Nippon Life’s purchase of Resolution Life causes ripple effects in Australia’s market

The MLC brand of life insurance in Australia will disappear after 130 years and a new one with almost two million customers will enter the local market as Japanese players chase profitable sectors.

Nippon president Hiroshi Shimizu with Resolution founder Sir Clive Cowdery.

Nippon Life Insurance Company’s bumper US$8.2bn ($12.9bn) acquisition of a controlling stake in global firm Resolution Life will trigger pay days for National Australia Bank, Hostplus and the NSW public sector’s TCorp.

The deal, which marked the largest global purchase of a life insurance company by a Japanese buyer, was announced on Wednesday. 

Under the transaction, Nippon buys the 77 per cent of Resolution that it doesn’t already own. If the transaction closes, as expected in the second half 2025, Nippon will own 100 per cent of Resolution, founded by Sir Clive Cowdery in 2003.

As part of the transaction Nippon, which bought 80 per cent of NAB’s local arm MLC Life in 2016, is snapping up the remaining 20 per cent of that business for $500m based on an expected deal completion date of December 31, 2025.

Nippon entered the Australian market when the major banks began to retreat from the life insurance sector amid regulatory challenges and a string of compliance issues.

It has been a turbulent investment, though, and Nippon has tipped significant amounts of capital into the business.

In Australia, Nippon and Resolution will bring their businesses together and rebrand as Acenda with a combined total of almost two million customers. That will result in the MLC brand disappearing from life insurance, as a 10-year agreement around the brand will end in the next 18 or so months.

Resolution Life in Australia

Resolution became a significant player in the Australian market when it snapped up 80 per cent of AMP’s life insurance unit in a $3bn deal that was completed in 2020. AMP sold the residual holding to Resolution the following year.

Resolution – which has operations spanning London, Bermuda, the US, Australia and NZ – has typically bought life insurance books to service existing customers or provides reinsurance rather than seeking any new business.

Resolution has almost 60 shareholders which are expected to sell into the Nippon transaction, including investment giant Blackstone, JPMorgan and Singapore’s Tamasek, while in Australia industry fund Hostplus and TCorp hold stakes in the group.

The acquisition is subject to a string of regulatory approvals from relevant authorities in the US, Japan, Bermuda and Australia.

Resolution Life global founder and chief executive Sir Clive Cowdery. Picture: John Feder

Nippon’s head of global business, Minoru Kimura, told The Australian the acquisition marked a “huge step” for the company as it boosted its exposure outside Japan.

“That is a very critical thing for our … long-term responsibility to our policyholders in Japan to bring in more stable and sustainable income streams,” he said, noting that Nippon wanted a bigger profit contribution from markets outside Japan particularly markets such as the US and Australia.

“They already have very stable regulatory regimes.”

New brand to be called Acenda in Australia

Sir Clive, also Resolution’s executive chairman, said the merger would create an “extremely strong” combined management team and group, which in Australia would facilitate more growth rather than just focusing on cost reduction, such as job cuts.

“Unquestionably in Australia the leading ambition is growth, and the secondary ambition is efficiency,” he said.

“We have decided to take a very slow and measured approach to looking for efficiency.

“We will be the number one (life insurance) company on the day we are born by assets, we will be the number three company in Australia … by premiums.”

TAL - which bought Westpac’s life insurance operations - is Australia’s largest player in the market by premiums followed by AIA Australia, which snapped up Commonwealth Bank’s life division.

ASX-listed Insignia last month confirmed MLC would be its go-forward consumer brand in the wealth sector, while Shadforth and Bridges would be its financial advice brands.

That is a marked consolidation from about nine brands in the Insignia stable previously, after a spate of acquisitions over the past six years including the MLC wealth division from NAB.

End of MLC brand

Mr Kimura and Sir Clive shrugged off any suggestion the loss of the MLC brand may lead to customer leakage in life insurance, post deal completion.

As part of the NAB transaction, the bank has agreed to provide up to $150m contingent tier two capital support to the joint MLC Life Insurance and Resolution Life Australasia business “if required”. NAB said the support could be drawn down for a period of three years after deal completion

Mr Kimura said obtaining all the regulatory approvals around the world take grunt work and was an “important step” toward getting the deal done, but he didn’t anticipate any significant issues.

He also sees opportunities in Australia to tap into Resolution’s exposure to annuity products.

The parties noted the life insurance entities in Australia would continue to operate separately for some years, before potentially being brought together.

Nippon first invested in Resolution in 2019 and two years ago became the company’s largest shareholder.