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Money Management

Japan’s MS&AD to take minority stake in Aussie manager Challenger

MS&AD Insurance Group Holdings, a Tokyo-based insurer, will acquire a minority stake in listed Australian investment manager Challenger Ltd., extending a relationship that began eight months ago with the offer of Australian-dollar annuities in Japan.

MS&AD — formed by the 2010 merger of Mitsui Sumitomo Insurance Group, Aioi Insurance Co. and Nissay Dowa General Insurance Co. — will purchase A$500 million ($396 million) of newly issued Challenger shares for an initial 6.3% stake in the firm, an MS&AD Insurance news release said.

The Japanese firm will look to boost its stake to 10% in the next 12 months through purchases of Challenger shares on the Australian Securities Exchange, according to separate news releases Tuesday by Challenger and MS&AD.

The share purchase is "part of a broader strategic relationship," building on the success of the sale of Challenger-managed annuities to MS&AD's customers in Japan, a Sydney-based spokesman for Challenger said.

MS&AD clients accounted for 15% of Challenger's annuity sales for the fiscal year ended June 30, even though the tie-up was only in effect for eight months of that year.

The spokesman said Challenger's A$70 billion in assets under management includes A$50 billion for 15 asset management boutiques under the firm's Fidante Partners multiboutique holding company, and its life insurance arm's industry-leading A$20 billion in annuity products.

MS&AD will look to strengthen its alliance by utilizing Challenger's know-how, with initiatives to "promote and accelerate the joint development of new products, to acquire know-how in such areas as the management of longevity risk," the insurer's news release said.

MS&AD "reserves the right to change its intentions and acquire, dispose and vote Challenger shares as it sees fit," the release stated.

A spokesman for the Japanese company couldn't immediately be reached for comment with regard to whether MS&AD could move at some point to take a majority stake in the Australian company.