First Quarter Activity Signals Record Insurance Carrier M&A Deals Ahead in 2021: S&P

First Quarter Activity Signals Record Insurance Carrier M&A Deals Ahead in 2021: S&P

2021-04-06 13:00:23

Mergers and acquisitions of insurance companies could reach historic levels in 2021 based on early indications from a robust first quarter, according to a new report from Standard & # 39; s.

US and / or Bermuda acquirers or acquisition targets reached a total transaction value of nearly $ 21.2 billion, the S&P Global Market Intelligence report found. That result exceeded the full-year figures from 2019 ($ 19.6 billion) and 2020 ($ 19.4 billion).

Early data suggests that insurance companies' M&A activity could double by 2021 from previous years to more than $ 40 billion, and the report suggests it could "mark one of the strongest years of the last quarter century" .

Two companies could form that final deal value figure for 2021: The Hartford and AIG.

Chubb made a failed $ 23 billion takeover bid for The Hartford in March, but industry observers expect the insurer to remain an attractive targetThe S&P report notes that The Hartford's future independence is questionable, and that the acquisition could make the total of M&A deals significantly higher.

Another factor that could push the mergers and acquisitions aggregate in the insurance industry even higher: when and how AIG plans to separate its life and retirement businesses. Possible options include an IPO, but the insurer has indicated that it is open to a private sale of an interest of almost 20 percent in the company.

If The Hartford is sold and AIG finds a partner to invest in its life and retirement business, S&P said the total value of the M&A deal could exceed $ 71.6 billion – a level seen in the past 24 years. exceeded twice, taking inflation into account.

P / C Versus Life

The transaction value for the life, annuity, accident and health insurance industry could be between $ 29 billion and $ 32 billion by 2021, depending on whether AIG & # 39; s plans to divest part of its life and retirement business. continue to sell. This is a peak that life insurance has not reached since 2001, S&P noted, when AIG defeated Prudential to acquire American General.

On the other hand, the deal value for P / C courier transactions is as low as in the first quarter since 2013, S&P said, reaching just $ 923.5 million. S&P predicts that the value of the P / C deal for the year will eventually reach approximately $ 10.5 billion. This figure takes into account the median inflation-adjusted activity for the last three quarters of the previous 10 years, added to the first quarter total. That number will surpass $ 38.9 billion, S&P said, when The Hartford is sold, "at a price approaching the tangible book multiplication that ACE Ltd. agreed to pay in the 2016 acquisition of Chubb Corp …"

There is at least one factor that can affect the ultimate value of the M&A deal for carriers: Biden is raising the corporate tax rate from 21 percent to 28 percent, as suggested.

“The expectation that a Biden government and a Democratic Congress would raise the highest individual tax bracket sparked a wave of deals between realtors and agencies in December 2020,” notes the S&P report. "Whether history repeats itself in 2021 may ultimately depend on the content, timing and legal manifestation of those ideas."

Source: S&P Global Market Intelligence


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