Accelerated evolution: M&A, transformation and innovation in the insurance industry

19 June 2018

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For the insurance industry, the need to find new opportunities for sustainable and profitable growth has become imperative. Technology is delivering unprecedented insights at scale, new markets and segments are rapidly created, and new customer value propositions are forming. Insurance leaders recognize that they now have a window of opportunity to innovate and transform their organizations to achieve sustainable competitive advantage in the future.

However, insurers know that they can't achieve these objectives through organic growth strategies alone. They are looking to mergers and acquisitions (M&A), partnerships, and corporate venture capital initiatives as a critical path towards achieving their strategic objectives of transformation and innovation. And expect to accelerate this evolution with strategy-aligned M&A and innovation initiatives over the coming years.

Based on a survey of 200 insurance executives globally, KPMG's report, Accelerated evolution: M&A, transformation and innovation in the insurance industry, illustrates that the successful insurance organizations of the future will be the ones that are already thinking beyond traditional M&A to execute transformational deals that satisfy both the evolving needs of their customer base, and demands from shareholders and investors for strategic capital deployment to enhance enterprise value.

Key findings of this report include:

  • With capital and surplus levels at record highs across the industry, nearly three-quarters of insurers expect to seek acquisition opportunities and two-thirds expect to seek partnership opportunities over the next 3 years.
  • More than 70 percent hope their deals will transform their organization in some way.
  • Tech-driven M&A activity has outpaced that of all global M&A over the past 5 years with 28 percent seeking to co-invest in emerging technologies and innovation with future potential.
  • Finding ‘the right deal’ to achieve strategic objectives is not expected to be easy. Only 10 percent say they are extremely likely to find a target that is a strategic fit for their business model and only 7 percent for their operating model.
  • Internal capabilities for deal sourcing, evaluation, and execution are lagging. 72 percent don’t think their deal sourcing objectives are well aligned with corporate strategy.

This new deal environment and recent trends in M&A and innovation strategies, if executed successfully, have the potential to accelerate the evolution of the global insurance industry.