Posted on: Friday, March 23, 2001

Japan insurer swallowed up by debt

Associated Press

Ailing mid-tier insurer Tokyo Mutual Life Insurance Co. filed for bankruptcy yesterday, the seventh Japanese insurer to collapse under a mountain of debt since World War II.

The insurer filed for a court-led rehabilitation after its main lender, Daiwa Bank, rebuffed pleas to extend a $242.4 million (30 billion yen) loan, Tokyo Mutual president Keniichi Nakamura said. He said the insurer had been discussing a possible alliance with several foreign life insurers, including GE Capital and American International Group Inc.

Tokyo Mutual had $7.9 billion (980.2 billion yen) in liabilities at the end of September 2000. Nakamura said he and Tokyo Mutual's entire board of directors will resign to take responsibility for the decision.

Japanese insurance companies have been hit hard by the collapse of a speculative bubble at the end of the 1980s.

Falling interest rates have left many insurers earning less on their assets than they are paying out to customers holding interest-bearing policies as investments.

Financial Services Minister Hakuo Yanagisawa, Japan's top financial regulator, moved swiftly to quiet concerns over the country's financial system, saying yesterday that he knew of no other financial institutions in danger of failure.

One reason for Tokyo Mutual's collapse was a plunge in share prices. The Tokyo stock market, which last week fell to its lowest level in 16 years, has generated around $687 million (85 billion yen) in portfolio losses for the insurer.

Tokyo Mutual's Nakamura also said many of the company's policyholders canceled their contracts after the failure of Chiyoda Mutual Life Insurance Co. and Kyoei Life Insurance Co. late last year aroused fears that more insurers might go bankrupt.

Kyoei Life's bankruptcy last October was Japan's biggest failure in the post-war era.