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| The Tokio Marine Group expresses its sincere appreciation to all investors and shareholders for their continuing guidance and support of its business activities. Business Developments and Results During the fiscal year ended March 31, 2010, the Japanese economy was characterized by the continued effects of the global downturn in the second half of the previous fiscal year. Although growth in emerging economies contributed to an increase in exports and consumer spending showed signs of recovery owing to the government's economic stimulus measures, the economy was unable to achieve a self-sustaining recovery and difficult conditions persisted, represented by continued high levels of unemployment rate. In the insurance industry, property and casualty insurance premiums decreased primarily because of lower automobile sales volume, decreased goods flow and rate cuts in compulsory automobile liability insurance. In the life insurance sector, the amount of life insurance-in-force decreased due in part to the declining birthrate and the aging population. In this environment, the Tokio Marine Group (the “Group”) has been implementing the “Innovation and Execution 2011” medium-term corporate strategy, beginning with the fiscal year ended March 31, 2010, with a vision of becoming a “global corporate group maintaining growth by offering quality that customers select.” In accordance with the strategy, we aim to realize sustainable earnings growth that originates in the improvement of the quality of our products, services and business processes. We will also focus on allocating management resources in business areas with high profitability and growth potential, as well as strengthening our business management and administration system, which will allow us to demonstrate our competitiveness globally. Tokio Marine Holdings, Inc. (“Tokio Marine Holdings” or the “Company” or “We”) reported improved consolidated business results as described below, primarily due to a significant decrease in impairment losses on securities, which the Company had posted in the previous period against the backdrop of the impact of the financial crisis, partially offset by a decrease in underwriting income largely due to the effects of the economic downturn. On a consolidated basis, ordinary income amounted to 3,570.8 billion yen, an increase of 67.7 billion yen from the previous fiscal year. The main components of ordinary income were underwriting income of 2,968.1 billion yen and investment income of 536.3 billion yen. Ordinary profit increased by 218.5 billion yen to 203.4 billion yen. Net income was 128.4 billion yen for the fiscal year ended March 31, 2010, an increase of 105.2 billion yen from the previous fiscal year. Domestic Property and Casualty Insurance Business The following represents the operating results of Tokio Marine & Nichido Fire Insurance Co., Ltd. (“Tokio Marine & Nichido”) for the fiscal year ended March 31, 2010. Net premiums written were 1,736.0 billion yen, a year-on-year decrease of 4.3 percent. Ordinary profit was 147.4 billion yen, an increase of 77.7 billion yen, and net income was 94.4 billion yen, an increase of 23.3 billion yen, in each case as compared to the previous fiscal year. Tokio Marine & Nichido is working on a new business renovation project for significantly restructure its products, back-office procedure and systems. Following the lead of the automobile insurance business in the previous fiscal year, we substantially simplified fire insurance business operations and transferred administration of fire insurance policies to a new system infrastructure in January 2010. The Company is striving to further enhance business efficiency through this project and to realize sustainable growth by providing customers with competitive products and services. Additionally, Tokio Marine & Nichido is promoting the use of "TNet", a new agency system, to further improve the quality of service that agents offer to customers. The company has also established a new basic procedures called “Multi-access” that utilize call centers and websites for insurance solicitation in order to enhance customer contacts. With respect to the operating results of Nisshin Fire & Marine Insurance Co., Ltd. for the fiscal year ended March 31, 2010, net premiums written were 131.8 billion yen, representing a decrease of 3.0 percent from the previous fiscal year. Ordinary profit was 6.4 billion yen, an increase of 22.6 billion yen, and net income was 4.2 billion yen, an increase of 14.5 billion yen, in each case as compared to the previous fiscal year. E. design Insurance Co., Ltd., a joint business established with NTT FINANCE CORPORATION, launched operations in June 2009 and is focused on sales of automobile insurance using mobile networks, including cellular phones, and the Internet. Domestic Life Insurance Business As of March 31, 2010, Tokio Marine & Nichido Life Insurance Co., Ltd. (“Tokio Marine & Nichido Life”) recorded 20,469.8 billion yen in the amount of life insurance-in-force, an increase of 1,395.2 billion yen from March 31, 2009, while the amount of newly signed life insurance was 2,900.4 billion yen, a year-on-year increase of 15.7 percent. Ordinary profit was 6.8 billion yen, a year-on-year increase of 1.3 billion yen. For the fiscal year ended March 31, 2010, Tokio Marine & Nichido Life continued to set aside additional amounts into underwriting reserves to meet standards required under the Insurance Business Law of Japan. As a result, net income amounted to 0 billion yen. Tokio Marine & Nichido Life is working toward the development of life insurance products that meet the needs of customers, and in October 2009, it has launched new medical insurance and cancer insurance products focused on covering medical expenses of advanced medical treatment and anti-cancer agent treatment. Tokio Marine & Nichido Life is expanding promotional activities, including running TV commercials, that introduce new product features by using its corporate character “Anshin Seemee.” As of March 31, 2010, Tokio Marine & Nichido Financial Life recorded 2,783.5 billion yen in the amount of life insurance-in-force, an increase of 141.2 billion yen from the previous fiscal year, although the amount of newly signed life insurance decreased 60.9 percent from a year earlier to 173.4 billion yen. Ordinary profit and net income each decreased by 11.4 billion yen from the previous fiscal year, resulting in ordinary loss and net loss of 1.3 billion yen, respectively. Tokio Marine & Nichido Financial Life is working toward strengthening its business foundation through sales of variable annuity insurance, mainly through "over the counter" channels at banks while monitoring risk control and profitability in light of financial market conditions. Overseas Insurance Business The Company is making efforts toward smoothly integrating Kiln Group Limited (“Kiln”), a U.K. insurance group that it acquired in the fiscal year ended March 31, 2008, and Philadelphia Consolidated Holding Corp. (“PHLY”), a U.S. property and casualty insurance group that it acquired in the previous fiscal year, into the Tokio Marine Group, as well as achieving the business plans of both companies. Kiln is steadily expanding operations mainly due to an increase in underwriting of insurance contracts with higher profitability such as reinsurance and marine insurance contracts. Net premiums written during the fiscal year ended March 31, 2010 increased by 35.5 percent year-on-year to 430 million British pounds (64.1 billion yen). In addition, Kiln is making a contribution to the earnings expansion of the Tokio Marine Group by operating a Lloyd’s syndicate established by the group during fiscal year ended March 31, 2009. While the U.S. property and casualty insurance market has been in the doldrums, PHLY has maintained high growth on the strength of its strategy focused on specific industry sectors and customer segments and robust marketing capabilities, recording a year-on-year increase of 10.7 percent in the amount of net premiums written to 1.87 billion US dollars (172.8 billion yen) for the fiscal year ended March 31, 2010. The Company's reinsurance business yielded successful results as its reinsurance subsidiaries, notably Tokio Millennium Re Ltd., which recorded a year -on -year increase of 13.3 percent in net premiums written to 360 million US dollars (33.2 billion yen) for the fiscal year ended March 31, 2010, benefited from the acquisition of new insurance contracts by leveraging their high creditworthiness and an increase in premiums owing to the hurricane that hit the U.S. in fiscal year ended March 31, 2009. The Company reached an agreement with Edelweiss Capital Limited, a leading financial services company in India, to establish a joint life insurance company in November 2009. As a result, the Tokio Marine Group will become the only Japanese insurance group to operate both a property and casualty insurance business and a life insurance business in the Indian insurance market, which we believe offers high-growth potential. Asset Management and Financial Services Business The Group engaged in comprehensive risk management in order to maintain a sound financial base and continued efforts to strengthen its asset liability management in order to meet payment obligations such as insurance claims and maturity refunds. At the same time, we strived to ensure the financial security and liquidity of our assets by increasing bond holding in the asset portfolio. Impairment losses on securities of the Group decreased by 133.4 billion yen from the previous fiscal year to 28.7 billion yen due to positive factors such as the recovery of securities prices and financial markets generally. Gain on valuation of credit default swaps (CDSs) was 10.2 billion yen, which is an increase of 24.4 billion yen compared with the previous fiscal year, and impairment losses on asset backed securities (ABSs) was 10 million yen, an improvement of 38.4 billion yen from the previous fiscal year. The Company expanded its financial services business, centered on asset management business that offers stable revenues, which includes consigned management of public pensions and corporate pensions and establishment and management of investment trusts. CSR Tokio Marine & Nichido introduced a system in May 2009 to allow customers to choose to receive insurance terms and conditions on the company website with the aim of reducing paper use from the viewpoint of protecting the global environment. Tokio Marine & Nichido is working on the “Green Gift” project, in which it donates the cost of planting mangroves depending on the number of instance when customers chose to use insurance terms and conditions on the Company website. The Company established Tokio Marine Business Support Co., Ltd. (“Tokio Marine Business Support”) in January 2010 to promote recruitment of people with disabilities. Tokio Marine Business Support has been certified as of March 2010 as a special subsidiary based on a law promoting the employment of people with disabilities, and will mainly perform various back-office jobs for Tokio Marine Group companies. Issues Facing the Group In the fiscal year ending March 31, 2011, the Japanese economy is expected to continue recovering based on the strength of improvements in overseas economies and the effects of economic stimulus measures by the government, although domestic demand is projected to slow down amid a mild deflationary environment. Given the further maturation of the Japanese economy coupled with a declining birthrate and an aging population, the domestic insurance market is not expected to grow further. In addition, we project that we will face more severe competitive environment in the future, especially in the property and casualty insurance industry due to the integration of major insurance companies. Under such circumstances, the Tokio Marine Group expects to focus on the issues as describedbelow. The Group will proactively move forward with its businesses to achieve an “Innovation and Execution 2011” medium-term corporate strategy. In the domestic property and casualty insurance business, we will aim to realize sustainable earnings growth through measures including the provision of competitive products and services, strengthening and expansion of our sales base and cultivation of new markets. In the domestic life insurance business, we will release new products that meet the needs of customers appropriately. At the same time, we will expand our insurance business through the concerted efforts of the life insurance and property and casualty insurance companies of the Tokio Marine Group. The Tokio Marine Group will seek to increase the profitability of its domestic property and casualty insurance business through the above measures. In the overseas insurance business, the Tokio Marine Group will pursue the expansion of the scale and earnings of its overseas insurance business through steady growth of Group companies including PHLY and Kiln. In addition, the Tokio Marine Group will aim to realize sustainable growth by further strengthening its domestic life insurance business and overseas insurance business. Meanwhile, we will continue to develop infrastructure for enhanced risk-based management (through an ERM system) in order to reinforce our business management and 7 administration systems on a global basis. Under our management philosophy to place “customer trust at the base of all its activities,” the entire Tokio Marine Group will endeavor to achieve further growth as a corporate group, seeking growth characterized by high profitability, sustainability and soundness. The management would like to express its sincere appreciation to all shareholders of Tokio Marine Holdings for their continued guidance and support. Note 1: All amounts (including numbers of shares) are truncated and all ratios are rounded to one decimal place. Note 2: The yen-denominated amounts of net premiums written of Kiln, PHLY and Tokio Millennium Re Limited are calculated at exchange rates in effect as of the end of December 2009. |
