Following its acquisition of Bermudian insurance and reinsurance player Endurance Specialty Holdings, Sompo Holdings has reported a significant increase to both its top-line and profitability thanks to the consolidation of this new business.
Sompo Holdings reported that its newly named Sompo International unit, which is the Endurance re/insurance business, has begun to contribute to its earnings in the last quarter, since its figures are now consolidated into the group.
Top-line and adjusted profit both “significantly increased” due to the consolidation of the Sompo International business, the Holding company said in an investor presentation.
In fact, the consolidation of Endurance’s underwriting business into Sompo’s overseas activities contributed to an increase in profit of JPY 6.8 billion in the last quarter, which supplied around half of the Holding company’s profit increase.
For the full business year Sompo Holdings expects that its adjusted profit will increase by around JPY 38.4 billion to JPY 58.4 billion, which it says is “mainly due to the start of Sl (Endurance) profit contribution.”
Sompo looked to an international re/insurer like Endurance to help it expand and diversify further outside of Japan, a key strategy for most large Japanese groups which often find themselves reliant on domestic business.
The company said that the acquisition of Endurance has helped it to grow its top-line in North America and the data really drives this home, as the company went from JPY 4.7 billion of net premium written in North America in the same quarter in 2016 to JPY 119.5 billion in the current year.
In terms of profit, the North American business at Sompo Holdings generated JPY 8.2 billion of adjusted profit in the current year quarter, up from just JPY 500 million last year.
That’s a significant increase to Sompo’s overall diversification, which will have the effect of making its global underwriting platform and capital more efficient, as the added diversity flows through to its capital model.
It’s not all rosy though, as the Sompo International business experienced loss activity above the prior years level in the last quarter, according to the Holding company, however Sompo said that the performance remains on target and is “basically in line with the plan.”
It’s also worth noting the contribution to the asset portfolio of Sompo Holdings, with the ex-Endurance business now making up almost 10% of the group’s total investment assets, a not insignificant amount.
The Endurance acquisition has clearly helped Sompo to achieve the diversification and entry into the U.S. that it was seeking, which over the longer term should see it reap the benefits in terms of top-line, profits and also the synergies it can recognise.