A.M. Best Affirms Rating and Revises Outlook for Nippon Life Insurance Company.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and assigned an issuer credit rating (ICR) of "aa-" to Nippon Life Insurance Company (Nippon Life) (Japan). The rating outlook has been revised to stable from negative for the FSR. A rating outlook of stable has been assigned to the ICR.

The ratings reflect the company's continued improvement in financial soundness, enhanced by core operating profitability and strong sales growth in the third market sector.

Nippon Life's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio, has improved continuously over the past four years. This is mainly attributed to the increased capital and surplus, price fluctuation and catastrophe reserves, as well as unrealized capital gains. The stronger capital position is also attributed to the additional offering of JPY 150 billion (USD 1.3 billion) of the kikin fund, which boosts the company's foundation funds and reserves to exceed JPY 3 trillion (USD 25.7 billion) in fiscal year 2005. A positive trend can be shown in the company's local solvency ratio, which has improved from 975% in fiscal year 2004 to 1,258% in fiscal year 2005. A.M. Best believes that Nippon Life's capitalization will be maintained given the current stable operating performance and the firm's commitment to strengthening its capital position.

Nippon Life's core operating profit has also been enhanced, recorded at approximately JPY 634 billion (USD 5.4 billion), a year-on-year increase of about 15% in fiscal year 2005. Mortality profit increased due to the longer life expectancy rates of the Japanese population. Negative margin has significantly improved with lower assumed interest rates and increased investment yield that alleviate the interest losses substantially compared to prior years.

In fiscal year 2005, Nippon Life proactively introduced medical/health care products to meet changing market demands. As a result, the company recorded a year-on-year increase in the medical/health care sector of about 20% in the amount of new policies (based on annualized net premium) in fiscal year 2005. This strong growth demonstrates the company's ability to develop new products and generate new revenue sources to meet changing market demands.

Offsetting these positive rating factors are intensified market competition and relatively high equity exposure.

Nippon Life has experienced a decline in market share in the domestic life insurance industry in the midst of the changing market environment. Foreign insurers and life subsidiaries of non-life insurers have been aggressive in gaining more market presence, especially in the third market sector. A.M. Best believes that the company will have to become flexible and quality oriented to compete in this intensified market landscape.

Nippon Life has a comparatively high equity exposure compared to that of the industry. This might exert negative pressure on its capitalization due to the volatility of the equity markets.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.