2ND LD: Sompo Japan, Nipponkoa announce management integration in April 2010.

TOKYO, March 13 Kyodo

(EDS: UPDATING WITH PRESS CONFERENCE)

Major nonlife insurers Sompo Japan Insurance Inc. and Nipponkoa Insurance Co. announced Friday they have agreed to integrate their businesses in April 2010 in a move that will reorganize Japan's nonlife insurance sector into three main groups from the current six.

Sompo Japan and Nipponkoa will set up a joint holding company under which the two insurers will operate as wholly owned units of the new firm, the insurers said, adding the new company's net premium revenues will top 2 trillion yen.

The two insurers said they will aim to strengthen their competitiveness in the insurance business by streamlining business operations and taking advantage of the planned merger. The domestic nonlife insurance market has dwindled due to declining childbirths and the aging of society.

Japan's nonlife insurance industry has experienced a wave of realignment, with Mitsui Sumitomo Insurance Group Holdings Inc., Aioi Insurance Co. and Nissay Dowa General Insurance Co. also planning to integrate in April 2010 to become the nation's largest nonlife insurance group.

The Sompo Japan-Nipponkoa alliance will be the third-largest insurance group after Tokio Marine Holdings Inc.

Sompo Japan President Masatoshi Sato told a press conference, ''While maintaining our revenue base in the domestic market, we will also seek business opportunities overseas through mergers and acquisitions in the future.''

The two insurance firms said they have no plans to cut their workforces due to the integration but will try to slash business costs by integrating some operations such as call centers.

They will also set up a preparatory panel to decide on the name of the new holding company and an equity transfer ratio.

U.S. investment advisory firm Southeastern Asset Management Inc., the largest shareholder of both Sompo Japan and Nipponkoa, had asked for Nipponkoa to merge with the other insurance entity.

Sompo Japan, the third largest with 1,368.7 billion yen in consolidated net premium revenues in the 2007 business year through March 31, 2008, is expected to post a group net loss of 52 billion yen in the current business year due to hefty losses in connection with the U.S. subprime mortgage meltdown.

Nipponkoa ranked fifth with 698.6 billion yen in consolidated net premium revenues.

Sompo Japan is noted for the sale and development of insurance products for individual customers while Nipponkoa has close business ties with regional banks. Both are lagging behind other nonlife insurance groups in international operations.