Japan MS&AD paying $530 million for NY Life's India JV stake

Japan's MS&AD is acquiring New York Life's 26 percent stake in a joint venture with Max India for about $530 million, in another example of Japanese companies' growing appetite for overseas assets.

MS&AD Insurance Group, Japan's largest property-casualty insurer by revenue, is among the industry's most aggressive in expanding in Asia through acquisitions, buying both life and non-life assets to secure growth beyond its weak home market.

A year ago, it bought a 50 percent stake in Indonesia's PT Asuransi Jiwa Sinarmas for about 67 billion yen.

Now, one of its core units, Mitsui Sumitomo Insurance, has struck a deal for the stake in Max New York Life, India's largest non-banking private insurance company, for Rs 27.3 billion, the Japanese company said in a statement.

The 26 percent stake is the maximum allowed for foreign ownership in Indian life insurance companies.

The deal would represent a further withdrawal from Asia for New York Life, which recently sold businesses in China, Thailand, South Korea and Hong Kong.

Under the deal, Mitsui Sumitomo will get two seats in the board of the joint venture, which will be renamed Max Life Insurance, the Japanese company said.

The joint venture had gross insurance premiums of Rs 58.1 billion and pretax shareholder income of Rs 1.94 billion for the year ended in March last year, Mitsui Sumitomo said.

Despite the large size of the Japanese economy there is little growth in its domestic market. That, combined with low interest rates and a strong yen, has pushed Japanese companies to aggressively buy up overseas assets.

Japan's outbound M&A activity has ramped up sharply over the past two years. In 2010 Japan's outbound deals including debt totaled $38.3 billion, making it the eighth most active country for overseas M&A, according to Thomson Reuters data.

In 2011 Japan became the third most active country with deals totaling $69.7 billion, an increase of 82 percent. And so far this year Japan's outbound deals have totaled $18.1 billion, leaving it with a No. 3 ranking, behind the United States and Switzerland.

On Thursday, Japan's Nidec Corp, a leading maker of micro motors used in electronic devices, said it will buy Italian industrial motor maker Ansaldo Sistemi Industrial SpA.

PAYING TOO MUCH?

Japan's insurers have been particularly aggressive in overseas acquisitions.

Tokio Marine, taking advantage of its financial firepower, has been bagging bigger and more expensive deals in Europe and the United States, including a $2.7 billion acquisition of U.S. insurer Delphi Financial Group.

Nippon Life last year said it would buy a 26 percent stake in India's Reliance Life Insurance for $680 million and in January also said it would purchase a stake in a fund management unit of Reliance Capital Ltd.

And Meiji Yasuda Life Insurance Co, Japan's No. 2 life insurer, said in January it wanted to do deals, and was planning to acquire one or two overseas companies in emerging economies this year.

Some industry executives say many prospective deals are unattractive and too expensive. Cheap borrowing and a strong currency make it easier for Japanese buyers to pay higher prices but there is some concern about paying too much.

MS&AD was criticized for overpaying for Sinarmas and that has put pressure on the amount that Japanese insurers are willing to spend, M&A bankers have said.

There are also concerns that huge losses from Thailand's flood damage coverage could have sapped Japanese insurers' M&A war chests.

In February, MS&AD said it expects a net loss of 145 billion yen for the year ended in March, hurt by more than 200 billion yen payment for Thai flood losses.

Citigroup Inc is advising MS&AD on the India deal, a source with knowledge of the deal said. A spokesman for Citi declined to comment.

MS&AD shares ended down 1 percent in Tokyo on Thursday, underperforming a 0.7 percent gain in the benchmark Nikkei average Max India shares were up 9.3 percent in late afternoon trade in Mumbai.