Nippon Life Insurance Co. said Thursday it will invest $500 million in Prudential Financial Inc., the second largest U.S. insurer, in a move aimed at strengthening its overseas operations amid a shrinking domestic market due to factors such as population decline.

Japan's leading life insurer said the transaction involving its purchase of a 10-year "exchangeable surplus note" issued by Prudential Insurance Co. of America, a subsidiary of Prudential Financial, is expected to close Friday.

Nippon Life has the option to exchange the surplus note for Prudential Financial common stock any time after five years from the issuance of the note.

The Japanese insurer, which already has 2.56 million Prudential shares, or 0.56 percent of the total outstanding stock, expects to hold a stake of 1 to 2 percent in Prudential after the exchange.

The objective of the additional investment is "to further strengthen the relationship between Nippon Life and Prudential in a manner mutually beneficial for both companies," Nippon Life said in a statement.

The two firms will consider business cooperation in areas such as insurance marketing in Japan and the United States.

Nippon Life has also invested in medium-sized U.S. insurer Principal Financial Group.