Japan's Meiji, Yasuda insurers to merge

TOKYO, Japan -- Two of Japan's major life insurers have agreed to merge operations by April 2004 in an effort to stay afloat amid a fragile insurance sector and a stubborn economic slump.

Meiji Life Insurance Co. and Yasuda Mutual Life Insurance Co. are the first top-tier players in Japan's life insurance industry to integrate operations.

A Yasuda official who spoke on condition of anonymity confirmed the union, which he said is aimed at making the companies better able to compete in an increasingly competitive business environment.

The merger of Meiji, Japan's No. 4 life insurer in terms of contracts held, and Yasuda, the country's sixth largest, would create an entity with combined assets of 26.85 trillion yen (US$200 billion).

That will make it Japan's third-largest life-insurance company, overtaking Sumitomo Life Insurance Co.

An official announcement on the merger is expected later Thursday after meetings by each board of directors, the Yasuda official added.

Ahead of the merger, local media reports said the two companies would first forge a comprehensive tie-up to integrate their systems in areas such as product development, asset management, human resources, and accounting.

Analysts said the companies decided to bolster their competitiveness and profits through a merger that will seek economies of scale.

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Analysts welcomed the move, saying it would inspire confidence among clients worried about meager returns on policies.

They also expect the deal to trigger further realignments in Japan's troubled life insurance sector.

"This is a good direction, as there are too many lifers in Japan," Morgan Stanley foreign-exchange strategist Toru Umemoto told the Associated Press news agency.

Life insurance firms have suffered over the years amid an industry-wide increase in policy cancellations and as investment yields fall below obligations.

However, the measure will have little immediate impact as the merger will not be sealed until 2004.

Umemoto added the merger would only make a big impact if the partners rethought strategies on how to allocate their vast assets.

Meiji Life is affiliated with the Mitsubishi group and Yasuda Mutual is part of the Mizuho Financial Group.

Yasuda Mutual Life, set up in 1880, employs 21,900 and Meiji Life Insurance, set up in 1881, has a work force of 39,100.

Meiji Life's solvency margin -- or its ratio of assets to liabilities -- was 504 percent at the end of September 2001, while Yasuda Life's margin was 576 percent.