A new report from Deloitte breaks down the 2014 M&A landscape by insurance sector
The worst of the recession is over and the insurance industry is well-poised for growth, according to the 2015 Insurance M&A Outlook recently issued by Deloitte.
In this report, the consultancy firm outlines the three major trends that occurred in 2014, including:
- The rise of substantial M&A deals, including eight that surpassed $1 billion
- The entrance of foreign buyers, who purchased insurance firms strategically to gain access to the U.S. insurance market
- Incidences of substantial consolidation in reinsurance, such as XL Group acquiring Catlin
It also analyzed each sector and found that while the life and health sector has remained relatively stagnant, property and casualty has made enormous strides since 2013. In fact, the P&C market has expanded by over 60% since then.
“Where P&C insurers have found themselves dealing with increased competition for a limited number of acquisition targets, companies with more capital are becoming more aggressive,” researchers discovered.
Brokers and agents experienced the most activity, as 2014 saw the most deals of any year in the past decade.
There are several reasons for this, including piqued interest from PE buyers because of this market’s stability, as well as the fact that “due to a soft P&C rate environment and very low exposure growth, brokers relied on M&A-driven growth even more than is typical.”
Finally, the report concluded with an outlook of M&A conditions in 2015. Some noteworthy prognoses include:
- Rising interest rates and slow GDP growth will make M&A activity more attractive
- Regulatory changes could create an uncertain environment
- Greater presence of foreign buyers, particularly from Asia, may choose to enter the market before interest rates soar
Most importantly, Deloitte found that buyers will be cautious, and will not pursue an M&A unless it’s an almost surefire investment on every front.
“The key to long-term sustainability and fundamental success in a more risk-aware M&A environment is being able to walk away from a deal unless it ticks all the boxes,” Deloitte reports.
