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Business deals

Sony completes $3.7bn takeover of financial unit

Company's face-to-face insurance marketing efforts stymied by coronavirus

Complete control of the financial firm will make it easier for Sony to make deals.   © Reuters

TOKYO -- Sony has wrapped up its full buyout of listed subsidiary Sony Financial Holdings, the Japanese tech group said Tuesday, spending 400 billion yen ($3.73 billion) to gain the leverage for enacting swift reforms in the unit.

The tender offer, conducted between May 20 and Monday, acquired the remaining 35% of shares in Sony Financial. The unit will be delisted from the Tokyo Stock Exchange.

By converting Sony Financial into a wholly owned subsidiary, "it will be easier to sell off a portion of existing operations and form partnerships with other companies," said Masao Muraki, senior analyst at SMBC Nikko Securities.

Sony Financial's portfolio spans insurance, banking and assisted living. The Sony brand has benefited the financial operations, but business partnerships had been limited on an operational front. Muraki sees smaller segments such as payments and assisted living being targeted for overhauls.

Insurance serves as Sony Financial's main producer, but also one of the biggest concerns.

Life insurance, in particular, drew 88.7 billion yen in pretax profit, accounting for 80% of the unit's black ink. The business grew through the employment of "life planners" who meet face-to-face with clients. Yet the hazards associated with the novel coronavirus have rendered this model unfeasible.

Critics also say the length of Sony Financial insurance policies leaves the company more exposed to the risk of changing interest rates.

For non-life insurance and banking, financial technology will be the key to success. The auto insurance business offers a smartphone app that tracks driving habits and lowers premiums in proportion to a driver's safety. The banking arm has started using artificial intelligence to automatically perform preliminary credit checks on home loans. Sony looks to harness its AI technology to improve precision.

Sony will change its name to Sony Group next April, with the financial unit under its direct control. Because of the pandemic, operating profit at the electronics business is expected to plummet by up to 70% this fiscal year. The stable earnings generated by Sony Financial have taken on an essential role in terms of consolidated group growth.

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