By Aidan Gregory

March 31 - (The Insurer) - MS&AD’s integration of Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance and its acquisition of a 15% stake in U.S. specialty insurer WR Berkley will power long-term growth at the Japanese insurer, according to analysts.

On Friday, MS&AD’s board announced its intention to proceed with plans to merge its two core non-life insurance businesses by April 2027, creating the largest Japanese domestic non-life insurer by market share, surpassing Tokio Marine and Sompo.

Separately, MS&AD has also agreed to build a 15% stake in WR Berkley via its subsidiary Mitsui Sumitomo Insurance Group.

The acquisition is expected to be completed by March 2026 and is part of an effort by MS&AD to diversify its revenue outside Japan, particularly after Japanese regulators ordered an unwinding of cross shareholdings to improve corporate governance.

“MS&AD announced two ambitious plans last week,” said Sam Wong and Shujin Chen, insurance equity analysts at Jefferies in Hong Kong, in a note on Monday. “While we are positive on potential cost synergies from the domestic merger, the overseas deal could limit near-term buyback upside.”

MS&AD said on Friday that the combination of MSI and ADI will enhance the group’s compliance frameworks after a spate of regulatory interventions over issues such as price fixing and information leaks, while also boosting the efficiency of the combined company.

Citi sees the combination of MSI and ADI and the WR Berkley stake-build as a long-term catalyst for growth, although the valuation of WR Berkley is “far from inexpensive”. However, with just a 15% stake, MS&AD may struggle to exert influence over its strategy, according to Koichi Niwa, an equity analyst at Citi in Tokyo.

“This is an important step for the firm's longer-term growth, in our view,” said Niwa. “We are optimistic about the firm's entry to the U.S. market, where it has had little presence until now, and about the creation of opportunities for cooperation.”

Niwa added that the transactions show a "company with a reputation for conservatism making bold restructuring moves".

WR Berkley is listed in New York, with a market capitalisation of $27.3 billion and a price-to-earnings multiple of around 16.4 times. Based on the current market cap, a 15% stake in WR Berkley would cost $4.1 billion.

Jefferies added that it believes the WR Berkley deal could be the first in a series of cross-border M&A transactions by MS&AD, particularly if the process goes smoothly.

“We think MS&AD remains interested in pursuing overseas M&A, including non-insurance assets, such as asset management companies,” said Wong and Chen. “The many corporate actions also pose near-term execution risk, although if successfully executed could bear fruit in the long term.”

Shares in MS&AD fell more than 8.1% in trading on Monday amid a global equity market sell-off driven by the threat of an escalating trade war between the United States and its trading partners.

U.S. President Donald Trump has said that new tariffs on Wednesday, which he has dubbed Liberation Day, will hit “all countries”.