London:
Marking the highest volume of M&A transactions worldwide, since 2015, global insurance industry saw 222 M&A deals completed in the first half of 2019, up from 196 in the second half of 2018.
According to today’s mid-year report from Clyde & Co,there were 11 transactions valued in excess of USD 1 billion in H1 2019 compared to 18 in the whole of 2018, although there is a question mark over whether this trend can continue.
While the Americas was the most active region with 93 deals, the biggest increase in activity was in Europe, which saw an 40 per cent rise with 88 completed deals compared with 64 in the previous six months as companies move on from the diversion of Brexit preparations.
France was the leading European country – and second most active worldwide behind the US – ahead of the UK and Spain.
New cross-border targets
Cross-border M&A activity continued apace in H1 2019 with 63 deals representing 28% of the global total as re/insurers look to extend their reach into new territories. But geographic focus is shifting – after a number of years of inbound activity the pool of targets in Bermuda is shrinking. Just one deal involving a Bermudan target closed in the first half of 2019 – Apollo’s USD 2.5 billion acquisition of Aspen. Meanwhile, European targets accounted for almost two-thirds of cross-border targets in H1 2019.
Ivor Edwards, partner and European head of the corporate insurance group at Clyde & Co, says: “Despite recent signs of market hardening, delivering a positive result for shareholders remains challenging and M&A is an attractive strategy to deliver growth for re/insurance businesses around the world. In Europe, now that the majority of re/insurers are Brexit-ready, they have been able to divert management attention back towards their growth ambitions. As a result, we have seen a surge in completed deals in 2019 that had been put on hold. Deal-makers elsewhere have been buoyed by a combination of strong economic growth, notably in the US, and positive growth prospects for the insurance sector, especially in Asia-Pacific.”
Joyce Chan, Clyde & Co Partner in Hong Kong says: “Planting a flag overseas can deliver a short-cut to growth, especially for re/insurers whose domestic markets are saturated and ultra-competitive.”
There were 38 deals in Asia-Pacific, marking the fourth consecutive period of rising deal volume to the highest level since 2015. Japanese acquirers were again the most active ahead of Australia and India, said the report.India was the stand-out market, where recent legislative changes are starting to translate into M&A, including the largest deal of the year worldwide so far – the acquisition of IDBI Bank by the Life Insurance Corp of India for USD 2.8 billion.
Chan, continues: “The breadth of opportunity in Asia Pacific was underlined in the first six months of the year with acquirors from 11 nations completing transactions. Inbound activity was also up, in a trend we expect to continue. Meanwhile, in China, a slew of new regulations has led to a spike in interest from foreign insurers and we expect a number of significant transactions to emerge in the second half of the year.”
Technology is a constant
Regardless of location, technology remains the most important emerging driver of M&A. H1 2019 saw technology investments around the world including USD 90 million into insurtech Singapore Life from Japan’s Sumitomo Life; USD 45 million from a US investor group into Paris-based Alan – a software-as-a-service startup for the health insurance market; and a similar amount into Pie Insurance, which offers US workers’ compensation insurance online.