Following rumours of Allianz’s takeover bid for QBE, speculation has it that the Australian giant, as well as other listed general insurers, may be looking to make its own acquisitions instead of pitching itself as a target as it deals with the pressures of profitability.
Cameron Green, Willis Re Australia chief executive, said that while 2016 was “fairly light” in Australia for mergers and acquisitions, the situation may change this year.
“I would suggest that every CEO of the listed insurance companies in Australia are thinking M&A. There is no doubt they would be looking at targets and assessing what’s going on because the settings in their own business are tough,” he told Australian Financial Review.
“There is very little growth and organic growth is complicated at the moment. It’s a competitive industry we work in, so I think they would all be thinking M&A, but they are all saying ‘hang on, what’s the motivation and value?’”
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Recent data from JPMorgan and actuarial firm Taylor Fry found that Australia’s general insurance sector is pressured by significant claims cost increases to some business lines and tipping premium rate increases in 2017.
The Willis Re Australia chief executive told AFR that against this backdrop, and with insurers prepping up for reporting season, investors would want the companies to consider M&A.
“They would be wanting them to look at opportunities and asking questions about how they are going to grow,” he said. “In fact they’re demanding it, if organic premium growth is anaemic, then they are asking how are you going to grow, how are we going to get the dividend and how are we going to get our earnings per share up?”
Green speculated that instead of outright purchases, insurers would be looking to buy “portfolios of business and different avenues of distribution.”
“Rather than QBE saying ‘I am going to buy Suncorp’, for example, I think most of them are looking at different pockets of business that could be accretive to theirs,” he said. “They could also be looking at parts of a business that have been successfully incubated outside of their business, rather than another insurance operating entity.”
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