Sompo Japan Insurance Inc. President Hiroshi Hirano announced Wednesday that he will become chairman in late June after being replaced by Managing Director Masatoshi Sato as the company deals with scandals that have drawn sanctions from the government.
If the move is approved at Sompo Japan’s general shareholders’ meeting late next month, Sato will replace Hirano, who will give up the right to represent the firm.
The announcement came the same day it was reported that the troubled insurance firm will be suspended by the Financial Services Agency over unlawful sales practices. The order is expected by week’s end.
Hirano denied speculation that he is resigning to take the the blame for the scandals.
“The reshuffle of executives has got nothing to do with the (FSA’s) inspection,” Hirano claimed at a hastily arranged briefing after releasing the firm’s annual report for 2005.
The scandals in part involve allegations that sales staff at Sompo Japan sold policies to relatives and friends, or took out policies in their names, and paid the premiums on the nonlife insurance products in order to meet sales targets, expecting possible reimbursement later.
When asked how the company intends to take responsibility for the scandals, Hirano said he will make his intentions clear after the FSA issues its penalties.
The FSA is expected to order the company to suspend parts of its business for about a month, including sales of life insurance products offered by its partners.
Hirano went on to claim that he made his decision to give up the presidency about a year ago and conveyed that to Sato last March after noting that the company had successfully carried out its midterm management plan and earned a record net profit of 67.3 billion yen.
Hirano said he will become chairman to associate with the business community and society, now that the firm has high profitability, a strong business foundation and mapped out a new midterm scheme.
Sompo Japan received a business improvement order in November for failing to pay claims. It would be rare for the FSA to again issue an improvement order to the same entity in such a short period of time.
Hirano, 63, assumed the presidency of Yasuda Fire & Marine Insurance Co., one of Sompo Japan’s predecessors, in 1999. He took the helm of Sompo Japan when it was formed in 2002 through a merger with Nissan Fire & Marine Insurance Co.
Nonlife insurers excel
Five of the six major nonlife insurers increased net profits in 2005 as the nation remained relatively free of serious natural disasters, according to their nonconsolidated annual reports released Wednesday.
In the year through March 31, the six insurers — Tokio Marine & Nichido Fire Insurance Co. under Millea Holdings Inc., Sompo Japan Insurance Inc., Mitsui Sumitomo Insurance Co., Aioi Insurance Co., Nipponkoa Insurance Co. and Nissay Dowa General Insurance Co. — reported a combined 295.2 billion yen in net profit, up from 250.3 billion yen a year before.
Payouts by the six drastically shrank as well, compared with fiscal 2004, when they shelled out a record amount to cover damage caused by several typhoons and earthquakes.
Other boosts were provided by appraisal gains on stockholdings and a pickup in auto insurance policies, the six insurers said.
Despite the favorable environment, the growth in net profits was considered relatively modest, partly because the insurers had to increase their contingency risk reserves, which are set aside for huge disaster-linked payments.
Industry leader Tokio Marine & Nichido Fire booked a net profit of 122.2 billion yen, up 26.1 percent from a year earlier, while Sompo Japan posted a record-high net profit of 67.9 billion yen, up 19.3 percent.