Signage for Tokio Marine & Nichido Fire Insurance Co. is displayed outside the company's headquarters building in Tokyo, Japan, on Friday, July 17, 2015. (Photo: Kiyoshi Ota/Bloomberg)
Continuing its goal to pursue business opportunities on foreign soil, Tokio Marine announced that it has agreed to purchase Privilege Underwriters, Inc. (PUI) for $3.1 billion from investors led by Stone Point Capital and KKR. PUI, which does business through the PURE Group of Insurance Companies (PURE Group), includes several business entities dedicated to serving the needs of high-net-worth clients, including PURE Risk Management, PURE Insurance Company, PURE Programs, and Haven Art Group. The deal is expected to close in the first quarter of 2020.
The $3.1 billion price-tag is 33-times PURE Group's forecast profit for 2020; however, Tokio Marine's Chief Executive Satoru Komiya said in a news conference, "We are paying for PURE's big potential growth." Following the acquisition, AM Best placed PURE Group's financial strength and credit rating under review, with "positive implications" considering Tokio Marine's successful track record with past dealings.
|Investing overseas
Earlier this year, Komiya explained the possibility of up-coming large-scale acquisitions in the U.S. and Europe, Bloomberg reported, which has come to fruition with the PURE deal. The transaction marks Tokio Marine's fourth sizable acquisition in the U.S. in 11 years, not counting its most recent U.S. acquisition of cyber insurance specialist NAS Insurance Services in April 2019. Tokio Marine's last big U.S. acquisition — Houston-based HCC Insurance Holdings — closed at $7.5 billion in 2015.
In total, the Japan-based insurer has spent more than $20 billion on large overseas acquisitions in just over a decade.
"The U.S. market is huge, and it is expected to grow steadily," said Komiya. "Also, the market is transparent."
In June 2019, Bloomberg also reported that overseas businesses accounted for nearly half of Tokio Marine's profits, mostly from the U.S, and that the company intended to place more focus on opportunities in emerging Asian markets, such as its deal to buy the Thai and Indonesian businesses of Sydney-based Insurance Australia Group Ltd. for about A$525 million in 2018.
"We have [a] group companies in Southeast Asia, but they're small," Komiya said in a June interview. "If we have a chance to make a further leap in the Philippines, Indonesia, and Malaysia, we'd like to expand our business."
Tokio Marine's move to buy PURE is part of a growing movement of Japanese financial firms looking abroad for growth opportunities amid an aging and shrinking population, which has limited domestic business prospects, Reuters reports.
It's also continuing a trend within the insurance M&A market; insurance agency M&A activity broke records in first-half 2019 when 328 deals were announced, according to OPTIS Partners. Clyde & Co.'s report, "Insurance Growth Report 2019 – Mid-year update," explains that global insurance industry M&A activity rose 13.2% in the first half of 2019 compared to the same period in 2018, as "cross-border M&A activity continued apace in [first-half] 2019 with 63 deals representing 28% of the global total as reinsurers look to extend their reach into new territories."
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Heather A. Turner
Heather A. Turner is the managing editor of ALM's NU Property & Casualty Group. She can be reached at [email protected].
