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    Banking, Finance & Insurance Q3 2022

    Q3 2022 Banking Finance Insurance

    Industry Trends

    Insurers Expect A $57 Billion Loss In Hurricane Ian's Aftermath

    The risk modeling firm Verisk projects that Insurers will be on the hook for up to $57 billion, which includes wind, storm surge, and inland flood losses from the recent hurricane to hit Florida’s west coast. The number could be higher, pushing some Florida insurance companies into insolvency and challenging the claims process. Additionally, high construction costs and inflation present challenges to the rebuilding process.1 2

    Federal Reserve Increases Rates Again

    The Federal Reserve in September raised the benchmark federal funds rate by another 0.75 percentage points to curb continued inflation. Officials voted to lift the federal-funds rate to a range between 3% and 3.25%, and the expectation is that they will end the year between 4% and 4.5%.3

    SPAC Activity Dwindles

    Just last year, SPACs were an easy way for a startup to raise capital and go public, but recently the trend has soured. Many companies that went public have missed forecasts, seen a declining share price, and other companies have already acquired some. Some startups which were going to go public by combining with a SPAC have decided to raise cash on their own.4

    Pensions Prep For PE Losses

    Pension funds are reporting their worst performance since 2009, and the situation will likely worsen. One indicator is the secondary market for private investments – it is trading at a steep discount. Additionally, the more illiquid parts of pension portfolios are not priced currently like stocks and bonds are - they include returns from 2021 when the market was up and had less volatility.5

    Mortgage Rates Continue to Rise

    The average rate for a 30-year fixed mortgage has soared to nearly 7%, the highest since July 2007. This increase coincides with the Fed raising interest rates. A potential homebuyer will see a significantly higher monthly payment in the current environment, which has impacted the housing market.6

    Largest Transactions Closed

    • Target
    • Buyer
    • Value($mm)
    • NSM Insurance Group, LLC
    • The Carlyle Group Inc.
    • $1,775.00
    • CBTX, Inc.
    • Stellar Bancorp, Inc.
    • $845.62
    • Metromile, Inc.
    • Lemonade, Inc.
    • $516.69
    • BT Holdings, Inc.
    • Origin Bancorp, Inc.
    • $313.48
    • Charter Bankshares, Inc.
    • Nicolet Bankshares, Inc.
    • $157.96
    • Community Bancorporation
    • National Bank Holdings Corporation
    • $135.95
    • Denmark Bancshares, Inc.
    • Bank First Corporation
    • $116.30
    • Beach Bancorp, Inc.
    • The First Bancshares, Inc.
    • $114.58

    Other Financial Buyer Transactions Closed

    • Target
    • Buyer
    • Value($mm)
    • Pavonia Life Insurance Company of Michigan
    • Axar Capital Management LP
    • n/a
    • CL Life and Annuity Insurance Company
    • Crestline Investors, Inc.
    • n/a
    • Metrus Energy, Inc.
    • Energy Capital Partners, LLC
    • n/a

    Other Strategic Buyer Transactions Closed

    • Target
    • Buyer
    • Value($mm)
    • MPB BHC, INC.
    • Alerus Financial Corporation
    • $85.37
    • Professional Warranty Service Corporation
    • PCF Insurance Services Of The West, LLC
    • $51.22
    • Comunibanc Corp.
    • Civista Bancshares, Inc.
    • $50.20
    • Liberty Bancorp (South San Francisco, CA)
    • DMG Bancshares, Inc.
    • $34.50
    • Farm, Ranch, and Equine Business of American Reliable Insurance Company
    • Everett Cash Mutual Insurance Company
    • $30.00
    • Quarry City Savings & Loan Association
    • Community National Bank & Trust
    • $10.37

     

    Source S&P Capital IQ as of 10/11/2022 and PCE Proprietary Data

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    Data Assumptions

    This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.

    Glossary

    EBIT - Earnings Before Interest and Taxes
    EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
    LTM - Last Twelve Months
    TEV - Total Enterprise Value

    Sources:

    1. “Verisk Estimates $57 Billion in Hurricane Ian Losses.” Business Insurance, Reuters, 3 Oct. 2022
    2. Christoforous, Alexis. “Hurricane Ian Could Cripple Florida's Home Insurance Industry.” ABC News, ABC News Network, 29 Sept. 2022
    3. Timiraos, Nick. “Fed Raises Interest Rates by 0.75 Percentage Point for Third Straight Meeting.” The Wall Street Journal, Dow Jones & Company, 21 Sept. 2022
    4. Sunderji, Aziz, and Amrith Ramkumar. “SPAC Activity in July Reached the Lowest Levels in Five Years.” The Wall Street Journal, Dow Jones & Company, 17 Aug. 2022
    5. Gillers , Heather, and Dion Rabouin. “Pensions Brace for Private-Equity Losses.” The Wall Street Journal, Dow Jones & Company, 24 Sept. 2022
    6. Grant , Charley. “Mortgage Rates Rise to 6.7%, Highest since 2007.” The Wall Street Journal, Dow Jones & Company, 29 Sept. 2022

     

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