2025 ECM Outlook: Insurance IPO Recovery to Continue in 2025

If we were to use a single word to sum up what we expect for U.S. IPO issuance, it would be “momentum.” Building off a constructive end to 2024, we believe U.S. IPO activity is poised to build on last year’s gains, potentially returning to its long-term average.  

Last year, U.S. IPO issuance grew 20%, reaching ~$27 billion. However, growth was uneven and episodic at the transaction level. Today, we’re seeing an increasing number of well-prepared issuers, narrowing valuation spreads between public and private markets, positive transaction performance trends and favorable economic incentives laying the groundwork for a durable IPO window.  

Based on a foundation that has been established over the past two years, issuance in 2025 could potentially exceed $50 billion. While such a figure represents a notable year-on-year acceleration, it would still rank only in the 60th percentile over the past 25 years, falling within a standard deviation below the mean.  

The IPO environment 

While there may be a contrarian view that public equity indices are discounting a Goldilocks environment, setting the stage for disappointment and volatility in the first quarter, we believe the broader framework for a constructive year is already in place.  

For starters, CEO confidence, as reflected in already announced M&A activity and business strategy shifts, has notably improved after being suppressed during the Federal Reserve’s rate hike cycle. At a recent investor conference featuring financial services leaders, optimism for 2025 was nearly unanimous, with a focus on both organic and inorganic growth opportunities.  

With consensus among debt market participants indicating that the upper bound of interest rates is capped at 5% and the price stability assumption secure, business leaders are regaining confidence to execute medium- and long-term plans. As a result, the fundamental drivers of economic activity and capital investment are strengthening, reducing the extent to which investor sentiment volatility will dictate access to equity markets compared to 2023 and 2024. 

The various measures of time spent on file for 2024 IPOs are misleading as companies on file from prior years were patient in waiting for an accessible window. For the IPO class of 2024, the average time to go public was a tick below 290 days, a significant increase from 113 days in 2021. That added time benefited those in-waiting IPO candidates mature by improving their profitability, consolidating market share and establishing market leadership.  

Against this backdrop, we anticipate the first half of 2025 will likely feature IPOs from companies that are already well-known to investors through consistent engagement, active M&A or liability management activities. These companies will benefit from heightened investor awareness and advanced transaction readiness. As with any durable IPO cycle, the early stages will be driven by well-prepared businesses transitioning to the public markets at attractive valuations. 

Growth strategies to shape valuations 

For some issuers, bid-ask spreads in 2024 made IPOs unattractive. Given the improvements in demand and the broadening performance in the public market, we think 2025 will take a more positive track. As market breadth improves, opportunities should arise for companies to leverage their unique positioning and capture valuations that would have been unattainable in the restrictive market environment of the past two years.  

Investments in technology, shifts in customer and end-market dynamics, talent acquisition, leadership excellence, and increased capital availability will define the class of 2025 IPO candidates. Many of the late-stage private companies now considering IPOs were forged during the post-pandemic crisis, receiving strategic investments, while others retreated and are now positioned as formidable market leaders. 

In a departure from the past two years of capital allocation that favored businesses with top-tier profitability and scale, the private-to-public valuation framework is pivoting to pay a premium for growth. While organic growth remains the most predictive factor for determining relative value, investors are increasingly factoring in total growth, including contributions from inorganic strategies.  

As for M&A, advances and integration of technology are accelerating and amplifying organic growth synergies. The benefits of scale, whether that’s leadership expertise, integration, and lower cost of capital, support the case for inorganic growth, increasing its contribution to public valuation multiples. This shift to valuing total growth is expected to benefit new issuers and aligns closely with trends in (re)insurance and the surrounding service ecosystems. 

New era of IPO issuance 

Historically, the insurance industry has accounted for a small share of total IPO proceeds, averaging less than 5% since the start of the 21st century. However, during favorable periods, the sector has seen substantial capital raises, with its share of total IPO volume peaking at 18% in 2002.  

The backlog for 2025 suggests that the insurance sector will likely outperform its long-term average, as several large companies contemplate going public reflecting the only viable exit option while others explore growth-driven opportunities. If the entire backlog converts and the sector maintains its historical share of 4.5%, total IPO proceeds would exceed $200 billion, an unlikely outcome and augurs our view that insurance issuance will trend well above average.  

However, given the market dynamics and the nature of the insurance backlog, 2004 may be a more realistic comparison, when the sector saw 11 IPOs raising $7 billion and accounting for 15% of total proceeds. On that basis, 2025 could deliver $8 billion in IPO proceeds for the insurance sector. 

The U.S. election factor 

Market conditions are not the only dynamic that’s changed. Public equity investor positioning has markedly improved following the U.S. election. Year-end data has shown that global allocations to U.S. equities are at record highs, cash levels are approaching pandemic-era lows, and expectations for economic growth are at their strongest in three years. Optimism is also being fueled by declining interest rates, deregulation, and lower corporate taxes, while sentiment readings post-election surged at a pace not seen since the market bottom in 2020.  

Overweight allocations in Financials and Technology align with our expectations for steady growth, stable inflation and lighter regulation. Insurance investor allocations reached decade highs, with meaningful increases recorded through the end of 2024. The scarcity of public market capitalization in the insurance sector creates an opportunity for IPO candidates, as investor demand for exposure to well-known industry themes has been constant post-pandemic, but the lack of public choices has created a vacuum to be filled. 

Balancing risk and reward in 2025

Based on all indications, this year is shaping up to be better than average for equity issuance. Market participants are well-positioned to transact in a baseline scenario, with activity already measurable in first quarter.  

Value investor Seth Klarman’s observation that “there is always a tension in the financial markets between greed and fear” is a fitting lens through which to view recent trends. Where the investment environment in 2023 and 2024 was predominantly influenced by fear of the Federal Reserve, recession, regional bank failures and election uncertainty, 2025 will be filled with a more positive outlook. This momentum is anticipated to continue throughout the year, with a pendulum swing toward risk-taking that supports a highly active and open IPO window.