Insurance M&A Seen Heating Up, Led By AIG, Ace and Markel

NEW YORK (The Deal) -- Although deal volume in the insurance industry remains well below pre-crisis levels, the pace has quickened in recent months and rebound is likely to continue.

A strengthening macroeconomic climate coupled with increasing confidence among CEOs, organic growth challenges, regulatory pressures and higher-than-ever levels of excess capital for insurers who stayed on the sidelines after the crisis are among the factors that are fueling deals. 

In addition to a low interest rate environment, the insurance market is also softening, which will further drive deal activity, according to one industry analyst.

Boris Lukan, who leads Deloitte Consulting's US Insurance M&A and Restructuring practice, said in a phone interview that insurance companies are starved for growth and are only seeing single-digit growth figures. Given low organic growth, public companies looking to increase their share prices and earn higher multiples will need to do deals, he explained.

Among companies expected to be active in the M&A arena are New York-based American International Group  (AIG), Switzerland-based Ace  (ACE), Glen Allen, Va.-based Markel  (MKL) , and Bermuda-based Catalina HoldingsAIG is likely to be both a buyer and a seller.

Switzerland-based reinsurer Swiss Re  (SREN) and London-based Deloitte Touche Tohmatsu have chronicled the industry's dynamics in recent reports.

According to Swiss Re, the second half of 2014 has seen a total of 359 M&A announcements, an increase from 295 in the first half of 2014. There were also eight deals with values of above $1 billion announced in 2014, Lukan said, which is just as many deals as the market has seen in total in the several years proceeding. He expects more deals in that range.

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