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Chiyoda Mutual Life Insurance Co. filed for court protection from creditors Monday with liabilities of 2.94 trillion yen — the biggest failure in Japan’s insurance industry since the war.

American International Group Inc., a U.S. insurance and financial services giant, said it is ready to support the firm’s rehabilitation.

Chiyoda Mutual Life Insurance Co. President Reiji Yoneyama shows the strain at a news conference.

Chiyoda, the nation’s 12th-largest life insurer in terms of assets, became the fifth insurer to collapse in the past four years.

Its liabilities exceeded assets by an estimated 34.3 billion yen as of the end of September. It has 11,188 employees and some 1.3 million policy holders.

The Tokyo District Court immediately accepted Chiyoda’s request, ordering its assets protected from creditors. The insurer will now have to draw up and present a rehabilitation program to the court in accordance with the law.

Chiyoda’s policyholders will be largely protected by current reserves at Chiyoda as well as a 960 billion yen safety-net scheme, which includes a government commitment to provide 400 billion yen to a safety net set up by the insurance industry.

But payouts for certain insurance plans — such as endowment insurance — could be lower than promised, and customers will not be able to cancel or renew contracts while the firm remains under court protection.

The collapse of the 96-year-old midsize insurance company follows years of financial difficulty brought on by disastrous real estate and stock market investments during the asset-inflated bubble era of the late 1980s.

It has also been hit hard by the country’s ultralow interest rates. It is saddled with 487.5 billion yen in bad loans and other worthless assets that have little chance of being recovered. Moreover, it has experienced an exodus of policyholders.

Further marketing of high-return insurance products only added to the insurer’s woes.

Chiyoda was the first company to apply for protection under a law enacted in June that allows collapsed financial institutions to receive fast-track assistance for rehabilitation.

“We are causing an extraordinary amount of trouble to our policyholders,” said Reiji Yoneyama, president of Chiyoda Mutual. “But by choosing this time (to file for court protection) we will be able to keep the inconvenience to a minimum.”

Yoneyama and the 10 other board members submitted their resignations Monday to a court-appointed administrator, and Yoneyama said AIG had offered financial help to Chiyoda under the court-led rehabilitation process. Lawyer Hideyuki Sakai, appointed by the court as a Chiyoda trustee, said he will proceed with talks with AIG on the bailout issue as soon as possible.

“Speed is of the utmost importance,” said Sakai. “Our operations base will deteriorate if we spend too much time on procedure. We are seeking a decision to begin rehabilitation procedure within one month — in one or two weeks, if possible.”

Yoneyama said he did not begin to look into the possibility of filing for protection until mid-September. “We were absolutely sure of being rescued by the banking sector,” he said.

AIG confirmed its offer in a press statement.

As the domestic insurance sector reels from falling premium income, low investment returns and plunging share prices, plus increased competition following deregulation in 1998, foreign insurers have aggressively sought to enter the market.

Other recent inroads include the purchase of the healthy operations of Toho Mutual Life Insurance Co. by U.S. financial services company GE Capital, a wholly owned subsidiary of General Electric Co.; the French insurance group AXA’s acquisition of Nihon Dantai Life Insurance Co.; and the purchase by French holding company Artemis of Nissan Mutual Life Insurance Co., now called Aoba Life Insurance.

Chiyoda’s collapse came less than a week after Tokai Bank President Hideo Ogasawara announced at a news conference that his bank, which has close ties with Chiyoda, will bail out the insurer only if another financial institution takes part in its capital replenishment.

Chiyoda asked Tokai Bank in June for a capital infusion after its solvency margin ratio — a key gauge of its ability to meet claims — fell to 263.1 percent, considered dangerously near the 200 percent warning level. That’s sharply down from 396.1 percent just a year earlier.

Tokai initially appeared to be ready to provide assistance, but the bank, which is to integrate with Sanwa Bank and Toyo Trust & Banking Co. under a holding company, is believed to be detaching itself from potentially risky financial obligations with low profit margins.

Chiyoda had been in talks with several foreign firms, including Germany’s Allianz group, but none of the discussions promised assistance soon enough, Yoneyama said.

Tokai Bank, in a press statement issued after Chiyoda’s announcement, said, “We will cooperate to help implement a rehabilitation program the insurer will draw up in the coming days within the scope of our capacity.”

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