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Insurance deal activity has accelerated in the second half of the year and is expected to remain strong into 2022 as investors continue to see the sector as an opportunity, PricewaterhouseCoopers LLP said Thursday in a report.
From the end of June to mid-November, there were 249 announced transactions, with $34.2 billion in announced deal value, as interest from private equity, asset managers and corporate entities in the sector remained high.
Insurance brokerage transactions drove the majority of announced M&A activity as consolidation continued in the sector, a trend that is expected to continue.
“As large brokerage aggregators seek economies of scale, we also expect to see continuing consolidation in the insurance brokerage space drive deal volume. This consolidation has led to high multiples for insurance brokerage targets and shows no signs of stopping,” PwC said.
Recent large deals include Chubb Ltd.’s announced acquisition of Cigna’s life, accident and supplemental benefits business in the Asia Pacific region and Covéa Mutual Group Insurance Co.’s announced acquisition of PartnerRe Ltd. for $9 billion.
“Considering the record levels of deployable capital, we expect competition for insurance carrier targets and run-off blocks to remain strong, ongoing brokerage consolidation to continue apace, and interest in InsurTechs to remain high,” PwC said.
The combination of insurers seeking “opportunities to divest non-core assets in order to free up capital and refocus their efforts on core competencies” and “willing private equity and asset managers who are looking to cost-effectively increase assets under management” is another catalyst for dealmaking, PwC said.
Potential headwinds for further investment include increased regulatory scrutiny and “policy uncertainty,” including U.S. lawmakers’ attempts to enact tax code changes by the end of this year.