Summary of the main themes covered at The Insurance Network’s evening panel discussion on Tuesday 25th January 2011.
Over 100 delegates took part in The Insurance Network’s evening panel discussions on Tuesday with an in-depth discussion on the strategic implications of mergers, acquisitions and further consolidation for the insurance industry. The panel discussed a wide range of issues from the pros and cons of embarking on an acquisition to how to exploit the strategic opportunities that emerging markets present.
Although the panel were drawn from a wide section of the industry there were two areas where the panel agreed. Firstly, although there has been a lot of chatter in the market there has not been that much activity. It was clear that there have been pockets of activity but no real evidence to suggest a fundamental shift in the broker or insurer landscape.
Reasons for this ranged from the uncertain regulatory environment and future capital requirements to the risks of embarking on an integration project with a company that might present more of a liability than an asset for the acquirer. The egos of company directors and their willingness to sell at this time in the cycle was also a barrier to further consolidation. This led into an interesting discussion on merits of taking on a full acquisition as opposed to taking over a team.
Secondly, the pockets of activity will be limited to those distressed companies that need to sell, opportunistic acquisitions due to undervalued companies and the continued consolidation in the regional broker space that has increased in recent months.
There were a number of questions and some heated debate as to whether there would be consolidation of the consolidators. Although the conditions appear ripe for consolidation in the aggregator space there was uncertainty as to where the capital would come from to support such market moves, and whether a combined entity would provide the economies of scale to make a deal worth while. The impact of consolidators on prices, fees and customer service were contentious issues, and there was keen discussion regards the impact on customer choice if we see a reduction of players in the market.
The discussions closed with the panel exploring a number of M&A deals that have both improved shareholder and wider stakeholder value. QBE, Aviva and Catlin were held up as examples of how M&A could prove to be successful. ‘General surprise’ was the common emotion in the room when the discussions inevitably came round to the ‘no deal’ between Beazley and Hardy...only time will tell whether that was the best decision for shareholders and places some pressure on the Hardy management team to deliver a better result.
It will be fascinating to see the progress of M&A activity during 2011 and see whether the predictions and implications outlined by the panel and audience discussions are forthcoming.
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