Deals for property & casualty and benefits brokers in US and Canada dip 14% in first quarter, OPTIS Partners reports
It couldn’t last forever. After a string of record-breaking quarters, OPTIS Partners reports that the First Quarter of 2022 (Q1-2022) saw a 14% dip in insurance agency mergers and acquisitions activity, representing a total of 149 agency transactions.
“The decline is not surprising because the fourth quarter of 2021 was frenetic, with 384 deals. Deal-makers usually take a short-lived breather after busy year-end activities, and seller inventory is shrinking,” said Steve Germundson, a partner at OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry.
“Many agency owners who had been thinking about selling over the last few years were pushed to act by record valuations and concern over tax increases. While valuations remain very high, the concern over tax increases has abated,” said OPTIS managing partner Timothy J. Cunningham.
According to the firm’s analysis, Q1-2022 was the lowest first-quarter total since 2016 representing a 7% decline from the five-year average. While a slower start to the new year, Mr. Germundson remained optimistic with regards to the remaining quarters of the year.
“History would tell us that activity in the remainder of 2022 will likely rise. Our conversations with a number of buyers confirm that as many are reporting double-digit numbers of letters of intent in hand going into the Q2,” Germundson said.
OPTIS Partners expands it analyses to other insurance distribution markets
In the past, the quarterly OPTIS Partner report included data covering both U.S. and Canadian agencies ‘selling primarily property-and-casualty insurance, agencies selling both P&C and employee benefits, and those selling only employee benefits.’ Starting this year, however, the company announced that it has expanded its tracking to include other sellers such as life/financial services, consulting, and other businesses associated with insurance distribution.
Within this new framework, the firm continues to breaks down buyers into four distinct groups:
- private equity-backed/hybrid brokers,
- privately held brokers,
- publicly held brokers, and
- all others
P&C Sellers continues to dominate sellers
While agency sales are down across the country, Property & Casualty sellers still account for the lion’s share of the transactions in Q1-2022. Approximately 58% of all transactions (87 according to OPTIS Partners) involved property & casualty agency sellers. After that, benefits agencies sales totaled 11 (7%), while 25%, or 37 sales, included P&C/benefits agencies. OPTIS Partners says the remaining 10% involved ‘all other sellers’.
Acrisure & Hub Take Top Spots Once Again
Among buyers, Acrisure and Hub stood out once again as the most active buyers in the nation. Both recorded the most transactions in Q1-2022, with 14 and 12 respectively. Both these figures were similar to the companies’ results at this same time last year. In comparison, three of the most active buyers in the past few years, such as AssuredPartners and Alera, had no announced transactions during this quarter.
As for other top buyers this quarter, OPTIS Partners noted that Inszone Insurance Services had 10 deals, High Street Partners had nine, while Integrity Marketing Group had seven, and PCF Insurance had six.
As for the type of seller dominating the marketplace, private equity-backed/hybrid group of buyers continue to fuel this market acquiring 70% of all Q1-2022’s agency transactions, while private parties accounted for only 21% of agency acquisitions.
Active acquires five or more deals in Q1-2022
| Buyer by Type | Q1-2018 | Q1-2019 | Q1-2020 | Q1-2021 | Q1-2022 |
|---|---|---|---|---|---|
| Acrisure | 29 | 17 | 18 | 9 | 14 |
| Hub International | 13 | 12 | 17 | 12 | 12 |
| Inszone Insurance Services | 4 | 2 | 10 | ||
| High Street Partners | 4 | 9 | |||
| Integrity Marketing Group | 1 | 1 | 7 | ||
| PCF | 9 | 8 | 6 | ||
| World Insurance Associates | 3 | 5 | 4 | 6 | 5 |
| Alkeme Holdings | 5 | ||||
| Broadstreet Partners | 7 | 9 | 16 | 12 | 5 |
| Westland Insurance Group | 3 | 1 | 3 | 5 | |
| Higginbotham & Associates | 1 | 1 | 3 | 5 | |
| Alliant Insurance Services | 1 | 1 | 1 | 7 | 5 |
| All Other | 93 | 110 | 105 | 99 | 61 |
| Total Reported Transactions | 151 | 155 | 176 | 150 | 149 |
How to access the full 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 by click the image below:
