Brokers and advisers should be on the lookout for more mergers and acquisitions among life insurance carriers, continuing a recent surge in such activity.
During 2015, the quest for top-line revenue growth drove 25 deals worth more than $532.7 million, according to a recent poll of 750 senior insurance executives from life, property and casualty and composite insurers, as well as reinsurers.
Willis Towers Watson M&A Risk Consulting interviewed executives across the Americas, Asia, Europe, Middle East and Africa, in the second and third quarters last year, with the help of London-based Mergermarket.
“In the U.S., protection-oriented businesses, such as group life insurance, would be particularly appealing to prospective buyers,” says Jack Gibson, global M&A leader for Willis Towers Watson M&A Risk Consulting. “Prices for these types of deals would be driven up significantly due to competitive bidding, given that 82% of the survey respondents said they wanted to make acquisitions.”
Key findings
Among the survey’s key findings: 82% of respondents say their firm is planning to acquire, while only one-third intend to divest. Nearly half of them sought to enhance their market position and add customers with their last major acquisition.
Employee Benefit Adviser, in partnership with business intelligence data analytics firm miEdge, introduces the top 10 large-group life insurance carriers in the country. Revealed in descending order, the listing is based on Form 5500 Schedule A reporting data on premiums as of Dec. 31, 2014.
The number and value of these pairings is expected to rise. Consider, for instance, that the $118.7 billion worth of deals done in the first three quarters of 2015 was nearly three times the number recorded during the previous year. Industry consolidation, particularly in the U.S. and among specialty lines, was cited for increasing the number of megadeals to 4 in 2015 from just 1 in 2014 – transactions that were worth $5.3 billion.
The uptick in M&A activity is expected to intensify during the next three years. For example, 90% of insurers in emerging Asia, Central and Eastern Europe, the Middle East, Latin America and Africa are planning deals between now and then.
Industry contraction is also predicted. More than half of the respondents in Western Europe, North America and the Australasia region expect to make at least one divestment before 2018. Consolidation and greater efficiencies were cited as the primary reasons.
But the criteria for making a deal is quite high. The survey found that respondents in the life and P&C segments are not willing to consider deals offering a future return on capital of less than 14.2% and 13.8% respectively.
Eighty percent of the respondents expect to focus on deals in their core-markets. More than a third of these M&As will be driven by distribution, which is becoming increasingly important to establish new market routes and higher revenues. Gibson also credits digital platforms and other new technologies for sparking many transactions.
