Chiyoda, Kyoei Liabilities Threaten AIG, Prudential Acquisitions

December 29, 2000

New revelations of the parlous financial condition of two Japanese Life Companies, Chiyoda and Kyoei, both of whom have filed for bankruptcy protection, puts into question the previously announced plans of American International Group to acquire Chiyoda, and Prudential to bail out Kyoei.

New revelations of the parlous financial condition of two Japanese Life Companies, Chiyoda and Kyoei, both of whom have filed for bankruptcy protection, puts into question the previously announced plans of American International Group to acquire Chiyoda, and Prudential to bail out Kyoei.

Japanese media reported this week that Chiyoda’s net liabilities exceeded its assets by a whopping 511 billion yen ($4.5 billion) 15 times more than it had reported, while Kyoei’s net liabilities totaled 185.5 billion yen ($1.65 billion) more than 41 times the figures it had given.

Both AIG and Prudential had expressed confidence in their ability to help the life insurers regain profitability, and were working on recovery plans, which included a large investment of outside capital. Their acquisition would be a major step in establishing a strong U.S. presence in the previously closed Japanese Life market.

Although neither company has yet commented on the revelations, the size of the liabilities could put both plans in doubt. Should the deals fall through it would also be a further serious blow to Japan’s financial regulators, who are trying to find ways to help the country’s life insurers.

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