Following the agreement of the acquisition of Singapore Life Holdings (Singlife) by Japan-based Sumitomo Life Insurance Company’s (Sumitomo Life) in December last year for $1.6 billion, Fitch Ratings sees the move as one likely to strengthen the Japanese company's credit profile.
Fitch estimates the purchase price to increase Sumitomo Life’s stake in Singlife from 23% to 100% at up to JPY400 billion ($3.76 billion), which the credit grader notes is “small” compared to the Japanese company’s net assets of JPY1,19 trillion and cash of JPY2,18 trillion as at March 2023.
Due to Singlife’s “solid franchise” in the growing Southeast Asian (SEA) life insurance market, Fitch believes the deal to be incrementally positive for Sumitomo Life, not forgetting the diversification effect for the company.
The American credit grader also expects Sumitomo Life to continue to make bolt-on acquisitions in the SEA region through using Singlife as its operating platform.
While the transaction is subject to the satisfaction of certain conditions such as regulatory approval in Japan and Singapore, Fitch expects Sumitomo Life group’s overall credit fundamentals post-transaction to “remain sound”.
This comes about thanks to its sustainable positive investment spread as well as its robust domestic life insurance underwriting that’s backed by a moderately growing profitable health sector. The continued reduction of interest-rate risk and successful global expansion, especially in the US, are other factors.
