Insurance M&A The Rapidly Changing Landscape TLT016 Speaker : - - PowerPoint PPT Presentation
Insurance M&A The Rapidly Changing Landscape TLT016 Speaker : Grace Vandecruze, Managing Director, Grace Global Capital LLC Learning Objectives State of the Market Regulatory Uncertainty Equity Market Valuations
TLT016
Speaker:
The Insurance Industry is on the Cusp of A Radical Transformation. The consolidation of two powerhouses in the P&C sector, along with the impact of foreign buyers in the U.S. is reshaping the insurance landscape. This presentation examines M&A - The Rapidly Changing Landscape, with a focus on P&C, Life and Health Sectors.
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Headwinds Tailwinds
Environment
Markets
Capital
VS.
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Source: namic.org/inmagazine/14winter/
7 Price/Book 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50
SNL U.S. Insurance L&H SNL U.S. Insurance P&C SNL U.S. Reinsurance SNL U.S. Managed Care
Averages 10Y 5Y 1Y Current U.S. L&H Insurers 1.24x 0.99x 0.95x 0.97x U.S. P&C Insurers 1.30x 1.24x 1.30x 1.32x U.S. Reinsurers 1.10x 0.93x 1.03x 1.04x U.S. Managed Care 2.03x 2.07x 2.85x 2.94x
Source: SNL Financial Database
Source: SNL Financial Database
Price/EPS 8 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0
SNL U.S. Insurance L&H SNL U.S. Insurance P&C SNL U.S. Reinsurance SNL U.S. Managed Care
2005 NWP: $426.8B Capital & Surplus: $432.3B 2,757 companies 2015 NWP: $584.2B Capital & Surplus: $680.8B 2,671 companies
Source: SNL Financial Database
State Farm 10% AIG 6% Allstate 6% Liberty 5% Travelers 4% Farmers 4% Nationwide 3% Progressive 3% Berkshire 3% Zurich 3% All Others 53% 9 State Farm 10% Allstate 5% Berkshire 5% Liberty 5% Travelers 4% Progressive 4% Chubb 4% Nationwide 3% Farmers 3% AIG 3% All Others 54%
2005 NWP: $521.1B Capital & Surplus: $244.2B 961 companies 2015 NWP: $623.6B Capital & Surplus: $366.9B 741 companies
Source: SNL Financial Database
MetLife 13% Prudential 7% Voya 5% AEGON 5% Manulife 5% AIG 5% Hartford 5% New York Life 4% Principal 3% Lincoln National 3% All Others 45%
10 MetLife 9% Northwestern 6% New York Life 6% Prudential 6% Lincoln National 4% Mass Mutual 4% Manulife 3% AEGON 3% State Farm 3% Securian 2% All Others 54%
2005 NWP: $269.8B Capital & Surplus: $ 60.4B 893 companies 2014 NWP: $526.9B Capital & Surplus: $143.0B 1,060 companies
Company has an announced M&A transaction Source: SNL Financial Database
UnitedHealth 12% Anthem Inc 11% Aetna 7% HlthCare Svc Corp 5% Independence Health 3% Humana 3% Highmark 3% BCBS MI 3% EmblemHealth 3% Kaiser 2% All Others 48% UnitedHealth 10% Anthem 10% Humana 9% HlthCare Svc Corp 5% Aetna 4% Centene 3% Independence Health 2% Highmark 2% Kaiser 2% WellCare 2% All Others 51%
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Americas Europe Asia
Source: Goldman Sachs Research; *Market Cap estimated at 1.5x surplus; 2014 Statista.com;
$59.5 $40.2 $38.4 $21.1 $19.0 $13.9 $13.9 $12.6 $10.5 $10.3
AEGON Ageas Prudential Plc Aviva Metlife* Prudential Financial* Legal & General Group AFLAC Hartford Alleanza Association Top 10 Global Companies in 2000 by Market Cap ($ in billions) Top 10 Global Companies in 2014 by Market Cap ($ in billions)
$81.5 $66.1 $62.9 $62.6 $61.8 $59.6 $42.8 $38.1 $34.7 $33.2 China Life AIA Metlife Ping An AXA Prudential Plc Prudential Financial ManuLife China Pacific Generali
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Small, Bolt-on Transactions AIG/Distress Sales
Transformational/ Scale Focused
Source: SNL Financial Database
P/E, Specialty Focused
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102 107 88 81 110 107 97 90 79 78
20 40 60 80 100 120 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Deal value ($B) Property & Casualty Life & Health Managed Care Multiline Total deals
*
$5.0 $5.5 $1.2 $0.5 $17.5 $1.1 $5.5 $3.6 $13.5 $12.3
0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Deal value (B) Life & Health
Aviva/AmerUS $2.7 InvGrp/ScottishRE $0.6 PL/Chase $0.9 Aegon/Merrill Lynch Life $1.3 ACE/Combined Ins. $2.4 SwissRe/New CA $0.5
MET/DELA & ALICO (AIG subs) $15.5
Fairfax/Zenith $1.4 Athene/Liberty (RBC) $0.6 SCOR/Trans. RE $0.9 Harbinger/Old Mutual $0.4 Guggenheim/EquiTrust $0.4 CPPI/Wilton Re $1.8 GreyCastle/SAC $0.7 CPPI/TransAm $0.5 Manulife/Std Life $4.0 PL/MONY $1.0 SCOR/Generali’s US $0.9 GAFG/Forethought $0.7 Resolution/Lincoln $0.6 DE Life/US Annuity $1.4 PRU/Hartford Life $0.6 Athene/Aviva $1.5 Athene/Presidential $0.4 Sumitomo/Symetra $3.7
Dai-ich Life/PL $5.6
Meiji/Stancorp $5.0 Strategic transactions are noted in blue; Financial transactions are noted in red Source: SNL Financial Database
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*
$4.6 $11.6 $15.9 $6.4 $7.4 $6.8 $2.0 $4.6 $7.8 $52.7
0.0 10.0 20.0 30.0 40.0 50.0 60.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Deal value (B) Property & Casualty
ACE/ABA (Brazil) $0.9 Tokio Marine/HC C $7.4 Exor/PartnerRe $6.6 Fosun/Ironshore $2.1 CM/Sirius $2.2 Endurance/Montpelier $1.4 Validus/Western World $0.7 TPG/Waranty Gp $1.2 Wright Ins/B&B $0.6 Catlin/Wellington $1.1 QBE/Preatoria $0.8 Liberty/OH Casualty $2.7 Mapre/Com. $2.3 QBE/WintherthurUS $1.2 Munich Re/Midland $1.3 Zurich/21st Century $1.9 Farmers/AIG auto $1.9 Validus/IPC $1.7 Fairfax/Odyssey Re. $1.0 ACE/Rain&Hail $1.0 Fairfax/Zenith $1.3 Alleghany/Transatlantic $3.5 Allstate/White Mt $1.0 Nationwide/Harleysville $0.8 QBE/Balboa $0.7 Travelers/Dom. of Canada $1.1 Dupperreault Grp/SAC Re $0.6 American Family/Homesite. $0.6 Enstar&Stone Pt/Torus $0.7
ACE/Chubb $28.4
Strategic transactions are noted in blue; Financial transactions are noted in red Source: SNL Financial Database
Liberty/Safeco $6.2 Tokio Marine/ PA Con. $4.7
$53.0
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Source: SNL Financial Database
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Private Equity Dominates Increase in Cross-Border Transactions Niche Focused/ Specialty Acquisitions Significant dry powder with PE firms will propel M&A forward Could serve as a catalyst for higher premiums Overseas players interested in establishing U.S. beachhead in niche businesses Retrenchment from U.S. by European insurers due to Solvency II requirements Chasing GDP growth by North American/European insurers in Asia/Latin America Focus on accretive use of capital/bolt-on acquisitions to offset lack of organic growth prospects Renewed focus on core competencies by shedding peripheral businesses
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Resurgence
Strategic Deals Low Valuation/ Regulatory Uncertainty “Cash is King” There has been a resurgence of large strategic deals in 2015 Regulatory concerns over non-bank SIFI will limit large, strategic transactions among the top life insurers Low valuations with little catalyst for stock price performances remain a significant
Continued regulatory overhang as industry deals with the explosion of regulatory requirements and authorities Cash will continue to be the currency of choice, driven by significantly improved balance sheets with excess capital
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Focus of major players on being either one of globalization, domestic dominance, or regional / niche markets Continued rationalization of non-core / subscale businesses
Convergence of global solvency standards What role will the U.S. regulatory position play? The Fed’s influence over the insurance industry will continue
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Recalibration of ROE targets Continued regulatory and rating pressures
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Contact Information
Grace Vandecruze Managing Director Grace Global Capital LLC 477 Madison Avenue, 6th Floor New York, NY 10022 Phone: 917-501-3565 gv@graceglobalcapital.com www.graceglobalcapital.com
Grace Vandecruze is the Founder and Managing Director of Grace Global Capital LLC, a consulting firm providing financial advisory, restructuring, valuation and capital-raising services to insurance regulators and companies since 2007. She advised the Attorney General of Delaware on the Highmark affiliation with Blue Cross Blue Shield of Delaware. In addition, she has served as financial advisor to Insurance Commissioners in several states including New Jersey, Indiana, Maryland, and North Carolina. She was a Managing Director at Swiss Re and was responsible for the firm's regulatory advisory practice in the insurance and financial services industries. She has extensive expertise in mergers and acquisitions and capital raisings, and most notably she provided expert testimony on the valuation of Conseco during the largest bankruptcy in the insurance industry. Prior to joining Swiss Re, she was a Vice President at a private equity firm specializing in the insurance industry and an Associate in the Financial Institutions Group at Merrill Lynch. She earned an MBA in Finance from The Wharton School at the University of Pennsylvania in 1994 and a BBA in Accounting from Pace University in
is a CPA. She is also a licensed sailor and has participated in several mountain treks to Bhutan, Annapurna, Kilimanjaro and Everest Base Camp.
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