Marine & Fire Insurance Co., Nippon Fire & Marine Insurance Co. and Koa Fire & Marine Insurance Co. formally announced Tuesday they will form a holding company by April 2002 to create the nation’s largest nonlife insurer.

Presidents of the three nonlife insurers told a news conference that the move is intended to create a “globally competitive and comprehensive” provider of nonlife insurance, life insurance, asset management and other financial services.

Counter to many expectations, the announced alliance does not include Sumitomo Marine & Fire Insurance Co., the fourth-largest nonlife provider. But Nippon Fire President Ken Matsuzawa acknowledged that the three remain in talks with Sumitomo on possible participation in the alliance. He declined to give a clear deadline.

Sumitomo’s participation came into the picture as Sumitomo Bank and Sakura Bank — a core firm within the Mitsui business conglomerate — announced plans to merge last week.

Under Tuesday’s plan, the three insurers will regroup and integrate their operations in two to three years following the formation of the single holding company as soon as possible before the 2002 deadline.

Once the integration is complete, the holding company will have not only nonlife insurance, but life insurance, reinsurance and overseas operations under its wing as well, they said.

With combined assets of more than 6 trillion yen and premium revenues exceeding 1.3 trillion yen, the size of the new entity will surpass that of Tokio Marine & Fire Insurance Co., the current industry leader.

Mitsui is the third-biggest nonlife insurer, while Nippon is ranked fifth and Koa eighth.

Mitsui Marine President Takeo Inokuchi said that intensifying competition within the industry, following deregulation of premium rates in July 1998, was the driving force behind the decision to consolidate. Deregulation has also prompted nonfinancial and foreign entities to make inroads, threatening the conventional players’ positions, he added.

Inokuchi specifically cited such new entrants as Direct Line and Sony Assurance Inc., funded by Sony Corp., as powerful competitors. Direct Line, a leading insurance company in the U.K., announced plans to sell automobile insurance online through a joint venture with Yasuda Mutual Life Insurance Co. last week.

“We don’t know what other big foreign entities will enter the market in the future,” Inokuchi said. “By joining hands, the three firms will be ready to fight with such powerful players squarely.”

While recent moves toward consolidation in the banking industry have featured drastic workforce cutbacks, the nonlife insurers emphasized that their announced integration will not involve downsizing.

“We didn’t decide to consolidate for restructuring reasons,” Mitsui’s Inokuchi said. “(Unlike banks), we have not received capital injections of public money, either.”

He added, however, that the three firms expect to reduce their combined payroll of about 16,000 by 3,000 over five years through attrition.

The firms will also try to reduce operational costs by 3 percent in five years, the officials said.

It remains unclear what role the alliance will play in another financial tieup to be centered on Sanwa Bank, with whom Koa has pledged to cooperate.

Sanwa and five companies including Koa said in July that they will cooperate in six areas encompassing securities business, trust banking, commercial banking, life insurance and nonlife insurance.

While Matsuzawa, whose Nippon Fire has close ties with Sanwa, said the three-party alliance will not affect the July agreement, Inokuchi of Mitsui emphasized that Tuesday’s announcement does not mean that his company will come under the Sanwa umbrella.

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