The six largest life insurers in Japan are planning to combine their corporate pension management operations in the coming years as population aging and very low interest rates eat away at their businesses.
Nippon Life Insurance and Dai-ichi Life Insurance have already formed Corporate-Pension Business Service, a 50-50 joint venture. This entity will absorb Japan Pension Service Co., which is owned by Sumitomo Life Insurance, Meiji Yasuda Life Insurance, Mitsui Life Insurance, and Fukoku Mutual Life Insurance, a report by Nikkei said.
The firms’ consolidation will be undertaken in stages, with a target completion date of 2023. It will retain the Corporate-Pension Business Service name, as well as all jobs in both units.
The six insurers are set to start discussions on the merger soon.
While many details have yet to be agreed upon, the firms have agreed to centralise systems and management of policyholders, among other duties, the report said. Asset management functions, however, will be carried out by the individual insurers.
According to the Life Insurance Association of Japan, almost 70% of all corporate defined-benefit pensions and employee pension funds were contracted to life insurers as of end-2016. However, while business is growing, costs have soared.
The industry is rolling back from down corporate pension operations as private plans become more popular amid concerns over Japan’s public pension system and the advanced state of the population’s aging.
Fund managers are also struggling to meet return targets due to the Bank of Japan’s negative rate policy.
Life insurers are also exiting “non-core” businesses to cut costs.