Despite witnessing robust U.S.Mergers and acquisitions (M&A) activities, the global insurance industry fell 3% in the first half of 2021. There were 197 completed deals worldwide, down from 206 in the second half of 2020, said Clyde & Co.’s “Insurance Growth Report” mid-year update.
At the same point last year, 201 deals had been completed, the report said.
Asia Pacific saw completed deals fall from 37 to 18 – the lowest level since Clyde & Co. began this report in 2011 – as post-pandemic and geo-political uncertainty weighed heavy on deal-makers. Japanese acquirers were again the most active compared to 2020, ahead of India and Australia.
M&A activity in Asia Pacific is likely to remain subdued until the markets have stabilized post-COVID-19 and there is greater certainty about the economic outlook.
“Deal-makers in Asia Pacific remain in wait-and-see mode for the time being. Given the cost and effort required to get transactions over the line, insurers are considering a range of growth options. These include strategic alliances with online banks, e-commerce giants, or other online retail platforms to access new distribution networks,” said Joyce Chan, partner at Clyde & Co in Hong Kong.
“The MGA model is likely to expand, especially in the medical insurance sector due to the uptick in middle-class spending coupled with an aging population.
After a standout 2020, which saw a total of 32 deals, M&A activity in the Middle East and Africa dropped back with only five completed transactions in the first half of this year. These all involved Middle East acquirers – two from Israel and one each from Egypt, Saudi Arabia and the UAE.
Driven by robust activity in the U.S., the Americas led the way with 116 deals (up from 102 during H2 2020), which pushed M&A in the region to its highest level since 2015, the report continued, noting that the trend is likely continue because of the positive economic outlook in the region.
“Deal-makers are looking past concerns around the COVID-19 pandemic and economic uncertainty. There is an expectation in the U.S. that the economy is going to grow in leaps and bounds over the coming quarters and years – the post-pandemic outlook is very positive,” commented Vikram Sidhu, Clyde & Co. partner.
On M&A trends in Europe, the report said, after a steep drop in transactions in 2020, deals held steady in H1 2021 at 51, up one from the previous six-month period. The UK was the leading European country – and second most active worldwide behind the U.S. – ahead of Spain and Germany.
“Market hardening is creating organic growth opportunities for re/insurance carriers, but the availability of cheap liquidity, active interest from private equity investors and strategic re-underwriting of portfolios at larger carriers signal that an uptick in M&A is likely. The extent of that increase will vary by region and investor sentiment – deal-makers in the U.S. are comparatively bullish whereas their counterparts in Asia-Pacific remain more cautious as they wait for a more positive economic outlook.”commented Ivor Edwards, partner and European head of the Corporate Insurance Group at Clyde & Co
“Even weak sectors have been rebounding and the concerns of the last year have been receding (albeit tempered by a rebound in COVID cases due to the Delta variant), bolstering investor sentiment. We expect M&A to remain at a high level for the remainder of the year and into 2022,” Sidhu added.