Asia has long been a popular destination for foreign insurers as most of the region has had strong potential for growth. However, in the last few years, the region has also been producing outbound deals, as insurers from Japan and China have been making acquisitions in more developed markets, such as the US and Europe.
According to Willis Towers Watson, deals with an Asian acquirer in 2015 were worth a total of US$48.1 billion, five times higher than the previous year’s level. Japanese insurers made up a third of the figure, with three megadeals in the US worth a combined US$16.2 billion.
Japan’s four largest life insurers,
Dai-ichi Life, Meiji Yasuda Life,
Nippon Life and
Sumitomo Life, all made acquisitions, with
Dai-ichi Life’s purchase of Protective Life in the US for US$5.7 billion, being the most notable.
Non-life insurers also made deals, such as
Tokio Marine buying insurer HCC Insurance Holdings Inc. for US$7.5 billion, and
Sompo Holdings buying Endurance for US$6.3 billion, as part of their efforts to diversify. Around 43% of
Tokio Marine’s revenue now comes from outside Japan, said Ian Brimecone, executive chairman for international at
Tokio Marine, speaking at the FT Asia Insurance Summit held in Hong Kong.
Negative interest rates and population growth in Japan have led insurers to invest overseas in order to fuel growth and provide returns for their investors.
As for neighboring China, several insurance groups have made overseas acquisitions, such as Fosun International fully acquiring
Ironshore, before selling it again in a deal announced yesterday, and plans for
Anbang to buy Fidelity & Guaranty Life and China Oceanwide gunning for Genworth.
However, China isn’t faced with negative interest rates, unlike Japan. In fact, the Chinese market still has potential for growth. This means that Chinese insurers are making acquisitions in order to diversify and enter new markets. Recent examples would include Anbang buying the Waldorf Astoria hotel in Manhattan and
China Life investing US$2 billion in Starwood Capital’s hotels in the US.
According to Brimecone, Japanese insurers’ deals were more strategic in nature and driven by the fundamental need for diversification in a stagnant home market. Chinese insurers’ deals, on the other hand, were more financially oriented.
Waheeda Narker, a senior consultant at Willis Towers Watson, said in a statement that these deals are banking on long-term returns, rather than short-term profits.
“You pay a lot for growth, which takes years to realize,” Narker said.
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