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Last Updated: Oct 11, 2008 - 8:39:37 AM |
Yamato, which went belly up with debts of ¥269.5 billion, asked the
Tokyo District Court to invoke the 2000 fast-track law for the
rehabilitation of troubled financial institutions, company officials
said.
Yamato's financial profile was hurt by losses from investing in
subprime mortgage-backed bonds and other securities like stocks, whose
prices have plunged amid the global financial crisis, the officials
said.
The rehabilitation law empowers a court to order the assets of troubled
financial institutions such as banks and insurers to be preserved. The
court is also authorized to halt policy cancellations and order
insurers to stop selling new policies provisionally.
Under it, insurance money and pension benefits payable to Yamato's
policyholders may be cut by percentages to be prescribed later, with
benefits for financial products with high savings components likely to
suffer the deepest cuts, analysts say.
Yamato's negative net worth — by which its debts eclipse assets — is
likely to amount to ¥11.5 billion as of Sept. 30, the officials said.
"We are really sorry for this and offer an apology from the heart,"
Yamato President Takeo Nakazono said at a press conference.
"The value of our securities holdings has undergone
sharper-than-expected falls as a result of the turmoil in global
financial markets," he said.
Under the rehabilitation law, the court would authorize the insurer to
start rehabilitation proceedings if it judges the insurer can be
revived as a corporate entity.
The court would then appoint an administrator to oversee the
rehabilitation proceedings. The administrator would be tasked with
devising a reconstruction program.
Kaoru Yosano, minister in charge of economic and fiscal policies,
rejected suggestions that Yamato's collapse may exert a negative
influence on Japan's financial system.
"The corporate scale of Yamato Life Insurance is small and it came to a
dead end as a result of its extraordinary business model," Yosano said.
Finance Minister Shoichi Nakagawa, now on a visit to Washington, told
reporters the Yamato failure "has stemmed chiefly from its
extraordinary profit and revenue structure, so the insurer's situation
differs from those of other insurance companies."
"The insurer has long engaged in risky business, and it was anticipated
that the insurer would develop a negative net worth," Nakagawa said.
Industry sources said that under its extraordinary business model, the
insurer has tried to offset the high cost of its mainline insurance
business with profit on investment in high-yielding securities like
collateralized debt obligations backed by subprime mortgages.
Yamato becomes the eighth life insurer to fail in Japan since the end
of World War II, and the first since the collapse in 2001 of Tokyo Life
Insurance Co., a predecessor of T&D Financial Life Insurance Co.
Source:Ocnus.net 2008
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