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Themes That Will Shape the Insurance Distribution Market in 2024

Financial Institutions January 22, 2024
Financial Institutions January 22, 2024
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Less than a month into the new year and 2024 is already distinguishing itself from the last. Inflation is moderating, the steady diet of interest rate hikes appears to be at an end, and the economy is seemingly on track for a soft landing (fingers crossed). Despite this shifting market paradigm, we expect many of the storylines that shaped the insurance and insurance distribution sector over the past 12 months to persist.  

2023 – A Look Back 

Despite the headwinds caused by the highest interest rate environment we’ve seen in the past two decades, 2023 marked another strong year for the insurance brokerage industry. 

Inflation (pricing and social) and increased CAT activity supported a hard (but softening) market in the property and casualty (P&C) insurance space, leading to higher premiums and more restrictions on coverage. Last year, we saw several national carriers fully or partially exit markets like California, Florida and Louisiana, in turn, having a positive impact on organic growth for the sector. Organic growth held up better than expected, with many public and private brokers posting high single-digit organic growth and select platforms in the double digits.  

Due to the high-interest rate environment, M&A activity in the distribution sector slowed significantly, especially when compared to 2021 highs. Since its 2021 peak, M&A activity by deal count fell by 48% in 20231; however, don’t mistake the muted market for lack of buyer interest. While there were fewer buyers at the table, those who remained were well-capitalized, motivated and willing to “stretch” for well-run platforms; said simply, management teams are “picking their spots.” Case in point, we closed the year out with a marquee M&A transaction in Aon’s announced acquisition of National Financial Partners for US$13.4 billion in December.2

As useful as it can be to identify trends predicting how valuations might evolve over the next 12 months, that won’t be easy in 2024. Just as the 2023 M&A valuation environment couldn’t be painted with a broad brush, we expect valuations will remain deal-specific this year.   

The rate environment impacted both strategic and sponsor buyers’ expectations differently, namely impacting expectations around future M&A volumes and price, ability to pay and investment return hurdles. All the while, tuck-in valuations for well-run platforms certainly didn’t soften. We continue to see a premium being placed on platforms demonstrating market leadership, growing above market organically and able to execute on M&A.  

2024 – A Look Ahead 

As we look ahead into 2024, the buzzwords and phrases of 2023 will remain: organic growth, integration, specialty, margin enhancement (outside M&A) and value proposition. These will continue to be major themes to watch and underpin a number of key questions, including whether the sector will maintain its strong organic growth trajectory in what is arguably a once-in-a-lifetime hard market. If so, at what level of organic growth does margin expansion become more challenging?   

Social and lawsuit inflation has emerged as a theme that could further impact the industry’s organic growth trajectory. Casualty lines (excluding work comp) impacted by social inflation have seen some upward pricing-power acceleration, largely due to worse-than-expected social inflation impacts, despite being the most positively impacted by higher interest rates. 

How to attract and retain talent is another question platform management teams are trying to answer. An executive told me we’re in an environment of “hand-to-hand combat for producer talent.” How do you define, articulate, differentiate, and defend your value proposition?  

Of course, the most commonly asked questions are centered on the U.S. Federal Reserve (Fed). We’ve clearly received a shift in tone from the Fed, but how will the expectation of lower rates impact M&A volumes and valuations? There are now over 30 financial sponsor-backed retail brokerage platforms in the U.S. The number of financial sponsors with the ability to pay, and without an investment in the space, is small and getting smaller – will the nature of capital in the sector be required to evolve? Will larger platforms be forced into the public markets or to merge? For years, participants in and observers of the brokerage sector have speculated that a wave of strategic-led “consolidation of the consolidators” would come. Are deals like Aon’s announced acquisition of NFP the catalyst?   

No matter how you look at it, there are a few truths we know as it relates to the sector. First, the global economy needs insurance to function. Second, the world is only becoming more complex, and therefore, in need of the technical expertise of insurance brokers. Finally, the insurance brokerage sector remains as resilient as ever. 2024 will be an exciting year, no doubt.


1 The Hales Report, January 8, 2024 

https://aon.mediaroom.com/2023-12-20-Aon-to-acquire-NFP,-a-leading-middle-market-provider-of-risk,-benefits,-wealth-and-retirement-plan-advisory-solutions 

Read more
John Belle Managing Director & Head, Insurance Distribution & Services Investment Banking

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