Millea Holdings is a product of merger between Tokio Marine and Nichido Fire in 2002. The company is primarily involved in the business of providing damage and life insurance services. Its principal lines of insurance are: voluntary automobile; compulsory automobile liability; fire and allied lines; personal accident; cargo and transit; and hull insurance services. The voluntary automobile segment generates about 44% of the direct premium written. Millea is also engaged in investment consulting, investment trust management, derivative and the manpower dispatch business.

The Japanese life insurance scenario is dominated by ten major players, while non- life insurance industry consists close to 50 licensed entities, offering almost similar services. The life industry’s main driver is population growth, while overall economic development aids the non-life part of the business. Japanese economy has seen a long phase of deflation that has hampered the non-life insurance growth, while recently hiked interest rate and inflation, can be considered as positive development. Still the aging population and drop in population growth is creating some worries for the insurance players.

Millea’s insurance premium growth is registering a stagnant trend, as company’s cross selling strategy has not been too successful. While the increasing competition due to deregulation and growing market share of international players is putting additional pricing pressure. Looking ahead in 2007, the positive indications of economy can have a constructive impact on the company. However, considering Millea’s long record of generating poor return on equity that now lingers around a mere four and half percent. It will be highly unlikely that such trend will change, especially taking into account the slow pace of Japanese economy growth. Moreover, company’s low margins, dormant growth, and unfavorable Japanese demographic trend, makes Millea’s stock an unappealing investment.