2nd UPDATE:Prudential Unit May Buy Stake In Yamato Life

The court-appointed administrator for Yamato Life Insurance Co. said Monday that it has reached an agreement with a unit of Prudential Financial Group (PRU) to help with Yamato's restructuring, a move that could ultimately lead to a stake investment by the unit in the failed insurer.

The deal would allow Prudential's unit, Gibraltar Life Insurance, to discuss details with Yamato's administrator and the Life Insurance Policyholders Protection of Japan - an industry-organized safety net for insurers - on how they would turn around the failed insurer. After restructuring, Gibraltar would take over Yamato's operations including customer contracts.

Yamato's court-appointed administrator also said that it plans to ask the Life Insurance Policyholders Protection Corp. of Japan for financial support as Yamato had negative net worth of Y64.3 billion as of Oct. 17.

A Gibraltar spokesman said that it will take a while to evaluate how much it will cost to turn around Yamato and how much of a stake the company would take.

"We'll discuss details from now on how we can support Yamato," he said, adding nothing concrete has been decided.

Prudential in the past has helped to turn around failed insurer Kyoei Life Insurance Co. in 2001, renaming it Gibraltar Life. In Japan, Prudential operates Gibraltar Life and Prudential Life Insurance, with both assets totaling Y5.8 trillion as of March 2008.

Yamato Life Insurance filed for bankruptcy protection last October following mounting write-downs on securities holdings.

The failure of the Japanese life insurer, although it was ranked only 33rd in Japan in terms of assets, came as a shock in October since it was the first Japanese financial-services company to succumb to the market turmoil, underscoring how much the broader sector has been hurt by the financial crisis.

Although Yamato's situation differed greatly from other, healthier, Japanese life insurers, life and non-life insurers have also been hurt by increasing losses on securities valuations due to falling share prices.

-By Atsuko Fukase, Dow Jones Newswires; 813-5255-2957; [e-mail]