Global insurance M&A activity slow in 2017

Global mergers and acquisitions’ activity has been “well below average levels recorded in the 2000s-era” in terms of both deal value and deal count, CreditSights analysts said in an Oct. 29 research note.

Through October 2017, aggregate deal value involving a US acquirer or target in the insurance sector excluding brokers totalled $15.6 billion. Since 2000, US insurance underwriters average $28.5 billion in deal value.

The biggest deals in 2017 involving a North American acquirer or target include Centene Corporation buying NY State Catholic Health Plan for $3.75 billion and Assurant purchasing Warranty Group for $1.91 billion.

Given the high level of natural catastrophe losses in the third quarter of 2017, CreditSights analysts do not expect to see an uptick in M&A activity through the rest of the year in the US P&C sector conducive to M&A activity in the near future.

In Europe, the largest deal completed so far in 2017 was NN Group’s €2.5 billion acquisition cum rescue of Delta Lloyd. Apart from the topical disposal of legacy German life portfolios, analysts anticipate deal activity for European life insurers to remain scarce with the exception of UK life insurers. UK life insurers could see further consolidation while there is an outside chance Aegon could succeed with its rumoured pursuit of ASR Nederland.

The low interest rate environment has increased somehow the valuation of insurers in particular those with a relatively long tail business such as life players, according to the note.

Analysts expect a steady deal flow in Europe to come mainly from non-core asset disposals especially by the larger European players such as Generali, AXA, Allianz and Zurich Insurance.

Even though the reinsurance sector remains under pressure, CrediSights analysts do not anticipate a pick-up in M&A activity in the near term without an adequate correction in valuations.

While acquisitions of US insurers by foreign buyers are likely to remain a key theme, Chinese buyers are likely to come under increased scrutiny from both Chinese and US regulators.

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