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Megadeals, political instability and strong equity markets deliver M&A underperformance for insurers

Willis Towers Watson Insurance M&A Performance Tracker shows insurers undertaking M&A in 2016 underperformed non-acquisitive peers for the first time since 2010


October 2, 2017

For only the second time this decade, insurers undertaking an acquisition underperformed their subindustry index.

ARLINGTON, VA, October 2, 2017 — For only the second time this decade, insurers undertaking an acquisition underperformed their subindustry index, according to leading global advisory, broking and solutions company Willis Towers Watson’s (NASDAQ:WLTW) Insurance M&A Performance Tracker.

The research, based on analysis of deals with a value of more than $50 million conducted in the insurance sector, showed acquirers lagged the index by 6.4 percentage points in the period six months before the deal’s announcement to the point six months after the deal closed. The last time acquirers underperformed their subindustry index was in 2010.

“Although acquirers in the insurance sector haven’t done as well in 2016 as they have in previous years, there are plausible explanations for this,” said Jack Gibson, global M&A lead, Willis Towers Watson M&A Risk Consulting. “Since 2008, insurance acquirers have outperformed the market, a trend even more pronounced since 2012. M&A is still beneficial, and it will be interesting to see what the data for 2017 show.”

From 2008 onward, insurers that carried out an acquisition outperformed peers by 3 percentage points. Since 2012, acquirers have traded 4.4 percentage points above their subindustry index.

According to the research, a number of factors account for the recent underperformance. First is the general trend for high value and low volume in the M&A market. Only 19 insurance deals were tracked in 2016, and average deal value was almost double the average value in 2015. These figures mirror those from 2010, the last year in which acquisitive insurers underperformed.

“The market tends to be nervous around big, transformational transactions and more comfortable when most activity involves smaller incremental bolt-ons,” said Gibson. “All other things being equal, big transactions are generally deemed to be riskier for the acquiring company.”

The drop in deal volumes could be attributed to a slowdown in activity in the life sector, the fall in property & casualty deals was less pronounced.

Strong equity markets may be another factor in the weaker performance of acquisitive insurers. “Equity markets are doing well, so firms don’t need to do acquisitions as shareholders are rewarding those focusing on organic growth,” said Gibson.

Geopolitical uncertainty and the surprise poll results in the U.K.’s Brexit referendum and U.S. presidential elections could also have been factors in shareholders’ cautious reactions to big ticket transactions.

Separate Willis Towers Watson research tracking M&A across all sectors reveals similar trends to those in insurance, with acquirers underperforming firms that did not do deals. The consultancy suggests this could indicate that investors are in “risk-off” mode, especially when deal values have been higher than normal.

About the Insurance M&A Performance Tracker

Based on analysis from Willis Towers Watson and Cass Business School, the Tracker explores the performance of insurance companies that carry out major acquisitions against their subindustry and regional indexes. Share price performance is measured as the percentage change in share price and is compared with MSCI Indices. The analysis is performance over two time periods:

  • From six months prior to the announcement date to one day post announcement
  • From six months prior to the announcement date to six months after the deal closed.

Deal data are sourced from Thomson Reuters, and only completed M&A deals with a value of at least $50 million are included in this research.

About Insurance Consulting and Technology

Willis Towers Watson’s Insurance Consulting and Technology business has over 1,200 colleagues operating in 35 markets worldwide. It is a leading provider of advice, solutions and software — primarily to the insurance industry. Its consulting services help clients manage risk and capital, improve business performance and create competitive advantage by focusing on financial and regulatory reporting, enterprise risk and capital management, M&A and corporate restructuring, products, pricing, business management and strategy.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 40,000 employees serving in more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at

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