Acquisitions abroad: different dynamics for Japanese and Chinese insurers

Moody’s has nonetheless revealed that their strategies are different. Japan is a stagnant market where few investment opportunities are available. Life insurers are concentrating particularly on the improvement of profitability whereas non life insurers do not hesitate to display their expansionist intentions.

Interest rates are low, the economy is creeping, the Japanese government’s dependence on stock and bond investments, and the substantial exposure to natural catastrophes are all unfavorable factors. Merger and acquisition analysis conducted by Japanese insurers has shown that the latter are keen on mature markets, niche companies with considerable market shares. They invest in insurance companies endowed with excellent ratings in order not to erode theirs.

Chinese insurers have a more important development potential in their own country than in Europe or the United States. They are, nonetheless, facing the pressure created by the huge concentration of the market and by the limited investment possibilities on the local stock market. Moreover, they are required to cope with the rapid evolution of the legal framework.

The acquisition of insurance companies located abroad provides them with the diversification they are looking for: access to new capital markets, new insurance classes, new techniques, and know-how. In general, their targets rank low on the market with less prestigious ratings.