Insurer Sompo Said Poised to Purchase Endurance for $6.5 Billion

  • Endurance shares climb 35% in New York trading, most since IPO
  • Japan’s Sompo plans to make a decision later Wednesday

Sompo Holdings Inc. is poised to buy Bermuda-based insurer Endurance Specialty Holdings Ltd. for about $6.5 billion, a person with knowledge of the matter said.

The Japanese insurer plans to announce the deal later Wednesday, the person said, asking not to be identified before an agreement is made public. Endurance shares surged 35 percent earlier in New York after the Nikkei newspaper reported a deal was imminent and the insurer confirmed it was in talks with the Japanese firm. Sompo also rose in morning trading in Tokyo.

“Sompo Holdings is planning to make a decision today on the reported transaction, and will promptly make an announcement in case there is any information that requires disclosure,” the Tokyo-based company said in a stock exchange filing.

Japanese insurers have been expanding outside the country to counter slowing growth at home and low bond yields that have pressured investment returns. Dai-ichi Life Insurance Co. bought Protective Life Corp. last year, and Sumitomo Life Insurance Co. agreed to purchase Symetra Financial Corp. for about $3.8 billion.

Attractive Market

“The U.S. is a pretty attractive market for Japanese insurers because you have a declining population in Japan as well as the negative interest-rate environment,” Robert Haines, a senior analyst at CreditSights Inc., said by phone. “The conditions are very ripe and conducive for further consolidation in the sector.”

Sompo Chief Executive Officer Kengo Sakurada said in an interview in May that the firm was interested in acquiring U.S. specialty companies that sell policies to businesses rather than individuals. Until the Endurance announcement, the firm had stayed out of the flurry of large overseas M&A deals by competitors.

Sompo shares climbed 2.1 percent at 10:03 a.m. in Tokyo, paring this year’s decline to 24 percent.

Seeking Partners

A glut of capital and low investment yields have hurt the earnings of many Bermuda insurers and reinsurers. That’s pushed some to seek out merger partners, Fitch Ratings said in a report in February. The ratings firm said that it expected the consolidation efforts to continue this year.

Led by CEO John Charman, Endurance has been expanding through acquisitions after going public in 2003. Charman struck a deal last year to buy Montpelier Re Holdings Ltd. and tried in 2014 to combine with rival Aspen Insurance Holdings Ltd. in a $3.2 billion hostile takeover bid. Endurance eventually terminated the attempt after the target company rebuffed the offer.

Endurance, which has operations in the U.S., Europe and Bermuda, writes property-casualty policies for risks such as agriculture, marine and energy. The company also has reinsurance units, which help provide coverage for primary insurance carriers.

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