Insurance sector in Ireland set for growth and consolidation

The Irish insurance sector is thriving despite the pandemic and companies are proving to be tempting targets for overseas investment and acquisition.

The insurance sector in Ireland weathered Covid-19 better than most sectors. Although the lockdowns during the past year have led to lower economic activity and a fall in the number of insurance premiums, there were also fewer claims made.

And most insurance professionals are cautiously optimistic about the year ahead, with 71% saying they are confident about their organisation’s growth prospects for 2021, according to a survey by PwC Ireland www.pwc.ie/media-centre/press-release/2020/insurance-ireland-leader-survey.html.

In addition, 62% of leaders said they expected revenues to grow in 2021, with 25% of those saying it would be more than 10%. Elsewhere, 22% stated they thought revenues would fall this year – COVID-19 was largely to blame for this sentiment, but there were other concerns such as the cost of claims and the low/negative interest rate environment.

PwC’s survey also highlighted three strategic priorities for 2021 for the insurance sector in Ireland. These were:

• Leadership and talent development – cited by 63% of respondents
• Initiatives to realise cost efficiencies (61%)
• Digital transformation (57%).

This overall uptick in confidence shows that Ireland’s insurance sector is well set for growth this year and as a key part of the Irish economy this is good news.

Ireland is one of the top six insurance markets in Europe and the second biggest for reinsurance in the EU, servicing 25 million policy holders in 110 countries internationally. Product and services include life and pensions, general, health and reinsurance sectors, according to Insurance Ireland [www.insuranceireland.eu], the representative organisation for the sector.

Insurance Ireland said members of the organisation – about 95% of insurance companies in the country – pay more than €13 billion in claims annually and safeguard the financial future of customers through €112.3 billion of life and pensions savings. About 28,000 people are employed in the sector in Ireland.

Investments in Irish insurance businesses

Unsurprisingly, as the sector remains robust despite the pandemic Irish insurance businesses are proving popular for investments. In April, the share price of insurer FBD, which is listed on Euronext, rose by up to 13% after it was revealed that Norwegian insurance group Protector Forsikring had built up a 6.3% shareholding in the company. The Norwegian company bought many of the shares from Invesco, which has now exited FBD.

Nevertheless, Protector Forsikring’s chief investment officer, Dag Marius Nereng, was quick to point out that the shareholding is purely for investment purposes and a bid to acquire FBD is not going to be forthcoming.

“An entrance to the Irish market is not on the agenda,” he told the Irish Independent. “We like the market position and we like the track record of the company.”

Meanwhile, back in September 2020 London-based insurance intermediary Global Risk Partners (GRP) bought a majority stake in Crotty Insurance.

The deal for the Dublin-based firm, for an undisclosed sum, was the first part of GRP’s strategy to build its presence in Ireland. Crotty Insurance, an independent commercial broker, has specialisms in several sectors including construction, renewable energy and professional services.

GRP, which is majority owned by private equity firm Searchlight Capital Partners, is looking for further deals in Ireland. Mike Bruce, GRP’s chief executive, said: “We’ve always seen Ireland as a great opportunity to grow the business beyond the UK, so we’re very pleased with this deal and look forward to further growth.”

Acquisitions

UK insurance companies are also looking to buy Irish rivals. In April, Aston Lark – a London-based insurance broker backed by Goldman Sachs – continued its acquisition spree with a deal to buy D O’Loughlin and Co Ltd, which trades as O’Loughlin Insurance Group. [www.astonlark.com/news-and-views/aston-lark-announces-acquisition-of-the-oloughlin-insurance-group/]

Dublin-based O’Loughlin is a long-established name in the Irish insurance sector dealing with personal and commercial lines.

The acquisition follows Aston Lark’s recent deal to buy North County Brokers. At the announcement of the O’Loughlin deal, Robert Kennedy, CEO of Aston Lark Ireland, said other deals for Irish insurance firms were in the pipeline.

Earlier in April, London-based PIB Group Ltd made its initial move into the Irish market with the acquisition of Enniscorthy-based insurance broker Creane & Creane Ltd.

Creane & Creane is one of Ireland’s longest established insurance brokers, dating back to 1945, and provides commercial and personal lines to customers. Following the deal – the financial terms of which were not disclosed – Creane & Creane will retain its name, branding and current leadership.

Creane & Creane’s managing director, Tony Doyle, said that becoming part of a larger group was a big decision: “Through PIB we will be able to pass further benefits on to our customers as well as our people.”

PIB’s chief executive, Brendan McManus, added that the company plans to focus on Ireland becoming a key territory: “With ambitions to grow both our retail and wholesale footprint through further acquisitions.”

Into the EU

Along with profitability, another reason for the popularity of Irish insurance firms – particularly among UK-based rivals – is that they offer entry to the EU market.

Ireland is the only English-speaking country in the EU, which makes it an attractive base for other Anglophone nations such as the US, Canada and Australia.

Ireland is also attracting attention with planned regulatory reforms in the insurance sector. The Action Plan for Insurance Reform was published in December 2020 and was welcomed by Insurance Ireland, which said it would bring focus to reducing the cost of claims in the market for the benefit of policyholders. The plan has 66 separate actions that aim to bring insurance costs down, increase competition and prevent fraud.

Setting up in Ireland

Establishing an insurance company in Ireland is relatively straightforward – its regime is harmonised with that of the EU, along with some Ireland-specific regulations. The Central Bank of Ireland is the competent authority for the regulation and supervision of non-life insurance companies.

Future prospects

There are signs that M&A activity in the sector will continue as 2021 progresses, especially as the economy is set for recovery as lockdown conditions imposed due to the COVID-19 pandemic are eased and there is a return to something approaching ‘normal’.

With plenty of smaller brokers operating in Ireland there are targets that may be willing to sell to larger rivals – domestic or overseas – especially if the price is right, which experts reckon could be about eight or nine times earnings.

Advice

With such positive sentiment going forward, there will be plenty of chances to invest in or acquire insurance companies in Ireland. For those looking to invest, acquire an existing company or establish a new business in Ireland, it is crucial to get the right advice.

Malone & Co Accountants https://www.maloneaccountants.ie/ can assist on all the relevant aspects from setting up a company to providing diligence services as part of an M&A deal or funding round in the sector. We can also provide in-depth information to ensure any deal achieves the value hoped for at the outset. Remember, while Ireland may share a land border with the UK, the regulatory regimes can be quite different, which can trip up unwary investors.