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Low interest rates, rising equities boost global insurer mergers

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Global insurer mergers and acquisitions are at the highest level in recent years and are likely to continue at that rate, Moody’s Investors Service Inc. said Tuesday

The report, Highest M&A Activity in Years Looks Set to Continue, notes that the total value of 15 insurance M&As during the first nine months of the year totaled more than $200 billion.

Ace Ltd.’s acquisition of Chubb Corp., XL Group P.L.C.’s purchase of Catlin Group Ltd., Cigna Corp’s proposed acquisition of Anthem Inc. and Fosun International Ltd.’s purchase of Ironshore Inc. are among higher profile deals so far this year cited by Moody’s.

Several factors have driven the spate of transactions, according to Moody’s. They include regulatory change such as the Patient Protection and Affordable Care Act in the United States driving health care M&As, low interest rates and rising equity markets, which encourage debt-fueled growth and expansion by Chinese and Japanese companies in search of nondomestic growth opportunities.

Moody’s predicts that M&As will continue owing to the fragmented insurance industries in many countries; “continued attractive economic fundamentals in many regions (low interest rates/funding costs and forced sellers,” and the international growth aspirations of many buyers.

Moody’s said acquisitions are likely to stop only if interest rates rise significantly and equity markets fall “dramatically.” It added, though, that a drop in equity markets might reduce the sale price of acquisitions.