Taiwan's CTBC Financial Holding Co. agreed to buy Tokyo Star Bank Ltd. and Taiwan Life Insurance Co. for about $1.4 billion as it seeks to diversify outside its crowded home market.

The island's fourth-largest financial company by market value will buy 100 percent of Taiwan Life in a share swap valued at about 26.6 billion new Taiwan dollars ($904 million), based on a CTBC share price of NT$19, CTBC President Daniel Wu said at a press conference in Taipei Thursday. The company will also pay ¥52 billion ($529 million) in cash for 98 percent of Tokyo Star, Executive Vice President Rachael Kao said.

In buying the Japanese lender, CTBC Financial follows competitors in expanding outside a home market where competition has squeezed lending margins to the second-lowest in the Asia-Pacific region. Bloomberg News reported the planned acquisition in July, with two sources saying it's the first takeover of a Japanese commercial lender by a foreign bank. Taiwan Life was the first life insurer established on the island, according to its website.

"Getting a life insurance business could dilute what CTBC is good at because the life insurance business may not generate as high return on equity as the banking business of CTBC," said Jerry Yang, an analyst at Daiwa Capital Markets Hong Kong Ltd. "Global investors generally prefer pure insurers or pure banks; it's better not growing their life arm too big."

Shares of CTBC Financial fell 0.3 percent to NT$19.90 in Taipei on Thursday before the announcement. Taiwan Life gained 3 percent to NT$26.10, valuing it at NT$24.4 billion.

Kao said the company will seek shareholders' approval at a meeting on Dec. 20, and regulatory approvals in both Taiwan and Japan. CTBC will issue new shares to fund the purchase of Taiwan Life, according to the statement.