Tokio Marine Holdings is taking a cautious approach to growth in its specialty insurance and cyber insurance lines as it reported strong underwriting business in North America and Brazil in its half-year 2024 financial results.
At the same time, the Japan-headquartered insurance giant is looking to cut unprofitable contracts and reduce high insurance limits to mitigate its exposure in risk markets, particularly in the US, where rising litigation costs pose significant challenges.
"By lowering coverage, we mitigate this risk and help manage insurance premiums more effectively,” said Taro Arakawa, head of investor relations at Tokio Marine.
Tokio Marine has revised its full-year adjusted net income forecast upward by ¥40 billion (US$258 million) thanks to accelerated sales of business-related equities and strong international underwriting. The updated forecast now stands at ¥1.04 trillion (US$6.71 billion).
Tokio Marine reported a 5.7% year-on-year increase in net premiums written for H1 2024, excluding foreign exchange effects. Its largest segment, international business, derives around 80% of premiums from the US, making North America the biggest contributor to its positive results, according to Arakawa.
“Strong performance in North America and Brazil offset declines in Asian life insurance, especially in Singapore, where lower interest rates are pressuring profitability,” Arakawa told Insurance Business. “This balance has led us to maintain our original projections for this fiscal year."
Cyber insurance is a noted area of potential growth for Tokio Marine. In September, Tokio Marine’s international insurance arm, Tokio Marine HCC (TMHCC), rolled out a new extension to its event cancellation insurance to cover malicious cyber attacks, addressing what it saw to be a gap in the market.
However, Arakawa noted that cyber seems to be entering a softening cycle and that the carrier would be selective about the risks it takes. “Cyber insurance remains a complex product requiring more data to properly evaluate the profitability, so we approach its expansion with great care,” he said.
For international business, Tokio Marine’s original projection showed a 4.5% increase from the previous year, but the revised projection is now 5.2%, reflecting an upward revision in premium growth.
In North America, the original projection was 4.1%, but it has been revised to 6.8%, making US operations the key driver of growth.
According to Arakawa, Tokio Marine has three major US subsidiaries: Philadelphia Insurance Companies, Delphi Financial Group, and HCC Insurance Holdings.
Philadelphia, a property and casualty carrier that targets niche markets such as SMEs, churches, nonprofits, schools, and specialty businesses, achieved an impressive 11% rate increase H1, exceeding projections. Arakawa attributed this to their strong market positioning and niche focus, despite broader market softening in some lines.
Delphi specializes in employee benefits, including disability and group life insurance, which are longer-tail products that support the company’s investments in higher-yield assets like commercial real estate. HCC focuses on specialty insurance with over 100 lines, including medical stop-loss, event cancellation, cyber insurance, and others.
While HCC saw a modest 1% rate increase amid a softening cycle, this exceeds the loss cost increase, ensuring profitability.
“Collectively, these subsidiaries are well-positioned to drive sustained growth and profitability across the group,” said Arakawa. Moving forward, Tokio Marine’s focus is on enhancing the quality and profitability of its overall portfolio.
“We see good potential in specialty insurance lines, but we are taking a cautious, data-driven approach to grow our cyber insurance business given the complexity and evolving market dynamics in that segment,” Arakawa said.
With reinsurance treaty renewals underway, Arakawa said the group expects either flat or a slight increase in rates following the impact of Hurricanes Helene and Milton on the global re/insurance market.
“We have a good approach (to reinsurance negotiations),” said Arakawa. “We have a lot of companies all over the world. We have aggregated the risk of each of these companies to Tokyo. This allows us to leverage significant bargaining power, reducing insurance premiums. Additionally, we are focused on improving portfolio profitability by eliminating unprofitable contracts.”
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