US insurance deals insights: Q4 2019

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Megadeals fuel surge in insurance industry deals value during quarter

Insurance dealmakers announced $12.5 billion in transactions during Q4 2019, marking the strongest quarterly total in nearly two years. Four megadeals in the P&C, life, and reinsurance sub-sectors dominated industry headlines.

Despite the surge in disclosed deal value during the quarter, the 2019 annual total of $19.9 billion is only 51% of the record set in 2018. Two large M&A transactions in 2018, including the huge AXA/XL tie-up, skew the year-over-year comparison. 

We expect deal activity will be robust in 2020, driven by high levels of deployable capital among private equity and corporate buyers.


“During the quarter, insurers made some meaningful strategic divestitures. On the buy side, capital came from the corporate sector and from alternative sources focused on runoff, legacy businesses.”

John Marra, US Insurance Deals Leader

Trends and highlights

  • Throughout 2019, industry deal volume fell steadily, and the fourth quarter continued the downward trend. In the brokerage subsector, high valuation multiples and intense competition for attractive assets pushed down deal volume to levels last seen in 1Q 2018. However, the overall impact of the decline was offset by renewed interest in P&C and life deals, which has risen since this past spring.  

  • New York Life Insurance Company announced the largest acquisition during the fourth quarter with an agreement to buy Cigna Corp.’s group life and disability insurance business for approximately $6.3 billion. The deal will allow New York Life to expand its employee benefits insurance operations while Cigna divests a non-core business.


Highlights of deal activity


Other significant deal activity

Megadeals

  • Tokio Marine Holdings Inc.’s business unit, Houston-based HCC Insurance Holdings Inc., announced an agreement to purchase Privilege Underwriters, Inc. and its specialty subsidiaries, known as Pure Group, for $3.1 billion. The acquisition is expected to generate growth opportunities with high-net-worth individuals.

  • The Carlyle Group and Tokyo-based T&D Holdings, Inc. announced an agreement to buy a 76.6% stake in Fortitude Group Holdings from American International Group, Inc. for $1.8 billion. (Fortitude’s group companies operate as Fortitude Re.) The transaction provides capital for Fortitude Re’s plan to grow as a platform for acquiring and managing legacy insurance portfolios. 

  • Resolution Life Group Holdings Ltd. agreed to acquire the life insurance business and other closed life and annuity blocks from Voya Financial, Inc. for $1.25 billion. The transaction allows Voya to divest capital intensive legacy blocks to focus on high-growth, capital-light core businesses.

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InsurTech activity

  • Aon announced an agreement to purchase CoverWallet, a leading commercial digital insurance platform, for an undisclosed amount. Through the transaction Aon is expected to digitize client solutions for small and mid-size clients, expanding its data and analytics capabilities. 

  • Securian Financial Group, Inc. announced an agreement to buy Empyrean Benefit Solutions, Inc., an employee benefits and HR administration platform, for an undisclosed amount. The deal is a strategic move by Securian, supporting its technological improvements and offerings in employee benefits.

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Other notable transactions

  • Interest in companies offering vehicle service warranty contracts drove two transactions during the quarter. Tiptree Inc. in December announced an agreement to buy Smart AutoCare Inc. for $110 million. Additionally, Goldman Sachs Group, Inc. filed forms with the Federal Trade Commission related to its sale of Safe-Guard Products International LLC to Stone Point Capital.

  • The Carlyle Group announced an agreement to acquire a majority interest in The Hilb Group, LLC for an undisclosed amount. Hilb is expected to use capital from the transaction to grow through M&A activity and expand into new geographies and product lines. 

  • In Dec 2019, Athene Holding Ltd. announced an agreement to reinsure an $800 million block of U.K. pension benefit liabilities through Athene Life Re International Ltd., a wholly owned subsidiary. The transaction—Athene’s first entry into the U.K. market—increased the firm’s total transactions in 2019 related to pension risk transfer to $6 billion.

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Insurance deals outlook

  • Dealmaking in 2020 got off to a strong start in January as Thomas H. Lee Partners, L.P. announced the purchase of AmeriLife Group, LLC. The deal reportedly is worth more than $1 billion. AmeriLife provides life, health, and financial service products to retired or soon-to-retire customers.

  • We anticipate insurance industry M&A will remain steady during 2020. Political and economic uncertainty may intensify scrutiny of steadily rising valuations. Still, high levels of deployable capital among corporate dealmakers and private equity firms will probably continue to generate a healthy transaction level.

  • We expect insurers will continue to optimize their legacy businesses by divesting capital-intensive business such as legacy blocks and focusing on capital- light, nimble businesses. In turn, demand for legacy blocks will probably continue to grow, especially among private equity firms and industry participants that specialize in managing legacy risks and seek to boost investment returns. 

  • We anticipate the brokerage sub-segment—which accounted for approximately 85% of deal activity last year—will continue as the focal point for most insurance deal volume. At the same time, total deal volume may decline. Buyers of large insurance brokers may grow more selective as valuation multiples have risen. Interest in small- to mid-sized brokers will probably remain high as larger industry participants compete for smaller targets to consolidate at more favorable transaction multiples.

About the data

We define M&A activity as mergers and acquisitions in which targets are US or Bermuda-based insurance companies acquired by US or Bermuda-based insurance companies. We define megadeals as transactions with deal value greater than $1 billion. We define divestitures as the sale of a portion of a company (not a whole entity) by a US-based seller. We have based our findings on data provided by industry-recognized sources. Specifically, values and volumes used throughout this report are based on announcement date for transactions with a disclosed deal value, as provided by Capital IQ, as of December 31, 2019, and supplemented by additional independent research. 

Information related to previous periods is updated periodically based on new data collected by Capital IQ for deals closed during previous periods but not reflected in previous data sets. Deal information was sourced from Capital IQ and includes deals for which buyers or targets fall into one of the insurance industry sub-sectors: life & health, property & casualty, insurance brokers, InsurTech, or other (such as title, financial guaranty or multiline insurance). Certain adjustments have been made to the information to correct for transactions which our data sources classify as financial services but which we assign to technology and other sectors, or vice versa.

Contact us

John Marra

Insurance Deals Leader, PwC US

Greg Peterson

Financial Services Deals Leader, PwC US

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