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MERITZ INSURANCE ANNUAL REPORT 2009

Meritz looks forward to 100 years of business success

Founded in 1922 as Korea's first non-life insurer, Meritz Insurance willproudly observe the 88th anniversary of its business operations in 2010.Above all, the unwavering trust and loyalty of our customers and clientshave enabled Meritz Insurance to enjoy steady growth throughout the past88 years.

The staunch support of our customers helped the Company to record ahighly impressive financial performance in FY2009. Of note, direct premiumwritten and total assets reached KRW3.28 trillion and KRW6 trillion,respectively, while net income amounted to KRW140.1 billion, a dramaticturnaround from the previous year's red ink. Furthermore, our solvencyratio of 230.9%, ranking second in non-life sector, along with demonstratingthe Company's financial soundness.

However, Meritz Insurance will never rest on its past laurels, as theCompany intends to commemorate 88th anniversary by pushing forwardwith management innovation in an effort to realize sustainable growth. Areinforced profitability structure, based on consistent sales expansion,secured profitability, and a high level of customer satisfaction, togetherwith optimal risk management, will enable the Company to bolster itsstanding as a key player of the financial industry. In order to become a"smart global leader," management will intensify the efforts to transformour corporate structure into a financial group framework, to furtherenhance shareholder value and customer satisfaction.

We will continuously adopt innovation so that Meritz Insurance can realizeits goal of becoming a legendary insurer with 100 years of business success.

ABOUT THIS REPORT

00 About This Report

02 Financial Highlights

04 A Message from the CEO

06 2009 at a Glance

10 Performance by Line

13 Underwriting Management

16 Investment Management

18 Risk Management

CONTENTS

22 Management’s Discussion & Analysis

30 Independent Auditors’ Report

31 Financial Statements

38 Notes to Non-consolidated Financial Statements

95 Internal Control Over Financial Reporting Review

Report

96 Corporate History in Brief

97 Accolades & Awards

98 Board of Directors

99 Organization

100 Credit Ratings

101 Corporate Data

FINANCIAL HIGHLIGHTS

02_03

MERITZ INSURANCEANNUAL REPORT 2009

(KRW in millions)

FY2009 FY2008 FY2007

Earned premium 3,046,383 2,609,776 2,266,929

Direct premium written 3,288,049 2,896,411 2,534,045

Net premium written 3,020,923 2,631,368 2,291,007

Incurred losses 2,296,786 2,152,938 1,788,425

Net operating expenses 752,370 683,490 542,101

Increase in catastrophe reserve (a) 13,632 (40,238) 13,581

Operating gains (16,406) (186,415) (77,179)

Operating income on investment 207,584 106,159 179,176

Total gain from operation 191,178 (80,256) 101,997

Non-operating income (4,017) 1,779 (1,067)

Net income (b) 140,407 (58,815) 71,148

Adjusted net income (a+b) 154,039 (99,053) 84,729

Total asset 6,034,989 5,265,467 4,564,535

Invested asset 4,627,571 4,138,331 3,623,989

Non-operating asset 1,407,418 1,127,136 940,546

Total liabilities 5,355,015 4,839,824 4,108,386

Total shareholder's equity 679,974 425,643 456,149

Adjusted shareholder's equity 799,413 531,449 602,193

Loss ratio (%) 75.4 82.5 78.9

Expense ratio (%) 24.7 26.2 23.9

Combined ratio (%) 100.1 108.7 102.8

Net investment yield (%) 4.9 2.8 5.6

Adjusted ROE (%) 26.2 (16.1) 18.6

Solvency ratio (%) 230.9 190.2 235.8

Stock Information

BPS (KRW) 7,994 4,293 4,864

PBR (X) 1.1 0.9 1.9

EPS (KRW) 1,234 - 684

PER (X) 5.9 - 13.2

Dividend Information

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

Face value (KRW) 500 500 500

Dividend rate (%) 4.0 0.6 2.5

Payout ratio (%) 22.8 - 36.6

2,5342,896

3,288

Direct premium written(KRW in billions)

Long-term

Net income(KRW in billions)

2007 2008 2009

71

-59

140

2007

2008

2009

Auto Commercial

Total assets(KRW in billions)

Key ratio(%)

16.2%14.3% 13.5%

21.8%

15.4% 14.6%

4,565

5,265

6,035

2007 2008 2009

235.8%

190.2%

230.9%235.8%

190.2%

230.9%

102.8% 108.7%100.1%

18.6%

-16.1%

26.2%

2007 2008 2009

G/R

G/R

Solvency margin ratio Combined ratio Adjusted ROE

Over the past five years,

we have enjoyed exceptional results

in revenue and net profit growth,

which surged by 2.1-fold and

6.7-fold, respectively.

Furthermore, the Company's

solvency margin ratio showed

steady improvement to reach

230.9% in FY2009

MERITZ INSURANCE ANNUAL REPORT 2009

A Message from the CEO

Review of FY2009I am truly honored and pleased to report on the FY2009 management performance and financialstatus of Meritz Insurance to our shareholders, who have never failed to extend to us theirunwavering support and encouragement, together with forthright advice on ways for managementto further bolster our corporate value. In 2010, during the “Year of the Tiger,” Meritz Insurancewill celebrate the 88th anniversary of its successful business operations. With the life expectancyof a typical domestic and foreign enterprise reaching an average of 15 years, according to a businessresearch report, Meritz Insurance is extremely proud of the sustained growth and positivemomentum that we have realized during the past 88 years, resulting in the Company’s lengthyhistory of corporate success.

There is concern for people to believe that old things are outdated and it is likely old-fashionedcustoms are imbedded. Fortunately in 2005, Meritz Insurance having the long history of 88 yearslaunched the “New Roadmap” through “Second Foundation” initiatives for the Company to growin a more resourceful, ambitious, and dynamic manner. This is why we have prepared the 88thanniversary with the concept of ”Palpal (88) Meritz.” (#8 is read as pal, Korean term palpalmeans “strong-willed.”) In line with this concept, we are prepared to initiate a variety of anniversaryprograms in 2010. In June and September, the Company will make best efforts to market innovativeanniversary promotions that will result in production of top-selling products. These productswill be advertised through various media.

Today, five years has passed since the Company adopted its new corporate name and moved intoits new Head Office, along with the efforts to realize a “Second Foundation.” Though several areasare in need of continued attention, we have recorded a number of impressive results as well.

Over the past five years, we have enjoyed exceptional results in revenue and net profit growth,which surged by 2.1-fold and 6.7-fold, respectively. Furthermore, the Company’s solvency marginratio showed steady improvement (up 51.8% points increase since FY2004) to reach 230.9% inFY2009, representing the industry’s second-highest level. In addition, adjusted ROE was up ahefty 15.2% points, to 26.2%, which ranks No. 1 in the industry. Of particular note, theCompany’s share price, after hovering around a level of KRW1,900 for awhile, has since soaredby more than 400%, as a reflection of our outstanding performance and growth potential.

During the past five years, FY2009 has been the most impressive year, in terms of revenue andunderwriting performance. Direct premium written was up 13.5% to KRW3,288 billion in FY2009,while net premium written increased 14.8%, driven by a realignment of reinsurance and retentionpolicies. The market share of protection-type long-term lines (monthly premium payment) moved upto 10.8%, from 10.1% a year earlier, thereby strengthening our foundation for sustainable growth.

In FY2009, net income amounted to KRW140.4 billion, for the best-ever performance in theCompany’s history. As such, this profit amount accounted for an 11.5% share of the industry’soverall profits, placing the Company second among domestic insurers. In addition, as of FY2009,total assets swelled to KRW6.35 trillion, up 14.6%, and marking the first time for the Company’stotal assets to exceed the KRW6.0 trillion level.

Outlook for FY2010 and BeyondHowever, we will never be satisfied with our past success. By taking full advantage of ouraccumulated experience and expertise, management will push ahead with a “Second Five-yearInnovative Development Plan” to reinforce our capability and optimize shareholder value, as welook forward to our 100th anniversary, in the not too distant future. Among the various businessinitiatives and strategies under consideration, Meritz Insurance is committed to restructuringthe Company into an integrated financial services group through establishing a financial holdingcompany. The reasons to convert the structure of governance are mainly as follows.

First, Mertiz Insurance aspires to become a large-scale and diversified financial group, whichwill better enable the Company to consolidate our business standing, broaden the foundation forsustained profitability, and upgrade our competitive advantages. When a financial group is inplace, its investment capability will surge to KRW350 billion, from KRW160 billion, which willallow management to pursue new business opportunities.

Second, there is only a low level of synergy among the Companies within the group at this time.However, the realization of synergy benefits will be vital when we establish the financial holdingcomapny. Under an integrated financial services group, member firms will be able to sharecustomer information, as well as manpower resources, in an effort to bolster our core competencyand enhance operational efficiency. Over the next three years, synergy gains are expected togenerate an additional KRW30 billion of profit.

Third, the Company intends to proactively respond to the industry trend of separating thedevelopment of financial products from the sales activities. By setting up a consolidation-typesales channel, we will be better positioned to market financial products within the group andalso sale products of outside financial companies, and as a result of which, we can expand ourbase of clients.

The creation of such a holding company requires the approval of various financial regulators,which will involve considerable time and effort. As such, I earnestly look forward to the continuedsupport and encouragement of our shareholders, in order for the future-oriented initiatives ofMeritz Insurance to proceed smoothly.

Finally, I would like to express my personal gratitude to our shareholders for their steadfastloyalty to Meritz Insurance, in spite of our considerable difficulty in FY2008, which enabled us toenjoy a robust recovery in FY2009. On behalf of our management and staff, I extend our bestwishes for your continued well-being and success.

Sincerely,

Vice Chairman & CEO

Myung Soo, Wohn

Best-ever Business Performance

In stark contrast to FY2008 when Meritz Insurance incurred a net loss, due in large part to

Refund Guarantee (RG) charges and a noticeable decline in overseas asset values, the

Company rebounded with its best-ever financial performance in FY2009. Five years after the

launch of its "Second Founding" initiative, direct premium written surged to KRW3.28 trillion,

while total assets rose to KRW6 trillion. This is a direct result of the concerted efforts by all of

our employees who sought to fulfill the "Solid Underwriting Company" management strategy.

Moreover, these successful efforts are being continued as we move forward.

Launch of 'Ritz Partners'

In response to heightened instability of the insurance industry, related to a steady aging of

insurance customers and their more diversified needs, together with an expected revision for

the "insurance sales company" in the Insurance Business Act, the Company established

"Ritz Partners," as of December 1, 2009. In particular, this new subsidiary, which will focus

on insurance sales, will take advantage of new opportunities and significantly expand our

sales network. Capitalized at KRW10 billion (funded by Meritz Insurance), Ritz Partners

intends to become a "Comprehensive Financial Products Sales Company," following the

commencement of its full-scale operations in 2010.

In FY2010, Ritz Partners intends to establish a 200-member marketing network in the Seoul

Metropolitan area for the sales of various financial products. In 2011-2012, the sales personnel

will number 1,300 in order to build a broad platform for added profitability, through quantitative

and qualitative growth. After 2013, Ritz Partners will be an comprehensive financial products

sales company with a staff of 2,000, which offers a wide range of financial products and services.

Customer Service Award from KMAC

Meritz Insurance earned the top award, for the general services area, from the KMAC, a

management group that evaluates the customer services of corporate enterprises. In particular,

Meritz was recognized for its noteworthy financial performance as well as for upgrading the

level of its customer satisfaction by implementing responsive and diversified customer services,

in line with the CEO's passion to promote CS management and corporate leadership.

This award confirms the wholehearted attitude of Mertiz employees toward CS and the

ceaseless efforts to maximize client satisfaction. The award also means that the Company's

exceptional customer services have been recognized by the KMAC, a reputable management

institute. As such, it is necessary for Meritz employees to maintain a customer-service mindset

in order to enhance the Company's competitive edge. Meritz Insurance has now received the

grand prize in KMAC Customer Service Award for three consecutive years.

2009 AT A GLANCE

06_07


'Management of Sharing'

Meritz Insurance puts its "management of sharing" philosophy into practice by extending a

variety of assistance to the local community, especially in regard to disadvantaged neighborhoods

and people in need. In particular, to fulfill its corporate social responsibility, the Company

places an emphasis on ethical corporate governance, customer satisfaction management,

employee satisfaction, and profitable performance.

In 2009, 4,585 Meritz employees and sales people engaged in volunteer activities at 93 welfare

agencies, along with taking the time for warmhearted interaction with socially marginalized persons.

The "fund of sharing," which accumulates monthly donations from individual employees and a

matching amount from the Company, was used to subsidize the medical treatment costs of

children inflicted with serious diseases. Furthermore, Meritz provides scholarship aid to children

whose parents have been lost or injured due to traffic accidents, to offer encouragement for a

brighter future. The Company also maintains sisterhood relations with Geumsa 2-village, in

Yeoju-gun, Gyeonggi-do, which includes the regular purchase of farm produce from local

residents, together with extending a helping hand for seasonal farming activities.

In addition, the Company supports "Beautiful Saturday Events" in which employees donate

clothing and other items, so that the sales proceeds can be provided to people in need. Our

personnel are also actively involved with environmental protection projects, including the

clean-up of "Seoul Forest" and Mt. Cheongye, of the southern suburbs of Seoul. Of particular

note, Meritz sponsored an economic camp for young students, our future leaders, in an effort

to help them acquire a better understanding of financial and economic matters. And the

Company produced an economic-theme musical, "Meriho's Space Journey," to help familiarize

students with basic economic principles.

Moreover, Meritz extended financial support to "2009 Lindenbaum Music Festival," Korea's

first musical education festival, as part of the Mecenat Movement. As a result, young

musicians were provided with a valuable opportunity to learn from distinguished conductors

and senior orchestra members.

In recognition of its diligent efforts to demonstrate corporate social responsibility, Meritz

Insurance has come to be known as a compassionate enterprise that contributes generously

to easing the burden of less fortunate families and individuals. In line with this, Meritz

received the Health and Welfare Minister Award from the Korea Economic Daily, for the

Sustainable Management sector.

Meritz Insurance will never cease its efforts to extend "love" and "sharing" relationship

with local community, since an utmost important values of insurance enterprise such as us

is ultimately concerned with the well-being of our society and customers.

Meritz focused on long-term sales to sustain profitable growth,

especially in protection-type driven new premiums. As a result,

Meritz has achieved industry's lowest long-term line's loss ratio.

3,288Direct Premium Written

69.2Long-term Mix

77.5 %

%

(2,274 KRW IN BILLIONS)

KRW IN BILLIONS

Long-term Loss Ratio

10_11


Business Overview

Meritz Insurance recorded a 23.0% sales growth in long-term toKRW2.27 trillion in FY2009, aided by sustained growth of new contracts, mostly consisting of protection-type products. The Company maintained a 9.1% market share, similar to its standing in the previous year.

[ Long-term Lines ]▶ Buoyed by steady growth of new contracts, centered on actual-expense medical

insurance and agency channels, the domestic long-term insurance sector in FY2009 surged

24.7%(YoY), to KRW24.99 trillion. However, the new premium market experienced considerable

volatility, in terms of monthly sales, due to a reform of the medical insurance system in

October 2009 (streamlining of medical expenses for life and non-life sectors). Savings-type

and pension-type insurance sales enjoyed favorable growth, as a result of the stagnation of

protection-type insurance during the second half of 2009. Meritz Insurance recorded a 23.0%

sales growth to KRW2.27 trillion, aided by sustained growth of new contracts, focusing protection

type products. The Company maintained a 9.1% market share, similar to its standing in the

previous year.

▶ Long-term market sales are expected to enjoy continued premium growth,

buttressed by sustainable growth of new premiums; however, the 2010 sales G/R are projected

to drop from 24.7% to 14.5%, but the sales will increase to KRW28.61 trillion, which would

be somewhat below the previous year's level, due to sluggish growth of new contracts. In

FY2010, Meritz Insurance is projected to record a growth of 18.2%, to KRW2.69 trillion,

which is likely to exceed the industry average, driven by notable growth in new protection-type

contracts and an improved persistent ratio through complete sales. Compared to a year

earlier, market share is projected to edge up 0.3% points, (YoY) to 9.4%.

▶ Announcing new products and promotions related to 88th anniversary of Meritz, the

company seeks to continue the impressive results of its protection-type sales, address manda-

tory insurance subscription by public facilities, and effectively respond to issues related to

Korea's aging society and other social problems. In doing so, management aims to broaden its

platform for the development of protection-type contracts. The Company's sales results will

likely outstrip the industry's growth average, based on a comprehensive marketing approach

and an upward trend in contract renewals through complete sales.

REVIEW OF FY2009

OUTLOOK FOR FY2010

MARKETING STRATEGYFOR FY2010

PERFORMANCE BY LINE

(KRW in billions)

Meritz Industry

FY2009 FY2010 (e) FY2009 FY2010 (e)

Direct premium 2,274.4 2,689.1 24,994.0 28,607.4

G/R 23.0% 18.2% 24.7% 14.5%

M/S 9.1% 9.4% - -* Excluding lump-sum payments

1,55

3

Long

-ter

mLi

nePr

emiu

m(K

RW

inbi

llion

s)

2007

2008

2009

1,85

0

2,27

4

[ Auto Lines ]▶ In FY2009, the industry's auto insurance was up 2.6%(YoY) to KRW11.21 trillion.

This subdued growth was attributed in large part to weakened demand for new automobiles

stemming from the economic and financial crisis in 2008 continuing until first half of 2009. As

for Meritz Insurance, its direct premium written sagged 4.8%, to KRW691.8 billion, primarily

anticipative rate increase for an expected deterioration of the loss ratio. Accordingly, the

Company's market share contracted 0.4% points to 6.2%.

▶ In FY2010, the domestic auto insurance market is projected to expand 3.9%, to

KRW11.65 trillion. This favorable outlook is based on an expected rebound in new automobile

sales, as a result of an overall economic recovery, along with higher premium rates per vehicle.

Meritz Insurance foresees a sharp rise of 7.4% in its auto insurance in FY2010, to KRW742.7

billion, driven by the enhanced productivity and efficiency of sales networks and propelling

growth of online sales of automobile insurance.

▶ Management's marketing strategy will focus on the creation of an optimal portfolio

aligned with today's auto market, in an effort to realize sustained growth and bolster operating

profit. In particular, the Company seeks to enhance GA channel profitability, upgrade branch

channel productivity, and expand online sales, in addition to optimizing our local portfolio.

Moreover, we intend to maximize the business potential of top-ranking clientele and further

reduce our "watch" clients. In order to fortify our customer base, we will target top-tier clients

in large cities (individuals in their 30s and 40s in six major cities) and commercial trucks that

represent significant sales potential.

REVIEW OF FY2009

OUTLOOK FOR FY2010


(KRW in billions)

Meritz Industry

FY2009 FY2010 (e) FY2009 FY2010 (e)

Direct premium written 691.8 742.7 11,211.7 11,647.8

G/R △4.8% 7.4% 2.6% 3.9%

M/S 6.2% 6.4% - -

686

Auto

Line

Prem

ium

(KR

Win

billi

ons)

2007

2008

2009

727

692

12_13


Business Overview

[ Commercial Lines ]▶ Led by substantial growth of engineering, liability and group personal accident

insurance in FY2009, commercial industry recorded a notable gain of 8.0%(YoY), to KRW4.11 trillion,

despite a contraction of the fire and marine insurance sectors. The Company experienced negative

growth for its marine and group personal accident insurance as a result of restructuring of its

portfolio around strategic product groups. However, the commercial lines did manage to record

an overall growth of 0.6%(YoY), amounting to KRW321.9 billion, led by an increase in property

package insurance and impressive gains in engineering insurance, as a result of SOC projects

and etc.

▶ Adversely affected by unusually strong demand for engineering insurance in FY2009,

commercial lines are expected to record a decline in FY2010. While we forecast a slowdown in

marine insurance, due to a likely depreciation of the Korean won, an overall growth of 2.6% is

projected, to KRW4.22 trillion, on the back of reinforcement of group accident insurance coverage

by corporate enterprises and sustaining expansion of new demand for liability insurance. In

FY2010, the Company intends to overcome the recent sluggish growth, due to a restructuring of

its portfolio, by focusing on strategic product groups, like liability, package, fire, and engineering

insurance. We are targeting a growth of 8.7%, amounting to KRW350 billion, along with capturing

a market share of 8.3%.

▶ In FY2010, efforts will be exerted to strengthen sales of a profit-oriented portfolio

by committing all available resources to the market in which we have thus far maintained a

low-ranking market share. To optimize profitable growth in the years ahead, we will push a

strategic initiative centered on systematic R&D of new markets with substantial growth potential.

For this purpose, the company intends to create a differentiated products considering diversity

of markets, channels, and customers, and further upgrade our competitive edge in channel

sales, along with implementing programs that offer diversified client services. In this way,

Meritz Insurance will further strengthen its core competencies of the value chain.

REVIEW OF FY2009

OUTLOOK FOR FY2010


(KRW in billions)

Meritz Industry

FY2009 FY2010 (e) FY2009 FY2010 (e)

Direct premium written 321.9 350.0 4,111.5 4,220.0

G/R 0.6% 8.7% 8.0% 2.6%

M/S 7.8% 8.3% - -

296

Com

mer

cial

Line

sPr

emiu

m(K

RW

inbi

llion

s)

2007

2008

2009

320

322

Business Overview

The industry's Long-term insurance sector reported a loss ratio of81.6% for FY2009, unchanged from a year earlier; however, Meritz was able to improve its Long-term sector loss ratio by 1.3%points, to 77.5%, based on a sales strategy that focused on growth ofprotection-type sales.

UNDERWRITING MANAGEMENT

[ Long-term Lines ]▶ The industry's Long-term insurance sector reported a loss ratio of 81.6% for FY2009,

unchanged from a year earlier; however, Meritz was able to improve its Long-term sector loss ratio

by 1.3% points, to 77.5%, based on a sales strategy that focused on growth of protection-type sales.

▶ In FY2010, the Company seeks to stabilize the growing risk loss ratio for Long-term

lines by solidifying the base for profitability through an expansion of new premiums centered on

protection type portfolio and multifunctional management of primary products. The risk loss ratio

is expected to narrow sharply due to a renewal of non-guaranteed mortgages, after October 2010.

In FY2010, the Company's Long-term loss ratio is projected to improve by 1.0% point, to 76.5%

▶ Management intends to steadily enhance earned premium through sales growth,

centered on selected products and growth of continuing premiums through improving persistency

ratio. We also aim to stabilize the risk loss ratio for Long-term insurance through differentiated

underwriting guidelines and closer monitoring and management of loss-related departments.

In addition, a combined-loss scoring system will be implemented to evaluate relevant statistics

in an effort to optimize risk loss portfolio. Over the long term, we plan to train specialists who

will help to stabilize the risk loss ratio for Long-term insurance.

REVIEW OF FY2009

OUTLOOK FOR FY2010

UNDERWRITINGSTRATEGY FOR FY2010

Meritz Industry

FY2009 FY2010 (e) FY2009 FY2010 (e)

Loss ratio 77.5% 76.5% 81.6% -

Risk loss ratio 84.2% 85.3% - -

14_15


Business Overview

[ Auto Lines ]▶ The industry's auto insurance sector experienced a deterioration of 5.8% points in

loss ratio, from the previous year, to reach 75.1% in FY2009. This outcome was mainly attributed

to the growing number of vehicles on the road, related to the economy's continued recovery,

and a rise in accidents due to extreme weather conditions during the winter season. The

Company also recorded a worsening of its loss ratio, by 5.6% points, to 75.5%.

▶ In FY2010, the loss ratio for the domestic auto market is expected to edge up 0.9%

point, to 76.0%, due in large part to rising insurance costs and small increase in the frequency of

accidents. The Company, however, is targeting a 74.0% loss ratio, based on intensified efforts to

improve onsite management, along with the promotion of underwriting differentiation and

efficiency.

▶ As for the Company's auto insurance, there will be an added emphasis on narrowing

its loss ratio through the promotion of regular maintenance and differentiation of vehicle types.

Management foresees a noticeable improvement in the profit-loss results through the adoption

of more effective underwriting practices and systematized operations overall.

Enhancement of portfolio quality based a system that categorizes insured vehicles on the basis

of regional characteristics, will help to stabilize the loss ratio for auto insurance. We will also

explore ways to improve the loss ratio by devising differentiated underwriting guidelines based

on the evaluation of profit/loss results by groups and the individual performances and sales profiles

of marketing representatives.

REVIEW OF FY2009

OUTLOOK FOR FY2010


Meritz Industry

FY2009 FY2010 (e) FY2009 FY2010 (e)

Loss ratio 75.5% 74.0% 75.1% 76.0%

[ Commercial Lines ]▶ Amidst a downward trend in the premium rates of primary products, along with

intensified price competition due to a growing number of insurers in the marketplace, the

industry's loss ratio for commercial lines in FY2010 sagged 4.3% points, to 54.4%, excluding

the previous year's RG charges.

In line with this, Meritz Insurance recorded a 1.8% point improvement, to 59.3%, excluding the

previous year's RG losses. When the RG charges are considered, together with foreign

exchange valuation gains of the RG reserve fund, the Company's loss ratio plummets to 38.6%,

a dramatic turnaround of 151.3% points from the previous year's 189.9%.

▶ With no drastic changes anticipated in the business environment for commercial

lines, the industry's loss ratio is projected to remain at a range around 55.0% in FY2010. Meritz

Insurance forecasts a similar improvement, with the loss ratio for its commercial lines narrowing

to 53.0%, a decline of 6.3% points, backed by profit-oriented portfolio.

▶ Meritz Insurance will pursue an optimal mix of revenues to upgrade its profitability

structure through profile marketing that places greater emphasis by implementing solid

underwriting. Management will thus promote a more consistent underwriting profit system.

In an effort to bolster the profitability structure of our commercial lines and to secure future

growth engines, Meritz Insurance intends to:

•Upgrade its underwriting capability, expand its primary products, prioritize underwriting

by channels and provide additional assistance, and foster professional underwriters

with areas of specialization.

•Enhance profit-loss management by stepping up Portfolio analysis, management,

and monitoring.

REVIEW OF FY2009

OUTLOOK FOR FY2010


Meritz Industry

FY2009 FY2010 (e) FY2009 FY2010 (e)

L/R 38.6 (59.3)% 53.0% 62.9 (54.4)% 55.0%* Figures in parenthesis are based on an exclusion of RG charges

16_17


Business Overview

The invested asset portfolio of Meritz Insurance rose 11.8% in after FY2009(YoY), amounting to KRW4.63 trillion, which generatedinvestment revenue of KRW207.6 billion, related to an overall investment yield of 4.9%.

▶ The invested asset portfolio of Meritz Insurance rose 11.8% in after FY2009(YoY),

amounting to KRW4.63 trillion, which generated investment revenue of KRW207.6 billion, related

to an overall investment yield of 4.9%. Of note, management managed to improve the

Company's profitability structure by stabilizing its profit base and expansion of duration matching

ratios of the special account.

To boost the portfolio's quality, management placed an emphasis on fixed interest-yielding

assets, including domestic and overseas bonds and loans, while being fully mindful of the serious

deterioration of investment revenue wrought by the subprime mortgage crisis in 2008. In particular,

we are committed to reducing variations in monthly revenue results by investing heavily in

"high-quality income-type products," which are associated with relatively lower market risks.

As for the special account holdings, the matching ratio of duration for liabilities (long-term/

pension accounts) has reached more than 70%, as of March 2010. The efforts to match asset/

liability maturity terms will also provide us with added flexibility when responding to short-term

changes in market conditions.

Duration matching ratio, as of March 2010

REVIEW OF FY2009

Maturity Term

Assets Liabilities Matching ratio

Long-term accounts 3.60 5.02 71.7%

Pension accounts 5.05 4.07 124.1%

INVESTMENT MANAGEMENT

▶ The financial market experienced considerable volatility during the first half of

2010, adversely affected the fiscal crises of various countries, especially in southern Europe's

region. Since much time will be necessary to overcome these financial difficulties, it is likely

that market instability will continue to be a concern of investors. On the other hand, it is

encouraging that countries across the globe are prepared to extend joint assistance if the

financial situation of countries should worsen.

Although the stock markets remains difficult to predict, as a result of such factors as the

financial crisis of countries in Europe and possible revaluation of the Chinese currency, the

market's fundamentals are sound overall, based on a steady improvement of economic indicators

and various economic stimulus measures.

While a low-interest-rate environment has been maintained for awhile, due to the provision of

ample liquidity to boost economic growth and to mitigate the potential impact of external factors,

interest rates are expected to gradually increase as the sense of crisis is eased and exit strategy

measures are implemented.

▶ As for the invested asset portfolio in FY2010, the Company is projecting KRW33.7

billion increase in investment profit (YoY) to KRW241.3 billion, based on an investment yield of

4.9%. Management will thus put forth its utmost efforts to acquire additional fixed-income

assets to broaden our profitability.

In FY2010, the Company's oversight of credit risk will focus on the prudent management of its

holdings of government and blue-chip corporate bonds. As for derivative investment, the

Company will refrain from the acquisition of synthetic index-type products with a high degree

of volatility.

In terms of loan assets, management will vigorously step up its credit analysis and financial

assessment of borrowers, along with selectively investing in prime-quality products. In this

way, the Company aims to optimize its profit results based on the holding of solid loan assets

and effective post-loan management.

INVESTMENTENVIRONMENT OF

FY2010

MANAGEMENT OFASSETS IN FY2010

18_19


Business Overview

▶ In December 2008, Meritz Insurance established a Risk Management Division to

classify and monitor the Company's insurance Interest, market, credit, and non-financial risks

Individually. Above all, the Division is responsible for controlling these potential risks and

Optimizing investment returns.

The Division's Risk Management Team outlines the risk management measures for all of the

Company's business activities, and oversees non-financial risks, while the Financial Risk

Management Team focuses on the management of asset and insurance-related risks. The Risk

Management Division is mainly responsible for formulation of risk management policy, operation

of risk management system, statistical measurement of risk and assistance to the decision making

process by Risk Management Committee and execution of decisions.

The Risk Management Committee (RMC) is comprised of the CEO and two outside directors,

who are financial industry specialists. In FY2009, the RMC convened seven sessions to deliberate

relevant matters, such as the determination of risk limits and hurdle rates, strategic asset

allocation (SAA), management strategy for derivates approval to renewal of reinsurance

treaty, guidelines for long-term insurance premium rates, and adoption/revision of risk

management regulations.

Significant matters taken up by the RMC in FY2009 included annual risk management measures,

comprehensive evaluation of overall risk status, review of operational structure and results of

the Investment/Lending Deliberation Committee and the LOB Deliberation Committee, and

issues related to the oversight of RBC/RAAS results.

Among the RMC members, the Company's risk management activities are a paramount concern,

which calls for their keen attention and diligent efforts. As such, the Committee and risk

management personnel continuously strive to strengthen risk management practices through

quarterly inspecting financial soundness, re-checking retention contracts, and reinsurance

operations.

REVIEW OF FY2009

RISK MANAGEMENT

▶ Management intends to sustain profitable growth through proactive responses to

potential risks and market trends. The Company will reinforce its risk management through

extensive monitoring of key risk management processes (risk management/compliance/audit),

expanded Stress Test application, proper adjustment of asset operational limits, upgraded

monitoring of collective risk assessment, implementation of KRI (Key Rate Indicator), and

stepped-up education to instill a risk management culture.

Install a proactive response system to continuously monitor Company-wide risks

RISK MANAGEMENTSTRATEGY AND PLANS

FOR FY2010

Strategictasks Assure proactive response to changes in risk management oversight

Establish Company-wide risk management system

Adopt inspection system to promote preemptive risk management

Continuous reinforcement of internal controls

Instill risk management culture and provide professionalism of risk controlmeasures

Despite difficulties of a challenging business environment,

Meritz realized highly impressive financial performance in FY2009.

Meritz recorded combined ratio and adjusted ROE as #1 in the industry along

with solvency ratio of 230.9%, performing the second best in the industry.

140.4Net Income

100.1Combined Ratio

230.9 %

%

KRW IN BILLIONS

Solvency Ratio

26.2 %

Adjusted ROE

22_23


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 performance and business plans.

However, such expectations of future performance plans involve certain risk and uncertainty that

can use 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.

REVIEW OF FY2009

Despite difficulties of a challenging business environment, Meritz Insurance performed very well in

FY2009. For instance, direct premium written, earned premium written and net premium written all

registered double-digit increases in FY2009 over the previous year.

Of particular note, net income made a big turnaround from a red ink in FY2008. Loss ratio, expense

ratio and combined ratio all showed improvement as well. The solvency margin ratio also vaulted

upward to 230.9% in FY2009, a rise of 41.0%p, over a year earlier.

MANAGEMENT'S DISCUSSION & ANALYSIS

INCOME STATEMENT SUMMARY

(KRW in billions,%)

FY2007 FY2008 FY2009 YoY(%)

Earned premium 2,266.9 2,609.8 3,046.4 16.7

Direct premium written 2,534.0 2,896.4 3,288.0 13.5

Net premium written 2,291.0 2,631.4 3,020.9 14.8

Underwriting income (77.2) (186.4) (16.4) -

Net investment income 179.2 106.2 207.6 95.5

Non-operating income (1.1) 1.8 (4.0) -

Ordinary income 100.9 (78.5) 187.2 -

Tax expenses (benefits) 29.8 (19.7) 46.8 -

Net income 71.1 (58.8) 140.4 -

Loss ratio (%) 78.9 82.5 75.4 (7.1%p)

Expense ratio (%) 23.9 26.2 24.7 (1.5%p)

Combined ratio (%) 102.8 108.7 100.1 (8.6%p)

BALANCED SHEET SUMMARY

(KRW in billions, %,%p)

FY2007 FY2008 FY2009 YoY(%)

Investment assets 3,624.0 4,138.3 4,627.6 11.8

Non-investment assets 940.5 1,127.1 1,407.4 24.9

Total assets 4,564.5 5,265.5 6,035.0 14.6

Policy reserve 3,501.1 4,196.6 4,697.0 11.9

Catastrophe reserve 146.0 105.8 119.4 12.9

Other liabilities 461.3 537.4 538.9 0.2

Total liabilities 4,108.4 4,839.9 5,355.0 10.6

Capital stock 61.9 61.9 61.9 0

Capital surplus 237.2 234.4 235.8 0.6

Retained earnings 235.7 157.4 297.8 89.2

Capital adjustment (78.7) (28.1) (116.6) -

Total shareholders’ equity 456.1 531.4 680.0 59.8

Solvency margin ratio(%) 235.8 189.9 230.9 4.1%p

2,534.0

Direct premium written(KRW in billions)

2007

2008

2009

2,896.4

3,288.0

456.1

Total shareholders' equity(KRW in billions)

2007

2008

2009

531.4

680.0

24_25


ANALYSIS OF RESULTS OF OPERATIONS

In FY2009, the Company continued to concentrate its effort on enhancing financial soundness and

eliminating uncertainties in response to the challenging business conditions. The majority of the

underwriting income was comprised of commercial, auto and long-term policies. In FY2009, direct

premium written was up 13.5% to KRW3,288.1, primarily attributable to notable growth of high

margin long-term insurance products, which are the Company’s prime growth engine. Market

share for long-term lines, however, shrank 0.1%p to 9.1% in FY2009.

Compared to the previous year, earned premiums rose 16.7% to KRW3,046.4 billion, while net

premium written also recorded a significant growth of 14.8%, year on year.


DIRECT PREMIUM WRITTEN BY LINE

(KRW in billions)

FY2007 FY2008 FY2009 YoY(%)

Commercial lines 295.8 320.0 321.9 0.6

Auto lines 685.5 726.7 691.8 (4,8)

Long-term lines 1,552.8 1,849.6 2,274.4 23.0

Total 2,534.0 2,896.4 3,288.0 13.5

Long-term lines contain premiums paid at once.

By line, direct premium written of long-term lines surged 23.0% in FY2009 over a year earlier to

KRW2274.4 billion fueled by growth strategy focused on protection-type products and agency

market expansion. Long-term lines accounted for 69.2% of total direct premium written.

Commercial lines also increased by 0.6% to KRW321.9 billion, while auto lines sagged 4.8% to

KRW691.8 billion. The mix of commercial line and auto line declined to 9.8% and 21.0%. respectively.

MARKET SHARE BY LINE

(%)

FY2007 FY2008 FY2009 YoY(%p)

Commercial lines 8.7 8.4 7.8 (0.6)

Auto lines 6.6 7.0 6.2 (0.8)

Long-term lines 9.0 9.2 9.1 (0.1)

Combined market share 8.1 8.5 8.2 (0.1)

FY2008

●Commercial lines 11.1%●Auto lines 25.0%●Long-term lines 65.9%

FY2009

●Commercial lines 9.8%●Auto lines 21.0%●Long-term lines 69.2%

Breakdown of direct premiums (%)

In FY2009, earned premium jumped 16.7% over a year earlier to KRW3,046.4 billion. Net premium

written was also up 14.8%, totaling KRW3,020.9 billions.

Incurred losses rose 6.7% in FY2009 over a year earlier to KRW2,296.8 billion. However, overall loss

ratio fell to 75.4% from 82.5%. Loss ratio for auto lines rose 5.6%p to 75.5%, while loss ratio for long-term

lines edged down 1.3%p to 77.5%. Loss ratio for commercial lines made a dramatic improvement

from 189.9% to 38.6%. Overall, loss ratio in FY2009 improved by 7.1%p over a year to 75.4%.

Adversely affected by challenging market competitions, net operating expenses rose by 10.1% to

KRW752.4 billion from KRW683.5 billion a year ago, while expense ratio was down 1.5%p to 24.7%.

Consequently, combined ratio dropped 8.6%p to 100.1% in FY2009 from 108.7% in FY2008

Despite robust growth of direct premium written, market share of long-term insurance edged

down 0.1%p to 9.1%, due to fierce market competition, while commercial lines and auto also went

down. Albright small, combined market share, as a result, slid 0.1%p to 8.2%.

COMBINED RATIO

(KRW in billions)

FY2007 FY2008 FY2009 YoY(%)

Earned premium 2,266.9 2,609.8 3,046.4 16.7

Incurred losses 1,788.4 2,152.9 2,296.8 6.7

(1,971.3)

Loss ratio (a) 78.9% 82.5% 75.4% (7.1%p)

Net operating expense 542.1 683.5 752.4 10.1

Expense ratio (b) 23.9% 26.2% 24.7% ( 1,5%p)

Combined ratio (a+b) 102.8% 108.7% 100.1% (8.6%p)

(101.7%)

Note: Figures in parenthesis exclude the effect the refund guarantee losses in 2008

78.9

Loss ratio(%)

2007

2008

2009

82.5

75.4

26_27


INVESTMENT PERFORMANCE

FY2009 INVESTMENT PERFORMANCE

Invested investment in FY2009 rose sharply by 11.8% over the previous year to KRW4,627.6 billion,

primarily attributable to rises in overseas securities and loans. Investment income almost doubled

(95.5%) to KRW207.6 billion. Overseas securities spiked up 4.4% to KRW446.1 billion. Loan investment

rose 38.9%, amounting to KRW790.2 billion. Domestic bonds grew 18.4% to KRW1,597.6 billion, as

the Company sought to concentrate on expansion of fixed-interest-bearing assets including

domestic and overseas bonds. In light of this investment policy and market volatility, stock holdings

shed 11.3% KRW126.3 billion. Meanwhile, investment revenue stood at 4.9%, a rise of 2.1%p over

the previous year.


(KRW in billions)

FY2009 FY2008

YoY(%) Share (%) YoY(%) Share (%)

Cash & equivalents 222.2 (6.8) 4.8 238.3 18.6 5.8

Domestic bonds 1,597.6 18.4 34.5 1,349.3 (10.7) 32.6

Stock 126.3 (11.3) 2.7 142.4 47.4 3.4

Investment funds 525.4 1.7 11.4 516.6 (0.3) 12.5

Overseas securities 446.1 4.4 9.6 427.4 54.8 10.3

Other 62.1 (30.8) 1.3 89.8 47.9 2.2

Loans 790.2 38.9 17.1 568.8 33.3 13.7

Real estate 667.3 0.7 14.4 662.4 64.7 16.0

Total 4,627.6 11.8 100.0 4,138.3 14.2 100.0

Investment revenue 4.9% 2.1%p 2.8%

FY2009

●Cash & equivalents 4.8%●Domestic bonds 34.5%●Stock 2.7%●Investment funds 11.4%●Overseas securities 9.6%●Other 1.3%●Loans 17.1%●Real estate 14.4%

Breakdown of invested assets (%)

NET INCOME

In FY2009, the Company posted net income of KRW140.4 billion, a dramatic turnaround from the

previous year’s red ink. This was mainly due to net investment income which rose to KRW207.6 billion.

Mentioned earlier, net investment income rose 95.5% which greatly contributed to a sharp rise in

net income.

Total assets rose 14.6% in FY2009 over the previous year, amounting to KRW6,035 billion. Domestic

bonds grew 18.4% to KRW1,597.6 billion, backed by the Company’s policy to secure interest-bearing

assets as much as possible amid market volatility. Also noteworthy was a 38.9% rise in loan investments

which totaled KRW790.2 billion. Meanwhile, cash and deposits grew 6.8% to KRW222.2 billion.

(KRW in billions)

FY2007 FY2008 FY2009

Earned premium 2,266.9 2,609.8 3,046.4

Underwriting income (77.2) (186.4) (16.4)

Net investment income 179.2 106.2 207.6

Non-operating income (1.1) 1.8 (4,0)

Tax expenses (benefits) 29.8 (19.7) 46.8

Net income (a) 71.1 (58.8) 140.4

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

Adjusted net income (a+b) 84.7 (99.1) 141.8

ASSETS

(KRW in billions)

FY2007 FY2008 FY2009 YoY (%)

Cash and deposits 201.0 238.3 222.2 6.8

Stocks 96.6 142.2 126.3 2.7

Equity-method stocks 132.1 143.3 190.2 32.7

Domestic bonds 1,510.2 1,349.3 1,597.6 18.4

Investment funds 518.2 516.6 525.4 1.7

Overseas securities 276.1 427.4 446.1 4.4

Other securities 60.7 89.8 62.1 (30.8)

Loans 426.8 568.8 790.2 38.9

Real estate 402.3 662.4 667.3 0.7

Investment assets 3,624.0 4,138.3 4,627.6 11.8

Non-investment assets 940 1,127.1 1,407.4 24.9

Total assets 4,564.5 5,265.5 6,035.0 14.6

71.1

Net income(KRW in billions)

2007

2009

-58.8

140.4

2008

4,564.5

Total assets (KRW in billions)

2007

2009

5,265.5

6,035.0

2008

28_29


ASSET QUALITY


Compared to FY2009, substandard & below loans stood at KRW3.4 billion, a reduction of KRW7.7

billion, as the company tried hard to clean up problem loans. Accordingly, the NPL ratio sled from

1.92% in FY2008 to 1.14% a year later. Also, coverage ratio almost doubled to KRW144.6% in

FY2009 from KRW74.9%.

(KRW in billions)

FY2007 FY2008 FY2009

Total loans * 435.5 577.2 804.6

Normal 415.3 565.5 784.2

Precautionary 2.1 0.6 11.2

Substandard & below 18.0 11.1 3.4

Doubtful 1.4 0 3.8

Estimated loss 0.9 1.8 2.0

NPL ratio (%) 4.13 1.92 1.14

Provisions for loan loss 8.7 8.3 13.3

Coverage ratio (%) 48.3 74.9 144.6

*Before allowance for doubtful accounts

LIABILITIES AND SHAREHOLDERS' EQUITY

(KRW in billions)

FY2007 FY2008 FY2009 YoY (%)

Policy reserve 3,501.1 4,196.6 4,697.0 11.9

Catastrophe reserve 146.0 105.8 119.4 12.9

Other liabilities 461.3 537.4 538.9 0.2

Total liabilities 4,108.4 4,839.8 5,355.0 10.6

Total shareholders’ equity 456.1 425.6 680.0 59.8

Adjusted shareholders’ equity* 602.2 531.4 799.4 50.4

Total liabilities In FY2009 grew 10.6% over FY2008 to KRW5,355.0 billion, policy reserve increased

11.9%, reaching KRW4,697 billion, while catastrophe reserve grew 12.9%.

435.5

Total loans(KRW in billions)

2007

2008

2009

577.2

804.6

4,108.4

Total liabilities(KRW in billions)

2007

2008

2009

4,839.8

5,355.0

SOLVENCY MARGIN RATIO

In 2009, the Company’s solvency margin ratio vaulted upward 41%p to 230.9% from 189.9% a year

earlier, the second highest in the industry, showing the company’s financial soundness. As of

February 2010, adjusted ROE rose to 28.4%, while RBC ratio stood at 265%, also the second best in

industry.

(KRW in billions)

FY2007 FY2008 FY2009

Solvency amounts 665.1 613.9 866.4

Solvency guidance 282.1 323.3 375.3

Solvency margin ratio(%) 235.8 189.9 230.9

(238.6) *

* Figures in parenthesis represent excluding refund guarantee losses in FY2008

235.8

Solvency margin ratio (%)

2007

2009

189.9

230.9

2008

30_31


THE BOARD OF DIRECTORS AND STOCKHOLDERS

MERITZ FIRE & MARINE INSURANCE CO., LTD.

We have audited the accompanying non-consolidated statements of financial position of Meritz Fire & Marine Insurance Co., Ltd. (the "Company")

as of March 31, 2010 and 2009, the related non-consolidated statements of operations, appropriations of retained earnings, changes in equity and

cash flows for the years 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 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, the non-consolidated financial statements referred to above present fairly, in all material respects, the non-consolidated financial

position of Meritz Fire & Marine Insurance Co., Ltd. as of March 31, 2010 and 2009, and the results of its operations, its changes in retained earnings

and equity and its cash flows for the years 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 non-consolidated 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 non-consolidated financial statements are for use by those who are knowledgeable

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

May 27, 2010

This audit report is effective as of May 27, 2010, the independent 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

non-consolidated financial statements and may result in modifications to this report.

INDEPENDENT AUDITORS' REPORT

NON-CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONAS OF MARCH 31, 2010 AND 2009

(Korean won in thousands)

2010 2009

Assets

Cash and cash equivalents (Notes 3, 10, 16, 28 and 37) 72,174,312 60,144,807

Deposits (Notes 3, 10, 16, 28 and 37) 149,999,460 178,201,787

Trading securities (Notes 4, 16 and 28) 176,690,119 249,117,936

Available-for-sale securities (Notes 5, 9, 16 and 28) 2,387,337,111 2,038,243,477

Held-to-maturity securities (Notes 5, 6, 16 and 28) 193,567,089 238,142,314

Equity method investments (Note 7) 190,238,600 143,348,232

Loans, less allowance for doubtful accounts of ￦14,357,013 thousand in 2010

(￦8,476,402 thousand in 2009) (Note 8) 790,244,245 568,752,277

Property and equipment (Notes 10 and 23) 681,453,901 676,765,026

Intangible assets (Note 11) 17,940,902 12,199,936

Deferred acquisition costs (Note 15) 840,990,095 645,609,108

Other assets, less allowance for doubtful accounts of ￦7,066,264 thousand in 2010

(￦6,315,768 thousand in 2009) (Note 12) 323,934,654 257,028,680

Separate account assets (Note 19) 210,418,544 197,913,109

Total assets 6,034,989,032 5,265,466,689

Liabilities and equity

Policy reserves (Notes 17 and 22) 4,696,950,444 4,196,649,496

Catastrophe reserves (Note 17) 119,438,218 105,806,563

Insurance accounts payables (Notes 8, 16, 20 and 35) 113,342,818 100,151,654

Severance and retirement benefits (Note 21) 561,244 -

Other liabilities (Note 18) 210,456,224 228,358,081

Separate account liabilities (Note 19) 214,265,681 208,858,342

Total liabilities 5,355,014,629 4,839,824,136

Equity

Capital stock (Notes 1 and 23) 61,900,000 61,900,000

Capital surplus (Note 23) 235,797,493 234,445,107

Capital adjustments (Note 23) (116,585,558) (114,393,077)

Accumulated other comprehensive income (Notes 23 and 31) 201,087,426 86,322,796

Retained earnings (Note 23) 297,775,042 157,367,727

Total equity 679,974,403 425,642,553

Total liabilities and equity 6,034,989,032 5,265,466,689

See accompanying notes.

￦￦

￦￦

￦￦

￦￦

32_33


NON-CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED MARCH 31, 2010 AND 2009

(Korean won in thousands, except per share amounts)

2010 2009

Operating revenue:

Premium income (Note 25) 3,271,836,963 2,897,479,969

Net reinsurance income (Note 24) 242,144,311 158,044,505

Compensation income (Note 14) 21,579,967 3,531,475

Interest income (Note 4) 168,951,856 145,881,703

Gain on valuation of securities (Notes 4 and 5) 2,694,168 3,330,922

Gain on disposal of securities (Notes 4 and 5) 40,857,211 19,990,369

Gain on foreign currency transactions and translation (Note 16) 5,795,166 94,053,915

Rental income 18,085,424 16,112,078

Dividend income 16,012,054 16,546,735

Expenses recovered 47,486,673 53,138,379

Reversal of policy reserves (Note 17) 146,466,014 2,893,678

Reversal of catastrophe reserves (Note 17) - 40,237,640

Separate accounts income (Note 19) 74,196,749 79,714,915

Gain on valuation and transactions of derivative financial instruments (Note 28) 36,833,108 10,304,359

Other operating revenues 528,480 566,097

4,093,468,144 3,541,826,739

Operating expenses:

Provision for policy reserves (Note 17) 646,766,962 698,465,210

Provision for catastrophe reserves (Note 17) 13,631,655 -

Claims paid 1,377,926,022 977,004,706

Refunds expenses 654,271,688 661,261,981

Net reinsurance premiums paid (Note 24) 250,913,263 266,112,018

Loss on valuation of securities (Notes 4 and 5) 1,499,299 42,564,931

Loss on disposal of securities (Notes 4 and 5) 9,399,873 13,200,924

Operating and administrative expenses (Notes 10, 11, 21, 26 and 27) 493,578,162 474,713,708

Amortization of deferred acquisition costs (Note 15) 309,960,462 264,909,423

Loss on foreign currency transactions and translation (Note 16) 45,352,970 9,338,437

Separate accounts expenses (Note 19) 74,196,749 79,714,915

Loss on valuation of derivative financial instruments (Note 28) - 60,875,283

Loss on transactions of derivative financial instruments (Note 28) 7,259,408 37,067,417

Other operating expenses (Note 29) 35,280,474 35,435,857

3,920,036,987 3,620,664,810

(Continued)

￦￦

(Korean won in thousands, except per share amounts)

2010 2009

Operating income (loss) 173,431,157 (78,838,071)

Non-operating income (expense):

Equity in earnings of equity method investments, net (Note 7) 10,978,591 6,658,639

Gain on disposal of property and equipment, net 14,040 268,926

Loss on valuation of land (Note 10) - (8,936,864)

Other, net 2,737,057 2,352,764

13,729,688 343,465

Income (loss) before income taxes 187,160,845 (78,494,606)

Income tax benefit (expense) (Note 30) (46,753,530) 19,679,265

Net income (loss) 140,407,315 (58,815,341)

Earnings (loss) per share (Note 32):

Basic 1,318 (542)

Diluted 1,316 (542)


￦￦

￦￦￦￦

34_35


NON-CONSOLIDATED STATEMENTS OF APPROPRIATIONS OF RETAINED EARNINGSYEARS ENDED MARCH 31, 2010 AND 2009


2010 2009

Retained earnings before appropriations:

Retained earnings carried forward from the prior year 27,727 11,460

Interim dividends (Note 34) - (5,328,392)

Net income (loss) 140,407,315 (58,815,341)

140,435,042 (64,132,273)

Transfer from voluntary reserves - 64,700,000

140,435,042 567,727

Appropriations:

Legal reserve 3,200,000 540,000

Voluntary reserve 105,200,000 -

Cash dividends (Note 34) 31,970,353 -

140,370,353 540,000

Unappropriated retained earnings carried forward to the next year 64,689 27,727


￦￦

￦￦

NON-CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYYEARS ENDED MARCH 31, 2010 AND 2009


Accumulatedother

Capital Capital comprehensive Retained Capital stock surplus adjustments income (losses) earnings Total

As of April 1, 2008 61,900,000 237,239,199 (53,784,921) (24,949,964) 235,744,940 456,149,254

Dividends - - - - (14,233,480) (14,233,480)

Interim dividends - - - - (5,328,392) (5,328,392)

Acquisition of treasury stock - - (66,231,273) - - (66,231,273)

Adjustment of stock issuance cost - 3,039 - - - 3,039

Equity adjustment arising from

equity method investments - - - 340,922 - 340,922

Loss on valuation of

available-for-sales securities - - - (57,120,374) - (57,120,374)

Valuation on treasury stock fund - (2,797,131) 4,525,877 - - 1,728,746

Valuation on derivative financial instruments - - - (22,481,203) - (22,481,203)

Net loss - - - - (58,815,341) (58,815,341)

Stock option - - 1,097,240 - - 1,097,240

Gain on revaluation of land - - - 190,533,415 - 190,533,415

As of March 31, 2009 61,900,000 234,445,107 (114,393,077) 86,322,796 157,367,727 425,642,553

As of April 1, 2009 61,900,000 234,445,107 (114,393,077) 86,322,796 157,367,727 425,642,553

Valuation on treasury stock fund - 1,352,386 (2,192,481) - - (840,095)

Gain on valuation of

available-for-sales securities - - - 82,943,418 - 82,943,418

Valuation on derivative financial instruments - - - 30,976,250 - 30,976,250

Equity adjustment arising

from equity method investments - - - 784,155 - 784,155

Equity adjustment of separate account - - - 60,807 - 60,807

Net income - - - - 140,407,315 140,407,315

As of March 31, 2010 61,900,000 235,797,493 (116,585,558) 201,087,426 297,775,042 679,974,403


￦￦￦￦￦￦

￦￦￦￦￦￦

￦￦￦￦￦￦

￦￦￦￦￦￦

36_37


NON-CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED MARCH 31, 2010 AND 2009


2010 2009

Cash flows from operating activities:

Net income (loss) 140,407,315 (58,815,341)

Adjustments to reconcile net income (loss) to net cash provided by

operating activities:

Net provision for policy and catastrophe reserves 513,932,603 655,333,892

Loss (gain) on valuation of securities, net (1,194,869) 39,234,009

Depreciation 17,889,190 17,937,557

Amortization 3,669,817 2,953,852

Provision for severance and retirement benefits 8,868,924 24,442,445

Provision for doubtful accounts, net 5,129,485 4,545,487

Amortization of deferred acquisition costs 309,960,462 264,909,423

Loss (gain) on foreign currency translation, net 25,695,336 (57,202,796)

Equity in earnings of equity method investments, net (10,978,591) (6,658,639)

Gain on valuation of derivative financial instruments, net (20,102,809) 58,857,250

Others, net (21,594,010) 6,339,386

Changes in operating assets and liabilities

Deposit 18,320,555 (2,629,296)

Trading securities 73,172,145 222,915,945

Available-for-sale securities (255,237,254) (428,876,314)

Held-to-maturity securities 44,575,224 69,959,240

Dividend income from equity method investment 2,896,492 5,825,984

Loans (226,490,708) (146,408,750)

Deferred acquisition costs (505,341,449) (408,361,886)

Separate account assets (8,860,583) (34,293,124)

Insurance accounts payables 13,716,732 (17,002,224)

Payment of severance and retirement benefits (3,360,625) (31,776,060)

Separate account liabilities 1,823,294 42,617,401

Others, net (39,845,113) (53,077,609)

Net cash provided by operating activities 87,051,563 170,769,832

Cash flows from investing activities:

Acquisition of equity method investments (37,802,943) (11,000,000)

Acquisition of property and equipment (22,598,134) (47,912,425)

Disposal of property and equipment 34,109 5,454,791

Increase in intangible assets (9,410,783) (6,353,073)

Increase in leasehold deposits, net (4,614,289) (10,652,729)

Others, net 712,050 222,059

Net cash used in investing activities (73,679,990) (70,241,377)

(Continued)

￦￦


2010 2009

Cash flows from financing activities:

Increase (decrease) in leasehold deposits received, net (1,342,068) 1,040,671

Redemption of borrowings - (100,000)

Adjustment on stock issuance cost - 3,039

Acquisition of treasury stock - (66,231,273)

Payment of dividends - (19,561,873)

Net cash used in financing activities (1,342,068) (84,849,436)

Net increase in cash and cash equivalents 12,029,505 15,679,019

Cash and cash equivalents at the beginning of the year 60,144,807 44,465,788

Cash and cash equivalents at the end of the year (Note 37) 72,174,312 60,144,807


￦￦

38_39


NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTSMARCH 31, 2010 AND 2009

1. CORPORATE INFORMATION

Meritz Fire & Marine Insurance Co., Ltd. (the "Company") was incorporated on October 1922. The Company provides primarily property and casualty

insurance products and related services. 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, 2010, 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") in July.

As of March 31, 2010, the stockholders of the Company and their shareholdings are as follows:

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 non-consolidated 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 non-consolidated financial

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

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

descriptions) from the Korean language financial statements.

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the Republic of

Korea, including Statements of Korea Accounting Standards ("SKAS") 1 to 24 (except for SKAS 14), and the significant accounting policies

followed by the Company in preparing the accompanying non-consolidated financial statements are summarized below.

Stockholder Number of shares Percentage of ownership (%)

Nine individuals, including Cho Jeong-Ho 27,744,866 22.41

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

Employees' stock ownership association 5,276,699 4.26

KB pure stocks 2 4,411,730 3.56

Woori Bank 4,117,925 3.33

Others 66,127,173 53.42

123,800,000 100.00

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 single 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 single premium payment is recognized as revenue in the period in

which the first day of insured period falls. If premium is received before the nominated collection due 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 when it is earned. Interest income on

defaulted, delinquent or restructured loans is recognized as income in the period when the 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 them 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 accumulated 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 end of the reporting period date. Non-marketable equity securities 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 the statement of operations.

40_41



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 in the statement of

financial position.

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 at the

reporting date and income and expenses are translated at the average exchange rate for the reporting period. All resulting exchange differences

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

Allowance for doubtful accounts

The allowance for doubtful accounts is provided in compliance with the Regulation of Insurance Supervision ("RIS"), which requires the application

of minimum loss ratios based on the degree of collectibility of 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 consumer loans), 2% (5% for

consumer 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 July 1, 1998 that were

revalued in accordance with the previous Korean Assets Revaluation Law and land and buildings that were revalued in accordance with the current

revised SKAS 5 which are stated at fair value less accumulated depreciation.

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.

Depreciation of property and equipment is provided using the declining balance method (buildings using the straight-line method) over the following

estimated useful lives:

The Company has early adopted the amended SKAS 5 Property, Plant and Equipment in 2009 and chosen the revaluation model as its accounting

policy for its land. As a result, land is measured at fair value which resulted in the increase in the Company's net assets by ￦185,725 million as of

March 31, 2009. Valuation is performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying

amount.

If an asset's carrying amount is increased as a result of a revaluation, the increase shall be credited directly to in the accumulated other compre

hensive income. However, the increase shall be recognized in the statement of income to the extent that it reverses a revaluation decrease of the

same asset previously recognized in the statement of operations.

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

the decrease shall be debited directly to accumulated 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

Insurance benefits that are paid in advance to a policyholder in the event of a claim where the benefits paid can be recovered through the

Company exercising its recourse guarantee or compensation right, or disposal of insured assets acquired by the Company during the resolution

process of accident claims, are accounted for as compensation receivables. Recoverable amounts out of the reserve for outstanding claims are

deducted directly from policy reserves.

Compensation receivables are estimated by multiplying the average recovery ratio (ie, recoverable amount/net claims) for the last 3 years to the

net claims amount during the year.

Years

Buildings 40

Vehicles 4

Furniture and equipment 4

42_43



Deferred acquisition costs

The expected cost of acquiring long-term insurance contracts entered into before April 1, 2004, except for those long-term contracts whose

related actual acquisition costs exceeded the expected acquisition costs, were deferred and amortized using the straight-line method over the

insurance contract term, or 7 years, whichever is shorter. However, pursuant to the RIS and Accounting Standards for Insurance Companies, the

Company calculates the unamortized deferred acquisition costs related to the insurance contracts at the end of the reporting period, by deducting

the difference between the policy reserves under the net level premium method and those under the surrender value method from the amounts

computed by adding the unamortized acquisition costs at the prior year-end to acquisition costs incurred during the current year.

During the year ended March 31, 2005, the Company changed its accounting policy for deferred acquisition costs related to the long-term insurance

contracts which were entered into on or after April 1, 2004, pursuant to a revision of the RIS in 2004. According to the revised RIS, actual acquisition

costs, or the expected deferred acquisition costs if the former exceeds the latter, are deferred and amortized using the straight-line method over

the insurance premium payment term, or over 7 years, whichever is shorter. However, if the unamortized deferred acquisition costs at the end of

the reporting period exceed the difference between the policy reserves calculated using the net level premium method and surrender value

method, the surplus amount is fully expensed in the current period. No additional amount was amortized in 2010 and 2009.

Policy reserves

In accordance with the Insurance Business Act ("IBA") and the RIS, the Company is required to maintain policy reserves and the details are as follows:

1. Long-term insurance premium reserves - The Company maintains a reserve for the portion of premiums, which is refundable to policyholders

upon maturity and cancellation of the policy under long-term saving oriented insurance unless there has been a substantial claim for payment

under the policy.

2. 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 reporting

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

3. 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 end of the reporting period.

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

dividends in accordance with the relevant laws and contract terms.

5. Excess participating policyholder dividend reserve - Pursuant to the 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.

6. 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 the relevant laws.

Catastrophe Reserves

In order to prepare for and recover from exceptionally large claims which may be incurred in the future, the Company is required to maintain a

catastrophe reserve as a liability with reserve rates determined by the IBA and the RIS.

The Company provides a catastrophe reserve by multiplying predetermined ratios to net retained premiums received during the reporting period

by line of insurance, up to a certain limit, as calculated by multiplying predetermined ratios to the total insurance premiums received during the

reporting period by line of insurance in accordance with the RIS requirements.

This reserve may be reversed up to the limit of the net loss for the year in the event that the ratio of net insurance expenses claimed to net earned

insurance premiums at risk, by line of insurance, for the year is in excess of the regulated ratio by line of insurance which are prescribed by the RIS.

Separate accounts

In accordance with "Article 108" of the IBA and RIS, the Company classifies all or part of the property equivalent to the reserves on retirement

insurance and retirement pension into separate accounts, which are recorded separately from other assets and liabilities on the statement of

financial position as "separate account assets" and "separate account liabilities" respectively.

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

assets as "separate account receivables" and "separate account payables, respectively".

The Company recognizes the separate account income and expenses arising from insurance policies where the Company has provided a guarantee

on principal and interest (guarantee on principal and interest on retirement insurance policies and retirement pension policies) separately in the

general account income statement.

According to "Article 6-23" of the RIS, 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 Employee Retirement Benefit Security Act ("ERBSA"), the Company made a transition to a new defined benefit pension

plan (DB Plan) and a defined contribution pension plan ("DC plan") to replace the traditional severance and retirement benefit plan, effective for

the current year.

Prior to April 1, 2009, the Company was obliged to pay all employees a severance payment which required no external funding under the

traditional severance and retirement benefit plan. The accumulated severance and retirement benefits under the previous severance and

retirement benefit plan were transferred to the DB plan at the effective date of the DB plan.

44_45



Under the DB Plan, the provision for the retirement benefit liability is determined based on an employee's final salary, equal in value at retirement

to at least one month's final salary for every year of service by the employee. The retirement benefit liability is partly funded, and the funds

contributed are managed by the plan's administrators that are appointed by the Company. The Company accounts for the funds contributed as a

deduction from the retirement benefit liability.

Under the DC Plan, the Company pays a fixed monthly contribution of at least 1/12th of an employee's annual salary for each year of service to a

separately administered fund which is managed by the plan's administrators. Contributions to the DC Plan are recognized as an expense in the

statement of operations as incurred.

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.

A contingent liability is disclosed, but not recognized when it is not probable that an outflow of resources embodying economic benefits will be

required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.

Income taxes

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from 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 operations 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 the statement of operations.

Foreign currency translation

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

Monetary assets and liabilities denominated in foreign currencies are translated into Korean won at the prevailing exchange rates of ￦1,130.8 to

US$1 and ￦12.1768 to ￥1 at March 31, 2010 and ￦1,377.1 to US$1 and ￦14.1480 to ￥1 at March 31, 2009. 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 net income. 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 other comprehensive income in equity. The ineffective portion of the gain or loss

is charged or credited to current operations. Derivative instruments that do not meet the criteria for hedge accounting, or contracts for which the

Company has not elected hedge accounting are measured at fair value with unrealized gains or losses reported in net income.

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 statement of financial position 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 statement of financial position 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 and equipment.

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

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 dilutive potential

common shares.

46_47



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 end of the reporting

period and the deficiency is expected to last other than temporary. The Company performs a premium deficiency test once annually.

A premium deficiency shall first be recognized by derecognizing any unamortized acquisition costs as an expense that the deficiency is eliminated.

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

Significant judgments and accounting estimates

The preparation of financial statements in accordance with Korean GAAP requires management to make judgments, estimates and assumptions

that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period, and

the reported amounts of revenues and expenses during the reporting period. Such judgments and accounting estimates made that have the most

significant effect on the amounts recognized in the financial statements were included in the valuation of property and equipment, loan and

receivables, securities, deferred income tax and derivative financial instruments. Actual results could differ from those estimates.

3. RESTRICTED DEPOSITS

Restricted deposits as of March 31, 2010 and 2009 are as follows (Korean won in thousands):

4. TRADING SECURITIES

Details of trading securities as of March 31, 2010 and 2009 are as follows (Korean won in thousands):

2010 2009 Remarks

Other deposits 10,500 10,500 Collateral for checking accounts

Time deposits - 13,771,000 Pledged as collaterals

10,500 13,781,500

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

2010 2009 2010 2009 2010 2009

Equity securities 30,355,378 - 30,270,870 - (84,508) -

Special bonds 20,192,864 - 20,191,000 - (1,864) -

Beneficiary certificates 105,747,774 173,719,557 105,898,249 175,485,891 150,475 1,766,334

Overseas securities 5,230,431 11,327,963 5,462,210 9,632,621 231,779 (1,695,342)

Other securities 14,419,344 69,324,816 14,867,790 63,999,424 448,446 (5,325,392)

175,945,791 254,372,336 176,690,119 249,117,936 744,328 (5,254,400)

(*) 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

reporting date. Non-marketable equity securities are carried at a value announced by a public independent credit rating agency.

￦￦

￦￦

￦￦￦￦￦￦

￦￦￦￦￦￦

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

2010 2009 2010 2009 2010 2009 2010 2009

Government and public bonds

42,183 - 15,045,021 15,485,384 65,056 314,009 15,152,260 15,799,393

Special bonds 26,796 175,787 31,556,482 28,954,843 1,110,598 2,289,801 32,693,876 31,420,431

Financial bonds - - 11,106,306 9,645,380 7,730,000 4,017,859 18,836,306 13,663,239

Corporate bonds - - 14,412,096 18,340,614 1,111,351 1,108,987 15,523,447 19,449,601

Overseas bonds 4,304 560,133 28,591,614 10,474,085 1,223,790 2,241,894 29,819,708 13,276,112

Other bonds 679,873 2,664,376 294,400 - - - 974,273 2,664,376

753,156 3,400,296 101,005,919 82,900,306 11,240,795 9,972,550 112,999,870 96,273,152

Book value 2010 2009Reclassification before

Type Companies date reclassification Fair value Book value Fair value Book value

CCO EverestⅡ Jul. 1, 2008 10,120,980 10,984,591 10,984,591 10,565,111 10,565,111

SC Low Vol ⅡFund Jul. 1, 2008 11,567,132 10,168,154 10,168,154 10,678,033 10,678,033

SG Best of Note Feb. 1, 2009 12,722,945 - - 12,823,555 12,823,555

34,411,057 21,152,745 21,152,745 34,066,699 34,066,699

Details of interest income from investment securities earned during 2010 and 2009 are as follows (Korean won in thousands):

The Company reclassified trading securities to available-for-sale categories as appropriate, following the amendment of SKAS 8. Under SKAS 8

as amended, the reclassifications were made with effect from July 1, 2008 at the fair value of the investment securities concerned at that date.

Unrealized losses on valuation of trading securities up to that date amounting to ￦1,648,715 thousand was recorded in net losses for the year

ended March 31, 2009. The Company would have recorded unrealized loss on valuation of trading securities amounting to ￦1,113,304 thousand

and ￦1,993,072 thousand in 2010 and 2009 in the statement of operations, respectively if the reclassification had not been made in 2009.

The following table shows the carrying values and fair values of the reclassified trading securities (Korean won in thousands):

Overseassecurities

￦￦￦￦￦￦￦￦

￦￦￦

￦￦￦￦￦

￦￦￦￦￦

￦￦￦￦￦

48_49



5. AVAILABLE-FOR-SALE SECURITIES

Details of equity securities classified as available-for-sale securities as of March 31, 2010 and 2009 are summarized as follows (Korean won in

thousands):

( 2010 )

Number of Acquisition Fair value/ Unrealized Impairment loss

shares Ownership (%) cost NAV Book value gains (losses) (*4) Up to 2009 2010

Equity securities with readily determinable fair values(*1):

OCI Co., Ltd. 3,500 0.02 1,054,179 689,500 689,500 (364,679) - -

STX Co. 143,665 0.29 6,904,273 2,923,583 2,923,583 (3,980,690) - -

Nongshim Holdings 18,072 0.39 1,789,129 1,134,922 1,134,922 (654,207) - -

Hanwha Non-LifeInsurance Co., Ltd.

897,042 1.84 10,629,948 9,688,054 9,688,054 (941,894)

Dong-A Pharmaceutical 40,803 0.39 4,185,812 4,712,746 4,712,746 526,934 - -

HynixSemiconductor Inc.

100,000 0.02 2,354,700 2,670,000 2,670,000 315,300 - -

Dae Joo Co., Ltd. 288,000 0.81 432,000 164,160 164,160 (267,840) - -

Hanjin Eng & Construction Holdings

87,750 0.30 4,424,398 1,110,037 1,110,037 (3,314,361) - -

Korea Line Co. 35,000 0.30 6,386,762 2,205,000 2,205,000 (4,181,762) - -

Jeonbuk Bank 1,329,394 2.49 9,993,150 9,345,640 9,345,640 (647,510) - -

Hanwha Chemical Corp. 60,000 0.04 988,858 828,000 828,000 (160,858) - -

Hyundai Mobis Co., Ltd. 20,000 0.02 3,072,243 3,000,000 3,000,000 (72,243) - -

Eugenes Corp. 90,000 0.17 983,632 321,750 321,750 (661,882) - -

Lotte Shopping Co., Ltd. 2,000 0.01 674,120 656,000 656,000 (18,120) - -

Seoul Broadcasting System

25,000 0.14 1,177,350 1,000,000 1,000,000 (177,350) - -

LG Display Co., Ltd. 40,000 0.01 1,561,647 1,598,000 1,598,000 36,353 - -

NHN Corporation 5,000 0.01 953,965 900,000 900,000 (53,965) - -

INICIS Co., Ltd. 64,800 0.50 1,328,400 377,136 377,136 (951,264) - -

SODIFF AdvancedMaterials Co., Ltd.

11,000 0.10 1,069,099 935,000 935,000 (134,099) - -

Seoul Semiconductor Co., Ltd.

35,000 0.06 1,615,271 1,526,000 1,526,000 (89,271) - -

Hanjin heavy Industries & Construction Co., Ltd.

239,622 0.50 11,962,262 6,170,267 6,170,267 (5,791,995) - -

Daewoo SecuritiesGreen Korea SpecialPurpose Acquisition

1,000,000 3.70 3,500,000 3,635,000 3,635,000 135,000 - -

Company

(Continued)

￦￦￦￦￦￦

( 2010 )



Tongyang Value Ocean Special Purpose Acquisition

200,000 4.05 2,000,000 2,100,000 2,100,000 100,000 - -

Company

Hana Nikel 1 2,400,000 10.55 11,999,988 8,880,000 8,880,000 (3,119,988) - -

91,041,186 66,570,795 66,570,795 (24,470,391) - -

Equity securities without readily determinable fair values (*3):

Korea SecuritiesDepository

376 0.01 3,160 3,160 3,160 - - -

Pusan New Port Company (*2)

988,614 0.86 4,943,070 5,060,715 5,060,715 117,645 - -

ARD Holdings, Inc. (*2) 320,000 0.66 1,600,000 1,640,000 1,640,000 40,000 - -

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 1,609,965 1,609,965 (385,035) - -

Mapo Aekyoung Town (*2)

168,000 14.00 840,000 808,416 808,416 (31,584) - -

Seoul guarantee InsuranceCompany (*2, *5)

49,984 0.14 1,805,484 2,105,076 2,105,076 299,592 - -

Shinhan 1st Special Purpose Acquisition

74,999 10.00 149,998 149,998 149,998 - - -

Company Ltd.

KDS 1 Preferred stock 795 - 6,042 - - - 6,042 -

C& Marine Financing Co.

200,000 12.50 1,000,000 - - - 1,000,000 -

Final Data Inc. 25,000 0.50 900,000 - - - 900,000 -

13,442,754 11,398,201 11,398,201 40,618 2,085,171 -

Contributed capital (*3):

MIC2003-1 - 0.83 132,237 132,237 132,237 - - -

Macquarie Korea OPP - 1.24 11,309,153 11,309,153 11,309,153 - - -

Shinhan Infra Portfolio - 10.42 24,535,190 24,535,190 24,535,190 - - -

Korea Infra 3 - 2.78 12,392,995 12,392,995 12,392,995 - - -

48,369,575 48,369,575 48,369,575 - - -

Beneficiary certificates 457,723,491 419,522,910 419,522,910 (37,665,904) 330,389 204,288

608,670,964 545,861,481 545,861,481 (62,095,677) 2,416,106 204,288 ￦￦￦￦￦￦

50_51



( 2009 )



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 Corp. 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 239,622 0.51 11,962,262 6,769,322 6,769,322 (5,192,940) - -Co., Ltd.

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

Hyundai Steel

Company40,000 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 250,000 0.28 4,459,368 3,125,000 3,125,000 (1,334,368) - -Insurance Co., Ltd.

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)

￦￦￦￦￦￦

(2009 )



Equity securities without readily determinable fair value (*3):

Korea SecuritiesDepository

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

Mapo Aekyoung Town 84,000 14.00 420,000 420,000 990,346 (798,782) - -

KDS 1 preferred stock (*2) 795 - 6,042 - 83,520 348,480) - -

C& Marine Financing Co. (*2)

200,000 12.50 1,000,000 - 2,047,500 (4,339,262) - -

Final Data Inc. (*2) 25,000 0.50 900,000 - 8,416,829 (1,546,765) - -

11,067,272 8,363,659 2,807,000 (1,331,511) - -

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 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

(*1) The fair value of marketable equity securities was measured at the closing price as of the statement of financial position date.

(*2) The fair value was measured 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.

(*5) The Company recorded reversal of impairment loss of ￦1,805,484 thousand for the year ended March 31, 2010 due to valuation by KBP.

￦￦￦￦￦￦

52_53



Debt securities classified as available-for-sale securities as of March 31, 2010 and 2009 are summarized as follows (Korean won in thousands):

( 2010 )

Acquisition Amortized Fair value Book value Unrealized gains Impairment loss

Maturity Type cost cost (*1) (*2) (losses) (*3) Up to 2009 2010

Within Special bonds 4,999,095 14,999,784 15,124,178 15,108,943 109,159 - -

1 year Financial bonds 9,781,956 9,923,788 10,401,837 10,273,570 349,782 - -

Corporate bonds 21,576,566 21,080,286 21,557,044 21,467,659 387,373 - -

Overseas bonds (*4,*5) 38,012,507 40,063,182 41,788,757 41,313,213 1,250,031 - -

Other securities 46,799,000 46,799,000 47,207,547 47,207,547 408,547 - -

131,169,124 132,866,040 136,079,363 135,370,932 2,504,892 - -

Within Government and5 years public bonds

52,117,733 53,429,246 54,784,872 54,650,055 1,220,809 - -

Special bonds 90,699,118 90,637,583 97,644,432 96,885,440 6,247,857 - -

Financial bonds 120,192,735 120,165,702 126,372,474 125,379,115 5,213,413 - -

Corporate bonds 133,402,645 133,504,755 142,917,549 141,554,617 8,049,862 - -

Overseas bonds (*4,*5) 301,179,043 302,257,328 299,428,698 296,459,522 (5,797,806) 23,691,097 374,441

697,591,274 699,994,614 721,148,025 714,928,749 14,934,135 23,691,097 374,441


44,626,407 44,810,767 46,703,599 46,567,783 1,757,016 - -

Special bonds 360,056,576 60,054,648 379,729,843 375,067,830 15,013,182 - -

Financial bonds 40,330,908 40,325,220 43,852,460 43,311,960 2,986,740 - -

Corporate bonds 39,063,476 39,323,292 40,364,331 40,069,335 746,043 - -

Overseas bonds (*4,*5) 91,224,749 91,199,249 92,942,452 91,602,856 403,607 14,295,368 776,214

575,302,116 575,713,176 603,592,685 596,619,764 20,906,588 14,295,368 776,214

Over Government and10 years public bonds

281,984,409 281,938,025 292,203,592 290,374,730 8,436,705 - -

Special bonds 90,088,617 90,088,224 94,084,165 93,641,890 3,553,666 - -

Corporate bonds 9,987,321 9,988,006 10,657,554 10,539,565 551,559 - -

382,060,347 382,014,255 396,945,311 394,556,185 12,541,930 - -

Total Government andpublic bonds

378,728,549 380,178,038 393,692,063 391,592,568 11,414,530 - -

Special bonds 555,843,406 555,780,239 586,582,618 580,704,103 24,923,864 - -

Financial bonds 170,305,599 170,414,710 180,626,771 178,964,645 8,549,935 - -

Corporate bonds 204,030,008 203,896,339 215,496,478 213,631,176 9,734,837 - -

Overseas bonds (*4, *5) 430,416,299 433,519,759 434,159,907 429,375,591 (4,144,168) 37,986,465 1,150,6555

Other securities 46,799,000 46,799,000 47,207,547 47,207,547 408,547 - -

1,786,122,861 1,790,588,085 1,857,765,384 1,841,475,630 50,887,545 37,986,465 1,150,655

￦￦￦￦￦￦￦

￦￦￦￦￦￦￦

( 2009 )

Acquisition Amortized Fair value Book value Unrealized gains Impairment loss

Maturity Type cost cost (*1) (*2) (losses) (*3) Up to 2008 2009

Within Special bonds 3,950,046 3,975,475 4,456,542 4,061,578 86,103 - -

1 year 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 securities 30,000,000 30,000,000 25,783,618 25,783,618 (4,216,382) - -

82,812,046 82,834,879 83,588,198 79,261,057 (3,573,822) - -


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) 303,525,885 305,012,925 310,624,029 307,518,485 2,505,560 6,243,287 17,447,810

794,847,495 795,431,084 816,088,233 808,939,619 13,508,535 6,243,287 17,447,810


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) 63,734,024 63,734,024 55,284,316 55,188,957 (8,545,067) - 14,295,368

513,903,314 515,433,099 518,746,339 514,759,653 (673,446) - 14,295,368

Over Government and10 years public 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 - -


217,529,939 218,627,240 221,314,895 20,671,913 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 (*4,*5) 367,259,909 368,746,949 365,908,345 362,707,442 (6,039,507) 6,243,287 31,743,178

Other securities 30,000,000 30,000,000 25,783,618 25,783,618 (4,216,382) --

1,542,348,654 1,544,450,319 1,570,897,131 1,554,740,329 10,290,010 6,243,287 31,743,178

￦￦￦￦￦￦￦

￦￦￦￦￦￦￦

54_55



(*1) The fair value of marketable debt securities was measured at the closing price as of the statement of financial position date. In addition, the fair value of non

marketable debt securities was measured 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 above is before deferred income tax adjustments.

(*4) Certain portion of the unrealized gain / loss from overseas bonds was reflected in current operations as a result of the application of fair value hedge accounting.

(*5) The Company recorded ￦1,151 million and ￦31,743 million of impairment losses on the overseas bonds for the years ended March 31, 2010 and 2009,

respectively, due to sharp decline in fair value triggered by financial crisis.

Changes in valuation gains and losses for available-for-sale securities for the years ended as of March 31, 2010 and 2009 are summarized as follows

(Korean won in thousands):

( 2010 )

Beginning balance Increase Decrease Ending balance

Equity securities (46,545,811) - (22,116,038) (24,429,773)

Government and public bonds 2,044,673 9,369,857 - 11,414,530

Special bonds 10,343,296 14,580,568 - 24,923,864

Financial bonds 2,390,665 6,159,270 - 8,549,935

Corporate bonds 5,767,265 3,967,572 - 9,734,837

Beneficiary certificates (82,883,014) - (45,217,110) (37,665,904)

Overseas bonds (6,039,507) - (1,895,339) (4,144,168)

Other securities (4,216,382) 408,547 (4,216,382) 408,547

Net valuation loss before income tax (119,138,815) 34,485,814 (73,444,869) (11,208,132)

Income tax effect 27,696,333 2,709,069

Net valuation loss after income tax (91,442,482) (8,499,063)

( 2009)


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

Beneficiary certificates (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)

Net valuation 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

Net valuation loss after income tax (34,322,108) (91,442,482)

￦￦￦￦

￦

￦￦

￦

￦￦￦￦

￦

￦￦

￦

Investment trust contracts as of March 31, 2010 and 2009 are as follows (Korean won in thousands):

Details of assets included in the investment trust contracts above as of March 31, 2010 are as follows (Korean won in thousands):

( 2010 )

Gains (losses)Company Face value Acquisition cost Book value on valuation

Available-for-sale securities TEMPIS 1 11,799,000 11,799,000 12,305,845 506,845

TEMPIS 2 11,500,000 11,500,000 11,679,558 179,558

Neaway AssetsInvestment 10,000,000 10,000,000 9,452,520 (547,480)

Samho SHInvestment 3,000,000 3,000,000 3,109,838 109,838

Albatross18 10,500,000 10,500,000 10,659,786 159,786

46,799,000 46,799,000 47,207,547 408,547

( 2009 )

Gains (losses)Company Face value Acquisition cost Book value on valuation

Available-for-sale Securities Neaway AssetsInvestment 10,000,000 10,000,000 6,305,581 (3,694,419)

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)

2010 2009

Cash 2,278,536 3,012,656

Securities 9,338,548 5,975,202

Bonds 31,988,673 10,240,650

Beneficiary certificates - 6,514,930

Other 3,601,790 40,180

47,207,547 25,783,618

￦￦￦￦

￦￦￦￦

￦￦￦￦

￦

￦￦

￦￦

￦￦￦

56_57



Details of pledged securities as of March 31, 2010 are as follows (US dollars in unit or Korean won in thousands):

Korean won Remarks Face value amounts of mortgage Companies

Available-for-sale securities Interest swap 10,000,000 10,000,000 Industrial Bank of Korea

Derivatives 60,000,000 60,000,000 Industrial Bank of Korea

Derivatives 50,000,000 50,000,000 SC First Bank

Derivatives 10,000,000 10,000,000 Kookmin Bank

Derivatives 9,000,000 10,177,200 Korea Development Bank

Derivatives 40,000,000 45,232,000 SC First Bank

185,409,200

Held-to-maturity securities Derivatives 10,000,000 10,000,000 Industrial Bank of Korea

Derivatives 10,000,000 11,308,000 Korea Development Bank

21,308,000

Total 206,717,200

6. HELD-TO-MATURITY SECURITIES

Details of held-to-maturity securities as of March 31, 2010 and 2009 are as follows (Korean won in thousands):

( 2010 )

Maturity Classification Acquisition cost Amortized Cost Recoverable value Book value

Within 1 year Government andpublic bonds

9,840 9,840 9,840 9,840

Financial bonds 20,000,000 20,000,000 20,000,000 20,000,000

Corporate bonds 19,953,573 19,992,069 19,992,069 19,992,069

39,963,413 40,001,909 40,001,909 40,001,909

Within 5 years Government and public bonds

1,228,556 1,257,180 1,257,180 1,257,180

Special bonds 10,000,000 10,000,000 10,000,000 10,000,000

Financial bonds 91,000,000 91,000,000 91,000,000 91,000,000

Overseas bonds (*) 11,545,000 11,545,000 11,308,000 11,308,000

113,773,556 113,802,180 113,565,180 113,565,180

Within 10 years Financial bonds 30,000,000 30,000,000 30,000,000 30,000,000

Over 10 years Special bonds 10,000,000 10,000,000 10,000,000 10,000,000

(Continued)

￦

￦￦￦￦

￦

￦

￦

￦￦$

￦$

$

( 2010 )


Total Government andpublic bonds 1,238,396 1,267,020 1,267,020 1,267,020

Special bonds 20,000,000 20,000,000 20,000,000 20,000,000

Financial bonds 141,000,000 141,000,000 141,000,000 141,000,000

Corporate bonds 19,953,573 19,992,069 19,992,069 19,992,069

Overseas bonds (*) 11,545,000 11,545,000 11,308,000 11,308,000

193,736,969 193,804,089 193,567,089 193,567,089

( 2009 )


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 6,255,000 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


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

(*) The difference of acquisition cost, amortized cost, recoverable value and book value is due to exchange rate applied at acquisition date and the statement of financial

position date.

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7. EQUITY METHOD INVESTMENTS

Details of equity method investments as of March 31, 2010 and 2009 are as follows (Korean won in thousands):

2010 2009

Number of shares Ownership (%) Acquisition cost Net asset value Book value Book value

Meritz Securities Co., Ltd.(*1) 86,625,715 32.06 102,991,271 168,368,098 150,752,293 124,039,918

Meritz Investment Bank (*2) 10,360,714 8.43 7,735,482 12,875,436 12,386,189 5,689,415

Meritz Assets Management 3,000,000 100.00 15,000,000 12,229,619 12,229,619 8511795

Meritz Financial Information Service 200,000 100.00 1,000,000 2,570,777 2,570,777 2,205,257

PT. Asuransi Hanjin Korindo (*3) 7,650 51.00 953,955 2,805,337 2,805,337 2,901,847

Ritzpartners Co., Ltd. 2,000,000 100.00 10,000,000 9,494,385 9,494,385 -

137,680,708 208,343,652 190,238,600 143,348,232

(*1) The shares were acquired in general account and therefore, if shares acquired in separate account are added, the number of shares and ownership would be

increased to 87,393,145 shares or 32.35%, respectively.

(*2) Though the Company's ownership is less than 20% as of March 31, 2010, the Company uses the equity method of accounting because key directors of the

Company are also members of investee's board of directors.

(*3) Financial statements as of December 31, 2009 were used for PT, Assuransi Hanjin Korindo.

The details of changes in book value of equity method investments for the years ended March 31, 2010 and 2009 are as follows (Korean won in thousands):

( 2010 )

Equity in Otherearnings (loss) comprehensive Ending

Companies Beginning Balance Acquisition Cash dividends of investee income (loss) Balance

Meritz Securities Co., Ltd. 124,039,918 18,699,993 (2,896,492) 10,353,248 555,626 150,752,293

Meritz Investment Bank 5,689,415 4,102,950 - 2,296,070 297,754 12,386,189

Meritz Assets Management 8,511,795 5,000,000 - (1,208,457) (73,719) 12,229,619

Meritz FinancialInformation Service 2,205,257 - - 365,520 - 2,570,777

PT. Asuransi Hanjin Korindo 2,901,847 - - (322,175) 225,665 2,805,337

Ritzpartners Co., Ltd. - 10,000,000 - (505,615) - 9,494,385

143,348,232 37,802,943 (2,896,492) 10,978,591 1,005,326 190,238,600

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( 2009 )

Equity in Otherearnings (loss) comprehensive Ending

Companies Beginning Balance Acquisition Cash dividends of investee income (loss) 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 FinancialInformation Service - 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

The changes in the difference between the acquisition cost and proportionate net asset value of investee at the time of acquisition (negative goodwill)

for the years ended March 31, 2010 and 2009 are as follows (Korean won in thousands):

( 2010 )

Beginning balance Increase Amortization Ending balance

Meritz Securities Co., Ltd. (7,880,768) (14,598,130) 4,863,093 (17,615,805)

Meritz Investment Bank (364,644) (2,553,714) 2,229,111 (489,247)

(8,245,412) (16,951,844) 7,092,204 (18,105,052)

( 2009 )

Beginning balance Increase Amortization 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)

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The condensed financial information of the investees as of and for the years ended March 31, 2010 and 2009 is presented as follows (Korean won

in thousands):

The market value of equity method investments as of March 31, 2010 and 2009 is as follows (Korean won in unit):

( 2010 )

Operating income

Companies Total assets Total liabilities Net asset value (losses) Net income (losses)

Meritz Securities Co., Ltd. 1,913,311,717 1,388,146,096 525,165,621 31,370,567 20,631,641

Meritz Investment Bank 1,722,318,400 1,569,525,447 152,792,953 935,062 3,061,415

Meritz Assets Management 12,692,994 463,375 12,229,619 (891,246) (1,259,369)

Meritz Financial Information Service 7,810,232 5,239,455 2,570,777 369,979 315,967

PT. Asuransi Hanjin Korindo 6,180,363 679,703 5,500,660 178,095 (631,715)

Ritzpartners Co., Ltd. 9,513,482 19,097 9,494,385 (603,197) (505,615)

( 2009 )

Operating income

Companies Total assets Total liabilities Net asset value (losses) Net income (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 Financial Information Service 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

Meritz Securities Co., Ltd. Meritz Investment Bank

March 31, 2010 1,180 820

March 31, 2009 975 735

8. LOANS

The maturities of loans as of March 31, 2010 and 2009 are summarized as follows (Korean won in thousands):

2010 2009

Within 1 year 132,902,617 77,881,522

1 year ~ 3 years 167,764,580 176,678,189

3 years ~ 5 years 77,087,784 59,720,217

Over 5 years 426,846,277 262,948,751

Total 804,601,258 577,228,679

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As of March 31, 2010 and 2009, loans to the Company's directors and employees consist of the following (Korean won in thousands):

The Company classifies its loans and other receivables into five different grades: "normal", "precautionary", "substandard", "doubtful" and "estimated

loss", pursuant to the RIS and the Company's own classification criteria of assets. Details of the classification of the loans and other receivables as of March

31, 2010 and 2009 are as follows (Korean won in thousands):

Annual interest rate March 31, 2010 March 31, 2009

Unsecured loans to employees 5.0% - 26,060

Loans related to housing 2.0% ~ 5.0% 12,303,096 12,606,252

12,303,096 12,632,312

( 2010 )

Descriptions Normal Precautionary Substandard Doubtful Estimated loss Total

Loans :

Policy loans 275,100,633 - - - - 275,100,633

Loans secured by real estate 218,300,261 1,181,049 3,283,220 - 1,981,000 224,745,530

Unsecured loans 49,010 485 - - 1,651 51,146

Guaranteed loans 13,501,603 15,010 - - - 13,516,613

Other loans 277,280,000 10,000,000 107,336 3,800,000 - 291,187,336

784,231,507 11,196,544 3,390,556 3,800,000 1,982,651 804,601,258

Other receivables :

Insurance receivables (*1) 52,764,101 8,337,467 ,589,484 2,081,580 881,106 66,653,738

Trade notes receivables 384,534 - - - - 384,534

Other accounts receivables 25,204,450 280,071 104,215 14,008 3,190,408 28,793,152

Suspense payment - - 61,159 - 9,196 70,355

Dishonored notes - - - - 791,154 791,154

Accrued income (*2) 3,940,259 2,190 - - - 3,962,449

82,293,344 8,639,728 2,754,858 2,095,588 4,871,864 100,655,382

866,524,851 19,836,272 6,145,414 5,895,588 6,854,515 905,256,640

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( 2009 )

Descriptions Normal Precautionary Substandard Doubtful Estimated loss Total

Loans :

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

Other receivables :

Insurance receivables (*1) 17,768,644 3,093,312 4,246,309 1,291,433 1,282,755 27,682,453


Other accounts receivables 17,919,657 - 275,000 - 3,152,047 21,346,704

Suspense payment - - 225,839 - 17,365 243,204


Accrued income (*2) 3,082,198 8,911 - - - 3,091,109

39,389,418 3,102,223 4,747,148 1,291,433 4,453,988 52,984,210

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 counterparty pursuant to the RIS.

(*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.

Details of allowance for doubtful accounts for the balances of loans and other receivables as of March 31, 2010 and 2009 are as follows (Korean

won in thousands):

( 2010 )

Normal Precautionary Substandard Doubtful Estimated lossDescriptions (0.5~0.75%) (2~5%) (20%) (50%) (100%) Total

Loans 5,167,840 1,959,826 1,336,120 2,850,000 1,982,651 13,296,437

Insurance receivables 263,820 166,749 517,896 1,040,790 881,106 2,870,361


Other accounts receivables 126,022 5,601 20,842 7,004 3,190,408 3,349,877

Suspense payments - - 23,611 - 9,196 32,807


Accrued income 19,700 443 - - - 20,143

5,579,304 2,132,619 1,898,469 3,897,794 6,854,515 20,362,701

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( 2009 )

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 49,261 645,716 1,282,755 2,928,441


Other accounts receivables 89,598 - 55,000 - 3,152,047 3,296,645

Suspense payments - - 52,815 - 17,365 70,180


Accrued income 15,410 177 - - - 15,587

3,982,560 86,790 3,626,297 646,963 6,281,033 14,623,643

As of March 31, 2010 and 2009, the allowances for loans, by each type, are summarized as follows (Korean won in thousands):

2010 2009

Policy loans 2,063,252 1,955,293

Loans secured by real estate 4,971,263 5,282,410

Unsecured loans 2,043 17,275

Guaranteed loans 102,012 106,397

Others 6,157,867 946,500

13,296,437 8,307,875

The ratio of allowance for doubtful accounts to total receivables as of March 31, 2010, 2009 and 2008 is as follows (Korean won in thousands):

Descriptions 2010 2009 2008

Loans 804,601,258 577,228,679 435,471,415

Insurance receivables 66,653,738 27,682,453 39,154,939

Other accounts receivables 28,793,152 21,346,704 19,115,246

Suspense payment 70,355 243,204 155,475

Accrued income 3,962,449 3,091,109 26,635,424

Trade notes receivables 384,534 618,919 668,654

Dishonored notes 791,154 1,821 51,820

905,256,640 630,212,889 521,252,973

Allowance for doubtful accounts 20,362,701 14,623,643 14,211,396

Allowance ratio 2.25% 2.32% 2.73%

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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. At March 31, 2009, the Company had 302,658 shares of common stock of SK

Networks amounting to ￦2,374 million and disposed all the shares in 2010.

10. PROPERTY AND EQUIPMENT

Changes in net book value of property and equipment for the years ended March 31, 2010 and 2009 are as follows (Korean won in thousands):

( 2010 )

Beginning balance Additions Disposals Depreciation Ending Balance

Land 399,244,045 418,002 - - 399,662,047

Buildings 262,126,048 682,394 - (7,626,341) 255,182,101

Furniture and equipment 14,320,698 10,031,751 (38,176) (10,208,256) 14,106,017

Vehicles 64,303 - - (36,486) 27,817

Construction in-progress 1,009,932 11,465,987 - - 12,475,919

676,765,026 22,598,134 (38,176) (17,871,083) 681,453,901

( 2009)

Beginning Endingbalance Additions 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 6,992,352 - (50,407,920) - - 1,009,932

416,913,658 47,912,424 (5,460,244) - 235,336,745 (17,937,557) 676,765,026

As disclosed in Note 2, the Company revalued its land by early adopting the revised SKAS 5. In determining the fair value of its land under revaluation

model, the Company engaged Daeil Asset Appraisal Co., Ltd., an accredited independent appraiser. Fair value is determined by reference to market

based evidence. The valuation performed by the appraiser as of March 31, 2009 was based on active market prices, adjusted for any difference in

the nature, location or condition of the specific property. The Company did not engage the independent appraiser for revaluation of the land during

the current fiscal year on the basis that there would be no significant changes in revalued amounts in 2010.

If the land was measured using the cost model, the carrying amounts would be as ￦164,325,302 thousand and ￦163,907,300 thousand at March

31, 2010 and 2009, respectively.

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Revaluation loss of ￦8,936,864 thousand was recorded as non-operating expenses for the year ended March 31, 2009. The movements in

accumulated other comprehensive income due to the revaluation are as follows (Korean won in thousands):

2010 2009

Beginning balance 190,533,415 -

Increase other comprehensive income by revaluation - 244,273,609

Adjustment of deferred income tax - (53,740,194)

Ending balance 190,533,415 190,533,415

The residual values of certain fully depreciated property and equipment which are still in use as of March 31, 2010 and 2009, amounted to

￦87,720 thousand and ￦71,552 thousand, respectively.

The values of the Company's land, as determined by the government for tax administration purposes are as follows (Korean won in thousands):

The property and equipment is insured against fire and other damages. Details are as follows (Korean won in thousands):

Book Value Value determined by the government

2010 2009 2010 2009

Main Building 228,561,920 228,561,920 122,762,750 123,655,570

Yeouido Building 27,938,000 27,938,000 16,762,800 16,946,000

Annex of Main Building 31,501,680 31,501,680 18,136,629 19,364,268

Branch Office 23,032,152 23,032,152 16,874,034 17,223,257

Training Building 38,995,130 38,995,130 32,629,278 33,366,964

Other 49,633,165 49,215,163 25,310,497 26,607,979

399,662,047 399,244,045 232,475,988 237,164,038

Insured amount

Type Insured property Insurance Company 2010 2009

Burglary insurance Cash and securities Dongbu Insurance Co.,Ltd. 1,102,000 1,102,000

Fire insurance Building Dongbu Insurance Co.,Ltd. 284,961,935 281,619,219

Property insurance Furniture and fixtures Dongbu Insurance Co.,Ltd. 29,481,986 26,785,928

315,669,921 309,507,147

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11. INTANGIBLE ASSETS

Details of intangible assets as of March 31, 2010 and 2009 are as follows (Korean won in thousands):

Changes in intangible assets for the years ended March 31, 2010 and 2009 are as follows (Korean won in thousands):

( 2010 )

Acquisition cost Accumulated amortization Book value

Development cost 18,557,197 (7,663,649) 10,893,548

Other intangible assets 13,993,483 (6,946,129) 7,047,354

32,550,680 (14,609,778) 17,940,902

( 2009 )

Acquisition cost Accumulated 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

( 2010 )

Beginning balance Purchases Amortization (*) Ending Balance

Development cost 5,686,571 6,848,054 (1,641,077) 10,893,548

Other intangible assets 6,513,365 2,562,729 (2,028,740) 7,047,354

12,199,936 9,410,783 (3,669,817) 17,940,902

( 2009 )

Beginning balance Purchases Amortization (*) Ending 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

8,800,714 6,353,073 (2,953,851) 12,199,936

(*) Amortization is charged to operating expenses in the statement of income.

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Residual useful lives of the Company's intangible assets as of March 31, 2010 are summarized as follows (Korean won in thousands):

Amount Residual useful lives Remarks

Development cost 10,893,548 1~5 System development cost and others

Other intangible assets 7,047,354 1~5 Software

17,940,902

12. OTHER ASSETS

Other assets as of March 31, 2010 and 2009 consist of the following (Korean won in thousands):

2010 2009

Insurance receivables (Notes 8,13 and 16) 101,325,521 74,816,642

Other accounts receivables (Note 8) 28,793,152 21,346,704

Leasehold deposits 93,555,790 88,941,501

Accrued income (Note 8) 27,498,791 27,355,558

Prepaid expenses 2,454,205 2,808,365

Compensation receivables (Note 14) 45,686,446 24,106,479

Income tax receivables - 11,840,678

Derivative financial instrument assets (Note 28) 27,732,911 7,797,066

Others (Note 8) 3,954,102 4,331,455

331,000,918 263,344,448

Less allowance for doubtful accounts (7,066,264) (6,315,768)

323,934,654 257,028,680

13. INSURANCE RECEIVABLES

Details of insurance receivables as of March 31, 2010 and 2009 are as follows (Korean won in thousands):

2010 2009

Premiums receivable 7,826,996 9,796,406

Due from agents 642,927 314,359

Co-insurance receivables 8,976,122 7,963,410

Due from agency receivables 8,896,017 7,406,338

Re-insurance receivables 20,260,502 24,112,921

Overseas reinsurance receivables 50,785,365 19,245,403

Deposits on reinsurance contracts assumed 3,937,592 5,977,805

101,325,521 74,816,642

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14. COMPENSATION RECEIVABLES

Changes in compensation receivables for the years ended March 31, 2010 and 2009 are as follows (Korean won in thousands):

( 2010 )

Beginning balance Increase (decrease) Ending Balance

General 3,531,856 19,299,288 22,831,144

Vehicles 20,258,230 2,141,554 22,399,784

Long-term 316,217 139,301 455,518

Personal annuities 176 (176) -

24,106,479 21,579,967 45,686,446

( 2009 )

Beginning balance Increase (decrease) Ending 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

15. DEFERRED ACQUISITION COSTS

Changes in deferred acquisition costs for the years ended March 31, 2010 and 2009 are as follows (Korean won in thousands):

( 2010 )

Beginning balance Increase Decrease Ending Balance

Long-term insurance (Non-participating) 638,976,694 500,991,739 (307,164,879) 832,803,554

Personal annuities 6,632,414 4,349,710 (2,795,583) 8,186,541

645,609,108 505,341,449 (309,960,462) 840,990,095

( 2009 )

Beginning balance Increase Decrease Ending 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

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16. MONETARY ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

Monetary assets and liabilities denominated in foreign currencies as of March 31, 2010 and 2009 are summarized as follows (Korean won in thousands

and US dollars, Euros and Japanese Yen in unit):

2010 2009

Foreign Equivalent Gain (loss) Foreign Equivalent Gain (loss)currencies Korean won on translation currencies Korean won on translation

(Assets)

Insurance receivables:

USD 36,937,236 41,768,625 (2,434,082) 10,653,422 14,670,827 1,416,303

EUR 39,433 59,867 (6,459) 89,996 163,468 3,568

YEN 670,306 8,162 118 5,844,960 82,694 (7,420)

Other - 226,428 (24,002) - 2,848,181 50,415

42,063,082 (2,464,425) 17,765,170 1,462,866

Deposits:

USD 41,203,664 46,593,101 (9,881,860) 56,392,569 77,658,206 19,000,424

EUR 49,026 74,432 (7,610) 127,477 231,548 1,046

YEN 51,357 625 (45) 549,924 7,780 (499)

GBP 21,337 36,380 (3,140) 309 607 (4)

46,704,538 (9,892,655) 77,898,141 19,000,967

Overseas securities:

USD 378,173,513 427,638,609 (12,158,229) 290,923,375 400,630,580 32,758,252

YEN 1,519,873,279 18,507,193 (1,907,961) 1,892,800,000 26,793,482 4,146,000

446,145,802 (14,066,190) 427,424,062 36,904,252

534,913,422 (26,423,270) 523,087,373 57,368,085

(Liabilities)

Insurance payable:

USD 11,463,412 12,962,825 697,278 11,757,110 16,187,716 (86,532)

EUR 105,365 159,965 15,637 91,881 166,891 6,044

YEN 1,450,801 17,666 490 694,466 9,825 (399)

Other - 51,487 3,645 - 2,570,834 (86,443)

13,191,943 717,050 18,935,266 (167,330)

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17. INSURANCE RESERVES

The company maintains Its policy reserves as a liability in accordance with the IBA and the RIS. Changes in policy reserves by policy type for the

years ended March 31, 2010 and 2009 are summarized as follows (Korean won in thousands):

( 2010 )


Long-term insurance premium reserve:

Long-term 2,701,242,944 586,383,346 - 3,287,626,290

Personal annuities 561,411,767 52,529,328 - 613,941,095

3,262,654,711 638,912,674 - 3,901,567,385

Reserve for outstanding claims:

General 431,733,415 - 254,419,908 177,313,507

Vehicles 155,652,870 - 9,346,268 146,306,602

Long-term 108,159,518 35,858,706 - 144,018,224

Personal annuities 3,794,971 - 254,606 3,540,365

Reinsurance (212,118,109) - (107,154,997) (104,963,112)

487,222,665 35,858,706 156,865,785 366,215,586

Unearned premium reserve:

General 157,987,133 3,898,129 - 161,885,262

Vehicles 336,164,003 - 30,604,819 305,559,184

Long-term 2,922,097 1,015,869 - 3,937,966

Personal annuities 14,367 5,119 - 19,486

Reinsurance (93,914,610) - (226,767) (93,687,843)

403,172,990 4,919,117 30,378,052 377,714,055

Reserve for participating policyholders' dividends:


Retirement insurance 372,244 133,377 - 505,621

34,184,264 6,765,449 - 40,949,713

Excess participating policyholders' dividends:


Retirement insurance 278,585 - 28,634 249,951

9,414,866 1,117,473 28,634 10,503,705

4,196,649,496 687,573,419 187,272,471 4,696,950,444

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( 2009 )


Long-term insurance premium reserve:

Long-term 2,279,958,465 421,284,479 - 2,701,242,944


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:



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 EUR 16 million, US$114 million, US$100 million, respectively. The Company reserved 34 billion and 182 billion as the reserve for outstanding claims excluding

reinsurance and compensation for the years ended March 31, 2010 and 2009, respectively.

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Changes in catastrophe reserves for the years ended March 31, 2010 and 2009 are summarized as follows (Korean won in thousands):

( 2010 )


General 33,818,807 5,752,698 - 39,571,505

Vehicles 71,987,756 7,878,957 - 79,866,713

105,806,563 13,631,655 - 119,438,218

( 2009 )


General 63,738,361 - (29,919,554) 33,818,807

Vehicles 82,305,842 - (10,318,086) 71,987,756

146,044,203 - (40,237,640) 105,806,563

18. OTHER LIABILITIES

Other liabilities as of March 31, 2010 and 2009 consist of the following (Korean won in thousands):

2010 2009

Other accounts payables 24,420,980 19,316,375

Accrued expenses 55,376,272 74,148,076

Deferred income tax liabilities (Note 30) 58,729,058 16,689,082

Income tax payable 17,456,596 -

Leasehold deposits withheld (Note 35) 16,121,516 17,463,585

Derivative financial instrument liabilities (Note 28) 32,473,683 96,376,450

Others 5,878,119 4,364,513

210,456,224 228,358,081

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2010 2009

Assets

Cash and deposits:

Ordinary deposits 239,685 32,134

Time deposits - 33,500,000

Other deposits 42,176,000 2,950,000

42,415,685 36,482,134

Marketable securities:

Stocks 1,423,758 539,681

Bonds 31,678,137 134,255,936

Beneficiary certificates 64,250,860 7,511,565

Overseas securities 6,902,098 -

Other securities 33,072,405 15,000,000

137,327,258 157,307,182

Loans:

Other loans 26,000,000 -

Allowance for doubtful accounts (130,000) -

25,870,000 -

Other assets:

Accounts receivable 8,828 1,848

Accrued income 2,112,853 4,001,059

Accrued dividends 5,761 780

Prepaid income taxes 118,241 120,106

Derivative financial instruments assets 2,559,918 -

4,805,601 4,123,793

Due from general accounts 4,539,108 13,399,691

Due to separate accounts (4,539,108) (13,399,691)

210,418,544 197,913,109

Liabilities

Other liabilities:

Accounts payable 21,042 31,965

Accrued expenses 1,238,105 714,814

Unearned income 362,422 202,932

Accrued income taxes 38 -

1,621,607 949,711

Due to general account 631,164 2,454,458

2,252,771 3,404,169

(Continued)

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19. SEPARATE ACCOUNTS

The Company manages retirement insurance contracts and retirement pension contracts separately from the general account. Financial

information of separate accounts as of and for the years ended March 31, 2010 and 2009 is as follows (Korean won in thousands):

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2010 2009

Reserve

Reserve for policyholders:

Premium reserve 211,211,216 204,861,145

Reserve for participating policyholders' dividend 1,011,082 2,052,737

Excess participating policyholders' dividend Reserve 457,296 969,775

Retained earnings for non-dividend (35,520) 24,975

212,644,074 207,908,631

Due from separate accounts (631,164) (2,454,458)

214,265,681 208,858,342

Income (*1):

Premium income 59,713,191 67,427,294

Interest income 7,890,364 10,563,734

Dividend income 177,057 6,587

Gain on disposal of marketable securities 816,718 204,363

Gain on valuation of marketable securities 4,105,870 2,059,836

Gain on foreign currency transactions 26,311 -

Gain on transaction of derivative financial instruments 20,226 -

Gain on valuation of derivative financial instruments 2,393,700 -

Other income 356,892 252,907

75,500,329 80,514,721

Expenses (*1):

Increase in policyholders' reserve 4,735,443 29,717,315

Claims paid 64,604,452 48,045,588

Separate account operating fees 1,182,750 1,294,814

Taxes and dues 1,011,197 459,462

Bad debt expense 130,000 -

Property management fee 92,884 70,077

Loss on disposal of marketable securities 843,504 264,346

Loss on valuation of marketable securities 244,307 636,256

Loss on foreign currency transactions 2,619,457 -

Interest expense 36,257 26,860

Other expense 78 3

75,500,329 80,514,721

(*1) Income and expenses on the retirement pension policies bearing dividend on the basis of actual results, amounted to ￦1,303,580 thousand and ￦799,806 thousand

for the years ended March 31, 2010 and 2009, respectively, which are not stated in the statement of income for general account.

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20. INSURANCE ACCOUNTS PAYABLE

Details of insurance accounts payables as of March 31, 2010 and 2009 are as follows (Korean won in thousands):

21. SEVERANCE AND RETIREMENT BENEFITS

Changes in severance and retirement benefits liabilities for the years ended March 31, 2010 and 2009 are summarized as follows (Korean won in

thousands):

2010 2009

Claims payables 32,839,896 32,136,173

Due to agents 27,168,966 1,129,524

Premiums refund payables 6,996,381 7,657,430

Due to agency business 6,558,052 6,446,771

Reinsurance payables 23,655,391 20,357,886

Overseas reinsurance payables 15,252,602 18,588,314

Deposits on reinsurance contracts ceded 871,530 13,835,556

113,342,818 100,151,654

22. 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.

Outstanding litigation

The Company is involved in litigation as a defendant with an aggregate claim amount of ￦85,266,589 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, 2010.

2010 2009

Beginning balance 1,747,068 39,401,412

Payments during the year (3,360,625) (62,096,789)

Provision during the year 8,868,924 24,442,445

Ending balance 7,255,367 1,747,068

Less deposits for retirement insurance (6,694,123) (1,747,068)

561,244 -

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Bank overdraft accounts agreement

The Company has opened bank overdraft accounts 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, 2010.

23. EQUITY

Details of capital stock as of March 31, 2010 are as follows (Korean won in unit):

Changes in number of common shares, capital stock and paid-in capital in excess of par vale for the recent 2 years are as follows (Korean won in

thousands):

2010

Number of common shares authorized 200,000,000

Par value 500

Number of common shares issued and outstanding 123,800,000

Capital stock 61,900,000,000

2010 2009

Treasury stock (122,712,317) (120,519,836)

Stock option (Note 33) 6,126,759 6,126,759

(116,585,558) 114,393,077

Number of Paid-in capital in common shares Capital stock excess of par value

2008.03.31 123,800,000 61,900,000 222,827,369

2008.06.19 (*1) - - 3,039

2009.03.31 123,800,000 61,900,000 222,830,408

2010.03.31 123,800,000 61,900,000 222,830,408

(*1) 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 in the capital surplus as of March 31, 2010.

As of March 31, 2010 and 2009, capital adjustments consist of the following (Korean won in thousands):

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As of March 31, 2010 and 2009, the Company had 17,232,157 shares of treasury stock amounting to ￦122,712 million and ￦120,520 million,

respectively, that were directly purchased or held through a Treasury Stock Fund in order to stabilize the Company's stock price.

As of March 31, 2010 and 2009, accumulated other comprehensive income consists of the following (Korean won in thousands):

2010 2009

Valuation loss for available-for-sale securities, net (Note 5) (8,449,064) (91,442,482)

Gain (loss) on valuation of derivative financial instruments (Note 28) 7,320,209 (23,656,041)

Equity adjustment arising from equity method investments, net (Note 7) 11,672,059 10,887,904

Revaluation surplus (Note 10) 190,533,415 190,533,415

Equity adjustment of separate account 60,807 -

201,087,426 86,322,796

As of March 31, 2010 and 2009, retained earnings consist of the following (Korean won in thousands):

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.

24. REINSURANCE

Details of ceded reinsurance transactions for the years ended March 31, 2010 and 2009 are as follows (Korean won in thousands):

2010 2009

Legal reserve 10,640,000 10,100,000

Voluntary reserve 146,700,000 211,400,000

Retained earnings before appropriations (accumulated deficit before disposition) 140,435,042 (64,132,273)

297,775,042 157,367,727

( 2010 )

Reinsurance Cash surrender Reinsurance premium ceded value recovered Reinsurance Claims claims returned

General 206,595,705 (1,597,594) 201,597,536 (5,264,741)

Vehicles 679,748 (332) 706,395 -

Long-term 44,636,087 (29,580) 44,847,540 (180,114)

Personal annuities 629,762 (533) 438,730 (1,035)

252,541,302 (1,628,039) 247,590,201 (5,445,890)

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25. PREMIUM INCOME

Details of premium income for the years ended March 31, 2010 and 2009 are as follows (Korean won in thousands):

( 2009 )

Reinsurance Cash surrender Reinsurance premium ceded value recovered Reinsurance Claims 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)

( 2010 )

Direct Assumedpremium written reinsurance premium Surrenders Total

General 321,897,074 21,703,197 (3,398,554) 340,201,717

Vehicles 691,775,719 - (34,516,529) 657,259,190

Long-term 2,196,831,772 - - 2,196,831,772

Personal annuities 77,544,284 - - 77,544,284

3,288,048,849 21,703,197 (37,915,083) 3,271,836,963

( 2009 )

Direct Assumedpremium written reinsurance 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

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26. OPERATING EXPENSES

Details of operating expenses for the years ended March 31, 2010 and 2009 are as follows (Korean won in thousands):

2010 2009

Wages and salaries 131,848,946 109,524,156

Provision for retirement and severance benefits (*1) 11,868,211 24,187,684

Other employee benefits 21,576,722 21,479,816

Administrative expenses 152,712,880 143,503,605

Amortization of intangible assets 3,669,817 2,953,852

Acquisition and collection expenses 61,282,517 29,506,574

Agent commissions 80,082,146 116,953,192

Co-insurance commissions 756,115 699,275

Agency business commissions 231,815 459,120

Claim inspection expenses 26,030,435 17,675,286

Assumed reinsurance commissions 3,188,281 7,175,678

Profit commissions paid for assumed reinsurance 156,220 175,412

Interest on ceded reinsurance deposits 174,057 420,058

493,578,162 474,713,708

(*1) It includes provision for severance and retirement benefits paid under the DC plan, amounting to ￦3,123,715 thousand.

27. VALUE-ADDED INFORMATION

Details of value-added information for the years ended March 31, 2010 and 2009 are as follows (Korean won in thousands):

Operating expenses Investment administration expenses Total

2010 2009 2010 2009 2010 2009

Wages and salaries 131,848,946 109,524,156 1,843,276 1,728,251 133,692,222 111,252,407

Retirement and severance benefits 11,868,211 24,187,684 124,428 254,761 11,992,639 24,442,445

Other employee benefits 21,576,721 21,479,816 224,474 256,469 21,801,195 21,736,285

Rental expenses 22,778,334 22,444,783 19,471 952 22,797,805 22,445,735

Depreciation (*1) 13,655,538 14,096,793 59,178 43,873 13,714,716 14,140,666

Taxes and dues 16,917,144 16,501,707 7,314,834 10,053,480 24,231,978 26,555,187

218,644,894 208,234,939 9,585,661 12,337,786 228,230,555 220,572,725

(*1) Depreciation of real estate for the years ended March 31, 2010 and 2009 amounting to ￦4,174,474 thousand and ￦3,984,241 thousand, respectively, is not included therein.

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28. DERIVATIVE CONTRACTS

Details of derivative contracts as of March 31, 2010 and 2009 are as follows (Korean won in thousands):

( 2010 )

Notional amount Unrealized gains (I/S)

Amount Trading Hedging Trading HedgingValued Total purpose purpose Total purpose Purpose

Currency Currency4,170,224 62,420,001 17,346,472 45,073,529 5,588,018 1,690,845 3,897,173 757,338

related forwards

Currency (9,112,500) 427,526,826 62,194,000 365,332,826 14,514,791 11,370,644 3,144,147 8,508,978

swaps

(4,942,276) 489,946,827 79,540,472 410,406,355 20,102,809 13,061,489 7,041,320 9,266,316

Interest Interest rate201,504 10,000,000 - 10,000,000 - - - 201,504

rate related swaps

(4,740,772) 499,946,827 79,540,472 420,406,355 20,102,809 13,061,489 7,041,320 9,467,820

Unrealizedgains (losses)

on valuation(B/S) (*1)

( 2009 )

Notional amount Unrealized gains (I/S)

Amount Trading Hedging Trading HedgingValued Total purpose purpose Total purpose Purpose

Currency Currency(16,364,020) 107,667,543 36,462,650 71,204,893 (13,009,169) (8,868,950) (4,140,219) (2,684,452)

related forwards

Currency(72,563,412) 470,769,540 125,316,100 345,453,440 (45,848,081) (36,089,821) (9,758,260 (27,991,854)

swaps

(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 Interest348,048 10,000,000 - 10,000,000 - - - 348,048

rate related rate swaps

Index related Stock price- 8,784,475 - 8,784,475 - - - -

index futures

(88,579,384) 597,221,558 161,778,750 435,442,808 (58,857,250) (44,958,771) (13,898,479) (30,328,258)

(*1) Unrealized gains (losses) on derivative is before deferred income tax adjustments.

The Company has been basically using the derivative financial instruments only as a tool for risk hedge. In this regard, the Company has entered into

currency forward contracts and currency swap contracts to hedge against foreign currency fluctuation and interest rate fluctuation of deposits and

securities denominated in foreign currencies, and interest rate swap contracts to hedge against interest rate fluctuation of domestic debt securities.

It is expected that cash flow fluctuation risk of the Company's derivative financial instruments with the purpose of cash flow hedge accounting as of

March 31, 2010 are exposed up to April 17, 2017. In addition, of the unrealized loss on valuation of derivative financial instruments which recorded in

accumulated other comprehensive income, ￦1,936,965 thousand is expected to be realized and charged to current operation within one year.

Unrealizedgains (losses)

on valuation(B/S) (*1)

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As of March 31, 2010, the Company has entered into currency swap contracts of ￦23,850,104 thousand (￦42,114,400 thousand as of March 31, 2009)

and currency forward contracts of ￦34,322,403 thousand (￦40,731,336 thousand as of March 31, 2009) to hedge the exposure to changes in the fair

value of overseas securities by foreign exchange rate fluctuation. Fair vale hedge accounting is applied to all of the derivative contracts above and

unrealized gains (losses) on valuation of the derivative financial contracts are recorded in the net income. Meanwhile, of unrealized gains (losses) on

valuation of the correspondent hedged overseas securities, gains (losses) on foreign currency translation are recorded in the net income.

As of March 31, 2010, the Company has entered into currency swap contracts of ￦341,482,722 thousand (￦303,339,000 thousand as of March 31,

2009), currency forward contracts of ￦10,751,126 thousand (￦30,473,557 thousand as of March 31, 2009) and interest rate swap contracts to

hedge the exposure to variability of cash flows of overseas securities by foreign exchange rate fluctuation and interest rate fluctuation. Cash flow

hedge accounting is applied to all of the derivative contracts above and the hedge-effective portion of unrealized gains (losses) on valuation of the

derivative contracts are recorded in the accumulated other comprehensive income.

Cumulative valuation gains (losses) of all derivative contracts are accounted for as derivative financial instrument assets (liabilities) in the statement of

financial position.

Credit derivative contracts

The Company invests in Credit Linked Notes (CLN), Credit linked Deposit (CLD) and Synthetic Collateralized Debt Obligation (SCDO) which had a book

value of ￦110,724,544 thousand as of March 31, 2010 (￦106,664,658 thousand as of March 31, 2009). Through these investments, the Company

takes the credit 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, CLDs and SCDOs are recorded at fair value, which is

obtained from independent credit rating agencies without bifurcating credit default swap embedded in the credit derivative contracts.

29. OTHER OPERATING EXPENSES

Other operating expenses for the years ended March 31, 2010 and 2009 consist of the following (Korean won in thousands):

2010 2009

Dividends to policyholders 2,553,178 2,268,342

Loss on valuation and disposal of loans 4,998,739 3,595,746

Investment administration expenses (Note 27) 18,279,677 21,291,831

Real estate administration expenses 5,224,352 4,264,429

Depreciation of real estate (Note 10) 4,174,474 3,984,241

Other 50,054 31,268

35,280,474 35,435,857

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30 . INCOME TAX

For the year ended March 31, 2010, the Company is subject to corporate income taxes, including resident surtax, at the aggregate rates of 12.1% on

taxable income of up to ￦200,000 thousand and 24.2% on taxable income in excess of ￦200,000 thousand. The aggregate tax rate will be 24.2% in

2010 and 22% in 2011 and thereafter on taxable income in excess of ￦200,000 thousand.

The major components of income tax expenses for the years ended March 31, 2010 and 2009 are as follows (Korean won in thousands):

A reconciliation of income tax expenses applicable to income before income taxes at the Korea statutory tax rate to income tax expenses at the

effective income tax rate of the Company is as follows (Korean won in thousands):

2010 2009

Current income taxes 39,123,359 (17,641)

Tax effect on temporary differences 42,039,976 8,728,766

Changes in tax adjustment on temporary differences at the beginning of the year - 952,658

81,163,235 9,663,783

Current and deferred income taxes recognized directly to equity (34,409,705) (29,343,048)

Provision for income taxes 46,753,530 (19,679,265)

2010 2009

Income (loss) before income taxes (A) 187,160,844 (78,494,607)

Tax at the statutory income tax rate 45,292,924 (21,586,017)

Adjustments:

Non taxable income (309,998) (341,384)

Non deductible expense 290,277 443,010

Other 1,480,327 1,805,126

Income tax expense (income) (B) 46,753,530 (19,679,265)

Effective income tax rate (B)/(A) 24.98% 25.07%

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Changes in deferred tax assets and liabilities for the years ended March 31, 2010 and 2009 are as follows (Korean won in thousands):

( 2010 )

Beginning balance Increase (*1) Decrease (*1) Ending balance

Deductible temporary differences:

Loss on impairment ofavailable-for-sale securities

39,356,032 2,590,410 - 41,946,442

Loss on impairment of membership 917,301 173,764 - 1,091,065

Allowance for bad debts 4,973,502 1,225,037 595,091 5,603,448

Loss on revaluation of land 8,936,864 - - 8,936,864

Retirement of stock 2,095 - - 2,095

Deemed dividends 254,384 308,215 19,344 543,255

Severance and retirement benefits liabilities 1,531,114 6,692,314 3,144,671 5,078,757

Taxes and dues 10,820,703 7,701,985 10,820,702 7,701,986

Depreciation - 275,110 - 275,110

Deemed depreciation - 494,649 270,599 224,050

Interest income - 92,990 - 92,990

Dormant policies 8,312,494 8,914,863 8,312,494 8,914,863

Retained earning adjustments arisingfrom equity method investments

1,002,905 - - 1,002,905

Available-for-sale securities 75 - 75 -

Dividends (equity method investments) 14,487,516 2,896,492 - 17,384,008

Restructured receivables 984,875 - 984,875 -

Loss on valuation of derivatives 60,159,391 (20,102,809) 25,227,826 14,828,756

Accumulated other comprehensiveincome (available-for-sale securities)

115,729,390 - 107,930,682 7,798,708

Tax loss carry-forwards 9,210,683 14,784,616 23,995,299 -

276,679,324 26,047,636 181,301,658 121,425,302

Additional temporary differences:

Accrued income 10,350,180 2,784,301 12,079,948 1,054,533

Gain (loss) on valuation of the trading securities (4,010,940) 1,847,295 (6,355,150) 4,191,505

Gain on foreign currency translation 57,200,756 (14,167,008) 33,404,894 9,628,854

Gain on cross trading 1,797,966 - - 1,797,966

Group severance and retirement benefits 1,531,114 5,078,757 1,531,114 5,078,757

Equity in earnings of equity method investments 44,983,290 10,978,591 - 55,961,881

Equity adjustments arising fromequity method investments

13,958,851 1,005,327 - 14,964,178

Accumulated depreciation 631,995 - - 631,995

Accumulated other comprehensiveincome (gain on revaluation of land) 244,273,609 - - 244,273,609

(Continued)

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( 2010 )


Separate account (accumulated othercomprehensive income

- 60,807 - 60,807

Accumulated other comprehensive income(gain on valuation of derivatives)

(30,328,258) 39,796,078 - (9,467,820)

Other additional capital surplus(treasury stock fund) 2,756,482 1,733,828 - 4,490,310

Compensation receivables 24,111,523 21,574,923 - 45,686,446

Land 278,328 - - 278,328

Advanced depreciation provisions 1,581,327 - - 1,581,327

369,116,223 70,692,899 40,660,806 399,148,316

Deferred income tax assets recognized (*2) 71,132,962 27,032,088

Deferred income tax liabilities recognized (*2) (87,822,044) (85,761,146)

(16,689,082) (58,729,058)

( 2009 )


Deductible temporary differences:

Loss on impairment ofavailable-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 of land - 8,936,864 - 8,936,864

Retirement of stock 2,095 - - 2,095

Deemed dividends 25,244 229,140 - 254,384

Severance and retirement benefits liabilities 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 adjustmentsarising 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 comprehensiveincome (available-for-sale securities)

42,638,184 73,091,206 - 115,729,390

Tax loss carry-forwards - 9,210,683 - 9,210,683

118,022,987 213,989,764 55,333,427 276,679,324

(Continued)

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( 2009 )


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 cross trading 1,797,966 - - 1,797,966

Group severance and retirement 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 fromequity method investments

14,547,563 - 588,712 13,958,851

Accumulated depreciation 666,981 - 34,986 631,995

Accumulated other comprehensive income(gain on revaluation of land)

- 244,273,609 - 244,273,609

Accumulated other comprehensive income(gain on valuation of derivatives)

(1,620,466) (28,707,792) - (30,328,258)

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

152,695,867 293,345,778 76,925,422 369,116,223

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)

(*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.

Temporary differences, not recognized as deferred income tax assets (liabilities) are as follows (Korean won in thousands):

2010 2009

Advanced depreciation provision of land (*1) 1,581,327 1,581,327

Retained earning adjustments arising from equity method investments 300,871 300,871

Dividends (on equity method investments) 5,215,201 4,346,258

Equity in earnings of equity method investments (*2) (10,059,868) (8,893,731)

(2,962,469) (2,665,275)

(*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 be extinguished in the foreseeable future.

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Deferred income tax assets (liabilities) directly charged/credited to the equity as of March 31, 2010 and 2009 are as follows (Korean won in thousands):

2010 2009

Gross Tax effect Net of tax Gross Tax effect Net of tax

Gain on valuation of available-for- sale securities (*1)

(11,208,133) (2,709,069) 2,709,069 (119,138,815) (27,696,333) 27,696,333

Loss on valuation of derivatives 9,467,820 2,147,611 (2,147,611) (30,328,258) (6,672,216) 6,672,216

Equity adjustments arisingfrom equity method investments

14,964,178 3,292,119 (3,292,119) 13,958,851 3,070,947 (3,070,947)

Revaluation surplus 244,273,609 53,740,194 (53,740,194) 244,273,609 53,740,194 (53,740,194)

Capital surplus ontreasury stock fund

4,490,310 987,868 (987,868) 2,756,482 606,426 (606,426)

261,987,784 57,458,723 (57,458,723) 114,931,294 23,049,018 (23,049,018)

(*1) Deferred income tax assets of gain on valuation of the available-for-sale securities include tax effect amounting to ￦14,715 thousand caused by separate account.

31. COMPREHENSIVE INCOME

Comprehensive income for the years ended March 31, 2010 and 2009 is as follows (Korean won in thousands):

2010 2009

Net income (loss) 140,407,315 (58,815,341)

Other comprehensive income (loss):

Loss on valuation of available-for-sale securities 82,943,418 (57,120,374)

Loss on valuation of derivatives 30,976,250 (22,481,203)

Equity adjustments arising from equity method investments 784,155 340,921

Revaluation surplus - 190,533,415

Separate account other comprehensive income 60,807 -

Comprehensive income 255,171,945 52,457,418

32. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share for the years ended March 31, 2010 and 2009 are computed as follows (Korean won in unit):

2010 2009

Net income (loss) 140,407,314,795 (58,815,341,378)

Weighted average number of common stock outstanding 106,567,843 108,551,333

Earnings (loss) per share 1,318 (542)

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Weighted average number of common stocks outstanding for the years ended March 31, 2010 and 2009 is computed as follows:

2010 2009

Beginning 106,567,843 113,467,843

Treasury stock (*1) - (4,916,510)

Weighted average number of common stocks outstanding 106,567,843 108,551,333

(*1) The number of treasury stock is calculated based on its acquisition date using the weighted average method.

Diluted earnings(loss) per share for the years ended March 31, 2010 and 2009 are computed as follows (Korean won in unit):

2010 2009

Net income (loss) of common stock 140,407,314,795 (58,815,341,378)

Compensation costs (after tax) - 795,498,790

Diluted net income 140,407,314,795 (58,019,842,588)

Weighted average number of diluted common stocks Outstanding 106,710,625 108,551,333

Diluted earnings (loss) per share (1,316) (*)

(*) Diluted earnings per share for the years ended March 31, 2009 was not presented as there was no anti-dilutive effect.

Weighted average number of diluted common stocks outstanding for the years ended March 31, 2010 and 2009 are as follows:

2010 2009

Weighted average number of common stocks outstanding 106,567,843 108,551,333

Stock options 142,782 -

Weighted average number of diluted common stocks Outstanding 106,710,625 108,551,333

(*) Weighted average number of diluted common stocks outstanding was calculated by treasury stock methods.

Potential dilutive securities as of March 31, 2010 are as follows.

Type Exercisable period Number of shares to be issued

Stock options From June 16, 2008 To June 15, 2016 1,491,278 shares

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33. STOCK OPTIONS

As of March 31, 2010, total stock options granted are summarized as follows:

3rd

Number of stock options granted 1,491,278 shares

Date of grant June 15, 2006

Method of grant New stock, treasury stock or difference compensation

Exercise price 5,780

Exercisable period June 16, 2008 ~ June 15, 2016

Minimum required service period: 2 years

Vesting conditions Achievement of the target net income

Changes in the number of stock options granted for the year ended March 31, 2010 are as follows (unit: shares):

3rd

April 1, 2009 1,491,278

Forfeited or expired -

Exercised -

March 31, 2010 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 (Korean won in thousands):

3rd

Compensation cost recognized until March 31, 2009 6,126,759

Compensation cost recorded for the year -

To be recognized in the future years -

6,126,759

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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

34. DIVIDENDS

Interim dividends paid for the years ended March 31, 2010 and 2009 are calculated as follows (Korean won in unit):

2010 2009

Dividend per share (percentage of par) - 50 (10%)

Number of shares issued and outstanding, excluding treasury stock - 106,567,843 shares

Total dividends - 5,328,392,150

Year-end dividends for the years ended March 31, 2010 and 2009 are as follows (Korean won in unit):

2010 2009

Dividend per share (percentage of par) 300 (60%) -

Number of shares issued and outstanding, excluding treasury stock 106,567,843 shares -

Total dividends 31,970,352,900 -

Dividend payout ratios for the years ended March 31, 2010 and 2009 are as follows (Korean won in unit):

2010 2009

Dividends 31,970,352,900 5,328,392,150

Net income (losses) 140,407,314,800 (58,815,341,378)

Payout ratios 22.77% -

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35. RELATED PARTIES

Related parties as of and for the years ended March 31, 2010 and 2009 are as follows:

Dividend yields for the years ended March 31, 2010 and 2009 are as follows (Korean won in unit):

Rewards and stock options granted to key management for the year ended March 31, 2010 are as follows (Korean won in thousands):

1) Rewards to the key management

2010 2009

Dividend per share 300 50

Stock price at the statement of financial position date 7,350 3,870

Price-dividend yields 4.08% 1.29%

Investor Relationship

Meritz Securities Co., Ltd. Meritz Fire & Marine insurance Co., Ltd. Subsidiary

Meritz Investment Bank Meritz Fire & Marine insurance Co., Ltd. Affiliate

Meritz Assets Management Meritz Fire & Marine insurance Co., Ltd. Subsidiary

Meritz Financial Information Service Meritz Fire & Marine insurance Co., Ltd. Subsidiary

PT. Asuransi Hanjin Korindo Meritz Fire & Marine insurance Co., Ltd. Subsidiary

Ritzpartners Co., Ltd. Meritz Fire & Marine insurance Co., Ltd. Subsidiary

Provision for StockWages and Severance and compensation

Position salaries retirement benefits expenses Other benefits Total

Registered directors 2,620,335 883,333 - 26,528 3,530,196

2) Stock options granted to the key management

Number of shares

Position Date of grant April 1, 2008 Exercised March 31, 2009 Exercise period Exercise price

Registered directors 2006.06.15 688,943 - 688,9432008.06.16 ~

5,7802016.06.15

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Transactions with related parties for the years ended March 31, 2010 and 2009 are summarized as follows (Korean won in thousands):

2010 2009

Revenue Expense Revenue Expense

Meritz Securities Co., Ltd. 1,763,048 2,589 2,946,601 58,929

Meritz Investment Bank 1,843,055 465,808 206,587 3,927

Meritz Assets Management 646,396 1,456,232 273,421 1,153,077

Meritz Financial Information Service 1,917,152 12,363,458 546,199 12,131,280

PT. Asuransi Hanjin Korindo 244,460 121,202 341,846 110,508

6,414,111 14,409,289 4,314,654 13,457,721

Outstanding balances with related parties arising from the above transactions as of March 31, 2010 and 2009 are summarized as follows (Korean

won in thousands):

Liabilities

( 2010 )

Accounts payable leasehold deposits received

Meritz Securities Co., Ltd. - 290,509

Meritz Financial Information Service 6,272,471 482,766

Meritz Assets Management - 162,565

6,272,471 935,840

( 2009 )

Accounts payable leasehold deposits received

Meritz Securities Co., Ltd. - 268,691

Meritz Assets Management - 157,830

Meritz Financial Information Service - 468,705

- 895,226

36. PREMIUM DEFICIENCY

Insurance contracts subject to insurance premium deficiency tests are all contracts that are long-term or individual annuity insurance, which can

normally incur premium income and claim payment as of February 28, 2010. 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.

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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 February 28, 2010 because there is no significant difference

between the contracts held as of March 31, 2010 and February 28, 2010, and it is almost certain that insurance premium deficit will not be incurred.

For premium deficiency calculation for the year ended March 31, 2010 the Company used following assumptions:

Classification Criteria Calculation methodAsset management earning rate = asset management income ÷management asset × 100

Discount rateRecent 3 years

Management asset = (∑management asset at the end of previous month + (interest rate) ∑management asset at the end of this month) ÷ 24

Asset management income = (investment income - Investment expense) Expense ratio Recent 1 year Actual expense ratio = actual operating expense ÷ expense loadings

Persistency ratio = Insurance premium persisted ÷ insurance premium of new contractsSurrender ratio

Recent 5 yearsSurrendered ratio = Insurance premium of surrendered contracts ÷ insurance premium of new contracts

(persistency ratio) Lapse ratio = Insurance premium of lapsed contracts ÷ insurance premium of new contractsExtinction ratio = Insurance premium of extinct contract by accident ÷ insurance premium of new contracts

Insurance claimRecent 3 years Insurance claim payment ratio = insurance claim paid ÷ premium at riskpayment 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 February 28, 2010 are as follows (Korean won in hundred million, %):

Classification Insurance contract amounts Expected interest rate Premium Surplus

Non-dividend insurance 1,484,189 3.5~8.0 7,754Individual annuities 7,323 4.5~7.5 853

1,491,512 3.5~8.0 8,607Fixed interest type 191,151 3.5~8.0 300Floating interest type 1,300,361 4.5~6.5 8,307

37. CASH FLOW INFORMATION

Cash presented in the statements of cash flows including cash, ordinary deposits and cash equivalents is as follows (Korean won in thousands):

2010 2009

Cash 1,600 5,335

Deposits:

Ordinary deposit 25,265,373 27,205,283

Current deposit 707,339 1,074,189

25,972,712 28,284,807

Cash equivalents 46,200,000 31,860,000

72,174,312 60,144,807

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The statements of cash flows are prepared using the indirect method. Significant non-cash transactions for the years ended March 31, 2010 and

2009 are summarized as follows (Korean won in thousands):

2010 2009

Increase (decrease) in available-for-sale securities from valuation of available-for-sale securities 107,930,682 (57,120,374)

Equity adjustments arising from equity method investments 1,005,327 340,921

Increase (decrease) in treasury stock due to valuation of treasury stock fund 2,192,481 (4,067,224)

Gain (loss) on valuation of derivatives 39,796,078 (22,481,203)

Transfer to buildings from construction in-progress - 50,407,920

Offset deposit for severance and retirement benefits against severance and retirements benefits - 30,320,729

38. 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, 2010 and 2009 are as follows (Korean won in thousands):

Three months ended March 31,

2010 2009

Operating revenue 1,025,796,479 932,125,980

Net gain (loss) 25,185,098 (108,751,438)

Net gain (loss) per share (won) 237 (1,002)

39. INTRODUCTION OF KOREA INTERNATIONAL FINANCIAL REPORTING STANDARDS

According to the roadmap announced in March 2007, the Company will adopt the Korea International Financial Reporting Standards (hereinafter "K-IFRS")

for the first time for the financial period beginning April 1, 2011. The Company formed a task force team and devised a strategic plan to transition to K-IFRS.

K-IFRS implementation task force team is periodically reporting the progress and results of the implementation project to management of the Company.

Additionally, the task force team is regularly providing training programs to employees to develop K-IFRS-trained resources.

The task force team completed its preliminary impact assessment of K-IFRS and developed a detailed master plan for the implementation of K-IFRS

accounting information system. Following this plan, the team conducted the detail analysis of the Company's financial reporting system requirement

and accounting policy changes impacted by the adoption of K-IFRS. Based on results of the above analysis, the Company has mapped out changes

that are required for its financial reporting system capable of capturing and producing K-IFRS financial data, and modifications to the Company's

work processes relating to the system changes have been made. The Company will complete the system and work processes changes by June 2010.

The table below summarizes the differences that are expected to give rise to a significant impact on the Company's financial statements based on

the K-IFRSs that are effective as of March 31, 2010. The differences listed below are not exhaustive, and additional differences may be identified in

the future as a result of further assessment.

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Section K-IFRS K-GAAP

FVO is applicable only in case of mitigating accounting

Adoption of the fair value optiondiscrepencies at the time of initial acquisition of financial

("FVO")instruments or a group of financial instruments managed N/Aand evaluated on a fair value basis or combined financial instruments including embedded derivatives.

Gain (loss) on translation of monetary available-for-sale Gain (loss) on translation of

Gain (loss) on translation of securities denominated in foreign currencies is recognized

available-for-sale securities isoverseas available-for-sale

as current income (loss) while gain (loss) on translation of recognized as accumulated other

securities.nonmonetary available-for- sale securities denominated in

comprehensive income regardless foreign currencies is recognized as accumulated other

of monetary/nonmonetary.comprehensive income.

Condition of hedge accounting Short-cut method is not acceptable in hedge accountingShort-cut method is acceptable inhedge accounting in same cases

Receivables are classified as one of normal, precautionary, substandard,

The Company is required to assess the impairment of assets at doubtful and estimated loss, and the related

everyreporting date by materiality and according to the allowance is calculated at a minimum of

Allowancemateriality, assessment is implemented based on specific or

0.5% (0.75% for household loans), 2%

portfolio of receivables.(5% for household loans), 20%, 50% and100%, respectively, of the out standing amount in each classification by the Regulation of Insurance Supervision

Valuation of leasehold deposits Initially recognized at fair value, after initial recognition, Stated at nominal valueand loans for employees measured at amortised cost using effective interest rate method.

Recognized as interest income if it can be obtained certainly Recognized on a accrual basis butRecognition of interest income and measured reliably, regardless of default of the principal recognized on a cash basis if the principal

and interest. or interest is defaulted.

In accordance with the Company'sregulations, employees and directorsterminating their employment with at least

Employee benefits The liability for severance and retirement benefits in estimated one year of service are entitled to severancebased on actuarial assumptions and on a discounted basis. and retirement benefits. An allowance

for employee retirement benefits is measured based on the assumption that all employees will leave as of the reporting date.

Additional disclosures such as fair value level of financial Disclosure of instruments, fair value of financial instruments measured at Disclosure of book value of financial assetfinancial instruments amortised cost method and risk of financial instruments and financial liability

including credit risk and liquidity risk are required.

Disclosure of insurance Nature and extent of risks arising from insurance contractsN/A

contracts should be disclosed

40. APPROVAL OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010

The Company's financial statements for the year ended March 31, 2010 will be approved in the shareholders' meeting to be held on June 11, 2010.

INTERNAL CONTROL OVER FINANCIAL REPORTING REVIEW 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, 2010. The Company's management is responsible for 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. The management's report on the operations of the ICFR of the Company states that "Based on the assessment result, I believe that the

Company's ICFR, as of March 31, 2010, is effectively designed and operating, in all material respects, in conformity with the Best Practice

Guideline."

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 the 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, 2010, and we did not review the ICFR subsequent to March 31, 2010. 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 27, 2010

This report is annexed in relation to the audit of the financial statements as of March 31, 2010 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

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1922. 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 stockholders

1935. 10 Headquarters moved toTaepyung-no, Jung-gu,Seoul

1937. 08 Got an auto insurance license

Era of Foundation &Exploration (1922~1949)

1950. 05 Renamed as Oriental Fire & Marine Insurance Inc. from Chosun Fire &Marine Insurance

1956. 07 First Korean insurer to be listed on Korea Stock Exchange

1958. 09 Privatized (Ewha Hakdang, acquired stake in Oriental insurancefrom the government)

1962. 03 Dongbang Life Insurance, acquired stake in Oriental insurance fromthe Ewha Hakdang

1963. 05 Control transferred to Samsung Group(Dongbang Life Insurancewas affiliated into SamsungGroup)

1967. 07 Affiliated into Hanjin Group

1976. 12 First Korean insurer to exceed KRW10 billion insale

New Birth (1950~1982)

1983. 12 Acquired building andmoved into Headquarters at Yoido-dong,Youngdungpo-gu, Seoul

1996. 05 Total assets exceeded KRW1 trillion

1997. 12 Established a training institute

2002. 06 Contract transfer from Regent InsuranceCo.,Ltd.

Era of Growth (1983~2004)

2005. 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 a "Meritz Tower" buildingat Yeoksam-dong,Gangnam-gu, Seoul

2005. 11 Acquired Meritz Securities as subsidiary

2006. 02 10:1 stock split(Par value changed fromKRW5,000 to KRW500)

2006. 11 Acquired Meritz Investment Bank as sub-subsidiary

2006. 11 First Korean insurer to receive A3 credit ratingfrom Moody's

2007. 08 Paid-in capital increased to KRW61.9 billion with arights offering of KRW225.7 billion

2007. 10 Interim dividend of KRW 100 per share (First interim dividend ininsurance industry)

2008. 04 Established Meritz Financial InformationService Co., Ltd.

2008. 05 Established Meritz Asset Management Co., Ltd.

2009. 04 Acquired 1st grade in 2008 FSS's civil application evaluation (three consecutive years)

2009. 12 Established "Ritz Partners" as subsidiary

2010. 01 Received A- credit rating from A.M Best for threeconsecutive years

2010. 03 Received A3 grade fromMoody's for four consecutive years

2010. 03 Total assets exceeded KRW6 trillion

2nd Founding (2005~ )

ACCOLADES & AWARDS1996.02 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)

1998.11 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 byKorea 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-ManagementAward sponsored by Kookmin Ilbo.

2008.08 Grand price in product field at Seo-kyung Truthful Insurance People

2008.11 Received grand prize for KMAC Korea Customer Satisfaction Management Awards.

2009.07 Grand price in innovative product field at Seo-kyung Truthful Insurance People

2009.11 Received outstanding prize for customer value innovation in Customer SatisfactionManagement Awards

BOARD OF DIRECTORS

98_99


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

Seung Bang, Ro·Auditor General

·Senior official in charge of inspection at FSS

·Senior official in charge of insurance affairs at FSS

·Researcher at International Cooperation Bureau at FSS

NON-EXECUTIVE DIRECTORS

In Joon, Kim·Outside Director

·Incumbent Professor at 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

Yeon Ku, Jo·Outside Director

·Information official at Ministry of Strategy & Finance

·Investigator at National Tax Tribunal

·Chief of Seoul Tax Inspection Department, National Tax Service

Jung Ho, Kang·Outside Director

·Korea representative (standing at IMF)

·Judge at National Tax Tribunal

·Chairmanof Korea Futures Exchange

Beom Ha, Jee·Outside Director

·Vice president of Korea Life Insurance

·Advisor to Presidential Reform Committee

·Dean of Business Administration School of U.S. King's College

·Currently, professor of economics at Handong Global University

ORGANIZATION

CEO

Personnel &General

Affairs Headquarter

Risk ManagementHeadquarter

CorporateSupporting General

Strategic PlanningHeadquarter

Long-termInsurance

Headquarter

Channel StrategicHeadquarter

Asset ManagementHeadqurter

AutomobileInsurance

Headquarter

Sales Education &Traning

Headquarter

AutomobileInsurance Claim

Headquarter

Long-term /GeneralClaim Adjustment

Headquarter

Commercial LineSales Headquarter Ⅰ

Actuary &Accounting

Headquarter

General InsuranceHeadquarter

Seoul AreaHeadquarter

Commercial LineSales Headquarter Ⅱ

Kyungin AreaHeadquarter

Commercial LineSales Headquarter Ⅲ

Jungbu AreaHeadquarter

Yungnam AreaHeadquarter

Agency Headquarter

New DistributionChannel

Headquarter

Commercial LineSales Headquarter Ⅳ

Commercial LineBusiness Division

Line of BusinessGeneral Sales General Claim Service

General

Meritz Insurance received "A3" credit rating for four consecutive years from Moody's and an "A-"

with a stable outlook from A.M. Best for three years in a row. This reaffirms that Meritz, with a

sound financial structure, is in a position to compete on an equal footing with leading global insurers.

The credit ratings are a reflection of Meritz's sound capitalization structure and its stable performance

results. This will not only enhance the Company's image, but also contribute to upgrading the

Company's corporate and brand image.

Moody's and A.M. Best are globally renowned credit rating agencies, which provide rating services

to financial institutions across the globe.

CREDIT RATINGS

100_101


A.M. Best Moody's

2010.03 A- (Excellent) Stable A3 Stable

2008.12 A- (Excellent) Negative A3 Negative

2007.10 A- (Excellent) Stable A3 Stable

2006.11 B++ (Good) Positive A3 Stable

2006.01 B++ (Good) Stable

2004.11 B++ (Good) Stable

A- (Excellent)A.M. Best

A3Moody's

CORPORATE DATA•Establishment : October 1, 1922

•Head Office : Meritz Tower, 825-2, Yeoksam-dong, Gangam-gu, Seoul, Korea (Postal code 135-934)

Tel: 82-2-3786-2114 Fax: 82-2-3786-2115

•Website : http://www.meritzfire.com

•Paid in Capital : KRW61,900,000,000

•Affiliates & Investee Companies (As of March 31, 2010)

•Shares Outstanding: 123,800,000 shares

•Shareholders (As of Mar. 31, 2010 )

•Listed Date: July 2, 1956

•Investor Relations: Tel. 82-2-3786-1156 Fax. 82-2-3786-1165

(KRW in thousands, %)

Company Investee firms & AffiliatesStatus of Investment to Other Firms

Equity investment Equity ratio

Meritz Securities Meritz Insurance 111,676,825 30.71%

Meritz Asset Management Meritz Insurance 15,000,000 100.00%

Meritz Financial Information Services Meritz Insurance 1,000,000 100.00%

Ritz Partners Meritz Insurance 10,000,000 100.00%

PT.ASURANSI HANJIN KORINDO Meritz Insurance 953,955 51.00%

Meritz Securities: Meritz Securities and Meritz Investment Bank were merged as of April 1, 2010

Major shareholders 22.41%

ESOP 5.06%

Related companies 2.98%

Treasury 13.92%

Foreigners 11.89%

Domestic 43.74%

Meritz Tower, 825-2, Yeoksam-dong, Gangnam-gu, Seoul, Korea

Tel : 82-2-3786-2114 Fax : 82-2-3786-2115

www.meritzfire.com

MER

ITZIN

SUR

ANCE

ANN

UAL

REPO

RT

2009

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