The Yasuda Mutual Life Insurance Company

The Yasuda Mutual Life Insurance Company

9-1, Nishi-shinjuku 1-chome
Shinjuku-ku, Tokyo 169-92
Japan
(03) 3342-7111
Fax: (03) 3348-4495

Mutual Company
Incorporated: 1880
Employees: 24,473
Assets: ¥5.42 trillion (US$37.70 billion)

The Yasuda Mutual Life Insurance Company, Japan’s oldest life insurance company, stands on its reputation as a dependable life insurer. In an ever-widening Japanese market, the company is also known as an industry pace-setter, most recently for its insurance lines aimed at Japanese women. Internationally, Yasuda Mutual has formed astute alliances to take advantage of Japan’s eminent position in global financial markets while expanding its awareness of alternate investment opportunities and knowledge of new management strategies.

Yasuda Mutual’s beginnings and early history are closely tied to the founding of the Yasuda zaibatsu, the financial conglomerate owned and managed by the Yasuda family. The group was organized following the collapse of the Tokugawa government in 1868, which had secluded feudal Japan from the rapidly industrializing West since 1639. The victorious Meiji Restoration government reopened communications with the West. It concentrated on modernizing Japan and catching up with the technologically superior Western nations. In this context, already consolidated families, such as Mitsui, quickly took advantage of new capitalist potential and government incentives, diversifying quickly and successfully. Unlike Mitsui, Yasuda had no pre-Mieji existence as a business concern. Its founding and progress were rather the vision of one man, a son of a lower class samurai, Zenjiro Yasuda.

With the rise of the Meiji government, Zenjiro Yasuda became an entrepreneur with almost reckless ambition and imagination. As a member of the board of Nippon Ginko, the Bank of Japan, he was an upstart who diluted the longer established power of the Mitsui family. He quickly began to amass newly available capital, forming the Yasuda Bank, now Fuji Bank, the center of the Yasuda zaibatsu. Unlike the other heads of large families—Mitsui, Mitsubishi, and Sumitomo—Yasuda consolidated his empire in banking and finance, specializing in backing small- and medium-sized traders and industrialists.

In 1880, as part of his financial empire, Yasuda founded the Yasuda Mutual Life Insurance Company. Along with the rest of the zaibatsu concerns, the company prospered. In 1893, the Yasuda zaibatsu absorbed the Tokyo Fire Insurance Company—later renamed the Yasuda Fire and Marine Insurance Company—a young insurance firm unable to survive without Zenjiro Yasuda’s aid. He was also one of the largest financiers of the Russo-Japanese War from 1904 to 1905; in the aftermath of the war, the government asked Yasuda to help the troubled Hayaku Zenjiro bank survive. He proposed a government loan of ¥6 million. In 1912 the existing Yasuda Bank was incorporated with capital of ¥10 million. At the same time, the Yasuda hozensha, or family holding company, was formed to manage and direct all Yasuda concerns, including Yasuda Mutual. The stock for these companies was all held by family members, however, and the Yasuda group remained private.

In the 1920s, post-World War I Japan declined into severe economic depression. Nationalist radicals, many opposed to the terms of the Portsmouth Treaty that had ended the war with Russia in 1905, divided the country with rioting and political assassinations. In this tense atmosphere, Zenjiro Yasuda was not a respected man. He had been accused of profiteering after the Russo-Japanese War. In 1921, the same year Prime Minister Hare Kei was assassinated by a nationalist fanatic, Zenjiro Yasuda was killed by a disgruntled visionary incensed by the financier’s refusal to fund a workers’ hotel. Zenjiro’s son, Zennosuke Yasuda, assumed leadership of the zaibatsu. Under his guidance, the conglomerate’s operations were modernized; a university education, for example, became a prerequisite for many Yasuda positions.

The Yasuda zaibatsu survived the postwar political upheaval and economic depression to come into its own in the late 1920s. By 1928, the group was ranked behind only the Mitsui and Mitsubishi groups in total capital; in that year, the Yasuda zaibatsu encompassed 66 companies and reported total capital of ¥308 million. Yasuda Mutual reflected the successful trend of its parent company. By 1939 the company was reporting profit rates of 453%. In 1940 and 1941, those rates soared even higher, to 1,642% and 3,089%, respectively, surpassing even Mitsui Life. Although the Anti-Profiteering Law had been revised and extended in 1937, it did not apply to the insurance industry, thus allowing the kind of spectacular growth experienced by Yasuda Mutual in the 1930s and early 1940s.

World War II occasioned a change in the Yasuda zaibatsu structure. To fund the war effort, the Japanese government began forcing consolidation of major financial institutions. Although Yasuda avoided full consolidation, it did streamline family members’ efforts. Hajime Yasuda, primary heir to the Yasuda empire and now head of the conglomerate, announced Yasuda’s new structure in January 1942: all Yasuda family members would withdraw from related and subsidiary companies, assuming new leadership positions as board members over all zaibatsu concerns.

With Japan’s defeat in August 1945, the organization of Yasuda again changed, this time to check the earlier move toward amalgamation. By the end of August, occupation forces had arrived under General Douglas MacArthur, Supreme Commander for the Allied Powers (SCAP). Under the SCAP administration, economic controls reversed the consolidating trend of Japanese business and enforced democratization and deconcentration of the Japanese economy. Early directives from the Allied powers included mandates for the dissolution of the zaibatsu, preferably according to proposals from the zaibatsu themselves. Responding to what they saw as an inevitable redirection of the Japanese economy, Yasuda executives assumed a leadership role in planning for the dissolution of their own group and ultimately that of other zaibatsu as well.

The Yasuda Plan was submitted in October 1945 and stipulated that the Yasuda zaibatsu would be dissolved and that Yasuda Bank would cease to control Yasuda subsidiaries. Shares held by family members in the bank, the holding company, and all other subsidiaries, including Yasuda Mutual, would be sold to a government control commission and the proceeds used to purchase ten-year government bonds. In addition, family members and executives appointed by them would resign from all Yasuda companies. The Mitsui and Sumitomo zaibatsu reluctantly agreed to the proposal, but Mitsubishi held out longer. The Yasuda Plan, with some revisions, was accepted by the U.S. government in November.

When the occupation ended in 1952, Japanese business reorganized itself once again along the original zaibatsu lines. Although the holding companies had been dissolved, the banks had remained intact; Yasuda Bank, renamed Fuji Bank, and the other zaibatsu banks now became the nuclei of business groups that were remarkably similar to the prewar zaibatsu. The families themselves never quite regained the extent of their prewar power. Mitsui was most acutely affected by the occupation; Yasuda, however, did reclaim some of its former holdings. Hajime Yasuda, the prewar zaibatsu chieftain who had announced the reorganization of 1942, became chairman of Yasuda Mutual after the occupation, a post he still held in the early 1990s. He also promoted other businesses that had been Yasuda subsidiaries during the zaibatsu’s heyday.

Despite a rapidly expanding postwar economy and the re-consolidation of the zaibatsu, the Japanese life insurance industry was slow to recover in comparison to other industries. By 1955, life insurance in force amounted to only 40% of the prewar amount. In the 1960s, the rate of recovery increased, with total life insurance assets doubling in the years from 1962 to 1966. Yet by 1966, life insurance assets amounted to only 5% of total assets of all Japanese financial institutions, compared with 10% before the war. In the tight money market then prevailing, most life insurance funds were loaned to emerging and expanding businesses rather than invested in negotiable securities, as had been the case in prewar Japan.

In 1987 Yasuda purchased an 18% voting stake in Paine-Webber for $300 million. The investment gave Yasuda two voting positions on PaineWebber’s board, an advisory board position for Yasuda President Norikazu Okamoto, and up to a 25% share in PaineWebber’s common stock. The move increased the company’s exposure to international money markets.

In 1988 the company established a firmer presence in the United States by forming Yasuda Life America Agency Inc., a subsidiary dedicated to strengthening and expanding insurance coverage for Japanese-affiliated companies in the United States. Internationalization through foreign investment also continued to escalate. In 1989 and early 1990, facing uncertainty in the Japanese economy, Chairman Yasuda and President Okamoto invested in foreign bonds rather than Japanese government bonds, increasing foreign bond assets to ¥821 billion, a 34% climb over the previous year. Such diversifying investments reflect Yasuda Life’s strong commitment to becoming a truly international company in a rapidly changing global market. In the early 1990s, as Japan’s fifth-largest life insurance company, Yasuda Mutual continued to search for investment opportunities.

Principal Subsidiaries

Yasuda Life International Investment S.A. (Luxembourg); Yasuda Life International Investment (Cayman) Ltd.; Yasuda Life International Investment (B.V.I.) Ltd. (British Virgin Islands); Yasuda Life Global Investment (Jersey) Ltd. (U.K.); Yasuda Life America Capital Management Ltd. (U.S.A.); Yasuda Life International (London) Ltd. (U.K.); Yasuda Life International (Hong Kong) Ltd.; Quaestor Investment Management Ltd. (U.K); Yasuda Life International (Singapore) Ltd.; Yasuda Realty America Corporation (U.S.A.); Yasuda Properties (U.K.) Ltd.; Yasuda Life America Agency Inc. (U.S.A).

Further Reading

“Three of Japan’s Zaibatsu,” The Oriental Economist, December 1945; The Yasuda Fire and Marine Insurance 1888-1988: A Century of Achievement, Tokyo, The Yasuda Fire and Marine Insurance Company, 1988; Roberts, John G., Mitsui: Three Centuries of Japanese Business, New York, Weatherhill, 1989.

—Lynn M. Voskuil