Best Affirms Tokio Marine & Nichido Fire ‘A++’ Ratings

December 2, 2005

A.M. Best Co. announced that it has affirmed the financial strength rating (FSR) of “A++” (Superior) and assigned an issuer credit rating (ICR) of “aa+” to Japan’s Tokio Marine & Nichido Fire Insurance Company, Ltd. (TMNF). Concurrently, Best upgraded the FSR to “A++” (Superior) from “A+” (Superior) of Nichido Insurance Company (Pacific) Ltd. The outlook on all ratings is stable.

“The ratings reflect the company’s superior capitalization, strong market leadership and the capability to offer full-scale insurance services including life and financial services,” said Best. “The ratings also recognize TMNF’s innovative product development, cost efficient operations, excellent claims servicing capabilities and strong agent and customer loyalty.”

Best noted: “TMNF maintains the highest level of capitalization amongst the Japanese non-life companies. Although the local solvency ratio dropped to 968.2 percent in fiscal year 2004 from 1,108.6 percent in fiscal year 2003 due to increased exposure to catastrophes, TMNF was able to maintain a highly stable capitalization level for the past few years. TMNF’s capitalization is enhanced by its financial flexibility, with access to the capital markets and modest debt outstanding.

“TMNF’s fixed income asset portfolio is of high quality and the characteristics of the fixed income assets are well matched with that of its maturity-refund liability. As the company projects better underwriting income in fiscal year 2005, and as the company continues reducing its business related equity holdings, both capitalization and operating performance are likely to improve in fiscal year 2005.

“Partially offsetting these positive rating factors is Japan’s intensely competitive motor insurance market. The competitive environment, combined with the low interest rate environment, limits premium growth and investment income. The profitability level of TMNF will fluctuate with its underwriting performance.”

Best concluded that while “these weakened fundamentals will result in continued pressure on TMNF in the near term, the company is actively pursuing strategies for improving its future premium growth through diversifying its revenue streams.”

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