Mitsui Marine & Fire Insurance Co. announced Monday that it will pull out of a three-way merger plan with Nippon Fire & Marine and Koa Fire & Marine, opting instead to strengthen its ties with other Mitsui corporate group firms and seek an alliance with Sumitomo Marine & Fire Insurance Co. Speaking at a news conference, Mitsui Marine President Takeo Inokuchi said his firm and Sumitomo Marine have agreed to start negotiations on a merger of their operations. If realized, a Mitsui-Sumitomo alliance would make the nation's biggest nonlife insurer group in terms of total assets, and second biggest in premium revenue, the officials said. Mitsui Marine, the nation's third-largest casualty and property insurer, said it had concluded that the planned merger -- originally scheduled for April 2002 -- would jeopardize its relations with other members of the Mitsui corporate group, led by Sakura Bank. Sakura is set to merge with Sumitomo Bank by April 2002. Inokuchi said the drastic changes that have affected the industry have compelled his firm to rethink its alliance strategy. In the four months since the announcement of the three-way merger in October, "grouping" moves across the entire financial industry -- ranging from banks, insurers and securities -- have accelerated, Inokuchi pointed out. "Under such circumstances, we concluded that we could not survive if we did not belong to one (powerful) financial group," he said. Officials of Nippon Fire, the fifth-largest of Japan's insurers, and Koa Fire, the eighth-largest, which are both part of an alliance led by Sanwa Bank, told a joint news conference that they will continue with the merger plan. This is not the first time Sumitomo's involvement in a merger deal has become an issue. In October, shortly before the three insurers announced plans to consolidate their operations, Sumitomo Bank and Sakura Bank announced a merger plan, giving rise to the possibility of Sumitomo Marine joining the three insurers. But Sumitomo Marine ended up deciding not to get involved at that time, saying that it believed it would be impossible for the four companies to settle differences in a timely manner. Officials of Nippon Fire and Koa Fire said that between the end of January and the beginning of February, Mitsui asked for changes in the merger plan "out of the blue." Mitsui demanded that the new group belong to the Mitsui corporate group -- which marked a departure from the three parties' earlier understanding that the new company would not belong to any particular corporate group. Mitsui also demanded that Sumitomo Marine be included in the alliance, the officials said. When the firms were unable to agree on the proposals, Mitsui said it wanted to pull out of the plan, the officials said. Nippon Fire and Koa Fire denied that their current participation in a loose financial alliance headed by Sanwa Bank was the root cause of the problems. Seven financial institutions, including Sanwa Bank, Koa Fire and Nippon Fire, as well as two midsize life insurers and a Sanwa-affiliated brokerage, have formed a nonexclusive alliance called Financial One. The alliance's business area includes cooperation in next-generation card business, call center operations and private banking. Ken Matsuzawa, Nippon Fire president, said that his firm and Koa Fire informed Mitsui that they would be willing to withdraw from Financial One if Mitsui would agree to stay. But that did not dissuade Mitsui from leaving, he said.
