Arthur J. Gallagher, Hub International and Confie Seguros were the top buyers in 2012
CHICAGO— A new annual survey by OPTIS Partners says the rate of mergers and acquisitions of insurance agencies hit an all-time high in 2012.
“Buyers were anxious to acquire and sellers equally anxious to complete their deals before capital gains tax rates went up in 2013,” said Timothy J. Cunningham, managing director of OPTIS, an investment banking and financial consulting firm specializing in the insurance industry.
The company, which provides consulting services to the insurance distribution system, conducted a survey of reported transactions in both the United States and Canada. The results published in the report entitled “Agent-Broker Mergers & Acquisitions 2012” notes that in 2012 alone, there were 291 reported transactions involving insurance agencies. The previous record for insurance agency M&As was in 2008 when there were 284 transactions. 2007 and 2011 tied for third place with each having 279 deals.
Of the 291 mergers & acquisitions in 2012, the OPTIS Partners study says that the top three buyers of agencies last year were publicly owned broker Arthur J. Gallagher (30 deals), private-equity-backed firm Hub International (21) and PE-backed firm Confie Seguros (18). And while overall privately owned agencies were still the biggest buyers in 2012, the actual number (93) was lower than 2011 figures which saw 101 privately owned insurance agency mergers & acquisitions occur within the same period of time.
“The decline is perhaps due to greater competition for deals from publicly owned brokers and private equity firms, which together accounted for 53 percent of the deals compared to 45 percent in 2011,” Cunningham said.
Agency acquisitions by banks were also strong but lower than their 2011 numbers with banks acquiring 24 agencies in 2012 versus 37 in 2011.
On the seller side, the report states that sales of property-and-casualty-focused agencies continued to rise, reaching 109, and deals for agencies selling both P&C and employee benefits also rose, to 78. Sales of employee benefits agencies fell slightly, to 66.
“Given the uncertainty about how Obamacare will affect employee benefits firms’ revenues and the complexity of implementing federal and state legislation, it’s a bit surprising sales of employee benefits-focused firms were so strong,” he said.
While it’s unlikely the record-setting year will be repeated, Cunningham expects M&A activity to stay strong in 2013.
The full report, “Agent-Broker Mergers & Acquisitions 2012,” can be accessed here.
A visual look at the numbers from Optis Partners.