HONG KONG--(BUSINESS WIRE)--A.M. Best has commented that the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Rating of “aa-”of Sompo Japan Nipponkoa Insurance Inc. (SJNK) (Japan) remain unchanged following its announced acquisition of Endurance Specialty Holdings Ltd. (Endurance) [NYSE:ENH].
This Credit Rating (rating) commentary follows SOMPO Holdings, Inc.’s announcement on Oct. 5, 2016, that its wholly owned subsidiary, SJNK, has entered a definitive agreement to acquire a 100% stake in Endurance.
The acquisition price is USD 93 per share in an all-cash deal totaling USD 6.3 billion. The transaction is subject to the approval of Endurance’s shareholders and regulators, and is expected to close in the first quarter of calendar year 2017.
SJNK is the main operating company in the group in terms of contribution to revenue and earnings, and is the core company to implement overseas expansion strategies. A.M. Best expects SJNK’s risk-adjusted capitalization to decline based on the company’s maximum estimated goodwill of JPY 223 billion (approximately USD 2.2 billion), stemming from the transaction, but remains supportive of the current ratings. Moreover, SJNK is expected to gain a meaningful presence in the U.S. property/casualty specialty market and achieve further diversification.
A.M. Best will continue to monitor the financial position and the post-merger integration process of Endurance into SJNK upon completion of transaction. Any material changes to the financial profile will be reviewed to assess its impact on the group’s financial strength.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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