By Michael Tsang, Zijing Wu and Kana Nishizawa March 19 (Bloomberg) — Dai-ichi Mutual Life Insurance Co.’s initial public offering, the biggest in Japan since 1998, will value the company’s shares right between its two largest competitors. Japan’s second-biggest life insurer is raising as much as 1.1 trillion yen ($12.2 billion) today, according to its prospectus. The company’s market value at its midpoint price will be equal to 0.56 times embedded value, or the sum of its net assets and the current value of future profits from existing policies. That’s 14 percent more than T&D Holdings Inc. , the nation’s largest publicly listed life insurer, and 33 percent less than Sony Financial Holdings Inc. , Bloomberg data show. Dai-ichi’s IPO will be Japan’s second-biggest in the past 20 years behind NTT DoCoMo Inc.’s $18.1 billion deal in October 1998, and comes after offerings fell to the lowest level in at least two decades last year, data compiled by Bloomberg and Tokyo IPO show. Japanese institutions have agreed to buy 30 percent of the sale from the insurer grappling with the world’s oldest population and Asia’s slowest-growing major economy. “There’s not a lot of room for growth,” said Curtis Freeze , chairman of Honolulu-based Prospect Asset Management Inc., which won’t add Dai-ichi to the $1 billion it oversees. “I’m not saying it’s poor quality, but it’s in the price.” Japanese companies raised 44 billion yen ($487 million) in six IPOs so far this year, compared with 15 U.S. deals totaling $3 billion, data compiled by Bloomberg show. Credit-Market Freeze The Dai-ichi deal will make this year the biggest for Japanese IPOs since 2006, when companies raised 2.14 trillion yen, Bloomberg data show. Sales sank to 56 billion yen last year as the collapse of New York-based Lehman Brothers Holdings Inc. froze credit markets and the Topix index posted the worst performance in the world’s 20 biggest equity markets. Dai-ichi is offering 4.6 million shares in Japan and 2.5 million shares overseas at 125,000 yen to 155,000 yen each, according to its regulatory filing. Tokyo-based DoCoMo , Japan’s largest mobile-phone operator, raised 2.13 trillion yen. Mizuho Financial Group Inc. , Sompo Japan Insurance Inc., Tokyo Electric Power Co. and Canon Inc. of Tokyo, along with 34 other companies, have agreed to buy a combined 2.11 million shares in Dai-ichi’s sale, according to the prospectus. The insurer will have 10 million outstanding shares and a market capitalization of $15.5 billion at the midpoint price when it lists on April 1, based on prevailing exchange rates. A price of 140,000 yen would value the company at 0.56 times its embedded value of 2.506 trillion yen as of the end of September, the prospectus and Bloomberg data show. Relative Value T&D Holdings of Tokyo has a market capitalization of 703.3 billion yen, or 0.49 times its embedded value, based on a sale document distributed by banks involved with the Dai-ichi offering. Tokyo-based Sony Financial , the insurance and banking unit of Sony Corp. in Tokyo, has a ratio of about 0.83 times. China Life Insurance Co. in Beijing trades at 3.1 times, according to Bloomberg data. Prudential Plc of London, the U.K.’s biggest insurer, paid 1.69 times the embedded value of New York-based American International Group Inc.’s Asian life insurance unit in its takeover announced this month. “Japanese life insurers are cheap,” said Hideo Arimura , a senior fund manager at Mizuho Asset Management Co., which oversees about $36 billion in Tokyo. “But it’s also true that they’re cheap because of their lack of growth potential.” Acquisitions Dai-ichi, which has 8.2 million policyholders, will use proceeds of the sale to convert to stock-based ownership from policy-based mutual ownership. The switch will expand fundraising options for acquisitions and partnerships as the population declines, the company told policyholders in June. Japan’s life insurers are struggling for new customers after the first global recession since World War II. The nation’s economy will grow less than 2 percent annually through at least 2012 after contracting 1.2 percent in 2008 and 5.2 percent last year, estimates compiled by Bloomberg show. That compares with growth of 9.6 percent projected for China this year, while gross domestic product in the U.S. will rise at least 3 percent annually from 2010 to 2012, the estimates show. Almost 23 percent of Japan’s 126 million people will be older than 65 this year, compared with 13 percent in the U.S., data compiled by Bloomberg show. Japan is the world’s oldest society, with a median age of 44, according to the United Nations’ World Population Ageing 2009 report. “The insurance business in Japan is very challenging because the economy has shown no nominal growth over the past few years, plus the demographics imply a shrinking population,” said Ian Burden , a London-based fund manager at Threadneedle Asset Management Ltd., which oversees about $94 billion. “Against that backdrop, I think things like insurance are very difficult.” To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net ; Zijing Wu in London at zwu17@bloomberg.net ; Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net .
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Dai-ichi Pricing at Premium to T&D, Discount to Sony in 2010′s Biggest IPO
