2003

Since 1922

Annual Report 2003Year ended March 31, 2004

MaximizingCore Competencies

“We are more committed than ever to optimize the corporate value for ourshareholders and customers. The Companyaims to realize the dual goals of keepingour profit-driven management on track andreinforcing our growth potential.”

CChhuunngg,, KKuunn--SSuupp President & Chief Executive Officer

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Profile

Forging Ahead--We will commit all available management

resources to sustaining strong growth and

enhanced profitability in the years ahead.>>>

210*297_EPS 2004.8.25 5:8 PM 페이지1

02. Financial Highlights 04. A Message from President & CEO 06. Our Vision 07. Management Targets for 2004

08. A Review of Operations 18. Strategic Initiatives 23. Financial Section 42. History in Brief

43. Board of Directors & Organization 44. Shareholder Information

82 years of quality service to our valued customersOriental Fire & Marine Insurance Co., Ltd. (OFMI) is the oldest non-life insurance

company in Korea. Since its establishment in 1922, OFMI has continuously been the

leader of Korea’s non-life insurance industry by placing its top priority on maximizing

customer satisfaction. The Company’s concerted efforts, focused on full customer

satisfaction through the development of innovative products and services, have been

well recognized by various related institutions for the past several years.

OFMI is poised to take another leap forward and develop further as the leading non-life

insurance company in Korea under its vision of “Customers’ First Choice for

Insurance.” With the advent of a new era in Korea’s insurance market, OFMI will strive

to achieve its goal of becoming a world-class insurance company through boundless

passion and dedication to our customers, innovative management based on

professionalism and transparency, and strategic “Partnership” with the world’s premier

insurance companies. In doing so, OFMI will remain at the forefront of Korea’s non-life

insurance industry.

A History ofLeadership

210*297_EPS 2004.8.25 5:8 PM 페이지2

Direct premiums written ￦ 1,543,954 ￦ 1,529,884 ￦ 1,537,890 $ 1,338,379

Gross premiums written 1,528,277 1,509,133 1,513,894 1,324,789

Net premiums written 1,208,070 1,134,069 1,136,873 1,047,217

Net premiums earned 1,204,297 1,187,313 1,051,808 1,043,947

Adjusted incurred losses (1) 504,076 424,250 351,219 436,959

Refunds & Reserves 487,204 519,467 476,457 422,334

Adjusted net operating expenses (2) 293,125 277,524 250,229 254,096

Expenses ratio (3) 24.3% 23.4% 23.8% 24.3%

Loss ratio (total) 82.3% 79.5% 78.7% 82.3%

Combined ratio 106.7% 102.9% 102.5% 106.7%

Net increase in catastrophe reserve 10,530 10,136 9,176 9,128

Net underwriting income (88,067) (43,037) (35,274) (76,341)

Net investment income 119,559 91,746 103,270 103,640

Net income 20,022 34,059 43,668 17,356

Invested assets 2,026,985 1,887,145 1,679,254 1,757,095

Total assets 2,332,002 2,150,525 1,938,490 2,021,500

Technical reserve 695,088 674.575 516,887 602,538

Long-term deposits 1,296,457 1,162,315 1,015,004 1,123,836

Catastrophe reserve 96,823 86,293 76,157 83,931

Adjusted shareholders’ equity (4) 294,940 265,978 223,386 255,669

Policyholders’ surplus (5) 299,815 268,283 224,664 259,895

Solvency ratio - Korean guidelines 185.5% 183.4% 163.4% 185.5%

FY2003 FY2002 FY2001 FY2003

Years ended March 31, 2004, 2003 & 2002

(1) Adjusted incurred losses = Incurred losses + Net loss adjustment expenses

(2) Adjusted net operating expenses = Net operating expenses - Net loss adjustment expenses

(3) Expense ratio = Adjusted net operating expenses / Net premiums earned

(4) Adjusted shareholders’ equity = Shareholders’ equity + Catastrophe reserve

(5) Policyholders’ surplus = Adjusted shareholders’ equity + Dividend reserves for participated policyholders

* Korean amounts for FY2003 are converted into US$1.00 at ￦1,153.60, the basic exchange rate as of March 31, 2004

Millions of Korean Won Thousands of U.S. Dollars

Financial Highlights

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02-03

Net Investment Income

Direct Premiums Written

FY2001 FY2002 FY2003

(Millions of Korean Won)

FY2001 FY2002 FY2003

(Millions of Korean Won)Adjusted Shareholder’ Equity

FY2001 FY2002 FY2003

(Millions of Korean Won)

Combined Ratio

FY2001 FY2002 FY2003

(%)Solvency Margin Ratio

FY2001 FY2002 FY2003

(%)

Total Assets

FY2001 FY2002 FY2003

(Millions of Korean Won)

1,93

8,49

0

2,15

0,52

5

2,33

2,00

2

1,53

7,89

0

1,52

9,88

4 1,54

3,95

4

103,

270

91,7

46

119,

559

102.

5

102.

9 106.

7

223,

386

265,

978

294,

940

163.

4

183.

4

185.

5

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A Message from President & CEO

During the 2003 fiscal year, ended March 31, 2004, Korea’s non-life

insurance sector encountered a slew of management challenges and

market adversities. Above all, the new Insurance Business Act served

to revolutionize the distribution channels of the domestic insurance

industry. In particular, the launch of bancassurance service in

September 2003 has further escalated competition throughout the

insurance market, while online insurance sales have continued to

enjoy rapid growth momentum.

The sharp fall-off in domestic consumption had an adverse impact on

the non-life insurance sector overall. Moreover, the extensive

damage wrought by killer-force Typhoon Mamie was another primary

factor behind the sharp deterioration of insurers’ bottom-line

earnings in 2003. Domestic non-life insurers recorded a cumulative

net loss of 120 billion won in the past fiscal period, while their

average growth slowed to 3.4%.

We have been wholly dedicated to our business partners andcustomers for 82 years. We will remain committed toenhancing customer services through development ofinsurance products tailored to changing needs of customers.

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04-05

In the fiscal year under review, Oriental Fire & Marine Insurance

was not immune to this difficult operating environment, thus

recording weaker-than-expected results in several areas.

Indeed, this was a major disappointment for the management

and staff, however, rather than being deterred by this temporary

setback, we are more committed than ever to optimize the

corporate value for our shareholders and customers. The

Company aims to realize the dual goals of keeping our profit-

driven management on track and reinforcing our growth

potential. In line with this, we are emphasizing the effective

implementation of the following priorities:

First, we intend to significantly bolster our marketing capability

for improved earning results and to better satisfy customers’

risk-solution needs. Accordingly, the relative shares of our long-

term, casualty, and risk-type insurance lines are being

substantially expanded. In addition, the Company’s active sales

force now includes some 1,200 representatives, marking a more

than 40% increase, while the creation of new distribution

channels, such as FC (financial consultants), TC (total

consultants) and corporate alliances, have contributed much to a

broadening of our customer base. Meanwhile, a solid platform

has been laid to ensure sustained growth of bancassurance

service as a result of the Company’s conclusion of strategic

alliances with all 13 Korean commercial banks.

Second, we will remain fully committed to boosting profitability

and operational efficiency. In this regard, our systematic and

effective risk management initiatives have helped to noticeably

boost the Company’s solvency margin ratio. As a key yardstick

for assessing an insurer’s financial soundness, our solvency

margin ratio in 2003 improved by 2.1% points, as compared to

the previous year, to reach 185.5%. Although net income growth

was suppressed primarily due to Typhoon Maemi, which

saddled the Company with a loss of some 15.3 billion won,

investment income surged 30.4% to 119.6 billion won in 2003,

from 91.7 billion won a year earlier. Of note, the globally

renowned insurance credit rating agency, A.M. Best, upgraded

the credit rating for Oriental Fire & Marine Insurance to B++.

Third, we have substantially improved our customer services, as

evidenced by the Company’s selection as an “enterprise with an

excellent track record in customer services” by the Ministry of

Commerce, Industry, and Energy. Moreover, Oriental Fire &

Marine Insurance was conferred the top award in terms of

service management by the Korean Service Management

Association, an affiliate organization of the commerce ministry.

Reflecting our efforts to enhance our insurance portfolio and

customer services, the number of OFMI policyholders stood at

1,546,000 as of the end of March 2004, a sharp jump of 55,000

customers from a year earlier. Meanwhile, our insurance policy

portfolio also showed explosive growth, totaling some 2,059,000

policies at the fiscal 2003 year-end, representing a gain of about

106,000 contracts. To build on this momentum, we will upgrade

our customer service processes for the ultimate goal of assuring

clients of the highest-quality insurance products and services.

Oriental Fire & Marine Insurance aims to realize the dual goals of keeping our profit-drivenmanagement on track and reinforcing our growth potential.

Total Assets & BPS

FY1999 FY2000 FY2001 FY2002 FY2003

BPS (Book Value Per Share)

Total Assets

1,57

1.3

21,270

1,64

8.7

1,93

8.5

2,15

0.5

2,33

2.0

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

(Billions of Korean Won)

(Kor

ean

Won

) 2,500

2,000

1,500

1,000

500

0

18,648

26,036

31,00034,375

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Fourth, a pro-active corporate culture is required by today’s fast-

changing times. Such a new corporate culture calls for

optimizing in-house communication among all staff members

and operating units by taking full advantage of all available

dialogue channels. All employees are required to acquire a

comprehensive understanding of our entire organization, while

striving to eradicate inflexible ways of thinking, so that the

Company can be well positioned to embrace needed change.

Management will implement an objective employee

compensation system, together with an innovative performance-

oriented management system, in order to foster a more

constructive and productive workplace environment. Staff

employees will also be encouraged to actively contribute to a

results-driven corporate culture that is capable of meeting any

challenges head-on.

Finally, management has made strenuous efforts to promote

ethical management. Nowadays, ethical management is not a

matter of choice, but an essential element of sound

management. The Company clearly demonstrated its resolve to

assure ethical corporate conduct as of 2003, during the year’s

first management strategy session. These diligent efforts are

already paying dividends in regard to our operational processes,

in which customer complaints related to insurance sales have

been noticeably curtailed. Related initiatives will also be

implemented to promote fair competition and sound marketing

practices.

These multifaceted efforts have enabled Oriental Fire & Marine

Insurance to considerably boost its earnings structure and

financial soundness. However, as previously mentioned, we

nonetheless recorded rather disappointing results in our overall

sales and underwriting income in the past fiscal year. While

assuming responsibility for falling short of various targets in

2003, the Company did attain favorable outcomes in several

areas, including the following achievements.

In fiscal 2003, direct premiums written amounted to 1.54 trillion

won, a gain of 0.9% from a year earlier. Of note, net premiums

written showed a solid growth of 6.5%, year on year, to some

1.21 trillion won, with this growth rate being more than double

the industry’s average in 2003. Total assets, standing at 2.33

trillion won, were up a healthy 8.4%, from the previous year,

while invested assets also rose sharply by 7.4% to 2.03 trillion

won.

Adjusted net income in fiscal 2003 amounted to 30.5 billion

won, including 20 billion won of net income and 10.5 billion won

of net allocation to catastrophe reserves, which enabled the

Company’s solvency margin ratio to improve by 2.1% points to

185.5%, as earlier indicated. Meanwhile, net worth in fiscal

2003 rose 7.7% to 294.9 billion won, as compared to 273.7

billion won a year ago. This contributed to a 10.9% year-on-year

growth in BPS (book value per share) to 34,375 won.

In 2004, Oriental Fire & Marine Insurance is prepared to undergo

sweeping change in the non-life insurance sector. Intensified

regulatory oversight of the insurance industry, together with

heightened consumer awareness, will undoubtedly result in a

more adverse market environment. However, we will face up to

and overcome such adversity. Management will commit all

available resources to ensuring sustained growth and enhanced

profitability. The following initiatives will be implemented in line

with management’s goal of “sustaining profitable growth

through maximization of core competency.”

In 2004, Oriental Fire & Marine Insurance is prepared to undergo sweeping change in the non-lifeinsurance sector. Intensified regulatory oversight of the insurance industry, together withheightened consumer awareness, will undoubtedly result in a more adverse market environment.

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06-07

First, reinforce core competencies in four primary areas

Oriental Fire & Marine Insurance will aggressively strive to

maximize our price competitiveness for target customer groups

through the development of innovative products tailored to

changing market conditions and consumer preferences. We will

also optimize our marketing capabilities through continuous

upgrading and creation of new distribution channels. Moreover,

our CS (customer service) system will be extensively renovated

in accordance with global standards so that our customer-driven

management remains on track.

Second, bolster overall efficiency and productivity

The Company will further strengthen our risk-solution expertise,

related to which a state-of-the-art risk management system will

be implemented. Moreover, we intend to significantly enhance

the quality of our insurance portfolio, while boosting

underwriting revenue through effective process management of

combined ratios. And the Company remains committed to

maximizing investment gains through sophisticated asset

management techniques.

Third, build a solid platform for sustainable growth

Promoting productivity gains of Company employees through

stepped-up education and training remains a top corporate

priority. In particular, we are actively seeking to establish a firm

foothold in the bancassurance sector, such that all necessary

management resources are being allocated to fortify our

marketing channels. Efforts are also underway to bolster our

brand power and enhance our public image through increased

public relations activities.

Finally, adopt an innovative corporate culture

We will adopt innovation across all business areas by

capitalizing on quantitative analysis and a capability to flexibly

adjust to market changes. Management thus seeks to

proactively respond to a changing business environment by

exploring target niche markets, based on short-term “hit and

run” tactics, while broadening a solid platform for sustained

growth. Above all, the Company will ensure that our new

corporate culture, which calls for all employees to demonstrate

solidarity of purpose at all times, can translate into improvement

of our bottom-line performance.

In 2005, Oriental Fire & Marine Insurance will be moving into its

new headquarters building in Gangnam, in the southeastern

area of Seoul. This occasion will serve as a catalyst for another

takeoff for the Company, for which innovative initiatives will be

implemented in order to steadfastly promote innovation and

change in all aspects of management and operations. The

management and staff of Oriental Fire & Marine Insurance stand

united in their commitment to maximize our growth potential

and transform the Company into a preeminent world-class

insurer. In this regard, we are relying on your continued support

and loyalty so that Oriental Fire & Marine Insurance can further

serve the interests of our shareholders, customers and

employees.

Thank you.

Chung, Kun-Sup

President & Chief Executive Officer

Management will commit all availableresources to ensuring sustained growthand enhanced profitability.

Trend in Annual IncomeNet Increase in Catastrophe Reserve

Net Income

50.0

40.0

30.0

20.0

10.0

0

(10.0)

(20.0)

(Bill

ions

of K

orea

n W

on)

FY1999 FY2000 FY2001 FY2002 FY2003

31.3

6.3

37.6

(19.

8)7.1

(12.

7)

43.7

9.2

52.9

34.1

44.2

10.5

30.5

10.1

20.0

Adjusted net Income

210*297_EPS 2004.8.25 5:8 PM 페이지8

Our Vision

Customers’ First Choice for Insurance

Oriental Fire & Marine Insurance is

strongly committed to establishing itself

as a preeminent global Insurance

company, with a focus on maximizing

value for our shareholders and delivering

innovative solutions to our clients.

To achieve these goals, the Company will

proactively respond to rapid changes in

the insurance market and constantly

strengthen its growth potential. At the

same time, Oriental Fire & Marine

Insurance will aggressively promote

management transparency and financial

soundness.

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08-09

Management Target for 2004

Sustaining Strong Growth throughMaximization of Core Competencies

Oriental Fire & Marine Insurance is strongly committed to reinforcing the core

competencies of our insurance operations--products, pricing, marketing, and customer

services--to sustain strong growth and enhance its financial structure in 2004 and beyond.

First,reinforce corecompetencies infour primaryareas

We aim to solidify our profit base through advancement of our profit-driven management.

Management priorities will include measures to strengthen risk management, upgrade the

insurance portfolio with a focus on more competitive products, and enhance management

oversight of combined ratios and assets.

Second,bolster overallefficiency andproductivity

It is essential to optimize the competitive advantages of our employees through quality

education to build a strong platform for future growth. The Company will thus commit all

management resources to upgrading our distribution channels, including a keen focus on

bancassurance service and realignment of sales organization. In addition, we will make

strenuous efforts to bolster our brand power.

Third,build a solidplatform forsustainablegrowth

The Company intends to significantly upgrade our corporate culture to optimize its bottom-

line results. In relation to this, our corporate culture, which has thus far not been properly

promoted, will become more relevant to the Company’s operational performance.

Fourth, adopt aninnovativecorporateculture

210*297_EPS 2004.8.25 5:8 PM 페이지10

Aerospace

Cargo

Motor

Marine Hull

A Review of Operations

210*297_EPS 2004.8.25 5:9 PM 페이지11

Aviation

Property

Long-term

Sustaining HealthyProfitable Growth

In fiscal 2003, direct premiums written amounted to 1.54 trillion won, again of 0.9% from a year earlier. Of note, net premiums written showeda solid growth of 6.5%, year on year, to some 1.21 trillion won, with thisgrowth rate being more than double the industry’s average in 2003.Invested assets also rose sharply by 7.4% to 2.03 trillion won.

210*297_EPS 2004.8.25 5:9 PM 페이지12

Breakdown of DirectPremiums Written forCommercial Lines in FY 2003

A Review of Operations

Commercial Lines

In the fiscal year ended March 31, 2004, Oriental Fire & Marine Insurance (OFMI) recorded

impressive sales growth in the non-marine insurance sector, despite a challenging market

environment. The non-marine sector, which comprises the property and casualty insurance

lines, enjoyed a robust 12.1% expansion in direct premiums written, buoyed by sharp gains in

property insurance (13.8%) and casualty insurance (10.0%). This outperformed the industry’s

average growth of 4.2% for fiscal 2003.

The total loss ratio for non-marine insurance, however, rose 6.2% points to 49.2%, primarily

due to the extensive property damage wrought by Typhoon Maemi. The loss ratio for

property insurance jumped 22.8% points, year on year, while the casualty line improved

4.8% points. The Company will implement more prudent and cost-sensitive underwriting

practices in regard to risks associated with natural disasters, while taking advantages of its

risk solution know-how.

OUTLOOK FOR 2004

Due to the extended downturn in domestic consumption, the non-marine insurance sector is

expected to record rather moderate growth in fiscal 2004. The better than anticipated results

of bancassurance service is projected to substantially impact the insurance market overall,

with tougher competition forecast in the areas of rates, quality of customer services, and

distribution channels. Given these circumstances, OFMI will focus on enhancing management

transparency, operational efficiency, financial soundness, and profitability, thereby boosting

the confidence of our clients and partners in the Company. As for international reinsurance

activities, OFMI will seek to solidify its working relationships with leading reinsurers for long-

term and mutual benefits.

(Millions of Korean Won)

AVIATION 18.8%

PROPERTY 35.0%

CASUALTY 28.3%

CARGO 6.5%

MARINE HULL 11.4%

2003

103,777

83,926

33,822

19,185

55,536

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12-13

RESPONSE TO MARKET DEREGULATION

Although three years have elapsed since the full deregulation of insurance rates has been

effective, its impact on the insurance market has been rather limited thus far. Competition has

intensified in only certain insurance lines, as insurers have demonstrated a strong

commitment to improvement of profitability rather than sales growth in low-growth sectors.

Accordingly, sharp discount rates for large-scale insurance contracts have in large part been

shunned.

Given these circumstances, Oriental Fire & Marine Insurance has sought to realize rates

segmentation by adopting diverse methods of rate calculation. In addition, management has

committed available resources to the development of new, innovative products and business

strategies reflecting changing market conditions.

SOLIDIFYING RELATIONS WITH FOREIGN REINSURERS

A significant number of reinsurers have already gone under or are on the verge of collapse,

due to catastrophic losses resulting from a series of extraordinary calamities ranging from the

“Martin & Lotha” disaster in 1999 to the September 11 (2001) terrorist attacks on the World

Trade Center in New York. In light of these circumstances, the credit ratings of international

reinsurers are an ever more critical element of reinsurance transactions. As such, the

company needs to maintain cooperative business relations with leading global reinsurers

while keeping a close watch on their credit ratings. The following measures are essential to

successfully undertake reinsurance transactions with foreign reinsurers:

Make regular visits to the world’s leading reinsurance markets for the purpose of publicizing

the Company’s underwriting capability.

Maintain consistency in reinsurance dealings in order to strengthen the loyalty of reinsurers

doing business with OFMI, while faithfully performing its role as assignor.

Meet with visiting representatives of reinsurance firms and promote the proven reputation

and financial soundness of OFMI

Participate actively in seminars sponsored by reinsurers and insurance brokers.

Regularly provide related parties with information on OFMI’s recent developments and

domestic insurance trends.

210*297_EPS 2004.8.25 5:9 PM 페이지14

Property

PropertyIn fiscal 2003, direct premiums written for property insurance grew 13.8%, as compared to a

year earlier, amounting to 103.8 billion won, which accounted for a 35.0% share of total direct

premiums for commercial lines. This marked a gain of 7.3% points over the prior year. On the

other hand, earned premiums written for property insurance contracted 2.9% to 27.5 billion

won, thereby raising the loss ratio to 67.6%.

Market conditions for the property insurance line are likely to remain dampened in fiscal 2004.

Negative factors behind the adverse operating environment include a downward trend in

premium rates resulting from sluggish demand growth, slumping corporate investment as a

result of the weakness in domestic spending, slippage in new policies contracts, and ever-

fiercer competition in the traditional insurance sectors. The burgeoning bancassurance

business, along with expanded market access by foreign insurers, will serve to escalate

competition in the property line market. As of April 2005, banks will be authorized to expand

their cross-selling of insurance products.

In response to a continued slow growth market environment and increased risks associated

with natural calamities, insurers are expected to adopt more conservative underwriting

guidelines and restructure their portfolios with a focus on more competitive products in order

to strengthen profitability. In this way, certain “undesirable risks” may be eventually

eradicated from the market.

The deregulation of premium rates, which has been in effect since April 2002, has not yet

significantly impacted the insurance market. In view of the prevailing characteristics of

Korea’s non-life insurance market, “non-economic factors,” especially personal and business

relationships, will likely carry more weight in the marketplace rather than premium rates

themselves.

(Millions of Korean Won)

Direct premiums written

Earned premiumswritten

Loss ratio (%)

91,2

18 103,

777

28,2

71

27,4

59 67.6

44.8

02 03 02 03 02 03

Despite a challenging market environment, the non-marinesector, which comprises the property and casualty insurancelines, enjoyed a robust 12.1% expansion in direct premiumswritten, buoyed by sharp gains in property insurance.

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The casualty insurance market grew 5.4% in fiscal 2003, driven bysignificant demand for liability insurance. As compared to theprevious year, liability insurance recorded 6.5% growth, whileengineering was up 4.5%.

Casualty

Casualty

Direct premiums written

Earned premiumswritten

Loss ratio (%)02 03 02 03 02 03

(Millions of Korean Won)

In fiscal 2003, direct premiums written for casualty insurance posted a solid 10.0% growth,

from a year earlier, amounting to 83.9 billion won. Net premiums earned for this line were up

6.3% as well, which resulted in a contraction of its loss ratio to 37.2% from 42.0%.

The casualty insurance market grew 5.4% in fiscal 2003, driven by significant demand for

liability insurance. As compared to the previous year, liability insurance recorded 6.5%

growth, while engineering was up 4.5%. Prospects for 2004 are bright as both the liability and

engineering lines are likely to trend upward. Of particular note, the liability line is expected to

see steady growth, backed by broadened market demand for PL and professional indemnity

coverage, along with the creation of new insurance demand stemming from the enforcement

of more stringent liability regulations. Engineering insurance will also enjoy an upswing as the

government strives to stimulate construction activity as a means of boosting still-sluggish

domestic consumption.76

,267 83

,926

39,3

26 41,7

93

37.242

.0

210*297_EPS 2004.8.25 5:9 PM 페이지16

In fiscal 2003, cargo insurance posted a healthy 8.2% gain in direct premiums written from

the previous year to 19.2 billion won, primarily due to the launch of aggressive marketing

initiatives following the deregulation of premium rates.

The loss ratio for the cargo line, however, swelled 18.7% points to 58.5% as a result of the

extensive property damage and large-scale freight losses caused by killer-force Typhoon

Maemi. The Company will strive to adopt more stringent underwriting guidelines, along with

focusing on more profitable policies. In fiscal 2004, rates per case are expected to trend

downward amid increased price competition. Nevertheless, the Company is targeting about

10% growth in direct premiums written based on the introduction of superior-quality

insurance products and client services.

MARINE LIABILITY INSURANCE

As the extraordinary property damages inflicted by Typhoon Maemi in 2003 outstripped the

cover limit of marine liability insurance, the maritime authorities asked for allocating

adequate coverage for this insurance. As the scope of insurance coverage on maritime

facilities continues to expand, domestic insurers have increasingly relied on international

reinsurers, in particular those based in London and other European markets, due to the

domestic reinsurance market’s limited capability.

Despite this market adversity, Oriental Fire & Marine Insurance has continued to record strong

growth in marine liability insurance by offering clients comprehensive and innovative

insurance coverage at competitive terms. As evidence of this, the Company has successfully

renewed insurance contracts with Hanjin Shipping, Global Enterprise, Dongnama Shipping,

and Heung-A Shipping. Moreover, OFMI has entered into new contracts with such clients as

PECT and KTCT, laying a solid foundation for sustained growth in 2004 and thereafter.

Cargo

In fiscal 2003, cargo insurance posted a healthy 8.2% gain indirect premiums written from the previous year. Marine Hullinsurance also showed exceptional operating results.

Cargo(Millions of Korean Won)

Direct premiums written

Earned premiumswritten

Loss ratio (%)02 03 02 03 02 03

17,7

35 19,1

85

11,4

99

58.5

39.8

10,1

84

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Marine Hull

Marine HullIn 2003, shipping companies as well as marine insurance firms worldwide enjoyed exceptional

operating results. Maritime transport companies recorded their highest-ever profits, on the

back of China’s robust economic growth, expanded cargo shipments, and general upturn in

shipping rates. Meanwhile, the upward trend in shipping rates and notable reductions in large-

scale maritime losses enabled insurers to book handsome profits as well.

However, this confluence of positive factors will not continue forever for the shipping industry

and related insurers. In fact, shipping firms are now wondering just how long China, which has

served as a powerful engine of the global economy, can remain on a path of rapid growth. There

are also growing concerns about increased competition due to increased ship construction.

The domestic marine hull insurance market realized a profit in fiscal 2003, buoyed by a

favorable business environment that included higher rates, increased number of ships in

operation, expanded tonnage of newly built ships, and an upturn in ship prices. Oriental Fire &

Marine Insurance benefited from these positive market conditions as well, recording 33.8

billion won in direct premiums written, up 2.6% from the prior year. This enabled the

Company to rank third in market share in Korea in this sector. In addition, OFMI ranked first in

terms of policies signed with domestic shipping companies, which are not affiliated with

business groups or foreign shipping giants.

Typhoon Maemi, which resulted in property losses of an unprecedented scale, has indeed

wrecked havoc on the domestic insurance industry. However, insurers and shipping owners

managed to elude large-scale damages through aggressive joint-risk management. However,

insurance losses related to new ship construction were unavoidable as the typhoon

devastated South Coast areas, where major shipyards are located. In spite of this, the

Company’s loss ratio for marine hull insurance in 2003 dramatically improved to 64.6% from

93.5% a year ago.

(Millions of Korean Won)

Direct premiums written

Earned premiumswritten

Loss ratio (%)02 03 02 03 02 03

32,9

79

33,8

22

6,11

9

7,03

2 64.6

93.5

210*297_EPS 2004.8.25 5:10 PM 페이지18

Thanks to its accumulated insurance expertise, Oriental Fire &Marine Insurance is expected to further solidify its standing asthe exclusive Korean insurer in the aviation-aerospace insurancesector.

Aviation & AerospaceAviation insurance sales in fiscal 2003 fell sharply to 55.5 billion won as Korean Air (KAL)

signed contracts directly with foreign insurers upon the expiration of existing contracts for

the airline’s fleet in November 2003. As a result, the domestic aviation market contracted to

110 billion won from 160 billion won. However, effective accident control enabled Oriental

Fire & Marine Insurance to reap healthy profit gains in 2003, with its loss ratio standing at

9.8%, down 24.5% points from the previous year. Thanks to expansion of its net retentions in

domestic reinsurance treaties, along with a restructuring of reinsurance facility mechanisms,

the Company recorded strong profitability results. Solid growth is expected to continue in

aviation insurance in line with the reinforced safety regulations of domestic airliners.

The Company also performed well in the field of aerospace insurance. Oriental Fire & Marine

Insurance was previously selected as lead insurer for the launch and initial operations of SK

Telecom’s commercial satellite for digital multimedia broadcasting (DMB) services that were

launched in March 2004. The Company garnered about 45% of the insurance premiums,

which totaled about 24.5 billion won. This enabled the Company to solidify its standing as a

key player in the domestic aerospace market and accumulate related insurance expertise.

Aviation & Aerospace

Direct premiums written

Earned premiumswritten

Loss ratio (%)02 03 02 03 02 03

(Millions of Korean Won)

110,

873

55,5

36

1,19

7

1,77

7

9.8

34.3

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A Review of Operations

Motor

Domestic motor sales in 2003 plummeted 18.7% from the previous year, amounting to 1.32

million units, primarily attributable to weak consumer demand and the ongoing economic

downturn. However, the number of registered vehicles was up 4.6% in 2003, bringing the total

to 14.6 million units. Against this backdrop, motor insurance sales in Korea showed a moderate

2.5% growth, year on year, to 7.93 trillion won. On the other hand, the related loss ratio rose

8.4% points to 76.7%, due to a series of adverse factors, including an increase in the number

of accidents, revisions of claims payment regulations and an upturn in insurance costs.

The Company’s motor insurance sales in fiscal 2003 were not immune from this difficult

operating environment, recording a contraction of 0.2% from a year ago to 615.7 billion won,

which caused its market share to fall to 7.8%. The loss ratio worsened to 79.6% as well,

affected by adverse market conditions such as the fast-growing popularity of online motor

insurance sales, intensified rate competition, and large-scale vehicle damages caused by

Typhoon Maemi, as well as other factors that have weighed down Korea’s motor insurance

sector in 2003.

RESPONSE TO MARKET TRENDS

The motor insurance sector can expect to face a slew of formidable challenges, including

further expansion of online direct insurance sales, prevalence of low-cost policies, and

significant demands for discount-type coverage for new policies. However, premium revenue

is expected to trend upward thanks to increased auto sales as consumer sentiments rebound,

as well as upward adjustment of minimum coverage amounts and mandatory subscription of

non-bodily (motor) insurance. At the same time, the motor insurance loss ratio is expected to

improve incrementally in step with overall hikes in premium rates, reduced incidence of

serious natural disasters, and curtailed operation of vehicles due to rising fuel prices. In light

of these circumstances, the Company will move aggressively to gather relevant information

and steadily upgrade the competitiveness of our policy terms.

Motor

Direct premiums written

Earned premiumswritten

Loss ratio (%)02 03 02 03 02 03

(Millions of Korean Won)

617,

084

615,

710

478,

526

504,

950

79.6

70.1

210*297_EPS 2004.8.25 5:10 PM 페이지20

Risk premiums 100.8 85.2 70.9

Incurred losses 71.0 61.1 54.7

Loss ratio (%) 70.4 71.7 77.2

Underwriting result 29.8 24.1 16.2

A Review of Operations

Long-term

In fiscal 2003, risk-type policies recorded solid growth, primarily due to the extension of tax

holidays (from seven years to 10 years), increased focus on consumer demand for risk-type

insurance, and expansion of the private health insurance market. Risk-type policy sales were

up a sharp 13.2% in 2003, as compared to a year earlier, while savings-type polices dropped

14.1%. This is a reflection of the Company’s efforts to increase the share of risk-type policies

in its portfolio holdings. OFMI’s cost-effective underwriting practices, sound management of

loss ratios, and more efficient claims payment procedures have all contributed to stabilizing

the loss ratio for long-term lines at 70.4%, down 1.3% points from a year ago, while yielding

an underwriting profit of 29.8 billion won.

OUTLOOK FOR 2004

Demand for long-term insurance is forecast to be sluggish throughout fiscal 2004 due to the

protracted slump in consumer spending. The Company will seek to further enhance its policy

renewal ratio and expand sales of risk-type products to ensure stable growth in direct

premiums written, backed by a solid foundation of renewal premiums. Consequently, the

Company will accelerate efforts to boost renewal rates along with preventing the surrender of

policies in force.

Meanwhile, the maturing of whole life insurance will likely spur diversification of market-

leading products. Innovative products, such as integrated insurance and CI insurance, may

gain widespread market acceptance. In 2004, the Company will continue to pursue a profit-

oriented marketing thrust based on expanded sales of risk-type policies.

In conjunction with this, Oriental Fire & Marine Insurance will work diligently to reinforce the

underwriting criteria for high-margin health-related policies along with bolstering sales of

both high-premium products and property insurance. In particular, the Company is determined

to realize a profit of 39 billion won by capitalizing on these initiatives. All employees will roll

up their sleeves to improve the policy renewal rate by minimizing the surrender of policies,

while ramping up sales of risk-type policies.

FY2003 FY2002 FY2001

Billions of Korean Won, %

* Loss ratio is based on risk premiums.

210*297_EPS 2004.8.25 5:10 PM 페이지21

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Strategic Initiatives

1) STATUS OF ONLINE INSURANCE MARKETING

In fiscal 2003, Korea’s online insurance sales showed strong

growth. In particular, online motor insurance, which debuted in

2001, began to yield tangible results. In 2003, Daum Direct, in

addition to three non-life insurers, launched motor insurance

sales via the Internet. Daum Direct is attracting keen attention

due to the fact that its business partner, a leading general

insurer, is participating in the online motor insurance

operations, albeit indirectly.

Currently, online motor insurance sales account for only a 4.5%

share of the overall motor insurance market; however, close

monitoring is warranted since commercial banks will be allowed

to sell motor insurance starting in April 2005, in line with the

ongoing deregulation of the financial services industry. The

Company will adopt a prudent and cost-conscious approach to

online marketing as the prevailing low-cost pricing has failed to

generate adequate returns for insurers thus far.

Nevertheless, the Company will remain alert to developments in

the fast-changing non-life insurance sector and create innovative

products tailored to the risk-solution needs of clients. Except for

online motor insurance, policies sales through the Internet will

be relatively limited for the time being. Currently, low-cost

policies for travelers dominate the cyber insurance market.

2) STRATEGY FOR E-COMMERCE

As the online motor insurance sector shows potential for steady

growth, the Company intends to significantly expand its online

insurance sales based on the following initiatives:

Step Up Internet Insurance Marketing

Oriental Fire & Marine Insurance will focus on providing a user-

friendly environment and promoting customer segmentation as a

means of bolstering online insurance marketing. Although

consumer demand for online insurance is expected to steadily

expand, this potential growth will be hampered by the fact that

customers need to develop the details of insurance policy

coverage on their own. Given this situation, the Company needs

to ensure a user-friendly process, which will enable consumers

to easily subscribe to insurance policies via the Internet.

Moreover, management will accelerate efforts to develop both

niche products and new distribution channels through

comprehensive analyses of customer needs, perspectives, and

preferences, as well as the promotion of market segmentation.

We will keep up with the latest trends in online motor insurance

and upgrade the competitiveness of our online marketing in

preparation for the full-fledged launch of online insurance sales.

Upgrade Customer Service Channels

Provision of customer services via the Internet has now become

an absolute must. Now that the security of financial services via

the Internet has been assured by certification of online

transactions and electronic insurance contracts, expanded use

of the Internet as a medium to promote customer services will

demonstrate the Company’s exceptional business capability,

and contribute to heightened customer satisfaction as well.

Overall, expansion of Internet applications will enable us to

strengthen our online services to help maximize customer

satisfaction and loyalty.

Moving Forward to Multiply Distribution Channels

210*297_EPS 2004.8.25 5:10 PM 페이지22

Strategic Initiatives

In fiscal 2003, the domestic insurance market underwent a

profound change upon the debut of a new insurance distribution

channel known as bancassurance, which has led to a significant

transformation of the portfolio makeup of insurers. The

Company responded to this development by renovating its sales

network of marketing representatives and agents. Of note, OFMI

is committed to offering differentiated insurance rates and

operations, thereby making it more convenient for financial

institutions to sell our policies. At the same time, the Company

remains focused on product innovation to address niche markets

and upgrading the quality of our sales network.

With the cross-selling of insurance products slated to further

expand starting in early 2005, banks will solidify their standing

as a significant distribution channel. It is thus essential for

Oriental Fire & Marine Insurance to bolster the efficiency and

quality of existing distribution channels, while reinforcing its

core competencies--insurance lines, pricing, customer services,

and marketing.

The Company will commit all available resources to enhancing

the competitive strengths of our product lines. Moreover, we

will focus on accessing new markets through the distribution of

advanced insurance products, such as consolidated policies and

CI, which have proven popular in industrialized countries. We

will also enhance the quality of our existing product lines

through constant customer input and to promote the competitive

edge of our premium products in response to growing consumer

demand for private medical insurance.

In addition, OFMI will offer insurance products that are

compatible with our marketing capability and launch “leisure

and makeover” policies in line with our streamlined sales

structure. Innovative products designed to satisfy the niche

market will also be marketed.

Finally, Oriental Fire & Marine Insurance aims to create a range

of products that are well-suited to the increasing diversity of

marketing channels, including home shopping, bancassurance,

and the Internet. In particular, the Company intends to offer not

only new products, but also value-added services tailored to the

specific characteristics of individual distribution channels and

consumers. The fulfillment of these initiatives will enable us to

attain our management goals for fiscal 2004, backed by an

unwavering commitment to our clients.

Creating New Product Lines Tailored to Changing Consumer Needs

210*297_EPS 2004.8.25 5:10 PM 페이지23

Financial Section

MD&A _ 24

Loss Analysis by Class _ 31

Financial Statements _ 32

Independent Auditors’ Report _ 40

Total income in fiscal 2003 amounted to 30.5 billion won, including 20billion won of net income and 10.5 billion won of net allocation tocatastrophe reserves, which enabled the Company’s solvency marginratio to improve by 2.1% points to 185.5%. Net worth also rose to 294.9billion won, as compared to 273.7 billion won a year ago.

Building a Strong Financial Base

210*297_EPS 2004.8.25 5:10 PM 페이지24

Management’s Discussion &Analysis of Financial Condition

(1) Adjusted net operating expenses = Net operating expenses - Net loss adjustment expenses

(2) Loss ratio = Adjusted incurred losses (including Refunds & Reserves)/Earned premiums×100

(3) Expense ratio = Adjusted net operating expenses/Net premiums earned×100

(4) Combined ratio = Loss ratio + Expense ratio

(5) Adjusted BPS = Catastrophe reserve + Total capital/number of outstanding stock

FY2003 FY2002 FY2001 FY2000

Millions of Korean Won, %

Income Statement Data :Net premiums earned ￦ 1,204,297 ￦ 1,187,313 ￦ 1,051,808 ￦ 898,440Direct premiums written 1,543,954 1,529,884 1,537,890 1,273,669Net premiums written 1,208,070 1,134,069 1,136,873 967,463Adjusted incurred losses incl. Refunds & Reserves 991,280 943,717 827,676 756,963Adjusted net operating expense (1) 293,125 277,524 250,229 217,463Net increase in catastrophe reserve 10,530 10,136 9,176 7,075Net underwriting Income (loss) (88,067) (40,037) (35,274) (87,785)Net investment income 119,559 91,746 103,270 52,268Net income (loss) 20,022 34,059 43,668 (19,783)Adjusted net income (loss) 30,552 44,195 52,844 (12,708)

Balance Sheet Data:Invested assets 2,026,985 1,887,145 1,679,254 1,427,582Non-operating assets 305,107 263,380 259,236 221,082Total assets 2,332,002 2,150,525 1,938,490 1,648,664Total liabilities 2,133,885 1,963,091 1,791,260 1,555,615Total shareholders’ equity 198,117 187,435 147,229 93,049

Major Financial Ratio (%)Loss ratio (2) 82.3 79.5 78.7 84.3Expense ratio (3) 24.3 23.4 23.8 24.2Combined ratio (4) 106.7 102.9 102.5 108.5Solvency margin ratio 185.5 183.4 163.4 145.0

Stock InformationAdjusted EPS (Korean Won) 3,561 5,151 6,159 (1,480)Adjusted BPS (Korean Won) (5) 34,375 31,000 26,036 18,648Adjusted return on equity (%) 11.5 18.1 27.6 (7.4)

SELECTED FINANCIAL DATA

210*297_재무 2004.8.26 1:16 PM 페이지1

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OVERVIEW

Fiscal 2003 was marked by significant upheaval in the non-life insurance sector’s competitive structure, which resulted from the launch

of bancassurance business and intensified price competition. In addition, the fast-growing popularity of online auto insurance sales

fueled competition, thereby contributing to deterioration of the non-life insurance industry’s overall loss ratio as well as erosion of the

profit performance of individual insurers.

In light of these developments, the Company stepped up efforts to reinforce a foundation capable of supporting stable growth and

profitability, while eschewing excessive rate-discounting in the auto insurance sector. Accordingly, management moved aggressively to

explore new profitable markets and create differentiated products tailored to the varied demands of customers. Moreover, impressive

progress has been realized in the efforts to restructure our portfolio with a focus on long-term risk-type insurance, casualty insurance,

and other high-margin product lines, while fortifying our marketing channels. Of significant note, through rapid expansion of distribution

channels, including bancassurance, together with intensified person-to-person marketing initiatives, Oriental Fire & Marine Insurance

has noticeably strengthened its capability to adapt to changing market conditions in a more timely and cost-effective manner.

In 2004, the non-life insurance market is likely to see a further escalation of competition, in various regards, as well as added

diversification of insurance products and distribution channels. In response to these trends, Oriental Fire & Marine Insurance will boost

its analysis and monitoring of market conditions and changing customer preferences so that it can swiftly capitalize on opportunities

related to new markets and products, while maximizing product competitiveness for targeted clients.

In particular, management is committed to continued enhancement of underwriting results and development of differentiated

underwriting techniques, which can fully take into account regional characteristics and specific customer requirements. The ultimate

goal is to bolster our bottom-line results. Moreover, the Company will strive to improve its administrative service processes for the

benefit of customers, while leveling up the competitiveness of non-price factors, including enhanced services, in an effort to ensure

steady growth of blue-chip customers.

Currently, the Company is implementing a “multi-channel” marketing strategy, in contrast to its previous practice of concentrating

management resources on specified channels. This innovative marketing approach will be steadily promoted in the years ahead. As for

person-to-person marketing, the Company intends to further reinforce our marketing organization through recruitment of qualified

salespersons and provision of advanced training programs.

At the same time, OFMI will intensify efforts to sharpen its competitive advantages through efficient utilization of new distribution

networks and active promotion of bancassurance sales, based on strategic alliances with leading financial services institutions. We will

also remain alert to minimize any conflict that might arise between off-line and online marketing activities, while reaping synergy gains.

210*297_재무 2004.8.26 1:16 PM 페이지2

ANALYSIS OF RESULTS OF OPERATIONS

UNDERWRITING PERFORMANCE

UNDERWRITING RESULT

Amid an adverse market environment, direct premiums written in fiscal 2003 edged up 0.9% from the previous year. On the other hand,

net premiums written posted a healthy 6.5% growth to 1,208.1 billion won, driven by the Company’s aggressive marketing, while net

premiums earned in 2003 amounted to 1,204.3 billion won, up 1.4% from a year ago.

Direct premiums written for commercial lines and motor insurance declined 10.0% and 0.2%, respectively, amounting to 296.2 billion

won and 615.7 billion won. In large part, this slide was attributed to increased competition in the non-insurance sector and

management’s emphasis on profitability, rather than quantitative volume growth. In sharp contrast, long-term lines enjoyed a robust

expansion of 8.3%, amounting to 632.0 billion won.

Management’s Discussion &Analysis of Financial Condition

(1) Adjusted net operating expenses= Net operating expenses-Net loss adjustment expenses. In Korea, loss adjustment expenses are generally included in net operating expenses, but

have been categorized into incurred losses in conformity with global standards.

FY2003 FY2002 FY2001 FY2000

Millions of Korean Won, %

Net premiums earned ￦ 1,204,297 ￦ 1,187,313 ￦ 1,051,808 ￦ 898,440Direct premiums written 1,543,954 1,529,884 1,537,890 1,273,669Net premiums written 1,208,070 1,134,069 1,136,873 967,463Adjusted incurred losses incl. Refunds & Reserves 991,280 943,717 827,676 756,963

Loss ratio 82.3 79.5 78.7 84.3Adjusted net operating expenses (1) 293,125 277,524 250,229 217,463

Expense ratio (%) 24.3 23.4 23.8 24.2Combined ratio (%) 106.7 102.9 102.5 108.5

Net increase in catastrophe reserve 10,530 10,136 9,176 7,075Net underwriting income (loss) (88,067) (43,037) (35,274) (87,785)

Direct Premiums Written by Line(Millions of Korean Won, %)

Commercial Lines

FY2000 FY2001 FY2002 FY2003

Motor Lines

FY2000 FY2001 FY2002 FY2003

Long-term Lines

FY2000 FY2001 FY2002 FY2003

230,

613

312,

309

329,

074

296,

245

463,

593

605,

247

617,

084

615,

710

579,

463 62

0,33

4

583,

726

631,

999

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In 2003, adjusted incurred losses, including refunds and reserves, were up 5.0% from a year ago, due to increased net claims paid for

motor insurance. This increase, however, was far lower than the 14.0% jump registered in 2002. The loss ratio rose by 2.8% points to

82.3%, as compared to 79.5% in 2002 and 78.7% in 2001. Since peaking at 84.3% in 1999, the loss ratio has been maintained within a

stable range. The loss ratio for motor insurance widened to 79.6% in 2003, from 70.1% in 2002, thereby contributing to a worsening of

the overall loss ratio, along with commercial lines that likewise incurred a net increase of 4.7% points in its loss ratio. Long-term lines, in

contrast, managed to record a narrowing of 2.2% points of its loss ratio.

Adjusted net operating expenses (net operating expenses minus net loss adjustment expenses) rose 5.6%, year on year, to 293.1 billion

won, while net premiums earned were up 1.4% to 1,204.3 billion won. As a consequence, the expense ratio inched up by 0.9% points,

while the combined ratio stood at 106.7%, versus 102.9% a year earlier. Due to the increased loss ratio, the Company’s underwriting

loss expanded to 88.1 billion won.

INVESTMENT OPERATIONS

INVESTMENT PERFORMANCE

* Loan income is based on total loans that refer to balance on B/S after deduction of allowance for doubtful accounts.

FY2003 FY2002

Millions of Korean Won

Investment income ￦ 140,087 ￦ 137,447Deposits 8,353 8,893Loans* 16,662 14,038Bonds 68,539 75,619Dividends 2,385 1,811Gain on disposition of securities 30,518 25,971Gain on valuation of securities 7,862 1,156Others 5,768 9,959

Investment expenses 20,528 45,701Loss on disposition of securities 6,325 22,751Loss on valuation of securities 1,020 3,947Real estate management expenses 949 924Others 12,234 18,079

Net investment income 119,559 91,746

Loss Ratio by line(%)

Commercial Lines

Motor Lines

Long-term Lines incl. Individual Pension

FY2003

FY2002

FY2001

FY2000

50.8 79.6 89.1

70.1 91.346.1

48.3

54.0 72.9 94.3

66.6 91.4

210*297_재무 2004.8.26 1:16 PM 페이지4

Buoyed by its effective asset management through expansion of interest-bearing assets, the Company recorded a significant gain of 27.8

billion won in investment income from a year earlier, amounting to 119.6 billion won, based on an impressive investment yield of 6.3%.

In particular, management employed a variable investment strategy in response to fluctuations in the stock market environment, which

enabled the Company to realize such a noteworthy return on investment in 2003.

Invested assets in fiscal 2003 rose 7.4% over a year ealier to 2,027.0 billion won. Cash and deposits were up 6.3%, year on year. Trading

securities, amounting to 382.6 billion won, contracted 11.2%, whereas available-for-sale securities expanded a sharp 23.4% to 969.6

billion won. Loans decreased 16.5% to 221.1 billion won; however, real estate holdings were up 33.2 billion won to 248.7 billion won.

Comprehensive risk management was another key factor behind the Company’s success in last year’s investment performance. Company

management established limits for overall risk and market risks on a quarterly basis, which were integrated into the overall risk

management framework, including a state-of-the-art ALM (asset-liability management) system, that is being incrementally installed.

Close cooperation and cross-checking among the financial planning, investment operation, and risk management teams also played a

significant role in reaping the better-than-expected results in investment activities.

TOTAL LOANS vs. INVESTED ASSETS

INVESTMENT YIELD

Management’s Discussion &Analysis of Financial Condition

FY2003 FY2002 FY2001

Loan income 16,405 0.84 15,025 0.85 17,685 1.14Invested assets 2,026,985 - 1,887,145 - 1,679,254 -

Amount Investment yield (%) Amount Investment yield (%) Amount Investment yield (%)

Total loans refer to balance on B/S plus allowance for doubtful accounts.

Loans refer to balance on B/S after deduction of allowance for doubtful accounts.

FY2003 (2004.03) FY2002 (2003.03) FY2001 (2002.03)

Millions of Korean Won

Total loans 213,501 10.5 255,042 13.5 157,396 9.4Invested assets 2,026,985 100.00 1,887,145 100.00 1,679,254 100.00

Amount Share (%) Amount Share (%) Amount Share (%)

Portfolio of Invested Assets(Millions of Korean Won, %)

Total 1,887,145Cash & Deposits 202,202Real estate 215,550Loans 252,657Trading securities 430,796

Bonds 420,278Stocks 10,518

Available-for-sale securities 785,940

Bonds 728,746Stocks, Money invested 57,194

FY2002

10.7%

11.4%

13.4%

22.8%

41.7%

Total 2,026,985Cash & Deposits 214,995Real estate 248,722Loans 211,074Trading securities 382,632

Bonds 353,762Stocks 28,870

Available-for-sale securities 969,562

Bonds 901,763Stocks, Money invested 67,799

FY2003

10.6%

12.3%

10.4%

18.9%

47.8%

Millions of Korean Won

210*297_재무 2004.8.26 1:16 PM 페이지5

OUTLOOK FOR 2004

The domestic stock market is expected to be rather limited in its upside potential due to the extended slump in domestic consumption

and high oil prices. Meanwhile, the prevailing low-interest-rate environment worldwide is likely to be disrupted by raising interest rates

in the United States. As a consequence, it is projected that the domestic financial market will experience heightened uncertainty.

In fiscal 2004, Oriental Fire & Marine Insurance is targeting 130 billion won of investment income based on an income yield of 6.2%,

slightly lower than the 6.3% attained in 2003. As such, the Company will seek to diversify its investment portfolio through an expansion

of loan activity, while also seeking to boost investment income through active exploration of niche products with high-income potential.

In addition, stock investment will continue to focus on maximizing profit opportunities within risk management guidelines. If the stock

market remains in the doldrums, Company management will curtail the stock portfolio and concentrate on more attractive investment

alternatives.

ANALYSIS OF FINANCIAL CONDITION

ASSETS

In fiscal 2003, the Company’s total assets posted a healthy 8.4 growth, as compared to the previous year, backed by a significant

increase in available-for-sale securities. In comparison with fiscal 2001, total assets surged 20.3%. Meanwhile, invested assets in fiscal

2003 accounted for 86.9% of total assets, slightly lower than that recorded in fiscal 2002.

As for asset quality, the Company’s substandard and below loans in fiscal 2003 amounted to 3.1 billion won, down from the previous

year’s 3.3 billion won. On the other hand, the substandard and below ratio rose somewhat to 1.44% of total loans outstanding, which

amounted to 213.5 billion won. Meanwhile, the ratio of net income versus total loans (balance on B/S after deduction of loan loss

provisions) stood at 7.3% in 2003, compared to 7.7% a year earlier.

FY2003 FY2002 FY2001

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Millions of Korean Won

Amount Share (%) Amount Share (%) Amount Share (%)

Invested Assets ￦ 2,026,985 86.9 ￦ 1,887,145 87.8 ￦ 1,679,254 86.6Cash & deposits 214,995 10.6 202,202 10.7 166,817 9.9Trading securities 382,632 18.9 430,796 22.8 504,445 30.0Available-for-sale securities 969,562 47.8 785,940 41.7 643,445 38.4Loans 211,074 10.4 252,657 13.4 154,295 9.2Real estate 248,722 12.3 215,550 11.4 210,252 12.5

Non-Operating Assets 305,017 13.1 263,380 12.2 259,236 13.4Total Assets 2,332,002 100.0 2,150,525 100.0 1,938,490 100.0

210*297_재무 2004.8.26 1:16 PM 페이지6

ASSET QUALITY

LIABILITIES & SHAREHOLDERS’ EQUITY

During fiscal 2003, total liabilities increased 8.7% over the previous year to 2,133.9 billion won, primarily impacted by a sharp expansion

of policy reserves, which increased 8.6% from a year ago to 1,796.5 billion won. Catastrophe reserve was up 12.2%, amounting to 96.8

billion won. Borrowings were reduced by 300 million won to 1.7 billion won. Meanwhile, shareholders’ equity surged 5.7% to 198.1

billion won, backed by a hefty increase in retained earnings resulting from net income of 20.0 billion won.

SOLVENCY MARGIN RATIO

Despite the deterioration of its loss ratio, which was mainly attributable to the extraordinary losses incurred by Typhoon Maemi and the

volatile financial environment, Oriental Fire & Marine Insurance was able to noticeably reinforce its overall financial structure in fiscal

2003. In particular, the Company’s solvency margin ratio stood at 185.5%, an improvement of 2.1% points from the previous year,

ranking OFMI fourth in this category.

In 2004, Oriental Fire & Marine Insurance will accelerate efforts to optimize its loss ratio management and advanced investment

operations, as well as innovative underwriting practices. Furthermore, the Company will strive to reinforce its risk management and

enhance its earnings performance. In doing so, the Company will be on track to further improve its solvency margin ratio and bolster its

standing as a financially sound non-life insurer.

Management’s Discussion &Analysis of Financial Condition

FY2003 FY2002 FY2001 FY2000

Millions of Korean Won

Total Liabilities ￦ 2,133,885 ￦ 1,963,091 ￦ 1,791,260 ￦ 1,555,615Policy Reserve 1,796,503 1,654,855 1,531,891 1,334,696Catastrophe Reserve 96,823 86,293 76,157 66,981Other Liabilities 180,387 173,180 140,294 119,284Separate Account Liabilities 60,172 48,763 42,918 34,654

Total Shareholders’ Equity 198,117 187,435 147,229 93,049Solvency margin ratio (%) 185.5 183.4 163.4 145.0

FY2003 (2004.03) FY2002 (2003.03) FY2001 (2002.03)

Millions of Korean Won

Normal 195,348 91.50 234,635 92.00 143,156 90.95Precautionary 15,071 7.06 17,114 6.71 8,463 5.38 Substandard 3,082 1.44 3,293 1.29 5,777 3.67 Total loans 213,501 100.00 255,042 100.00 157,396 100.00

Amount Share (%) Amount Share (%) Amount Share (%)

Solvency Margin Ratio(Billions of Korean Won, %) Solvency Margin Ratio (%)-

Korean Guidelines

Solvency Margin

Solvency Margin Requirements

163.4%

294.5 319.7

183.4% 185.5%

243.3

148.9 160.6 172.3

FY2001

FY2002

FY2003

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Loss Analysis by Class

* Loss adjustment expenses are included in Incurred losses in line with international standards.

* For FY2003 and FY2002, the reported figures for risk and savings type classifications are based on the Company’s internal practices and the records for FY2001 & FY2000 were restated with

intent to comply with such practices.

* Korean amounts are converted into US$1.00 at ￦1,153,60, the basic exchange rate as of March 31, 2004.

Thousands ofMillions of Korean Won U.S Dollars

PROPERTYNet premiums earned ￦ 27,459 ￦ 28,271 ￦ 24,580 ￦ 21,591 $ 23,803Incurred losses 18,572 12,672 11,674 13,812 16,099Loss ratio (%) 67.6 44.8 47.5 64.0 67.6CASUALTYNet premiums earned 41,793 39,326 31,198 24,838 36,082Incurred losses 15,566 16,499 14,952 12,709 13,493Loss ratio (%) 37.2 42.0 47.9 51.2 37.4CARGONet premiums earned 10,184 11,499 8,055 8,391 8,828Incurred losses 5,959 4,574 3,829 2,450 5,166Loss ratio (%) 58.5 39.8 47.5 29.2 58.5HULLNet premiums earned 7,032 6,119 5,857 3,293 6,096Incurred losses 4,546 5,721 3,217 2,871 3,941Loss ratio (%) 64.6 93.5 54.9 87.2 64.6AVIATIONNet premiums earned 1,777 1,197 1,008 770 1,540Incurred losses 174 411 462 (50) 151Loss ratio (%) 9.8 34.3 45.8 (6.5) 9.8SUBTOTAL (Commercial lines)Net premiums earned 88,245 86,413 70,699 58,884 76,349Incurred losses 44,817 39,877 34,133 31,792 38,850Loss ratio (%) 50.8 46.1 48.3 54.0 50.9MOTORNet premiums earned 504,950 478,526 416,303 310,958 437,717Incurred losses 401,983 335,443 277,309 226,594 348,850Loss ratio (%) 79.6 70.1 66.6 72.9 79.6LONG-TERM RISK TYPENet premiums earned 535,223 490,129 430,979 352,918 463,959Incurred losses 458,281 422,321 367,731 283,247 348,460Loss ratio (%) 85.6 86.2 85.3 80.3 85.6TOTAL (Excluding savings type)Net premiums earned 1,128,418 1,055,068 917,981 722,760 978,024Incurred losses 905,081 797,641 679,173 541,633 397,262Loss ratio (%) 80.2 75.6 74.0 74.9 80.2LONG-TERM SAVINGS TYPENet premiums earned 75,879 132,246 133,827 175,680 65,776Incurred losses 86,199 146,075 148,503 215,330 74,722Loss ratio (%) 113.6 110.5 111.0 122.6 113.6LONG-TERM TOTALNet premiums earned 611,102 622,375 564,806 528,598 529,735Incurred losses 544,480 568,397 516,234 498,578 471,983Loss ratio (%) 89.1 91.3 91.4 94.3 89.1TOTAL (Including savings type)Net premiums earned 1,204,297 1,187,313 1,051,808 898,440 1,043,800Incurred losses & Refunds & Reserves 991,280 943,717 827,676 756,963 859,293Loss ratio (%) 82.3 79.5 78.7 84.3 82.3

FY2003 FY2002 FY2001 FY2000 FY2003

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ASSETSCash and deposits ￦ 214,994,570 ￦ 202,202,333Trading securities 382,632,184 430,125,825Available for sale securities, net of present value discount of ￦338,501 thousand

in 2004 and ￦350,447 thousand in 2003 756,209,763 711,747,478Held to maturity securities 203,312,184 65,457,470Securities accounted for using the equity method 10,040,307 8,734,961Loans, net of allowance for doubtful accounts of ￦2,426,709 thousand

in 2004 and ￦2,384,792 thousand in 2003 211,074,245 252,657,023Fixed assets:

Investment assets 3,892,085 3,892,085Tangible assets 251,900,407 217,120,604Intangible assets 3,742,349 4,895,511

Total fixed assets 259,534,841 225,908,200

Other assets:Insurance receivables, net of allowance for doubtful accounts of ￦2,925,226 thousand

in 2004 and ￦2,025,627 thousand in 2003 80,726,784 67,867,066 Other accounts receivable, net of allowance for doubtful accounts

of ￦2,774,960 thousand in 2004 and ￦3,043,089 thousand in 2003 17,122,287 16,627,896 Leasehold and other deposits 63,181,353 63,381,753Accrued income, net of allowance for doubtful accounts

of ￦7,132 thousand in 2004 and ￦6,294 thousand in 2003 17,088,969 21,186,090Prepaid expenses 1,549,892 1,805,357Compensatory receivables 16,613,336 14,841,959Separate account assets 60,172,412 48,763,472Deferred acquisition costs 22,408,514 3,794,202Notes receivable, net of allowance for doubtful accounts

of ￦9,174 thousand in 2004 and ￦7,951 thousand in 2003 1,825,691 1,582,372Advance payments 799,529 79,278 Other 12,715,112 13,762,625

Total other assets 294,203,878 253,692,071

TOTAL ASSETS ￦ 2,332,001,973 ￦ 2,150,525,359

(Continued)

FY2003 FY2002

AS OF MARCH 31, 2004 AND 2003

In thousands of Korean won

Balance Sheets

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LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES:Policy reserve, net of reserve for reinsurance claims of ￦195,041,974 thousand in

2004 and ￦182,035,531 thousand in 2003 ￦ 1,796,502,849 ￦ 1,654,854,986Catastrophe reserveOther liabilities: 96,822,764 86,293,379

Unpaid claims 99,555,726 84,365,810Other accounts payable 11,234,483 5,197,807Accrued expenses 24,748,779 25,374,446Separate account credits 131,390 1,669,017Separate account liabilities 60,172,412 48,763,472Accrued severance indemnities, net of transfer to the National Pension

Fund of ￦504,525 thousand in 2004 and ￦657,569 thousand in 2003 and deposits for retirement insurance of ￦15,193,403 thousand in 2004and 13,110,278 thousand in 2003 10,307,178 9,103,350

Premiums received in advance 1,036,596 1,691,448Bank overdraft - 3,578,069Borrowings 1,700,000 2,000,000Advances 3,591,629 3,941,049Withholdings 923,620 1,824,320Leasehold deposits received 13,606,637 11,855,169Accrued income taxes 7,048,450 15,013,284Deferred income tax liabilities 4,711,550 3,329,821Other 1,790,745 4,235,162

Total other liabilities 240,559,196 221,942,223

Total liabilities 2,133,884,809 1,963,090,587,882

STOCKHOLDERS’ EQUITYCommon stock 42,900,000 42,900,000Capital surplus 26,511,878 25,916,944 Retained earnings 128,168,934 116,026,821Capital adjustments :

Treasury stock (10,531,230) (9,936,297)Gain on valuation of available for sale securities 10,424,822 12,413,901Gain on valuation of securities accounted for using the equity method 581,861 243,644Others 60,900 (130,242)

Total stockholders’ equity 198,117,165 187,434,772

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY ￦ 2,332,001,973 ￦ 2,150,525,359

FY2003 FY2002

In thousands of Korean won

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OPERATING INCOMEPremium income ￦ 1,528,277,448 ￦ 1,509,132,886Reinsurance claims 192,790,921 149,001,176 Interest income 93,554,195 98,549,613Dividend income 2,385,313 1,811,341Gain on disposition of trading securities 20,944,337 20,453,485Gain on valuation of trading securities 7,861,462 1,156,370Expenses recovered 64,080,455 71,333,618Reversal of policy reserves - 54,026,012Other 4,258,920 6,762,665

Total 1,914,153,051 1,912,227,167

OPERATING EXPENSESPolicy reserves 141,567,453 147,311,700Catastrophe reserves 10,529,385 10,136,425Claims paid 687,164,306 572,399,570 Refund expense 352,969,997 372,058,622 Reinsurance premium expense 320,207,675 375,064,118 Interest expence 228,159 61,103 Loss on disposition of trading securities 6,171,015 21,334,288 Loss on valuation of trading securities 1,049,316 3,993,509 Operating expenses 360,614,318 350,698,327 Investment administration expenses 5,313,356 5,270,048Other 3,920,386 4,075,927

Total 1,889,735,369 1,862,403,636

TOTAL OPERATING INCOME ￦ 24,417,683 ￦ 49,823,530

(Continued)

FY2003 FY2002

FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

In thousands of Korean won

Statements of Income

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OTHER INCOME (EXPENSES)Gain on disposition of available for sale securities - net ￦ 8,810,631 ￦ 2,758,908 Gain (loss) on valuation using the equity method - net 1,134,493 (1,185,808)Loss on valuation of the Stock Market Stabilization Fund - net - (415,724)Loss on impairment of available for sale securities (3,339,379) (3,193,521)Gain on disposition of securities for using the equity method - 232,536 Loss on disposition of investment assets - net - (42,868)Gain on disposition of tangible assets - net 5,546 12,544 Gain (loss) on foreign currency transactions - net 39,749 (956,203)Loss on foreign exchange translations - net (2,434,882) (1,359,333)Reversal of allowance for bad debts 622,553 43,387 Gain (loss) on valuation of derivatives - net 179,098 (96,991)Gain on transactions of derivatives - net 282,225 828,996 Donations (269,995) (2,369,800)Others - net (985,375) (3,950,865)

Total other income (expenses) 4,044,664 (9,694,742)

ORDINARY INCOME 28,462,347 40,128,789

EXTRAORDINARY GAINS - 8,472,473

INCOME BEFORE INCOME TAXES 28,462,347 48,601,262

INCOME TAX EXPENSE (8,440,002) (14,542,402)

NET INCOME ￦ 20,022,345 ￦ 34,058,859

NET INCOME PER SHARE (In Korean Won) ￦ 2,584 ￦ 5,676

FY2003 FY2002

In thousands of Korean won

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RETAINED EARNINGS BEFORE APPROPRIATIONS Beginning of the year ￦ 36,826 ￦ 58,199Cumulative effect of accounting changes - -Valuation using the equity method of accounting - - Net income 20,022,345 34,058,859

End of the year 20,059,171 34,117,058

APPROPRIATIONSLegal reserve (800,000) (800,000)Loss on disposition of treasury stock - (130,242)Voluntary reserve (11,500,000) (25,400,000)Cash dividends (7,749,990) (7,749,990)

Total appropriations (20,049,990) (34,080,232)

UNAPPROPRIATED RETAINED EARNINGS TO BE CARRIED FORWARD TO NEXT YEAR ￦ 9,181 ￦ 36,826

FY2003 FY2002

FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

In thousands of Korean won

Statements of Appropriations ofRetained Earnings

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FY2003 FY2002

FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

In thousands of Korean won

Statements of Cash Flows

(Continued)

CASH FLOWS FROM OPERATING ACTIVITIES

Net income ￦ 20,022,345 ￦ 34,058,859

Addition of expenses not involving cash outflows :Depreciation 8,131,003 6,387,486Retirement allowance 9,154,763 8,901,878Bad debts 1,116,900 1,820,174Reserve for outstanding claims 3,735,457 -Long-term insurance premium reserve 129,156,154 142,890,831Unearned premium reserve 3,771,413 -Excess participating policyholder dividend reserve 2,335,087 3,393,503Policyholders’ dividend reserve 2,569,343 1,027,366Catastrophe reserve 10,529,385 10,136,425Loss on disposition of trading securities 6,171,015 21,334,288Loss on valuation of trading securities 1,049,316 3,993,509Loss on disposition of available for sale securities 1,917,223 7,300,776 Loss on valuation of securities using the equity method - 1,185,808Loss on valuation of the Stock Market Stabilization Fund - 415,724Loss on impairment of available for sale securities 3,339,379 3,193,521Loss on disposition of investment assets - 54,238Amortization of intangible assets 1,648,162 1,555,578Amortization of deferred acquisition cost 1,745,604 2,088,643Loss on foreign exchange translation 2,687,927 1,680,013Others 717,858 1,873,904

Sub-total 189,775,990 219,233,667

Deduction of revenues not involving cash inflows :Reversal of reserves for outstanding claims - (781,557)Reversal of policyholders' dividend reserve - (53,244,455)Interest income (11,946) (63,879)Gain on disposition of trading securities (20,944,337) (20,453,485)Gain on valuation of trading securities (7,861,462) (1,156,370)Gain on disposition of available for sale securities (10,727,855) (10,059,684)Gain on valuation of the Stock Market Stabilization Fund - -Gain on disposition of investment assets - (11,371)Gain on disposition of tangible assets (11,263) (20,156)Gain on foreign currency translation (522,798) (327,257)Gain from assets contributed - (8,472,473)Others (2,793,421) (2,085,663)

Sub-total (42,873,083) (96,676,349)

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(Continued)

FY2003 FY2002

In thousands of Korean won

Statements of Cash Flows

Changes in assets and liabilities resulting from operations :Increase in insurance receivables (14,162,016) (22,731,792)Decrease (increase) in accrued income 4,096,284 (1,328,737)Decrease (increase) in prepaid expenses 255,465 (510,758)Increase in compensatory receivables (1,771,377) (3,225,650)Increase in deferred policy acquisition costs (20,359,916) (1,179,989)Decrease (increase) in notes receivable (244,542) 351,099Increase in advance payments (720,251) (36,645)Increase in other assets (11,492,436) (6,493,462)Increase in unpaid claims 15,569,579 15,133,447Increase (decrease) in accrued expenses (625,667) 8,619,923Payment of severance indemnities (6,020,852) (5,439,770)Decrease in transfers to the National Pension Fund 153,043 237,950Increase (decrease) in income taxes payable (7,964,834) 15,013,284Increase in other liabilities 6,495,012 4,705,773

Sub-total (36,792,509) 3,114,673

Net cash provided by operating activities 130,132,743 159,730,850

CASH FLOWS FROM INVESTING ACTIVITIESCash inflows from investing activities :

Decrease in deposits 301,997,765 512,823,117 Decrease in trading securities 3,794,217,880 3,384,908,103 Decrease in available for sale securities 698,174,044 1,057,293,766 Decrease in held to maturity securities 26,884,007 - Decrease in loans 1,349,274,064 672,266,262Disposal of tangible assets 92,265 474,589Decrease in other assets 1,400,130,098 838,520,717

Sub-total 7,570,770,122 6,466,286,553

Cash outflows for investing activities :Increase in deposits (349,864,606) (516,733,731)Increase in trading securities (3,725,962,794) (3,306,585,098)Increase in available for sale securities (739,404,211) (1,169,421,981)Increase in held to maturity securities (165,156,721) (17,690,392)Increase in loans (1,308,203,493) (771,094,472)Acquisition of tangible assets (42,997,525) (11,607,543)Increase in other assets (1,400,548,205) (786,206,383)

Sub-total (7,732,137,555) (6,579,339,599)

Net cash used in investing activities (161,367,433) (113,053,046)

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FY2003 FY2002

In thousands of Korean won

CASH FLOWS FROM FINANCING ACTIVITIESCash inflows from financing activities :

Increase in other accounts payable 1,110,197,829 430,722,253Increase in bank overdraft 37,733,417 33,334,086Increase in leasehold deposits received 3,652,886 4,001,814Increase in other liabilities - 785,330

Sub-total 1,151,584,133 468,843,483

Cash outflows for financing activities :Decrease in other accounts payable (1,104,164,319) (442,247,110)Payment of dividends (7,746,824) (7,724,253)Decrease in bank overdrafts (41,311,486) (32,195,868)Decrease in leasehold deposits received (1,901,418) (818,979)Decrease in other liabilities (300,000) -

Sub-total (1,155,424,047) (482,986,210)

Net cash used in financing activities (3,839,914) (14,142,727)

NET INCREASE (DECREASE) IN CASH (35,074,604) 32,535,077

CASH AT BEGINNING OF YEAR 53,240,973 20,705,896

CASH AT END OF YEAR ￦ 18,166,369 ￦ 53,240,973

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Independent Auditors’ Report

To the Shareholders and Board of Directors of

Oriental Fire & Marine Insurance Co., Ltd.

We have audited the accompanying balance sheets of Oriental Fire & Marine Insurance Co., Ltd. (the “Company”) as of March 31, 2004 and 2003,

nd the related statements of income, appropriations of retained earnings and cash flows for the years then ended (all expressed in Korean won).

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

tements based on our audits.

We conducted our audits 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 audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2004 and

2003, and the results of its operations, the appropriations of its retained earnings and its cash flows for the years then ended, in conformity with

financial accounting standards generally accepted in the Republic of Korea.

Without qualifying our opinion, we draw attention to the following:

As discussed in Note 11 to the accompanying financial statements, the Company had significant transactions and related account balances with

its related parties as of and for the years ended March 31, 2004 and 2003. Premium income from related parties was ￦70,010 million and

￦135,950 million for the years ended March 31, 2004 and 2003, respectively, and net premium expense to related parties was ￦22,193 million

and ￦3,788 million for the years ended March 31, 2004 and 2003, respectively. The related insurance receivables were ￦335 million and

￦2,101 million as of March 31, 2004 and 2003, respectively, and the related claims payable were ￦217 million and ￦9 million as of March 31,

2004 and 2003, respectively. In addition, there was an extraordinary gain recorded for the year ended March 31, 2003 due to contribution of

investment securities in the amount of ￦8,472 million from a related party.

As discussed in Note 41 to the accompanying financial statements, the Company took over Regent Fire Insurance Co., Ltd’s insurance contracts,

the related assets, liabilities and other contractual status jointly with Samsung Fire & Marine Insurance Co., Ltd, Hyundai Marine and Fire

Insurance Co., Ltd and LG Insurance Co., Ltd, according to “the Resolution on Insurance Contract Transfer regarding Regent Insurance Co., Ltd.” by

the Financial Supervisory Committee dated June 7, 2002. Accordingly, assets amounting to ￦10,345,878 thousand and liabilities amounting to

￦32,052,619 thousand were transferred to the Company. Shortage in net assets of ￦21,706,741 thousand was indemnified by Korea Deposit

Insurance Corporation.

As described in Note 2 to the accompanying financial statements, Korea Accounting Standards Board issued Statements of Korea Accounting

Standards (“SKAS”) No. 2 through No. 9, which are effective for a fiscal year beginning after December 31, 2002. Accordingly, the accompanying

a financial statements of the Company have been prepared in accordance with SKAS No. 2 through No. 9.

Ahn Kwon & Co.4-7, 10, 11, 13th Fl., Tae Young Bldg.

252-5, Kongdeok-Dong, Mapo-Gu, Seoul Korea

Mapo P.O.Box 124Tel 82-2-3271-3000

Fax 82-2-3271-3100, 3200, 3400www.ahnkwon.co.kr

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In addition, in accordance with SKAS No. 6, appropriations of retained earnings, including dividends, are not reflected in the accompanying

balance sheets until approved by shareholders. The effect of this accounting change is to decrease total liabilities and increase total

shareholders’ equity as of March 31, 2004 by ￦7,750 million. The balance sheet as of March 31, 2003, which is comparatively presented, is

restated to reflect the effect of this accounting change retrospectively and, as a result, total liabilities as of March 31, 2003 decreased by

￦7,750 million and total stockholders' equity as of March 31, 2003 increased by the same amount. In connection with this accounting change,

operating income, net income and net income per share for the year ended March 31, 2003 were not affected.

In addition, in accordance with SKAS No.8, the Company changed its accounting method for securities. In connection with this accounting

change, the financial position and operating income and net income were not affected.

As discussed in Note 3 to the accompanying financial statements, during the year ended March 31, 2003, the Company reclassified held-to-

maturity bonds in separate accounts under the Korean Insurance Business Act to available-for-sale bonds, and valued them at fair value

according to a revision in the Enforcement Decree of the Insurance Business Act in the Republic of Korea. As it was not practical to

reasonably determine the cumulative effect of this accounting change, the accounting change was applied prospectively. As a result of the

accounting change, the investment securities and valuation gains on investment securities (capital adjustment) both increased by

￦13,558,266 thousand.

As discussed in Note 43 to the accompanying financial statements, as LG Card Co., Ltd was under a liquidity crisis, the creditors of LG Card

were discussing a normalization of LG Card’s operations as of March 31, 2004. The ultimate recovery of LG Card’s operations depends on the

determinations of its creditors, including a support level by its creditors and the stakeholders, and the developments in the overall Korean

economy. There is an uncertainty relating to the valuation of LG Card assets of the Company as of March 31, 2004 and the ultimate result may

differ from the current estimate of the management.

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 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 knowledgeable about Korean accounting procedures and auditing standards and their

application in practice.

May 12, 2004

Notice to Readers

This auditors’ report is effective as of May 12, 2004, auditors’ report date. Certain subsequent events or circumstances may have occurredbetween the auditors’ report date and the time the auditors’ report is read. Such events or circumstances could significantly affect theaccompanying financial statements and may result in modifications to the auditors’ report.

210*297_재무 2004.8.26 1:16 PM 페이지18

History in Brief

October 1922

July 1956

July 1967

October 1983June 1988

June 1994January 1995May 1996May 1997September 1997October 1997

December 1997

May 1998September 1998

November 1998 December 1998

September 1999December 1999

March 2000

June 2001October 2001November 2001July 2002

June 2003July 2003October 2003December 2003

1920s

1950s

1960s

1980s

1990s

2000s

OFMI established

Listed on Korea Stock Exchange

Became a member company of Hanjin Business Group

Motor insurance business commencedLondon liaison office opened

Private pension business commencedPaid-in capital increased to ￦42.9 billionTotal assets surpassed ￦1 trillionRated Grade A in Company Management by Insurance Supervisory BoardConferred the Award for Excellence in National Customer Satisfaction ContestReceived the Product Development Award in Naeway Economic Daily’s annual insuranceproducts contestReceived the Prime Minister Award in Management & Office Innovation CasesPresentation ContestRated Grade A in Business Management by Insurance Supervisory BoardAwarded The Best Prize in ‘98 Customer Satisfaction Management Contest by Korea Management Association ConsultingPT. Asuransi Hanjin Korindo, a joint venture in Indonesia, established Ranked No.1 in Non-Life Insurance Industry in ‘98 NCSI (National Customer SatisfactionIndex) Survey by Korea Productivity Center, the University of Michigan and Chosun IlboReceived The Grand Prix in ‘99 Customer Satisfaction Management Contest by KMACRanked No.1 in Non-Life Insurance Industry in ‘98 NCSI Survey by Korea ProductivityCenter, the University of Michigan and Chosun Ilbo

Conferred the Outstanding Award in Finance in 5th Maeil Business Newspaper’s DailyFinancial Products ContestReceived the ‘Masterpiece Award’ in new product sector of Korea Marketing Awards 2001Ranked No.1 in financial sector of Korea Service Quality IndexIntegrated Customer Call Center establishedAwarded The Best Prize in New Corporate Culture Award created by Korea ManagementAssociationTotal assets surpassed ￦2 trillionRated Grade B++ by A.M. BestOFMI was incorporated into the Korea Corporate Governance Stock Price Index (KOGI).Conferred Innovation Prize in insurance sector by Maeil Business NewspaperSelected as an enterprise with an outstanding track record in customer service by MOCIEConferred the top award in service management by Korea Service ManagementAssociation / President & CEO Chung Kun-Sup was conferred the Distinguished ServiceAward from the associationMerit Motor Insurance (for individuals) was selected as an outstanding financial productby Financial Supervisory Service

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Chung, Kun-Sup President & CEO

Cho, Su-Ung Standing Auditor

Cho, Jung-Ho Director

Kim, Han Non-Standing Director

Kim, Jonn-Hyung-Jun Non-Standing Director

Moon, Byung-Hak Non-Standing Director

Shareholders

Board of Directors

Departments at Head Office 29

Board of Directors

Organization

Regional Headquarters 9

Branches 34

Sub-Branches 237

Commercial Lines Sales Depts. 15

Customer Service Centers 9

Claim Service Centers 8

Liaison Office (London) 1

Subsidiary(Joint Venture-Jakarta) 1

Standing Auditor

Chief ExecutiveOfficer

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Shareholder Information

Oriental Fire & Marine Insurance CO., LTD.www.insuworld.co.kr

UnderwritingMarine & Aviation Dept. Property & Casualty Dept.

Tel. 82-2-3786-1910 Tel. 82-2-3786-1870

Fax. 82-2-3786-1940 Fax. 82-2-3786-1890

Investor RelationsInvestment Dept.

Tel. 82-2-3786-1021

Fax. 82-2-3786-1040

Head Office25-1, Yoido-dong, Youngdungpo-gu, Seoul 150-878, Korea

Tel. 82-2-3786-1910

Fax. 82-2-3786-1940

E-mail. ikbae@ofmi.co.kr

London Liaison Office4th Floor (north), 28 Great Tower Street, London, EC3R 5AQ, United Kingdom

Tel. 44-20-7626-1115

Fax. 44-20-7626-1118

E-mail. ofmi@ofmi.eclipse.co.uk

PT. Asuransi Hanjin Korindo (Joint Venture)Wisma Korindo, Fl. 10, Jalan M.T. Haryono Kav.62, Jakarta, Indonesia

Tel. 62-21-797-6241

Fax. 62-21-797-6243

E-mail. hykim@korindo.co.id

210*297_EPS 2004.8.25 5:10 PM 페이지27

Since 1922

210*297_EPS 2004.8.25 5:10 PM 페이지28

Since 1922

25-1, Yoido-dong, Youngdungpo-gu,

Seoul, 150-878, Korea

Telephone: 82-2-3786-1910

Facsimile: 82-2-3786-1940

www.insuworld.co.kr

210*297_재무 2004.8.26 1:20 PM 페이지1