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COVID-19 to deter M&A activity in 2020: Conning

17th April 2020 - Author: Matt Sheehan

With mergers and acquisitions (M&A) in the P&C market already slowing through 2019, the COVID-19 pandemic is likely to deter further activity through 2020, according to analysts at Conning.

MergerConning noted that M&A activity involving acquisitions of property and casualty insurers last year was down approximately 6% compared to 2019.

And with the P&C industry now facing a potentially extended period of economic slowdown, companies will probably be more focused on positioning themselves to withstand the challenges brought by the COVID-19 crisis.

“With the duration of this turmoil difficult to predict, we expect insurance-related M&A will experience inactivity for some time,” said Steve Webersen, Head of Insurance Research at Conning.

But the distribution acquisition market could fare better, after sustained interest from consolidators and private equity investors supported activity throughout 2019.

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“While the property and casualty insurer M&A sector took pause, the distribution acquisition market maintained its blistering pace,” Webersen explained.

“There were no large strategic broker deals in 2019, however, private equity and private equity-backed brokers remain highly active in this space. This upward trajectory in deal count is expected to persevere as buyer demand continues to be high.”

“Multiple factors dampened the M&A environment for property and casualty insurers in 2019,” added Jerry Theodorou, a Director, Insurance Research at Conning.

“A firming pricing climate helped fuel premium expansion lessening the need for inorganic growth, concerns over reserve adequacy kept buyers from making acquisitions, and targets have become more expensive, especially the higher quality organizations.”

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