Yasuda Mutual Life Insurance Co. and Fukoku Mutual Life Insurance Co. announced Monday that they will form a wide-ranging alliance to share costs for investment in computer systems and cooperate in other areas. The move by Yasuda, the sixth-largest life insurer in terms of assets, and Fukoku, which ranks 11th, is likely to accelerate further unions in the industry as Japanese insurers grapple with poor sales, dismal investment performances and deregulation resulting in intensified competition. A driving force behind the tieup was a need to share the burden of huge costs for investing in information technology, the two firms said. "There is only so much you can do by yourself," Fukoku President Tomofumi Akiyama told a news conference. "IT investments, in particular, cost a significant amount of money." Information technology is seen as a key area of investment for life insurers as they keep an eye on future opportunities in such areas as the U.S.-style 401(k) pension plan, which is expected to be introduced as early as next fiscal year. The two firms will also jointly operate in the nonlife insurance business by having Fukoku purchase a stake in the nonlife subsidiary of Yasuda Mutual. Fukoku will also become an equity participant in a joint venture in the automobile insurance business to be set up by Yasuda Mutual and U.K.-based Direct Line Group. Contrary to some reports, however, the officials denied that they will merge or come under a joint holding company in the future, saying that they will honor their respective "uniqueness and independence." "We (Fukoku) have more than 10,000 sales representatives, while Yasuda Mutual has nearly 20,000 sales staff," Akiyama said. "For our representatives to work together is absolutely unthinkable. ... In fact, if we merge our workforce, the company might go down." The officials said the three-way consolidation plan announced in August by Fuji Bank, Dai-Ichi Kangyo Bank and the Industrial Bank of Japan hastened their talks on cooperation. Yasuda Mutual belongs to the Fuyo corporate group, led by Fuji Bank, while Fukoku has maintained a close relationship with DKB. But they denied speculation that they will try to broaden their alliance to other insurers affiliated with the three banks. There was once speculation that Dai-ichi Mutual Life Insurance Co., which is in a comprehensive alliance with IBJ, and Asahi Mutual Life Insurance Co., which is also close to DKB, were planning to join the Yasuda-Daido team. "A tieup between three or four firms would be very complicated," Akiyama said. "I am convinced that it would work out best to (cooperate) just between the two firms that trust each other." The other areas of cooperation will include: joint operation of call centers; Fukoku's participation in the existing investment trust joint venture between Yasuda and Paine Webber; joint-risk management of assets; and personnel exchanges. The life insurance industry has for years suffered declining contract volumes amid the lingering recession. Their financial health is also plagued by massive outstanding contracts from the bubble economy era that promised high yields to policyholders. The two companies enjoy relatively good financial health, both in terms of good credit ratings and high solvency margin ratios -- 727.2 percent for Yasuda and 820.6 percent for Fukoku.
