A 7% stake in Aflac: a strategic alliance aimed at equity-method treatment (2018)

Can a stake that avoided impairment fill the hole in growth?

The shape of this decision is easiest to see against the Australian acquisition that preceded it. After buying an unfamiliar overseas business outright, misjudging its value under the time pressure of a listing, and sinking into a write-down, what Japan Post chose next was a minority stake in a partner whose business it already knew. Combining a trust structure with voting provisions in the articles to take in accounting profit without bearing the risks of control — that design can fairly be called the cautious template a company arrives at after being hurt by M&A. In keeping its distance from the danger of impairment, it was the opposite of Toll.

Whether the investment answered the problem a privatized company actually has, though, still needs watching. Equity-method income thickens the consolidated figures, but it does not make up for the structural contraction of domestic mail, postal savings and postal insurance. Even the joint sale of cancer policies that was the point of the alliance was thrown into disarray the following year by the improper solicitation at Japan Post Insurance. The Aflac stake can be seen as a move to spread earnings outward rather than growth that fills the hole in the core business. How a patience that takes in profit slowly connects to the next pillar of growth is a question left for the years ahead.