TOKYO -- Nippon Life Insurance, Japan's biggest life insurance company, has entered into final negotiations over acquiring U.S. life insurer MassMutual Life's subsidiary in Japan, Nikkei has learned. Nippon Life will spend 100 billion to 200 billion yen ($886 million to $1.77 billion) to purchase a majority stake in the company.
MassMutual's Japan subsidiary specializes in selling insurance products over the counter. Nippon Life has lagged behind its domestic competitor Dai-ichi Life in this area, and will look to strengthen its business through the acquisition.
This is the first consolidation in the Japanese life insurance market since Nippon Life acquired Mitsui Life Insurance in 2015. With Japan's largest life insurer on the move again, there may be more deals ahead.
Both Nippon Life and MassMutual will look to agree on the basics of the deal in the near future, and sign an agreement within the current fiscal year ending in March 2018.
MassMutual's Japan subsidiary started out as Yokohama Life Insurance in 1907. It became a MassMutual unit in 2001, and in 2004, it began specializing in selling insurance over the counter at banks. In addition to foreign currency products, it sells pension products for seniors and whole life insurance policies, which can be treated as investments.
Over-the-counter insurance sales have been declining due to the Bank of Japan's negative interest rate policy. The market was worth close to 7 trillion yen in fiscal 2015, but in a year it declined to around 4 trillion yen.
With investment returns suffering, MassMutual Japan's insurance premium income for the year ended this past March came to 322.9 billion yen, down from 468.9 billion yen for the year through March 2015.
Nippon Life, for its part, has a strong sales team but was cautious about the over-the-counter approach. According to Nikkei research, it ranked fifth in over-the-counter sales last fiscal year, slipping from third place in fiscal 2015 -- before the BOJ adopted negative rates.
Nevertheless, Nippon Life expects the over-the-counter market to grow over the medium to long term. Concluding the MassMutual deal would likely make it the No. 2 domestic player, after Dai-ichi Life.