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I. Review of M&A Activity in 2015
sums to purchase annuities. More recently, the U.K. government has suggested that annuity policyholders sell them back to insurers. These developments have led U.K. life insurers to a significant re-calibration of what has traditionally been a core product. These changes reportedly have also prompted the £1.8 billion merger of two retirement-specialist insurers, Just Retirement and Partnership Assurance.
Another large transaction completed in 2015 in Europe was XL Group plc’s acquisition of Catlin Group Limited, a U.K.-listed group with syndicate and managing agency operations at Lloyd’s with additional international underwriting platforms. The recommended share and cash offer was valued at $4.1 billion and completed in May 2015 by means of a Bermuda scheme of arrangement. The transaction added immediate scale in specialty insurance and pre-empted the structural changes expected in the P&C sector in relation to consolidation.
These deals were followed by Fairfax Financial Holdings Limited’s acquisition of U.K.-listed Brit plc, a specialty insurer and reinsurer with a presence at Lloyd’s. The transaction was effected through a recommended cash offer. It was completed in July 2015 with an on-sale of 29.9% of the Brit shares to Ontario Municipal Employees Retirement System (“OMERS”), with Fairfax retaining 70.1% of the shares in Brit and the ability over time to repurchase the shares owned by OMERS. Fairfax noted at the time of completion that Brit’s growing U.S. and international reach was complementary to Fairfax’s existing worldwide operations and that the acquisition would allow Fairfax further to diversify its group risk portfolio. The transaction was valued at £1.22 billion.
Continuing the trend of Asian investment in North American and European insurance assets, which we discussed in Section I.A.2 above, another U.K.-listed Lloyd’s specialty insurer, Amlin, was the target of a takeover by Japan’s Mitsui Sumitomo in a deal valued at £3.47 billion. The transaction was announced in
Developments and Trends in Insurance Transactions and Regulation 2015 Year in Review
September 2015 and approved by Amlin’s shareholders in November 2015. Amlin’s CEO, Charles Philipps, said that the transaction would safeguard Amlin’s future in an insurance market that is increasingly dominated by giant businesses and by a reliance on technology, which is driving consolidation. The transaction is being effected by means of a scheme of arrangement under English law and is expected to be completed by the end of the first quarter of 2016, once all regulatory approvals have been obtained.
Zurich’s potential offer to buy the U.K.-listed insurance group RSA would have been another large deal, if it had come to fruition. Although circumstances meant that no formal offer was made to shareholders under the U.K. Takeover Code on this occasion, the existence of the discussions was another sign that the U.K. insurance industry is in the midst of an M&A revival. RSA itself has also been active in the M&A markets, with the completion of the sale of its Italian operations to ITAS Mutua. The disposition marked the latest in a string of asset divestments aimed at allowing RSA to focus on its core U.K., Canadian and Scandinavian operations.
This upsurge in activity was mirrored to some extent in continental Europe, albeit on a smaller scale. France-based AXA acquired Genworth’s lifestyle protection business in a deal valued at €465 million. AmTrust Financial Services, Inc. was also able to benefit from Genworth’s decision to exit European markets by purchasing the latter’s European mortgage insurance business in a deal worth approximately $55 million. AmTrust had a busy year in terms of European M&A, as it also purchased Nationale Borg, a Dutch insurer and reinsurer of surety and trade credit insurance for approximately €154 million. In addition, Direct Line completed the sale of its Italian and German operations to Mapfre for €550 million. The fact that there are fewer headline deals in continental Europe is perhaps an indication that the larger European insurers are biding their time while they adjust their portfolios and adapt to the implementation of Solvency II (for further commentary, see Section I.B.3 below).
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