A.M. Best Affirms Rating of Fuji Fire & Marine Insurance Company Limited.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of B++ (Very Good) of Fuji Fire & Marine Insurance Company Limited (Fuji Fire) (Japan). The rating outlook is stable.

The rating of Fuji Fire reflects its stable operating performance, sound investment portfolio and prudent risk management to control interest rate risk. The rating also considers the close business affiliation with its major shareholders, American International Group (AIG) and ORIX .

Fuji Fire's operating performance stabilised in fiscal year 2003. Due to its cost-cutting strategy, the expense ratio decreased slightly, and the combined ratio stabilised at a moderate level. Investment income improved through the sale of its equity holdings and the recovery of the Japanese equity market in fiscal year 2003.

Fuji Fire reallocated its investment portfolio by shifting its equity holdings to fixed income assets. As of fiscal year 2003, Fuji Fire had 11.3% of its assets in equity holdings compared with the industry average of 28.2%. The company currently has over 50% of its assets in cash and fixed income, which ensures the stability of investment income and liquidity.

The two major shareholders, ORIX and AIG, continued to provide management expertise to Fuji Fire by sending personnel to the company. Both companies are financially sound; ORIX is a leading leasing company in Japan, and AIG is one of the largest insurance groups in the world.

Partially offsetting these positive rating factors include Fuji Fire's decreasing trend of market share, relatively high leverage ratio and moderate local solvency margin.

Fuji Fire has a small presence with a premium market share of 4.3% as of fiscal year 2003. The company's market share has been on a decreasing trend over the last five years. Fuji Fire is challenged in maintaining its existing market position.

Fuji Fire has a leverage ratio of 1.4 times, which is relatively high compared with other leading non-life insurers in Japan. Although the company's local solvency margin improved from 605% in fiscal year 2002 to 777% in fiscal year 2003, it remains relatively moderate among the major non-life insurers in Japan.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.

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 http://www.ambest.com.