More Insurer Partnerships, Tech Investments, Divestitures to Come in 2021, Says Bain

More Insurer Partnerships, Tech Investments, Divestitures to Come in 2021, Says Bain

2021-02-23 15:41:17
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"We expect older insurers to continue their focus on cleaning up and strengthening their core portfolios in the near term [and] peripheral portfolio business will remain the subject of exploratory divestment talks," the Bain report said. "This will create attractive opportunities for companies looking to strengthen their market positions or pursue proximity."

M&A opportunities will evolve at the same rate as in 2020, Bain said, grown in part from partnerships and initial technology investments and unit sales that don't fit core strategies.

Divestments have been the driving force behind most insurance mergers and acquisitions worth more than $ 1 billion in the past 5 years.

"Partnerships and investment will continue to be the primary approach for companies pursuing new capabilities," explains the Bain report. "That said, as insurers over time become more confident in which capabilities will be most important in deploying these capabilities at scale, we expect an increasing interest from traditional insurers in owning and advancing proprietary capabilities."

Insurers' continued efforts to streamline and focus on core strengths will also keep M&A strong, Bain said. This trend was already well underway in 2020, the agency noted.

"The year 2020 continued a multi-year trend of global insurers streamlining their operations by simplifying operations and redefining themselves with a narrower scope and stronger core," said Bain. "Pressure on profit pools from low rates and increasingly complex capital requirements have forced [carriers] to look more critically at the ability of their business units to create sustainable value."

Bain noted that the increased pressure on management attention and the need for digital investments for core businesses meant that less central business units "seemed less and less attractive". These factors have contributed to divestments being the driving factor behind most insurance mergers and acquisitions valued at more than $ 1 billion in the past five years, Bain said.

Relevant transactions in this category include Aviva to continue the sale of its operations in Singapore and the Italian Aviva Vita; AXA & # 39; s purchase of XL and AXA & # 39; s sale of its operations in Poland, the Czech Republic and Slovakia; and also AIG's plan to separate his life and retirement business to create a simpler business structure.

However, for some companies, doubling their core strengths can mean a merger with a rival. Bain cited Aon's $ 30 billion offer for Willis Towers Watson as a great example of this in 2020, as well as Allstate's purchase of National General to grow in non-standard auto insurance and strengthen its network of independent agents.

Bain's full "2021 Global M&A Report" spans multiple sectors other than insurance.

Source: Bain & Co.

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