Insurance distributors seek growth via M&A: Report

Insurance distributors are seeking acquisitions as this is the most viable way to grow the business, according to Conning, an investment management firm for the global insurance industry.

With 358 transactions in 2016, insurance distribution acquisition activity exceeded the prior five-year average of 348 deals per year, Conning says in a report titled “Global Insurance Distribution & Services Sector Mergers & Acquisitions.”

The main driver for M&A is the absence of more viable ways for insurance distributors to grow, according to the report. The demand for M&A targets has contributed to a rise in valuations, which may cause some buyers to pause, but Conning does not expect the level of activity to subside in 2017. “It appears that sellers remain motivated and, more important, demand for insurance distribution acquisitions remains robust,” the report notes.  

Within the insurance services sector there was activity on many fronts in 2016, often led by new insurtech formations. The motivations for the deals included the wish to control expenses better, finding ways to manage loss costs better, keeping pace with more rapidly advancing insurance technology, and better assessing and exploiting the “Internet of Things.”

The combination of a higher level of confidence among businesses and expectations for lower tax rates could serve to accelerate the pace of M&A in the distribution and services sectors, according to Conning.

“We would not be surprised if 2017 produced a record number of transactions, with tech-driven service providers garnering more attention,” the report concluded.

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