Global - What we do - Industries - Financial Services - Insurance - Global insurance industry set for resurgence in M&A

Global insurance industry set for resurgence in M&A 

The past decade has seen a strong trend towards consolidation in the insurance industry. Merger and acquisition activity boomed in the late 1990s due to rising stock markets, declining interest rates, industry deregulation and increased globalization.
With the equity market decline of 2001-2002, global Merger and acquisition (M&A) activity fell away, but there are now signs of a resurgence. Business is improving for the top global insurance companies.

Consolidation is on the agenda. Insurers want to increase their capital base, achieve economies of scale, secure distribution channels, deal with product complexity, spread their geographical reach and, especially with smaller companies, deal with newly imposed regulations.

What is the current state of the global insurance industry and what M&A activity is anticipated?
The following provides some opinions of KPMG member firms around the world:
  • Central and Eastern Europe — there are only two insurers of any size, the former national insurers of Poland and Czechoslovakia, both of which may try to expand and move out of their home countries. The rest of the market consists of subsidiaries of global insurers with a few late entrants. It is thought the top 10 might consolidate into 5 major players.
  • Germany — global players are most active in M&A, but some local large to medium-sized companies are beginning to act, hoping to gain opportunities from the consolidation of industry and to expand outside of Germany — especially to Eastern Europe.
  • France — French insurers tend to expand by entering several countries at once, trying to reach the top five through additional acquisitions of smaller local entities. Two thousand and six was profitable for insurers in France. This is encouraging some into M&A, but there are few suitable targets.
  • Netherlands — this market is already consolidated so M&A activity is limited. There is some activity in some sub-sectors. Property and casualty insurance faces price competition at present and is open to consolidation, as is the life and pensions sector, due to the government outsourcing trend.
  • Mexico — while still fragmented, with many small players, there has been some consolidation and more is expected over the next five years. It is expected more that global players will enter Mexico, possibly through M&A, as Mexican insurance legislation comes in line with international standards.
  • Spain — the 5 main companies have a 50 percent market share, mostly in the health insurance sector. The other sectors are fragmented and M&A opportunities exist. Latin America is seen as the natural target for companies wanting to expand outside Spain through M&A, though opportunities are limited.
  • UK — after record profits in the UK, insurers are looking to explore acquisitions, particularly in high growth, emerging Asian and European markets. Cost reduction through local market consolidation also seems likely. Consolidation is expected in the unproven sector of bulk annuity, and also in the property and casualty, and life sectors.
  • U.S. — the last two years have been relatively quiet for M&A in the U.S. insurance market, especially among the larger players. The expectation is that the life area is ready for activity. There has been some increased M&A activity in certain segments such as warranty and non standard automobile, driven by strong retail markets.
  • South Africa — some large insurers have acquired medium-sized companies recently to gain a place in the emerging low-income segment of the market. Generally though, there has been little activity, due in part to competition regulation in South Africa. New regulations regarding solvency, however, may make some of the smaller insurers targets for acquisition.
  • Japan — consolidation is more or less complete in the mature insurance market of Japan. For example there are fewer than 10 significant property and casualty players. As many companies are dealing with issues arising from regulation and the 'non-payment' problems of recent times there is little interest in M&A.
  • Australia — also a mature market, M&A activity within the Australian insurance industry is limited at present. The exception was 1 transaction early in 2007 forming the second largest insurer in Australia. Some M&A activity centers around the privatization of government health funds. Insurers are acquiring entities in other markets including the U.S. and Europe, but primarily in Asia, due to its proximity, high economic growth and relative low insurance levels.
  • China/Asia-Pacific — in China, global players have entered the market and formed joint ventures with local partners. M&A is expected to expand as caps imposed on foreign ownership of Chinese insurers are relaxed. China out-bound investment is expected at some point. In the wider Asia-Pacific region, global players continue to expand, with recent activity in Hong Kong, Korea, Malaysia, Thailand and Indonesia among others.


Contact

Frank Ellenbürger

Frank Ellenbürger

Global Head of Insurance

+49 89 9282 1848

gofmdotcomfs@kpmg.com
  • Sign up now

Subscribe to selected content and receive email alerts when new content is available for viewing on this site.

Already a member? Login

Not a member? Register

Or find a contact in your location

Go