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24 August 2021
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24 August 2021
Insurance Growth Report 2021 - mid-year update
24 August 2021
Insurance & Reinsurance
Global
1. Introduction
M&A activity across 2021. In this mid-year update our partners across the world examine the trends and factors driving deal activity in the first six months of this year.
Following the release earlier this year of the Insurance Growth Report 2021, which offered an overview and analysis of global insurance M&A across 2020, in this mid-year update our partners across the world examine the trends and factors driving deal activity in the first six months of this year.
Despite a tough year across the insurance sector, the industry has proved remarkably resilient in the face of significantly reduced revenue in Covid-19-affected classes of business, and the impact of business interruption disputes on insurers hit by the resulting class actions.
M&A activity dips in H1 2021
In contrast to the outlook at year-end 2020, global M&A activity in the first half of 2021 dipped slightly to 197 completed deals, compared with 201 in H1 2020. Activity was up 7.3% and 2.0% in the Americas and Europe, respectively, but was down everywhere else. In the Asia-Pacific region, the number of H1 deals fell 51.4%, year-on-year.
Kay stats at a glance
Volume of deals completed globally, 1 Jan 2009 - 30 Jun 2021
Uptick in mega deals
- There were 11 deals in H1 2021 valued at over USD 1.0 billion
- There were 15 in the whole of 2020
US leads big spenders
- Americas’ acquirors dominate the top 20 largest deals by value
- US has nine of the top 20 deals, Bermuda three, Canada and Cayman Islands one each
UK tops the leaderboard
- The sale of UK-headquartered RSA to Regent Bidco for USD 9.2 billion was the was the largest deal of H1 2021
Cross-border activity holds steady
- There were 35 completed cross-border deals in H1 2021 – 17.7% of the global total – the same number as in H2 2020.
- 19 of 35 cross-border deals were inter-region – 54.2%
Key takeaways
Global deal activity in the last six months points to the impact of regulatory activity and restructuring at carriers, as well as the continuing popularity of MGAs and insurtech.
Key takeaways from H1 2020
Regulatory challenges and drivers
In Asia-Pacific, the anticipation of a robust H1 for M&A transactions was frustrated in part by a continuing high regulatory bar in certain jurisdictions. At the same time, regulatory activity is also driving divestment of insurance businesses, with some significant portfolios likely to become available.
MGAs remain popular
MGAs continue to hold their allure for insurers looking to access new distribution channels while, at the same time, private equity capital is very active in the space, looking for potential targets. In the Americas, some insurtech MGAs who have attained sufficient scale are keen to have their own insurance capital and are looking to buy small insurers to expand. Europe has likewise seen the establishment of a number of MGAs for specialist classes of business such as cyber, warranty and indemnity, and financial lines.
Technology: insurtech ‘yes’, legacy IT ‘no’
Insurtechs are now in the position of being both attractive as assets as well as potential acquirors and creators of insurance businesses. The attractiveness of the insurtech sector as an alternative to traditional insurance start-ups has never been more obvious, though also features as a significant barrier to M&A in the insurance sector.
Life insurance presents challenge to M&A
In Europe, what is currently the life insurance sector’s pain could prove to be the legacy sector’s gain, as the preponderance of life insurers and life insurance divisions at composite carriers presents a challenge to M&A activity.
Strategic disposals highlight carriers’ core focus
While hiving off distressed business to the legacy market has been a recurring feature of the insurance sector since before the pandemic, disposals of non-core, but not necessarily under-performing, business appears to be a growing theme this year.
End
