Insurance companies seeking transformational acquisitions, report finds

Published: June 20, 2018

Updated: July 24, 2018

Author: Luke Jones

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Over the next year, we may see numerous acquisitions in the insurance industry as companies look for expand. KPMG International has published a report that points to acquisitions and partnerships becoming an avenue for companies trying to move ahead of competition.

Titled Accelerated Evolution – M&A, Transformation and Innovation in the Insurance Industry,” the report surveyed 200 global insurance executives to understand plans for mergers, acquisitions, and strategies moving forwards.

The report found 80% of executives asked believe they will be pursuing between one and three acquisitions or partnership over the next three years. Most executives say they have plans for an acquisition that could “transform” the shape of their current business. More than 60% says looking for organizational transformation is a key reason for looking towards M&As.

“Insurers are competing for market share in a slow-growth environment, that is experiencing an influx of dynamic new insurtech players,” said KPMG International head of global insurance Laura Hay. “They know they can’t rely just on organic growth to meet their objectives, so alliances and acquisitions become essential as insurers look to engage with customers in new and different ways, and gain access to innovative operating capabilities and technology infrastructure to reshape their business and drive future growth.”

Other key findings of the report include:

  • A majority of insurance executives are looking for inorganic opportunities outside their country of domicile – 66% expect to conduct cross-border deals, while 32% say they expect deals to be focused domestically.
  • North America – particularly the US – is widely expected by survey participants to have the most insurance M&A activity in the coming three years.
  • Only 10% and 7% of participants said that they are “extremely likely” to find a deal that is a strategic fit for their business and operating models, respectively.
  • 72% said their deal sourcing objectives are not highly aligned with their corporate strategy.

72% of surveyed executives rated their capabilities for evaluating an M&A target’s strategic fit as “moderate” to “low”.