In mid-December, PwC tallied a surge in M&A deals in the U.S. insurance industry in the second half of 2024, and predicted an active year in 2025 with brokerage and MGA deals leading the way.

According to PwC’s U.S. Insurance Deals Outlook 2025, a new administration in Washington ushering in a “deals-friendly” environment and the need for private equity firms to realize value from existing assets are factors that will fuel activity in the coming year.

The report, published in mid-December, reveals that there were 307 announced U.S. insurance industry deals between May and mid-November 2024—more than double the number of deals announced from mid-November 2023 to April 2024.

The total announced deal value was more than $20 billion in the late-2024 six-month period, PwC said. PwC consultants cited one of two megadeals contributing to the value—the $5.1 billion take-private acquisition of legacy reserve specialist Enstar by Sixth Street—to suggest that there is budding interest in property/casualty carriers. They believe the trend will carry into 2025.

Related articles: Legacy Acquisition Specialist Enstar to Be Acquired by Sixth Street for $5.1B ; Questionable Loss Reserves: Are Legacy Reinsurance Deals the Answer?

The reasons they gave did not include anything about a specific interest in legacy reinsurers.

“The P/C market is becoming more efficient, with the focus on specialization in the P/C ecosystem, and from a rate perspective coming out of a hard market,” they wrote instead. “PE firms are expanding their asset aggregation from the L/A [life and annuity] sector to the P/C sector,” they added.

While P/C has been relatively quiet in recent years, ongoing demand for insurance brokerages and managing general agencies and demand for L/A assets has fueled deals. PwC cited Marsh McLennan’s $7.8 billion deal to acquire McGriff Insurance Services to highlight the brokerage deal trend.

Related articles: Marsh McLennan to Buy TIH’s McGriff Insurance for $7.75B; Marsh McLennan Completes $7.75B Buy of McGriff Insurance Services

After the November 2024 cutoff date for PwC’s deal-counting, Arthur J. Gallagher announced a deal almost twice as big—entering an agreement to acquire AssuredPartners for $13.5 billion cash to expand the broker’s reach in the U.S. middle-market P/C and employee benefits space.

Related article: Gallagher to Buy AssuredPartners for $13.5B to Increase Mid-Market Reach

The PwC report notes that insurance brokerages and MGAs have continued to see high valuations and EBITDA multiples as a result of their steady cash flows and resiliency in the face of economic uncertainty.

Another perspective: Viewpoint: Strategies for Brokers as M&A Slows and Insurance Rates Soften

In addition, “PE firms have a backlog of exits and are under pressure to realize value,” the report says, noting that because PE firms own several large consolidators, PwC expects PE exits to affect the brokerage sector, in particular.

With the new administration bringing a likely reduction in regulations, many insurers and brokers could be looking to IPO in the near future, PwC concludes.

Separately in December, during a Standard & Poor’s webinar titled “IN/sights: Outlook & Trends for U.S. Insurers 2025 & Beyond,” Tim Zawacki, insurance sector strategist for S&P Global Market Intelligence, offered his view of M&A activity in the P/C carrier sector. He noted that in the almost 10-year period since the ACE/Chubb combination, blockbuster deals haven’t happened. But S&P has seen a number of affiliations among regional mutual insurer.

A mutual may affiliate with another mutual, similarly positioned in a different region, in order to diversify from a geographical standpoint, he said.

“We’re also seeing a particularly elevated level of mutual insurance holding company conversions where mutuals will gain some additional financial flexibility by adopting the mutual holding company structure,” he said. “By our count right now, we’re on pace for a record year for MIHC conversions,” he said, reporting that seven took effect in 2024, topping a prior record of six in a single year.

These “companies, whether by choice or by force, are responding to pressures that they’re facing from a financial standpoint, from a reinsurance availability standpoint and from a financial flexibility standpoint.”