Global P/C insurance M&A activity was “surprisingly rigorous” in 2020 despite significant challenges created by the coronavirus pandemic, Conning said.
Conning tracked $28.6 billion in property/casualty M&A deals in 2020, from 124 transactions. That compares to $16.1 billion in M&A deals in 2019, involving 124 transactions.
That the transactions happened at all, let alone at such a robust rate, was a remarkable thing, Conning said.
“It was remarkable because, for much of the year, many parts of the economy were shut down and confidence in the economy was evaporating. It was remarkable as well because commercial insurance rates were rising in the hardest market in a decade,” the report concludes. “Property/Casualty M&A is normally quiescent in hard markets when insurers can attain growth goals by simply having rising rates fill their sales.”
Conning looked at P/C M&A transactions announced in 2020 and 2021, through early March. Acquisitions of P/C insurers, insurance agents and brokers, MGAs, MGUs, program administrators and insurance service providers are covered in the analysis.
Transactions covered in the study include State Farm’s $400 million acquisition of GAINSCO, Allstate’s $3.7 billion buy-up of National General, and Kemper’s $370 million acquisition of American Access Casualty. Acquisition targets are all strong players in the nonstandard auto market, Conning said.
Acquisition also focused on homeowners insurance in distressed markets in Florida and other southeastern states. Buyers in those regions snatched up insurers including Cypress, Homeowners of America, Southern Fidelity and Anchor Property/Casualty. Conning said.
COVID-19 and Other Factors
COVID dampened M&A activity mid-year, Conning noted, with the resulting economic uncertainty killing some deals, such as Covea’s planned $9 billion acquisition of PartnerRe. Other deals that died including Altamont Capital’s planned acquisition of Topa Insurance, and Avatar Partner’s planned acquisition of Centauri, a homeowners insurer in the southeast.
Insurers rebounded, however, as they dealt with low interest rates and a focus on competitive strengths. AIG announced plans to sell off its life and retirement business, for example, and MetLife sold its property-casualty business to Farmers.
Private equity investors also kept the ball rolling as they invested in and acquired insurers, insurance brokers and insurance service providers. Private equity-backed brokers were responsible for half of the year’s acquisitions in the sector, Conning said.
In 2021, pent-up demand is fueling some deal-making. As insurance rate hikes slow, insurers and other companies in the sector are expected to seek M&A as a way to reach scale and grow further, Conning said.
Conning’s full report is “Global Property-Casualty Insurance M&A in 2020.”
Source: Conning