SecProbe.io

CORRESP
1
filename1.htm

Letter of Correspondence

 September 12, 2005

 By Facsimile and E-mail

 Mr. Jim B. Rosenberg

 Mr. Don Abbott

 Mr. Frank Wyman

 United States Securities and Exchange Commission

 Division of Corporation Finance

 Washington, D.C. 20549

 Facsimile No.: 1-202-772-9217

 E-mail: (c/o wymanf@sec.gov; abbottd@sec.gov)

Re:

 Millea Holdings, Inc.

 Form 20-F for the Fiscal
Year Ended March 31, 2004

 (File No. 000-31376)

 Dear Messrs. Rosenberg, Abbott and
Wyman:

 On behalf of Millea Holdings, Inc. (“Millea
Holdings”), this letter constitutes our further response to the comment letters of the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) dated August 26, 2005 (the
“August 26 Comment Letter”) and September 7, 2005 (the “September 7 Comment Letter”) relating to Millea Holdings’ annual report on Form 20-F for the fiscal year ended March 31, 2004 (the “2004 Form
20-F”).

 Set forth below are Millea Holdings’
responses to the Staff’s Comments 1 and 2 of the August 26 Comment Letter and revised response to Comment 1 of the September 7 Comment Letter. As Millea Holdings intends to reflect these responses in its annual report on Form 20-F for the
fiscal year ended March 31, 2005 (the “2005 Form 20-F”) due by September 30, 2005, we would very much appreciate the Staff’s assistance in providing any further comments relating to these responses as promptly as practicable
within this week in order to facilitate the finalization and internal filing procedures for the 2005 Form 20-F.

Securities and Exchange Commission

September 12, 2005

 References to
“we”, “us” and “our” in the responses set forth below are to Millea Holdings, unless the context otherwise requires.

 August 26 Comment Letter

 Comment 1:

 Management’s Discussion and Analysis of Financial Condition and Results of Operations

 Critical Accounting Policies

 Insurance Reserves, page 45

1.
Please refer to your proposed disclosures to prior comments 2 and 3. You do not provide:

1-1.
any quantification of the historical accuracy of your loss, claim and loss adjustment expense liability,

 Response:

 In response to the Staff’s comment, we refer you to Annex 2 to our response letter dated August 2, 2005 (the
“August 2 Response Letter”). Annex 2 contained the following proposed disclosure, which we believe quantifies the historical accuracy of our loss, claim and loss adjustment expense liability by quantifying the extent of development
for claims related to prior years for each of the three years ended March 31, 2005:

 For the years ended March 31, 2005, 2004 and 2003, our adverse developments for claims related to prior years (net of reinsurance) were as
follows:

Year ended March 31,

2005

2004

2003

(yen in millions, except percentages)

 Claims expense recognized in the current year relating to prior years, net of reinsurance

¥
•

¥
9,325

¥
438

 Claims expense recognized in the current year relating to prior years as a percentage of opening reserves for losses, claims and loss
adjustment expenses, net of reinsurance

•
%

1.18
%

0.07
%

 Claims expense recognized in the current year relating to prior years as a percentage of net incurred losses, net of
reinsurance

•
%

0.83
%

0.04
%

 2

Securities and Exchange Commission

September 12, 2005

 As set forth in the above table, subsequent developments on prior years’ claims represented an immaterial portion of the current
year’s claims expense for the periods presented.

 We expect to include
this in our 2005 Form 20-F in the revised form presented in Annex 1 hereto.

1-2.
its sensitivity to changes in key assumptions, such as claim frequency and severity,

 Response:

 We note the Staff’s comment. Although we generally take into consideration trends of claim frequency and severity information available when making
assumptions regarding loss development, our analysis is a qualitative process affected by a range of factors and neither claim frequency nor severity is a direct quantitative factor in the analysis. To assist readers of our 2005 Form 20-F to better
understand the sensitivity relating to our losses, claims and loss adjustment expense liability, however, we propose to provide the following additional disclosure for fiscal 2005 with respect to sensitivity to changes in paid claims and case
reserves:

We estimate that a 1% increase in paid claims during the fiscal year ended March 31, 2005, together with a 1% increase in case reserves as of March 31, 2005, would have increased our aggregate
losses, claims and loss adjustment expense liability as of March 31, 2005 by approximately 1.26%.

 Please see Annex 1
attached hereto for draft expanded disclosure we expect to include in our 2005 Form 20-F in respect of Comment 1-2.

1-3.
the range of loss reserve estimates as determined by your actuaries, and

 Response:

 We note the Staff’s comment. We refer to our response to Comment 2 in our August 2 Response Letter where we noted in the last paragraph that we use
actuarial methods to determine our best estimate of policy liabilities and accruals (i.e., loss reserves) rather than a range of estimates. Please let us know if you have further questions in this regard.

1-4.
the potential impact of known trends and uncertainties on net income and cash flow.

 3

Securities and Exchange Commission

September 12, 2005

 Response:

 We note the Staff’s comment. Based on our ongoing
work in preparing the 2005 Form 20-F, we now expect to provide additional details as to known trends and uncertainties in our 2005 Form 20-F.

 Please see Annex 1 attached hereto for draft expanded disclosure we expect to include in our 2005 Form 20-F in respect of Comment 1-4.

1-5.
Also, we were unable to locate discussion and quantification of the risks associated with your longer-tail businesses, such as earthquake exposures. Please expand your proposed
disclosure to include this information or tell us why these disclosures are not meaningful to investors.

 Response:

 In response to the Staff’s comment, we confirm that in our 2005 Form 20-F filing we will seek to expand our critical accounting policy disclosure
with respect to insurance reserves to include additional discussion and quantification of the risks associated with bodily-injury claims, which constitute the majority of our longer-tailed businesses.

 With respect to our earthquake exposures, as we noted in our letter to the
Staff dated September 2, 2005, there were no material JER-related loss reserves as of March 31, 2005 as there were no significant earthquake losses charged to us through JER during the four-year period ended March 31, 2005.

 We also have limited earthquake exposure with respect to buildings and
structures other than dwellings covered under polices we write as an extension of fire insurance coverage on a private basis. However, as with JER coverage, there were no significant earthquake losses charged to us through these policies during the
four-year period ended March 31, 2005. Accordingly, there were no material loss reserves related to these policies as of March 31, 2005. In addition, although these private earthquake policies are not entitled to reinsurance arrangements through
JER, a substantial part of the risk associated with these policies is reinsured by reinsurers.

 We note for the Staff that we expect to continue to disclose in the “Business—Property and Casualty Insurance—Earthquakes” section in our 2005 Form 20-F the maximum policy coverage per occurrence
per policy with respect to our JER exposure.

 Please see Annex
1 attached hereto for draft expanded disclosure we expect to include in our 2005 Form 20-F in respect of Comment 1-5.

 4

 Securities and Exchange Commission

September 12, 2005

 Comment 2:

 Contractual Obligations, page 72

2.
Please refer to prior comment 4. In Annex 4, you state that future payments for expected loss, claim and loss adjustment expense and policy benefits and losses have been excluded
from the table of contractual obligations because lacking payment triggering events, they are not reasonably fixed and determinable. Given your asset-liability management processes and other resources, it appears that you possess the capability for
estimating the future payments associated with these reserves based on your past experience. If management is able to determine the time period in which it expects to pay out these amounts then we believe you should include this disclosure in the
contractual obligation table. For the portion of the reserves that management cannot determine the expected time period in which losses are paid, please disclose this fact, discuss why management cannot estimate the expected time period of payments
and how your inability to estimate timing of payments could affect the asset-liability management process, and your future financial position or results of operations. Please expand your proposed disclosure, as appropriate.

Response:

 In response to the Staff’s comment, we confirm that in our 2005 Form 20-F we will seek to include information as of March 31, 2005 regarding future payments for expected losses, claims and loss adjustment
expenses and future policy benefits and losses in our contractual obligations table.

 Please see Annex 2 attached hereto for draft expanded disclosure we expect to include in our 2005 Form 20-F in respect of Comment 2.

 5

 Securities and Exchange Commission

September 12, 2005

 September 7 Comment Letter

 Comment 1:

 Note 4. Reinsurance, page F-26

1.
Please refer to prior comment 4. We have read your proposed new disclosure. You appear to have determined that the amount of loss reserves related to JER was “nil” at
March 31, 2004 because no earthquake losses were outstanding at that time and none had been charged to the Company through JER. Apparently, when such retrocessional losses are outstanding, you record them on an incurred basis in accordance with SFAS
60. Please expand your proposed disclosure disclosures in MD&A to discuss the amount of related premiums, claims and profit for each period presented for this line of business.

 Response:

 In response to the Staff’s comment and in accordance with our recent discussions, we confirm that we expect to include
the requested additional disclosure in the MD&A section of our 2005 Form 20-F as follows:

 The premiums earned (net of reinsurance), claims incurred (net of reinsurance) and the resulting profit for JER-related policies for the
years ended March 31, 2005, 2004 and 2003 are as follows:

Year ended March 31,

2005

2004

2003

(Yen in millions)

 Premiums earned, net of reinsurance

¥
•

4,930

4,550

 Losses incurred, net of reinsurance

•

—

—

 Profit as per above

¥
•

4,930

4,550

 During the years ended March 31, 2005, 2004 and 2003, there were no significant earthquake events covered by our JER policies and we did not record any losses
related to these policies. In the event that in future periods earthquake events covered by our JER policies occur, we may experience significant losses related to our JER policies.

 * * *

 6

 Securities and Exchange Commission

September 12, 2005

 If you have any
questions about this response letter or any further comments on Millea Holdings’ 2004 Form 20-F, please do not hesitate to contact Mr. Katsumi Suetsugu of Millea Holdings in Tokyo (Tel: +81-3-6212-3597; Fax: +81-3-6212-3712), Mr. Michael
Liesmann of PricewaterhouseCoopers LLP in New York (Tel: 973-236-4569; Fax: 813-741-4625) or Eugene Gregor of Davis Polk & Wardwell in Tokyo (Tel: +81-3-5561-4566; Fax: +81-3-5561-4425).

 Sincerely yours,

 /s/ Eugene C. Gregor

 Eugene C. Gregor

 Attachments

 cc:

Mr. Katsumi Suetsugu

 Mr. Hirokazu Fujita

 Mr. Shigeru Taguchi

 Mr. Makoto Hirokawa

 Millea Holdings, Inc.

 Mr. Michael Liesmann

 PricewaterhouseCoopers LLP

 Mr. Akira Yamate

 ChuoAoyama PricewaterhouseCoopers

 Theodore A. Paradise, Esq.

 Fumiko Yokoo, Esq.

 Davis Polk & Wardwell, Tokyo Office

 Annex 1 - Proposed Insurance Reserves

 Disclosure for 2005 Form 20-F

 Set forth below is proposed draft disclosure which we would expect to include in our 2005 Form 20-F relating to the critical accounting policy regarding insurance reserves. Material enhancements to the proposed
draft disclosure included in our previous August 2 Response Letter are indicated in boldface type.

 Insurance Reserves

 Loss, Claim and Loss Adjustment Expense Liability

 Our loss, claim and loss adjustment expense liability represents estimates of future payments that we will make in respect of property and casualty and life insurance claims, including expenses relating to those
claims for insured events that have already occurred as of the balance sheet date.

 As of March 31, 2005, our loss, claim and loss adjustment expense liability accrued by line of business was as follows:

 Loss, claim and loss adjustment
expense liability

 Line of Business

as of March 31, 2005

(yen in millions)

 Property and casualty business:

 Voluntary automobile

¥                •

 CALI

                  •

 Fire & allied

                  •

 Personal accident

                  •

 Marine – Cargo & transit

                  •

 Marine – Hull

                  •

 Other

                  •

 Loss adjustment expenses – unallocated

                  •

 Total

¥                •

 The establishment of
our loss, claim and loss adjustment expense liability is an inherently uncertain process, involving assumptions as to factors such as court decisions; changes in laws, social, economic and demographic trends, inflation and other factors affecting
claim costs; and, in our life insurance business, assumptions regarding mortality and morbidity trends.

 We estimate loss, claim and loss adjustment expense liability for reported claims on a case-by-case basis, based on the facts known to us at the time
reserves are established. We periodically adjust these estimates to recognize the estimated ultimate cost of a claim. In addition, we establish reserves in our property and casualty business to recognize the estimated cost of losses that have
occurred but about which we have not yet been notified. When actual claims experience differs from our previous estimate, the resulting difference will be reflected in our reported results for the period of the change in the estimate. See
“Business — Property and Casualty Insurance — Property and Casualty Losses and Reserves — Property and Casualty Reserves”.

 A1-1

 As claims are reported over time, not all claims incurred during a fiscal period will be reported to us
by the balance sheet date. Accordingly, we estimate incurred but not yet reported amounts using actuarial methods. We apply actuarial methods appropriate for each line of business. The majority of the loss, claim and loss adjustment expense
liability is determined utilizing an incurred loss triangle method. Under the incurred loss triangle method, reported losses (i.e., paid claims plus case reserves) and loss ratios are tracked by accident year for each line of business to determine
loss development factors. These historical loss development factors, along with any known or anticipated trends in claims development, are considered by management in determining the loss development factor to be utilized in calculating the
appropriate level of reserve for the current fiscal year.

 Changes in reported losses may affect our historical loss development factors, which in turn may affect our estimate of the amount of losses, claims and loss adjustment expense liability. For example, we estimate that a 1% increase in
paid claims during the fiscal year ended March 31, 2005, together with a 1% increase in case reserves as of March 31, 2005, would have increased our aggregate losses, claims and loss adjustment expense liability as of March 31, 2005 by approximately
1.26%.

 In developing our property and casualty reserves,
we review our actual exp