Japan''s life insurers diverge on bank exposure, maintains S&P

Our Banking Bureau
07 May 2003

Tokyo: Standard & Poor's (S&P) ratings services has said that Japanese life insurance companies' policies governing their exposure to the major banks are gradually diverging.

Although overall exposure risks remain high, some companies have become more aware of the risks, while some others remain stuck in traditional relationships. In one of its earlier reports S&P had warned about Japan's largest life insurers have huge exposure to the major banks.

The rating agency recently requested updated exposure figures from rated insurers, which confirmed greater awareness of risks in this exposure among some insurers. Holdings of bank common stock dropped sharply by 53 per cent-86 per cent at most of the 10 major life insurance companies during fiscal 2002 (ended March 2003).

While the reduction was largely due to the plunge in the banks' share prices, part of the reduction can be attributed to outright sales, as a few insurers have unwound part of their ownership interests in some of the major banks.

The private offering of JPY1 trillion in preferred stock by Mizuho Holdings in March 2003 gathered significant market attention. Dai-ichi Life Insurance, Yasuda Mutual Life Insurance, Fukoku Mutual Life Insurance, and Meiji Life Insurance underwrote a total of JPY106 billion of the offering.

However, the amount underwritten by insurers turned out to be relatively small compared to the major life insurers' existing exposure to major banks' common stock, which stood at JPY1.9 trillion at March 31,2002 according to S&P's previous survey.