In a move to expand its Japanese business, insurance giant AMERICAN INTERNATIONAL GROUP, INC. is studying the possibility of taking over AOBA LIFE INSURANCE CO. Forty-three members of the Life Insurance Association of Japan formed that company in June 1997 to service policies sold by NISSAN MUTUAL LIFE INSURANCE CO. before it failed in April of last year. Aoba Life had assets of $16.2 billion and 455 employees when it began operations in October. It only collects premiums and pays claims; no policies are sold. The life insurance trade association has given AIG permission to examine Aoba Life's books. At the same time, it hired MORGAN STANLEY DEAN WITTER & CO. to help calculate an appropriate sales price for Aoba Life. New York City-based AIG has a long-standing presence in Japan through AIU INSURANCE CO., AMERICAN HOME ASSURANCE CO. and AMERICAN LIFE INSURANCE CO., but it has failed to make much headway in the mainstream markets of life insurance and nonlife insurance.
UNUM CORP. has enlisted two heavyweights to sell its long-term disability policies and related products. Through an affiliate, CHIYODA MUTUAL LIFE INSURANCE CO. is offering the Portland, Maine company's long-term disability policies to corporate buyers of its life insurance policies. Meanwhile, Unum coverage that guarantees five years of mortgage payments if the policyholder becomes unable to make the payments for any reason is available through the nationwide branches of DAI-ICHI KANGYO BANK, LTD. Since 1994, wholly owned UNUM JAPAN ACCIDENT INSURANCE CO. has sold long-term disability policies through its own agents and smaller Japanese property and casualty insurers, but it, too, has found the going tough, even though local nonlife companies do not have a comparable product.
American firms are starting to take advantage of the end last December of Japan's ban on reinsurance arrangements. For instance, REINSURANCE GROUP OF AMERICA INC. has a deal with DAIHYAKU MUTUAL LIFE INSURANCE CO. Under it, the St. Louis company will guarantee the payment of the equivalent of $38.6 billion worth of whole life and term life insurance policies sold by the midsize insurer between 1989 or 1990 and 1997 in return for part of the future premiums on these contracts. Daihyaku Mutual Life benefits by reducing its potential liabilities and also because RCA will make an up-front payment to it of $75.8 million.
As many as 10 of the investment management firms under UNITED ASSET MANAGEMENT CORP.'s umbrella will help TOKIO MARINE & FIRE INSURANCE CO., LTD. develop an array of investment trusts (mutual funds) for sale to Japanese investors beginning in the fall. The funds will consist mainly of non-Japanese assets and will include global equity, global tactical allocation and U.S. equity portfolios. Japan's top nonlife insurer also will offer equity and fixed-income investment trust portfolios managed in- house. Both groups of products will be marketed through a variety of distribution channels, including Tokio Marine's own agents, direct sales and brokerage houses. Boston-based UAM's operating firms managed more than $213 billion worth of assets for clients, primarily institutions, as of March 31, 1998.
Investors interested in buying these or other mutual funds have a new source of investment information available. MORNINGSTAR, INC., the provider of data on mutual funds, U.S. and international equities, closed- end funds and variable annuities, formed a company with SOFTBANK CORP. (see Japan-U.S. Business Report No. 341, February 1998, p. 26). The joint venture, in which the Chicago-based firm has a 60 percent interest, initially is redistributing existing Morningstar print and software investment information products. However, it plans to produce a line of Japan-tailored products for the professional financial community as well as individual investors.
The Tokyo office of STANDARD & POOR'S CORP. is offering a credit-rating evaluation service. Banks, brokers, insurers, manufacturers and other companies can consult S&P staff on the strategic moves they are planning, such as mergers, debt restructuring and share repurchases, and receive a confidential assessment of the implications of the proposed action for the firm's credit rating.
Although the details still need to be finalized, FUJI BANK, LTD. will provide securities custodial services in Japan for CHASE MANHATTAN CORP., while the New York City bank will do the same overseas for the Japanese bank. The prospective partners apparently decided that they could cut costs by tying up. Fuji Bank recently became the top custodial agent in Japan (see Japan-U.S. Business Report No. 341, February 1998, p. 15).
With the help of U.S. companies, financial deals in Japan are becoming increasingly sophisticated. As a case in point, CREDIT SUISSE FIRST BOSTON CORP. securitized the future revenue stream from tenants renting office space in YAMATO MUTUAL LIFE INSURANCE CO.'s headquarters building in a prime location in central Tokyo. The investment bank then sold all the rights to receive part of the rental income to GOLDMAN, SACHS & CO. for a reported $454.6 million. It is expected to earn an annual return of 5 percent since the Yamato Mutual Life building is fully leased, with companies renting 80 percent of the floor space and the life insurer occupying the rest. The proceeds from the deal enabled Yamato Mutual Life to write off all of its bad loans.
An exchange rate of ¥132=$1.00 was used in this report.