Japan's Dai-ichi Life in talks to buy Protective Life for $5 billion: source

Mon Jun 2, 2014 6:48am EDT
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By Taiga Uranaka

TOKYO (Reuters) - Japanese insurer Dai-ichi Life Co is in advanced talks to buy U.S. peer Protective Life Corp in a deal that could be worth over $5 billion, extending a drive to buy assets abroad as an antidote to a weak domestic outlook.

The deal would be the biggest so far in a string of overseas acquisitions by Japan's insurers. They're snapping up businesses in markets from the United States to Southeast Asia as a path to future growth while the rapid ageing and eventual shrinkage of Japan's population clouds long-term earnings prospects at home.

Dai-ichi Life, Japan's second-largest private-sector life insurer, plans to buy 100 percent of Protective Life, said a source with direct knowledge of the matter. The 107-year-old U.S. company, based in Birmingham, Alabama, has a market capitalization of $4 billion and posted a net profit of $393.5 million in 2013 from operations that span the country.

"For top (Japanese) insurers with large market share like Dai-ichi Life, it would be very difficult to secure growth when the overall domestic life insurance market starts shrinking," said Teruki Morinaga, insurance sector analyst at Fitch Ratings in Tokyo. "So, it has to go overseas," he said, adding he was commenting based on media reports and hadn't independently verified their accuracy.

In a statement to the Tokyo Stock Exchange, Dai-ichi Life said, "It is true that we are considering an acquisition of a U.S. life insurance company. But nothing has been decided." A spokesman declined to comment further.

Eva Robertson, vice-president of investor relations at Protective Life, said in an email to Reuters that the company declined to comment, citing company policy on media reports.

The source, who was not authorized to discuss the matter, said Dai-ichi Life, worth close to $15 billion by market value, is planning to fund half of the acquisition cost from existing reserves if the deal goes through. The remainder would be sought externally, the source said, including a possible share issue, along with loans.

As investors fretted over the potential for a dilutive impact on their holdings from a deal, Dai-ichi Life's shares sank 5 percent by the close in Tokyo in heavy trading, compared with a gain of 2.1 percent gain in the broader market. In a separate statement, the company confirmed it is considering fund-raising options including the issue of new shares.   Continued...

A man walks past Japan's Dai-ichi Life Insurance company headquarters building in Tokyo April 21, 2011.  REUTERS/Yuriko Nakao