A.M. Best Affirms Rating of Tokio Marine and Fire Insurance Company Limited; Revises Outlook to Stable.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A++ (Superior) of Tokio Marine and Fire Insurance Company Limited (Tokio Marine) (Japan). The outlook has been revised to stable from negative.

The rating reflects the company's superior capitalization, market leadership and diversified strategies for competing in a deregulated and highly competitive financial services marketplace. The rating also recognizes Tokio Marine's innovative product development, cost efficient operations and strong agent and customer loyalty. The change in the outlook reflects the company's ability to withstand the turbulent financial market conditions in the last few years with limited deterioration in its risk-based capitalization and the company's continuous effort to reduce equity exposure.

Tokio Marine maintains superior capitalization as measured by Best's Capital Adequacy Ratio (BCAR), the solvency margin capitalization standard in Japan and the insurance leverage ratio. The BCAR score has been maintained above the 200% level during the last five years; the local solvency ratio stands at 1,109% as of March 2004; and adjusted insurance leverage stood at 0.6 times in fiscal year 2003. The company's capitalization is enhanced by its financial flexibility, as well as its access to the capital markets and modest outstanding debt. It is also strengthened by the company's extensive reinsurance coverage and substantial reserves to protect against catastrophe losses.

Tokio Marine is the largest non-life insurer in the Japanese non-life market with a gross premium market share of 20.2% as of fiscal year 2003 (includes maturity-refunds type premium and compulsory automobile liability insurance). The merger with Nichido Fire (currently rated A+ (Superior)) in October 2004 will further enhance the combined entity's presence in the market. Nichido Fire's market share as of fiscal year 2003 stood at 5.4%. The business profile of the company is enhanced as it is a core member of Millea Insurance Group and is also affiliated with the Mitsubishi Group. Millea Insurance Group is expected to develop into one of the dominant full service insurance groups in Japan.

Partially offsetting these positive rating factors is the fierce price competition in motor insurance business, which is the major line for non-life insurance companies, the continuation of low interest rate environment and pressure for higher dividend as Millea Holdings pursues new business.

The fierce competition, combined with the low interest rate environment, will exert continued pressure on underwriting profitability. Tokio Marine has coped with this challenge by reducing its expense ratio, which is the lowest in the industry. The realized capital gains--through the continuous sale of the company's equity holdings in the past two years--have compensated for the low operating performance as well. In addition, the sale of its equity holdings has reduced the market risk of the company. The company has indicated to A.M. Best that it plans to further reduce its equity holdings until fiscal year 2005.

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.