August 15, 2017 / 2:01 AM / 2 years ago

Japan's MS&AD buys stake in Australian annuity provider Challenger

TOKYO (Reuters) - Japanese insurer MS&AD said it has agreed to buy 6.3 percent of Australian annuity provider Challenger Ltd for A$500 million ($393 million), to tap the growing market for managing retirement savings.

In a statement on Tuesday, MS&AD also said it plans to raise its stake to 10 percent within 12 months.

MS&AD Insurance Group Holdings Inc and its domestic peers have been buying businesses overseas to temper risk exposure to natural disasters.

In 2015, MS&AD agreed to pay $5.3 billion for Amlin PLC, an underwriter in the Lloyd’s of London specialist insurance market.

In its latest deal, MS&AD will buy 6.3 percent worth of new Challenger shares. It will also buy outstanding shares on the open market to raise its holding to around 10 percent within 12 months, subject to regulatory and market conditions.

Challenger was established in 1985 and currently manages A$66.6 billion worth of assets.

MS&AD said it expects Australia’s annuity market to grow as the population ages.

Australia’s A$2.1 trillion pool of tax-advantaged retirement savings, known locally as “superannuation” or “super” funds, is among the world’s largest after the U.S., Britain, Japan and Canada, showed data from consultancy Deloitte. It is set to reach nearly A$10 trillion by 2035.

Reporting by Taiga Uranaka; Editing by Christopher Cushing

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