The logo of Japanese life insurer Meiji Yasuda is seen at an office building in Tokyo. A rapidly ageing population and forecasts of continuing population decline have prompted Japanese insurers to start looking overseas.

Reuters/Tokyo

Japan’s Meiji Yasuda Life Insurance Co said yesterday it has agreed to buy US-based StanCorp Financial Group for $5bn, the latest multi-billion deal by acquisitive Japanese insurers.
More purchases are likely as other big Japanese life insurers have said they are also looking to expand in the world’s largest market and elsewhere, in an effort to grow outside their home market where the population is shrinking.
“We have set a target of overseas businesses making up 10% of our overall profits. With the acquisition of StanCorp, it comes within reach,” Meiji Yasuda deputy president Hiroaki Tonooka told reporters at a briefing.
Overseas businesses accounted for only 1.8% of Meiji Yasuda’s ¥520bn ($4.2bn) adjusted profits in the year to end-March 2015.
Meiji Yasuda, Japan’s third-largest life insurer by assets, and other major Japanese life insurers have traditionally been domestically focused, as their home market has been relatively stable and profitable.
But a rapidly ageing population and forecasts of continuing population decline have prompted insurers to start looking overseas.
In February, Dai-ichi Life Insurance Co completed a $5.6bn acquisition of mid-sized US life insurer Protective Life in the biggest ever acquisition by a Japanese life insurance company. Dai-ichi has said it is looking for more acquisitions in the US and Asia.
Cashed-up Japanese insurers have built up big war chests after years of steady profits. Meiji Yasuda, a mutual company, said it will fund the StanCorp acquisition with cash on hand.
The Japanese company is paying $115 per share for StanCorp, representing a 50% premium to the US company’s closing price on Thursday. Tonooka said the premium was appropriate given StanCorp’s growth potential.
Portland, Oregon-based StanCorp, which offers insurance and retirement products to companies and individuals, has about $2bn in premium revenues and posted a 2014 net profit of $210mn, Meiji Yasuda said
The Japanese company has premium revenue of $27.5bn and net profit of $2.1bn for the year ended in March.
Mitsubishi UFJ Morgan Stanley and Morgan Stanley advised Meiji Yasuda and Goldman Sachs is financial advisor to StanCorp The deal is expected to close in Q1 2016.
With two of Japan’s top four life insurers bagging multi-billion deals, others are likely to follow.
Nippon Life Insurance Co, Japan’s biggest life insurer with $500bn in assets, has said it is looking for overseas targets and could spend up to ¥1.5tn ($12.1bn) on acquisitions and investments at home and abroad over the next 10 years.
Unlike life insurance companies, Japanese property-casualty insurers began expanding overseas years ago to diversify geographic risk exposures in the event of a catastrophe in one region.
In June, Tokio Marine Holdings Inc agreed to buy US specialty insurer HCC Insurance Holdings Inc for $7.5bn, in what would be the biggest M&A deal this year by a Japanese company.