OLDWICK, N.J.--(BUSINESS WIRE)--Global merger and acquisition (M&A) activity for the life/annuity (L/A) segment for the first six months of 2015 remained elevated but lacked the large mega-deals that made so many headlines for the property/casualty and healthcare segments.
According to a new Best Special Report, titled, “Life/Annuity First Half 2015 Global Merger and Acquisition Trends and Analysis,” total deals for the L/A segment were up 37% in the first half of 2015 compared with the same period a year ago, growing to 37 from 27 deals; however, the total value of those deals declined 47% to USD 6.9 billion during the first half of 2015 from USD 12.6 billion during the first half of 2014. The lack of large deals also dropped the average deal size to USD 538 million from USD 787 million during the same time period. The lack of publicly available deal values makes historical comparisons difficult.
A.M. Best believes the following key trends drove the recent M&A activity for the first half of 2015 in the L/A segment:
- Selling off of non-core segments and run-off businesses to companies specializing in them;
- Regulatory uncertainty regarding Solvency II and SIFI guidelines makes big deals from the largest life insurers unlikely;
- International cross-border activity is up as companies seek growth in new markets;
- Lack of large deals as companies appear to be more capital cautious and seek to consolidate and specialize in a low interest rate environment rather than vertically and horizontally integrate as A.M. Best sees in the property/casualty and health segments; and
- Private equity/investment firms’ activity picks up.
There have been several deals involving a movement to a more core business model with the disposal of non-core businesses. North America was the most popular region for deals by target investments as it represented 35% of the market, followed by Asia, which made up 26% of deals. Europe made up 24% of deals, down from about a third of the deals in earlier periods. A.M. Best believes the smaller than average deal count in Europe is partially due to uncertainty regarding Solvency II. Latin America and the Caribbean made up 11% of deals, while Middle East/Africa made up only 3% of total deals.
Over 40% of all deals were cross-border M&As, as companies move to an international focus to find growth. A.M. Best believes private capital, whether buying or selling, will continue to play an active role in the L/A segment. A.M. Best expects private capital to be more active in blocks of business as opposed to full-on acquisitions.
A.M. Best remains somewhat concerned about the lack of experience of foreign insurers operating in some of the product lines and markets of their newly acquired U.S. insurance carriers; however, this concern is partially mitigated by the fact that the U.S. executive management teams in most cases have been incentivized to remain with their companies. Additionally, A.M. Best believes that this acquisition activity is likely to continue as foreign insurers continue to seek opportunities to expand and diversify their global presence and mitigate the challenging economic environments in their countries of domicile.
To access a copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=241496.
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