07 Mar Japan’s Direct Investment in Australia: In Focus Insurance & Food
AJBCC member company Herbert Smith Freehills will shortly release an analysis of the number and extent of recent Japanese M&A activity in Australia. The report will show continuing sector diversification by Japanese investors in Australia, a trend which has been in evidence over the last few years.
Two recent investments by Japanese companies are in Insurance – Daido Life Insurance in Integrity Life and Food – Nisshin Seifun in Allied Pinnacle.
Life Insurance Business Fertile Ground for Japanese Investment
With Japan’s shrinking population, Japan’s life insurers have faced a contractionary income situation exacerbated by the long period of super low interest rates in Japan. As a result, the industry has looked at expanding overseas.
Australia is an attractive market, especially for acquisition, with its high per capita income and growing population.
In addition the recent unwinding strategy by Australian banks to provide a “cradle to grave” product offering to their customers, could not have come at a better time for Japanese investment.
This has coincided with the need for a number of Australian financial institutions keen to divest their life insurance business as they seek to remove, amongst other things, conflict of interest issues in the sector.
Japanese Life Insurance Snapshot 2018
- 41 Life companies operating in Japan
- 14 of them being foreign companies
- Largest are; Dai-ichi Life, Nippon Life, Meiji Yasuda, Sumitomo Life, Kanpo
Large stakes in Australia through acquisition;
- Dai-ichi Life of TAL
- Nippon Life of MLC
- TAL of Suncorp Life
Medium / Smaller stakes in Australia through acquisition;
- Sony Life acquired a minority stake in Clearview
- Mitsui Sumitomo Life Insurance purchased the Commonwealth Bank’s interests in the China based BoComm Life.
- Daido Life Insurance acquired a 14.9% stake in Integrity Life
- Daido Life is one of 3 life companies under the listed T&D Holdings, Inc – the other two being Taiyo Life and T&D Financial Life.
Interesting Postscript: T&D also owns Japan’s pet insurer company- Pet and Family. Although the current size of Japan’s pet insurance market is not huge, it has been said to enjoy annual growth over 20%. There are about 18 million companion animals (dogs and cats) in Japan.
Changing Palate drives Japanese Food M&A
Japanese food and ingredient companies have been relatively slow to move overseas,
as historically they viewed their products as being only appropriate for the domestic Japanese market.
However the rapid growth amongst Western consumers for Japanese food, together with a Japanese Government promotion of Japanese food exports have seen the situation change.
This is evidenced by Japan’s major flour milling company, Nisshin Seifun acquiring Australia’s biggest flour milling company Allied Pinnacle (from a private equity firm)
In Nisshin Seifun’s case, it seems that the strategy is two fold – securing quality ingredients and transferring different manufacturing skills. According to Nisshin Seifun, it plans to utilise its own sales channel in South East Asia to drive exports of Allied Pinnacle’s high quality flour and bakery ingredients and bakery products.
For more information on this report, please get in touch with AJBCC.