The number of publicly announced deals that closed in the insurance distribution sector during the first two quarters of 2019 closely tracked the number of deals during the same period in 2018, suggesting that 2019 may be another record-setting year with respect to deal activity.
With 580 deals closed during the calendar year, 2018 set the high-water mark with respect to the number of announced transactions. Some 283, or 48.8% of the total, closed in the first half of the year. The first half of 2019 during which 280 transactions closed was equally frenetic and suggests that we are poised to repeat 2018’s performance. This, despite the cooling of the broader U.S. economy, which retracted in the first half of 2019 due to the lagged impact of higher short-term interest rates, weak economies throughout Europe and a continued slowdown in China.
The year 2019 got off to a torrid start with 85 transactions closed in January 2019, 17 of which were the result of the formation of Patriot Growth Insurance Services LLC, a new national retail insurance agency backed by Boston-based private equity firm Summit Partners.
Private equity backed buyers continue to lead the pack with 162 announced transactions in the first two quarters of 2019, or 57.9% of all deal activity.
The geographic locations of the sellers generally tracked the most populous U.S. states, including California, Texas, New York and Florida.
Independent agencies completed 69 transactions year-to-date and public brokers accounted for 27 deals, or approximately 10% of the total.
Insurance carriers, banks and thrifts, and other buyers rounded out the numbers with a total of 22 transactions.
The top five buyers in the first six months of 2019 represented approximately one-third of the total deal activity and the top 10 buyers accounted for roughly half.
As a result of its formation, and several follow-on acquisitions, Patriot was the most active acquirer with 23 deals closed.
Hub International Limited was the second most active buyer with 19 closed transactions in the first half of 2019. Hub is backed by Altas Partners LP and Hellman & Friedman LLC and has closed 208 publicly announced deals since 2012, trailing only Acrisure LLC, which had 244 during the same period of time.
AssuredPartners Inc., Broadstreet Partners Inc., and Arthur J. Gallagher & Co. rounded out the top five buyers and collectively closed 49 deals through June 30, 2019. Other buyers in the top 10 include OneDigital Health and Benefits, Alera Group Inc., Acrisure, Brown & Brown Inc. and Hilb Group LLC.
OneDigital led this group with 11 closed transactions, followed by Alera with 10, Acrisure and B&B both with nine, and Hilb with eight.
The geographic locations of the sellers generally tracked the most populous U.S. states, including California, Texas, New York and Florida, which accounted for 102 of the 280 announced deals in the first half of 2019.
Although the underlying economic landscape may be less favorable than it was in 2018, counteracting and equally influential factors do exist. There is an increasing number of buyers who have what seems to be endless supplies of capital to deploy. The average age of insurance agency owners continues to increase, and most do not have viable plans to perpetuate their agencies internally. Balancing all these factors, it is likely that deal activity will remain strong through calendar year 2019 and we may match, if not exceed, 2018’s unprecedented deal activity.
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