Mitsui Sumitomo Insurance Group Holdings Inc., Aioi Insurance Co. and Nissay Dowa General Insurance Co. are in talks to create Japan's largest non-life insurer, two people familiar with the negotiations said.
The three companies may merge as early as the second half of 2009, one of the people said. Both declined to be identified because a final decision hasn't been made, Bloomberg reported.
Japan's insurance stocks jumped on speculation the merger may reduce competition. The three insurers had 2.73 trillion yen ($30 billion) in combined revenue from premiums in the year ended March 31, more than industry leader Tokio Marine Holdings Inc., which had 2.25 trillion yen.
"If you see mergers, it's a good sign," said Nader Naeimi, a Sydney-based senior investment strategist at AMP Capital Investors, which manages about $85 billion. "It shows that companies are starting to understand that there's value out there and are beginning to take advantage of the cheap valuations."
Masahiro Mizoguchi, a spokesman for Aioi, Yuichi Murakami, a spokesman for Mitsui Sumitomo, and Kiyoshi Oshida, a spokesman for Nissay Dowa, said the companies didn't have any announcement to make.
Mitsui Sumitomo rose 6.8 percent to 2,845 yen as of 9:45 a.m. on the Tokyo Stock Exchange. Nissay gained 15 percent to 579 yen while Aioi was untraded and poised to climb. An index tracking nine insurance stocks gained 4.9 percent, the biggest increase among 33 industry groups on the benchmark Topix Index, which rose 0.1 percent.
The Nikkei, Asahi, Yomiuri and Mainichi newspapers earlier reported details of a planned merger.