Value of insurance M&A deals falls 80%

The total value of mergers and acquisitions in the insurance sector fell almost 80% last year, says a report from PricewaterhouseCoopers.

Throughout 2009 the increased trend of government ownership, with the need for banks to raise capital, may result in the disposal of insurance subsidiaries, said the report, Back to the ‘Domestic’ Future.

“UK banks will probably be active in making divestments in 2009 as they seek to shore up their capital positions,” said Charles Garnsworthy, a partner at PricewaterhouseCoopers.

“Given the low appetite of UK consumers for bancassurance [banks that own insurance companies], the disposal of insurance subsidiaries looks like a likely outcome. Annuity writers in particular will be under pressure to conserve or raise further capital if they are to survive the market.”

Capital pressure on life companies, falling equity values, higher defaults on bond portfolios, and increased capital requirements under Solvency II could also contribute to market consolidation, the report said.

Garnsworthy added that there might be opportunities for aggregators and external capital sources such as private equity houses to acquire distressed portfolios at discounted prices.