Insurance deal making shifts into higher gear

Insurance deal making shifts into higher gear

UK insurers expected to have the most assets for sale in 2017 as Solvency II forces firms to grow or go

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London 17 March, 2017– 2017 will be a year of deal making in the insurance industry, according to a new report released by KPMG International, with 84 percent of insurance companies globally planning to make between one and three acquisitions in 2017.

Ninety four percent of insurers plan at least one divestiture in 2017 and the UK is expected to have the most assets up for sale as Solvency II forces companies to grow or go. One respondent and head of investment for a mid-sized life insurer commented: “Those insurers that cannot raise the required capital under the regulation may choose to get rid of businesses if they believe that resulting capital charges could otherwise negatively impact returns.”

Asia-Pacific is due to be the region most in demand by buyers. Forty seven percent of respondents are looking at Asia Pacific for acquisitions, more than twice the percentage for North America.  Western Europe is seen as presenting the most divestiture opportunity led by the UK, Italy and Spain.

According to the report, The new deal: Driving insurance transformation with strategy-aligned M&A, 33 percent of insurers say transforming their business model will be the primary driver of acquisitions in 2017. Partnerships are also viewed as critical for operational transformation, with 87 percent of insurers indicating they will partner for new operating capabilities, while 76 percent say they will partner to access new technology infrastructure.

Despite the strategic need for business transformation, many insurers continue to take an opportunistic approach to M&A. Just 47 percent of those insurers with dedicated M&A teams say their deal identification objectives are aligned to their corporate strategy. Thirty-seven percent admit their approach to deal making is still largely reactive.   

“In this environment, the key to M&A success is to align financial, business and operating models so that you can achieve clarity about the markets and geographies you wish to play in and how you will win,” noted Matthew Smith,
Global Strategy Group, Insurance Sector Lead, KPMG in the UK.
“You must also be prepared to analyze your capabilities in the areas of due diligence and targeting in order to understand how to extract maximum value over the medium term and how the target’s capabilities complement your own.”

“Insurers are clearly hungry for good M&A opportunities,” said Ram Menon, KPMG Global Head of Insurance Deal Advisory.  “They are focused on transforming their business and operating models, and even with geopolitical uncertainties, they are aggressively looking at deals that can help meet their objectives.”

 

ENDS

 

About the Report

In Q4 2016, KPMG commissioned a survey of 200 global insurance executives to learn about their opinions and plans regarding M&A, corporate strategy, and innovation over the coming 12 months. The survey respondents were divided regionally among firms in Asia-Pacific (33%), Europe, Middle East + Africa (33%), and North America (33%) as well as by the segments Life (25%), Non Life (25%), Reinsurance (25%), and Other (25%). (The segment ‘Other’ encompasses Insurance Brokers and Insurance Services.) Companies needed to have a minimum of US$1.5bn in annual revenue to qualify for participation.

About KPMG UK

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 13,500 partners and staff.  The UK firm recorded a revenue of £2.07 billion in the year ended 30 September 2016. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 152 countries and has 189,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such.  

For further information, contact:

Christina Bridge, KPMG UK
M: 07789 504905
E: Christina.Bridge@KPMG.co.uk

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