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Japan Insurers Cut Outlooks on Thai Floods

Source: WSJ

Posted on 18 Nov 2011

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Japan's top three nonlife insurers lowered their earnings outlooks for the full fiscal year ending in March, hit by a combined $3.4 billion in expected payouts related to the flooding in Thailand and securities valuation losses due to financial market turmoil.

Tokio Marine Holdings Inc., MS&AD Insurance Group Holdings Inc. and NKSJ Holdings Inc. also reported dismal results for the first half ended September, hurt by increased policy payouts after two powerful typhoons over the summer caused widespread damage in parts of central and western Japan.

The earnings downgrades highlight the spreading impact of the Thai disaster on the Japanese corporate sector. Thailand is an important production base for Japanese makers of auto parts, cameras and computer components, with 450 Japanese firms operating facilities in seven industrial sites in the country.

MS&AD Insurance, Japan's second largest casualty insurer by market capital, expects to be hit hardest by the flooding, with policy payments related to the disaster estimated at about ¥130 billion ($1.70 billion).

Tokio Marine, Japan's biggest property and casualty insurer, estimates about ¥100 billion in payments related to the disaster, while third-biggest NKSJ expects payments to come to around ¥30 billion.

Those payments for would dwarf an estimated ¥122 billion that the industry had to pay out earlier this year after typhoons caused flooding and landslides across Japan in late August and September.

The impact from March 11 earthquake and tsunami was, however, relatively light, as the government and a reinsurer—the Japan Earthquake Reinsurance Company—as well as primary insurers themselves, helped to cover insurance claims for policyholders.

MS&AD lowered its group net profit outlook to ¥6 billion from ¥67 billion for this fiscal year ending March 31. It also estimates a roughly ¥45 billion securities valuation loss for the full year.

Tokio Marine lowered its group net profit outlook to ¥90 billion from ¥145 billion, while NKSJ now expects to swing to a net loss of ¥12 billion, from a profit of ¥16 billion previously foreseen.

For the first half of the fiscal year through September, Tokio Marine posted a group net profit of ¥79.07 billion down 17% from ¥95.24 billion in the same period a year earlier.

MS&AD reported an 82% tumble in net profit for the six-month period to ¥7.14 billion from ¥40.06 billion, while NKSJ swung to a net loss of ¥33.31 billion from a net profit of ¥24.12 billion a year earlier.