The business performance of the nation's eight second-tier life insurance firms in fiscal 1997 indicates that the gap between the stronger and weaker companies is widening, earnings reports released Tuesday showed.

Factors such as the prolonged economic downturn and doubts over the soundness of domestic life insurers after last year's collapse of Nissan Mutual Life Insurance Co. affected their business. These same concerns also helped boost sales at foreign life insurance firms during the fiscal year.

Following the shrinking trend among the nation's top eight life insurers, the total outstanding contract value for individual insurance policies at the eight smaller firms came to 188.8 trillion yen, a 4.4 percent decline from the previous fiscal year.

The firms' newly disclosed solvency margin ratios, which serve as benchmarks for an insurer's ability to absorb risk, ranged from 1,016.8 for Daido Life Insurance Co. to 154.3 for Toho Mutual Life Insurance Co. Regulators have said that 200 percent would be enough of a ratio to call an insurance company trouble-free, and Toho was the only one of the 16 largest domestic life insurers that failed to meet the mark.

Financially ailing Toho decided earlier this year to transfer all new business operations and its sales network to joint venture GE Capital Edison, established in April with U.S. nonbank financial company GE Capital Services Inc. Toho is to continue operations as the manager of current insurance contracts and investment assets, and Toho officials stressed that its solvency ratio would improve to levels above 200 percent because it would not take on new policies and continue to write off bad loans.