To go or grow?
That is the question insurance companies are asking themselves in 2017.
The volatility caused by Brexit and the U.S. presidential election forced most companies to the sidelines in 2016. But after a year to catch their breath, mergers and acquisitions are the buzz of 2017.
“Insurers took 2016 to understand how major events will influence the business and investment climate around the world,” says Ram Menon, Global Lead Partner, Insurance Deal Advisory with KPMG in the U.S.
“And while there are still many unknowns, we expect insurers to return to the market and start to take advantage of the new realities that have been created as we move into the second half of 2017.”
According to a new study by KPMG International, 84 percent of insurance companies plan to make between one and three acquisitions in 2017, while 94 percent plan at least one divestiture.
KPMG’s study, The new deal: Driving insurance transformation with strategy-aligned M&A, delivered its findings based on a survey of 200 global insurance decision-makers. The U.S. remains the top national market where insurers expect the most deal activity. Almost a quarter ranked the U.S. as their top national destination, versus 12 percent who said they were focused on Greater China, the second top national target market.
“Insurers are clearly hungry for good M&A opportunities,” says Menon. “They are focused on transforming their business and operating models, and even with geopolitical uncertainties, they are aggressively looking at deals that can help meet their objectives.”
Already this year, the industry witnessed insurance carrier Nationwide expanding its reach with the acquisition of Jefferson National, a distributor of investment products that counts some 4,000 advisors and $4.7 billion in client assets.
As Kirt Walker, Nationwide Financial president and chief operating officer, said at the time of the deal, “This partnership allows for growth in ways that our companies couldn’t have achieved individually and complements our strong brokerage distribution channel.”
Go or grow
The KPMG study revealed an appetite for big deals is potentially speeding up consolidation within the industry. “Sixty-six percent of sellers are hoping to divest businesses valued at between $250 million and $1 billion while 70 percent of potential buyers are hoping to buy businesses of that size.”
Big deals are on the rise in 2017 for insurance sector mergers & acquisitions. (Thinkstock)