Conning’s new Strategic Study, Global Insurance Distribution & Services Sector Mergers & Acquisitions: Building for the Future – 2016
Hartford, CT (Mar. 29, 2016) – Conning’s annual insurance M&A study examines insurance distribution and services mergers & acquisitions – both U.S. and non-U.S. – for 2015 and historically. This comprehensive global insurance M&A analysis provides a listing of transactions announced in 2015 and in early 2016. The study also includes in-depth analysis of emerging or expected trends across insurance distribution and insurance services. The study explores the patterns of insurance M&A activity, the motivations behind key individual transactions, and their financial characteristics, yielding valuable insights into the direction of insurance distribution and services for industry participants and investors.
Click here for the table of contents or to order the study.
Introduction
This 2016 study on M&A (mergers and acquisitions) in the insurance distribution and services marketplace constitutes the second edition of Conning’s separation of insurance underwriting M&A from non-risk-bearing insurance distribution and services. A separate Conning study focuses on the insurance underwriting sector.
The distribution sector remains in a state of consolidation, with the number of global M&A transactions increasing for a third consecutive year; 2015 saw growth of 10% above the previous high reached in 2014. The number of U.S. transactions grew by 18%. Additionally, deal volume in the aggregate reached a new high in 2015 at nearly $20 billion, albeit driven by one significant transaction. Beyond the Willis/Towers Watson transaction, M&A activity in 2015 was highlighted by fewer transformational deals and a number of bolt-on transactions that help a buyer build out a broader product offering. Often deals helped a buyer compete better in the market and improve its relationship with customers. Strategic buyers remained the most active acquirers of larger distribution firms, a characteristic consistent with 2014 M&A activity.
Facing a challenging business environment, strategic buyers turned to transactions as an attractive way to grow and build out their platform to serve clients. The decision to acquire a distributor is often being driven by a desire to expand product lines (and expertise), add scale and improve efficiencies, and diversify through broader geographic capabilities. Strategic buyers often make multiple acquisitions. Consolidators were active acquirers in 2015, with the ten most active consolidators accounting for more than 35% of total distribution transactions. Private equity buyers were active distribution acquirers in 2015 through direct investment by existing portfolio companies. Private equity remains attracted to the strong cash flows, revenue growth opportunities resulting from economic growth, and the potential for efficiencies from additional scale.
The increase in M&A activity was not limited to the distribution sector; the insurance services sector saw strong demand by buyers to acquire claims adjusters/TPAs, health services firms, and insurance technology providers. The technological transformation occurring in the insurance industry is creating interest from buyers looking for big data and predictive analytic technologies and greater capabilities to meet the demands associated with a changing health care environment, such as the roll-out of the Affordable Care Act. The number of insurance services transactions and aggregate deal value increased more than 25% in 2015, led by a strong increase in the number of claims adjuster/TPA transactions and several large health services transactions.
Insurance technology providers were the most active acquirers, driven by a push to expand product and service capabilities. Technology providers often are attracted to broadening their product suite and see acquisitions as an effective way to gain scale and new product capabilities fairly quickly. The number of insurers acquiring technology service firms was sparse in 2015, but that does not necessarily mean insurers are not focused on capitalizing on the ongoing technology transformation. Several insurers were active investors in technology startups, including insurance startups. These investments do not appear in our M&A database.
For additional information on any of our products or to order publications, please email Conning at [email protected] or call toll-free at 1-888-707-1177.
About Conning
Conning (www.conning.com) is a leading global investment management firm with a long history of serving the insurance industry. Conning supports institutional investors, including pension plans, with investment solutions and asset management offerings, award-winning risk modeling software, and industry research. Founded in 1912, Conning operates globally through its offices in Hartford, New York, London, Cologne and Hong Kong.
