Dai-ichi Mutual Life Insurance Co. plans to raise around 50 billion yen in capital funds by the end of September by conducting the first-ever public offering of subordinated bonds in the industry, sources said late Thursday.
Dai-ichi Mutual is working out the details of the plan, which is aimed at boosting its capital base, the sources said.
The life insurance industry has been criticized for its practice of cross-shareholding with banks and other major companies, and Dai-ichi’s plan to offer subordinated bonds to the public is apparently an attempt to diversify its fundraising sources and enhance its public image.
The subordinated bond issues would raise Dai-ichi’s solvency margin ratio — a key gauge of an insurer’s ability to pay out policy obligations — by more than 10 percentage points.
As of March 31, Dai-ichi’s solvency margin ratio was 543.5 percent, down from 593.0 percent a year earlier but well above the 200 percent threshold, below which the government requires insurers to take prompt corrective measures.
Because subordinated bonds have a lower priority than ordinary corporate debentures in terms of interest payment and capital redemption, they have almost the same standing as the issuer’s equity capital.
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