Insurer M&A activity surging: Deloitte

Insurance merger and acquisition activity continues to accelerate for most sectors in 2021, with the number of deals increasing 18% year-to-date, according to a report released Monday by Deloitte Consulting LLP.

Lower interest rates continue to create opportunities around debt financing as predicted and “are here for the taking when it comes to insurance M&A,” Deloitte said in the mid-year outlook.

Broker transactions continue to remain strong in terms of average deal size and number of deals, according to the update.

Almost 60% of brokerage deal volume in the first half of 2021 was driven by private equity investors and private equity-backed aggregator platforms, Deloitte said.

However, property/casualty deals are down, with 18 deals year-to-date, versus 24 in the same period of 2020. This is likely due to the current rate-hardening environment more than any other factor, Deloitte said.

Life and annuity deals also increased from five to 17 year-to-date, it said.

Aggregate deal value is about four times higher than in the first half of 2020 and full calendar year 2020, driven by some large deals, Deloitte said. Average deal value year-to-date is also higher than 2020, it said.

While in the past, private equity investors mainly focused on brokerage, several have demonstrated having life and annuity platforms that drive assets under management and fee-based income can fuel M&A activity, Deloitte said.

“This is likely to drive this space at a pace that we haven’t seen before, although it is unclear how this may change if interest rates go up,” according to the update.