Corebidge acquisition could catapult Nippoin Life’s profitability 

Fitch projects an increase in consolidated core profit by ~$580m.

Nippon Life Insurance Company's acquisition of a 20% equity interest in US-based Corebridge Financial, Inc. is expected to moderately enhance its credit profile, according to Fitch Ratings. 

This acquisition will likely classify Corebridge as an affiliated company accounted for by the equity method. 

Fitch projects an increase in Nippon Life's consolidated core profit by approximately $580m (JPY90b) annually, adding to the $3.1b (JPY479b) core profit reported for the fiscal year ending March 2023. 

The agreement also allows Nippon Life the potential to increase its stake in the future.

The deal's completion depends on regulatory approvals in Japan and the US. 

Fitch views the acquisition as incrementally positive for Nippon Life's credit profile due to Corebridge's strong presence in the growing US life insurance market and the diversification benefits it brings to Nippon Life.

The impact on Nippon Life's capital adequacy and financial leverage is expected to be minor and manageable. 

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The purchase price of $3.8b is modest relative to Nippon Life's consolidated net assets of $50b (JPY7.753t) and cash equivalents of $13b (JPY2.055t) as of September 2023.

Fitch anticipates a slight decrease in Nippon Life's economic solvency ratio (ESR), from 240% at the end of September 2023. 

The risky-asset ratio is expected to rise moderately from 163% in March 2023 to 169% post-acquisition, which is considered manageable.

Nippon Life's overall credit fundamentals are expected to remain robust. 

This stability is attributed to its leading position in the Japanese life insurance market, a sustainable positive investment spread, strong domestic life insurance underwriting supported by an expanding and profitable health sector, and reduced interest rate risk.

($1.00 = JPY156.48)