Sompo Japan Insurance Inc. and Nipponkoa Insurance Co. will merge to create an insurer with a market value of ¥1 trillion as declining car sales and the aging population cut demand for their products.

Each share of Sompo will be worth 0.9 shares of Nipponkoa, the firms said Wednesday. Masatoshi Sato, president of Sompo, will become the president of the new holding company, to be called NKSJ Holdings Inc., while Nipponkoa President Makoto Hyodo will be chairman.

Insurers are seeking alliances to reduce costs as premium income wanes with the nation's worst postwar recession. Mitsui Sumitomo Insurance Group Holdings Inc., Aioi Insurance Co. and Nissay Dowa General Insurance Co. said in January they plan to merge to create Japan's largest casualty insurer.

"Through the holding-company structure, we aim to take advantage of our existing brands," Sato said. "A name change poses a challenge for us, but we will develop using our customer base."

U.S. fund Southeastern Asset Management Inc. has had holdings in both insurers for more than a decade. The fund tried in June for a second time to oust Nipponkoa's Hyodo, saying he had failed to raise shareholder value. The insurer's stock has slumped 37 percent during the past year.

When the firms announced their intention to unite in March, Southeastern said it expected to be involved in talks on the terms and conditions.

The new company will have 12 board members, including six outside directors. The two firms expect to save about ¥30 billion in fiscal 2012.

Sompo, Japan's third-largest casualty insurer by premium income, and fifth-ranked Nipponkoa will unite under the holding structure in April.

The pair had combined premium revenue of ¥1.97 trillion as of March, the firms said.

That compares with ¥2.59 trillion if the three-way merger led by Mitsui Sumitomo goes ahead, and ¥2.1 trillion at Tokio Marine Holdings Inc.