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Like others, Sompo pays premium for specialty lines

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Like others, Sompo pays premium for specialty lines

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.

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The price that Sompo is paying represents about 1.4xEndurance's book value, according to S&P Global Market Intelligencecalculations.

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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.

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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.