M&A activity surge expected in insurance

CFOs have plenty of capital to spend, according to survey

M&A activity surge expected in insurance
by Timothy Montales

An annual survey by Moody’s Investors Service of chief financial officers (CFOs) has revealed that more than 40% are seeking to deploy surplus capital, compared with last year’s 10%.

As 30% of respondents estimated an increased exposure to real estate, private placements, infrastructure, mortgages, and loans, share buybacks have become another popular option for CFOs.

“With large European insurers reporting solid levels of capital, CFOs are turning their attention toward the employment of excess capital. M&A and share buybacks are the main options available to them,” Antonello Aquino, associate managing director, Moody’s, said, according to The Actuary.

As artificial intelligence and the internet of things become their next focus, around 90% of insurers were found to have invested in technology to tune up access to services and office functionality, and to utilize big data.

The results come after Willis Towers Watson’s (WLTW) February research revealed that 49% of global insurers hope to clinch new technologies via M&A activity over the next three years.

“Insurers recognize the importance of building a sustainable digital infrastructure to improve customer engagement and as an essential distribution channel,” Nicholas Chen, digital solutions head – Asia Pacific, WLTW, said. “The tools emerging are often so far removed from insurers’ previous experience that external innovation models are likely to be the only way of expanding digital capabilities. This is expected to lead a wave of new M&A activity in the years to come.”

One third of Moody’s survey respondents recognized prolonged low interest rates as this year’s top challenge, yet the majority of CFOs do not expect to issue large volume debt in the next two years.

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