$2.6bn Aspen deal latest in insurance M&A frenzy

Alternative investment manager  Apollo is paying $2.6 billion to buy Bermuda-based Aspen Insurance Holdings and take the insurer private in what is the latest development in a string of insurance deals.

In January 2018, AIG unveiled its plan to acquire Bermuda-based Validus for an aggregate transaction value of $5.56 billion, funded by cash on hand.

In March, French insurer AXA decided to buy Bermuda-based property/casualty commercial lines re/insurer XL Group for $15.3 billion (€12.4 billion) in cash.

Last week, US-based Navigators was bought by The Hartford in a $2.1 billion deal.

Total announced global insurance estimated transaction volume for first-half 2018 was $48 billion, according to a report titled "Bulking Up: The Global Reinsurance Sector Marches Toward Consolidation".

Tough market conditions for global reinsurers is forcing them to review their long-term relevance and many are resorting to M&A to build scale, acquire expertise, and diversify, according to the report.

Aspen has been looking for a buyer for much of the year. The re/insurer reported an underwriting loss of $558.1 million for 2017 after an underwriting profit of $51.9 million in the previous year. The combined ratio deteriorated to 125.7 percent from 98.5 percent over the period.

Through the Aspen acquisition, Apollo will gain access to the insurer’s premium income and may be able to use it to generate higher returns.

Chris O’Kane, Aspen’s Group CEO, said: “Under the ownership of the Apollo Funds, Aspen will have additional scale and access to Apollo’s investment and strategic guidance, which will help us to accelerate our strategy and take Aspen to the next level. We are excited about the future as we embark on a new chapter in our history with a partner that understands our strengths, culture and customer-centric philosophy.”

Alex Humphreys, partner at Apollo, added: “We believe that Aspen benefits from strong underwriting talent, specialized expertise and longstanding client relationships which makes them well positioned in the market.

“We look forward to working with Aspen to build on the existing high-quality specialty insurance and reinsurance business and we aim to leverage Apollo’s resources and deep expertise in financial services to support the company as it embarks on its next chapter,” Humphreys added.

Other private equity firms are also targeting the insurance sector. Cinven, for example, is in exclusive talks to acquire a retirement products unit of Axa and. Furthermore, Bain Capital Private Equity agreed to buy Esure Group for about £1.17 billion.

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