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Japan insurers marry to survive

MITSUI Sumitomo Insurance Group Holdings Inc, Aioi Insurance Co and Nissay Dowa General Insurance Co said that they plan to merge to cope with declining domestic demand, creating Japan's largest non-life insurer.

The three companies, with a combined market value of about 1.4 trillion yen (US$11 billion), said yesterday in Tokyo that they agreed to complete the transaction by April 2010.

The three companies have all suffered falling premium revenue in Japan, which has a declining population and is in its first recession since 2001. Demand for auto insurance, which accounts for 55 percent of premium revenue at Mitsui Sumitomo, is falling as vehicle sales in Japan may have slumped to a 28-year low in 2008.

"The merger will help to cut costs and boost the scale of the businesses, allowing them to expand their product range and marketing," said Kiyoshi Ishigane, a Tokyo-based strategist at Mitsubishi UFJ Asset Management Co.

Mitsui Sumitomo President Toshiaki Egashira said that the merger will cut costs by as much as 30 percent.

"Japan's insurance market is saturated and it's hard to bet on a quick recovery," said Egashira.

Aioi and Nissay Dowa will first merge their companies and then combine with Mitsui Sumitomo, creating a holding company through an equity swap. The terms are yet to be decided.

The three companies have presence in 38 countries and will consider overseas takeovers, of both life and non-life insurers, Egashira said.


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