Merger and acquisition activity is on the rise in the US and Canada
There were a reported 110 insurance agency mergers and acquisitions in the U.S. and Canada during the first four months of this year, according to Optis Partners, LLC. This represents the highest frequency of mergers and acquisitions seen in the insurance industry since before 2008. There are many factors that influence the prevalence of mergers and acquisitions, including the hardening of the insurance market and ongoing economic problems. For some organizations, these sorts of deals may simply make the most sense from a business perspective.
Trend may be beneficial for the insurance market as a whole
A higher frequency of mergers and acquisitions may be a positive sign for the insurance industry as a whole. Large companies are feeling more financially comfortably, allowing them to purchase their smaller counterparts and make use of their innovative technologies, analytics, and insurance products. Competition within the insurance market has also been gaining more momentum, which could be a difficult for small insurance groups to manage if they have no interest from their larger counterparts. These smaller groups have been banding together to form strategic partnerships in order to participate more effectively in their chosen markets.
2014 may beat 2012 in terms of mergers and acquisitions
The analysis from Optis Partners shows that private buyers and equity-backed firms represented some 80% of the mergers and acquisition activity from the buying side. Approximately 15% of this activity came from publicly held buyers. If current market trends hold out, this high degree of mergers and acquisitions activity is expected to continue throughout the remainder of 2014. In 2012, the insurance industry saw a great deal of activity when it came to mergers and acquisitions that may be overshadowed by the activity seen this year.
Insurance industry is showing healthy signs of growth
Mergers and acquisitions are generally seen as a positive sign in the insurance industry. In some cases, mergers are considered to be a symptom of a symbiotic relationship shared between two insurance organizations. Acquisitions are beneficial for some organizations from a financial standpoint, while they also open the market to new insurance products that may not have been available before the acquisition.