Worldwide growth in insurance M&A continues: Report

There were 222 mergers and acquisitions completed in the global insurance industry in the first half of 2019 compared with 196 in the second half of 2018, a 13.2% increase, according to Clyde & Co’s Insurance Growth Report midyear update, released Thursday.

The increase is the largest in the volume of transactions since the first half of 2015 and the fourth consecutive six-month period of growth, the law firm said in its report.

The Americas was the most active region with 93 deals, up from 92, but the biggest increase in activity was in Europe, with 88 completed deals, a 39.7% increase over the 64 in the previous six months, the report said.

There were 38 deals in Asia-Pacific, up 11.8% from 34, the fourth consecutive period of rising deal volume and the highest level since 2015, the report said.

Although the U.S. still had the most deals of any one country, at 66, this represents the third consecutive period of decline for U.S deal volume, the report said.

The slowing could continue, however. “Although U.S. insurance M&A continues at a steady pace, there is growing geopolitical and financial uncertainty that is causing U.S. dealmakers to pause,” Vikram Sidhu, Clyde & Co partner in New York, said in a statement released with the report. “It is likely that U.S. insurance M&A deal activity will cool down in the second half of 2019, although certain areas such as insurance agency acquisitions are likely to continue strongly throughout the year.”

Worldwide, there were 11 deals in first half 2019 valued at over $1.0 billion each compared with 18 in the whole of 2018, data in the report showed.

“The search for scale is still a key factor as leading players seek to deliver cost synergies in addition to new distribution channels and customers,” Ivor Edwards, partner and European head of the corporate insurance group at Clyde & Co, said in the statement. “However, there is a limited pool of targets at the top end of the market and it may become increasingly difficult for buyers and sellers to come to an agreement on valuation.”

The first half of 2019 also featured “many” technology investments around the world, including Japan’s Sumitomo Life putting $90 million into insurtech Singapore Life as “technology continues to be a key growth driver in all regions,” the report said, calling it “the most important emerging driver of M&A.”

“While these investments may be relatively small, especially in comparison to the value of the larger, big-ticket M&A, they retain tremendous strategic importance,” Kathrin Feldmann, counsel at Clyde & Co in Dusseldorf, Germany, said in the statement. “Technology can unlock access to new distribution routes, markets and customers, while at the same time delivering substantial efficiencies, resulting in a dramatic impact on the balance sheet.”