Insurers and banks are leading a market plunge today with insurers Aflac and MetLife, which have direct risk exposure in Japan, each dropping more than 7% in early trading. The drop comes on the heels of Japan’s Prime Minister, Naoto Kan, issuing a statement on the danger of radiation leaks having increased at a nuclear facility damaged by last week’s earthquake and resultant tsunami.
Three-quarters of Aflac’s insurance premiums derived from Japan in 2010, although most of its exposure is in medical insurance, notes analysts. When MetLife purchased Alico from financially strapped American International Group (AIG) last year, Alico depended on Japan for $7 billion in revenue. Prudential also acquired non-U.S. life units from bailed-out AIG in the past year. The companies back liabilities in that nation with Japanese securities, note analysts.
The Hartford Financial Services Group also fell 8.3% in early trading. The Hartford, which suspended sales to Japan in 2009 to focus on its U.S. business, still has exposure to potential losses in the country, according to recent annual financial disclosures.
“It’s the nuclear worry today,” Steven Schwartz, an analyst covering the life insurance industry at Raymond James Associates Inc., told Bloomberg. “You’re dealing with something that’s so far out” on the range of standard disaster expectations, he said.
Japan’s Topix stock index saw its largest two-day drop since 1987 in the face of growing concern over the government’s ability to contain the crisis that began with an earthquake and tsunami last week.
Japan generated about 75% of Aflac’s 2010 sales, the most among U.S.-based companies with a market value of at least $100 million, according to data compiled by Bloomberg. Aflac shares suffered further declines in early trading following a 3% setback of the previous trading session. The company is the largest seller of cancer insurance in Japan.
