Mergers and Acquisitions in the P&C Insurance Ecosystem: Preparing for the Turn

A number of factors have led to industry-transforming mergers and acquisitions in the P&C insurance marketplace.

Boston, November 30, 2011 – A new report from Aite Group examines the mergers-and-acquisitions (M&A) activity that has reshaped the North American property and casualty (P&C) insurance landscape in 2011. Based on September to November 2011 Aite Group interviews with 18 stakeholders in the North American private equity investment community, representing P&C insurers, agency and brokerage firms, and insurance IT services and software providers, the report also defines the P&C insurance ecosystem by market segment.

As the P&C industry anxiously awaits the P&C market cycle’s turn from the recent soft market to the next hard market, opportunistic companies are preparing in many ways, including growth through acquisition. Sustained poor market conditions have beaten down valuations, resulting in attractive acquisition pricing. Carriers, whose growth has been slowed by current market conditions, are looking to technology vendors to help them squeeze out better earnings results. Vendors, eager to satisfy that demand, have been taking advantage of the same relatively attractive valuations to “bulk up,” filling product and expertise gaps to grow their share of the pie. As always, a number of factors are driving these M&A transactions, some of them unique to each industry segment and others more closely related to the strategic objectives of buyers and sellers.

“All major insurance market segments saw some M&A activity, but in terms of pure deal count, the distribution space was far and away the most active,” says Stephen Applebaum, senior analyst with Aite Group and author of this report. “In 2011, there have been almost 200 M&A transactions involving insurance agencies, with retail brokerages acquiring the majority. M&A activity in the highly fragmented insurance technology and services market featured continued consolidation as well as horizontal and vertical product-line expansion by segment leaders and smaller players alike.”

About Aite Group

Aite Group is a leading independent research and advisory firm focused on business, technology and regulatory issues and their impact on the financial services industry. It was founded by leading industry experts in Banking and Securities & Investments. Aite Group brings together a team of business strategy, technology and regulatory experts to deliver comprehensive, timely, and actionable advice to financial institutions and technology vendors. It seeks to become a true partner, advisor, and catalyst by exchanging ideas and challenging basic assumptions to ensure that our clients always stay one step ahead of the competition.