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 the digital producer and a staff writer at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

2018 Risk All Stars

Stop Mitigating Risk. Start Conquering It Like These 2018 Risk All Stars

The concept of risk mastery and ownership, as displayed by the 2018 Risk All Stars, includes not simply seeking to control outcomes but taking full responsibility for them.
By: | September 14, 2018 • 3 min read

People talk a lot about how risk managers can get a seat at the table. The discussion implies that the risk manager is an outsider, striving to get the ear or the attention of an insider, the CEO or CFO.

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But there are risk managers who go about things in a different way. And the 2018 Risk All Stars are prime examples of that.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Goodyear’s Craig Melnick had only been with the global tire maker a few months when Hurricane Harvey dumped a record amount of rainfall on Houston.

Brilliant communication between Melnick and his new teammates gave him timely and valuable updates on the condition of manufacturing locations. Melnick remained in Akron, mastering the situation by moving inventory out of the storm’s path and making sure remediation crews were lined up ahead of time to give Goodyear its best leg up once the storm passed and the flood waters receded.

Goodyear’s resiliency in the face of the storm gave it credibility when it went to the insurance markets later that year for renewals. And here is where we hear a key phrase, produced by Kevin Garvey, one of Goodyear’s brokers at Aon.

“The markets always appreciate a risk manager who demonstrates ownership,” Garvey said, in what may be something of an understatement.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Dianne Howard, a 2018 Risk All Star and the director of benefits and risk management for the Palm Beach County School District, achieved ownership of $50 million in property storm exposures for the district.

With FEMA saying it wouldn’t pay again for district storm losses it had already paid for, Howard went to the London markets and was successful in getting coverage. She also hammered out a deal in London that would partially reimburse the district if it suffered a mass shooting and needed to demolish a building, like what happened at Sandy Hook in Connecticut.

2018 Risk All Star Jim Cunningham was well-versed enough to know what traditional risk management theories would say when hospitality workers were suffering too many kitchen cuts. “Put a cut-prevention plan in place,” is the traditional wisdom.

But Cunningham, the vice president of risk management for the gaming company Pinnacle Entertainment, wasn’t satisfied with what looked to him like a Band-Aid approach.

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Instead, he used predictive analytics, depending on his own team to assemble company-specific data, to determine which safety measures should be used company wide. The result? Claims frequency at the company dropped 60 percent in the first year of his program.

Alumine Bellone, a 2018 Risk All Star and the vice president of risk management for Ardent Health Services, faced an overwhelming task: Create a uniform risk management program when her hospital group grew from 14 hospitals in three states to 31 hospitals in seven.

Bellone owned the situation by visiting each facility right before the acquisition and again right after, to make sure each caregiving population was ready to integrate into a standardized risk management system.

After consolidating insurance policies, Bellone achieved $893,000 in synergies.

In each of these cases, and in more on the following pages, we see examples of risk managers who weren’t just knocking on the door; they were owning the room. &

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Risk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, clarity of vision and passion.

See the complete list of 2018 Risk All Stars.

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