UPDATE: Nippon Life To Buy Allianz Subordinated Bond For EUR500 Million
July 05 2011 - 5:37AM
Dow Jones News
TOKYO (Dow Jones)--Major life insurer Nippon Life Insurance Co.
said Tuesday it will invest about EUR500 million, or about Y60
billion, to buy a 1% to 2% stake in German insurer Allianz, the
latest in a series of efforts by Japanese insurers to extend their
global reach to offset the limited growth prospects of the domestic
market.
The Tokyo life insurer said it will spend the amount on
convertible subordinated bonds to be issued by a financial unit of
Allianz. The transaction will be completed by July 7 and by
exercising the conversion right, Nippon Life will be able to obtain
Allianz common shares at any time within next 10 years.
A Nippon Life spokesman said that while the eventual holding
depended on various factors, the company would end up with a stake
between 1% and 2% of Allianz shares based on current share
prices.
The move underscores how the nation's life insurance sector
feels in dire need of finding global partners at a time when
Japan's population is shrinking and its life-insurance industry is
seen as saturated, dimming future growth prospects.
With this concern in mind, Nippon Life has already formed
several business tie-ups with foreign financial institutions
including U.S. Prudential Financial Inc. in 2009 and Northwestern
Mutual Life Insurance in 2010. In March it also agreed to buy about
a 26% stake in India's Reliance Life, a unit of Reliance ADA Group
for Y60 billion.
Other major life insurers have also been looking to invest
overseas.
Dai-ichi Life Insurance Co. (8750.TO) has been among the most
active, buying Tower Australia Group Ltd. for about Y99.6 billion
earlier this year to add to investments in Vietnam and Thailand
over the past few years.
Japanese nonlife insurers have also been active in making
acquisitions. Last year, MS&AD Insurance Group Holdings Inc.
(8725.TO) bought a 30% stake in Hong Leong Assurance Bhd. in
Malaysia for about Y27 billion and NKSJ Holdings (8630.TO) acquired
a majority stake in Turkey's Fiba Sigorta Anonim Sirketi for Y27
billion.
As for the domestic life insurance sector, despite market
saturation, consolidation of market players has been progressing at
a relatively slow pace because most insurers including Nippon Life
are still mutualized.
-By Hiroyuki Kachi and Atsuko Fukase, Dow Jones Newswires;
813-6269-2789; Hiroyuki.Kachi@dowjones.com