KPMG survey sees rise in M&A activity in insurance industry
Tax and advisory firm KPMG L.L.P. in a recent report said it foresees increased mergers and acquisitions in the coming year.
In its “2014 Insurance Industry Outlook Survey,” the audit, tax and advisory services firm also reported “the vast majority” of survey respondents are investing in customer programs, talent and technology to grow their businesses and gain a competitive advantage.
KPMG is one of the Big Four auditors, along with Deloitte, Ernst Young and PricewaterhouseCoopers. Its global headquarters is in Amstelveen, the Netherlands. Its Connecticut offices are in Stamford.
In surveying 95 U.S.-based senior insurance executives, KPMG found 54 percent of them indicated they expect to be involved in a merger or acquisition as a buyer over the next year, up from 34 percent in KPMG’s 2013 survey.
Of that 54 percent, 19 percent said they were “very likely” to be involved in a merger or acquisition as a buyer, up from 10 percent last year. Thirty-five percent said “somewhat likely” to expectations for MA activity, up from 24 percent the year before.
The number of executives who said they had no plans for MA activity dropped from 41 percent in 2013 to 21 percent in 2014.
Insurance executives expect a significant uptick in mergers and acquisitions in 2014, the survey found. Investments in strategic acquisitions, customer programs and information technology are expected to rise, too.
More executives in the survey reported being focused on talent management. They identified regulatory pressures as the top threat to business.
When asked by KPMG to identify the primary drivers of MA activity in the insurance industry in 2014, executives most frequently cited: “access to new markets and geographic areas” (45 percent), “regulatory changes and pressures” (45 percent, up from 36 percent in 2013), “access to new technology and products” (37 percent, up from 29 percent in 2013) and “improved use of capital” (24 percent).
Fourteen percent of respondents also indicated the “strategic divestiture of current assets” is one of the initiatives expected to consume management’s time, energy and resources the most, up from 3 percent last year.
More than half of respondents (52 percent) believed that “customer demand and changes in customer focus, buying patterns and preferences” will be the primary driver of transformation for their business, followed by “coping with changes in technology” (45 percent) and “domestic competition” (42 percent).
But cost continues to be the main challenge to implementing and supporting sophisticated data and analytics, according to 37 percent of respondents.
The survey was conducted February through April. Based on revenue in the most recent fiscal year, 29 percent of respondents work for companies with annual revenues exceeding $10 billion, 11 percent with annual revenues between $5 billion and $10 billion, 13 percent between $1 billion and $4.9 billion, 11 percent between $500 million and $999.9 million, 24 percent between $250 million and $499.9 million, and 13 percent with revenues between $100 million and $249.9 million.