How Insurers Can Strengthen Their Cores with M&A

Bain Partner Simon Porter shares ongoing M&A trends in insurance as well as what to expect in 2021.


How Insurers Can Strengthen Their Cores with M&A

In 2020, insurers continued the multiyear trend of streamlining their portfolios to simplify operations. With the goal of strengthening their core capabilities, many insurers prioritized partnerships and investments over acquisitions. Simon Porter, a partner with Bain's Mergers & Acquisitions practice, discusses how these trends will endure and evolve as insurers move into the digital future.

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Using M&A to Help Insurers Focus on Their Core

When it comes to testing new ideas or adding capabilities, insurers prefer investments and partnerships over acquisitions.

Read a transcript of the video below:

SIMON PORTER: What we're expecting to see is continued simplification from insurers focusing on their core businesses. And as they look to access new capabilities, we expect that in the near term, they will continue to focus on partnerships and investments. What we've seen insurers do to access new capabilities is either partner with organizations or make investments through their corporate venture funds.

So we definitely expect to see insurers continue to invest through 2021. The corporate venture groups are actively looking at insurtechs to understand the ideas that are out there.

So at the moment, we're seeing insurers make acquisitions that really reinforce their positions in their core businesses, so seeing several acquisitions in the P&C space in the US with insurers looking to gain share. These acquisitions are really stabilizing and doubling down in areas that they know well. And I think what we're seeing is that reinforcing of the core is building a platform that will allow them to grow in the future.

Simplification is really being driven by a need to focus management on the core of the business. I think there are real questions about the benefits and the advantages of some of the more sprawling organizations that we've seen over recent years. Whether it's questioning are there real benefits between multiline offerings in the Americas, in particular, or for global companies, are there really advantages across markets?

When we look across the industry broadly, over the last five years, what we see is that 70% of the M&A deals over $1 billion have been driven by these divestiture moves. For 2021, expect that we will continue to see simplification as insurers reinforce their cores. However, everyone knows that you can't simplify your way to growth. So there will come a point where we see insurers taking bolder steps and making bigger moves.

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