Meiji Yasuda's LGA buy to boost core profits: Fitch Ratings

Core profits could rise $59m yearly.

Meiji Yasuda Life Insurance’s acquisition of Legal & General America (LGA) is expected to strengthen its credit profile and global diversification, according to Fitch Ratings. 

The transaction, which includes acquiring LGA as a wholly owned subsidiary and a 5% stake in its parent company, Legal & General Group Plc, is projected to increase Meiji Yasuda Life’s consolidated core profit by approximately $59m (¥9b) annually. 

For the financial year ending March 2024, the insurer reported a consolidated core profit of $3.87b (¥561b). 

Once the acquisition is completed, the company anticipates its overseas core profit contribution to rise to 18% from the current 16%.

The acquisition, valued at $3.3b, is expected to have a minimal impact on Meiji Yasuda Life’s capital adequacy and financial leverage. 

The cost remains manageable against the company’s consolidated net assets of $40.02t (¥5.8t) as of March 2024 and its cash and cash equivalents of $7.59t (¥1.1t).

Fitch forecasts a moderate decrease in Meiji Yasuda Life’s economic solvency ratio from 215% at the end of September 2024 due to the acquisition.  

The acquisition is also expected to enhance the group’s presence in the expanding US individual life insurance and pension risk transfer markets.

($1.00 = ¥152.01)