Tokio Marine’s chief executive has said that the insurer plans to use its agreement with Berkshire Hathaway to support global expansion, reported the Financial Times (FT).
The Japanese company is aiming to rank among the world’s five largest insurers over the next ten years, as per the report.
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
CEO Masahiro Koike said the company was moving into a new stage of a long-running effort to broaden its business mix.
The tie-up announced this year with Warren Buffett’s conglomerate, which will acquire a 2.5% holding in Tokio Marine for $1.8bn (Y287.4bn), is a key part of that plan.
Koike said working with Berkshire on insurance deals outside Japan would help Tokio Marine keep financial capacity for its newer non-insurance activities, while also allowing it to move more quickly on expansion.
“The significance of the Berkshire deal is because if we are able to team up on the insurance M&A [mergers and acquisitions] side, that would allow us to save some money to invest on the solutions side,” he told the FT in an interview.
The deal “opens up other options that we would not be able to do on our own”, Koike added.
The non-insurance solutions unit began last year with the acquisition of ID&E, an engineering company involved in disaster prevention and mitigation.
The business includes a range of services and risk-related activities outside traditional insurance.
Koike wants earnings from that unit to rise from Y10bn to Y100bn by 2035.
Over the same period, Tokio Marine is targeting an increase in group adjusted net income from Y881bn to Y1.7tn.
Established in 1879 as Japan’s first insurer, Tokio Marine built its position in the domestic market before expanding abroad in recent decades. Its local competitors include Sompo and MS&AD Insurance.
International operations now generate nearly two-thirds of Tokio Marine’s profits.
Koike said the Berkshire arrangement may also help the insurer reduce its reliance on North America.
“Of that 65%, about 90% comes from the United States. So it is highly concentrated in the US. And based on where the geopolitical situation is, that definitely heightened our sense of urgency to regionally diversify further,” he said.
Tokio Marine’s approach is to seek larger acquisitions that would combine Berkshire’s balance sheet with Tokio Marine’s operating capabilities to take its “domestic and international operations to the next level”, Koike added.
The ten-year agreement will be exclusive for the first five years and could increase to a maximum stake of 10%. It also includes Berkshire taking on reinsurance for an undisclosed share of Tokio Marine’s overall risk.
Koike said that backing would enable Tokio Marine to manage “volatility” and increase its exposure more quickly in higher-risk segments such as natural catastrophe property cover and cyber insurance.
