Hello Friends! Happy New Year! We are back after a much-needed holiday break. We hope all of you enjoyed this time-of-year with the usual slow down and break from the hectic bustle of our insurance industry. This week we are including stories that broke over the holidays and also news from the first week of 2024. The themes include a couple of big events that happened over the last two weeks of 2023, reinsurance market insights from a ‘much calmer’ 1/1 renewal cycle than the past year and new strategic expansions and acquisitions to start off 2024. So, let’s get back to our weekly routine of telling the story of our insurance industry with the headlines and explore the three things we learned.
First Let’s Catch on Holiday Week Big Deals
There were two notable deals among others around the holidays featuring big players, highlighting private equity capital investment and divestment. These end of year moves were among the biggest of 2023; and are bold statements by the players involved and mark milestones in their respective strategies.
First off, Aon’s acquisition of NFP. This $13.4 billion deal is a powerful testament to Aon’s commitment to expanding its footprint in the middle-market segment. It also can possibly be a consolation from the failed deal to merge with WTW last year. The acquisition brings together two firms that share a deep commitment to client excellence and a collaborative ‘one-firm’ mindset. NFP is set to operate as an independent but connected platform within Aon, going to market as “NFP, an Aon company.” This strategic move is expected to drive long-term earnings per share accretion and contribute to a robust free cash flow profile. However, it’s noteworthy that Aon’s share price saw a 7.0% decline post-announcement, reflecting the market’s initial skepticism or perhaps its caution about the integration process under Aon’s united strategy.
In another significant move, Bain Capital Insurance’s $200 million investment into GuideOne Insurance to launch The Mutual Group marks the first investment from Bain Capital Insurance, drawn from the $1.17 billion fund announced last year. This innovative platform is dedicated to mutuals, aiming to bolster the financial strength and operational efficiency of its member companies. With GuideOne as its inaugural member, The Mutual Group will redefine service capabilities in the mutual insurance space, fostering innovative solutions and providing a capital lifeline for many companies challenged by current market dynamics.
Reinsurance Market Insights from Jan 1 Renewals
As we start off 2024, the reinsurance market showed notable signs of stability and predictability, following this year’s January 1 renewal cycle. Reports from a few of the big brokers show a significant shift from the previous year’s challenges, marked by volatility and uncertainty. Aon reported a “relatively smooth” renewal, with a rebound in profitability and rebuilding of capital positions. There’s an increased availability of retrocession capacity, reflecting a healthier market. Despite these positive signs, Aon warns of ongoing uncertainties such as climate change impacts, inflation, and geopolitical risks, which could keep potential investors cautious.
Howden’s report titled ‘Navigating a New World’ highlights market adjustments: The market is adapting to cyclical and structural changes, leading to more favorable supply dynamics. Howden observed stable risk-adjusted rate movements across various sectors, including property-catastrophe and London Market casualty.
Gallagher Re noted a significant shift from last year’s stressful renewal, thanks to improvements in the property market. A balance between property supply and demand has been achieved, contributing to market stability. The absence of major US wind events in 2023 positively influenced the market, despite substantial insured property catastrophe losses. There’s an increasing trend of primary companies buying more tail cover, supported by the market’s willingness to deploy capacity.
New Year, New Strategic Expansions
The first week of 2024 featured several strategic moves. Ledgebrook, an insurtech MGA, has embarked on a strategic partnership with Obsidian Insurance Group to launch a new Miscellaneous Professional Liability program, expanding its product offerings. Under the experienced leadership of James Lassiter and with CEO Gage Caligaris at the helm, Ledgebrook leverages its advanced systems and technology to enhance solution delivery efficiency.
Gallatin Point Capital and American Family have completed a partnership, marking Gallatin Point’s majority stake acquisition in Trusted Resource Underwriters Exchange (TRUE). Founded by American Family, TRUE is a reciprocal insurer concentrating on homeowners in storm-prone regions like Florida. This collaboration, involving an investment of over $1.25 billion to fund a business model offering enhanced insurance services, in catastrophe-exposed areas.
In the world of insurance technology providers, two significant developments took place this week. Dyad, Inc., is born from the merger of XDimensional Technologies and I-Engineering and supported by Serent Capital, with a mission to offer comprehensive software solutions to the P/C insurance market. This merger synergizes the strengths of two experienced companies, creating a unified brand poised to meet the diverse needs of the insurance sector with a robust portfolio ranging from agency management to policy administration systems. Simultaneously, Majesco has expanded its portfolio of solutions by acquiring Decision Research Corporation (DRC), a specialist in enterprise rating and core solutions for the P&C market. This acquisition is a strategic step in widening market opportunities in the MGA/MGU market segment.
Join us as we continue to explore the headlines and news shaping the insurance sector, and stay tuned for more insights on the unfolding narrative of our industry! Stay productive, stay safe and stay in touch!