Tokio Marine profit slides as economic pain bites

Mon Aug 11, 2008 5:10am EDT

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By David Dolan

TOKYO, Aug 11 (Reuters) - Tokio Marine Holdings , Japan's largest property and casualty insurer, posted a 42 percent decline in quarterly profit on Monday, as a stumbling economy dented its insurance business.

The firm, which last month unveiled plans to buy U.S. insurer Philadelphia Consolidated as part of a push beyond its shrinking home market, also said it will buy back up to 50 billion yen ($455.8 million) of its own stock, a move that could support its softening share price.

Results were even grimmer for three of Tokyo Marine's smaller rivals, underscoring the harsh outlook for insurers in the world's second-largest economy.

Nissay Dowa General Insurance and Aioi Insurance both booked sharp drops in quarterly profit, while Fuji Fire and Marine Insurance fell to a loss.

Japanese insurers face limited prospects for expansion at home given the country's economic problems and expected decline in population. Growth figures due on Wednesday are expected to show Japan's economy contracted in the second quarter and some policymakers say the country may already be in recession.

The cash-rich Tokio Marine is looking to counteract the malaise at home by increasingly its business overseas.

Tokio Marine completed the purchase of Lloyd's of London insurer Kiln Ltd in March for 442 million pounds ($848 million), to increase its European presence.

The insurer said group net profit fell to 28.9 billion yen ($263 million) in the three months to the end of June, hurt by a slowdown at its core unit, which booked a downturn in underwriting income.

Underwriting income was flat across the group while deposit premiums from policyholders fell by nearly 16 percent.

The insurer said it would by back up to 50 billion yen of its own shares, or 2.2 percent of its outstanding stock.

Shares of the firm have fallen 24 percent over the past 12 months, reflecting the worsening outlook for Japanese financial firms. Tokyo's index of insurance firms fell about 27 percent during the same period. ($1=109.93 Yen, $1=.5214 Pound) (Reporting by David Dolan; Editing by Michael Watson)