shaping tomorrow change &...

MERITZ INSURANCEANNUAL REPORT 2008

Shaping TomorrowChange & Innovation

Founded in 1922 as Korea's first non-life insurance

company, Meritz Insurance has been striving to contribute

to the happiness of its customers and the welfare of society

for the past 87 years. Since our investors and customers are

the reason for our existence, we continue to place our effort

on achieving a steady growth in profitability through a

differentiated strategic management approach.

Through continuous change and innovation, Meritz

Insurance's strong fundamentals enabled it to receive

excellent ratings from global credit agencies. The Company

received “A3” from Moody's for 3 consecutive years and “A-

“ from AM Best for 2 consecutive years. We have vowed to

become the “Strongest Underwriting Company” in 2009.

As it relates to underwriting, which is essential to the

insurance industry, we will establish ourselves as the most

competitive insurance company, while continuously pushing

ahead with our effort to equip ourselves with a

differentiated “Product Factory” that is capable of

developing new innovative products. This is because

adhering to the essentials of the insurance is Meritz

Insurance's responsibility to its customers. Through a

differentiated profitability-based management approach to

realize innovative growth and enhance customer &

shareholder value, we are continuously growing as a

leading company.

Table of contents 01 Working for Client's Success

02 Financial Highlights

04 CEO Message

06 2008 at a Glance

Puts Sights on Tomorrow12 Business Overview

Auto Lines

Long-term Lines

Commercial Lines

Investment Management

Risk Management

AIMS TO BE THESOLIDUNDERWRITINGCOMPANY

Corporate Information88 Corporate History in Brief

89 Accolades & Awards

90 Board of Directors

91 Organization

92 Credit Ratings

93 Corporate Data

Prepare for Tomorrow24 Management’s Discussion & Analysis

32 Independent Auditors’ Report

33 Financial Statements

38 Notes to Financial Statements

87 Internal Control Over Financial Reporting Review Report

02 MERITZ INSURANCE ANNUAL REPORT 2008

Financial Highlights

FY2008 FY2007 FY2006

Key figures

Earned premium 2,609,777 2,266,929 1,895,554

Direct premium written 2,896,411 2,534,045 2,180,156

Net premium written 2,631,368 2,291,007 1,943,111

Incurred Losses 2,152,938 1,788,425 1,538,488

Net operating expenses 683,490 542,101 461,302

Increase in catastrophe reserve (a) (40,238) 13,581 11,721

Operating gains (186,415) (77,179) (115,957)

Operating income on investment 106,159 179,176 159,209

Total gain from operation (80,256) 101,997 43,252

Non-operating income 1,779 (1,067) 983

Net income (b) (58,815) 71,148 35,793

Adjusted net income (a+b) (99,053) 84,729 47,514

Total asset 5,265,467 4,564,535 3,747,770

Invested asset 4,138,331 3,623,989 3,000,362

Non-operating asset 1,127,136 940,546 747,408

Total liabilities 4,839,824 4,108,386 3,487,682

Total shareholder's equity 425,643 456,149 260,088

Adjusted shareholder's equity 531,449 602,193 392,551

Loss ratio 82.5% 78.9% 81.1%

Expense ratio 26.2% 23.9% 24.3%

Combined ratio 108.7% 102.8% 105.4%

Net investment yield 2.8% 5.6% 5.9%

Adjusted ROE (16.1%) 18.6% 13.7%

Solvency ratio 189.9% 235.8% 170.4%

Stock information

BPS(KRW) 4,293 4,864 4,575

PBR(X) 0.9 1.9 1.7

EPS(KRW) - 684 554

PER(X) - 13.2 13.7

Dividend information

Number of shares 123,800,000 123,800,000 85,800,000

Face value(KRW) 500 500 500

Dividend rate(%) 0.6% 2.5% 1.4%

Payout ratio(%) - 36.6% 22.2%

(Unit: KRW in millions)

03

Note:

1) Separate account asset included in non - invested assets

2) Adjusted shareholder's equity = Shareholder's equity + Catastrophe reserve

3) Adjusted ROE = Adjusted income / {(Adjusted shareholder's equity of

current year + Adjusted shareholder's equity of previous year) / 2}

Total assets Key ratio

KRW in billions

20063,748

200613.7

200718.6

-16.12008

2006105.4

2007102.8

2008108.7

2006170.4

2007235.8

2008189.9

20074,565

20085,265

Direct premium written

Long-term

Net income

KRW in billions KRW in billions

%

20062,180

200636

200771

-592008

20072,534

20082,896

Auto Commercial

16.2%16.2%

35.5%

98.8%

-182.7%

14.3%

20.5%21.8%

15.4%

Solvency margin ratio

Combined ratio

Adjust ROE


CEO Message

Myung Soo, Wohn / Vice Chairman & CEO

Direct premium written stood at KRW2.9 trillion, a 14.3% growth over the previous year,

which was a 3.8%p higher growth than the average industry growth rate of 10.5%.

As a result, our market share increased to 8.5%, a 0.3%p increase over fiscal 2007.

What was most encouraging was that our overall growth pattern consisted of the long-term

insurance sector leading our growth.

As the CEO of Meritz Insurance, before conveying my salutations to all our shareholders, I would like to apologize for our performance in

fiscal 2008. Since we ended fiscal year 2008 with a deficit, we were not able to provide year-end dividends. For this, I am truly sorry.

We started-off the year with great hope to achieving our targets by utilizing the strong foundations and growth that we had

diligently achieved over the past 3 year after declaring our “Second Founding” in 2005. However, as we faced the unprecedented

global financial crisis during the second half of 2008, we experienced many difficulties. With a heavy burden on my chest, I will try

to discuss our fiscal 2008 management results. I will start-off with the financial section, concentrated on key management

performances. Direct premium written stood at KRW2.9 trillion, a 14.3% growth over the previous year, which was a 3.8%p higher

growth than the average industry growth rate of 10.5%. As a result, our market share increased to 8.5%, a 0.3%p increase over

fiscal 2007. What was most encouraging was that our overall growth pattern consisted of the long-term insurance sector leading

our growth. The long-term insurance sector, considered a future growth engine, achieved significant growth in fiscal 2008.

On the back of our revenue growth, total assets recorded KRW5.3 trillion, a 15.4% increase compared to that of fiscal 2007.

By achieving total assets in excess of KRW5 trillion, it opened a new era for Meritz Insurance. Even despite the growth in

revenues, we were adversely affected by the global financial crisis, bankruptcies in the shipbuilding industry, and overseas

asset quality deterioration during fiscal 2008. The Refund Guarantee (RG) loss affected the underwriting income, while

overseas asset quality deteriorations substantially affected our investment income.

As a result, the Company recorded a KRW58.8 billion net income loss in fiscal 2008. I take full responsibility and apologize for these

results. The Company is preparing itself for a better future after 2009 by completely cleaning up all bad assets in 2008.

05

We provisioned KRW181.7 billion for the RG exposure and wrote-off KRW60.2 billion from overseas

investments. Especially as it relates to RG, we provisioned for potential outstanding losses from RG claims

(including potential interest) by converting it into Korean Won, based on the foreign exchange rate as of the end

of March 2009. This decision was based on management's selection and strong conviction that a company's

existence is linked to “Sustainable Management,” which is an integration of the “Transparent Management”

and “Going Concern” concept. The Company will of course continue to place its effort on minimizing losses.

Next, our management results from a non-financial perspective.

First, from a customer satisfaction perspective, we achieved substantial results in 2008. We received

the “Overall Grand Prize” from the Customer Satisfaction Management Evaluation sponsored by KMA

in 2008. In addition, we received level 1 from the Financial Supervisory Services' (FSS) Civil Affairs

Evaluation for 3 consecutive years.

Furthermore, although it was a difficult year for everyone, “Share Management” brings about a new

meaning. As a result, all our employees and management have tried to fulfill their obligation to society as a

mature corporate citizen by participating in diverse social voluntary activities. Although Meritz Insurance recorded a loss in fiscal 2008,

fiscal 2009 will not be a gloomy year. Rather, we learnt a very painstaking lesson due to a slowdown. By eliminating all uncertainties, we

plan to take a bigger leap forward. Our basic stamina and profit-based management fundamentals have not been harmed in anyway.

As such, we are showing improvements every year. After 2005, we have continuously stabilized our combined ratio, which is a

combination of the loss ratio and expense ratio. This can be better understood and realized if the one-off factors are excluded.

If you exclude the one-off factors such as the RG loss and overseas investment write-offs, the net income of a negative KRW58.8 billion

comes to a positive KRW99.6 billion. This result significantly exceeds the KRW71.1 billion net income achieved in 2007, the highest in

the company's history. Excluding the one-off factors, the fiscal 2008 net income exceeded the fiscal 2007 net income by KRW28.5 billion.

The corporate health of the Company continues to improve with the combine ratio decreasing by 1.1%p to 101.7%. Utilizing the ever-

improving corporate health, we should concentrate on what we do best, which is “Insurance” to establish the “Solid Underwriting

Company.” By lowering the combined ratio to below 100%, we will achieve the highest Underwriting Margin in the industry. We will not

be discouraged or frustrated. We will stand-up and progress forward. No, we are progressing forward.

To convey our gratitude to our shareholders, all our employees and management will re-arm ourselves as one to leap forward. I am

confident that we will be able to successfully achieve our objectives in fiscal 2009. To this end, I would like to emphasize that we

are capable and competent to fulfilling our obligations to our shareholders.

Thank you.


2008 at a Glance

ESTABLISHED MERITZ ASSET MANAGEMENTIn preparation for the enforcement of the Integrated Capital Market Act, we established Meritz Asset Management Co., Ltd. on

May 2008 to maximize our asset management capabilities through the asset management expertise and know-how accumulated

over the years. By establishing Meritz Asset Management, we are able to create synergies within the Meritz Financial Group

since Meritz Asset Management is managing all of Meritz Insurance's assets, while the management of trust assets under Meritz

Investment Bank was transferred to Meritz Asset Management. Meritz Asset Management is a 100% Meritz Insurance owned

company with a capital of KRW10 billion. The Company's main office is located at Yeoido, Seoul. Meritz Asset Management is

managed under a vision of “Opening the Customers' Happiness as an Enriching Financial Partner.” The Company currently has 4

divisions and 10 teams. As of the end of fiscal year 2008, the year of the Company's establishment, Meritz Asset Management'

account balance at trustee recorded KRW321.9 billion and a net income of a negative KRW1.5 billion.

ESTABLISHED MERITZ FINANCIAL INFORMATION SERVICEMeritz Financial Information Service Co., Ltd. was established on April 2008 to enable us to manage our IT organization flexibly

and to reduce IT related costs through economies of scale. In addition, by improving work processes through the ITSM

(Information Technology Systems Management), a superior IT service operating system, we are able to enhance our customers'

investment value and maximize efficiencies and synergies of our IT resources when we establish a holding company in the future.

Meritz Financial Information Services is 100% owned by Meritz Insurance and has a capital of KRW1 billion. The Company

currently has 3 divisions and 10 teams. The Company operates the SM (System Management), SI (System Integration) and service

businesses, while carrying-out outsourcing IT services for the four Meritz Financial Group companies: Meritz Insurance, Meritz

Securities, Meritz Investment Bank, and Meritz Asset Management. As of the end of fiscal year 2008, the Company had KRW3.8

billion in total assets and recorded a net income of KRW1.3 billion.

07

ASSET REVALUATIONIn fiscal 2008, to secure asset soundness, we initiated an asset revaluation of our real estate properties, which is part of our tangible

assets. This resulted in a valuation gain of approximately KRW235.7 billion, which was reflected on our balance sheet. The valuation

gain increased our solvency margin ratio by 72.5%p. This enabled us to secure sufficient provisions for insurance payments to our

customers. It also enabled us to concentrate our competencies on marketing. As of the end of March 2009, we have been able to

maintain our solvency margin ratio at a stable 189.9%.

TOP RANKING FOR 3 CONSECUTIVE YEARS IN FSS' CIVIL AFFAIRS EVALUATION Since 2002, the Financial Supervisory Services (FSS) carries out Civil Affairs Evaluation evaluations on about 79 financial

institutions segmented into 5 sectors, banking, credit card, life insurance, non-life insurance and securities. The Civil Affairs

Evaluation evaluation is to encourage financial institutions to voluntarily prevent customer complaints and to provide financial

consumers select information on the financial institutions.

Meritz Insurance continues to provide customer satisfaction and maintain a management approach catered towards customer

satisfaction. As a result, we achieved a high score of over 90 points on average in three categories which include the number of

customer complaints, nature of complaints and effective resolution of complaints. This provided us with the honor of being rated as

a “first class” insurance company in the non-life insurance sector. We achieved this honor 3 years in a row: 2006, 2007 and 2008.

This was the result of all our employees and management focusing their efforts on protecting

customer interests by minimizing customer complaints, aggressively resolving even trivial

customer complaints, and thoroughly analyzing the type of complaints by our major

customers and improving our work process to resolve these complaints. The results

from the FSS and our efforts are why customers are selecting us and enabling us to

earn their confidence.

Meritz Insurance was rated as a "First Class"

insurance company in the non-life insurance

sector for 3 consecutive years by the

Financial Supervisory Services (FSS).


2008 at a Glance

CORPORATE SOCIAL RESPONSIBILITYBy including “Sharing Management” as one of its 5 management principles, Meritz Insurance continues to actively carry-out

Sharing Activities. In 2008, we concentrated our efforts on social voluntary activities for children, disabled and local societies.

Through these activities, 2008 was a year where we were able to further strengthen our “Sharing Management” activities.

First, with a sense of responsibility to providing financial education that will help lead our future, we supported an “Economic

Camp” and “On-site Financial Learning Experience” for children in remote island areas. We also sponsored the Child Fund Korea's

“Happy School.” We actively support low income children so as not to lose the opportunity to learn.

In addition, through a Sharing Fund, which is a Matching Grant, we carried-out diverse Sharing activities related to children by

supporting the Korea Childhood Leukemia Foundation and The Korea Heart Foundation, and the Mothers' Breast Feeding

Campaign promoted by UNICEF to help children grow healthy. We also provided scholarships to children of traffic accident victims

and held various cultural activities for them. We helped sponsor a “Happy Children's Day Experience Event” with children from

the World Vision's Seongnam Social Welfare Center.

Meritz Insurance continues to be a strong friend to the disabled by providing food and bath and helping in the cleaning effort by

visiting the Holt Ilsan Center every month. We also helped sponsor the “Spiritual Sounds,” a choir consisting of the disabled from

Holt. We further shared our love through marathon and walking events for the mentally disabled. Throughout the event, each

mentally disabled is assisted by an employee hand-in-hand. A “One Day Treatment Camp” was also held for disabled children.

09

Finally, we held a “Merry Meritz Concert” in Seoul, Bucheon, Jeonju, Changwon, Daejeon and Ulsan to provide comfort for

regional citizens from their daily lives through melodies from a cappella and orchestra. We helped vitalize the farming economies

by providing a helping hand through voluntary farm support activities during the busy farming season. This provided great

encouragement to the farming communities.

All Company employees and insurance agents participated in a “Beautiful Saturday” program where donated goods were sold off

to generate funds for our neighbors in need. We provided support to local communities by holding a “Love Briquette Delivery”

event so that low income families can spend a warm winter.

Meritz Insurance will continue to provide society with hope through active participation in charitable activities. We will move

forward step-by-step to reach out to our neighbors. We will further place our effort to creating a society where everyone is able to

laugh without pain.

By including "Sharing Management"

as one of its 5 management principles,

Meritz Insurance continues to actively

carry-out Sharing Activities.

AM best assigned the Company

“A-(Excellent),” in recognition of its stellar

performance, in FY2008.

PPuuttss SSiigghhttss oonn TToommoorrrrooww

In FY2008, the loss ratio rose to 82.5% from 78.9%, which led to combined ratio

deterioration to 108.7%. This was mainly due to commercial lines loss ratio 189.9%.

We eliminated all uncertainties, such as refund guarantee exposures. The auto and

long-term lines' loss ratios improved 4.3%p and 3.8%p respectively, standing at

69.9% and 78.8%.

FY2008 Auto Direct Premium Written

726.7KRW in billions

G / R

6.0%


Business Overview

Performance by Line

AUTO LINES

● Review of FY2008

In FY2008, the domestic market for auto insurance recorded a 1.3%

growth to KRW10.9 trillion. This low level of growth was mainly

due to the slowdown in automobile sales as a result of the difficult

economic and financial environment. Despite the slow growth in

the domestic Market, we were able to record a 6.0% growth to

KRW726.7 billion in direct premium, while securing a market share

of 7.0%, a 0.4%p increase from the previous fiscal year.

● Outlook for FY2009

The domestic auto insurance market is expected to decrease by

2.4% to KRW10.7 trillion in FY2009. We believe this to be the

result of a slowdown in new automobile sales due to the economic

stagnation, and the reduction in premium rates. In FY2009, we

expect to grow the auto insurance by 1.8% to KRW740 billion.

Although difficult, we will achieve this by strengthening our

productivity and efficiencies, while further concentrating on online

auto insurance sales.

● Marketing Strategy for FY2009

Our marketing strategy is focused on sustainable growth and

achieving operating profits by establishing an optimal business

portfolio catered towards the auto market. In greater detail, we

plan to optimize our channel P/F by improving the AG channel

profitability, enhancing the branch channel productivity, and

increasing online channel sales, while optimizing our local P/F

through sustainable growth of our existing top ranking clientele,

and reduction of our “watch” clientele. To secure top ranking

customers, we will aggressively target the following: i) type 3

high-occupancy vehicle with a good L/R, ii) 1,000cc to 1,600cc

vehicles driven by the 28~42 age group, which is expected to grow

due to the recession, and iii) commercial dump trucks that provide

significant sales potential. In addition, we will establish

efficiencies in the expenditure by managing the premium payment

through credit cards.

We plan to optimize our channel P/F by improving

the AG channel profitability, enhancing the branch

channel productivity, and increasing online channel

sales, while optimizing our local P/F through

sustainable growth of our existing top ranking

clientele, and reduction of our "watch" clientele.

13

UNDERWRITING MANAGEMENT


In FY2008, the auto insurance sector recorded a 3.3%p

improvement to 69.6% compared to the previous fiscal year. This

was the result of adjustments made to the insurance rate at the

appropriate time and the reduction in accident rates due to the

economic stagnation. As a result of our efforts to continuously

manage our loss ratio by improving our regional portfolio, our loss

ratio improved by 4.3%p to 69.9%


We project the loss ratio in the domestic auto insurance sector to

worsen by 2.9%p to 72.5% due to the increase in cost of insurance

and accident rates. However, our loss ratio target for FY2009 has

been set at 70.0% in the auto insurance sector. We plan to achieve

this through continuous on-site management and a strategy based

on differentiating and enhancing efficiencies of our underwriting

practices.

● Underwriting Strategy for FY2009

In FY2009, we will improve our loss ratio by differentiating our auto

insurance by delinquent and excellent customers, while

concentrating on cost efficiencies. Our strategy to improve our

profitability will be through strengthening our underwriting

practices, securing system stability and enhancing applications.

In addition, improving the soundness of our portfolio through a

system of categorizing insured vehicles based on regional

characteristics will contribute to the stabilization of the auto

insurance loss ratio. We also plan to stabilize our profits through

differentiation and efficiency enhancements. To achieve this, we

will differentiate our underwriting practice by analyzing the

profit/loss by group and solicitor, and by establishing a rational

method to improving the loss ratio through the introduction of our

sales profile.

(Unit : KRW in billions, %)

Meritz Insurance Industry

FY08 FY09(e) FY08 FY09(e)

Direct Premium

Written 726.7 740.0 10,923.0 10,673.7

G/R 6.0 1.8 1.3 △2.4

M/S 7.0 6.9 - -

L/R 69.9 70.0 69.6 72.5

Auto line premiumKRW in billions

2007685.5

2008726.7

2009740.0

To enhance competitiveness, we will concentrate

on managing three product areas we have a

competitive advantage in, which are whole life

insurance/combination-type insurance,

driver's insurance and children's insurance.

Long-term line premiumKRW in billions

20071,552.8

20081,849.6

20092,156.2


Business Overview

LONG-TERM LINES


The domestic long-term insurance sector recorded a growth of

16.7% compared to the previous fiscal year to KRW20 trillion due

the continued growth in indemnity and health insurance and

expansion in Agency channels.

Meritz Insurance also recorded a substantial growth of 19.1% to

KRW1.8 trillion as a result of the continuous growth in protection-

type insurance sales, and significant increases in agency channels.

This growth rate was 2.4%p higher than the industry growth rate,

enabling us expand our market share by 0.2%p to 9.2% in FY2008.


The domestic long-term insurance sector is projected to realize a

16.0% growth to KRW23.2 trillion in FY2009 resulting from the

growth in insurance premiums due to the increase in new

contracts.

As for Meritz Insurance, our long-term lines are expected to

achieve a 16.6% increase to KRW2.2 trillion in direct premiums for

FY2009. This will mainly be due to our growth strategy centered on

a good risk. Market share is projected to increase by a slight

0.1%p compared to the previous fiscal year to 9.3%.


The protection-type insurance will lead the domestic long-term

insurance sector in FY2009. To enhance competitiveness, we will

concentrate on managing three product areas we have a

competitive advantage in. The three product areas are whole life

insurance/combination-type insurance, driver's insurance and

children's insurance. We will also target the middle- to high

income consumer group and continue the diversification of our

channels to expand our market share. To expand into new markets

and establish a future growth platform, Meritz Insurance will take

pre-emptive measures to overcome the changing environment,

enabling the Company to strengthen its ability to lead the industry

in areas such as the aging (elderly) market.



The loss ratio for domestic long-line insurance sector is expected

at 82.4%, a 0.7%p improvement over the previous fiscal year.

As for Meritz Insurance, FY2008 loss ratio improved by 3.8%p to

78.8% stemming from the Company's protection-type insurance

coverage focused marketing policy and growth strategy

concentrated on good risk. The risk premium loss ratio increased

by 3.5%p to 80.6% compared to FY2008 as a result of increased

loss ratio of life benefits. such as actual medical expenses and

daily allowance. The mortality profit increased by KRW8.3 billion

to KRW66.4 billion due to the continuous growth of risk premium.

FY2008 Long-termDirect Premium Written

1,849.6KRW in billions

G / R

19.1%

15


The domestic long-term insurance sector loss ratio is projected to

improve by 0.1%p to 82.3% over the previous fiscal year.

With the continuous improvements carried-out in FY2008, Meritz

Insurance's the loss ratio for its long-term line insurance is expected

to improve to 2.1%p to 76.7% in FY2009. The risk premium loss ratio

in FY2009 is projected to maintain a stable growth trend resulting

from continued diversified portfolio management and Profile

marketing based on underwriting gains. Accordingly, we expect the

risk premium loss ratio to maintain a level similar to FY2008 at

80.9%. As a result, mortality profit and loss is projected to improve

by KRW19.0 billion to KRW85.4 billion in FY2009.


By simultaneously managing the coverage customer portfolio and

channel/Product portfolio, Meritz Insurance will be able to realize

underwriting gains now, while expanding its stable profitability

platform for the future.

Due to the global financial crisis in FY2008, the decrease in market

liquidity not only reduced our persistency ratio, but it also reduced

the entire industry's persistency ratio. In FY2009, the Company plans

to set and manage a higher persistency ratio compared to FY2008 by

strictly managing the complete sales ratio, expanding the evaluation

of the persistency ratio to all our branches, and adjusting upwards

the persistency ratio management level.

Through these initiatives, we will not only achieve our direct

premium revenue, we will also establish a stable platform for long-

term growth in revenue and profitability. We will establish a profile

sales structure to search and expose good risk through diverse

aspects such as pricing, product, underwriting and claim adjustment

by emphasizing the strengths of the LOB organization. Through

regular monitoring and sounding the alarm based on profitability

management scenarios, we will not only be able to achieve our

profitability targets, we will also be able to convert our Company

into a solid underwriting company by expanding its growth engine

on a medium- to long-term basis and by strengthening the

Company's fundamentals.




Direct Premium

Written 1,849.6 2,156.2 19,987.7 23,196.4

G / R 19.1 16.6 16.7 16.0

M / S 9.2 9.3 - -

L / R 78.8 76.7 82.4 82.3

Risk Premium L/R 80.6 80.9 - -

FY2008 CommercialDirect Premium Written

320.0KRW in billions

G / R

8.2%


Business Overview

COMMERCIAL LINES


Despite the negative growth in property insurance and engineering

insurance, the domestic commercial market for commercial

insurance was able to realize KRW3.8 trillion in revenues, which

was an 11.2% growth over the previous fiscal year, due to the

growth in liability insurance, group personal accident insurance,

and marine insurance.

Meritz Insurance also witnessed a drop in revenues from fire and

engineering nsurance. However, with the continuous growth in

liability and group accident insurance, and growth in marine

insurance due to the increase in construction of ships along with

the increase in exports and imports during the second half of 2008,

the direct premium of the commercial insurance increased by 8.2%

to KRW320 billion, while achieving a market share of 8.4%.


Although the fire, engineering and marine hull insurance is

expected to show a slowdown due to the global economic

stagnation, the domestic commercial line insurance is projected to

realize a 2.6% growth to KRW3.9 trillion. This growth is expected

to stem from the expansion of the group accident insurance as part

of corporate's welfare benefit, increase in liability insurance,

growth in other casualty insurances, and decline in rate reduction

due to the hardening of the reinsurance market from the soft

market which has been maintained for the past 5 years.

Despite the overall industry slowdown, Meritz Insurance expects

to achieve a 6.2% growth to KRW340 billion by concentrating on

strategic product groups such as liability insurance, general

property insurance, personal accidental insurance (group personal

accidental insurance) and package insurance. We're targeting a

market share of 8.8%.


The protection-type insurance will lead the domestic long-term In

the commercial line insurance sector, Meritz Insurance will

establish segmented targets by market, product and coverage in

FY2009. The segmentation of targets will be utilized for profile

marketing to achieve competitiveness by effectively utilizing our

resources. This will enable us to create an optimal revenue

portfolio in our profitability structure. In addition, rather than

concentrating on direct premium growth, we will place greater

emphasis on actual growth in retention profits on the back of a

stable and profitable market. To achieve this, we will first select

our core products, such as general property, accident and liability

insurance, and concentrate our marketing resources on these core

product sectors. The DFA (Dynamic Financial Analysis) system will

be utilized to flexibly deal with the changing environment through

profit-analysis of each product.

Despite the overall industry slowdown,

Meritz Insurance expects to achieve a 6.2% growth

to KRW340 billion by concentrating on strategic

product groups such as liability insurance,

general property insurance, personal accidental

insurance (group personal accidental insurance)

and package insurance.

17

Commercial line premiumKRW in billions

2007295.8

2008320.0

2009340.0



The industry's loss ratio for commercial lines in FY2008

deteriorated by 19.5%p to 74.3%. This was mainly the result of the

decrease in the tariff rates increase in price competition due to the

growth in competitive bidding, and appreciation of the foreign

currency and RG losses.

Meritz Insurance's commercial line insurance sector loss ratio also

witnessed a similar trend ending at 61.1% in FY2008.


The loss ratio of the domestic commercial line insurance sector in

FY2009 is projected to remain at the low 60% due to factors that

affected the loss ratio in FY2008.

However, with an underwriting strategy based on stability and

profitability, Meritz Insurance's loss ratio is expected to improve by

3.6%p to 57.5%, a substantial improvement than the projected

industry average.


Meritz Insurance plans to secure an optimal revenue portfolio for

its profitability structure through profile marketing that prioritizes

underwriting profits. By utilizing an optimal strategy for retention

and reinsurance, and managing risk appropriately, we will be able

to establish a stable underwriting platform. We will stabilize our

loss ratio by assessing and managing our risk through the C/R

scoring method, and diverse profit-analysis tools such as the DFA.

For risks that we can understand and analyze, Meritz Insurance

will underwrite those risks at appropriate price levels. This will be

achieved through a strong commitment to effectively implementing

our underwriting practices. The aggregated risk will continuously

be recognized and managed, while business practices that involve

moral hazards will be terminated at the outset.




Direct Premium

Written 320.0 340.0 3,750.0 3,875.0

G / R 8.2 6.2 11.2 2.6

M / S 8.4 8.8 - -

L / R 189.9(61.1) 57.5 74.3(63.3) 62.5

* Figures in ( ) have had RG losses excluded.

Note> In March 2009, the decrease in fixed income assets

and the increase in variable income assets was the

result of increases in stock related asset evaluation

due to increases in share price and not due to

actual investments carried-out.

Note> Fixed Income Asset: Deposits, Investment

Securities, Foreign Currency Bonds, Loans


Business Overview

INVESTMENT MANAGEMENT


In FY2008, Meritz Insurance's invested asset portfolio totaled

KRW4.1 trillion, a 14.2% increase over the previous fiscal year,

with generated investment revenues at KRW106.2 billion. The

investment yield stood at 2.8% at fiscal year's end.

The low investment yield stems from the stagnant performance of

the global stock market and the index linked performance assets

due to the global financial crisis caused by financial uncertainties

as a result of the U.S. subprime crisis. The bankruptcy of Lehman

Brothers resulted in the spread of credit risk, leading to the decline

in credit related NAV of assets, such as the CLN, and the

impairment losses incurred due to the decline.

To deal with the fast-evolving financial market, we turned our

focus from generating income, which was our operational

objective at the beginning of the year, to strengthening our risk

management. As a result, we divested assets that were expected

to be sluggish, such as performance assets and credit related

assets, including CLNs and CDOs. For those assets deemed

difficult to sell-off in the market, we initiated write-offs. Through

these efforts, we continue to secure asset soundness.

As for new investments, we concentrated on establishing a stable

income platform and minimizing volatilities to be able to realize

stable income despite sudden shocks in the market by turning our

focus towards assets providing fixed income such as domestic and

overseas bonds and loans.

Meritz Insurance operates a matching strategy that can flexibly

deal with the changing environment. We continue to implement a

duration matching strategy for special account assets and

liabilities. Since we expected the duration of annuity account

liabilities to increase, we changed our focus to investing in long-

term bonds.

● Investment Environment for FY2009

There is expected to be signs of a recovery in the global economy

in 2009 as a result of economic stimulus packages by each

country's government and the easing of monetary policies.

However the recovery itself is expected to be slow. As was the

case in the past financial crisis which was followed by an

economic stagnation, consumer demand is not expected to pick-up

easily due to the deleveraging in the financial markets and the

slowing down of consumption as a result of the worsening

unemployment situation. These factors will likely be an

impediment to a fast economic recovery.

08.3 08.4 08.5 08.6 08.7 08.8 08.9 08.10 08.11 08.12 09.1 09.2 09.3

88.0%

86.0%

84.0%

82.0%

80.0%

20.0%

18.0%

16.0%

14.0%

12.0%

Trend in the composition of fixed/Performance assets in FY2008

Performance asset(Right hand side)

Lehman Brothersbankruptcy (08.9)

Fixed income asset(Left hand side)

FY2008 Monthly Fixed Income Asset Investment Income

14.5KRW in billions

19

Due to the economic stimulus packages introduced by each

country, the global stock market increased by 30% from the lowest

level during March 2009, while the commodities market, such as

oil and raw materials, rebounded, causing the financial markets to

somewhat stabilize in early 2009. However, uncertainties still exist

regarding concerns of delinquencies in the U.S. housing market

and U.S. commercial mortgages. For these reasons, the global

economy will improve slightly compared to 2008, but it will be

difficult to expect a large scale recovery.

Market rates are expected to remain low for a certain period of

time due to liquidity supply policies as part of the economic

recovery measure. However, once there are signs of an economic

recovery during the latter half of 2009, interest rates are projected

to increase slightly. Accordingly, the interest rate is expected to be

within the 3-year treasury rate between 3.5~4.5% in FY2009.

● Investment Strategy for FY2009

The Company's invested asset return target for FY2009 is

KRW198.8 billion, an 87.1% increase of KRW92.6 billion, equal to

an investment yield of 4.6%. Starting in the second half of FY2008,

the Company increased its fixed income assets by concentrating on

bonds and loan assets of sound domestic companies. Through this,

Meritz Insurance plans to secure an income platform where it will

be able to generate approximately KRW15.5 billion in revenues

every month (KRW185.0 billion annually).

(Unit : KRW in billions)

March March FY2009 (e) Increase

2008 2009 (A) (B) (B-A)

Fixed Income Asset

Investment Income

(Monthly) 12.0 14.5 15.5 1.0

A.I. investments will concentrate on investments that provide a

minimum volatility in returns. Investments in high volatility

products such as performance based products will be curtailed,

while greater emphasis will be placed on products that provide for

greater returns that bonds within a limited risk level.

In case of loan assets, we will carry-out investments on a selective

basis focusing on sound products by strengthening the analysis of

the borrower's credit and evaluation of guarantees. We will

concentrate on generating profits and securing stability through

aggressive and efficient post-management of our investments.


Business Overview

RISK MANAGEMENT

● Role & Responsibilities of the Risk Management Division

Meritz Insurance classifies risks that may occur as part of its

business operations into 5 categories: insurance, market, credit,

interest rate and non-financial. For efficient management and

control of each individual risk, we established a Risk Management

Division (“Division”) on December 18, 2008.

The Division comprises of 3 teams. The Risk Management Team's

responsibility includes risk planning for the entire Company and

non-financial risks, while the Financial RM Team's role is to

manage financial risk stemming from assets and insurance.

Reputation risk is managed by the Public Relations Team. The

Division is responsible for the overall functions of risk

management which includes i) establishing risk management

policies, ii) operating the risk management system & measuring

the quantification of risk, iii) analyzing and reporting the overall

risk status, iv) supporting the decision-making process of the Risk

Management Committee & evaluating the status of the actions

taken on the decision made by the Risk Management Committee,

and v) improving the corporate image.

● Risk Management Committee

The Risk Management Committee (RMC) is comprised of three

directors: CEO and two non-executive directors with professional

financial backgrounds. In FY2008, the RMC held three formal

sessions in which major issues were deliberated and decided

upon. Major issues decided during the RMC sessions included the

setting of risk limits and hurdle rates, strategic asset allocation

(SAA), approval to renew special reinsurance contracts, long-term

insurance premium rate guideline, and enactment/revision of the

risk management regulations. Items that were reported to the RMC

included results of the risk assessment measures, plans to operate

the Risk Management Division & issues that need to be carried-

out, overall risk status analysis, operating structure and results of

the Investment/Lending Deliberation Committee and the LOB

Deliberation Committee, issues related to the control policies of

risk, and results of the credit review evaluation.

The RMC members' awareness of risk management is very high.

With a great interest toward risk management, the RMC members

are aggressively providing support to upgrade our risk

management to advanced levels and to establish a risk

management culture within the Company.

● Method for Measuring and Managing Risk by Type

Risk Risk Level Measurement Method Management Method

Market VaR(Delta Regular Method/SMC 99%, 10days) Measure risk on a daily basis & monitor risk limits

Credit MTM/DM method through the credit manager Measure risk on a monthly basis & monitor risk limits

Interest Rate Measure risk level through the Duration Gap Method Manage the duration matching by account

Insurance Measure insurance value and reserve capacity risk Monthly monitoring of limits and trend analysis

Non-financial Establish & manage non-financial KRI (Management Index) Risk Control Self Assessment (RCSA)

IntegratedIntegration of risks based on FSS' RBC standards Establish / monitor integrated risk limit

Management

21

After the start of the financial crisis, the importance of risk

management was further emphasized by management.

Management's determination towards establishing a risk

management system and overcoming the financial crisis can be

felt through various initiatives such as management placing

greater emphasis on the importance of risk management,

assessing asset soundness quarterly, thoroughly inspecting

existing contracts, and evaluating the reinsurance status and

initiating improvement measures.

● Strategy & Plans for FY2009

In FY2009, the Company will concentrate on enhancing corporate value

through a total risk management approach. We will overcome the

global financial crisis and establish a new platform for a new start. The

foundation of our business plan is to establish a “Solid Underwriting

Company.” To achieve this, what's more important is risk management.

We should not only simply initiate a high level financial risk

management, but we should also focus on strictly managing risks

stemming from the management of non-financial risks that are at the

bottom of the risk-chain and which affects the financial risk.

Meritz Insurance plans to concentrate on the following: i)

strengthen the LOB Deliberation Committee and Investment /

Lending Deliberation Committee structure to implement pre-risk-

management, ii) reinforce the management of asset/insurance

risks to ①immunize the Company from ALM Risk, ②strengthen the

assessment of individual risks, and ③fortify the management of

reinsurance underwriting, and iii) improve the management of non-

financial/operating risks to ①manage the Key Risk Indicator (KRI),

②establish a risk management culture, and ③strategically

disclose our reputation risk.

Through this, we need to make sure that the basic operation work

processes are perfect. We believe that to maximize shareholder

value, “Excellence in Operations” should be the underlying objective.

Our efforts regarding risk management are to secure a stable

revenue platform and improve our customer's confidence in Meritz

Insurance. We will continuously focus on establishing an advanced

risk management system.

● Risk Management Strategy & Plan

•Establish & Manage an Asset Portfolio

•Daily Monitoring of Asset Management

•Strengthen Credit Reviews

•Strengthen Strategic ALM Management

•Establish RAAS Improvement Methods &

Aggressively Deal with RBC Regulations

•Strengthen Underwriting Reviews

- Control by the LOB Deliberation Committee

•Strengthen Reinsurance Risk Management

•Establish & Manage KRI (Key Risk Indicator)

•Eliminate Risk Factors

•Assess Non-financial Risk Status

•Establish Risk Management Culture

•Strengthen Reputation Risk Management

•Initiate Management Support Activities to

Create a Quality Brand

Asset Risk

InsuranceRisk

Non-financialRisk

ReputationRisk

We will overcome the global financial crisis and

establish a new platform for a new start.

The foundation of our business plan is to establish

a "Solid Underwriting Company,"

by placing greater emphasis on risk management.

Since the declaration of our “second founding” in 2005,

Meritz Insurance has undergone a complete transformation,

as a result of the implementation of innovative

initiatives in key areas.

PPrreeppaarree ffoorr TToommoorrrrooww

For FY2008, Meritz's earned premium was up a healthy 15.1% over the previous

year, amounting to KRW 2,609.8 billion. Direct premium written grew 14.3% to KRW

2,896.4 billion. This was the result of the sound growth of high margin long-term

insurance products, which is primary growth engine.


Management's Discussion & Analysis

OVERVIEW

● Basis of Presentation

Management's Discussion and Analysis may contain forward-looking statements that are

provided to assist in the understanding of anticipated future performances and business plans.

However, such expectations of future performances and plans involve certain risks and

uncertainty that can cause actual results to differ materially from those expressed in the

forward looking statements, due to factors beyond the Company's control. The term

“Company,” used herein, without any other qualifying description, refers to Meritz Fire &

Marine Insurance Co., Ltd.

● FY2008 in Review

FY2008, which ended March 31, 2009, was a difficult year for the Company, as a result of the

global financial crisis, stemming from the US subprime mortgage crisis, which spread to the

real economy. The shipbuilding industry also faced many difficulties due to the overall

economic downturn, domestically and overseas. In addition, the global financial crisis

adversely affected the Company's investment in overseas securities.

Despite the adverse operating environment, the Company's gross premium increased by 14.3%

to KRW2,896.4 billion, well above the industry average growth rate of 10.5%. This enabled the

Company to expand its market share to 8.5%. This performance was also due to the increase in

high margin long-term insurance products which increased by 19.1%. As a result of the growth

in sales, the Company's total assets amounted to KRW5,265.5 billion in FY2008, surpassing the

KRW5 trillion mark.

In FY2008, the Company recorded a net loss of KRW58.8 billion due to one-off losses from

shipbuilding refund guarantees and overseas securities. During FY2008, the Company

concentrated on strengthening its financial structure and maintaining a sound financial asset

platform by cleaning up its bad assets. Although the Company's profit deteriorated, the

Company maintained its solvency margin ratio at 189.9% as of the end of FY2008. The margin

ratio placed the Company within the second highest group of non-life insurance companies in

Korea. This was despite the refund guarantee losses incurred by the Company.

25

INCOME STATEMENT SUMMARY

(KRW in billions)

FY2006 FY2007 FY2008

Earned premium 1,895.6 2,266.9 2,609.8

Direct premium written 2,180.2 2,534.0 2,896.4

Net premium written 1,943.1 2,291.0 2,631.4

Underwriting income (116.0) (77.2) (186.4)

Net Investment income 159.2 179.2 106.2

Non-operating income 1.0 (1.1) 1.8

Ordinary income 44.2 100.9 (78.5)

Tax expenses (benefits) 8.4 29.8 (19.7)

Net income 35.8 71.1 (58.8)

Adjusted net income 47.5 84.7 (99.1)

Loss ratio 81.1% 78.9% 82.5%

Expense ratio 24.3% 23.9% 26.2%

Combined ratio 105.4% 102.8% 108.7%

BALANCE SHEET SUMMARY

(KRW in billions)

FY2006 FY2007 FY2008

Investment assets 3,000.4 3,624.0 4,138.3

Non-investment assets 747.4 940.5 1,127.1

Total assets 3,747.8 4,564.5 5,265.5

Policy reserve 3,001.7 3,501.1 4,196.6

Catastrophe reserve 132.5 146.0 105.8

Other liabilities 353.5 461.3 537.4

Total liabilities 3,487.7 4,108.4 4,839.8

Capital stock 42.9 61.9 61.9

Capital surplus 29.0 237.2 234.4

Retained earnings 188.9 235.7 157.4

Capital adjustment (0.6) (78.7) (28.1)

Total shareholders' equity 260.0 456.1 425.6

Adjusted shareholders' equity 392.6 602.2 531.4

Solvency margin ratio 170.4% 235.8% 189.9%

Direct premium written(KRW in billions)

20062,180.2

20072,534.0

20082,896.4

Total shareholders' equity(KRW in billions)

2006260.0

2007456.1 2008

425.6



ANALYSIS OF RESULTS OF OPERATIONS

● Underwriting performance

(KRW in billions)

FY2006 FY2007 FY2008

Earned premium 1,895.6 2,266.9 2,609.8

Direct premium written 2,180.2 2,534.0 2,896.4

Net premium written 1,943.1 2,291.0 2,631.4

In FY2008, the Company focused on enhancing its financial soundness and eliminating

uncertainties in response to adverse business conditions. The majority of the underwriting

income was comprised of commercial, auto and long-term policies.

The Company's direct premium written grew 14.3% over the previous year, to KRW2,896.4

billion in FY2008. This was the result of the sound growth of high margin long-term insurance

products, which is the Company's primary growth engine. After two years of continuous

growth, the sales in growth slowed. However, sales growth continues to exceed the industry

average, which enabled the Company to secure a market share of 8.5% in FY2008.

DIRECT PREMIUM WRITTEN BY LINE

(KRW in billions)

FY2006 FY2007 FY2008 Change (%)

Commercial line 273.8 295.8 320.0 8.2

Auto line 671.5 685.5 726.7 6.0

Long-term line 1,234.9 1,552.8 1,849.6 19.1

Total 2,180.2 2,534.0 2,896.4 14.3

MARKET SHARE BY LINE

(%)

FY2006 FY2007 FY2008 Change (%p)

Commercial line 8.5 8.7 8.4 (0.3)

Auto line 7.3 6.6 7.0 0.4

Long-term line 8.6 9.0 9.2 0.2

Combined market share 8.0 8.1 8.5 0.3

By line, direct premium written on long-term insurance increased by 19.1% to KRW1,849.6 billion in

line with the agency market expansion, and growth strategy focused on protection-type products.

The long-term line accounted for 63.9% of total direct premium written. Commercial line and auto

line, on the other hand, also increased by 8.2% and 6.0% to KRW320.0 billion and KRW726.7 billion,

respectively, while the proportion of total sales contracted to 11.0% and 25.1%, respectively.

Breakdown of direct premiums

Earned premium(KRW in billions)

20061,895.6

20072,266.9

20082,609.8

Commercial line 11.7%Auto line 27.0%Long-term line 61.3%

FY2007

Commercial line 11.1%Auto line 25.0%Long-term line 63.9%

FY2008

27

The market share of the profitable long-term line realized a growth of 0.2%p to 9.2% in FY2008,

while that of the commercial line slipped 0.3%p points to 8.4%, affected by intensive market

competition. Meanwhile, market share of auto line expanded by 0.4%p to 7.0% in FY2008 from

6.6% a year ago.

COMBINED RATIO

(KRW in billions)

FY2006 FY2007 FY2008*

Earned premium 1,895.6 2,266.9 2,609.8

Incurred losses 1,538.5 1,788.4 2,152.9

(1,971.3)

Loss ratio (a) 81.1% 78.9% 82.5%

(75.5%)

Net operating expense 461.3 542.1 683.5

Expense ratio (b) 24.3% 23.9% 26.2%

Combined ratio (a+b) 105.4% 102.8% 108.7%

(101.7%)

* ( ) figures exclude the effect from the refund guarantee losses in FY2008.

For FY2008, the Company's earned premium was up a healthy 15.1% over the previous year,

amounting to KRW2,609.8 billion. Net premium written also increased by 14.9% to KRW2,631.4

billion from KRW2,291.0 billion a year ago.

Incurred losses increased by 20.3% YoY, to KRW2,152.9 billion in FY2008, mainly due to rising

losses from commercial lines. This resulted in the loss ratio sharply increasing to 82.5% in

FY2008 from 78.9% from the prior year. As a result of the increasing loss from the refund

guarantee for shipbuilders, the commercial insurance loss ratio deteriorated by 131.1%p to

189.9% in FY2008.. However, excluding the refund guarantee for shipbuilders, the Company's

loss ratio improved by 3.4% points to 75.5% from 78.9% in FY2007, while the commercial line

loss ratio slightly increased to 61.1% from 59.8%. Meanwhile, the loss ratio for the auto and

long-term insurance continuously improved by 4.3%p and 3.8%p, respectively, standing at 69.9%

and 78.8% in FY2008.

In FY2008, net operating expenses rose by 26.1% to KRW683.5 billion from KRW542.1 billion a

year ago due to the intensifying market competition, while the expense ratio increased by 2.3%p

to 26.2% from 23.9% in FY2007.

Consequently, the Company's combined ratio reached 108.7%. If the refund guarantee loss effect

is excluded, the combined ratio decreases to 101.7%, a drop of 1.1%p from the previous year.

Loss ratio(%)

200681.1 2007

78.9

200882.5



INVESTMENT PERFORMANCE

FY2008 INVESTMENT PERFORMANCE

(KRW in billions)

Investment Assets % in Portfolio Investment

- yoy - yoy Income Yield

Cash & equivalents 238.3 18.6% 5.8% 0.2%p 10.4 4.8%

Domestic bonds 1,349.3 -10.7% 32.6% -9.1%p 79.6 5.7%

Stock 285.7 24.9% 6.9% 0.6%p 6.7 2.6%

Investment funds 516.6 -0.3% 12.5% -1.8%p 14.8 2.9%

Overseas securities 427.4 54.8% 10.3% 2.7%p -32.2 -8.8%

Other 89.8 48.0% 2.2% 0.5%p -2.4 -3.2%

Loans 568.8 33.3% 13.7% 2%p 30.7 6.4%

Real estate 662.4 64.7% 16.0% 4.9%p -1.4 -0.3%

Total 4,138.3 14.2% 100.0% - 106.2 2.8%

Although investment assets rose 14.2% YoY to KRW4,138.3 billion, investment income

decreased by 40.8% to KRW106.2 billion in FY2008. The Company's substantial decrease in

investment income was mainly a result of the relatively high concentration of overseas

investments and the high portion of short-term trading securities, which were directly affected by

the financial crunch. However, the Company's 7-year (FY2002~FY2008) average yield was 5.5%,

well above the domestic top 4 company's 5.3%.

To reduce the investment income volatility and maintain a stable investment yield, the Company

reduced investments in short-term trading securities, but expanded fixed income assets. Short-

term trading securities decreased by 46.9% over the previous year to KRW249.1 billion, while

fixed income assets increased by 14.1% to KRW2,811.9 billion in FY2008

FY2008 INVESTMENT INCOME EXCLUDING ONE-OFF ITEMS

(KRW in billions)

One-off items

Overseas investments Excluding

Investment Credit Asset one-off

Income (Yield) Redemption Write-off enhancement revaluation Sub-total item

106.2 (2.8%) -7.8 -38. -4.9 -8.9 -60.2 166.4

(4.4%)

In FY2008, the Company cleared its high-risk overseas securities through redemption, write-offs

and credit enhancements to eliminate future uncertainties. As a result of these efforts, valuation

losses on available for-sale securities sharply decreased at the peak of KRW94.9 billion in

November 2008 to KRW36.4 billion in March 2009.

Breakdown of invested assets

Cash & equivalents 5.8%Domestic bonds 32.6%Stock 6.9%Investment funds 12.5%Overseas securities 10.3%Other 2.2%Loans 13.7%Real estate 16.0%

FY2008

29

NET INCOME

(KRW in billions)

FY2006 FY2007 FY2008*

Earned premium 1,895.6 2,266.9 2,609.8

Underwriting income (116.0) (77.2) (186.4)

Net Investment income 159.2 179.2 106.2

Non-operating income 1.0 (1.1) 1.8

Tax expenses (benefits) 8.4 29.8 (19.7)

Net income (a) 35.8 71.1 (58.8)

Incurred in catastrophe reserve (b) 11.7 13.6 (40.2)

Adjusted net income (a+b) 47.5 84.7 (99.1)

In FY2008, the Company posted a net loss of KRW58.8 billion compared to a positive net income

of KRW71.1 billion a year ago. This result was mainly attributable to losses from refund

guarantees for shipbuilders and high-risk overseas securities. As such, the Company fully

acknowledged the future uncertainties that may have an effect on its bottom line. The Company

is confident that it will be able to take the next step forward as the “Best Underwriting

Company” with a solid financial performance.

ASSETS

(KRW in billions)

FY2006 FY2007 FY2008 Change (%)

Cash and deposits 283.1 201.0 238.3 18.6

Stocks 42.5 96.6 142.4 47.4

Equity-method stocks 79.7 132.1 143.3 8.5

Domestic bonds 1,065.2 1,510.2 1,349.3 (10.7)

Investment funds 281.1 518.2 516.6 (0.3)

Overseas securities 363.4 276.1 427.4 54.8

Other securities 20.8 60.7 89.8 47.9

Loans 489.0 426.8 568.8 33.3

Real estate 375.7 402.3 662.4 64.6

Investment assets 3,000.4 3,624.0 4,138.3 14.2

Non-invested assets 747.4 940.5 1,127.1 19.8

Total assets 3,747.8 4,564.5 5,265.5 15.4

The Company's total assets stood at KRW5,265.5 billion in FY2008, up 15.4% from KRW4,564.5

billion a year ago, as a result of increases in investment assets. Total investment assets stood

at KRW4,138.3 billion, an increase of 14.2% from KRW3,624.0 in FY2007, primarily attributable

to the rapid growth of investment in overseas securities. Of total assets, investment assets

accounted for 78.6% in FY2008 down 0.8%p points from 79.4%.

Net income(KRW in billions)

200635.8

200771.1

-58.82008

Total assets(KRW in billions)

20063,747.8

20074,564.5

20085,265.5



As for the Company's investment portfolio in FY2008, domestic bonds took up the largest portion

at 32.6%, down 9.1% points compared to 41.7% a year earlier. Outstanding balance of domestic

bonds declined 10.7% to KRW1,349.3 billion in FY2008 from KRW1,510.2 billion the year before.

Overseas securities surged 54.8% to KRW427.4 billion, influenced by the sharp depreciation of

the Korean Won.

(KRW in billions)

FY2006 FY2007 FY2008

Total loans* 496.1 435.5 577.2

Normal 474.3 415.3 565.5

Precautionary 9.7 2.1 0.6

Substandard and below 12.1 18.0 11.1

Loan loss reserve 7.2 8.7 8.3

NPL Ratio 2.4% 4.1% 1.9%

Coverage ratio 59.2% 48.3% 74.9%

* Before allowance for doubtful accounts

Total loans before allowance for doubtful accounts expanded 32.5% yoy to KRW577.2 billion,

while substandard and below loans decreased from KRW18.0 billion to KRW11.1 billion in

FY2008. The Company improved its assets quality through strict risk management. Non-

performing loan ratio (substandard and below ratio) dramatically improved by 2.2%p from 4.1%

the previous year to 1.9% in FY2008. Moreover, the over 30 day delinquency ratio also improved

from 4.3% a year ago to 2.0% in FY2008.

Coverage ratio (loan loss reserve / substandard and below loans) sharply rose 26.6%p yoy to

74.9%, as a result of the Company's effort to cope with future uncertainties.

LIABILITIES AND SHAREHOLDERS' EQUITY

(KRW in billions)

FY2006 FY2007 FY2008

Policy reserve 3,001.7 3,501.1 4,196.6

Catastrophe reserve 132.5 146.0 105.8

Other liabilities 353.5 461.3 537.4

Total liabilities 3,487.7 4,108.4 4,839.8

Total shareholders' equity 260.0 456.1 425.6

Adjusted shareholders' equity* 392.6 602.2 531.4

* Adjusted shareholders' equity= Shareholders' equity + catastrophe reserve

Total loans(KRW in billions)

2006496.1

2007435.5

2008577.2

Total liabilities(KRW in billions)

20063,487.7

20074,108.4

20084,839.8

31

Total liabilities grew 17.8% to KRW 4,839.8 billion due to an increase in policy reserve in

FY2008. Policy reserves increased 19.9% over the previous year to KRW4,196.6 billion, while

catastrophe reserves also decreased 27.5% to KRW105.8 billion in FY2008.

The Company's shareholders' equity decreased by 6.7% to KRW425.6 billion in FY2008 from

KRW456.1 billion a year ago as a result of its net loss of KRW58.8 billion and valuation losses on

available-for-sale securities. Adjusted shareholders' equity, which includes the catastrophe

reserve in the total shareholders' equity, dropped by 11.7% to KRW531.4 billion from 602.2

billion in FY2007.

(KRW in billions)

FY2006 FY2007 FY2008

Solvency amounts 426.9 665.1 613.9

Solvency guidance 250.5 282.1 323.3

Solvency margin ratio 170.4% 235.8% 189.9%

(238.6%)*

* ( ) figure represents excluding refund guarantee losses in FY2008

In FY2008, the Company's solvency margin ratio posted 189.9%, down from 235.8% a year ago,

due to the losses from refund guarantees. Despite the refund guarantee losses, the Company

maintained the second-highest solvency margin ratio within the Korea's non-life insurance

industry, and well above the minimum required ratio of 100% by the Financial Supervisory

Service. However, excluding the refund guarantee loss effect, the Company's solvency margin

ratio in FY2008 jumped to 238.6% from 235.8% a year ago.

Solvency margin ratio(%)

2006170.4

2007235.8

2008189.9

32

The Board of Directors and Stockholders

Meritz Fire & Marine Insurance Co., Ltd.

We have audited the accompanying balance sheet of Meritz Fire & Marine insurance Co., Ltd. (the “Company”) as of March 31, 2009 and

the related statements of operations, appropriations of retained earnings, changes in equity and cash flows for the year then ended. These

financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial

statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require that

we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also

includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall

financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as

of March 31, 2009 and the results of its operations, its changes in retained earnings and equity and its cash flows for the year then ended,

in conformity with accounting principles generally accepted in the Republic of Korea.

Accounting principles and auditing standards and their application in practice vary among countries. The accompanying financial

statements are not intended to present the financial position, results of operations, its changes in retained earnings and equity and cash

flows in accordance with accounting principles and practices generally accepted in countries other than the Republic of Korea. In addition,

the procedures and practices utilized in the Republic of Korea to audit such financial statements may differ from those generally accepted

and applied in other countries. Accordingly, this report and the accompanying financial statements are for use by those who are

knowledgeable about Korean accounting principles and auditing standards and their application in practice.

The financial statements of the Company for the year ended March 31, 2008 were audited by other auditors whose report dated May 23,

2008, expressed an unqualified opinion on those financial statements. The financial statements of the Company for the year ended March

31, 2008, presented for comparative purposes, have no material difference with those audited financial statements except for

reclassification, as discussed in note 2.

May 21, 2009

MERITZ INSURANCE ANNUAL REPORT 2008

Independent Auditors' Report

This audit report is effective as of May 21, 2009, the auditors' report date. Accordingly, certain material subsequent events or circumstances may

have occurred during the period from the auditors' report date to the time this audit report is used. Such events and circumstances could

significantly affect the accompanying financial statements and may result in modifications to this report.


Balance SheetsAs of March 31, 2009 and 2008

(Korean won in millions)

Assets 2009 2008

Cash and deposits (Notes 3, 15) ￦ 238,347 ￦ 201,035

Trading securities (Note 4) 249,118 469,609

Available-for-sale securities (Notes 4, 5, 9 and 15) 2,038,244 1,699,478

Held-to-maturity securities (Notes 4, 5, 6 and 15) 238,142 292,686

Equity method investments (Note 7) 143,348 132,104

Loans, less allowance for doubtful accounts of ￦8,476

million in 2009 (￦8,685 million in 2008) (Note 8) 568,752 426,787

Property and equipment, net (Note 10) 676,765 416,913

Intangible assets (Note 11) 12,200 8,801

Deferred acquisition costs (Note 14) 645,609 502,157

Other assets, less allowance for doubtful accounts of ￦6,316 million

in 2009 (￦5,527 million in 2006) (Notes 8, 12, 13, 15, 27 and 34) 257,029 238,677

Separate account assets (Note 17) 197,913 176,288

Total assets 5,265,467 4,564,535

Liabilities and Stockholders's Equity

Policy reserves (Note 16) 4,196,649 3,501,078

Catastrophe reserves (Note 16) 105,807 146,044

Other liabilities:

Insurance accounts payable (Notes 15, 18) 100,152 117,176

Severance and retirement benefits, less deposit for retirement - 13,157

insurance of ￦1,747 million in 2009 (￦26,244 million in 2008) (Note 20)

Other liabilities (Notes 19, 27, 28 and 34) 228,358 152,022

Total other liabilities 328,510 282,355

Separate account liabilities (Note 17) 208,858 178,909

Total liabilities 4,839,824 4,108,386

Commitments and contingencies (Note 21)

Stockholders' equity:

Capital stock (Note 22) 61,900 61,900

Capital surplus 234,445 237,239

Capital adjustments (114,393) (53,785)

Accumulated other comprehensive income 86,323 (24,950)

Retained earnings 157,368 235,745

Total stockholders' equity 425,643 456,149

Total liabilities and stockholders' equity ￦ 5,265,467 ￦ 4,564,535

See accompanying notes.

33


Statements of OperationYears ended March 31, 2009 and 2008

(Korean won in millions, except per share amounts)

Operating Revenue 2009 2008

Premium income (Note 24) ￦ 2,897,480 ￦ 2,541,974

Net reinsurance income (Note 23) 158,045 138,571

Interest income (Note 4) 145,882 127,182

Rental income 16,112 13,819

Dividend income 16,547 24,938

Expenses recovered 53,138 51,448

Gain on valuation and disposal of securities 23,321 51,694

Gain on valuation and transaction of derivative financial instruments (Note 27) 10,304 20,848

Gain on foreign currency transaction and translation (Note 15) 94,054 20,457

Separate accounts income (Note 17) 79,715 87,517

Reversal of policy and catastrophe reserves 43,131 888

Other operating revenues 4,098 862

3,541,827 3,080,198

Operating Expenses

Provision for policy reserves (Note 16) 698,465 500,263

Provision for catastrophe reserves - 13,581

Claims paid 977,005 860,627

Refunds expenses 661,262 589,480

Net reinsurance premiums paid (Note 23) 266,112 250,967

Loss on valuation and disposal of securities 55,766 30,904

Loss on valuation and transaction of derivative financial instruments (Note 27) 97,943 38,424

Loss on foreign currency transaction and translation (Note 15) 9,338 3,831

Amortization of deferred acquisition costs (Note 14) 264,909 166,107

Operating and administrative expenses (Notes 10, 25 and 26) 474,714 429,088

Separate accounts expenses (Note 17) 79,719 87,517

Other operating expenses 35,432 25,173

3,620,665 2,995,962

Operating income (losses) (78,838) 84,236

Non-operating Income (expense)

Equity in earnings of equity method investment, net (Note 7) 6,659 13,979

Gain on disposal of equity method investments, net - 2,679

Gain on disposal of property and equipment 269 83

Loss on valuation of land (8,937) -

Other, net 2,353 164

344 16,905

Ordinary income (78,494) 101,141

Extraordinary gains (losses) - -

Income (losses) before income taxes (78,494) 101,141

Income tax expenses (benefits) (Note 28) (19,679) 29,993

Net income (losses) (58,815) 71,148

Earnings (losses) per Share (Note 31)

Basic ￦ (542) ￦ 669


35MERITZ INSURANCE ANNUAL REPORT 2008

Statements of Appropriations of Retained EarningsYears ended March 31, 2009 and 2008


Retained Earnings before Appropriations

(accumulated deficit before disposition) 2009 2008

Retained earnings carried forward from the prior year ￦ 11 ￦ (3,630)

Retained earnings adjustment arising from equity method investments - (828)

Interim dividends (Note 33) (5,328) (11,845)

Net income (losses) (58,815) 71,148

(64,132) 54,845

Transfer from voluntary reserves 64,700 -

568 54,845

Appropriations

Legal reserve 540 2,700

Voluntary reserve - 37,900

Cash dividend - 14,234

Total appropriations 540 54,834

Unappropriated retained earnings carried forward to the next year ￦ 28 ￦ 11


36


Accumulated otherCapital Capital Capital comprehensive Retained

stock surplus adjustments income (losses) earnings Total

As of 1 April 2007 ￦ 42,900 ￦ 28,974 ￦ (10,913) ￦ 10,268 ￦ 188,859 ￦ 260,088

Cumulative effect of accounting changes - - - (224) (3,662) (3,886)

Dividends - - - - (7,927) (7,927)

Interim dividends - - - - (11,845) (11,845)

Issuance of capital stock 19,000 206,465 - - - 225,465

Net income for the year - - - - 71,148 71,148

Acquisition of treasury stock - - (44,249) - - (44,249)

Equity adjustment arising from

equity method investments - - - 9,955 (829) 9,126

Loss on valuation of available for sales securities - - - (42,124) - (42,124)

Valuation on treasury stock fund - 2,039 (2,812) - - (773)

Valuation on derivative financial instruments - - - (2,824) - (2,824)

Stock option - (239) 4,190 - - 3,951

As of March 31, 2008 ￦ 61,900 ￦ 237,239 ￦ (53,784) ￦ (24,949) ￦ 235,744 ￦ 456,150

As of April 1, 2008 ￦ 61,900 ￦ 237,239 ￦ (53,784) ￦ -24,949 ￦ 235,744 ￦ 456,150

Dividends - - - - (14,233) (14,233)

Interim dividends - - - - (5,328) (5,328)

Acquisition of treasury stock - - (66,231) - - (66,231)

Adjustment of stock issuance cost - 3 - - - 3

Equity adjustment arising from

equity method investments - - - 340 - 340

Loss on valuation of available for sales securities - - - (57,120) - (57,120)

Valuation on treasury stock fund - (2,797) 4,525 - - 1,728

Valuation on derivative financial instruments - - - (22,481) - (22,481)

Net losses for the year - - - - (58,815) (58,815)

Stock option - - 1,097 - - 1,097

Revaluation surplus - - - 190,533 - 190,533

As of March 31, 2009 ￦ 61,900 ￦ 234,445 ￦ (114,393) ￦ 86,323 ￦ 157,368 ￦ 425,643



Statements of Changes in Shareholders' EquityYears ended December 31, 2009 and 2008


Statements of Cash FlowsYears ended March 31, 2009 and 2008


Cash Flows from Operating Activities 2009 2008

Net income (losses) ￦ (58,815) ￦ 71,148

Adjustments to reconcile net income to net cash provided by

operating activities:

Losses on valuation of securities, net 39,234 7,361

Net provision for policy and catastrophe reserves 655,334 512,957

Amortization of deferred acquisition costs 264,909 166,107

Provision for severance and retirement benefits 24,442 14,976

Provision for doubtful accounts, net 4,545 3,313

Depreciation and amortization 20,891 18,919

Gain on foreign currency translation, net (57,203) (18,436)

Gain on equity method investments, net (6,659) (16,659)

Gain on valuation of derivative financial instruments, net 58,857 15,227

Others, net 6,342 2,028

Changes in operating assets and liabilities (781,107) (934,353)

Net cash provided by (used in) operating activities 170,770 (157,412)

Cash Flows from Investing Activities

Increase in equity method investments, net (11,000) (26,139)

Acquisition of property and equipment, net (42,457) (43,577)

Increase in intangible assets (6,353) (6,215)

Increase in leasehold deposits, net (10,653) (3,654)

Others, net 222 565

Net cash used in investing activities (70,241) (79,020)

Cash Flows from Financing Activities

Increase (decrease) in leasehold deposits received, net 1,040 (4,581)

Redemption of borrowings (100) (400)

Adjustment on stock issuance cost 3 -

Increase in capital stock - 225,465

Acquisition of treasury stock (66,231) (44,249)

Payment of dividends (19,562) (19,772)

Net cash provided by (used in) financing activities (84,850) 156,463

Net increase (decrease) in cash and cash equivalents 15,679 (79,969)

Cash and cash equivalents at the beginning of the year 44,466 124,435

Cash and cash equivalents at the end of the year (Note 36) ￦ 60,145 ￦ 44,466



Notes to Financial StatementsMarch 31, 2009 and 2008

1. Corporate information

Meritz Fire & Marine Insurance Co., Ltd. (the “Company”) was incorporated on October 1922. The Company is engaged in the insurance

business and offers primarily property and casualty insurance products. On October 1, 2005, the Company changed its name from Oriental

Fire & Marine Insurance Co., Ltd. to Meritz Fire & Marine Insurance Co., Ltd.

As of March 31, 2009, the Company has 123,800,000 common shares issued amounting to ￦61,900 million. The Company listed its

common shares at the Korea Exchange (“KRX”, formerly “Korea Stock Exchange”) in July 1957 pursuant to the provisions of the Korean

Securities and Exchange Act.

As of March 31, 2009, the stockholders of the Company and their shareholdings are as follows:

Percentage of

Stockholder Number of shares ownership (%)

Nine individuals, including Cho Jeong-Ho 27,751,186 22.42

Meritz Fire & Marine Insurance Co., Ltd. (Treasury stock) 16,121,607 13.02

Employee stock ownership 6,827,303 5.51

KB pure stocks 2 3,356,843 2.71

Woori Bank 3,093,381 2.50

Others 66,649,680 53.84

123,800,000 100.00

2. Summary of significant accounting policies

BASIS OF FINANCIAL STATEMENT PREPARATION

The Company maintains its official accounting records in Korean won and prepares statutory financial statements in the Korean language

in conformity with accounting principles generally accepted in the Republic of Korea (“Korean GAAP”). Certain accounting principles

applied by the Company that conform with financial accounting standards and accounting principles in the Republic of Korea may not

conform with generally accepted accounting principles in other countries. Accordingly, these financial statements are intended for use by

those who are informed about Korean accounting principles and practices. In the event of any differences in interpreting the financial

statements or the independent auditors' report thereon, the Korean version, which is used for regulatory reporting purposes, shall prevail.

The accompanying financial statements have been condensed, restructured and translated into English (with certain expanded

descriptions) from the Korean language financial statements.

Certain supplementary information attached to the Korean language financial statements, but not required for a fair presentation of the

Company's financial position, results of operations and cash flows, is not presented in the accompanying financial statements.

ADOPTION OF NEW AND REVISED STATEMENTS OF KOREA ACCOUNTING STANDARDS (“SKAS”), KOREA FINANCIAL ACCOUNTING

STANDARDS (“KFAS”), KOREA FINANCIAL ACCOUNTING STANDARDS INTERPRETATION (“KFAS INTERPRETATION”) AND DETAILED

REGULATION ON INSURANCE SUPERVISION FOR THE APPLICATION OF A LAW (“DETAILED RIS”)

39

STANDARDS AND AMENDMENTS EFFECTIVE IN 2009

The Company has adopted the following new and revised SKAS, KFAS and Detailed RIS for the current financial year.

•SKAS 8 Amendments - Investment in Securities

•Detailed Regulation on Insurance Supervision for the application of a law

Standard that is not yet effective and which has been early adopted by the Company

The Company has also early adopted the following revised SKAS for the current financial year.

•SKAS 5 Amendments - Property, Plant and Equipment

The principal effects of these changes are as follows.

SKAS 8 Amendments - Investment in Securities

The Korea Accounting Standards Board has amended the SKAS 8 Investments in Securities. The revised standard allows the

reclassification of investments in securities that are classified as trading to available-for-sale or held-to-maturity in rare circumstances

only. Certain investments in trading securities of the company meeting this criterion have been reclassified to available-for-sale category.

Following such reclassification, loss on valuation of trading securities decreased by ￦344 million. The comparative 2007 financial

statements were not restated and the related reclassification is disclosed in Note 5.

Detailed Regulation on Insurance Supervision for the application of a law

The regulation revised the presentation of financial statements accounts. As a result, Investments in Bonds Issued by a Financial Company

are reclassified to Financial Bonds.

SKAS 5 Amendments - Property, Plant and Equipment

This revised standard allows an entity to choose either the revaluation model or cost model as its accounting policy to an entire class

property, plant and equipment. The comparative 2008 financial statements shall not be restated. The Company has early adopted the revised

standard and revalued its land at fair value. As a result, the Company's net assets increased by ￦185,725 millions as of March 31, 2009.

FISCAL YEAR

The Company's fiscal year end is March 31. References in the accompanying financial statements for 2009 and 2008 represent the years

ended March 31, 2009 and 2008, respectively.

REVENUES

Revenues from premium income are recognized at the time when such premium payments become due. However, in the case of insurance

contracts of which the first premium payment or lump-sum premium payment are uncollected as of the first day of the insured period due

to a payment extension allowed by the Company, the first premium payment or lump-sum premium payment may be recognized as revenue

in the period in which the first day of insured period falls. If premium income is received before the nominated collection date, the

Company records unearned insurance premium based on calendar period calculation.

Interest income on deposits, securities and loans, and other investments is recognized as income in the period in which it is earned.

Interest income on defaulted, delinquent or restructured loans is recognized as income in the period in which payments are received.

CASH EQUIVALENTS

Highly liquid deposits and marketable securities with original maturities of three months or less, and which have no significant risk of loss

in value by interest rate fluctuations, are considered as cash equivalents.



INVESTMENTS IN SECURITIES

Investments in securities within the scope of SKAS 8 Investments in Securities are classified as either trading, held-to-maturity and

available-for-sale securities, as appropriate, and are initially measured at cost, including incidental expenses.

Securities that are acquired and held principally for the purpose of selling them in the near term are classified as trading securities. Debt

securities which carry fixed or determinable payments and fixed maturity are classified as held-to-maturity if the Company has the positive

intention and ability to hold to maturity. Securities that are not classified as either trading or held-to-maturity are classified as available-

for-sale securities.

After initial measurement, available-for-sale securities are measured at fair value with unrealized gains or losses being recognized directly

in equity as other comprehensive income. Likewise, trading securities are also measured at fair value after initial measurement, but with

unrealized gains or losses reported as part of net income. Held-to-maturity securities are measured at amortized cost after initial

measurement. The cost is computed as the amount initially recognized minus principal repayments, plus or minus the cumulative

amortization using the effective interest method of any difference between the initially recognized amount and the maturity amount.

The fair value of trading and available-for-sale securities that are traded actively in the open market (marketable securities) is measured at

the closing price of those securities at the balance sheet date, except for non-marketable equity securities which are measured at cost

subsequent to initial measurement if their fair values cannot be reliably estimated. Non-marketable debt securities are carried at a value

using the present value of future cash flows discounted using an appropriate interest rate which reflects the issuer's credit rating

announced by a public independent credit rating agency. If the application of such measurement method is not feasible, estimates of fair

values may be made using a reasonable valuation model or quoted market prices of similar debt securities issued by entities conducting

business in similar industries.

The Company recognizes an impairment loss on its investments in securities if there is objective evidence that the securities are impaired.

The impairment loss is charged to statement of income.

EQUITY METHOD INVESTMENTS

Investments in entities over which the Company has control or significant influence are accounted for using the equity method.

Under the equity method of accounting, the Company's initial investment in an investee is recorded at acquisition cost. Subsequently, the

carrying amount of the investment is adjusted to reflect the Company's share of income or loss of the investee in the statement of income

and share of changes in equity that have been recognized directly in the equity of the investee in the related equity account of the

Company on the balance sheet.

At the date of acquisition, the excess of the cost of the investment over the Company's share of the net fair value of the investee's

identifiable assets and liabilities is accounted for as goodwill which is amortized over its useful life within 20 years using the straight-line

method. Conversely, negative goodwill represents the excess of the Company's share in the net fair value of the investee's identifiable

assets and liabilities over the cost of the investment. Negative goodwill is recorded to the extent of the fair value of acquired non-

monetary assets and recognized as income using the straight-line method over the remaining weighted-average useful life of those

acquired non-monetary assets. The amount of negative goodwill in excess of the fair value of acquired non-monetary assets is recognized

as income immediately.

In translating the financial statements of foreign investees into Korean won, assets and liabilities are translated at the exchange rate on

the balance sheet date and income and expenses are translated at the weighted-average exchange rate for the period. All resulting

exchange differences are recognized as foreign currency translation adjustments in other comprehensive income within equity.

41

ALLOWANCE FOR DOUBTFUL ACCOUNTS

The allowance for doubtful accounts is provided in compliance with the RIS (“Regulation on Supervision of Insurance Business”), which

requires the application of minimum loss ratios based on the degree of collectible of all receivables, including loans. Receivables are

classified as normal, precautionary, substandard, doubtful and estimated loss, and the related allowance is calculated at a minimum of

0.5% (0.75% for household loans), 2% (5% for household loans), 20%, 50% and 100%, respectively, of the outstanding amount in each

classification.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation, except for certain assets in existence as of January 1, 2000

which were revalued in accordance with the Korean Assets Revaluation Law and are stated at revalued amount less accumulated

depreciation. The revaluation is no longer allowed effective from January 1, 2001.

Maintenance and repairs are expensed in the year in which they are incurred. Expenditures which enhance the value or extend the useful

life of the related assets are capitalized.

The Company has depreciated its property and equipment using the declining balance method (buildings: the straight-line method) over the

following estimated useful lives as follows:

Years

Buildings 40

Vehicles 4

Furniture and equipment 4

The Company has early adopted the revised standard SKAS 5 Amendments - Property, Plant and Equipment and chose the revaluation

model as its accounting policy for land. As a result, the Company revalued its land to fair value.

If an asset's carrying amount is increased as a result of a revaluation, the increase shall be recognized in the other comprehensive income.

However, the increase shall be credited the statement of income to the extent of any debit balance existing in the revaluation deficiency in

respect of that asset.

If an asset's carrying amount is decreased as a result of a revaluation, the decrease shall be recognized in the statement of income.

However, the decrease shall be debited directly to other comprehensive income to the extent of any credit balance existing in the

revaluation surplus in respect of that asset.

INTANGIBLE ASSETS

Intangible assets are stated at cost less accumulated amortization. Amortization is recognized as an expense based on the straight-line

method over the estimated useful life of 5 years.

IMPAIRMENT OF ASSETS

When the recoverable amount of an asset is less than its carrying amount due to obsolescence, physical damage or abrupt decline in the

market value of the asset, the decline in value, if material, is deducted from the carrying amount and recognized as an asset impairment

loss in the current year.

If the value of impaired asset subsequently recovers and the recovery objectively relates to an event arising after the period when the

impairment loss was recorded, such recovery is credited in the current operations up to the previously recorded impairment loss.



COMPENSATION RECEIVABLES

Of the amounts paid for claims during the year, amounts recoverable by exercising compensation and other rights or through disposal of

secured assets acquired in the resolution of accidents are accounted for as compensation receivables. Recoverable amounts out of the

Reserve for outstanding claims are deducted directly from Policy Reserves. Compensation receivables are calculated by multiplying the

average recovery ratio (recovery amount/net claims) for the last 3 years from the prior year balance sheet date to the amount of net claims

for current year.

DEFERRED ACQUISITION COSTS

The Company capitalizes acquisition costs, to the extent that they are within the predetermined cost estimates, incurred from long-term

insurance policies and amortizes using the straight-line method over the duration of insurance policies.

POLICY RESERVES

In accordance with the Insurance Business Act (“IBA”) and the RIS, the Company is required to maintain policy reserves. When an insurance

contract is made, policy reserves are appropriated in consideration of the future claims, refunds, policyholder dividends and related

expenses. The amount collectible from reinsurance contracts (termed reinsurance reserves) is reported as a deduction from policy reserves.

Long-term insurance premium reserves - The Company maintains a reserve for the portion of premiums (and investment income on

such portion) which is refundable to policyholders upon maturity and cancellation of the policy under long-term deposit-type insurance

unless there has been a substantial claim for payment under the policy.

Reserve for outstanding claims - The reserve for outstanding claims refers to a provision for claims received but not settled, or for

claims not received, and therefore not yet settled, on the insurance policies where the events causing the payment of claims have

occurred at the balance sheet date. The amount collectible from exercising the right is reported as a deduction from policy reserves.

Unearned premium reserve - The Company is required to maintain an unearned premium reserve, which is the premium whose

payment date belongs to the current year and whose applicable period has not yet commenced at the balance sheet date.

Reserve for participating policyholder dividend - The reserve for participating policyholder dividend is provided for the purpose of

future dividends in accordance with the laws and contract terms.

Excess participating policyholder dividend reserve - Pursuant to relevant laws and contracts, the Company may provide an excess

participating policyholder dividend reserve in accordance with the operating results of related insurance products. The reserve may be

used to pay participating policyholder dividends or additional dividends.

Reinsurance reserve - In the event of ceding or assuming insurance, the Company maintains reinsurance reserves at amounts which

can be expected to be collected from, or paid to, the related reinsurance companies pursuant to relevant laws.

CATASTROPHE RESERVES

Catastrophe reserves are required based on the regulations approved by the Governor of the Financial Supervisory Service. Non-life

insurance companies may establish a catastrophe reserve in proportion to underwriting profit for the year. These reserves can be used

against exceptionally large claims in the future.

43

SEPARATE ACCOUNTS

In accordance with “the Article 108” on the Insurance Business Act and Regulation on Supervision of Insurance Business, the Company

classifies all or part of the property equivalent to the reserves on retirement insurance and retirement pension into separate accounts and

the Company are recorded as single gross amount in the balance sheet as “separate account assets” and “separate account liabilities”.

The given or received capital that are caused by temporary transactions are deducted from separate account liabilities and separate account

assets as “Separate Account Debits” and “Separate Account Credits”.

The Company recognizes the separate account revenue and expenses of insurance policies giving a guarantee on principal and interest

(retirement insurance policies and retirement pension policies giving a guarantee on principal and interest) as separate account revenue and

expenses by total amount, respectively, on the general account income statement.

According to “the Article 6-23”on Regulation on Supervision of Insurance Business, the Company does not state separate account revenue

and expenses on the insurance policies bearing dividends on the basis of actual results (variable insurance policies and retirement pension

policies bearing dividend on the basis of actual results) in the general account income statement

SEVERANCE AND RETIREMENT BENEFITS

In accordance with the Korean Law on Guarantee of Employee's Severance and Retirement Benefits and the Company's regulations,

employees terminating their employment with at least one year of service are entitled to severance and retirement benefits, based on the

rates of pay in effect at the time of termination, years of service and certain other factors. The retirement benefit liability is computed as if

all employees were to terminate at the balance sheet dates

In accordance with the Korean National Pension Law prior to revision, the Company had also prepaid a portion of its severance and

retirement benefits obligation to the National Pension Service (“NPS”). Such prepayments have been offset against the Company's liability

for severance and retirement benefits. Additions to these prepayments are no longer required effective from April 1, 1999. The prepayments

are deducted from retirement benefit liability.

The retirement benefit liability is partly funded, and the funds contributed are managed by Mirae Asset Life insurance Co., Ltd (etc), the

plan's administrator, appointed by the Company. The Company accounts for the funds contributed as a deduction from the retirement benefit

liability.

PROVISIONS AND CONTINGENT LIABILITIES

Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event, it is probable that an

outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made on the

amount of the obligation. The provision is used only for expenditures for which the provision was originally recognized. If the effect of the

time value of money is material, provisions are stated at present value.

INCOME TAXES

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered or paid to

the tax authorities. Deferred income taxes are provided using the liability method for the tax effect of temporary differences between the tax

bases of assets and liabilities and their reported amounts in the financial statements. Deferred income tax assets and liabilities are

measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. In addition, current tax

and deferred tax are charged or credited directly to equity if the tax relates to items that are credited or charged directly to equity.



VALUATION OF LONG-TERM RECEIVABLES (PAYABLES) AT PRESENT VALUE AND RESTRUCTURING

Receivables or payables arising from long-term installment transactions are stated at present value. The difference between the carrying

amount of these receivables or payables and their present value is amortized using the effective interest rate method and credited or

charged to the statement of income over the installment period.

When credit terms (e.g., principal, interest rate, payment period) of receivables from debtors experiencing financial difficulties (e.g., court

receivership, debt restructuring, financial workout) are unfavorably changed from the perspective of the Company, such receivables are

stated at present value and the difference between the carrying amount and present value of such receivables is charged to current

operations.

FOREIGN CURRENCY TRANSLATION

Transactions involving foreign currencies are recorded at the exchange rates prevailing at the time the transactions are made.

Assets and liabilities denominated in foreign currencies are translated into Korean won at the appropriate exchange rates of ￦1,377.1 to

US$1 and ￦14.1480 to ￥1 at March 31, 2009 and ￦991.7 to US$1 and￦10.0020 to ￥1 at March 31, 2008. The resulting unrealized foreign

currency translation gains or losses are credited or charged to current operations.

DERIVATIVE

Derivative financial instruments are presented as assets or liabilities valued principally at the fair value of the rights or obligations

associated with the derivative contracts. The unrealized gain or loss from a derivative transaction with the purpose of hedging the exposure

to changes in the fair value of a recognized asset or liability or unrecognized firm commitment is recognized in current operations. For a

derivative instrument with the purpose of hedging the exposure to the variability of cash flows of a recognized asset or liability or a

forecasted transaction, the hedge-effective portion of the derivative instrument's gain or loss is deferred as an other comprehensive income

in equity. The ineffective portion of the gain or loss is charged or credited to current operations.

LEASES

A lease is accounted for as either a capital lease or an operating lease. A lease is recognized as a capital lease if it transfers substantially to

the Company all the risks and rewards incidental to ownership of the leased asset.

An asset acquired by way of a capital lease arrangement is stated in the balance sheet at the lower of the fair value or the present value of

minimum lease payments at the inception of the lease. The corresponding liability is included in the balance sheet as a capital lease

obligation. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate

of interest on the remaining balance of the liability. Capitalized lease assets are depreciated in the same manner as other depreciable

property, plant and equipment.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term.

45

SHARE-BASED PAYMENT TRANSACTIONS

For equity-settled share-based payment transactions, the Company measures the goods or services received, and the corresponding

increase in equity at the fair value of the goods or services received or the equity instruments granted over the vesting period. For cash-

settled share-based payment transactions, the Company measures the goods or services acquired and the liability incurred at the fair value

of the liability, and re-measures the fair value of the liability at each reporting date, with any changes in value recognized in profit or loss for

the period. For share-based payment transactions in which the terms of the arrangement provide the supplier of goods or services with a

choice of whether the Company settles the transaction in cash or by issuing equity instruments, the Company accounts for that transaction,

or the components of that transaction, as a cash-settled share-based payment transaction if, and to the extent that, the Company has

incurred a liability to settle in cash (or other assets), or as an equity-settled share-based payment transaction if, and to the extent that, no

such liability has been incurred.

Share-based payment transactions implemented before the effective date of SKAS 22 are accounted in accordance with Korea Financial

Accounting Standards Interpretations 39-35 Accounting for Stock Options.

PER SHARE AMOUNTS

Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding during the

year. Diluted earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding

during the year plus the weighted average number of common shares that would have been outstanding assuming the conversion of all

dilative potential common shares.

PREMIUM DEFICIENCY

The Company recognizes a premium deficiency in accordance with the Accounting Standards for Insurance Companies, if the expected

interest rate, which has been used in calculating premium reserves, exceeds the interest rate for a one-year time deposit at the balance

sheet date and the deficiency is expected to last other than temporary. The Company performs a premium deficiency test once a year.

A premium deficiency shall first be recognized by charging any unamortized acquisition costs to expense to the extent the deficiency is

required to be eliminated. If the premium deficiency is greater than the unamortized acquisition costs, a liability shall be accrued for the

excess deficiency.

3. Restricted bank deposits

Restricted deposits as of March 31, 2009 and 2008 are as follows (in thousands of Korean won):

March 31, 2009 March 31, 2008 Remarks

Other deposits ￦ 10,50 ￦ 10,500 Collateral for checking account

Time deposits 13,771,000 9,917,000 Pledged as collateral

￦ 13,781,500 ￦ 9,927,500



4. Trading securities

Details of trading securities as of March 31, 2009 and 2008 are as follows (in thousands of Korean won):

Balance before valuation Fair value (*) Valuation gains (losses)

2009 2008 2009 2008 2009 2008

Equity securities ￦ - ￦ 504,432 ￦ - ￦ 502,200 ￦ - ￦ (2,232)

Special bonds - 9,725,373 - 9,731,655 - 6,282

Beneficiary certificate 173,719,557 266,640,907 175,485,891 270,130,669 1,766,334 3,489,762

Overseas bonds 11,327,963 133,856,496 9,632,621 128,583,402 (1,695,342) (5,273,094)

Other 69,324,816 60,000,000 63,999,424 60,661,512 (5,325,392) 661,512

￦254,372,336 ￦ 470,727,208 ￦ 249,117,936 ￦ 469,609,438 ￦ (5,254,400) ￦ (1,117,770)

(*) The fair value of trading securities that are traded actively in the open market (marketable securities) is measured at the closing price

of those securities at the balance sheet date. Non-marketable equity securities are carried at a value announced by a public independent

credit rating agency.

Details of interest income in connection with securities are as follows (in thousands of Korean won):

Trading securities Available-for-sale securities Held-to-maturity securities Total

2009 2008 2009 2008 2009 2008 2009 2008

Government and public bonds ￦ - ￦ 409,413 ￦15,485,384 ￦ 12,171,017 ￦ 314,009 ￦ 1,671,388 ￦ 15,799,393 ￦14,251,818

Special bonds 175,787 1,187,346 28,954,843 18,605,399 2,289,801 8,963,708 31,420,431 28,756,454

Financial bonds - - 9,645,380 5,962,346 4,017,859 1,552,190 13,663,239 7,514,535

Corporate bonds - 168,747 18,340,614 15,823,197 1,108,987 1,112,550 19,449,601 17,104,494

Overseas bonds 560,133 1,301,438 10,474,085 6,638,617 2,241,894 4,141,889 13,276,112 12,081,944

Other 2,664,376 819,973 - - - - 2,664,376 819,973

￦ 3,400,296 ￦ 3,886,917 ￦ 82,900,306 ￦ 59,200,576 ￦ 9,972,550 ￦ 17,441,725 ￦ 96,273,152 ￦80,529,218

47

5. Available-for-sale securities

Details of equity securities included in available-for-sale securities as of March 31, 2009 and 2008 are as follows (in thousands of Korean won):

March 31, 2009

Unrealized Shares Ownership Cost/beg. gains (losses)

Companies percentage balance Fair value Book value (*4)

<Equity securities with readily determinable fair values> (*1)

Nongshim Holdings 18,072 0.39% ￦1,789,128 ￦ 990,346 ￦ 990,346 ￦ (798,782) ￦ - ￦ -

Dae Joo Co., Ltd. 288,000 0.81% 432,000 83,520 83,520 (348,480) - -

Korea Line Co. 35,000 0.30% 6,386,762 2,047,500 2,047,500 (4,339,262) - -

Dong-A Pharmaceutical 95,213 0.93% 9,963,594 8,416,829 8,416,829 (1,546,765) - -

OCI Co., Ltd. 14,000 0.07% 4,138,511 2,807,000 2,807,000 (1,331,511) - -

Mirae Asset Securities 25,000 0.06% 2,480,274 1,777,500 1,777,500 (702,774) - -

Samsung C&T Corporation 90,000 0.06% 4,855,803 3,577,500 3,577,500 (1,278,303) - -

Samsung Electronics Co., Ltd. 9,000 0.01% 4,827,927 5,112,000 5,112,000 284,073 - -

Samsung Securities Co., Ltd. 70,000 0.10% 4,889,391 4,046,000 4,046,000 (843,391) - -

Samsung SDI Co., Ltd. 15,000 0.03% 1,275,690 982,500 982,500 (293,190) - -

Amore Pacific Corp. 7,001 0.12% 4,540,276 4,270,610 4,270,610 (269,666) - -

Woori Financial Group 150,000 0.02% 2,004,752 1,053,000 1,053,000 (951,752) - -

Eugenes Co. 90,000 0.17% 983,632 328,950 328,950 (654,682) - -

INICIS Co., Ltd. 64,800 0.50% 1,328,400 210,924 210,924 (1,117,476) - -

Jeonbuk Bank 1,278,264 2.40% 9,993,150 5,764,971 5,764,971 (4,228,179) - -

First Fire & Marine Insurance 1,315,200 4.91% 15,384,831 7,259,904 7,259,904 (8,124,927) - -

Hana Nikel 1 2,400,000 10.55% 11,999,988 8,220,000 8,220,000 (3,779,988) - -

Hanjin Eng & Construction Co., Ltd. 239,622 0.51% 11,962,262 6,769,322 6,769,322 (5,192,940) - -

Hanjin Eng & Construction Holdings 87,750 0.30% 4,424,398 1,184,625 1,184,625 (3,239,773) - -

Hyundai Steel Company 40,000 0.05% 2,427,898 1,714,000 1,714,000 (713,898) - -

Hyundai Motor Co. 35,000 0.02% 2,326,151 1,942,500 1,942,500 (383,651) - -

Hyundai Marine & Fire Insurance Co., Ltd. 250,000 0.28% 4,459,368 3,125,000 3,125,000 (1,334,368) - -

LG Electronics Inc. 25,000 0.02% 2,732,343 2,285,000 2,285,000 (447,343) - -

LG CHEM Ltd. 50,000 0.07% 4,510,707 4,500,000 4,500,000 (10,707) - -

SK Networks Co., Ltd. 302,068 0.12% 1,806,291 2,374,254 2,374,254 567,963 - -

SK Energy Co., Ltd. 63,000 0.07% 6,435,224 5,575,500 5,575,500 (859,724) - -

STX Co. 143,665 0.36% 6,904,273 2,916,399 2,916,399 (3,987,874) - -

￦135,263,024 ￦89,335,654 ￦89,335,654 ￦(45,927,370) ￦ - ￦ -

(continued)

Impairment loss

Up to 2008 2009





<Equity securities without readily determinable fair values> (*3)

Korea Securities Depository 376 0.01% ￦ 3,160 ￦ 3,160 ￦ 3,160 ￦ - ￦ - ￦ -

Pusan New Port Company (*2) 988,614 1.00% 4,943,070 4,954,933 4,954,933 11,863 - -

ARD Holdings, Inc. (*2) 320,000 0.66% 1,600,000 1,869,440 1,869,440 269,440 - -

Pointpark Ltd. 100,000 2.32% 200,000 20,871 20,871 - 179,129

Busan International Airlines (*2) 399,000 3.99% 1,995,000 1,095,255 1,095,255 (899,745) - -

Mapo Aekyoung Town 84,000 14.00% 420,000 420,000 420,000 - - -

KDS 1 Preferred Stock (*2) 795 - 6,042 - - - - 6,042

C& Marine Financing Co. (*2) 200,000 12.50% 1,000,000 - - - 1,000,000

Final Data Inc. (*2) 25,000 0.50% 900,000 - - - - 900,000

11,067,272 8,363,659 8,363,659 (618,442) 179,129 1,906,042

<Contributed capital> (*3)

MIC2003-1 - 0.83% 165,038 165,038 165,038 - - -

Macquarie Korea OPP - 1.24% 13,500,153 13,500,153 13,500,153 - - -

Shinhan Infra Portfolio - 10.42% 22,684,551 22,684,551 22,684,551 - - -

Korea Infra 3 - 2.78% 8,301,356 8,301,356 8,301,356 - - -

44,651,098 44,651,098 44,651,098 - - -

<Beneficiary certificates>

Beneficiary Certificates 424,366,140 341,152,737 341,152,737 (82,883,014) - 330,389

￦615,347,534 ￦483,503,148 ￦483,503,148 ￦(129,428,826) ￦ 179,129 ￦ 2,236,431

March 31, 2008



<Equity securities with readily determinable fair values> (*1)

Nongshim Holdings 18,072 0.39% ￦1,789,128 ￦1,310,220 ￦1,310,220 ￦(478,908) ￦ - ￦ -

SK Networks 302,068 0.13% 1,806,291 5,728,418 5,728,418 3,922,127 - -

First Fire & Marine Insurance 1,070,000 4.00% 11,807,532 8,292,500 8,292,500 (3,515,032) - -

Dong-A Pharmaceutical 93,338 0.93% 9,963,594 9,847,159 9,847,159 (116,435) - -

Jeonbuk Bank 1,253,200 2.78% 9,993,150 9,273,680 9,273,680 (719,470) - -

SK Energy 13,000 0.01% 1,954,572 1,326,000 1,326,000 (628,572) - -

Hanjin Eng & Construction Holdings 87,750 0.30% 4,424,398 3,058,087 3,058,087 (1,366,311) - -

Hanjin Eng & Construction Co., Ltd. 237,250 0.50% 11,962,262 14,828,125 14,828,125 2,865,863 - -

Eugenes Co. 90,000 0.21% ￦ 983,632 ￦ 852,300 ￦ 852,300 ￦ (131,332) ￦ - ￦ -

(continued)

Impairment loss

Up to 2008 2009

Impairment loss

Up to 2008 2009

49



INICIS Co., Ltd. 64,800 0.50% ￦1,328,400 ￦ 291,600 ￦ 291,600 ￦(1,036,800) ￦ - ￦ -

Dae Joo Co., Ltd. 288,000 0.81% 432,000 138,240 138,240 (293,760) - -

56,444,959 54,946,329 54,946,329 (1,498,630) - -

<Equity securities without readily determinable fair values> (*3)

Shinwha Electronics Co. 8,000 2.00% 40,000 204,784 40,000 - - -

Korea Securities Depository 359 0.01% 3,160 31,303 3,160 - - -

Pusan New Port Company (*2) 988,614 1.00% 4,943,070 5,583,692 5,583,692 640,622 - -

ARD Holdings, Inc. 320,000 0.66% 1,600,000 2,093,536 1,600,000 - -

Pointpark Ltd. 100,000 2.32% 200,000 13,598 20,871 - 179,129 -

Final Data Inc. (*2) 25,000 0.50% 900,000 46,925 46,925 (853,075) - -

C&Shipping Financing. 200,000 12.50% 1,000,000 925,914 1,000,000 - - -

Busan International Airlines 399,000 4.20% 1,995,000 1,995,000 1,995,000 - - -

KDS 1 Preferred Stock 795 - 6,042 - 6,042 - - -

10,687,272 10,894,752 10,295,690 (212,453) 179,129 -

<Contributed capital> (*3)

MIC2003-1 - 0.83% 358,333 357,724 358,333 - - -

Macquarie Korea OPP - 1.24% 8,848,153 7,071,475 8,848,153 - - -

Shinhan Infra Portfolio - 10.42% 18,753,320 18,962,553 18,753,306 - - -

Korea Infra 3 - 2.78% 2,917,367 2,952,765 2,917,367 - - -

30,877,173 29,344,517 30,877,159 - - -

<Beneficiary certificates>

Beneficiary Certificates 249,733,300 248,064,549 248,064,549 (1,668,751) - -

￦347,742,704 ￦343,250,147 ￦344,183,727 ￦(3,379,834) ￦ 179,129 ￦ -

(*1) The fair value of marketable equity securities was valued at the closing price as of balance sheet date.

(*2) The fair value was valuated based on Korean Bond Pricing & KR Co's (the “KBP”) valuation report. KBP used more than one valuation

model such as Discounted Cash Flow (DCF) model, Imputed Market Value (IMV) model, Discounted Free Cash Flow to Equity (FCFE)

model, Dividend Discount Model (DDM) and Risk Adjusted Discounted Cash Flow Model together with reasonable applicable

assumptions.

(*3) These equity securities are stated at acquisition cost as the fair value of these securities cannot be measured reliably in accordance

with Korean GAAP.

(*4) Unrealized gain (loss) on valuation of investment securities above is before adjustment of deferred income tax.

Impairment loss

Up to 2008 2009



Debt securities included in available-for-sale securities as of March 31, 2009 and 2008 are summarized as follows (in thousands of Korean won):

March 31, 2009 Unrealized Amortized Fair value Book value gains (losses)

Maturity Type Cost cost (*1) (*2) (*3)

Within 1 year Special bonds ￦ 3,950,046 ￦ 3,975,475 ￦ 4,456,542 ￦ 4,061,578 ￦ 86,103 ￦ - ￦ -

Financial bonds 20,000,000 20,000,000 20,693,647 20,403,980 403,980 - -

Corporate bonds 28,862,000 28,859,404 32,654,391 29,011,881 152,477 - -

Other bonds 30,000,000 - 25,783,618 25,783,618 (4,216,382) - -

82,812,046 52,834,879 83,588,198 79,261,057 (3,573,822) - -

Within 5 years Government andpublic bonds 4,928,044 4,947,054 5,099,750 5,086,197 139,143 - -

Special bonds 154,446,475 154,562,611 159,426,662 158,160,345 3,597,734 - -

Financial bonds 129,778,690 129,831,575 133,123,603 131,818,260 1,986,685 - -

Corporate bonds 202,168,401 201,076,919 207,814,189 206,356,332 5,279,413 - -

Overseas bonds (*4,*5) 315,242,973 316,730,013 310,624,029 307,518,485 2,505,560 6,243,287 17,447,810

806,564,583 807,148,172 816,088,233 808,939,619 13,508,535 6,243,287 17,447,810

Within 10 years Government andpublic bonds 91,816,096 92,928,929 94,560,940 94,303,861 1,374,932 - -

Special bonds 300,083,141 300,107,051 309,473,684 306,268,365 6,161,314 - -

Corporate bonds 58,270,053 58,663,095 59,427,399 58,998,470 335,375 - -

Overseas bonds (*4,*5) 65,581,537 65,581,537 55,284,316 55,188,957 (8,545,067) - 14,295,368

515,750,827 517,280,612 518,746,339 514,759,653 (673,446) - 14,295,368

Over 10 years Government andpublic bonds 120,785,799 120,751,257 121,654,205 121,281,855 530,598 - -

Special bonds 30,000,000 30,000,000 30,820,156 30,498,145 498,145 - -

150,785,799 150,751,257 152,474,361 151,780,000 1,028,743 - -

Total Government andpublic bonds 217,529,939 218,627,240 221,314,895 220,671,913 2,044,673 - -

Special bonds 488,479,662 488,645,137 504,177,044 498,988,433 10,343,296 - -

Financial bonds 149,778,690 149,831,575 153,817,250 152,222,240 2,390,665 - -

Corporate bonds 289,300,454 288,599,418 299,895,979 294,366,683 5,767,265 - -

Overseas bonds 380,824,510 382,311,550 365,908,345 362,707,442 (6,039,507) 6,243,287 31,743,178

Other bonds 30,000,000 - 25,783,618 25,783,618 (4,216,382) - -

￦1,555,913,255 ￦1,528,014,920 ￦1,570,897,131 ￦1,554,740,329 ￦ 10,290,010 ￦ 6,243,287 ￦31,743,178

Impairment loss

Up to 2008 2009

51

March 31, 2008

Unrealized Amortized Fair value Book value gains (losses)

Maturity Type Cost cost (*1) (*2) (*3)

Within 1 year Government and public bonds ￦ 271,260 ￦ 299,349 ￦ 346,450 ￦ 299,509 ￦ 160 ￦ - ￦ -

Special bonds 9,562,435 9,968,106 10,107,902 10,039,235 71,129 - -

Financial bonds 19,999,588 20,000,000 20,004,105 19,935,375 (64,625)

Corporate bonds 17,000,000 17,000,000 17,088,670 16,977,800 (22,200) - -

Overseas bonds (*4,*5) 1,886,050 1,886,050 1,938,234 1,938,234 - - -

48,719,333 49,153,505 49,485,361 49,190,153 (15,536) - -

Within 5 years Government andpublic bonds 112,260,268 112,942,141 115,554,073 114,502,825 1,560,684 - -

Special bonds 178,403,959 178,596,954 181,159,214 179,012,937 415,983 - -

Financial bonds 129,800,576 129,822,903 132,328,525 131,118,190 1,295,287 - -

Corporate bonds 253,048,128 252,631,648 255,028,681 250,488,073 (2,143,575) - -

Overseas bonds (*4,*5) 48,314,000 48,314,000 42,078,520 41,890,425 (8,291,389) - -

721,826,931 722,307,646 726,149,013 717,012,450 (7,163,010) - -

Within 10 years Government andpublic bonds 116,011,154 116,814,415 117,587,288 117,256,310 41,895 - -

Special bonds 259,482,503 259,519,870 256,708,992 254,306,330 (5,213,540) - -

Corporate bonds 53,271,885 53,474,990 52,243,730 51,878,368 (1,596,622) - -

Overseas bonds (*4,*5) 78,731,912 78,737,799 44,445,288 44,158,418 (30,994,730) - 6,243,287

507,497,454 508,547,074 470,985,298 467,599,426 (37,362,997) - 6,243,287

Over 10 years Government andpublic bonds 99,630,308 99,618,397 101,527,742 101,219,590 1,601,193 - -

Special bonds 20,000,000 20,000,000 20,485,080 20,272,575 272,575 - -

119,630,308 119,618,397 122,012,822 121,492,165 1,873,768 - -

Total Government andpublic bonds 328,172,990 329,674,302 35,015,553 333,278,234 3,603,932 - -

Special bonds 467,448,897 468,084,930 468,461,188 463,631,077 (4,453,853) - -

Financial bonds 149,800,164 149,822,903 152,332,630 151,053,565 1,230,662 - -

Corporate bonds 323,320,013 323,106,638 324,361,081 319,344,241 (3,762,397) - -

Overseas bonds 128,931,962 128,937,849 88,462,042 87,987,077 (39,286,119) - 6,243,287

￦1,397,674,026 ￦1,399,626,622 ￦1,368,632,494 ￦1,355,294,194 ￦(42,667,775) ￦6,243,287

(*1) The fair value of marketable debt securities was valued at the closing price as of balance sheet dates. In addition, the fair value of

non-marketable debt securities was valued by discounted cash flow using discount rates reflecting the bond's credit rating by an

independent credit valuer.

(*2) Fair value includes accrued income, which is the difference between fair value and book value.

(*3) Unrealized gains (losses) on valuation of investment securities amounts is before deferred income tax adjustments.

(*4) Certain portion of the unrealized gain/loss from overseas bonds was reflected in current operations as fair value hedge accounting

was applied.

(*5) The Company recorded ￦31,743 million of impairment losses on the overseas bonds for the years ended March 31, 2009 due to sharp

decline in fair value triggered by financial crisis.

Impairment loss

Up to 2007 2008



The Company reclassified trading securities to available-for-sale categories as appropriate, following the amendment of SKAS 8. Under

SKAS 8 as amended, the reclassification's were made with effect from July 1, 2008 at the fair value of the investment securities

concerned at that date.

The following table shows the carrying values and fair values of the reclassified trading securities (in thousands of Korean won):

Book valueReclassification before

Type Companies date reclassification

Trading securities reclassified to CCOavailable-for-sale securities Everest Ⅱ Jul. 1, 2008 ￦ 10,120,980 ￦ 10,565,111 ￦ 10,565,111

Trading securities reclassified to SC Low Volavailable-for-sale securities ⅡFun Jul. 1, 2008 11,567,132 10,678,033 10,678,033

Trading securities reclassified to SG Best ofavailable-for-sale securities Note Feb. 1, 2009 12,722,945 12,823,555 12,823,555

￦ 34,411,057 ￦ 34,066,699 ￦ 34,066,699

Unrealized losses on valuation of trading securities amounting to ￦1,649 million and ￦415 million was recorded in net income for the

years ended as of March 31, 2009 and 2008.

Changes in valuation gains and losses for available-for-sale securities for the years ended as of March 31, 2009 and 2008 are summarized

as follows (in thousands of Korean won):

March 31, 2009

Beginning balance Increase Decrease Ending balance

Equity securities ￦ (1,711,083) ￦ - ￦ (44,834,728) ￦ (46,545,811)

Government and public bonds 3,603,932 - (1,559,259) 2,044,673

Special bonds (4,453,853) 14,797,149 - 10,343,296

Financial bonds 1,230,662 1,160,003 - 2,390,665

Corporate bonds (3,762,397) 9,529,662 - 5,767,265

Beneficial securities (1,668,751) - (81,214,263) (82,883,014)

Overseas bonds (39,286,119) 33,246,612 - (6,039,507)

Other securities - - (4,216,382) (4,216,382)

Valuation gain (loss) before income tax (46,047,609) 58,733,426 (131,824,632) (119,138,815)

Income tax effect 11,725,501 27,696,333

Valuation gain (loss) after income tax ￦ (34,322,108) ￦ (91,442,482)

March 31, 2009

Fair value Book value

53

March 31, 2008

Beginning balance Increase Decrease Ending balance

Equity securities ￦ 3,055,720 ￦ - ￦ (4,766,803) ￦ (1,711,083)

Government and public bonds 7,339,351 - (3,735,419) 3,603,932

Special bonds 1,937,004 - (6,390,857) (4,453,853)

Financial bonds 620,738 609,924 - 1,230,662

Corporate bonds 422,829 - (4,185,226) (3,762,397)

Beneficial securities 2,958,017 - (4,626,768) (1,668,751)

Overseas bonds (3,891,424) - (35,394,695) (39,286,119)

Valuation gain (loss) before income tax 12,442,235 - (58,489,844) (46,047,609)

Income tax effect (3,421,614) 11,725,501

Valuation gain (loss) after income tax ￦ 9,020,621 ￦ (34,322,108)

Investment trust contracts as of March 31, 2009 are as follows (in thousands of Korean won):

Gains (losses)Company Face value Cost Book value on valuation

Available-for-sale Neaway AssetsInvestment ￦ 10,000,000 ￦ 10,000,000 ￦ 6,305,581 ￦ (3,694,419)

Available-for-sale Meritz AssetsManagement 20,000,000 20,000,000 19,478,037 (521,963)

￦ 30,000,000 ￦ 30,000,000 ￦ 25,783,618 ￦ (4,216,382)

Details assets included in investment trust contracts as of March 31, 2009 are as follows (in thousands of Korean won):

2009

Cash ￦ 3,012,656

Securities 5,975,202

Bonds 10,240,650

Beneficiary certificates 6,514,930

Other 40,180

￦ 25,783,618



Details of pledged securities as of March 31, 2009 are as follows (in US dollars or thousands of Korean won):

Korean won amounts of

Remarks Face value mortgage Companies

Available-for-sale securities Interest swap ￦ 10,000,000 ￦ 10,000,000 Industrial Bank of Korea

Derivatives ￦ 115,000,000 115,000,000 Industrial Bank of Korea

Derivatives ￦ 50,000,000 50,000,000 SC First Bank

Derivatives $ 4,000,000 5,508,400 Korea Development Bank

Derivatives $ 40,000,000 55,084,000 SC First Bank

Held-to-maturity securities Derivatives ￦ 10,000,000 10,000,000 Industrial Bank of Korea

Derivatives $ 30,000,000 41,313,000 Korea Development Bank

Index futures ￦ 20,000,000 ￦ 20,000,000 Hyundai Futures Co., Ltd.

6. Held-to-maturity securities

Details of held-to-maturity securities as of March 31, 2009 and 2008 are as follows (in thousands of Korean won):

March 31, 2009

Amortized RecoverableMaturity Classification Cost cost value Book value

Within 1 year Government andpublic bonds ￦ 11,232 ￦ 13,480 ￦ 13,480 ￦ 13,480

Special bonds 868,150 867,209 867,209 867,209

879,382 880,689 880,689 880,689

Within 5 years Government andpublic bonds 1,188,037 1,192,906 1,192,906 1,192,906

Special bonds 10,000,000 10,000,000 10,000,000 10,000,000

Financial bonds 20,000,000 20,000,000 20,000,000 20,000,000

Corporate bonds 19,953,573 19,984,719 19,984,719 19,984,719

51,141,610 51,177,625 51,177,625 51,177,625

Within 10 years Financial bonds 121,000,000 121,000,000 121,000,000 121,000,000

Overseas bonds (*) 46,255,000 46,255,000 55,084,000 55,084,000

167,255,000 167,255,000 176,084,000 176,084,000

Over 10 years Special bonds 10,000,000 10,000,000 10,000,000 10,000,000

Total Government andpublic bonds 1,199,269 1,206,386 1,206,386 1,206,386

Special bonds 20,868,150 20,867,209 20,867,209 20,867,209

Financial bonds 141,000,000 141,000,000 141,000,000 141,000,000

Corporate bonds 19,953,573 19,984,719 19,984,719 19,984,719

Overseas bonds 46,255,000 46,255,000 55,084,000 55,084,000

￦229,275,992 ￦229,313,314 ￦238,142,314 ￦238,142,314

55

March 31, 2008

Amortized RecoverableMaturity Classification Cost cost value Book value

Within 1 year Government andpublic bonds ￦ 9,436,846 ￦ 9,923,466 ￦ 9,923,466 ￦ 9,923,466

Special bonds 42,378,251 42,373,577 42,373,577 42,373,577

51,815,097 52,297,043 52,297,043 52,297,043

Within 5 years Government andpublic bonds 11,232 42,987 42,987 42,987

Special bonds 868,150 865,755 865,755 865,755

Financial bonds 20,000,000 20,000,000 20,000,000 20,000,000

Corporate bonds 19,953,573 19,977,768 19,977,768 19,977,768

40,832,955 40,886,510 40,886,510 40,886,510

Within 10 years Special bonds 10,000,000 10,000,000 10,000,000 10,000,000

Financial bonds 120,000,000 120,000,000 120,000,000 120,000,000

Overseas bonds (*) 69,327,000 69,327,000 59,502,000 59,502,000

199,327,000 199,327,000 189,502,000 189,502,000

Over 10 years Special bonds 10,000,000 10,000,000 10,000,000 10,000,000

Total Government andpublic bonds 9,448,078 9,966,453 9,966,453 9,966,453

Special bonds 63,246,401 63,239,332 63,239,332 63,239,332

Financial bonds 140,000,000 140,000,000 140,000,000 140,000,000

Corporate bonds 19,953,573 19,977,768 19,977,768 19,977,768

Overseas bonds 69,327,000 69,327,000 59,502,000 59,502,000

￦301,975,052 ￦302,510,553 ￦292,685,553 ￦292,685,553

(*) The difference of cost, amortized cost, recoverable value and book value is due to exchange rate applied at acquisition date and

balance sheet date.



7. Equity method investments

Details of equity method investments as of March 31, 2009 and 2008 are as follows (in thousands of Korean won):

March 31, 2009 March 31, 2008

Number of Ownership Net assetshares (%) Cost value Book value Book value

Meritz Securities Co., Ltd. 362,061,475 26.81 ￦ 84,291,279 ￦131,920,686 ￦124,039,918 ￦124,269,017

Meritz Investment Bank (*1) 3,465,000 5.50 3,632,532 6,054,059 5,689,415 5,495,581

Meritz Assets Management 2,000,000 100.00 10,000,000 8,511,795 8,511,795 -

Meritz FIS 200,000 100.00 1,000,000 2,205,257 2,205,257 -

PT. Asuransi Hanjin Korindo (*2) 7,650 51.00 953,955 2,901,847 2,901,847 2,339,690

￦ 99,877,766 ￦151,593,644 ￦143,348,232 ￦132,104,288

(*1) Though the Company's ownership is less than 20% as of March 31, 2009, the Company uses the equity method because key directors

of the Company are also members of investee's board of directors.

(*2) Financial statements as of December 31, 2008 were used for PT, Assuransi Hanjin Korindo.

The details of changes in book value of equity method investments for the years ended March 31, 2009 and 2008 are as follows (in

thousands of Korean won):

March 31, 2009

Equity in OtherBeginning Acquisition Cash earnings (loss) increase Ending

Companies balance (disposal) dividends of investee (decrease) balance

Meritz Securities Co., Ltd. ￦124,269,017 ￦ - ￦(5,792,984) ￦ 6,347,112 ￦ (783,227) ￦124,039,918

Meritz Investment Bank 5,495,581 - (33,000) 383,324 (156,490) 5,689,415

Meritz Assets Management - 10,000,000 - (1,488,205) - 8,511,795

Meritz FIS - 1,000,000 - 1,205,257 - 2,205,257

PT. Asuransi Hanjin Korindo 2,339,690 - - 211,151 351,006 2,901,847

￦132,104,288 ￦ 11,000,000 ￦(5,825,984) ￦ 6,658,639 ￦ (588,711) ￦143,348,232

March 31, 2008

Equity in OtherBeginning Acquisition Cash earnings (loss) increase Ending

Companies balance (disposal) dividends of investee(*) (decrease) balance

Meritz Securities Co., Ltd. ￦66,050,536 ￦36,537,015 ￦(3,006,386) ￦11,830,736 ￦12,857,116 ￦124,269,017

Meritz Investment Bank 11,352,732 (6,754,202) (195,000) 1,107,019 (14,968) 5,495,581

PT. Asuransi Hanjin Korindo 2,331,679 - - 77,359 (69,348) 2,339,690

￦79,734,947 ￦29,782,813 ￦(3,201,386) ￦13,015,114 ￦12,772,800 ￦132,104,288

(*) Loss on disposal of equity method investment due to uneven paid-in capital increase is included.

57

The changes in the difference between the cost and proportionate net asset value of investee at the time of acquisition (goodwill or

negative goodwill) for the years ended March 31, 2009 and 2008 are as follows (in thousands of Korean won):

< March 31, 2009>

Beginning Increase Amortizationbalance (decrease) (accretion) Ending balance

Meritz Securities Co., Ltd. ￦ (8,262,135) ￦ - ￦ 381,367 ￦ (7,880,768)

Meritz Investment Bank (477,067) - 112,423 (364,644)

￦ (8,739,202) ￦ - ￦ 493,790 ￦ (8,245,412)

< March 31, 2008>

Beginning Increase Amortizationbalance (decrease) (accretion) Ending balance

Meritz Securities Co., Ltd. ￦ (9,623,845) ￦ - ￦ 1,361,710 ￦ (8,262,135)

Meritz Investment Bank (1,637,544) 834,323 326,154 (477,067)

￦ (11,261,389) ￦ 834,323 ￦ 1,687,864 ￦ (8,739,202)

The condensed financial information of the investees as of and for the years ended March 31, 2009 and 2008 is as follows (in thousands of

Korean won):

< March 31, 2009 >

Total Net asset Operating Net incomeCompanies Total assets liabilities value income (losses) (losses)

Meritz Securities Co., Ltd. ￦1,506,706,457 ￦1,014,648,695 ￦ 492,057,762 ￦ 22,512,949 ￦ 21,772,328

Meritz Investment Bank 1,229,558,005 1,119,570,303 109,987,702 5,075,108 4,826,564

Meritz Assets Management 8,900,514 388,719 8,511,795 (1,488,205) (1,488,205)

Meritz FIS 3,626,115 1,420,858 2,205,257 1,547,381 1,205,257

PT. Asuransi Hanjin Korindo 7,655,274 1,965,379 5,689,895 (166,874) 414,022

< March 31, 2008 >

Total Net asset Operating Net incomeCompanies Total assets liabilities value income (losses) (losses)

Meritz Securities Co., Ltd. ￦1,477,917,381 ￦ 983,582,622 ￦ 494,334,759 ￦ 51,940,241 ￦ 42,650,283

Meritz Investment Bank 1,032,433,013 923,839,421 108,593,592 9,982,446 11,216,354

PT. Asuransi Hanjin Korindo 5,477,229 889,602 4,587,627 62,286 157,918



8. LoansMaturities of loans as of March 31, 2009 and 2008 are summarized as follows (in thousand of Korean won):

March 31, 2009 March 31, 2008

Under 1 year ￦ 77,881,522 ￦ 101,995,638

1 year ~ 3 years 176,678,189 101,283,600

3 years ~ 5 years 59,720,217 54,693,253

Over 5 years 262,948,751 177,498,924

￦ 577,228,679 ￦ 435,471,415

As of March 31, 2009 and 2008, loans to directors and employees consist of the following (in thousands of Korean won):

Interest rate March 31, 2009 March 31, 2008

Unsecured loans to employees 5.0% ￦ 26,060 ￦ 2,044,809

Loans related to housing 2.0% ~ 5.0% 12,606,252 11,332,873

￦ 12,632,312 ￦ 13,377,682

The Company classifies loans into five different grades: "normal", "precautionary", "substandard", "doubtful" and "estimated loss",

pursuant to RIS and the Company's own classification criteria of assets. Details of the classification as of March 31, 2009 are as follows

(in thousands of Korean won):

Descriptions Normal Precautionary Substandard Doubtful Estimated loss Total

Policy loans ￦260,706,299 ￦ - ￦ - ￦ - ￦ - ￦260,706,299

Loans secured by real estate 121,366,232 341,000 8,748,607 - 1,817,965 132,273,804

Unsecured loans 364,598 227,242 - 2,495 9,080 603,415

Guaranteed loans 13,784,961 60,200 - - - 13,845,161

Other loans 169,300,000 - 500,000 - - 169,800,000

565,522,090 628,442 9,248,607 2,495 1,827,045 577,228,679

Insurance receivables (*1) 17,768,644 3,093,312 4,246,309 1,291,433 1,282,755 27,682,453

Notes receivables 618,919 - - - - 618,919

Other accounts receivables 17,919,657 - 275,000 - 3,152,047 21,346,704

Suspense payment - - 225,839 - 17,365 243,204

Dishonored notes - - - - 1,821 1,821

Accrued income (*2) 3,082,198 8,911 - - - 3,091,109

￦604,911,508 ￦ 3,730,665 ￦13,995,755 ￦ 1,293,928 ￦ 6,281,033 ￦630,212,889

(*1) The allowance for doubtful accounts is determined after netting insurance receivables against insurance payables by each counter

party.

(*2) The Company records accrued income for the accounts classified as “normal” or “precautionary”. And the Company does not provide

an allowance for doubtful accounts for accrued income receivables from financial institutions.

59

Details of allowance for doubtful accounts for the balances of receivables as of March 31, 2009 are as follows (in thousands of Korean won):

Normal Precautionary Substandard Doubtful Estimated lossDescriptions (0.5~0.75%) (2~5%) (20%) (50%) (100%) Total

Loans ￦ 3,785,615 ￦ 24,747 ￦ 2,669,221 ￦ 1,247 ￦ 1,827,045 ￦ 8,307,875

Insurance receivables 88,843 61,866 849,261 645,716 1,282,755 2,928,441

Trade notes receivable 3,094 - - - - 3,094

Other accounts receivable 89,598 - 55,000 - 3,152,047 3,296,645

Suspense payments - - 52,815 - 17,365 70,180

Dishonored notes - - - - 1,821 1,821

Accrued income 15,410 177 - - - 15,587

￦ 3,982,560 ￦ 86,790 ￦ 3,626,297 ￦ 646,963 ￦ 6,281,033 ￦14,623,643

Bad debt write-offs for the years ended March 31, 2009 and 2008 amounting to ￦4,210,949 thousand and ￦255,651 thousand

respectively, were offset against the allowance for doubtful accounts.

As of March 31, 2009 and 2008, the allowances for doubtful accounts, based by the type of loans, are as follows (in thousands of Korean won):

March 31, 2009 March 31, 2008

Policy loans ￦ 1,955,293 ￦ 1,649,400

Loans secured by marketable securities - 2,850

Loans secured by real estate 5,282,410 6,252,597

Unsecured loans 17,275 52,592

Loans for guarantee payments 106,397 93,709

Others 946,500 633,512

￦ 8,307,875 ￦ 8,684,660

The ratio of allowance for doubtful accounts to total receivables as of March 31, 2009, 2008 and 2007 is as follows (in thousands of

Korean won):

Descriptions 2007 2008 2009

Loans ￦ 496,122,980 ￦ 435,471,415 ￦ 577,228,679

Insurance receivables 24,504,017 39,154,939 27,682,453

Other account receivables 31,156,988 19,115,246 21,346,704

Suspense payment 119,536 155,475 243,204

Accrued income 26,206,855 26,635,424 3,091,109

Notes receivable 769,032 668,654 618,919

Dishonored bills 1,820 51,820 1,821

￦ 578,881,228 ￦ 521,252,973 ￦ 630,212,889

Allowance for doubtful accounts ￦ 10,833,745 ￦ 14,211,396 ￦ 14,623,643

Allowance ratio 1.75% 2.52% 2.32%



9. Restructured receivables

In 2003, receivables from SK Networks (formerly SK Global) were restructured, and since then, the Company was given stock of SK

Networks in lieu of the majority of these receivables. As a result, the remaining balance of this receivable reduced to ￦6,013 million as of

March 31, 2007 and in January 2008, the remaining balance was collected in cash.

10. Tangible assets

Changes in tangible assets for the years ended March 31, 2009 and 2008 are as follows (in thousands of Korean won):

< March 31, 2009 >

Beginning Endingbalance Purchases Disposals Transfers Revaluation Depreciation balance

Land ￦ 118,869,315 ￦ 1,985,584 ￦ (2,478,300) ￦ 45,530,701 ￦ 235,336,745 ￦ - ￦ 399,244,045

Buildings 258,994,854 7,786,025 (2,269,986) 4,877,219 - (7,262,064) 262,126,048

Furniture and equipment 14,487,752 11,148,463 (711,958) - - (10,603,559) 14,320,698

Vehicles 136,237 - - - - (71,934) 64,303

Construction in-progress 24,425,500 26,992,352 - (50,407,920) - - 1,009,932

￦ 416,913,658 ￦47,912,424 ￦(5,460,244) ￦ - ￦ 235,336,745 ￦ (17,937,557) ￦ 676,765,026

< March 31, 2008 >

Beginning Endingbalance Purchases Disposals Transfers Revaluation Depreciation balance

Land ￦ 119,094,903 ￦ - ￦ (225,588) ￦ - ￦ - ￦ - ￦ 118,869,315

Buildings 240,820,396 5,451,300 (66,849) 19,774,632 - (6,984,625) 258,994,854

Furniture and equipment 14,633,867 10,095,210 (21,141) - - (10,220,184) 14,487,752

Vehicles 216,898 118,407 (37,697) - - (161,371) 136,237

Construction in-progress 14,551,526 29,648,606 - (19,774,632) - - 24,425,500

￦ 389,317,590 ￦45,313,523 ￦ (351,275) ￦ - ￦ - ￦17,366,180 ￦ 416,913,658

The Company has early adopted “SKAS 5 Amendments - Property, Plant and Equipment” and revalued its land at fair value. The fair value

based on the active market price adjusted for any difference in nature, location and condition. The revaluation date is March 31, 2009.

61

If the land was measured using the cost model, the carrying amounts would be as follows (in thousands of Korean won):

March 31, 2009 March 31, 2008

Book value ￦ 163,907,300 ￦ 118,869,315

Revaluation loss of ￦8,936,864 thousand was recorded as non-operating expenses for the year ended as of March 31, 2008. The

movements in accumulated other comprehensive income due to revaluation are as follows (In thousands of Korean won):

March 31, 2009

April 1, 2008 ￦ -

Increase other comprehensive income by revaluation ￦ 244,273,609

Adjustment of deferred income tax. ￦ (53,740,194)

March 31, 2009 ￦ 190,533,415

The residual values of tangible assets still in use as of March 31, 2009 and 2008, of which the depreciation has been completed, totaled

￦71,552 thousand and ￦64,370 thousand, respectively.

The values of the Company's land, as determined by the government for tax administration purposes are as follows (in thousands of

Korean won):

Book value Value determined by the government

March 31, 2009 March 31, 2008 March 31, 2009 March 31, 2008

Main building ￦ 228,561,920 ￦ 43,660,468 ￦ 123,655,570 ￦ 88,835,590

Yeouido building 27,938,000 11,083,600 16,946,000 15,572,000

Annex of main building 31,501,680 11,581,500 19,364,268 18,530,400

Branch office 23,032,152 29,701,036 17,223,257 18,717,833

Training building 38,995,130 21,601,480 33,366,964 31,950,700

Other 49,215,163 1,241,231 26,607,979 1,396,739

￦ 399,244,045 ￦ 118,869,315 ￦ 237,164,038 ￦ 175,003,262

The Property and equipment insurances against fire and other damages are as follows (in thousands of Korean won):

Insurance Type Insured property company

Burglary insurance Cash and securities Dongbu Insurance

Co.,Ltd. ￦ 1,102,000 ￦ 998,000

Fire insurance Building Dongbu Insurance

Co.,Ltd. 281,619,219 268,098,833

Property insurance Furniture and fixtures Dongbu Insurance

Co.,Ltd. 26,785,928 24,098,498

￦ 309,507,147 ￦ 293,195,331

Insured amount

March 31, 2009 March 31, 2008



11. Intangible assets

Details of intangible assets as of March 31, 2009 and 2008 are as follows (in thousands of Korean won):

< March 31, 2009 >

AccumulatedCost amortization Book value

Development cost ￦ 11,709,143 ￦ (6,022,572) ￦ 5,686,571

Other intangible assets 11,430,754 (4,917,389) 6,513,365

￦ 23,139,897 ￦ (10,939,961) ￦ 12,199,936

< March 31, 2008 >

AccumulatedCost amortization Book value

Development cost ￦ 9,544,177 ￦ (4,780,086) ￦ 4,764,091

Other intangible assets 7,242,647 (3,206,024) 4,036,623

￦ 16,786,824 ￦ (7,986,110) ￦ 8,800,714

Changes in intangible assets for the years ended March 31, 2009 and 2008 are as follows (in thousands of Korean won):

< March 31, 2009 >

Beginning Endingbalance Purchases Amortization balance

Development cost ￦ 4,764,091 ￦ 2,164,966 ￦ (1,242,486) ￦ 5,686,571

Other intangible assets 4,036,623 4,188,107 (1,711,365) 6,513,365

Total ￦ 8,800,714 ￦ 6,353,073 ￦ (2,953,851) ￦ 12,199,936

< March 31, 2008 >

Beginning Endingbalance Purchases Amortization balance

Development cost ￦ 2,145,336 ￦ 3,301,973 ￦ (683,218) ￦ 4,764,091

Other intangible assets 1,993,269 2,912,640 (869,286) 4,036,623

Total ￦ 4,138,605 ￦ 6,214,613 ￦ (1,552,504) ￦ 8,800,714

63

Details of amortization for the years ended March 31, 2009 and 2008 are as follows (in thousands of Korean won):

March 31, 2009 March 31, 2008

Operating expense ￦ 2,953,851 ￦ 1,552,504

The Company's intangible assets as of March 31, 2009 are summarized as follows (in thousands of Korean won):

March 31, 2009 Useful lives Remarks

Development cost ￦ 5,686,571 1~5 System developmentcost and others

Other intangible assets 6,513,365 1~5 Software

￦ 12,199,936

12. Insurance receivables

Details of insurance receivables as of March 31, 2009 and 2008 are as follows (in thousands of Korean won):

March 31, 2009 March 31, 2008

Premiums receivable ￦ 9,796,406 ￦ 7,689,941

Due from agents 314,359 309,304

Co-insurance receivables 7,963,410 7,135,151

Due from agency receivables 7,406,338 9,374,058

Re-insurance receivables 24,112,921 22,397,030

Overseas reinsurance receivables 19,245,403 31,274,123

Deposits on reinsurance contracts assumed 5,977,805 4,572,942

￦ 74,816,642 ￦ 82,752,549



13. Compensation receivables

Compensation receivables as of March 31, 2009 and 2008 are as follows (in thousands of Korean won):

< March 31, 2009 >

Beginning Increase Endingbalance (decrease) balance

General ￦ 2,950,964 ￦ 580,892 ￦ 3,531,856

Vehicles 17,436,889 2,821,341 20,258,230

Long-term 186,973 129,244 316,217

Personal annuities 178 (2) 176

￦ 20,575,004 ￦ 3,531,475 ￦ 24,106,479

< March 31, 2008 >

Beginning Increase Endingbalance (decrease) balance

General ￦ 2,850,645 ￦ 100,319 ￦ 2,950,964

Vehicles 17,491,709 (54,820) 17,436,889

Long-term 113,944 73,029 186,973

Personal annuities 933 (755) 178

￦ 20,457,231 ￦ 117,773 ￦ 20,575,004

14. Deferred acquisition cost

Details of deferred acquisition costs as of March 31, 2009 and 2008 are as follows (in thousand of Korean won):

< March 31, 2009 >

Beginning Endingbalance Increase Decrease balance

Long-term insurance (Non-participating) ￦ 495,836,888 ￦ 405,423,001 ￦ (262,283,195) ￦ 638,976,694

Personal annuities 6,319,757 2,938,885 (2,626,228) 6,632,414

￦ 502,156,645 ￦ 408,361,886 ￦ (264,909,423) ￦ 645,609,108

< March 31, 2008 >


Long-term insurance (Non-participating) ￦ 345,146,787 ￦ 314,604,969 ￦ (163,914,868) ￦ 495,836,888

Personal annuities 5,247,046 3,264,435 (2,191,724) 6,319,757

￦ 350,393,833 ￦ 317,869,404 ￦ (166,106,592) ￦ 502,156,645

65

15. Foreign currency assets and liabilities

Assets and liabilities denominated in foreign currencies as of March 31, 2009 and 2008 are as follows (in thousands of Korean won):

March 31, 2009 March 31, 2008

Foreign Equivalent Gain (loss) on Foreign Equivalent Gain (loss) oncurrencies Korean won translation currencies Korean won translation

<Assets>

Insurance receivables

USD 10,653,422 ￦14,670,827 ￦ 1,416,303 14,284,434 ￦14,165,873 ￦ 490,802

EUR 89,996 163,468 3,568 352,201 551,194 67,184

YEN 5,844,960 82,694 (7,420) 16,130,269 161,335 16,227

Other - 2,848,181 50,415 - 5,894,151 1,042

17,765,170 1,462,866 20,772,553 575,255

Deposits in foreign currencies

USD 56,392,569 77,658,206 19,000,424 52,551,518 52,115,340 2,559,840

YEN 549,924 7,780 (499) 2,065,741 20,662 3,586

GBP 309 607 (4) 309 612 36

EUR 127,477 231,548 1,046 76,720 120,066 3,874

77,898,141 19,000,967 52,256,680 2,567,336

Overseas securities

USD 358,487,664 400,630,580 32,758,252 310,285,456 265,800,425 12,539,666

YEN 2,000,000,000 26,793,482 4,146,000 1,000,000,000 10,272,054 2,032,000

EUR - - - - - 1,244,240

427,424,062 36,904,252 276,072,479 15,815,906

￦523,087,373 ￦57,368,085 ￦349,101,712 ￦18,958,497

<Liabilities>

Insurance payable

USD 11,757,110 16,187,716 (86,532) 16,038,880 15,905,757 (465,743)

EUR 91,881 166,891 6,044 116,060 181,634 (15,103)

YEN 694,466 9,825 (399) 1,705,974 117,083 (12,931)

Other - 2,570,834 (86,443) - 4,144,271 (22,503)

￦ 18,935,266 ￦ (167,330) ￦20,348,745 ￦ (516,280)



16. Policy reserves

As of March 31, 2009 and 2008, policy reserves consist of the following (in thousands of Korean won):

< March 31, 2009 >


Long-term Insurance Premium Reserve:

Long-term ￦ 2,279,958,465 ￦ 421,284,479 ￦ - ￦ 2,701,242,944

Personal annuities 517,093,014 44,318,753 - 561,411,767

2,797,051,479 465,603,232 - 3,262,654,711

Reserve for Outstanding Claims:

General(*1) 131,712,537 300,020,878 - 431,733,415

Vehicles 163,490,056 - 7,837,186 155,652,870

Long-term 82,746,631 25,412,887 - 108,159,518

Personal annuities 3,187,985 606,986 - 3,794,971

Reinsurance (99,509,313) (112,608,796) - (212,118,109)

281,627,896 213,431,955 7,837,186 487,222,665

Unearned Premium Reserve:

General 150,553,134 7,433,999 - 157,987,133

Vehicles 315,680,906 20,483,097 - 336,164,003

Long-term 2,878,356 43,741 - 2,922,097

Personal annuities 9,698 4,669 - 14,367

Reinsurance (87,541,528) (6,373,082) - (93,914,610)

381,580,566 21,592,424 - 403,172,990

Reserve for Participating Policyholders' Dividends:


Retirement insurance 238,081 134,163 - 372,244

28,509,479 5,674,785 - 34,184,264

Excess Participating Policyholders' Dividends:

Personal annuities 12,132,898 - 2,996,617 9,136,281


12,308,543 102,940 2,996,617 9,414,866

￦ 3,501,077,963 ￦ 706,405,336 ￦ 10,833,803 ￦ 4,196,649,496

(*1) The Company entered into Refund Guarantee Insurance contracts with Asia Heavy Industries, Jinse Shipbuilding, C& Heavy Industries

amounting to US$15 million and EUR16 million, US$114 million, US$100 million, respectively. The company reserved ￦182 billion as the

reserve for outstanding claims excluding reinsurance and compensation for the year ended March 31, 2009.

67

< March 31, 2008 >


Long-term Insurance Premium Reserve:

Long-term ￦ 1,876,886,886 ￦ 403,071,579 ￦ 2,279,958,465


2,355,332,441 441,719,038 - 2,797,051,479

Reserve for Outstanding Claims:

General 94,253,885 37,458,652 - 131,712,537

Vehicles 163,590,513 - 100,457 163,490,056

Long-term 65,649,776 17,096,855 - 82,746,631

Personal annuities 2,947,008 240,977 - 3,187,985

Reinsurance (72,441,028) (27,068,285) - (99,509,313)

254,000,154 27,728,199 100,457 281,627,896

Unearned Premium Reserve:

General 126,049,827 24,503,307 - 150,553,134

Vehicles 302,246,523 13,434,383 - 315,680,906

Long-term 3,753,504 - 875,148 2,878,356

Personal annuities 14,970 - 5,272 9,698

Reinsurance (74,562,392) (12,979,136) - (87,541,528)

357,502,432 24,958,554 880,420 381,580,566

Reserve for Participating Policyholders' Dividends:



21,670,940 6,838,539 - 28,509,479

Excess Participating Policyholders' Dividends:

Personal annuities 13,164,473 - 1,031,575 12,132,898


13,196,409 143,709 1,031,575 12,308,543

￦ 3,001,702,376 ￦ 501,388,039 ￦ 2,012,452 ￦ 3,501,077,963



Details of catastrophe reserves as of March 31, 2009, 2008 are as follows (in thousands of Korean won):

< March 31, 2009 >


General ￦ 63,738,361 ￦ - ￦ (20,588,108) ￦ 43,150,253

Vehicles 82,305,842 - (19,649,532) 62,656,310

￦ 146,044,203 ￦ - ￦ (40,237,640) ￦ 105,806,563

< March 31, 2008 >


General ￦ 58,015,037 ￦ 5,723,324 ￦ - ￦ 63,738,361

Vehicles 74,448,067 7,857,775 - 82,305,842

￦ 132,463,104 ￦ 13,581,099 ￦ - ￦ 146,044,203

17. Separate accounts

The Company manages retirement insurance contracts retirement pension contracts separately from the general account. Financial

information of separate account as of and for the years ended March 31, 2009 and 2008 is as follows (in thousands of Korean won):

March 31, 2009 March 31, 2008

(Assets)

Cash and deposits:

Ordinary deposits ￦ 32,134 ￦ 11,209

Time deposits 33,500,000 45,400,000

Other deposits 2,950,000 -

36,482,134 45,411,209

Marketable securities:

Stocks 539,681 1,303,483

Bonds 134,255,936 120,052,868

Beneficiary certificates 7,511,565 2,540,538

Other securities 15,000,000 -

157,307,182 123,896,889

Loans:

Allowance for doubtful accounts - (18,275)

Other loans - 3,655,267

- 3,636,992

Other assets:

Accounts receivable 1,848 -

Accrued income 4,001,059 3,343,076

Accrued dividends ￦ 780 ￦ -

(continued)

69

March 31, 2009 March 31, 2008

Prepaid income taxes ￦ 120,106 ￦ -

4,123,793 3,343,076

Due from general account 13,399,691 2,903,462

Due to separate accounts. (13,399,691) (2,903,462)

197,913,109 176,288,166

(Liabilities)

Other liabilities:

Accounts payable 31,965 -

Accrued expenses 714,814 717,805

Unearned income 202,932 -

949,711 717,805

Due to general account 2,454,458 282,507

3,404,169 1,000,312

(Reserve)

Reserve for policyholders:

Premium reserve 204,861,145 175,564,903

Reserve for participating policyholders' dividend 2,052,737 2,107,765

Excess participating policyholders' dividend Reserve 969,775 505,525

Retained earning for non-dividend 24,975 13,123

207,908,631 178,191,316

Due from separate accounts 2,454,458 282,507

￦ 208,858,342 ￦ 178,909,121

Income statements of separate accounts

March 31, 2009 March 31, 2008

(Income)

Premium income ￦ 67,427,294 ￦ 78,016,624

Interest income 10,563,734 7,461,173

Dividend income 6,587 270,341

Gain on disposal of marketable securities 204,363 333,952

Gain on valuation of marketable securities 2,059,836 1,332,665

Other income 252,907 102,740

80,514,721 87,517,495

(Expenses)

Policyholders' reserve 29,717,315 47,972,246

Claims paid 48,045,588 37,740,606

Separate account operating fees 1,294,814 1,019,958

Taxes and dues 459,462 462,114

Bad debt expense - 386

Property management fee 70,077 3,000

Loss on disposal of marketable securities 264,346 83,181

Loss on valuation of marketable securities 636,256 213,796

Interest expense 26,860 22,207

Other expense 3 -

￦ 80,514,721 ￦ 87,517,495



18. Unpaid claims

Details of insurance payables as of March 31, 2009 and 2008 are as follows (in thousands of Korean won):

March 31, 2009 March 31, 2008

Claims payables ￦ 32,136,173 ￦ 30,789,131

Due to agents 1,129,524 991,235

Premiums refund payables 7,657,430 8,643,045

Due to agency business 6,446,771 9,626,954

Reinsurance payables 20,357,886 34,676,145

Overseas reinsurance payables 18,588,314 20,816,234

Deposits on reinsurance contracts ceded 13,835,556 11,633,352

￦ 100,151,654 ￦ 117,176,096

19. Borrowings

Borrowings as of March 31, 2009 and 2008, and the repayment schedule are as follows (in thousands of Korean won):

Description Payable to Interest rate 2009 2008 Maturity

Job training facility loans Shinhan Bank 2.50% ￦ - ￦ 100,000 2008.6.30

20. Severance and retirement benefits

Changes in severance and retirement benefits liabilities as of March 31, 2009 and 2008 are summarized as follows (in thousands of

Korean won):

March 31, 2009 March 31, 2008

Beginning balance ￦ 39,401,412 ￦ 35,505,829

Payments during the year (62,096,789) (11,080,457)

Provision during the year 24,442,445 14,976,040

Ending balance ￦ 1,747,068 ￦ 39,401,412

21. Contingencies and significant contracts

RE-INSURANCE AGREEMENTS

The Company and 19 other non life insurance companies are engaged in mutual insurance agreements, which secure a part of their total

insured amounts. These insured amounts are additionally re-insured by Korean Reinsurance Company and any remaining amounts not

covered by Korean Reinsurance Company are re-insured by Munich Re Insurance Company and other foreign insurance companies. In

accordance with the reinsurance agreements, the Company receives or pays commissions from/to Korean Reinsurance Company and

foreign reinsurance companies.

71

OUTSTANDING LITIGATION

The Company is involved in litigation as a defendant with aggregate claim amount of ￦55,664,316 thousand arising in the normal course

of its business related to policy coverage and claims disputes. The Company has provided reserves for the possible estimated losses

resulting from such litigation as of March 31, 2009.

BANK OVERDRAFT ACCOUNTS AGREEMENT

The Company has opened a bank overdraft account with Woori Bank and other banks (within the limit of ￦1,900 million) and one-day bank

overdraft accounts (within the limit of ￦13,000 million) as of March 31, 2009.

22. Common stock

Details of common shares as of March 31, 2009 are as follows:

March 31, 2009

Number of common shares authorized ￦ 200,000,000

Par value 500

Number of common shares issued and outstanding 123,800,000

Common stock ￦ 61,900,000,000

Changes in common shares for the recent 2 years are as follows (in thousands of Korean won):

Number of Paid-in capital incommon shares Common stock excess of par value

2007.03.31 85,800,000 42,900,000 16,362,409

2007.08.24 (*1) 38,000,000 19,000,000 206,464,960

2008.03.31 123,800,000 61,900,000 222,827,369

2008.06.19 (*2) - - 3,039

2009.03.31 123,800,000 61,900,000 222,830,408

(*1) Paid-in capital increase

(*2) Refund of capital stock premium

In accordance with the Korean Asset Revaluation Act and the Insurance Business Act, the Company revalued its land and buildings in 1976

and 1994, resulting in a revaluation gain of ￦41,737 million, net of revaluation tax, which was offset entirely against the accumulated

deficit in 1993. In addition, the Company revalued its land and buildings in 1998, resulting in a revaluation gain of ￦9,555 million, which

was recorded as revaluation surplus as of March 31, 2009.

As of March 31, 2009, the Company had treasury stock amounting to ￦120,520 million (17,232,157 shares), that were directly purchased

or held through a Treasury Stock Fund in order to stabilize the stock price.

The Korean Commercial Code requires the Company to appropriate, as a legal reserve, at least 10% of cash dividends for each accounting

period until the reserve equals 50% of outstanding capital stock. The legal reserve may not be utilized for cash dividends, but may be

used to offset a deficit, if any, or may be transferred to capital stock.



23. Reinsurance

Details of ceded reinsurance transactions for the years ended March 31, 2009 and 2008 are as follows (in thousands of Korean won):

< March 31, 2009 >

Reinsurance Cash surrender Reinsurance Reinsurance claimspremium ceded value recovered claims returned

General ￦ 211,688,248 ￦ (397,217) ￦ 113,694,573 ￦ (2,269,184)

Vehicles 691,032 (1,358) 1,252,797 -

Long-term 53,534,775 (66,678) 45,048,766 (87,540)

Personal annuities 663,569 (353) 405,093 -

￦ 266,577,624 ￦ (465,606) ￦ 160,401,229 ￦ (2,356,724)

< March 31, 2008 >

Reinsurance Cash surrender Reinsurance Reinsurance claimspremium ceded value recovered claims returned

General ￦ 197,426,727 ￦ (119,912) ￦ 97,304,200 ￦ (1,563,092)

Vehicles 622,929 (7,033) 2,743,449 -

Long-term 52,443,608 (93,445) 39,747,096 (95,109)

Personal annuities 694,550 (212) 434,249 -

￦ 251,187,814 ￦ (220,602) ￦ 140,228,994 ￦ (1,658,201)

24. Premium income

Details of premium income for the years ended March 31, 2009 and 2008 are as follows (in thousands of Korean won):

< March 31, 2009 >

AssumedDirect premium reinsurance

written premium Surrenders Total

General ￦ 320,038,636 ￦ 36,620,145 ￦ (3,274,687) ￦ 353,384,094

Vehicles 726,732,850 - (32,276,183) 694,456,667

Long-term 1,783,347,204 - - 1,783,347,204

Personal annuities 66,292,004 - - 66,292,004

￦ 2,896,410,694 ￦ 36,620,145 ￦ (35,550,870) ￦ 2,897,479,969

< March 31, 2008 >



General ￦ 295,778,513 ￦ 41,030,817 ￦ (3,058,181) ￦ 333,751,149

Vehicles 685,474,056 - (30,043,591) 655,430,465

Long-term ￦ 1,491,929,078 ￦ - ￦ - ￦ 1,491,929,078

(continued)

73

< March 31, 2008 >



Personal annuities ￦ 60,863,211 ￦ - ￦ - ￦ 60,863,211

￦ 2,534,044,858 ￦ 41,030,817 ￦ (33,101,772) ￦ 2,541,973,903

25. Operating expenses

Details of operating expenses for the years ended March 31, 2009 and 2008 are as follows (in thousands of Korean won):

March 31, 2009 March 31, 2008

Wages and salaries ￦ 109,524,156 ￦ 110,723,798

Retirement and severance benefits 24,187,684 14,704,693

Other employee benefits 21,479,816 22,468,354

Administrative expenses: 143,503,605 125,476,938

Amortization on intangible assets 2,953,852 1,552,504

Acquisition and collection expenses 29,506,574 23,985,597

Agent commissions 116,953,192 106,557,773

Co-insurance commissions 699,275 675,487

Agency business commissions 459,120 759,854

Claim inspection expenses 17,675,286 13,944,159

Assumed reinsurance commissions 7,175,678 7,692,868

Profit commissions paid for assumed reinsurance 175,412 189,846

Interest on ceded reinsurance deposits 420,058 356,726

Total ￦ 474,713,708 ￦ 429,088,597

26. Value-added information

Details of value-added information for the years ended March 31, 2009 and 2008 are as follows (in thousands of Korean won):

Investment administration

Operating expenses expenses Total

March 31, 2009 March 31, 2008 March 31, 2009 March 31, 2008 March 31, 2009 March 31, 2008

Wages and salaries ￦109,524,156 ￦110,723,798 ￦ 1,728,251 ￦ 2,199,889 ￦111,252,407 ￦112,923,687

Retirement and severance benefits 24,187,684 14,704,693 254,761 271,347 24,442,445 14,976,040

Other employee benefits 21,479,816 22,468,354 256,469 288,019 21,736,285 22,756,373

Rent 22,444,783 18,077,093 952 1,477 22,445,735 18,078,570

Depreciation and amortization (*1) 14,096,793 13,547,034 43,873 71,739 14,140,666 13,618,773

Taxes and dues 16,501,707 16,148,084 10,053,480 8,341,099 26,555,187 24,489,183

￦208,234,939 ￦195,669,056 ￦ 12,337,786 ￦ 11,173,570 ￦220,572,725 ￦206,842,626

(*1) Depreciation of real estate for the years ended March 31, 2009 and 2008 amounting to ￦3,984,241 thousand and ￦3,747,470

thousand respectively, were not included.



27. Derivative contracts

Details of derivative contracts as of March 31, 2009 and 2008 are as follows (in thousands of Korean won):

< March 31, 2009 >

Notional amount Unrealized gains (losses) (I/S) Unrealizedgain (loss)

Trading Hedging Trading Hedging on valuation Value Total purpose purpose Total purpose purpose (B/S) (*1)

Currency related Currency forwards ￦(16,364,020) ￦107,667,543 ￦36,462,650 ￦71,204,893 ￦(13,009,169) ￦(8,868,950) ￦(4,140,219) ￦ (2,684,452)

Currency Swaps (72,563,412) 470,769,540 125,316,100 345,453,440 (45,848,081) (36,089,821) (9,758,260) (27,991,854)

(88,927,432) 578,437,083 161,778,750 416,658,333 (58,857,250) (44,958,771) (13,898,479) (30,676,306)

Interest rate Interest rate related Swaps 348,048 10,000,000 - 10,000,000 - - - 348,048

Index related Stock price index futures - 8,784,475 - 8,784,475 - - - -

￦(88,579,384) ￦597,221,558 ￦161,778,750 ￦435,442,808 ￦(58,857,250) ￦(44,958,771) ￦(13,898,479) ￦(30,328,258)

< March 31, 2008 >

Notional amount Unrealized gains (losses) (I/S) Unrealizedgain (loss)

Trading Hedging Trading Hedging on valuation Value Total purpose purpose Total purpose purpose (B/S) (*1)

Currency related Currencyforwards ￦(7,419,214) ￦143,092,941 ￦ - ￦143,092,941 ￦(7,370,888) ￦ - ￦(7,370,888) ￦ -

Currency swaps (993,360) 227,184,300 - 227,184,300 (7,856,174) - (7,856,174) (1,904,408)

(8,412,574) 370,277,241 - 370,277,241 (15,227,062) - (15,227,062) (1,904,408)

Interest rate Interest rate related swaps 283,942 10,000,000 - 10,000,000 - - - 283,942

Stock price index futures - 31,311,600 31,311,600 - - - - -

Index related GovernmentBond futures - 217,950 217,950 - - - - -

- 31,529,550 31,529,550 - - - - -

￦(8,128,632) ￦411,806,791 ￦31,529,550 ￦380,277,241 ￦(15,227,062) ￦ - ￦(15,227,062) ￦(1,620,466)

(*1) Unrealized gains (losses) on derivative is before deferred income tax adjustments.

The Company entered into currency forwards and swap contracts to hedge against foreign currency fluctuation and cash flow fluctuation.

For certain currency swaps and currency forward contracts whose notional amounts are ￦42,114,400 thousand and ￦40,731,336 thousand

respectively, fair value hedge accounting is applied and thus changes in fair value of the derivatives are reflected in the net income.

For the remaining currency swaps and currency forward contracts whose notional amounts are ￦303,339,000 thousand and ￦30,473,557

thousand respectively, cash flow hedge accounting is applied and related unrealized gain on derivatives are reflected in comprehensive income.

75

CREDIT LINKED NOTE

The Company invests in Credit Linked Notes (CLN) and Synthetic Collateralized Debt Obligation (SCDO) which had a book value as of March

31, 2009 of ￦106,664,658 thousand. Through these investments, the Company takes the risks of underlying assets, such as corporate bonds

constituting CLNs, but earns interest higher than the market rates. However, there could be a loss resulting from changes in the credit status

of the underlying assets. CLNs and SCDOs are recorded at fair value, which is obtained from independent credit rating agencies.

28. Income tax

Components of income tax expense for the years ended March 31, 2009 and 2008 are as follows (in thousands of Korean won):

March 31, 2009 March 31, 2008

Current income taxes ￦ (17,641) ￦ 33,088,727

Tax effect on temporary differences (*) 8,728,766 (16,351,658)

Changes in tax adjustment on temporary differences at the beginning of the year 952,658 80,269

9,663,783 16,817,338

Current and deferred income taxes recognized directly to equity (*) (29,343,048) 13,175,350

Provision for income taxes ￦ (19,679,265) ￦ 29,992,688

(*) The aggregate tax rate will be reduced to 24.2% from 2009 and 22% from 2010 and thereafter on taxable income in excess of ￦200

million.

Reconciliation of accounting income and income tax expense for the years ended March 31, 2009 and 2008 is as follows (in thousands of

Korean won):

March 31, 2009 March 31, 2008

Income(losses) before income taxes (A) ￦ (78,494,607) ￦ 101,140,878

Tax at the statutory income tax rate (21,586,017) 27,813,741

Adjustments:

Non taxable income (341,384) (139,177)

Non deductible expense 443,010 2,039,676

Other 1,805,126 278,448

Income tax expense (income) (B) (19,679,265) 29,992,688

Effective income tax rate (B)/(A) 25.07% 29.65%



Changes in deferred tax assets and liabilities for the years ended March 31, 2009 and 2008 are as follows (in thousands of Korean won):

< March 31, 2009 >

Beginning Endingbalance Increase (*1) Decrease (*1) balance

(Deductible temporary differences)Loss on impairment of available-for-sale securities ￦ 7,201,651 ￦ 33,979,609 ￦ 1,825,228 ￦ 39,356,032

Loss on impairment of membership 819,207 98,094 - 917,301

Allowance for bad debts 5,840,655 95,167 962,320 4,973,502

Loss on revaluation - 8,936,864 - 8,936,864

Extinguishment of stock 2,095 - - 2,095

Deemed dividends 25,244 229,140 - 254,384

Provision for severance benefits 22,839,738 8,115,779 29,424,403 1,531,114

Taxes and dues 9,605,924 10,820,702 9,605,923 10,820,703

Dormant policies 9,610,815 4,729,286 6,027,607 8,312,494

Retained earning adjustments arising from equity method investments 1,002,905 - - 1,002,905

Available-for-sale securities 220 - 145 75

Dividends (equity method investments) 8,661,532 5,825,984 - 14,487,516

Restructured receivables 984,875 - - 984,875

Loss on valuation of derivatives 8,789,942 58,857,250 7,487,801 60,159,391

Accumulated other comprehensive income(available-for-sale securities) 42,638,184 73,091,206 - 115,729,390

Accumulated other comprehensive income(gain on valuation of derivatives) 1,620,466 28,707,792 - 30,328,258

Tax loss carry-forwards - 9,210,683 - 9,210,683

119,643,453 233,760,692 55,333,427 307,007,582

(Additional temporary differences)Accrued income 23,169,552 10,350,180 23,169,552 10,350,180

Gain (loss) on valuation of the trading securities 5,269,299 (4,684,174) 4,596,065 (4,010,940)

Gain on foreign currency translation 18,442,217 57,200,756 18,442,217 57,200,756

Gain on rotational dealing 1,797,966 - - 1,797,966

Provision for group severance benefits 22,839,738 4,718,042 26,026,666 1,531,114

Equity in earnings of equity method investments 38,324,652 6,658,638 - 44,983,290

Equity adjustments arising from equity method investment 14,547,563 - 588,712 13,958,851

Accumulated depreciation 666,981 - 34,986 631,995

Accumulated other comprehensive income(gain on revaluation) ￦ - ￦ 244,273,609 ￦ - ￦ 244,273,609

(continued)

77

< March 31, 2009 >


Other additional capital surplus (treasury stock fund) ￦ 6,823,706 ￦ - ￦ 4,067,224 ￦ 2,756,482

Compensation receivables 20,575,004 3,536,519 - 24,111,523

Land 278,328 - - 278,328

Advanced depreciation provisions 1,581,327 - - 1,581,327

154,316,333 322,053,570 76,925,422 399,444,481

Deferred income tax assets recognized (*2) 32,104,634 71,132,962

Deferred income tax liabilities recognized (*2) (40,064,950) (87,822,044)

￦ (7,960,316) ￦ (16,689,082)

< March 31, 2008 >


(Deductible temporary differences)Loss on impairment of available-for-sale securities ￦ 958,364 ￦ 6,243,287 ￦ - ￦ 7,201,651

Loss on impairment of membership 865,549 - 46,342 819,207

Allowance for bad debts 6,098,287 - 257,632 5,840,655

Extinguishment of stock 2,095 - - 2,095

Deemed dividends 171,608 - 146,364 25,244

Provision for severance benefits 24,218,930 14,976,040 16,355,232 22,839,738

Taxes and dues 8,185,085 9,605,924 8,185,085 9,605,924

Dormant of insurance policies 3,297,527 9,202,243 2,888,955 9,610,815

Capital surplus using the equity method - 1,002,905 - 1,002,905

Available-for-sale securities - 220 - 220

Dividends (securities accounted for using equity method investments) 5,572,643 3,201,385 112,496 8,661,532

Restructured receivables 1,588,320 - 603,445 984,875

Loss on valuation of derivatives - 8,789,942 - 8,789,942

Accumulated other comprehensive income(available-for-sale securities) - 42,638,184 - 42,638,184

Accumulated other comprehensive income(gain on valuation of derivatives) - 1,620,466 - 1,620,466

￦ 50,958,408 ￦ 97,280,596 ￦ 28,595,551 ￦ 119,643,453

(continued)



< March 31, 2008 >


(Additional temporary differences)Accrued income ￦ 19,663,009 ￦ 23,169,552 ￦ 19,663,009 ￦ 23,169,552

Gain (loss) on valuation of the trading securities 9,440,681 1,251,003 5,422,385 5,269,299

Gain on valuation of derivatives 14,725,938 - 14,725,938 -

Gain on foreign currency translation - 18,442,217 - 18,442,217

Gain on rotational dealing 1,797,966 - - 1,797,966

Provision for group severance benefits 23,035,528 11,688,076 11,883,866 22,839,738

Deferred Acquisition cost 81,254 - 81,254 -

Equity in earnings of equity method investments 27,173,814 13,979,144 2,828,306 38,324,652

Retained earning adjustment arising from equity

method investments 23,091 - 23,091

Equity adjustments arising from equity method investments 816,481 13,780,720 49,638 14,547,563

Accumulated depreciation 670,035 - 3,054 666,981

Available-for-sale securities 2,850 1,982 4,832 -

Accumulated other comprehensive income(available-for-sale securities) 16,872,583 - 16,872,583 -

Accumulated other comprehensive income(gain on valuation of derivatives) 2,275,253 - 2,275,253 -

Other additional capital surplus (treasury stock fund) 4,011,324 2,812,382 - 6,823,706

Compensation receivables 20,457,231 117,773 - 20,575,004

Land 278,328 122,167 122,167 278,328

Amortization of development costs 917 - 917 -

Advanced depreciation provisions 1,581,327 - - 1,581,327

142,907,610 85,365,016 73,956,293 154,316,333

Deferred income tax assets recognized (*2) 13,553,819 32,104,634

Deferred income tax liabilities recognized (*2) (37,865,793) (40,064,950)

￦ (24,311,974) ￦ (7,960,316)

(*1) The income tax effect of temporary differences at the beginning of the period, reflects the results of the actual tax return filing.

(*2) Deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are

expected to reverse.

79

Temporary differences, not recognized as deferred income tax assets (liabilities) are as follows (in thousand of Korean won):

March 31, 2009 March 31, 2008

Advanced depreciation provision of land (*1) 1,582,327 1,581,327

Retained earnings arising from equity method (*2) 300,871 300,871

Dividends (on equity method investments) (*2) 4,346,258 2,598,460

Equity in earnings of equity method investments income (*2) (8,893,731) (7,044,276)

(2,665,275) (2,563,618)

(*1) Tax effect is not recognized since there is no possibility of disposal in the foreseeable future.

(*2) Tax effect is not recognized since temporary differences are not likely to extinguished in the foreseeable future.

Deferred income tax assets (liabilities) directly charged/credited to shareholders' equity as of March 31, 2009 and 2008 are as follows

(in millions of Korean won):

March 31, 2009 March 31, 2008

Gross Tax effect Net of tax Gross Tax effect Net of tax

Gain on valuation of the available for sale securities (119,138,815) 27,696,333 27,696,333 (46,047,609) 11,725,501 11,725,501

Loss on valuation of derivatives (30,328,258) 6,672,217 6,672,217 (1,620,466) 445,628 445,628

Equity adjustments arising from equity method investments 13,958,851 (3,070,947) (3,070,947) 14,547,562 (4,000,580) (4,000,580)

Revaluation surplus 244,273,609 (53,740,194) (53,740,194) - - -

Capital surplus on treasury stock fund 2,756,482 (606,426) (606,426) 6,823,706 (1,876,518) (1,876,518)

Retained earning adjustments arising fromequity method investments (1,002,905) 154,447 154,447 1,002,905 (193,059) (193,059)

Losses on disposition of treasury stock - - - (329,143) 90,514 -

110,518,964 (22,894,570) (22,894,570) (25,623,045) 6,191,486 6,100,972

29. Comprehensive income

Comprehensive income for the year ended March 31, 2009 and 2008 is as follows (in thousands of Korean won):

March 31, 2009 March 31, 2008

Net income (losses) ￦ (58,815,341) ￦ 71,148,189

Other comprehensive income (losses):

Loss on valuation of available-for-sale securities (57,120,374) (42,124,381)

Loss on valuation of derivatives (22,481,203) (2,824,397)

Equity adjustments on equity method investments 340,921 9,955,034

Revaluation surplus 190,533,415 -

Comprehensive income ￦ 52,457,418 ￦ 36,154,445



30. Capital lease

The Company's capital lease assets as of March 31, 2009 and 2008 are as follows. (in thousands of Korean won):

Acquisition Accumulated Book Depreciationcost depreciation value expense

Equipment:March 31, 2009 ￦ - ￦ - ￦ - ￦ 142,450

March 31, 2008 ￦ 7,517,473 ￦ 6,869,639 ￦ 647,834 ￦ 724,696

31. Earning per share

Basic earning per share for the years ended March 31, 2009 and 2008 are as follows (In Korean won):

March 31, 2009 March 31, 2008

Net income (loss) ￦ (58,815,341,378) ￦ 71,148,189,244

Weighted average number of shares outstanding 108,551,333 106,327,797

Earnings (loss) per share ￦ (542) ￦ 669

Weighted average numbers of common stocks outstanding for the years ended March 31, 2009 and 2008 are as follows:

March 31, 2009 March 31, 2008 (*1)

Beginning 113,467,843 88,391,638

Treasury stock (4,916,510) (268,060)

Issuances - 17,362,323

Exercising of stock options - 841,896

Weighted average number of common stocks outstanding 108,551,333 106,327,797

(*1) Weighted average number of common stocks outstanding for prior year was recalculated considering capital increase on August 24, 2007.

Diluted earnings per share for the years ended March 31, 2009 and 2008 are as follows (in Korean won):

March 31, 2009 March 31, 2008

Net income (loss) of common stock (58,815,341,378) 71,148,189,244

Compensation costs (after tax) 795,498,790 2,799,210,426

Diluted net income (58,019,842,588) 73,947,399,670

Weighted average number of diluted common stocks

outstanding 108,551,333 106,953,782

Diluted earnings (loss) per share (*1) (534) 691

(*1) Diluted earnings per share for the years ended March 31, 2009 and 2008 are not presented as there was no anti-dilative effects.

81

Diluted weighted average number of common stocks outstanding for the years ended March 31, 2009 and 2008 are as follows:

March 31, 2009 March 31, 2008

Weighted average number of common stocks outstanding 108,551,333 106,327,797

Stock options - 625,985

Diluted weighted average number of common stocks outstanding 108,551,333 106,953,782

(*) Diluted weighted average number of common stocks outstanding was calculated by treasury stock methods.

32. Stock option

As of March 31, 2009, total stock options granted are summarized as follows:

3rd

Number of stock options granted 1,491,278

Date of grant June 15, 2006

Method of grant New stock, treasury stock or difference compensation

Exercise price ￦5,780

Exercise period June 16, 2008 ~ June 15, 2016

Vesting conditions Minimum required service period: 2 yearsAchievement of the target net income

Changes in the number of stock options granted for the year ended March 31, 2009 are as follows (unit: shares):

3rd

April 1, 2008 1,491,278

Forfeited or expired -

Exercised -

March 31, 2009 1,491,278

Stock price was calculated based on the price at date of grant (3rd: ￦8,800) using the Black-Scholes Option Pricing Model. The

compensation cost consists of the following (in thousands of Korean won):

3rd

Compensation cost recognized until March 31, 2008 ￦ 5,029,519

Compensation cost recorded for the year 1,097,240

To be recognized in the future years -

￦ 6,126,759



Details of assumptions used to calculate compensation costs are as follows:

3rd

Risk free interest rate 5.35%

Expected life of option 2.16 years

Expected stock volatility 49.36%

Expected dividend ratio 20.00%

Expected ratios of non-exercise 0.00%

Weighted average exercise price ￦ 5,780

Weighted average fair value of stock option ￦ 4,108.39

33. Dividends

Interim dividends paid for the year ended March 31, 2009 and 2008 are calculated as follows (in Korean won):

March 31, 2009 March 31, 2008

Dividend per share (percentage of par) ￦ 50 (10%) ￦ 100 (20%)

Number of shares issued and

outstanding, excluding treasury stock 106,567,843 118,447,843

Total dividends ￦ 5,328,392,150 ￦ 11,844,784,300

Year-end dividends for the year ended March 31, 2009 and 2008 are as follows (In Korean won):

March 31, 2009 March 31, 2008

Dividend per share (percentage of par) - ￦ 125 (25%)

Number of shares issued and outstanding, excluding treasury stock - 113,867,843

Total dividends - ￦ 14,233,480,375

Dividend payout ratios for the years ended March 31, 2009 and 2008 are as follows (in Korean won):

March 31, 2009 March 31, 2008

Dividends ￦ 5,328,392,150 ￦ 26,078,264,675

Net income (losses) (58,815,341,378) 71,148,189,244

Payout ratios - 36.65%

Dividend yields for the years ended March 31, 2009 and 2008 are as follows (in Korean won):

March 31, 2009 March 31, 2008

Dividend per share ￦ 50 ￦ 225

Stock price at the balance sheet date 3,870 9,010

Price-dividend yields 1.29% 2.50%

83

34. Related parties

Related parties as of and for the years ended March 31, 2009 and 2008 are as follows:

Investor Relationship

Meritz Securities Co., Ltd. Meritz Fire & Marine insurance Co., Ltd. Affiliate

Meritz Investment Bank Meritz Fire & Marine insurance Co., Ltd. Affiliate

Meritz Assets Management Meritz Fire & Marine insurance Co., Ltd. Subsidiary

Meritz FIS Meritz Fire & Marine insurance Co., Ltd. Subsidiary

PT. Asuransi Hanjin Korindo Meritz Fire & Marine insurance Co., Ltd. Subsidiary

Rewards and stock options granted to key management for the year ended March 31, 2009 are as follows (In thousands of Korean won):

1) Rewards to the key management

Wages and Provision for Stock compensationPosition salaries severance benefits expenses Other benefits Total

Registered directors ￦ 5,476,517 ￦ 2,286,109 ￦ 506,905 ￦ 42,048 ￦ 8,311,579

2) Stock options granted to the key management

Number of shares

Date of April 1, March 31, Exercise ExercisePosition grant 2008 Exercised 2009 period price

Registered directors 2008.06.162005.06.15 688,943 - 688,943 ~ 2016.06.15 ￦ 5,780

Transactions with related parties for the years ended March 31, 2009 and 2008 are summarized as follows (in thousands of Korean won):

March 31, 2009 March 31, 2008

Revenue Expense Revenue Expense

Meritz Securities Co., Ltd. ￦ 2,946,601 ￦ 58,929 ￦ 2,287,143 ￦ 374,478

Meritz Investment Bank 206,587 3,927 174,737 26,045

Meritz Assets Management 273,421 1,153,077 - -

Meritz FIS 546,199 12,131,280 - -

PT. Asuransi Hanjin Korindo 341,846 110,508 194,487 5,843,165

￦ 4,314,654 ￦ 13,457,721 ￦ 2,656,367 ￦ 6,243,688



Outstanding balances with related parties arising from the above transactions as of March 31, 2009 and 2008 are summarized as follows

(in thousands of Korean won):

< March 31, 2009 >

Assets Liabilities

leasehold depositsInsurance receivables Leasehold deposits received

Meritz Securities Co., Ltd. ￦ - ￦ - ￦ 268,691

Meritz Investment Bank - - 468,705

Meritz Assets Management - - 157,830

￦ - ￦ - ￦ 895,226

< March 31, 2008 >

Assets Liabilities

leasehold depositsInsurance receivables Leasehold deposits received

Meritz Securities Co., Ltd. ￦ 147,607 ￦ - ￦ 1,674,806

￦ 147,607 ￦ - ￦ 1,674,806

35. Premium deficiency

Insurance contracts subject to insurance premium deficiency test are all contracts that are long-term or individual annuity insurance, which

can normally incur premium income and claim payment as of February 28, 2009. According to the type of each contract and the

characteristics of coverage, the insurance contracts are classified as long-term insurance or pension insurance, dividend insurance or non-

dividend insurance, fixed interest type insurance or floating interest type insurance. To reflect the characteristics of insurance, it was

divided into casualty-type, driver-type, property-type, illness-type, saving-type and pension-type, and lump-sum payments and installment

payment in the calculation.

Although insurance contracts subject to insurance premium deficiency test should be based on contracts held as of the fiscal year end

according to the Financial Supervisory Service's guide, the test was based on the contracts held as of January 31, 2008 because there is

no significant difference between the contracts held as of March 31, 2009 and February 28, 2009, and it is almost certain that insurance

premium deficit will not be incurred.

85

For premium deficiency calculation for the year ended March 31, 2009, the Company used following assumptions :

Classification Criteria Calculation method

Recent 3 years Asset management earning rate = asset management income ÷ management asset×100

Management asset = (∑management asset at the end of previous month + ∑management asset at the end of this month) ÷24

Asset management income = (investment income - unrealized gain on investment securities and stocks - unrealized gain on derivatives)

Expense ratio Recent 1 year Actual expense ratio = actual operating expense ÷ expense loading

Recent 5 years Persistency ratio = Insurance premium persisted ÷ insurance premium of new contracts

Surrendered ratio = Insurance premium of surrendered contracts÷insurance premium of new contracts

Lapse ratio = Insurance premium of lapsed contracts÷ insurance premium of new contracts

Extinction ratio = Insurance premium of extinct contract by accident ÷insurance premium of new contracts

Insurance claim Recent 3 years Insurance claim payment ratio = insurance claim paid÷ risk premiumpayment ratio

Surrender ratio (persistency ratio) was based on the statistical analysis using past 5-year data, removing outliers that cause errors and

fitting function to reflect the trend.

Premium surplus for the year ended March 31, 2009 are as follows (in hundred million of Korean won, %):

Insurance Expected PremiumClassification contract amounts interest rate surplus

Non-dividend insurance ￦ 1,220,606 3.5~8.0 ￦ 7,689

Individual annuities 7,655 4.5~7.5 759

1,228,261 3.5~8.0 8,448

Fixed interest type 210,045 3.5~8.0 338

Floating interest type ￦ 1,018,216 4.5~6.5 ￦ 8,110

Discount rate(interest rate)

Surrender ratio(persistency ratio)



36. Cash flow information

Cash presented in the statements of cash flows including cash, ordinary deposits and cash equivalents is as follows (in thousands of Korean won):

March 31, 2009 March 31, 2008

Cash ￦ 5,335 ￦ 9,020

DepositsOrdinary deposit 27,205,283 30,521,699

Current deposit 1,074,189 935,068

28,284,807 31,465,787

Cash equivalents 31,860,000 13,000,000

￦ 60,144,807 ￦ 44,465,787

The statements of cash flows are prepared using the indirect method. Significant non-cash transactions for the years ended March 31,

2009 and 2008 are summarized as follows (in thousands of Korean won):

March 31, 2009 March 31, 2008

Increase (decrease) in available-for-sale securities fromvaluation of available-for-sale securities ￦ (57,120,374) ￦ 42,124,381

Equity adjustments on equity method investments 340,921 9,955,034

Increase (decrease) in treasury stock due to valuation of treasury stock fund (4,067,224) 2,812,382

Gain (loss) on valuation of derivatives (22,481,203) (2,824,397)

Transfer to buildings from construction in-progress ￦ 50,407,920 ￦ 19,774,632

37. Operating result of the final interim period

The Company did not issue 4th quarter interim financial statements and the Company's major financial indicators for the three months ended March

31, 2009 and 2008 are as follows (in thousands of Korean won):

Three months ended March 31,

2008 2007

Operating revenue ￦ 932,125,980 ￦ 808,906,572

Net loss (108,751,438) (1,141,431)

Net loss per share (won) (1,002) (10)


Internal Control Over Financial ReportingReview Report

The Representative Director

Meritz Fire & Marine Insurance Co., Ltd.

We have reviewed the accompanying management's report on the operations of the internal control over financial reporting (“ICFR”) of

Meritz Fire & Marine Insurance Co., Ltd. (the “Company”) as of March 31, 2009. The Company's management is responsible for the design

and operations of its ICFR, including the reporting of its operations. Our responsibility is to review management's ICFR report and issue a

report based on our review. Management's report on the operations of the ICFR of the Company states that “Based on the assessment of

the operations of the ICFR, the Company's ICFR has been effectively designed and has operated as of March 31, 2009, in all material

respects, in accordance with the ICFR standard established by the ICFR Operation Committee.”

We conducted our review in accordance with the ICFR review standards established by the Korean Institute of Certified Public

Accountants. These standards require that we plan and perform our review to obtain less assurance than an audit as to management's

report on the operations of the ICFR. A review includes the procedures of obtaining an understanding of the ICFR, inquiring as to

management's report on the operations of the ICFR and performing a review of related documentation within limited scope, if necessary.

A company's ICFR consists of an establishment of related policies and organization to ensure that it is designed to provide reasonable

assurance on the reliability of financial reporting and the preparation of financial statements for external financial reporting purposes in

accordance with accounting principles generally accepted in the Republic of Korea. However, because of its inherent limitations, the ICFR

may not prevent or detect material misstatements of the financial statements. Also, projections of any assessment of the ICFR on future

periods are subject to the risk that ICFR may become inadequate due to the changes in conditions, or that the degree of compliance with

the policies or procedures may be significantly reduced.

Based on our review of management's report on the operations of the ICFR, nothing has come to our attention that causes us to believe

that management's report referred to above is not presented fairly, in all material respects, in accordance with the ICFR standards.

We conducted our review of the ICFR in place as of March 31, 2009, and we did not review the ICFR subsequent to March 31, 2009. This

report has been prepared for Korean regulatory purposes pursuant to the Act on External Audit for Stock Companies, and may not be

appropriate for other purposes or for other users.

May 21, 2009

This report is annexed in relation to the audit of the financial statements as of March 31, 2009 and the review of internal accounting control

system pursuant to Article 2-3 of the Act on External Audit for Stock Companies of the Republic of Korea.


Corporate History in Brief

Era of Foundation & Exploration1922. 10 Founded Chosun Fire & Marine Insurance with paid-in capital of KRW5 million

(The first fire & marine insurance company in Korea)

1923. 08 Held the first general meeting of shareholders

1935. 10 Headquarters moved to Taepyung-no, Jung-gu, Seoul

1937. 08 Acquired an auto insurance license

Era of Growth1983. 12 Acquired building and moved into new Headquarters in Yoido-dong, Youngdungpo-gu, Seoul

1996. 05 Total assets exceeded KRW1 trillion

1997. 12 Established a training institute

2002. 06 Contracts transferred from Regent Insurance Co.,Ltd

2nd Founding2005. 03 Disaffiliated from the Hanjin Group

2005. 10 Renamed as Meritz Fire & Marine Insurance Co., Ltd. from Oriental Fire & Marine

Insurance Inc.

2005. 10 Headquarters moved to 'Meritz Tower' located in Yeoksam-dong, Gangnam-gu, Seoul

2005. 11 Acquired Meritz Securities as subsidiary

2006. 02 10:1 stock split (Par value changed from KRW5,000 to KRW500)

2006. 11 Acquired Meritz Investment Bank as sub-subsidiary

2006. 11 First Korean insurer to receive A3 credit rating from Moody's

2007. 08 Paid-in capital increased to KRW61.9 billion with a rights offering of KRW225.7 billion

2007. 10 Interim dividend of KRW100 per share (First interim dividend in the insurance industry)

2008. 04 Established Meritz Financial Information Service Co., Ltd.

2008. 04 Acquired 1st level in 2007 FSS's civil application evaluation (two consecutive years)

2008. 05 Established Meritz Asset Management Co., Ltd.

2008. 12 Received A3 credit rating from Moody's for three consecutive years

2008. 12 Received A- credit rating from A.M.Best for two consecutive years

2009. 01 Total assets exceeded KRW5 trillion

New Birth1950. 05 Renamed as Oriental Fire & Marine Insurance Inc. from Chosun Fire & Marine Insurance

1956. 07 First Korean insurer to be listed on the Korea Stock Exchange

1958. 09 Privatized (Ewha Hakdang, acquired stake in Oriental insurance from the government)

1962. 03 Dongbang Life Insurance, acquired stake in Oriental insurance from the Ewha Hakdang

1963. 05 Control transferred to the Samsung Group (Dongbang Life Insurance was affiliated

into Samsung Group)

1967. 07 Affiliated into Hanjin Group

1976. 12 First Korean insurance company to exceed KRW10 billion in sales

1922~1949

1950~1982

1983~2004

2005~


Accolades & Awards

1996.02 Awarded “Special Award” at the 1st Maekyung Business Daily Financial Product Awards

1997.01 No.1 customer satisfaction provider in automobile insurance service as evaluated by

Korea Consumer Protection Board

1998.11 Awarded Prime Minister Prize in private and governmental management and service

innovation contest (two consecutive years)

1998.12 Ranked 1st among non-life insurers in the National Customer Satisfaction Index (NCSI) for

1998, Korea Productivity Center (KPC) at Korea Customer Service Management Awards

1999.09 Awarded grand management innovation prize by KMAC for outstanding customer

satisfaction

1999.12 No.1 non-life insurance carrier for outstanding customer satisfaction as jointly

selected by Korea Productivity Center, Chosun-Ilbo and Michigan University in two

consecutive years

2000.03 Received “Special Award” at the 5th Maekyung Business Daily Financial Product Awards

2001.10 No.1 financial service provider in Korea Service Quality Index (KS-SQI) survey

2001.12 Awarded by Financial Service Commission as outstanding new financial product

(Military service insurance)

2002.07 Awarded the best prize for new business culture in corporate image contest by KMAC

2004.03 Awarded special prize in Maekyung Daily grand financial product contest

2004.10 Awarded grand prize for children/youth welfare service in Hankyung social outreach

business contest

2005.11 Received outstanding prize for customer value innovation in Customer Satisfaction

Management Awards

2006.11 Received the best prize for customer value innovation in Customer Satisfaction

Management Awards

2007.03 Awarded by Maekyung as outstanding new financial product (gold prize)

2007.10 Received the innovation award in non-life sector at 2007 Financial Innovation Award

from Moneytoday

2007.12 Received a plague of thanks for outstanding “sharing management” from KCCI's

voluntary corps

2008.02 Gained grand prize in the field of welfare of disabled persons at Sharing-Management

Award sponsored by Kookmin Ilbo

2008.08 Grand prize in product field at Seo-kyung Truthful Insurance People

2008.11 Received grand prize for KMAC Korea Customer Satisfaction Management Awards


Board of Directors

EXECUTIVE DIRECTORS

● Jung-Ho, Cho

- Chairman

- Incumbent Chairman of Meritz Securities

- Incumbent Director of Meritz Investment Bank

● Myung-Soo, Wohn

- Vice Chairman & CEO

- Senior Managing Director & CIO of Samsung Fire & Marine

Insurance

- Senior Managing Director & COO of PCA Life Insurance

● Sang-Il, Lee

- Auditor General

- Head of Insurance Supervision Department at Financial

Supervisory Service (FSS)

- Head of Insurance Conflict Settlement Office at FSS

NON-EXECUTIVE DIRECTORS

● In-Joon, Kim

- Outside Director

- Incumbent Professor at the Yonsei School of Business

- Director of Jeil Products Ltd. / CEO of IFS Co., Ltd.

- Professor at the Graduate School of Management in Korea

Advanced Institute of Science & Technology

● Hwan-Kyun, Park

- Outside Director

- Incumbent Outside Director of Hyundai Engineering and

Construction Co.

- Member of the KOSDAQ Committee

- Auditor of Woori Bank

● Yeon-Ku, JO

- Outside Director

- General Secretary of the Bureau of Information, Ministry of

Finance & Economy,

- Examiner of the International Court, National Tax Service

- Head of the Taxation Office, National Tax Service

- Head of the Investigation Department, Seoul Regional Tax

Office, National Tax Service

● Jung-Ho, Kang

- Outside Director

- Proxy Director and Permanent Representative of the

International Monetary Fund (IMF

- Permanent Judge at the International Court

- CEO & President of KOSDAQ

- Director General of Korea Futures Exchange


Organization

Vice Chairman& CEO

Strategic PlanningDivision

Asset ManagementDivision

Sales General

Risk ManagementDivision

Personnel & GeneralAffairs Division

Corporate SupportingGeneral

Line of BusinessGeneral

Long-term InsuranceDivision

Automobile InsuranceDivision

General InsuranceDivision

Claim Division

Channel Strategic Division

Sales Education &Training Division

Metropolitan AreaDivision

Jungbu AreaDivision

Yungnam AreaDivision

Agency Division

Local Agency Unit

New DistributionChannel Division

Commercial LineBusiness Division

•Commercial Line SalesDivision Ⅰ•Commercial Line Sales

Division Ⅱ•Commercial Line Sales

Division Ⅲ•Commercial Line Sales

Division Ⅳ


Credit Ratings

EXECUTIVE DIRECTORS

Meritz Insurance received an “A3” credit rating for 3 consecutive years from Moody's, and an

“A-“ from A.M. Best 2 years in a row. With a sound financial structure, the high credit rating

reaffirms Meritz Insurance's ability to compete on an equal standing with prospective global

insurance companies. Moody's and A.M. Best are globally renowned credit rating agencies,

which provide rating services to financial institutions around the world.

The credit ratings are a reflection of Meritz Insurance's sound capitalization structure and its

stable operating performance. This will not only enhance the Company's image, it will also

contribute to the Company's sales and marketing competitiveness.

A.M. Best Moody's

2008.12A- (Excellent) A3

Negative (Negative)

2007.10A- A3

(Excellent) Stable (Stable)

2006.11B++ (Good) A3

Positive (Stable)

2006.01B++ (Good)

Stable

2004.11B++ (Good)

Stable

A.M. Best

A-(Excellent)

A3

Moody’s


Corporate Data

● Established Date: October 1, 1922

● Head Office: Meritz Tower, 825-2, Yeoksam-dong Gangnam-gu, Seoul, Korea (Postal Code: 135-080)

Tel. 82-2-3786-2114 Fax. 82-2-3786-2115

● Website : http://www.meritzfire.com

● Paid-in Capital: KRW61.9 billion

● Affiliates & Investee Companies (As of March 31, 2009)

(KRW in Millions, %)

Equity Investment Equity Ratio

Meritz Securities 84,291.3 26.81%

Meritz Investment Bank 3,632.5 5.50%

PT.ASURANSI

HANJIN KORINDO 954.0 51.00%

Meritz Asset Management 10,000.0 100.00%

Meritz Financial Information Services 1,000.0 100.00%

● Shares Outstanding: 123,800,000 Shares

● Shareholders (2009.3.31)

● Date Listed: July 2, 1956

● Investor Relations : Tel. 82-2-3786-1156, Fax. 82-2-3786-1165

Major shareholders22.8%

ESOP6.5%

Related companies 3.0%

Treasury 13.9%Foreigners

9.6%

Domestic44.2%

Meritz Tower, 825-2, Yeoksam-dong Gangnam-gu, Seoul, KoreaTelephone : 82-2-3786-2114Facsimile : 82-2-3786-2115www.meritzfire.com

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