A.M. Best Affirms Rating of Prudential Life Insurance Company, Ltd. (Japan).

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 Prudential Life Insurance Company, Ltd. (POJ) (Japan). The outlook on both ratings is stable.

The ratings reflect POJ's superior operational efficiency accompanied by excellent asset liability management (ALM), well-established brand recognition in offering whole life products through its distinctive Life Planners, continuing growth momentum in the stagnant Japanese life market and the strategic importance to its ultimate parent, Prudential Financial. In addition, the acquisition of Aoba Life has further improved POJ's profitability and has secured a large database for the company to market its products.

Through the excellent policy persistency and agent retention, the company receives strong recognition from policyholders, which in turn helps POJ maintain superior efficiency. The company maintains the highest policy persistency ratios and agent retention ratios in the Japanese life insurance market. Although deregulation and liberalization of the financial services sector is fostering fierce competition in the life insurance market, the company is well positioned to sustain strong growth.

Other positive factors include improvements in the investment market, as well as the excellent asset liability management the company has in place.

Offsetting factors are POJ's weak capitalization as measured by the Japanese accounting standard, negative interest margins in recent years and policyholders' preference for a broader array of insurance products.

Due to the heavy burden generated by acquisition costs, the company was unable to record high net income in the past few years. But as the reserving ratio reached 100% in fiscal year 2005, the company started to book net income on a J-GAAP basis. A.M. Best expects that the growth rate of capital will exceed the growth of total assets going forward.

A negative interest margin is common for most of the life companies in Japan. In the case of POJ, although the gap between assumed interest rate and investment yield has decreased, the absolute amount of negative spread did not decrease. The company expects that the absolute volume will start decreasing in fiscal year 2006.

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.