M&A in the insurance business

Encouraged by optimistic forecasts, insurance companies are readjusting their external growth strategy to take advantage of the opportunities yielded by the market.

Many insurers are also making recourse to mergers and acquisitions tool in order to streamline their operations. These operations allow them to:

• reorganize their distribution network,
• strengthen their core business,
• achieve economies of scale that will help them adapt to rapid changes in the industry.

In 2021, a shift in the M&A strategy of insurance companies was noted. The latter have been engaging in transactions not only to expand their geographic reach but also to increase their capabilities, taking advantage of new business opportunities. This trend has materialized in the form of large-scale deals.

M&A insurance: mega deals relinquished

Despite the strong performance of the M&A market, 2021 had witnessed the cancellation of a number of mega-deals which unfortunately ran into obstacles, mainly of a regulatory nature.

Some of these transactions include:

• In May 2021: Chubb's offer to take over Hartford Financial Services Group for 23 billion USD, revised upwards to 25 billion USD, failed to obtain Hartford's board approval.
• In July 2021: the attempted merger between Aon and Willis Towers for 30 billion USD has been abandoned following the veto of the American authorities.

In addition to purely economic and financial reasons, the cancellation of such mega merger projects sometimes involves strategic and political considerations such as:

• the loss of sovereignty of the States involved,
• the adverse impact on prices and the market,
• the limitation of competition in the market,
• the data security requirements of target companies,
• repressive measures and harsh conditions imposed by governments,
• antitrust enforcement primarily in the United States, Europe, and China.

M&A insurance deals in 2021

The total number of transactions carried out by the insurance market have amounted to 418 deals in 2021 compared to 407 in 2020, an increase of 2.7%. According to Clyde & Co, activity was driven by the second half of the year, which was particularly prosperous with 221 transactions.

M&A insurance evolution in America

The Americas (United States, Canada and Bermuda) remain the most active region in terms of mergers and acquisitions, accounting for more than 50% of deals, that is, 224 transactions.

The United States alone completed 180 deals in 2021.

M&A insurance evolution in Europe

In Europe, the M&A market is supported by the post-covid economic recovery in the second half of 2021. The number of transactions is up 21%, from 103 deals in 2020 to 125 in 2021.

M&A insurance evolution in Asia

After two relatively dynamic years, Asia-Pacific has seen a 44% drop in the number of deals. The number of transactions declined from 75 in 2020 to 42 in 2021.

M&A insurance evolution in the Middle East and Africa

The Middle East and Africa are also experiencing a trend similar to that of the Asia-Pacific region. From 32 deals in 2020, this number dwindled down to 17 in 2021, a 47% decline in one year.

Assurance : répartition des opérations de F&A par région

M&A insurance: Sizable deals

A rebound in the number of large transactions has been noted in 2021: more than 25 mega-deals worth more than 1 billion USD against 20 in 2020.

The most important takeover pertains to the acquisition of the British RSA Insurance Group by Regent Bidco, a subsidiary of the Canadian insurer Intact Financial Corporation, for 9.2 billion USD.

The French mutual Covéa has also signed a substantial purchase agreement by accepting the terms of the acquisition of the 12th global reinsurer PartnerRe for 9 billion USD, that is, 1.28 times the book value of the Bermudan company.