TOKYO -- Japanese insurance provider Tokio Marine Holdings will acquire U.S. counterpart Pure Group for $3.1 billion, the company said Thursday, in a bid to maintain profit growth against mounting climate disaster payouts.
Tokio Marine expects to purchase all outstanding shares of holding company Privilege Underwriters and its subsidiaries in the first quarter of 2020. The Japanese parent will derive half of its profit overseas following this transaction.
Insurers are suffering from increased property and casualty losses as the number of natural disasters rapidly escalates. Tokio Marine's pending acquisition is an attempt to diversify and stabilize its revenue sources. Pure Group specializes in products for wealthy Americans.
"We will diversify our insurance portfolio and solidify our business base," Tokio Marine President Satoru Komiya told reporters Thursday.
Pure Group holds the third-largest share of the U.S. "high net worth" insurance market. American International Group is one of the two leaders. In 2018, Pure Group recorded close to $1 billion in gross written premiums. Aside from insuring damage to artwork and homes, the U.S. company offers advice on disaster prevention.
Pure Group is a reciprocal insurer; its policyholders promise to exchange their risk with one another, thus insuring themselves.
According to a study by insurer Swiss Re, global insured losses from disaster events in 2017 reached $144 billion, the highest ever recorded. These losses remain high. In 2018, forest fires, typhoons and other disasters dealt the industry its fourth-largest cumulative loss in history.
In Japan, heavy rains in 2018 battered the western part of the country. Typhoon Jebi also caused serious damage. As a result, the nonlife insurance industry paid out 1.5 trillion yen ($14 billion) that year, the largest amount ever.
Tokio Marine has been strengthening its overseas business to spread these risks. Following its acquisition of Kiln from the Lloyd's insurance group of the U.K. for 100 billion yen in 2008, Tokio Marine has acquired American companies Philadelphia Consolidated Holding, Delphi Financial Group and HCC Insurance Holdings. The combined price of the four deals was nearly 2 trillion yen.
The Japanese group is building up a presence in the developing world as well. Tokio Marine announced in June 2018 the acquisition of Thailand's Safety Insurance. That September, the company said it would invest in South African providers Hollard Holdings and Hollard International.
Komiya expressed Thursday a desire for further acquisitions, especially to offset the substantial U.S. and European share of overseas operations. "I strongly hope for opportunities in Asia's developing world," he said.