Mutual Life Insurer Meiji Yasuda to Acquire StanCorp for US$5 Billion
July 27, 2015 by Iris Lai
Meiji Yasuda Life Insurance Co. has agreed to acquire StanCorp Financial Group Inc. in the United States for approximately US$5 billion. The buy moves the Japanese mutual life insurer into the international market.
Meiji Yasuda will acquire all outstanding shares of StanCorp for US$115 per share in cash. The acquisition price represents a 50% premium to StanCorp’s share price as of the business close on July 23, 2015, according to StanCorp. The financial group will continue to operate under the Standard brand and to maintain current operation, management team and staffs after the transaction.
Meiji Yasuda said in a statement the acquisition will accelerate its diversification and international growth, along with enhancing business experiences from the U.S. market. The Meiji Yasuda and Standard are leading players in group benefit insurance in their respective markets, Meiji Yasuda said.
Standard will make “a key pillar of our international operations,” said Akio Negishi, president of Meiji Yasuda, in a statement. The company has explored opportunities in the U.S. market for some time and Standard stood out as “an ideal partner” given with the common background and vision in mutual business.
The transaction is expected to be completed in the first quarter of 2016 and it is subject to customary closing conditions and regulatory approvals, according to StanCorp.
Meiji Yasuda intends to fund the transaction through cash and cash equivalents on hand. StanCorp said the company will become Meiji Yasuda’s primary U.S. presence and partner. The Portland-based Standard offers insurance, retirement and investment products and services.
“While we were not looking for a buyer, Meiji Yasuda’s proposal presented a tremendous opportunity to create value for all our stakeholders — providing a substantial cash premium to our shareholders while enabling us to maintain our current operations and valued employees,” Greg Ness, chairman, president and chief executive officer of StanCorp., said in a statement
StanCorp offers financial products and services through its subsidiaries Standard Insurance Co., Standard Life Insurance Co. of New York, Standard Retirement Services, StanCorp Mortgage Investors, StanCorp Investment Advisers, StanCorp Rea Estate and StanCorp Equities. The financial group reported net profit of US$121 million and total assets of US$23.4 billion as of June 2015, according to Meiji Yasuda. Its insurance premium income amounted US$1.1 billion in the first half of 2015.
The acquisition will expand Meiji Yasuda’s global presence with total assets of US$327 billion, which is well propositioned for international growth. StanCorp said this is a “compelling transaction” in today’s rapidly changing competitive landscape and “all-cash premium transaction provides substantial and immediate value for StanCorp’s shareholders.”
This deal marks the recent merger and acquisition spree of Japanese insurance companies in the U.S. market. On June 10, Tokio Marine Holdings Inc. agreed to acquire HCC Insurance Holdings Inc. for US$7.5 billion through its subsidiary Tokio Marine & Nichido Fire Insurance Co. Ltd (Best’s News Service, June 10, 2015). Dai-ichi Life Co. Ltd.’s US$5.7 billion acquisition of Protective Life was among the largest recent deals in the life sector. Dai-ichi Life said overseas insurance businesses continue to be one of the key growth drivers.
Meiji Yasuda reported a 10.3% rise in net surplus to ¥265.4 billion (US$2.1 billion) for the 2014 fiscal year ended March 31. Total assets rose to ¥35.6 trillion in the 2014 fiscal year from ¥34.3 trillion a year ago. Its solvency margin ratio stood at 1,041, up from 945.5 in the previous year, according to Meiji Yasuda’s financial statement (Best’s News Service, May 29, 2015).
In April 2014, Meiji Yasuda launched the “Next Challenge Program” three-year business plan with the growth strategy supported by enhancing domestic life business’ products and services lineup such as medical and nursing care insurance, together with overseas expansion.
Oversea insurance business contributed to about 13% and 9% of the company’s total premium income and revenue, respectively, in the 2014 fiscal year, according to Meiji Yasuda.
In the United States, Meiji Yasuda acquired a majority equity stake in Pacific Guardian Life Insurance Co. Ltd. in Hawaii in 1976. It increased its stake in PGL to 100% in 1985, according to Meiji Yasuda’s annual report.
In 2012, Meiji Yasuda acquired shares of two Polish insurers, TU Europa S.A. and TUiR Warta S.A, jointly with its alliance partner German-based insurer Talanx AG. It became the first Japanese insurer to enter the Polish insurance market, said Meiji Yasuda.
In Asia, Meiji Yasuda holds stakes in PT Avrist Assurance in Indonesia, Founder Meiji Yasuda Life Insurance Co., Ltd. in China and Thai Life Insurance Public Co. Ltd. in Thailand. Meiji Yasuda said it has worked toward “medium to long-term profit expansion for existing affiliates and subsidiary” of its overseas business. The company has promoted new overseas investment with the upper limit of investment set at ¥250 billion under its medium-term business plan.
Meiji Yasuda Life Insurance Co. currently has a Best’s Financial Strength Rating of A+ (Superior). Both Standard Insurance Co. and the Standard Insurance of Life Insurance Co. of New York have the Best’s Financial Strength Rating of A (Excellent).
