2024: The Year of the Rebound

In several sectors, 2024 will be looked upon as a rebound year.

For the U.S. economy, inflationary pressures eased, the Federal Reserve cut interest rates three times, the labor market strengthened, real gross domestic product (GDP) increased, and the financial markets reached historic highs.

For the insurance industry, financial performance for the U.S. property and casualty (P&C) sector improved markedly in 2024. AM Best reported that the U.S. P&C sector recorded $4.1 billion in underwriting profits for the first nine months of 2024—up significantly from the $32.1 billion loss reported for the same period in 2023. This can be attributed to several factors, including improvements in rates, risk selection, program design, and portfolio yields, as well as an improving outlook for personal lines.

For brokers, 2024 showed some signs of rate stabilization, with commercial P&C premiums rising by an average of 5.1% across all lines of business in the third quarter—down from 7.7% and 5.2% in the first and second quarters, respectively. But the market remains hard, with modest rate hikes expected to continue in 2025 for commercial auto, umbrella/excess liability, and personal lines. Carrier capacity in 2025 is expected to be similar to last year’s levels for all lines except umbrella/excess liability, which is projected to significantly decrease due to rising litigation costs, the frequency and severity of nuclear verdicts, and higher claim payouts.

The U.S. insurance industry in 2025 is expected to remain stable, boosted by improved profitability and underwriting results and investment returns amid a strong economic backdrop. This will remain a consideration for many independent firms as they assess their options for the future.

The mergers and acquisitions (M&A) market is expected to remain active in 2025. Many firms had geared up to close their deals by year’s end if Democrat Kamala Harris was elected president in November, over fears of increased capital gains taxes once she took office. Once Donald Trump was re-elected president, those fears dissipated, and many deals were put on hold to delay their timing on paying taxes and are expected to close in early 2025 instead.

In 2024, a number of large brokers were acquired by other, larger brokers. We may see a few more of these large deals in the first part of 2025. However, this will not deter activity in the marketplace.

The independent firms need to continue focusing on how to grow their business rather than remaining reliant on rate and market exposure to drive their top line. Firms that build a value proposition that is attractive to their target clients will be in a great position to achieve high sales velocity (higher than 18%) and remain in control of their future. Others will look to partner (sell) to one of the 40+ well-capitalized buyers in the marketplace to bolster their position in the geographic markets and industry niches that they serve.

M&A Market Update

The preliminary M&A numbers are in for 2024—but stay tuned for further updates as many buyers delay calendar year announcements until later in January.

As of Dec. 31, there were 726 announced insurance brokerage M&A transactions in the United States in 2024. This is down 3.3% from the 751 deals announced at the end of 2023. With counting likely to continue for several weeks, 2024’s deal total could close the gap on 2023’s final number of 807.

Private capital-backed buyers accounted for 537 of the 726 announced transactions (74.0%) in 2024. Independent agencies were buyers in 113 deals, or 15.6% of the market. Bank buyers completed seven acquisitions in 2024—an all-time low.

There were 102 acquisitions of specialty distributors, 14.0% of the total announced deals in 2024. This percentage share is down from 22% in 2023, reversing the three-year trend of increasing percentage share for specialty distributors. The top 10 buyers accounted for 49.2% of all announced transactions, while the top three (BroadStreet Partners, Inszone Insurance, and Hub International) accounted for 24.9% of the 726 deals.

Notable Transactions

• December 5: Brightstone Specialty Group, a specialty subsidiary of Highstreet Insurance Partners, acquired DMI Insurance Services (DMI) and its sister company, South Valley Claims (SVC), based in Austin, Texas. DMI, established in 1962, specializes in tailored insurance programs, specifically in the niche market of independent auto dealers and garage risk. MarshBerry served as advisor to DMI and SVC in the transaction.
• December 9: Arthur J. Gallagher signed a definitive agreement to acquire AssuredPartners, with the transaction expected to close in Q1 2025, pending regulatory approvals. The deal enhances Gallagher’s middle-market property and casualty and employee benefits focus, leveraging AssuredPartners’ broad U.S. footprint and niche expertise in areas such as transportation, energy, healthcare, and government contractors. The acquisition is set to bolster Gallagher’s business through enhanced data and analytics, expanded specialty product offerings, and increased opportunities across its wholesale, reinsurance, and claims management operations.
• December 9: Alliant Insurance Services has acquired Union First, a benefits consulting and third-party administration firm specializing in serving public safety labor associations, including police, firefighters, and deputy sheriffs. Union First will integrate into Alliant’s Employee Benefits Group— West Region. Union First provides services such as benefits consulting, claims advocacy, collective bargaining support, and benefit trust administration. MarshBerry served as advisor to Union First in the transaction.