Japan’s Dai-Ichi Life Buying 15% Stake in M&G to Rank as Largest Shareholder

Japanese investors continue to expand their role on the global stage with Dai-Ichi Life Holdings set to take a 15 percent stake in M&G PLC, according to an announcement late on Friday.

Japan’s second-largest life insurer is establishing a partnership which will make M&G Dai-Ichi’s preferred asset management partner for Europe, according to a statement by the two companies. Focused on growth, distribution and product development opportunities, the relationship between the two firms is expected to generate $6 billion of investment in M&G funds over the next five years and $2 billion in investment in Dai-Ichi Life strategies over the same period, the companies said.

“We see our partnership with M&G acting as a spearhead to develop our presence across Europe and the UK, accelerating our strategy to become a global top-tier insurance group,” sadi Dai-Ichi Life president and chief executive Tetsuya Kikuta. He added that, “M&G possesses not only a reputable and long-established life insurance business, but comprehensive asset management solutions in both public and private markets.”

Dai-Ichi intends to acquire its stake in M&G via on-market purchases with no changes to the UK firm’s issued share capital. M&G is the parent firm of property investment house M&G Real Estate.

At least $3 billion of the new investment seen headed to M&G targets the company’s high-alpha strategies across public and private markets, with half of Dai-Ichi’s $6 billion in expected business flows intended to come from its own balance sheet. 

Trading Territories

“The strategic partnership with Dai-ichi Life Holdings and the associated circa 15 percent investment is recognition of M&G’s strengths and clear confidence in our leadership, strategy and long-term prospects,” M&G group CEO Andrea Rossi said in the statement. He added that “It will enable us to further capitalise on the significant private market opportunities across Europe and enable even greater access to the Japanese and Asian market where we will benefit from Dai-ichi Life Holdings market-leading expertise.”

M&G, which had £345.9 billion ($467 billion) of assets under management and administration as of 31 December, sees the deal accelerating its expansion in Europe’s private markets, while opening new potential sources of business flows in Japan and across Asia. The acquisition will boost the Japanese firm beyond a mix of institutions to rank as M&G’s largest shareholder, according to market data.

The partnership is planned to enhance access to public and private market capabilities in Europe for Dai-Ichi Life, which has JPY 67.5 trillion ($471 billion) in total assets, with the Japanese giant to have the right to appoint a director to M&G’s board for as long as it holds at least a 15 percent shareholding in the company, subject to unspecified conditions. 

Dai-Ichi’s acquisition of the M&G stake is subject to regulatory approval with the Japanese firm warranting that it will not acquire shares in M&G exceeding 19.99 percent of the UK firm’s issued share capital, subject to unspecified exceptions.

Japanese Insurers Look Overseas

The deal comes as declining yields on traditional investment mainstays, such as government bonds and domestic equities, and rising demographic challenges, have forced Japanese insurers, including Dai-Ichi, to look for alternative strategies for delivering returns.

In January of this year Dai-Ichi announced a partnership with Prudential Financial which involves the US titan’s PGIM unit providing asset management services to the Japanese firm. In May Dai-Ichi announced that it would boost its stake in UK asset manager Capula Investment Management to 15 percent from 4.7 percent.

In March last year Dai-Ichi said that it would reduce its domestic equity holdings by around 30 percent over the next three years while the company targets overseas acquisitions. That strategy was outlined just days after US investment manager Canyon Partners said that Dai-ichi had agreed to acquire a 19.9 percent stake in the company. As part of that deal, the Japanese firm also committed to invest at least $1.3 billion as a limited partner in Canyon’s funds.

Dai-Ichi’s competitors have also been boosting their overseas holdings with market leader Nippon LIfe in December agreeing to buy US insurer Resolution Life Group for around $8.2 billion in the largest ever foreign acquisition in the industry by a Japanese player. 

In February, UK insurer Legal & General said it would sell its US protection business to Japan’s fourth-ranking life insurance company, Meiji Yasuda, for $2.3 billion in cash with the Japanese firm also taking a 5 percent stake in L&G.