2 minute read 12 Jun 2019
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Robust M&A activity helps fuel double-digit growth 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 12 Jun 2019

Riding a wave of economic confidence, insurance companies focus M&A efforts on technology and convergence to achieve their growth ambitions.

Strong earnings growth in 2018 and broad-based confidence in capital markets has insurance companies feeling optimistic about their growth potential, despite predictions from economists and analysts about the economic headwinds ahead.

Over 90% of insurance executives we surveyed share a view that the global economy is improving. In terms of their own growth projections, 75% of companies expect revenue growth of between 6% and 15% in next year. More than half anticipate double-digit growth rates of between 11% and 25%. They see expanding into adjacent sectors or into their domestic markets as strategic priorities in achieving these objectives.

Revenue growth expectations

75%

of companies expect revenue growth of 6%–15% in the next year.

Almost all executives plan on making major investments in technology

Almost all insurance respondents surveyed say they will be significantly increasing their investment in technology across a broad range of operational priorities, including improving financial data access and analysis, enhancing the customer experience and improving internal efficiencies.

With the competition for top talent intensifying, a third of insurance executives say they also plan on increasing the use of technology, automation and AI to give their employment strategy a boost.

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M&A appetite remains strong as insurance executives look for assets to address technology, convergence and activist shareholders

Technology also features as a main strategic driver, along with sector convergence and the response to changing customer behavior, as 71% of insurance executives say they will actively pursue M&A in the coming year.

However, in addition to the opportunities M&A presents for insurance executives, it also poses a host of risks. For an acquisition or merger to create value, the combination of the buyer and seller must become more than the sum of the parts. To realize the potential of their transactions, insurance executives will have to quickly address risks while seizing opportunities and synergies. To help them do this, insurance companies may want to develop leading-practice M&A playbooks and assemble dedicated M&A teams within functions.

M&A appetite

71%

say they plan to pursue M&A in the next 12 months.

M&A appetites expected to rise further, even as the focus shifts to organic growth

Looking ahead, a large majority of insurance executives expect M&A intentions to rise further in the next 12 months, even as 72% of insurance executives indicate they will shift their focus from M&A to organic growth. For those who are pursuing M&A, 74% say they will be looking for cross-border opportunities. However, they will continue to be selective as the gap between buyers and sellers continues to grow.

Cross-border

74%

of those pursuing M&A say they will be targeting cross-border assets.

Summary

The EY Global Capital Confidence Barometer (pdf) gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas.

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.