Meiji Yasuda Life Insurance Co agreed to buy US insurer StanCorp Financial Group Inc for about US$5 billion, joining Japanese insurers that are expanding abroad to counter the shrinking domestic market.
Meiji Yasuda is to pay US$115 a share for the Portland, Oregon-based insurer, a 49.9 percent premium on its one-month weighted-average share price, according to a statement.
Japanese insurers are looking for ways to spread risks and increase revenue overseas as an aging population saps demand for policies and natural disasters lead to higher payouts.
Tokio Marine Holdings Inc agreed to buy HCC Insurance Holdings Inc for about US$7.5 billion last month. Dai-Ichi Life Insurance Co paid about US$5.5 billion for Protective Life Corp this year.
“This continues the process” of Japanese insurers pursuing takeovers abroad, Tokyo-based Keefe Bruyette & Woods analyst David Threadgold said by telephone.
Japan’s demographics mean that “if you stay at home, you’re a shrinking company.”
StanCorp was founded more than 100 years ago and sells a range of products that companies offer to their employees, like long-term disability and life insurance. It also offers annuities.
Its profit has climbed as it benefited from higher premiums in its employee-benefits unit and improvements in the individual-disability business.
The insurer on Thursday said that net income rose 58 percent to US$64.3 million in the second quarter from a year earlier.
Meiji Yasuda deputy president Hiroaki Tonooka said the purchase price was appropriate considering StanCorp’s growth potential.
The Japanese insurer will “make a comprehensive decision” if a good deal comes up in the future, he said.
The company said the purchase of the US group, one of the biggest transactions ever by a Japanese life insurance company, is part of its bid to expand profits.
“The size and profit of our overseas insurance business will jump with this purchase,” the company said. “We will position StanCorp as an important base in the US market that is the largest in the world and is expected to see mid- and long-term stable growth.”
StanCorp will become a wholly-owned subsidiary of the Japanese insurer early next year, after approval by shareholders of the US group and by the US regulators.
“This is a friendly transaction that the board of directors of StanCorp unanimously approved,” Meiji Yasuda said.
StanCorp’s shares had rallied almost 10 percent this year, before the acquisition announcement. That compares with a 1.2 percent drop for the Bloomberg Industries North America Life Insurance Valuation Peers Index.
The deal with closely held Meiji Yasuda includes a 25-day “go-shop” period during which StanCorp can seek competing offers. If another bidder emerges with a better offer, there is a US$90 million break-up fee, according to the statement.
Japanese insurance firms have announced nearly US$28 billion worth of acquisitions in the past five years as they pursue business outside their home market, where a shrinking population has weighed on growth.
“Particularly for large Japanese life insurers, the total amount of insurance in force is declining, so bringing a quality overseas insurer under the umbrella is a good way to secure stable revenues and diversify portfolios,” Tokyo-based Standard & Poor’s credit analyst Reina Tanaka said.
Additional reporting by AFP
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