Japan’s three non-life insurance giants seek merger to fight competition

Tokyo, Japan, December 29: The unrelenting recession has been ailing many unshakeable business giants across all the sectors worldwide, forcing them to either bailout or merge into other companies to bear the blow little softly.

The latest giant to follow suit is Mitsui Sumitomo Insurance Group Holdings Inc., Japan’s second largest non-life insurers, which is in talks with the Aioi Insurance Co. and Nissay Dowa General Insurance Co. for a merger.

The merger would eventually create Japan’s largest non-life insurer group, bringing down Tokio Marine Holdings Inc. from its current top position in the sector, which has already felt the jerk with its shares dropping soon after the news surfaced.

On the contrary, the shares of the three companies lifted up as investors welcomed the move, for it means lesser competition in the sector, thus more profitability.

Several sources report that the three companies may reach an agreement by March 2009, and the merger could take place later next year.

The move by the trio came in as a measure to fortify their operations in recession and to cut through competition, as in recession demand for car insurance, fire insurance and home insurance has slumped significantly.

The current leader Tokio Marine had reported 2.25 trillion yen as its revenue from premiums for the year ended March 31. As against it, Sumitomo, Aioi and Nissay Dowa had collected 2.73 trillion (about $ 30 billion), if pooled together.

However, Tokio is still ahead in combined market value 2.1 trillion yen ($23.18 billion), compared with 1.8 trillion yen of the three companies.

All the insurance companies, and for that matter, all the financial institutions, have lost their financial standing with the sliding value of their securities holdings. This has called for mergers and combined forces to tackle persistent economic downfall.