APAC to lead insurance M&A deals: KPMG

Asia Pacific is predicted to be at the forefront of renewed mergers and acquisition (M&A) activity in the global insurance sector, according to a survey conducted by KPMG. The survey canvassed more than 200 insurance industry executives and revealed that 84% of global firms want to target between one and three acquisitions in 2017, with two thirds of insurers interested in cross-border deals. Some 94% of insurers surveyed are planning at least one disposal. “Insurers are clearly hungry for good M&A opportunities,” said Ram Menon, global lead partner of KPMG’s insurance deal advisory in the US. “They are focused on transforming their business and operating models, and even with geopolitical uncertainties, they are aggressively looking at deals that can help meet their objectives.” Asia-Pacific emerged as the most favoured region for acquisition targets, identified as such by almost half (46%) of respondents and more than double the percentage for North America. The survey also showed that the majority of insurers will seek mergers to enable new operating capabilities (87%) or access new technology (76%). At the same time, a separate report from Clyde & Co reveals that 2016 was a particularly slow year for global insurance M&A activity, with 387 deals. M&A activity fell to its lowest level since 2013. Clyde & Co notes that M&A deals were down 13% in 2016, following 444 transactions in 2015. Activity was slower in the second half of the year, with 186 deals. The report shows that 12 of the top 20 largest deals last year featured Asia-based buyers, particularly from China and Japan. “Last year didn’t match what was, in retrospect, a bumper year in 2015,” said Andrew Holderness, global head of the corporate insurance group at Clyde & Co. The report agrees, however, that M&A levels are likely to rebound in 2017. “With competition to leverage opportunities showing no sign of diminishing, and tough market conditions expected to continue for the foreseeable future, there is no doubt that insurance businesses around the world will continue to look at all available avenues in the search for growth,” said Mr Holderness. He noted that insurers are now investing more in technology. This trend could act as a driving force behind M&A activity in 2017. Last year, investment in insurtech startups totalled $1.7bn worldwide. “Insurance businesses are looking increasingly at how they can deploy innovative technological solutions to reduce their cost base. At the same time, technology is rapidly cementing itself as the key to accessing new customers in new markets. Although still early stages, we expect insurtech will dominate boardroom discussions in coming years,” said Mr Holderness. Disposals will also be a driver of M&A activity in 2017, as companies come to terms with five years of difficult trading conditions, adds Clyde & Co in its report, not least in the UK as a result of the vote to leave the European Union. Regulation will also play its part in driving M&A, Clyde & Co notes. Companies that want to enter markets where regulators have introduced protectionist measures, including China and South Africa, will need to build market share through M&A. At the same time, more open markets, including India and Dubai, are encouraging foreign insurers to establish new offices.

APAC to lead insurance M&A deals: KPMG

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