Nov. 22 (Bloomberg) -- Millea Holdings Inc., Japan's largest publicly traded insurer, cut its profit forecast by 11 percent as it set aside more money to cover pension obligations and Hurricane Katrina claims. The shares fell 4.3 percent.

Net income will rise to 89 billion yen ($747 million) in the year ending March 31, from 67.6 billion yen a year earlier, Millea said in a statement today. The Tokyo-based insurer in May predicted 100 billion yen of profit.

Millea is expanding its life insurance and overseas business to bolster premium income as a low birth rate limits growth in casualty and property policies in Japan. The company set aside 159.4 billion yen in pension provisions, up from 2.8 billion yen a year earlier, after the government tightened rules in April.

Insurers set aside as much as 6 percent of their future premiums in a contingency fund to be used to fulfill minimum payments in the future. Annuities are pension plans that pay benefits based on returns from investments in stocks and bonds.

Millea earned 37.9 billion yen for the six months ended Sept. 30, rebounding from a 7.13 billion yen loss a year earlier when a record number of typhoons struck Japan, swelling payouts for property damage and injuries. The company, formed from the merger of Tokio Marine & Fire Insurance and Nichido Fire & Marine Insurance, announced the profit rebound in a preliminary earnings report on Nov. 7.

The company's shares closed 4.3 percent lower at 2.01 million yen in Tokyo. Millea's market value rose by almost a third this year, lagging a 45 percent gain in an index of nine Japanese insurance stocks.

Millea's first-half profit was boosted by investment income as Japan's benchmark Nikkei 225 Stock Average gained 17 percent in the three months ended Sept. 30. The economy grew at an annual 1.7 percent pace in the quarter, extending Japan's longest recovery in eight years.

Millea doubled revenue from investments to 149.1 billion yen in the six-month period. Life insurance premiums surged to 290.1 billion yen from 186.6 billion yen a year earlier.

Bank of Japan Governor Toshihiko Fukui reiterated last week the central bank sees potential for change after April 1 in a policy that's held interest rates close to zero for five years. Higher rates would boost interest payments on bonds insurers buy.

Millea raised its full-year revenue forecast to 3.15 trillion yen from 2.98 trillion yen. Profit will also be eroded by the need to spend more money to develop the life insurance business, the company said.

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