Moody’s affirms Sompo Japan Insurance on solid footing as $3.5bn Aspen deal advances

Moody’s has affirmed Sompo Japan Insurance’s insurance financial strength rating at stable, following parent Sompo Holdings’ $3.5bn acquisition plan for Aspen.

The rating affirmation reflects the insurer’s “very strong economic capitalisation, low level of goodwill and strong financial flexibility, even after considering the impact of the planned acquisition”, Moody’s said.

Post-transaction, a modest deterioration is expected in SJI’s financial metrics given the relatively small size of Aspen compared to the Japanese insurer, as well as Aspen's solid financial position, the ratings agency said.

It added: “The transaction in line with Sompo’s overseas growth strategies could contribute to a gradual improvement in geographic diversification and enhance the group’s specialty insurance product offerings. The insurer has some track record of successfully integrating overseas acquisitions, including Sompo International Holdings Ltd. into the group. That said, retaining key management members of Aspen will be critical to ensure a smooth transition and continued execution of its strategies.”

The terms of the transaction, that it will be funded by Sompo’s cash on hand, as well as from its sale of strategic shareholdings is not expected to negatively impact the insurer’s leverage and coverage metrics.

Moody’s said it expects Sompo’s economic solvency ratio (ESR) to remain strong post transaction and within the upper half of the insurer’s ESR target range of 200-250%.

Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.