Global Insurance M&A Deals Total Value Soars, Volume Dips in First Half

Deal value for global insurance mergers and acquisitions was up $44.4 billion in the first six months of 2018, driven by a slew of megadeals that pushed value to its highest first-half total since the financial crisis, according to a report from Willis Towers Watson and Mergermarket.

The first half of the year saw 14 deals worth over $600 million taking place in this sector, although total deal volume was down to just 84 deals, the lowest number since 2009, according to the report.

Key deal drivers behind this surge in value relate to the changing nature of business models. As regulatory pressures become the norm, new models are emerging and more businesses are seeking to return to their core strategy, the report says.

“As processes, reporting and monitoring become increasingly business as usual, executives have taken back their ‘bandwidth’ and got on with the job of strategically guiding their companies,” said Fergal O’Shea, senior director, Willis Towers Watson, citing the impact of Solvency II implementation.

A growing trend for companies wishing to take this approach is to divest unwanted parts of their business, meaning that valuable assets are once again on the market. For private equity investors, record levels of inflow has driven interest in these assets and resulted in complex acquisitions from these buyers in 2018.

Regulatory change has also played a significant role in relation to U.S. assets, as tax reform in the region has provided an immediate boost to company earnings since the turn of the year, which means U.S. insurers instantly became more attractive to foreign insurers who see the potential to earn more from the U.S. than before.

While these drivers support a positive outlook for global insurance M&A in the coming months, the authors contend that time to market may extend the phase to execution, given higher deal values and potential deal complexity.

“We’re seeing a much longer stretch of time from announcement to closing,” said Jack Gibson, managing director at Willis Towers Watson. “However, debt continues to be cheap, and following the recent tax reforms, U.S. companies have been given a steroid kick. We will continue to see an active M&A market, it’s just a matter of paying the right price and overcoming the hurdles that have led to deals taking longer to consummate and are perhaps driving the lower number of deals this year.”

Other findings from the report include:

The report covers completed M&A deals announced from January 1, 2018, to June 30, 2018 with a value of at least $5 million.