Mitsui Sumitomo, 2 others to merge, create Japan`s largest nonlife insurer

TOKYO, Jan. 23 Kyodo -
Mitsui Sumitomo Insurance Group Holdings Inc., Aioi Insurance Co. and Nissay
Dowa General Insurance Co. announced Friday that they have agreed to integrate
in April 2010, a move that will create Japan's largest and the world's
fifth-largest nonlife insurance group.
Through the amalgamation, Mitsui Sumitomo, the second-largest nonlife insurer
in Japan, fourth-ranked Aioi and sixth-ranked Nissay Dowa will have combined
net premium revenues of about 2.7 trillion yen, surpassing that of current
industry leader Tokio Marine Holdings Inc. Net premium revenues correspond to
sales at manufacturers.
The three insurers are seeking to strengthen their management bases, cut costs
and expand overseas operations to better survive in the maturing Japanese
market and compete with overseas rivals.
Mitsui Sumitomo Insurance Group President Toshiaki Egashira said at a press
conference that the environment surrounding Japan's nonlife insurance companies
is ''very severe,'' due partly to Japan's falling birthrate and the aging
population and a fall in the number of privately owned vehicles due to the
worsening economy.
''It is essential to expand the quality and quantity of our management bases
and business resources at an early date to win an overwhelming competitive edge
in Japan and compete with overseas rivals on an equal footing,'' Egashira said.
''We believe the integration is the best way to do that.''
The planned integration is expected to save tens of billions of yen in costs as
the three insurers will streamline their sales networks and cooperate on system
investment, the trio said.
The trilateral integration could lead to another industry shake-up involving
both life and nonlife insurance companies as they seek to survive amid stiffer
competition, industry analysts said.
Under the integration plan, Mitsui Sumitomo Insurance Group Holdings will
become a new holding company with Aioi and Nissay Dowa merging into a single
entity that will come under the wing of the new holding firm through a stock
swap deal, the three firms said in a joint statement.
The holding company, the name of which will be changed to a neutral one for the
three parties, will supervise the operations of Mitsui Sumitomo Insurance Co.
and those of the Aioi-Nissay Dowa merged company.
The two insurance firms could also integrate in the future, industry watchers
said.
The three companies will hold extraordinary shareholders meetings early next
year to obtain approval for the integration. They also plan to decide on the
new holding company's name around that time.
After the integration, Toyota Motor Corp., currently the largest stakeholder in
Aioi, is expected to become the top stakeholder in the new holding company with
a stake of about 6 percent, followed by Nippon Life Insurance Co., a Nissay
Dowa group firm, which will hold a stake of approximately 5 percent.
The three aim to achieve synergies as Aioi is strong in auto insurance targeted
at individuals and Nissay Dowa can use Japan's top life insurer Nippon Life's
sales network for auto insurance operations.
Mitsui Sumitomo Insurance Group, which has four life and nonlife insurers under
its umbrella, places emphasis on overseas operations, mainly in Asia.
The trio will also study ways to merge Mitsui Sumitomo Kirameki Life Insurance
Co. of the Mitsui Sumitomo Insurance group and Aioi Life Insurance Co. of the
Aioi Insurance group in order to achieve synergy effects from the amalgamation,
they said.
==Kyodo