Life insurance M&A outlook gloomy: Report

Despite the flurry of life insurance business sell offs, a new study found global life insurers are overlooking Australia for superior acquisition opportunities elsewhere in the Asia Pacific.

Willis Towers Watson's analysis of merger and acquisitions in the global insurance market over the next three years predicts activity in the Australian sector to be minimal.

Only 5% of reinsurance, general and life insurance company executives that took part in the study are seriously considering acquisition opportunities in Australasia.

Instead, a large portion (40%) is targeting the growing middle class of emerging Asian countries such China, India, Indonesia and Vietnam, and look at developed Asian countries such as Hong Kong before focusing any acquisition efforts on Australia.

Willis Towers Watson head of strategy for insurance consulting and technology in Asia Pacific, Kevin Angelini, said Hong Kong is appealing based on a number of measures.

Hong Kong is a well-regulated free market with good profitability, mature insurance customers, abundant cash flow, robust solvency ability, strong management experience, and access to international capital markets, he said.

"All of these can help acquirers to integrate resources quicker and better," Angelini said.

In its effort to grow, one Australian life insurance company executive, who was among the 200 surveyed, said the firm is seeking out ways to bring in capital to invest in crucial areas and boost returns.

"In the next three years we hope to own a larger share of the market and will try to expand by merging with partners to increase the value of the business and to expand efficiently."

The report noted life insurers overall are "hard hit by the low yield environment" compared to other types of insurers. They are unable to achieve sufficient investment returns on annuities, which pay out guaranteed returns to policyholders, hence weighing down portfolios.

Italy's Generali by way of example is aiming to sell its US$50 billion German life insurance book, which, if sold, would mark the largest closed book sale on record, it said.

The most "powerful motivation" to enter an acquisition over the next three years is branding as many life insurers will need to transition to digital sales strategies, and that requires a strong, recognisable brand which is just as important as competing on pricing, the report said.

Read more: Asia PacificHong KongReportAustralia forWillis Towers WatsonKevin AngeliniAustralasiaChinaGeneraliIndiaIndonesiaItalyVietnam
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