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Endurance deal to 'meaningfully' broaden, deepen acquirer's US business

Amongthe various strategic benefits of Sompo Holdings Inc.'s agreement to acquire Bermuda-based insurerand reinsurer Endurance SpecialtyHoldings Ltd. will be the strengthening of the Tokyo-basedinsurer's relatively deep roots in the U.S. market.

U.S.-domiciledsubsidiaries of Endurance combined to hold net admitted assets of $4.74 billionand policyholders' surplus of $784.3 million as of June 30. The group of U.S.companies headlined by Charlotte, N.C.-based Sompo Japan Insurance Co. of America, as consolidated byS&P Global Market Intelligence, had $1.56 billion in net admitted assetsand $751.2 million in surplus on the same date, and its presence in the predates Endurance's 2001 formation by nearly four decades.

SompoJapan Insurance Co. of America was incorporated in 1962 as Federated InsuranceCo. The company changed its name to Yasuda Fire & Marine Insurance Co. ofAmerica in 1972. Thirty years later, in connection with the merger of NissanFire & Marine Insurance Co. and Yasuda Fire & Marine Insurance Co. Ltd.,the company took on its current name. Sompo Japan Insurance Co. of Americaassumed all of the assets and liabilities of NIPPONKOA Insurance Co. Ltd. (U.S. Branch) in September2014, concurrent with the merger of their respective parent companies.

Theaffiliated Sompo Japan Fire &Marine Insurance Co. of America cedes all of its direct premiumswritten to Sompo Japan Insurance Co. of America under a 100% quota-shareagreement. Both companies are wholly owned by Sompo America Holdings Inc.

SompoAmerica is admitted to write P&C lines in all 50 states and it offers afull line of commercial P&C products with a focus on complex risks. TheS&P Global Market Intelligence group-level consolidation also includesthree entities that are not part of Sompo America: Guam-based ,Canopius US Insurance Inc.and Sompo Japan CanopiusReinsurance AG (US Branch), an entity that was newly licensed inMay. NKSJ Holdings Inc., the name by which Sompo Holdings operated at the time,acquiredCanopius Group Ltd. in May 2014.  

TheSompo Holdings U.S. group had $381 million and $242.1 million in direct and netpremiums written, respectively, in 2015 and $204.6 million and $109.4 millionin direct and net premiums written, respectively, in the first half of 2016.The current members of the Endurance U.S. P&C group generated direct andnet premiums written of $1.60 billion and $702.1 million, respectively, infull-year 2015. For the first half of 2016, their direct and net premiumvolumes totaled $1.07 billion and $489.3 million, respectively.

Alliedlines direct premiums written, which include multiperil and private cropbusiness, accounted for 55.7% of the Endurance U.S. group's total filed directpremiums written in 2016. Approximately 96.8% of the $868.2 million in alliedlines direct premiums written produced in 2015 by the Endurance U.S. grouppertained to AmericanAgri-Business Insurance Co.'s crop writings. Other liabilityrepresented the lone other business line to account for as much as 3% of theEndurance U.S. group's direct premiums written in the first half of 2016. The$305.5 million attributable to that line amounted to 28.7% of the group'soverall direct premium volume for that period.

"Endurancehas been expanding the U.S. insurance business, an area where we could notexpand meaningfully alone," said Sompo Holdings Deputy President, SeniorManaging Executive Officer and Group CFO Shinji Tsuji during a to discuss theacquisition. Endurance generated approximately 64% of its $3.32 billion in 2015gross premiums written from the U.S. market, Sompo Holdings said. On apro-forma, post-acquisition basis, Sompo Holdings said its premium income fromNorth America would rise to ¥219.2 billion from ¥22 billion on a stand-alonebasis.  

Endurance,itself, used M&A to build its U.S. platform through shell deals to acquireTraders & PacificInsurance Co., which now operates as , from OneBeaconInsurance Group Ltd. in August 2005; CORE Insurance Co., now , from Employers Re in June 2006; and ,now Endurance Risk Solutions AssuranceCo., from MotoristsMutual Insurance Co. in June 2007. Endurance additionallyacquired activecrop insurer American Agri-Business and affiliates in December 2007.

Thecompany's first U.S.-domiciled unit, Endurance Reinsurance Corp. of America,was formed in 2002. It was recently renamed Endurance Assurance Corp.