The volume of global insurance industry mergers and acquisitions reached a 10-year high in the first half of 2022, up 9.5 percent from the same six months a year ago.
According to Clyde & Co.’s Insurance Growth Report mid-year update, the trend has largely been driven by a 22 percent increase in transactions in the U.S. There were 242 completed deals during the first half worldwide — 132 in the Americas. The total is up from 221 during the second half of 2021 and 197 at the end of June 2021.
Source: Clyde & Co’s Insurance Growth Report
Thirteen deals during the first six months were valued over $1 billion. The U.S. had six of these large deals, headlined by the U.S.-based Apollo Global Management and Athene Holdings merger valued at $7.7 billion, said Clyde & Co.
“In the face of stark economic pressures — inflation, rising energy costs and looming recession — insurers remain focused on growth opportunities,” said Eva-Maria Barbosa, partner at Clyde & Co in Munich. “Several factors are driving deals. Rising interest rates promise better investment returns for long-duration businesses while helping insurers to rebalance portfolios. Private equity firms and asset managers are still keen to explore either entry into the insurance market or expansion of existing footprints. And flagging InsurTech valuations mean acquisitions are increasingly attractive to both PE investors and traditional carriers seeking to increase technological capabilities.”
Clyde & Co. described private-equity interest as “buoyant,” as the insurance sector is seen a reliable source of returns. However, scrutiny from investors is likely to increase as insurers are impacted by ESG factors, though it is too early to assess that impact.
Peter Hodgins, a partner at Clyde & Co’s office in Dubai, said: “There are still a lot of PE investors who prefer to go ‘balance sheet light’ or to stay with intermediaries or companies servicing the insurance industry, and this is driving significant consolidation in this part of the insurance sector. There nevertheless remain a number of very large, highly professional PE funds that are really interested in the insurance industry, and we continue to see the growth of regional insurance conglomerates.”
Interest in InsurTechs continues to wane as valuations keep dropping in 2022 and investors remain wary of the risk faced by current economic conditions. Investments in specialized cyber brokers remain “highly attractive” to PE investors, Clyde & Co. added.
“With more than 450 InsurTechs failing over the past decade, success has proven to be an exclusive club for many,” said Marc Voses, partner at Clyde & Co. in the U.S.