Japan's Yamato Life Files for Bankruptcy Protection

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TOKYO -- Yamato Life Insurance Co. Friday became the first Japanese financial-services company to succumb to the financial market turmoil spilling over from the subprime lending crisis, filing for bankruptcy protection with liabilities of nearly $2.7 billion.

Government and other public officials were quick to say that the failure of the midsize unlisted insurer, ranked 33rd in Japan in terms of assets, was a one-off, and that no other insurer is in a similar position. They added that the country's financial system remains stable, with Japan's banks having so far avoided subprime problems of the scale faced by some U.S. and European peers.

But the demise of Yamato, Japan's fifth-biggest corporate failure this year, came as smaller financial institutions across Japan are hurt by the global financial turmoil. On Friday, Sumitomo Trust & Banking Co., a midsize trust lender, cut its profit forecasts. Heightened fears for the global economy and its credit system led to a 9.6% fall in the Nikkei 225 Stock Average.

Yamato said Friday that prices of securities held for investment purposes fell sharply in the face of the global financial turmoil, causing an expected net loss of 11.04 billion yen ($111.7 million) for the fiscal first half ended September.

"We assessed a risk [for our business] and sold off our assets but that couldn't offset a drop in our asset value," Takeo Nakazono, Yamato Life's president, said at a news conference.

The company said liabilities will exceed its assets by 11.49 billion yen for the six-month period, totaling 269.5 billion yen at the end of September. As of March 2008, Yamato had assets valued at 283.1 billion yen.

At a separate news conference, Economy Minister Kaoru Yosano said Japanese financial system remains healthy. "The collapse of Yamato Life (Insurance) is a special case and due to its own weaknesses ... Japan's financial system is stable," Mr. Yosano said.

Japan's regulator, the Financial Services Agency, said Yamato had failed for its own lax management of investment risks, in which the insurer tried to finance insurance business through gains from high-risk, high-return securities. The FSA said that 90% of policyholders' premiums kept and managed to date by Yamato for future repayments will be protected, with the nation's insurance industry set to provide funds if necessary.

Write to Kazuhiro Shimamura at kazuhiro.shimamura@dowjones.com and Yuzo Yamaguchi at yuzo.yamaguchi@dowjones.com