ECONOMY IN JAPAN – A SORRY PICTURE
ECONOMY IN JAPAN – A SORRY PICTURE
The proposed merger between Sompo Japan Insurance Inc. , the nation’s third largest casualty insurer and Nipponkoa Insurance Co., the fifth largest insurance company in Japan, is the hot topic of discussion in Japan these days. The merger is likely to happen by 2010. Sompo enjoys a market value of 478 billion yen ($4.9 billion), whereas Nipponkoa at 497 billion ($5.09 billion). This merger is fallout of struggle for survival, in the face of falling population and economic recession, first of its kind in the last decade.
Three other leading insurance companies have gone on record, about their intention to merge, which will result in the nation’s largest casualty insurer. All these mergers rivet around the same logic that is survival in the face oddities. Similar mergers are envisaged in other sectors too to consolidate their positions.
Nipponkoa’s shares have experience a dip (8.4%) in the market whereas Sompo’s shares have gone up (4.6%) in the market. Merger would be good step towards consolidation, and is foreseen as a measure to overcome failures and construct a stable and durable firm. Once the merger formalities are completed the eventual company will be the third largest of its kind based on premium revenue. Both the companies have their presence in 26 countries worldwide and have a collective employee base of around 25, 000. Both companies showed falling premiums, the major reason being a dip in demand in the area of auto insurance.
Nipponkoa has gone ahead with cost cutting measures and is laying emphasis on increasing the sales, owing to the instructions from its major shareholder at Memphis, Tennessee. The observers can only adopt a wait and watch policy as things will unfold by themselves in the near future.
Tags: insurance