MS& Insurance : Corporate Governance Report

Corporate Governance Report

CORPORATE GOVERNANCE	MS&AD Insurance Group Holdings, Inc.
	Last Update: Nov 19, 2021
	MS&AD Insurance Group Holdings, Inc.
	Noriyuki Hara, President & CEO
Contact:	Human Resources & General Administration Dept.
	e-mail: [e-mail]
	Securities Code:	8725
	https://www.ms-ad-hd.com/en/index.html

This document has been translated from the Japanese original (as submitted to the Tokyo Stock Exchange) for reference purposes only.

In the event of any discrepancy between this translated document and Japanese original, the original shall prevail. MS&AD Insurance Group Holdings, Inc. assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from this translation

(Note)

"Audit & Supervisory Board Member" in this report is used in the same sense of "Kansayaku" in the reference format provided by Tokyo Stock Exchange.

The corporate governance of MS&AD Insurance Group Holdings, Inc. (the "Company") is described below.

1. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other

Basic Information

1. Basic Views

1. In line with its Corporate Philosophy (Mission), MS&AD, as a holding company overseeing all group businesses, has established a management framework that ensures transparent, fair, swift and decisive decision-making that takes into account the standpoint of all stakeholders. The Company's objectives are to sustain stability and consistent growth over the long term by using corporate resources efficiently and managing risks properly and ultimately, to further increase enterprise value.
2. To this end, the "MS&AD Insurance Group Corporate Philosophy (Mission), Corporate Vision and Values" were formulated as something all officers and employees of the Group should adhere to in all situations. In addition to working to disseminate these principles among all officers and employees of the Company and its Group companies, corporate governance, compliance and risk management are positioned as important management issues in the Medium-Term Management Plan, and efforts shall be made to actively promote that Plan.

■ Aspirations of MS&AD Insurance Group

To contribute to the development of a vibrant society and help secure a sound future for the planet, by enabling safety and peace of mind through the global insurance and financial services business.

To create a world-leading insurance and financial services group that consistently pursues sustainable growth and enhances corporate value

・CUSTOMER FOCUS

Striving to provide security and satisfaction to our customers

・INTEGRITY

Being sincere, kind, and fair in our dealings with people

・TEAMWORK

Growing together as a team by respecting one another's individuality and opinions and sharing knowledge and ideas

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・INNOVATION

Always improving the way we work while responding to stakeholders' interests

・PROFESSIONALISM

Providing high-quality services by constantly enhancing our skills and proficiency

Please see attached "the MS&AD Insurance Group Basic Policies on Corporate Governance (hereinafter referred to as "Basic Policies on Corporate Governance")" at the end of this report for more-detailed information.

The Group insurance companies in which the Company has a direct investment are notated as follows:

Mitsui Sumitomo Insurance Co., Ltd.	Mitsui Sumitomo Insurance, MSI
Aioi Nissay Dowa Insurance Co., Ltd.	Aioi Nissay Dowa Insurance, ADI
Mitsui Direct General Insurance Co., Ltd.	Mitsui Direct General Insurance, MD
Mitsui Sumitomo Aioi Life Insurance Co., Ltd	Mitsui Sumitomo Aioi Life Insurance, MSI Aioi Life
Mitsui Sumitomo Primary Life Insurance Co., Ltd.	Mitsui Sumitomo Primary Life Insurance, MSI Primary Life

[Reasons for Not Implementing the Principles of the Corporate Governance Code]

The Company has implemented all principles (including those for Prime Markets) of the Corporate Governance Code

that was revised in June 2021.

[Disclosure Based on the Principles of the Corporate Governance Code]

(1)[Principle 1.4] Policy for Strategic Equity Holdings

a. MS&AD Insurance Group Basic Policy for Reduction of Strategic Equity Holdings

Strategic equity holdings is shares held under the assumption of long-term holding for the purpose of maintaining and strengthening comprehensive business relationships.

We have adopted a policy to reduce the aggregate amount of our strategic equity holdings, aiming to build a solid financial base less affected by fluctuations in stock prices and to improve the capital efficiency (Note).

The suitability of holding strategic equities is assessed from the perspective of the equity issuers' growth potential and profitability for each equity and the medium- to long-term business relationship.

If the rationale is not confirmed, we shall proceed with sales of those strategic equity holdings after obtaining the equity issuers' understanding. Otherwise, we may sell our holdings, taking into account the market environment and our business and financial strategies.

(Note) The Group's strategic equity holdings of ¥500 billion are planned to be sold over the 5 years from fiscal 2017 to fiscal 2021. We shall proceed with sales of our holdings based on the planning. The Group sold equity holdings of ¥502.7 billion by the end of fiscal 2020 and is proceeding with the plan after fiscal 2021. The balance of market value of the strategic equity holdings held by the Company as of March 31, 2021 is ¥2,837.5billion.

b. Verification of propriety of strategic equity holdings and reduction efforts

・Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance shall examine the propriety of their strategic holdings by each equity based on profitability and balance of insurance contract as to whether the purpose of the holding is appropriate and whether the benefits and risks associated with the holding are commensurate with the capital cost. The results of these examinations shall be confirmed by MS&AD's Board of Directors.

・Based on the results of the examinations of each equity, constructive dialogue shall take place with regard to equities that do not meet the objective of the rationale and are particularly in need of improvement. The equity will continue to be held in the event that an improvement is anticipated, and sale negotiations will be entered into in the event that an improvement is not anticipated.

c. Criteria for Ensuring Appropriate Handling of the Exercise of Voting Rights Pertaining to Strategic Equity Holdings

The basic policy on the exercise of voting rights for strategic equity holdings is as follows.

1. Basic approach to the exercise of voting rights
   The exercise of voting rights is seen to be an important means of influencing the management and improving the

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enterprise value of investee companies. Therefore, decisions are not made uniformly based on formulaic short-term criteria, but rather in terms of enhancement of enterprise value in the medium-to-long term and improvement in shareholder returns, among others, based on dialogue with investee companies.

1. The process for exercising voting rights
   When exercising voting rights, items such as those listed below are verified for each proposal, with a focus on such aspects as whether the company in question is managed with an emphasis on growth of the company and the interests of shareholders, and whether the company is engaged in any antisocial behavior. Proposals are also judged based on the results of dialogue with the company concerned following a detailed examination of individual issues as required.
   

	Type of proposal		Matters for verification
	Appropriation of surplus		∙ Status of shareholder returns
	Election of Directors		∙ Status of enhancement of corporate value
			∙ Status of occurrence of scandals, etc.
			∙ Status of election of Independent Outside Directors
			∙ Status of attendance at Board of Directors meetings, etc.
	Election of Audit & Supervisory		∙ Status of occurrence of scandals, etc.
	Board Members and Accounting		∙ Status of attendance at Board of Directors meetings and Audit &
	Auditors		Supervisory Board meetings
	Officers' remuneration and		∙ Status of enhancement of corporate value
	bonuses
		∙ Status of attendance at Board of Directors meetings, etc.
	Retirement benefits and
		∙ Status of occurrence of scandals, etc.
	condolence money for officers
	Issuance of stock acquisition		∙ Any application of performance-linked remuneration, and recipients
	rights and stock remuneration
		∙ Any decrease of equity ratio by existing shareholders
	Changes to the Articles of		∙ Examined individually
	Incorporation
	Takeover defense measures		∙ Examined individually
	Shareholder proposals		∙ Examined individually

(c) Criteria for judging proposals relating to the exercise of voting rights

Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance have established specific evaluation criteria and guidelines for the exercise of voting rights of shares held. In the event that the criteria and guidelines are met, dialogue will take place as necessary with the investee companies, and proposals shall be judged based on the dialogue.

* Both companies will periodically report on its details on their websites.

(2)[Principle 1.7] Procedures for related Party Transactions

a. With respect to transactions between the Company and a related party, to ensure that they do not harm the common interests of the Company and the Company's shareholders, such transactions as competition transaction by a director, transactions between a corporate officer and the Company, and other transactions with conflict-of-interest characteristics, such transactions will require prior deliberation and approval of a Board of Directors' meeting with the attendance of multiple outside directors, and in the case of similar transactions by executive officers will require a report to the Board of Directors.

b. Transactions falling under Related Party Transactions as set forth in the Companies Act and the Ordinance on Financial Statements, etc. are noted in the Securities Report. Note that preparation of the Securities Report is a matter to be reported to the Board of Directors.

(3)[Supplementary Principle 2.4.1] Ensuring the diversity of core human resources of the Company

Please see Ⅲ3. "Measures to Ensure Due Respect for Stakeholders".

(4)[Principle 2.6] Exercise of functions as an asset owner of a corporate pension plan

・The Mitsui Sumitomo Insurance Corporate Pension Fund and the Aioi Nissay Dowa Insurance Corporate Pension Fund have been established in order for Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance, which are the main operating companies of the Group, to implement defined-benefit corporate pension plans and manage the pension assets separately from the companies.

・Decisions regarding asset management of each Corporate Pension Fund are made by the Board of Representatives

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based on deliberations by the Asset Management Committee. Personnel in the asset management, accounting, and human resources departments in each company who possess appropriate qualities shall be appointed to the Asset Management Committee and the Board of Representatives, and labor union executives are appointed as representatives of the beneficiaries.

・Personnel who have extensive experience in asset management shall undertake asset management operations of the corporate pension fund. In addition, both funds accepted the Stewardship Code.

・The incorporation of shares and the exercise of voting rights by investees are in accordance with the evaluation criteria of the party to whom asset management has been delegated, and there are no matters that constitute a conflict of interest.

(5)[Principle 3.1] Full Disclosure

a. Aspiration of the Group (Mission etc.) and business strategies and business plans; ( [Principle 3.1(i)])

1. 1. Business Objectives, etc.;
      Please see the above I.1 "Aspiration of the MS&AD Insurance Group" .
   2. Business strategies and business plans
      Please see our Group's Medium-Term Management Plan, "Vision 2021" on our company web site as below. https://www.ms-ad-hd.com/en/group/what/strategy/management_plan.html
2. Basic policy and guidelines on corporate governance; [Principle 3.1(ii)]
   Please see the above I.1 "Basic Views" and the attached "the Basic Policies on Corporate Governance".
3. Board policies and procedures in determining the remuneration of the senior management and directors; [Principle 3.1(iii)]
   Please see the below II.1 "Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods ".
4. Board policies and procedures in the appointment and dismissal of the senior management and the nomination of

directors and Audit & Supervisory Board Members candidates; [Principle 3.1(iv)]

・For policies regarding the nomination of directors and Audit & Supervisory Board Members candidates, please see the below"Criteria for the Selection of Director Candidates and Audit & Supervisory Board Member Candidates", in the Appendix of the attached "Basic Policies on Corporate Governance".

・For policies regarding the nomination of director candidates who engage in managing affairs continuously (including Chairman & Director, Vice Chairman & Director and President), please see the above-mentioned criteria as well as "(8) Succession plan for the Chief Executive Officer (CEO), etc. a. Criteria for CEO Selection".

・For procedures regarding the appointment of the senior management and the nomination of directors and Audit & Supervisory Board Members candidates, please see the below II.1 "Committee's Name, Composition, and Attributes of Chairperson" Supplementary Explanation "1. Nomination Committee (Nomination Process)".

・For policies regarding the dismissal of directors who engage in daily business (including Chairman & Director, Vice Chairman & Director and President), please see "(10) Objective, timely and transparent procedures for the dismissal of a CEO".

・The dismissal of executive officers and the dismissal of directors and Audit & Supervisory Board Members of domestic insurance companies in which the Company has direct investments shall be deliberated by the Nomination Committee and determined by the Board of Directors upon receipt of the results of deliberations by the Nomination Committee.

e. Explanations with respect to the individual appointments, dismissals and nominations based on d.[Principle 3.1(v)]. Please see [Reasons for selection as a candidate] in the "Notice of Convocation of Annual Shareholders Meeting". https://www.ms-ad-hd.com/en/ir/ir_event/meeting.html

(6)[Supplementary Principle 3.1.3] Initiatives for sustainability, etc.;

a. Initiatives for sustainability

Please see our "Sustainability Report". https://www.ms-ad-hd.com/en/csr/report.html

b. For information on the impact of climate change risks and opportunities on our business activities and earnings, please see our "TCFD Report". https://www.ms-ad-hd.com/en/csr/community/climate_change/tcfd.html

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c. Investment in human capital and intellectual property (a)Human capital

Please see page 33 in "Integrated Report 2021". https://www.ms-ad-hd.com/en/ir/library/disclosure.html

(b)Intellectual property

With regard to investment in intellectual property, our company is working to promote digitization as a key strategy in its medium-term management plan. A "Digitalization Promotion Committee" has been set up in each task committee, and discussions on the promotion of digitization are conducted regularly as a group.

In addition, through investment in startup companies, we are collaborating with these companies to make use of cutting-edge technology to provide new services and enhance business operations. The main activities are as follows.

・Providing new services for individuals and companies that contribute to risk measurement (quantification) and security and safety measures for customers

*Climate Change Risk Analysis Venture Jupiter Intelligence Launches TCFD Quantitative Assessment Service for Climate Change Impact ~ Global Assessment of the Impact of Natural Disaster Risks Due to Climate Change ~

・Enhancing and streamlining operations such as product development, insurance underwriting, and claims services.

(7)[Supplementary Principle 4.1.1] Scope and content of the matters delegated to the management

Please see Chapter 3. 2. "Role of the Board of Directors" in the attached "Basic Policies on Corporate Governance".

(8) [Supplementary Principle 4.1.3] Succession plan for the Chief Executive Officer (CEO), etc.

The Company has formulated the succession plan that stipulates the selection of the Group CEO (hereinafter referred to as "CEO") and the fostering of successors. The outline of the plan is as follows.

a. Criteria for CEO selection

• Ability to embody the Group's Mission, Vision and Values, and having the concept of CSV (Creating Shared
  Value with society) in his/her own system of values
• Ability to plan and build future visions
• Fairness and impartiality
• Ability to develop human assets
• Ability to demonstrate leadership
• Global response capability
• Acting in the Group's best interest b. CEO Selection Process

(a) Recommendation by Current CEO

• The current CEO prioritizes the candidates and recommends them to the Nomination Committee (the majority of whose members and the chairperson are appointed from among Outside Directors).
• Candidates may be from within the Group as well as outside the Group.

(b) Deliberation by the Nomination Committee

• The Nomination Committee deliberates on candidates recommended by the CEO.
• Outside Directors can recommend other candidates.

(c) Resolution by the Board of Directors

After (a) and (b) above, the Nomination Committee advises the Board of Directors which makes the final decision. c. Development Plan for CEO Candidates

The CEO must position the development of a large number of candidates as an important role for him/her and provide the candidates from inside the Group with the following experience as needed.

1. • Multiple departments (Management, operations, international, sales, claims services, systems, etc.)
   • Management of domestic operating companies and overseas subsidiaries
2. [Supplementary Principle 4.2.1] Management remuneration

In order to realize a Director remuneration system functioning as an appropriate incentive for improving linkage between Director remuneration and business performance and achieving sustainable growth for the purpose of strengthening governance and increasing medium term corporate value, the Company is introducing a restricted stock

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