Tag: Worldwide

The United States would file complaints with the World Trade Organization if it determines privatization plans for Japan Post constituted new barriers to trade.

In October 2007, the government-run postal system will be broken into four units, wholly owned by a government holding company, with the Kampo and Yucho segments becoming the world’s largest life insurer and savings bank, respectively. The life insurance unit would operate as an independent company called Kampo Seimei Hoken in Japanese and Postal Insurance Corp. in English. The PIC would debut with assets totaling 114.59 trillion yen (USD953.9 billion) and anticipates first-year earnings of 77 billion yen (USD641 million) in fiscal year 2008.

Under Japan’s 10-year implementation plan for privatization, PIC will see an initial public offering for a limited number of shares on the Tokyo Stock Exchange in late 2011, with the government’s remaining shares to be sold off in subsequent offerings over a five-year period. But it’s the plan’s proposal that the PIC be allowed, as early as this fall, to branch into new product lines, such as accident and medical insurance, and to increase the permitted face values of its life insurance products that is drawing concern from the U.S. life industry.

In its road map, Japan Post Corp. cited the need to branch into new and more profitable areas as a precursor to privatization, arguing such expansion is necessary to draw investors’ interest in the life insurer.

Among concerns raised by private life insurers are Kampo’s current exemptions from taxes and from obligations to contribute to guaranty funds, as well as the fact that regulators historically have allowed Kampo’s contracts to differ sharply from those written in the private sector.