Tokio Marine & Fire Insurance Co. and Asahi Mutual Life Insurance Co. have decided to scrap their plans to integrate under a single holding company by March 2003 due to the cautious stance of the nonlife insurer, sources from the two companies said Wednesday.

Instead, the companies will reopen negotiations for a union under the Millea Insurance Group by April 2004, they said.

A key sticking point in the talks was the price tag for the planned March transfer of Asahi's sales division to a wholly owned subsidiary of Tokio Marine to bring Asahi into the group, the sources said.

Tokio Marine rejected Asahi's demand of at least 200 billion yen in good will from Tokio Marine for the business transfer, sources close to the talks said.

The latest decision effectively means the suspension of a plan announced with much fanfare in September 2000 to unite domestic life and property insurance.

Tokio Marine envisaged that later on, other life insurance companies would join the Millea group, in which it and Nichido Fire & Marine Insurance Co. would come under one holding company in April, with Kyoei Fire & Marine Insurance Co. to follow in 2004.

After the transfer of its sales division, Asahi was supposed to continue to manage its existing insurance policies and turn itself from a mutual company into a stock company with capital injections from Tokio Marine to merge with the Tokio Marine unit in March.

But the plan would have left Asahi divided for an entire year, and although Asahi officials sought more assurances that the merger would indeed take place, the Tokio Marine side was reluctant to offer such a promise, given the uncertainty of the domestic economic environment, officials said.

The life insurance industry continues to take punishment in the form of share price plunges, cutthroat competition and policyholder flight.

Tokio Marine, the nation's top nonlife insurer, has been increasingly cautious about the union with struggling Asahi Mutual, as industry observers warned of possible damage to its financial standing should the scheme proceed as planned.

The talks between Tokio Marine and Asahi Mutual were further affected by the announcement last week by Meiji Life Insurance Co. that it would merge its operations with Yasuda Mutual Life Insurance Co. Tokio Marine had been wooing Meiji Life to join the Millea group, as Tokio Marine and Meiji Life both have close ties with the Mitsubishi Tokyo Financial Group.

Instead, Meiji Life opted to cross traditional corporate alliances to join Yasuda.

The talks have increased market fears about Asahi's financial strength, but Asahi's main bank, Dai-Ichi Kangyo, said it remains committed to the insurer.

"Dai-ichi Kangyo Bank has had close ties with Asahi over many years. DKB will continue to support Asahi," DKB Vice President Tadashi Kudo said Wednesday.