Best Affirms Nipponkoa ‘A’ Ratings

June 26, 2006

A.M. Best Co. has affirmed the financial strength rating of “A” (Excellent) and assigned an issuer credit rating of “a+” to Japan’s Nipponkoa Insurance Company Limited with a stable outlook.

“The ratings reflect Nipponkoa’s solid market profile, growth in risk-adjusted capitalization and expansion of distribution channels,” said Best. “Nipponkoa is one of the five largest general insurers in Japan with a market share of about 10 percent in terms of direct premiums written as of fiscal year 2004. The company has maintained a stable market share in the past four years. Synergies created through mergers, acquisitions (such as Sonpo 24) and distribution arrangements with financial institutions (such as Meiji Yasuda Life) are expected to strengthen Nipponkoa’s operating efficiency going forward.”

Best also noted: “Nipponkoa is prudently capitalized, with the local solvency ratio improving from 996.4 percent in fiscal year 2004 to 1,015 percent at September 30, 2005. Best’s Capital Adequacy Ratio (BCAR), which measures capitalization on a risk-adjusted basis, also demonstrates the company’s strong capital position.”

However, “exposure to the volatility in the equity market, relative dependency upon maturity refund type business and intensified competition in the Japanese non-life industry,” constitute partially offsetting factors.

Best indicated that the Company “has a relatively high exposure in the equity market with about 30 percent of investments allocated in equity assets as of September 30, 2005. The equity portfolio is geared toward a heavier weighting in the financial sector. Although Nipponkoa has made an effort in reducing its stock holdings, volatility in the stock market remains a concern.

“The competition in Japan’s non-life insurance market remains competitive due to the deregulation and liberalization of the financial services industry.”

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