NU Online News Service, April 1, 1:33 p.m. – Daido Life Insurance Company, Osaka, made history over the weekend by becoming the first Japanese insurer to demutualize.

A few Japanese life insurers are investor-owned stock companies, but most are mutual insurers, meaning that they are owned by policyholders. Analysts say mutual insurers’ inability to raise capital by issuing stock has contributed to their financial problems.

Daido Life, the ninth largest life insurer Japan, has overcome lack of access to equity capital by distributing most of the company’s pre-conversion value to policyholders, selling some additional stock to the public, and listing its shares on the Tokyo and Osaka stock exchanges starting today.

Daido Life generates the equivalent of about $10 billion in revenue per year, mainly by selling individual term life insurance and products aimed at executives of small and midsize companies. The company says it gets many of its sales through alliances with groups such as the National Federation of Corporate Taxpayers Associations and the Tax Payment Association.

“While the Japanese life insurance industry has contracted over the past several years because of Japan’s weak economy and reduced confidence in life insurance companies caused by the recent failures of a number of life insurers, the company’s business has remained strong,” Daido Life says in a statement on its Web site.

Daido Life estimates it has more than seven times as much capital as it needs to meet Japanese solvency standards.

The company has posted a Japanese-language document describing the demutualization on its Web site, at http://www.daido-life.co.jp/ir/news/pdf/020401.pdf

The Daido Life demutualization will have no immediate effect on the company creditworthiness, analysts from the Tokyo office of Standard & Poor’s write in a bulletin on the demutualization.

Managers could have trouble keeping earnings high enough to please stockholders, the S&P analysts warn.

But, “in the long term, the enhanced financial flexibility provided by immediate access to capital markets and stock currency for mergers and acquisitions could be a positive factor for Daido Life’s ratings,” the analysts write.