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Global insurer M&A transaction values reach US$195 billion in 2015


March 18, 2016   by Canadian Underwriter


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The aggregate value of global insurance transactions in the property-casualty, life and health sectors last year was four times higher than in 2014, reaching US$195 billion, notes a study released this week by Conning, Inc.

Global insurance transaction value skyrockets in 2015

“M&A activity in 2015 was driven by continued low interest rates, high levels of industry capital and low-growth economies in developed countries,” Steve Webersen, head of insurance research at Conning, an investment management company for the global insurance industry, explains in a company statement.

“While many of these issues have been in place for some time, they came to a head in 2015, as insurers capitulated to the need for acquisitions to spur growth,” Webersen points out.

In 2015, the number of transactions was relatively unchanged at 183, notes the introduction of the study, Global Insurer Mergers & Acquisitions in 2015: The Big Bang, part of a topics page released by Conning. The study tracks and analyzes U.S. and non-U.S. insurer M&A activity across p&c, life-annuity and health insurance sectors, as well as analyzes transactions by sector and provides comparisons with prior years.

M&A activity provides one of the clearest indicators of insurers’ business strategies, the introduction notes. “The insurance industry is in the midst of rapid innovation and transformation in response to pressures created by technology developments affecting insurance exposures and buyer demand. Because M&A is a leading indicator of the evolution of markets, it is important to understand its patterns and directions,” it emphasizes.

“Numerous factors converged in 2015 to stimulate a veritable big bang of large-scale M&A activity,” the introduction notes, including capital build-up at insurers, low interest rates, anemic economic and exposure growth, a softening p&c market, regulatory developments and interest from Asian buyers.

But not only did the value of global transactions rise, so did individual transactions valued at US$1 billion or more. At 24 billion-dollar-plus transactions in 2015, this was three times higher than the recent annual average, study figures show.

“Record-setting global mergers and acquisitions activity in 2015 was characterized by an unprecedented number of high-value strategic transactions,” Jerry Theodorou, Conning’s vice president of insurance research, says in the company statement.

“Close to half of the billion-dollar-plus transactions were outbound transactions by Japanese and Chinese buyers, as the Japanese sought external growth opportunities and the Chinese pursued asset accumulation and diversification strategies,” Theodorou reports. “Four consolidation transactions among U.S. health insurers alone, valued at $100 billion, accounted for more than half of the global insurer mergers and acquisitions value,” he adds.

“The character of 2015 insurer M&A also changed fundamentally from recent years,” the introduction suggests. “Whereas much of the insurance M&A activity following the financial crisis was undertaken by financial buyers or characterized by bolt-on acquisitions or seller-driven strategies to prune underperforming units, the significant M&A transactions in 2015 were largely by strategic buyers seeking scale and diversification,” it explains.

“In addition to creating formidable entities with large scale, the landmark consolidations that took place in 2015 also stimulated companies that did not enter the M&A arena to review how their relevance and competitive advantage could be affected in the new market landscape,” it points out.

Looking forward, Webersen says, “the transformative consolidations of 2015 may pressure other competitors to merge, and may also provide opportunities for mid-market players as certain components of the merged businesses are spun off and talent is displaced.”