UPDATE 3-Japan NKSJ sees no impact from Ambac as shares fall

* Says no impact on earnings from possible Ambac bankruptcy

* Sompo Japan supplies some reinsurance to Ambac unit

* Shares fall as much as 8% in heavy volume, end down 4%

By Taiga Uranaka

TOKYO, Nov 2 (BestGrowthStock) – Japanese insurer NKSJ (8630.T: ) said
the potential bankruptcy of Ambac Financial Group (ABK.N: ) would
not impact its earnings after worries over its business with the
U.S. bond insurer sent NKSJ’s shares down sharply in heavy trade.

Shares of NKSJ fell as much as 8 percent before closing down
4 percent after Ambac, hit by huge losses on risky mortgages,
said Monday it may file for bankruptcy protection this year after
skipping a bond interest payment. [ID:nN01129385]

The sell-off was fuelled in part by a report from Citigroup
Global Markets Japan analyst Makoto Kasai in which he highlighted
the uncertainty over the potential impact on Sompo Japan, a core
unit of Japan’s third-largest property and casualty insurer.

“Accurately assessing the impact of Ambac’s possible
bankruptcy is difficult owing to the lack of clarity on the
handling of unincurred claims,” he said in a report. “Extreme
caution regarding these issues will be necessary for some time.”

NKSJ said that while Sompo Japan reinsures some insurance of
the U.S. company’s Ambac Assurance Corp unit, it did not have any
exposure to Ambac Financial itself and therefore did not expect
any impact on its earnings.

“We do not have any credit extended to Ambac,” said NKSJ
spokeswoman Yuko Tezuka.

Insurance companies typically hedge risk by having part of
their insurance portfolio underwritten by other insurance firms.

Such reinsurance contracts between Sompo Japan and Ambac
Assurance, an insurance unit of Ambac Financial, stands at about
200 billion yen ($2.5 billion), NKSJ said.

Even if Ambac Financial went bankrupt, NKSJ would not
necessarily face any losses as it would simply be required to
uphold its obligations to those policyholders it has exposure to
from reinsurance contracts, Tezuka said.

Separately, NKSJ announced after the close of trade on
Tuesday that its first-half net profit would likely be 2.7 times
larger than an earlier estimate thanks to smaller payouts than
expected for natural disasters.

NKSJ said it now expects a net profit of 24.1 billion yen for
the six months ended in September, up from its earlier estimate
of 9 billion yen. It will unveil its full-year forecast when it
officially reports first-half results on Nov. 19.

NKSJ shares, which fell as low as 507 yen in morning trade,
pared losses to end down 4 percent at 531 yen in a flat market.
Volume spiked to more than 15 million shares, about three times
the daily average over the past three months.

($1=80.53 Yen)
(Editing by Michael Watson)

UPDATE 3-Japan NKSJ sees no impact from Ambac as shares fall