An S&P Global Market Intelligence analysis found that there were 544 deal announcements in the insurance sector in 2016, with an aggregate disclosed deal value of $27.39 billion.
That represents a significant drop in both volume and transaction value from 2015, which saw 604 deal announcements with an aggregate disclosed deal value of $164.19 billion.
Despite the annual declines, insurance brokers posted their largest fourth-quarter aggregate announced deal value since 2010. In the fourth quarter of 2016, announced insurance broker deal values totaled $4.47 billion.
The largest deal of 2016 involved Sompo Holdings Inc., one of the largest insurers in Japan, which in early October of that year announced plans to acquire Endurance Specialty Holdings Ltd. for $6.3 billion. The price tag represents about 1.4x Endurance's book value, according to S&P Global Market Intelligence calculations.
With the return of Asian investors driving notable transactions, consolidation activity ticked up in both the property and casualty and the life and annuity spaces. Factors such as negative interest rates and demographic challenges have led Japanese insurers to look to certain international markets for expansion. Interest from Chinese acquirers, meanwhile, has generally stemmed from their desires to diversify their portfolios in a relatively safe manner.
Endurance Specialty Holdings shareholders voted in favor of the proposed merger at a special general meeting held Jan. 27.
The second-largest announced deal of 2016 was Liberty Mutual Holding Co. Inc.'s planned acquisition of Ironshore Inc. The deal, announced in early December 2016, was valued at $3 billion, representing 145.5% of Ironshore's book value. The combination is expected to create the fifth-biggest excess and surplus insurance carrier, based on 2015 premium volumes.
Two mega-deals that could have changed the face of the U.S. health insurance industry have been blocked by the courts, which ruled that the combinations would do unacceptable harm to competition in the industry. In January, a federal judge blocked the proposed merger between Aetna Inc. and Humana Inc. writing that he was unconvinced that the efficiencies created by the merger would mitigate the anti-competitive effects that would be felt by consumers. After mulling their options, the two sides announced Feb. 14 they had opted to pull the plug on the deal. Humana will receive a breakup fee, net of tax, of about $630 million. Aetna also terminated its deal to sell certain Medicare Advantage assets to Molina Healthcare Inc.
Another federal judge blocked on Feb. 8 Anthem Inc.'s proposed acquisition of Cigna Corp. Those two companies have not announced plans to either appeal the ruling or terminate the transaction. Under the merger's terms, Cigna could receive a $1.85 billion termination fee.
