Competition among European insurers for attractive technology assets is set to intensify, a report on insurers’ M&A intentions published by Towers Watson, in conjunction with Mergermarket, has found.
Among respondents from property and casualty (P&C) companies, more than four in ten rated digital distribution as the most attractive channel for acquisition in the next three years. A quarter of life insurers also put top priority on digital distribution capability, albeit somewhat behind the bancassurance channel which dominates in many markets across the EMEA (Europe, Middle East and Africa) region.
The availability of modern technology platforms in particular was rated equally with a target company’s market share as the key driver of valuations for P&C personal lines businesses. Moreover, a number of senior industry executives indicated that they expect to cast their M&A nets wider in the future to potentially absorb specialist technology providers that could enhance their business prospects.
“We view the importance of digital distribution as part of the move to a more technology focused insurance business model,” commented Andy Staudt, M&A Leader – EMEA P&C Insurance for Towers Watson.
He added: “New technology platforms can be developed internally by companies but given the high levels of investment required to implement some of these initiatives and the development time involved, our respondents expect to see major insurance companies acquiring some of these capabilities from smaller niche providers. This could lead to a high level of competition for these targets, as well as the growth of new technology-led businesses that develop solutions aimed at the insurer market.”
In its survey report – Ready for takeoff: The outlook for insurance M&A in EMEA 2014 – Towers Watson noted that the emphasis on technology solutions was symptomatic of a global move to support consumers in comparing and choosing their own financial products. The growing pressure to compete in areas such as real-time pricing, telematics and in the general use of big data were also identified as catalysts for future M&A activity.
Paul Francis-Grey, Deputy Editor and Head of Financial Services at Mergermarket, said: “Financial technology has fast become one of the most active sub-sectors in M&A terms as companies look to enhance their capabilities and offerings. Advancements in technology and the increasing reliability that businesses have upon it has placed added emphasis upon employing robust and functional systems, making it an increased necessity across the insurance sector.”
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