Asian insurers expected to get in on M&A act
The next big wave of mergers in the insurance industry could involve companies from the Asia Pacific region, according to experts.
The news came as financial services firm Deloitte released its 2015 outlook for the insurance and reinsurance market — which predicts mergers and acquisitions (M&A) will increase as insurance and reinsurance firms come to terms with a tough market and more competition from areas like insurance-linked securities (ILS).
Deloitte partner Liz Cunningham said: “The entrance of new players in the mergers and acquisitions market — including reinsurers and investors from Asia Pacific — adds a new dimension to the evolving insurance M&A landscape.”
But she said: “The successful integration of an acquired company is one of the most challenging parts of this M&A process and in order to successfully capture synergies, companies must build their integration capabilities, including effective due diligence both before and after the close of a transaction.”
The Deloitte report said that several said that several Asian firms bought into US companies in 2014, including the $5.8 billion purchase by Japanese firm Dai-ichi Life Insurance of Protective Life Corporation.
The report added: “Large Chinese and Korean organisations are also looking to acquire both life and property and casualty insurance companies in the US and elsewhere.”
The report said that an increased number of large mergers and acquisitions had driven up the aggregate deal value last year.
The latest deal was announced last week, when Bermuda-based Endurance agreed to buy Montpelier Re, also Island-domiciled, in a deal worth more than $1.8 billion.
RenaissanceRe acquired Platinum Underwriters, both Bermuda-based, in a $1.9 billion deal announced last November,
A few weeks later, XL Group said it would merge with Catlin Group in a deal worth around $4.1 billion, while Axis Capital is to carry out an $11 billion “merger of equals” with PartnerRe.
Deloitte Caribbean and Bermuda CEO John Johnston said: “It appears that the M&A activity that’s been the subject of so much speculation in the Bermuda market over the last few years is now coming to fruition, with significant and transformative deals in progress or already consummated among a number of major firms.”
The Deloitte report said that overall cross-border mergers and acquisitions were up 45 per cent at the start of December 2014, compared to the previous year — its highest year-to-date level since 2008, the year the global financial crisis hit.
The report added: “Inbound mergers and acquisitions — especially by Asian insurers — is expected to continue in 2015 as an improving US economy leads to more growth opportunities on both a relative and absolute basis compared to emerging economies and foreign buyers seek to make a play before US interest rates rise.”
And the report said: “Some European insurance companies are also evaluating potential acquisitions, although not at the same level as their Asian counterparts.”
Mr Johnston predicted: “We expect to see further M&A activity, conceivably resulting in a fundamentally different landscape for the Bermuda market, dominated by fewer, larger property and casualty players.
“Greater scale many produce cost synergies in the short term and a heightened ability to invest, innovate, attract top talent and compete better in the longer term.”
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