Insurer M&A Activity on the Rise: Towers Watson

March 25, 2014

An overwhelming majority (86 percent) of North American insurance executives expect to see an increase in the volume of insurance mergers and acquisitions over the next one to three years, and 78 percent say they are actively considering acquisitions, according to a new survey conducted by Towers Watson.

“Insurance M&A activity slackened to an unnaturally low level in most parts of the world after the 2008 financial crisis,” said Jack Gibson, Towers Watson’s global lead for insurance M&A. “But lately we’ve seen a strong trend toward accelerated activity that has featured bold, transformative moves into new geographies, product lines and distribution systems. Many of these recent deals have been well received by both buyers and sellers,bringing significant value, attractive platforms and superior talent to the marketplace.”

Gibson had a few recommendations for insurers considering acquisitions:

Insurers that are considering acquisitions cited several different areas of focus, with 64 percent seeking an opportunistic purchase (one where the right deal comes along) and 55 percent interested in bolt-on acquisitions within an existing geography and segment.

Nearly half (47 percent) of respondents said they would focus on expansions into new markets, with the same percentage indicating they would pursue acquisitions to improve access to new customer segments, distribution capabilities, product expertise, or other technical or operational capabilities.

Insurers ranked the leading drivers and impediments to North American insurance M&A activity over the next one to three years. They believe the most significant factors to fuel further activity will be strategic intention to expand into new geographies/sectors (58 percent), difficulties of organic growth given the challenging economic times (57 percent) and general economies of scale (54 percent).

Respondents cited the price expectation gap between buyers and sellers (55 percent) and limited availability of viable opportunities (52 percent) as the major impediments to activity.

Other key findings of the survey included:

Source: Towers Watson

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