According to Sidley Global’s Insurance Review, the resurgence in insurance mergers and acquisitions (M&A) that characterised the last two quarters of 2020 continued to pick up throughout 2021, with very few lingering effects from the COVID-19 pandemic that had suppressed deal activity in early 2020.
Last year saw the consummation of 180 U.S. insurance mergers and acquisitions, the highest total since 2015.
Insurance M&A activity was reportedly turbocharged by a number of “megadeals,” primarily in the life, health, and annuity sectors.
Sidley noted that the statistics would have been even more impressive had the US$30 billion Aon plc and WTW merger not been blocked by the U.S. Department of Justice.
Consistent with recent years, announced deal activity in the property and casualty space was comparatively light, although interest in brokerage transactions remained keen.
Dealmaking was once again stimulated by the converging seller and buyer motivations that we have observed in recent years.
The report noted that sellers continued to pursue divestitures, as well as through reinsurance, in order to exit non-core business lines, and buyers sought to broaden their geographic reach, diversify their product offerings, and acquire new distribution channels.
The participation of private equity-backed and other financial buyers continued unabated, owing in no small measure to the reliable return streams on invested capital derived from insurance business.
Additionally, Sidley reported that insurers have been actively exploring opportunities to acquire technology and data analytics assets in deals with both early stage and mature insurtech businesses.
While a comprehensive discussion of the insurance M&A transactions announced or closed in 2021 is beyond the scope of this publication, we consider below some of the more noteworthy transactions and developments in insurance M&A in the past year.
Sidley noted that the deployment of assets by private equity and other financial buyers into the insurance industry have continued to buoy transactional activity in the insurance space, and general economic conditions do not seem unfavourable.
However, the impact on borrowing rates of mounting inflationary pressures, and the knock-on effects on the financing and viability of transactions, bear watching in 2022.
Rate increases will also impact the U.S. and global economy as a result of the Russian invasion of Ukraine and the resulting sanctions regime.
