Bloomberg News

Prudential Targets Japan Where ‘They’re Old, But They’re Rich’

June 10, 2011

June 10 (Bloomberg) -- Prudential Financial Inc., the U.S. life insurer that spent more than $4 billion this year to expand in Japan, said the best way to make money outside its home market is to focus on a limited number of nations.

“Our strategy is getting deeper in countries that we’re already in, as opposed to dramatically broadening,” Ed Baird, chief operating officer of Newark, New Jersey-based Prudential’s international business, said today at a conference. “In Japan, they’re old, but they’re rich.”

Chief Executive Officer John Strangfeld has called Japan an attractive market that lacked the “sex appeal” of faster growing economies. Prudential’s concentration on Japan contrasts with the growth of larger rival MetLife Inc., which spent more than $16 billion last year to expand in more than 50 countries.

“Doing that cross currency, cross country is exceedingly difficult,” Baird said. Prudential concentrates on expanding in countries where it already does business because, “in our experience, it’s only through this approach that you can really reap the benefits of economies of scale,” Baird said.

Strangfeld boosted Prudential’s business in Japan by buying two units from American International Group Inc. in February. Prudential, the second-biggest U.S. life insurer, has done business in the country for more than two decades.

Japan, the second-biggest life insurance market, accounted for about 17 percent of the world’s policy sales in 2009, according to a study by Swiss Reinsurance Co. Life insurance sells well in the country in part because an aversion to stock market investment among the Japanese has limited the growth of other products like mutual funds, Baird said.

Shunning Stocks

“The Japanese don’t have a strong interest, even in their own equities,” Baird said. “If one takes a look at the 20-year history of the Nikkei, that’s not an entirely illogical position.”

The Nikkei 225 Stock Average slipped 62 percent in the 20 years ended May 31, compared with a more than tripling of Standard & Poor’s 500 Index. The U.S. is the largest life insurance market.

Aflac Inc., the world’s biggest seller of supplemental health insurance, gets about three-quarters of its revenue in Japan. The Columbus, Georgia-based company started its operations in Japan in 1974 by selling cancer insurance. MetLife, based in New York, bought American Life Insurance Co. from AIG in November to add businesses in countries from Chile to Poland and Russia. Alico also gave MetLife customers in Japan.

--Editors: Dan Kraut, William Ahearn

To contact the reporters on this story: Andrew Frye in New York at afrye@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net;


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