September 17, 2019 by Greg Meckbach
Now is a good time for brokerages to sell their businesses and in some cases, the buyers come from outside the industry, speakers told insurance professionals at the recent A.M. Best briefing.
“If I was in the [P&C] business I would love to be acquired by Intact, Aviva or RSA,” said Ron Stokes, EY Canada’s national transaction leader for financial services.
“It’s a great time to sell your business,” Stokes said Sept. 13 during a panel discussion on emerging issues and hot topics at A.M Best Company Inc.’s 13th annual Insurance Market Briefing – Canada in Toronto.
Moderating the session was Sridhar Manyem, director of industry research at Oldwick, N.J.-based A.M. Best. Manyem asked Stokes about the advice he provides to EY clients looking at mergers and acquisitions.
“I think the movement consolidating the broker network will continue to move forward. You see an aging broker population – not much in the back office, there still hasn’t been a full transition to digital so that’s going to continue,” said Stokes.
A.M. Best tracked more than 550 deals in Canada in 2018, where primary insurers, brokers or managing general agents were either the target or buyer or both, A.M. Best Financial Analyst Daniel Heitlinger said during the property and casualty market segment of the Sept. 13 briefing, held at the Sheraton Centre in Toronto.
“2019 continues to be an active year for M&A activity,” Heitlinger said, citing as an example Intact Financial Corp.’s recent agreement to acquire the Guarantee Company of North America and managing general agent Frank Cowan Company Limited.
But it’s not just insurance companies looking to acquire P&C companies. There are also private equity firms looking at the insurance industry – especially regional players with limited exposure to markets outside of Canada, suggested Heitlinger.
“If a private investor is looking to park their capital somewhere, they be more inclined to invest in an insurance company today than they might have been a few years ago, given the current global trade climate. It may not be conducive to other businesses that are more dependent on the international supply chain long term,” he said.
Another driving force behind M&A is low interest rates, which makes cheap financing available, A.M. Best said in Canada Insurance: Still Profitable Amid Growing Challenges, a report released Sept. 12.