Sumitomo Life Insurance Co, Japan’s fourth-largest life insurer, plans to try to raise about ¥100 billion (US$1.1 billion) in capital as early as next month to strengthen its financial base, a spokesman said.
The Osaka-based life insurer is considering borrowing perpetual subordinated loans from domestic banks, including Sumitomo Mitsui Financial Group Inc, Sumitomo Life spokesman Yoshiki Miyazaki said by telephone yesterday.
Japanese life insurers are bolstering their balance sheets as the worst financial crisis since the Great Depression erodes the value of their investments and earnings. Insurers are taking action because the government may move to tighten capital rules.
‘IMPROVING CAPITAL’
“Choosing perpetual subordinated loans to raise funds is aimed at improving capital quality in advance as we anticipate that capital requirements may become stricter,” Miyazaki said.
Mitsui Life Insurance Co said this month it will raise ¥60 billion to boost capital, while Asahi Mutual Life Insurance Co last month said it aims to raise about 35 billion yen by year’s end.
“There’s a possibility that life insurers’ assets have deteriorated considerably amid the financial crisis,” said Susumu Kato, chief economist at Calyon Securities in Tokyo. Japanese life insurers, of which many are mutual corporations, “have little choice but to boost capital in order to pay policyholders in a stable manner.”
FALLING PROFITS
Unrealized profits on the securities Sumitomo Life holds fell to ¥120 billion at the end of September from ¥711 billion a year earlier, according to the company’s statement.
“There’s no problem in the company’s financial health” because Sumitomo Life’s solvency margin stood at 996 percent at the end of September, Miyazaki said.
Solvency margin ratio is a gauge of life insurers’ ability to pay policyholders. Sumitomo Life’s ratio was the fifth highest among Japan’s nine biggest insurers at the end of September. The industry requires the ratio to be more than 200 percent, the threshold for a healthy life insurer.
The Nikkei newspaper reported earlier yesterday Sumitomo Life may boost capital in January. The paper said the insurer may buy preferred securities issued by Sumitomo Mitsui Financial.
FORECAST CUT
T&D Holdings Inc, Japan’s biggest publicly traded life insurer, cut its full-year net income forecast by 95 percent last month to ¥2 billion, citing losses on stock investments.
Asahi Life posted 112 billion yen of unrealized losses at the end of September, the company’s earnings statement showed.
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