Posted on Feb 11, 2011 by Sergio Ulloa
American International Group's (AIG) general insurance arm Chartis has announced that it has made a cash tender offer to complete a full take-over of Fuji Fire & Marine Insurance of Japan.
Currently Chartis holds a controlling stake of 54.66 percent in Fuji Fire & Marine, which it acquired in 2010. Chartis will spend approximately US$ 571 million (¥47 billion) to acquire 100 percent control of the Japan based insurer. Chartis has offered a purchase price of US$1.7 (¥ 146) per-share, representing a near 30 percent premium over Fuji Fire & Marine closing price at the end of share trading on the 9th February 2011.
The directors of Fuji Fire & Marine support the tender offer as it will reinforce the insurers operations in Japan. Shareholders of Fuji Fire and Marine - the Orix Corporation - an international financial service company, which currently holds a 15.53 percent share in the insurer, are expected to offer their stake in the Japanese based insurer.
Following the tender offer, Fuji Fire & Marine, will be delisted from the Tokyo Stock Exchange. The tender offer is scheduled to commence from Monday the 14th February and run through to March the 24th 2011. The transaction will benefit both parties, with Chartis consolidating its position in Japan - the second largest insurance market in the world. Fuji Fire and Marine will strengthen its presence through Chartis' global network, financial capacity and product range.
Jose A. Hernandez, CEO of Chartis Far East Holdings K.K. Said: "Including Fuji Fire and Marine as a full member of the Chartis group is a natural progression of the excellent partnership we have developed over the past ten years, most recently as Fuji Fire and Marine's majority shareholder. Our expanded distribution platform enables us to accelerate our delivery of innovative products and superior services through our loyal agency force to a broader range of Japanese customers."
The offer is still subject to regulatory approval from the Financial Service Agency in Japan. When the deal is completed Chartis expects to operate under the Fuji Fire and Marine brand in Japan.
The AIG group recently retreated from the Japanese life insurance market by selling AIG Star Life Insurance and AIG Edison Life Insurance to US insurance rival Prudential Financial
for US$4.8 billion (¥437.7 billion). AIG, the US-based insurer, will now increase its presence in the Japanese insurance market through the Chartis brand and the full acquisition of Fuji Fire and Marine - a Japanese insurance company which was established in 1918 and now has a national distribution network.
AIG has been going through a period of transition since the world financial markets experienced a recession during 2007, which subsequently lead to the global insurer requiring a US$182 billion (¥15 trillion) bailout package from the US federal government in 2008
. Since then AIG has been restructuring its global operations, which has seen them sell-off the Alico brand to Metlife
and place Nan Shan
its Taiwanese insurance arm up-for-sale - in addition to the recent sale of Star Life and Edison Life to Prudential Financial.
As AIG works towards streamlining its international operations through divestment - as part of a process to repay the US government for the bailout loan - the insurance company has been keen to consolidate its business in core insurance markets that produce substantial written premiums for the group. Along with AIA - AIG's lucrative insurance arm in Asia - Chartis has become a pivotal general insurance business for the group with a global reach that generated operating income of US$1.1 billion (¥ 98 billion) in the third quarter of 2010.
Chartis has emerged as one of the world's leading property-casualty and general insurers with more than 45 million clients worldwide. The insurer offers personal line products including: travel, automotive, home and accident care. In business line insurance, Chartis offers: risk solution, special risk cover, travel, accident and healthcare.
AIG has reported that it will boost Chartis' reserves following the credit rating agency - Fitch Rating - downgrade of the property and casualty insurers status from a +A to A. The grade was made as Fitch believes the insurer may not be able to underwrite strong results as in previous years.
Insurance companies mentioned:
A leading property-casualty and general insurance company, Chartis has over 45 million policyholders in 160 countries worldwide. With more than 90 years experience in the insurance industry, and a range of progressive products, Chartis aims to help clients comprehensively manage risk.
Fuji Fire and Marine
The Fuji Fire and Marine Insurance Company Limited was founded in 1918 and through its subsidiaries offers life and non-life insurance products and services for individuals and small and medium-sized companies across Japan.
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
Prudential Financial Inc
Prudential Financial Inc. is a financial services leader, with approximately US$750 billion of assets under management as at September 2010. Prudential Financial operates in the United States, Europe, Latin American and Asia, with approximately 42,000 employees worldwide