Meiji Yasuda Life Insurance is buying a 15% stake in Thai Life Insurance for about $750 million, the latest in a string of investments in Southeast Asia by Japanese financial institutions looking for growth outside their lacklustre home market.
The deal follows hot on the heels of Dai-ichi Life Insurance’s purchase of a 40% stake in Indonesia’s Panin Life for $335 million. Outside the insurance sector Japanese megabank Mitsubishi UFJ Financial Group announced its acquisition of a 75% stake of Thailand’s Bank of Ayudhya for $5.7 billion.
These deals have swollen the value of Japanese companies’ deals in Southeast Asia to $8.2 billion so far this year, already a new annual record, surpassing the $7.6 billion spent in all of 2006.
Japanese financial institutions are not the only ones to spot the growth opportunities in Southeast Asia, but they have been able to outbid competitors from North America and Europe using their low funding costs and, up to earlier this year, a strong currency.
Meiji Yasuda, Japan’s second-biggest life insurer, outbid private equity firms Carlyle, KKR and CVC in early on in the bidding for the Thai Life stake.
Tokyo-headquartered Meiji Yasuda is hoping the deal will pay off given the growth of insurance in the Thai economy. Reinsurer Swiss Re is forecasting premiums sold in Thailand will grow by 6% in 2014, well above the 3.5% in Japan and 3.9% globally.
The Japanese insurer is also looking to broaden Thai Life’s distribution platform. Meiji Yasuda is part of the Mitsubishi family of companies and people familiar with the insurer’s thinking say that it hopes to sell insurance products over Bank of Ayudhya’s banking network once MUFG’s acquisition takes effect. However, nothing has been agreed as both deals are pending regulators’ approval.
The capital injection from Meiji Yasuda comes as Thai Life, the third-largest life insurer in Thailand by total premiums sold in 2012, is looking to expand outside its home market.
“The strategic partnership will help Thai Life to take full advantage of the rapid growth of the economy and the life insurance industry in the Asean region,” said Chai Chaiyawan, President of Thai Life in a statement on Friday.
Thai Life has the second-largest tied agency force and the largest number of branches and customer care centres across the country in 300 locations nationwide.
As of December 31, 2012, Thai Life had total assets of over Bt202 billion ($6.5 billion) and total reserves of Bt160 billion. In 2012, Thai Life generated first year premiums of Bt12.4 billion, representing a 40% increase from 2011.
Barclays was Thai Life’s financial adviser and Baker & McKenzie served as its legal adviser, Thai Life said in a statement on Friday.