Millea Group Ups Profit Forecast; Subprime Exposure $245 Million

Japan’s Millea Group – Tokio Marine, Nichido and Nissin Fire – increased its profit forecasts for the fiscal year ending March 2008 by Yen 7.7 billion ($70 million), despite some exposure to subprime loans (SPL’s).

The Group said it’s “risk exposure to U.S. SPL’s as of the end of six months ended September 30, 2007 was approximately Yen 26.9 billion [$245 million], as compared with approximately Yen 26.2 billion [$237.7 million], the amount previously announced on August 22, 2007.”

Millea explained that the “difference was mainly due to the risk exposure in connection with credit derivatives that were indirectly related to U.S. SPLs, further found through a detail review on the components of CDOs conducted after the August 22, 2007 announcement. The impairment loss related to US SPL’s as of the six months ended September 30, 2007 amounted to approximately Yen 1.4 billion [$121.7 million].”

The exposures were broken down as follows: Credit derivatives – approx. Yen 8.0 billion ($72.5 million), hedge fund investments – approx. Yen 1.5 billion ($13.6 million), asset backed securities – approx. Yen 1.2 billion ($10.8 million) and financial guaranty treaty reinsurance written – approx. Yen 16.2 billion ($147 million).

Millea expects adjusted earnings of Yen 164.1 billion ($1.48 billion) for the fiscal year ending March 31, 2008, which is an increase of Yen 7.7 billion when compared to the Business Plan.

Source: Millea Group – http://ir.millea.co.jp/en