| Q1. |
I have a question regarding guidance for FY2009. Tokio Marine and Nichido Fire on the stand-alone basis is expected to make an ordinary profit of 120 billion yen, while on the consolidated basis, ordinary profit is expected to be 125 billion yen. Why is there such a narrow gap between the stand-alone basis of Tokio Marine Nichido Fire and the consolidated basis of Tokio Marine Holdings in this year? |
| A1. |
First of all, once Tokio Marine and Nichido Fire post some sales gains, there will be difference between the purchase method and the pooling of interests method to be accounted for. We have not changed our thinking on this front, but this is certainly one of the factors that we will see to some extent this year as well.
With regards to this year's guidance, Tokio Marin and Nichido Financial Life are expected to make an ordinary loss of 10 billion yen.
Also, Tokio Marine and Nichido Financial Solutions Securities made a major loss in FY2008, and they are expected to make a loss of approximately 5 billion yen in FY2009 as well.
Overseas insurance subsidiaries are expected to make positive contributions. So, Tokio Marine and Financial Life, Tokio Marine and Nichido Financial Solutions and accounting related to the purchase method have negative factors, in addition to the negative impact from Tokio Marine and Nichido Fire, while those will be somewhat offset by the positives from overseas subsidiaries. This is the composition of our guidance this year.
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| Q1(2) |
What is your assumption for the impact of purchase-method accounting in terms of the yen amount? |
| A1(2) |
It would be around 18 billion yen.
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| Q1(3) |
What are your assumptions for your major subsidiaries outside Japan, particularly Kiln and Philadelphia? |
| A1(3) |
Philadelphia is expected to make 22 billion yen of ordinary profit before the amortization of good will and 10billion yen after the amortization.
For Kiln, it would be 4.5 billion yen before the amortization and 1.5 billion yen post amortization.
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| Q2. |
This is not related directly to figures, but I am curious to find out about the performance of Philadelphia in the US and how the company's fundamentals have changed after your acquisition. It would be helpful if you could share with me some figures or indicators, for instance, net premiums written or the number of policies so I can better understand how their numbers have trended since your acquisition. |
| A2. |
In a nutshell, the fundamentals of the company have remained unchanged since our acquisition, and they continue to be strong. According to the latest report on hand, from January through April 2009, net premiums written continued to grow almost by double digits. In our view, this is an impressive rate of growth given that the entire US market grew negatively in 2007 and 2008. Combined ratio continued to trend below 90%. The company has maintained a strong performance since our acquisition. So, when compared to before the acquisition, the fundamentals of this company have remained almost unchanged and remain strong.
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| Q2(2) |
As some of the major insurers in the US collapsed, I hear that the market landscape in terms of market share has been changing. May I take it that Philadelphia is performing very well thanks to this industrial background, or are they already enjoying synergy effects as part of your group? Which one of the two factors do you think is the main reason? |
| A2(2) |
We think the biggest factor behind their strong performance is their core competence and strength in marketing. Before our acquisition and before the financial crisis, this company was growing at 10 or 15% per annum and they have successfully continued doing so to date. Since some of the major insurers in the US are in a critical state, we see a trend where policyholders and brokers are opting for financially sound insurers in the general so-called "flight to quality" trend. This trend is certainly working in favor for Philadelphia's sales activities. However, we believe they are performing very strongly based on their strong sales activities which have traditionally been their strength.
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| Q3. |
I have a question about the solvency margin ratio of Tokio Marine and Nichido Fire on the stand-alone basis. It was about 700% at the end of March, which I understand is not a problematic level at all, but compared to the level that you had until a little while ago, the margin appears to be coming off. Of course, criteria for the solvency margin are reviewed and likely to become more stringent, but what is your current view on 700% level of solvency margin ratio? Thank you. |
| A3. |
As you are fully aware, under the current medium-term plan, which we announced in December last year, we are trying to embark on an ERM or enterprise risk management-based approach and manage our business based on risk. Now, the solvency ratio margin has dropped below 700% due to the unprecedented conditions that we are surrounded by. But we do not feel that we have to take some action on this immediately. Of course, the risk weight of stocks, for instance, is being reviewed at the moment, and we would like to determine how the revision would impact our capital policy and risk the overall structure. So, in that sense, we have to review not only our capital policy but also risks. How we want to make risks efficient? So, we have to look at this issue from these two perspectives and at the same time, we would like to keep our solvency margin ratio at a high and sound level. But if I may emphasize, we are not planning to take any actions immediately in response to the current level of the margin.
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| Q4. |
I have a question on the Tokio Marine and Nichido Fire's non-consolidated performance. Incurred losses from automotive and personal accident businesses appeared to have improved on the full year basis, while as of the end of the third quarter, losses were expanding in both lines of the business. What is the reason behind this improvement? I would assume this is because at the end of FY2007, you made a substantial provision to the statistical IBNR reserve, but please clarify the loss trend. |
| A4. |
As you correctly pointed out, as of the end of FY2007, we made provisions to the statistical IBNR reserve given the trend of loss at that time. So, you are correct in saying that the incurred loss at the end of FY2008 went down somewhat compared to the end of the third quarter because of this reason. I would also like to add that the level of newly incurred losses is trending either flat or marginally lower.
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| Q5. |
On Tokio Marine and Nichido Financial Life, EV from new business is expected to show a negative growth and while the EV based on the in-force policies as of the end of last fiscal year was 53.9 billion yen, you are now expecting a decline. So, what kind of sales or underwriting policy are you going to take in the space of variable annuity? |
| A5. |
With regards to the variable annuity business of Tokio Marine and Financial Life, as you mentioned, new business EV and EV of in-force policies have been affected due to the recent tough investment environment. However, we continue to believe that the variable annuity is one of the promising markets for growth in Japan in the future. Therefore, we have not changed our policy materially. In any case, the demand in the market is not that big at the moment, and we do not want to stretch ourselves too much by taking aggressive product strategies. So, we will continue to watch how the demand and market situation develops. For the time being, we will not rush to take bold actions, and we want to prepare for the positive momentum to come.
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