Mitsui Sumitomo Insurance to strengthen presence in China, India

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Mitsui Sumitomo Insurance Group (MSIG) will strengthen its appetite for acquisitions in China and India, although it will remain cautious toward the US, MSIG’s president told dealReporter.

“I think we will put priority in Asian M&A, especially China, India and Vietnam,” president Toshiaki Egashira said. “It does not mean that we have absolutely no interest in the US. But the US market has lower priority than Asia.”

An MSIG spokesperson also said MSIG is eyeing life and non-life insurance companies, especially reinsurance businesses, in China and India, along with the Southeast Asian region.

Unlike number-one rival Tokio Marine, which has been aggressively building its operations in the US through acquisitions, MSIG’s overseas forays have so far been focused in Southeast Asia and Europe. Thanks to its recent acquisition of Aviva’s entire Asian operations and Mingtai, Taiwan’s second-largest non-life insurer, in 2005, the spokesperson said MSIG is currently one of the top five players in Taiwan and almost every Southeast Asian country.

Now, judging from its decision on Friday to integrate with two other Japanese non-life insurance companies, Aioi Insurance and Nissay Dowa, MSIG is aiming to be a leading global player. “This [the integration] is the best opportunity to change the landscape of the insurance industry. The combined premium revenues of the three will make the integrated company the fifth largest in the world,” Egashira said.

MSIG’s aggressive foray reflects the inexorable reality of a shrinking customer base at home as a result of Japan’s aging population and a drastic fall in auto-insurance premiums caused by dwindling auto sales.

A Tokyo-based sector analyst saw considerable synergies in the linkup up of MSIG, Aioi (an affiliate of Toyota Motor), and Nissay (an affiliate of Nippon Life Insurance).

Said Egashira, “This is the best combination we can think of. We have operational bases in 38 countries. We can build a strong customer base worldwide by combining a global sales network of Toyota, Nippon Life as well as the Mitsui and Sumitomo groups.” After the press conference announcing the integration plan, Egashira said: ”We have absolutely no M&A plans in Japan [for the time being].”

The planned integration will also make it possible for MSIG to cut considerable costs for system operations. “The integration will enable us to cut such operational costs by 20%-30% or JPY 20bn (USD 224.7m) to about JPY 68bn (USD 764m),” said Egashira.

The MSIG spokesperson said the linkup with Toyota-affiliate Aioi would enable the combined company to seek acquisitions in Europe, especially, North and East Europe as well as Russia, by exploiting Toyota’s plants in these regions.

Meanwhile, spokespeople for MSIG, Aioi and Nissay said they have yet to pick their respective financial and legal advisors, though they already have short lists of candidates. As a result, they have yet to start due diligence and file applications at respective competition authorities.

“We are still in the early days. But we are hoping to hold respective EGMs in January 2010 so that we can complete the integration in April 2010 as scheduled,” said the spokesperson. The three companies are expected to announce their share swap ratio prior to the EGMs, according to an Aioi spokesperson.

The share price of MSIG closed 7.17% lower, at JPY 2,200, in Tokyo on Friday, while Aioi shares ended 5.16% lower at JPY 404. Nissay shares, meanwhile, closed 5.65% lower at JPY 468. MSIG has a market capitalization of JPY 926.9bn (USD 10.4bn).

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