Chartis to Consolidate Japan Nonlife Presence with Fuji Fire Acquisition

Chartis Inc., the nonlife insurance unit of American International Group Inc., said it will acquire all the shares in Fuji Fire & Marine Insurance Co. Ltd. and make it a wholly owned subsidiary.

Chartis plans to buy the remaining 45.3% stake in Fuji Fire it doesn't already own for about 47 billion yen (US$567.8 million). The nonlife insurance group currently owns 54.66% of shares in Fuji Fire and is the Japanese nonlife unit's largest shareholder.

A cash tender offer through Chartis Japan Capital Co. LLC, a subsidiary of Chartis, will purchase "all common shares and stock acquisition rights of Fuji Fire that it does not already own, for 146 yen per share," said Chartis in a statement.

The tender offer represents a roughly 29.2% premium over the publicly listed Fuji Fire's average stock price during the past three months and a 30.36% premium over the closing price on Feb. 9. Chartis said the tender offer is scheduled to commence in Japan on Feb. 14 and end on March 24.

Orix Corp., the second-largest shareholder with a 15.53% stake in Fuji Fire, has agreed to "tender all of its shares into the offer based on the terms in this tender offer agreement," according to Chartis.

The full acquisition of Fuji Fire "is a natural progression of the excellent partnership we have developed over the past 10 years," said Jose A. Hernandez, chief executive of Chartis Far East Holdings. The transaction strengthens Chartis' position in the Japan market while allowing Fuji Fire to benefit from the group's resources and financial strength, he said in a statement.

Chartis has no plans to merge Fuji Fire with the group's existing operations in Japan, said a spokesperson for Chartis. Fuji Fire will retain its brand name and structure after the transaction, which is expected to close in this second half.

Osaka-based Fuji Fire plans to be delisted from the Osaka Stock Exchange and Tokyo Stock Exchange after the insurer tenders all the shares to Chartis. The transaction is subject to regulatory approvals, according to Chartis.

The transaction will enhance Fuji Fire's competitive edge in the market with the support of the global group's resources, credit and capital strength, said Fuji Fire.

Chartis has no plans to sell Fuji Fire Life Insurance Co., a life subsidiary of Fuji Fire, although AIG has divested its life units in Japan. Prudential Financial Inc. recently completed its US$4.8 billion acquisition of AIG Star Life Insurance Co. Ltd. and AIG Edison Life Insurance Co.MetLife Inc. completed its acquisition of AIG's American Life Insurance Co. international subsidiary for US$16.2 billion last November. In Japan, Alico has been renamed MetLife Alico.

Fuji Life will be an important part of Chartis's Japan operations for products and services offerings, said Fuji Fire.

"The expanded distribution platform enables us to accelerate our delivery of innovative products and services through the agency force to a broader range of Japanese customers," said Hernandez.

In Japan, Chartis provides nonlife insurance through various operations including AIU Insurance Co., American Home Assurance Co. and JI Accident and Fire Insurance Co., a joint venture with JTB Corp.

In 2010, Chartis became a majority shareholder of Fuji Fire through a private placement of new shares worth 13.5 billion yen (BestWire, Jan. 22, 2010).

Fuji Fire was founded in 1918 as Nippon Kan-i Kasai Insurance Co., a specialist fire insurer, and changed its name to Fuji Fire in 1949. The company provides nonlife insurance for individuals, small and medium-size companies and their employees. Fuji Fire reached a business alliance agreement with AIU in 2000 and then formed a capital partnership in 2002. The insurer's business portfolio includes voluntary automobile, compulsory automobile liability insurance, fire, personal accident and health, casualty and marine for groups and individuals.

Fuji Fire reported net income of 4.8 billion yen in the 2009 fiscal year ended March 31, 2010, up from a loss of 59.6 billion yen a year earlier. Net written premiums fell to 270.6 billion yen from 284.7 billion yen.

Fuji Fire & Marine Insurance Co. Ltd. currently has a Best's Financial Strength Rating of B++ (Good).

(By Iris Lai, Hong Kong bureau manager: [email protected])