2018 Insurance Company M&A Activity Fueled By CVS-Aetna Deal

By John Hilton

Although insurance company merger-and-acquisition activity was relatively high in 2018, the sector is generally cold, an industry consultant said today.

There were 87 insurance company transactions during the year, the highest number tracked by Tiburon Strategic Advisors in at least five years.

Fueled by the mega-merger between CVS Health and Aetna, the 87 transactions averaged $971 million per deal, more than twice the 2017 average.

But that transaction value should decrease moving forward, said Chip Roame, managing director of the Tiburon, Calif. consulting firm.

"This is not the hot area," Roame said. "A lot of this was a cash flow buy. There’s a lot of old blocks of annuities that are out there. There’s a lot of insurance deals where you can just buy the risk for a slight discount of what it’s actually worth. So there’s a lot of M&A insurance that is really a cash flow buy."

Overall, Tiburon reported 800 transactions across the five sectors it tracks: retail banks, insurance companies, brokerage firms, investment management firms and fintech.

While it is just three fewer transactions than Tiburon recorded in 2017, it is also the lowest number since 2005 (787 transactions). The 800 transactions in 2018 had a total market value of about $150 billion, Roame said.

"The largest category in numbers would be banks, but it’s a lot of community banks with low numbers," he explained. "The largest category in transaction values would be in fintech."

'Substantial Growth'

In fact, Tiburon counted 179 fintech transactions with a market value of $52.5 billion. By comparison, in 2017, fintech transactions had a total market value of $14 billion.

"The news is fintech right now," Roame said.

First Data Corp. and Fiserv Inc. expect to close Monday on Fiserv’s $22-billion acquisition of First Data. The deal, announced in January, is one of the largest fintech transactions and a sign of things to come.

Tiburon is projecting "substantial growth" in both the numbers of fintech deals, as well as the dollars involved.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.