Yamato Life Files for Bankruptcy, Citing Investments (Update1)

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Yamato Life Files for Bankruptcy, Citing Investments (Update1)

By Komaki Ito and Tomoko Yamazaki

Oct. 10 (Bloomberg) -- Yamato Life Insurance Co., a Japanese insurer, filed for court protection from creditors in the nation's first bankruptcy in the industry in seven years, with debt exceeding assets by 11.5 billion yen ($116 million).

A decline in the value of securities holdings widened losses at the Tokyo-based company, whose debts total 269.5 billion yen, Yamato Life said at a press briefing in Tokyo.

The global credit crisis sparked by the U.S. subprime collapse has wiped out more than $670 billion in market value from the Tokyo Stock Exchange's first section this week as investors flee equities. The collapse of closely held Yamato is the eighth by a Japanese life insurer since World War II, according to Teikoku Databank Ltd.

``The fact that insurers are starting to struggle with their investments is a harbinger that even pension funds may start to suffer given the market environment,'' said Tetsuo Inoue, chief strategist at Proud Asset Management Japan Co. in Tokyo. ``It's a tough situation.''

The last collapse by a Japanese life insurer was in 2001, when Tokyo Mutual Life Insurance Co. filed for protection from creditors with debts of 980 billion yen. Kyoei Life Insurance Co. filed for protection in 2000 in Japan's biggest postwar corporate collapse, with debts of 4.5 trillion yen.

Yamato Life's solvency margin, which gauges its ability to pay policyholders, stood at 26.9 percent, according to company President Takeo Nakazono.

The firm had shifted its assets to alternative investments, which accounted for about 30 percent of the total portfolio as of the end of September, to boost returns. The move ended up hurting the company as the global market collapsed, Nakazono said.

Japan's corporate bankruptcies jumped 34 percent last month, the fastest pace in eight years, as exports slumped and the credit-market turmoil engulfed the world's second-largest economy. Bankruptcies rose to 1,408 cases in September from a year earlier, according to Tokyo Shoko Research Ltd.

To contact the reporter on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net; Komaki Ito in Tokyo at kito@bloomberg.net

Last Updated: October 9, 2008 21:55 EDT