The financially ailing Taisho Life Insurance Co. said Wednesday that it has avoided possible collapse by securing a pledge of 4.5 billion yen in fresh capital through outside funding.
Taisho Life officials told a news conference that the midsize insurer’s solvency margin ratio at the end of March had fallen to 67.7 percent, after its auditors demanded in late May that its earnings reports be revised.
The 67.7 percent — way below the 200 percent insurers are expected to secure — is also significantly lower than the firm’s original estimate of between 240 percent and 250 percent.
While the firm’s solvency margin ratio currently stands at 135 percent, still below the regulatory threshold, Taisho officials said the ratio will rise to 355 percent on Aug. 1, when the firm receives 4.5 billion yen from Claremont Capital Holding Inc., a Japanese investment company, through the allocation of new shares.
Apart from the 4.5 billion yen it has pledged, Claremont Capital has already pumped in some 6.2 billion yen to bail Taisho out. When the transaction is completed in August, Claremont and its president, Yoshihiko Kokura, will have an 81 percent stake in Taisho.
Kokura said his firm is negotiating with other life insurance groups overseas for possible tieups with Taisho, with a goal of jointly developing insurance products.
Taisho President Kiyoshi Hosokawa said his firm saw a surge in contract cancellations following the “early correction order” issued by the Financial Supervisory Agency in March. The number of cancellations jumped to 10,000 in March alone, compared with 1,800 to 2,000 per month in preceding months.
Hosokawa added that Taisho’s two directors will probably resign from their posts to take responsibility for the firm’s worsening financial condition and that other top executives, including Hosokawa, will have their pay cut.
Like those of many other life insurers in the nation, Taisho’s financial condition has deteriorated in recent years under the weight of losses from the negative spreads between high yields promised to policyholders and poor investment returns.
Taisho also took a beating from the collapse in May of Daiichi Mutual Fire & Marine Insurance Co., as its 1 billion yen in loans to Daiichi became irrecoverable.
But Taisho officials claimed the firm’s cancellations have subsided since April, adding that the collapse in late May of another life insurer, Daihyaku Mutual Life Insurance Co., has had little effect.
100 billion yen deficit
Failed Daiichi Mutual Fire & Marine Insurance Co. has a capital deficit of about 100 billion yen, more than double the amount determined by the Financial Supervisory Agency when the insurer collapsed in May, industry sources said Wednesday.
Premium payments and the nonlife insurance industry’s policyholder protection fund will have to be used to help cover the amount, the sources said.
When the agency ordered the Tokyo-based insurer to halt operations May 1, it estimated that the company’s net worth had plummeted to minus 42.2 billion yen.
But a subsequent re-examination has shown that the deficit was more than the earlier estimate because of falling land and asset prices, the sources said.
The Non-Life Insurance Policyholders Protection Corp. of Japan can cover up to 65 billion yen. The fund’s coverage will be determined after it is decided how much of the financial burden policyholders should shoulder.
If the fund’s coverage is insufficient, the government or other nonlife insurers may be forced to consider offering some financial backing.