NKSJ and its bigger rivals MS&AD Insurance and Tokio Marine Holdings are accelerating their overseas expansion as Japan’s 8 trillion yen ($95 billion) property-casualty insurance market faces weak growth prospects.
Their main businesses are car and home insurances, and both of them are unlikely to rise amid Japan’s aging demography.
“We have to tap overseas markets to secure growth, and we will seek such opportunities mainly in BRIC (Brazil, Russia, India and China) and ASEAN countries,” Managing Executive Officer Hiroyuki Yamaguchi told Reuters in an interview on Wednesday.
“(Target) overseas insurance companies include reinsurers and we will also look at life insurance firms, so we might need more than 200 billion yen.”
NKSJ, created through the merger of Sompo Japan and Nipponkoa Insurance in April, had said it would spend 200 billion yen ($2.4 billion) on acquisitions over the three years ending in March 2013.
The firm, which is 12.5 percent owned by Southeastern Asset Management, said in June it would acquire Turkish nonlife insurance firm Fiba Sigorta for about 28.1 billion yen. In May, it bought Singapore’s Tenet Insurance for about 6.4 billion yen.
Tokio Marine, Japan’s No. 2 non-life insurer, has been most aggressive in the industry in overseas expansion, spending $4.7 billion to acquire U.S. insurer Philadelphia Consolidated and 442 million pounds ($680 million) to buy Lloyd’s of London insurer Kiln in 2008.
OPPORTUNITY KNOCKS
Yamaguchi said there is a chance that “relatively healthy” assets could be put on sale by European and the U.S. insurance companies if they need to reduce assets to meet stricter capital rules or improve their balance sheets under new accounting rules.
European regulators are set to introduce new rules, known as Solvency II, which are designed to better align insurance companies’ capital safety cushions with the risks on their books.
As for reinsurance firms, Yamaguchi said NKSJ sees opportunities in Bermuda-based companies, some of which are likely to be put up for sale as investment funds may move to cash out their ownership stakes due to current economic uncertainty.
Yamaguchi also said NKSJ wants to raise its stakes in its overseas ventures, including India’s Universal Sompo General Insurance, if changes in local regulations on foreign ownership allow in the future.
NKSJ currently holds 26 percent of Universal Sompo, the maximum under current regulations.
Yamaguchi added that the firm may consider lifting its 30 percent stake in Berjaya Sompo Insurance in Malaysia, where rules allow for an up to 70 percent hold.
“Our basic stance is to take a majority stake in overseas operations. Unless we can control management, there will be restrictions on what we can do to realize the potential of the business in question.”
Source : Reuters
