TOKYO — MS&AD Insurance Group Holdings will spend 44 billion yen ($401 million) to acquire a 6%-plus stake in Challenger, a leading player in Australia’s fast-growing superannuation industry.
Sydney-based Challenger offers retirement-focused insurance and asset management services. It boasts a roughly 50% share of Australia’s superannuation market by sales, leading its closest rival by a margin of more than 2-to-1.
In Australia, employers must contribute 9.5% of workers’ regular pay toward their retirement. The country’s superannuation market is estimated to balloon to 9.5 trillion Australian dollars ($7.47 trillion) in 2035 from the current A$2 trillion, driven by a rapidly aging population and planned hikes in contribution rates.
MS&AD affiliate Mitsui Sumitomo Primary Life Insurance has already been testing the waters via a business partnership with Challenger. Tokyo-based MS&AD aims to lift its stake to around 10% within a year and may make the Australian company an equity-method affiliate further down the road. Investing in Challenger will help MS&AD acquire know-how in the Australian pension market and co-develop new products later on.
Such other Japanese players as Nippon Life Insurance and Dai-ichi Life Insurance have already entered Australia’s growing life insurance market.
MS&AD, whose core business consists of nonlife polices provided by Mitsui Sumitomo Insurance and other units, continues to try to diversify its earnings base.