Japanese insurer Dai-ichi Life Co is in advanced talks to buy Protective Life Corp of the US in a deal that could be worth more than US$5 billion, a source with direct knowledge of the matter said yesterday.
The deal would be the biggest so far in a string of overseas acquisitions by Japanese insurers, led by Dai-ichi Life, seeking out higher-growth markets to offset weak long-term prospects at home as the country’s population ages rapidly.
Dai-ichi Life, Japan’s second-largest private-sector life insurer, plans to buy 100 percent of Protective Life, the source said. The 107-year-old US company, based in Birmingham, Alabama, has a market capitalization of US$4 billion and posted a net profit of US$393.5 million last year.
The source said Dai-ichi Life, worth close to US$15 billion by market value, is planning to fund half of the acquisition cost from existing reserves if the deal goes through. The remainder would be sought externally, the source said, including a possible share issue, along with loans.
In a statement, Dai-ichi Life said: “It is true that we are considering an acquisition of a US life insurance company. But nothing has been decided.”
A spokesman declined to comment further.
The Nikkei Shimbun business daily, which first reported the talks, said a deal would likely top ￥500 billion (US$4.9 billion).
Dai-ichi Life’s shares fell more than 4 percent in Tokyo in heavy trading, compared with a gain of nearly 2 percent in the broader market, as investors fretted over the potential for a dilutive impact on their holdings from a deal.
“The acquisition itself is positive for the company in the long term, but the market is wondering how the company will finance it,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management. “Dilution fears from a possible share offering plan hit investor sentiment.”
Eva Robertson, vice president of investor relations at Protective Life, said in an e-mail to Reuters that the company declined to comment, citing company policy on media reports.
For the year ended in March, Dai-ichi Life was the only major life insurer to post growth in insurance premium revenue, boosted by its Australian unit. Sluggish domestic business weighed on its rivals.
Last month Japan’s largest private-sector life insurer, Nippon Life Insurance Co, agreed to buy 20 percent of Indonesia’s Sequis Life for 4.87 trillion rupiah (US$417.13 million).
The biggest acquisition by a Japanese insurer so far is Tokio Marine Holdings Inc’s purchase of property and casualty insurer Philadelphia Consolidated Holding Corp for about US$4.7 billion in 2008.
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