| Q1. |
I understand the company projects to release ¥44.0 billion from catastrophe loss reserves in FY2011 relating to the Great East Japan Earthquake. Aside from the event, how much do you expect to add to the catastrophe loss reserves? |
| A1. |
We expect to add approximately the same level of amount we posted in FY2010.
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| Q2. |
You expect non-consolidated ordinary profit of Tokio Marine & Nichido in FY2011 to be ¥173.0 billion, up ¥27.2 billion YoY. Please explain the factors of the change from FY2010 figure of ¥145.7 billion. |
| A2. |
Below are the factors of the change from FY2010.
♦ Breakdown of underwriting profit: negative ¥31.1 billion in FY2010→ ¥49.0 billion in FY2011 (up ¥80.1 billion YoY)
· Reversal effect of incurred losses relating to the Great East Japan Earthquake (private insurance basis): ¥81.9 billion (positive contribution)
· Increase in additional provision for general underwriting reserves (private insurance basis): ¥14.4 billion (negative)
· Reversal effect from decline in funding of foreign currency-denominated provision for outstanding claims due to the appreciation of the yen: ¥18.1 billion (negative)
· Increase in natural catastrophe loss (excluding the increase relating to the Great East Japan Earthquake): ¥21.1 billion (negative)
· Decline in other incurred losses (private insurance basis): ¥9.3 billion (positive)
· Decline in provision of catastrophe loss reserves: ¥44.2 billion (positive)
· Decline in business expenses: ¥ 4.2 billion (positive)
♦ Breakdown of investment income: ¥203.7 billion in FY2010 → ¥149.5 billion in FY2011 (down ¥54.1 billion YoY)
· Decline in gains and losses on sales of securities: ¥45.6 billion (negative)
· Decline in net interest and dividends income: ¥7.1 billion (negative)
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| Q3. |
Given the increase in auto incurred losses of ¥8.0 billion YoY in 1H FY2010, it seems the upward trend has somewhat calmed down in 2H FY2010 (¥5.0 billion YoY). Please explain the current situation in the auto loss trend, including impacts from heavy snowfalls in FY2009 and FY2010 as well as the number of reported claims in April this year. |
| A3. |
Heavy snows became the major factor of the auto losses in December and January in FY2010, while natural catastrophe, including wind losses, had a larger impact to FY2009 auto losses in February and March 2010.
Regarding the current loss trend, the number of reported claims after the earthquake in March declined and such trend continued in April, despite the number before the disaster significantly surpassed the level of last year. However, the number in the latest week grew more than what we saw in the corresponding week last year. We will closely monitor the situation to determine whether the declining trend is either still a firm, or just a temporary one.
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| Q4. |
Please tell me the actual amount of natural catastrophe loss in the international reinsurance business in FY2010 and your assumption for FY2011 projection. |
| A4. |
We expected a ¥25.0 billion of natural catastrophe loss for the entire international insurance business including reinsurance at the beginning of FY2010, and the result turned out to be ¥31.0 billion. Considering the impact from the appreciation of the yen, the difference should be ¥8.0 billion (instead of ¥6.0 billion), as the initial assumption of ¥25.0 billion under the ending FY2010 FX rate becomes ¥23.0 billion. (Note: the assumed amount of natural catastrophe losses for FY2011 is ¥25.0 billion.)
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| Q5. |
If you see an increase in the reinsurance cost after the Japan earthquake, can you explain whether you see any changes in underwriting earthquake risk in the primary business? |
| A5. |
As of today we cannot comment on how much the reinsurance rates have changed, as we have been extending our regular renewal date of April 1st.
With regard to our primary underwriting policy, we now have restrictions in taking earthquake risk. To be more precise, we do not accept any new auto policy covering earthquake/eruption/tsunami risks (Note: there is no change in underwriting policies for residential earthquake insurance). In addition, we restrict accepting new earthquake rider for commercial fire policy. We have such restrictions as a result of earthquake risk exposure control, not due to whatever possible increase of reinsurance rates we may assume.
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| Q6. |
Comparing the ordinary profit and net income of Tokio Marine & Nichido Life, the effective tax rate seems to be quite low. Can you explain the reason? |
| A6. |
Tokio Marine & Nichido Life has been adding extra provision of standard underwriting reserves until FY2010, within the range of yearly profit. Such additional funding resulted in creating a distortion of observed effective tax rate in the past, and the trend still continues.
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| Q7. |
Auto loss ratio in FY2010 was approximately 71% and that of FY2011 seems to be expected at around 70%. Considering the number of reported claims you explained earlier, this estimation may sound somewhat conservative. Please explain what you assume on the auto loss ratio toward another summer season. |
| A7. |
In FY2010, there were multiple factors which raised auto loss ratio, such as an increase of car usage due to new car sales growth or a hot summer season, and increase of accident frequency due to the recovery of domestic trades, as well as heavy snowfalls in December and January 2011. We assume those factors are temporary and thus the loss ratio in FY2011 should return normal. Having said, the latest reported claim trend has been upward as mentioned earlier, and we may see another hike in accident frequency and traffic volume amid the expected economic recovery. Therefore we do not necessarily forecast the ongoing FY2011 loss ratio based on the declining trend of reported claims after the earthquake event.
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