According to new insights from Fitch Ratings, Sumitomo Life’s acquisition of Singapore-based Singlife is poised to have a favourable impact on the Japanese insurer's credit profile.
The acquisition, which is estimated by Fitch to cost up to JPY400 billion (approximately US$3 billion), will increase Sumitomo Life’s ownership in Singlife from 23% to 100%. This investment is considered manageable in comparison to Sumitomo Life’s reported net assets of JPY1,188 billion and cash reserves of JPY2,177 billion as of the end of March 2023.
According to the report, the completion of this transaction hinges on meeting specific conditions, including regulatory approvals in Japan and Singapore. Fitch anticipates a gradual positive effect on Sumitomo Life’s credit profile from this deal. This optimism is based on Singlife’s established presence in the growing Southeast Asian life insurance market and the potential diversification benefits for the Sumitomo Life group. Furthermore, Fitch projects that Sumitomo Life will leverage Singlife as a platform for additional strategic acquisitions in Southeast Asia.
Fitch has expressed confidence in the overall credit fundamentals of the Sumitomo Life group. This confidence stems from factors such as a sustainable positive investment spread, robust domestic life insurance underwriting supported by a growing and profitable third sector (health), a continued reduction in interest rate risk, and successful international expansion, particularly in the United States.
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