Best Affirms NIPPONKOA ‘A’ Rating

September 5, 2005

A.M. Best Co. announced that it has affirmed the financial strength rating of “A” (Excellent) of Japan’s NIPPONKOA Insurance Company Limited with a stable outlook.

“The rating reflects Nipponkoa’s excellent market profile, strong risk-adjusted capitalization and stable operating performance,” said Best.

“Nipponkoa is one of the five largest general insurers in Japan with a market share of 10 percent in net premiums written as of fiscal year 2004,” the report continued. “Since January 2004, the new arrangement with Meiji Yasuda Life Insurance Company, whereby the company sells Nipponkoa’s non-life products, has created a synergy effect that will strengthen Nipponkoa’s operating efficiency.”

Best noted that the company is “prudently capitalized on a risk-adjusted basis, with an improved local solvency ratio of 1,016 percent in fiscal year 2004 from 996 percent in fiscal year 2003. The Best’s Capital Adequacy Ratio, which measures capitalization on a risk-adjusted basis, also demonstrates the company’s strong capital position.”

The rating agency also indicated that “despite the severe typhoon losses in Japan in fiscal year 2004, Nipponkoa sustained a stable operating performance that was supported by management’s consistent cost reduction strategies.”

However, Best said: “These positive rating factors are partially offset by the relatively high expense ratio compared to its peers, vulnerability to equity markets, as well as the intensified competition within the motor insurance market in Japan.

“Though the industry experienced positive underwriting income and a favorable investment market in fiscal year 2003, competition in the motor insurance market intensified in fiscal year 2004, limiting Nipponkoa’s growth potential.

“A relatively high portion of Nipponkoa’s assets are allocated to domestic equities. Moreover, the percentage of investments in its equity and loan portfolios is considered high.”

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