NKSJ Holdings Inc. (8630), Japan’s third- largest non-life insurer, may increase the amount it will spend for acquisitions abroad as it aims to counter declining demand at home, President Masatoshi Sato said.
NKSJ, formed as a holdings company of Sompo Japan Insurance Inc. and Nipponkoa Insurance Co. last year, may boost the budget allocated for overseas acquisitions from the current 200 billion yen ($2.6 billion), Sato said. The Tokyo-based company last year announced plans to use some of 300 billion yen proceeds from selling cross-shareholdings for merger and acquisitions.
“We still have a buffer of about 100 billion yen and if opportunity poses, we may well increase the budget,” Sato said in an interview in Tokyo on July 29. “M&A is a wave we need to catch when the opportunity arises.”
NKSJ is reviewing its mid-term goals following the March earthquake, including an increase in profit by 2015 announced in May 2010, Sato said. He’s sticking to his plan of targeting the so-called BRIC nations that include Brazil, Russia, China and India, as well as Southeast Asian countries to cope with Japan’s aging population and declining car sales that cut domestic demand after the catastrophe.
The insurer has a presence in 41 locations in 29 countries, according to Sato. The company recently bought stakes in Fiba Sigorta Anonim Sirketi, a Turkish non-life insurer, and Tenet Insurance Co., a Singaporean insurance company.
NKSJ shares gained as much as 2 percent to 520 yen and closed at 510 yen at 3 p.m. in Tokyo. The stock has declined 15 percent this year, compared with the 9 percent drop by the six- member Topix Insurance Index.
The recent strength in the Japanese currency will give a “tailwind” to seeking acquisitions, Sato said. The yen has strengthened 4.2 percent against the dollar this year, making it cheaper to buy assets denominated in foreign currencies.
Japanese insurers are looking overseas as they grapple with an aging society and declines in returns on their securities holdings in the aftermath of the nation’s record earthquake in March. NKSJ turned to a loss of 12.9 billion yen last fiscal year on insurance payments related to the magnitude-9 temblor and valuation losses on securities holdings.
NKSJ expected to save about 30 billion yen in the fiscal year 2012 through combining Sompo Japan and Nipponkoa. The insurer is targeting a profit of 160 billion yen for the fiscal year ending March 2015, compared with the 16 billion yen forecast for the year ending March 2012.
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