Insurance agency mergers and acquisitions hit an all-time high in 2012, a recent study shows, with 291 transactions in the U.S. and Canada.

“Buyers were anxious to acquire and sellers equally anxious to complete their deals before capital gains tax rates went up in 2013,” says Timothy J. Cunningham, managing director of OPTIS, an investment-banking and financial-consulting firm that released the study.

The study analyzed reported transactions in the U.S. and Canada from various sources, including press releases, news reports and company websites. Transactions include retail and wholesale agencies and brokerages, and MGAs/MGUs selling property & casualty, employee benefits and life/financial services products.

The 291 deals in 2012 topped the previous record of 284 deals in 2008. Activity slowed in 2009 and 2010, with 167 and 193 transactions reported respectively. The study attributes the drop to the collapse in the economy. In 2011, amid signs of economic recovery, the number of deals jumped to 279.

Acquisitions made by privately owned agency groups, while still higher than any other individual category of buyers, declined in 2012 relative to the year prior, and OPTIS says the fall is “perhaps due to greater competition” for deals. Private-agency groups accounted for 93 of the 291 acquisitions, down from 101.

Private-equity-backed firms followed closely, accounting for 86 deals. “On a stand-alone basis, [private-equity] firms have grown from 17 percent of the total in 2008 to 30 percent in 2012, a significant and steady increase over the past five years,” OPTIS says.

Private equity and public brokers combined made up 53 percent of the announced deals in 2012, up from 45 percent in 2011, the study says.

A look at the most active buyers since 2008 shows two public brokers, Arthur J. Gallagher and Brown & Brown, leading the way. AJG announced 30 deals in 2012 and 102 deals since 2008. Brown & Brown announced 15 deals in 2012 and 96 deals since 2008.

The two public brokers are followed by four private-equity-backed firms: Hub International, Confie Seguros, USI Holdings and Assured Partners.

The list, which shows all buyers with 10 or more acquisitions since 2008, features just one private-agency group among the 16 buyers: Ryan Specialty, which announced five deals in 2012, two deals in 2011 and four deals in 2010.

As for the types of agencies of interest to buyers, OPTIS notes that P&C agencies accounted for most of the purchased agencies in 2012, and the number acquired was up compared to 2011. The number of firms acquired selling P&C and employee-benefits products also rose steadily from 2011, while firms specializing in employee benefits fell slightly from 2011.

But employee-benefits firms still appear to be in high demand, and OPTIS speculates that these agencies might be pressured to sell or partner with a larger organization as a response to the 2009 healthcare-reform law.

Cunningham, though, wonders why buyers are looking to acquire such firms. “Given the uncertainty about how [healthcare reform] 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 says.

Special Reports /

Agent/Broker Acquisition Activity Takes Off in 2012; Private Equity Interest Grows

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