Global M&A deals in insurance distribution hits $20 billion

Global mergers and acquisitions involving insurance distribution and services have more than quadrupled between 2014 and 2015, according to a new report.

Market research firm Conning discloses this finding in “Global Insurance Distribution & Services Sector Mergers & Acquisitions: Building for the Future.” The report is the second edition of Conning research separating insurance underwriting M&A from non-risk-bearing insurance distribution and services. A separate Conning study focuses on the insurance underwriting sector.

In 2015, mergers and acquisitions of life insurance distributors and services providers (including brokerage-general agencies) grew by 10 percent, the report shows, topping a high that was reached in 2014. Total M&A transactions (including life and non-life sectors) were valued at $20 billion in 2015, well above the $4 billion recorded in 2014. The rise represents the third consecutive year in which aggregate M&A transaction values increased.

What’s fueling the deal-making? Conning cites several factors, including acquirers’ desire to boost competitiveness, expand and diversify product portfolios and improve customer relations, achieving economies of scale. Distributors and service providers also needed to keep pace with the demands of insurers, which also are consolidating.

“In 2015, a record number of insurers turned to M&A to help achieve growth objectives in a difficult environment,” the report states. “The continued availability of low-cost debt financing and the desire of strategic buyers to gain scale and diversification contributed to strong M&A activity in the insurance distribution/services sector, insurance underwriting arena, and more broadly in other sectors of the economy.”

Also underpinning the wheeling-and-dealing: the pursuit of new technology that can give providers a competitive edge. Particularly coveted by providers, the report notes, are predictive analytics solutions — data mining, statistics, modeling, machine learning, and artificial intelligence tools — that can analyze reams of data to discern buying preferences and yield other market insights.

In addition to insurance technology (IT) providers, companies targeted for acquisitions included claims adjusters, third-party administrators (TPAs) and health services firms.