Second Half Of 2011 Sees Sustained M&A Activity

The sharp upturn seen in the first half of 2011 in mergers & acquisitions activity in the insurance industry continued from July to December according to data supplied by Thomson Reuters, with 266 deals being completed compared to the 280 in the first six months. The United States dominated the picture – accounting for almost half the deals done, while just over a third were in Europe. This is backed up by figures released in a recent renewal report by reinsurance broker Guy Carpenter which noted that M&A deals in the US and Bermudian non-life sector picked up last year in terms of total dollar value to $12.8bn from $7.3bn in 2010.

We believe that levels of activity will remain high for the coming year for a number of reasons. In Europe activity is undoubtedly being driven by the imminent arrival of Solvency II. This increased focus on capital requirements and a review by re/ insurers of their books of business – both live and in run-off – and the capital they require will undoubtedly trigger a range of corporate activity; from capital raising to sales and purchases. Buyers will hope to apply more effective capital management techniques to companies that may have been operating relatively inefficient structures, while sellers will be looking to reduce their capital requirements.

In the US, the much predicted hardening of insurance prices seems to be getting underway, climbing at the fastest rate in nearly four years, with the market expecting this trend to continue as insurers move to make up for weaker investment returns. A monthly review of midsize and large-cap US client data by Marsh has shown a 5.3 per cent average uplift in commercial property insurance rates in January from a year ago. If the market hardening is sustained, valuation levels for...