Buying Endurance Specialty for about $6.3 billion to build a bridgehead in the largest market (2016)

An acquisition that closed the gap in a single stroke

What sat at the centre of this decision was the fear that a group whose mainstay remained the mature domestic non-life business could reach neither the level of return on equity investors demanded nor the global trend toward scale in insurance. With Tokio Marine running away alone and MS&AD having got there first, Sompo moved to fill the blank of the largest market, the United States, with a single acquisition on the order of ¥630 billion. CEO Sakurada’s reading — that having a footing in a large market is itself a diversification of earnings — did, at least in raising the weight of the overseas business, bring a real change to the shape of the group.

That said, taking on overseas underwriting means that the swings of great catastrophes in North America and Europe, on top of Japanese typhoons and floods, are now reflected in one’s own results. Entrusting the transformation of the business to the executives acquired with it, and tying its best people down on five-year contracts, suggests an acquisition that bought “people” about as much as it bought the business itself. How the path of widening an overseas platform from a base in US specialty insurance is to be reconciled with concentrated catastrophe risk and the difficulty of integration — whether the bridgehead of 2016 bears long-term fruit still appears to rest on how well it is run.