The insurance mergers and acquisitions (M&A) landscape, which experienced a lull in 2023, is poised for a resurgence in 2024, with an influx of private equity and external investments expected to stimulate activity, according to a report by Deloitte.
There were 537 insurance M&A deals in 2023, down 21% from 2022. While brokers accounted for the largest number of deals last year, at 485, that volume was down 17% from 584 deals in 2023.
Property/casualty insurers accounted for 35 M&A deals, down 8% from 2022, while life and annuity insurers had 17 deals, up from 16 the year before.
While the number of deals was generally lower, deal value increased, according to Deloitte. The aggregate insurance M&A deals totaled $28.9 billion in 2023, up 63% from 2022.
The life and annuity (L&A) market, which saw subdued M&A activity in 2023 due to a mismatch between available capital and uncomplicated balance sheet assets, is set to witness a revival, Deloitte said. This is expected to be driven by an influx of private equity money and external investment. Furthermore, the report predicts that more public insurance companies will turn to divestiture as a strategy to mitigate the impact of Long-Duration Targeted Improvements (LDTI).
The property and casualty (P&C) market, which faced dampened M&A activity due to social inflation and third-party litigation, is also expected to see a slow reinsurance market in 2024. However, the report suggests that the high-interest environment might prompt some companies to seek scale in the reinsurance market.
Deloitte observed that insurtech went “mainstream” in the P&C sector last year.
“Amid continuous deal flow, plug-and-play solutions emerged from the ecosystem to become part of the insurance company infrastructure. Many of these solutions collect data—including from third-party sources like weather or satellite providers—and massage it to help underwriters make better decisions about risk,” the report stated.
In 2024, firms and investors with available capital may acquire insurtechs for their solutions or seasoned tech talent, particularly as valuations become more affordable, the report noted.
The report also anticipates that climate-related perils could trigger additional legislation, leading to more consolidation as insurers strengthen their balance sheets and decide their future business locations.
In the insurance brokerage sector, the report predicts more acquisition opportunities in 2024, driven by private equity investors undeterred by higher premiums. The proposed fiduciary legislation by the Department of Labor to improve the quality and fairness of investment recommendations could also encourage life insurance companies to revisit the value of an independent sales force.
The report concludes by advising companies interested in dealmaking in 2024 to assess their existing business books, understand their capital requirements, and refine their growth strategies for a more modern approach to financial analysis and reporting. It also suggests that companies identify and collect necessary data, consider due diligence questions for potential targets, and set up models to weigh alternative scenarios.
The full report can be accessed here. &
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