Dai-ichi Life Holdings is looking to acquire several domestic competitors, as severely low interest rates lead the Japanese insurance industry towards consolidation in the medium term.
Currently, Dai-ichi is the second-largest private life insurer in Japan, having US$493.8 billion in assets.
“Looking forward to 2020 and beyond, I expect there will be major changes (in the domestic life insurance industry), including M&As. We have been, and will always be, studying possible M&As in Japan,” Koichiro Watanabe, the company’s president, told Reuters
. “A holding company structure can flexibly and nimbly adapt to these changes.”
Life insurers have been affected by weak investment returns as the Bank of Japan's expansive stimulus measures have severely lowered returns on Japanese government bonds (JGBs). Dai-ichi and other insurers have stopped buying JGBs, instead focusing on investing in high-return but risky assets, such as foreign bonds.
Watanabe highlighted the impact of ultra-low interest rates on insurers, saying it will negatively impact them in the future.
“The real risk to insurance companies emerges when interest rates start going up,” he said. “Those locking themselves with very low-yield assets are losing financial strengths to withstand the shock.”
Due to the low yields domestically, Japanese insurers have turned to overseas acquisitions, such as Sompo
Holdings’ purchase of US-based Endurance Specialty Holdings.
Dai-ichi has also made a recent purchase, acquiring US firm Protective Life for US$5.6 million. According to Watanabe, his company is considering more large-scale overseas acquisitions to help its growth.
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