PwC: insurance industry M&A deals expected to rise
The year ahead will bring a rise in global mergers and acquisitions, with ESG, portfolio optimisation and digitalisation remaining strategic priorities, a new PwC report has forecast.
PwC 2023 Global M&A Industry Trends Outlook says that the insurance brokers market will be an area strongly affected, as insurers themselves continue to battle rising inflation.
Corporations can expect more ESG influence on investment decisions and areas of focus for M&A owing to regulation and mounting pressure from stakeholders.
Companies will seek strategic partnerships and consolidation opportunities to boost digital capabilities, counter the disruption from platforms and fintechs, and address sustained pressure from regulators.
The report says property and casualty insurers in particular have not been able to increase premiums they charge in line with inflation, and personal insurance claims are being driven higher by inflation.
Also, wage inflation is increasing operational expenses.
Matt Britten, partner, insurance, PwC Bermuda, said: “The need to accelerate transformation for insurers is critical.
“In this challenging environment, it is time for insurers to clearly define their core business and decide which business areas will drive future growth and should be retained, and which to exit or dispose of, with the aim of deriving the greatest value from the divestment.”
He added: “M&A tends to slow during times of uncertainty or market volatility — but those can be precisely the times when valuations become more attractive and opportunity knocks.”
Strong M&A activity in the insurance broker sector is already in its early days of significant market consolidation of small, mid-tier and peer-sized players.
Meanwhile, Megan Green, partner, asset and wealth management, PwC Bermuda, said: “The AWM landscape continues to evolve.
“Asset and wealth management companies are leveraging transactions to react to slowing revenue growth and shrinking margins.They are seeking to drive growth through acquisitions, with a focus on core capabilities.”
Sean Kelly, partner, banking and capital markets, PwC Bermuda, said: “We see the banking M&A market being negatively affected by geopolitical issues, inflation and concerns about global GDP growth.
“Meanwhile, technology capabilities remain central to M&A strategies as banks face internal challenges and shareholder pressures to optimise and digitalise their business models.”
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