Tokio Marine to purchase AIG’s medical cover unit

Deal to set company record for largest purchase of an overseas business unit

Tokio Marine to purchase AIG’s medical cover unit

Insurance News

By Gabriel Olano

Tokio Marine Holdings will acquire the medical stop-loss insurance unit of American International Group (AIG) as the Japanese insurance heavyweight continues its overseas expansion push in order to survive a shrinking home market.

The deal is valued at around ¥30 billion (US$266 million) and will be conducted through HCC Insurance Holdings, Tokio Marine’s US-based subsidiary.

Medical stop-loss insurance is a common form of insurance in the US, where the insurer will cover claims above a certain amount for companies that fund their in-house insurance plans for employees. Tokio Marine’s premium income for medical stop-loss insurance (including HCC) was around US$1 billion in 2016, a 4% growth from the previous year, reports Nikkei. 

With medical costs surging, demand for this type of insurance is also growing. It currently is the largest source of income for HCC, which currently ranks fifth in medical stop-loss insurance in the US. Bringing in AIG’s business into the fold could boost it up to third place.

In recent years, AIG has divested itself from business areas it considers non-core in order to focus more on casualty insurance. It has been reportedly searching for a buyer of its medical stop-loss business for some time.

This deal will be Tokio Marine’s largest acquisition of a business unit from a foreign counterpart. The insurer has been more aggressive in overseas expansion than its Japanese competitors. By expanding its American footprint, Tokio Marine seeks to spread out the risks it faces at home, such as a weakening market and frequent disasters.

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