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Towers Watson: M&A Activity Ready to Pick Up

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Even with the economic crisis lingering, life insurance companies can be expected to pull themselves away from introspection and look towards increased merger and acquisition activity in the next few years.

This is the chief takeaway from the Towers Watson’s 29th North American Life Insurance CFO Survey, released today. The survey, conducted by global professional services company, Towers Watson (NYSE:TW) and conducted from September to October 2011 queried CFOs from large to midsize North American life insurance companies on what they thought the appetite for M&A activity would be in the coming years.

With private equity and other financial entities poised to get back to work respondents to the survey envisioned many fewer obstacles than they did during the same survey in 2009. Only 29% of those surveyed feel that capital issues are confining M&A activity, compared to 77% in 2009. The overall condition of the global economy and the uncertainty of the near future is not as constricting as it was in 2009 with only 38% of respondents saying it was an obstruction compared with 50% in 2009.

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Instead of doubts about the whether M&A activity was prudent in this economy, CFOs expressed doubts that there are enough blocks of business of the right size up for sale. They also did not feel like capital surplus was keeping M&A activity dormant as they did in 2009; over half of those surveyed have familiarized themselves with some form of third party capital raising with reinsurance and direct debt issue as the top two forms.

“According to our CFO survey, extensive preplanning and comprehensive communication are as important as the price paid and other financial factors. This survey result underscores the importance of early focus on these people-related issues coincident with, if not prior to, the time when the financial terms of the deal are being negotiated,” said Jack Gibson, Towers Watson’s managing director of global mergers and acquisitions.