NKSJ’s Sompo Japan to Acquire Fiba Sigorta in Turkey

NKSJ Holdings Inc. said its subsidiary Sompo Japan Insurance Inc. will acquire a midsize Turkish nonlife insurance company, Fiba Sigorta Anonim Sirketi, for 28.1 billion yen (US$307 million).

Sompo Japan has agreed to purchase 93.36% of the common shares of Fiba Sigorta, the 11th-largest nonlife insurer in Turkey. Sompo Japan will buy the remaining 6.64% shares, held by current and former employees of Fiba Sigorta, if it is requested by shareholders, NKSJ said in a statement.

The transaction is expected to be completed by October 2010, subject to shareholder and regulatory approvals. The group has not decided on any specific name change after the transaction, said a spokesperson at Sompo Japan.

The acquisition will be the first foreign investment by NKSJ, which was established after the merger of Sompo Japan and Nipponkoa Insurance Co. Ltd. in April. Overseas insurance businesses are one of the main revenue drivers for NKSJ, along with its domestic nonlife and life operations in Japan, said NKSJ.

In the next three years, NKSJ said the group will invest about 200 billion yen on merger and acquisition activities to boost its overseas insurance businesses. The group aims to increase its adjusted consolidated income from overseas operations to 16 billion yen in the 2014 fiscal year.

The transaction "enables NKSJ to expand in the fast-growing Turkish nonlife insurance market and provides a platform for further business opportunities in the region," said NKSJ.

Turkey's insurance market is still under-penetrated as nonlife premiums accounted for only 1% of the country's gross domestic product, according to NKSJ. The nonlife sector stood at about 630 billion yen, with an average growth rate of 13% per year in the past five years.

Established in 2001, Fiba Sigorta is a retail-focused nonlife insurer offering motor and home insurance products. With total assets of 20.7 billion yen, the Turkish insurer reported gross written premium of 17.7 billion yen in 2009.

Fiba Sigorta has achieved sustainable growth and profitability, supported by its bancassurance business model, client and claims management infrastructure and services, according to NKSJ.

"We'll leverage strengths of business model Fiba Sigorta have developed in individual market and focus more on individual market, while we'll transfer underwriting skill and know-how in the commercial market," said Sompo's spokesperson.

Sompo Japan has representative offices in Istanbul and Dubai, but it has not yet provided any services in these areas.

In March, Sompo Japan set up a new sales desk with Russian insurance company OJSC IC Rosno, which is operating under the insurance group Rosno, People's Insurance Co. Russia OJSC. The tie-up with Rosno, an affiliate of Germany's Allianz SE, enables Sompo Japan to sell Rosno's insurance products to Japanese clients (BestWire, March 12, 2010).

In June, Sompo Japan gained approval from the China Insurance Regulatory Commission to open a branch in China's eastern coastal Jiangsu province. The new branch plans to start operations in June and it will be Sompo Japan's fourth operation in China, in additional to Liaoning province, Guangdong province and Shanghai city.

These operations safeguard the company's "business front-line position" in China, said Sompo Japan in a statement. Many Japanese corporations have invested in these coastal regions, creating substantial needs for nonlife insurance services.

Sompo Japan Insurance Inc. currently has a Best's Financial Strength Rating of A+ (Superior).

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