M&A Activity

M&A Growth in 2017

Data from the first half of the year shows a healthy appetite for mergers and acquisitions.
By: | August 29, 2017 • 2 min read

The first half of 2017 saw robust growth of M&A activity.

Deal value more than tripled to $10 billion, compared to $2.9 billion in the first half of 2016, according to PrincewaterhouseCoopers Corporate Finance LLC’s “U.S. Insurance Deals insights 1H 2017.”

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“When you think about the insurance industry, you have to remember there are a lot of smaller deals happening without announced deal values. There is a lot of activity that occurs behind the scenes,” said John Marra, U.S. Insurance Deals Leader and Global FS Deals partner of PwC.

“There’s a lot of capital out there looking for opportunity in the insurance industry, and it’s a slow, sometimes complex process to get deals announced and completed,” he said. “There was a little bit of a pause last year, at the end of 2016 — third and fourth quarter — and due to the success of closed deals in the prior year or two, more deals came out at the start of this year.”

“The brokerage trend continues, as big players are investing where they can. Based on what we saw [in the first half of the year], I think the main question is ‘Who’s going to come to market?’” — John Marra, U.S. Insurance Deals Leader and Global FS Deals partner of PwC

A total of 249 insurance deals were announced in the first half. Insurance broker deals were most active at 90 percent of deal volume, reported PwC.

The largest deal announced in the first half of the year was the acquisition of insurance broker USI by an investor group, including private equity firm KKR and Canadian pension fund CDPQ, for $4.3 billion.

John Marra, U.S. Insurance Deals Leader and Global FS Deals partner, PwC

“The brokerage trend continues, as big players are investing where they can. Based on what we saw [in the first half of the year], I think the main question is ‘Who’s going to come to market?’” Marra said.

“A number of players came to the market at the end of last year. It got others asking, ‘should we be an acquirer?’ ‘Should we be acquired?’ These are key decisions being made,” he said.

Among the key M&A trends, the life sector led the market in deal volume, while property/casualty contributed most to deal value.

“New capital continues to drive annuity and life business. The P&C side is a little different — premium and profitability growth are hard to come by,” said Marra, “so opportunities remain for small- to medium-size companies to build much-needed scale through consolidation.”

In the life and annuity sector, opportunities exist for insurers to exit capital-intensive or non-core businesses with plenty of investor interest in closed blocks and a narrower product concentration.

PwC predicts a healthy appetite for deals to continue through the second half of the year. One such example is Oak Hill Capital Partners, a private equity firm, acquiring The Carlyle Group’s Stake in EPIC Insurance Brokers & Consultants. EPIC is a retail P&C insurance brokerage and employee benefits consultant valued at $977 million.

The acquisition will give Oak Hill a controlling equity position in EPIC and enable EPIC to continue its organic growth strategy. The investment is expected to close in the third quarter of 2017, another example of a continued robust market. &

Autumn Heisler is a staff writer at Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

2018 Most Dangerous Emerging Risks

Emerging Multipliers

It’s not that these risks are new; it’s that they’re coming at you at a volume and rate you never imagined before.
By: | April 9, 2018 • 3 min read

Underwriters have plenty to worry about, but there is one word that perhaps rattles them more than any other word. That word is aggregation.

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Aggregation, in the transferred or covered risk usage, represents the multiplying potential of a risk. For examples, we can look back to the asbestos claims that did so much damage to Lloyds’ of London names and syndicates in the mid-1990s.

More recently, underwriters expressed fears about the aggregation of risk from lawsuits by football players at various levels of the sport. Players, from Pee Wee on up to the NFL, claim to have suffered irreversible brain damage from hits to the head.

That risk scenario has yet to fully play out — it will be decades in doing so — but it is already producing claims in the billions.

This year’s edition of our national-award winning coverage of the Most Dangerous Emerging Risks focuses on risks that have always existed. The emergent — and more dangerous — piece to the puzzle is that these risks are now super-charged with risk multipliers.

Take reputational risk, for example. Businesses and individuals that were sharply managed have always protected their reputations fiercely. In days past, a lapse in ethics or morals could be extremely damaging to one’s reputation, but it might take days, weeks, even years of work by newspaper reporters, idle gossips or political enemies to dig it out and make it public.

Brand new technologies, brand new commercial covers. It all works well; until it doesn’t.

These days, the speed at which Internet connectedness and social media can spread information makes reputational risk an existential threat. Information that can stop a glittering career dead in its tracks can be shared by millions with a casual, thoughtless tap or swipe on their smartphones.

Aggregation of uninsured risk is another area of focus of our Most Dangerous Emerging Risks (MDER) coverage.

The beauty of the insurance model is that the business expands to cover personal and commercial risks as the world expands. The more cars on the planet, the more car insurance to sell.

The more people, the more life insurance. Brand new technologies, brand new commercial covers. It all works well; until it doesn’t.

As Risk & Insurance® associate editor Michelle Kerr and her sources point out, growing populations and rising property values, combined with an increase in high-severity catastrophes, threaten to push the insurance coverage gap to critical levels.

This aggregation of uninsured value got a recent proof in CAT-filled 2017. The global tally for natural disaster losses in 2017 was $330 billion; 60 percent of it was uninsured.

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This uninsured gap threatens to place unsustainable pressure on public resources and hamstring society’s ability to respond to natural disasters, which show no sign of slowing down or tempering.

A related threat, the combination of a failing infrastructure and increasing storm severity, marks our third MDER. This MDER looks at the largely uninsurable risk of business interruption that results not from damage to your property or your suppliers’ property, but to publicly maintained infrastructure that provides ingress and egress to your property. It’s a danger coming into shape more and more frequently.

As always, our goal in writing about these threats is not to engage in fear mongering. It’s to initiate and expand a dialogue that can hopefully result in better planning and mitigation, saving the lives and limbs of businesses here and around the world.

2018 Most Dangerous Emerging Risks

Critical Coverage Gap

Growing populations and rising property values, combined with an increase in high-severity catastrophes, are pushing the insurance protection gap to a critical level.

Climate Change as a Business Interruption Multiplier

Crumbling roads and bridges isolate companies and trigger business interruption losses.

 

Reputation’s Existential Threat

Social media — the very tool used to connect people in an instant — can threaten a business’s reputation just as quickly.

 

AI as a Risk Multiplier

AI has potential, but it comes with risks. Mitigating these risks helps insurers and insureds alike, enabling advances in almost every field.

 

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]