Nippon Life Insurance (Nippon Life) is acquiring a 35% stake in Myanmar’s Grand Guardian Life Insurance (GGLI) for US$21 million as the Japanese company moves to speed up its business expansion in the Southeast Asian nation.
The stake will be purchased via an allotment of new shares in Yangon-based GGLI, the insurance unit of Myanmar’s financial conglomerate Shwe Taung group, which will retain 65% of the shareholding through another unit, Grand Guardian Insurance Holdings.
The deal, which is subject to approval from Myanmar’s financial authorities, is expected to be completed between September and October this year, Nippon Life says in a statement on June 21.
GGLI will then be rebranded as Grand Guardian Nippon Life Insurance.
Myanmar, which has 11 local insurance companies, began to open up its private insurance market in 2013.
There are currently 21 foreign insurers with representative offices in the country. Nippon Life set up its office in Yangon early last year.
According to Nippon Life, although Myanmar’s life insurance market is still at an early stage, it’s expected to grow at a high rate in the long term along with the country’s “solid” economic development.
“With Shwe Taung group’s strong business foundation in Myanmar and brand power, and through leveraging Nippon’s Life experience and know-how of the life insurance business, together both parties aim to create synergy and provide support for stable and sustainable growth of GGLI,” the Japanese insurer says.
Teruki Morinaga, director of insurance at Fitch Ratings Japan, says Nippon Life is one of around six Japanese life and non-life insurance groups that have been developing business in Myanmar in recent years with an eye on the potential of the country’s young demographics and sizeable population.
“The size of Myanmar insurance market is still small at the moment from Japanese insurers’ standpoint, but they can capture the substantial growth opportunities in the frontier market over the long run,” Mr. Morinaga tells Asia Asset Management (AAM).
According to Soichiro Makimoto, vice president and senior analyst in the financial institutions group at Moody’s Investors Service, the GGLI stake will “mildly” improve Nippon Life’s business diversification.
“Although the acquisition will only have a moderate near-term impact on Nippon Life’s credit profile, the transaction will bring longer-term growth potential for the insurer in the emerging market,” Mr. Makimoto tells AAM.
Tokyo-based Nippon Life had 680 trillion yen ($6.33 trillion) of total assets globally as of March 2019.
GGLI had 59.72 billion Myanmar kyat ($39.3 million) of total assets at the end of 2018.
