Japan’s Nippon Life Insurance has reportedly agreed to buy an 80% stake of National Australia Bank’s life insurance operation for approximately $1.7bn.

It is widely reported that an official announcement on the deal will be made tomorrow (28 Oct).

Earlier today (27 Oct), NAB submitted a trading halt request to the Australian Securities Exchange pending an announcement in relation to a material transaction.

Nippon Life, Japan’s second largest life insurer by gross written premiums, has responded to media reports about the potential deal by confirming that discussions between NAB and Nippon Life regarding a long-term partnership in life insurance are ongoing.
However, as of 15 October the Japanese life insurer said nothing has been decided.

Timetric’s Insurance Intelligence Center reported on 16 October that NAB has reached a non-binding memorandum of understanding with Nippon Life.

NAB group CEO Andrew Thorburn has reportedly said the bank has been exploring a potential strategic partnership with Nippon Life and a long-term deal for the creation of life-insurance products, as part of a broader look at options to improve returns in NAB’s wealth division, which houses its insurance business.

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A deal between Nippon Life and NAB comes as Japan’s aging population is growing rapidly.

A Timetric report Life Insurance In Japan, Key Trends and Opportunities to 2018 explains that the lack of substantial growth opportunities in the domestic market has prompted life insurers to acquire life insurance companies outside Japan, particularly in Southeast Asia.

For example, on 4 June 2013, Dai-ichi Life insurance concluded a new share subscription with Indonesian Life insurer PT Panin Life
More recently, in September 2015 Nippon Life and Mitsui Life signed a basic agreement on management integration.

Meanwhile, in August 2015 Sumitomo Life Insurance Company said it had entered into a definitive agreement to acquire Symetra Financial Corporation a US life insurance group listed on the New York Stock Exchange.

The Timetric report explains that Japan registered low growth in life insurance business during 2009-2013 with gross written premium expanding at a compound annual growth rate (CAGR) of 0.3% to value JPY33trn (US$340.4bn) in 2013.