An internal ministry of finance paper 10 years ago estimated that if Japan's biggest life companies demutualized and listed on the Tokyo Stock Exchange they would account for 25% of the Nikkei index.
Today they might not be worth that much - maybe 12% of the index or ¥20 trillion ($153 billion) at the US earnings multiple of 17 times. That is, nearly as much as the biggest 19 banks. Morgan Stanley analyst Hideyasu Ban believes the largest firm, Nippon Life, would be worth ¥5 trillion alone, at his preferred valuation parameter of 1.8 times adjusted book.
A strong listed life insurance sector could help restore health to other companies in the financial system. Demutualized businesses tend to take on a new lease of corporate life, expanding their activities and sharpening up their operating efficiencies as their share performance comes under more scrutiny. Rejuvenated life companies could even help recapitalize the banking sector by merging with banks to form European-style bancassurance entities.
"Five years from now there should be some form of consolidation of the banking sector," says Miles Wixon, insurance analyst at Salomon Smith Barney.