Dai-ichi Life Insurance Co., Japan’s second-biggest life insurer, plans to buy full control of Tower Australia Group Ltd. for about 100 billion yen ($1.2 billion), its biggest overseas acquisition.
Dai-ichi Life, which owns about 30 percent of Tower Australia, aims to buy the remaining shares in the first half of next year, said Yasuhiro Kunii, an investor relations official at the Tokyo-based firm, without elaborating.
The Japanese insurer sold shares to the public in April to fill its war chest for acquisitions as the economy stagnates and the population declines. Australian workers will increase pension savings to A$6.1 trillion ($6.1 trillion) by 2035, from A$1.1 trillion in July, according to a government study.
“It is vital for insurers to move and conduct business overseas,” said Winston Barnes, head of sales and trading for Asian markets at WJB Capital Group Inc. in San Francisco. “It is hard to judge whether this is a wise use of their capital at present, for investors will have to wait years to potentially realize a possible return on investment.”
Dai-ichi Life fell 0.2 percent to 130,700 yen at the 11 a.m. trading break in Tokyo. The shares have fallen 20 percent since listing on the Tokyo Stock Exchange. Tower Australia slid 1.1 percent to A$2.73 in Sydney.
Australian Pension Growth
Philippa Ellis, a Tower investor relations official in Sydney, wasn’t immediately available to comment.
The purchase follows the Australian government’s move to cut pension fees earlier this month for retirement savers by A$2.7 billion.
The MySuper plan may cut fees savers pay to asset managers by 40 percent, helping the average worker retire with an extra A$40,000, according a government-commissioned study overseen by Jeremy Cooper, former deputy chairman of Australia’s markets regulator.
In November, Sydney-based Tower Australia said full-year net income rose 88 percent to A$87.4 million.
Currently one in five Japanese citizens is over 65 years old. Only 13 percent are under 15, according to government statistics. Prime Minister Naoto Kan’s government forecasts economic growth will slow to 1.5 percent next fiscal year from 3.1 percent.
Dai-ichi Life purchased about 30 percent of Tower Australia from Guinness Peat Group Plc for 37.6 billion yen in 2008 to seek an alliance with the Australian life insurer.
Last month, Dai-ichi Life said first-half net income fell 42 percent to 29.4 billion yen from a year ago as premium income and the value of investments declined. Premium income fell 15 percent to 1.67 trillion yen.
“It’s a positive growth scenario for a life insurer to go overseas as the Japanese market will continue to shrink due to the dwindling birthrate and aging population,” said Hidemasa Mizumoto, an analyst at Mizuho Investors Securities Co. in Tokyo. “The acquisition will spur Dai-ichi Life to accelerate its overseas acquisitions.”