SECTOR PERFORMANCE UPDATE
Insurance sector lagging as valuations ease and M&A slows
All six insurance segments tracked in Mercer Capital’s market-weighted indices continue to lag broader market returns, though this may be driven more by investors’ insatiable appetite for Mag-7 stocks as opposed to insurance industrypessimism.
Nevertheless, valuation multiples are moderating from earlier peak levels, particularly for insurance brokers and specialty/E&S underwriters. At the median, shares for publicly-traded insurance brokers are now at 75% of their 52-week high. The median multiple of forward EBITDA has also declined from 18.6x in Q1 to 14.5x at September 30.
These pullbacks are indicative of the continuing softening of the commercial insurance market, which weighs on organic growth figures and has the potential to pressure margins.
Through the first nine months of 2025, both broker and underwriter M&A transaction volume is down 20% from the prior year, though these figures may move slightly as there is often a lag in transaction reporting.
One surprising transaction in the third quarter was Sompo Holdings’ $3.5 billion acquisition of specialty P&C (re)insurer Aspen Insurance in late August (a 36% premium to its trading price and a multiple of ~1.3x tangible book value). Aspen had only recently completed its IPO in May.
Other notable M&A transactions during the quarter included Skyward Specialty’s $555 million acquisition of Apollo (a Lloyd’s underwriting platform) and Aon’s divestiture of NFP’s wealth business to Madison Dearborn Partners for $2.7 billion.