Tokio Marine Holdings, one of Japan’s most acquisitive re/insurance companies, is reportedly looking to boost its profits by scouting for further deals in Asia and overseas with up to $9 billion in available capital, according to Reuters.
Tsuyoshi Nagano, Chief Executive of Tokio Marine, told Reuters that the firm would have sufficient capital buffers even after spending 1 trillion yen ($9.13 billion) on acquisitions.
Japanese re/insurers have been increasingly relying on foreign acquisitions in recent years due to an aging population and low interest rates at home, in addition to heightened exposure to natural disasters.
Whilst acquisitions may offer Japanese re/insurers a way to diversify their risks, Nagano warned that many targets are also becoming too expensive.
“There are companies we have in mind, but it’s not easy, it will take time,” he said. “We have to be careful not to overpay.”
Tokio Marine has already spent $15 billion in the last decade buying other insurance businesses, including HCC Insurance Holdings for $7.5 billion in 2015, Delphi Financial Group for $2.7 billion in 2012 and Philadelphia Consolidated Holding for $4.7 billion in 2008.
The company said that these three deals are expected to account for nearly 80% of its overseas profits in the year to March 2019.
“We are building a stable business by diversifying geographically and operationally,” Nagano told Reuters, adding that Tokio Marine was now looking to double Asia’s contribution to its overseas profits.
With overseas profits of 145 billion yen at year end March 2018, overseas earnings are likely to contribute 45% of the company’s total profits for the year.
“As overseas business profits are nearing 200 billion yen, we would like to raise the proportion of Asia (outside Japan) to 20 percent or more from less than 10 percent now,” Nagano said.
Whilst Tokio Marine will continue to look for deals in the U.S and Europe, Southeast Asian countries may offer better opportunities due to the region’s strong economic growth, rising middle-class income and lower insurance penetration.
“We are always considering strategic options in countries like India, Indonesia, Thailand, Malaysia and the Philippines,” said Nagano.
Tokio Marine recently revealed plans to acquire the Thai and Indonesian operations of IAG for $525 million
