I I I F Acquisition of Stancorp Financial Group
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Acquiiiisition o f StanCorp Financial Group July 24, 2015 Todayʼs Highlights Transaction Overview Acquisition of StanCorp Financial Group (“StanCorp”) in an all cash transaction $115 per share, approximately $4,997 million (approximately JPY624 billion) (※1) Key Strengths of StanCorp Leading provider of group life and disability insurance in the U.S. Consistent long-term growth and profitability generated by robust business model Solid financial strength Trusted and talented management team with strong culture of internal development Transaction Rationale Increase overall group profits and diversify the group business portfolio (risk diversification), while reinforcing the stability and sustainability of the overall group business and profits Provide increased policyholder benefits and strengthen domestic life insurance busin ess (※1) US$1=JPY125 (The same applies hereafter, unless otherwise noted) 1 Transaction Structure and Key Terms Transaction • Acquisition of 100% of StanCorpʼs outstanding shares in cash through a Structure reverse triangular merger • $115 per share / approximately $4,997 million total consideration (approximately JPY624 billion) Aggregate • 49. 9% premitStCʼ1ium to StanCorpʼs 1-month vol ume wei ght e d average pr ice, Consideration 50.0% premium to latest closing price on July 23, 2015 • 2.24x book value per share (ex. AOCI) as of June 30, 2015 Funding • Cash and cash equivalents on hand Required • Approval by StanCorp shareholders Approvals • Customary regulatory approvals Expected • First quarter of 2016 (calendar year) Closing Date 2 Sti1Section 1 OiOverview o fUSLifIf U.S. Life Insurance MktMarket Section 2 Key Strengths of StanCorp Section 3 Strategic Rationale of the Transaction Appendix 3 Our Overseas Insurance Business Strategy Overseas Insurance Business Europa Warta Pacific Guardian Life (Wroclaw, Poland) (Warsaw, Poland) (Honolulu, U.S.) 【Made affiliate in FY 2012】 【Made affiliate in FY 2012】 【Made subsidiary in FY 1975】 Talanx (Germany) StanCorp 【Alliance formed in FY 2010】 (Portland, U.S.) Thai Life Avrist Founder Meiji Yasuda Life Insurance (Bangkok, Thailand) (Jakarta, Indonesia) (Shanghai, China) 【Made affiliate in FY 2013】 【Made affiliate in FY 2012】 【Made affiliate in FY 2010】 In addition to profit expansion in our existing overseas operations, our strategy is to promote new investment opportunities in both developing and developed countries, while considering the geographical diversification and the developmental stage of the life insurance market of each country This transaction is our first significant majority investment in a developed market 4 U.S. Life Insurance Market Premium Income (2014 ) (Unit: US$ billion) Population (2010 -2050) (Unit: 100 million) 5.0 5.0 U.S. accounts for approx. U.S. increases by 4.0 600 20% of the global life 4.0 approx. 30% Japan decreases 303.0 by more than 528 insurance market 10% 2.0 500 3.0 1.0 400 371 202.0 000.0 2010 2020 2030 2040 2050 2010 2020 2030 2040 2050 300 Nominal GDP (2013-2020) 235 30,000 900 200 172 U.S. economy 800 Japan economy 25,000 increases by increases by 700 118 more than 30% approximately 600 10% 100 20,000 56 36 500 15 15,000 400 0 (Unit: US$ billion) (Unit: JPY trillion) 10,000 300 013 014 015 016 017 018 019 020 013 014 015 016 017 018 019 020 22 22 22 22 22 22 22 22 2 2 2 2 2 2 2 2 U.S. life insurance market is the world’s largest life insurance market with JPY66 trillion of premium income Mid/long-term stable growth based on growing population and robust economic growth Group life insurance has central role in filling large protection gap for middle income demographic [Source: Swiss Re, United Nations, IMF] 5 U.S. Group Life Insurance Market Proportion of Group Life Insurance to Life Insurance Life I nsurance O wnershi p b y H ouseh old Ownership by Household (by Household Income) 60% US$125,000 25% 31% 44% 49% 50% 44% US$100,000 21% 37% 41% 40% ~US$125,000 US$50,000 23% 43% 34% 30% ~US$99,999 US$35,000 32% 39% 30% 20% ~US$49,999 10% Below US$35,000 57% 25% 18% 0% 0% 20% 40% 60% 80% 100% Group Life Insurance Individual Life Insurance Individual Life Insurance Only Grouppy Life Insurance Only Both Ownership Ownership Household insurance ownership is Group insurance is used as protection higher for group life compared to instrument primarily by middle-income in div idua l life dhidemographic High potential growth is expected for the middle-income demographic due to the large coverage gap Group life insurance has a central role in providing protection to the middle-income demographic [Source: LIMRA (as of 2010)] 6 Section 1 OiOverview o fUSLifIf U.S. Life Insurance MktMarket Section 2 Key Strengths of StanCorp Section 3 Strategic Rationale of the Transaction Appendix 7 Overview of StanCorp Company Overview Financial Highlights (2014) • Year of Foundation: 1906 • Premium Income: -Demutualization: 1998 US$2,052 million (US GAAP) -NYNYSESE Listing:Listing: 19991999 - US$4,122 million (US Statutory Accounting) • Employees: 2,739 (As of June 30, 2015) - • Headquarters: Portland, Oregon, U.S. • Total Income Before Income Taxes: US$305 million • Customers: approximately 6.1 million (operates in all 50 • Net Income: US$210 million states) • Total Assets: US$22,711 million • Financial Strength Ratings: S&P A+ (Strong); Moody’s A2 • Shareholders’ Equity: US$2,156 million (Good); A.M. Best A (Excellent) (As of June 30, 2015) • ROE: 9.8% • Chairman, President and CEO: J. Greg Ness Core Products Business Segments (2014 P/T Income) • Employee Benefits – Group Life – AD&D Asset Insurance Management – Group Disability Services 22% – Group Dental Employee – Group Vision Individual Benefits • Individual Disability Disability 62% 16% Asset • Retirement Plan Management • Individual Annuities (※1) Excludes other business (US$42 million loss before income taxes) US$347 million (※1) [Source: Company filings] 8 Key Strengths of StanCorp 8th in group life / AD&D insurance (market share: 3%) Leading Provider of Group 5th in group long-term disability insurance (market share: 8%) Life and Disability 5th in ggproup short-term disabilityy( insurance (market share: 6%) Products (Rankings based on 2013 In-force Premiums) Consistent long-term growth and profitability generated by robust Consistent Long -term bibusiness modldel; s trong re ltilations hip oftf trus t w ithitith its pribkimary broker- Growth and Profitability based distribution channel and loyal customer base Generated By Robust – 2010-14 net income CAGR: 3.1% (Peer average: 0.5%)(※1) Business Model – 2010-14 averagg(e ROE: 8.9% (Peer averagg)e: 6.4%)(※1) RBC ratio: 435% as of June 30, 2015 Solid Financial Strength Credit ratings: A+(+ (S&P) / A2 (Moodyʼs) / A(A (AMBestA.M.Best) as of June 30, 2015 Trusted and Talented Experienced and talented management team with proven track Management Team with record supported by its own internal development programs Culture of Internal Shares the same customer-oriented management philosophy Development (※1)Average of 4 U.S. listed life insurers primarily operating in group insurance business 9 Leading Provider of Group Life and Disability Insurance in the U.S. Group Life Group LTD (※1) Group STD (※1) Market Market Market Company Share Company Share Company Share (%) (%) (%) 1 MetLife 31.6% 1 Unum 15.3% 1 Unum 13.5% 2 Prudential 13.4% 2 Cigna 11.6% 2 Cigna 10.0% 3 Minnesota Life 7.9% 3 MLifMetLife 10. 8% 3 HfdHartford 95%9.5% 4 Cigna 6.0% 4 Hartford 10.1% 4 Lincoln FG 8.7% 5 Unum 5.5% 5 StanCorp 8.0% 5 StanCorp 6.0% 6Hartford 5.5% 6Prudldential 6.8% 6 Aetna 5.9% 7 Aetna 4.6% 7 Lincoln FG 5.5% 7 MetLife 5.8% 8 StanCorp 3.4% 8 Aetna 5.3% 8 Sun Life Financial 5.7% 9 Lincoln FG 3.3% 9 Liberty Mutual 5.0% 9 Guardian Life 5.6% 10 Sun Life Financial 2.7% 10 Sun Life Financial 4.4% 10 Prudential 4.8% StanCorp has established a top 10 market position in major group insurance areas (※1) Disability insurance is a form of insurance that insures against accident, illness, pregnancy or psychological disorders that may prevent the beneficiary from working, which also protects against loss of income. There are limited state-provided benefits in the U.S. for disability allowance, maternity benefit or child-care allowance similar to those of Japan. As a result, private disability insurance provided through an employerʼs benefits program is common. [Source:Gen Re (market share is based on 2013 In-force Premiums)] 10 Robust Business Model with Consistent Long-term Growth and Profitability Net Income (Unit: US$ million) ROE StanCorp CAGR 3.1% Peer (※1) 10.3% 10.5% CAGR 9.8% 0.5% 226 StanCorp 210 YoY Average +35.9% 8.9% 186 71%7.1% 6.6% Peer (※1) 137 137 Average 121 6.4% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2015 H1 StanCorp ROE StanCorp ROE Peer ROE (Last 5 years average) (Last 5 years average) Strong group insurance franchise has enabled steady long-term growth, profitability, and financial soundness Long-term, stable broker relationships enabled by nationwide network of 40 sales offices Robust business management and conservative culture exemppylified by flexible ppgricing manag ement in light of changes in claims activity (※1) Average of 4 U.S. listed life insurers primarily operating in group insurance business 11 Solid Financial Strength RBC Ratio Financial Strength Ratings (As of June 30, 2015) 445% 435% Rating Firm Rating Outlook 398% 365% S&P A+ Stable 331% 327% Moodyʼ s A2 Stable A.M. Best AStable 2010 2011 2012 2013 2014 2015H1 Solid financial strength driven by robust business management [Source: Company filings] 12 Experienced and Talented Management Team and Culture of Internal Development StanCorp Management Team StanCorp Management Philosophy To exceed customersʼ needs for financial J.