According to The Australian Financial Review today, Insurance Australia Group (IAG) has formed a strategic relationship with Warren Buffett's investment giant Berkshire Hathaway that will see the US group take a 3.7 per cent stake in IAG via a $500 million placement.
The deal, announced on Tuesday, will see the two companies form a 10-year, 20 per cent quota arrangement across IAG's consolidated insurance business. Berkshire Hathaway will receive 20 per cent of IAG's gross written premiums and pay 20 per cent of claims.
IAG chief executive Mike Wilkins said the deal would help "deliver improved consistency of earnings" and provide the company with "significant capital flexibility".
"We look forward to the benefits that will flow from the combination of IAG's underwriting skills, supply chain management expertise and deep customer knowledge, coupled with Berkshire Hathaway's speciality insurance expertise," Mr Wilkins said in a statement to the ASX.
The two companies have had a reinsurance arrangement since 2000.
Mr Buffett said in a statement that the partnership with IAG would help fast-track Berkshire Hathaway's entry into the Asia-Pacific region.
"We have worked with IAG for more than 15 years and over that time we've developed a good understanding and respect for their people, what they offer and the way they do business.
IAG expects the quota arrangement will cut its capital requirements down by $700 million over the next five years.
IAG said its insurance margin guidance for 2014-15 remained unchanged at 10.5 to 12.5 per cent as outlined in late April. It expects FY16 margins to increase to 14-16 per cent.
According to The Australian Financial Review today, more foreign students started courses in Australian universities, colleges and English schools in 2015 than any year in history, a huge rebound driven by the lower dollar, easier visas and a scheme that allows them to stay for 18 months after graduation.
Nearly 147,000 students started courses in the first three months of this year, above the previous first quarter record of 142,400 reached in 2009 at the peak of the last education export boom.
Universities and other higher education institutions also took their largest ever intake of new international students this year, with 61,493 starting courses in the first quarter.
Responding to the figures, federal Education Minister Christopher Pyne will this week commission a review of the economic benefits of education exports focussed on the additional income and job opportunities created in local communities and highlighting its potential to help fill the gap in export income caused by the end of the resources boom.
Even as resource exports come under pressure, education exports grew 14 per cent in the past year to be worth $17.5 billion annually. Education is now Australia's third-largest export industry after iron ore and coal, and the largest service export. It is substantially larger than tourism, which is worth $14.5 billion annually.
In 2014 Australia hosted 590,000 international students, up 12.3 per cent on 2013, and signs are that strong growth will continue, with enrolments in the first quarter of 2015 up 11.5 per cent on the same period in 2014. Aside from the lower dollar, student numbers have been boosted by two Labor government schemes, streamlined student visa processing and visas which allow graduates temporary stays (including work) in Australia after graduation.
According to The Nikkei Asian Review, Panasonic is joining with Nippon Telegraph and Telephone (NTT) to develop next-generation information systems ahead of the 2020 Tokyo Olympics, including 3-D video distribution systems for broadcasting sports events.
The two Japanese companies, key sponsors of the Tokyo Olympics and Paralympics, see the events providing an excellent opportunity to promote their technologies to the rest of the world.
Panasonic's technologies for shooting and processing 3-D video will be combined with NTT's high-speed communications technologies. This will make possible public viewing of Olympic events in 3-D, for example.
The duo also plans to launch a service that enables smartphone users to choose the camera angle. This technology will have applications beyond the Olympics, such as concerts and other events, so demand from overseas is expected to be strong.
Furthermore, Panasonic and NTT intend to develop electronic billboards that would let foreign tourists’ access facility information, transportation options and other information in their native languages simply by holding their smartphones up close. Panasonic's high-resolution display and other video technologies will be integrated with NTT's data analysis technologies to commercialize this product.
Panasonic aims to create 150 billion yen ($1.2 billion) in new business through the Olympics. It has already reached a deal with French information technology giant Atos to jointly develop state-of-the-art systems, such as surveillance cameras and displays, for the Tokyo Olympics.
Financial service is the next boom in Australia and Japan Post Bank plans venture with Sumitomo Mitsui Trust and Nomura in Japan. Can Japan and Australia collaborate to provide the financial service in Asia?
Japan Post Bank plans venture with Sumitomo Mitsui Trust and Nomura in Japan
According to The Nikkei Asian Review today, Japan Post Bank, Sumitomo Mitsui Trust Bank and Nomura Holdings plan to form an asset management company that would develop low-risk personal finance products for sale at post offices.
The three have reached a broad agreement on the joint venture -- the first between the government-owned Japan Post group and major private-sector financial institutions -- and may announce their plans this month.
The alliance is in part aimed at helping bridge the divide between the postal group and private-sector banks, which have long accused it of crowding them out, ahead of this fall's initial public offering of shares in Japan Post Holdings and its banking and insurance units.
Japan Post Bank likely would put up half of their new company's several hundred million yen in initial capital, with Sumitomo Mitsui Trust and the Nomura group contributing roughly 30% and 20%, respectively. The three have informed financial regulators of their plans, which call for launching the company next year.
Japanese post offices already sell various mutual funds and other investment products. The joint venture would seek to cater to an underserved segment of customers preferring safe, deposit-like vehicles for their money. It also would offer personal defined-contribution retirement savings plans and wrap accounts, which let investors delegate the management of their portfolios. Sales of these products would begin at select locations and eventually expand nationwide.
Japan Post Bank sees the venture as a launchpad for an asset management business with access to a network of 24,000 post offices. It hopes to ride a shift in personal finance from savings to investment being promoted by the government and seized on by private-sector financial institutions. The bank is trying to show investors that its strategy for post-IPO growth points in this direction.
Nomura Holdings, the parent of Nomura Securities, hopes the venture will broaden its own retail customer base by creating new investors. It can contribute know-how on explaining financial products to beginners. For the past few years, its sales efforts have emphasized building assets over the medium to long term rather than earning sales commissions, and its assets under management have grown.
Sumitomo Mitsui Trust sees joining forces with the postal group as a way to level the playing field with Japan's three megabanks, which boast far bigger branch networks. It brings strength in product development that draws on years of experience managing corporate pensions.
Financial service is the next boom in Australia
According to The Australian Financial review today, the export and trade of Australia's global expertise in financial services, and particularly in funds management, is an opportunity whose time has come.
While Australia's financial services sector is large – at $2.5 trillion, the world's fourth-largest pool of funds under management – less than 5 per cent of these funds are sourced from overseas investors. And while this has been growing and delivering significant benefits to the economy, there is the potential for an exponential increase in foreign-sourced funds if the right policy settings are implemented.
The Johnson Report of 2009 identified Australia's comparative advantage in funds management: our proximity to Asia; a highly skilled funds management workforce and our first-mover advantage in establishing superannuation. Mark Johnson also noted we have arguably the most sophisticated and advanced financial sector in the region.
On current trends, Asia is forecast to become the leading region for consuming goods and services and to be home to the majority of the world's middle class. But with 60 per cent of the world's population, Asia still has only 12 per cent of global funds under management.
An ageing population in Asia, and particularly in Japan, also creates new opportunities for Australia's financial services sector. Currently, our exports of insurance and pension products to Asia are estimated at approximately $174 million, or around 2 per cent of total exports.
While we no longer pick winners and seek subsidies to favour particular industries, we do need governments to remove trade barriers and build links.
According to The Australian Financial Review today, coal and gas producers insisted they still have a future under an agreement by the world's biggest economies to "decarbonise" the global economy by 2100 but say increased investment in carbon capture technology is vital to meet that goal.
Glencore, Australia's largest coal exporter, responded by declaring that coal would be the chosen fuel for baseload energy for decades to come particularly in the developing world.
"Global policy should be targeting the least-cost path to emissions reduction. That path includes coal," the spokesman said.
"The production of zero emissions electricity from coal is already happening," he said.
He pointed to the Boundary Dam power plant in Canada, the world's only operating commercial coal-fired generation with technology to capture carbon dioxide emissions.
"The technology exists, the next step is to bring costs down so it can be commercialised at scale," Mr Michael Roche, Queensland Resources Council chief executive, said. "There is no future for coal or for gas in the long run without carbon capture and storage."
Gas producers used the G7 pledge to argue the case for natural gas as a cleaner burning alternative to coal.
"We all know that gas can play an essential role in ensuring we grow living standards while reducing our carbon footprint," said Susie Smith, general manager carbon and sustainability at oil and gas producer Santos.
Royal Dutch Shell, whose business is totally reliant on the production of fossil fuels, has also pointed to the crucial role of carbon capture technology.
According to The Australian Financial Review today, the US engineering firm building the LNG plants at Gladstone, Queensland Australia has declared that it expects to complete three more LNG trains at the sites by the end of the year, quadrupling Queensland's LNG production and giving birth to a new major industry for the state.
Privately owned Bechtel confirmed it should complete construction of the first production units at the Santos GLNG project and at the Origin Energy Australia Pacific LNG venture, as well as the second train of the BG Group project, which already has one train in operation.
The timing given by Bechtel appears to confirm the schedules signalled by the three individual ventures. Both GLNG and APLNG have signalled a likely start-up of their first production in the September quarter.
The plants are the world's first to produce LNG for export using gas extracted from coal seams.
"The projects will begin producing LNG in rapid succession over the second half of 2015," Bechtel's global LNG general manager Alasdair Cathcart said in a statement on Tuesday.
The higher-than-expected costs to bring the three ventures into production have exacerbated worries about the impact the rout in crude oil prices will have on the profitability of the projects, given the prices for their LNG sales contracts are directly tied to oil prices.
Bechtel construction teams at GLNG and APLNG recently reached the milestone of introducing gas into the LNG plants, and started to generate their own power as part of the commissioning process for the first production trains at the respective sites.
The second production trains at GLNG and APLNG are expected to begin production in early 2016.
LNG from the three projects will be sent to China, Japan, South Korea, Malaysia and elsewhere in Asia.
Once all six trains are operational, the three projects on Curtis Island will produce about 25 million tonnes of LNG, enough to power a city the size of Tokyo with 13 million people.
According to The Asahi Shimbun, drivers of Subaru brand cars will soon be able to sit back and relax during heavy traffic congestion in expressways and let the vehicle automatically take over the operation of accelerating, braking and handling.
Yasuyuki Yoshinaga, the president of Fuji Heavy Industries Ltd., the manufacturer of Subaru automobiles, told The Asahi Shimbun during a June 4 interview that the Tokyo-based firm plans to put the automatic driving technology into practical use in 2017.
Yoshinaga added that FHI will also introduce technology in 2020 that will enable a car to automatically pass a slow-moving vehicle on expressways.
The new technologies are further developed versions of FHI’s EyeSight safety technology that enables vehicles to automatically detect cars running in front of them. The technology uses cameras to monitor traffic lanes and helps vehicles maintain a safe distance from other cars and not veer out of their own traffic lane.
Currently, EyeSight can only be used to detect vehicles at long distances. The updated technology will be able to detect cars at much shorter distances and be effective in detecting cars in traffic jams.
“I want drivers to be able to enjoy their drives to their destinations and relax on their way back home,” Yoshinaga said.
During the interview, Yoshinaga poured cold water on a possible return by Subaru to the World Rally Championship, which it quit in 2009 due to management difficulties.
Asked whether FHI would take part in the competition again, Yoshinaga was not hopeful.
“We want to return (to WRC),” he said. “But it has become impossible for us to use our cars due to changes in the rules.”
Yoshinaga also noted that FHI’s sales in North America increased 85 percent during the past five years. Asked why the sales are so bullish there, Yoshinaga said: “One reason is a boom in sport utility vehicles. Another is that people’s interests in safety, in which our cars have a great strength, have become higher.”
According to The Bloomberg today, venture capitalists who have long avoided investing in Japan may think again as startups in the country develop a new generation of robot technology, according to consultant Koichi Hori.
While Japan has little chance of catching up to the U.S. in digital media, the next phase of technological innovation will be in robotics with artificial intelligence, said Hori, who headed Boston Consulting Group Inc.’s Japan office before founding Dream Incubator Inc. in 2000. That plays to Japan’s strengths in engineering, he said.
“Digital media will only be in the mainstream for about three years, or five years at most,” Hori, 70, said in an interview in Tokyo on May 27. “From that time on, robots and robotics will be the eye-catchy industries. Japan has a good chance, particularly in the area of hardware for robots.”
Prime Minister Shinzo Abe is pushing for a “robot revolution” to help reclaim the dominance of Japanese technology after companies such as Sony Corp. lost ground to Apple Inc. and Samsung Electronics Co. With venture investment less than 3 percent that of the U.S., Japan has struggled to replicate Silicon Valley’s success as a hub of innovation.
During a trip to California in May, Abe lamented the reluctance of Japanese businesspeople to take risks and champion entrepreneurs. He announced a program to send people from 200 Japanese companies to Silicon Valley in the next five years to “absorb the culture.” Abe plans to more than quadruple the nation’s robotics industry to 2.4 trillion yen ($19 billion) by 2020.
Japanese are beginning to soften their stance toward startups, Hori said.
“In the U.S., people who start their ventures are to a certain extent respected by society, and in contrast in Japan entrepreneurs have been considered as those who couldn’t become bureaucrats or employees of big corporations,” he said. “It’s been changing here, especially in the past three to four years.”
Squse Inc., a Kyoto-based maker of robotic hands, won as much as 500 million yen in funding from the state-backed Innovation Network Corp. of Japan in February 2014. Mujin Inc., a Tokyo-based developer of software for industrial robots, in August raised 605 million yen from Jafco Co. and University of Tokyo Edge Capital Co.
Google Inc. bought Tokyo-based Schaft Inc. in 2013 after the robot venture was turned down for investment by 10 Japanese firms and ultimately got funding from the U.S. government. In turn, Schaft co-founder Takashi Kato opened a fund to invest in technologies from Japanese startups and universities that have been overlooked by investors, he said last year.
Investment by Japanese venture capitalists totaled 144 billion yen in 2014, dwarfed by about $48 billion spent by their U.S. counterparts, data from the Japan Venture Enterprise Center and the U.S. National Venture Capital Association show.
Dream Incubator has invested an undisclosed sum in car-robotics venture ZMP Inc., which is working with DeNA Co. to aim at offering a driverless car by 2020, according to a document prepared by Hori’s firm.
Hori founded Tokyo-based Dream Incubator after a two-decade stint at Boston Consulting. The company, which listed in 2002, manages private-equity funds and offers mergers and acquisitions advice and consulting services.
Japanese investors are showing a considerable appetite for Australian companies. Cheap money, low growth fuel Japanese bids
According to The Australian Financial Review today, first it was Japan Post with a knockout $6.5 billion for out-of-favour Toll Holdings. And now a Japanese bidder, Nippon Life, is knocking on the door at National Australia Bank's unloved life insurance unit talking numbers that would have surprised most shareholders and analysts.
With bonds at zero, Japanese investors are showing they're happy to accept single digit returns on investment and a considerable appetite for Australian companies.
And hedge funds and bankers are starting to wonder where the bidders will show up next.
Japanese companies have shown a liking for financial services. And it was only five years ago, Japan's Dai-Ichi Life snapped up another of Australia's biggest life insurers, TAL, in a $1.2 billion deal. Then there was Nikko Asset Management, which purchased fund manager Tyndall Investments.
The NAB life approach from Nippon appears timely, with profits across the sector suffering from low investment yields. With investment income being a big driver of profits, the Japanese insurer would be itching to boost its balance sheet with an acquisition that promised some form of growth.
The mooted offer from Nippon is above what the broker thought would be NAB Life's realisable value last year of $800 million.
Investment bank JPMorgan is advising NAB on the potential deal, with Nippon Life believed to have tabled a price north of $2.5 billion.
More people use smartphone every day for different purposes with a wide range of functions. For example, people use smartphone not only for phone call and email but also car navigation and monitoring their exercise.
According to The Nikkei Asian Review today, Toyota Motor will explore the possibility of using Ford Motor's platform for Internet connectivity between smartphones and "infotainment" systems in its cars.
The Japanese automaker made the announcement Thursday, but gave no details other than saying it would consider adopting Ford's SmartDeviceLink (SDL) platform in future releases of Lexus and other models.
This represents the first fruit of the collaboration that the two companies agreed to in 2011 regarding telematics for information services in cars.
It also suggests that automakers are not going to cede the initiative to the likes of Google and Apple and want more say in the connected cars of the future.
Ford has already commercialized the SDL platform. Based on technology from Livio, a U.S. company acquired in 2013, SDL lets smartphone apps interact with car-mounted terminals, enriching the experience of connectivity in the car. For example, it could let drivers use the display panels and voice-recognition features of devices like car navigation systems to control smartphone apps, read email messages aloud and utilize favorite smartphone apps to play music and view maps.
Ford's SDL platform competes with similar technologies for connected cars under development by U.S. information technology giants Google and Apple. Japan's Nissan Motor and Germany's Volkswagen have joined Google's camp for Android Auto, a platform that facilitates the use of Android smartphones in cars. Apple's rival platform, called CarPlay, utilizes the Siri voice-operable interface.
Toyota has thrown its hat in the Apple camp, but is teaming with Ford as part of its "competition and cooperation" strategy to also polish its own technologies in this field.
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