Japanese insurer Tokio Marine Holdings Inc, one of the country’s most acquisitive companies, has a US$9 billion war chest for overseas purchases and is scouting for deals in Asia as it looks to boost its profits from the region.
Japanese insurers have been accelerating their pace of foreign acquisitions over the past few years with an aging population and low interest rates denting returns at home. Heightened exposure to natural disasters has also raised their need to spread risk geographically.
Tokio Marine, Japan’s largest property-and-casualty insurer by market value, has already spent more than US$15 billion in the past decade to buy specialty and other insurance businesses in the United States and elsewhere.
“We are building a stable business by diversifying geographically and operationally,” Chief Executive Tsuyoshi Nagano told Reuters, adding the insurer was now looking to double Asia’s contribution to its overseas profits.
“We are always considering strategic options in countries like India, Indonesia, Thailand, Malaysia and the Philippines.”
Southeast Asian countries are a popular destination for foreign insurers given the region’s strong economic growth, rising middle-class income and lower insurance penetration.
Now, there is additional reason for cheer as according to sources, Malaysia is likely to review a directive to foreign insurers to reduce ownership of their local units.
Tokio Marine will also continue to look for deals in the United States and Europe, Nagano said.
Over the past decade, Tokio Marine has made three big U.S. purchases – specialty insurer HCC Insurance Holdings for US$7.5 billion in 2015, Delphi Financial Group for US$2.7 billion in 2012 and Philadelphia Consolidated Holding for US$4.7 billion in 2008.
These deals are expected to account for nearly 80 per cent of Tokio Marine’s overseas profits in the year to March 2019, the company said.
Overseas earnings will likely contribute 45 per cent of the company’s total profits for the year, the company said.
Tokio Marine’s overseas profits came in at 145 billion yen in the year ended March 2018.
“As overseas business profits are nearing 200 billion yen, we would like to raise the proportion of Asia (outside Japan) to 20 per cent or more from less than 10 per cent now,” Nagano said.
Tokio Marine, which recently said it was buying the Thai and Indonesian operations of Insurance Australia Group (IAG.AX) for US$390 million, is looking for more acquisition opportunities in Asia, Nagano said.
“There are companies we have in mind, but it’s not easy, it will take time,” he said.
Nagano, who took over as Tokio Marine’s CEO in 2013, said the firm would have sufficient capital buffers even after spending 1 trillion yen (US$9.13 billion) on acquisitions.
Tokio Marine could do another multi-billion US or European acquisition, but Nagano cautioned targets were becoming too expensive. “We have to be careful not to overpay.”