The Japanese life insurer is expected to pay a little over 200 billion yen (US$1.65 billion) and will likely complete the acquisition by the end of fiscal 2016 starting next April, sources said. The two companies are expected to announce the deal by the end of October.
Under the broad agreement, NAB will spin off its life insurance business, in which Nippon Life will take an 80% stake. NAB will retain the remaining 20%.
NAB is one of Australia's four major lenders. Its insurance business is estimated to have made around 160 billion yen in revenue, including related earnings, in fiscal 2014, up 8% from the previous year.
Nippon Life decided to invest in the spun-off entity with NAB and plans to continue selling insurance products at NAB branches, a key sales channel in Australia. The move comes as the company sees few opportunities for growth in the domestic life insurance market due to Japan's shrinking population. Although Australia's insurance market is only about 15% as large as Japan's, the market is growing by double digits every year.
The company has been considering buying NAB's insurance business for the past few years, foreseeing steady growth thanks to Australia's solid economy and growing population.
Nippon Life announced a deal to buy domestic rival Mitsui Life Insurance earlier this year. The company is aiming for a tenfold increase in revenue from operations outside its domestic life insurance business over the next 10 years. It is seeking to bolster its operations at home and abroad through acquisitions.
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