TOKYO - Dai-ichi Mutual Life Insurance, Japan's second-largest life insurer, said on Monday it would sell about 1.07 trillion yen ($11.7 billion) worth of shares in the country's biggest initial public offering in more than a decade.

Dai-ichi Life is looking to expand overseas to offset its shrinking life insurance business in Japan as the population falls.

Because Dai-ichi does not have much potential for growth in Japan, it needs to become a public company to make it easier to raise money to support its expansion, said Wataru Kasatani, a financial analyst for MDAM Asset Management in Tokyo.

Dai-ichi Life, Japan's second only to unlisted Nippon Life Insurance, plans to list on the Tokyo Stock Exchange on April 1 after completing the process of demutualization, in which its stock is distributed to its more than 8 million policyholders.

The company, established in 1902, will not raise any funds for its operations in the global offering, with policyholders given the option of holding on to their stock or cashing out.

Dai-ichi said more than 7 million shares would be sold globally at a tentative price of 150,000 yen each. The final price will be set on March 19 after gauging investor demand.

The company, whose main building in Tokyo served as headquarters for the U.S. occupation forces after World War II, already has a presence in Thailand, Australia and India.

SEEN AS A TEST

Dai-ichi's IPO is seen as a key test for investor demand for new issues. The size of Japan's IPO market dwindled last year to its lowest since 1992 amid the sluggish outlook for the world's second-largest economy.

Dai-ichi's IPO also comes as other Asian insurers look to tap the resurgent equity market for funds.

Korea Life Insurance Co Ltd, that country's No. 2 life insurer, aims to raise up to $2 billion in March, in what could be the country's biggest initial public offering in four years. AIA, the Asian unit of American International Group (AIG.N) is planning a $10 billion-plus IPO in Hong Kong next month.

At the indicative price, Dai-ichi would be Japan's biggest IP0 since mobile phone company NTT DoCoMo's 2.1 trillion yen offering in late 1998. Dai-ichi's tentative price would give it a market value of 1.5 trillion yen, more than double the value of rival T&D Holdings.

The estimated price of 150,000 yen seems to be relatively cheap. But will the share price keep rising from here? Maybe not, said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

I think they are going to be the kind of shares that trade in a stable manner and attract those investors who are after dividends.

Dai-ichi's embedded value, a measure of insurance companies' worth that includes the present value of future profits from long-term insurance contracts, was 2.5 trillion yen in September. That means Dai-ichi's market value would be 60 percent of its embedded value.

That is about the same as T&D Holdings, which had 1.1 trillion yen embedded value in September and a current market value of about 640 million yen.

Dai-ichi Life's revenue from the insurance business rose 16 percent to 2.9 trillion yen for nine months through December from a year earlier. Its fundamental profit, equivalent of operating profit, rose 18 percent to 265 billion yen.

But the growth was led by Dai-ichi Frontier Life Insurance Co, a unit that sells variable annuities.

Dai-ichi Life said it would sell 691.4 billion yen worth of the shares in Japan and the rest overseas.

Of the total shares sold in Japan, Dai-ichi said Japanese companies, such as Mizuho Corporate Bank, Sompo Japan Insurance Inc and Bank of Tokyo-Mitsubishi UFJ would buy 2.1 million shares, helping it establish a base of stable shareholders.

Nomura Holdings Inc, Mizuho Securities and Bank of America-Merrill Lynch will arrange the initial public offering, Dai-ichi said.

($1=91.60 Yen) (Additional reporting by Kiyoshi Takenaka and Chikafumi Hodo; Editing by Lincoln Feast)

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