The Beat Goes On
|Van Ostrand, Leigh A|
Global M&A trends will continue this year as regulatory and economic conditions drive insurance deals.
Corporate mergers and acquisitions had an important impact on the global insurance market in 2012.
These transactions took place against a backdrop of regulatory changes, continuing low interest rates, distress in
This M&A activity was coupled with other transactions across the capital spectrum, including reinsurance and capital markets transactions, as insurance companies sought to manage their own capital needs in the most efficient and effective manner possible.
Financial institutions that received government assistance during the crisis divested assets in an effort to repay government loans. Examples abound. In
AIG also spun off its Asian life insurance business, AIA, in
AIG said in
The U.S. government has recouped its entire investment in AIG at a profit. In
In addition to AIG,
Since this announcement,
Repayment of government aid has also driven recent M&A activity in
Diversification: Evolving Views
Insurance companies are re-evaluating their presence overseas as views of global diversification change.
In contrast with
The agreements provide that Axa will be the exclusive provider of property/casualty products to
In another change to the global landscape, Japanese insurance companies looked beyond
Bermuda Market Also Active
Although traditional strategic deals, where an insurance company acquires another insurance company, are still getting done, in recent years alternative asset managers have also become active in the market, both through acquisitions and by starting their own reinsurance companies.
Examples of traditional deals include the acquisition by U.S.-based
The third trend in
Looking ahead, the current regulatory and economic climate will have an impact on M&A activity and the landscape of the global insurance industry. In particular, Solvency II may be a large driver of future M&A activity for European insurers, as new capital and risk management requirements lead companies to exit certain lines of business.
However, there is uncertainty about the timing of the new rules and if the Solvency II start date is postponed, it may well forestall some M&A activity, causing companies to hold off from entering into transactions as they wait for the final legislation. And, as always in the insurance industry, M&A activity could be spurred by catastrophes, whether they are man-made- as in the European debt crisis- or not.
The emergence of asset managers as a source of buy-side M&A activity, the need to address changing capital requirements, the desire to deploy capital in high-growth markets, and the steady increase in bancassurance activity all gave rise to a busy 2012 in the insurance M&A market. Expect this activity to extend into 2013.
* The Issue: Insurance merger and acquisition activity continued at a brisk pace in 2012.
* The Reasons: Changing capital requirements, the need to enter high-growth markets and increased bancassu ranee activity fueled a busy year.
* Watch For: Regulatory and economic conditions, and the approach of Solvency II in
As always in the insurance industry, M&A activity could be spurred by catastrophes, whether they are manmade - as in the European debt crisis - or not.
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