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Brief Explanation of FY2010 Financial Results
 

<Summary of FY2010 Financial Results>
 
1. Consolidated Results of Tokio Marine Holdings
 
(References: "Supplemental material for FY2010 results conference call")
 
Ordinary Income
- Net premiums written: ¥2,272.1 billion, down ¥20.7 billion or 0.9% YoY
Tokio Marine & Nichido and Nisshin Fire recorded premium increases
Meanwhile, premiums from overseas subsidiaries declined overall on a consolidated basis, primarily due to the impact from the appreciation of the yen (premiums increased on a local currency basis)
- Life insurance premiums: ¥405.3 billion, down ¥59.4 billion or 12.8% YoY
Insurance premiums and other of Tokio Marine & Nichido Life: Steady growth in policies in force raised insurance premiums by ¥18.6 billion or 4.1% YoY
Insurance premiums and other of Tokio Marine & Nichido Financial Life: As a result of narrowing down of its product line in consideration of the current financial market environment, insurance premiums and other declined by ¥68.9 billion or 37.8% YoY
International life insurance business: Premiums increased supported by growth in Asian life entities
(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)*: ¥526.5 billion, down ¥17.5 billion or 3.2% YoY, strongly affected by the appreciation of the yen
Excluding the effects of the strong yen, premiums increased by approximately 8% YoY on a local currency basis
* Result for the overall International insurance business, including foreign branches of Tokio Marine & Nichido, equity method investees and non-consolidated companies
Changes by region: (Please refer to the table provided below)
Philadelphia Insurance Companies: A decrease of approximately 7% YoY, due to the appreciation of the yen. Premiums continued to grow by about 5% YoY on a local currency basis despite the flat growth in the overall U.S. P&C market
Kiln: A decrease of approximately 4% YoY, due to the appreciation of the yen. Excluding the effects of the strong yen, premiums increased by approximately 11% YoY owing to an expansion in underwriting by utilizing the capacity of the 100% owned Lloyd's Syndicate by the Tokio Marine Group
Reinsurance business (excluding Kiln): Premiums decreased approximately 8% YoY, due to the effects of the appreciation of the yen. Excluding the effects of the strong yen, premiums increased by about 5% YoY supported by the initiative to expand new business in the U.S.
Non-life insurance businesses in Asia and other:　Premiums increased by approximately 4% YoY despite the effects of the strong yen
North America (excluding Philadelphia) and European subsidiaries: Premiums decreased approximately 24% and 15% YoY respectively, due to the lower rate levels caused by increased competition especially in Japanese corporate businesses as well as the effects of the strong yen
Life insurance business: Premiums surged approximately 36% YoY, supported by the launch of the new products and enhancement of sales network in the Asian life insurance entities
Ordinary Profit
- Ordinary profit: ¥126.5 billion, down ¥76.8 billion or 37.8% YoY
The decrease was primarily due to a significant increase in natural catastrophe losses relating to the Great East Japan Earthquake in March 2011 and the New Zealand Earthquake in February 2011
Incurred losses relating to the Great East Japan Earthquake: ¥91.5 billion posted in FY2010 consolidated results in total (Total of domestic and international non-life insurance, excluding residential earthquake insurance which has no impact on P/L.)
Adjustment in consolidated results, relating to natural disasters at overseas subsidiaries: Loss of ¥33.4 billion relating to the New Zealand Earthquake in February 2011 and the Great East Japan Earthquake in March 2011 was adjusted to be recognized in the FY2010 consolidated results in accordance with the financial accounting principles, despite the accounting period for overseas subsidiaries covers from January to December
Net Income
- Net income: ¥71.9 billion, down ¥56.4 billion or 44.0% YoY
The factors driving the decreases were mostly the same as those that led to lower ordinary profit
 
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2. Non-Consolidated Results of Tokio Marine & Nichido
 
(Reference: "Information about major subsidiaries' business results," page 2)
 
- Net premiums written: ¥1,742.7 billion, up ¥6.6 billion or 0.4% YoY
Fire insurance: Premiums decreased by 4.8% YoY
Premiums originated from domestic; due to the reduction in conditions and the reversal effect caused by early renewals in the midterm of contracts in the previous fiscal year for major contracts
Premiums from abroad; due to the appreciation of the yen and the sluggish U.S. economy
Personal accident insurance: Premiums increased by 2.3% YoY
Rate revisions for overseas travel insurance and the increased number of travelers
The increased sales in medical lines of Super-Insurance
Auto insurance: Premiums increased by 0.6% YoY
Primarily due to the higher unit price caused by rate revisions in July 2009 and July 2010
- Net claims paid: ¥1,094.2 billion, down ¥2.2 billion YoY
Claims paid related to the Great East Japan Earthquake in FY2010: ¥0.2 billion
- Net loss ratio: 67.5%, down 0.4 point YoY
Fire insurance: 41.5%, down 0.9 points YoY, mainly due to the reversal effect of the large claim payments for typhoon No. 18 (Typhoon Megi) in the previous fiscal year
Auto insurance: 71.0%, up 1.3 points YoY, owing primarily to the increase in claim payments associated with the rise in frequency of accidents, covered by endorsements for damage to own vehicle and for property damage liability
- Business expenses and net expense ratio:
Agency commissions and brokerage: ¥300.9 billion, down ¥3.5 billion YoY
Decline in average agency commission points
Operating and general administrative expenses on underwriting: ¥282.5 billion, down ¥3.4 billion YoY
Personnel expenses: Up ¥2.5 billion YoY, due to the reversal effect of the results in the temporary decrease in previous fiscal year
Non-Personnel expenses: Down ¥5.4 billion YoY, despite an increase in the expense for the Business Renovation Project, owing to the declines in other IT-related expenses and printing expenses as a result of company-wide cost-down efforts
Total expenses: ¥583.4 billion, down ¥7.0 billion YoY
Net expense ratio: 33.5%, an improvement of 0.5 points YoY
- Provision for outstanding claims (private insurance basis): An increase in provision of ¥62.6 billion, up ¥83.8 billion YoY
Despite of decline in funding of foreign currency-denominated provision for outstanding claims due to the appreciation of the yen,
Almost all incurred losses for private insurance lines relating to the Great East Japan Earthquake were posted on the provision for outstanding claims
Total net losses of natural disasters: ¥104.0 billion, up ¥81.1 billion YoY for all lines
Of which, total incurred losses relating to the Great East Japan Earthquake: ¥100.2 billion for all lines, excluding residential earthquake insurance: ¥81.9 billion, almost all of which were posted on the provision for outstanding claims
Current situation of auto insurance:
The number of reported claims (i.e. frequency) increased due to the record heavy snowfalls in winter, despite a slight decrease in Q3 after the steep increase in Q2.
Reported claims declined in March on one month YoY due to decline in traffic affected by the earthquake.
The full year result of auto insurance was lower than the projection as of 1H end due to increases in accidents due to heavy snowfalls in winter.
- Provision for underwriting reserves: A decrease in the provision of ¥150.5 billion, up ¥10.0 billion YoY
Of which, general underwriting reserve (private insurance basis): A decrease in the provision of ¥5.9 billion, down ¥1.7 billion YoY
Decline in funding of provision for fire insurance due to the reversal effect from posting large number of long-term contracts in the previous fiscal year, and a decline in premiums
Of which, catastrophe loss reserve: An increase in the provision of ¥14.6 billion, up ¥41.0 billion YoY
Mainly due to a decline in reversal of provision for catastrophe loss reserves caused by the depletion of the balance in auto insurance
- Underwriting profit/loss: loss of ¥31.1 billion, down ¥112.9 billion YoY
- Investment income (net): ¥203.7 billion, sharp increase by ¥103.3 billion YoY
Income from interest and dividends: ¥137.6 billion, up ¥29.2 billion YoY
Mainly due to an increase in dividends on foreign stocks of overseas subsidiaries in Q1
Gain and losses on sales of securities: ¥119.6 billion, up ¥51.7 billion YoY, due mainly to the consistent efforts to sales of business-related equities throughout the fiscal year
Market value of the business-related equities at the time of sale in FY2010: ¥187.0 billion
Income from financial derivatives: ¥23.4 billion, up ¥12.0 billion YoY
Mainly due to posting of valuation gains from foreign exchange forwards and currency swaps due to the strong yen
- Ordinary profit: ¥145.7 billion, down ¥1.6 billion YoY
- Net income: ¥100.7 billion, up ¥6.2 billion YoY
 
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3. Non-Consolidated Results of Nisshin Fire
 
(Reference: “Information about major subsidiaries' business results,” page 3)
 
- Net premiums written: ¥134.0 billion, up ¥2.1 billion or 1.7% YoY
Mainly due to a premium increase in auto insurance by 2.5% YoY, supported primarily by expansion of the sales network and the revision of premiums rates
- Net loss ratio: 66.2%, up 1.6 points YoY
Mainly due to an increase in claim payments, covered by endorsements for damage to own vehicle and for property damage liability in auto insurance
- Net expense ratio: 37.3%, an improvement of 1.9 points YoY
Factors supporting the improvement include a considerable decrease in corporate expenses due to reductions in personnel and non-personnel expenses in addition to premium increases
- Provision for outstanding claims: An increase in the provision of ¥5.3 billion, up ¥3.8 billion YoY
Mainly due to the impact from the Great East Japan Earthquake and an increase in the number of accident in auto insurance
Incurred losses relating to the Great East Japan Earthquake: ¥2.7 billion for all lines (¥1.2 billion excluding residential earthquake insurance), almost all of which were posted on provision for outstanding claims
- Underwriting profit/loss: Loss of ¥5.8 billion, down ¥3.9 billion YoY
Primarily due to an increase in incurred losses
- Investment income (net): ¥7.9 billion, down ¥0.3 billion YoY
- Ordinary profit: ¥2.5 billion, down ¥3.9 billion YoY
- Net income: ¥1.5 billion, down ¥2.7 billion YoY
 
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4. Non-Consolidated Results of Tokio Marine & Nichido Life
 
- Sales performance (Reference: “Information about major subsidiaries' business results,” page 30)
New policies (Individual insurance):
Number of new policies: up 3.8% YoY
Steady growth in third sector lines with the start of underwriting third sector lines of Super Insurance
Sum insured of new policies: down 4.1% YoY
Primarily due to the revision of "whole-life with long-term discounts insurance" in view of profitability improvement
Annualized premiums of new policies: down 2.8% YoY
Due to the same reason as above
Policies in force (Individual insurance):
Number of policies: up 10.6% YoY
Sum insured: up 7.6% YoY
Annualized premiums of policies in force: up 6.6% YoY
- Statement of income (Reference: “Information about major subsidiaries' business results,” page 28)
Insurance premiums and other: ¥475.9 billion, up ¥18.6 billion or 4.1% YoY
The stable growth was achieved in tandem with the larger volume of policies in force
Business expenses: ¥85.3 billion, up 2.0% 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 premiums.
Ordinary profit: ¥19.4 billion, up ¥12.5 billion YoY
Net income: ¥5.2 billion after achieving 100% of the accumulation rate of the standard underwriting reserve on the 15th year since the establishment of TMNL
 
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5. Non-Consolidated Results of Tokio Marine & Nichido Financial Life
 
- Sales performance (Reference: "Information about major subsidiaries' business results," page 39)
New policies (Individual annuities): "Number", "Sum insured" and "Annualized premiums" declined by around 40% YoY
The decrease was a result of narrowing down of its product line after Q3 by continuously taking a risk-restrictive sales stance since the previous fiscal year in consideration of the financial market environment.
- Statement of income (Reference: "Information about major subsidiaries' business results," page 37)
Insurance premiums and other: ¥113.4 billion, down ¥68.9 billion or 37.8% YoY
Decline in new policies
Ordinary profit (loss): Loss of ¥2.3 billion, down ¥1.0 billion YoY
Major product sold in FY2010 was the no-load one with no initial fee, and then the burden of sales-costs tend to be recognized in the earlier period.
Net income (loss): Loss of ¥2.5 billion, down ¥1.1 billion YoY
 
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6. Non-Consolidated Results of E. design Insurance
 
(Reference: "Information about major subsidiaries' business results," pages 23 - 25)
 
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7. Earnings of International Insurance Business
 
(References: "Supplemental material for FY2010 results conference call")
 
- Net income: ¥47.5 billion, down ¥21.3 billion YoY
Adjustment relating to natural disasters incurred from January to March 2011: -¥27.9 billion after tax (additionally posted in the consolidated results in FY2010)
- Adjusted earnings* after adjustment relating to natural disasters : ¥24.8 billion, down ¥51.7 billion or 68.0% YoY
Adjusted earnings before adjustment relating to natural disasters: ¥52.7 billion, down ¥23.7 billion or 31.0% YoY
* Includes 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 profits on financial accounting basis and consolidated accounting standards
Due to the effects of the considerable appreciation of the yen and natural catastrophe losses derived from the earthquakes in Chile, New Zealand which hit twice and North East Japan, adjusted earnings significantly declined from the same period in the previous fiscal year when there were benign natural catastrophe losses.
Changes by region: (Results in each region are before-adjustment relating to natural disasters)
Philadelphia Insurance Companies: Adjusted earnings of ¥23.1 billion, down ¥5.3 billion or approximately 19.0% YoY
Primarily due to the appreciation of the yen and impact from natural catastrophe losses
Excluding the effects of the appreciation of the yen, a decline of about 8% YoY
The combined ratio remained favorable at 89.5% as a result of maintaining underwriting discipline while the combined ratio of the entire U.S. P&C insurance market stood above 102%
Kiln: Adjusted earnings of ¥10.0 billion, down ¥0.5 billion or approximately 5% YoY
Primarily due to the appreciation of the yen and impact from natural catastrophe losses
On the other hand, positive factors such as i) business expansion by utilizing the capacity of the 100% owned Lloyd's Syndicate by the Group, ii) rise in investment income, and iii) the reversal effect from the foreign exchange loss recognized in the pervious fiscal year
Excluding the effects of the appreciation of the yen, an increase of about 10% YoY
Reinsurance (excluding Kiln): Adjusted earnings of ¥6.8 billion, down ¥15.1 billion YoY
Mainly due to increases in natural catastrophe losses including New Zealand Earthquake in September 2010 and decreases in premiums along with soft market conditions in addition to the appreciation of the yen
North America (excluding Philadelphia): Adjusted earnings of ¥5.0 billion, down ¥3.3 billion YoY
Decrease due to the reversal effect of reserve release in the previous fiscal year
Central and South America: Adjusted earnings of -¥0.6 billion, up ¥5.4 billion YoY
Mainly due to the reversal effect of increase in IBNR funding in the previous fiscal year owing to the tightening of regulations in Brazil
Life insurance: Adjusted earnings of ¥3.0 billion, down ¥4.8 billion YoY
Steady growth in new policies in primary entities
On the other hand, a decline due primarily to the reversal effect of the substantial increase in EV in the previous fiscal year affected by the rise in Asian equity market
<Result for the overall International insurance business>
Result for the overall International insurance business
 
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8. Business Projections for Full-Term FY2011
 
(References: "Supplemental material for FY2010 Results conference call")
 
Ordinary Income
- Consolidated net premiums written: ¥2,296.0 billion, up ¥23.8 billion or 1.1% YoY
Tokio Marine & Nichido: ¥1,743.0 billion, up ¥0.2 billion or 0.0% YoY
Increase in compulsory automobile liability insurance or "CALI" expected due to revision of premiums rates
Premiums in private insurance lines expected to decline due to repercussions of the Great East Japan Earthquake and uncertainty of economic trends
Nisshin Fire: ¥136.1 billion yen, up ¥2.0 billion or 1.5% YoY
Revision of premium rates in CALI and auto insurance and expansion of sales networks expected to contribute ordinary profit
- Life insurance premiums: ¥452.6 billion, up ¥47.2 billion or 11.7% YoY
Insurance premiums and other of Tokio Marine & Nichido Life: ¥497.6 billion, up ¥21.7 billion or 4.6% YoY
Steady growth in policies in force expected
Insurance premiums and other of Tokio Marine & Nichido Financial Life: ¥148.2 billion, up ¥34.7 billion or 30.6% YoY
Sales growth of plain type product (released in February 2011) expected
- Insurance premiums of International insurance business: ¥577.0 billion, up ¥50.5 billion or approximately 10.0% YoY
Given economic recovery in Europe and North America and economic growth in emerging markets mainly in Asia, growth expected mainly in Philadelphia, Kiln, Asian life and non-life insurance and primary non-life insurers in Europe and America
Ordinary Profit
- Ordinary profit: ¥220.0 billion, up ¥93.4 billion YoY
Tokio Marine & Nichido: ¥173.0 billion, up ¥27.2 billion YoY
Underwriting profit: Projected to increase due to i) expected release of catastrophe loss reserves for private lines of approximately ¥ 44.0 billion in line with claims pay-out for the Great East Japan Earthquake and ii) expected significant decline in incurred natural catastrophe losses by assuming natural disasters as in an average year
Investment income (net): Expected to decline due to lower gain on sales of securities
Nisshin Fire: ¥5.0 billion yen, up ¥2.4 billion YoY
Underwriting profit: Projected to increase supported by revision of premium rates in auto insurance and expected decline in funding of provision for outstanding claims due to the reversal effect of rise in incurred losses by the Great East Japan Earthquake in the previous fiscal year
Investment income (net): Expected to decline due to lower gain on sales of securities
Tokio Marine & Nichido Life: ¥18.6 billion, up ¥9.1 billion YoY
Expected to increase in premiums due to steady growth in policies in force
Decline in the burden of additional funding of standard underwriting reserve
Tokio Marine & Nichido Financial Life: ¥0 billion, up ¥2.3 billion
Expected to improve due to suspension of sale of no-load products with no initial fee
International insurance business: ¥23.1 billion, down ¥37.1 billion before adjustment relating to natural disasters
In net amount, ¥56.6 billion, up ¥29.7 billion YoY, after adjustment of the reversal of ¥33.4 billion loss, having been recognized in the FY2010
Net Income
- Net income: ¥145.0 billion, up ¥73.0 billion YoY
The factors driving the increase are expected to be mostly the same as those of ordinary profit.
- Forecast of dividends of Tokio Marine Holdings
Dividend for the full year: ¥50 per share
 
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9. Adjusted earnings
 
(Refer to "FY2011 Business Plan of Tokio Marine Group (adjusted earnings basis)")
 
- Group's Total Adjusted earnings in FY2010: ¥72.0 billion, falling below the forecasts released in November 2010 by ¥28.0 billion
Tokio Marine & Nichido Life: EV sharply increased by changes in assumptions used in calculating EV, which were brought about by cost reduction efforts and higher interest rate
Domestic non-life insurance and international insurance business: Significant increase in natural catastrophe losses mainly from the earthquakes in North East Japan and New Zealand
- Group's Total Adjusted earnings in FY2011: ¥128.0 billion, up ¥56.0 billion
Tokio Marine & Nichido Life: EV is projected to decline due to the absence of the significant increase of EV by assumption changes in the previous fiscal year.
Domestic non-life insurance and international insurance business: Adjusted earnings are projected to increase due to the reversal effect of significant increase in natural catastrophe losses posted in the previous fiscal year.
<Projections for the international insurance business>
Projections for the international insurance business
 
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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.