Major Japanese Life Insurer Fails
In Japan’s biggest corporate bankruptcy, Chiyoda Mutual Life Insurance Co. said Monday it had filed for court protection from creditors under new fast-track laws for financial firms.
The failure of the nation’s 12th- largest life insurer, which came as corporate bankruptcies have been soaring in the past months, could cloud Japan’s economic climate by hurting private spending, a core engine for growth.
“The Japanese economy has been putting its worst behind it, but a recovery in private-sector demand is not yet a sure thing,” said DKB Research Institute chief economist Akio Makabe. “Chiyoda’s failure will hurt people’s confidence and pour cold water on the much-needed recovery in private-sector demand.”
The Chiyoda move could also hurt sentiment in Japan’s share market when it opens today after a holiday Monday. The filing had little sustained impact on the yen in Asian trading Monday.
Chiyoda’s failure should heat up a survival battle in the hard-hit insurance industry, which is already reeling from a triple blow of falling premium income, low investment returns and weak share prices.
Those still in weak financial health will have to seek mergers or rescue takeovers amid the increasing competition that has developed since 1998, when deregulation opened the way for international insurers to enter the domestic market.
Chiyoda is the fifth life insurer to fail in Japan’s postwar history. The company has a total debt of $26.95 billion.
Chiyoda Mutual President Reiji Yoneyama, who announced the bankruptcy filing at a news conference, said he has submitted his resignation.
The 96-year-old Chiyoda Mutual expressed hope it would find foreign supporters after the court filing, saying it had recently held talks with American International Group to seek its financial help under the court-led rehabilitation process.
Japan’s government had urged banks Friday to press on with efforts to save the mid-size Chiyoda after Tokai Bank toughened conditions for a bailout.
Tokai, which has spearheaded rescue efforts for Chiyoda Life, told the ailing insurer it must tie up with a foreign firm to get any financial help. The bank had hardened its stance while it concentrated on a planned union next April with Sanwa Bank and Toyo Trust & Banking.
In a statement released Monday, Tokai Bank President Hideo Ogasawara said, “We will cooperate to help implement a rehabilitation program the insurer will draw up in the coming days within the scope of our capacity.”
