In this issue of our Insurance M&A newsletter we continue to explore the key themes and trends impacting the global insurance markets and the implications for M&A.
Throughout the Spring and early summer of 2015, we have seen a number of large-scale deals, including ACE acquisition of Chubb, Willis merger with Towers Watson and Aetna’s merger with Humana. We expect further activity through the balance of the year and into 2016, as the pricing and yield pressure continues to drive the need for scale in the P&C market, particularly when combined with complementary underwriting capability or distribution reach.
There is also a strong expectation of further consolidation in the US health insurance market as insurers respond to the new environment created by Obamacare.
We expect to continuing involvement from alternative capital, which new investors entering the market. This trend will be complemented by increasing activity from pension funds and private equity investors.
In Europe, the lack of certainty around Solvency II continues to create a difficult environment for acquirers. A number of business models will be stressed under SII and accordingly we expect to see an increase in deal activity in the second half of the year. Interestingly, Mexico which has adopted its own version of Solvency II is expecting a wave of consolidation driven by increasing capital requirements.
Finally, we have undertaken a recent study on the opportunities created through alliances and partnerships. We expect this type of transaction or tie up will be an increasingly important mechanism for insurers to secure distribution, innovation, capability and customer reach. Our report covering bancassurance and the link between FinTech and insurance and innovative distribution will be released later this year.
In Asia Pacific, IAG and Berkshire Hathaway formed a strategic relationship, helping the insurer to reduce its capital requirements. Under the deal Berkshire will take 3.7 percent stake in IAG for A$ 500 million.
Additionally a number of Taiwanese financial services companies have announced regional/domestic expansion plans. While the Chinese market saw an increase in domestic activity. Read more:
China witnessed a number of domestic deals such as:
In the second quarter of 2015, a number of private equity deals were witnessed across the region mostly in the insurance brokerage segment. Additionally, many European companies continue to use M&A to build scale, acquire complementary underwriting capability, enter new markets and strengthen positioning in existing markets. In Africa, we continue to see the insurance market evolve. Read more.
Many European companies continue to use M&A to build scale, acquire complementary underwriting capability, enter new markets and strengthen positioning in existing markets, such as:
In Europe, companies are also looking to dispose of their legacy business. Examples include:
In Africa, continued evolution in the insurance market was observed.
The Americas have been the most active region in terms of both size and number of transactions, with strong interest from the large global players. As a result we have seen a number of large deals. Read more.
The US Supreme Court rejected a case which would have obstructed the implementation of the Affordable Care Act (ACA) of 2010. It has allowed nationwide tax subsidies in Obamacare law. With this, the anticipated consolidation in the US health insurance market fueled further. Few examples of consolidation include:
Insurance brokerage has been the most active segment with a large number of domestic deals:
A number of private equity deals were also witnessed in the segment such as, ABRY Partners, LLC has acquired a controlling stake in The Hilb Group, LLC. With this, the group can expand beyond the east coast. Alliant Insurance Services also announced a significant equity investment from Stone Point Capital LLC.
Frontiers in Finance looks at strategy options for insurers that want to spur insurance technology innovation through FinTech startups.
Climate change, disaster resilience, economic stability, require innovative public-private partnerships.