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MLC costs majority shareholder Nippon Life huge impairment loss

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Nippon Life has recorded an impairment loss on its 80% shareholding in consolidated subsidiary MLC Life.

The impairment loss was contained in the Japanese insurer’s financial results for the year to March 31, which was released last month.

“The decline reflected deteriorating profitability at MLC mainly due to an increase in payments for income protection insurance,” Nippon Life said. “As a result, the company recorded a loss on valuation of shares of subsidiaries and affiliates of 68,391 million yen ($904 million) as an extraordinary loss.”

Nippon Life has pumped in additional capital on two separate occasions since acquiring the 80% share from NAB in 2016 for $2.4 billion.

The most recent fund injection was announced last month, when the Japanese life insurer and NAB agreed to put in $400 million to shore up MLC’s financial position.

Like other life insurers in Australia, MLC has been affected by the industry-wide increase in claims payment and lapses, forcing it to ask for financial help from its two shareholders.

The financial woes of MLC has sparked talk in Japan that Nippon Life may have to make another capital injection.

A spokesman for MLC Life declined to comment to on the matter, saying information published in the world’s largest-circulating financial newspaper, Tokyo’s Nikkei, was “speculation”.