Wednesday, December 13, 2017

Hong Kong insurers attract buyers seeking M&A-driven growth

Amid low growth and even lower interest rates in the US and European economies, insurers adopting an M&A strategy to grow revenues and tap new technologies are looking overseas, mostly to Asia and in particular to Hong Kong, according to new research from Willis Towers Watson.

As insurers become more outward-looking and seek to generate a greater percentage of future profits from overseas, Hong Kong is where many insurance companies are turning to for new opportunities, largely driven by mainland China.

“Hong Kong’s emergence as a hub to capture a flow of savings out of mainland China comes against a backdrop of Beijing’s elevated scrutiny on capital outflows to strengthen the yuan,” said Kevin Angelini, head of strategy for the insurance consulting and technology business in Asia Pacific at Willis Towers Watson.

 

The expansion of the insurance business can offer a long-term and low-cost channel to gain access to capital so that buyers can reinvest the premiums to feed their other business, such as real estate, which could yield higher investment returns, according to Angelini.

While buyers’ traditional goal when making an acquisition is to acquire customers, the approach of mainland Chinese non-insurance buyers is the reverse — to acquire relevant licences, business infrastructure and qualified management staff.

The most widely cited single factor for value creation in M&A deals is customer retention, and insurtech plays a significant role in that by improving customer engagement through the use of data and analytics.

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