Japanese insurance group MS&AD Insurance Holdings, the parent of the Mitsui Sumitomo insurance entities, has bought a stake in an Australian life and annuities specialist as it looks for further diversification.
Japanese insurance groups have been investing in operations around the globe as they look to diversify their businesses away from their home turf.
MS&AD Insurance is investing AU $500 million to take a 6.3% stake in Challenger Limited, an Australian listed financial services company with a life insurance and fund management business.
The pair already had a partnership that saw Challenger offering Australian dollar denominated annuities into the Japanese market, with this partnership delivering 15% of Challenger’s annuity sales in the latest tax year.
Challenger is the largest provider of individual annuity insurance in Australia and is the seventh largest fund manager in the country.
The individual annuity market in Australia is expected to see significant growth, given an aging population, increasing number of retirees and the nature of Australia’s superannuation system.
As well as further diversifying its business portfolio with the addition of life and annuity related income from Australia and adding further global growth, MS&AD Insurance also sees synergies between the Challenger business and its own Mitsui Sumitomo Primary Life Insurance subsidiary and hopes to see the pair promote and accelerate the joint development of new products.
The company also sees an opportunity to advance its expertise in the longevity risk management space, a sector that is likely to experience growth both in Japan and Australia in the future, as aging populations begin to impact the ability of some pensions to maintain their promises to retirees.
Challenger sees the investment as a positive sign that the growth of annuities in Japan, through the existing partnership, and Australia will benefit both parties and the global reach of both sides is enhanced through closer relations.