COVID drags Tokio Marine International 2020 profits down 44%

Cecilia Nysing

Tokio Marine Holdings, Inc. has reported a 44% decrease in profits for its international business over the full-year 2020 period, which the company attributes almost entirely to the impact of the COVID-19 pandemic.

Total full-year profits across the international business segments came to JPY 101.1 billion (USD 928 million), which was down 78.3 billion on the 179.5 billion recorded for FY 2019.

Tokio Marine estimates that COVID had a roughly JPY 80.0 billion impact on this result, although it is worth noting that profits came in 26.1 billion higher than the 75.0 billion projection that the insurer made back in November 2020.

Of the JPY 80.0 billion decline, 60.0 billion was related to underwriting (mainly event cancellation, business interruption and trade credit insurance), and 20.0 billion was related to investment, Tokio Marine explained.

Tokio Marine also saw an overall JPY 108.2 billion, or 6.2%, decrease in net premiums written for its international business segments, which totalled 1,633 billion in FY 2020, versus 1,741 billion in FY 2019.

Again, Tokio Marine attributed the result to the COVID-19 pandemic, which it says was responsible for JPY 62.0 billion of the decline and caused the company to focus on bottom line-focused underwriting.

In fact, net premiums reportedly rose 1.0% YoY on a local currency basis, and grew by 7.0% in the core North America segment if the impact of COVID is excluded, as Tokio Marine looked to capture hardening market conditions.

Staying with the international business, Tokio Marine recorded an improved combined ratio of 94.7% for the full-year 2020 period, down 8.1 percentage points from 102.8% in the previous year. This was due almost entirely to corresponding decrease in the loss ratio, which came to to 64.1% versus 72.2% previously, while the expense ratio remained mostly unchanged at 30.5%.

Looking ahead over 2021, international business unit profits are forecast to grow to JPY 167.0 billion (USD 1.53 billion) thanks to factors such as a reaction to the impact of COVID-19 in FY 2020 and the profit expansion of the Pure segment, while natural catastrophes are projected to be at the same level as the average year at around 9.6 billion.

Similarly, net premiums written are projected to grow 11.1% YoY to JPY 1,815 billion thanks to factors such as the weaker Japanese yen (101.1 billion), a reaction to the impact of COVID-19 in FY2020, rate increases, and business expansion.

Parent company Tokio Marine Holdings overall reported consolidated net income of JPY 161.8 billion (USD 1.48 billion) for the full-year 2020 period, down 97.9 billion YoY primarily due to the impact of COVID-19 and an increase in various reserves, and below the FY 2020 projection due to the increase in various reserves.

However, adjusted net income was up 49.4% to JPY 336.1 billion (USD 3.08 billion), which the company says reflects underlying capabilities when deducting catastrophe loss reserves.

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