Hit by hefty share price losses and insurance payouts following the Sept. 11 terrorist attacks in the United States, four of the nation’s nine largest nonlife insurers on Monday reported net losses for the 2001 business year.
The firms slipped into the red just as reorganization of the sector is beginning in earnest.
Together, the nine companies suffered losses estimated at 104.5 billion yen from insurance payouts related to the terrorist attacks in the year ended March 31.
Much like Taisei Fire & Marine Insurance Co., which was driven into bankruptcy by losses resulting from the terrorist attacks, the four companies that went into the red discovered only after the attacks that they had taken on more risk than they bargained for in reinsurance deals.
Yasuda Fire & Insurance Co. and Nissan Fire & Insurance Co. were hit especially hard from a deal with U.S. reinsurance broker Fortress Re Inc. The two, set to merge in July to form Sompo Japan Insurance Inc., together posted losses of 83.1 billion yen for the business year.
Aioi Insurance Co. incurred a loss of 83.4 billion yen. The nonlife insurer, created in a merger last year of Chiyoda Fire & Marine Insurance Co. and Dai-Tokyo Fire and Marine Insurance Co., saw the resignation of Chairman Koji Fukuda to take responsibility for the loss.
Along with Nipponkoa Insurance Co., the three companies were unable to recover from the losses from the terrorist attacks.
It was the first time the four companies went into the red since the years immediately following the end of World War II.
Like the rest of the sector, the hurting nonlife insurers saw net premiums stall, and they were forced to chalk up hefty appraisal costs against losses in their shareholdings.
Together, the nine companies set aside 361.9 billion yen in appraisal costs, up 64.8 percent from the previous year, against shares that had fallen 50 percent or more from their book value.
With the benchmark Nikkei average of 225 stocks slumping to postbubble lows during the 12 months to March 31, the insurers saw the unrealized value of their shareholdings shrink 21 percent to 4.16 trillion yen.
Executives from the companies said that up to 80 percent of the appraisal costs were for massive bank shareholdings.
Faced with stagnating profits, the industry saw a flurry of realignment, with five major groups dominating 85 percent of the market.
Meanwhile, intensifying competition due to deregulation is threatening to eat away at profits, as they are forced to pump more funds into product development to create unique and innovative products that will retain customers.
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