Insurance: US Deals 2023 midyear outlook

Insurance M&A remains resilient in a challenging deals environment

In contrast to the broader deals slowdown in other sectors, there was considerable insurance deal activity from late 2022 through early 2023. For the six-month period from mid-November 2022 to mid-May 2023, there were 194 announced transactions representing over $7 billion in deal value, compared to 263 announced transactions and $2 billion in deal value in the previous six-month period from mid-May 2022 to mid-November 2022. Lower value insurance brokerage transactions drove much of the decline in transaction volumes.

There have been three mega deals announced so far in 2023. In February 2023, Stone Point Capital LLC announced its 20% acquisition of Truist Insurance Holdings Inc. for $1.95 billion, demonstrating continued demand from private equity buyers for insurance distribution assets given their steady stream of cash flows. Additionally, Brookfield Reinsurance Ltd. announced a deal in February 2023 to acquire Argo Group International Holdings, Ltd. for $1.1 billion, which will add scale to Brookfield’s existing property and casualty (P&C) platform after its acquisition of American National Group Inc. acquisition last year. In May 2023, RenaissanceRe Holdings, Ltd. announced a $3 billion deal to acquire American International Group, Inc.’s treaty reinsurance business, including Validus Reinsurance Ltd, which will enable RenaissanceRe to scale its P&C reinsurance business and focus on underwriting, fee and investment income to drive profitability.

Deal activity in the life and annuity sector remained especially strong in 2023, driven by large reinsurance transactions (which are excluded from the above metrics). There were several notable reinsurance transactions announced in May 2023, including the Fortitude Reinsurance Company Ltd. / Lincoln National Life Insurance Company, Resolution Life US Holdings Inc. / Farmers New World Life Insurance Company, and MetLife Inc. / Global Atlantic Financial Group reinsurance agreements (reinsurer / reinsured, respectively).

Explore national deals trends


“Despite uncertainty around interest rates and the US economic environment, we expect insurance deal activity to remain very active through the remainder of the year. We are seeing increased demand by private equity buyers seeking to acquire insurance brokerages, managing general agencies and blocks of life and annuity businesses.”

— Mark Friedman, PwC Insurance Deals Leader

Integration insights for insurance

Many executives are trying to fundamentally reposition their businesses for ongoing success. Over the last three years, we’ve seen an increasing number of companies make large scale, transformational deals to acquire new markets, channels, products, operations and talent.

However, successful mergers and acquisitions — ones that meet strategic, operational and financial goals — are rare. Only 14% of respondents to our recent M&A Integration Survey noted this level of success.

On the plus side, survey results indicate that companies are beginning integration earlier and investing more to make transformational deals successful. But there’s plenty of room for improvement.

The survey report notes what separates the 14% from the rest: Successful organizations move from transaction to transformation over the long-term using a combination of M&A integration fundamentals, experience, investment and technology-enabled accelerators.


Key deal drivers

Opportunity amid uncertainty

Insurance companies with strong balance sheets are appealing targets in the current interest rate environment because of their self-leveraged balance sheets and investment income which benefits from rising interest rates. Life and annuity blocks of business are of particular interest to private equity backed platforms given the long duration nature of the liabilities and potential to increase investment yields through access to alternative investment strategies.

Additionally, the P&C reinsurance market is viewed favorably due to significant increases in premium rates, which is driven by catastrophe-related losses and the availability of higher yielding assets. The favorable P&C reinsurance market may see more deal activity in addition to the aforementioned RenaissanceRe / Validus transaction. 

Capital allocation

We expect private equity will continue to deploy capital in the insurance distribution subsector. Insurance brokerages and managing general agencies (MGAs) have proven very resilient in times of economic uncertainty and can provide private equity funds steady and reliable cash flows. The P&C insurance sector is also experiencing increases in premium rates and inflation, which make the distribution business even more appealing because commissions rise with increases in rates. We also expect the rise in borrowing costs will continue to lower valuations, providing buyers opportunities to acquire high-quality and growing insurance brokerage businesses at valuations below what we’ve seen in recent years.

Furthermore, we expect corporates to continue to divest capital-intensive life and annuity businesses to focus on core products and strategies. This willingness to divest, combined with continued demand from primarily private equity buyers seeking to build or add to their insurance platforms, could cause deal activity to accelerate in the second half of 2023 and into 2024 as demonstrated already with recent announcements of significant reinsurance transactions.   

Necessity for business reinvention

A significant percentage of life and annuity premiums are now associated with asset managers / private equity backed platforms looking to scale their portfolio of permanent capital assets. Through unique asset sourcing, origination of private credit and alternative investment solutions, these asset managers and private equity participants have been able to generate higher investment yields on assets, while also earning asset management / origination fees from the insurance companies. As private equity backed platforms consolidate the market, these higher asset returns will allow insurance companies to offer products with enhanced returns to policyholders. This will affect some insurers who do not have access to these higher yielding assets. They will have to compete on pricing but may not be able to generate equivalent net investment yields, resulting in spread compression.

We expect this deal driver will continue to pressure corporates to determine if a divestiture of non-core businesses is the best option for their stakeholders. Alternatively, insurers may look to partner with private equity or create sidecar vehicles to access higher yielding assets while remaining in control of their businesses.

Divestitures create opportunities

Divestitures can allow a company to focus time and resources on the businesses that are the ideal strategic fit. A new PwC divestitures study examines the decision-maker’s journey and value in divestitures, including portfolio review, divestiture execution and reinvestment. The study explores a wide range of internal and external influences impacting the speed and effectiveness of portfolio decisions and divestitures. The research also uncovers elements that have the greatest impact on decision-making and seller return.

Insurance IPO market

The insurance IPO market has been inactive recently, consistent with other IPO markets, but may offer opportunities for businesses looking for fundraising or exits. Many companies, including many insurtechs, that previously shelved plans for an IPO listing have begun to prepare for potential listings in the coming months or years. In addition, the industry may see other high-profile IPOs, including by some of the larger brokerage platforms that have outgrown opportunities for sale in the private M&A market.

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