A.M. Best Lowers Rating for Unum Japan Accident Co.

February 20, 2003

A.M. Best Co. has lowered the financial strength rating to A- (Excellent) from A (Excellent) of Unum Japan Accident Insurance Company, Ltd., Tokyo, Japan, and placed the rating under review with negative implications. The company has a financial size category of V.

The rating reflects the company’s excellent growth opportunities in the Japanese long-term disability insurance market and the strategic importance of the operation to the company’s parent, UnumProvident Corporation.

The rating also recognizes UnumProvident’s commitment to Unum Japan and the support it provides in underwriting, management, capitalization and reinsurance. While disability products remain under-appreciated in Japan, the company is experiencing strong sales results, and Unum Japan’s ongoing marketing and product development efforts in affiliation with several large life and non-life insurers should promote sales going forward. As the initiator of the disability market in Japan and a subsidiary of the leading U.S. disability underwriter, Unum Japan is positioned to benefit as the market grows.

Offsetting factors include Japan’s continuing recession and the company’s limited distribution network and small scale of operations. Several years of slow or negative economic growth, high unemployment and erosion of discretionary income in Japan has restrained demand for the company’s products.

Furthermore, deregulation has opened the market to other insurers, and Unum Japan’s success has attracted several large potential competitors whose full-scale entry into the market may further limit the company’s future growth and returns. Japan’s Financial Services Agency’s recent decision to penalize the company exacerbates this position. A.M. Best will closely monitor developments in this regard.

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