NU Online News Service, May 7, 2003, 11:33 a.m. EDT – Asahi Mutual Life Insurance Company, Tokyo, says it will defer about $2 billion in interest payments this year and stop making dividend payments on either individual or group life insurance policies.
Asahi, one of Japan’s largest life insurers, suspended dividend payments to individual policyholders in 2002 but managed to keep up dividend payments to group policyholders, according to a bulletin on Asahi from the Tokyo office of Standard & Poor’s Ratings Services.
S&P notes that Asahi’s deferral of interest payments involves “kikin” debt. Banks and corporations that are closely related to a Japanese life insurer use kikin funding to help capitalize the life insurer, Japanese law limits the amount of kikin interest an insurer can pay to “an amount equal to net assets on its balance sheet minus the aggregate amount of kikin, reserves for loss payments, reserves for amortization of the kikin, and unrealized gains on other securities,” S&P says.
Kikin agreements usually let life insurers defer interest payments when they are unable to meet the Japanese legal requirements for making the payments, S&P says.