During the first half of 2021, insurance industry mergers and acquisitions (M&A) in the America achieved their highest level since 2015, with 116 finalized deals, up from 102 in the second half of 2020. The region’s good performance was underpinned by solid transaction activity in the United States, according to Clyde & Co’s Insurance Growth Report mid-year update, where insurance deal makers appear to be looking past concerns about the COVID-19 epidemic and related economic instability.
A recent example where insurance deal makers had a field day is this scenario where AIG Closes Sale of Equity Stake in Life & Retirement Business to Blackstone.
Vikram Sidhu, a partner at Clyde & Co in New York stated that, some of the optimism that came in the early part of the year when we suddenly gained universal access to vaccines drove some of that first-half transaction activity in the United States. For the US market, there was a lot of hope and expectation. The United States remains the world’s largest insurance market, making it very appealing to both American and foreign dealmakers at any given time.
According to Clyde & Co, various factors drove deal activity in the first half of the year. Increased investment in technology and insurtech, as well as significant interest in specialty underwriting facilities – managing general agents and underwriters (MGA/MGUs) – were among the reasons that remained consistent with previous years. Another recurrent theme, as described by the global insurance law company, was strategic disposals.
Sidhu remarked. that they are seeing a lot of legacy books being sold off or prepared for sale. The sellers are typically enterprises that are looking to the future in a proactive and innovative manner, attempting to clean up their balance sheets and free up cash; they are focusing on the next two, five, or ten years.
All of these M&A drivers were present in the United States during the first half of 2021, and Sidhu anticipates good transaction pace to sustain in the next quarters and years, given America’s “extremely positive” post-pandemic viewpoint.
“Dealmakers are attempting to buy and build agreements for the future,” Sidhu told Insurance Business.”That has really spurred the activity in the US because there’s a real expectation that we’re moving towards a sustained recovery in the coming years, and the strategic movers want to be well positioned to develop their businesses out, even if it’s been slower than we’d hoped for at times.”
Simultaneously, a slew of new prospects and developments in the insurance field have attracted the attention of investors in the US market. “There’s a lot of excitement about clean energy – that’s just one example of the innovation and potential emerging in a field that’s predicted to expand at a breakneck pace.”
As a result, investors and dealmakers are paying attention,” Sidhu added. “Despite all of the challenges that line of business has had [with increased frequency and severity of losses, particularly involving ransomware], cyber is another line of business that is becoming increasingly attractive.” Cyber insurance continues to draw investors who believe they understand the industry and can profit from it because they know how to effectively manage and underwrite the risks.”