Japanese life insurer Dai-ichi Life Insurance Company's plan to acquire a 15% stake in UK-based M&G plc is likely to enhance the life insurer's global diversification and international investment capability according to Fitch Ratings.
In a non-rating action commentary, the rating agency expects the deal, announced on 30 May 2025, to be incrementally positive over the medium term for Dai-ichi Life’s credit profile, given M&G’s strong international investment ability, including non-traditional assets, as well as the global diversification benefits for the Dai-ichi Life group. The transaction is, however, subject to the satisfaction of certain conditions, including regulatory approval in Japan and the UK.
Fich said it anticipates a minimal and manageable negative impact on Dai-ichi Life's capital adequacy and financial leverage. The purchase price for the 15% stake of about JPY160bn ($1.1bn) is low relative to the company’s consolidated net assets of JPY3,470bn and cash and cash equivalents of JPY2,456bn as of end-March 2025. The rating agency estimates Dai-ichi Life’s economic solvency ratio (ESR) will decrease only marginally from 210% at end-March 2025 due to the acquisition.
Dai-ichi Life expects M&G to become an affiliated company accounted for by the equity method. Fitch estimates the deal is likely to increase Dai-ichi Life’s consolidated adjusted profit by approximately JPY15bn per annum, compared with Dai-ichi Life’s consolidated adjusted profit for the financial year ended March 2025 of JPY440bn. Additionally, Dai-ichi Life plans to delegate $3bn of its investment assets to M&G to enhance the global diversification of its investment portfolio and seek higher investment returns.
The proposed partnership is broadly neutral to M&G’s ratings in the near to medium term, although it could lead to enhanced diversification of earnings sources in the longer term. The agreement underpins M&G’s strategic intent to expand its international footprint, particularly in the Asian and European asset management markets. M&G expects the partnership to generate at least $6bn in new business flows into the funds it manages over the next five years.
Dai-chi Life’s ratings continue to reflect its franchise, which is one of the largest in the Japanese life insurance market, its international insurance business portfolio, which is the most well-diversified among Japanese peers, a sustainable positive investment spread, and continued reduction in financial market risks.