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4 November 2021Insurance

Insurers may eschew M&A in hardening market as organic growth opportunities call: SCOR CEO

M&A should remain muted throughout the insurance industry as a hardening market and strong options for organic growth trump the risks of growth through acquisitions, the chief executive of  SCOR Laurent Rousseau (pictured) told an industry seminar.

SCOR, for one, is not on an aggressive hunt for assets. “We do not build our plans on the need for M&A – our plans are organic,” Rousseau said. SCOR “will consider” any offer hitting the market that matches the SCOR strategic view, but only where the return looks clearly superior to current outlook.

By segment, P&C firms may find integration risks an unnecessary distraction just when organic growth looks so easy, he said. Life, in turn, may already be too concentrated to support further consolidation, aside from new offers in the asset management and savings space.

“When the market is hardening in rate increases, insurers are better off growing on their own than making an acquisition,” Rousseau claimed. “Today we are in hardening part of the market that should not necessarily lead to consolidation.”

The blocker: adjusting to new risks, new segments and new geographies can be a pricey and time-consuming distraction when market is on hand for the taking. “You’re better running on your own capital with the risks that you already know,” he said.

Rousseau’s read on the industry’s M&A history: hardening markets and M&A sprees have never gone hand in hand. The last consolidation spree goes back some twenty years to line up with a legendary market hardening. The last notable deal, AXA’s September 2018 deal for XL Group, came on a somewhat softer market. And, a recent $9 billion deal for Partner Re just doesn’t count, as it represents a change in financial ownership, not a consolidation or positioning move, he said.

Foreseeable exceptions may just as easily prove the Rousseau rule: global tax regime changes could alter the calculus for Bermuda holdings and “will raise real questions” which could trigger some deals on the island financial center.

The life insurance side of the business, in turn, not only has too many organic growth opportunities to allow for M&A focus, but may be too consolidated to begin with, Rousseau indicated.

Only the asset management side with client savings components offer any “interesting developments” that could trigger M&A. Expect a focus on “new players, new capacity, often sponsored by financial investors and able to bring a financial return component from which insurers are constrained.”

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