Dai-ichi Life Not Seeking Additional Capital After Its April Demutualization and IPO

Dai-ichi Mutual Life Insurance Co., the third-largest life insurer in Japan, does not plan to seek additional capital after its scheduled non-fundraising initial public offering in Tokyo on April 1.

The insurer said it will not raise any funds for its operations in the global offering, but its policyholders were given the option of holding on to their stock or cashing out. As of Jan. 12, the total claimable assets belonging to all policyholders of the company was 24.92 trillion yen, said Dai-ichi in a statement.

According to Dai-ichi [085255], on April 1, the closing date of its global offering, it will achieve demutualization, converting from a mutual company to a stock company, with its stock distributed to its more than 8 million policyholders.

Dai-ichi said more than 7 million shares would be sold globally at a tentative price of 150,000 yen (US$1,641.9) a share, which would add up to 1.07 trillion yen.

Tokyo-based Neil Katkov, head of Asia for consultancy Celent, told BestWire that Dai-ichi is one of the largest major financial institutions in Japan that has not yet been demutualized. The listing of the insurer also reflects an "evolution" of the capital market structure of the Japanese insurance sector in recent years since the investment and trading bubbles in 2006, he said.

Katkov noted the listing of Dai-ichi is also a "test" for a newly introduced trading platform by the Tokyo Stock Exchange, as to whether the system can support major IPOs. He said the improved information technology system may also attract more international investments to trade through the Japanese market.

The decision was made based on the Dai-ichi Life's conclusion that it was "necessary to become a stock company, which will provide it with more flexibility in adopting various corporate strategies in order to realize sustained growth, and to publicly list its shares in order to enhance management transparency based on market discipline."

The life insurer said in its preliminary offering circular that it is conducting the global offering in connection with its reorganization from a mutual life insurance company to a joint stock corporation in accordance with its plan for demutualization and the Insurance Business Act of Japan.

The company said it aims to achieve its financial strategies by taking up capital measures such as promoting asset liability management and promote risk asset control and using hybrid capital to provide stable returns to shareholders or policyholders.

Of the total shares sold in Japan, Dai-ichi said Japanese companies, including Mizuho Corporate Bank, Sompo Japan Insurance Inc. [085258] and Bank of Tokyo-Mitsubishi UFJ would buy 2.1 million shares, helping the insurer to set up a stable shareholders base.

Due to the shrinking of both revenue and population in Japan, the life insurance industry has less opportunity for growth in the domestic market, which has driven Dai-ichi to seek overseas business expansion.

Established in 1902, Dai-ichi Life said it is the third-largest life insurer in Japan, including government-run Japan Post Insurance Co. Ltd. [090527], as measured by total assets and premium income for the year ended March 31, 2009.

Dai-ichi said it has been actively expanding its overseas operations in recent years, particularly in the Asia-Pacific region. The life insurer acquired an insurance company in Vietnam, invested in overseas insurance companies in Thailand, India and Australia, and entered into a business alliance and capital tie-up with a financial holding company in Taiwan.

As of Dec. 31 2009, the insurer claimed that it had a solvency margin ratio of 986. It also had 55,883 employees, including 44,779 sales representatives.

(By Rebecca Ng, Hong Kong news editor: [email protected])