Nippon Life Insurance’s ambitious $8.2 billion acquisition of Resolution Life Group Holdings Ltd. holds significant potential. Fitch Ratings predicts it could annually augment the insurer’s consolidated core profit by around $330 million (¥50 billion), adding to the already substantial $5.04 billion (¥764 billion) reported for the fiscal year ending March 2024. Once the deal closes, Resolution Life will become a wholly-owned subsidiary, and Nippon Life anticipates its overseas core profit to exceed 20% of the group total within a few years.
The acquisition, though, hinges on regulatory nods in multiple jurisdictions such as Japan, the US, Bermuda, and Australia. Fitch deems this transaction credit-positive for Nippon Life. This is due to Resolution Life’s foothold in the expanding closed-book business market and the diversification it offers to Nippon Life’s global portfolio. Despite the hefty $7.92 billion (¥1.2 trillion) price tag, it is well within Nippon Life’s means, considering its consolidated net assets of $62.04 billion (¥9.4 trillion) and cash and cash equivalents of $5.93 billion (¥899 billion) as of September 2024.
Moreover, while Nippon Life’s economic solvency ratio may dip moderately from 227% at the end of September 2024, it will stay firm. Fitch also anticipates Nippon Life’s credit fundamentals to remain sturdy, underpinned by its leading position in the Japanese life insurance market, favorable investment spreads, robust underwriting in the burgeoning health insurance segment, and diminished interest rate risk.
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