Many P&C and life insurance CFOs will turn their collective attention from internal concerns and focus on M&A in the coming year, according to two recent Towers Watson surveys—“Life Insurance CFO M&A Survey” and “P&C Insurance CFO M&A Survey.”
Among the 20 P&C CFOs surveyed, 55 percent are considering acquiring a company, while 50 percent are interested in purchasing a block of business in the coming year. Bruce Fell, a managing director in Towers Watson’s P&C practice, said P&C CFOs feel the need to maintain strong cash positions and balance sheets in order to pursue such transactions or fend them off, as the case may be. Few P&C respondents (15 percent) said they plan to divest or merge. “CFO survey findings suggest that the difference between the demand for companies and blocks of business, and the intention of respondents to divest companies or blocks of business, or both, could flag a shortage in the future,” said Fell, who noted that over the past 12 months, 30 percent of respondents acquired or pursued a company, while 20 percent acquired or pursued a block of business.
Fell also says that while attractive prices and the low cost of financing may have encouraged companies to make acquisitions over the last year, a deeper examination suggests that respondents are looking at M&A strategically, with attractive pricing a secondary consideration. In fact, the report states that product positioning, financial performance, the elimination of competitors and global presence are all reasons why P&C survey participants completed or are considering M&A. Some of that strategy may involve geographic expansion. According to the report, 45 percent of P&C respondents expect to expand their presence in the United States over the next year, and some are targeting areas outside the country, including Asia (15 percent), Canada and Latin America (10 percent each) and Africa (5 percent).
Life insurers also are putting less emphasis on price paid and other financial factors and focusing more on extensive preplanning and comprehensive communication, according to Jack Gibson, Towers Watson’s managing director, global Mergers and Acquisitions. Seeing fewer hurdles to M&A than in 2009, 59 percent of the 22 life insurance respondents are considering buying a company, and 50 percent are considering buying a block of business. Only 29 percent of this year’s respondents view capital issues and constraints as impediments, compared to 77 percent in 2009. Further, 38 percent of respondents to the current survey view general economic conditions and uncertainty as impediments, compared to 50 percent in 2009.
Life insurance respondents also expressed doubts as to the number of blocks or companies that may be available: 38 percent do not believe there are enough companies or blocks of business of the right size for sale, up from 32 percent in 2009.
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