A large majority of insurers plan to pursue acquisitions or divestitures through 2017, according to a new KPMG report, indicating that late-2015 and 2016 deal-making wasn’t a fluke.
About 84 percent of insurers will target one to three acquisitions in 2017, the report noted. In addition, 94 percent said they’d pursue at least one divestiture through the year. KPMG said these results suggest a broader environment for deal-making.
“Insurers are clearly hungry for good M&A opportunities,” according to the KPMG report. “And the majority reported that they expect to undertake domestic acquisitions over the coming year. A significant number also seem keen to use the current environment to expand their foreign operations and footprint.”
Insurers are making these decisions in the wake of the Brexit vote in June 2016 and the election of U.S. President Donald Trump, which are both widely expected to affect the global business and investment climate, KPMG said.
KPMG noted that two-thirds of insurers said they will pursue a cross-border acquisition of some kind, something that the consulting firm said is noteworthy considering “55 percent of our respondents currently operate in five markets or less.” The prediction: at least some insurers will be looking at acquisitions in regions and markets that are new to them.
Also worth noting: KPMG said that the U.S. continues to be the top national market where insurers expect the most deal activity. According to KPMG, nearly 25 percent ranked the U.S. as their top national destination. The second top national target market was Greater China, which 12 percent of insurers said was their top national basis.
Other highlights from the KPMG survey:
- 87 percent said they are seeking an M&A partner to obtain new operating capabilities.
- 67 percent said they’d pursue an M&A transaction to gain access to new technology infrastructure.
- 39 percent said that aligning the M&A deal evaluation process to corporate strategy objectives was the biggest factor for M&A success, though 37 percent said their main focus was to be reactive to market opportunities.
- In terms of where insurers plan to target acquisition opportunities for 2017, 47 percent ranked Asia-Pacific as the biggest option, and 21 percent gave the same ranking to North America.
- 33 percent of insurers see transforming their business model as a primary driver of acquisitions in 2017, while the same percentage say that enhancing their existing operating model and transforming their operating model are big deal activity motivators.
- About 48 percent of insurers ranked Western Europe as having the most divestiture opportunities for their company in 2017, and 21 percent said Asia-Pacific presented the biggest opportunities. Fifteen percent said North America was tops in terms of divestiture opportunities.
KPMG’s data is based on a 2016 fourth-quarter survey of 200 global insurance executives about their perspectives and M&A outlook over the coming 12 months. About 33 percent came, equally, from the Americas, Asia-Pacific and Europe, Middle East & Africa. Responses by segment: 25 percent from life insurers; 25 percent from non-life insurers; 25 percent from reinsurance; and 25 percent from “other,” which translates to insurance brokers and services. Minimum annual revenue for participating companies was $1.5 billion.
The report is: “The New Deal: Driving insurance transformation with strategy-aligned M&A.”