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A.M. Best reports ‘substantial increase’ in p&c insurance mergers in 2015


February 22, 2016   by Canadian Underwriter


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There was a “substantial increase” last year of merger and acquisition activity in the United States property & casualty insurance industry, with the sixth-largest deal involving the Toronto-based Fairfax Financial Holdings Ltd., A.M. Best Company Inc. noted in a report released Friday.

There were five acquisitions, valued at more than US$2 billion each, involving property and casualty insurers with operations in the United States, reports A.M. Best Company Inc.

“Mergers and acquisitions activity increased significantly in 2015, particularly in scale,” Oldwick, N.J.-based A.M. Best wrote in its Best Special Report, a 2016 Review & Preview of U.S. P&C. “In 2015, there were nine transactions announced each of which were in excess of $1 billion, where either the target or acquirer has U.S. operating property/casualty insurance subsidiaries.” All figures are in U.S. dollars.

Five of those transactions were in excess of $2 billion, noted A.M. Best, which provides financial ratings of insurance firms. A.M. Best added the activity in 2015 was “substantial increase” from 2014, when only two transactions valued at more than $1 billion were announced.

The sixth-largest transaction of 2015 cited by A.M. Best was Fairfax Financial’s $1.88 billion acquisition – announced in February, 2015 – of the majority of Brit PLC, a London-based insurer. Brit owns Brit Global Specialty USA, which underwrites on behalf of Brit Syndicate 2987 in the Lloyd’s market. Toronto-based Fairfax, is led by Prem Watsa, founder, chairman and CEO, who essentially controls more than 40% of voting shares. Fairfax’s holdings include Toronto-based Northbridge Insurance, Stamford, Conn.-based OdysseyRe and Morristown, N.J.-based Crum & Forster, as well as The Keg restaurant chain, Sporting Life, Kitchen Stuff and the majority of Cara Operations Ltd. (which in turn owns Swiss Chalet, Harvey’s and Kelsey’s, among others). Fairfax announced June 29 it sold 29.9% of Brit to the Ontario Municipal Employees Retirement System.

The largest transaction of 2015 was the $28.3-billion acquisition — by ACE Ltd. — of Warren, N.J.-based The Chubb Corp. Initially announced July 1, the deal was completed Jan. 14, 2016. ACE – based in Zurich, Switzerland and led by chairman and CEO Evan Greenberg – has changed its name to Chubb Ltd.

The second-largest transaction – which closed Oct. 27, 2015 – was the $7.5-billion acquisition by Tokio Marine Holdings Inc. of HCC Insurance Holdings Inc., the Houston-based firm whose holdings include Houston Casualty Company. Tokio Marine & Nichido Fire Insurance has a presence in Toronto and Vancouver.

“While much of the activity continues to be focus on the reinsurance space, the two largest deals announced last year involved primary companies,” A.M. Best stated. “Even within the reinsurance space, access to primary business is often a key element in transactions, reflecting the challenging conditions facing the reinsurance market.”

The third-largest 2015 transaction cited by A.M. Best was EXOR S.p.A.’s $6.9-billion agreement to acquire Pembroke, Bermuda-based PartnerRe Ltd. That deal, which is subject to regulatory approval, was approved in November by PartnerRe shareholders. PartnerRe has a Toronto office and a principal office in Greenwich, Conn. Turin-based EXOR, which is controlled by the Agnelli family, also has minority stakes in Fiat-Chrysler Automobile and CNH Industrial N.V., which makes the Case and New Holland heavy equipment. In January, 2015, PartnerRe’s board of directors had recommended a merger with Axis Capital Holdings Ltd., another Bermuda reinsurer and commercial insurer. But the PartnerRe board changed its recommendation after EXOR improved the price and conditions of its April, 2015 offer. EXOR had invested in PartnerRe when PartnerRe was founded in 1993.

The fourth-largest transaction in 2015 cited by A.M. Best was the $4.1-billion acquisition, by Dublin-based XL Group PLC, of Catlin Group Ltd. The acquisition was completed May 1. Hamilton, Bermuda-based Catlin – originally called Catlin Underwriting Agencies – was founded in 1984 Stephen Catlin, now executive deputy chairman of XL Group, which provides commercial insurance and reinsurance using the XL Catlin brand.

In the fifth-largest transaction – valued at $2.235 billion – Hamilton, Bermuda-based White Mountains Insurance Group Ltd. announced July 27 it agreed to sell Sirius International Insurance Group Ltd. to CM International Holding PTE Ltd. of Singapore. Sirius America has a branch office in Toronto.

The other p&c insurance M&A deals exceeding $1 billion were: Endurance Specialty Holdings Ltd.’s agreement to acquire Montpelier Re Holdings Ltd.; Fosun International Ltd.,’s agreement to acquire the shares of Ironshore Inc. that it does not already own; and Zurich Insurance Group agreement, with Wells Fargo & Company, to acquire Anoka, Minn.-based agricultural insurance provider Rural Community Insurance Agency Inc.


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