Insurance M&A transactions: decline in mergers and acquisitions in 2023

In a difficult geo-political and socio-economic context, insurers are striving to capitalize on the limited opportunities presented by the market. To generate adequate returns, they are adapting their operating strategies to an increasingly complex environment.

M&A transactions stand as one way of strengthening the position of industry players.

According to Clyde & Co, the number of transactions, which peaked at 449 in 2022, was down by 23% in 2023, a decline that underscores the growing caution of market players in the face of economic and geopolitical uncertainties.

Inflation, political instability in many areas, rising interest rates and, consequently, higher transaction costs have all contributed to a frail and volatile economic climate. Implementing an international or regional expansion strategy in such an environment has become a high-risk venture.

Merger and acquisition trends: 2014-2023

With 346 mergers & acquisitions, 2023 saw the lowest number of transactions in the last decade.

The second half of 2023 was more dynamic, with 175 transactions recorded compared with 171 in the first half of the year. This half-yearly growth, albeit moderate, points to a possible upturn in activity in 2024.

M&A transactions in the Americas

With 162 agreements, the Americas (North and South combined) accounted for almost half (47%) of all global M&A transactions in 2023. The region also accounted for 8 of the year's top 20 deals. The United States is the region's most active country, with 122 mergers.

However, the region as a whole saw a 31% drop in the number of deals compared to 2022. North America continues to attract the largest flow of foreign capital. Consequently, 73% of mergers in this region stem from cross-border deals. 33% of transactions come from Asia, 26% from Europe and 14% from the MEA (Middle East and Africa) region. American investors, on their part, accounted for 11% of transactions in Asia and 25% in Europe.

M&A transactions in Europe

Ranking second in terms of M&A, Europe accounted for 31% of global transactions in 2023. However, this region has seen a 16% drop in transactions, from 127 in 2022 down to 107 one year later. UK is the most dynamic country, with 28 transactions, followed by France (16) and Italy (15).

The Middle East and Africa accounted for 28% of European deals in 2023, with America (25%) and Asia (20%) trailing behind in descending order.

Conversely, European investors' interest in Asia has dropped considerably, from 24% in 2022 to 3% in 2023. The same trend applies to the Middle East and Africa region, which now attracts just 3% of European insurance investments. The latter are increasingly turning towards North America, where their volume rose from 12% in 2022 to 26% in 2023.

M&A transactions in Asia-Pacific

The Asia-Pacific region accounted for 52 M&A transactions in the insurance sector in 2023, or 15% of the global total, down by 13.4% in comparison with 2022.

Japan is the most dynamic country in the region, with 23 transactions in 2023, followed by Australia and China, with 9 and 6 deals respectively.

Asia-Pacific mergers are mainly driven by regional players. The Middle East/Africa zone only accounts for 14% of transactions, America for 11% and Europe for 3%.

M&A transactions in the Middle East and Africa

The Middle East and Africa (MEA) region saw a 37.5% drop in the number of M&A transactions in 2023, with only 15 mergers. A ten-year analysis of the region shows a peak of 32 transactions in 2020. Over the past year, South Africa, Bahrain and the United Arab Emirates have been the most active countries in terms of M&A activity.

Globally, the Middle East and Africa region attracts few large-scale investors. Investments from this zone account for just 4.33% of insurance M&A transactions in 2023.

On the other hand, players in this region are massively investing abroad. Acquisitions made in Europe by insurers from Africa and the Middle East had more than doubled between 2022 and 2023, rising from 13% to 28%. At the same time, Asia and America each account for 14% of mergers and acquisitions by players in the MEA region.