Key nonlife insurers Sompo Japan Insurance Inc. and Nipponkoa Insurance Co. have essentially agreed to integrate their businesses, possibly in April 2010, sources said Thursday.
The two companies will by the end of the week release details of the deal, which would create an insurance company with net premium revenues of more than ¥2 trillion, the sources said.
Sompo Japan and Nipponkoa are considering setting up a holding company under which the two firms will operate, the sources said.
The two insurers apparently aim to expand their business and cut costs through the planned merger at a time when the domestic nonlife insurance market has contracted due to the declining birthrate and aging population.
Mitsui Sumitomo Insurance Group Holdings Inc., Aioi Insurance Co. and Nissay Dowa General Insurance Co. have already decided to merge and form the country’s largest nonlife insurance group.
The latest merger plan by Sompo Japan and Nipponkoa would reduce the number of groups in the nonlife insurance sector to three from the current six. The Sompo Japan-Nipponkoa alliance would be the smallest of these groups.
U.S. investment advisory firm Southeastern Asset Management Inc., the largest shareholder in both Sompo Japan and Nipponkoa, had asked for Nipponkoa to merge with another insurer.
Sompo Japan had ¥1.369 trillion in consolidated net premium revenues in the year that ended last March, making it the third-largest nonlife insurance company in Japan. Nipponkoa, meanwhile, posted ¥698.6 billion, ranking as fifth-largest. Sompo Japan had total assets of ¥6.451 trillion and Nipponkoa ¥3.323 trillion in the year.