Conning has a new report on mergers and acquisitions. It’s titled Global Insurance Distribution & Services Sector Mergers & Acquisitions: The Beat Goes on. The report predicts 2017 will be a “robust” year for mergers and acquisitions and the reasons range from ongoing industry trends and the current climate of the U.S. government.
Conning doesn’t see either changing for the remainder of the year.
“The combination of a higher level of confidence among businesses and expectations for lower tax rates could serve to accelerate the pace of M&A in the distribution and services sectors. We would not be surprised if 2017 produced a record number of transactions, with tech-driven service providers garnering more attention,” the report said.
Conning is not alone. KPMG, Clyde & Co. and others have made similar predictions and all expect insurers to either look for acquisitions or to acquired. Conning thinks the reason is because of excess capital and rates that show low increases or that are flat and that have been for the last several quarters.
All this means low organic growth rates can only be countered via mergers and acquisitions. And Conning says there are plenty of opportunities for both.
“The buyers are plentiful and take many forms — agents, brokers, MGAs/MGUs (managing general agents/managing general underwriters), insurers, private equity firms,” Conning said in the report.
Another reason for the increase is an evolving market and customer demands that mean more efficiencies and digital options must be had and a lot of insurers just don’t want to go there.
“We expect the insurance industry to continue investing significant dollars in acquiring relevant knowledge. The industry cannot afford to ignore new risks and new technologies. Insurers are obliged to invest in resources to enhance growth and efficiency,” Conning said.
Another driver is the Trump presidency. Lower tax rates are coming. Consumer confidence in the economy since the election of Donald Trump has gone higher. But the possibility of higher interest rates could heat up M&A activity.
Not all is positive. Conning says things could change. Trump economic policies could cause the U.S. economy to weaken. Foreign companies could drop out of the market and the U.S. dollar could stay strong.
They could make the M&A activity for the year a bit of a disappointment.
Source link: Carrier Management