Fitch Upgrades Singapore Life’s ratings post Sumitomo Life Acquisition

IFS rating upgraded to A+ following Sumitomo Life acquisition and change in financial reinsurance arrangement.

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Fitch upgrades singapore lifes ratings post sumitomo life acquisition
Fitch upgrades singapore lifes ratings post sumitomo life acquisition
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Fitch upgrades singapore lifes ratings post sumitomo life acquisition

Key APAC insurance developments – delivered free each weekday.

(Re)in Summary

• Fitch Ratings upgraded Singapore Life’s (SL) IFS rating to ‘A+’ and IDR to ‘A’.
• Parent company Singapore Life Holdings also saw its IDR increase to ‘A’.
• The rating upgrades follow SLH’s acquisition by Sumitomo Life Insurance Company in March.
• Acquisition by Sumitomo Life highlights SLH’s strategic importance to expanding into Southeast Asia.
• Fitch also noted financial reinsurance arrangement which contributed significantly to improved ROE in 2022.

Fitch Ratings on Monday upgraded Singapore Life’s (SL) insurer financial strength (IFS) rating to ‘A+’, from ‘A-‘, and its issuer default rating (IDR) to ‘A’, from ‘BBB+’.

Its parent company, Singapore Life Holdings (SLH), also saw its IDR lifted to ‘A’ from ‘BBB+’, with its subordinated long-term securities rating also upgraded from ‘BBB’+ to ‘A’. The outlook for both companies is stable.

This rating improvement comes after the completion of SLH’s acquisition by Sumitomo Life Insurance Company on 18 March 2024, with Fitch noting SL’s critical role as a wholly-owned core operating subsidiary under its new Japanese parent.

Company profile

Singapore Life, also known as Singlife, is a digital insurer which was established in 2014. It offers a variety of life insurance products, including term life, universal life, and critical illness cover. Singlife has also expanded its services to include savings and investment products, aiming to make insurance more accessible through technology.

As of 2022, SLH was ranked the sixth-largest life insurer in Singapore by total assets. The company has a diversified distribution strategy, focusing on financial advisory, group and affinity, and direct digital channels.

Fitch has assessed SLH’s company profile as ‘Moderate’ relative to other Singapore life insurers, citing its stable business risk profile and ‘Neutral’ corporate governance ranking.

Key rating drivers

SLH reported a net profit of SGD257m (US$191m) in 2022, with a consolidated return on equity of 13%, marking a substantial recovery from a -6% in 2021. This improvement was significantly influenced by starting a financial reinsurance arrangement, which functions akin to a loan.

Under this setup, SLH receives cash upfront from the reinsurer as a reinsurance commission, which it then repays over the agreed period, based on the performance and cash flow from the reinsured portfolio. This strategy is expected to support SLH’s profitability, particularly under the newly implemented IFRS 17 accounting standard.

SLH’s capitalisation remains ‘Strong’, with a Fitch Prism Model score of ‘Extremely Strong’ in 2022 and a consolidated regulatory risk-based capital ratio of 226% as of end-June 2023.

The strategic importance of SLH to Sumitomo Life, especially within the rapidly growing Southeast Asian market, is a pivotal factor behind the rating upgrade.

As Sumitomo Life’s only wholly-owned life insurance subsidiary in Southeast Asia, SLH represents a key operational platform for the Japanese insurer in a region that has shown more rapid growth compared to the mature life insurance market in Japan.

Fitch recognises SL as ‘Very Important’ to its parent company, Sumitomo Life, attributing a two-notch uplift to SL’s standalone credit profile as a result.

This acquisition underlines Sumitomo Life’s commitment to expanding its footprint in Southeast Asia, with SLH poised to play a central role in exploring and executing potential bolt-on acquisitions to bolster its presence in the region.

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