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A better approach to Mergers & Acquisitions in North American insurance

Large deals are enticing but rare—and smaller ones create more value. Programmatic deal-making would help.

Read the whole McKinsey report

Chicago, IL (Apr. 9, 2021) – It’s easy to understand the allure of really large acquisitions: the best of them can be staggeringly successful. The right large acquisition, carefully mapped to an acquirer’s strategy, can vault a company ahead of its peers into a position of global leadership. Those with well-defined synergies, flawless execution, and skillful integration can also earn enviable excess total shareholder returns (TSR).

But among North American life and property and casualty (P&C) insurers, such acquisitions are rare—and if higher shareholder returns are the objective, even many midsize deals fall short. In our analysis of approximately 250 transactions totaling more than $200 billion in life and P&C carrier acquisitions since 2007, we found that the primary goal for six out of every ten transactions (representing 70 percent of deal value) has been to increase scale. Presumably, the assumption is that the benefits of scale will show up in shareholder returns—but in fact, insurers in both the life and the P&C sectors generated superior excess TSR by focusing on smaller acquisitions and on goals other than building scale. This included, for example, efforts to diversify product offerings or add new capabilities.

Such a track record suggests that many insurers need a different approach to M&A, especially amid the COVID-19 crisis as factors such as sustained low interest rates drag down insurers’ results. As the industry undertakes ongoing restructuring, making a series of small deals could be a bridge to a programmatic approach to acquisitions for P&C and life insurers, 1 increasing the odds of carriers’ success as well as their potential for long-term independence. Across industries, the most effective programmatic acquirers have built organizational infrastructures and established best practices across all stages of the M&A process—from strategy and sourcing to due diligence and integration planning to establishing the operating model. With a brisk outlook ahead for all sorts of deals, the insurance industry has an opportunity to begin adapting those best practices for its own growth needs.

A bridge to programmatic M&A

The obvious advantage of smaller transactions is that they are less complex, usually making the acquirer’s rationale clearer and more straightforward. Smaller deals that are core to an insurer’s existing business often result in lower risk and greater excess TSR compared with large deals. And they are often more cost-effective to finance, whether through internally generated funds, bank loans, or newly issued debt.

An effective M&A process is key. The median TSR for insurance industry acquisitions obscures a striking difference between top- and bottom-quartile performance. For instance, insurers generating top-quartile results delivered excess TSR more than 40 percentage points above the bottom quartile, which suggests a substantial advantage for insurers with superior M&A capabilities. We also found that the insurers delivering top-quartile excess TSR tended to acquire businesses with high returns on invested capital and an improved growth profile as part of a new, larger organization.

Insurers with the most effective M&A processes often take a structured approach—more programmatic and central to a well-planned growth strategy than the approach that many insurers take. Indeed, despite the success achieved by companies in other industries that pursue M&A programmatically, North American life and P&C insurers tend to see acquisitions as one-off or episodic events, pursue large deals, acquire selectively, or even forgo M&A to focus on organic growth. Such approaches carry higher risks than programmatic M&A and are less likely to generate excess TSR. And outperformance of the broader industry over a ten-year period is virtually impossible without a healthy inorganic strategy.

At its core, programmatic M&A means completing many small deals regularly over time rather than focusing on occasional large transactions. It also means divesting to refocus on growth in segments offering attractive returns. If done right, programmatic M&A can increase the odds of generating superior shareholder returns, as shown across multiple sectors.

Read the full report with additional charts on McKinsey’s website.

About McKinsey

McKinsey & Company is a global management consulting firm that serves leading businesses, governments, non governmental organizations, and not-for-profits. We help our clients make lasting improvements to their performance and realize their most important goals. Over nearly a century, we’ve built a firm uniquely equipped to this task. For more information, visit www.mckinsey.com.

SOURCE: McKinsey

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Candian Life Insurance News

Trov Technology Enables A New Wave Of Consumer Brands To Offer Digital Renters Insurance

San Francisco, CA (Apr. 7, 2021) – Trov, a global leader in embedded insurance, is continuing to expand its presence in the UK market, enabling brands to offer digital insurance products to their customers and tap additional revenue streams. With an initial focus on renters insurance distributed by proptechs, fintechs, retailers, and utilities, Trov announces a new wave of consumer brands that will offer digital insurance powered by its innovative technology, including Love to Rent, OpenBrix, Moovshack, Utilita and Movinghub. Additionally, the company’s existing UK partner Lloyds Banking Group has expanded with Trov beyond its Halifax branded Renters Insurance product to launch Flexible Contents Insurance, a product under the Lloyds Bank brand, designed for renters, tenants and homeowners.

Embedded insurance (technology-enabled insurance products offered in the context of non-insurance applications) is revolutionizing insurance distribution as popular brands are motivated to generate new revenue streams while keeping customers within their existing ecosystems. The banking industry has seen much of its customer acquisition shift to all-digital channels, via embedded finance, and now the insurance industry is undergoing a similar change. McKinsey estimates that emerging digital ecosystems (interconnected services that enable users to fulfill a variety of needs in one integrated experience) will generate 30% of global revenue by 2025, with P&C insurance sales playing a significant role.

Trov has designed its APIs and white-label software to power this shift by providing digital ecosystems with the necessary tools, from quote to claim, to make insurance a seamlessly integrated offering within their customer applications.

Success with Halifax Renters Insurance Leads to Broader Expansion with Lloyds Banking Group

In November 2019, Trov partnered with Lloyds Banking Group and launched a first-of-its-kind digital renters insurance product, brought to market under the Halifax brand. Just over a year on, and with COVID-19 increasing the relevance of flexible insurance solutions, Halifax Renters Insurance has gained momentum, consistently demonstrating strong customer satisfaction scores. Customers report the journey as being straightforward, clear and simple to navigate and in particular like how quick and easy the application process is.

This month, Lloyds Banking Group reinforced its confidence in Trov’s insurance technology by launching an all digital, flexible contents insurance product under its Lloyds Bank brand. Owing to Trov’s scalable white-label technology, the application was rapidly developed and launched, with minimal resources required. Scott Walchek, Founder and CEO, Trov, comments: “It’s exciting to work with many popular brands and empower them to offer digital insurance products with Trov’s technology. While renters insurance is one of our foundational offerings, brands that work with Trov will be able to rapidly launch a roadmap of embedded insurance products thanks to our scalable APIs and network of insurance carrier partners. Distributing insurance is complex and Trov has done the heavy lifting, simplifying this for brands, enabling them to rapidly get to market and generate recurring revenue.”

Powering the next generation of insurance, Trov’s technology is purpose built to facilitate the seamless distribution of digital insurance products. In 2021, Trov has a strong queue of brand partners readying to launch not only renters insurance, but other (soon to be announced) P&C products.

About Trōv

Trov is a global leader in embedded insurance, powering the future of digital insurance distribution and emerging mobility. Its APIs and white-label software enable brands to rapidly deploy modern P&C insurance solutions in home, renters, auto, pet, small business and mobility. Trov’s global customers and partners include industry leaders such as Waymo, Lloyds Banking Group, Groupe PSA, Hyundai, and Honda amongst many others.

Founded in 2012 by serial tech entrepreneur Scott Walchek, Trov is backed by leading VC’s and strategic partners. The company is headquartered in the San Francisco Bay Area with offices in New York and London. For more information, please visit www.trov.com.

SOURCE: Trov

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Candian Life Insurance News

Canada Life launches customizable term insurance product to maximize fit and flexibility

Winnipeg, MB (Apr. 5, 2021) – Canada Life is pleased to announce it has launched Canada Life My Term™ life insurance – a new customizable term product that allows customers to pick the exact term length they want, between five and 50 years, to suit their unique needs.

“Gone are the days when customers have to pick a term product based on a pre-set time period,” said Paul Orlander, Executive Vice-President, Individual Customer, Canada Life, noting plans can be assigned any length between five and 50 years, up to age 85. “With today’s announcement, we are offering our customers exactly what they need to fit their unique life situation.”

Canada Life My Term™ provides:

  • Flexibility to modify existing coverage, including converting coverage to a permanent life insurance policy or extending coverage on a yearly basis without additional underwriting;
  • Affordable premiums that are fixed and guaranteed not to change for the term of years selected; and
  • Customizable coverage with optional benefits, such as accidental death benefit and disability waiver of premium benefit.

“We designed Canada Life My Term™ with our customers in mind – because it’s important they get affordable coverage for as long as they need it,” said Orlander. “Unique and innovative solutions for customers means that if their needs change, their policy can change with them. Whether its short-term coverage for a car loan debt or long-term coverage for mortgage protection, customers can work with their advisors to determine the solution that’s best for them.”

Canada Life My Term™ replaces the previous Simply Preferred stand-alone term 10, term 20, term 30 and term-to-age-65 products.

For more information, visit canadalife.com/insurance.

About The Canada Life Assurance Company

Canada Life is a leading insurance, wealth management and benefits provider focused on improving the financial, physical and mental well-being of Canadians. For more than 170 years, individuals, families and business owners across Canada have trusted us to provide sound guidance and deliver on the promises we’ve made.

On January 1, 2020, Great-West Life, London Life and Canada Life became one company – Canada Life, and today, we proudly serve more than 12 million customer relationships from coast to coast to coast. For more information, visit www.canadalife.com.

Source: Canada Life

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