Mitsui Sumitomo Insurance, part of MS&AD Insurance Group Holdings, intends to spend as much as USD 4.5 billion (500bn yen) on mergers and acquisitions (M&A) through 2023, with a focus on the North American market, reports Nikkei.
It’s understood by Nikkei that the Japanese insurer is eager to diversify its portfolio in light of the challenging earnings environment in Japan.
In recent years, the country has been hit by numerous natural catastrophe events, which have reportedly pushed Mitsui Sumitomo’s fire business in Japan to record losses for ten consecutive years.
“Now that we have made it into the global top 10 by revenue, we need to reach the top level in terms of profits. We will create a 500 billion yen fund for overseas M&A. About 60% of it will be allocated to North America,” said recently appointed President and CEO, Shinichiro Funabiki, as reported by Nikkei.
Traditionally, Mitsui Sumitomo has taken a cautious approach to international M&A which has seen it fall behind the likes of Tokio Marine in North American acquisitions.
However, it appears that the insurer feels that now is the right time to tap the specialty insurance market in the U.S. and also the country’s property insurance market, which is the largest in the world.
Nikkei reports that the insurer will consider leveraging surplus cash as capital for the fund. And, has chosen a fund as a vehicle for its overseas M&A activities to enable it to act quickly when opportunities arise.
According to Funabiki, acquisitions in North America would lead to diversified risks for the firm’s core insurance operation. At the same time, the insurer is also hopeful of generating synergies with UK insurer MS Amlin, which it acquired in 2016.
Analysts at Morgan Stanley have since commented on the USD 4.5 billion M&A fund, noting that it could “point toward diversification of its business portfolio along geographical and product lines.”