Cash-rich Japanese financial firms are hoovering up Southeast Asia’s life insurance companies

Cash-rich Japanese financial firms are hoovering up Southeast Asia’s life insurance companies
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So far this year Japanese companies have spent $6.6 billion in Southeast Asia, much of it on life insurance companies. Judging by reports on Tuesday that Meiji Yasuda is considering a $700 million offer for the unlisted insurer Thai Life, it looks like there’s more to come.

Foreign markets have long been a popular destination for Japanese M&A money—a record $112 billion of it last year—but few more so than life insurance. According to Reuters, Meiji Yasuda Life is in exclusive talks with Thai Life for a 15% stake, after edging ahead of Japanese peer Sumitomo Life.

Total outbound Japanese M&A has actually dropped by 67% from last year, but Southeast Asia is still gaining steam. In the last few months, Dai-ichi Life bought 40% of Indonesia’s Panin Life for $337 million, and Sumitomo is expected to bid for Indonesia’s BBNI life insurance unit. The region’s banks have also been a popular target: Mitsubishi UFJ is finalizing plans to buy a 51% stake in Thailand’s Bank of Ayudhya for about $4 billion, and Sumitomo Mitsui Financial agreed to buy 40% of Indonesia’s BTPN for $1.5 billion. That’s all just this year.

So why the shopping spree? Japan’s own life insurance market is saturated and a long-term stagnant economy has throttled its ambitious companies, who have long seen M&A as their ticket to greater profits. And Asian insurance products are set for a big boom: Swiss Re expects premiums in emerging Asian economies to grow 9.8% in 2013, way above its 2.2.% estimates for industrialized countries. Asia’s growing middle classes have more personal disposable income than ever, life insurance penetration rates are low, and population growth is high, so markets may be small for the time being, but have plenty of room for expansion.