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Top 5 Insurance M&A Deals in Q4 2020

The five major deals accounted for 100% of the fourth quarter's total deal value, with the largest deal being the $3.94 billion acquisition of Metlife Auto & Home Insurance Agency by Zurich Farmer's Group and Farmer's Exchanges.
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top 5 insurance m&a deals in q4 2020

The U.S. insurance industry saw $4.57 billion in total mergers & acquisitions in the fourth quarter of 2020, according to GlobalData's deal's database. This number marked a decrease of 5.2% over the previous quarter and a drop of 5.6% when compared to the last four-quarter average of $4.85 billion.

Despite the slight decrease in total deal value, the U.S. insurance industry still held a 56.6% share of the global insurance industry M&A deal value for the fourth quarter of 2020, which totaled $8 billion at the end of the quarter.

The U.S. also saw a notable increase in deal activity during the quarter, with 73 total deals marking an increase of 46% over the previous quarter and a near 70% increase compared to the last four-quarter average.

Five major deals accounted for 100% of the fourth quarter's total deal value and out of those five, three major deals represented $4.5 billion of the total value.

The largest of the quarter's deals was the by far $3.94 billion acquisition of Metlife Auto & Home Insurance Agency by Zurich Farmer's Group (FGI) and Farmer's Exchanges. Zurich is offering $2.43 billion for the deal via FGI and Farmer's Exchanges is offering $1.5 billion.

Under the deal, Farmer's Group will buy the entire Metlife U.S. property-casualty business and immediately dispose of the U.S. p-c business to Farmer's Exchanges. The deal will position Farmer's Exchanges as the sixth-largest U.S. personal lines insurer.

George Quinn, chief financial officer at Zurich, said that the insurer's long-term goals did not depend on acquisitions, but they “can accelerate what we are looking to achieve."

MetLife president and CEO Michel Khalaf said the sale would allow the life insurer “to focus on our core strengths."

The deal has yet to receive regulatory approval, expected in the second quarter of 2021.

The second-largest deal of the quarter was Kemper's $370 million cash acquisition of American Access Casualty (AAC). Under the deal, Kemper will acquire American Access Casualty Company, its captive insurance agency, Newins Insurance Agency Holdings, and its subsidiaries.

The move to acquire AAC, a specialty private passenger auto insurer, is being pursued by Kemper to continue its focus on niche markets.

“AAC is a great addition to Kemper's specialty auto franchise and aligns with our strategic intent to serve growing niche markets with affordable and easy-to-use products," said Duane Sanders, president of Kemper's p-c division.

The deal is subject to regulatory approval and is expected to be finalized in the first quarter of 2021.

The third mega-deal of the quarter was Aflac's $200 million acquisition of a 9% stake in Trupanion, the U.S. pet insurance industry leader.

Under the deal, the companies are entering an exclusive alliance agreement to sell pet insurance in U.S. worksites. In a press release, Aflac said the move will provide opportunities for both companies to further capitalize on an “underpenetrated market."

The last two deals of the quarter, accounting for a notable $63 million, were Assurant's acquisition of EPG Insurance and Kingsway Financial Services acquisition of PWI.

Assurant, the U.S.-based risk management products and services provider, is paying $43 million to acquire EPG, which provides extended service contracts and insurance sold through heavy equipment dealers and manufacturers. The acquisition builds on a pre-existing relationship between the companies. Assurant has been EPG's underwriter since 2018.

Kingsway Financial Services closed its acquisition of PWI in the fourth quarter as well, paying $18.67 million to acquire PWI Holdings Inc. and its subsidiaries. The acquisition further strengthens Kingway's position in the vehicle service contract and extended warranty industry.

Jan Alex is an IA contributing reporter.

Wednesday, February 17, 2021
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