Mitsui Sumitomo eyes Phl insurance market

MANILA, Philippines - Mitsui Sumitomo Insurance Group Holdings Inc. is quietly undertaking due diligence on the country’s life insurance industry, hoping to be the first Japanese insurer to re-enter the Philippine market.

The Tokyo-based Japanese insurance holding company already has a foothold in the Philippines through a joint venture with the Bank of the Philippine Islands (BPI) in the non-life insurance sector.

It is the third largest property insurance company in Japan, with a market share estimated at over 20 percent.

Insurance regulators said Mitsui Sumitomo has yet to decide on whether to acquire an existing local insurer or form a new company.

Acquiring an existing domestic player will require at least P250 million as it is the prevailing minimum paid-up capital requirement. Establishing a new insurer, on the other hand, will mean a minimum capital level of P1 billion.

But regulators said there are no visible “for sale” signs among the 27 existing players in the life sector.

“The only life insurer for sale is inactive National Life Insurance Co. (NLIC) but the tag price may cost more than just putting up its own firm,” they said.

Mitsui Sumitomo operates several insurance-related companies, with the Mitsui Sumitomo Primary Life Insurance Co. Ltd. as its leading life insurance provider.

In the first quarter of the year, the life insurer reported profits worth ¥9.7 billion, and a net income of ¥6.2 billion.

Early this year, Sumitomo Mitsui Financial bought PT Bank Tabungan Peniunan Nasional of Indonesia for $1.5 billion. It is one of several Japanese financial institutions that have been raiding Indonesia’s financial sectors.

In the Philippines, major and medium cap banking institutions have been forging working relationships in what experts call the “second Japanese invasion.”

BDO Unibank Inc., Metropolitan Bank & Trust Co. (Metrobank), Rizal Commercial Banking Corp., and BPI have establish fresh liaisons with Japanese financial institutions for trade financing, corporate loans, and general banking facilitation.

In the insurance sector, the Pacific Century Group (PCG) is putting up its own life insurer in the Philippines by yearend, naming it FWD Life Insurance (Philippines) Co.

PCG is a Hong Kong-based private investment group with massive interests in media, information and communications technology, telecommunications, financial services, and property.

PCG marks the re-entry of foreign players into the country’s life insurance industry in over a decade.

It is involved various leading sectors including: PCCW Ltd., the leading provider of communications in Hong Kong and Asia’s leading information communications and technology telecommunications; PineBridge Investments, global asset management firm with AUMs worth $72 billion, among others.

Meiji Yasuda Life Insurance Co. and Dai-ichi Life Insurance Co. are two other Japanese insurers that have sent scouting teams to the Philippines.

Meanwhile, the situation is not unique to the Philippines. In fact, the other Asean members have already experienced the “second Japanese invasion.”

Economies in Southeast Asia had been outpacing the rest of Asia, and it giving rise to unprecedented personal income.

Developed economies like Japan spotted opportunities, where Asian individuals and families increased their ability to afford insurance. That new demand has boosted stock prices and corporate valuations, culminating in a spate of M&A transactions.

Japanese insurers and banks thus “launched massive assaults” on Southeast Asian financial services companies, with a strong bias towards Indonesia, Malaysia, Thailand and the Philippines.

On the other hand, Japan’s homeland economy remains in the doldrums, forcing its financial giants to look for sweet opportunities, abroad.

Since last year, mergers and acquisition recorded in Southeast Asian insurance industry already reached a record $13.1 billion, compared with a total of $3.9 billion in the previous four years, according to Thomson Reuters.

Unconfirmed reports indicate that acquisitions by Japanese financial institutions are already running well over $10 billion in the first five months of 2013.

Swiss Re Economic Research & Consulting forecasts that life insurance premiums in emerging Asia – a region comprising of seven countries, including China, India, Malaysian, Thailand – will grow at a compounded annual rate of 8.5 percent between 2011 and 2021 to $631 billion.

By contrast, premiums in industrialized countries will expand 2.9 percent in the same period.