SUMITOMO LIFE Insurance, Japan's fourth-largest life insurer, intends to raise about 100 billion yen (€784 billion) in capital as early as next month in an attempt to strengthen its financial base, a spokesman said.

The Osaka-based life insurer is considering borrowing perpetual subordinated loans from domestic banks, including Sumitomo Mitsui Financial Group, Sumitomo Life spokesman Yoshiki Miyazaki said yesterday.

Japanese life insurers are bolstering their balance sheets as the worst financial crisis since the Great Depression erodes the value of their investments and earnings. Insurers are taking action because the government may move to tighten capital rules.

"Choosing perpetual subordinated loans to raise funds is aimed at improving capital quality in advance as we anticipate that capital requirements may become stricter," Mr Miyazaki said.

Mitsui Life Insurance said this month it will raise 60 billion yen to boost capital, while Asahi Mutual Life Insurance last month said it aims to raise about 35 billion yen by year's end.

"There's a possibility that life insurers' assets have deteriorated considerably amid the financial crisis," said Susumu Kato, chief economist at Calyon Securities in Tokyo.

Japanese life insurers, of which many are mutual corporations, "have little choice but to boost capital in order to pay policyholders in a stable manner".

Unrealised profits on the securities Sumitomo Life holds fell to 120 billion yen at the end of September from 711 billion yen a year earlier, according to the company's statement.

The Nikkei 225 Stock Average has slumped more than 40 per cent this year.

"There's no problem in the company's financial health" because Sumitomo Life's solvency margin stood at 996 per cent at the end of September, Mr Miyazaki said.

Solvency margin ratio is a gauge of life insurers' ability to pay policyholders. Sumitomo Life's ratio was the fifth highest among Japan's nine biggest insurers at the end of September.

The industry requires the ratio to be more than 200 per cent, the allowable threshold for a healthy life insurer.

TD Holdings, Japan's biggest publicly-traded life insurer, cut its full-year net income forecast by 95 per cent last month to 2 billion yen, citing losses on stock investments.

Asahi Life posted 112 billion yen of unrealised losses at the end of September, the company's earnings statement showed. - (Bloomberg)