When under strong financial pressure, insurers will sell low-performing divisions, and concentrate on their top-performing markets. M&A activity is expected and regular in industries that :
i) Require large economies of scale
ii) Have elatively commoditised products/services, making it difficult to produce goods/services that are much better than the competition
iii) Have heavy regulation and other barriers to entry, preventing disruptive new entrants from shaking up the market
The above are true not only for insurance, but also banking, hospital groups, and pharmaceuticals, to name a few sectors. Because it's not easy to grow your own market share via product improvements (price slashing can often lead to large losses, as witnessed by the exits of some insurers), M&A is a useful tool for insurers to grow. They already have large amounts of cash anyway from the insurance premiums they collect (called "premium float"), so they can invest that cash to buy other insurers to grow their market share. If you can't beat the competition head-on, why not join forces to beat everyone else?
If you're interested in mergers & acquisitions, here's a top guide on how to buy a business in Singapore.
When under strong financial pressure, insurers will sell low-performing divisions, and concentrate on their top-performing markets. M&A activity is expected and regular in industries that :
i) Require large economies of scale
ii) Have elatively commoditised products/services, making it difficult to produce goods/services that are much better than the competition
iii) Have heavy regulation and other barriers to entry, preventing disruptive new entrants from shaking up the market
The above are true not only for insurance, but also banking, hospital groups, and pharmaceuticals, to name a few sectors. Because it's not easy to grow your own market share via product improvements (price slashing can often lead to large losses, as witnessed by the exits of some insurers), M&A is a useful tool for insurers to grow. They already have large amounts of cash anyway from the insurance premiums they collect (called "premium float"), so they can invest that cash to buy other insurers to grow their market share. If you can't beat the competition head-on, why not join forces to beat everyone else?
If you're interested in mergers & acquisitions, here's a top guide on how to buy a business in Singapore.