S&P Raises Japan’s Fuji Fire Ratings to ‘BBB+’

April 27, 2005

Standard & Poor’s Ratings Services announced that it has raised its financial strength and long-term counterparty ratings on Japan’s Fuji Fire & Marine Insurance Co. to “BBB+” from “BBB”, “reflecting the insurer’s improved capitalization and profitability.” The outlook on the long-term rating is stable.

“Amid a stable investment environment, Fuji Fire has substantially reduced its holdings of domestic equities and other assets with high price-fluctuation risk, leading to improved capitalization relative to risk,” stated S&P credit analyst Kai Nakajima.

“Fuji Fire’s new management has introduced more stringent systems for revenue and risk management, and has made progress in improving the company’s insurance product portfolio, which previously had excessive weighting in auto insurance. Management has also cut costs and eliminated insurance policies with high loss ratios, boosting the company’s profitability,” he added.

S&P noted that the “Japanese nonlife insurance industry suffers from stagnant growth, but it now has added pressures on its underwriting profit due to increased payouts related to natural disasters in 2004 and intensifying competition, especially among major insurers. Nevertheless, Fuji Fire’s credit quality is expected to remain stable, given its increasingly secure financial base, reduced risk assets, improving profitability, and prudent use of reinsurance.

“Further improvement in profitability would require a reversal of its falling premiums deriving from fire and casualty insurance. Fuji Fire formed a capital alliance with ORIX Corp. (BBB+/Stable/–) and American International Group Inc. (AIG: AA+/Watch Neg/A-1+) in March 2002. Pursuing enhanced profitability and management capabilities, the insurer added board members from the alliance partners under a three-year business plan through March 2005.”

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