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Kyoei Life Insurance Co., a troubled midsize insurer with liabilities of about 4.5 trillion yen, filed for protection from creditors with the Tokyo District Court on Friday, making it the largest life insurer to collapse since World War II, company officials said.

The failure, ranked 11th in asset terms on Kyoei’s 4.6 trillion yen, comes only 11 days after Chiyoda Mutual Life Insurance Co. — 12th in asset terms at 3.5 trillion yen — filed for court protection with 2.9 trillion yen in liabilities.

Like Chiyoda, Kyoei has invoked fast-track legislation aimed at rehabilitating troubled financial institutions.

As of Sept. 30, Kyoei had a negative net worth — a situation in which liabilities exceed assets — as the sliding stock market helped increase its latent losses on securities holdings, the sources said.

The firm has suffered from a plunge in new policy sales and reduced ability to borrow amid a series of life-insurer collapses. The final blow came with Chiyoda’s failure, after which many of Kyoei’s customers rushed to cancel their contracts.

Kyoei’s solvency margin — a key index gauging an insurer’s ability to pay claims — plunged to 210 percent as of March 31, just above the 200 percent threshold.

In May, Kyoei arranged a tieup with Prudential Insurance Co. of America, the biggest U.S. life insurer, hoping that the partnership could help solve its immediate financial difficulties.

At the time, Prudential agreed to take a stake in Kyoei by purchasing 30 billion yen in new Kyoei shares. But the anticipated benefits of the deal never materialized, leaving the Japanese insurer no choice but to file for bankruptcy.

Following Kyoei’s announcement, Prudential Insurance said it will continue to seek ways to bail out the Japanese insurer.

Founded in 1935, Kyoei is a stock company, which is rare for a Japanese insurer.

Kyoei’s financial strength came from a customer base that included many Japanese Self-Defense Forces servicemen, as well as teachers and school employees.

Its net premium revenues — which corresponds to sales at nonfinancial firms — came to 626.8 billion yen in the year through March 31, 2000. It had a workforce of more than 13,000 people, including an army of 10,832 salespeople as of March.

Kyoei is the sixth Japanese life insurer to fail under a mountain of bad loans and assets that piled up in the wake of the asset-inflated bubble economy’s collapse in the early 1990s.

“I am sorry for this conclusion, and apologize deeply to our customers, stockholders and the many people who have supported us,” said Kyoei President Shoichi Otsuka during a press conference.

Kyoei had counted on capital injection from U.S. insurance company Prudential Insurance Co.. Having been announced in May, the talks failed at the end of September, on consideration of the amount of latent losses and Kyoei’s projected performance for the first half of fiscal 2000, Otsuka said.

Prudential has offered to sponsor Kyoei’s rehabilitation, he said.

After the failure of Chiyoda Mutual Life, premium from new contracts fell rapidly while canceled contracts increased, Otsuka said. “We had no choice but to apply for court protection under the law,” he said.

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