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In a complex market, insurance deal activity rebounds in the second half of 2024
The insurance deals market has been very active in 2024, primarily due to ongoing demand for insurance brokerages and managing general agencies (MGAs) as well as life and annuity (L&A) assets. There also has been a reemergence of property and casualty (P&C) carrier deal activity, which had been quiet in recent years relative to L&A.
For the six-month period from May to mid-November 2024, the number of announced transactions in the insurance sector more than doubled. There were 307 announced transactions with an announced deal value of more than $20 billion, compared to 145 transactions announced from November 2023 to April 2024.
Two megadeals of note over the last six months include:
- In September 2024, Marsh McLennan acquired McGriff Insurance Services, LLC, for $7.8 billion, with the goal of enhancing its capabilities across commercial P&C, employee benefits, management liability and personal lines.
- In November 2024, Enstar shareholders approved its take-private acquisition by Sixth Street for a total equity value of $5.1 billion.
We expect the insurance deals market in 2025 to be very active considering the current macroeconomic environment, continuing investor interest in the industry, expectations that interest rates have stabilized, a likely reduction in regulations in the wake of US elections and private equity (PE) having a backlog of exits.
Note: The primary M&A data source used in the 2025 outlook is S&P Capital IQ.
Strategic thinking
The primary deals trends we’ve seen include:
- The interest rate environment has benefited carriers and has accelerated demand for asset intensive businesses. As a result, we’ve continued to see L&A deals, including reinsurance via alternative transaction structures like sidecars funded by third-party capital or reciprocals. These alternative reinsurance transaction structures have been popular because they create multiple revenue streams for investors and free up capital for insurance carriers. Activity in this space has resulted in a significant portion of life and annuity premiums being managed by asset managers/PE-backed platforms.
- As demonstrated by the Enstar/Sixth Street transaction, there is more interest in P&C carriers. The P&C market is becoming more efficient, with the focus on specialization in the P&C ecosystem, and from a rate perspective coming out of a hard market. PE firms are expanding their asset aggregation from the L&A sector to the P&C sector.
- Insurance brokerages and MGAs have continued to see high valuations and EBITDA multiples due to their steady cash flows and resiliency in the face of economic uncertainty. Brokerage growth is largely inorganic through acquisitions, resulting in the consolidation of brokerages by key players looking for economies of scale. Additionally, interest remains high in insurance service providers like third-party administrators (TPAs) and fronting carriers.
“We expect to see further consolidation of the insurance and insurance brokerage sector as investors focus on growing both their platforms in the insurance brokerage space and assets under management through consolidating asset intensive blocks of business.”
The bottom line
The insurance deals market is likely to remain very active in the coming year thanks to persistent investor interest and activity in the sector, ongoing consolidation in certain market areas (which could be fueled by PE interest in selling assets to established players) and potential deals-friendly legislation by the new US government.
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