In 2013, insurance experts predicted a rise in M&A activity throughout the industry. So far, their predictions have proven accurate, with a consistent flow of activity throughout this year.
Five of these transactions have crossed the billion-dollar mark, making 2014 a hectic year for the industry. The sixth-largest deal amounts to about $600 million or $700 million, a "noteworthy falloff," says Boris Lukan, a Deloitte partner and head of insurance practice M&A for the US.
"We haven't seen many billion-dollar deals over the course of the last few years," he says. "Now, we've seen the return of the large transaction." Having five in the first half of the year is significant.
Most of the transactions to occur thus far have reflected a growing interest in consolidation and have primarily affected the brokerage sector. Acquisition is the classic strategy for insurance brokerage growth, Lukan says, and most players engage in multiple transactions.
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Tom Mason, senior industry analyst at SNL Financial, says M&A activity in other areas of insurance has been varied. "I think buyers might be a bit more hesitant on the P&C side," due to smaller rate increases among insurers. The life insurance space has seen one major transaction -- Dai-ichi Life's purchase of Protective Life -- but no other large deals.
Lukan says insurers are also experiencing a shift in the geographical focus of M&A deals. "The degree of foreign investment interest that we're seeing into the United States has grown."
Over the past few years, many transactions have involved US companies targeting acquisitions in foreign countries and receiving little inbound activity. Now this is changing. Japan, Korea, China, and various European nations are seeking ways to gain entry into the US market, which remains the world's largest insurance market despite its slow growth, he says.
In the second half of 2014, he predicts continued acceleration in deal flow in all sectors of the industry. Interest in the US marketplace is likely to drive activity as foreign players seek ways to leverage investment management skills. At the same time, large US insurers will continue to pursue a handful of high-growth foreign markets in both Latin America and Asia.
Read on to learn more details behind the largest M&A transactions of 2014.
Kelly Sheridan is Associate Editor at Dark Reading. She started her career in business tech journalism at Insurance & Technology and most recently reported for InformationWeek, where she covered Microsoft and business IT. Sheridan earned her BA at Villanova University. View Full Bio