Best Downgrades NIPPONKOA Insurance Co. of America

May 20, 2004

A.M. Best Co. announced that it has downgraded the financial strength rating to “A-” (Excellent) from “A” (Excellent) of new York-based NIPPONKOA Insurance Company of America, with a stable outlook.

“The downgrade reflects A.M. Best’s opinion that NKA is no longer core to its parent company, NIPPONKOA Insurance Company, Limited (NKJ) (Japan), and NKJ’s decision to suspend NKA’s underwriting activities for two years, through March 31, 2006,” said the announcement.

“Offsetting factors are the company’s strong capital position and NKJ’s commitment to retain 100 percent of NKA’s capital during this two-year period,” it continued. Best said it would “reevaluate NKA’s rating status again after all remaining policies have been transferred to NKJ’s U.S. branch (NKB), currently expected to be January 2005.”

It also noted that “NKA’s direct writings will be transferred to NKB to increase efficiencies. NKA, as the Assistant U.S. Manager, will continue to service claims and provide various underwriting functions to NKB. NKA has maintained excellent risk-adjusted capitalization since its domestication in 2001 through good historical returns and the retention of earnings. The company has agreed not to remove surplus during this two-year period, and it is therefore expected that NKA will maintain excellent capitalization as existing financial obligations are satisfied.”

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