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Brief Explanation of FY2010 2Q Financial Results
 

<Summary of FY2010 2Q Financial Results>
 
1. Consolidated Results of Tokio Marine Holdings
 
(References: "Supplemental material for FY2010 2Q conference call")
 
Ordinary Income
- Net premiums written: ¥1,174.9 billion, down 7.7 billion or 0.7% YoY
Tokio Marine & Nichido and Nisshin Fire continued to see premium increases, owing to the effects of revisions in products and rates and the favorable sales of new cars in the first half of FY2010.
Premiums from overseas branches declined due to the large impact from the strong yen
- Life insurance premiums: ¥227.5 billion yen, up 8.5 billion or 3.9% YoY
Insurance premiums and other of Tokio Marine & Nichido Life: Steady growth in new policies as well as policies in force raised insurance premiums by ¥13.5 billion or 6.5% YoY.
Insurance premiums and other of Tokio Marine & Nichido Financial Life: Insurance premiums increased ¥16 billion, up 18.4% YoY, due to the reversal effect of the considerable decline in new policies in the second quarter of the previous fiscal year.

(References: Non-consolidated life results do not add up to the consolidated results of life operations due to the difference in accounting format between life and non-life operations; the consolidated results are shown in the non-life format).
- Insurance premiums of international insurance business (total of life and non-life)*: ¥299.5 billion, down ¥8.8 billion or 2.9% YoY
* Result for the overall international insurance business, including foreign branches of Tokio Marine & Nichido, equity method investees and non-consolidated companies.
Premiums decreased mainly due to the strong yen. Excluding the effects of foreign exchanges, premiums increased by approximately 6%.
U.S. branches of Tokio Marine & Nichido and European subsidiaries: Decrease in premiums, due to the strong yen and the lower rates caused by increased competition among Japanese corporate businesses
Life and non-life insurance businesses in Asia:
- 5% increase in non-life insurance premiums owing to premium growth mainly in China, India, Thailand and Indonesia
- Life insurance premiums achieved double-digit growth
Philadelphia Insurance Companies: 3% decrease due to the appreciation of the yen to the US dollar although they continued to grow by approximately 6% in local currency, supported by the outstanding sales capability of the company.
Kiln: Premiums dropped 13% due to the strong yen and weak sterling pound although they grew approximately 4% in local currency owing to the underwriting expansion by utilizing the capacity of the syndicate 1880, while the reinsurance market is softened.
Reinsurance business (excluding Kiln): Premiums increased 3% YoY. Excluding the foreign exchange impact, premiums increased by approximately 15%, owing to the growth of new business in the US, pursued by Tokio Millennium Re Ltd.
Ordinary Profit
- Ordinary Profit: ¥148.1 billion, up 43.5 billion or 41.6%
Tokio Marine & Nichido:
Decline in funding of the foreign-currency-denominated provision for outstanding claims due to the appreciation of the yen
Increase in gains on sales of business related equities
Improvement of gains from financial derivatives such as foreign exchange forwards due to the appreciation of the yen
Overseas subsidiaries:
Increase in profits of Philadelphia Insurance Companies
Increase in investment income of Kiln and others, due to the appreciation of the dollar against the sterling pound compared with the level at the beginning of the period
Tokio Marine & Nichido Financial Life:
Increase in funding underwriting reserve for minimum guarantee, due to the deterioration of the investment environment caused by the decline in stock prices
Burden of sales cost of no-load-type products for the first year of these policies
Gains or losses on investment in securitized instruments: CDS, ABS and financial guarantee reinsurance yielded total profits of ¥8.1 billion, including:
Gains on valuation in CDS investments, due to the tightening of credit spreads
Gains on redemptions or sales in ABS
Interim Net Income
♦ Interim net income: ¥95.2 billion, up ¥23.9 billion or 33.7% YoY
The factor driving the increase was mostly the same as the factor that led to higher ordinary profit.
 
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2. Non-Consolidated Results of Tokio Marine & Nichido
 
(Reference: "Material for FY2010 Interim Results Press Conference", page 2)
 
- Net premiums written: ¥874.0 billion, up ¥3.7 billion or 0.4% YoY
Fire insurance: Premiums decreased by 3.2%, owing to: (i) switches in inception dates of major contracts from the original dates in the previous year due to changes in conditions, and (ii) the sluggish U.S. economy.
Casualty insurance: Premiums increased by 2.1%, owing to rate revisions for overseas travel insurance, the increased number of travelers and the increased sales in medical insurance of Super-Insurance.
Auto insurance: Premiums increase by 0.6%, mainly due to the higher unit price caused by revisions to rates and products in July 2009 and July 2010.
Marine insurance: Premiums increased 11.1%, owing primarily to the considerable recovery of international trade and distribution.
- Net loss ratio: 66.7%, up 0.7 percentage points YoY
Fire insurance: 43.0%, up 2.6 points, mainly due to the payment of claims for major accidents which occurred during prior fiscal years
Auto insurance: 70.4%, up 2.4 points, owing to the increase in the unit price of vehicle repairs and the rise in frequency of accidents caused by the increased traffic volume of automobiles
Net claims relating to natural disasters: Down ¥4.9 billion YoY to a total of ¥0.7 billion for all lines, because of fewer number of typhoon attacks than in an average year
- Business expenses and expense ratio:
Agency commissions and brokerage: ¥152.4 billion, down ¥1.6 billion YoY
Decline in average agency commission points
Operating and general administrative expenses on underwriting: ¥146.7 billion, up ¥6.9 billion YoY
Increase in non-personnel expenses associated with the launch of new IT system related to the Business Renovation Project
Total business expenses: ¥299.2 billion, up ¥5.3 billion YoY
Net business expense ratio: 34.2%, up 0.5 points YoY
- Provision for outstanding claims: Reversal of ¥12.6 billion, down ¥7.6 billion YoY
The strong yen reduced funding of foreign currency-denominated provision for outstanding claims. However, the impact of the strong yen was comparable to that a year earlier and the released amount declined YoY, due to the reversal effect by the decline in provision for financial guarantee insurance in the previous interim period.
- Provision for underwriting reserves: Reversal of ¥56 billion, up ¥21.5 billion YoY
Of which general underwriting reserve (private insurance basis): An increase of ¥9.8 billion, up ¥3.6 billion YoY
Of which catastrophe loss reserve: Reversal of ¥13.2 billion, up ¥4.9 billion YoY
Claims paid for auto insurance increased.
- Underwriting profit: ¥35.4 billion, down ¥17.9 billion YoY
- Investment income (losses): ¥111.7 billion, up ¥67.1 billion YoY
Income from interest and dividends: ¥83.1 billion, up ¥25.8 billion YoY, owing to increases in dividends on foreign stocks of overseas subsidiaries
Gains and losses on sales of securities: ¥47.5 billion, up ¥26.9 billion YoY, due mainly to the sell-offs of business-related equities
Income from financial derivatives: ¥21.3 billion, up ¥7.5 billion YoY
Increase in gains from foreign exchange forwards and currency swaps under the appreciation of the yen
- Ordinary profit: ¥133.6 billion, up ¥52.4 billion YoY
- Interim net income: ¥93.5 billion, up ¥37.1 billion YoY
 
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3. Non-Consolidated Results of Nisshin Fire
 
(Reference: "Material for FY2010 Interim Results Press Conference", page 3)
 
- Net premiums written: ¥67.5 billion, up ¥1.2 billion or 1.8% YoY
Auto insurance: Increase in premiums, supported by the addition of new agents and the revision of its premium rates
Fire insurance: Increase in new policies primarily in the real estate channel
- Net loss ratio: 64.9%, up 4.0 percentage points YoY
Auto insurance: Increase in automobile physical damage insurance losses, due mainly to the rise in the number of auto accidents.
Fire insurance: Progress of payments of major accidents and natural disasters occurred in prior fiscal years
- Expense ratio: 37.2%, down 1.9 percentage points YoY
Factors supporting the improvement include a decrease in corporate expenses due to a substantial reduction of personnel costs as well as increasing premium income.
- Underwriting profit: Loss of ¥0.5 billion, down ¥2 billion YoY
While corporate expense reductions were effective, casualty claims primarily for auto insurance increased.
- Investment income (losses): ¥3.2 billion, down 0.5 billion YoY
Loss on valuation of securities declined while income from interest and dividends, and gain on sales of securities dropped.
- Ordinary profit: ¥2.6 billion, down ¥2.1 billion YoY
- Interim net income: ¥1.9 billion, down ¥1.0 billion YoY
 
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4. Non-Consolidated Results of Tokio Marine & Nichido Life
 
- Insurance business (Reference: "Material for FY2010 Interim Results Press Conference", page 28):
New policies (individual insurance): Both first-sector products including "Household Term Insurance" and third-sector products including "Medical Mini" showed steady growth.
Number of new policies: up 10.1% YoY
Amount of new policies: up 4.4% YoY
Annualized premiums of new policies: up 5.5% YoY
Policies in force (individual insurance): Increased steadily
Number of policies: up 5.3% from the end of the previous fiscal year
Amount of policies: up 4.0% from the end of the previous fiscal year
Annualized premiums of policies in force: up 3.2% from the end of the previous fiscal year
- Statement of income (Reference: "Material for FY2010 Interim Results Press Conference", page 26):
Insurance premiums and other: ¥222.5 billion, up ¥13.5 billion or 6.5% YoY
The stable growth was achieved in tandem with the higher volume of policies in force.
Business expenses: ¥42.2 billion, up 4.0% YoY
The rate of increase remained relatively low compared with the growth rate of premiums as non-personnel expenses were reduced despite the rise in agency commissions in line with the increase in new policies.
Ordinary profit: ¥15.7 billion, up ¥2.4 billion or 18.5% YoY
Interim net income: ¥7.4 billion, up ¥1.5 billion or 25.7%
Additional provision for underwriting reserves in order to fullfill the standard amount of underwriting reserve will be made at the end of the fiscal year, and all the funding obligation for the reserve is expected to be completed by the end of the fiscal year.
 
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5. Non-Consolidated Results of Tokio Marine & Nichido Financial Life
 
- Insurance business (Reference: "Material for FY2010 Interim Results Press Conference", page 35:
New policies (individual annuities): "Number", "Amount" and "Annualized premiums" all increased YoY
Policies in force (individual annuities): "Number", "Amount" and "Annualized premiums" all slightly increased compared with the end of the previous fiscal year.
Continued to take risk-restrictive stance on variable annuities sales in accordance with full control of minimum guarantee risks.
The increase was a reversal effect from the considerable drop in new policies due primarily to the review of sales costs in the second quarter of the previous fiscal year.
- Statement of income (Reference: "Material for FY2010 Interim Results Press Conference", page 33):
Insurance premiums and others: ¥103.4 billion, up ¥16.0 billion or 18.4% YoY
Ordinary profit (loss): Loss of ¥3.6 billion, down ¥4.3 billion YoY
Deteriorated investment environment required funding of reserve for minimum guarantee.
No-load products for which upfront sales cost is recognized have become core products.
Interim net income (loss): Loss of ¥3.7 billion, down ¥4.3 billion YoY
 
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6. Non-Consolidated Results of E. design Insurance
 
(Reference: "Material for FY2010 Interim Results Press Conference", pages 19-24)
 
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7. Earnings of International Insurance Business
 
(References: "Supplemental material for FY2010 2Q conference call")
 
- Interim net income: ¥31.0 billion, up ¥7.3 billion or 30.8% YoY
- Adjusted earnings*: ¥31.9 billion, up ¥4.1 billion or 14.8% YoY
Earnings increased at each location as a result of sales efforts and improvement in profitability amid negative effects of the strong yen of approximately 8% against the dollar and approximately 17% against the sterling pound YoY.
* Includes interim net income of "international insurance business (life and non-life)" for financial accounting purposes as well as profits and losses of overseas branches of Tokio Marine and Nichido and equity method investees; valuing earnings of life insurance business at embedded value (EV); adjusting the differences between local accounting standards and consolidated accounting standards.
Adjusted Earnings
Adjusted Earnings
Philadelphia Consolidated: Adjusted earnings of ¥12.6 billion, up ¥1.3 billion or 11% YoY
(Excluding the effects of foreign exchange, an increase of approximately 20%)
The combined ratio remained favorable level at around 89% as a result of maintaining disciplined underwriting and rate setting while the combined ratio of the entire U.S. P&C insurance market stood at around 102%.
Kiln: Adjusted earnings of ¥4.6 billion, up ¥4.7 billion YoY
Positive factors included the growth of the Group retention by utilizing the new Syndicate 1880, the rise in investment income and foreign exchange gains due to the stronger dollar against the sterling pound from the beginning of the fiscal year although its performance was impacted by natural disasters such as the earthquake in Chile and wind and flood disasters in Europe and Australia.
Reinsurance (excluding Kiln): Adjusted earnings of ¥8.6 billion, down ¥2.2 billion or 21% YoY
(Excluding the effects of foreign exchange, a decrease of approximately 12%)
Maintained underwriting discipline with emphasis on the bottom line supported by solid risk management while the reinsurance market softened.
Other non-life: Secured profits despite the effects of the appreciation of the yen
Europe: Decline in major accidents
North America: Increase in investment income
Asia: Improvement in loss ratio at some countries
Life insurance: Adjusted earnings of ¥1.0 billion, down ¥2.4 billion or 69% YoY
Earnings increased steadily primarily in Malaysia, Singapore and China life although the results dropped YoY due to the limited increase in net asset value caused by the sluggish Shanghai stock market.
 
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<Business Projections for Full-Term FY2010>
 
Consolidated Business Projections on Financial Accounting Basis
 
(References: "Supplemental material for FY2010 2Q conference call")
 
- Consolidated ordinary income: ¥3,280 billion, a downward revision of ¥80 billion from the projection at the beginning of the fiscal year
Expecting a decline in income associated with the termination of sales of some products by Tokio Marine & Nichido Financial Life
Net premiums written: ¥2,289.4 billion, a downward revision of ¥47.8 billion from the original projection
Tokio Marine & Nichido: ¥1,746 billion, a downward revision of ¥7 billion from the original projection
(Growth rate up 0.6% from the FY2009 result)
Fire insurance: Expect a decline in premiums for the full term due to the delay in recovery of the number of housing starts and the lower earnings from major policies although recovery is expected in the second half of the fiscal year.
Auto insurance: Expect negative impacts to the number of policies, due to the lower number of new car sales caused by the completion of subsidies for eco-friendly car purchases.
Nisshin Fire: ¥133.9 billion yen, a downward revision of ¥0.4 billion from the original projection
(Growth rate up 1.5% from the FY2009 result)
Life insurance premiums: ¥379.8 billion, a downward revision of ¥143.1 billion from the projection at the beginning of the fiscal year
Expect a decline in earnings associated with the suspension of sales of major products by Tokio Marine & Nichido Financial Life
Total net premiums written from international insurance companies: ¥549 billion, a downward revision of ¥46 billion from the original projection
Foreign exchange impact (appreciation of yen)
- Consolidated ordinary profit: ¥180 billion, no change from the original projection
Tokio Marine & Nichido: ¥158 billion yen, an upward revision of ¥5 billion from the projection at the beginning of the fiscal year
Underwriting profit: ¥8 billion, a downward revision of ¥12 billion from the original projection
A downward revision due to the decline in net premiums written and the rise in loss ratio caused by the increase of the auto-accident frequency, despite a decrease in funding of foreign currency-denominated provision for outstanding claims due to the appreciation of the yen and a reduction in projection of claims for natural disasters
Investment income(losses): ¥177.4 billion, up ¥14.7 billion YoY.
Increase in gains on financial derivatives under the appreciation of the yen
Nisshin Fire: ¥3.4 billion, a downward revision of ¥1.7 billion from the original projection
Projection for insurance underwriting profit is revised downward of ¥4.1 billion yen from the original projection, due primary to the increase in funding of provision for outstanding claims in auto insurance owing to increasing accidents, although investment income is expected to be improved by the increase in gain on sale of securities.
Tokio Marine & Nichido Life: ¥4.7 billion, an upward revision of ¥0.6 billion from the forecast at the beginning of the fiscal year
Projection was revised upward in expectation of the steady increase in policies in force
Tokio Marine & Nichido Financial Life: - ¥4.8 billion, a downward revision of ¥1.2 billion from the forecast at the beginning of the fiscal year
Expecting an increase in funding of underwriting reserve for minimum guarantee, due to the worsening conditions in the investment environment.
Overseas subsidiaries: ¥60.8 billion, a downward revision of ¥1.4 billion from the original projection
Expecting impacts of the appreciation of the yen and slight increase in the expectation of natural cat hazard
- Net income: ¥115 billion, no change from the original projection
 
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Adjustment Projections on Adjusted Earnings Basis
 
(Reference: "Business Projections for Full-Term FY2010 (Adjusted Earnings-Basis")
 
Domestic non-life: ¥48 billion, an upward revision of ¥5 billion from the original projection at the beginning of the fiscal year
Tokio Marine & Nichido: ¥50 billion, an upward revision of ¥5 billion from the original projection
Same reason as to the upward revision to the net income for FY2010 for financial accounting purposes
Domestic life: ¥2 billion, a downward revision of ¥34 billion from the original projection
Tokio Marine & Nichido Life: ¥22 billion, a downward revision of ¥11 billion from the original projection
Expect a drop in EV due to the decline in ultra-long-term interest rates
Tokio Marine & Nichido Financial Life: -¥24 billion, a downward revision of ¥23 billion from the original projection
Expect a drop in EV due to the deterioration in the investment environment and a considerable decline in the sales volume
International insurance business: ¥53 billion, a downward revision of ¥7 billion from the original projection
Expect impacts of the appreciation of the yen and the expectation of slight increase in natural cat hazard
Financial and other business: ¥1 billion, no change from the original projection
Group total: ¥100 billion, a downward revision of ¥36 billion from the original projection
Adjusted ROE: 3.3%, a downward revision of 1.0%
 
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These information materials are prepared based on the currently available information for us and described subject to our predictions and forecasts carried out at the time of preparation.
It must be noted that what is described therein does not guarantee our future business performance and carries certain risk of misjudgment or uncertainty.
Accordingly, you are kindly requested to bear in mind that there may be a possibility of sizable divergence between the actual business performance in the future and that of our predictions or forecasts described therein.



Copyright (c) Tokio Marine Holdings, Inc.