Defying gravity: Insurance M&A on the rise

15 March 2016

Defying gravity: Insurance M&A on the rise

© 2016 Willis Towers Watson. All rights reserved.

Fergal O’Shea, Andy Staudt and Steve Allan

© 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 1

Presenting today

Andy Staudt

+44 20 7170 3476 [email protected]

Fergal O’Shea

+353 1 614 6820 fergal.o’[email protected]

Steve Allan

+44 20 7170 [email protected]

What we did

2

Individuals surveyed50/50 Life/P&C

EMEAAPac

Americas

Respondents each inEMEAAPac

Americas

We performed a survey, asking questions about

Mergers and Acquisitions

750 250April

Global Why?Who?How?

2015

© 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only.

Key drivers for M&A


Insurers seek modern distribution options

and innovative technology

Expansion through consolidation Asia is rising

Capital management via disposal of non-core and / or legacy

portfolios

Key drivers for M&A


Consolidation has spurred a rise in the number of megadeals. In the future, insurers expect to focus M&A activity on core markets.

Almost 50% of respondents say they made their last acquisition due to the target’s existing market position and customer base, both which are considered to boost top-line growth.

It is rare for insurers to use M&A to move into new markets, only 8% of respondents had no operations in deal target markets.





portfolios

Key drivers for M&A


The majority of Lloyd’s businesses (77%) are considering legacy portfolio disposals.

More than half of firms based in Western Europe (53%) expecting to make at least one sale in the next three years.

This represents a 42% rise in respondents interested in divesting operations compared to two years ago.

And we now have some certainty over European solvency regulation!





portfolios

Key drivers for M&A


Distribution is a key driver for M&A activity, as well as new technologies





portfolios

Key drivers for M&A


The Asian market is expected to be a centre of M&A activity over the next three years.





portfolios

Deal participants


Key drivers for M&A





portfolios

Deal participants


Key drivers for M&A





portfolios

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Africa

ME

CEE

WE

Reg

ion

of T

arge

t

Local insurance

PE

International insurance - developed

International insurance - emerging

Hedge funds

SWF

No competition

Buyer competition

Deal participants


0% 50% 100%

Africa

ME

CEE

WE

Reg

ion

of T

arge

t

Localinsurance

PE

Internationalinsurance -developed

Internationalinsurance -emerging

Hedge funds

SWF

No competition

Buyer competition - past

Deal participants


Africa

ME

CEE

WE

Reg

ion

of T

arge

t

Localinsurance

PE



Hedge funds

SWF

No competition

Buyer competition - past

Africa

ME

CEE

Lloyds

WE

Localinsurance

PE



Hedge funds

SWF

Primary drivers - future

The importance of people


Reflections on deal drivers and challenges

Key deal drivers Common challenges

Customer retention / satisfaction

Integrating IT / Internal processes

Realising revenue / commercial synergies

Capital managementissues

Hiring / retaining employees

Cultural / organisational differences

Realising cost synergies

61%

57%

44%

44%

42%

39%

24%

Cross-border expansion

Market consolidation

and top-line growth

Distribution options and innovative technology

The importance of people



Clearly articulate deal objectives in terms of executable plan focused on the workforce

Common theme

Early stage due diligence –Identification of key risks and financial exposures

Move quickly to secure key leadership and talent

Balanced implementation plan focused on: Managing change and

engaging with core employee groups

Minimizing disruption and maintaining business as usual



Any questions?

Andy Staudt

+44 20 7170 3476 [email protected]

Fergal O’Shea

+353 1 614 6820 fergal.o’[email protected]

Steve Allan

+44 20 7170 [email protected]

Business

Defying gravity: Insurance M&A on the rise