in reinsurance transactions, whereby different insurance companies underwrite a portion of the policies. We maintain favorable relations with major reinsurance firms around the world, and have constructed solid ties for reinsurance transactions.

Forproperpaymentofclaims

For proper response to insured occurrences of all kinds, we cooperate and interact with experts in diverse fields with a wealth of skill and know-how.

Non-life insurance surveyorsNon-life insurance surveyors appraise the insurance value of buildings and other properties, estimate damage, and investigate the causes and circumstances of accidents, etc. We have erected a system for accurate relay of the requests expressed by customers to the surveyors back to us.

PhysiciansWe have formed partnerships with 80 consultant physicians in various fields throughout Japan who stand ready to advise us as necessary in regard to payment of claims. In the Medical Support Office, consultant physicians are always on hand to furnish the Claim Handling centers nationwide with counsel on incidents in illness compensation products.

AttorneysAttorneys provide legal advice and consultation services in negotiations regarding out-of-court settlements. We have tie-ups with about 700 attorneys across the country.

Also in other countries, we have partnered with law firms backed by a wealth of experience in dealing with overseas product liability lawsuits. Similarly, we work in coordination with overseas non-life claim agencies and surveyors* in provision of accident response services for exported freight.*Experts who investigate the accident circumstances, causes, and damage from a third-party perspective.

Handlingofpersonalinformation

We are working with business partners to build systems for proper management of customer information. At outsourcing firms, data processors, and other partners commissioned to handle customer information, we strive to establish a system that does not allow information leaks through checking their information management systems or other measures.

Reinsurancescheme

As a company grow

ing together with its partners

Responsibility to business partners

As a company growing together with its partners

Fundamental guidelines1) The selection of business partners (contractors, suppliers, and

others) shall not be based solely on precedent, but shall reflect comprehensive consideration of business terms, the management state, technical abilities, environmental activities, and other factors.

2) Information arising from business transactions shall be properly controlled and protected.

3) Business partners (contractors, suppliers, and others) shall observe all legal guidelines and social codes.

4) The Company shall demand the optimal quality, prices, date of delivery, and services from its business partners (contractors, suppliers, and others).

We have formulated the MSIG policy toward its business partners to serve as a set of fundamental rules in transactions such as outsourcing and product purchase.

MSIG policy toward its business partners

Post Challenge SystemRookie Post Challenge

Trainee System

Conversion of employee classifications

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Assessment system(emphasis on human resources development

and the approach process)

Support for acquisition of knowledge and skills needed for execution of existing dutiesSupport for acquisition of knowledge and skills needed for future (targeted) duties

Personnel transfer

Training and self-bettermentBrother-SisterSystem

Career Counseling Team (tentative name)

Experience of the Sales and Claims Handling sections

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Responsibility to employees

Staff Hatz-ratz (encouraging staff)MSI attaches a lot of importance to development of employee capabilities. Since fiscal 2005, we have taken measures to be a company that gives its employees a sense of fulfillment from their work and allows its diverse human resources including female to fully exercise their talents. Beginning in fiscal 2007, we are going to expand these measures and arrange environment for energetic work by employees as one of the key approaches in the context of New Challenge 10.

Developinghumanresourcesandimprovingmotivation

As a company grow

ing together with its partners

Responsibility to employees

We hope to produce employees who learn and act on their own initiative and are always ready to take up the challenge of ambitious targets. To this end, we have prepared systems for employee growth. We are also making efforts to give them ample margin, which is vital for them to tackle tasks with a high level of motivation.

Diagramofsupportforemployeegrowth

In fiscal 2007, we provided management trainings for the heads of all organizational units. These trainings included support for coaching* employees to induce their motivations.

*Coaching: A communication technique aimed at bringing out individuality, heightening motivation, and encouraging spontaneous action toward attainment of the other party’s own goals.

To help new employees blend into the workplace more quickly, we instated the Brother-Sister System, in which they are given particular assistance by an older employee appointed by the workplace superior to coach them.

Creatingidealworkingconditions

We are striving for office environments that are ideal for work and friendly to customers. In some space in the Claims Handling section, we are currently introducing new office layouts.

In addition, we are streamlining the business process through direct mailing of printed matter by agents and revising our intranet contents to strengthen communication among employees.

Systemtoassistidealworkingcondition Human Resources Counseling Office

The Office provides assistance with the solution of various problems related to personnel affairs, in areas such as the mental and physical health of employees and their families, worries at work and in personal life, and consultation/complaints about sexual harassment.

Health management rooms and centers We have 11 such rooms and centers around the country

providing support for health management and preventive measures so that employees can stay physically and mentally healthy and concentrate on their work.

Team WITH* (to support workplaces for the physically challenged)

The team helps to endow workplaces nationwide with environments enabling physically challenged employees to find joy in their work and fully exercise their talents.

• We conduct workplace questionnaires when hiring and reposting physically challenged employees.

*WITH stands for “willingly & thoughtfully”, which is indicative of our focus on a positive-minded, well-considered, and compassionate attitude toward acceptance of physically challenged employees.

COLUMN

Under our Post Challenge System, employees can apply directly for placement in departments and posts of their choice.

Our in-house Trainee System gives employees short-term experience of work in departments that are new to them. This system stimulates interdepartmental communication and supports employee career formation.

We are conditioning the working environment for each department through substantial improvement of the business process systems and steps to create more margin.

Our employees are the key points of contact with customers and society, and the principals of our activities to enhance our corporate quality. At MSIG, we regard each and every one as a “human treasure”. We intend to resolve various issues related to work so that all Group employees will be able to fulfill their responsibility to society through their duties.

As a company growing together with its partners

04 05 06 0705 06 (FY) (FY)

(People) (People)Maternity leave

0

20

40

60

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15

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76 7467

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(People) (People)Maternity leave

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As a company grow

ing together with its partners

Responsibility to employees

COLUMN

Promotion of activity by female employeesAs part of the “Staff Hatz-ratz ” with high levels of vitality, we aspire to be a company that offers completely equal employment opportunities to men and women, and allows motivated employees to take up the challenge of various posts. In line with its policy of providing support for both childcare and career development, the Group is engaged in a wide range of activities centered around the Women’s Empowerment Team in the Human Resources Department.

Policiesinactivitiesrelatedtowomen’sempowerment

AcquisitionoftheNext-GenerationCertificationMark

In May 2007, we were certified by the director of the Tokyo Labor Bureau as being a company taking active measures to support child-raising.

Numberofemployeestakingmaternityorchildcareleave

Special website• The website displays information on various measures of

support and on activities.• It includes a “suggestion box” so we can reflect employee

feedback in future measures.

Numberofemployeestransferringfromoperationstoregionalcareer-trackpositions

Specificmeasuresofsupport

Childcare support• When placing personnel to take over for employees who

take maternity or childcare leave, we make sure there is enough time for handover.

• We have expanded the provision of information to employees who take maternity or childcare leave while furnishing them with tools for self-education.

• Employees are given a choice of working hours (short-time, flex-time, shift service, etc.).

• There is a program affording discounts at daycare centers. Career support

• The Step Up Job system offers education and other support for employees when transferring from operations to a regional career-track position. This support is extended for the one-year period of training for the posting.

• By expanding the in-house Trainee System and the Post Challenge System, we have made it easier for female employees to apply for new positions.

“Work-LifeBalance”handbook

We prepared “Work-Life Balance” handbook, which presents measures of support for full activity by women. As a tool for deepening understanding of the female lifecycle, it is distributed to all employees, both male and female.

1) Workplaces facilitating work by women = preparation of environments enabling women to work in a manner adapted to their lifecycle stages.

2) Provision of opportunities and support for thought about careers and acquisition of the requisite knowledge and skills by women.

3) Provision of opportunities and support for challenge of management and executive posts by women.

Provision of opportunities and support for considering

careers

Provision of opportunities and support for challenging

new posts

Preparationofenvironmentsenablingwomentoworkinamanneradaptedtotheirlifecyclestages

—Promotionforunderstandingofsupportivesystemsandworkplaces—

*Transfers are made on April 1.

Employee’s voice

Strikingtherightwork-lifebalancewiththesupportandunderstandingofthefamilyandworkplaceI made the switch to a regional career-track position because I wanted to try doing a job that I had built up myself from scratch. Recently, I have begun to find enjoyment in taking up the challenge of developing new customers.

It is definitely hard to take care of my six- and three-year-olds while holding down my job, but the childcare support systems have reinforced. Improvements have been made so that we can no longer complain that it is hard to take time off or leave early in spite of the systems allowing it, as exemplified by the posting of replacements and wider range of options for working hours. I hope that more employees will make the most of these systems and have a fulfilling career without sacrificing their family life. I am also going to try my best to do so.

JunkoTanjiDeputyManagerProfessionalAgenciesSection.2ndTokyoProfessionalAgenciesDepartment

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Features of MSIG’s CSR accountingWe have established the MSIG CSR accounting model based on an environmental accounting framework. We define “CSR accounting standards” in internal manuals that describe our objects and methods of measuring in an effort to conduct more meaningful CSR accounting. We measure the costs and effects of social contribution and welfare activities, ethics and compliance activities, and environmental protection activities.

CSR-related costs are calculated from expenses and losses based on financial accounting as well as the difference between the ordinary prices of products and services and the lower prices at which we offer them. With regard to CSR-related effects, those that contribute profits under financial accounting are considered “internal effects”, while influences on general society are classified as “outside effects”. Furthermore, “economic effects” are determined by measuring in monetary units, and items classified as “other effects” are measured in non-monetary, quantitative terms or described qualitatively.

Analysis of fiscal 2006 resultsTotal CSR-related costs came to ¥10.7 billion, up ¥1.5 billion from fiscal 2005. The main factors behind this increase were the construction of various systems to bolster the compliance structure, expansion of the staff in the Compliance Department, and increase in the number of vehicles covered by automobile insurance discounts for eco-friendly cars.

In the category of internal effects, the total economic effects amounted to a loss of about ¥50 million, down about ¥300 million from fiscal 2005. This result derived from the larger amount of documents handed to customers for explanation of Important Notice and revision of pamphlets, which drove up paper use costs and made the effects less than the environmental protection costs.

In the category of outside effects, the total economic effects came to ¥1.4 billion, down slightly from fiscal 2005. This was due to a decrease in donations from fiscal 2005.

CSRaccountingstatement

PrincipalbreakdownofCSR-relatedcostsandeffects(economiceffects)

CSR-related costs CSR-related effects (economic effects)

Social contribution and welfare activities(see page 27–28)

• Donations made with a social contribution or welfare purpose

• Maintenance and operation costs for Shirakawa Hall, etc.• Support for Smile Heart Club activities• Maintenance costs for sports promotion facilities

Internal effects• Income generated by providing facilitiesOutside effects• Amount of contributions and other donations, monetary value

of donated goods• Difference in usage rate for MSI Cultural Foundation tickets

and usual market rate

Ethics and compliance activities(see page 18)

• Personnel and physical expenses related to compliance activities

• Costs related to providing InterRisk Research Institute & Consulting’s ethics and compliance services

Internal effects• InterRisk Research Institute & Consulting’s sales related to the

provision of ethics- and compliance-related services

Environmental protection activities(see page 24–26)

• Pollution control, environmental protection, and resource recycling costs

• Automobile insurance discount for eco-friendly cars• Costs related to providing InterRisk Research Institute &

Consulting’s environmental services• Costs related to installing and operating environmental

management systems• Costs related to planting trees on the roof of the

Surugadai Building• Costs related to promotion for eco-inspections and eco-

maintenance

Internal effects• Amount of reduction in energy consumption costs• Amount of reduction in sewage and waste treatment costs• Sales related to provision of InterRisk Research Institute &

Consulting’s environmental servicesOutside effects• Resource consumption reduction effects of special coverage

for automobile insurance (Automobile Physical Damage Excess Repair Expense Optional Policy, Property Damage Excess Repair Expense Optional Policy)

ItemCSR-related costs

CSR-related effects

Internal effects Outside effects

Economic effects Other effects

Economic effects Other effectsFY 2005 FY 2006 FY 2005 FY 2006 FY 2005 FY 2006

Social contribution and welfare activities 1,390 1,19 2 53 54 953 767 Table on page 36, (1)

Ethics and compliance activities 3,462 4,720 177 206 Table on page 36, (2) — —Environmental protection activities 4,291 4,715 20 (305) 588 673 Table on page 36, (3)

Common 79 66Total 9,222 10,693 250 (46) 1,541 1,440

To compare costs and effects, it is necessary to take into consideration other effects for which monetary conversion is not possible.

Unit:¥million

CSR accounting

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PrincipalbreakdownofCSR-relatedeffects(othereffects)

[Reference index] CSRV: CSR value (contribution to corporate value)From the standpoint of brand image maintenance and improvement, we believe that CSR initiatives contribute to stable and sustainable growth for future profits in our economic and business activities. However, we cannot numerically measure this value by comparing the costs and effects on the CSR accounting statement. CSRV is key in converting the intangible value generated by CSR activities

CSRV: Contribution to corporate value

Estimated corporate value generated by CSR activities ¥73.5 billion

[Reference] Distribution among stakeholders and relationship with CSR accountingThe CSR accounting statement for MSIG focuses on three areas; social contribution and welfare activities, ethics and compliance activities, and environmental protection activities. For social contribution and welfare activities and environmental protection activities, the calculation costs and their relationship with the economical effect

(distribution amount) on our various stakeholders is approximated in the table below.

However, we cannot measure the importance of our various stakeholders by the monetary values associated with them in this table.

FY 2005 FY 2006 Principal items

Distributed capital

Customers 13,328 13,250 Netpremiumswritten

Others 367 714 Investmentincome(expenses),provisionforunderwritingreserve,andotheradjustment

Total 13,695 13,964

Distribution amount

Customers 7,873 8,286 Netclaims,provisionforoutstandingclaimsAgents 2,199 2,13 9 AgentfeesExecutives and regular employees 1,466 1,4 7 2 Personnelcosts

Business partners (contractorsandsuppliers) 1,032 1,1 1 1 Non-personnelexpenses,reinsurancefees

Local communities and the international community

Taxes 420 343 Incometaxes,taxesandpublicchargesSocial contribution 14 12 Socialcontributionandwelfarecosts(pleaseseethe

CSRaccountingstatement)

Environment 43 47 Environmentalprotectioncosts(pleaseseetheCSRaccountingstatement)

Shareholders648 554

Netincome(shareholder dividends) 185 198

Total 13,695 13,964

CSR-related effects (other effects)

(1)Social contribution and welfare activities(see page 27–28)

Outside effects expected as a result of the following activities• Donation of courtesy products for shareholders, etc.• Smile Heart Club activities• Popularization and support of women’s judo and women’s track and field as sports promotion activities

(2)Ethics and compliance activities(see page 18)

Internal effects expected as a result of the following activities• Reinforcement of investigations for legal violations and other measures related to compliance through an increase in the

staff of the Compliance Department• Tightening of compliance system through implementation of various training for employees and agents• Performance of tests with agents to confirm their thorough understanding of laws and regulations• More rigorous monitoring through patrols to check the execution of compliance programs at sales and claims handling sites

(3)Environmental protection activities(see page 24–26)

Outside effects Reduction of energy consumption• Electricity usage volume 4,009 MWh• Gas usage volume 78,904 m3

• Heat supply usage volume 473 GJ• Gasoline usage volume 253 kl• Water usage volume 5,239 m3

• Paper usage volume –2,122 tons

Reduction of atmospheric emissions (from report and data based on the Automobile NOx/PM Law)

• Nox 159 kg• Particulate matter (PM) 6 kg

Reduction of emissions into water and soil 933 m3 Reduction of emissions of waste 186 tons

into a quantitative value and estimates corporate value created by CSR activities, using as a reference the brand valuation model laid out by the Ministry of Economy, Trade and Industry’s Committee on Brand Value Evaluation.

Unit:¥billion

*Because of the difficulty of making an exact calculation for each stakeholder category, the table was prepared by a simplified method based on figures in non-consolidated profit/loss statements. The “others” category presents totals for items that could not be placed into one of the stakeholder categories.

CSR accounting

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Third-party opinionMs. Yukiko FuruyaBoard Member, Chairperson of the Consumer-oriented Management System Special CommitteeNippon Association of Consumer Specialists

Ms. Furuya was certified as an advisory specialist for consumers’ affairs by the Minister of International Trade and Industry (the current Minister of Economy, Trade and Industry) in 1988 and as a senior risk consultant by the Risk Managers and Consultants Association of Japan in 1998. She has been in her current position since 2004. Since 2003, she has concurrently served as the chairperson of the Consumer-oriented Management System (COMS) Special Committee and the chairperson of the Publicity Committee. Since 2004, she has been a member of the Japanese ISO committee on social responsibility (SR). She has an extensive background in consulting, lectures, and publications in the areas of CSR, CS management, and compliance-oriented management.

(6) I would also approve of the measures taken in an attempt to correct the prevailing problem of CSR reports going largely unread by consumers because of their length and depth. I am referring not only to the reduction of the information presented in order to make the report easier to read, by leaving more detailed information to the corporate website and other sources, but also to the publication of the CSR Report leaflet with shorter descriptions of action for improvement.

(1) Even after reading the report, I felt unconvinced with regard to placement of the MSIG Charter on Professional Conduct at the foundation of activities for business improvement in response to the administrative measures in June 2006. The Charter was adopted in October 2004, some two years before, and I wonder whether it is really grounded in the customers’ viewpoint. As I see it, this is a discrepancy that is not cleared up by the report.

(2) Although the report is not an in-depth publication on the subject, I think it should nevertheless provide information on matters with a bearing on trust among partners and benefit to consumers, such as the MSIG Charter on Professional Conduct, typical complaints and MSI’s response to them, results of the examinations by the Claims Payment Examination Council, and in-house rules for product development. I recommend that rules should be made for disclosure of such information to consumers.

(3) The text on agents is essentially confined to the basic aspiration to have them trusted by customers, like MSI itself. Enhancement of quality at agents is indispensable for improving the business quality at MSI. I got the impression that there was a lack of clarity about problems in approaches for agents. I would like to see a reconfirmation of these problems and redoubling of efforts to improve quality at agents.

Issues and requests

(1) In sections on approaches to business improvement, the report presents the facts of and response to premium-related errors uncovered in its own voluntary investigation, apart from the problems cited in the administrative measures.

(2) It also presents specific details about the revision of all business processes from the customers’ viewpoint. The distinction between “Tozen (desirable) quality”and “Kando (outstanding) quality”, articulation of each level, and action to ultimately deliver the latter as well as the former struck me as a good-faith approach.

(3) Items such as the explicit statement of policy on the handling of complaints, examples of improvements that were made in response to customer feedback, and other concrete descriptions of MSI measures should bring its approaches from the customers’ viewpoint home to consumers.

(4) The incorporation of external perspectives into the systems for corporate governance and product development also deserves high marks as a step to further deepen the customers’ viewpoint. The Association to which I belong (noted above) likewise offers MSI advice from a third-party standpoint for preparation of materials that are easy to understand and contain all appropriate information, for presentation to customers at the time of sales. As such, I have a good understanding of MSI’s stance and approve of it.

(5) I would give MSI very high ratings for setting up a system for the filing of objections about claims payment to a third party. This is a step of support for consumers in consideration of their liability to incur disadvantage because of their lack of professional knowledge about insurance and their weakness relative to the corporate side. I regard it as providing effectiveness of proper claims payment.

CSR Report 2007 presents a special feature on the approaches being taken to improve the business process and enhance quality following the administrative measures in June 2006. In my opinion, it adequately delivers the message that MSI has gone back to the basics and is striving for improvement in the wake of the action. The present positive points, issues and requests concerning MSI’s approaches and the CSR report are shown below.

Positive features

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MSI comment

year. On the other hand, for this report, upon repeated discussion on how to convey specific CSR activities to our stakeholders, we gave precedence to a readable length and comprehensible content. In our selection of information disclosure media and content, we consider things from a variety of standpoints, but did not fully note the particulars, as was observed by Ms. Furuya. We intend to continue examining such issues while listening to what all concerned have to say about them.

Improvement of the business quality at agents, which are the direct contact points with customers in product sales, is a vital key to enhancing corporate quality in the entire Group. We are determined to fully achieve this objective through sure execution of the “basic insurance cycle at agents”.

Shiro FujiiGeneral Manager, Corporate Planning Department

Mitsui Sumitomo Insurance Company, Limited.

In response to the administrative measures, we took to heart the opinions of our customers, agents, employees, and other stakeholders, revised our setups for operation of our business from the customers’ viewpoint, and formulated New Challenge 10. As was mentioned by President Egashira in his message, the CSR-oriented management targeted by MSIG lies in efforts to enhance corporate quality, build confidence, and link the trust from society to additional growth. While there remain many tasks to be addressed, I think our approach of breeding understanding of the top priorities for quality improvement and stimulating efforts to that end by each and every employee constitutes a significant step.

On the subject of information disclosure, we began providing information through the Internet this fiscal

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MitsuiSumitomoInsuranceandMitsuiSumitomoKiramekiLifeInsuranceparticipateinthe‘TeamMinus6%’project,anationalcampaign

ledbytheJapanesegovernmenttopreventglobalwarming.