FY2011 2Q Results Conference Call: Q&A

Described below is the summary of Q&A session with institutional investors and securities analysts at the FY2011 2Q results conference call held on November 18, 2011.

Q1Please tell me the FY2011 interim deferred tax assets and liabilities for Tokio Marine & Nichido and Nisshin Fire in terms of gross figures for each. In addition, please tell me the figures corresponding underwriting reserves among the deferred tax assets.

Tokio Marine & Nichido had deferred tax assets of around ¥580 billion and deferred tax liabilities of about ¥410 billion. Nisshin Fire, meanwhile, had deferred tax assets of approximately ¥39 billion and deferred tax liabilities of around ¥5 billion. As for underwriting reserves for residential earthquake and compulsory automobile liability insurance (CALI), which will not be affected by tax rate changes because these lines are operated on a "no loss, no profit" basis, they come to around ¥100 billion at Tokio Marine & Nichido and ¥10 billion at Nisshin Fire.

Q1(2)Regarding proposed legislation to lower corporate tax rates, it is expected that deferred tax asset reversals will come to ¥80 billion on a consolidated basis. How does this figure break down by company? Also, please explain any points that should be noted regarding consolidation adjustments after summing the figures for individual companies.

Deferred tax asset reversals will come to about ¥67 billion at Tokio Marine & Nichido and ¥3-4 billion at Nisshin, with the remainder associated with Tokio Marine & Nichido Life. As for consolidation adjustments, there is nothing in particular to note.

Q2What will be the impact of a corporate tax reduction on net asset value?

The impacts of the corporate tax reduction we are anticipating on net asset value will differ for each element of net asset value, but we think the overall impact will be basically neutral.

Q3The revised projection for international insurance business on adjusted earning basis is lower than the original projections by ¥83 billion, with flooding loss in Thailand accounting for ¥65 billion. What is the cause of the remaining ¥18 billion of the downward revision? How much of the ¥18 billion is attributable to 1H and how much to 2H?

Of the ¥18 billion, we expect that about ¥12 billion was caused by the impacts of flooding in Australia, North American tornadoes in April and May, Hurricane Irene, and other large-scale natural disasters. The remaining ¥6 billion reflects foreign exchange impacts and the reversal effect of IBNR releases in the previous fiscal year. Regarding the breakdown, we expect that ¥12 billion to 1H and ¥6 billion to 2H, mainly due to the impacts of natural disasters other than Hurricane Irene.

Q3(2)Is it correct to understand that the impacts of natural disasters on the international insurance business in 2H will total ¥71 billion including the ¥65 billion due to floods in Thailand and the ¥6 billion you just mentioned?

Yes, that is correct.

Q4Please tell me the 1H results and full-year forecasts for the combined ratios and the loss and expense ratios for Philadelphia and Kiln.

Philadelphia's combined ratio was 105.8% for 1H and is expected to be 101.8% for the full year. Its loss ratio was 76.7% for 1H, with a full-year forecast of 71.8%, and its expense ratio was 29.2% for 1H, with a full-year forecast of 30.0%*. Kiln's combined ratio was 145.5% for 1H, with a full-year forecast of 110.9%. Its loss ratio was 109.4% for 1H with a full-year forecast of 79.8%, and its expense ratio was 36.1% for 1H, with a full-year forecast of 31.0%*.
* Figures that were mentioned in the conference call response did not include fractional adjustments. On the website, these figures have been replaced after the adjustments.

Q5Why has catastrophe risk, which is an element of the denominator for calculating the solvency margin ratio, been reduced?

The reason for the reduction is that the private-sector burden declined as a result of a change in the residential earthquake reinsurance system.

Q6Regarding the trend of Tokio Marine & Nichido's loss ratio excluding the impacts of natural disasters, it seems that there has been some improvement in the W/P loss ratio and even more improvement in the E/I loss ratio for auto insurance and for all types of insurance (excluding CALI and residential earthquake insurance). Could you elaborate?

Tokio Marine & Nichido's E/I loss ratio for auto insurance , excluding the impact of natural disasters, improved by 2.0 points, from 69.5% at last year's interim, to 67.4% for this year's interim. Similarly, the E/I loss ratio for all types of insurance (excluding CALI and residential earthquake insurance) improved by 2.4 points, from 60.1% at last year's interim, to 57.8% as of this year's interim.

Q7About the impact of yen's appreciation to profit and loss, is it correct to understand that despite the yen's appreciation throughout 1H of this year, its impact to profit and loss has been relatively small compared to last year?

That is correct. The yen has risen to a lesser extent this year, as compared to last year, so your understanding is correct.

Q8It was explained that the flooding in Thailand has amounted to more of a disaster than was expected. How would you apply that experience to future underwriting? We estimate that direct premiums written for Japanese companies in Thailand come to about ¥5 billion, so it would appear that recovering ¥200 billion in claims will require a significant amount of time. Will it be possible to raise insurance rates by a factor of several times current rates? Alternatively, is it possible to scale back underwriting?

While it is a fact that flooding in Thailand has in some ways exceeded our expectations, the full extent of the damage has yet to be determined, so we have not set any directions for future underwriting. In making those decisions, we will consider factors including the amount of losses, the size of our business in Thailand, and developments regarding reinsurance, among others, and we will make final determinations on how to proceed at the earliest convenience. That said, however, I do not think we will continue with the underwriting direction we have pursued to date.

Q9Today, there was no announcement regarding share repurchases. What is preventing share repurchases? Any possibilities of M&A, uncertainty of market conditions, or perhaps the flooding in Thailand?

It is difficult for us to provide definitive answers. Based on our overall consideration of current conditions in Europe, developments with regard to natural disasters, the status of our capital buffer, which is scheduled to be discussed in the coming IR conference, and M&A opportunities, we do not make no announcement at this time.

Q10The full-year outlook for the number of accidents for auto insurance is calling for a slight increase over last year. What is the outlook for unit claim costs?

Recently unit repair costs have risen due to the impact of typhoons, which result in high unit claim costs. However, we are continuing with measures aimed at controlling unit repair costs and believe there is nothing to support a significant increase in unit repair costs going forward.

Q11How much did you sell business-related equities for 1H and what is the direction in 2H?

During 1H, the sales of business-related equities came to around ¥36 billion. For the full-year, our goal is to complete about ¥100.0 billion sales, which we have publicly announced, and we endeavor to proceed in due course. It will be necessary to pay attention to the trend of stock market, but we expect to achieve our goal.

Q12I have heard that since the flooding in Thailand has resulted in a large number of petty claims, reinsurance has not functioned well. Looking to the future, would it be possible to continue insurance policies by, for example, setting high deductibles of ¥300-500 million as a condition in direct underwriting?

We will diligently consider that and other conditions for direct underwriting.

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.