Sompo Japan buys Maritima stake

Sompo Japan, the country’s second-largest non-life insurer, is taking a 50 per cent stake in Brazil’s Maritima Seguros for Y14.4bn ($151m), its largest overseas investment.

Sompo Japan’s move, which will make it Maritima’s largest shareholder, highlights the rush by Japanese financial institutions to build a global presence in the face of a saturated market and shrinking population at home.

Tokio Marine, Japan’s largest non-life insurer, last year spent £442m ($693m) to acquire the UK’s Kiln, a Lloyd’s agent, and $4.7bn to buy Philadelphia, a US specialised insurer.

Maritima is Brazil’s tenth-largest insurance company, with businesses in life assurance and non-life insurance and strength in retail sales.

Sompo Japan, which is merging with NipponKoa next year, aims to increase revenues from its overseas operations.

It has businesses in 26 markets outside Japan and has invested extensively in Asia.

It has been in the Brazilian market, where it has developed businesses targeting local corporations and multinationals, for 50 years.

Maritima had complementary strength in the retail auto insurance market, Sompo Japan said.

The gloomy outlook for the non-life insurance market in Japan was reinforced on Wednesday by disappointing results announced by the top groups for the year to March.

Non-life insurers in Japan have been hit by a decline in housing starts, which has depressed demand for fire insurance, and slumping car sales, which have cut into demand for casualty insurance.

The financial crisis has forced insurance companies to write down the value of their securities holdings.

Tokio Marine, the market leader, suffered a 79 per cent drop in net profits to Y23.1bn.

Although Tokio Marine dipped into reserves to report profits in its premium income, this was not enough to completely counter the sharp fall in the value of its shareholdings.

Mitsui Sumitomo Insurance, which is planning to merge with two other insurance groups to become the largest domestic non-life insurance group by market share, made a small net profit of Y8.2bn.

Sompo Japan, which incurred a Y147.9bn loss related to financial guarantee insurance, fell into an annual net loss of Y66.7bn.

All three companies, however, expect to return to profit this year, due to the expected absence of large securities valuation losses.

Tokio Marine is forecasting a net profit of Y80bn and Sompo Japan is predicting a profit of Y30bn.

MSIG expects to rebound to a net profit of Y22bn.