Private equity rises as major player in insurance M&A

Private equity has emerged as a force in insurance dealmaking, executives at the Mergermarket Global Insurance M&A Strategy & Innovation Forum said.

Fifteen years ago, PE firms were not considered competitive in insurance M&A, said Anthony Torre, senior managing director, corporate development at Prudential. That’s changed.

“I don’t think [PE is] becoming competitive,” Torre said at the forum on March 15. “They are competitive. They’re here.”

Ram Menon, global lead partner-insurance deal advisory with KPMG in the U.S., said many firms now have insurance teams: “Over the last few years, PE has been active in acquiring businesses in the life and annuity sectors. One would expect these PE-insurance companies to continue to look for growth and acquisitions targets and become competitive players in the sector.”

PE has become “very relevant … and they’ve done a very nice job,” Torre told Buyouts on the sidelines of the event.

Menon and Torre spoke during a panel, “M&A for Strategic Growth and Innovation.”

PE appears particularly dominant in the distribution industry. PE-backed firms accounted for nearly 51 percent of announced M&A as of Aug. 31, 2016, according to Marsh, Berry & Co. Four firms, BroadStreet Partners (Century Equity Partners), Acrisure (Genstar sold the company to management in November), Assured Partners (Apax Partners) and Hub International (Hellman & Friedman) accounted for a majority of transactions, Marsh said.

A report from KPMG International, in partnership with Mergermarket, anticipated more insurance M&A in 2017.

Eighty-four percent of insurers questioned expect to make one to three acquisitions in 2017. Nearly all, or 94 percent, plan at last one divestiture, according to “The New Deal: Driving insurance transformation with strategy-aligned M&A.” The KPMG survey questioned 200 global insurance executives during fourth-quarter 2016.

Asked about M&A in 2017, Torre said: “I can’t remember a prediction where M&A was not going up. It will be consistent with what it’s been. … I’m betting on steady as she goes.”

Large deals, he said, will be “few and far between.”

Action Item: Contact Anthony Torre at +1 973-802-8689

Ram Menon, global lead partner-insurance deal advisory with KPMG. Photo courtesy of the firm.