|Home > News|
|Home > News|
Thursday, May 22, 2008
Nonlife insurers lashed by steep profit hits
Four of Japan's six major nonlife insurance companies saw their group net profits plunge in business 2007 as the U.S. subprime loan crisis and the subsequent fall in global stock prices pushed down profits from their investments, the firms said Wednesday.
Aioi Insurance Co., which suffered the most from the housing loan upheaval, booked ¥83.6 billion in subprime-related losses in the business year ended in March. As a result, Aioi posted a net loss of ¥3.17 billion, down from a net profit of ¥16.2 billion the year before.
"One of the reasons we booked a group net loss was because of the great amount of losses we suffered from the subprime loans," Aioi Managing Director Takayoshi Uemura said. "We are strengthening divisions to monitor investment polices."
Aioi said earlier that its directors will voluntarily return 10 percent to 50 percent of their salaries for two months to take responsibility for the losses.
Net profit dropped 43.4 percent at Nipponkoa Insurance Co. and 34.2 percent at Mitsui Sumitomo Insurance Co. as the global market turmoil increased their investment costs.
Millea Holdings Inc., which has Tokio Marine & Nichido Fire Insurance Co. under its wing, was the only insurer to post a double-digit increase in net profit. In sharp contrast with its rivals, Millea posted ¥108.8 billion in group net profit, up 16.9 percent from the year before, amid a boost in revenues from interest and dividends from its investments.
The combined premium revenues of the six nonlife insurers dropped 1.1 percent to ¥6.42 trillion in the business year to March as a decline in housing starts pushed down fire insurance sales.
Nipponkoa's revenues from fire insurance premiums dropped 8.1 percent to ¥95.9 billion. Nissay Dowa General Insurance Co. saw a 7.5 percent plunge in the same category.
The housing slump began last July following a revision of the Building Standards Law in June in the wake of revelations in 2005 that architect Hidetsugu Aneha had been fabricating quake-resistance data.
The legal revision, which also raised the penalties for architects who fabricate data, was meant to make the buildings safer, but the complicated procedures for getting permits caused delayed construction starts.
Housing starts dropped 19.4 percent to 1.04 million units in fiscal 2007, the first fall in five years.