Fitch: Protective Life Purchase to Boost Dai-ichi Life's Credit Profile

Thu Jun 5, 2014 10:45pm EDT

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(The following statement was released by the rating agency) TOKYO/HONG KONG, June 05 (Fitch) Fitch Ratings says The Dai-ichi Life Insurance Company, Limited's (Dai-ichi Life; Insurer Financial Strength rating: A+/Stable) acquisition of US-based Protective Life Corporation (PL; IFS: A/Rating Watch Positive) will strengthen the Japanese insurer's credit profile. Fitch expects the negative impact on Dai-ichi Life's capital adequacy and financial leverage to be limited. Dai-ichi Life said the purchase price will be JPY582bn (USD5.7bn), which is sizeable compared to the company's net assets of JPY1,948bn at end-March 2014. However, it plans to issue common equity of about JPY250bn to fund the deal. In addition, Fitch expects that Dai-ichi Life will step up efforts to reduce its domestic equity holdings and issue perpetual hybrid capital in the near future. The main uncertainty about the acquisition is whether Dai-ichi Life will be able to integrate PL smoothly with minimal business interruptions. Dai-ichi Life plans to retain PL's existing experienced local management under Dai-ichi Life's current corporate governance system, a strategy that Dai-ichi Life has previously used successfully when it integrated TAL in Australia. The agency expects Dai-ichi Life's overall credit fundamentals to continue to improve. This is due to: improving investment spread; resilient domestic life insurance underwriting backed by a steadily growing profitable third (health) sector; continued reduction of interest rate risk as the company reduces the duration gap between assets and liabilities; and successful global expansion, mainly through its life insurance operations in Australia. Contacts: Teruki Morinaga Director +813 3288 2772 Fitch Ratings Japan Limited Kojimachi Crystal City East Wing 3F, 4-8 Kojimachi, Chiyoda-ku Tokyo 102-0083 Akane Nishizaki Associate Director +852 2263 9942 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available at www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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