Insurance agency mergers and acquisitions hit a record high of451 reported transactions for the U.S. and Canada in 2015,surpassing the previous record of 357 in 2014, according toa report from Optis Partners.

“This is strong evidence of a steady, entrenched shift in buyerdynamics,” said Timothy J. Cunningham, managing director ofOptis, aChicago-based investment banking and financial consulting firmspecializing in the insurance industry, and National Underwriter Property & Casualtyadvisory board member. “Private-equity backed buyers wereresponsible for virtually all of the year-over-year growth, whileP&C agencies dominated the seller category.”

Indeed, private-equity-backed agencies were 2015’s biggestbuyers, with 242 transactions, which is an increase of more than50% from the year previous, the “2015 Agent-Broker Mergers & Acquisitions”report states. This is the first time that any buyer group hasaccounted for the majority of transactions, Cunningham says.

Caledona, Mich.-based brokerage Acrisure (which is backed byGenstar Capital) made the most transactions, with 56 acquisitions.Lake Mary, Fla.-based AssuredPartners, backed by Apax Partners,came in second with 38 transactions, followed by Chicago-basedbrokerage Hub International, backed by Hellman & Friedman, with37 transactions.

What’s driving this trend is the “limited options available toinvestors to generate the returns they seek,” the report states.“Interest rates have been paltry for years; the U.S. stock markethas become more volatile after years of growth … Meanwhile, theinsurance brokerage business has proven to be an opportunisticvehicle that meets investors’ return demands.” As such,private-equity-backed buyers are “willing to push agency values tolevels not seen in many years.”

Privately owned insurance companies purchased 109 agencies in2015, followed by public brokers (50 transactions), banks (24transactions) and all others, which includes carriers (26transactions).

Property and casualty agencies drive sales

Fifty-seven percent of merger and acquistion sales were ofP&C-focused agencies, Optis says in its report. Agenciesspecializing in both P&C and employee benefits represented 17%of the sales, which is the same percentage of transactions foragencies with employee benefits only.

The report covers agencies selling primarily property andcasualty insurance, agencies selling both P&C and employeebenefits, and employee benefits agencies.

Data for the report comes from reported transactions in theinsurance distribution sector for both retail and wholesaleproducers, including managing general agencies and managing generalunderwriters.

Data is restricted to those agencies providing P&C, employeebenefits, or a combination thereof. The total number oftransactions actually is greater than the 451 reported, as manybuyers and sellers do not report transactions, Optis said in itsreport.

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Trends in annual number of insurance agency mergers andacquisitions, 2008-2015. Source: OPTIS Partners.

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