Sompo raises 2018 profit outlook on domestic business and Endurance acquisition

Japan’s Sompo has raised its 2018 profit target, driven by a good performance of its domestic business as well as expectations on the agreed acquisition of Bermuda-based Endurance.

Sompo now expects an adjusted consolidated profit of between ¥220 billion ($1.95 billion) and ¥230 billion for the 2018 full year (irregular fiscal year), according to a November 24 mid-term management plan update.

Due to a good performance of the domestic P&C insurance business, Sompo has revised upwards the adjusted profit for the segment for the 2018 fiscal year. The combined ratio in the segment is expected to improve to 92.5 percent in 2018 from 95.3 percent in 2015, helped by lower expenses.

The company also plans to grow its domestic life business over the period. Premium and other income in the segment is set to expand to ¥450.0 billion in the 2018 full year from ¥396.4 in 2015. The company plans to evolve into a health support enterprise by going beyond boundaries of insurance.

Sompo also expects to expand its top- and bottom-lines if closing procedures on the acquisition of Endurance are finalised as planned.

Sompo Holdings has confirmed that it has entered into a definitive agreement for the acquisition of 100 percent of the outstanding ordinary shares of Bermuda-based Endurance Specialty Holdings, in a deal that could be finalised by March 2017.

The acquisition is set to help Sompo’s overseas insurance’s adjusted profit to grow to over ¥60 billion compared to ¥18.7 billion in 2015. Premiums from overseas should jump to ¥650 billion from ¥294.3 billion in 2015.

Sompo wants to grow the Endurance business in the existing Sompo business networks, leveraging the product development capabilities and underwriting expertise of Endurance. In this sense, Endurance products should be offered to Sompo customers globally including Japan.

Sompo has made a number of acquisitions outside of Japan in recent years such as Canopius (UK) in 2014 and Maritima (Brazil) in 2013 as it aims to become a “truly globalised insurance group.”

During a conference call held on October 5, Sompo’s chief financial officer Shinji Tsuji suggested that further deals could be in the pipeline as the Japanese insurer aims to become one of the ten biggest insurance corporations globally.