Sumitomo Life Insurance Co. said Friday it will raise 150 billion yen in perpetual subordinated loans from Sumitomo Mitsui Banking Corp. and other concerns by the end of March in a bid to strengthen its financial standing.
The move is expected to raise Sumitomo Life’s solvency margin to around 500 percent from 452 percent as of the end of September.
Life insurers’ financial health is often measured by their solvency margins, which roughly correspond to excess assets over liabilities. Financial authorities will take corrective action if the level falls below 200 percent.
Life insurers have successively raise funds to strengthen their financial positions as they have been hit hard by negative returns on investment stemming from the continuation of weak stocks and razor-thin interest rates.
Repayment priority on subordinated loans is secondary or subordinate in the case of business failure, while perpetual loans set no repayment date.
The latest borrowing will increase Sumitomo Life’s outstanding balance of subordinated loans to 545 billion yen.
Sumitomo Trust & Banking Co. is expected to be among other providers of loans to the insurer in the coming fundraising.
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