NAGOYA – Tokai Bank is contemplating injecting 100 billion yen into the flagging capital account of Chiyoda Mutual Life Insurance Co., bank officials said Saturday.
The capital injection is intended to bolster Chiyoda Mutual Life’s solvency margin ratio, which is far below that of Japan’s seven other leading life insurance companies, the officials said.
“We have no alternative but to play a leading role” in reviving the insurer’s financial health, a Tokai executive said. The solvency margin ratio is a key gauge of an insurance company’s ability to pay out insurance claims.
Chiyoda’s ratio had fallen to 263.1 percent by the March 31 end of fiscal 1999, a sharp drop from the previous fiscal year’s 396.1 percent.
A reading above 200 percent is considered an indication of an insurer’s financial health, but the seven other major insurers have ratios ranging from 600 percent to 1,000 percent.
As Tokai Bank is to integrate its operations with Sanwa Bank’s next March, the two will hold talks to determine how much Tokai should inject into Chiyoda Mutual Life and when to do so, the officials said.
Chiyoda Mutual Life is contemplating making its capital structure into that of a stock company in view of the recapitalization move by Tokai Bank, sources at the insurance firm said.
If this happens, the injected capital would be converted into shares in Chiyoda Mutual Life, they said.
Chiyoda took a hammering from the burst of the bubble economy a decade ago, with much of its outstanding loans to other companies turning sour.
Because of its management difficulties and the slumping economy, the amount of new insurance and pension plan contracts concluded by the company in fiscal 1999 fell 10.3 percent from the previous year, industry analysts said.
Net premium revenues — which correspond to sales at commercial companies — shrank 14.4 percent to 513.0 billion yen in fiscal 1999.