德勤全球-2019_Insurance_MA_Outlook_28页_1mb

2019 Insurance M&A Outlook Summary

Core Content

This report provides an overview of the insurance M&A landscape in 2018 and outlines key trends and drivers for 2019. It emphasizes the continued growth in the insurance industry through mergers and acquisitions, highlighting the impact of macroeconomic factors, tax reforms, and the evolving role of InsurTech.

2018 M&A Activity

Underwriters

• Deal Volume: Increased by 4% to 87 deals, marking the second-most active M&A market since 2013.
• Aggregate Deal Value: Rose by 189% to $42.7 billion, driven by two major P&C deals: AXA's $15.3 billion acquisition of XL Group and AIG's $5.5 billion acquisition of Validus.
• Average Deal Value: Increased by 130% to $971 million.
• P/BV Multiples: The average P/BV multiple was 1.34x, with a slight decline compared to 2017.

Life and Health (L&H)

• Deal Volume: Decreased by 16% to 26 deals, though the aggregate deal value increased by 30% to $8.6 billion.
• Notable Deals: Lincoln Financial Group's $3.3 billion acquisition of Liberty Mutual's group benefits business, Voya Financial's closed block variable annuity (CBVA) and individual fixed annuities businesses.
• P/BV Multiples: The average P/BV multiple was 1.21x, with a trend of increasing financial investor interest due to rising interest rates.

Property and Casualty (P&C)

• Deal Volume: Rose by 15% to 613 deals, with a 316% increase in aggregate deal value to $34.1 billion.
• Major Deals: AXA/XL and AIG/Validus were significant contributors. Eight deals of over $1 billion were announced in 2018, including four over $2 billion.
• P/BV Multiples: The average P/BV multiple was 1.35x, with a notable decrease in deal multiples compared to 2017.

Brokers

• Deal Volume: Reached a record high of 594 deals, up 11% from 2017.
• Aggregate Deal Value: Increased by 50% to $8.1 billion, primarily due to the Marsh & McLennan/Jardine transaction.
• Average Deal Value: Rose by 26% to $245 million.

2019 Outlook

M&A Drivers

• Continued Growth: Insurance M&A activity is expected to remain consistent with 2018 levels unless significant market disruptions occur.
• Tax Reform Impact: The US Tax Cuts and Jobs Act of 2017 has had varied implications for insurers, particularly in terms of tax rates, reserving methodologies, and cross-border operations.
• Interest Rates: Rising interest rates are making life and health insurance companies more attractive to financial investors.
• InsurTech Interest: Insurance companies are increasingly interested in acquiring InsurTech firms for their disruptive capabilities, and PE and VC investors are likely to liquidate their holdings, increasing the availability of InsurTech targets.

Key Trends

• Cross-border Deals: US insurers may seek to acquire Bermuda-based companies due to the impact of new tax rules. European firms may also expand their US presence, while Japanese firms are expected to dominate due to their long-term return focus.
• Portfolio Optimization: Insurers will continue to look for acquisitions that diversify their product lines and customer bases. Smaller, high-performing specialty businesses are likely to be in demand.
• Shrink-to-Grow Strategy: Some insurers may divest non-core businesses to clean up their balance sheets and use proceeds for strategic acquisitions.
• PE and VC Participation: Private equity firms and venture capital groups are expected to increase their involvement in insurance M&A, particularly in reinsurance due to its favorable yield and interest rate environment.

Conclusion

The insurance M&A landscape in 2019 is poised for continued activity, driven by economic growth, rising interest rates, and the impact of tax reforms. Companies should prepare for the potential of cross-border deals, InsurTech acquisitions, and portfolio optimization strategies. Tax due diligence and strategic planning will be crucial for maximizing value and navigating the new regulatory and tax environment.