Loosening of the Volcker Rule Frees Billions of Dollars in Banking & Finance
On June 25, 2020, federal agencies finalized amendments loosening the Volcker Rule, a part of the 2010 Dodd-Frank Act. The move will let banks invest in venture-capital funds with fewer restrictions and allow lenders to reduce margin requirements for derivative trades. The move is expected to free up billions of dollars in capital for the Banking & Finance industry. The rule aimed to provide a future safeguard from irresponsible risk-taking by banks, following the 2008 financial crisis.1
Insurtech Funding Rounds Decline in 2020
Insurtech funding has experienced a significant decline throughout 2020. Compared on a year-over-year basis, funding was down from 81 total deals in Q2 2019 to just 36 total rounds in the second quarter of 2020. Though the overall frequency of funding decreased in Insurtech, a less significant decline was found in larger deals, over $10 million, with a fall from 21 to 15 in second quarter year-over-year numbers. The data shows that more established companies in the field are still experiencing a positive outlook from investors.2
Workers’ Compensation Experiences Market Shifts From COVID-19 Claims
Workers' compensation is experiencing a period of complicated compensation renewals due to declining premium rates, decreases in payroll, and low-interest rates. Insurers are more skeptical about underwriting healthcare, and customer-facing businesses since the overall life span and financial consequences of COVID-19 in each industry are yet to be realized. As a result, it is proving to be a challenge for insurers to forecast the pandemic's impact based on each industry's anticipated claim volume. Though a recovery in claim volume is occurring, the effect measured on a year-over-year basis is clear. Falling premiums for workers comp is likely to continue in 2020, as payrolls continue to fall, and remote working becomes more prevalent.3
U.S. Health Insurers See Increased Profits During Coronavirus
U.S. health insurers have experienced increased profits during the coronavirus crisis. In a wholly disrupted industry, coronavirus' added costs have been clear for insurers during the preceding months. Most insurers have agreed to waive COVID-19 related co-pays, tests, deductibles, and other care in recent months, adding stress to the industry. However, the expenses of coronavirus related costs have been outweighed by Americans avoiding hospitals and delaying elective surgeries. Insurance providers, like UnitedHealth, have reported earnings higher than expectations in the first quarter and have kept their 2020 profit forecasts unchanged as of now. Insurance agency profits may be short-lived depending on how long the coronavirus deflates the number of elective surgeries in the United States.4
Rapid Increase in Global Liquidity During Coronavirus
Global liquidity during the coronavirus crisis has occurred at a much faster pace in comparison to the 2008 downturn. Forecasters predict a $16 trillion increase in worldwide debt in 2020, leading to the rise in private and public sector borrowing to a record high of $200 trillion by year-end. As higher savings rates and accommodative central bank policies continue to support growing debt levels worldwide, expectations reflect that much of this free liquidity will eventually be placed in equities. So far, in the U.S., the M2 money supply has increased by $3 trillion this year to $18.4 trillion.5
Allstate to Acquire National General
Allstate has announced that it will acquire National General for $4 Billion, an approximate 69% premium on the company. The deal comes after Allstate, along with Progressive, State Farm, and others agreed to return billions of dollars in premiums to customers for April and May due to stay-at-home orders. With these premium returns ranging from 15-25% of client's total premiums. The acquisition comes at a time when personal-property insurers are experiencing extreme financial stress. Allstate expects the acquisition to increase its market share considerably in the area and expand its independent agent distribution.6 7
Largest Transactions Closed
- CenterState Bank Corporation
- South State Corporation
- Opus Bank
- Pacific Premier Bank
- Carolina Financial Corporation
- United Bankshares, Inc.
- IAS Parent Holdings, Inc.
- iA Financial Corporation Inc.
- Revere Bank
- Sandy Spring Bank, Inc.
- MutualFirst Financial, Inc.
- Northwest Bancshares, Inc.
- ARX Holding Corp.
- The Progressive Corporation
- Pedestal Bancshares Inc.
- Business First Bancshares, Inc.
- American Financial & Automotive Services, Inc.
- Assurant, Inc.
- National Lloyds Corporation
- Align Financial Group, LLC
This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.
EBIT - Earnings Before Interest and Taxes