UPDATE 5-Japan MS&AD paying $530 mln for NY Life's India JV stake

Thu Apr 12, 2012 10:35am EDT

* MS&AD is 4th Japanese insurer to enter Indian market

* MS&AD unit to get two board seats in India JV

* Concerns raised that Japan insurers are overpaying for buys

* Indian life insurers see declining premium

By Taiga Uranaka and Devidutta Tripathy

TOKYO/NEW DELHI, April 12 (Reuters) - Japan's MS&AD is buying New York Life's 26 percent stake in a joint venture with Max India for about $530 million, the latest in a spate of outbound deals from Japan and the second in about a year with an Indian insurer.

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 ($827.21 million). It was already in a general insurance joint venture in India.

Now, one of its core units, Mitsui Sumitomo Insurance, has struck a deal for the stake in Max New York Life, India's sixth-largest life insurer based on premium income, for 27.3 billion rupees ($530.72 million).

The 26 percent stake is the maximum allowed for foreign ownership in Indian life insurers, although a possible change to lift the limit to 49 percent has long been pending.

Max India Chairman Analjit Singh told reporters at a press conference in New Delhi that Mitsui Sumitomo made an unsolicited offer to New York Life eight or nine months ago.

New York Life recently sold businesses in China, Thailand, South Korea and Hong Kong.

"We are focused on, concentrating on, our leading market positions that we have in the United States and Mexico and that is the  driver of our repositioning from our international businesses," Michael Sproule, chief financial officer for New York Life, told reporters in the Indian capital.

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

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

Last year, Japan's Nippon Life Insurance Co bought 26 percent of Reliance Life Insurance, a unit of Indian billionaire Anil Ambani's Reliance Capital, for $680 million.

India's $41 billion life insurance industry is dominated by state-owned Life Insurance Corp of India with a 70 percent market share.

PAYING TOO MUCH?

Japan's insurers have been particularly aggressive in overseas acquisitions. Thursday's deal marks the fourth entry of a Japanese player into a life insurance market which holds plenty of potential given low penetration and rapid economic growth, but is fiercely competitive, with 24 players.

Premium income at Indian private sector insurers fell 18 percent to 252 billion rupees in the year through February after a regulatory clampdown on the sale of equity-linked products squeezed sales.

Several of the foreign joint venture partners in smaller Indian insurers have also been looking to exit as they face pressure in their home markets and struggle with a challenging Indian market.

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.

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.

For a Factbox on recent overseas deals by Japanese life insurers, see

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 advised MS&AD on the deal while Goldman Sachs advised Max India, Singh said.

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 finished up 8.4 percent in Mumbai.

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