Global M&A Insurance News

August 2014 

In this issue of KPMG’s Global M&A Insurance News, we explore the key themes and trends impacting the insurance markets worldwide, and the implications for deal activity.


M&A Insurance Newsletter

Through the first two quarters of 2014 M&A activity continued to be relatively buoyant and discussions at the recent International Insurance Society conference in London suggest that the industry can expect further consolidation.


Regional updates 

  • Europe, Middle East and Africa Regulation continues to act as a driver of consolidation across the sector. We are also seeing a number of transactions in the broking sector across the region, primarily driven by a motivation to enhance advisory capability and diversify across the value chain. Private equity interest in the sector also remains strong. Close Open
    • UK budget reform cancelling an effective requirement for pensioners to buy annuities, resulted in:
      • a 40-50 percent decline in annuity sales in the first quarter of 2014, creating pressure on share prices of non-diversified providers
      • increase in demand for large bulk annuity transactions to counter the collapse in individual annuity sales. Pension Insurance Corporation agreed to insure three-fifths of Total's £2.6 billion UK pension liabilities - the second largest transaction of its kind in the UK.
    • Admin Re acquired more than 400,000 individual and group pension and related annuity policies, plus £4.2 billion in unit-linked assets from HSBC in the UK.
    • Increase in HNW offshore life transactions across Europe. Activity driven in part by the volatile environment, following greater regulatory scrutiny and European and global tax transparency initiatives. Wealth Assurance acquired Valorlife in Lichtenstein and Blackstone acquired Lombard from Friends Provident for US$532 million.
    • RSA, the UK-based general insurer group issued £750 million in new shares and announced the future sales of businesses in Canada, Eastern Europe and Asia to improve capital. The Eastern European operations were sold to Poland's PZU for €360 million.
    • Fosun International, China's largest private conglomerate continued its overseas insurance expansion and acquired 80 percent of Portugal's largest insurance group, Caixa Seguros, for €1 billion.
    • There were a number of transactions in the broking sector driven by a motivation to enhance advisory capability and diversify across the value chain. Willis acquired a Swedish employee benefits adviser and JLT acquired Towers Watson's reinsurance brokerage and an employee benefits business in the UK.
    • Helvetia is merging with Nationale Suisse to become the clear number three insurer in Switzerland.
    • In Italy, Carige is in exclusive talks to sell its insurance assets to Apollo (further evidence of the focus from private equity on the sector).
    • Ageas acquired a 49 percent stake in Ocidental Companhia Portuguesa De Seguros, S.A. and Medis Companhia Portuguesa de Seguros de Saude, SA for US£167 million in a move to expand its non-life business.
    • There were initial reports of possible expansion of Takaful providers into European markets via M&A, although we are yet to see this develop.
    • In Russia, Zurich sold its retail business to OLMA Group.
    • In the UK we expect to see continued consolidation of mutuals due to expected increased solvency strain under Solvency II.
    • There is significant regulatory change impacting the German life market, which may result in reduced capacity to pay dividends and lower underwriting profit. An efficient cost structure will be critical to future success and a potential catalyst for consolidation and back book rationalisation.

    Feature on Africa

    In July we held a set of workshops for insurers focused specifically on high growth markets. The series started with a three day session on Africa with several global insurers in attendance. To learn more about the African market see our latest market overview.

    • Key themes included:
      • the underlying investment thesis is compelling supported by economic development, demographics and a reforming sector
      • there is a window of opportunity over the next 12-18 months in markets like Nigeria and Ghana as the regulator allows the industry some breathing space to recapitalise and/or bring in external capital/partners
      • the region cannot be treated as one market and there are significant differences between countries
      • valuations remain attractive versus other high growth markets, reflecting the relative maturity of the markets
      • in a number of countries the regulator is driving significant reform and we are seeing greater cooperation and consistency arising from initiatives like the East African Community framework. These are expected to have a positive long term impact on the sector
      • innovation, including both product and technology is forcing change, we may see these high growth markets unencumbered by legacy issues leapfrog mature markets.

    Challenges are not to be underestimated and an awareness of the relative maturity of many markets is important. Conversely the opportunity to provide support and enhance capabilities through a close partnership presents huge upside.

  • Asia Pacific While opportunities remain we expect the pace of M&A in the region to slow. There are relatively few large deals remaining, although we may see banks exiting their insurance business in favor of a long term distribution agreement. Future activity is therefore likely to be driven by market consolidation and new entrants looking to establish niche positions. Close Open
    • In India it now looks likely that the FDI cap will be increased to 49 percent and concerns about various riders being attached to the increase have dissipated following comments made by the Finance Secretary. The government has made clear that management control must remain with the local partner.
    • Philippines has committed to full ASEAN economic integration by 2015. The economic integration will give ASEAN insurers easier access to the market, which is likely to facilitate cross-border acquisitions.
    • Continued development and interest in ‘second horizon’ countries in the Asia region, evidenced by the return of Manulife and Prudential to Myanmar. Citizens Bank is also interested in setting up a life insurance joint venture in Myanmar.
    • RSA is selling its businesses in Hong Kong and Singapore for approximately US$150-300 million. Sompo Japan Insurance Inc., AXA Group, QBE Insurance Group Ltd. and Allianz S.E are all rumoured to be considering bids.
    • RSA has sold its China business to Swiss Re Corporate Solutions for £71 million.
    • KB Financial acquired an additional 19.47 percent stake in LIG, South Korea's fourth-largest property and casualty insurer.
    • In South Korea, The Korean Development Bank’s life insurance business is rumoured to be available for sale with DGB Financial Group and a private equity fund reported to be possible bidders.
    • German based ERGO Insurance Group, announced the acquisition of Singapore’s SHC Insurance for €66 million, a property-casualty insurance company.
    • China relaxed M&A rules for the insurance industry allowing insurers in China, including Chinese-based foreign insurers, to buy stakes in more than one peer that competes in the same product lines. This new regulation combined with proposed changes in group supervision is expected to create opportunities.
    • Increasing capital and regulatory requirements in Malaysia are expected to drive further consolidation.
  • Americas In Latin America we anticipate increasing transaction activity as insurers look to secure position in these rapidly growing areas. In North America, including Bermuda, further activity is expected to be driven by the low interest rate environment, increasingly active alternative capital providers and desire to build market share, access underwriting capability and drive scale efficiencies. Close Open
    • M&A on the rise throughout the US. In our recent Insurance Outlook Survey, 54 percent of senior insurance executives across the United States indicated that they expect to be involved in an M&A deal as a buyer over the next year, up from 34 percent in our 2013 survey.
    • We continue to see M&A in Bermuda with activity being driven by a number of factors, including over capacity in the reinsurance market (linked in part to the continued involvement of alternative capital), securing growth and diversification in mature markets, accessing underwriting capability and a focus on improving efficiency and driving scale. Recent examples include:
      • Endurance ultimately unsuccessful with its pursuit of Aspen
      • Validus acquired Western World Insurance Group for US$690 million to gain greater market share of the US commercial sector.
    • Japanese insurers continued to expand overseas. Dai-ichi Life, Japan’s second-largest life insurer, agreed to acquire Protective Life Corp for US$5.7 billion (a 35 percent premium to the share price). The deal requires shareholder and regulatory approval and is expected to conclude at the end of 2014.
    • RSA agreed to sell Noraxis, its majority-owned Canadian brokerage business to the US broker Arthur J. Gallagher & Co for C$500 million.
    • Marsh is buying a majority stake in Semusa, a Panama-based insurance broker and adviser to strengthen its position in Central America and the Carribbean. Marsh has recently acquired companies in the Dominican Republic and Peru.
    • Brazil’s PTG Pactual has agreed to acquire Ariel Re, with the investment bank keen to expand its footprint in the property and casual reinsurance sector. Another example of alternative sources of capital directly entering the market.
    • ACE acquired Itau Seguros for US$687 million in a move to strengthen its current market position in Brazil.

Articles & publications – Leading the field with industry insight

Ongoing regulatory requirements such as the implementation of risk-based capital and the consumer protection agenda; new tax developments addressing tax base erosion and profit shifting (BEPS); and the fast-pace, disruptive forces of technology are all having a profound impact on global insurance markets and the potential for M&A. We have included our recent insurance publications below, discussing these topics in greater detail.

Evolving Insurance Regulation
Regulation is a key driver of M&A activity in many markets. In this report we analyse the key regulatory developments and implications for the sector, including the adoption of risk based capital and the IAIS ICP’s which are an important driver in many markets.
An industry transforming: Insurers in a fast changing, digital world
We have been exploring what the future might look like as the industry embraces digital technologies and starts to harness the full value of the vast amounts of data now available to it. In the attached publication we share our preliminary findings.
Taxation of Cross-Border Mergers and Acquisitions
Taxation of Cross-Border Mergers and Acquisitions features information from 60 countries on their current laws and regulations and the possible implications for tax-efficient structuring and financing of a merger or acquisition. A valuable tool to understand the tax impacts of transactions worldwide.
2014 Insurance Industry Outlook Survey: Revolution not evolution
The insurance industry faces a potential upheaval that could challenge incumbents and remake the industry in a new form. Our recent survey found that in order to win in the marketplace, companies need to think in terms of revolution, not evolution and M&A is playing a significant role.

Supporting publications for our feature on Africa

Continued evolution in the insurance markets in Africa
KPMG International has developed detailed analysis of all the key insurance markets in Africa, including market trends, regulatory developments and the implications for M&A.
Insurance in Africa: Sector report
Within the African market there still remains a large divide between access to life and non-life insurance. With most Africans still struggling to meet their basic day-to-day, insurance is still a way off for many Africans, especially beyond South Africa.

Note: Content for this newsletter has been compiled from a variety of publicly available sources.


For more information on how KPMG’s global network of member firms can help you with your M&A activities, please contact:

Sam Evans

Global Insurance Transactions & Restructuring Lead

Partner, KPMG in Zurich

+41 58 249 55 63

About the author

Sam has significant insurance transaction experience, having worked on deals in many of the major global insurance markets. Sam has worked with KPMG in the UK, KPMG in Australia, and most recently, KPMG in Hong Kong where he was Head of Insurance for Transaction Services for the KPMG’s Asia region. He is now with KPMG in Switzerland based in Zurich and leads KPMG International’s Global Insurance Transactions & Restructuring team.

Throughout his career, Sam has specialized in the insurance sector. Sam led a large number of cross border transactions, supporting clients through acquisitions, joint ventures and strategic investments. Sam has led due diligence teams in the UK, China, Russia, Switzerland, Luxembourg, Belgium, India, Indonesia, Malaysia, Thailand, Hong Kong, Australia, Vietnam, Sri Lanka, Singapore and Kenya. Sam has significant experience in both mature and high growth markets.

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