Sompo Japan Boosts Southeast Asia Presence With Acquisition of Singapore’s Tenet

Sompo Japan Insurance Inc. [085258] said it will acquire Singapore's Tenet Insurance Co. Ltd. [089446] for S$95 million (US$67.9 million) and will take full control of the local nonlife insurer.

This acquisition aims to further strengthen Sompo's operations in Singapore and Southeast Asia. Sompo said the business platform in Singapore is an "indispensable" point for further development in Southeast Asia.

The Japanese insurer has reached an agreement with Hwa Hong Corp. Ltd. and Hwa Hong Capital Ltd. to purchase 100% of the issued ordinary and preferred shares of Tenet.

The transaction should be completed by the end of June. The acquisition will not materially affect Sompo's financial result for the fiscal year ended March 31, 2010, said Sompo.

Formed in 1957, Tenet is a midsize local nonlife insurer, ranking 26th in Singapore in terms of premium income. Tenet reported gross written premium income of S$45.7 million and net income of S$9.5 million in 2009.

In Singapore, Sompo has a primary focus on Japanese-related large commercial business while Tenet focuses on the local medium and small commercial and retails markets. The two units will create complementary relationship with virtually no business duplication, said Sompo.

Sompo said the group benefit from economies of scale to further enhance competitiveness in pricing and reinsurance negotiations through a combined infrastructure system and increased investment in information technology.

The Japanese insurer established Sompo Japan Insurance (Singapore) Pte Ltd. [084393] in 1989, to provide nonlife insurance services and reinsurance support for the group's affiliated companies in the region.

In 2008, Sompo Japan Asia Holdings Pte Ltd. was established as the regional headquarters, providing support to regional offices in Southeast Asia. The acquisition of Tenet will further enhance Sompo's insurance business in Singapore, as well as infrastructure platform in Southeast Asia, said Sompo.

As the hub of Southeast Asia, Sompo said Singapore boasts an open insurance market in which domestic foreign insurers and reinsurers compete. The market has attracted a variety of information channels and professionals.

Singapore's nonlife sector achieved annual average growth of 9.1% from 2000 to 2008. With an anticipated 5% growth of gross domestic product, Sompo said the market should continue with stable expansion.

Tenet has achieved growth mainly by specializing in product distribution channels and markets such as personal accident and fire insurance, according to Sompo.

In Japan, Sompo plans to merge with Nipponkoa Insurance Co. Ltd. [084413] in April. A joint holding company, NKSJ Holdings Inc., will be formed with total capital of 100 billion yen (US$1.1 billion) (BestWire, Jan. 4, 2010).

In the first three quarters of the 2009 fiscal year, Sompo Japan reported net income of 21.4 billion yen and net written premiums of 973.9 billion yen. As of December, its solvency margin ratio stood at 794.4 and total assets amounted 6.09 trillion yen.

Sompo Japan Insurance Inc. currently has a Best's Financial Strength Rating of A+ (Superior). Tenet Insurance Co. Ltd. has a Best's Financial Strength Rating of A- (Excellent).

(By Iris Lai, Hong Kong bureau manager: [email protected])