Press Release

Insurers in developed markets face wave of suitors in M&A surge

Megadeals, consolidation and search for top-line growth define insurance M&A market in 2015

January 27, 2016

LONDON, Wednesday 27 January, 2016 — The competition for attractive assets will intensify in the next three years as the majority of insurers (82%) plan to acquire, while only one third intend to divest, according to a survey of senior insurance executives conducted by Willis Towers Watson M&A Risk Consulting in conjunction with Mergermarket.

In 2015, top-line revenue growth was the leading driver of M&A activity in the insurance sector, with €111.4bn worth of deals completed in the first three quarters of the year – nearly three times that recorded in 2014. According to the survey, almost half of respondents made their last major acquisition in order to enhance their market position and increase customer numbers. In addition, consolidation - particularly in the US and speciality lines - spurred a rise in the number of megadeals to four (worth more than €5bn) compared to just one last year and 25 deals worth more than €500m.

Jack Gibson, Global M&A Leader for Willis Towers Watson M&A Risk Consulting, said: “We expect this trend to continue, although competition for the best transactions is tough. Just 4% of deals proceeded without competition from other potential buyers. Incumbent local insurers are fighting hard, international competitors are also trying to cherry-pick the best deals, and an increasing threat is posed by emerging players such as private equity and non-insurance investors from Asia.”

According to the survey, in the next three years the vast majority (90%) of insurers in emerging Asia, Central and Eastern Europe, the Middle East, Latin America and Africa are planning deals. In contrast, more than half of firms in Western Europe, North America, Australasia and Lloyd’s expect to make at least one divestment before 2018, primarily due to consolidation and efficiency drives.

The survey shows that insurers are setting higher deal criteria with respondents not willing to consider deals offering a future return on capital of less than 13.8% in the P&C sector and 14.2% in the life sector. Willis Towers Watson asserts that if insurers are to stick to these higher minimum returns on capital criteria they will need to be more selective initially, given that deal competition is expected to intensify, adding upward pressure on prices.

Survey respondents overwhelmingly indicate they expect to focus their M&A activity on core markets (80%), with just 8% not already having operations in deal-target markets. Distribution, which is already a key driver of more than a third of M&A activity, is expected to become increasingly important as insurers seek new routes to market and higher revenues.

Jack Gibson said: “Reinventing distribution so it is fit for purpose in the evolving marketplace is a major challenge. Digital platforms feature strongly on insurers’ wish-lists and the desire to access and secure new technologies is a key element of many transactions.”

About the report

The survey was conducted by Willis Towers Watson M&A Risk Consulting, supported by researchers from Mergermarket who canvassed the opinions of 750 senior insurance executives from life, property and casualty and composite insurers, as well as reinsurers, regarding their outlook for M&A in the insurance industry, and their own company’s plans and strategy. The companies involved were split equally across the Americas, Asia and EMEA regions. Interviews were carried out in the second and third quarters of 2015.

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 39,000 employees in more than 120 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.



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