M&A activity for P&C, reinsurance focuses on global diversification

Much of the mergers and acquisitions activity in the property/casualty and reinsurance industries during the first half of 2014 was driven by consolidation or companies attempting to enter new markets such as Asia and Latin America, notes a new report issued Monday by A.M. Best.

This is similar to what has been happening in the past few years, a statement from the ratings agency says.

Global M&A activity in the P&C and reinsurance industries continued at a steady pace in the first half of the year, with A.M. Best research showing 35 such deals announced during that time. The available disclosed amount for all deals was about US$ 5.6 billion compared to about US$10 billion announced for all of 2013, the statement adds.

Although not included in the deal count for the first six months of 2014, one example of the trend of M&A activity being driven by consolidation or companies attempting to enter new markets was a July 4 announcement by ACE.

ACE reported that it will be acquiring the commercial business of Itaú Seguros in Brazil for almost US$700 million, thereby becoming the largest commercial insurer in Brazil. “ACE’s announcement implied that, once the deal is completed, Latin America will represent approximately 14% of total premiums to ACE compared with about 8% of total premium in 2013 – making ACE one of the major players in the region,” the statement notes.

From the sell side, “increased competition, low interest rates and lower insurance rates have prompted many companies to downsize through the divestiture of underperforming or non-core business lines,” A.M. Best states.

In addition, the company reports it has “noticed that some insurers now understand that organic growth remains challenging at this stage of the cycle, making acquisitions an attractive alternative to growing the business internally.”