2008-08-07 00:40:03 -

www.ambest.com - A.M. Best Co. has affirmed the financial strength rating (FSR) of A++ (Superior) and the issuer credit rating (ICR) of "aa+" of Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF) (Japan). The outlook for both ratings is stable.

Concurrently, A.M. Best has affirmed the FSR of A++ (Superior) and the ICR of "aa+"

of Tokio Marine & Nichido USB Group and its four members, which are led by Tokio Marine & Nichido Fire Insurance Co., Ltd. (United States Branch) (New York) and include three U.S. subsidiaries of TMNF that are reinsured by the United States branch: TM Specialty Insurance Company, TM Casualty Insurance Company and Trans Pacific Insurance Company. Additionally, A.M. Best has affirmed the FSR of A (Excellent) and ICR of "a" of TNUS Insurance Company, another wholly owned U.S. subsidiary of TMNF. The outlook for all of these ratings is stable.

The ratings reflect TMNF's diversified income sources, excellent risk management and strong absolute capitalization. The ratings also reflect the company's leading market position in the Japanese non-life market.

Tokio Marine Holdings, Inc. (TMH) has actively diversified its revenue sources in recent years. Over the last decade, the group has successfully grown its life business, which is expected to contribute 20%-25% of adjusted earnings going forward. The group has also taken active steps to achieve its medium-term strategy, which is to generate 20%-25% of the group's adjusted earnings from international business. With the diversification, the group's concentration risk on Japanese catastrophe exposure has been alleviated, and TMNF is able to capture new business opportunities outside the matured Japanese non-life market.

In line with the group's strategy, TMNF acquired Kiln Ltd. (Bermuda) in March 2008, and on July 23, 2008, the company announced it will acquire Philadelphia Consolidated Holding Corp. (Philadelphia Consolidated) (Bala Cynwyd, PA). This transaction will allow TMNF to have a meaningful presence in the U.S. non-life insurance market. TMNF's net premiums written were JPY 1.9 trillion (USD 17.6 billion) in fiscal year 2007, and Philadelphia Consolidated's were USD 1.5 billion in calendar year 2007. TMNF reported a net income of JPY 123 billion (USD 1,139 million) in fiscal year 2007, and Philadelphia Consolidated reported USD 327 million in calendar year 2007.

In the Japanese non-life market, TMNF is the market leader with dominant market share of approximately 25% as of fiscal year 2007. The company is strengthening its distribution capability by investing in the "Business Renovation Project" to streamline business processes from fiscal year 2006 to fiscal year 2008. In addition, TMNF has integrated the sales and marketing functions of non-life and life businesses to provide one-stop shopping services for its customers.

TMNF demonstrated a superior capitalization level with an absolute adjusted capitalization level of JPY 3.4 trillion (USD 31 billion). Due to the acquisition of Philadelphia Consolidated, the risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), is expected to decline in fiscal year 2008. However, A.M. Best expects that TMNF's strong earnings capability would be able to replenish the capital, and risk-adjusted capitalization would improve going forward.

Partially offsetting these positive rating factors are the volatility of risk-based capitalization due to the high level of equity holdings and the high catastrophe exposure in Japan.

As of fiscal year 2007, TMNF's equity investments accounted for approximately 32% of its total assets and 110% of its adjusted capital. This high level of equity exposure subjects the company to potential instability of its risk-based capital.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

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Moungmo Lee, +852-2827-3402
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Austin Oh, +852-2827-3404
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Jim Peavy, +(1) 908 439 2200, ext. 5644
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Rachelle Morrow, +(1) 908 439 2200, ext. 5378
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