Insurance megadeals driving surge in M&A deal value

 
Jasper Jolly
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Fewer mergers, but higher value in the insurance sector (Source: Getty)

An increase in the number of insurance megadeals drove a surge in the total value of mergers and acquisitions (M&A) activity, according to data to be published today.

Total deal value rose by 170 per cent between the first half of 2016 and the first half of 2017, a survey by Willis Towers Watson and Mergermarket will today show.

At the same time the volume of merger deals in the insurance industry fell by more than 17 per cent in the first half of 2017 compared to the same period last year.

Read more: Here's why insurance M&A activity will rocket in 2017

The jump in the value of deals reflect broader findings across the global economy. Mergermarket data shows an 8.4 per cent increase in the value of M&A worldwide in the first half, despite there being 1,117 fewer deals on the same period last year.

In 2016, there were only 14 deals worth more than $500m, but in the first half of 2017, there have already been 11, according to the survey.

Firms which have already been active in the acquisitions market anticipate further moves, with 81 per cent of firms which have made one or two acquisitions expected to make the same number of purchases in the next three years.

Fergal O’Shea, EMEA life insurance M&A leader at Willis Towers Watson, said: “This seems to signal that activity will continue to be driven by serial acquirers and those that have been active in recent years, as opposed to new entrants that have sat out the past few years finally sticking their toe in the water.”

Read more: Insurance firms set for shopping spree in bid to spend surplus capital

“A number of companies have made large acquisitions in the past two years and have been in integration mode. Once that completes, they can turn from being internally focused back to M&A.”

The jump in megadeals has come amid a stronger global economy, as well as defensive plays as big firms look to ensure they stay ahead of competition.

Almost two-thirds of respondents to the survey said revenue, cost and financial synergies will be the main driver of M&A in the next three years, with increased competition and increased costs named as the top two challenges for the sector.

Competition authorities have looked askance at some of the efforts by large players to consolidate, with US regulators in particular taking an active role in blocking health insurance megamergers, including between Anthem and Cigna, and between Aetna and Humana.

Meanwhile multiple insurers have decided to merge with asset managers, including the August merger between Prudential’s European insurance business and its UK asset management arm M&G to create MG Prudential, and the merger of Standard Life and Aberdeen Asset Management in March.

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