Year-over-year, the insurance sector saw a mild 5.7 percent drop in deal volume compared to 1H19. There was a massive spike of 273.6 percent in deal value, mostly attributed to one mega deal (>US$25bn) in the UK, executed just weeks before the pandemic. The US (#191), the UK (#28), Canada (#16), Italy (#10) and China (#9) remained the most targeted nations. Interestingly, insurance brokerage appeared to be the prime acquisition target for a multitude of buyers (insurers, banks, e-commerce, etc.) capturing ~70 percent of global insurance deals in 1H20 — a trend expected to continue in 2H20.
In the Americas, particularly in the US, insurance deal activity remained buoyant — seeing an increase in both value (up by 135.7%) and volume (up by 15.1 percent ). Though the market did not see many high value deals, the average deal size trailed around US$419 million in 1H20. Consolidation in the sector was led by large industry players acquiring smaller players for portfolio diversification and new service lines. Moreover, insurance brokerage remained an attractive segment with continued interest from various PE firms. A jump in cross-border activity was also seen during the period prompted mainly by active bidders from Bermuda and Japan.
EMEA deal volume dwindled (down by 24.8 percent) while value rose by 639.6 percent in 1H20. Deal value in the region was lifted by one mega deal in the UK — Aon PLC’s* proposed acquisition of Willis Towers Watson for US$30 billion — merging two of the largest insurance brokers globally and signifying massive consolidation in the insurance brokerage sector. Though overall deal volume was subdued elsewhere, deal activity in Italy and Sweden picked up pace; in Italy, the life insurance and brokerage segments drove most of the activity. Similarly, an increase in renewal of bancassurance agreements helped spur activity. In Sweden, retail insurance brokerage deals contributed to an overall positive deal environment.
In the ASPAC region, deal volume (down by 2 percent) and value fell sharply by 33.6 percent, with China (#9), India (#8), Australia (#6) and Japan (#6) being the most active target markets. In China, insurance brokerage and insurtech deals remained prevalent while regional distribution deals proved attractive as insurers look to expand their distribution reach. A number of foreign insurers sought to enter or increase their stake in existing JVs. Strategic deals remained prevalent in the sector in India, while few life insurance deals were seen in Japan. Moreover, Japanese insurers remained active in US M&A markets during the period. VC investment in insurtech dropped significantly in 1H20. Before COVID-19, the insurtech sector already saw its deal pipeline slowing thanks to frothy valuations and traditional VC firms lacking significant exits outside of a few large acquisitions.
Among the top 5 deals in the insurance space, three are domestic transactions with two cross-border deals in 1H20. One mega deal transaction (>US$10 bn) was announced during the period.
For international transactions, the US remained particularly acquisitive especially in the UK and ASPAC. At a regional level, insurance transactions were concentrated within Western Europe countries.
Non-life assets formed the majority of total insurance assets (47 percent); insurance brokerage and reinsurance remain buoyant with the same proportion of assets seen in 1H19.
Western Europe represents the maximum concentration of available assets followed by Asia Pacific. Life and non-life assets remain the most prevalent in Western Europe and Asia Pacific, while brokerage is an attractive segment in North America and Western Europe. Countries with maximum assets available are the US, Italy, Australia and France.
Insurer valuations saw a decline during the period — from an average of 1.47x in Jan’20 to 1.15x in Jun’20. Among the major insurers, Asian insurers were hit hardest while European players traded better at an average of 1.02x in Jun’20.