By Taiga Uranaka
TOKYO (Reuters) - Japanese insurer Dai-ichi Life Co is in advanced talks to buy Protective Life Corp of the United States in a deal that could be worth over $5 billion, a source with direct knowledge of the matter said on Monday.
The deal would be the biggest so far in a string of overseas acquisitions by Japanese insurers, led by Dai-ichi Life, seeking out higher-growth markets to offset weak long-term prospects at home as the country's population ages rapidly.
Dai-ichi Life, Japan's second-largest private-sector life insurer, plans to buy 100 percent of Protective Life, said the source, who was not authorised to discuss the matter publicly. The 107-year-old U.S. company, based in Birmingham, Alabama, has a market capitalisation of $4 billion and posted a net profit of $393.5 million in 2013 from operations that span the country.
The source said Dai-ichi Life, worth close to $15 billion by market value, is planning to fund half of the acquisition cost from existing reserves if the deal goes through. The remainder would be sought externally, the source said, including a possible share issue, along with loans.
In a statement, Dai-ichi Life said, "It is true that we are considering an acquisition of a U.S. life insurance company. But nothing has been decided." A spokesman declined to comment further.
The Nikkei business daily, which first reported the talks, said a deal would likely top 500 billion yen ($4.9 billion).
Dai-ichi Life's shares fell more than 4 percent in Tokyo in heavy trading, compared with a gain of nearly 2 percent gain in the broader market, as investors fretted over the potential for a dilutive impact on their holdings from a deal. "The acquisition itself is positive for the company in the long term, but the market is wondering how the company will finance it," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management. "Dilution fears from a possible share offering plan hit investor sentiment." At midday in Tokyo Dai-ichi Life shares were down 4 percent, while the benchmark Nikkei 225 index was up 1.8 percent.
Eva Robertson, vice-president of investor relations at Protective Life, said in an email to Reuters that the company declined to comment, citing company policy on media reports.
OVERSEAS APPETITE
Last month Japan's largest private-sector life insurer, Nippon Life Insurance Co [NPNLI.UL], agreed to buy 20 percent of Indonesia's Sequis Life for 4.87 trillion rupiah ($417.13 million), joining Japanese peers expanding in rapidly growing Southeast Asian markets.
Yet Dai-ichi Life, the sole listed company among Japan's top four life insurers, has forged ahead in overseas deals - and reaped the benefit. It said in 2013 it was ready to spend 300 billion yen in mergers and acquisitions over the next two years.
Acquisitions by the company include the buyout of Tower Australia Group for $1.2 billion in 2010 and a 40 percent stake in Panin Life of Indonesia for $337 million in 2013.
For the year ended in March, Dai-ichi Life was the only major life insurer to post growth in insurance premium revenue, boosted by its Australian unit. Sluggish domestic business weighed on its rivals.
The biggest acquisition by a Japanese insurer so far is Tokio Marine Holdings Inc's purchase of property and casualty insurer Philadelphia Consolidated Holding Corp for about $4.7 billion in 2008.
Goldman Sachs is advising Dai-ichi Life on the planned acquisition, according to two sources with direct knowledge of the matter.
($1 = 101.7450 Japanese Yen)
($1 = 11675.0000 Rupiahs)
(Reporting by Taiga Uranaka; Additional reporting by; Gregory Roumeliotis, Ayai Tomisawa and Emi Emoto; Editing by Richard Pullin and Kenneth Maxwell)
