Consistent with our expectations, mergers and acquisition
(M&A) activity in Canada's insurance industry continued to
increase in 2011 as more carriers and brokers sought to expand
market share, drive premium growth, and seek economies of scale. A
continued low interest rate environment and sluggish improvements
in soft premium rates continued to squeeze margins and drive many
players to seek scale. If more deals could be found, chances are
more deals could have taken place.
We expect M&A deal volume in the Canadian insurance sector
to continue to strengthen into 2012. Generally, there appears to be
more buyers looking to add scale and diversify into new markets and
geographies than there are willing sellers. With investment yields
likely to remain low (and therefore asset values relatively high),
and premium rates stagnating and continuing to squeeze margins,
this phenomenon is likely to continue into 2012. Outside of
potentially market changing events, such as
