Failed Tokyo Mutual Life Insurance Co. said Saturday that it has received approval from the Tokyo District Court to begin rehabilitation procedures.

On March 23, the midsize life insurer, which has total liabilities of 980.2 billion yen, filed for court protection from creditors under fast-track legislation designed to deal with troubled financial institutions.

The life insurer’s action followed Daiwa Bank’s decision the previous day to abandon a program to rescue the insurer after a planned alliance between the company and a foreign financial institution failed.

Speaking at a news conference Saturday, Masaharu Ohashi, the court-appointed administrator for the insurer, said that prospective purchasers of Tokyo Mutual have been whittled down from the initial seven financial institutions to three candidates — American International Group Inc., GE Edison Life and the financial group formed through a tieup between Taiyo Mutual Life Insurance Co. and Daido Mutual Life Insurance Co.

Ohashi said the final decision on the matter would probably be made around early June, and that the extent to which payouts to policyholders would be reduced would be “a major criteria” in deciding which entity would receive Tokyo Mutual.

He added that a rehabilitation plan would be submitted to the court by Aug. 10.

Tokyo Mutual became the third financial institution to apply for the legal protection scheme, following Chiyoda Mutual Life Insurance Co. and Kyoei Life Insurance Co., both of which failed last October.

Insurers are facing an ever-worsening business environment, as recent plunges in share prices further aggravate a situation in which premium income is falling and investment returns are dismally low.

The failure of Tokyo Mutual — founded in 1895 — was expected to affect an estimated 700,000 policyholders, whose payouts on long-term insurance policies were expected to be reduced.

Tokyo Mutual saw dozens of policyholders canceling contracts after the failures of Chiyoda Mutual and Kyoei Life, which prompted the public to pay closer attention to life insurance companies.

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