TOKYO -- Japan's top six life insurers plan to unify corporate pension management in the next six years or so as an aging society and rock-bottom interest rates dim the businesses' prospects.
Nippon Life Insurance and Dai-ichi Life Insurance run Corporate-Pension Business Service as a 50-50 joint venture. That unit will swallow up Japan Pension Service Co., an outfit owned by Sumitomo Life Insurance, Meiji Yasuda Life Insurance, Mitsui Life Insurance and Fukoku Mutual Life Insurance.
The consolidation will happen in stages, with the completion slated for fiscal 2023. The new entity will retain the Corporate-Pension Business Service name, and Japan Pension Service will be liquidated once all its functions are transferred. All jobs in both units are expected to be maintained.
The six parties will soon confirm plans to start discussions of this operational consolidation. Although the details of the merger have yet to be settled, they plan to centralize systems and management of policyholders, among other duties. Asset management functions will remain at the individual insurers.
Roughly 69% of all corporate defined-benefit pensions and employee pension funds were contracted to life insurers at the end of fiscal 2016 based on the number of plans, according to the Life Insurance Association of Japan. But while business has grown, costs have also risen among all insurers.
The industry is also being pushed to slim down corporate pension operations as private plans gain wider currency amid concerns over Japan's public pension program and the graying society.
Fund managers of all stripes are struggling to maintain satisfactory portfolio earnings in the face of the Bank of Japan's negative rate policy and marginal yields. Life insurers are busy identifying lucrative businesses, and categorizing other units as "non-competition" areas destined for mergers and cost-cutting.
In the case of contract pension management, the insurance companies see the business tapering off as the working population diminishes. This scheme will allow providers to more easily allocate funds and labor to core businesses, and such a rationalization could maximize payouts to policyholders.