Results for 2Q18 show that mergers and acquisitions (M&A) activity among property and casualty (P&C) re/insurers has increased in terms of both transaction value and count when compared with the same period in 2017, according to analysts at Keefe, Bruyette & Woods (KBW).
Underwriter transaction values for the year to date are up significantly, primarily due to the announcements of AIG’s $5.5 billion acquisition of Validus in January and AXA’s $15.4 billion acquisition of XL in March.
The number of M&A deals over the period also saw a mild increase, with 91 deals through June 2018 versus 87 deals through June 2017.
KBW noted that 2018’s hurricane season could temporarily limit near-term M&A activity, but maintained that there was enough traditional and reinsurance capacity to limit target’s balance sheet exposure to major storms to the extent that hurricane losses are a concern.
In general, however, it expected consolidation activity to increase as re/insurers pursue expense-saving opportunities, broader geographic footprints, and more diverse books of business.
Weakening reserve positions, which reflect both normal reserve cyclicality and accelerating loss trends, are also likely to make potential acquisition targets more open to selling.
