The stage is set for an active deal-making environment
CEE Insurance M&A Outlook
Deloitte's report has been published for the first time, providing an overview of the insurance M&A dynamics in the CEE region. The study contains detailed analysis about 12 countries, such as Poland, Czech Republic, Slovakia, Hungary, Romania, Slovenia, Croatia, Bulgaria, Serbia as well as Estonia, Latvia and Lithuania.
Recent performance of the insurance industry in CEE has been reassuring, gross written premiums are increasing significantly, with the largest contributor being the non-life segment and geographically being Poland. The average penetration (GWP compared to GDP) remained stable over the last three years with paid claims increasing the same time.
These positive dynamics were fostered by stable economic growth accompanied with improving labour market conditions in the region.
Besides insuretech solutions, another long-awaited trend picking up momentums market consolidation, which is driven by non-core exits and acquisitive growth strategies to reposition business and optimize economies of scale.
Most of the insurance markets in the region are still fragmented with a relatively high number of universal insurance companies with low market shares, which implies further consolidation as competitive pressure and difficulties to scale operations efficiently will require smaller players to rethink their strategy in the region.
Potential investors are evaluating our region based on three factors: i) expected future economic growth is still expected to outgrow Western Europe and other more developed countries, ii) GWP per capita in most countries is still significantly lower than in Western Europe still indicating higher than average future growth potential; iii) in the same time the new regulatory requirements (Solvency II and the expected introduction of IFRS 17 in early 2020s) make insurance operations more costly and capital extensive thus putting further pressure on profitability and require further centralization on a regional level. This higher than average market growth potential, together with the strategic repositioning of large insurance groups provide motivating factors to consider trading on both the sell and buy side. Fortunately, a number of potential players have significant war chests to deploy for executing deals.
“As a result of the large number of insurance companies operating on the local markets and the same the time multinational groups repositioning their presence in the region, in a tightening regulatory environment, we expect an increase in the number of M&A deals in the forthcoming years.”- explains Vedrana Jelušić Kašić, Partner in Financial Advisory Services.