NEWS RELEASE. No.2005-PA-002 Mar 11, Non-Life Insurance Companies: R&I Reviewed Ratings

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1 No.2005-PA-002 Mar 11, Non-Life Insurance Companies: R&I Reviewed Ratings Rating and Investment Information, Inc. (R&I), has reviewed the following ratings. R&I RATINGS (For rating actions, please find the list at the bottom of the report) SEC. CODE COMPANY NAME ---- The Tokio Marine & Fire Insurance Co., Ltd Sompo Japan Insurance Inc Mitsui Sumitomo Insurance Co., Ltd NIPPONKOA Insurance Co., Ltd Aioi Insurance Co., Ltd The Nisshin Fire & Marine Insurance Co., Ltd The Fuji Fire & Marine Insurance Co., Ltd The Asahi Fire & Marine Insurance Co., Ltd. SEC. COMPANY NAME CODE ---- Tokio Marine & Nichido Life Insurance Co., Ltd Mitsui Sumitomo Kirameki Life Insurance Co., Ltd NIPPONKOA Life Insurance Co., Ltd Aioi Life Insurance Co., Ltd. RATINGS PERSPECTIVE In its review of non-life insurers on this occasion, R&I raised the rating of The Nisshin Fire & Marine Insurance Co., Ltd. by one notch and affirmed the existing rating for all other insurers. The upwards adjustment of Nisshin Fire from BBB+ to A- was in recognition of the insurer s change in status to a company accounted for by the equity method under Tokio Marine & Nichido Life Insurance Co., Ltd. and its promotion of original retail strategies. At the same time, R&I also undertook a review of the life insurance subsidiaries and affirmed all of their ratings. The Rating Outlook for all of the insurers is Stable. In the non-life insurance market, the liberalization began in the latter half of the 1990s and due to the increasing competition in the market, there has been a realignment of the industry. The ratings of the major non-life insurers have been maintained at a relatively high level reflecting that they are supported by the strength of their operational bases and generally favourable solvency which, in contrast to other financial sectors. Natural disasters in fiscal 2004 resulted in estimates for insurance payouts reaching the second highest level in history but, the financial health of insurers was not destabilized. R&I regards the ratings will remain stable for the foreseeable future. At the same time, there are some areas of concern from a medium-term perspective. One of these is the sluggish business environment in the domestic non-life insurance. In automobile insurance, a mainstay of the insurance market, the decreasing trend in earnings has not yet come to a halt, due to the sluggish growth in car ownership and increasing prevalence in no-fault discounting. The decrease in car insurance earnings, which account for 50-60% of the insurers premiums paid-in, is directly linked to the decrease in loadings (part of the premium that covers cost) which support the business management of non-life insurers. Deteriorating conditions among dedicated insurance agencies positioned as the core of the sales channel have also become conspicuous.

2 Another element of concern is the greater diversity and complexity of risk. To counter the low growth of their domestic non-life operations, insurers are devoting efforts to developing business in third sector insurance, such as medical insurance, as well as life insurance and overseas insurance businesses, particularly in Asia. However, such diversification of businesses involves a larger risk. In addition to the large price volatility risk of stockholdings, R&I will pay attention to the risk management the companies take against the rising risk in the process of business diversification. The solvency margin ratio (an indicator of the health of the company s management) of respective insurers is at a high level. However, when stockholding risk, asset and liability interest rate risk, and natural disaster risk are taken into consideration, the solvency reserve of each company does not have the margin of reserve that indicators might show and there is a considerable disparity between companies. EVALUATION OF INDIVIDUAL COMPANIES * The Tokio Marine & Nichido Fire Insurance Co., Ltd. * Tokio Marine & Nichido Life Insurance Co., Ltd. Tokio Marine and Nichido Fire are core companies of insurance holding company Millea Holdings, Inc., and both companies merged in October The rating reflects R&I s assessment of the Millea group on a consolidated basis and the companies positioning as core companies of the group. In addition to Tokyo Marine having a high share of the non-life insurance market at approximately 25%, it has a capital and business alliance with medium-sized non-life insurance company Nisshin Fire, which has the distinctive characteristic of making use of small scale agencies. Supported by equity capital and an abundance of unrealized capital gains on stocks, the level of solvency exceeds that of their competitors. However, the decreasing trend in earnings in its mainstay automobile insurance continues and uncertainty remains regarding the profitability of domestic non-life insurance operations. R&I will watch to see if its domestic life insurance and foreign insurance operations will result in a stable source of earnings from the perspective of group profitability. With regard to Tokio Marine & Nichido Life Insurance, also under the umbrella of Millea Holdings, there have been no changes to previously evaluated factors, such as the high level of integration with the group and the parent company's determination to support it. The Millea group has positioned the insurer as a key business that will support group core operations. * Sompo Japan Insurance Inc. (Sec. Code: 8755) Sompo Japan Insurance Inc. is a company that was formed as a result of the merger of major non-life insurance company Yasuda Fire & Marine Insurance Co., Ltd, and medium-sized non-life insurance company Nissan Fire & Marine Insurance Co., Ltd. The company has announced its intentions to pursue selection and concentration tactics in its businesses in favor of diversification strategies and will focus on domestic non-life insurance business including car insurance and life insurance predominantly through its subsidiary Sompo Japan Himawari Life Insurance. The company has been making all-out efforts to improve earnings by expanding its customer base through alliances with companies like Daiichi Mutual Life Insurance and Credit Saison and through cost reduction effects accompanying the merger. However, in comparison with the top three domestic insurers, solvency is inferior in some respects. Not only are unrealized equity profits low in comparison with those of other insurers, Sompo Japan recorded large losses due to foreign reinsurance transactions the former Nissan Fire and Marine was involved in. To maintain the current rating, it is essential for Sompo Japan to improve its solvency through continued efforts to reduce policy shares and to build up earnings.

3 * Mitsui Sumitomo Insurance Co., Ltd. (Sec. Code: 8752) * Mitsui Sumitomo Kirameki Life Insurance Co., Ltd. Mitsui Sumitomo Insurance Co., Ltd. came into being following the merger of two large nonlife insurance companies. With the customer bases of both the Mitsui and Sumitomo groups at its core, its strength is in corporate insurance. Consolidated paid in net premiums surpass those of Japan Sompo, making it the second largest insurer in the industry and the operating cost ratio has fallen to a level where it compares favorably with other insurers. Solvency is at a favorable level but stockholding risk remains high. To diversify group earnings which had been leaning toward domestic non-life operations, in recent years the company has been stepping up its investment in new businesses, such as life insurance and overseas insurance businesses. While R&I can understand the company s promotion of diversification of earnings as the domestic non-life insurance business matures, it will follow developments to determine whether there is a risk that sudden business expansion will lead to placing a financial burden on the company in the future. With regard to Mitsui Sumitomo Insurance Co., Ltd's subsidiary, Mitsui Sumitomo Kirameki Life Insurance Co., Ltd, there have been no changes to previously evaluated factors, such as the high level of integration with the parent company, its importance to the group strategy, and the parent company's determination to support it. Mitsui Sumitomo Insurance has clearly positioned the life insurance business as a pillar of the group together with non-life insurance. * NIPPONKOA Insurance Co., Ltd. (Sec. Code: 8754) * NIPPONKOA Life Insurance Co., Ltd. NIPPONKOA Insurance Co., Ltd. was formed as a result of the merger of Nippon Fire & Marine Insurance Co., Ltd. and Koa Fire & Marine Insurance Co., Ltd. and has a market share of approximately 10%. It is differentiating itself from the other major companies by emphasizing its independence. It has formed marketing alliances with major life insurer Meiji Yasuda Life Insurance and T&D group s Taiyo Life Insurance and its life insurance sales force channels are very good. However, sluggish growth of the traditional insurance agency channel is conspicuous and has become an issue on the sales side. While solvency is relatively good, stockholding risk remains high, and further reduction of policy shares is required. IT systems-related costs in recent years have grown, and the operating cost ratio has become stuck at a high level but the insurer s loss ratio is lower than that of other major insurers and insurance income and expenditure is stable. R&I will observe whether or not improvement in efficiency proceeds according to company expectations. With regard to NIPPONKOA Insurance Co., Ltd's subsidiary, NIPPONKOA Life Insurance Co., Ltd, there have been no changes to previously evaluated factors, such as the high level of integration with the parent company, its importance to the group strategy, and the parent company's determination to support it. * Aioi Insurance Co., Ltd. (Sec. Code: 8761) * Aioi Life Insurance Co., Ltd. Occupying a place as one of Japan s top five groups, Aioi Insurance Co., Ltd. was formed as a result of the merger of medium-sized non-life insurance company Dai-Tokyo Fire & Marine Insurance Co., Ltd., an insurer that had dealt primarily with non-life insurance for individuals with a focus on car insurance, and the Toyota group's Chiyoda Fire & Marine Insurance Co., Ltd. While the insurer is aiming to become the leading brand in the area of car insurance with the backing of top car maker Toyota Motor Corp., the declining trend in car insurance earnings continues, canceling out anticipated Toyota effects. The car insurance loss ratio has stabilized but the burden of IT systems-related investment and other costs are building up, so there is a disparity between Aioi s operating cost ratio and that of other top non-life insurers. In addition, it posted large losses related to foreign reinsurance

4 transactions it was involved in and its solvency is the lowest of the top five groups. Improving solvency by increasing the earnings flow and reducing risk is a pressing issue. With regard to Aioi Insurance Co., Ltd.'s subsidiary, Aioi Life Insurance Co., Ltd, there have been no changes to previously evaluated factors, such as the high level of integration with the parent company, its importance in the group s strategy, and the parent company's determination to support it. * The Nisshin Fire & Marine Insurance Co., Ltd. (Sec. Code: 8757) In recognition of The Nisshin Fire & Marine Insurance Co., Ltd. s changed status as a company accounted for by the equity method under The Tokio Marine and Fire Insurance Co., Ltd. and the promotion of its retail strategies, R&I has adjusted the insurer s rating upwards from BBB+ to A-. The insurer has only a small market share of approximately 2% and in an austere operational environment where the non-life insurance market is becoming increasingly deregulated, it had not formulated medium-term policies to improve earnings. In recent years, however, it has worked out plans to gain a foothold in the regional and retail markets and is in the process of establishing its own original business model based on small to medium-sized agencies run in conjunction with existing local businesses and managed chiefly by low-cost, part-time sales and marketing staff. In addition, in 2005 Tokio Marine and Nichido Fire acquired 30.99% of Nisshin s shares. The alliance with Tokio Marine and Nichido Fire can be expected to result not only in complementary effects for Nisshin s creditworthiness but also in support for its retail strategies in the future. Solvency is relatively solid in terms of equity capital and contingency liability reserves and, in contrast to other companies, asset holding risk has been kept in check through the insurer s promotion of the sale of stock. However, in spite of active efforts to cut large scale costs, there has been no halt to the decreasing trend in net premiums paid in, so it will not be easy to lower the operating cost ratio further. * The Fuji Fire & Marine Insurance Co., Ltd. (Sec. Code: 8763) The Fuji Fire & Marine Insurance Co., Ltd. is a medium-sized non-life insurance company whose head office is located in Osaka. In addition to its agency network, it has the largest direct sales force channel in the industry. The insurer has formed a capital alliance with the large USbased finance and insurance group AIG and the large non-bank company Orix. Reaping the benefits of the management teams of the two companies, the insurer is initiating reform inspired to some extent by AIG s methods, establishing profit centers that assume responsibility for earnings for specific products and channels. Accident insurance, an area where the company has devoted efforts in recent years, is doing well and the loss ratio and operating cost ratio have improved. However, the declining trend in earnings continues, diminishing the effects of solvency improvement. There is progress in the contraction of shareholding risk and natural disaster risk is also being held in check through reinsurance but solvency is somewhat inferior to that of other companies. It is essential for Fuji Fire to get its profitability back on the road to recovery to hasten improvement in solvency. * The Asahi Fire & Marine Insurance Co., Ltd. Asahi Fire & Marine Insurance Co., Ltd. is an unlisted non-life insurer belonging to the Nomura Securities group. In addition to selling general insurance products, such as automobile insurance, it has promoted as its leading product long-term fire insurance, which is savings-based long-term insurance payable on maturity. Starting with risk diagnostic services, the insurer has been gradually developing new business targeting small to medium-sized businesses and promoting sales of long-term fire insurance through local housing construction companies and these strategies in niche product areas are beginning to show results. However, its operating cost ratio remains high and

5 profitability low. Asahi s motto is to be a personal insurance company. However, the question is whether it can adhere to this principle and address its high cost structure issue at the same time. Asahi Fire is supported by contingency liability reserves and unrealized capital gains on securities, and it has secured a certain degree of solvency. However, the small amount of capital in absolute terms and the heavy reliance on unrealized capital gains on stocks need to be taken into account. The weight of total assets accounted for by long-term assets is high, and although Asahi Fire is not troubled by the serious problem of negative spreads that exists in the life insurance industry, R&I will continue to pay attention to the ALM (Asset Liability Management) situation. R&I RATINGS: The Tokio Marine and Fire Insurance Co., Ltd. Senior Long-term Credit Rating: AA+ (Affirmed) Bonds Rated Issue Date Redemption Issue Amount (mn) Unsec. Str. Bonds No. 1 Dec 02, 1999 Dec 02, 2009 Yen 50,000 Unsec. Str. Bonds No. 2 Sep 20, 2000 Sep 20, 2005 Yen 30,000 Unsec. Str. Bonds No. 3 Sep 20, 2000 Sep 20, 2010 Yen 20,000 Unsec. Str. Bonds No. 4 Sep 20, 2000 Sep 18, 2020 Yen 10,000 AA+ (Affirmed) Issue Limit: Yen 100,000 million a-1+ (Affirmed) Sompo Japan Insurance Inc. (Sec. Code: 8755) Senior Long-term Credit Rating: AA (Affirmed) Bonds Rated Issue Date Redemption Issue Amount (mn) Unsec. Conv. Bonds No. 2-2 Mar 05, 1996 Mar 31, 2005 Yen 15,000 AA (Affirmed) Issue Limit: Yen 30,000 million a-1+ (Affirmed) Mitsui Sumitomo Insurance Co., Ltd. (Sec. Code: 8752) Senior Long-term Credit Rating: AA (Affirmed) Preliminary Rating for the Shelf Registration scheme Issue Amount (mn): Yen 200,000 (Shelf Amount) Issue Period: Two years from October 15, 2004 AA (Affirmed) Bonds Rated Issue Date Redemption Issue Amount (mn) Unsec. Str. Bonds No. 1 Nov 19, 2004 Dec 20, 2007 Yen 30,000 Unsec. Str. Bonds No. 2 Nov 19, 2004 Dec 18, 2009 Yen 70,000 AA (Affirmed)

6 NIPPONKOA Insurance Co., Ltd. (Sec. Code: 8754) Senior Long-term Credit Rating: A+ (Affirmed) Issue Limit: Yen 80,000 million a-1+ (Affirmed) Aioi Insurance Co., Ltd. (Sec. Code: 8761) Senior Long-term Credit Rating: A (Affirmed) Issue Limit: Yen 75,000 million a-1 (Affirmed) The Fuji Fire & Marine Insurance Co., Ltd. (Sec. Code: 8763) Senior Long-term Credit Rating: BBB+ (Affirmed) The Nisshin Fire & Marine Insurance Co., Ltd. (Sec. Code: 8757) Senior Long-term Credit Rating: A- (Upgraded from BBB+) Bonds Rated Issue Date Redemption Issue Amount (mn) Unsec. Conv. Bonds No. 2 Nov 22, 1996 Mar 31, 2006 Yen 10,000 A- (Upgraded from BBB+) Issue Limit: Yen 15,000 million a-1 (Upgraded from a-2) The Asahi Fire & Marine Insurance Co., Ltd. Senior Long-term Credit Rating: BBB (Affirmed) Tokio Marine & Nichido Life Insurance Co., Ltd. Insurance Claims Paying Ability: AA+ (Affirmed) Mitsui Sumitomo Kirameki Life Insurance Co., Ltd. Insurance Claims Paying Ability: AA (Affirmed)

7 NIPPONKOA Life Insurance Co., Ltd. Insurance Claims Paying Ability: A+ (Affirmed) Aioi Life Insurance Co., Ltd. Insurance Claims Paying Ability: A (Affirmed) An R&I Senior Long-term Credit Rating is an opinion regarding an issuer's overall capacity to pay its entire financial obligations, without taking into account the degree of recovery of specific obligations. A Senior Long-term Credit Rating will be assigned to all issuers. Ratings for individual issues may differ from the Senior Long-term Credit Rating depending on the terms and conditions of the issue.