Hit by slumping share prices and mounting policy cancellations, the nation’s top 11 life insurers are continuing to lose strength, earnings reports released Tuesday showed.

The combined value of policies in force at the nation’s largest life insurers slipped 3.6 percent to 1.169 quadrillion yen from the end of last fiscal year, marking the fifth consecutive year-on-year decline.

The largest ones also saw their solvency margin ratios — a key gauge of an insurer’s financial strength — fall in the nine months since Sept. 30, as weak share prices and ultralow interest rates eroded business conditions.

The solvency margin measures a company’s ability to pay out policy obligations in the event of a disaster or unforeseen loss.

The margins at all the insurers are comfortably above 200 percent, the threshold at which the Financial Services Agency issues a warning to improve financial soundness.

However, the solvency margins dwindled, damaging the insurers’ creditworthiness and making it difficult for them to stem the tide of policy cancellations.

Voluntary cancellations and mandatory cancellations due to negligence in premium payments combined reached about 111.2 trillion yen in fiscal 2001, up 6.8 percent compared with the previous year.

Amid the economic downturn, households are also opting for reduced coverage as a way to save on premium payments, and insurers are trying to brake the trend by mobilizing more salespeople specialized in preventing policy cancellations, officials of the insurance companies said.

Combined paper profits on securities holdings shrank close to 40 percent compared with the previous year.

Combined unrealized profits fell 3 trillion yen, and three firms — Asahi Mutual Life Insurance Co., Mitsui Mutual Life Insurance Co. and Sumitomo Life Insurance Co. — posted paper losses.

Industry leader Nippon Life Insurance Co. lost 1.3 trillion yen in paper gains, but still managed to keep 2.8 trillion yen in paper profits, maintaining a comfortable lead over its rivals.

But as life insurers find it increasingly difficult to find new business, which grew a mere 2 percent in the year to March 31, even the largest are doing their best to shore up their faltering capital.

The insurers’ admitted that negative spreads — the gap between returns on insurers’ investments and rates of return promised to policyholders — remain high, and are unlikely to narrow much in the current year.

Even the Bank of Japan is saying that ultralow interest rates are likely to linger.

Insurers have been trying to reinforce their capital bases by asking investors and banks with close ties to provide them with foundation funds, a type of subordinated debt.

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