The total costs of mergers and acquisitions in the insurance industry quadrupled in 2015 compared with 2014.
With 24 billion-dollar-plus deals across the globe, the aggregate value of global insurance transactions in 2015 hit a staggering US$195 billion, according to a new study by investment management firm Conning Inc.
“Record setting global mergers and acquisitions activity in 2015 was characterized by an unprecedented number of high-value strategic transactions,” Jerry Theodorou, vice president, Insurance Research at Conning, Inc, said.
The total number of billion-dollar-plus deals over the year trebled when compared with 2014 as Theodorou noted that the industry is facing an increased focus from investors in the Far East.
“Close to half of the billion-dollar-plus transactions were outbound transactions by Japanese and Chinese buyers, as the Japanese sought external growth opportunities and the Chinese pursued asset accumulation and diversification strategies.
“Four consolidation transactions among U.S. health insurers alone, valued at $100 billion, accounted for more than half of the global insurer mergers and acquisitions value.”
Steve Webersen, head of insurance research at Conning, Inc, noted that global economic forces were the main reason for the increased activity.
“M&A activity in 2015 was driven by continued low interest rates, high levels of industry capital, and low-growth economies in developed countries,” Webersen said.
“While many of these issues have been in place for some time, they came to a head in 2015, as insurers capitulated to the need for acquisitions to spur growth.”
Webersen stressed that the glut of M&A’s are not done yet as the future of the industry looks to filled with similar billion-dollar deals as increased consolidation could continue to impact the industry.
“Looking forward, the transformative consolidations of 2015 may pressure other competitors to merge, and may also provide opportunities for mid-market players as certain components of the merged businesses are spun off and talent is displaced,” Webersen concluded.