P&C deals declined 6% through Q3 2022, perhaps signaling —a regression to the mean
There has been a total of 627 agency acquisitions so far in 2022, down from 668 over the same time period in 2021 says OPTIS Partners consulting in its latest quarterly report on mergers and acquisition activity nationally. According to the data, which covers both U.S. and Canadian property and casualty and employee benefits insurance, while less than last year, this number is still the second-highest recorded total for this nine-month period.
“Several factors account for the year-over-year change in the number of deals done so far in 2022,” said Steve Germundson, partner of OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry. “The single biggest factor is a regression to the mean coming off last year, in which the number of deals far outpaced prior years. The current number of deals is very close to the five-year average.”
The data covers U.S. and Canadian agencies selling property-and-casualty insurance, agencies selling both P&C and employee benefits, and those selling only employee benefits. In 2022, data was expanded to include life/financial services, consulting, and other businesses associated with insurance distribution.
OPTIS Partners’ Report Now Covers Four Types of Sellers & Buyers
As noted in the first quarterly report of the year, OPTIS Partners has expanded its reporting in 2022 to now include mergers & acquisitions of four types of buyers and sellers associated with the insurance distribution system. These four groups include:
- private equity-backed/hybrid brokers,
- privately held brokers,
- publicly held brokers, and
- all others
The addition of the fourth group allows for the inclusion of business associated with the insurance distribution system such as the life/financial services industry and consulting businesses.
Acrisure Still Sits atop Agency Acquisition Rankings
Acrisure led all buyers with 80 transactions year-to-date, far more than any other buyer, and slightly ahead of their historical pace. Other top buyers were PCF Insurance at 56 deals (down from 68 in 2021) and Hub International with 50 (down from 40). No other buyer reported more than 30 transactions.
Of the 10 most-active buyers, only four completed more deals through three quarters of 2022 versus 2021: Inszone Insurance Services increased by 17, Keystone Agency Partners was up by 16, Hub International did 12 more deals, and Acrisure was up by three.
Most Active Acquirers So Far in 2022
The following list is the most active acquirers across the nation in 2022. Each of the listed companies completed 15 or more deals so far this year.
| BUYER BY TYPE | 2017 | 2018 | 2019 | 2020 | 2021 | Q1-Q3 2022 |
|---|---|---|---|---|---|---|
| 1. Acrisure | 92 | 101 | 98 | 108 | 122 | 80 |
| 2. PCF Insurance | 0 | 4 | 4 | 36 | 99 | 56 |
| 3. Hub International | 49 | 59 | 52 | 65 | 61 | 50 |
| 4. High Street Partners | 0 | 1 | 3 | 9 | 71 | 30 |
| 5. Inszone | 0 | 2 | 6 | 10 | 12 | 23 |
| 6. Broadstreet Partners | 32 | 34 | 34 | 58 | 45 | 22 |
| 7. Keystone Agency Partners | 0 | 0 | 0 | 7 | 14 | 21 |
| 8. World Insurance Associates | 5 | 9 | 18 | 42 | 50 | 21 |
| 9. Patriot Growth Insurance Svcs | 0 | 0 | 25 | 21 | 31 | 19 |
| 10. Relation Insurance | 2 | 0 | 6 | 11 | 33 | 18 |
| 11. Risk Strategies Company | 11 | 10 | 22 | 18 | 24 | 16 |
| 12. Integrity Marketing Group | 0 | 4 | 6 | 1 | 6 | 15 |
| 13. All Other | 420 | 419 | 376 | 409 | 493 | 255 |
| Total Reported Transactions | 611 | 643 | 650 | 1,061 | 628 |
Significant Broker Transactions during Q3-2022
In this quarter’s report, OPTIS Partner also include a new section entitled Significant Broker Transactions, listing five notable deals so far this year:
| Seller | Buyer | Estimate 2021 Revenue | Date |
|---|---|---|---|
| Westwood Insurance Agency (West Hills, CA) | Baldwin Risk Partners | $82 million | March 2022 |
| Distinguished Programs (New York, NY) | Aquiline Partners | $122 million | April 2022 |
| York International LLC | IMA Financial | $32 million | August 2022 |
| BenefitsMall | Truist | $150 million | August 2022 |
| M&T Insurance | Arthur J. Gallagher | $37 million | September 2022 |
Hot pace expected to continue
“This return to a ‘normal’ number of deals is to be expected considering the surge in deals last year along with the fact that a lot of the agency owners contemplating whether or not to sell pulled the trigger on it in the last few years. The inventory has shrunk,” said Dan Menzer, partner at OPTIS.
“Two major factors are influencing today’s valuations. The increase in the cost of capital should work to reduce values, yet the ever-expanding number of buyers appears to be propping them up,” said Tim Cunningham, managing partner. ” The net effect is a valuation environment that is holding rather steady, though we could expect underwriting standards to tighten, and a few buyers could be finding themselves limited by high leverage.”
How to access the full report as well as the Q3-2022 Report
The OPTIS Partners report is based on its own proprietary database tracking which are the most active acquirers and other announced transactions. As such, while it is a reasonably accurate indication of deal activity in the sector, it is highly probable that the actual number of agency acquisitions was far greater than the total number reported. One simple reason for this result is that many buyers and sellers do not report transactions at all, while other acquirers omit reporting small transactions. Access the report read at https://optisins.com/wp/2022/10/q3-2022-ma-report/ or by clicking the image below:
Alternatively, for those interested in reviewing or comparing the Q1-2021 report with this quarter’s report, please refer to the following link:
