Insurance industry M&A hits six-month high

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Mergers and acquisitions among insurance brokerages have reached a record high with 328 deals in the first half of 2019. This marks the second highest six-month total in history, trailing only the first half of 2017 when 333 transactions were reported, according to new data from investment banking and financial consulting firm Optis Partners. A total of 665 transactions have closed in the past 12 months alone.

Last year, brokerage M&A hit an all time high, with 626 deals, surpassing 2017’s high of 611. The industry may be on track for another record high this year and Tim Cunningham, managing director of Optis, says he doesn’t predict a slowdown any time soon.

"You’ve got a pretty robust inventory of sellers and a well capitalized group of buyers,” he says. “You’re seeing valuations inch up at multiples we’ve ever seen before.”

See also: Virtus buys Cobbs Allen benefits practice as industry M&A grows stronger

The brokerages leading the charge include Acrisure (39 deals), Hub International (26), Patriot Growth (21), Assured Partners (21), Broadstreet Partners (18) and Gallagher (16), Optis reports. While Acrisure closed the highest number of deals over the time period, this was actually a low for the firm — marking its lowest six month total since 2016, Cunningham says.

Cunningham says Acrisure may be focusing its efforts on acquisitions outside of the U.S. and Canada, a key initiative for the brokerage. While international expansion is important to the firm, it also requires additional regulatory oversight and approval, which could be more time intensive, he adds.

Gallagher may also be a firm to watch. The brokerage has been more aggressive with valuations compared with years prior, and acquisitions are an important part of their growth strategy, Cunningham says.

See also: Insurance brokerage M&A not slowing down

In the employee benefits market, OneDigital continues to be an aggressive acquirer. The company completed its largest acquisition in company history of Northwestern Benefit in April. In July, the firm acquired both Valley Benefits and Carolina Benefits Group.

While a high number of deals mean there will be fewer small insurance brokerages, this could be good news for employers. Consolidation means larger firms will have additional capabilities — including more advanced technology, analytics and compliance tools for employers to take advantage of, he says.

“If there’s more cohesiveness it’s ultimately better for everybody. There is still enough competition,” Cunningham adds.

See also: Insurance brokerage M&A picks up speed

It also means middle market employers will have more robust choices when selecting a broker, he says. As brokerages grow larger and develop more advanced capabilities, employers will have more comprehensive options.

“I think it ultimately creates more competition in the middle market and the larger space — more capabilities create more competition,” he says.

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