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Saturday, Jan. 24, 2009

Three nonlife insurers plan 2010 integration


Staff writer

Mitsui Sumitomo Insurance Group Holdings, Inc., Aioi Insurance Co. and Nissay Dowa General Insurance Co. announced Friday they have agreed to merge in April 2010, in a move that will create Japan's largest nonlife insurance group.

The integration plan comes as slumping car sales hit automobile policy sales — a key nonlife insurance business.

Analysts also predict the latest move may trigger further mergers in the industry as firms battle to survive the harsh business environment.

The three insurers had ¥2.73 trillion in combined revenue from premiums in the year that ended last March, more than the ¥2.25 trillion of industry leader Tokio Marine Holdings Inc.

Toshiaki Egashira, president of Mitsui Sumitomo Insurance, said at a joint news conference in Tokyo that the industry is faced with a declining birthrate, a graying population, as well as falling car ownership and sluggish new housing starts due to the recession.

"The three companies share the sense of crisis and understanding of the environment," Egashira said. "(The three firms) reached an understanding that it will be best to integrate their managements."

Under the planned merger, Mitsui Sumitomo Insurance Group Holdings will become a new holding company, while Aioi and Nissay Dowa will merge into one entity under it.

With the merger, the three nonlife insurers say they aim to streamline businesses and increase profitability.

The trio also said they aim to create a world-leading insurance and financial group that operates globally.

Minoru Hattori, industry analyst at Okasan Securities Co., pointed out that car ownership is in decline and consumers are choosing smaller cars that result in cheaper insurance policies.

Japan's car sales are estimated to have fallen 4.5 percent from 2007 to 5.11 million vehicles last year, according to the Japan Automobile Manufacturers Association.

Meanwhile, five of the country's six major nonlife insurers booked sharp falls in their group net profit during the first half of 2008.

To survive the turmoil in the financial market and slumping sales of cars and automobile insurance policies, Hattori anticipates more mergers are likely, even between nonlife and life insurers.

As competitors merge, more firms will feel pressed to follow suit, he predicted.



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