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Author: Tan KW   |   Latest post: Sun, 13 Oct 2019, 12:45 AM

 

Japan insurers target China M&A in new phase

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HONG KONG: Japanese insurance companies have spent more than US$50bil on acquisitions over the past five years to become the world’s second-largest buyer of insurance assets, and the deals spree won’t be slowing down any time soon.
 
The cashed-up insurers are expected to step up their hunt in new markets, with Asia, mainly China, at the top of their wish list, bankers and insurance sector sources said.
 
Two sector giants – Nippon Life Insurance and Tokio Marine Holdings – said last month they were seeking more deals overseas, at a time when not many regional or global insurers have the appetite to splurge cash on assets.
 
Japanese insurance firms have been busy scooping up assets in countries, from Australia to the United States, in the last few years, as they sought to cushion the impact of negative interest rates and a fast-maturing market at home.
 
They struck merger and acquisition (M&A) deals worth US$6.1bil last year, up 66% from 2017, Refinitiv data showed. Japanese insurers have spent US$53bil on deals since 2014, the second most by insurers of any country after the United States.
 
The overseas push, however, largely excluded China, the world’s No. 3 insurance market after the United States and Japan, due to foreign ownership curbs and fragile diplomatic relations between the two Asian economies.
 
That would change with China set to allow foreigners to own majority stakes in domestic insurance joint ventures, and Beijing and Tokyo looking to forge closer business ties amid rising trade tensions with Washington, the bankers said.
 
“Now finally with the easing of foreign shareholding, they would jump in,” said Linda Sun-Mattison, an Asian insurance analyst at Bernstein, referring to Japanese insurers. “China is probably the biggest opportunity in the life insurance sector.”
 
China is in the process of easing foreign ownership curbs for life insurance joint ventures that will allow overseas firms to own 51% in those units compared to the current 50%. Foreign firms have already been allowed to operate wholly-owned non-life units in the country.
 
Beijing has pledged to remove the foreign ownership limit in life insurance ventures completely in three years.
 
In a sign of the growing interest in China, Mitsui Sumitomo Insurance, a unit of Japan’s MS&AD Insurance Group Holdings Inc, agreed in May to buy Commonwealth Bank of Australia’s 37.5% stake in mid-sized BoComm Life for US$477mil.
 
Bankers who work with Japan insurers said firms including Dai-ichi Life Holdings Inc and Sompo Holdings Inc were expected to step up their search for Chinese targets in the years ahead.
 
“While you will see a few big deals happening in the US, the number of transactions will definitely be more in Asia ... where the Japanese insurers need to consolidate their position,” said a Hong Kong-based financials head at an investment bank.
 
The banker said his firm was already working on a few possible acquisition deals by Japanese insurers in China. He declined to be named as he was not authorised to speak to the media.
 
 
 - Reuters 
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