The flow of mergers and acquisitions was slow in the life and annuity sector in the first half of 2018.
Life and annuity issuers announced deals with a total value of $3.7 billion in the first half, according to Deloitte's 2019 industry outlook report. The total value was 79% higher than in the first half of 2017.
But the number of life and annuity deals fell to 15, from 16.
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The Deloitte analysts predict that life and annuity M&A flow will grow next year.
"The confluence of unrelenting market pressure to achieve sustainable growth, a lingering abundance of capital and capacity, improving global economies, and an upturn in interest rates may indicate that insurers should be prepared for a potential uptick in M&A in 2019," the analysts write.
Here are five questions we expect to shape our life and annuity issuer M&A coverage in the coming year.
1. Should the insurer really be making that acquisition?
Plentiful capital and near-zero interest rates have simplified efforts to arrange for deal financing in recent years.
This year, however, "rising interest rates could be a double-edged sword, because it makes debt more expensive," the Deloitte analysts note.
In other words: Some buyers who who always knew they could whip out their "revolving credit facilities" (enterprise-level credit cards) may find they have no access to affordable deal financing.
Companies pay for M&A deals with shares of their own stock. If an insurer's stock craters, the insurer will have a hard time using its stock to pay for deals.
2. What will market volatility do to the private equity-backed players' appetite for financing new life and annuity deals?