Federal Kemper Life Assurance Co., Affiliate Outlook Revised To Stable; 'A' Ratings Affirmed

Business Wire, July 1, 2004

NEW YORK -- Credit Rating:A /Stable/--

On July 1, 2004, Standard & Poor's Ratings Services revised its outlook on Federal Kemper Life Assurance Co. (Federal Kemper) and Zurich Life Insurance Co. of America (Zurich Life) to stable from negative.

At the same time, Standard & Poor's affirmed its 'A' counterparty credit and financial strength ratings on Federal Kemper and Zurich Life.

These ratings actions follow the merger completion of J.P. Morgan Chase & Co. (J.P. Morgan) and Bank One Corp. (Bank One). Federal Kemper and Zurich Life are wholly owned subsidiaries of Banc One Insurance Holdings, a subsidiary of J.P. Morgan.

The ratings affirmation reflects the insurance group's strong competitive position, stable earnings, strategic benefit given its ownership, and extremely strong capitalization. Partially offsetting these strengths are its limited business profile given its concentration in commodity-driven term insurance and annuities, which reflects thinning margins in a highly competitive market.

Outlook

The outlook revision from negative to stable reflects the improved economic environment easing pressure on the insurance group's net spreads and successful integration year to date related to the Bank One and Zurich Life U.S. insurance operations.

Major Rating Factors

--Strong competitive position. The insurance group is well positioned in the term insurance business with strong positions in the direct and brokerage term markets. Prospectively, the group is expected to access its large retail bank customer base through a lead generation model directed toward the existing telemarketing infrastructure. In the past two years, the group has successfully achieved scale in this distribution channel. Variable and qualified annuities are complimentary businesses for the operation. Fixed annuities are a significant source of revenue to the combined J.P. Morgan operation through the distribution of these products.

--Strong operating performance. The group's earnings are strong due the stable characteristics of its life insurance business. First-quarter pretax GAAP earnings of about $44 million reflected strong mortality and a reduced level of operating expenses noted by a 20% reduction in the group's headcount.

--Ownership benefits. Given its ownership, the group is expected to benefit from the very strong risk management capabilities inherent within the combined organization. In addition, affiliated distribution outlets may provide a competitive advantage within certain product segments.

--Extremely strong capitalization. The group's capitalization is extremely strong with a consolidated Standard & Poor's capital adequacy ratio of about 200% as of Dec. 31, 2003. The capitalization is supported by strong statutory earnings and a high-quality balance sheet, with very little exposure to below-investment-grade securities.

Ratings List

                                            To           From

Federal Kemper Life Assurance Co.
Zurich Life Insurance Co. of America
  Counterparty credit rating            A /Stable/--  A /Negative/--
  Financial strength rating             A /Stable     A /Negative

Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find Ratings, then Credit Ratings Search.