HONG KONG--(BUSINESS WIRE)--A.M. Best Co. has assigned a financial strength rating of A- (Excellent) and an issuer credit rating of “a-” to Aioi Insurance Company (China) Limited (AIC) (China). The outlook assigned to both ratings is stable.

The ratings reflect AIC’s favorable risk-adjusted capitalization, excellent liquidity position and strong operational support from the parent, Aioi Nissay Dowa Insurance Company Limited, including business generation and reinsurance. A.M. Best also recognizes the company’s experienced management team, who has extensive experience in the insurance industry and previously worked in various capacities in insurance companies.

AIC’s underwriting and asset risks are comfortably supported by its overall level of capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The company benefited from the parental support through two additional capital contributions since it began operations in June 2007, to facilitate operations and to support future business growth. Net premium leverage stood at 0.15 times for 2009 and is expected to increase to a level of around 1.00 times through 2012. A.M. Best believes the company’s prospective risk-adjusted capitalization will remain adequate to absorb its projected premium growth and anticipates that the company will benefit from continued parental support when capital needs arise.

AIC’s overall operating results have steadily improved over the years, due largely to the favorable underwriting performance of its Japanese interest abroad business in China (which accounted for 99.5% of the total premiums written as of the first half period ending June 30, 2010), along with stable streams of investment earnings. The company has a very conservative investment strategy, with all investments in cash and fixed deposits, which allows AIC to have stable, albeit modest, streams of interest income in future periods.

While AIC is maintaining its existing Japanese customer base, it will broaden its premium sources through leveraging the strong business relationship between its parent company and Toyota Motor Corporation, as well as its partnership with local insurance companies for potential growth opportunities in non Japanese-related business going forward.

Partially offsetting these positive factors is the high level of set-up expenses associated with the relatively new book of business and the execution risk related to projected premium growth. In view of the increasingly competitive insurance environment, A.M. Best believes challenging market conditions and the three-year operating history with a limited underwriting track record could place pressure and execution risk on AIC to meet its anticipated break-even period in three years.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Understanding Universal BCAR”; and “Rating Members Of Insurance Groups”. Methodologies can be found at www.ambest.com/ratings/methodology.

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.

To view the Simplified Chinese version of this press release, please visit http://www.ambest.com/press/111101aioichina.pdf.