As P&C players largely seek scale and share around the globe, life companies are primarily rebalancing their products and distribution. In this Credit Suisse Global Sector Thematic Report, we leverage the full scope of Credit Suisse’s Global Research platform with inputs from 15+ financial services analysts from around the world (NA, EMEA, APAC and LatAm).

Globally, P&C M&A has proven to be more durable than life insurance. Global P&C M&A is vibrant, as business tools and “operational learnings” can be applied outside of home regions, and certain lines benefit from global spread of risk. In contrast, global Life Insurers are rebalancing, as they invest in core products and distribution and divest noncore lines, particularly in North America. In addition, accounting rules and capital requirements often dis-incentivize cross-border life insurance holdings, with European insurers now having limited North American life exposure, and vice versa.

Several factors will likely accelerate these trends, including rising investor activism, potentially higher U.S. tax rates and demanding accounting rules and capital requirements.

Anticipation of higher capital gains rates could pull forward U.S. life and annuity block divestitures into 2021.

Our top Outperform rated insurers to benefit from Global M&A are Chubb (CB) and Voya (VOYA) (U.S.), Allianz (ALVG.DE) and Hiscox (HSX) (Europe), and AIA (1299.HK) and Cathay Life (2882.TW) (APAC). We favor CB, Allianz, and AIA given their abilities use M&As to strengthen operations, which we already view as compelling.

Cathay could benefit from reduced competition. VOYA and HSX are possible takeouts, though we favor the stocks for VOYA’s high quality, capital light businesses and think Hiscox’s valuation is compelling in light of its solid growth and return outlook. For a more detailed list by geography, see Figure 14.