Japan’s Insurers Post Gains in Net

TOKYO — Japan’s major nonlife insurers posted net profit gains for the fiscal first quarter, partially helped by the recovery in global financial markets, but most of them said the prolonged economic downturn pulled down insurance premium income.

Tokio Marine Holdings Inc., Japan’s largest property and casualty insurer, said its group net profit for the three months ended June rose 23% to 35.34 billion yen ($364 million) from 28.85 billion yen a year earlier, helped by lower operating costs and smaller reserves for future claims overseas.

The firm’s net premium revenue for the period increased by 2.4% to 593.81 billion yen, boosted by its roughly $4.7 billion acquisition of U.S. nonlife insurance group Philadelphia Consolidated Holding in December. Domestically, Tokio Marine still saw a decline in its insurance premiums at most of its businesses, including its mainline automotive insurance business.

Fifth-ranked Nipponkoa Insurance Co. said its fiscal first-quarter net profit rose 13% to 7.66 billion yen from 6.78 billion yen a year earlier due to gains on sales of securities. But its net premium revenue decreased by 6.9% from a year earlier to 164.86 billion yen.

Meanwhile, Japan’s third-largest nonlife insurer, Sompo Japan Insurance Inc. swung to a net loss of 3.82 billion yen, from a year-earlier net profit of 7.29 billion yen, due to poor investment income after extending losses on sales of securities and lower interest and dividend income, in addition to lower insurance premiums. Net premium revenue fell 5% to 336.47 billion yen from 354.34 billion yen a year earlier.

Poor revenue underscores how Japan’s nonlife insurers have suffered from the economic downturn, which has hurt the automobile industry. For most nonlife insurers, automotive-insurance business accounts for nearly 50% of all insurance revenue, so poor auto sales have led to a drop in net insurance premiums.

Also, given Japan’s shrinking population, which limits growth prospects, nonlife insurers are trying to survive through consolidation and overseas expansion.

Japan’s second-largest nonlife insurer, Mitsui Sumitomo Insurance Group Holdings Inc., said Monday that its group net profit for the fiscal first quarter rose 37% to 32.18 billion yen on gains from derivative trading. But net premium revenue fell at all of its businesses, including its core automotive and fire insurance businesses.

The nation’s fourth-largest nonlife insurer, Aioi Insurance Co., said Monday that net profit for the quarter nearly quadrupled to 10.57 billion yen due to sharp gains from derivatives trading. But Aioi also reported a 6.2% drop in net insurance premiums.

In January, Mitsui Sumitomo, Aioi and sixth-ranked Nissay Dowa General Insurance Co. agreed to merge in April 2010 to form the country’s largest nonlife insurer.

And in March, Sompo Japan and Nipponkoa Insurance said they agreed to merge, setting up a joint holding company effective April 1. The merger would create Japan’s third largest nonlife insurer by premium revenue.

These consolidation moves will leave only three major players in the nation’s nonlife insurance industry; the two combined entities and Tokio Marine.

All of the five firms’ earnings are based on Japanese accounting standards.

Write to Atsuko Fukase at atsuko.fukase@dowjones.com