Megadeals boost insurance market as transactions decrease
PwC said the recent economic environment has generally been favorable for the insurance industry.
Large transactions carried deal-making in the insurance business the last six months, according to a recent PwC report.
Between mid-November 2023 and April of this year, 145 insurance transactions worth over $34 billion were announced, compared to 318 transactions totaling $11.2 billion from the previous six month period.
“There was steady activity in the insurance deals market relative to other sectors despite a decrease in insurance deal volume,” PwC said. “Lower deal volume resulted from a slight cooling in insurance brokerage deal activity because of interest rate uncertainty.”
Borrowing costs changed the return profile of brokerage targets as buyers watch interest rates, according to the report. At the same time, high interest rates benefitted carriers that rely on income generated by investment portfolios.
PwC said higher investment yields and premiums helped the insurance market outperform most other sectors.
Meanwhile, megadeals over the six-month period included Aon plc’s $13.6 billion acquisition of NFP Corp. and Arch Insurance North America’s agreement to acquire Allianz’s U.S. MidCorp and Entertainment insurance businesses for $1.4 billion. The deal is expected to close during the second half of 2024, the report showed.
Despite persistent inflation and interest rate uncertainty, PwC said the recent economic environment has generally been favorable for the insurance industry.
“Significant premium rate increases across P&C lines, coupled with higher spread on investments, have led to healthy profits,” the PwC said. “However, higher carrier profitability comes with rising valuations, which in some instances have led to downward pressure on M&A activity.”
Megadeals will increase moving forward, the report showed, led by private equity-backed consolidators seeking underwriting expertise in products with significant growth potential.
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