A.M. Best Assigns Rating to Aioi Insurance Company Ltd.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Oct. 7, 2003

A.M. Best Co. has assigned an initial financial strength rating of A (Excellent) to Aioi Insurance Company, Ltd., Japan. The outlook is stable.

The rating reflects Aioi Insurance's excellent business profile, secure risk-adjusted capitalization, high-quality investment portfolio and well-managed catastrophe exposure. The rating also considers the recent recovery in the Japanese equity market, which has contributed to enhancing the Japanese industry's solvency levels.

Aioi Insurance was created from the merger between Chiyoda and Dai-Tokyo and is one of the five largest general insurers in Japan with a market share of over 10% in terms of direct risk premiums written. The company has a strong competitive position in the motor insurance market and benefits from its relationship with Toyota Motor, its largest shareholder.

Aioi Insurance is prudently capitalized on a risk-adjusted basis, with a local solvency ratio of 683% as at March 31, 2003. A.M. Best anticipates that the company's solvency will improve significantly in the short term due to the robust recovery in the Japanese equity market. Given its relatively small maturity refund business, the company's exposure to negative interest spread is also contained.

The company's investment portfolio is conservatively managed. The bond and loan portfolios have a short duration and consist of generally high-quality issues. Management also intends to reduce its exposure to the volatile equity market, while maintaining a favorable degree of diversification across issuers and industries.

While Japan is subject to major catastrophic risks, the company's exposure is well-protected by its retrocession programs, which limit its net loss per event to a manageable percentage of capital and surplus. The amount of catastrophe reserve accumulated also provides additional financial resources, which can be drawn upon.

These factors are partially offset by Japan's stagnant economic environment, which will continue to negatively impact the company's growth prospects and earnings stability.

The prolonged deterioration in the Japanese economy has dampened the general insurance market's growth prospects. This is further exacerbated by the intense competition that prevails in the traditional distribution channels. The country's low interest rates and volatile equity market will also exert pressure on the company. These economic fundamentals will play a vital role in determining the company's long-term financial stability.

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.