Japanese Insurers Sell $11 Billion in Cross-Held Shares Amid Governance Reforms

Japanese Non-Life Insurers Accelerate Cross-Shareholdings Sale to Improve Governance and Boost Profits

In a significant move to address governance concerns, Japan's top three non-life insurers—Tokio Marine Holdings Inc., MS&AD Insurance Group Holdings Inc., and Sompo Holdings Inc.—have sold ¥1.64 trillion (around $11 billion) worth of cross-held shares during the first nine months of the fiscal year ending March 2025. This amount already accounts for nearly 90% of their initial sales target of ¥1.84 trillion. The accelerated sale of these shares highlights the companies’ commitment to reducing the cozy relationships between businesses that stem from mutual shareholding, which had previously been a point of regulatory scrutiny.

The sale of cross-shareholdings was a response to mounting pressure from policymakers who have emphasized the need for improved corporate governance. This push was intensified following fines imposed on the insurers in October 2024 after they were found to have coordinated changes in insurance fees for mutual clients. Cross-shareholding, a practice where companies hold shares in each other to solidify their business relationships, has long been seen as a contributing factor to conflicts of interest and a lack of transparency.

Tokio Marine Holdings, a prominent player in Japan’s insurance market, sold ¥781 billion in cross-held shares during the nine-month period. Meanwhile, MS&AD Insurance Group unloaded ¥536.8 billion, and Sompo Holdings reduced its holdings by ¥328.5 billion. These sales are part of a broader, long-term strategy to divest from cross-shareholdings, with the insurers aiming to reduce such stock stakes over the next six to seven years, in line with broader regulatory and governance reforms.

“The progress of these share sales is faster than initially planned, which is certainly a positive step for improving corporate transparency,” said Mitsushige Akino, president of Ichiyoshi Asset Management. However, Akino noted that the crucial next step for these insurers is how they reinvest the funds generated from these sales. The insurers must now focus on deploying the capital in business sectors that will help increase their profits, ensuring sustainable growth.

The proceeds from these stock sales are being strategically allocated towards shareholder returns, mergers and acquisitions, and investments in human resources, with all three insurers seeing a boost in net income for the period ending December. This strong financial performance highlights the positive impact of reducing cross-shareholdings, which not only clears up potential conflicts of interest but also allows the insurers to better capitalize on emerging business opportunities.

The move by Japan's top insurers to accelerate the sale of their cross-held shares is part of a broader global trend where corporations are increasingly being asked to clean up their balance sheets and improve transparency in response to public and regulatory pressure. It signals a broader shift toward shareholder value optimization and improved business practices across corporate Japan.

In the wake of these developments, other insurance and financial firms in Japan are likely to follow suit, recognizing the growing importance of governance and strategic investment. The results of this ongoing divestment strategy will likely have a lasting impact on how Japanese corporations operate, with enhanced transparency and increased opportunities for profit reinvestment set to become the new norm.