March 25, 2013 by Angela Stelmakowich, Editor
Some property and casualty carriers are deploying multi-prong distribution strategies, which is putting pressure on the marketplace and resulting in activity on the mergers and acquisitions (M&A) front, Allan Buitendag, a partner and Canadian insurance consulting leader at PwC Consulting, noted last week in downtown Toronto.
There was significant M&A activity in 2011 and this continued in 2012, Buitendag said during his session at the Ontario Mutual Insurance Association’s (OMIA) 2013 annual convention. “This is all tied into a shift between the desires of many larger carriers in the industry as well as the reality of what we would call the distribution dilemma,” Buitendag told session attendees. Companies and brokers “are considering where their future lies,” he said.
“There are challenges around people trying to control their distribution. How do they manage that and ensure the independent brokers they deal with remain independent brokers? How do they deal with technology and automation?” Buitendag asked.
“Our perspective is what you’re going to see in the next two years is going to be increasingly more aggregation around the market share side. Many of the companies that are going through significant transformation activities right now, including both operations and IT, are striving to become more efficient, to drive down that combined ratio, and position themselves well.”
If the goal is acquisition, how a company positions itself will allow it to focus on different types of organizations or pieces of organization, whether those be agent, broker or direct businesses, Buitendag suggested.
A lot of the recent activity has been on the broker side, he told session attendees, although certainly there have been a few large deals on the carrier side in the last couple of years. These include those below:
Western Financial, subsequently, has been growing, he said. “However, in addition to acquiring new brokers, we’re starting to see some consolidation among those brokers and I think it’s fair to say it’s only a matter of time before we start seeing some rationalization within those Western Financial brokers and the businesses they write into,” he added.
Looking at the M&A picture overall, “suffice it to say, there’s more people out there who would like to buy organizations than there are those who want to sell organizations. The cost of those organizations seems to be quite high, but I think we’ll see some ongoing activity in the industry and more consolidation.”
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