Insurance M&A tally in 2017 rises to $57bn: WTW
Global insurance M&A rose 16 percent last year to $57bn, according to Willis Towers Watson (WTW) Securities.
WTW Securities' tally compared with $49bn in 2016.
Brian Shea, head of WTW Securities Europe, attributed the year-on-year increase to a "flurry of December deals, such as Tryg's purchase of Alka and The Hartford's sale of its run-off life and annuity business".
The assessment defies some expectations of a modest M&A slowdown in 2017 after second-half worries ranging from cat losses to the nature of US president Donald Trump's tax reforms.
However, in sister company Willis Re's 1st View report, WTW Securities had earlier noted that life insurance deals outpaced non-life transactions by a wide margin.
In 2017 North America accounted for about $23bn of deal volume, with Asia, at $17bn, coming ahead of Europe, at $14bn, for transactions.
Notable M&A trends identified in the report included the popularity of companies with InsurTech credentials.
Sizeable deals with an InsurTech element included Travelers' $490mn purchase of the UK's Simply Business, the report noted.
The report also highlighted an uptick in legacy book sales, with legacy buyers growing in number and sophistication.
Noteworthy legacy deals in 2017 included The Hartford's $3bn sale of Talcott Resolution to an investor consortium including Bob Diamond's Atlas Merchant Capital.
WTW Securities also highlighted the attractiveness of capital-light MGAs and brokers. This trend was underscored by KKR's purchase, with Caisse de dépôt et placement du Québec, of USI for $4.3bn from Onex.
However, WTW Securities noted that 2017 cat losses have not proved to be a driver of M&A to date. Instances of distressed sellers were rare and buyers were more likely to seek the organic growth expected from higher rates than to buy rivals, it added.
The findings follow a year in which the number of P&C and insurance broker deals worth more than $1bn dwindled to just a handful. As well as the Talcott and USI deals, these included Mitsui's $1.6bn takeover of Fairfax's First Capital and Intact's $1.7bn takeover of White Mountains' OneBeacon.
WTW Securities' comment about cat losses echoes a prediction made by Axis CEO Albert Benchimol, who said in October that firmer reinsurance rates could be a deterrent to M&A this year.
Axis completed its £477.6mn ($644.8mn) takeover of Lloyd's insurer Novae in October.
Shore Capital's Eamonn Flanagan noted that the still-emerging cat losses made it unclear to would-be buyers what potential targets were exposed to. This could crimp insurance M&A in the first half of 2018, he predicted.
He also said recent catastrophes offered insurers the "chance to underwrite like demons" as rates improved.
Following Axis' takeover of Novae, Flanagan reiterated his view of the "scarcity value" of the remaining three London-listed Lloyd's insurers.
"We're still of the view that it will be Lancashire first, Beazley second and maybe Hiscox a long way third."
EY insurance transactions leader David Lambert said noted that M&A drivers remain intact.
"M&A as one of stepping stones to the future remains very valid and we are expecting more of that positive M&A," he said.
He also said Brexit may provide impetus for deals as UK carriers opt to retreat from the European mainland.
"Brexit could be the straw that breaks the camel's back, with some companies deciding that businesses that were just about core aren't any more," he said.