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David Jasmund

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Industry Trends

High Demand For Life Insurance Continues

The COVID-19 pandemic has increased people's awareness of life insurance products and has led many to purchase coverage before they normally would have considered doing so – effectively pulling demand forward. Employers are also looking to utilize benefits to attract and retain employees in the tight labor market. The increase in demand has caused premiums to rise and has benefitted a few players in the market. While Northwestern Mutual, New York Life and Metlife retained their spots in the top three positions, Massachusetts Mutual Life Insurance Co. increased from No. 6 To No. 4 and Sammons Enterprises Inc. improved from No. 20 to No. 12.1

Bank Mergers On Pace To Hit Highest Level

Activity slowed in 2020 because the uncertainty brought on by the global COVID-19 pandemic made it difficult for banks to assess the creditworthiness of the loans on their own and competitors' balance sheets. A wave of defaults did not transpire, and confidence has returned – banks are looking to scale up, and mergers are on a pace not seen since 2008 ($54Bn in deals through late September). Upcoming deals include U.S. Bancorp's potential purchase of MUFG Union Bank's core retail banking operations, and Citizens Financial Group Inc.'s plan to buy Investors Bancorp Inc. For small banks struggling to keep up with the high-end digital offerings of the megabanks or decreasing industry margins, a merger may be an attractive option.2

Title Insurance Performance Benefits From Strong Housing Market

M&A activity in the third quarter includes Acrisure acquiring New York-based Tempo Title, one of the largest private title and settlement providers in the country, Stewart Information Services Corporation (NYSE-STC) acquiring Title First Agency, Inc., and Compass real estate brokerage acquiring Legacy Texas Title Co., its fifth title insurance acquisition for the year. This activity is driven in part by strong performance in the segment. Results for 2020 show that U.S. title insurers saw the largest YoY increase in premiums since 2012, and the segment was the most profitable of the overall property/casualty insurance market. Title insurers benefit from the low interest rate environment that supports housing demand and home price appreciation coupled with title-related claims being near historic lows. The expectation is that the segment will continue to benefit from the economy buoyed by extraordinary U.S. monetary policy, which continues to support the housing market.3 4 5 6 7 8

Private Equity Investment In Insurance At Record High

Private Equity backed M&A in the insurance sector has globally reached $19.3Bn from January through August 2021, nearly double that of the entire year 2019 and the highest amount on record for at least a decade. Apollo, Blackstone, The Carlyle Group Inc., KKR & Co. Inc. and Ares Management Corp, all large public PE firms, have invested in insurance companies over the last two years as they are a source of permanent capital and a tool to drive growth.eals include Apollo Global Management Inc.'s planned merger with Athene Holding Ltd for $11Bn, Blackstone agreeing to acquire Allstate Life Insurance Co. and certain subs for $3.05 Bn, and in a separate transaction, Blackstone acquiring a 9.9% stake in SAFG Retirement Services Inc. for $2.2Bn.9 14

Private Debt Market Grows

Just a few years ago, a $1 Bn unitranche loan would have been considered a blockbuster deal in the direct lending world. However, in 2020 deal sizes increased when Golub Capital provided a $2.04 Bn loan to Risk Strategies, an insurance brokerage firm, and a $2.2 Bn loan to real estate software company MRI Software. These deals have now been eclipsed by the Q3 21 $2.6 Bn of debt financing to help fund Thoma Bravo's buyout of Stamps.com. By the same token, deal volume was $21.6 Bn in the second quarter of 2021, about 7x the volume in the second quarter of 2016, and it is estimated that the market could even support a $5 Bn unitranche loan.10 11

Nonbank Lenders Moving Into Banking

Goldman Sachs has announced it will pay approximately $2.2B in an all stock transaction for specialty lender GreenSky, a "buy now, pay later"(BNPL)company and the largest fintech platform for home improvement consumer loan originations. The transaction will put them one step closer to building a “real banking platform of the future,” according to David Solomon, Goldman Chief Executive. M&A in that sector has increased this year, with Square Inc. purchasing Afterpay Ltd. (a BNPL company)for $29 Bn and PayPal Holdings Inc. buying Paidy Inc. (a BNPL company)for $2.7 billion. Other examples of financial-technology lenders shifting into a banking model are Lending Club acquiring Radius Bancorp, Square Inc. getting a banking license, and SoFi Technologies seeking to become a bank.12 13

Largest Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Talcott Resolution Life Insurance Company
  • Sixth Street Partners
  • $2,000.00
  • Prearranged Funeral Insurance and Final Expense Business of Assurant, Inc.
  • CMFG Life Insurance Company
  • $1,350.00
  • Boston Private Financial Holdings, Inc.
  • SVB Financial Group
  • $941.42
  • ProSight Global, Inc.
  • TowerBrook Capital Partners L.P.; Further Global Capital Management, L.P.
  • $585.89
  • First Choice Bancorp
  • Enterprise Financial Services Corp
  • $397.09
  • Premier Financial Bancorp, Inc.
  • Peoples Bancorp Inc.
  • $292.88
  • Bank of Commerce Holdings
  • Columbia Banking System, Inc.
  • $268.84
  • Mackinac Financial Corporation
  • Nicolet Bankshares, Inc.
  • $248.30
  • Apostrophe, Inc.
  • Hims & Hers Health, Inc.
  • $200.00
  • American River Bankshares
  • Bank of Marin Bancorp
  • $135.64

Other Financial Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Pavonia Life Insurance Company of Michigan
  • Aspida Financial
  • $75.00

Other Strategic Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • LoanMe, Inc.
  • NextPoint Financial, Inc.
  • $101.50
  • Legacy Bank of Florida
  • Seacoast Banking Corporation of Florida
  • $90.66
  • SouthCrest Financial Group, Inc.
  • Colony Bankcorp, Inc.
  • $83.23
  • LINKBANCORP, Inc.
  • LINKBANCORP, Inc.
  • $75.00
  • Health Savings Account Business of Fifth Third Bancorp
  • HealthEquity, Inc.
  • $62.56

 

Source S&P Capital IQ as of 10/13/2021 and PCE Proprietary Data

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Contacts

David Jasmund

Orlando Office

407-621-2111 |

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Michael Poole

Orlando Office

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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. Ross, Hailey, and Kris Elaine Figuracion. "High Demand for Life Insurance Continues in Q2 as Total Premiums Rise YOY." Capitaliq.spglobal.com, 21 Sept. 2021.
  2. McCaffrey, Orla. "Bank Mergers Are on Track to Hit Their Highest Level since the Financial Crisis." The Wall Street Journal, Dow Jones & Company, 28 Sept. 2021.
  3. "Best's Market Segment Report: Robust Housing Market Drives Historic Title Insurance Performance." Yahoo!, Yahoo!, 6 Oct. 2021.
  4. "US Title Insurer Outsized Returns Supported by Robust Housing Market." Fitch Ratings: Credit Ratings & Analysis for Financial Markets, 25 Aug. 2021.
  5. “Mergers & Acquisitions Archives.” Acrisure, 22 Aug. 2021.
  6. "Stewart Continues Expansion with the Acquisition of Title First Agency." Stewart, 27 July 2021.
  7. "Compass Acquires Another Title Company." HousingWire, 14 Sept. 2021.
  8. Hethcock, Bill. "CEO: LegacyTexas Title Looking for Growth after Acquisition by Compass." Bizjournals.com, 4 Oct. 2021.
  9. Naqvi, Ali, and Annie Sabater. "More than $19B in PE Insurance Sector M&A Already at Record High." S&P Global Market Intelligence, S&P, 27 Aug. 2021.
  10. Raimonde, Olivia. "Why Unitranche Loans Grew From Niche to Billions." Bloomberg.com, Bloomberg, 7 Aug. 2021.
  11. "(NY) Calypso's US$2.3bn Unitranche Sets US Private Debt Market Record." Refinitiv Loan Connector, 30 Apr. 2021.
  12. Demos, Telis. "Banks Strike Back, but Returns Remain Strong with Fintech." The Wall Street Journal, Dow Jones & Company, 18 Sept. 2021.
  13. Hoffman, Liz, and Peter Rudegeair. "Goldman Is Buying Greensky in a $2.2 Billion Bid to Expand in Main Street Banking." The Wall Street Journal, Dow Jones & Company, 15 Sept. 2021.
  14. Farman, Madeleine. “Apollo's Merger with Athene Highlights PE's Rush for Permanent Capital.” S&P Global Market Intelligence, 25 Mar. 2021.

 

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