3 minute read 16 Apr 2018
old and new

How insurance M&A markets are becoming increasingly sophisticated

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.

3 minute read 16 Apr 2018

Our latest mergers and acquisitions report  reveals a healthy M&A outlook as the insurance sector transforms.

However, our data points to a solid first quarter of dealmaking in 2018, and the deal outlook remains healthy. According to our M&A survey - EY Global Capital Confidence Barometer - almost half (48%) of insurance executives surveyed expecting to pursue acquisitions actively in the next 12 months — which is above the average since April 2013.

Market optimism

79%

see the M&A market as improving

Strong dealmaking intentions

The stronger-than-expected turnaround in economic activity in the Eurozone has boosted executives’ expectations for global economic growth. With China and the US remaining positive, all the major engines of growth in the global economy are now synchronized in an upward trajectory. In this context, all (100%) insurance executives surveyed see the global M&A market as either stable or improving in the next 12 months.

Portfolio transformation

35%

identified an asset at risk of disruption to divest during their most recent portfolio review

Hunt for high-quality assets

Insurance executives expect increasing competition for assets — with 80% pointing towards private equity (PE) and other funds. We are seeing PE activity across many areas of insurance, including participating in the extensive consolidation and reshaping of distribution businesses. PE investment will also be a key part of the development and monetization of new technologies supporting the sector. Read EY’s Global M&A themes 2018 for more insight on the M&A trends that we expect to see accelerate as more insurers seek to transform, using business acquisitions or disposals as elements of that transformation.

Shifting from optimizing to transforming

Transformational deal activity will continue through 2018 and beyond, and insurers will invest in InsurTech businesses as a way of accessing and operating in emerging “digital ecosystems.” New digital ecosystems are both a massive opportunity and an existential threat as such ecosystems will also be a route for sector convergence. We are seeing the creation of evermore sophisticated insurance M&A markets in response to ongoing sector transformation: bigger pipelines, better targeting and divesting assets at risk of disruption will be critical components of successful business portfolio transformation. Read EY’s Financial Services Global Corporate Divestment Study 2018 (pdf) to find out why strategic divestments play a key role in achieving this goal.

Market outlook

Looking ahead, while half (51%) of respondents are wary of changes in trade policy and protectionism, cross-border M&A will be a major theme in the next 12 months. We continue to see a clear outlook for insurance sector transformation and a record level of dry powder could also fuel increased activity in the broader Insurance sector by PE acquirers.

Global Capital Confidence Barometer 

Explore our latest M&A report.

Read more

Summary

Our M&A report, Global Capital Confidence Barometer, shows 100% of insurance executives see the global M&A market as stable or improving in the next 12 months. Bigger pipelines and better targeting is enhancing portfolio predictions, and transformational deal activity will continue. 

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.