Insurers To Sell $3.1B In Honda Shares In Wake Of Governance Push: Report

Four major Japanese property and casualty insurers are reportedly preparing to sell approximately 500 billion yen ($3.1 billion) worth of shares in Honda Motor Co. Ltd. HMC, signaling an accelerated trend of unwinding cross-shareholding practices.

Tokio Marine Holdings, Sompo Holdings, and two units of MS&AD Insurance Group Holdings will collectively sell their stakes in Honda, reported Reuters.

Additional financial institutions are also expected to reduce their Honda holdings, bringing the total sale to around 500 billion yen, the report added.

Honda is poised to formally authorize the insurers to proceed with the sale. The automaker has already committed to repurchasing up to 300 billion yen of its shares within the current fiscal year to mitigate the impact of the insurers’ sell-off.

The insurers, including MS&AD units Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance, have previously pledged to eliminate all cross-shareholding arrangements.

As of March, Honda was among the top five companies involved in cross-shareholding with these insurers, except for Aioi Nissay Dowa Insurance.

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The planned sale underscores a broader trend in Japan to unwind cross-shareholding practices, which have been criticized for fostering poor corporate governance by shielding management from shareholder scrutiny.

Collectively, the four insurers held over 300 billion yen in Honda shares as of March, with Tokio Marine holding 161 billion yen, Sompo Japan holding 81 billion, Mitsui Sumitomo holding 73 billion, and Aioi Nissay holding 2.8 billion, according to securities filings, which the report noted.

These insurers collectively held around 9 trillion yen in cross-shareholdings, with other significant holdings in companies such as Toyota Motor Corp. TM, Shin-Etsu Chemical Co. Ltd., and Itochu Corp.

In December, Japan’s Financial Services Agency issued a business improvement order to the four insurers after discovering they had colluded to fix corporate insurance fees.

The regulator mandated the reduction of cross-shareholdings, further pressing the insurers to unwind these financial entanglements.

Price Action: HMC shares closed higher by 1.92% at $32.86 on Monday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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