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Stacy Kirshner. (Photo: Alvarez & Marsal)

Practice Management > Building Your Business > Dealmaking

Buyers Still Want Life and Health Brokers: Stacy Kirshner

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What You Need to Know

  • Though market volatility has affected some deals involving insurers, M&A remains strong after a record year in 2021.
  • Corporate-backed and private equity-backed consolidators continue to shop for brokers.
  • Rising rates could eventually lead to a recovery in insurer deal volume.

The new investment market volatility has slowed some deals involving insurers — but not the pace of acquisitions for life, health and annuity brokers.

Stacy Kirshner, a managing director with the transaction advisory group at Alvarez & Marsal, gave that assessment in a recent email interview.

Alvarez & Marsal is a professional services group that’s well-known for its restructuring and turnaround expertise. It’s also a major player in the insurance deal advisory market.

What It Means

Even if you have no interest in selling your advisory practice, all of those acquisitions might be increasing the value of your practice. That could increase your ability to use the value of your practice to make deals of your own, or to use equity stakes or other strategies based on the value of your practice to attract talent.

The Big Picture

Kirshner said that, overall, insurance organization deal volume was lower in the first half of this year than in the first half of 2021.

But 2021 was a record year for mergers and aggregations, and M&A volume continues to be strong, Kirshner said.

“We remain bullish on our outlook for insurance M&A for the second half of 2022,” she reported.

Here are some of her other observations.

1. Volatility has been tougher on the product issuers than the sellers.

Some buyers are trying to cut what they pay for insurers.

“Re-pricing has already started to take effect and has either paused or ended certain transactions,” Kirshner said.

In the long run, however, she expects rising interest rates to improve conditions for deals involving insurers.

Life and annuity issuers tend to benefit from increases in interest rates because they use huge portfolios of corporate bonds to support product benefits obligations.

2. Insurance distributors are in a different dealmaking environment.

Both private equity firms and corporate buyers view insurance brokerage deals as being “extremely attractive, because of the brokerage firms’ high margins, recurring revenue and free cash flow conversion,” Kirshner said.

“Life and health insurance brokers are well-positioned,” she said.

She sees strong interest in firms that serve aging baby boomers, and in those that have integrated with RIAs to capitalize on retirement services cross-sell opportunities.

Buyers, meanwhile, have more acquisition opportunities to consider, because “the volatility in the market has encouraged insurance brokerage sellers to engage with buyers.”

3. Insurance technology firms are still hot.

“Pricing will continue to remain high, particularly for assets that focus on digital technology through enhanced cybersecurity, comprehensive and integrated policy administrative systems, and systems to digitize and improve the customer experience,” Kirshner concluded.

(Image: Shutterstock)