ⅠNEXI Mission

NEXI is committed to:
1. Providing insurance products that will make customers feelsecure and protected in overseas transactionsC O N T E N T S

2. Providing advice to customers from the preliminary stage ofplanning transactions
3. Responding promptly to the inquiries and interests of customers

Ⅰ NEXI Mission

4. Meeting the demands and business needs of customers
5. Promptly completing the assessment of insurance claims andmaking insurance claim payment

NEXI's Resolution

6. Speedily allocating the recovery

Management Principle

SPEED

PROFESSIONAL

Nippon Export and Investment Insurance (NEXI) is committed tocontributing to the economy and society of Japan through efficientand effective insurance business operations. It does this by
responding precisely to customers needs with a rapid perception ofmarket changes and by underwriting the risks inherent ininternational transactions that cannot be adequately protected byconventional commercial insurance.

Management Policy
1．NEXI, as an independent administrative institution servicing the
public through its operations, aims to contribute to the stabilityof people s lives and to the sound growth of the economy.

INTEGRATIONREFORMATION

IT ORIENTED

2. NEXI will always give first priority to the interests of its
customers, respond promptly and precisely to customers
individual needs, provide customer services of superior quality,
and achieve the highest level of operating efficiency andeffectiveness.
3. NEXI fully utilizes the talents of its entire management andhuman resources to accommodate anticipated changes in themarket. Its objectives are to undertake more risk, develop new
products and to be creative in applying flexible risk underwriting
schemes. The company further aims to increase profitability
through prudent risk control and by applying suitable criteria, toensure long-term growth and prosperity.
4. NEXI encourages and fosters the development of knowledge andthe skills of its employees through training and makes the bestuse of the staff's diverse professional backgrounds to create an
ideal workplace that corresponds to current changes in society.

TRANSPARENCY

1

Message fromⅡ the Chairman

3

Main Data for

Ⅲ Fiscal Year 2004

7

Main Projects Recently

Ⅳ Underwritten

11

Review of Performance

Ⅴ in Fiscal Year 2004

Financial Results for
Fiscal Year 2004

Achievement of First
Medium-Term Objectives

Profile of NEXI

NEXI Customer Service
Charter

17

23

29

31

33

Message from the Chairman
Annual Report 2004

Ⅱ

Ⅱ

Message from the Chairman

Since our establishment in April 2001, we at Nippon Export
and Investment Insurance (NEXI), an independentadministrative institution, have been endeavoring to improve
the level of our services and to enhance the efficiency andtransparency of our business operations. Based on thecommitments outlined in the Customer Service Charter ,which was announced in 2003, we have instituted a series ofinnovative programs in order to respond to business needs.
These include: simplifying and accelerating our procedures,
expanding our range of indemnified risks, developing new
products to meet the changing environment, and providing
customers with enhanced assistance in preserving their credit.
Hidehiro Konno, Chairman and CEO

Reflecting these changes and owing to a strong support by ourcustomers, the total underwritten amount of insurance, which
had been on the decrease, has turned around since NEXI s
establishment and has continued to increase. In fiscal 2004,
the total reached 11.6 trillion yen, which was an increase of
4.0% over the previous year. We have been underwriting longterm non-L/G commercial risk transactions, starting out with
six transactions in the first year and increasing to eighteen in
2004.
In this time when the world situation is undergoing hourlychanges, risk control surrounding foreign trade is becoming
increasingly important. Furthermore the regulatoryenvironment of Japan s trade and investment insurance has
undergone a fundamental change with the opening up of
the market for entry by the private insurers. As we enter thefifth year of operation, we are determined to take up thesechallenges. We will further strengthen the relationships withour customers and will deliver trade and investment insurance
services that are of further benefit to them. We would greatly
appreciate your continuing support and encouragement.

Meeting Customers Demands and Raising
the Quality of Services Still Higher in FY2004
Spirit of Customer Service Charter
Reflected in NEXI Services
Based on the spirit of the Customer Service Charter,
various procedures have been simplified and efforts havebeen made to lighten the burden on our customers andaccelerate the speed of service delivery.
The following procedures have been simplified:■When making insurance claims or receiving

authorization for completing the obligation ofrecovery, the number of materials to be submitted has
been reduced.
■The procedure for renewing the claims payment limit
at the beginning of the fiscal year has been simplified
with the use of electronic media.

Introduction of Export Credit
Insurance for SMEs
NEXI introduced a new insurance product specificallydesigned to support SMEs in their advance into theoverseas market. The main features of this insurance areas follows:■95% of the damage incurred from the inability tocollect receivables is indemnified for direct exporttransactions from Japan with a maximum repayment
term of 180 days.

Regarding the insurance for guarantees for local currency
issue bonds (Asian bonds) that started in FY2004, theapplicable term has been extended till the end of FY2005.
Now this insurance is available also in several countries
where Japan has concluded economic partnershipagreements (EPAs) or where negotiations for theconclusion of EPAs are underway. In addition, thediscount rate for the political risk premium rate has been
expanded.
(Japan)(ASEAN Country)

Guarantor(Insured party)

Bond Issuer(Japanese company
subsidiary or affiliate)

Overseas Untied Loan
Insurance(Debt Guarantee)
NEXI
Reinsurance

Bond Agent
Redemption

Purchase

Investors

METI (the Ministry of Economy,
Trade and Industry)■This insurance is sold in alliance with banks in orderto promote bank loans for SMEs that are engaged inexport business, making it possible to apply for thisinsurance at the service window of the alliance banks.
■The level of convenience has been increased with acomplete revision of services that became far simpler
and faster. These include a simplified procedure forestablishing the right of pledge for insurance claim
rights.

3

Extension of Applicable term of Insurance for
Guarantee for Local Currency Issue Bonds(Asian Bonds) and Expansion of System Content

Conclusion of Reinsurance Agreementswith Overseas Export Credit Agencies for
Implementation of One-Stop-Shops
NEXI has concluded reinsurance agreements with USEXIM(US), Finnvera (Finland), EFIC (Australia), and CESCE(Spain). Through these agreements, for projects where
procurement is made from a number of countries, it has
become possible to use a single window service for eachcountry s export credit agency (ECA). This has led to a
reduction in the total cost of transactions for customers andfor the flexible formation of finances. In December 2004, as
the first transaction based on the reinsurance agreementwith USEXIM, NEXI underwrote reinsurance for the export
of Boeing 767 aircraft to Uzbekistan Airways.
4Message from the Chairman
Annual Report 2004

Expansion of Risks to be Indemnified
NEXI has revised what is called, Supplemental
Agreement on Full Turnkey Contract, which covers
losses incurred when plants under construction abroad
suffer damage due to war, etc. It is now clearly stated that
Act of terrorism is one of the reasons for indemnity.

Started Underwriting MLT
Transactions for Prepayment ImportInsurance
Until now, NEXI had limited the underwriting oftransactions with a maximum repayment term of less than
two years but in order to support the stable import of raw
materials to Japan, since October 2004, transactions havebeen underwritten with a maximum repayment term of
two years or more for political risks.
Prepayment Import Insurance covers losses incurred by
Japanese importers who are unable to recover a
prepayment due to political and commercial risk, despite
their demand for reimbursement when the cargo did not
arrive on the due date, under circumstances in which thecargo was purchased from abroad by advance payment.

New and Simplified Insurance Premium
System for Export Credit Insurance, etc.

Sales of License Insurance
Increasing Steadily

Further Usable Overseas Investment
Insurance

In order to simplify application procedures, fortransactions of Export Credit Insurance of less than two
years or of two or more years, in October 1, 2004, a
unified and greatly simplified method of calculating theinsurance premium was introduced and underwriting
using the new insurance premium system was started.

Intellectual Property License Insurance (commonly known
as License Insurance) is being used more and more by
NEXI s customers. This insurance package was developedin October 2003 to respond to the needs of clients who arehandling patent rights or copyright. NEXI is often
consulted by people from a variety of industries, including
manufacturing corporations, communication companies,
content creators, such as makers of animated movies andgame software, and pharmaceutical companies.
Applications are now being made by customers who had
never before used trade and investment insurance.

■In response to customer needs, the requisite conditions

Number of Insured Transactions for FY2004: 28(8 transactions for the preceding fiscal year)■Starting April 2005, dividends and profit gained after

Following are the types of insurance which
the new insurance premium system applies to:
Export Credit Insurance (Specific Insurance)(Export Contracts and Technical Cooperation
Contracts)●●

Export Credit Insurance (Comprehensive Insurance)
Comprehensive Insurance for Specified Capital
Goods (Machinery and Equipment, Cable, Railroad
Vehicles, Ships and Vessels, and Automobiles)

Suspension of royalty
payments due to a
restriction on foreign
currency remittances in
the licensee's country

Non-payment of royalties
due to bankruptcy of acompany that has been
provided with a license or
know-how

Non-payment ofroyalties on the duedateComprehensive Insurance for TechnicalCooperation Contract
Comprehensive Insurance for Specified Consumable
Goods (Chemicals, Textiles, and Steel Materials)
Enterprise Comprehensive Insurance

for the acknowledgement of insured risks for Overseas
Investment Insurance were relaxed starting October
2004. The period for the suspension of businessactivities for covering losses incurred from suspensionof business activities due to occurrence of a politicalrisk event had been longer than six months but now,
this has been shortened to over three months. As aresult, NEXI is now able to broadly cover not only
those cases of full withdrawal from business but also
cases of temporary occurrence of insured risk.
resuming business has been excluded from the object of
the refund of recovery for the obligation of recovery
that arises upon receiving insurance claims.
■When customers increase their capital for business thatis already under an insurance contract and apply forinsurance for the increased capital, NEXI makes it
possible to unify the new insurance contract with theexisting contract in order to simplify the necessary
customer procedures.

Suspension of foreign exchange transactions or
foreign currency remittances
Bankruptcy of the licensee company or delayed payments● Buyer s Credit Insurance

Additional Alternative Documents for
Credit Inquiry Reports
The following have been added as alternative documents
for credit information reports: Rating Credit Opinion by
Cofanet (provided by Coface Service Japan) in case of
new registration as E-rating buyer (subject to satisfactionof certain conditions); and the report described in the
BANKSCOPE (published by Bureau Van Dijk) in case of
new registration as S-rating buyer.

Claims paid

N EXI
Reduction of Premium Rate forCategory A Countries
In order to lighten the burden of insurance premium
payments made by customers who are involved in exporttransactions to developed countries, the premium rate
for category A countries (mainly, developed countries)
was reduced for transactions of Export Credit Insurancewith a repayment term of less than two years and alsotransactions of Trade Insurance for Manufacturers.

Ⅱ

Sales of Trade Insurance for
Manufacturers Steadily Increasing
Since its introduction in April 2003 in response tocustomer needs, there has been a steady increase in salesof Trade Insurance for Manufacturers.
Number of Insured Transactions for FY2004: 40(15 transactions for the preceding fiscal year)

Introduction of Transfer Scheme of
Uncovered Part of Paris Club Claimsfor HIPCs to NEXIIn order to meet customer demand, it was introduced in October
2004 that the uncovered part of Paris Club claims for HIPCs(Heavily Indebted Poor Country) is taken over by NEXI.

NEXI s firm policy is to immediately act upon its customers needs at all times.
For further details of any revisions to the system, please visit our website.
URL http://www.nexi.go.jp
56

Main Data for Fiscal Year 2004
Annual Report 2004

Ⅲ

Ⅲ

Main Data for Fiscal Year 2004

1. Result of Trade and Investment Insurance Activities (from FY1987 to FY2004)

2. Underwritten AmountThe total underwritten amount in FY 2004 was · 11.6 trillion, up 4.0% from the previous year.

■ Underwritten Amount■ Underwritten Amount by Region
Oceania 3.9%
Africa 2.4%

(Fiscal Year)(Billions of yen)200

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

100

2001

10.1

2002

10.6

2003

11.1

2004

11.6
0

0

3

South
America
3.0%
North and Central
America
28.1%

6

9

12

Asia
44.9%

Europe17.6%

15（Trillions of yen）

3. Outstanding Commitment
Total outstanding commitment in FY 2004 was · 9.3 trillion, up 8.3% from the previous year.

■ Outstanding Commitment-100■ Outstanding Commitment by Region
Oceania 1.3%
Africa 2.3%
South
America
7.4%
North and Central
America
17.5%(Fiscal Year)

2001

7.5

2002

7.9

-200

8.6

2003

0

-300

Europe
11.1%

9.3

2004

2

4

6

8

Asia
60.3%

10（Trillions of yen）

4. Premium Income
The total amounts of premium income in FY 2004 was · 41.0 billion, down 8.0% from the previous year.

-400(Fiscal Year)(Billions of yen)

1987 1988 1989 1990 1991 1992 1993
Premium income
30.4 21.3 34.2 44.8 35.7 44.7 46.2
Recoveries and34.9 40.0 69.3 38.7 40.7 111.2 77.3
other income
Claims paid
109.5 164.8 142.7 198.6 341.9 148.2 128.0
Single year balance (44.2) (103.5) (39.2) (115.1) (265.5) 7.7 (4.5)

Fiscal Year

1994
44.1
85.2
80.6
48.7

1995 1996 1997 1998
43.5 41.0 46.0 45.4
98.3 121.2 123.0 91.3
57.1 44.4 30.2 16.7
84.7 117.8 138.8 120.0

1999
33.2
84.6
21.6
96.2

2000
32.9
85.3
32.4
85.8

2001
40.0
74.5
49.9
64.6

2002 2003 2004
32.8 44.8 39.4
70.2 97.7 101.4
65.1 23.0 12.9
37.9 119.5 127.9

42.1

2001
34.3

2002

43.6

2003

41.0

2004

＊The amount is based on cash.

0

10

20

30

40

50 （Billions of yen）

＊The amount is based on bills issued.

78

Main Data for Fiscal Year 2004
Annual Report 2004

5.

Ⅲ

Claims Paid

The total amount of claims paid in FY 2004 decreased by 44.0% from the previous year to · 12.9 billion.

■ Claims Paid by Risk (Commercial/Political)

Commercial■ Claims Paid by Region
South America 10.0%

Political

North and Central
America
0.0%(Fiscal Year)

2001

29.6

20.3

■Claims Paid by Region(Commercial)

Africa 1.6%
Oceania 0%

North and Central
America
0.1%South America
0.2%
Africa 0.1%

■Claims Paid by Region(Political)
Oceania 0%
Africa11.4%

Oceania 0%

Europe 0%

Europe
0.0%

49.9

Asia
14.9%
North and Central
America
0.0%

Europe
0.0%

28.8

2002

36.3

65.1

Asia
99.7%

Asia
88.3%

2003

12.2

2004

11.2

10.8

South America
73.7%

23.0

1.7

0

12.9
10

20

30

40

50

60

70
(Billions of yen)

6.

Recoveries

Recoveries for FY 2004 was · 101.4 billion, with an increase by 3.8% from the previous year.

■ Recoveries(Fiscal Year)■ Claims Paid by Policy Term
2 years or more

Less than 2 years(Fiscal Year)

30.5

2002

2003

21.5

28.4

2001

10.3

49.9

34.6

12.7

65.1

2001

74.5

2002

70.3

2003

97.7

2004

101.4
0

20

40

60

80

100

120 (Billions of yen)

■ Recoveries by Region

23.0

Oceania 0%

2004

0

6.0

7.0

10

12.9

Africa
17.6%

20

30

40

50

60

Asia
17.9%

70
(Billions of yen)South America
29.2%

Europe34.7%

North and Central
America 0.6%

910

Main Projects Recently Underwritten
Annual Report 2004

Ⅳ

Ⅳ

Main Projects Recently Underwritten

Indonesia

Korea

Cilegon 740 MW Combined Cycle Power Project

Seoul Beltway ProjectThis is a project to construct a new 740MW natural gas fired combined-cycle power
plant at Cilegon in the Banten Province of Java, Indonesia. NEXI has underwritten
the Buyer s Credit Insurance for the financing of approximately ¥12.1 billion
provided by a syndicate of private Japanese financial institutions (agent bank: Bankof Tokyo-Mitsubishi, Ltd.) for the supply of power generation machinery andequipment exported by the Mitsubishi Heavy Industries, Ltd. and the Mitsubishi
Electric Corporation through the Mitsubishi Corporation.

This is a project to construct and operate the 36.3km unopened northern section of thecircular toll expressway, commonly known as the Seoul Beltway, with a total length of
127.5km. Under the Korean Law and Regulation of Private Participation in
Infrastructure , the project is being conducted under a concession contract between a
consortium of major general contractors as the main constituents and the Korean
government for the purpose of relieving traffic congestion in Seoul Metropolitan Cityand the vicinity. The Seoul Beltway is planned to be partially opened in 2006 andfully opened in 2008. NEXI has underwritten the Overseas Untied Loan Insurance for
an offshore loan of $100 million provided by a syndicate of private Japanese financial
institutions including the UFJ Bank, Ltd.

(The insurance contract was concluded in March 2005.)(The insurance contract was concluded in October 2004.)

ASIA

Philippines
Leyte-Cebu Interconnection Uprating ProjectThis project concerns the laying of submarine cables between Leyte Island and Cebu
Island in the Philippines, implemented by the National Transmission Corporation(Transco). NEXI has underwritten the Buyer s Credit Insurance for the financing ofapproximately ¥2.7 billion provided by a syndicate of private Japanese financial
institutions (agent bank: UFJ Bank Limited) for the supply of submarine cables andsubstation equipment exported by the Kanematsu Corporation and the J-Power
Systems Corporation.
(The insurance contract was concluded in May 2004.)

India
Construction of Second Float Glass Plant Project by Asahi India, Ltd.
This is a project to construct a second float glass plant (with the capacity of producing
700MT /day) in northern India by Asahi India Glass, Ltd., which is a joint Indian company of
the Asahi Glass Co. Ltd. The third largest comprehensive glass manufacturer in India, Asahi
India Glass holds more than 85% of the Indian glass market share for high quality glass usedin automobiles. The float glass manufactured in the new factory will be used not only inconstruction but also as automotive glass material. The automotive glass material made in
Asahi India Ltd. will be distributed mainly to Japanese automobile manufacturingsubsidiaries in India. NEXI decided to underwrite the Overseas Untied Loan Insurance for thefinancing of $65 million provided by the Citi Group. This is the first time for NEXI to cover a
non-L/G (letter of guarantee) commercial risk of a privatecompany in India using Overseas Untied Loan Insurance.
(The insurance contract was approved preliminarily in June 2005.)

11

12

Main Projects Recently Underwritten
Annual Report 2004

Saudi Arabia

Bulgaria

Construction of NGL Recovery Plant Project by Saudi Aramco

Rehabilitation Project of Maritsa East 2 Thermal Power Plant

JGC Corporation has accepted an order for the design, procurement of machineryand materials, and construction work of a petrochemical plant to be constructed by
the Saudi Oil Company (Saudi Aramco). This plant will be the largest natural gas(NGL) recovery plant in the world and is anticipated to recover 310 thousand barrelsof NGL per day. A portion of the separated and refined gas will be used as material
for a petrifaction plant planned to be constructed in Saudi Arabia. NEXI has
underwritten the Export Credit Insurance for the technical cooperation contracts (forapproximately ¥86.6 billion) for Saudi Aramco.

This is a project to replace the steam turbines and install a flue gas desulphurization
duct for renovation of Thermal Power Plant Maritsa East, a national power company
of Bulgaria. NEXI has underwritten the Export Credit Insurance for the financing ofapproximately ¥10 billion provided by ABN AMRO Bank N.V. Tokyo Branch.
(The insurance contract was concluded in
October 2004.)

NEXI has also underwritten the Export Credit
Insurance for the supply of machines andtools (approximately ¥25 million) by Mitsui& Co., Ltd. for this project.

(The insurance contract was concluded in May 2005.)

THE
MIDDLEEAST

Iran
HDPE Project by Ilam Petrochemical Co., Ltd.
The Ilam Petrochemical Co., a subsidiary of the National Petrochemical
Company (NPC: state-owned petrochemical company in Iran), is constructing
production facilities for high-density polyethylene (HDPE). NEXI has
underwritten the Buyer s Credit Insurance for the export of related facilities forthe construction project by the Mitsui Engineering & Shipbuilding Co., Ltd. This
project is extremely important for Iran because, through the construction of an
HDPE plant with an annual output of 300 thousand tons, the country will be able
to make effective utilization of its abundant natural gas resources.
(The insurance contract was concluded in March 2005.)

Ⅳ

EUROPE(The insurance contract was concluded in
November 2004.)

Turkmenistan
Construction Machinery Export Project for State Concern
Turkmenneftegasstroi
ITOCHU Corporation has supplied construction machinery (approximately ¥4 billion) to State
Concern Turkmenneftegasstroi; Turkmenistan s national oil and gas company. The machinery
is used for construction and restoration of the oil and gas pipelines, which are the mainindustries of the country. NEXI has underwritten the Export Credit Insurance for this contract.
(The insurance contract was concluded in May 2004.)

Uzbekistan
Export of Boeing 767 Aircraft to Uzbekistan Airways

BahrainLow Sulphur Diesel Production Plant Project of BAPCOThis is a project to extend desulphurization equipment implemented by the Bahrain
Petroleum Company (BAPCO). NEXI has underwritten the Buyer s Credit
Insurance for the financing of approximately $156 million provided by the
syndicate of Japanese financial institutions (agent bank: Hongkong and Shanghai
Banking Corporation Limited (HSBC) Tokyo Branch, global agent: BNP PARIBAS
Tokyo Branch, and Mizuho Corporate Bank, Ltd.) for the export of project related
equipment by the JGC Corporation. The project is a core operation for themodernization of the Sitra Refinery, which is the only refinery in Bahrain.
Furthermore this project is the first transaction where Japanese export credit
agencies (ECAs) and Islamic Lease Finance have co-financed a loan.

Based on the Reinsurance Agreement concluded in August 2004, with the US Ex-Im Bank anexport credit agency in the US, NEXI underwrote reinsurance for the export of Boeing 767
aircraft to Uzbekistan Airways. Japanese companies are prominently involved in
manufacturing the Boeing 767 aircraft by participating in the international joint development,
and production of the airframe and engine for the aircraft. This is the first transaction under
the Reinsurance Agreement and it has thesignificance of supporting such international
joint project between Japan and the US throughexport credit insurance.
(The reinsurance contract was concluded in
December 2004.)

Turkey(The insurance contract was concluded in February 2005.)

Export of Construction Machinery to ENKA Marketing Inc. ProjectThis is a transaction in which NEXI, in cooperation with Atradius, a Dutch export credit agency,
underwrote insurance for non-L/G (letter of guarantee) financing for a project to export of some150 construction machines from the European local subsidiary of the Hitachi Construction
Machinery Co., Ltd. to ENKA Marketing Inc., thesubsidiary of a major construction company in Turkey.
This is the first transaction to be insured based on the
Reinsurance Agreement between Atradius and NEXI.
NEXI has reinsured 7.38 million Euros (approximately ¥1billion), which is 50% of the total amount underwritten by
Atradius for the original insurance contract.

13(The reinsurance contract was concluded in
November 2004.)

14

Main Projects Recently Underwritten
Annual Report 2004

MexicoBrazilDevelopment of Ku-Maloob-Zaap Oil Field Project by PEMEXPetrochemical Plant Expansion Project by Braskem S.A.

This is an oil field development project for the Ku-Maloob-Zaap (KMZ) oil field
located offshore Gulf of Mexico by a Mexican state-owned oil company, Petroleos
Mexicanos (PEMEX). The goal of the project is to increase the production of crude
oil and gas. NEXI has underwritten the Overseas Untied Loan Insurance for thefinancing of $300 million provided by a syndicate of Japanese financial institutions(agent bank: Bank of Tokyo-Mitsubishi, Ltd.) This transaction is the first for
Mexico since the conclusion of the JapanMexico Free Trade Agreement and is verysignificant because of its contribution to thefurther strengthening of economical
relationships between the two countries.

LATIN
AMERICAⅣ

This is a project to expand and improve a number of existing petrochemical plants
belonging to Braskem S.A. with the purpose of upgrading productivity and reducing
production costs. NEXI has underwritten the Overseas Untied Loan Insurance forthe finance in yen equivalent of $50 million by the Citibank, N.A. and the Bank ofTokyo-Mitsubishi, Ltd. Braskem S.A. is the largest petrochemical company in Latin
America that has an integrated production system of basic petrochemical products(ethylene, etc.) and commodity synthetic resin (polyethylene, vinyl chloride, etc.). It
is also a major supplier of ethylene dichloride (EDC) to Japan.
(The insurance contract was concluded in March 2005.)(The insurance contract was concluded in
December 2004.)

BrazilBrazilProject to Upgrade Steel Plant Facility of Gerdau Acominas S.A.

Campos Basin Oil Transportation (PDET) Project by
PETROBRAS

NEXI provided Overseas Untied Loan Insurance for the US＄240 million loan
extended by Japanese financial institutions (agent bank: ABN AMRO Bank N.V.
Tokyo Branch) to Gerdau A ominas S.A., a major Brazilian steel company, toupgrade and modernize their production facility. Gerdau A ominas S.A. has strong
ties with Japanese steel companies through receiving technical support etc. This
project is significant as it would improve their production efficiency, and lead to anincrease in production of crude steel whose market is heating worldwide. This is
the first transaction for NEXI to provide political and commercial risks cover on
non-L/G basis for the company.
(The insurance contract was concluded in December 2004.)

This is a project to construct an offshore platform and related facilities to increase
the transportation capacity of crude oil in the Campos Basin. The project is being
run by Petroleo Brasileiro S.A. (PETROBRAS), a state oil company in Brazil.
NEXI has underwritten Overseas Untied Loan Insurance for the financing of $328
million provided by a syndicate of Japanese financial institutions (agent bank:Mizuho Corporate Bank) as a portion of the total amount of $910 million used forthe project. Mitsubishi Corporation and Marubeni Corporation are bothparticipating in this project as investors. This isan extremely significant project from theperspective of developing the overseas operations
by Japanese companies.
(The insurance contract was concluded in March
2005.)

15

16

Review of Performancein Fiscal Year 2004
Annual Report 2004

Ⅴ

Ⅴ

Review of Performancein Fiscal Year 2004

１

Economic Trends

3

１．2003 年度決算につ いてThe Japanese economy continued to recover steadily in FY2004. This was seen not only in an improvement in the corporate
sector, including earnings and capital investment, but also in the form of a gradual improvement in consumer spending. The
overall world economy was also stable, due to high growth in Asia as well as in the United States, in spite of the negative impactof high oil prices.
Amid such circumstances, Japan s exports in FY2004 increased 10.1% over the previous year to ·61.7 trillion. Japan s exports toother Asian countries and to the United States showed a significant increase of 13.6% and 3.6% respectively. Major export items
that contributed to the growth were steel, scientific/optical instruments and automobiles. Japan s current account (preliminary)also increased 5.8% over the previous year, aided by the direct investment surplus.

Japan s export (for reference)

Underwritten Amount by Insurance TypeThe total underwritten amount in FY2004 was ·11,558.8 billion, up 4.0% from the previous year. In terms of type of
insurance, Export Credit Insurance was the largest at ·10,807.3 billion, an increase of 0.1% over the previous year. Thiswas followed by Overseas Untied Loan Insurance of ·650.3 billion, a sharp increase of 202.7%.
The total amount underwritten for the past four years is also worthy of note. It showed a steady increase every year in spiteof the Japanese export slowdown in FY2001 and 2002. Since FY2002, the amount has been over ·10 trillion.
Export Credit Insurance (two years or more) and Overseas Untied Loan Insurance showed a substantial increase, while
Export Bill Insurance and Export Bond Insurance have decreased.

(Billions of yen)(Billions of yen/Millions of U.S. dollars)

Fiscal year

1999

2000

2001

2002

2003

2004

Fiscal Year

2001

2002

2003

Total exports

48,547.6

52,045.2

48,592.8

52,727.1

56,060.9

61,720.8

Export Credit Insurance

9,737.9

10,182.9

10,796.9

10,807.3$101,956

93.5

0.1

(1.8)

7.2

(6.6)

8.5

6.3

10.1

less than 2 years

9,647.1

9,918.2

10,219.5

10,542.1$99,454

91.2

3.2

2 years or more

90.8

264.7

577.5

265.2

$2,502

2.3(54.1)

Export Bill Insurance

60.6

53.5

41.9

41.6

$392

0.4

(0.6)

Export Bond Insurance

50.2

0

0

0

0

ー

ー

Prepayment ImportInsurance

1.8

0.6

0.8

1.8

$17

0.0

132.3

Overseas Investment
Insurance

55.6

41.8

63,8

55.1

$520

0.5

(13.6)

Overseas Untied Loan
Insurance

230.6

339.3

214.8

650.3

$6,1355.6

202.7

Short-Term Trade Insurance
for Manufacturers

ー

ー

1.2

2.7

$25

0.0

130.1

10,136.6

10,618.0

11,119,3

11,558.8$109,045

100.0

4.0

Year-to-year change (%)(Source: Trade Statistics, Ministry of Finance)2

Summary of Underwriting

Summary of Trade and Investment Insurance Business

Underwritten Amount (1999 to 2004)(Billions of yen)

Fiscal year

1999

2000

2001

2002

2003

2004

Year-to-year change

Underwritten amount

12,024.7

10,811.6

10,136.6

10,618.0

11,119.3

11,558.8

4.0%(Note 1) The above total shows only the insurance amount originally underwritten by NEXI.

Total

Outstanding Commitment (1999 to 2004)

2004

Composition (%)

Year-to-yearchange(%)(Billions of yen)

Fiscal year

1999

2000

2001

2002

2003

2004

Year-to-year change

Outstanding commitment

7,315.6

7,523.0

7,549.1

7,874.2

8,593.9

9,306.5

8.3%(Note 5) Because of the rounding up or down of the fractions, the sum of the items in the columns does not necessarily
coincide with the total amount. (the same applies hereafter)(Note 2) The above total shows only the insurance amount originally underwritten by NEXI.

Operating Income (1999 to 2004)
Fiscal year

1999

2000

(Billions of yen)

2001

2002

2003

2004

Year-to-year change

Premium income

33.2

32.9

42.1

34.3

43.6

41.0

(5.9%)

Recoveries

84.6

85.3

74.5

70.3

97.7

101.4

3.8%

Total

117.7

118.2

116.6

104.6

141.3

142.4

0.8%

(Note 3) The amount of premium income includes refunded insurance premiums. The premium income after FY2001 is on anissued bill basis. On the other hand, the premium income prior to FY2001 is on a Special Account actual payment
receipt basis.
(Note 4) The amount of recoveries after FY2001 is on a payment notice receipt basis. On the other hand, the amount ofrecoveries prior to FY2001 is on an actual payment receipt basis.

Claims Paid (1999 to 2004)

17(Billions of yen)

Fiscal year

1999

2000

2001

2002

2003

2004

Year-to-year change

Claims paid

21.6

32.4

49.9

65.1

23.0

12.9

(44.0%)

18

Review of Performancein Fiscal Year 2004
Annual Report 2004

Amount Underwritten by Region

4１．2003 年度決算につ いてIn terms of a regional breakdown based on original insurance, the largest share of ·5,758.3 billion was Asian transactions, andthis was followed by North and Central American transactions of ·3,602.1 billion. South America showed the sharpest
increase at 63.6% over the previous fiscal year. Over the past four years, the amounts underwritten for Asia, Europe andOceania showed steady growth.
(Billions of yen/Millions of U.S. dollars)

Region

FY2001

FY2002

FY2003Asia

4,334.6

4,943.6

5,633.4

FY2004
5,758.3

Composition (%)

Year-to-yearchange (%)

44.9

2.2

$54,324

Europe1,708.3

1,799.9

2,373.6

2,259.9$21,320

17.6

(4.8)

North and Central
America

4,074.3

4,036.4

3,370.4

3,602.1$33,982

28.1

6.9

South America

379.0

226.8

238.3

390.0

$3,6793.0

63.6

Africa

273.8

402.6

293,5

306.8

$2,8942.4

4.5

Oceania

276.2

341.2

433.8

497.1

$4,6903.9

14.5(Note 6) Classification used to compute the above amountPre-shipment − country of the shipment consignee
Post-shipment − country of the payer (or country of the guarantor when guaranteed)(Note 7) The amount includes some transactions that are doubly computed, i.e. for both pre-shipment (country of the consignee)and post-shipment (country of the payer).
(Note 8) The above amount shows only the insurance amount originally underwritten by NEXI.
(Note 9) Middle East and Central Asia are included in Asia (the same applies hereafter).
(Note 10) Central and Eastern Europe and Russia are included in Europe (the same applies hereafter).

Top Ten Countries and Regions of Underwritten Amount in FY2004(Billions of yen/Millions of U.S. dollars)

Ⅴ

Outstanding Commitment

Outstanding Commitment by Type of Insurance
The total outstanding commitment in FY2004 was ·9,306.5 billion, up 8.3% from the previous year. Export Credit
Insurance produced the largest amount of ·7,424.6 billion, followed by Overseas Untied Loan Insurance of ·1,403.3
billion. These figures have been increasing for the past four years while Export Bill Insurance, Export Bond Insurance andOverseas Investment Insurance have been on a downward trend.
(Billions of yen/Millions of U.S. dollars)

Fiscal Year

2001

2002

2003

Export Credit Insurance

5,938.9

6,144.4

6,995.4

7,424.6$70,043

79.8

6.1

less than 2 years

4,465.8

4,723.3

5,327.2

5,811.0$54,82162.5

9.1

2 years or more

1,473.1

1,421.1

1,668.2

1,613.6$15,223

17.3

(3.3)

Export Bill Insurance

15.4

10.5

9.4

9.4

$89

0.1

(0.1)

Export Bond Insurance

2004

Composition(%)

Year-to-year change(%)

9.9

8.3

6.8

5.6

$53

0.1

(17.4)

Prepayment ImportInsurance

0.8

0.3

0.5

1.5

$14

0.0

220.9

Overseas Investment
Insurance

747.0

630.3

533.2

458.2

$4,3234.9(14.1)

Overseas Untied Loan
Insurance

837.2

1,080.4

1,047.3

1,403.3$13,239

15.1

34.0

Short-Term Trade Insurance
for Manufacturers

ー

ー

1.2

3.8

$36

0.0

230.1

7,549,1

7,874.2

8,593.9

9,306.5$87,797

100.0

8.3

Total

Outstanding Commitment Balance by Region

Underwritten Amount

OrderCountry

1

U.S.A

2,344.9$22,1122

People's Republic of China

1,304.8$12,309

In terms of region, Asia accounted for the largest amount of ·5,700.1 billion, up by 9.0% from the previous fiscal year. SouthAmerica increased by 18.5%, while Africa decreased by 43.8%. For the past four years, most of the regions have shown an
increase, and Asia and Europe showed the strongest growth.

3

Panama (flag of convenience vessel)

605.3$5,710(Billions of yen/Millions of U.S. dollars)

4

Thailand

525.7$4.959

Region

FY2001

FY2002

FY2003

5

South Korea

488.6$4,609Asia

4,396.0

4,719.8

5,234.9

5,700.1$53,775

60.3

9.0

6

Taiwan488.2$4,606

Europe

684.7

693.8

993.0

1,053.3$9,937

11.1

6.4

7

Belgium

447.7＄4,224

North and Central America

1,476.0

1,427.7

1,461.5

1,659.5$15,656

17.5

13.6

8

Australia

422.5＄3,986South America

658.0

607.6

591.7

701.4

$6,617

7.4

18.5

9

Singapore

402.0$3,792Africa

349.9

517.7

393.2

220.9

$2,0842.3(43.8)

10

U.K.

369.7

$3,488

Oceania

86.4

72.2

108.0

122.9

$1,1591.3

13.7

FY2004Composition(%) Year-to-year change(%)(Note 11) Classification used to compute the above amountPre-shipment − country of the shipment consignee
Post-shipment − country of the payer (or country of the guarantor when guaranteed)(Note 12) The amount includes some transactions that are doubly computed, i.e. for both pre-shipment (country of
the consignee) and post-shipment (country of the payer).
(Note13) The above amount shows only the insurance amount originally underwritten by NEXI.

19

20

Review of Performancein Fiscal Year 2004
Annual Report 2004

Insurance Claims Paid

5

6

Insurance Claims Paid by Insurance Type and by Risk
The total amount of claims paid in FY 2004 decreased 44.0% over the previous year to ·12.9 billion. This is due to a stable world
economy contributing to a decrease in political risk. Claims paid by NEXI during its first medium-term objective period from2001 to 2004 amounted to ·150.9 billion. The total premium received during the same period was ·152.41 billion, whichindicates that the loss ratio by simple comparison is 99%. NEXI s income and payment during these four years has been wellbalanced, even excluding its recovered claims.
In FY 2001 and 2002, large claims payments occurred due to the currency crisis in Argentina and some commercial risk events.
Claims paid since 2003 have substantially decreased thanks to the upturn of the world economy. Today, the claims paid due topolitical events have decreased compared with the commercial risk due to a decrease in war and economic crises in theconsignee s countries.
(Billions of yen/Millions of U.S. dollars)

Type of
Insurance

FY2002

FY2001
Commer- Politicial
Total
Risk

FY2003

Commer- Politicial
Total
cial Risk
Risk

Total cial Risk

FY2004

Commer- Politicial
cial Risk
Risk

Total

Commercial Risk

Politicial Risk

Composition (%)

Export Credit Insurance

49.5

29.4

20.1

49.6

13.9

35.7

20.1

10.0

10.1

7.3

$69

5.9

$56

1.4

$13

56.6

Export Bill Insurance

0.2

0.2

0

0.3

0.3

0

0.2

0.2

0

0.0

$0.0

0.0

$0.0

0

$0

0.3
ー

Recoveries for FY2004 totaled ·101.4 billion, an increase of ·3.7 billion (by 3.9%) over the previous year. The result is
attributed to recoveries of commercial risk events in Asia. However, commercial risk events recoveries accounted for only 7.0%(·7.1 billion) of the total recoveries. The remaining 93.0%, or about ·94.3 billion, is in connection with political risk events.
The top five countries in terms of NEXI recoveries in FY2004 were: Brazil (·27.2 billion), Poland (·23.0 billion), Russia(·10.7 billion), Nigeria (·9.7 billion) and the Philippines (·6.9 billion), which account for 76% of the total recoveries.

Recoveries by Risk
（Billions of yen）

FY2001

FY2002

FY2003

FY2004

Political risk

73.6

67.3

94.3

94.3

Commercial risk

1.0

3.0

3.5

7.1

Total recoveries

74.5

70.3

97.7

101.4

(Note 15) Because of the rounding up or down of the fractions, the sumof the items in the column does not coincide with the total
amount. (the same applies hereafter)

Export Bond Insurance

0

0

0

0

0

0

0

0

0

0

$0

0

$0

0

$0

0.0

0.0

0

0

0

0

0

0

0

0

$0

0

$0

0

$0

ー

0

0

0

0

0

0

0.5

0

0.5

0.2

$2

0

$0

0.2

$2

1.7

Recoveries by Region

0.2

0

0.2

15.2

14.6

0.6

2.1

2.0

0.1

5.3

$50

5.2

$49

0.1

$1

41.3

ー

ー

ー

ー

ー

ー

0

0

0

0

$0

0

$0

0

$0

ー

49.9

29.6

20.3

65.1

28.8

36.3

23.0

12.2

10.8

12.9 $122

11.2

$106

1.7

In terms of breakdown of recoveries by region about ·18.1 billion were from Asia, showing an increase of 33.8% over theprevious year. About 71% of the total Asian recoveries are from three countries: the Philippines with ·6.9 billion (·7.0billion for the previous year), Thailand with ·3.8 billion (no recovery for the previous year) and Indonesia with ·2.2
billion (·1.4 billion for the previous year). Recoveries from Europe were ·35.2 billion, 80% up from the previous year.
Most of these were from Poland and Russia, with ·23 billion (·8.1 billion for the previous year) and ·10.7 billion (·9.9billion for the previous year) respectively, accounting for 96% of the recoveries from Europe.
Recoveries from North and Central America were ·0.6 billion, 41.9% down from the previous year, of which ·0.3 billion(·0.2 billion for the previous year) from Cuba and ·0.2 billion (·0.2 billion for the previous year) from Antigua andBarbuda, accounting for 96%. ·29.6 billion was recovered from South America, with an increase of 12.2% over theprevious year. Three countries, Brazil, Ecuador and Peru, occupied 98% of the South American recoveries, with ·27.2
billion (·24.6 billion for the previous year), ·1 billion (·1 billion for the previous year) and ·0.7 billion (·7 billion for theprevious year) respectively.
Recoveries from Africa decreased 51.9% to ·17.8 billion. Recoveries from Nigeria, Egypt and Algeria were ·9.7 billion(·27.5 billion for the previous year), ·3.9 billion (·3.6 billion for the previous year) and ·3.8 billion (·3.3 billion for theprevious year) respectively. The recoveries from those three countries occupied 97% of the total recoveries from Africa.

Total$16 100.0

Insurance Claims Paid by Region(Billions of yen/Millions of U.S. dollars)

RegionTotal

FY2001

FY2002

FY2003

Commer- Politicial
Total
cial Risk
Risk

Commer- Politicial
Total
cial Risk
Risk

FY2004

Commer- Politicial
cial Risk
Risk

Asia

46.0

27.2

18.8

47.6

28.4

19.2

19.3

11.4

Commercial Risk

Total

Politicial Risk

Year-toyearchange(%)

7.9

11.4

$108

11.1

$105

0.3

$3

(40.9)

Europe

1.5

0.9

0.7

0.1

0.1

0

0.1

0.1

0

0.0

$0

0.0

$0

0

$0

(93.3)

North and Central
America

1.0

1.0

0

0.1

0.1

0

0.1

0.1

0.0

0.0

$0

0.0

$0

0

$0

(92.4)South America

0.2

0.2

0

17.0

0.3

16.6

3.3

0.7

2.6

1.3

$12

0.0

$0

1.3

$12

(61.2)

Africa

1.1

0.3

0.9

0.5

0

0.5

0.3

0

0.3

0.2

$2

0.0

$0

0.2

$2

(22.1)

Oceania

0.0

0.0

0

0

0

0

0.0

0.0

0

0

$0

0

$0

0

Total

49.9

29.6

20.3

65.1

28.8

36.3

23.0

12.2

10.8

12.9

$122

11.2

$106

1.7

$0 (100.0)$16(Note 14) Because of the rounding up or down of the fractions, the sum of the items in the column does not coincidewith the total amount. (the same applies hereafter)

Top Five Countries in terms of Insurance Claims Paid
(Billions of yen/Millions of U.S. dollars)

21

Recoveries

Prepayment ImportInsurance
Overseas Investment
Insurance
Overseas Untied
Loan Insurance
Short-Term Trade
Insurance
for Manufacturers

OrderCountry

Total claims paid

1

Thailand

5.2

$49

5.2

$49

0

$0

2

Singapore

3.7

$35

3.7

$35

0

$0

3

South Korea

2.2

$21

2.2

$21

0

$0

4

Argentina

1.3

$12

0

$0

1.3

$12

5

Zimbabwe

0.2

$2

0

$0

0.2

$2

Commercial Risk

Political Risk

(43.9)

Ⅴ(Billions of yen/Millions of U.S. dollars)

Region

FY2001

FY2002

FY2003

Asia

10.4

13.1

13.5

18.1

FY2004Composition（％）

Year-to-year change(%)

$171

17.9

33.8

Europe

28.1

23,2

19.6

35.2

$332

34.7

80.0

North and Central
America

1.7

1.5

1.1

0.6

$6

0.6

(41.9)South America

28.3

25.6

26.4

29.6

$279

29.2

12.2

Africa

6.0

6.9

37.1

17.9

$169

17.6

(51.9)

Oceania

0

0.0

0

0

$0

−

−

74.5

70.3

97.7

101.4

$957

100.0

3.8

Total

22

Financial Results for
Fiscal Year 2004
Annual Report 2004

Financial Results for
Fiscal Year 2004

１

Fiscal Year 2004 in Review１．2003 年度決算につ いて

2

Nippon Export and Investment Insurance (NEXI), an independent administrative institution, submitted a financial statement
for its fourth year of operations (fiscal year 2004, ending March 31st, 2005) to the Minister of Economy, Trade and Industryon June 22nd 2005 and Ministry approval was obtained as of June 29th.

Financial Statements

Balance Sheet (As of March 31st)
Titles(Millions of yen)AmountOverview of Financial Statement
Financial highlights for NEXI businessEnd of year: March 31st
(Millions of yen)

FY2001
Ordinary Income

FY2002

7,418

6,317

FY2003

FY2004

9,436

9,346

Net premium written

7,390

5,875

9,253

8,571

Interest on securities

−

−

9

567

9,156

5,492

8,505

7,027

Ordinary Expenses
Net claims paid

2

78

402

75

Operating and administrative
expenses

4,087

647

3,327

1,980

Provision for outstanding
commitments reserve

4,835

4,543

4,705

4,897

AmountTitles(Liabilities)（Assets）
Cash and cash items

48,086

Outstanding claims reserve

Securities

75,411

Reserve for outstanding commitments

10,041
11,681

Receivables subrogated by paying claims

331,573

Amount due to the reinsurer

Accrued income

135,859

Deposits received

8,912

Accrued premium

8,875

Prepaid insurance premium

5,937

Reinsurance credit

721

Accrued amount payable

4,762

Buildings (Note 2)

133

Suspense receipts

5VehiclesEquipment and fixtures (Note 4)
Deposits
Suspense payment
Other assets
Allowance for uncollectible receivables

98

Reserve for bonus payment(1,738)

825

931

2,319

Extraordinary profit

20,1406,408

17,112

3,173

Total profit

18,402

7,233

18,043

5,492

Total assets

150,084

166,125

217,309241,292

Net assets

122,754

134,815

183,712

198,908(Note) The profits and losses of receivables invested by the government have been entered as extraordinary profit and loss.

Profits and Losses
Net premium written for fiscal 2004 decreased ·0.7 billion from the previous year to ·8.6 billion. Ordinary profit,
however, stepped up ·1.4 billion to ·2.3 billion, due to an increase in earned premium, a decrease in net claims paid and anincrease in income from interest.
In accordance with the ordinance of the Ministry of Economy, Trade and Industry, profits derived from the recovery ofreceivables contributed in kind by the government have been entered as extraordinary profit. (Due to contribution in-kindby the government, NEXI was granted the right to receive recoveries relating to insurance claims payments made as aresult of rescheduling agreements between governments.) Extraordinary profit in fiscal 2004 is relatively small comparedwith the previous year, when NEXI received large amounts of recoveries from the Nigerian government as a result of arescheduling agreement.

Reserve for retirement allowance390

Other liabilities

591

2,937

Total liabilities

42,384582(363,947)

63(Funds and surplus)
Capital104,352
45,386

Capital surplus (Note 5)
Retained earnings

43,677

Surplus reserve
Unappropriated retained earnings

Total Assets

241,292

5,492(of which: net profit of the current year)

5,492

Total retained earnings

49,169Total funds and surplus

198,908

Total liabilities, funds and surplus

241,292(Notes) 1. Amounts between one million yen and 500 thousand yen have been rounded up to one million
yen. Amounts less than 500 thousand yen have been omitted.
2. The accumulated depreciation of buildings is ¥69 million.
3. The accumulated depreciation of vehicles is ¥2 million.
4. The accumulated depreciation of equipment and fixtures is ¥1,263 million.
5. The breakdown of capital surplus is as follows:
Appraisal difference of receivables subrogatedby paying claims(Millions of yen)

Recognized rescheduled receivables

113,392

Foreign exchange difference of rescheduled receivables(13,013)

Evaluation difference of commercial risk subrogated receivables
Difference of allowance for uncollectible receivables

Payment to the National Treasury (Trade Insurance Special Account)

125

668

Government investment

Ordinary profit (loss)

174

Total

(3,838)(51,154)
45,386

As of the end of the first medium-term objective period (four years), half amount of the reserve after appropriation of
profit was transferred to the national treasury in accordance with the provision of the Trade and Investment Insurance Law.
The actual payment was made in July, 2005.
Unappropriated retained earnings of the fourth year of operations (·5,492 million) have been fully transferred to thereserve.

23

24

Financial Results for
Fiscal Year 2004
Annual Report 2004

Statement of Cash Flows (From April 1st 2004 to March 31st 2005)

Statement of Income (From April 1st 2004 to March 31st 2005)（Millions of yen）

AmountTitlesOrdinary income
Net premium written (Note 2)

9,346Premium received

8,571

Reinsurance premium paid

(30,525)

Insurance claims paid

(12,103)

2

Ordinary profit and loss

Reversal of outstanding claims reserve

40

Interest income
Interest on securities

567

Foreign exchange gain

6

Other ordinary income
Ordinary expenses

Reinsurance claims received

12,339

Income from recovery of receivables subrogated by paying claims

24,942

Payment of recovered receivables subrogated by paying claims(3,573)

159

Income from recovery of receivables subrogated by the government

90,148

7,027

Payment of recovered receivables subrogated by the government(81,392)75

Personnel expenses(1,552)Estimated amount of insurance claims recovery (Note 4)

62

Other operating expenses(2,487)

Provision for outstanding commitments reserve

1,980

Operating and administrative expenses

4,897
12
1

Other ordinary expenses

2,319

Ordinary prof it
Extraordinary
profit and loss

38,050Net claims paid (Note 3)

Interest paid

16,375Extraordinary profit

2

Others

33,848Subtotal

6,137Interests and dividends received(13)

Interests and dividends paid

39,972

Net cash provided by operating activities
Ⅱ Cash flows from investing activities

Profit relating to in-kind contribution of receivables subrogated by the government (Note 5) 16,375(Increase) in time deposits(43,000)

13,202

Decrease in time deposits

65,000Extraordinary loss
Losses relating to in-kind contribution of receivables subrogated by the government (Note 6)
Provision for uncollectible receivables subrogated by the government
Total profit of the current year

(Notes)1. Amounts between one million yen and 500 thousand
yen have been rounded up to one million yen. Amounts
less than 500 thousand yen have been omitted.

41,187

Recoveries of write-offs

Refund of premium paid for reinsurance

1,044Interest income from receivables
contributed in-kind by the government
Recovery of non-rescheduled receivables
contributed in-kind by the government

Total

Redemption of securities

0

5,492

Purchase of fixed assets(2,182)（Millions of yen）

（Millions of yen）

Premium paid for reinsurance

Purchase of securities

11,214

5. The profits and losses of receivables contributed inkind by the government have been entered as
extraordinary profit and loss.

Premium of original insurance written

90

Premium received for reinsurance

1,988(1) The breakdown of profit concerning receivables
contributed in-kind by the government

2. The breakdown of net premium written is asfollows:(33,750)
8,571

64

Other extraordinary profit

15,889333

Total（Millions of yen）

Insurance claims paid

12,103

Reinsurance claims recovered(12,028)

Total

75

16,375(2) The breakdown of loss concerning receivables
contributed in-kind by the government

0(Increase) in deposits(30,688)

Net cash (used in) provided by investing activities
Ⅲ Cash flows from financing activities
Finance lease payment(385)

Net cash (used in) provided by financing activities

(385)

460
1,155
373

Total

1,988

8,982

Ⅴ Net increase(decrease) in cash and cash equivalents
Ⅵ Cash and cash equivalents at the beginning of the current year

16,104

Ⅶ Cash and cash equivalents at the end of the current year

25,086(Note 1) Amounts between one million yen and 500 thousand yen have beenrounded up to one million yen. Amounts less than 500 thousand yen
have been omitted.

(Note 2) The breakdown of cash at the end of the current year by title of balance
sheet is as follows:（Millions of yen）

Cash and cash items
Time deposits
Balance of cash at the end of current year

48,086(23,000)
25,086（Millions of yen）

(1) Difference of booking value between the current year end and the previous year end
concerning estimated recovery of commercial event receivables subrogated by paying claims(70)(Note 3) Important noncash transactions
Acquisition of assets by financial lease（Millions of yen）

(2) Recovery of commercial event receivables subrogated by paying claims

8

Vehicles7(3) Recovery of non-ledger-asset political-event receivables subrogated by paying claims

0

Total

7

Total

83

Ⅳ Foreign exchange difference related to cash and cash equivalents（Millions of yen）

Elimination loss of receivables
subrogated by paying claims
Recognized amount of receivables
contributed in kind by the government
Other extraordinary loss

4. The breakdown of the estimated amount of
insurance claims recovery is as follows:(50,506)90

3. The breakdown of net claims paid is as follows:

25（Millions of yen）

Ⅰ Cash flows from operating activities

(62)

26

Financial Results for
Fiscal Year 2004
Annual Report 2004

Ⅳ .Translation of accounting titles distinctive to NEXI

Notes
Ⅰ. Important Accounting Principles
1. Accounting procedures of depreciation(1) Depreciation of tangible fixed assets
Depreciation of tangible fixed assets purchased with a value
exceeding ¥200,000, either singly or by set, has been
calculated by adopting a straight-line depreciation method. This
is in accordance with estimated serviceable life stipulated in
the Corporate Tax Law defining residual value as10% of thepurchase value. However, the depreciation of buildings (limited
to incidental facilities), has been calculated by a straight-line
depreciation method that sets its residual value at ¥1 as thememorandum value.
(2) Amortization of intangible fixed assets
Amortization of the trademark right has been calculated by astraight-line depreciation method which fixes its residual value
at ¥0 in accordance with the estimated serviceable life
stipulated in the Corporate Tax Law.
Amortization of computer software with a four year-availability
period being used in-house has been calculated by a straightline depreciation method that sets its residual value at ¥0 by
applying the relative availability period to the estimatedserviceable life.
However, part of the computer software will be replaced by the
new system from April, 2006 notwithstanding the remaining
period of its availability. Therefore, amortization of the software
which will be disused has been calculated by applying March
2006 to the termination date of the estimated serviceable life.
2. Calculation basis of the reserve for retirement allowances andits estimate
In order to prepare for retirement allowances payments forboard members and employees, a reserve is provided based on
100% of the amount of retirement allowances that are requiredby the rules of payment of retirement allowances for board
members and also by those that apply to employees
respectively.
3. Calculation method of reserve for outstanding commitments,
outstanding claims reserve, receivables subrogated by paying
claims and allowance for uncollectible receivables
Reserve for outstanding commitments, outstanding claims
reserve, receivables subrogated by paying claims andallowance for uncollectible receivables have been booked withthe respective amount which has been calculated inaccordance with the following ordinance. "Concerning the
calculation methods ordained by the Minister of Economy,
Trade and Industry, pursuant to the articles of the ministerial
ordinance with regard to the finance and accounting of the
Independent Administrative Institution Nippon Export
Investment Insurance" (Heisei 13･03･27 Trade No.2 dated
March 29th, 2001).

27

Titles

4. Calculation basis of reserve for bonus payments and its estimate
In order to prepare for payment of bonuses for board members
and employees, a reserve is provided based on the amount thatremains in the current year according to the rules of
remuneration of board members and employees respectively.
5. Appreciation basis and method for securities(1) Appreciation of bonds that are owned for the purpose ofbeing held until maturity has been carried out by adopting
an amortized cost method (straight-line method).
(2) Appreciation of rest of the bonds which does not have amarket price has been carried out by adopting a moving
average cost method.
6. Appreciation method of money claims and debts in foreign
currencies
Money claims and debts in foreign currencies have beentranslated into Japanese yen at the exchange rates prevailingat the end of the fiscal year.
7. Accounting and depreciation methods applied to leasetransactions
Financial lease transactions have been booked in accordancewith the accounting procedures of typical sales transactions.
Depreciation has been booked by a straight-line method, whichsets its residual value at ¥0 by applying the relative contract
period as its estimated serviceable life.

Receivables subrogatedby paying claims

Total of assets of receivables subrogated by NEXI s paying claims andestimated amount of potential subrogated receivables with regard to theoutstanding claims reserve.

Accrued premium

Accrued insurance premiums due from policyholders arising frominsurance contracted.

Reinsurance credit

Receivables arising from reinsurance provided by the government○ Accrued premiums on reinsurance to be refunded by the government○ Accrued reinsurance claims to be paid by the government

Outstanding claims reserve

Amount considered to be necessary in order to cover incurred losses under aninsurance contract or losses recognized as having been incurred at the end of
the fiscal year.

Reserve for outstanding
commitments

Amount reserved in order to prepare for possible future claim payments underinsurance and reinsurance contracts.

Amount due to the reinsurer

Amount to be paid by NEXI to the government under reinsurance contracts.

Prepaid insurance premium

Insurance premiums received with NEXI s obligation starting from the next fiscal
year or later.

Net premium written

Amount calculated by deducting reinsurance premium paid from premium
written. Premium written is the total amount of premium of original insurance
written and premium received for reinsurance.

Net claims paid

Amount calculated by deducting reinsurance claims recovered from insurance
claims paid. Insurance claims paid are the total amount of original insurance
claims paid and reinsurance claims paid.

Estimated amount of
insurance claims recovery

The total of the following amounts:○ Amount of receivables subrogated at the time of claim payment○ Recovery of commercial event receivables subrogated by paying claims○ Recovery of non-ledger-asset political-event receivables subrogated bypaying claims○ Difference of the booking value between the current year end and theprevious year end, of the estimated amount of potential subrogatedreceivables capitalized with regard to the outstanding claims reserve○ Difference of the booking value between the current year end and theprevious year end, of estimated recovery of commercial event receivables
subrogated by paying claims that have been capitalized.

Provision for outstanding
claims reserve

Provision for outstanding claims reserves for the current fiscal year.

Provision for outstanding
commitments reserve

Provision for outstanding commitments reserves for the current fiscal year.

Capital surplus
Appraisal difference ofreceivables subrogatedby paying claims

Appraisal difference of in-kind contribution of receivables subrogated by thegovernment except for those related to accrued income.

・Recognized amount ofrescheduled receivables

Receivables rescheduled on or after April 1st 2002 of the political event
receivables subrogated and contributed in kind by the government.

・Foreign exchange differenceof rescheduled receivables

Foreign exchange difference in the foreign currency denominated receivables
entered at the end of the fiscal year concerning the rescheduled political-event
receivables that were subrogated and contributed in kind by the government.

・Evaluation difference ofcommercial risk subrogatedreceivables

Evaluation difference entered at the end of the fiscal year concerning thecommercial-event receivables subrogated and contributed in-kind by thegovernment.

・Difference of allowance foruncollectible receivables

Difference of allowance for uncollectible receivables for the fiscal year
concerning the rescheduled political-event receivables that were subrogatedand contributed in kind by the government.

Ⅱ. Important Debt Assumption Undertaken
Not applicable.

Translation

Ⅲ. Important Subsequent Events
Not applicable.

28

Achievement ofFirst Medium-Term Objectives
Annual Report 2004

Achievement ofFirst Medium-Term Objectives

Nippon Export and Investment Insurance set medium-term objectives for the first term of FY2001 to FY2004 and enforced
various measures and policies based on these objectives. The following outlines the main achievements of these medium-term
objectives.

2

Promotion of efficiency of business operations(1) Objective: Promoting efficiency of business operations

１

Improvement in quality of services
and other operations offered(1) Objective: Improvement of services
・Based on the spirit of the Customers Services Charter, NEXI simplified various procedures in order to lighten theburden on its customers and accelerate its speed of service delivery.
・NEXI s Trade and Investment Insurance Business Manual is thoroughly followed and maintained by the staff in eachbusiness operation. A database has been constructed and is maintained so that staff can share information efficiently
and rapidly.
・The period used for the assessment of claims of insured risks for each fiscal year was much less than the number ofdays mentioned in the medium-term objectives (150 days). (FY2001 - 92 days, FY2002 - 113 days, FY2003 - 66 days,
FY2004 - 72 days)(2) Objective: Qualitative and quantitative expansion of insured risks
corresponding to changes in needs
・NEXI introduced methods used by private banks and external rating agencies to analyze the creditworthiness of buyers
and borrower banks.
・For medium to long term non-L/G (letter of guarantee) commercial risk transactions (where the insurer s period of
obligation is two years or more, without government guarantee, and covering commercial risk in addition), where
intense risk assessment is required, NEXI took the measure of increasing the percentage of indemnity that has led to
the favorable expansion of underwriting.
・Taking customers demands into account, NEXI improved various systems and developed new products.
・The premium income for each fiscal year has reached FY2000 levels, which is the standard of the medium-term
objectives. NEXI has also achieved the expansion of the total amount of insured risks on a premium income basis.

(3) Objective: Reinforcement of recovery system
・NEXI improved the infrastructure of debt recovery management for each buyer/transaction.
・In order to strengthen the system and improve the efficiency of recovery, NEXI realigned its organization by separating
the Claims Service & Recovery Group and launching an Asset Management Department. (FY2004)
・A Servicer Recovery System was introduced. (FY2002)
・The recovery rate of insured commercial risks for each fiscal year has exceeded FY2000 levels, which is the basis of themedium-term objectives. Moreover, the range of increase for the results of the recovery rate from the beginning to theend of the term, one of the criteria for the extent of recovery efforts of the fiscal year, has been increasing year by year.

・NEXI, Nagoya (Nagoya branch office) has closed and its business operations have been integrated with NEXI, Osaka(Osaka branch office). (FY2004)
・NEXI s organizational structures have been reorganized, including the underwriting section, the recovery section,and the systems section.
・Reinsurance agreements have been concluded with overseas export credit agencies and reinsurance has been
underwritten (inward reinsurance) instead of directly underwriting insurance.
・The objective that the rate of personnel expenses should not increase has been achieved through appropriate
personnel placement as well as through the use of temporary employees and consigning the sales of products to
private non-life insurance companies.
・Operating expenses for each fiscal year has achieved the target of less than 18% through a reduction in operating
expenses and premium income growth.

(2) Objective: Efficient development of next computer system
・Based on the Next Generation Information System Plan, NEXI is efficiently developing its next computer system.
・The size of software used was greatly reduced from that estimated from the conversion of the current computer
system. This has been brought about by standardization and the simplification of functions.
・NEXI has carried out competitive bidding based on government procurement regulations and promoted efficiency
from the stage of system design, making it possible to greatly reduce development expenses in comparison with thecurrent system.

3

Improvement of financial affairs(1) Objective: Financial break-even principle in relation to business operation
・Except for the first fiscal year, ordinary profit and loss has turned a profit every year due to the increase in insuranceincome acquired from favorable underwriting of insurances and also due to the decrease in net claims paid throughfavorable business environment and improvement in risk management. The interest income acquired from investing
the surplus in securities (government bonds) started in FY2003 also helped in turning a profit.
・Extraordinary profit and loss has posted high earnings each fiscal year due to the large sum of income acquired fromrescheduled interest that resulted from the progress of recovery negotiations of receivables contributed in kind by thegovernment.

(2) Objective: Reinforcement of financial ground・The balance of financial assets (total of cash equivalents and securities) at the end of the term for the first mediumterm objectives was ￥123.5 billion. This was due to the full start of fund management using government bonds andthe favorable results of subrogated debt recovery (encashment).
Starting from FY2005 the percentage of indemnity of government reinsurance has been reduced to 90% taking into
account the fact that the balance of financial assets out of the amount of total assets is maintaining sufficient liquidity.

29

30

Profile of NEXI
Annual Report 2004

Profile of NEXI
■ Date of Establishment

April 1st, 2001

■ Governing Law

The Law concerning the general rules of independent administrative institutions
The Trade and Investment Insurance Law■ Business Aim

To perform insurance business efficiently and effectively by underwriting those risks occurring throughinternational business activities that cannot be covered by ordinary insurances.

■ Competent Minister

The Minister of Economy, Trade and Industry■ Capital¥104,352,324,369 (Fully contributed by the Japanese Government) (Unchanged from the previous year)■ Number of Employees

149（As of April 1st, 2005）■ Scope of Business1. To perform trade and investment insurance business according to Chapter 3 of the Trade and Investment
Insurance Law.
2. To perform any business accompanied by the above.
3. To accept reinsurance of the insurance commitment of international institutions, foreign governments andforeign corporations that perform insurance business, including reinsurance of undertaking losses covered bytrade and investment insurance and corresponding losses.
4. To cede NEXI s insurance commitment under the Trade and Investment Insurance Law, to the Japanese
government as the other party of the reinsurance contract according to Chapter 4 of the Trade and Investment
Insurance Law. In addition, to cede NEXI s insurance commitments to contracted parties such as international
institutions, foreign governments and foreign corporations, including the reinsurance of undertaking losses
covered by trade and investment insurance.

■ Brief History

July, 1999

■ Offices

Head Office

Chiyoda First Building, East Wing 3F, 3-8-1, Nishi-Kanda,
Chiyoda-ku, Tokyo 101-8359
Tel. 81-(0)3-3512-7650
Fax. 81-(0)3-3512-7660

NEXI, Osaka

3-1-22, Kitahama, Chuo-ku, Osaka City, Osaka 541-0041
Tel. 81-(0)6-6233-4017
Fax. 81-(0)6-6233-4001

From the left, Yukio Kitazume (Vice Chairman), Hidehiro Konno (Chairman and CEO),and Naoki Obayashi (Vice Chairman)■ Members of the Board andthe Audit Board
Chairman and CEO

Hidehiro Konno

Vice Chairman

Naoki Obayashi

Vice Chairman

Yukio Kitazume

The Law concerning the general rules of Independent
Administrative Institutions was approved.
December, 1999 The Law to partly amend the Trade and Investment
Insurance Law was approved.
April, 2001
The independent administrative institution, Nippon
Export and Investment Insurance was established.

Corporate Auditor (Full Time) Katsuo Oki
Corporate Auditor (Part Time) Takashi Imai
Katsuo Oki

Takashi Imai

(Corporate Auditor)(Corporate Auditor)■ URL

ht t p: / / www.nexi .go.j p■ Main Insurance● Export Credit Insurance

Products(For reference）
March, 1950 The Trade and Investment
Insurance Law was approved
Thereafter, trade and investment insurance
has been managed by the Ministry of
Economy, Trade and Industry (formerly the
Ministry of International Trade and Industry).

● Buyer s Credit Insurance● Trade Insurance for Manufacturers● Export Credit Insurance for SMEs
● Export Credit Insurance for Licenses● Overseas Untied Loan Insurance● Overseas Investment Insurance● Export Bill Insurance● Prepayment Import Insurance

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