S&P Sees No Change in Aioi Ratings from Subprime Writedown

February 26, 2008

Standard & Poor’s Ratings Services indicated that its financial strength and long-term counterparty credit ratings on Japan’s Aioi Insurance Co. Ltd. (‘A+’ – stable outlook) “would be unaffected by additional subprime-related losses or company forecasts of a net loss for fiscal 2007 (ending March 31, 2008).”

S&P noted that Aioi had announced that its “write-downs and realized losses from its subprime-related assets, almost all consisting of collateralized debt obligations (CDOs) backed by asset-backed securities (ABS), including subprime loans, with the notional principal amount of ¥106.2 billion [$984 million], had reached ¥67.5 billion [$625 million] as of the end of December 2007.

“The company went on to say that losses could increase to ¥92 billion [$852 million], which is equivalent to about 90 percent of the notional amount, as of the end of March 2008. This would, in turn, lead to a minor bottom-line loss for fiscal 2007.”

S&P stated that despite the subprime losses, it “believes that, based on the company’s strong capitalization, Aioi is highly likely to maintain a capital base commensurate with the ‘A+’ rating on the company.”

Source: Standard & Poor’s – www.standardandpoors.com

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