A.M. Best: Asia-Pacific M&As Driven by Top-Line Growth Prospects

December 3, 2014

The Asia-Pacific region has been a popular destination for mergers and acquisitions, driven by top-line growth prospects for many still-developing markets with low insurance penetration, according to a Best’s Special Report titled, “Asia-Pacific Mergers and Acquisitions Seen as More Balanced, Driven by Value Creation.”

At the same time, a host of insurers in the region’s advanced markets, with a need for diversification, have looked outside the region after gaining a good foothold in domestic markets.

The momentum of Asia-Pacific M&As continues to build, reflecting changes in local, regional and international underlying market fundamentals since the global financial crisis. A few sizable acquisitions were driven by some western companies that had been negatively affected by the financial crisis and therefore needed to focus on core markets or lines of business by exiting Asia.

At the same time, some Asian markets continue to tighten regulations, with increasing minimum capital requirements leading to a consolidation trend, particularly in Southeast Asia, as regulators look to enhance market efficiency and competitiveness.

In mature markets such as Japan and Australia, companies face difficulties growing their business. Expansion, within Asia and outside the region, has led to a few high value deals internationally. Locally, Japanese non-life companies merged to improve their operating efficiency and to reduce costs in the long run.

The Asia-Pacific region is seeing mixed M&A trends as buyers from diversified backgrounds seek deals for a variety of purposes. Some of the biggest global M&A deals in terms of value came from Asian acquirers buying into mature western markets.

For inbound M&A activity, emerging markets, particularly in Southeast Asian countries such as Indonesia, Malaysia and Thailand, have been popular targets for western and Asian buyers. Regulation is a common trigger for M&As as a direct or indirect result of an underlying need to restructure the industry or market.

Source: A.M. Best Company

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