2021 insurance M&A outlook
Powering through disruption
Unprecedented times give rise to ample opportunities. Reenergized insurance M&A activity could play a critical role for insurers as they decide how to shift from recovery mode to thrive in the next normal. Develop an insurance M&A strategy and identify growth opportunities by exploring the trends and drivers reshaping the insurance sector in 2021.
Looking back at insurance M&A in 2020
The insurance industry posted more M&A activity in 2020 than anticipated, considering the widespread uncertainty emanating from COVID-19’s health, economic, and political challenges. First-half global 2020 insurance M&A was consistent with first-half 2019, likely because most deals closing in this period were already in process prior to the full-scale COVID-19 outbreak. After a pause during the summer months, dealmaking picked up again, with 25 insurance company deals announced in the United States alone toward the latter part of the third quarter and a life and health (L&H) megadeal to close out the year.
Total deal volume across underwriters and brokers decreased about 8% year over year (YOY) through December 31, 2020—620 deals versus 671 in 2019. However, aggregate deal value climbed about 39% YOY ($21.6 billion in 2020 compared with $15.6 billion in 2019), buoyed by several transformative transactions in both the property and casualty (P&C) and L&H sectors and a couple of large transactions in the broker space.
Read more about 2020’s insurance M&A activity across underwriting, life and health, property and casualty, insurance brokers, and InsurTech—and see our full insurance M&A outlook for 2021.
A refreshed insurance M&A landscape
We expect 2021 to be a positive year for insurance M&A. Companies are powering through the pandemic-driven disruption to pursue growth opportunities that are likely to emerge alongside an improving—and likely transformed—economy and industry landscape. There’s also an increased appetite for InsurTech acquisitions to meet customers’ digital engagement demands and support employees’ new work-from-home needs. A Deloitte survey of insurance industry executives—conducted prior to the pandemic—found that more than half expect to complete an M&A transaction in the next two years.
In Deloitte’s global outlook survey of insurance executives, 32% of North American respondents, 38% of European respondents, and 26% of Asia Pacific respondents plan to pursue M&A as a way to support financial stability over the next six to 12 months. Deals are likely to be strategic rather than opportunistic as companies consider where to play and how to win in the next normal.
Some companies may need to consider radical actions, including distressed asset sales, to salvage value from loss-making divisions and preserve the viable core business. This portfolio rebalancing may bolster market supply for future dealmaking. Conversely, companies that have a strong balance sheet and competitive positioning but expect a significant degree of structural disruption could use M&A to safeguard their customer base and accelerate long-term transformation of their business model.
2021 insurance M&A trends and drivers
In addition to piloting their company through the pandemic and various economic and market conditions in 2021, insurance executives should consider how to address the following trends as they move forward with their M&A growth strategies.
Moving forward on 2021 insurance M&A opportunities
Conditions are aligning for a positive insurance M&A environment in 2021. As company leaders look beyond COVID-19 and strategize how to thrive in the next normal, they are considering how acquisitions, mergers, alliances, disposals, and investments can help them enhance their portfolios, enter more profitable market segments, and accelerate the shift to digital operating models.
If you’d like to talk more about insurance M&A activity and how your organization can succeed in 2021, let’s set up a conversation.
Visit our Insurance industry page for broader industry insights, analysis, and resources.
In today’s rapidly evolving marketplace environment, key business issues are converging with impacts felt across multiple industry sectors. What are the key trends, challenges, and opportunities that may affect your business and influence your strategy? Look for more perspectives and insights from some of Deloitte’s forward thinkers.