European Insurance M&A Barometer Report: H1 2023

Executive Summary

Welcome to FTI Consulting’s European Insurance M&A Barometer Report for 2023, highlighting insurance deal activity across the region in H1 of this year. Our report shines a light on key trends in the insurance mergers & acquisitions (“M&A”) market, the most notable transactions, and the players to watch. Insurance transactions are not always officially announced, which means volumes can be understated.

Yet despite rising interest rates, European insurance M&A activity continued to increase in H1 2023. Record volumes were reached, with 267 deals announced (compared to 219 in H1 2022 and 199 in H1 2021 respectively). Most deals were small, although there were several notably large transactions such as the sale of Liberty Mutual’s Iberian business to Generali for €2.3bn, and the sale of Argo to Brookfield Reinsurance for $1.1bn.

Increased Activity Across the Sector

While all indications show that globally investor enthusiasm has cooled, it has not yet in Europe. Current conditions are not inhibiting the wave of consolidation in Europe’s insurance distribution sector that started just before the pandemic.

On the basis of H1 alone, 2023 has been another eventful year so far for insurance intermediaries and service providers. Broking continued to attract a variety of investors to fuel continued M&A activity, with 229 announced transactions compared to 186 in H1 2022.

These transactions accounted for 86% of Europe’s deal volume in H1 2023. Private equity (PE) investors have long been attracted to the low capital requirements and scalability of insurance distribution and services businesses. H1 2023 saw an increase of 35% in PE activity – direct and through portfolio companies – with 164 announced transactions compared to 121 in H1 2022. For broker consolidation platforms, add-ons and bolt-ons have been the dominant path to value creation.

Strategic (non PE-backed) buyers also pursued opportunities, with 103 transactions being announced compared to 98 in H1 2022.

A number of landmark transactions continued to shape the evolution of the European broking landscape. Despite speculation that valuations for brokers might have hit a peak in 2022 and could decline in 2023, several transactions made it to the finish line at high multiples during H1. TA Associates reportedly paid a multiple in the range of 17x-18x Earnings Before Interest, Taxes, Depreciation & Amortisation (EBITDA) for a minority stake in MRH Trowe, and a similar multiple range was paid by Castik Capital for Global Gruppe, and by Brown & Brown for Kentro in the same period.

At present, many processes for high-quality businesses are being run with a selective group of high-conviction parties, instead of holding broader multi-round auction processes. The current practice offers clear process advantages to both sellers and buyers. Processes can be simpler, faster and less costly, with less time required from management. The likelihood of a failed process is also reduced, especially if a switch to a controlled fallback process is well prepared.

Demand for insurance distribution and service providers by consolidators across the continent underpinned transaction volumes. This accounted for 126 transactions, compared to 90 in H1 2022, and represented 56% of deal activity in the distribution and services sector. International platforms (including Howden, PIB and Acrisure) and regional consolidators (such as Diot-Siaci, Quintes, You Sure, Säkra, MRH Trowe and GGW) have all strengthened their market position with multiple acquisitions.

In the carriers sector, deal volumes for property & casualty (“P&C”) insurance have almost doubled, with 20 announced transactions compared to 13 in H1 2022, on the back of the continued hard market for some classes of business and improvement in underwriting profitability. Going forward, there are already additional businesses for sale in this market; trades are expected in H2 2023.

Life transaction volumes remained steady despite economic uncertainties, with 16 announced transactions compared to 14 in H1 2022.

Regional Activity Levels

The UK and Ireland (including Bermuda) continue to lead the European market for insurance industry M&A. Although deal activity in the region may have peaked due to the scarcity of targets, there were 112 announced transactions in H1 2023, compared to 105 in H1 2022. Most of these were broker consolidation deals.

Insurance M&A volumes in France also increased, with 20 deals signed and announced compared to 15 in H1 2022.

Although the Benelux region is a mature market with low organic growth, deal activity continued at pace, with over 26 announced transactions in H1 2023 compared to 15 in H1 2022; PE-backed platforms were the dominant force. Many of the large independent broker businesses in region are reportedly in the market and are expecting to trade in the next 6 to 12 months, likely to generate record deal amounts.

Deal volumes in Italy declined, with 12 deals announced in H1 2023 compared to 19 in H1 2022. In contrast to other European markets, many of the takeover targets were carriers as opposed to brokers, suggesting that consolidation in Italy is still nascent.

Iberia was the most active market in continental Europe, with insurance M&A activity fuelled by broker consolidation, compared to being third most active in 2022. In 2022, announced transactions more than tripled, and activity has continued on an upward trend, with H1 2023 seeing 30 deals compared to 21 in H1 2022. PE-backed acquirers and strategic buyers each accounted for about 50% of deal volumes. PE firms have now acquired the majority of independent broker platforms and similar businesses in the region, suggesting that competition for add-on/bolt-on targets will continue to be fierce.

The Nordics saw an increase in deal volumes, with 28 announced transactions in H1 2023 compared to 16 in H1 2022. PE-backed intermediaries were behind most of the activity. Inter-Nordic strategic transactions have also been on an upward trend over the past two years.

All eyes are now on the Germany, Austria, Switzerland (DACH) region, because it remains one of the most fragmented markets in Europe. H1 2023 brought a strong continuation of deal announcements, with 26 transactions compared to 21 in H1 2022. Notable transactions included sales of a minority stake of MRH Trowe to TA Associates, and of Global Gruppe to Castik Capital. More than 80% of deals were acquisitions of distribution and service providers, with PE-owned broker consolidators continuing to exploit market fragmentation (particularly in Germany) in pursuit of their growth strategies. Significant potential for further consolidation remains, however.

Insurance M&A volumes in the Central and Eastern Europe (CEE) region recovered from the previous year’s drop, with 13 announced transactions in H1 2023 compared to seven in H1 2022 – even though the geopolitical crisis that triggered the drop continues. Apax-backed broker consolidator PIB strengthened its presence in the Polish market with two acquisitions, while Acrisure and Ardonagh each acquired two businesses in the region.

Conclusion

The first half of 2023 was a highly active period for insurance M&A across Europe. This was despite uncertainty on macroeconomic conditions, significantly higher borrowing costs for distribution consolidators, and what many of us thought was already an overheated level of activity. There are no signs that activity will decrease for the remainder of the year, but some restraint may start to emerge as the longer-term impact of macroeconomic conditions becomes more certain.

This report reviews insurance deal activity across Europe, leveraging the results of our recent research. If you’d like a more in-depth analysis of these results, or to find out how FTI Consulting can help your company acquire or dispose of insurance businesses across Europe, please speak to one of our experts.

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