TOKYO -- Sompo Japan Nipponkoa Insurance plans to reduce its payroll by 4,000 positions by the end of March 2021 -- a nearly 20% decrease from the fiscal year ended March 2018.
The Japanese insurer's nonlife business is under pressure, in part, due to a series of natural disasters in the country in recent years. To cope, it intends to enhance efficiency by automating more clerical processes while scaling back hiring of new graduates.
Sompo Japan also wants to send more individuals on secondments to other group companies, including nursing care and security operations under the Sompo Holdings umbrella.
The broader Japanese financial industry has been hurt by prolonged low interest rates. Leading banks have announced plans to cut personnel, including Mizuho Financial Group, which plans to cut 19,000 positions. Sompo Japan's move shows the downsizing trend is spreading to insurance.
After the planned reduction, Sompo Japan will be left with about 23,000 employees. It expects its profit to improve by about 10 billion yen ($93.1 million).
The plan takes into account natural attrition as older employees retire, and includes a 4% cut in hiring in April 2020 versus this spring, to 250. The figure would be 70% below the number of hires three years earlier.
The company does not plan to offer employees a voluntary severance package.
Sompo Japan Nipponkoa Insurance was established in 2014 in a merger between Sompo Japan Insurance and Nipponkoa Insurance. The company, which has the largest workforce among Japan's major nonlife insurers, is widely considered to be in need of streamlining.
Although Sompo Holdings' net profit increased 5% to 146.6 billion yen for the year ended this past March, the disasters have raised uncertainty for the fire insurance segment in particular. The auto insurance market is also expected to shrink as Japan's population ages and declines.