NEW YORK (

TheStreet

) -- Japan's second largest casualty insurer

Tokio Marine

is buying Delaware -based

Delphi Financial Group

( DFG) for $2.7 billion in cash, valuing the company at a 73% premium in a deal that signals a move into the U.S. as a diversification from disaster hit Asian insurance markets.

The move, which is both one of the five biggest insurance acquisitions of 2011 and one of the biggest Japanese ventures into the U.S., will allow Tokio Marine to diversify its insurance risks away from the Asia Pacific region which suffered from a devastating earthquake and tsunami in March and flooding in Thailand in November.

Tokio Marine will pay $43.875 for each Delphi class A share, and $52.875 for each class B share and will also give existing Delphi shareholders a $1 a share dividend when the deal closes in the second quarter of 2012.

The purchase is Tokio Marine's second largest in the U.S. after paying over $4.7 billion for Philadelphia Consolidated Holdings in 2008 - and it's a further push to diversify its risks. The Tokyo -based company also spent nearly $1 billion to buy

Kiln Group

in 2008, a member of the Lloyds of London insurance market.

While it's unclear whether Tokio Marine's continued international expansion out of the Asia Pacific region will be matched by its Japanese peers, Paul Newsome an analyst with Sandler O'Neill says that diversification would be logical. "It would make sense that after the terrible earthquake and other natural disasters, Japanese insurers would want to diversify away from Asian insurance risks." Newsome notes that Tokio Marine already displayed interest in U.S. niche businesses, unlike other Japanese competitors.

Delphi Financial sells niche regional property and casualty insurance, along with a larger employee benefits insurance division for long-term disability, life and excess workers' compensation risks. Its employee benefit business earned $1.59 billion out of overall revenue of $1.75 billion in 2010.

Other benefit insurers in similar insurance businesses, size and valuation to Delphi Financial such as

Unum Group

(UNM) - Get Report

and larger insurers

StanCorp Financial Group

(SFG)

,

Torchmark

(TMK)

and

CNO Financial Group

(CNO) - Get Report

rose on news of the deal.

For its U.S. deals, Tokio Marine hasn't hesitated in paying high premiums for acquisitions. When buying Philadelphia Consolidated, Tokio Marine paid an 81% premium, according to

Bloomberg

data, a slightly higher premium than Wednesday's Delphi Financial Group purchase.

"Our current business in the U.S. has very little overlap with Delphi's business, and will create an ideal fit," said Tokio Marine in a statement. "The acquisition of Delphi is an important step in this development, serving to further diversify our business mix in the United States," added company president Shuzo Sumi in a statement.

Delphi shares rose over 72% to $43.92 in early trading. Prior to the deal announcement, Delphi Financial Group shares were down nearly 12% year-to-date as a result of a slowing in profits.

"Our current business in the U.S. has very little overlap with Delphi's business, and will create an ideal fit," said Tokio Marine in a statement. "The acquisition of Delphi is an important step in this development, serving to further diversify our business mix in the United States," added company president Shuzo Sumi in a statement.

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U.S. based liabilities may be a welcome diversification for Tokio Marine from the Asia Pacific region, which has suffered from record earthquakes and tsunami's. The U.S. may also represent a better growth opportunity for insurers who are contending with Japan's aging population and slow growth. In December, Tokio Marine cut its 2011 earnings forecast by 89% and estimated it would pay 100 billion yen in claims tied to recent floods in Thailand.

Excluding the impact of Thai flooding on profits, with Delphi, Tokio Marine will garner nearly half of its profits from international operations. The deal will bolster the company's international profits to 46% of overall profits from 37%, the company said.

If the businesses are combined, Tokio Marine and Delphi Financial Group may look to continue a U.S. growth push.

"This does not mark the end of M&A for us. We will continue to search for things that can help us grow," said Sumi about the deal according to

Reuters

reports.

"Merging with Tokio Marine is exciting because it will leverage our underwriting and investment expertise and give us access to substantial resources to take advantage of acquisitions and other new business opportunities," added Delphi Financial Group Chief Executive Don Sherman in a press release.

-- Written by Antoine Gara in New York