S&P Revises NIPPONKOA Outlook-Negative to Stable

April 27, 2004

Standard & Poor’s Ratings Services announced that it has revised the outlooks to stable from negative on its long-term counterparty credit and financial strength ratings on NIPPONKOA Insurance Co. Ltd. (A+/Stable/–) and Aioi Insurance Co. Ltd. (A-/Stable/–), “reflecting the companies’ improving profitability and capitalization.”

S&P also affirmed the above ratings on the companies. The bulletin noted that “despite projected pressure on premium income due to a drop in the unit price of core auto insurance products, the company’s profitability and capitalization are improving. Fewer natural disasters in Japan have lowered the companies’ losses, while the insurers have enhanced their underwriting capabilities.”

“Previously, concerns over potential deterioration in NIPPONKOA and Aioi’s investment performance and capitalization, caused by stock price fluctuation in Japan, have been a major negative constraint on the ratings on the companies,” stated S&P Credit analyst Kai Nakajima. “But, concerns have been alleviated by the companies’ disposals of stockholdings held for business relationship purposes and the recovery in Japanese stock prices.”

The report indicated that “NIPPONKOA’s net premium income is likely to have fallen at the end of March 2004 from the previous year. However, the company should be able to mitigate the impact on its profitability through over-the-counter sales at banks and sales of non-life insurance products through its alliance with Taiyo Life Insurance Co. (A/Stable/–). The sales of its products through an alliance with Meiji Yasuda Life Insurance Co. (BBB+/Negative/A-2), commenced in January 2004, will also help alleviate the pressures.”

S&P also said that “Aioi’s net premium income generated from Toyota-related sales has increased steadily, supported by its close ties with Toyota Motor Corp. (AAA/Stable/A-1+) in both operations and finance, which is expected to mitigate downward pressures on premium income.

“In fiscal 2001 (ended March 31, 2002), Aioi suffered a substantial deterioration in profitability and capitalization due to losses incurred from reinsurance transactions relating to the terrorist attacks in the U.S. However, its efforts to enhance underwriting capabilities and reduce operating expenses, in addition to external factors, such as fewer natural disasters, have helped improve its combined ratio.”

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