Insurance industry M&A truly went global in 2015, and a noteworthy chunk of the attention came from China and Japan. Conning summarizes the scope of this in a new report, and the author said he expects both trends to continue.
Global P/C insurance M&A activity totaled $63 billion in 2015, of which $17 billion came from Asian buyers, said Jerry Theodorou, a vice president with Conning’s insurance research property/casualty team. In 2014, the P&C M&A total was $17 billion.
“It is a trend that is going to stay with us,” Theodorou, told Carrier Management in a telephone interview. “That has been picked up in other reports, but it is really stark to see how much Asians were buyers rather than targets in 2015.”
Conning’s report, “Global Insurer Mergers & Acquisitions in 2015—The Big Bang,” found that global M&A deals in P/C life and health insurance were worth an aggregate $194.9 billion, four times their total value in 2014. The money covered 183 transactions, about the same as in the previous year, but the deal values landed higher because of a surge in “exceptionally large transformative deals” in both property/casualty and health/managed care insurance, Conning said.
Many of those transformative deals took place in the U.S., where M&A aggregate value rose from $6.7 billion in 2014 to $39.6 billion in 2015. Among the big deals: ACE’s nearly $30 billion acquisition of Chubb.
Some of the more unexpected acquisition activity came from China, however, including Fosun International’s $1.8 billion bid for shares of Ironshore Inc. that it did not already own. There was also White Mountains Insurance Group’s sale of Sirius International Insurance Group to an arm of Shanghai’s China Minsheng Investment.
But Japanese insurers such as MS&AD Insurance Group Holdings Inc. and Sompo Japan Nipponkoa Insurance Inc. also continued to seek mergers with U.S. peers. And Tokio Marine Holdings agreed last year to buy U.S. specialty property/casualty insurer HCC Insurance Holdings Inc. for $7.5 billion.
Theodorou said that China investors are looking to acquire financial assets and real estate internationally in order to put their assets into more stable markets. He said Japan companies, however, are pursuing international M&A investment because of the country’s shrinking population that reduces the potential for premium and new growth.
“That is quite significant and something that we think is going to continue,” Theodorou said.
His comments on China and Japan echo similar statements last fall and winter from Arch Capital Chairman President and CEO Constantine Iordanou, XL Catlin Executive Deputy Chairman Stephen Catlin, Tiger Risk Partners CEO Rod Fox and Berto Sciolla, Gen Re’s executive vice president, regional manager for North American treaty reinsurance.
The report also noted the fact that three major Lloyd’s insurers—Catlin, Amlin and Brit —were all acquired in 2015, showing the attractiveness of the Lloyd’s platform, which “supports a global reach while also having a sizable presence in the U.S. specialty markets.”
As well, Conning noted that reinsurance M&A in 2015 represented continued industry consolidation and also investment from outside the industry, such as EXOR’s recently-concluded acquisition of PartnerRe.
Conning’s report looked at all global insurance-related mergers and acquisitions in 2015. Ninety-five were P/C company transactions, 57 came from life insurance and 25 were health insurance transactions.