Japan’s MS&AD Insurance Group has acquired a 6.3% stake in annuity company Challenger, through a $500 million equity placement.

MS&AD, the parent of Mitsui Sumitomo Primary Life Insurance (MS Primary), intends to increase its holding to 10% over the next year.

The investment follows Challenger’s expansion into the Japanese market, where it partners with MS Primary to provide Australian-dollar annuities.

“We look forward to further leveraging our relationship with MS&AD group and exploring new growth opportunities for both groups,” Challenger CEO Brian Benari said.

Challenger’s annuity sales grew 20% to $4 billion last financial year, with sales through MS Primary accounting for 15% of the total.

The company says Japan has one of the world’s most rapidly ageing populations and low domestic interest rates, which make higher-returning foreign-currency annuities popular.

Challenger’s average assets under management grew 12% to $64.7 million last financial year, while net profit after tax gained 21% to $385 million. The company expects normalised net profit before tax will rise 8-12% this financial year to $545-$565 million.