Financial Situation and Business Strategies of Nissay Dowa General Insurance June 3, 2008
The Company is committed to regaining the trust of our customers, as a critical management issue in FY2007. For that purpose, we are devoting our energies to a sweeping reform of management quality in every category from the viewpoint of customers, as the highest priority issue for management quality. These reforms are taking place through a policy checking activity for all contracts, training for agents and employees, revisions to products and business processes and action to strengthen administration. We believe that accelerating these measures, raising the level management quality high enough to meet customer expectations, and regaining the trust of our customers will be the cornerstone for future growth. FY2008 is the final year of the medium-term management plan introduced in FY2006.We are united in our quest to complete these management reforms and improve performance and productivity, and to fully execute our plan. As we embrace the challenges of the future, we ask for your continued support.
I. Financial Review of FY2007 II. Management Policies for FY2008 and Priority Measures
Financial Highlights Net premiums written in FY2007 decreased 2.5%, influenced by the worsening market environment, such as decreasing unit sales of new vehicles and housing starts, and the policy checking activity. The underwriting balance also decreased because of rises in the expense ratio and loss ratio. However, the company secured current income of 12.4 billion yen and net income of 6.4 billion yen, reflecting the contribution of asset management. Increase/ FY2006 FY2007 Decrease 318.2 ▲ 8.0 326.3 Net premiums written (billion yen) （ 1.4 ） （▲ 2.5 ） （ Growth rate (%) ） 186.7 194.7 7.9 Net claims paid (billion yen) （ 5.3 ） （ 4.2 ） （ Percentage change (%) ） 62.0 66.4 +4.4 Loss ratio (%/P) 32.3 33.5 +1.2 Expense ratio (%/P) ▲ 5.7 5.7 0.0 Underwriting balance (%/P) 12.4 +2.8 Current income (billion yen) 9.6 +0.1 6.2 6.4 Net income (billion yen) 4
Net Premiums Written by Line of Business Net premiums written decreased in voluntary automobile insurance and fire insurance, which was influenced by the worsening market environment, and rate revisions for personal accident insurance and CALI. Net premiums written continued to increase in marine insurance. FY2005 FY2006 FY2007 Net premiums Growth rate Net premiums Growth rate Net premiums Growth rate （ billion yen) （ billion yen) （ billion yen) (%) (%) (%) ▲2.4 ▲7.5 Fire 48.9 2.3 47.8 44.2 ▲3.7 Marine 4.6 5.0 7.6 5.4 9.5 Personal 29.9 ▲1.7 ▲3.9 29.9 30.4 1.7 Accident Voluntary ▲0.7 159.5 0.0 160.9 0.9 159.9 Automobile ▲2.7 ▲2.7 ▲1.6 CALI 40.3 39.2 38.5 40.1 ▲ 6.4 Miscellaneous 38.4 3.5 42.8 11.6 ▲0.0 ▲2.5 Total 321.7 326.3 1.4 318.2 5
Analysis of Loss Ratio of Automobile Insurance Premiums per contract in FY2007 fell 1.6% with the decrease in the number of new high- premium contracts. The overall number of contracts increased 0.6%, suggesting steady growth. [Premiums per contract and number of contracts for voluntary automobile insurance] FY2005 FY2006 FY2007 ▲ 1.0 Growth rate (%) +0.6 +0.8 Change in number of +1.5 +1.6 +0.6 contracts (%) Change in premiums per ▲ 0.9 ▲ 0.8 ▲ 1.6 contracts (%) Factors for the Decline - Slumping acquisition of new contracts (Number of new contracts ▲ 9.1% compared to FY2006 ） - Slumping acquisition of new contracts (Number of new contracts ▲ 9.1% compared to FY2006 ） -Influenced by a worsening market environment and policy checking activity -Influenced by a worsening market environment and policy checking activity -Escalation of grade and further discounts -Escalation of grade and further discounts 6
Premiums by Channel All channels except the corporate channel decreased because of the worsening market environment influenced by the decrease of new vehicle sales and housing starts, and policy checking activity. [Sales accounts] FY2007 Amount of increase Growth rate (billion yen) (billion yen) (%) ▲ 3.6 ▲ 5.9 Nippon Life sales staff 58.4 ▲ 1.4 ▲ 1.6 Professional agents 87.1 73.6 2.0 Corporate channel 2.8 ▲ 2.5 ▲ 12.4 Banks 17.8 ▲ 0.4 ▲ 1.7 Auto dealers 20.8 37.4 ▲ 0.7 ▲ 1.9 Auto repair shops ▲ 1.5 ▲ 3.6 Miscellaneous 38.8 ▲ 8.0 ▲ 2.3 Total 339.1 7
Net Claims Paid and Loss Ratio Net claims paid decreased in fire insurance because of decrease in natural disasters. Claims paid for voluntary automobile insurance and personal accident insurance increased substantially as a result of payment for nonpayment issues of incidental claims and accelerated payments. As a result, the loss ratio increased by 4.4 percentage points, to 66.4%. [Net claims paid and loss ratio by line of insurance] [Net claims paid, Loss ratio] (billion yen) 240 70% FY2006 FY2007 Net claims paid Loss ratio Net claims Net claims Loss ratio (%) Loss ratio (%) paid (¥bn) paid (¥bn) (Change (P) ) (Change (P)) 220 (Change (%)) (Change (%)) 66.4% 21.2 17.1 45.9 40.6 Fire （ +16.1 ） （△ 19.0 ） （ +7.1 ） （△ 5.3 ） 62.0% 2.6 2.6 55.3 50.5 200 Marine 59.7% （△ 5.3 ） （△ 0.5 ） （△ 7.3 ） （△ 4.8 ） Personal 12.2 44.9 16.5 60.3 60% （ +4.4 ） （ +35.1 ） 194.7 Accident （ +1.5 ） （ +15.4 ） 180 Voluntary 101.7 69.2 108.9 74.9 （ +5.0 ） （ +7.1 ） 186.7 Automobile （ +2.8 ） （ +5.7 ） 28.1 28.0 78.4 79.5 177.3 CALI （ +3.0 ） （△ 0.5 ） （ +3.9 ） （ +1.1 ） 160 20.7 21.3 50.5 55.5 Miscellaneous （ +1.9 ） （ +2.9 ） （△ 4.8 ） （ +5.0 ） 186.7 194.7 62.0 66.4 Total 140 50% （ +5.3 ） （ +4.2 ） （ +2.3 ） （ +4.4 ） FY2005 FY2006 FY2007 8
Reforming the Service Quality of Claims Payments We are undertaking priority initiatives to improve the service quality of claims payment in areas such as the administrative quality of claims payment, organization and personnel, education, and systems. As a result of these initiatives, the payment system is improving. Key initiatives for innovating the quality Improving the claims payment system Key initiatives for innovating the quality Improving the claims payment system Administrative quality Administrative quality h For preventing nonpayment completely Organization and Personnel Organization and Personnel of claims payment of claims payment n Set up a committee to examine n Set up a committee to examine 0 occurrences from 2 nd n Increase staff n Increase staff Nonpayment Nonpayment half of FY2007 claims payment services claims payment services (by 266 from FY2006) (by 266 from FY2006) n Establish sessions for the n Establish sessions for the (number of nonpayments n Establish more claims service n Establish more claims service in the month of inspection) examination of tertiary insurance examination of tertiary insurance centers centers n Expand the scope of n Expand the scope of consideration for unacceptable consideration for unacceptable n Improve training systems rulings on claims payments n Improve training systems rulings on claims payments h Improving the situation of voluntary automobile insurance related to For customer satisfaction Operation and system For customer satisfaction Operation and system personal cases n Accelerate payment of insurance n Accelerate payment of insurance n Distribute guidelines of “from n Distribute guidelines of “from claims for long-term cases in Number of Number of claims for long-term cases in +22.7% (vs. FY2006) voluntary automobile insurance insurance claim to receiving voluntary automobile insurance insurance claim to receiving payments payments n Enhance the early payment payments” n Enhance the early payment payments” acceleration system acceleration system Number of cases Number of cases △ 7.6% (vs. FY2006) n Introduce measures to prevent n Introduce measures to prevent in progress in progress n Distributed “Policy details n Distributed “Policy details nonpayment nonpayment (full implementation of inspection in the (full implementation of inspection in the guidelines” guidelines” following month) following month) 9
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