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▼ Planned Merger Will Lead to Domination of 3 Mega Insurers; Sector’s Quarter-Century-Long Reorganization Reaching Conclusion
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Mitsui Sumitomo Insurance Co. and Aioi Nissay Dowa Insurance Co. have entered into merger discussions, with the target date for the merger set for April 2027.
If the merger is realized, the domestic non-life insurance sector will be dominated by three mega-companies, representing a shift to a structure similar to that of the banking industry.
The sector’s reorganization over the past quarter century, which kicked into full gear during a period of liberalization in the insurance sector and the accompanying intensification of competition, has reached its final stage.
Survival
A little after 4:30 p.m. on Thursday, the day before the announcement, Shinichiro Funabiki, president of both MS&AD Insurance Group Holdings, Inc. and Mitsui Sumitomo Insurance Co., and Keisuke Niiro, president of Aioi Nissay Dowa Insurance Co., met with Yutaka Ito, director-general of the supervision bureau, at the Financial Services Agency (FSA) in Kasumigaseki, Tokyo.
It was a 15-minute meeting, during which the two presidents informed Ito that they planned on Friday to proceed with discussions on a merger of their companies. As they left the room after the meeting, the two were seen chatting amicably.
“We aim to become a world-leading insurance and financial group by working toward consolidating our strengths and improving management efficiency,” MS&AD Insurance Group Holdings, which controls the two firms, emphasized in an announcement made on Friday.
To survive in the domestic market, where population decline and other factors have made little room for further growth, MS&AD Group has shifted toward the judgment that a merger of the two companies is more desirable than the current structure, in which the two firms coexist under a joint holding company.
Concern
However, before the decision was made, a series of twists and turns took place due to persistent reluctance on the part of Aioi Nissay Dowa Insurance. Aioi Nissay Dowa Insurance, whose earning power falls short of Mitsui Sumitomo Insurance’s, had been rife with concerns that it “might be swallowed up” by its merger partner.
In the fiscal year ended on March 31, 2024, Mitsui Sumitomo Insurance’s net income totaled ¥167.7 billion. Aioi Nissay Dowa Insurance, on the other hand, posted a total of ¥56 billion net income, about one-third of Mitsui Sumitomo’s.
What Niiro was concerned about in particular was how the company’s employees would be treated. He laid bare his concern to those around him, saying, “Unless the merger is made in a manner that is mutually satisfying, we will end up having many unhappy people.”
While approving the merger plan, senior FSA agency officials asked Mitsui Sumitomo Insurance to “proceed carefully with dialogue.”
Funabiki and Niiro have had a series of behind-the-scenes talks since last year to reconcile their views. At the same time, Funabiki got other related major companies on board with the merger plan, thus clearing the way for it to happen.
In 1996, the non-life insurance industry started to see the effects of moves to liberalize the insurance sector, such as allowing insurers to freely set their premiums.
Those moves brought about the collapse of the “convoy system,” under which government regulation had prevented weak companies from going under, and led to a succession of mergers and corporate integrations amid an intensification of market competition.
The birth of Sompo Japan Nipponkoa Insurance Inc. — presently Sompo Japan Insurance Inc. — through a merger of Sompo Japan Insurance Inc. and Nipponkoa Insurance Co. in 2014 ushered in a domestic non-life insurance sector comprised of four major insurers. Now, the next chapter in the history of the sector is being written.
‘Thorny issues’
The crucial moment for the merger has yet to come. How to allot executive posts and what to do with employees who become redundant are the toughest issues to be tackled, and finding a way to conclude the deal with mutual satisfaction will be an uphill battle.
“The merger ratio is connected to the number of executive posts allocated, so that will be a difficult topic of discussion,” said a senior executive of Aioi Nissay Dowa. “Disputes over the name of the new company are also inevitable, so there are many thorny issues ahead.”
If the merger is realized, the domestic non-life insurance sector will be dominated by three mega-companies, representing a shift to a structure similar to that of the banking industry.
The sector’s reorganization over the past quarter century, which kicked into full gear during a period of liberalization in the insurance sector and the accompanying intensification of competition, has reached its final stage.
Survival
A little after 4:30 p.m. on Thursday, the day before the announcement, Shinichiro Funabiki, president of both MS&AD Insurance Group Holdings, Inc. and Mitsui Sumitomo Insurance Co., and Keisuke Niiro, president of Aioi Nissay Dowa Insurance Co., met with Yutaka Ito, director-general of the supervision bureau, at the Financial Services Agency (FSA) in Kasumigaseki, Tokyo.
It was a 15-minute meeting, during which the two presidents informed Ito that they planned on Friday to proceed with discussions on a merger of their companies. As they left the room after the meeting, the two were seen chatting amicably.
“We aim to become a world-leading insurance and financial group by working toward consolidating our strengths and improving management efficiency,” MS&AD Insurance Group Holdings, which controls the two firms, emphasized in an announcement made on Friday.
To survive in the domestic market, where population decline and other factors have made little room for further growth, MS&AD Group has shifted toward the judgment that a merger of the two companies is more desirable than the current structure, in which the two firms coexist under a joint holding company.
Concern
However, before the decision was made, a series of twists and turns took place due to persistent reluctance on the part of Aioi Nissay Dowa Insurance. Aioi Nissay Dowa Insurance, whose earning power falls short of Mitsui Sumitomo Insurance’s, had been rife with concerns that it “might be swallowed up” by its merger partner.
In the fiscal year ended on March 31, 2024, Mitsui Sumitomo Insurance’s net income totaled ¥167.7 billion. Aioi Nissay Dowa Insurance, on the other hand, posted a total of ¥56 billion net income, about one-third of Mitsui Sumitomo’s.
What Niiro was concerned about in particular was how the company’s employees would be treated. He laid bare his concern to those around him, saying, “Unless the merger is made in a manner that is mutually satisfying, we will end up having many unhappy people.”
While approving the merger plan, senior FSA agency officials asked Mitsui Sumitomo Insurance to “proceed carefully with dialogue.”
Funabiki and Niiro have had a series of behind-the-scenes talks since last year to reconcile their views. At the same time, Funabiki got other related major companies on board with the merger plan, thus clearing the way for it to happen.
In 1996, the non-life insurance industry started to see the effects of moves to liberalize the insurance sector, such as allowing insurers to freely set their premiums.
Those moves brought about the collapse of the “convoy system,” under which government regulation had prevented weak companies from going under, and led to a succession of mergers and corporate integrations amid an intensification of market competition.
The birth of Sompo Japan Nipponkoa Insurance Inc. — presently Sompo Japan Insurance Inc. — through a merger of Sompo Japan Insurance Inc. and Nipponkoa Insurance Co. in 2014 ushered in a domestic non-life insurance sector comprised of four major insurers. Now, the next chapter in the history of the sector is being written.
‘Thorny issues’
The crucial moment for the merger has yet to come. How to allot executive posts and what to do with employees who become redundant are the toughest issues to be tackled, and finding a way to conclude the deal with mutual satisfaction will be an uphill battle.
“The merger ratio is connected to the number of executive posts allocated, so that will be a difficult topic of discussion,” said a senior executive of Aioi Nissay Dowa. “Disputes over the name of the new company are also inevitable, so there are many thorny issues ahead.”
- 29/3 20:54
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