The Tokyo District Court, Japanese regulatory authorities and major creditors have all given final approval to American International Group’s takeover of failed insurer Chiyoda Mutual Life Insurance Co.
Chiyoda filed for bankruptcy protection last October after running up a mountain of bad debt. AIG agreed in February to takeover its operations and inject up to $513 million in new capital to restructure the company, but some problems remained caused by new estimates that put Chiyoda’s negative net worth at over $6.1 billion.
AIG has apparently satisfied regulators and the bankruptcy court that its restructuring will be accomplished by writing down goodwill and reducing policyholder payments, and that it doesn’t intend to ask for a contribution from the Japan’s Life Insurance Policyholders Protection Corp., a government sponsored fund which was set up to secure payments to insureds put in jeopardy by the failures in the the ailing Japanese life insurance industry.
AIG announced the approvals on Friday and confirmed that “Chiyoda has become a joint-stock company and commenced operations as AIG Star Life insurance Co. Ltd., a wholly owned subsidiary of AIG.” It “will operate a a separate entity from the existing Japanese life insurance operations of AIG’s American Life Insurance Company (ALICO).”
The takeover of Chiyoda, and the resumption of its operations substantially strengthens AIG’s position in the Japanese market.
In an unrelated move a number of Japanese life insurers confirmed that they would begin valuing assets using “mark-to-market” accounting standards beginning for the year 2000 rather than 2001. The value of securities held by the insurers will be calculated on their actual market value as of March 31st 2001, and will be reflected in their account settlement statements due in June.
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