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Global insurance M&A at lowest level for three years

10 September 2012

According to a report released today by the Corporate Insurance Group at Clyde & Co, mergers and acquisitions (M&A) activity has been trending down over the last three years.

Despite the fact that the sector saw a surge in transaction activity in 2011, the six months to June 2012 was quieter than at any period since the first half of 2009.

Europe has seen the biggest fall in the volume of insurance M&A, with a pronounced decrease in activity in 2011 which has continued into the first half of 2012. There was a 21% fall in deals done between 2009 and 2010 – and a further 18% decline in 2011. The Americas is the leading region in terms of number of transactions and has accounted for 52% of global M&A activity in the insurance sector over the past 12 months. This has been driven predominantly by the US – not surprisingly given its maturity and size – as well as increased activity in Latin America. Asia Pacific has seen its share of global M&A activity drop from a high of 24% in the first half of 2011 to 8% in the first six months of 2012.

Andrew Holderness, Global Head of Clyde’s Corporate Insurance Group said: “It is likely that last year’s uptick was a result of deals being completed that had been put on hold during the financial crisis. Now however, while boards and investors are still interested in doing deals, there is a high level of caution about making sure it is the right deal on the right terms – and that is slowing transaction activity.

“In terms of the underlying themes driving activity, many of these remain very similar to last year: the fallout from the global financial crisis, regulatory reform and the desire to look beyond mature markets for growth. In addition, this year there is the effect of the on-going European debt crisis and post-catastrophe recapitalisation after one of the most expensive years ever in terms of catastrophe claims.

“Looking forward, the market is at something of a crossroads. There are a number of factors that could kick start M&A activity in the next 12 months. For example, a significant catastrophe creating widespread balance sheet damage and resulting in a sharp turn in the pricing cycle may kick start new investments, while continued solvency deterioration in the Eurozone may force more asset sales or corporate transactions.

“Overall, however, we believe that there are sufficient drivers for the stage to be set for a range of M&A activity around the world in the coming year and beyond as insurers everywhere reconsider their market position and evaluate the best opportunities for sustained growth.”

Please click here to view the 2009 - 2012 Corporate Insurance report on M&A activity.

To view a specific regional section from the report, please click on the links below:

The Americas
Asia Pacific
Europe
MENA & Sub-Saharan Africa