Prudential Financial Inc. and MetLife Inc., insurers that have competed for U.S. sales for more than a century, are extending their rivalry in Japan as American International Group Inc. sells units.
Prudential, which entered Japan in 1987, is set to buy AIG’s Star Life Insurance and Edison Life Insurance units for $4.8 billion, three people with knowledge of the matter said yesterday. MetLife expects to complete a $15.5 billion deal for American Life Insurance Co., known as Alico, on Nov. 1. Both firms sidestepped the worst of the financial crisis and are expanding in the world’s second-largest life-insurance market as bailed-out rivals retreat.
Prudential’s John Strangfeld is making his second deal in Japan since taking over as chief executive officer in 2008. He’s building a business in a nation that already contributes more than a fifth of Prudential’s revenue. MetLife CEO Robert Henrikson is adding Alico’s more than $7 billion of annual revenue in Japan to a non-U.S. business that reported $5.5 billion of revenue in 2009.
“Met is probably making a riskier acquisition, but there’s a bigger payoff,” said Randy Binner, an analyst who follows U.S. insurers for FBR Capital Markets and has “outperform” ratings on MetLife and Prudential. “Pru would not expect to have that same kind of home run or multiple or expansion. But they’re much more likely to execute it well.”
Prudential, the second-biggest U.S. life insurer, will pay for the AIG units in cash, said the people, who declined to be identified because the negotiations are private.
Source : Bloomberg
