PWC: value of US insurance M&As drops in Q1 despite rise in transactions

US insurance sector deal value dropped in the first quarter of 2019 compared with the same three months in 2018, research from PWC revealed, despite a “surge” in the number of M&As among property and casualty companies.

The consultancy said that while total disclosed deal value “slumped”, deal volume during the first quarter of 2019 “soared” 35 percent compared with the same period in 2018 as 165 M&As were confirmed in Q1 2019.

It said this surge in volume “affirms our expectation that the insurance deals market will probably strengthen in the second quarter”.

Total disclosed deal value for insurance was $53.5 million in Q1 2019, a marked drop from $29.5 billion during the same period in 2018. However, PWC said “the low number understates the vibrancy of the market”.

As further evidence of this trend, researchers highlighted the announcement by Liberty Mutual Insurance in April to buy the  global surety and credit reinsurance operations  of AmTrust Financial Services at an undisclosed value.

The research said the decline in deal value “veils an intense interest in the sector among both private equity firms and publicly-traded companies”. It said prospective buyers think they can make major improvements in target companies’ operational costs, underwriting profiles, risk selection, liability matching, and investment yield.

“Private equity, hedge funds, corporates, and other financial services firms see potentially significant unrealised value in blocks of variable and fixed annuities and long-term care insurance.

PWC added: “We expect that the completion of Wilton Reassurance Company’s deal with CNO Financial Group on 30 September 2018 will prompt discussions about M&A in the boardrooms of similar firms during 2019. The transaction focused on reinsuring CNO’s blocks of legacy comprehensive and nursing home long-term care policies.”

Greg Peterson, PWC US financial services deals leader, said: “Green shoots sprang up in financial services deals in early 2019. We expect the trend to accelerate as firms extend geographical reach, boost tech savvy, and stake out new distribution, products, and services."

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