Global insurance M&A trends

Global Insurance
Mergers and Acquisitions

2 Global Insurance – Mergers and Acquisitions
Contents
03 Introduction
04 Global Insurance M&A
06 Global Deal Pricing and Value
08 Top 50 Global Deals (2011-2013)
10 Western Europe
14 North America
18 Asia Pacific
22 Latin America
26 Middle East and North Africa
30 Private Equity
32 Transaction Risk

Global Insurance – Mergers and Acquisitions 3
This document draws together our views,
observations and analysis of the global trends in
the insurance M&A market, including influencing
factors and macroeconomic variables.
Our analysis covers five primary regions: Western Europe, North America, Asia,
Latin America and the Middle East and North Africa. Each section includes a
review and remark on deal activity and current trends, in addition to consideration
of future bearings.
We believe that improving macroeconomic conditions in developed markets will
bring more positive activity in the near future.
We would welcome the opportunity to discuss our insights into your specific sector
with you.
Dear board member
Introduction
Peter Allen
Partner
Global Head of Insurance
T +44 (0)20 7728 2154
E peter.d.allen@uk.gt.com

2006
2007
2008
2009
2010
2011
2012
2013
615
755
1450
1060
892
518 537
342
Global Insurance M&A
Since the global financial crisis, we have
observed a consistent decline in global deal
activity; with deal volume hitting its
lowest level through 2011. However, there
is ample evidence for optimism in the near
future. Although a cautionary attitude
towards M&A remains, the effects of
more stringent monitoring of capital and
operational ‘belt-tightening’ have left a
number of firms with capital to deploy.
Improved macroeconomic conditions in developed countries,
allied to the availability of attractive financing options is
having a positive effect on firms’ appetite to re-enter the
M&A market. While most observers have suggested that the
market has been driven by a desire to expand, both from a
product and a geographic perspective, Grant Thornton’s
research suggests that, following the global financial crisis,
disposals remain a prominent driver.
Additionally, domestic consolidation has emerged as a key
theme, particularly in developed markets, but also in
emerging economies.
Between 2011 and 2013, over half of the companies
targeted were insurance distributors. Distributors present an
attractive investment proposition for both cash buyers and
private equity houses. The former due to their strategic
importance; the latter because brokers are often cash-
generative. Moreover, the lack of exposure to underwriting
risk reduces the capital volatility. These tactical acquisitions
are also highly beneficial for intermediaries as they allow
them to meet their expansion plans.
The acquisition of distributors is remarkably important in
Western Europe and the United States. Despite high
valuations in the wholesale broking sector, continued
industry consolidation is expected in 2014 due to high
intermediation in mature economies.
Number of Global Insurance Deals
(2006 – 2013)
Source: Insurance Intelligence Center

19%
11%
3%
61%
6%
55%
7%
11%
23%
2% 2%
Global Insurance M&A
Unsurprisingly, the United States remains the most active
region globally. This is despite myriad challenges, including
slow insurance market growth, poor insurance pricing and
insurance catastrophes such as Superstorm Sandy.
Meanwhile, there has recently been a notable rise in deal
activity in emerging markets, particularly in Latin America
and Asia Pacific. Insurers are increasingly drawn to high
growth markets in search of returns. Conversely, insurers in
emerging countries have shown a greater interest in acquiring
companies established in mature economies.
Volume of Global Insurance Deals:
Regional Market Share
(2011 – 2013)
Europe
Asia
Middle East & North Africa
North America
Latin America
Accident and Healthcare
Insurance Distribution
Life Insurance
Non-Life Insurance
Reinsurance
Services
Volume of Global Insurance Deals:
Target Company by Subsector
(2011 – 2013)

0 5,000 10,000 15,000 20,000
US$ Million
Deal Y-3
Deal Y-2
Deal Y-1
Deal Year
Deal Y+1
Deal Y+2
Deal Y+3
0 5 10 15 20 25 30 35
Price Earning Ratio
Deal Y-3
Deal Y-2
Deal Y-1
Deal Year
Deal Y+1
Deal Y+2
Deal Y+3
Global Deal Pricing
and Value
The analysis of post-deal Total Net Asset Value (TNAV) and
Price-Earnings Ratios (P/E Ratios) of the top 50 global deals
presents interesting contrasts.
P/E trends suggest that short-term sentiment reacts
positively to deals.
TNAV evaluations offer a direct contradiction.
Companies suffer a decrease in net asset value the
year following the deal. This is likely a direct
consequence of deal costs such as re-alignment,
operational changes or cultural integration.
Nevertheless, this is followed by a steady recovery
which derives from the strategic benefits of the
acquisition.
Top 50 Global Deals: Average TNAV
(2011 – 2013)
Top 50 Global Deals: Impact on Average P/E Ratio
(2011 – 2013)
Source: Grant Thornton Research and Insurance Intelligence Center

0
100
200
300
400
500
600
US$Million
AverageP/BV
2008 2009 2010 2011 2012
0.5
0
1
2
1.5
2.5
3
Global Deal Pricing and Value
Price to book values recovered sharply in 2011 and
eased off in 2012. One possible reason for the 2012
movement is that average deal sizes were much
higher, implying that larger deals are -
unsurprisingly - priced more cautiously.
Source: Grant Thornton Analysis of Deloitte Insurance M&A 2013
Insurance Deals: Price to Book Value
(2008 – 2012)
No. of Deals
Average Deal Values (US$M)
Average P/BV Deal Multiples

0
10,000
20,000
30,000
40,000
50,000
Western
Europe
North
America
Southeast
Asia
Latin
America
Middle East
and Africa
US$Million
26%
32%
26%
12%
4%
Top 50 Global Deals
(2011-2013)
Although North America was the location for more than 60% of global
M&A deals between 2011 and 2013, when considering the Top 50 Deals
by Value, only 32% of the sample took place there. Surprisingly, despite
significant lower insurance premium volume, Asia Pacific was the location
for 26% of the top 50 global deals in 2012.
In 2010 and 2011, the search for growth had been
the overwhelming driver behind global deal
making. Insurers sought to diversify their risk by
expanding their product ranges and geographical
footprint. Moreover, firms focused on
maximising available capital, often taking
advantage of perceived low prices and
opportunities to acquire ailing businesses.
However, Grant Thornton’s analysis of the 50
largest deals between 2011 and 2013 indicates a
change in trend. Divestments, either by insurers
or banks, are prevalent, with over 50% of deals
driven by a desire to dispose of businesses that are
not strategic priorities or are no longer financially
profitable, or forced upon financial institutions
by governments and regulators.
Top 50 Global Deals: Breakdown by Region and Value
(2011 – 2013)
Source: Grant Thornton Analysis
2013
2012
2011
Top 50 Global Deals by Region
(2011 – 2013)
Western Europe
North America
Southeast Asia
Latin America
Middle East and Africa

0
500,000
1,000,000
1,500,000
2,000,000
2008 2009 2010 2011 2012
US$Million
35%
22%
8%
31%
4%
Top 50 Global Deals (2011-2013)
Prior to the global financial crisis, consolidation
drove deal-making activity, partly due to the ease
with which institutions could leverage debt, in
addition to the availability of funding from Private
Equity investors. Moreover, as banks sought to
broaden their portfolios, particularly given the
increasing appeal of bancassurance products,
M&A activity led to further consolidation.
However, with the financial pressures resulting
from the crisis came a change in the status quo.
Banks were required to rebuild their balance
sheets, sometimes by disposing of their non-core
businesses. Each trend that typified pre-crisis
conditions was systematically reversed by the
new norms.
Macroeconomic conditions are showing
favourable trends; as 2014 progresses, market
conditions are likely to be more akin to those of
pre-crisis times, at least in developed markets. The
cyclical nature of such trends would suggest that,
with improved conditions, deal-making will
increase and consolidating trends will return.
Insurance Premium Volume by Region (2008-2012)
(2008 – 2012)
Source: Sigma
Western Europe
North America
Latin America
Advanced Asian Markets
Emerging Asia
Top 50 Global Deals Rationale
(2011 – 2013)
Divestment by an Insurance Business
Divestment by a Bank
Private Equity
Bolt-on
Unrated
Source: Grant Thornton Analysis of Insurance Intelligence Center

Western
Europe

0
50
100
150
200
250
300
2009 2010 2011 2012 2013
US$Billion
0
2
4
6
8
10
12
United
Kingdom
France Italy Germany Spain Austria Switzerland
Total
Life
Non-life
Western Europe
Western Europe
Despite recent signs of recovery and improved levels of confidence,
uncertainty remains in Western Europe, particularly in the south.
In the current low growth environment, many
companies have opted for organic growth over
acquisitions, explaining the relatively low volume
of deals in the last four years. Nevertheless, with
19% of global deals, as a whole, Europe remains an
important location for M&A activity.
Although Europe is often perceived as a single
market, the political and macroeconomic
panorama varies dramatically from one country to
another. The vast difference in deal volume
between states is therefore unsurprising. A recent
survey by Clifford Chance found that the UK is
the most attractive European country for M&A1
.
Despite the stringent entry requirements
imposed by the Franchise Board, Lloyd’s of
London remains one of the most appealing
investment propositions. For insurers outside
Europe, Lloyd’s guarantees immediate access to
a global network of licences, a pool of business
and a rating2
.
In such a mature market, internal growth
opportunities are limited, especially in this
uncertain economic climate; consequently, we
expect more consolidation in order to achieve
economies of scale or capital efficiency, particularly
now that the Solvency II timeline is clearer.
1
Clifford Chance. “European M&A: On the road to recovery?”
2
Clyde&Co: “M&A activity, A Global Overview 2009-2013”
Austria
Germany
France
Italy
Spain
Switzerland
United Kingdom
Western Europe: Gross Written Premiums
(2009 – 2013)
Western Europe: Penetration as a % of GDP
(2012)

47%
10%
27%
4%
6% 6%
0
20
40
60
80
100
120
2010 2011 2012 2013
0
75
150
225
300
375
450
DealValue(US$Million)
Number of Deals
Average Value of Disclosed Deals
Western Europe
Many European insurers are looking to invest in
emerging markets as they offer greater returns.
This is particularly true for Property and
Casualty, composites and reinsurance firms.
However, there is competition for quality targets.
Further transactions are motivated by a desire to
diversify the product offering and diversify the
scope of the distribution model; not only to
achieve greater returns, but also due to the
pressure from rating agencies that may apply
pressure to firms that do not offer a wide range of
products in various regions3
.
The Lloyd’s Market will continue to entice
deal-makers, its global standing and exposure to a
highly diverse portfolio of risk regardless of
market conditions appeals to international insurers
looking to expand their global footprint. The
similarity in risk profile between the Lloyd’s
Market and reinsurers or Property and Casualty
specialists, remains attractive.
Meanwhile, as a mature market showing signs
of renewed macroeconomic growth,
Grant Thornton does not expect to see major
structural changes in M&A activity in the near
future. Deal-making is likely to be on an
opportunistic basis, partly driven by disposals.
Western Europe: Target Company by Subsector
(2011 – 2013)
Life Insurance
Non-Life Insurance
Reinsurance
Services
Europe: Number of Deals and Average Deal Value
(2010 – 2013)
Source: Grant Thornton Research and Insurance Intelligence CenterSource: Grant Thornton Research and Insurance Intelligence Center
The United Kingdom is widely
perceived as the most attractive
M&A market in Europe.
Germany and Scandinavian countries
complete the list of the most attractive
countries. All are stable environments
in which to operate and have remained
relatively resilient to much of the
financial turmoil witnessed in
Southern Europe since 2008.
3
Ibid 2

11
10
9
0
10
20
30
40
50
60
70
80
United
Kingdom
France Italy Germany Spain Austria Switzerland
2010
2011
2012
2013
6 France –
Russia 8 Netherlands 9 Poland
10 Italy –
Luxembourg
– Switzerland
– Ukraine
Western Europe
Europe: Volume of Insurance M&A Deals
(2010 – 2013)
1
Source: Towers Watson
Lloyd’s M&A
Transactions
(2010 – 2013)
2011
2012
2013
UK life insurers are being affected by the Retail
Distribution Review which encourages customers to
shop around for better deals and increases competition.
Life insurer Partnership Assurance, owned by private equity
firm Cinven and valued at £1.8 billion, was floated in June
2013. The flotation presented the firm’s owners with a return
of more than seven times their investment. Morgan Stanley
and Bank of America managed the IPO. Nevertheless, the
company recently suffered a 21% fall in its share price after
missing their sales targets and announcing that they don’t
expect sales growth.
In its IPO prospectus, Partnership predicted that distribution
channels could be “adversely affected” if regulators were to
“consider that any of the agreements the group has in
place with distributors are at risk of non-compliance with
their interpretation of the rules, or the spirit of, the RDR”.
Similarly, Just Retirement was floated at the beginning of
November 2013 but its shares fell 5% on the first day, this
is the second experience of the company in public markets.
It was bought by a private company in 2009 when its shares
were badly affected during the financial crisis.
As public markets re-open through 2014, large deals are
likely to be conducted via flotation, particularly as Private
Equity firms look for strategic exits.
Case Study: Flotation
The Most Attractive European Countries for M&A1
1 United
Kingdom
2 Germany
3 Sweden
4 Norway
5 Denmark

North America

0
200
400
600
800
1000
1200
2009 2010 2011 2012 2013
US$Billion
0%
20%
40%
60%
80%
100%
United
States
Canada
North America
North America
Despite the adverse effects of the financial crisis and burgeoning growth in
emerging markets, North America continues to dominate the insurance M&A
market, contributing over 50% of deals globally, between 2011 and 2013.
This is both a predictable and natural consequence
of the size and maturity of the world’s premier
insurance market.
Nevertheless, despite the economic signs of
recovery, growth is still slow and has been further
affected by budgetary disagreements. Compared
with previous years where there were suggestions
of a recovery, 2013 saw a significant reduction in
deal volume in the US. Moreover, average deal
value has also decreased every year since 2010 and
the number of reported deals in 2013, to date, is
only 25% of that in 2010.
Regulation continues to play a key role in both
Canada and the USA’s insurance market. Canada’s
historically burdensome regulatory environment,
coupled with domestic domination of the market,
has made the environment less attractive to foreign
companies, which explains the country’s low
volume of insurance deals.
Increasing solvency and corporate governance
requirements are likely to cause mid-sized and
smaller underwriting businesses difficulty. Large
insurers possess the resources and capabilities to
handle these changes. This could potentially drive
consolidation in some of the region’s more
fragmented insurance sectors. The Patient
Protection and Affordable Care Act, is also
propelling consolidation in the healthcare sector.
North America: Gross Written Premiums
(2009 – 2013)
United States
Canada
North America: Distribution Channels
(2011 – 2013)
Agencies
Bancassurance
Insurance Brokers
E-Commerce
Direct Marketing
Source: Insurance Intelligence Center Source: Insurance Intelligence Center

0
50
100
150
200
250
300
350
2010 2011 2012 2013
0
50
100
150
200
250
300
350
2010 2011 2012 2013
0
250
500
750
1000
1250
1500
1750
North America
An improving macroeconomic environment will
drive activity through 2014. Grant Thornton
believes that, with the emergence of capital-related
regulatory requirements, deal activity will pick up
and, likely, be marked by consolidation.
Firms will increasingly focus more on
management and allocation of capital. More
integrated, enterprise-wide approaches to risk
management will be unavoidable, particularly for
larger insurers.
North America: Volume of Insurance Deals
(2010 – 2013)
USA
Canada
North America: Number of Deals and Average Deal Value
(2010 – 2013)
Number of Deals
Source: Grant Thornton Research and Insurance Intelligence Center Source: Grant Thornton Research and Insurance Intelligence Center

1% 2%
65%
6%
20%
6%
Life Insurance
Non-Life Insurance
Reinsurance
Services
In February 2013, Markel Corporation, an underwriter
of speciality insurance products, entered into a merger
agreement to acquire Alterra Capital Holdings Limited,
a Bermudian provider of diversified insurance and
reinsurance products for $3.1 billion.
In a joint statement the companies declared: “The
combination of Markel and Alterra is expected to create
significant benefits for the shareholders of both companies,
and to provide a robust foundation for strong financial
performance going forward”. This merger brought together
different underwriting teams with limited overlap in
diverse specialty insurance and reinsurance lines. These
complementary business profiles provided important
diversification of risk.
Despite seeing some senior departures when the merger
was announced, the deal has already attracted increased
submissions. Dave Kalainoff, Markel Chief Underwriting Officer,
stated: “We are seeing more quota share opportunities with
submissions coming in from companies interested in buying.
Pricing on the original business is now getting close to the
point where we can support a quota share”.
In August 2013, AM Best affirmed the financial strength
rating of A upon Alterra Bermuda Limited and its affiliated
operating companies. This rating took into consideration
the consolidation and the future benefits to result from
its integration into Markel. The rating also confirmed the
immediate benefits gained in terms of scale, reach, brand,
distribution platform and its leadership position in the excess
and surplus lines market place in the United States.
Case Study: Market Consolidation
North America: Target Company by Subsector
(2011 – 2013)
North America

Asia Pacific

2009 2010 2011 2012 2013
US$Billion
0
100
200
300
400
500
0
4
8
12
16
20
India
Singapore
South
Korea
Hong
Kong
Japan
Taiwan
China
Vietnam
M
alaysia
Indonesia
Philippines
Thailand
2010
2011
2012
2013
Asia Pacific
Asia Pacific
With an 11% share of the global market, Asia Pacific closes the gap on the
European market.
Deal volumes were flat through 2012 and early
2013, following a raft of activity in 2011 as the
region emerged as the primary destination for
investors looking for increased Return on Equity.
The deal-making frenzy of 2011 has had a
notable impact on valuations in the region. Buyers
are often faced with inflated valuations or, some
may argue, valuations that better reflect the
growth potential of the region. Asian insurers
trade at a median Price to Book (P/B) ratio of 1.731
,
while deals in Europe and the United States are
struck at rates closer to half of that. This suggests
that these valuations are prompting hesitation on
the part of investors.
Despite considerable investor interest in recent
times, the Asian market remains proportionately
under-penetrated. This makes for an attractive
proposition for investors and acquirers.
China
Indonesia
Japan
Hong Kong
Malaysia
Philippines
South Korea
Asia Pacific: Gross Written Premiums
(2009 – 2013)
1
Thompson Reuters
Asia Pacific: Volume of Insurance Deals
(2010 – 2013)

0
10
20
30
40
50
60
2013201220112010
0
100
200
300
400
500
600
12%
18%
35%
32%
3%
Life Insurance
Non-Life Insurance
Reinsurance
0
5
10
15
20
Hong
Kong
Japan
Singapore
South
Korea
Philippines
Taiwan
China
Vietnam
M
alaysia
Indonesia
Thailand
Total
Life
Non-life
Asia Pacific
Correlated to strong economic growth, the demand for
insurance is growing. Indonesia and Malaysia present a strong
case for investment in the region, with penetration rates below
5% of GDP, coupled with growing populations and
increasing personal wealth. The Indonesian market continues
to grow, premiums having increased 10% year-on-year2
, so
the opportunity to make investments is considerable.
Deal rationale in the region is dominated by the ambition
to expand existing business. Close to 15% of all deals are
motivated by a desire to expand geographically.
A significant number of deals originate from better
capitalised foreign investors looking to enter the Asian
marketplace. Yet, over 60% of all deals originate from within
the region.
Opportunities may result from reduction in foreign
ownership restrictions, particularly in countries such as
India. Despite relatively subdued M&A levels in India in
recent times, the government has indicated publicly (both at
home and abroad) its intention to increase the current 26%
FDI limit to 49%. Yet, there has been political opposition and
it is thought that legislation may be further delayed.
Nonetheless, India’s large population, growing middle class,
significant under-penetration of products and a need for
additional capital cannot be filled by local investors alone.
Asia Pacific: Number of Deals and Average Deal Value
(2010 – 2013)
Number of Deals
Asia Pacific: Target Company by Subsector
(2011 – 2013)
2
Grant Thornton Analysis of Insurance Intelligence Center
Asia Pacific: Insurance Penetration as a % of GDP
(2012)

In February 2012, HSBC sold its entire shareholdings
(15.57%) in Ping An Insurance (Group) Company of
China to Charoen Pokphand Group Company Limited
for US$9.39 billion. It is estimated that the bank made
US$2.6 billion out of the disposal.
As HSBC’s Chief Executive confirmed, this transaction
represents further progress in the execution of the group’s
strategy. In 2012, the UK bank sold its general insurance
businesses in Hong Kong, Singapore, Argentina and Mexico.
Thanks to this sale, HSBC expects to boost its Core Tier
1 capital ratio by half a percentage point and its total capital
ratio by a full percentage point improving its Basel III position.
This acquisition by Charoen Pokphand Group, owned
by Dhanin Chearavanont, represents the biggest Chinese
acquisition by a Thai entity. An analyst noted that “it makes
sense for the group to get its hands in the country’s financial
sector as a way to capture some of China’s fast growth”.
Disposals continue to drive the Global Insurance M&A
market. Grant Thornton’s analysis of the 50 largest deals
between 2011 and 2013 found that 33% of deals were bank
disposals. The trend is a direct consequence of the regulatory
constraints on banking institutions. Subsequently, many of
these disposals court the attention of local insurers looking to
diversify their product offerings or expand their geographical
presence.
Case Study: Bank disposal
Easy to enter?
The dynamic and
unique political and
regulatory nuances of
the Asian region present
myriad challenges to
investors. Balancing the
attractiveness of the
market and potential
returns against the
challenges they will face
is a key success factor
for inter-regional deals.
Asia Pacific
Asia Pacific: Market Attractiveness vs. Ease of Entry
0
Non-Life GWP (2011)
10 20 30 40 50
MarketAttractiveness
Ease of Market Entry
180
170
160
150
140
130
120
110
100
90
80
Indonesia
Hong
Kong
Singapore
Taiwan
Malaysia
Thailand
Vietnam
India

Latin America

0
1
2
3
4
PeruEcuadorUruguayMexicoColombiaPanamaArgentinaBrazilVenezuelaChile
Total
Life
Non-life
2009 2010 2011 2012 2013
US$Billion
0
20
40
60
80
Considering the major economic crisis and the periods of political instability
that South America went through during the 90’s, the economic recovery of
the last decade is more than remarkable.
This region is now prosperous, generally stable and
therefore an attractive destination for investors
affected by the slow growth and financial volatility
of the developed world.
Brazil is the biggest insurance market in the
region, the volume of written premiums having
doubled in the last five years. Vast infrastructure
investments, the recent discovery of oil reserves
and the hosting of two sporting mega-events will
increase the premium growth potential.
Chile shows the highest insurance penetration
rates which are mainly due to the premiums
linked to its social security programs. Although
Chile’s population is a lot smaller than that of
Argentina and Colombia, their Gross Written
Premiums are comparable.
Despite progress made in recent years,
penetration rates in the region remain low and
mainly driven by non-life insurance, offering
unprecedented prospects for premium growth.
Latin America
Latin America
Argentina
Brazil
Colombia
Peru
Chile
Mexico
Latin America: Gross Written Premiums
(2009 – 2013)
Latin America: Penetration as a % of GDP
(2012)

0
5
10
15
20
25
30
35
2013201220112010
0
100
200
300
400
500
600
10%
42%
17%
26%
5%
Life Insurance
Non-Life Insurance
Reinsurance
There has been sustained deal flow in Latin America since
2011, with Brazil, Mexico and Argentina particularly
prominent. Although the region is attractive to foreign
investors, most of the deals have been internal. Despite the lack
of barriers to entry, potential investors must consider the
high-market concentration in some of the most attractive
countries, such as Brazil or Mexico, where the top five insurers
dominate the non-life sector.
Distribution networks and brokers remain principal
targets for acquirers, contributing over 40% of total
transactions in recent times. The absence of capital volatility
associated with underwriting businesses, combined with the
regional importance of distribution networks and their
subsequent value, ensure these businesses are attractive to a
wide range of potential acquirers.
One of the main reasons we have not seen more activity in
the region is because the largest international companies such
as Zurich, Allianz and MetLife are already present in the
market. Undoubtedly, the mild depression of the economy
has also had a negative effect on the number of transactions.
Nevertheless, the increasing demand for more sophisticated
insurance products will continue to attract experienced
foreign investors; therefore, we expect strong insurance M&A
activity though 2014 and beyond.
Latin
America
Latin America: Number of Deals and Average Deal Value
(2010 – 2013)
Number of Deals
Latin America: Target Company by Subsector
(2011 – 2013)

0
4
8
12
16
20
PeruMexicoEcuadorColombiaChileBoliviaBrazilArgentina
2010
2011
2012
2013
Latin America
As part of its plan to grow overseas, UnitedHealth Group
Inc. bought 90% of Brazil’s Participações for $4.3
billion. With this acquisition, the American company
intends to enter the rapidly growing health market in
Brazil, where the expanding middle class is stimulating
demand for health-related insurance products.
The company’s Chief Executive, Stephen J. Hemsley,
compared Brazil’s potential to the U.S. market several
decades ago and stated: “We believe we have never seen a
more compelling opportunity for growth, value and service”1
.
Although some analysts consider that the price paid for the
acquisition is somewhat onerous, it is justified by the country’s
growth potential as only one quarter of the population has
private health insurance. Moreover, despite the Brazilian
government offering health care services, due to budget
constraints, the system is strained. Therefore the demand for
such products is expected to grow exponentially.
In the US market, due to burdensome regulation, numerous
companies are looking for faster growing companies
overseas. On the other hand, foreign companies benefit from
the US expertise in the health sector.
Despite the obvious benefits of the deal, United Health
will face myriad post-deal regulatory challenges, particularly
as Brazilian law does not fully permit foreign ownership of
hospitals.
Case Study: UnitedHealth Group acquires 90% of Participações
1
The Wall Street Journal: ‘UnitedHealth to Buy 90% of Brazil’s Amil for $4.3 billion’
2
Grant Thornton Analysis of Economist Intelligence Unit, 2013
Latin America: Volume of Insurance Deals
(2010 – 2013)

Middle East and
North Africa

0
1
2
3
4
5
IsraelTurkeyKuwaitJordanOmanMoroccoSyriaUnited
Arab Emirates
Bahrain
Total
Life
Non-life
US$Billion
0
2
4
6
8
10
12
2013201220112010200920082007
Middle East and North Africa
Middle East and
North Africa
The IMF states that the “near-term economic outlook for the MENA region
has weakened”1
.
Deal volumes and values remained relatively robust
in the immediate aftermath of the global financial
crisis. However, in light of numerous regional
conflicts and political transitions, the region faces a
period of uncertainty.
Gross Written Premiums have continued to
grow, year-on-year, with the non-life market
representing close to two thirds of the total
premiums written in the region. Though, real
premium growth dropped by close to 50% in 2012.
Despite short-term turbulence, social and
demographic trends in the region are favourable –
an increasingly affluent and young population, low
insurance penetration rates (regionally, 1.1%) and
wealthy governments prepared to invest in
infrastructure and social welfare. Indeed, projected
CAGR growth between 2012-2017 is estimated at
18.1% per annum2
.
Cultural hurdles and state-owned businesses
remain the primary barriers to more significant
M&A activity in the region. Added to this,
regulatory restrictions complicate matters; in the
United Arab Emirates and Saudi Arabia, all
domestic companies must be publicly listed.
Middle East and North Africa: Gross Written Premiums
(2007 – 2013)
Middle East and North Africa: Penetration as a % of GDP
(2012)
Bahrain
United Arab Emirates
Syria
Morocco
Oman
Jordan
Kuwait
Turkey
Israel
1
IMF Regional Economic Outlook – Middle East and Central Asia, November 2013
2
M&A Activity, A Global Overview, 2009-2013 – Clyde & Co, 2013

0
1
2
3
4
5
6
7
Kuwait
Jordan
Om
an
M
orocco
Bahrain
UAE
Turkey
SaudiArabia
Qatar
Israel
2011
2012
2013
0
5
10
15
20
25
30
201320122011
0
100
200
300
400
500
600
700
800
900
19%
23%
16%
42%
Life Insurance
Non-Life Insurance
Initial IPOs have brought about strained valuations in the
region, with initial share prices often trading at a discount to
the underlying Total Net Asset Value (TNAV) of a company.
Deal volume rose through 2011 and 2012, but dipped
through 2013, likely as a result of the growing political and
social unrest in the region. Despite reduced deal activity, the
average deal value increased significantly from 2011 to 2012;
an underlying sign of a region with strong medium-term
growth prospects.
While inward cross-border deal volumes remain low,
countries such as Turkey and the United Arab Emirates are
attracting the attention of investors seeking greater returns
than in more mature markets. Interestingly, a recent survey
by Baker & McKenzie found that 95% of respondents
believed that their investment in ‘fragile states’ over the
past five years were ‘helpful to very helpful’3
. Moreover,
Baker & McKenzie found that those investing in ‘fragile
states’ were more likely to be from less mature markets,
such as Asia and South Africa.
Middle East and
North Africa
Middle East and North Africa: Number of Deals and Average Deal Value
(2011 – 2013)
Number of Deals
Middle East and North Africa: Target Company by Subsector
(2011 – 2013)
Middle East and North Africa: Volume of Insurance Deals
(2011- 2013)
3
Opportunities Across High-Growth Markets, Baker & McKenzie, 2013

0
2000
4000
6000
8000
10000
12000
14000
16000
18000
2013201220112010200920082007
US$million
1
CIA World Factbook, 2013
2
Thompson Reuters
3
Islamic Finance Outlook, Standard & Poor’s, September 2012
4
Middle East Insurance Review, April 2013
Takaful is an ancient Arab concept, relating to a pooled
liability that obliges those who commit offences to pay
compensation to their victims.
In its modern-day manifestation, Takaful is commonly
referred to as Islamic insurance. The core difference to
conventional insurance revolves around cooperative principles
and mutual ownership. Takaful policyholders share in, and are
liable for, both the profits and losses of pooled funds; with
vendors acting, effectively, as fund operators.
Takaful is offered by around 200 companies globally4
, in
both Muslim and non-Muslim countries. Insurance contributions
in the sector have grown by 18% through 2013. Products
include both Life and General Insurance risks, with a small
number of re-Takaful companies emerging in core markets.
Close to half of all the existing Takaful companies are based in
Gulf Cooperation Council (GCC) countries, with Malaysia and
Indonesia as burgeoning markets.
Takaful
Why Takaful?
With Muslims forming over 22% of the world’s
population1
and the Islamic world comprising
1.7 billion Muslims3
, this is a significant customer-
base that insurers can ill afford to ignore. Indeed,
Standard and Poor’s observed that, in the Islamic
world, “traditional insurers and reinsurers have met
with sudden and often aggressive competition from
Sharia-compliant Takaful and cooperative providers”2
.
While M&A activity in the Takaful segment is
limited, particularly relative to traditional deal activity,
as the market evolves and insurance penetration
rates in Islamic growth regions increases, deal
activity is likely to increase significantly.
A number of recent deals have suggested a
growing trend towards cross-border transactions
between the Gulf and Asia. As deal volume
increases, the Takaful sector will grow its credentials
as a truly global insurance offering able to make
significant inroads in areas that, to date, remain
largely under exploited.
Takaful has established itself in regional pockets
to capitalise on market opportunity, Takaful
requires global operators able to utilise established
operational functions and leverage distribution
networks to reach a far wider audience.
Middle East and North Africa
Global Takaful Contributions
(2007 – 2013)
Levant
South Asia
Africa
GCC
ASEAN
Saudi Arabia
Source: Grant Thornton Analysis of EY Global Takaful Insights, 2013

Private Equity

0
2
4
6
8
10
12
14
16
18
20
201320122011
0
140
280
420
560
700
840
980
1120
1260
1400
0
10
20
30
40
50
60
70
80
Services
Risk
M
anagem
ent
Reinsurance
Accident&
Healthcare
Life
Insurance
Distribution
Channel
Non-Life
Insurance
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
Private Equity
Private Equity
With over 130 deals in the last three years, it is evident that the insurance
industry has become a popular destination for Private Equity to invest in.
Most deals have taken place in Europe and
North America, followed closely by Asia Pacific.
The insurance sector is particularly attractive for
PE firms looking for investment opportunities
in the current low-return market place. Europe
is an attractive destination due to the low levels
of political risk and the important role that
insurers play in the economy.
Our research shows that in recent years
PE firms actively sought out non-life insurers
and distribution vehicles; these are sectors
where investors can achieve greater returns
on investment without exposure to
underwriting risk.
Certain regulators around the world,
especially in Asia, consider that PE firms should
not own life businesses. The belief is that the
social importance of this sector needs to be
protected and therefore private equity houses are
not the ideal owners.
In a recent survey by Towers Watson, 45% of
respondents saw private equity firms as a driving
force behind deal-making, particularly in
Europe and North America1
.
1
Towers Watson: Surviving the Perfect Storm
Global Private Equity deals
(2011 – 2013)
Global Private Equity deals by Industry
(2011 – 2013)
Number of Deals
Southeast Asia
Europe
North America
Latin America
Deal Value US$M
Southeast Asia
Europe
North America
Latin America
Number of Deals
Deal Value US$M

Transaction Risks

3.4 3.6 3.8 4.0 4.2 4.4 4.6 4.8
Pressure to instead return funds to
shareholders through buybacks and dividends
Other strategic priorities (capital management,
expense control, regulatory challenges)
Difficulty getting funding
Regulatory uncertainty
Concerns about capital adequacy
Soft consumer demand
More attractive opportunities
in other regions
Price expectation gap
between sellers and buyers
Volatile economic
environment
Transaction Risks
Transaction Risks
As the macroeconomic environment in the developed economies improves,
Boards might become less risk adverse.
There is currently more clarity around crucial
regulations for the industry, such as Solvency II,
Global Systematically Important Insurers (GSII)
and Dodd-Frank. As Clyde & Co point out: “The
uncertainty around these criteria has meant that
some companies have been deterred from
substantial acquisitions in case that would put them
into the GSII category”2
. Regulatory transparency
might have a positive effect on the number of deals
undertaken and, ultimately, completed.
While the majority of M&A activity is focused
on achieving business growth or expansion into new
markets; a recent survey by AONHewitt3
found
that “companies do not normally have a well defined
strategy to address cultural issues”. From a peak in
2008, the number of insurance deals that have been
withdrawn has steadily fallen. Nevertheless, the
data on withdrawn deals is very scarce as companies
avoid talking about deal failure.
Impediments to acquisitions in the EMEA insurance sector
Source: Towers Watson
1
Clifford Chance. “European M&A: On the road to recovery?”
2
M&A Activity, A Global Overview, 2009-2013 – Clyde & Co, 2013

“In domestic deals,
cultural differences
between two organisations
are a soft issue, in
international M&A, culture
suddenly becomes a very
hard issue.”
Companies face many challenges after a deal is
completed and there is no a single reason why a
deal might fail; nevertheless, the integration of
people and culture is one of the most important
factors for the success of a deal. Although most
organisations successfully identify cultural
integration as a top priority, it is still the most
common factor for deal failure.
0
2
4
6
8
10
12
14
Q1
2013
Q3
2012
Q1
2012
Q3
2011
Q1
2011
Q3
2010
Q1
2010
Q3
2009
Q1
2009
Q3
2008
Q1
2008
Q3
2007
Q1
2007
Q3
2006
Q1
2006
Transaction Risks
Withdrawn Global Insurance Deals
(2011 – 2013)
Source: Thompson Reuters
3
Culture Integration in M&A, AONHewitt

© 2014 Grant Thornton UK LLP. All rights reserved.
‘Grant Thornton’ refers to the brand under which the Grant Thornton
member firms provide assurance, tax and advisory services to their
clients and/or refers to one or more member firms, as the context requires.
Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL).
GTIL and the member firms are not a worldwide partnership. GTIL and each
member firm is a separate legal entity. Services are delivered by the member
firms. GTIL does not provide services to clients. GTIL and its member firms
are not agents of, and do not obligate, one another and are not liable for one
another’s acts or omissions.
This publication has been prepared only as a guide. No responsibility can be
accepted by us for loss occasioned to any person acting or refraining from
acting as a result of any material in this publication.
grant-thornton.co.uk
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