Nippon Life Insurance Co. plans to bolster its foundation fund, the equivalent of a stock company’s capital, by 150 billion yen by August via a securitization plan it hopes will attract individual investors, informed sources said Wednesday.
Nippon Life, a mutual firm, hopes to attract an array of investors by pricing the securities so they are affordable to individuals.
The move would make Nippon Life the first major Japanese life insurer to raise funds, at least in part, from individual investors.
It also hopes its pricing strategy will allow it to procure funds more flexibly.
In closing its books for the 2001 business year, Nippon Life also plans to set aside another 200 billion yen to hedge against fluctuations in asset value and against a mandated future writeoff of the foundation fund. These measures will help boost the life insurer’s net worth by around 350 billion yen, the sources said.
The funding is part of Nippon Life’s capital-boosting program, through which it plans to increase reserves and the foundation fund from the current 2 trillion yen to 3 trillion yen over a five-year period that began in March.
Domestic life insurers are experiencing difficulty due to the long-standing problem of “negative spreads” between the rates of return guaranteed to policyholders and much lower rates of return on investments, such as shares on the Tokyo Stock Exchange.
Nippon Life said it hopes to galvanize its base despite this adverse business environment, and that the increase in its reserves and foundation fund will help in this endeavor.
At the end of September, Nippon Life’s solvency margin ratio, considered the benchmark of an insurer’s credibility, stood at 636 percent, the best among Japan’s top seven life insurers.
If Wednesday’s plan is realized, Nippon Life’s fund will grow to 750 billion yen and its solvency margin ratio will rise by some 20 percentage points.
Other than Nippon Life, Dai-Ichi Mutual Life Insurance Co. plans to bolster its foundation fund by 80 billion yen and its reserves by several tens of billions of yen by August.
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