2 minute read 20 Nov 2018
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Strong discipline pre- and post-deal leads to M&A success in insurance

By

David Lambert

EY Global Insurance Transactions Leader

Helping clients to assess the merits of investing into, or divesting of, companies in the insurance sector.

2 minute read 20 Nov 2018

Insurers say sector convergence and InsurTech are driving increased M&A — but not at all costs.

This article is part of our M&A report Global Capital Confidence Barometer, 2nd half 2018.

Sector transformation continues to drive M&A activity, as 51% of insurance companies say they expect to pursue deals in the next 12 months, according to the our latest Capital Confidence Barometer findings. With 78% expecting the insurance M&A market to improve, it would appear that healthy dealmaking will continue into 2019.

Although sector convergence and legacy consolidation remain key drivers of M&A, investment in, or acquisition of, InsurTech companies is the quickest way to access emerging digital ecosystems.

While 63% of insurance companies expect to close more deals in the next 12 months, they remain highly disciplined; 96% of respondents say they’ve put the brakes on a planned deal in the past 12 months. One in five cited either competition or regulatory or government intervention as the reasons.

M&A expectations

51%

of insurance executives expect to actively pursue acquisitions in the next year.

Insurers do a better job at achieving post-deal synergies than their global counterparts

For deals insurers did complete, nearly half (47%) achieved the post-deal synergies they identified, significantly higher than the global average (28%). Those that are more aggressive in setting synergy targets are more likely to achieve or exceed targets, with 61% either meeting identified synergies or achieving higher synergies than expected.

Post-deal integration

47%

of insurance executives say they managed to achieve the synergies identified in their most recent deal.

Portfolio optimization helps to streamline the business and remain agile

Portfolio optimization helps insurance companies streamline their businesses and remain agile enough to pivot in response to a changing landscape. Seventy-nine percent of insurance companies say they review their portfolios at least every six months. Seventy-four percent identified underperforming assets or those at risk of disruption to divest during their latest review.

By actively managing their portfolios, insurance companies are able to remain competitive and meet investor demands for higher returns.

The insurance sector shows a stronger propensity for dealmaking than global executives as a whole. As companies in the sector continue to seek new markets and access new technologies, we would expect dealmaking to continue apace while other sectors may pause.

Portfolio optimization

39%

of insurance executives have identified an asset at risk of disruption to divest as part of a portfolio review.

Summary

While half of insurance companies expect to pursue M&A and 63% expect to close deals in the months ahead, 96% say they’ve cancelled a deal if it wasn’t right. This kind of pre-deal discipline, combined with a better than average ability to achieve expected synergies post-deal, is resulting in greater M&A success for insurers. Download the full report (pdf).

About this article

By

David Lambert

EY Global Insurance Transactions Leader

Helping clients to assess the merits of investing into, or divesting of, companies in the insurance sector.