MS&AD Insurance Group Holdings Inc. will acquire approximately 6.3% of the outstanding shares of Australian financial services company Challenger Ltd. for A$500 million.

Challenger said it will issue ordinary shares to the Japanese group on Aug. 23 at A$13.06 per share. Proceeds of the equity placement will be used to increase Challenger Life Co.'s common equity Tier 1 capital and to fund future growth.

MS&AD Insurance Group separately said it plans to increase its holding in Challenger to 10% in the next 12 months through the market, subject to market conditions and regulatory approvals.

The deal strengthens the existing partnership between Challenger and Mitsui Sumitomo Primary Life Insurance Co. Ltd., a subsidiary of MS&AD Insurance Group, and widens the Australian company's access to the Japanese market.

As of Aug. 14, US$1 was equivalent to A$1.27.