Book values remained stable last week. The S&P 500 Banks Index implied book value has increased by three percentage points since the end of November, reflecting a 32 percent aggregate decline from December 31, 2007. The Guy Carpenter Global Composite regained some momentum, edging slightly higher from the previous week. The Global Composite has lost 15 percent of its aggregate implied book value, compared with 17 percent at the end of November.

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A sagging economy has pushed non-life insurer earnings lower in Japan. After-tax net income for the seven largest companies dropped 67.1 percent for the first half of fiscal year 2008 (April 1, 2008 to September 30, 2008) relative to the same period in 2007-after adjustments for contingency reserve movements.

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Market conditions have had a particularly profound impact on investment income and realized gains in the Japanese market. Investment gains were off 50.7 percent year-over-year. Further, unrealized capital losses on domestic and foreign securities (including U.S. structured fixed income investments) pushed adjusted capital and surplus 12.3 percent lower for the first half of FY2008-and down 26.4 percent from the beginning of FY2007.

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Rate reductions and a slowing economy has precipitated a JPY100 billion (USD1.1 billion) reduction in net written premium, though net earned premium did grow lightly. Underwriting income fell 63.6 percent on an earned-incurred basis as a result of slightly higher losses in core lines of business and administrative expense growth. For the first half of FY2008, the combined ratio for these seven carriers was 99 percent, compared to 97.3 percent for the first half of FY2007.

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Book values ticked higher last week, as both the Guy Carpenter Global Composite and the S&P Banks Index showed signs of renewed hope. Gains were slight, but they emphasize the trend toward stability.

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The Guy Carpenter Global Composite’s aggregate book value unchanged from last week. The measure is still down 18 percent for the year. Likewise, the aggregate book value of the S&P Banks Index is unchanged from last week-down 35 percent year-to-date.

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As third quarter results become available, Guy Carpenter will continue to update the Changes to European (Re)insurers Earnings Sources chart. With the latest information, the conclusions have not changed, indicating that the latest results are consistent with early insights.

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As third quarter results become available, Guy Carpenter will continue to update the GC Reinsurance Composite Earnings Sources chart. With the latest information, the conclusions have not changed, indicating that the latest results are consistent with early insights.

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As third quarter results become available, Guy Carpenter will continue to update the Change in Equity chart. With the latest information, the analysis has not changed, indicating that the latest results are consistent with early insights.

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The Guy Carpenter Global Composite’s aggregate book value is down 18 percent for the year, relatively unchanged over the past week. The impairment of banks’ capital is still significantly worse than that of insurers.

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