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More than $19B in PE insurance sector M&A already at record high

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More than $19B in PE insurance sector M&A already at record high

Private equity and venture capital firms have been pouring capital into insurance companies despite the uncertainties about claims and losses from the pandemic.

PE-backed M&A in the sector globally reached $19.28 billion in disclosed value in the year to Aug. 20, already exceeding the full year 2020 total of $12.88 billion, according to S&P Global Market Intelligence data.

This year's disclosed deal value is nearly double that of the $10.61 billion in 2019 and is the highest amount on record for at least a decade.

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First half highlights include two large publicly listed PE firms buying insurance assets. The largest deal was Apollo Global Management Inc.'s planned merger with retirement services company Athene Holding Ltd. in an all-stock transaction that implies a total equity value of roughly $11 billion for Athene.

In the first quarter, Blackstone agreed to acquire Allstate Life Insurance Co. and certain other subsidiaries of The Allstate Corp. for $3.05 billion, according to S&P Global Market Intelligence data. In a separate deal in July, Blackstone agreed to acquire a 9.9% stake in Los Angeles-based financial and insurance products and service provider SAFG Retirement Services Inc. from American International Group Inc. for $2.2 billion in cash.

The five big public PE firms — Apollo, Blackstone, The Carlyle Group Inc., KKR & Co. Inc. and Ares Management Corp. — have all bought into insurance companies over the past two years. The acquisitions are not all typical deals for sector exposure. Some of the firms have said their insurance company buyouts will sit on the balance sheet, provide synergies with PE and become a source of permanent capital.

Key venture capital deals

On the venture capital front, insurance businesses gathered nearly $8.82 billion in global funding rounds in the year to Aug. 6. Of that total, roughly $8.35 billion was raised during the first half and about $466.0 million has been secured since the beginning of the third quarter.

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During the period, the majority of venture capital transactions were in North America, with 48 funding rounds.

One of the larger funding rounds completed to date was Grand Rapids, Mich.-based insurance broker Acrisure LLC's $3.45 billion capital raise from two transactions. Investment funds affiliated with BDT Capital Partners LLC led a $3 billion investment into Acrisure's senior preferred stock, and a consortium of investors invested $454 million of new capital in junior preferred stock.

Another large round was German insurtech company wefox Germany GmbH, which raised $650 million in series C funding led by venture capital firm EDB Investments Pte. Ltd. The deal is notable because it signals strong private capital interest in the digitalization of the insurance industry, one of the drivers of M&A in the sector.