Global insurance M&A themes, 2018
Article Synopsis :
This report from EY explores broader M&A trends in insurance as well as the role of M&A teams, and the range of skills required, as insurers move into emerging business models and innovative transactions.
Key takeaways include:
- Portfolio optimization continued through 2017, with a number of major insurers simplifying and streamlining their businesses, often as a critical step in creating future business models
- The question of “buy or build?” has become central to many insurance M&A decisions and will continue to underpin consolidation as well as the targeted acquisition of capabilities
- Insurers continue to invest into Insurtech businesses, partly as a response to the ongoing question of buy or build, but increasingly as a way of accessing and operating in emerging “digital ecosystems”
- The drive to access and create sustainable revenue models from such ecosystems will lead to new types of partnership and joint venture arrangements
- For insurers, new digital ecosystems are both a massive opportunity and an existential threat as such ecosystems will also be a route for sector convergence, with players from outside of the insurance sector competing for roles in the value chain
- Such convergence may result in a number of “wow” moments in 2018 and beyond
- Successful M&A will come from insurers combining talent developing centres of innovation with the deep experience and knowledge across their existing organizations to create diverse teams addressing fast-changing opportunities
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Digital Insurer's CommentsAccess to innovation, new sources of non-insurance revenue, and new data monetization models are increasingly cited as M&A drivers, but these ‘assets’ are tricky to quantify for valuation purposes.
We agree with the report that we’ll likely see fewer deals this year, but we may also see some real game-changers, with insurers stepping out of industry, as M&A teams hone valuations on ‘innovation’ assets.
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