Japanese Insurers’ Guidance Cuts Mostly a Result of Transitory Factors and Don't Affect Our FVEs

We maintain our fair value estimates of JPY 4,300 for MS&AD Insurance, JPY 5,600 for Sompo Holdings, and JPY 2,500 for Dai-Ichi Life Insurance, and round up our fair value estimate for Tokio Marine to JPY 2,400 from JPY 2,333 post-split (JPY 7,000 before its three-for-one stock split). These are equivalent to 0.97 times book value per share adjusted for catastrophe, contingency, and price fluctuation reserves, unrealized gains on bonds not marked to market, and the value of in-force life insurance business for Tokio Marine, 0.50 times book value per share adjusted on the same basis for MS&AD, 0.65 times the same for Sompo, and 0.36 times embedded value for Dai-Ichi Life. There is 13% downside from the current price to our fair value for Tokio Marine, 9% upside for MS&AD, and 6% upside for Dai-Ichi Life, while Sompo shares are trading very near our fair value.