Tokio Marine, a Japanese multinational insurer, is reportedly considering the acquisition of either Insurance Australia Group (IAG) or Suncorp, in a deal that could be valued at more than A$20 billion ($14 billion). This comes as the insurer seeks to deploy its surplus capital and diversify its overseas earnings, with Australia identified as a key market for expansion. The company's President and CEO, Masahiro Koike, previously indicated interest in acquisition opportunities in Australia, Canada, and Southeast Asia.
Both IAG and Suncorp have market capitalizations around A$20 billion, fitting Tokio Marine's acquisition ambitions. IAG, Australia and New Zealand's largest general insurer with brands like NRMA Insurance and CGU, has reportedly appointed Goldman Sachs as an advisor. Suncorp, which specializes in home, contents, and motor insurance and recently sold its banking arm for A$4.9 billion in 2022, is reportedly working with Barrenjoey, UBS, and JPMorgan.
The potential acquisitions face varying considerations. IAG has recently resolved an A$4 billion lawsuit related to the collapse of Greensill Capital, which could make it a more attractive target. Suncorp, on the other hand, might face greater regulatory and political scrutiny due to its significant presence in the Queensland market. Both companies have reported recent declines in half-year net profits, with Suncorp experiencing a 76% fall to A$263 million and IAG a 35% fall to A$505 million, impacted by factors like natural hazard costs and lower investment returns.
Tokio Marine's partnership with Berkshire Hathaway, announced in March, is expected to provide the Japanese insurer with additional financial flexibility to pursue larger transactions. While IAG has stated it has not received any inbound approaches from Tokio Marine and Suncorp has declined to comment, analysts have noted Tokio Marine's interest in the Australian market as an "open secret" for diversifying its global portfolio.
