TOKYO: The bulk of Japan's top life insurers reported yesterday falls in a key gauge of their ability to pay policy obligations, highlighting the precarious state of their financial health as stock prices plunged in the past year.
Still, all of the top 10 insurers, which unveiled business results for fiscal 2002/03, said they had no intention of cutting yields promised to policyholders although a government-endorsed bill to allow such action had been submitted to parliament.
The majority of insurers reported their solvency margin ratios in the year ended in March weakened as their huge holdings of domestic stocks dropped in value. The Nikkei share average fell 28% in fiscal 2002/03.
Asahi Mutual Life Insurance, widely seen as among the most fragile of the major insurers, said its solvency margin ratio fell to a precariously low 360.4 from 417.6 a year earlier. A fall below the 200 threshold would prompt the authorities to issue a formal warning to improve operations.
Rock-bottom interest rates have also hit most Japanese insurers and coupled with falling share prices have left them plagued by what are known as “negative spreads”, or the gap between what they earn on their investments and what they have guaranteed to policyholders.
The average guaranteed return on major insurers' policies is around 3% to 4%, while Japan's 30-year yield stands at 1%, with the benchmark 10-year yield near a lifetime low of 0.52%. – Reuters
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