By Taiga Uranaka
TOKYO (Reuters) - MS&AD Insurance Group Holdings Inc (T:8725) has agreed to pay $5.3 billion (3 billion pounds) for Amlin PLC (L:AML), an underwriter in the Lloyd's of London specialist insurance market, in the fourth multi-billion dollar deal this year by a Japanese insurer.
MS&AD and peers such as Tokio Marine Holdings Inc (T:8766) have been raising the scale and pace of acquisitions as an aging population stymies growth at home, while heightened exposure to natural disasters raises the need to spread risk geographically.
But the deal announced on Tuesday dwarfs the half a billion that Japan's second-largest property-casualty insurer by market value paid in its last major international deal, for 50 percent of Indonesia's Asuransi Jiwa Sinarmas in 2011.
Chief Executive Yasuyoshi Karasawa has said MS&AD was looking to buy into a European or U.S. specialist insurer, and on Tuesday said Amlin's role as the leader of Lloyd's second-largest underwriter syndicate made it a perfect target.
"Within the allowance of our capital buffer, our policy remains the same that we are open to acquisitions if there are good targets in the United States," he added.
MS&AD will use cash and loans to buy all of Amlin shares for 670 pence each, or 36 percent above Monday's closing price, for a total of 3.47 billion pounds ($5.34 billion). It expects to close the deal in January-March pending regulatory approval.
"The offer reflects the strategic value which (MS&AD) places on Amlin and what it wants to achieve. It also reflects the heights of the M&A activity in the sector over recent months," Amlin Chief Executive Charles Phillips told reporters.
Amlin hired Evercore Partners and Rothschild as financial advisers for the deal while Goldman Sachs (NYSE:GS) and Nomura advised MS&AD.
Analysts said membership of the world's oldest insurance market make for desirable yet expensive targets.
"Based on our analysis of other comparable deals, the deal represents the highest multiple that we have seen for a Lloyd's of London market business in recent years," RBC Capital Markets analyst Kamran Hossain said in a note to clients, referring to MS&AD's offer price being 2.4 times the book value of Amlin.
The deal follows a string of acquisitions by MS&AD rivals.
In June, leading property-casualty insurer Tokio Marine said it had agreed to buy U.S. speciality insurer HCC Insurance Holdings Inc (N:HCC) for $7.5 billion, in what would be this year's biggest M&A deal by a Japanese company.
In July, Meiji Yasuda Life Insurance Co [MEIJY.UL] agreed to buy StanCorp Financial Group Inc (N:SFG) for $5 billion, and last month, Sumitomo Life Insurance Co [SMTLI.UL] agreed to buy Symetra Financial Corp (N:SYA) for about $3.8 billion.