Fitch anticipates rise in reinsurance M&A activity as market softens

Although 2024 has not seen any major reinsurance M&A announcements, Fitch Ratings expects that as the market inevitably softens and organic growth opportunities diminish, companies that have accumulated capital may seek to acquire less successful re/insurers.

Fitch analysts noted that M&A activity has slowed in 2024 following several large deals in 2023, largely due to the ongoing hard market.

“While higher market valuation multiples of re/insurers has increased the currency of acquiring companies, the same holds true for most potential acquisition targets. This makes acquisitions expensive and less likely to be executed, acting as a constraint to the consideration of large-scale M&A activity,” Fitch explained.

Recently, global reinsurers have steered away from M&A and have focused more on organic growth opportunities, thanks to continued favourable pricing and beneficial terms and conditions.

Additionally, challenges such as integration risks, concerns over casualty reserve adequacy, and regulatory approval uncertainties have also hindered M&A activity.

On the IPO front, the situation has been mixed. Hamilton started trading on the New York Stock Exchange in November 2023, raising about USD 81 million to expand its business. This IPO improved Hamilton’s financial flexibility and access to capital markets after being private since its formation in 2013.

In contrast, Aspen decided not to move forward with its IPO in 2024, despite filing regulatory documents with the SEC in 2023. The company also reportedly considered a merger transaction instead of going public. Ultimately, valuations for the company proved to be unsatisfactory for its owner Apollo Global Management, Inc., which took the company private in 2019.

Aspen has improved its profitability through portfolio adjustments and might revisit the market in 2025 if conditions improve.

An improved market environment could also offer opportunities for newer companies like Convex Group Limited and Vantage Group Holdings Ltd. to go public. Ascot Group Limited is also seen as a potential IPO candidate in 2025.

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