This annual Conning study analyzes transactions by sector and provides comparisons with prior years, across sectors and among geographic regions. The report identifies and explores trends that have occurred, are emerging, or are expected to emerge both within and across five sectors—property-casualty, life-annuity, health/managed care, distribution and insurance services. In addition, we analyze the drivers of M&A whose influence was more pervasive, and was present in multiple sectors.
2. Executive Summary and Outlook
3. Macro Drivers of U.S. and Global Insurance M&A
- Economic and Financial Conditions
- Regulatory Initiatives
- Selective Growth Rather Than Consolidation
4. U.S. Property-Casualty Insurance Sector Analysis
- Largest U.S. Property-Casualty M&A Transactions
- Property-Casualty M&A Drivers
- Property-Casualty M&A Themes
- Midsized Insurer Property-Casualty Acquisitions
- Specialty Property-Casualty Acquisitions
- Reinsurance M&A
- M&A Among Mutuals
5. U.S. Life-Annuity Insurance Sector Analysis
- Largest U.S. Life-Annuity M&A Transactions
- Life-Annuity Industry M&A Drivers
- Life-Annuity Industry M&A Themes
6. U.S. Health/Managed Care Insurance Sector Analysis
- Health Insurance/Managed Care Industry M&A Drivers
- Health Insurance/Managed Care Industry M&A Themes
- Health Insurance/Managed Care Industry Valuations
7. U.S. Insurance Distribution Sector Analysis
- The Players
- M&A Pricing Remains Above Historical Norms
- Insurance Distribution Industry M&A Drivers
- Insurance Distribution Industry M&A Themes
- Wholesale Brokers Consolidate as Market Hardens
- Commercial Banks Change Direction
- International Consolidation Mirrors U.S.
8. U.S. Insurance Services Sector Analysis
- Largest U.S. Insurance Services M&A Transactions
- Insurance Services Industry M&A Drivers
- Insurance Services Industry M&A Themes
- Insurance Services Industry Valuations
9. Non-U.S. Insurance Mergers & Acquisitions in 2013
- Latin America
- Middle East
A. Methodology and Criteria for Inclusion in M&A Database
B. Series of Recurring M&A Studies
C. Historical Summary Data
D. 2013 M&A by Sector
E. 2013 U.S. Insurance Distribution M&A: Employee Benefits, MGA, and Cross-Border Transactions
F. The Development of Insurance M&A
Many of the ingredients for a robust U.S. insurance M&A market were present in 2013. The U.S. economy was showing signs of life as new job growth, especially in the private sector, began to improve after a prolonged jobless recovery. Consumer confidence was on the mend. Publicly traded insurers watched their stock prices rise above book value for the first time in several years, providing higher-valued non-cash currency for acquisitions. Banks were offering attractive lending conditions, in terms of interest rate charges and covenant “light” restrictions. Financial buyers, in particular sophisticated private equity investors, were active purchasers, usually an indication of an active M&A market. A firming property-casualty market was creating built-in premium growth for property-casualty insurers.
So why were 70% of the top 20 global transactions completed outside the U.S.? Why was U.S. insurance M&A off in 2013 in all sectors except insurance distribution? Were strategic purchasers too preoccupied with global expansion? Was regulatory scrutiny impeding would-be buyers? Were prior acquisitions not performing as planned? Was margin compression from existing operations influencing executives’ confidence? Did the pending implementation of the Affordable Care Act force buyers into a wait-and-see mode?
Answers to these questions begin to address, although not entirely, the tepid nature of insurance M&A in 2013.
Overall, the 2013 U.S. insurance M&A market declined as uncertainty and risk aversion overcame attractive economic conditions and favorable supporting fundamentals. Attractive international acquisition opportunities, reserving issues at home, changing U.S. and European statutory capital requirements, and rating downgrades all had some influence on the tone of the market. Thus, without a reasonable degree of certainty surrounding future growth prospects, inactivity in insurance M&A prevailed.
The drivers and dynamics shaping M&A activity vary according to insurance sector. As such, we analyze themes, patterns, and significant insurance M&A activity separately for each of five sectors—property-casualty, life-annuity, health/managed care, insurance distribution, and insurance services. In addition, we analyze the drivers of M&A whose influence was more pervasive, and was present in multiple sectors.
Conning has been producing annual and occasional semi-annual Strategic Studies listing and analyzing insurance M&A since 1989. Until 2007, the coverage focused on U.S. and Bermuda insurance markets. Beginning in 2008, Conning expanded its coverage and analysis to encompass transactions globally.