MS&AD seeks acquisitions, growth outside Japan
Japanese insurance group MS&AD is seeking acquisitions outside Japan to further diversify the business, CEO Yasuyoshi Karasawa said while presenting the group’s “Vision 2021” plan.
“In the management plan “Vision 2021,” we have laid the foundations for 50 percent of group adjusted profit to be generated from international business in succeeding medium-term management plans, including both organic growth and inorganic growth,” Karasawa said.
Potential acquisition targets should share the same values and should have a sustainable growth model, Karasawa explained, pointing to the investment in China’s BoCommLife Insurance, announced in May 2018, as a good example.
Potential acquisition targets should also offer a diversification of risks to MS&AD. “It is important whether risks are diversified according to domestic or overseas, non-life or life insurance, regions, and perils,” Karasawa said.
The group’s focus on Asia is set to serve as a basis for MS&AD’s global development, Karasawa suggested.
“These strengths in Asia will also benefit business expansion in other countries and regions where we do not have our own network, Karasawa said. He pointed to Latin America and MS&AD’s alliance with Mapfre, helping to develop business that by utilizes both MS&AD’s facilities in Asia and those of Mapfre in Latin America.
Mapfre has been running similar business in cooperation with Australia’s QBE in the Oceania Region, with AXA in Francophone Africa; and with Generali, in Central and Eastern Europe.
“The reason these alliances work well is that our group has strengths in Asia, and each partner provides its facilities in each region to our group and in return can utilize the facilities of our group in Japan and Asia.
“By making full use of this strength, we believe we can pursue efficient global development,” Karasawa noted.
MS&AD wants to also take part in the growth potential in China and India. “In order to develop life and non-life insurance business in these two countries and build firm footholds, it is important to form alliances with good local partners and steadily manage business,” Karasawa said.
MS&AD has a local subsidiary for non-life insurance in China which has been forming alliances with China’s Ping An Insurance and China Pacific Insurance. MS&AD wants to develop life insurance in China together with the Bank of Communications. In India, MS&AD plans to develop non-life insurance business through teaming up with the southern business conglomerate Murugappa Group and develop life insurance business with the New Delhi business conglomerate Max Group.
During the period of the management plan, MS&AD intends to diversify its business portfolio by initially aiming at achieving 50 percent profit from the domestic non-life insurance business and 50 percent from the domestic life insurance and international businesses combined. As a next step, MS&AD aims at raising the profit of its international business to 50 percent of the group’s profit.
The domestic non-life insurance business, which generates most of the group’s profit as of now, will aim at keeping a combined ratio of 95 percent or lower and maintain and expand the profit level to secure about 50 percent of entire group profit during this medium-term management plan period.
In the domestic life insurance business MS&AD has been “aggressively” developing and selling products that meet market needs to stabilise profits of its two life insurance companies. They are expected to generate about ¥45 billion ($8.9 million) on an annual basis during the term of the management plan “Vision 2021”.
The international business is expected to achieve annual profit of more than ¥100 billion through organic growth by fiscal 2021. Although MS Amlin registered “severe” financial results in fiscal 2017, the sum of profit of Amlin/Lloyd’s syndicate and the reinsurance subsidiary of Mitsui Sumitomo Insurance before integration was about ¥40 billion, Karasawa noted. “While not a simple calculation as the risk amount of natural disasters was restrained because of integration, we can foresee that MS Amlin business will generate profit of about ¥45 billion considering cost reductions, initiatives currently being pursued to recover profitability, and synergies with Asian and US businesses,” Karasawa said.
“In addition, the Toyota retail business, being undertaken by Aioi Nissay Dowa Insurance, will see profit expand, and, through a close relationship with Toyota Motor Corporation, steadily develop international business,” Karasawa explained.
“In such a manner, the growth platform of international business to meet the target has already been put firmly in place,” Karasawa added.
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