Investor appetite for insurance assets achieved a new annual record in 2022, with European insurance M&A activity reaching all-time high despite economic headwinds, according to a recent report by FTI Consulting, Inc.
The pace of activity seen in 2021 largely continued through 2022, the report found that 435 deals were recorded for the year, compared to 379 in 2021 and 285 in 2020, marking a new annual record.
However, analysts warn, looking to the near-term, some interest in certain deals may start to narrow as interest rates increase and debt financing becomes more expensive amidst the looming recession threat.
André Frazão, Associate Partner in the Global Insurance Services practice at FTI Consulting, said: “Speculation that valuations would hit a new peak in 2022 came to pass, with several transactions making it to the finish line at record-high multiples.
“Broker consolidator activity continues to be underpinned by the large spread between the add/bolt-ons target’s purchase multiple and the trading multiple for consolidator platforms.”
FTI Consulting’s 2022 European Insurance M&A Barometer Report shows private equity investors maintained a strong appetite for insurance M&A, accounting for 60% of Europe’s deal volume in 2022.
There was also a notable uptick in deal activity from strategic buyers, who accounted for 40% of transactions in 2022, up by 22% on the previous year.
In the UK and Ireland, the leading European market for insurance industry M&A, the report found that deal activity may have peaked, with 177 announced transactions in 2022 compared with 197 in 2021.
The second most-active market for insurance M&A activity last year was the DACH region of Germany, Austria and Switzerland. 53 deals were reported, up from 39 in 2021.
In Iberia, which has traditionally seen only a small volume of transactions each year, deal activity more than tripled to 43 in 2022, compared to 13 in 2021, this figure makes it the third most-active market in continental Europe.
Deal activity also increased in Italy, where there were 29 deals; in Benelux, where there were 46 deals; and in the Nordics, where there were 41 deals.
The only region on the continent that saw an annual decline was Central and Eastern Europe (CEE). Following a downward quarterly trend of deal activity in 2022 only 15 transactions were made in 2022 compared to the 24 made in 2021, wich according to analysts reflects the ongoing economic impact of the war in Ukraine.
Mr. Frazão added: “Activity levels in the UK and Ireland have traditionally been very strong, particularly in the insurance distribution sector, but it is also an increasingly saturated market.
“During 2022, investors turned their attentions to continental Europe, where all the markets in the region, with the exception of CEE, saw an increase in activity, a trend that is likely to continue in 2023.”
