Prudential Insurance Co. of America will infuse 50 billion yen into failed Kyoei Life Insurance Co., Kyoei's court-appointed administrators said Wednesday.
Prudential will also extend 98 billion yen in subordinated loans to Kyoei when it begins operating as its wholly owned subsidiary, the U.S. company said.
Kyoei policyholders, however, will have to accept a 1.75 percent rate of return, drastically lower than the promised 4 percent.
Prudential has prepared a set of measures to bring Kyoei's solvency margin above 500 percent, which will eliminate the need to go to the Life Insurance Policyholders Protection Corp., the industry safety net, they said.
"Unless share prices plummet, we are projecting a comfortable 500 percent solvency margin . . . when operations commence," said court-appointed administrator and lawyer Shinjiro Takagi.
Kyoei applied for court protection in October with a capital deficit of 689.5 billion yen.
Prudential, the major U.S. insurance company that has been pegged as Kyoei's sponsor, will purchase its business rights and brand name for 364 billion yen to help reduce the deficit.
The scheme was announced to dispel public fears that taxpayers' money will be needed to rehabilitate Kyoei.
A total of 415 billion yen remains available in the form of emergency protection funds pooled by life insurance companies, and the industry safety net can apply for 400 billion yen in public funds should it exceed its limit.
The industry continues to brace for the funding needs of the failed Taisho Life Insurance Co. and Chiyoda Mutual Life Insurance Co., which have yet to announce their rehabilitation plans.