4 of the largest Japanese insurance companies are going to draw on their reserve funds to cover unrealized security losses in their portfolio's from the financial year that ended in March.
So they are continuing to make progress cleaning up the balance sheet and We are seeing some "Mark to Market" occurring.
Sumitomo Life Insurance Co., Yasuda Mutual Life Insurance Co., Asahi Mutual
Life Insurance Co. and Mitsui Mutual Life Insurance Co. are expected to
draw on a combined Y300-400 billion in reserve funds to cover unrealized
securities losses for the year ended this March, sources familiar with the
matter said, the Nihon Keizai Shimbun reports in its Sunday edition.
Though life insurers are required by law to set aside two kinds of
reserves, one in case of major losses caused by a sharp decline in asset
values and the other for contingencies necessitating the payment of huge
sums of insurance money, most insurers have seldom resorted to drawing on
such money in the past. The Nikkei Stock Average index, however, dived
15% on the year during fiscal 2001, causing investment returns earned by
life insurers to fall far below yields guaranteed to policyholders.
Sumitomo, Yasuda and Mitsui expect to post pretax and net profits for
fiscal 2001 by using mostly reserves set aside for losses caused by a
decline in asset values. Asahi, which will rely on both types of reserves,
will likely post a pretax loss and net profit. The use of such funds,
however, is expected to negatively affect the life insurers' solvency
margins, which are a gauge of their ability to pay out insurance claims.
In March, Sumitomo, Asahi and Mitsui raised funds to boost their capital. |
