U.S. financial services giant Citigroup Inc. said Thursday it has reached a basic agreement on a life insurance tieup with Mitsui Marine & Fire Insurance Co. and Sumitomo Marine & Fire Insurance Co.

Citigroup hopes to gain inroads into the Japanese insurance market in addition to its banking and securities operations here.

The move is bound to trigger another round of consolidation as insurers jockey for position ahead of next month's introduction of defined-contribution pension plans, modeled on U.S. 401(k) plans.

The new company will market funds featuring defined-contribution pension plans at major securities companies and other agents in April, pending approval by financial regulators.

"Individuals are searching for better places to invest their savings," said Itsuko Ogawa, spokeswoman at Mitsui Marine.

Ogawa said that while 401(k) plans may have a slow start at first, "we are convinced that the market has extremely large potential."

Mitsui Marine and Sumitomo Marine will merge next month to form Sumitomo Mitsui Marine & Fire Insurance Co., which will hold a majority stake in the new company. Citigroup's international insurance division, CitiInsurance International Holdings Inc., will hold a 49 percent stake.

The company will be capitalized at about 10 billion yen, and will be funded in part by other companies within the Sumitomo Mitsui banking group.

Under the 401(k) format, employees make a fixed contribution each month, selecting how the funds are invested out of several options chosen by their employer. The benefits vary according to their investment performance.

Asahi skips dividends

Asahi Bank said Thursday it will skip interim dividend payments for the fiscal first half to Sept. 30 due to the continued weakness of Tokyo stock prices.

The book closing will be the first in which Japanese banks adopt international mark-to-market accounting rules.

But Asahi said it will pay annual dividends for the full year through March 31. In the case of common stock, the Tokyo-based major commercial bank will pay 3 yen per share for the year, abandoning its earlier announced plan to pay an interim dividend of 1.5 yen and an equal amount at the close of the business year.

Under mark-to-market accounting rules, banks are required to deduct 60 percent of unrealized losses on their shareholdings from their core capital, thereby cutting into capital resources, from which dividends are drawn.

If the key 225-issue Nikkei average ends September lower than 10,000 (it closed Thursday trading at 9,785.16), most banks will face losses in their stockholdings, making it almost certain they will see their core capital eroded for their interim book closing.

Rating outlooks down

Standard & Poor's Corp. said Thursday it has revised the outlooks on the long-term ratings on seven major Japanese banks to negative from stable and on two others to stable from positive.

The banks with negative outlooks are: the Bank of Tokyo-Mitsubishi, Dai-Ichi Kangyo Bank, the Industrial Bank of Japan, Fuji Bank, Sumitomo Mitsui Banking Corp., Sanwa Bank and Tokai Bank, the U.S. credit-rating agency said.

It said Mitsubishi Trust & Banking Corp. and Toyo Trust & Banking Co. had their outlooks revised to stable.

"The revised outlooks reflect the worsening operating conditions surrounding the major banks, such as the deteriorating domestic economy and falling stock prices, which are constraining the banks' abilities to deal with continuing asset quality problems," S&P said.

"Since 1999, the outlooks on the ratings on most Japanese banks have been stable reflecting the previously sounder economic outlook," the rating agency said, but "the financial sector has failed to overcome ongoing structural issues, such as weak earnings, low quality of capital, and high exposure to stock price volatility."