The investment environment for P&C Insurance distribution has been amazing, but like all good things, change is underway. We still see a strong sellers premium for “A+ assets” (i.e. 25% EBITDA margin, 80’s combined ratio and 10%+ growth and 90%+ retention). However, the valuations for others are drifting downward. The Private Equity-fueled acquisition binge has now clearly ebbed, taking the wind out of sector valuation trends (as we previously noted).
With our clients, we see the “land grab” for distribution rollup acquisitions now giving way to a strong appetite for specialized distribution and technology investments – to streamline processes, reduce expenses and implement AI techniques.
Most insurance industry sources remain optimistic about M&A. However, after a decade of consolidation in the best of conditions, the P&C Insurance market seems due for a period of settling. This may limit the options for owners that waited and watched – as valuations for smaller sized firms have pulled back. Furthermore, end market conditions are creating headwinds:
“The cost of inflation on claims continues to drive up combined ratios, fueling expectations for a prolonged hard market. This will likely diminish deal activity in the near term…” - Deloitte, 2024 Insurance Outlook
For the owners considering their options – we expect to see growing interest with minority interest investors - firms that accommodate the owner’s continued leadership and control of the business but provide the financial flexibility to navigate uncertain waters.
Our team is always available to connect on trends in the P&C Insurance industry.
Reference: Deloitte 2024 Global Insurance Outlook
