News Life and Health05 Dec 2017

Australia:Life insurance mart trails Asia's in M&A activity

05 Dec 2017

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

Only 5% of reinsurance, general and life insurance company executives that took part in the study are seriously considering acquisition opportunities in Australasia, reported Financial Standard citing Willis Towers Watson's analysis of M&A in the global insurance market which predicts activity in the Australian sector to be minimal over the next three years.

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

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 notes 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.

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 says.

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