Insurer M&A activity could slow down in 2019: Report

There were 382 mergers and acquisitions in the insurance sector completed in 2018, up from 350 in 2017, but 2019 may see a slowing of pace, according to a report released Friday from Clyde & Co LLP.

There were 18 transactions valued at $1 billion or more in 2018 compared with 16 in 2017, the report said.

The deal total in the Americas grew to 189 from 176 in 2017 and increased in the Asia-Pacific region to 59 from 42 in 2017 as deals in the Middle East and Africa declined to eight from 11, the report said.

In the Americas, however, deal volume slipped from 97 in the first half of 2018 to 92 in the second half of the year, the first such decline in deal volume in two years, London-based Clyde said.

While the data showed a slowing, other factors may support an active deal environment in 2019, Clyde said.

“While we predict a slowdown in M&A in some markets in the first six months of 2019, the second half of the year could see a return to form,” Clyde said. “With clarity around Brexit finally achieved, the disruption that will follow will generate opportunities, especially in the run-off market.”

Market conditions will also play a factor. “Meanwhile, with no significant hardening of the market on the horizon, we expect the need to dispose of non-core assets to persist,” Clyde added.

Also helping drive the market is that mergers and acquisitions remain a “key strategy” used by companies in the insurance sector to both increase premium income and reduce cost base, Clyde said.

“Transaction activity worldwide was buoyant in 2018,” Andrew Holderness, global head of Clyde & Co’s corporate insurance group, said in a statement released with the report. “However, factors including Brexit, trade wars and protectionism are generating uncertainty, the enemy of deal-making.”

“The slowdown in the Americas in the second half of last year is indicative of heightened investor caution and we predict 2019 will be a year of two halves — a slowdown in M&A in some markets in the first six months, while the second half should see a return to form,” he added.

The Clyde & Co Insurance Growth Report is report was based on interviews with Clyde & Co partners around the world in December and January, supplemented by existing third-party research on insurance company mergers.