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Toyota Motor Corporation (ADR) (TM): Playing the Yen Game

This insurance business should benefit from further yen depreciation

Ms&Ad Insurance Group Holding Inc (OTCMKTS:MSADF) should not only benefit from higher inflation expectations – all Japanese insurers will – but should also have good operational years in 2013 and 2014.

During the company’s first quarter, profit increased mostly as a result of substantial improvement of investment income due to a recovering market. Operationally, the company needs to improve. At both Mitsui Sumitomo and Aioi Nissay Dowa (both part of the Ms&Ad Insurance Group Holding Inc (OTCMKTS:MSADF) group), the combined ratio remains above 100%, which indicates that the company pays out more money than the premiums being received. Nevertheless, loss ratios have gotten better at both subsidiaries.

All of the above taken into account, profit is expected to be boosted yoy by lower payouts for non-life insurance in categories like fire, auto, and other casualty insurance, as well as a decline in valuation losses on marketable securities. Besides, there was positive news for shareholders: dividends are expected to rise, and a share buyback program was announced (0.4% of shares outstanding).

Bottom line

All the ideas mentioned above are supposed to benefit in US dollar terms as the yen depreciates. I chose companies that I expect to improve operational performance at the same time as their costs in US dollars diminish (like in the case of Toyota Motor Corporation (ADR) (NYSE:TM)) and/or their income is boosted by inflation expectations (Ms&Ad Insurance Group Holding Inc (OTCMKTS:MSADF)).

Federico Zaldua has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Playing the Yen Game originally appeared on

Federico is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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