Sompo to build global growth ‘brick by brick’ in difficult and pricey M&A market

Sompo will accelerate investments “brick by brick, person by person” to meet its global growth ambitions while it waits for its M&A team to sort through a difficult and pricey M&A market, key company officials have indicated.

“M&A has been a part of our strategy of the past five years and I expect it to continue, but I'm not going to wait for M&A opportunities to come; we are going to move out now,” James Shea (pictured), the chief executive of its global P&C unit Sompo International, told a conference for equity analysts.

“We're not going to wait for that magical acquisition to happen - we've got a business to build,”  Sompo International CFO Michael McQuire concurred.

The road to full-scale global means “brick by brick, person by person” in a drive that will likely focus on niche specialty lines near Sompo’s current profile and could target missing geographies.

“We will achieve continued growth and diversification through organic investments,” Shea said. M&A, on even the smallest of scales, could be likewise geared to “give us footholds in different segments and industries and in acquisition of talent.”

“I do believe there is opportunity on the niche products, on some of the property programmes,” Shea said, citing a Sompo profile strong on specialty lines. “It can be delivered by investing in people and relationships,” he said, citing “strong” positions with distributors who account for some 95% of Sompo International’s business.

Canada is clearly a missing element in the North American presence. European locales under investigation include Germany, Switzerland and Spain. Eyes may further be on unspecified “different markets” in Asia from Sompo’s office in Singapore, he indicated.

A larger move into the European market for large corporate and multinational global coverages, going head-to-head with the major European-based players “would not be wise,” he said.

No matter how they invest moving forward, the 2023 targets for profit contribution to the larger group rely on the existing US and UK presence, Shea stated. Continental European Business is chiefly reinsurance, and positioning for 1.1 2023 renewals is “critical”, those premiums won’t make a huge dent against the 2023 profit targets, he noted.

The lack of major M&A in Sompo’s go-global drive over the past 12M testifies to high valuations, diminished supply and a “very diligent” approach to adding value, Shea said.

M&A could be designed to fulfill a similar role and need not be oversize to secure growth, he indicated.

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