After dropping to “unnaturally low” levels during the 2008financial crisis, mergers and acquisitions activity appears set toincrease in volume over the next one-to-three years, a recentsurvey suggests.

Towers Watson says 86% of North American insurance executives“expect to see an increase in the volume of insurance M&As overthe next one-to-three years, compared to the previous threeyears….”

The firm adds 78% of the executives say they are activelyconsidering acquisitions. Specifically:

• 64% say they are seeking an opportunistic purchase, or “onewhere the right deal comes along,” Towers Watson says.
• 55% say they are interested in bolt-on acquisitions within anexisting geography and segment.
• 47% say they would focus on expansions into new markets.
• 47% say they would pursue acquisitions to improve access to newcustomer segments, distribution capabilities, product expertise orother technical or operational capabilities.

Regarding the most significant factors that could fuel furtherNorth American M&A activity:

• 58% say strategic intention to expand into newgeographies/sectors.
• 57% say difficulties achieving organic growth given thechallenging economic times.
• 54% say general economies of scale.

Major impediments to increased activity, according to the surveyrespondents, include price-expectation gaps between buyers andsellers (55%) and limited availability of viable opportunities(52%).

“Each insurer has its own philosophy about acquisitions, butthere are a few parameters all acquirers should observe,” JackGibson, Towers Watson's global lead for insurance M&A, says ina statement. “Foremost, insurers need a clear M&A strategydeveloped in advance that aligns with their broader corporatestrategy. Those that do are most likely to find a strategic fitthat makes sense from both a near- and longer-term perspective.Beyond financial considerations, it is vital for insurers tocarefully consider integration and cultural issues in advance, notafter the deal is announced, as some deals that are strategicallyand financially attractive may not be good organizational fits. Itis also important that insurers continually evaluate assumptionsduring the due diligence period to confirm the transaction stillmakes as much sense at the time the offer is made as it did earlierin the process.”

The survey involved 60 North American insurance executivesacross the life and property and casualty sectors who participatedin an online survey from Jan. 8 through Jan. 27.