Daiichi Mutual Fire & Marine Insurance Co. has decided to give up its restructuring efforts, paving the way for another company to take over the financially troubled insurer's operations, company sources said Sunday.

Daiichi Mutual Fire apparently plans to notify the Financial Supervisory Agency, the nation's financial industry watchdog, of its decision early next week. The FSA is expected to order the Tokyo-based insurer to suspend operations and assign an administrator the job of finding a company to take over the operations.

Daiichi Mutual Fire would be Japan's first nonlife insurer to collapse in the postwar era. The FSA began investigating Daiichi Mutual Fire in January. On April 10, it ordered the company to shore up its capital base and improve its management. The insurer failed to seek support from other companies to strengthen its financial position, the sources said.

Daiichi Mutual Fire is believed to have a capital deficit of more than 80 billion yen due to a decline in investment returns and a rise in bad loans, according to industry sources.

A capital deficit occurs when a company's prospective losses eclipse the combined amount of its shareholders' equity and other capital items.

Daiichi Mutual Fire's automobile and accident insurance policies will be protected by the Non-Life Insurance Policy-Holders Protection Corp. of Japan, a fund created by the industry to protect policyholders from collapses of insurers.

Still, some payments for savings-oriented insurance products may be reduced. Daiichi Mutual Fire, founded in 1949, posted a premium income of 59.7 billion yen and a recurring profit of 1.7 billion yen on assets of 1,387 billion yen in the 1998 financial year, which ended on March 31, 1999.

Its solvency margin, which measures an insurer's ability to pay out obligations in the event of a disaster or unforeseen loss, was 330 percent at the end of the 1998 financial year. A 300 percent level is seen as healthy.