European Insurance M&A Barometer Report 2022

Executive Summary

Welcome to the second annual edition of FTI Consulting’s European Insurance M&A Barometer Report, highlighting insurance deal activity across the region in 2022. Our report shines a light on the key trends in the insurance mergers and acquisitions (“M&A”) market, its most notable transactions, and the players to watch.

Insurance transactions are not always officially announced, which may mean volumes are understated. Yet despite spiralling inflation and rising interest rates, in 2022 we witnessed a continued increase in European M&A activity in the insurance industry, setting new record volumes with 435 deals announced (compared with 379 and 285 in 2021 and 2020, respectively).

Last year was another eventful one for insurance intermediaries and service providers, as broking continued to attract a variety of investors to fuel continued M&A activity: 377 announced transactions (compared with 305 in 2021), accounting for 86% of Europe’s deal volume in 2022. PE investors have long been attracted to the low capital requirements and scalability of insurance distribution and services businesses, and 2022 saw 239 announced transactions (compared with 214 in 2021). Strategic buyers (non-PE backed) also repositioned and pursued various opportunities, announcing 138 transactions (compared with 91 in 2021); this 50% increase in deal activity demonstrated the availability of funding and the ability to win competitive auction processes. For broker consolidation platforms, add-ons and bolt-ons have been the dominant path to value creation.

A number of landmark transactions continued to evolve the European broking landscape. Despite speculation that valuations for brokers might hit a peak in 2022, several transactions made it to the finish line at record-high multiples, with Eurazeo reportedly paying 17.5x EBITDA for BMS, Goldman Sachs paying a reported 18x EBITDA for The Clear Group, Howden announcing the purchase of global reinsurance broker TigerRisk for a reported 17x-18x EBITDA and the acquisition of the Swedish consolidator Säkra by Cinven for a reported 18x EBITDA.

Demand for insurance distribution businesses by international broker consolidators across the continent underpinned transaction volumes, accounting for 215 transactions (compared with 131 in 2021), which represents 57% of deal activity in the distribution services sector. International platforms (including Howden, PIB and Acrisure) and regional consolidators (such as You Sure, Säkra, MRH Trowe and GGW) have all strengthened their market position with several acquisitions. US-based buyers continue to acquire in Europe, too, to expand their footprint and take advantage of under-tapped niche insurance markets. Notable transactions such as the acquisition of Global Risk Partners (“GRP”) by the fifth-largest US broker, Brown & Brown, and Acrisure’s acquisition of London Market MGA Volante Global support the thesis behind this recent trend, and the strong dollar may encourage further US takeovers.

In the carriers sector, the deal volumes for P&C have decreased for both personal and commercial lines on the back of challenging market conditions that reflect sustained weak performance and high levels of volatility; a number of processes did not complete or were pulled.

At least $7.8 billion (bn) of reserves was transferred from the live market to legacy carriers in 2022. These transactions have been driven by strong demand from insurers for capital-relieving legacy solutions, supported by a plentiful supply of capital from investors, which acquirers have used to take on larger and more diverse portfolios. “Mega deals”, those in excess of $1bn in value, contributed almost $6bn of that total, with Enstar being the largest legacy acquirer with $4.2bn of reserves acquired, followed by RiverStone who was the most prolific by deal count.

There are now upwards of 10 players that consistently compete for assets in the legacy market, causing many deals to become increasingly competitive. However, not every legacy carrier has the balance sheet to compete in the bidding process for such deals. Therefore, if opportunities of this size continue to come to market in greater numbers, other solutions such as the syndication of transactions may need to be explored. This ongoing inflationary environment could be a trigger for more legacy transactions as insurers will continue to look to release trapped capital associated with retaining non-core portfolios.

On the life side, transaction volumes remained steady despite economic uncertainties, driven by legacy transactions and bancassurance deals. Life insurers seeking to increase economies of scale and assets under management through such transactions provided relief in an environment where organic growth is suffering from strong headwinds, thus offering a lifeline for struggling insurers.

Despite the UK and Ireland (including Bermuda) continuing to lead the European market for insurance industry M&A, deal activity in the region may have peaked, with 177 announced transactions in 2022 compared with 197 in 2021. The decline reflects the increased saturation of the UK and Irish markets, particularly in the availability of broker targets. PE direct and PE-backed acquirers accounted for around 60% of total broker and service providers transactions announced during the year, but a rising trend of dealmaking activity, driven by strategic buyers, nearly doubled the previous year’s volumes (70 in 2022 vs 37 in 2021).

The Eastern European geopolitical crisis has exacerbated inflationary pressures, particularly for energy and food, amid disparities among nations in their patterns of economic recovery from prior lockdowns. This is increasing claims costs in various P&C and specialty lines of business and is therefore a key factor in driving the persistence of a hard market in the P&C insurance segment. However, the London market M&A transaction volumes for carriers’ businesses remained relatively quiet, continuing the trend from the previous 18 months, with just a handful of material transactions observed in 2022.

Insurance M&A volumes in France recovered from the previous year’s drop, with 31 deals signed and announced. Most of these transactions involved PE-backed platforms acquiring distribution businesses, reflecting an uptick in brokerage M&A activity. The largest transaction in France was the sale of CVC’s international broker APRIL to global investment firm KKR. However, only one transaction was announced in the carriers sector, reinforcing our view of challenging market conditions.

Although the Benelux region is a mature market with low organic growth, deal activity continued at pace with 46 announced transactions (compared with 38 in 2021), with strategic buyers serving as the dominant force. Established local PE-backed broker platforms continued roll-up strategies targeting now Belgium as the next market to consolidate. The Benelux brokerage and service providers market is still highly fragmented, and looks set for targets coming to market in 2023. The largest insurance deal in Europe in 2022 was the sale of Aegon’s Dutch insurance operations to a.s.r. in a cash and shares deal worth around €4.9bn — a transaction that would see a.s.r. replace the seller as the country’s second-largest insurer.

Deal volumes in Italy continued to rise, with 29 deals announced in 2022 (compared with 20 in 2021), driven by broker consolidation to establish local presence and strengthen market share. Positive momentum was observed over the year, with Howden Group making several acquisitions and announcing the takeover of publicly quoted leading Italian broker Assiteca. In contrast to 2021, the majority of takeover targets were brokers or service providers as opposed to carriers, whose volumes have decreased in line with other European markets.

Although insurance M&A in Iberia has produced only a small volume of transactions historically, deal volumes recently spiked, fuelled by broker consolidation, bancassurance players via banking merger integrations and strategic disposals. In 2022, announced transactions more than tripled — 43 compared with 13 in 2021 — making Iberia the third most active market in continental Europe. Both carrier and intermediary transactions, where PE-related investors and strategic buyers shared 50% of dealmaking volumes, have significantly increased. Private equity firms have now acquired the majority of independent “broker platform-type” businesses in the region, suggesting that competition for add-on/bolt-on targets will be fierce.

The Nordics region saw an increase in deal volume, with 38 announced transactions in 2022 vs 21 in 2021; 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. Two of the most high-profile transactions were the sale of a minority interest in specialty commercial lines MGA RiskPoint to Nordic Capital and Cinven’s purchase of Swedish broker consolidator Säkra.

The Germany, Austria, Switzerland (“DACH”) region remains one of the most fragmented markets in Europe, with a significant increase in deal volume in 2022 — the second largest after the UK and Ireland. 2022 brought a continuation of strong deal announcements: 53 transactions compared with 39 in 2021. More than 80% of deals were acquisitions of distribution and service providers, with PE-owned broker consolidators continuing to exploit the highly fragmented market (particularly in Germany) in pursuit of their growth strategy. Significant potential for further consolidation remains, however. Notable transactions included Zurich’s legacy life insurance back book sale to Cinven-backed German life insurance run-off manager Viridium Group, and Athora’s acquisition of a €16bn closed-book life insurance portfolio from AXA Germany.

The decrease in deal volumes in the Central and Eastern Europe (“CEE”) region, reflecting the impact of the current geopolitical crisis, came as no surprise: just 15 transactions announced in 2022 compared with 24 in 2021. Despite the headwinds, international insurers such as Allianz, Vienna Insurance Group (“VIG”) and Generali made acquisitions in the region, and Apax-backed broker consolidator PIB strengthened its presence in the Polish market with three acquisitions.

Click here to download the full report for a detailed breakdown of all European insurance M&A activity in 2022.