Ey global-insurance-ma-themes-2016

1. Global
insurance M&A
themes 2016
Will M&A be an enabler for
insurance sector transformation?

2. Foreword Terms such as the “ return of the
megadeal” have been used to describe
insurance M&A activity in 2015 . The
significant increase in deal values
outlined in this document supports this
theme, but a more useful description
is that 2015 saw a rapid increase in
transformational deals.
Industry transformation is therefore
the main topic of this review of M&A themes in 2016, as it is the
transformation of the insurance sector that has been the key
driver of recent large deal activity. This fundamental industry
transformation is ongoing and indeed is likely to accelerate,
pointing to the likelihood of a highly active insurance M&A
market for some time to come.
The theme of transformation also has a fundamental impact
on the assessment and practical execution of deals. There has
been much focus on the challenge of integration, particularly
on the high-profile deals announced in 2015, but for a deal to
be transformational requires far more than effective integration
(vitally important as that is). Enabling genuine business
transformation through M&A will be a critical topic for insurance
management teams and investors in 2016 and beyond.
In this document, we explore some of the key sector
transformational themes driving M&A, and we also discuss
how insurers are reacting to the operational challenges of
integration and transformation.
We hope you find this document informative, and we would
welcome the opportunity to discuss our views with you.
D av id L ambert
G l oba l I n s ur a n ce T r a n s a cti on s L ea d er

3. Contents
G l oba l i n s ur a n ce d ea l a cti v i ty ................................................................ 2
K ey tr a n s f or ma ti on a l th emes d r i v i n g i n s ur a n ce M & A ............................. 4
C a p i ta l f l ow s .......................................................................................... 8
O utl ook f or 2 0 1 6 ................................................................................. 1 0
M & A i n teg r a ti on .................................................................................. 1 2
M eth od ol og y
► EY’ s Global insurance M&A themes 2016 is based on analysis of ThomsonO NE.com and Mergermarket data from 1 J anuary 2010
to 31 December 2015 .
► We included selected additional transactions that were not in the databases.
► Deals include transactions (announced or completed) in which the target is in the insurance sector.
► Deals in which less than 20% (disclosed) of the company was acquired have been excluded from this analysis.
► Equity investments were included.
► J oint ventures were not included.
► There is no minimum disclosed value deal threshold.
► US health insurance transactions have been excluded.
► The information and opinions contained in this document are derived from public and private sources that EY believes to be
reliable and accurate but which, without further investigation, cannot be warranted as to their accuracy, completeness or
correctness. This information is supplied on the condition that EY, its member firms, or any leader or employee of any thereof are
not liable for any error or inaccuracy contained herein, whether negligently caused or otherwise, or for loss or damage suffered
by any person due to such error, omission or inaccuracy as a result of such supply.

4. 2 Global insurance M&A themes 2016
G l oba l i n s ur a n ce d ea l a cti v i ty
N umber of d eals > U S $ 1b
9
14
24
2013 2014 2015
Americas Europe Asia-Pacific Middle East and Africa
Americas Europe Asia-Pacific Middle East and Africa
D eal v alue*
67 % 14% 18%
1%
5 0% 40% 10%
1%
40% 37 % 21%
2%
44% 28% 26%
2%
2015
2014
2013
2012
5 9%2015
2014
2013
2012
25 % 11%
12%
12%
13%
4%
3%
4%
4%
5 2% 32%
49% 35 %
49% 33%
D eal v olume*
2015 hig hlig hts
The year saw a sharp rise in global insurance deal
activity, with the total value of insurance- focused
transactions exceeding US$ 111b, a record high for
recent years. The key driver for this increase in activity
was the very large, or “ megadeals,” with the top 10
global insurance deals accounting for 67 % (US$ 7 4b) of
deal value.
H owever, in contrast to the global trend, deal values
for European insurers were down when compared with
2014. In part, this was due to large prior- year deals,
but it does appear that the introduction of the Solvency
II Directive has inhibited M&A activity, although this
“ overhang” is likely to lead to high levels of activity in
2016.
The top 10 deals include a number of key
transformational deals, with significant merger
activity among non- life specialty insurers, transactions
by brokers to significantly increase their global
range of capabilities and solutions, and maj or in-
market consolidation in Asia-Pacific. We discuss
the transformational themes driving M&A on the
following pages.
O f the top 10 deals, 5 were by J apanese groups
investing largely into the mature US and UK markets.
We discuss the key trends in capital flows on page 8.
7 3 % I n cr ea s e i n th e tota l v a l ue of
d ea l s , comp a r ed w i th 2 0 1 4
15 % D ecr ea s e i n th e v ol ume of
d ea l s , comp a r ed w i th 2 0 1 4
17 4 % I n cr ea s e i n th e a v er a g e v a l ue
of d ea l s , comp a r ed w i th 2 0 1 4
5 N umber of d ea l s
a bov e U S $ 5 b
* Figures may not add up to 100% due to rounding
U S $ 111b
U S $ 64 b
U S $ 4 0b
U S $ 4 9 b
5 65
664
5 02
5 4 4

5. 3 Global insurance M&A themes 2016
T op 10 d eals by d isclosed v alue
D eal activ ity by g eog rap hy * *
D ate T arg et T arg et country Acq uirer Acq uirer country * V alue ( U S $ m)
J ul 2015 Chubb United States ACE United States 28,5 34
J un 2015 Towers Watson United States Willis Group United Kingdom 8,113
J un 2015 H CC Insurance United States Tokio Marine & Nichido Fire J apan 7 ,5 04
J an 2015 Partner Re B ermuda Exor Italy 5 ,266
Sep 2015 Amlin United Kingdom Mitsui Sumitomo Insurance J apan 5 ,263
J ul 2015 StanCorp Financial United States Meij i Yasuda Life Insurance J apan 4,961
Sep 2015 H uaxia Life Insurance China B aotou H uazi China 4,944
J an 2015 Catlin Group B ermuda X L Group B ermuda 3,928
Aug 2015 Symetra Financial United States Sumitomo Life Insurance J apan 3,7 92
Nov 2015 Mitsui Life Insurance J apan Nippon Life Insurance J apan 2,7 43
Americas
Asia-Pacific
E urop e
Mid d le E ast and Af rica
2015
2014
2013
2012
3 3 5
14 4
24
62
3 4 5
18 1
17 8
215
7 8
62
7 2
26
16
22
24 6
269
2015
2014
2013
2012
2015
2014
2013
2012
2015
2014
2013
2012
15 , 19 5
19 , 9 25
1, 265
7 5 , 08 4
3 1, 4 8 9
16, 204
21, 606
25 , 3 04
15 , 05 5
13 , 5 8 8
7 9 9
8 3 8
5 66
12, 667
8 , 3 23
6, 15 5
2015
2014
2013
2012
2015
2014
2013
2012
2015
2014
2013
2012
2015
2014
2013
2012
V olumeV alue (US$ m)
* Acquirer’ s main country of operations
* * Deal data is by the geographical location of the target company

6. 4 Global insurance M&A themes 2016
K ey tr a n s f or ma ti on a l th emes d r i v i n g
i n s ur a n ce M & A
Insurers are not simply engaging in large deals in search
of greater scale. The key driver has been the underlying
transformation of the sector. Large- scale M&A is playing its part
as one of the key enablers for transformation — not the only
enabler by any means, but one of the key ways of accelerating
the j ourney toward a desired future model.
There are many components driving the current need for
transformation, and management teams are grappling with a
complex combination of these emerging and developing trends.
C ap ital op timiz ation
Regardless of regulatory regime, ongoing intense pressure on
margins is forcing insurers to look at every potential way to
improve returns on capital. Enhanced data and management
information tools are enabling management teams to reassess
returns and to be far more sophisticated in assessing and
managing risk.
Insurers are taking a more holistic view of the types of aggregate
underwriting and other risks taken across their organizations.
The use of “ global capital markets” in the transfer of risk (e.g.,
use of reinsurance, structured insurance solutions and other risk
transfer mechanisms) also continues to increase in sophistication
and application.
The hunt for enhanced yield is pushing new approaches to
asset allocation and asset liability matching. This requires
the development (or acquisition) of enhanced capabilities in
originating new asset classes, and in structuring and monitoring
such assets in a manner that ensures effective use of risk capital.
T he d riv e f or red uctions in op erating and
p roj ect sp end
O ngoing pressure on premium rates, the continuing outlook for
low investment yields and other factors impacting profitability
have once again put the spotlight on expense efficiency.
A number of business models will not be sustainable unless
management teams can find ways to achieve significant
reductions in ongoing expenses. This is leading many groups to
seek enhanced margins through merger synergies, but expense
management and rationalization are also driving groups to
consider divestment of businesses as a tool to achieve overall
simplification and expense efficiency.
I nv estment into
technolog y and enhanced
customer p rop ositions
C ap ital op timiz ation
T he continuing need f or
g row th, scale and new
cap abilities
T he d riv e f or
red uctions in op erating
and p roj ect sp end
T ransf ormational themes
d riv ing M&A

7. 5 Global insurance M&A themes 2016
El i te s p or ts tea ms ta l k a bout “ ma r g i n a l
g a i n s , ” th e con cep t th a t ev er y s i n g l e f a ctor
a f f ecti n g p er f or ma n ce s h oul d be a n a l yz ed
cl os el y a n d ev er y i mp r ov emen t, h ow ev er
s l i g h t, w i l l con tr i bute i n cr emen ta l l y to th e
d i f f er en ce betw een s ucces s a n d f a i l ur e. As
i n s ur er s tr a n s f or m, ma r g i n a l g a i n s a cr os s th e
w h ol e r a n g e of f a ctor s a f f ecti n g r etur n on
ca p i ta l a n d w i d er commer ci a l s tr en g th ma y
w el l s i mi l a r l y a d d up to th e d i f f er en ce betw een
s ucces s a n d f a i l ur e.
Proj ect expenditure has been very high across large parts of the
insurance sector and is likely to remain high as insurers continue
to deal with maj or changes in regulatory requirements, rapid
shifts in consumer behavior and expectations of service, and the
need to invest in new digital capabilities. The size of this proj ect
spend across the sector is a compelling part of the investment
rationale behind mergers of peers. Such businesses can either
continue to separately spend large amounts on new proj ects, or
they can combine, with reduced aggregate spend and reduced
execution risk.
T he continuing need f or g row th, scale and new
cap abilities
Insurers, like all businesses, need to search for profitable
growth. This continues to drive acquisitions into higher growth
and emerging markets, but with ongoing transformation and
increased sophistication across the sector, there is also a drive
to achieve growth in new areas of capability. In addition to
the acquisition of product and geographical capabilities in the
insurance manufacturing space, the search for new capabilities
is also manifesting itself in areas such as distribution, wider
insurance consulting and risk management, and technology.
I nv estment into technolog y and enhanced
customer p rop ositions
Technology will transform all elements of the insurance
value chain.
It remains to be seen whether digital proves to be an opportunity
or a threat to incumbent insurers. What is beyond doubt is
that rapid technological change is affecting every facet of the
insurance value chain, from customer acquisition, predictive
analytics, risk management and telematics, and other
developments, through to potentially revolutionary changes to
insurance administration from technologies such as blockchain
and robotics. Indeed, digital technology is affecting the very
nature of insurance risk, requiring new understanding of the
impact on traditional risk types (e.g., motor, home) as well as on
emerging risks such as cyber.
“ Convergence” between the insurance sector and other
nonfinancial sectors (notably, technology and consumer-
related businesses) is driving a blurring of the traditional lines
between sectors, with collaboration and cross- investment a
growing trend.
In this context, the type of M&A activity seen to date, including
insurers establishing ventures to invest into developing fintech
(financial technology) companies, is surely just the tip of the
iceberg of what is likely to be a series of increasingly large
and strategically important transactions at the interface of
insurance, technology and other relevant sectors.

8. 6 Global insurance M&A themes 2016
Achiev ing ef f ectiv e transf ormation
Management teams should not necessarily contemplate M&A
simply because their competitors are doing so. H owever, if
insurers see their competitors fundamentally transforming
their businesses, then they do need to react accordingly. That
is exactly what management teams the world over are doing
currently.
Carrying out a transaction, even a “ megadeal,” does not in and
of itself create transformation. Transactions simply create the
conditions for transformation to occur. Transformation requires
a fundamental re- evaluation of how the combined businesses
will operate after the deal — so it is a lot more than a “ standard”
acquisition and integration process. It is therefore imperative
that, post- merger, management teams continue to look closely
at the strategic obj ectives of the deal and ensure that they are
pulling all of the levers available to achieve the target end state.
H ow transf ormation is p lay ing out in k ey
subsectors and reg ions
Different elements of the insurance industry are transforming
and evolving in different ways, with a consequential impact on
M&A activity. In broad terms, the theme of capital optimization
plays a greater role in underpinning deal rationales in the life
sector, while non- life sector activity has tended to be driven
more by the themes of cost efficiency and capability build-
out. That said, capital optimization, cost efficiency, enhanced
capabilities and technology permeate the vast maj ority of
insurance M&A value assessments.
C a r r yi n g out a tr a n s a cti on , ev en a
“ meg a d ea l ” , d oes n ot i n a n d of i ts el f cr ea te
tr a n s f or ma ti on . T r a n s a cti on s s i mp l y cr ea te
th e con d i ti on s f or tr a n s f or ma ti on to occur .
Below, we discuss how specific trends are emerging as a result of
these overall transformational themes.
I ncreasing p olariz ation betw een “ old ” and
“ new ” businesses
As insurance groups focus their efforts, and capital, on their
forward- looking business models, the gap will widen between
old and new in terms of customer interface, product design,
administration, and many other areas of operations and
policyholder interactions. As a result, the increasing expense
strain from managing legacy operations will continue to present
a compelling case for divestment of legacy businesses to closed
and runoff consolidators.
That said, legacy businesses and portfolios generate significant
cash flow for many insurers. There will be a period during which
insurers need to balance the benefits of retaining legacy back
books with the longer- term necessity to create cash- generating
“ new” businesses.
S trateg ic d ecisions in a S olv ency I I
env ironment
The buildup to the implementation of Solvency II generated
intense speculation about M&A activity but did not lead to a
rapid increase in deal activity. If anything, uncertainty over the
eventual impact of Solvency II has acted as an inhibitor of deals.
H owever, insurers are now making M&A decisions based upon a
clear assessment of their current and proj ected capital positions.
The new reality of operating within a Solvency II environment is
requiring management teams to set strategy in a very different
way than under previous regulatory regimes. Smaller insurers
are taking actions to increase their capital flexibility (including
seeking capital raises, mergers and sales of non- core portfolios),
and insurers large and small will consider M&A as a tool for
optimizing and refocusing capital.
Solvency II is not only affecting M&A and capital allocation
decisions by European insurers. Changes in capital requirements

9. 7 Global insurance M&A themes 2016
I nsig hts f rom our 2016 Global Corporate
Divestment Study
EY’ s 2016 Financial Services Global Corporate
Divestment Study, i n d i ca tes th a t ma n y
i n s ur er s a r e n ot n eces s a r i l y p l a n n i n g to
d i v es t but w oul d be op en to op p or tun i s ti c
a p p r oa ch es . T h er e i s cl ea r l y a l a r g e ma r k et
f or i n s ur a n ce bus i n es s es a n d p or tf ol i os ,
w i th s ubs ta n ti a l ca p i ta l bei n g d ep l oyed by
i n d us tr y con s ol i d a tor s , r ei n s ur er s , As i a -
Pacific investors, major private equity players
a n d oth er s . I n s ur a n ce comp a n i es n eed to
be better p r ep a r ed to mov e w h en th er e i s
a r ecep ti v e buyer a n d a s tr a teg i c r a ti on a l e
to d i v es t.
for certain risk types are driving the creation of significant
capital flows to and from Europe, perhaps the most notable
example being the large amount of longevity risk reinsured
from Europe to North America during 2015 as European
insurers sought to optimize their capital position in the run- up
to Solvency II. Such global “ capital markets” in insurance risk
are likely to continue to adapt and evolve rapidly, in line with the
increased sophistication in capital and risk assessment.
“ Are w e in or are w e out? ”
Insurers have developed diverse businesses across a
number of markets, many of which are individually subscale
but represent important bridgeheads into future growth
markets. Transformational trends driving capital and expense
rationalization, and ruthless focus on core strategic priorities,
are increasingly raising a question for certain markets: “ are we
in or are we out? ” Many groups will decide emphatically that
they are in for the long term, and they may be able to increase
the scale and margins on such businesses through consolidation
with the operations of those who decide to retrench from certain
regions, niches or products.
Simplification through M&A
Simplification through M&A may sound like an oxymoron, but
as insurance groups seek to simplify their businesses — focusing
management time, investment and capital on those activities
critical to the future strategy — then disposal of non- critical
businesses becomes a key enabler of simplification. The
simplification agenda requires a thorough understanding of the
full cost of doing business across all product lines and locations,
whether that is incurred directly on a local basis, or a cost
incurred at a holding company or group oversight level.

10. 8 Global insurance M&A themes 2016
Capital flows
2015 M&A activity reflected strong demand from buyers and
providers of capital to the insurance sector, and a supply of
assets by insurers open to offers from potential bidders. This
trend appears to be set to continue, if not accelerate. A number
of the factors described earlier driving the industry to transform
are encouraging insurers to divest of operations that become
non- core to their future strategic areas of focus, while at the
same time there is significant capital available to the sector.
K ey trend s in terms of incoming cap ital
► There are significant capital flows coming out of Asia-
Pacific, most notably from Japan and China, into mature
insurance markets in North America and Europe. During
2015 , J apanese insurers invested US$ 21.9b in acquiring
North American insurers and US$ 5 .4b into European
insurance acquisitions.
► Private equity (PE) activity does not feature strongly in the
data on 2015 deal activity, as it has been dominated by large
corporate transactions. H owever, sophisticated PE investors,
and other financial investors are playing a very active role in
a wide range of M&A opportunities.
► Shifts in the global “playing field” through the introduction of
new regulatory solvency rules are creating markets for the
acquisition or divestment of certain risk types.
► This flow of incoming financial investment is consistent
with results from EY’ s 2016 Global Corporate Divestment
Study, which saw j ust 29% of insurance executives
identifying private equity and sovereign wealth fund
investors as likely buyers of insurance assets, compared
with 42% in 2015 . Results from that study also show a shift
in the types of buyers for insurance assets, with 5 2%
of insurers seeing foreign emerging-market financial
institutions as likely buyers of insurance assets, compared
with j ust 21% in 2015 .
T he challeng e of being comp etitiv e in
auction p rocesses
The ongoing flow of new investor types
i n to ma tur e i n s ur a n ce ma r k ets i s cr ea ti n g
ch a l l en g es i n a ucti on p r oces s es both f or
bi d d er s a n d s el l er s . S el l er s w i l l n ot l ook
s i mp l y f or th e bi d d er w i l l i n g to p a y th e
h i g h es t p r i ce. O th er con s i d er a ti on s , s uch
a s ea s e of tr a n s i ti on , s a f eg ua r d s f or oth er
s ta k eh ol d er s ( cus tomer s , emp l oyees , bus i n es s
p a r tn er s a n d ma n y oth er s ) a n d cer ta i n ty of
ex ecuti on , a r e a l w a ys k ey. As w e s ee l a r g e
insurers with high-profile brands divesting of
bus i n es s es th a t a r e h ea l th y but l es s r el ev a n t
to th ei r f utur e s tr a teg i es , ch oos i n g th e r i g h t
bidder will increasingly focus on nonfinancial
con s i d er a ti on s i n a d d i ti on to th e a l w a ys -
i mp or ta n t f a ctor of p r i ce.
W e a r e s eei n g bi d d er s becomi n g i n cr ea s i n g l y
sophisticated in defining their specific
v a l ue p r op os i ti on , both i n comp eti ti v en es s
of p r i ci n g a n d w i d er con s i d er a ti on s . S uch
bi d d er s typ i ca l l y h a v e v er y cl ea r p l a n s f or
the target business based upon specific
cor e comp eten ci es , th ey us e a r a n g e of r i s k
mi ti g a ti on tool s to of f - l oa d r i s k s th a t a r e n ot
cen tr a l to th os e f utur e p l a n s , a n d th ey i n v es t
v i a s tr uctur es p ut i n p l a ce to a ch i ev e op ti mum
capital efficiency.

11. 9 Global insurance M&A themes 2016
Asia-Pacific
Mid d le E ast
and Af rica
E urop e
13.6
0.4
5 .4
0.5
21.9
0.3
M&A transaction flows in 2015*
( U S $ b)
2.3
Americas
Acq uirer reg ion
Targetregion
Americas
Europe
Asia-Pacific
MiddileEast
andAfrica
Total
Americas 39.6 13.6 21.9 0.0 7 5 .1
Europe 2.3 7 .4 5 .4 0.0 15 .2
Asia-Pacific 0.3 0.1 19.5 0.0 19.9
Middle East and Africa 0.0 0.4 0.5 0.4 1.3
Total 42.1 21.5 47 .3 0.4 111. 5
* Figures have been rounded

12. 1 0 Global insurance M&A themes 2016
O utl ook f or 2 0 1 6
M a r ti n L uth er K i n g J r . op ti mi s ti ca l l y s a i d : “ T h e a r c of th e mor a l un i v er s e i s l on g but i t ben d s
toward justice.”
I f th er e i s s uch a th i n g a s a n a r c to th e i n s ur a n ce un i v er s e, th en w e ca n s ee a cl ea r tr en d i n th e s ector
becoming far more efficient and effective in its use of capital, using technology to streamline and
op ti mi z e cus tomer i n ter a cti on a n d op er a ti on s , a n d p r ov i d i n g a r a n g e of p r od ucts a n d ca p a bi l i ti es th a t
i n ma n y ca s es a r e cur r en tl y i n th ei r i n f a n cy.
The inevitability of this trend (or arc) can give confidence to management teams in making the case
for major strategic decisions, investments and divestments. However, uncertainties in how this arc
will play out drive great uncertainty in fully quantifying potential decisions and valuing potential
tr a n s a cti on s .
The question being asked is whether the high level of deal activity will continue through 2016.
We think the key question is: “Will the insurance sector continue to move through a period of
r a p i d tr a n s f or ma ti on ? ”
T h e r es p on s e to th a t w oul d be a n emp h a ti c “ yes , ” a n d i t i s our ex p ecta ti on th a t th i s i n d us tr y
tr a n s f or ma ti on w i l l con ti n ue to d r i v e h i g h l ev el s of M & A a cti v i ty.
M er g er s of
l a r g e a n d
mi d s i z ed p eer s
to be better
p os i ti on ed f or
tr a n s f or ma ti on
D i s r up ti on a n d
con s ol i d a ti on i n
th e d i s tr i buti on
s ector
S ol uti on s to
l eg a cy — cl os ed
a n d r un of f
bus i n es s es
N ew
con s ol i d a ti on
a n d outs our ci n g
mod el s
C on s ol i d a ti on
a n d
con v er g en ce
betw een
i n s ur a n ce,
tech n ol og y a n d
oth er s ector s
I n cr ea s i n g
p ol a r i z a ti on
betw een g l oba l
d i g i ta l “ s up er -
i n s ur er s ” a n d
coun tr y or n i ch e
bus i n es s mod el s
S trateg ic op p ortunities f rom the arc of insurance sector transf ormation

13. 1 1 Global insurance M&A themes 2016
O ur p red ictions f or 2016 and bey ond :
The disconnect
between “ old” and
“ new” business models
will drive further deal
activity
► Insurers will continue to release capital from legacy portfolios to focus on more
profitable segments and new product opportunities.
► Investors will create ever more sophisticated business models to optimize risks and
returns on the consolidation of such legacy businesses.
Consolidation among
large and midsized
insurers will continue
► Pressure on margins, increasing compliance and proj ect spend, and the need to build
new competencies will continue to drive compelling valuation cases for the merger of
large insurers.
There will be
further potential for
“ megadeals”
► Global insurers may use the period of rapid transition and change in the sector as an
opportunity to make the case for very large transactions.
Large groups will
continue to divest of
operations and simplify
their businesses
► While global insurers are looking at ways to develop and build new capabilities, the need
for greater focus and business simplification will continue to drive divestments.
► North American insurers in particular will see activist investors challenge management
teams to explore the full extent of potential business simplification.
M&A activity in the
European life insurance
sector
► We anticipate an acceleration in European life insurance M&A, with disposals of subscale
or non- economic portfolios, and a number of insurers taking actions to increase the
availability of capital to support new business.
Sector convergence will
drive increasing cross-
investment between
sectors
► B usinesses with leading global capabilities in digital customer experience, access to data
and best-in-class analytics will increasingly find opportunities to enter the insurance
value chain.
► Partnerships with incumbent insurers and, potentially, acquisition of regulated
businesses will become entry routes for such businesses into the sector.
Asia-Pacific investors
will continue to be
important providers
of capital into mature
markets
► Asia-Pacific capital will continue to invest into insurance businesses around the world.
Such investments will increasingly be into strategic regional or global commercial
structures that generate synergies and/or operational excellence.
► J apanese insurers will continue to invest into North America and Europe, albeit not at the
levels seen in 2015 .
Technological
transformation will
take on increasing
importance in M&A
► Insurers have been investing into new digital businesses, largely via “ venture” - style
structures. As digital business models continue to develop, with potential winners
emerging in the race to build leading- edge propositions, then larger- scale M&A is likely.
1
2
3
4
5
6
7
8

14. 1 2 Global insurance M&A themes 2016
T op three lessons learned by
insurers f rom their recent
M&A integ rations
R esourcing : despite continuing pressure on B AU margins
and the scale of regulatory change, releasing sufficient
resources to work on the integration is essential to
success. O f the insurers surveyed, 5 8% involved > 5 0
dedicated full- time equivalents (FTE) in integration.
P lanning : integration planning needs to commence
alongside due diligence and build momentum thereafter.
Sixty- four percent of insurers on average now have a
synergy and integration plan in place at signing, rising to
100% for deals > US$ 1b in value.
E x ecution: establishing and then maintaining the right
integration program governance, management and
controls are necessary to ensure that the acquirer and
target collaborate effectively, that functional areas do
not operate in silos and that integration work streams
collectively focus to achieve the target operating model.
M & A i n teg r a ti on
Effective integration is a critical step toward ongoing transformation. There is significant integration
a cti v i ty h a p p en i n g i n th e ma r k et a cr os s a l l r eg i on s , w i th a l mos t U S $ 1 b of cos t s yn er g i es bei n g ta r g eted by
th e Ace- C h ubb, W i l l i s - T ow er s W a ts on a n d X L - C a tl i n mer g er s a l on e.
P rimary v alue d riv er in recent
M&A integ rations
There is more to insurance M&A than j ust cost synergies; 7 8%
of insurers we recently surveyed identified capital synergies and
revenues as the primary driver of value in recent transactions.
Whatever the value drivers for any deal are, effective integration
planning and rigorous execution are critical to both enable value
creation and protect the inherent value of the business- as- usual
(B AU) operations of both the acquirer and target.
T arg et op erating mod el d esig n
The strategic rationale for the merger or acquisition and
relative size, shape and priorities of the acquirer and target
will materially influence the integration strategy selected.
While the finance, treasury and tax functions will in large part
become integrated whatever the strategy, for other functions
this is much less the case, and time needs to be taken to
evaluate the right answer given the specific circumstances
of each deal. This variation is in part what drives the depth of
levels of integration realized by insurers shown in the graph
to the right (“ Depth of functional integration achieved” ),
the other key factors being that integrations can require
sustained focus for up to three years and willingness to tackle
legacy issues.
K ey strateg ic p lanning
consid erations
► Will we build on or address legacy issues?
► Will “ one plus one” be enough or even right, given current
developments in the market?
► At what speed can we integrate, given our organizational
capacity and capability?
► What priority is integration versus other change programs,
and what interdependencies exist, e.g., digital, robotics?
► H ow do we maximise the current value of each business once
it is integrated?
Source: Striking the Right Chord: M&A integration in financial services, 2015.
Tax
Revenue
Cost
Capital
22%
22%
30%
26%

15. 1 3 Global insurance M&A themes 2016
Most imp ortant d eal imp rov ement f actors in hind sig ht
N umber of d ed icated integ ration resources, by d eal v alue*
D ep th of f unctional integ ration achiev ed
Less than US$ 100m US$ 100m — US$ 499m US$ 5 00m — US$ 1b More than US$ 1b
Most important Important
H igh integration (5 – 6) Moderate integration (3– 4) Low integration (1– 2)
Integrate more deeply
More than 5 0 FTE
Finance, treasury or tax
Legal, risk and compliance
H R
O perations
Front office and distribution
IT
26– 5 0 FTE
16– 25 FTE
6– 15 FTE
Integrate more quickly
More integration
resources
Start integration
planning earlier
More effective governance, decision-
making and program management
Communicate better
with stakeholders
B etter quality
integration resources
12%
22%
18%
16%
10%
14%
8% 28%
22%
38%
32%
38%
34%
48%
Manag ing p eop le and
culture
H uman capital and the relationships
that key individuals hold in the
market remain primary assets of
insurers that need to be carefully
nurtured and guarded during an
integration. If managed well, they can
help accelerate integration delivery
and value realization. They can also
destroy value even quicker if allowed.
The H R, people and communication
work stream(s) are consequently
of paramount importance because,
among other things:
► Retention measures are often
required to “ lock- in” the employees
key to organic growth and/or the
integration effort, both at the
acquirer and target.
► The path to parity of employee
proposition needs to be explained
early and delivered upon.
► Cultural similarities and differences
need to be quickly identified,
understood and communicated,
and then harmonized in a
structured change management
program over a sustained period.
► Communication programs need
to be proactively influencing
employee perception and
engaging staff in effective two-
way dialogue before the rumor
mill takes over and negative
messages disseminate across the
organizations.
► A significant proportion of
the workforce may need to be
trained in the use of new policies,
processes and systems, depending
on the target operating model
selected.
31%
17 %
11%
17 % 67 % 17 %
44%44%
67 % 17 %
28%41%
Source: Striking the Right Chord: M&A integration in financial services, 2015.
Source: Striking the Right Chord: M&A integration in financial services, 2015.
5 2%
34%
31%
28%
23%
20% 5 4%
23%
40%
22%
26%
34% 14%
40%
47 %
32%
5 3%
26%
* Dedicated = > 5 0% of time

16. EY | Assurance | Tax | Transactions | Advisory
About EY
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the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In
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© 2016 EYGM Limited.
All Rights Reserved.
EYG No. EG0319
38942.indd (UK) 02/16. Artwork by Creative Services Group Design.
ED None
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specific advice.
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