The sale of Endurance Specialty Holdings Ltd. adds to the list ofinsurance M&A transactions from Japanese companies of late, marking anotherrelatively large deal that was done at a premium to book value.
As the two companies announced Oct. 5, Tokyo-based has agreed to pay$93 per share in cash for Endurance, making for a total deal value of about$6.3 billion. News of the deal surfaced Oct. 4, causing Endurance shares to spike.
Prior to that point, the stock had been lagging the broadermarket on a year-to-date basis, with a total return of 3.3% for Enduranceversus 7.5% for the S&P 500. Endurance was also trading at a discount tobook value through August and September. But that was a far cry from where itwas trading for much of 2011 and 2012. On Oct. 5, 2011, for instance, it wastrading at 0.62x book value.
The price that Sompo is paying represents about 1.4xEndurance's book value, according to S&P Global Market Intelligencecalculations.
That is higher than Sumitomo Life Insurance Co.'s of , butsignificantly less than MeijiYasuda Life Insurance Co.'s acquisition of StanCorp Financial Group Inc. With regard to P&Cdeals in particular, the price-to-book ratio on the Sompo/Endurance transactionis lower than both MS&ADInsurance Group Holdings Inc.'s deal for Amlin Plc and Tokio Marine Holdings Inc.'s of
As with Amlin and HCC, Endurance is strong in specialtylines. As of year-end 2015, it wrote about $370 million of U.S. excess andsurplus direct premiums, according to S&P Global Market Intelligencecalculations. Thataccounted for about 1.2% of the market, and was in the same ballpark asTravelers Cos. Inc.and Navigators Group Inc.
As S&P Global Market Intelligence in October 2015, Japaneseacquirers have been looking overseas amid lackluster economic growth in theirhome country. The Endurance deal is poised to give Sompo a much largerfootprint in the U.S.,but that is not the only place where Endurance writes. International insuranceaccounted for 11% of its $3.9 billion in gross premiums written as of the 12months ended June 30, 2016, according to an Aug. 1 . At the same time,its reinsurance business, which accounted for 41% of the total, writes on aglobal basis.
Click here for a downloadable spreadsheet for use in analyzing M&A activity. It shows, among other things, aggregate statistics, most active acquirers, largest deals and a heat map of activity.