It's been a big six months since the release of the fifth annual report on merger and acquisition (M&A) activity in the global insurance market by Shanghai-based global law firm Clyde & Co and the M&A market's certainly heating up!
Big News Locally
In the local market, Brookfield Infrastructure Partners and Qube Holdings Ltd (ASX: QUB) are fighting for Asciano Ltd (ASX: AIO), G8 Education Ltd (ASX: GEM) tried its best to buy Affinity Education, while Macquarie Group Ltd (ASX: MQG) purchased Australia and New Zealand Banking Group's (ASX: ANZ) dealer finance unit, Esanda.
Big News Internationally
On an international scale, Pfizer and Allergan announced plans for a $US160 billion mega-merger, Royal Dutch Shell is performing a $US70 billion takeover of BG Group, while brewer Anheuser-Busch InBev NV arranged a $108 billion acquisition of SABMiller PLC in a huge deal for the global beverage market.
Insurance MIA?
The Clyde & Co report predicted multi-billion dollar Chinese insurers and private equity groups could soon set their sights on Australia's big insurers like Insurance Australia Group Ltd (ASX: IAG), QBE Insurance Group Ltd (ASX: QBE) or Suncorp Group Ltd (ASX: SUN).
Thus far we've only seen Chinese investment groups seriously interested in our agriculture and mining companies, however I believe 2016 will be very different to 2015.
Australia's insurance companies remain among the most profitable in the world and have even attracted the attention of the great Warren Buffett when his company purchased 3.7% of IAG earlier in the year.
The only way companies like IAG and Suncorp will meaningfully expand their presence inside China's borders will be via a partnership with a company already there, an option I hope they're seriously considering.
Time to Buy?
I wouldn't buy the companies above based purely on the chance of a Chinese group taking an interest in them, however they do produce solid dividend yields and QBE, in particular, has earnings growth potential well beyond the greater market.
