Tokio Marine plots multibillion-dollar deal after Berkshire takes stake
The insurer’s targets include Australia’s Suncorp and IAG, and Canada’s Intact Financial Corporation
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TOKIO Marine, the Japanese insurer backed by Berkshire Hathaway, is closing in on its largest acquisition after months of due diligence on Australian and Canadian targets.
Pursuing a multibillion-dollar international takeover is part of chief executive Masahiro Koike’s push to diversify the operations of one of Japan’s largest financial services companies.
Over the past months, Tokio Marine has reviewed a number of targets including Australia’s Suncorp and Insurance Australia Group (IAG) – two of the country’s largest general insurers and among its most valuable listed companies – as well as Canada’s Intact Financial Corporation, with a view to launching a deal.
Suncorp and IAG have market capitalisations of about US$14 billion and US$13 billion, respectively. Intact is worth about US$34 billion.
Two people with direct knowledge of the matter said Suncorp has emerged as the preferred target, with the Canadian company deemed too large.
The same people warned that discussions were ongoing and there was no certainty a deal would result.
Shares in Suncorp rose more than 7 per cent on Tuesday (Aug 25), reducing their decline over the past 12 months to about 10 per cent. IAG was 4.5 per cent higher.
Tokio Marine said it would not comment on market speculation. Suncorp, IAG and Intact all declined to comment. Some details of Tokio Marine’s plans were first reported by The Australian.
Berkshire Hathaway, which was until recently run by Warren Buffett, acquired a 2.5 per cent stake in the Japanese company in March that also involved an agreement to cooperate on large-scale international mergers and acquisitions.
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The plan is for the two groups to make sizeable acquisitions together that use Berkshire’s balance sheet alongside Tokio Marine’s operational expertise and its record in identifying takeover targets.
Since 2008, Tokio Marine has made five large-scale international deals in property and casualty insurance worth roughly US$19 billion, including paying US$7.5 billion for US-based HCC – its largest deal to date.
Although it is not clear what Berkshire’s role in a potential takeover would be, said the same people, the deal with the US giant is intended to involve insurance M&A outside Japan that will allow Tokio Marine to preserve firepower for domestic investment.
Tokio Marine was the main insurer of supply chain finance provider Greensill Capital, which collapsed in 2021. Two years earlier, the Japanese company had acquired Bond & Credit Co (BCC), the Sydney-based outfit that provided billions of dollars of cover to Greensill.
Tokio Marine’s takeover of BCC was part of an aggressive global expansion that included buying out IAG’s 50 per cent stake.
IAG offers a variety of policies such as vehicle and rural insurance in Australia and New Zealand under brands including NRMA and CGU.
Brisbane-based Suncorp also trades under the AAMI and GIO brands, and has been viewed as a potential target for consolidation after selling its banking arm to ANZ in 2024.
Suncorp posted a net profit of A$1 billion (US$714.2 million), paid a special dividend and announced a share buyback in the release of its annual results this month.
Steve Johnston, the long-serving chief executive, said Suncorp had invested in new IT systems, simplified its business and struck a new reinsurance deal that would reduce earnings volatility and natural hazard risk.
“This result demonstrated that a well-run insurance company can deliver for both customers and shareholders,” he said.
Australia has been a hunting ground for Japanese investors for decades, with its energy, logistics, industrial, consumer and real estate sectors the target of high-profile takeover moves.
Australia’s insurers have also been targeted by Japanese rivals, with Daiichi Life and Tokio Marine having acquired smaller players in the past.
Japanese foreign direct investment reached a record US$113 billion last year, indicated a report by law firm Herbert Smith Freehills Kramer and the Australian National University, with 77 transactions completed.
These included Mitsui’s US$5.4 billion investment in the Rhodes Ridge iron ore joint venture.
The report said Australia’s life insurance and financial services sectors were attractive to Japanese investors due to the country’s population growth and affluent consumer base. FINANCIAL TIMES
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