UK insurance M&A the outlier as EMEA deal volume falls in 2023

Mergers and acquisitions in the UK insurance industry rose in 2023, in contrast to a wider slowdown in deal activity across Europe, the Middle East and Africa.

There were 156 acquisitions of UK insurance targets last year, up from 130 in 2022, according to S&P Global Market Intelligence data. Deal numbers across EMEA, meanwhile, dropped to 354 from 385 over the same period, largely because deals fell year over year in many of the typically most active countries, including France, Ireland, Spain and Italy.

The general decline is in keeping with a wider slowdown in insurance M&A activity in other regions across the globe.

Buoyed by brokers

The UK has been comfortably the most active M&A market in EMEA by deal volume over the last five years, typically racking up in excess of 100 transactions a year, while the other active countries generally have deal volumes in the low double digits.

The main driver of the UK's volume is broker M&A. As in the US, there is a large number of small brokers and several larger groups with buy-and-build strategies that are keen to snap up smaller rivals.

One of the biggest deals of 2023 by transaction value, however, was arch-broker consolidator Ardonagh Group Holdings Ltd.'s pending sale of Atlanta Group Ltd. The personal lines brokerage, which Ardonagh built up through a series of acquisitions, is being sold to UK broker and MGA group Markerstudy Ltd. Ardonagh will hold a "substantial minority equity stake" in the combined Markerstudy/Atlanta entity.

While broker deals dominated, there were also some notable UK carrier acquisitions in 2023.

RSA Insurance Group Ltd., owned by Canada's Intact Financial Corp., was both a buyer and seller in the year, acquiring Direct Line Insurance Group PLC's brokered commercial lines business, and offloading its UK direct home and pet personal lines business to Admiral Group PLC. Aviva PLC is adding American International Group Inc.'s UK protection business to its clutch of recent bolt-on acquisitions.

Despite leading other countries by a substantial margin, deal activity was not confined to the UK.

Assicurazioni Generali SpA, which had a busy year for acquisitions, topped the table of deals with disclosed transaction values with its €2.30 billion purchase of Liberty Mutual's Spanish business. Caisse Centrale de Réassurance SA, France's state-owned catastrophe reinsurer, sold CCR Re Société anonyme, its multiline international reinsurance subsidiary, to a consortium of French mutual insurers.

Busy start

Although deal numbers across EMEA were down in 2023, they were slightly ahead of 2019, before the COVID-19 pandemic hit. Early signs indicate that 2024 will be another active year for insurance mergers and acquisitions both in the UK and elsewhere.

Aviva has agreed to buy Lloyd's of London insurer Probitas Holdings (Bermuda) Ltd, continuing its bolt-on acquisition strategy. ageas SA/NV has declared its interest in buying Direct Line Insurance Group, although the UK insurer has rejected two indicative offers from the Belgian group so far. And Bloomberg reported in March that Generali has drawn up a wish list of acquisitions, which includes some large European insurance groups, including Aviva.

During a recent earnings call, Generali CEO Philippe Donnet dismissed talk of its wish list as "press rumors." But he also indicated that, unlike some of its peers, Generali's M&A strategy would not be limited to bolt-on deals.

Broker consolidators are showing no signs of slowing down. Ardonagh, for example, has already announced the acquisitions of mid- and high-net-worth broker Hoxton Risk Services Ltd. and Solutions Healthcare so far in 2024.

And the UK pensions risk transfer market is providing fuel for back-book deals. Rothesay Life PLC announced in March that it is acquiring a £6 billion portfolio of Scottish Widows Ltd.'s in-force bulk annuity business from parent Lloyds Banking Group PLC.