Brief Explanation of FY2010 3Q Financial Results <Summary of FY2010 3Q Financial Results> 1. Consolidated Results of Tokio Marine Holdings (References: "Supplemental material for FY2010 3Q conference call") Ordinary Income - Net premiums written: ¥1,728.4 billion, down ¥1.6 billion or 0.1% YoY Tokio Marine & Nichido and Nisshin Fire recorded slight premium increases. Meanwhile, premiums from overseas subsidiaries declined overall on a consolidated basis, primarily due to the impact from the strong yen (premiums increased on a local currency basis.) - Life insurance premiums: ¥313.3 billion, down ¥21.7 billion or 6.5% YoY Insurance premiums and other of Tokio Marine & Nichido Life: Steady growth in policies in force raised insurance premiums by ¥17.9 billion or 5.5% YoY. Insurance premiums and other of Tokio Marine & Nichido Financial Life: As a result of continuously taking a risk-restrictive sales in consideration of the financial market environment, new policies for variable annuity declined ¥22.8 billion or 17.4% YoY. (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)*: ¥421.0 billion, up ¥3.6 billion or 0.9% YoY * Result for the overall International insurance business, including foreign branches of Tokio Marine & Nichido, equity method investees and non-consolidated companies. Excluding the effects of the strong yen, premiums increased by approximately 6% YoY. Changes by region: (Please refer to the table provided below.) Philadelphia Insurance Companies: A decrease of approximately 2% YoY, due to the appreciation of the yen against the US dollar, although premiums continued to grow by about 5% YoY in local currency despite the flat growth in the overall U.S. P&C market. Kiln: Premiums increased approximately 8% YoY in local currency although they were almost flat on a yen basis, 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 3% YoY on a yen basis, due to the effects of the appreciation of the yen and the softening of the market, although they increased approximately 5% YoY in local currency. Non-life insurance businesses in Asia: Premiums increased approximately 8% despite the effects of the strong yen. North America (excluding Philadelphia) and European subsidiaries: Premiums decreased 22% and 12% YoY respectively, due to the lower rates caused by increased competition especially in Japanese corporate businesses.
Life insurance business: Premiums surged approximately 31% YoY, supported by growth in new policies primarily in the Chinese life insurance business. Ordinary Profit - Ordinary profit: ¥218.9 billion, up ¥53.1 billion or 32.0% YoY The increase was primarily due to the decline in funding of the foreign-currency denominated provision for outstanding claims due to the appreciation of the yen, greater gains from financial derivatives such as foreign exchange forwards due to the stronger yen, and the increase in gains on accelerated sales of business- related equities at TMNF. Gains or losses on investment in securitized instruments: Recorded total profits of ¥10.2 billion, including gains on valuation of CDS investments, due to the tightening of credit spreads and gains on redemptions or sales in ABS. Quarterly Net Income - Quarterly net income: ¥138.9 billion, up ¥28.9 billion or 26.3% YoY The factor driving the increase was mostly the same as the factor that led to higher ordinary profit. 2. Non-Consolidated Results of Tokio Marine & Nichido (Reference: "Summary Report," pages 12 and 13) - Net premiums written: ¥1,304.0 billion, up ¥2.4 billion or 0.2% YoY Fire insurance: Total premiums including domestic and overseas decreased by 4.2% YoY, due to: (i) the reversal effect caused by changes in conditions and switches in inception dates from the original dates in the previous year for major contracts, and (ii) the sluggish U.S. economy. Marine insurance: Premiums increased 10.5% YoY, owing primarily to the considerable recovery in international trade and distribution although the appreciation of the yen was a declining factor. Auto insurance: Premiums increased 0.5% YoY, owing primarily to the higher unit price caused by revisions to products and rates in July 2009 and July 2010. - Net loss ratio: 67.7%, -0.0 point change YoY Fire insurance: 41.3%, down 2.0 points, mainly due to the reversal effect of the payment of claims for typhoon No. 18 (Typhoon Megi) in the previous fiscal year. Marine insurance: 53.3%, down 15.4 points, due to the decrease in major accidents. Auto insurance: 71.1%, up 2.1 points, 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, that became remarkably apparent in the second quarter of the current fiscal year. - Business expenses and net expense ratio: Agency commissions and brokerage: ¥225.4 billion, down ¥4.5 billion YoY Decline in average agency commission points Operating and general administrative expenses on underwriting: ¥215.9 billion, up ¥3.0 billion YoY Personnel expenses: Up ¥5.6 billion, due to the reversal effect of the results in
FY2009 Non-Personnel expenses: Down ¥1.9 billion, owing primarily to the declines in IT-related expenses not associated with the Business Renovation Project and printing expenses Total expenses: ¥441.4 billion, down ¥1.5 billion YoY Net expense ratio: 33.9%, an improvement of 0.2 points YoY - Provision for outstanding claims (private insurance basis): Reversal of ¥17.2 billion, down ¥7.4 billion YoY Decline in funding of foreign currency-denominated provision for outstanding claims due to the appreciation of the yen Provision for claims increased with the higher volume of major contracts in Other lines Bounce-back effect of the reversal of provision for outstanding claims in overseas in prior fiscal years Increase in provision for outstanding claims in auto insurance Current situation of auto insurance: The number of reported claims (frequency) has decreased slightly since October 2010. However, the unit costs of insurance payment jumped more than expected. Consequently, the result has not exactly been making the projected recovery. Given the severe cold wave and heavy snow continuing into the new year, the loss trend of the fourth quarter cannot be expected to improve significantly. - Provision for underwriting reserves: Reversal of ¥93.5 billion, down ¥4.8 billion YoY Of which, general underwriting reserve (private insurance basis): An increase in the provision of ¥4.5 billion, up ¥3.0 billion YoY Income for auto insurance and casualty insurance increased. Of which, catastrophe loss reserve: Reversal of ¥5.3 billion, up ¥18.6 billion YoY In addition to the increase in claims paid for auto insurance, the balance of catastrophe loss reserve exhausted in the third quarter of the current fiscal year. - Underwriting profit: ¥44.3 billion, down ¥30.2 billion YoY - Investment income (net): ¥170.3 billion, up ¥98.3 billion YoY Income from interest and dividends: ¥118.4 billion, up ¥28.3 billion YoY, mainly owing to increases in dividends on foreign stocks of overseas subsidiaries Gain and losses on sales of securities: ¥77.4 billion, up ¥35.4 billion YoY, due mainly to the accelerated sales of business-related equities Income from financial derivatives: ¥27.0 billion, up ¥15.6 billion YoY, owing to the posting of valuation gains from foreign exchange forwards and currency swaps due to the strong yen - Ordinary profit: ¥194.6 billion, up ¥74.3 billion YoY - Quarterly net income: ¥132.0 billion, up ¥51.3 billion YoY
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