SECTOR PERFORMANCE UPDATE
Insurance Stocks Lag in 2025 as Tailwinds Fade and Capital Reallocates
All insurance segments tracked in Mercer Capital’s market-weighted indices lagged the broader market in 2025, with the S&P 500 up 16.4% compared to mixed performance across insurance subsectors. Life & Annuities (+14.0%) and Standard Lines P&C (+13.7%) came closest to keeping pace, while Brokers (-12.7%) and Managed Care (-5.0%) were notable laggards.
The most notable shift in 2025 was the reset in broker valuations. After several years of multiple expansion driven by strong organic growth, M&A multiple arbitrage, and favorable financing, investors recalibrated expectations as pricing momentum slowed and growth normalized. The result was a steady compression in EBITDA multiples throughout the year, even as underlying profitability remained solid.
Investors also tempered their enthusiasm on insurance in light of AI-driven fears, though it remains to be seen whether benefits (better underwriting, cost efficiencies) will outweigh the risks. Specialty carriers saw multiples decline from elevated levels earlier in the year, while Standard Lines insurers remained relatively stable.
M&A activity also reflects this shift from expansion to normalization, as deal volume for brokers and underwriters declined 6% and 8%, respectively. Buyers (both strategic and financial) remain active, but are increasingly selective and valuation-conscious.
The fourth quarter of 2025 also saw two insurance IPOs. Neptune Flood (NYSE:NP), a private flood MGA, debuted October 1st at $20/share and finished the quarter at $29 (+46%). Insurance technology firm Exzeo Group (NYSE:XZO) spun out of HCI Group on November 4th at $21/share and ended the year at $24 (+15%)