Megadeals, Political Instability, Strong Equity Markets Deliver M&A Underperformance for Insurers
For only the second time this decade, insurers undertaking an acquisition underperformed their sub-industry index, according to the Willis Towers Watson Insurance M&A Performance Tracker.
Key Findings
Insurance firms that carried out a significant acquisition in 2016 were likely to underperform their sub-industry index.
This is a reversal of the pattern of the previous eight years, when acquirers were likely to outperform their sub-industry index.
A high-value, low-volume M&A environment, political volatility and a strong equity market contributed to the weaker performance of acquisitive insurers in 2016.
The research, based on analysis of deals with a value of more than
"Although acquirers in the insurance sector haven't done as well in 2016 as they have in previous years, there are plausible explanations for this," said
From 2008 onwards, insurers that carried out an acquisition outperformed peers by 3 percentage points. Since 2012, acquirers have traded 4.4 percentage points above their sub-industry index.
According to
"The market tends to be nervous around big, transformational transactions and more comfortable when most activity involves smaller incremental bolt-ons," says
The drop in deal volumes could be attributed to a slowdown in activity in the life sector. The fall in Property & Casualty deals was less pronounced.
Strong equity markets may be another factor in the weaker performance of acquisitive insurers. "Equity markets are doing well, so firms don't need to do acquisitions as shareholders are rewarding those focusing on organic growth," said
Geopolitical uncertainty and the surprise poll results in the
Separate
About the Insurance M&A Performace Tracker
Based on analysis from
From six months prior to the announcement date to one day post announcement
From six months prior to the announcement to six months after the deal closed.
Deal data is sourced from Thomson Reuters and only completed M&A deals with a value of at least
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