September 8, 2009 by Canadian Underwriter
The global insurance industry will see a pick up in mergers & acquisitions (M&A) activity in 2010, according to Tony Ursano, CEO of Willis Capital Markets & Advisory.
Ursano made the comment at an industry event in London on Sept. 8, 2009, a Willis release says.
So far in 2009, insurance M&A volume has been light, with deals completed at an average price of 1.09 times book value, the release says.
This is in contrast to specialty insurance M&A transactions that took place before the financial crisis, in which the average price was 2.46 times book value.
“As markets stabilize, valuations boost confidence and acquisition financing capacity and terms improve, we expect to see a significant increase in M&A activity in the insurance space,” Ursano reportedly said.
“While the outlook is positive, we must bear in mind that more than 50% of insurance deals have failed to create shareholder value due to a number of factors, including difficulty assessing the profitability of the target, the cyclical nature of the insurance market and the volatility of the financing markets.”
Factors likely to drive future M&A activity include the fact that the size and scale of insurance companies is becoming increasingly important for rating agencies, investors and clients and that M&A would satisfy the pent-up demand for liquidity from private equity owners, the release says.