EBITDA Multiples for Insurance Companies – 2023 Report

The report below contains the results of our recent analysis of EBITDA and revenue multiples for private insurance companies as of Q4 2023. The data used in this analysis was sourced from proprietary M&A databases, interviews with insurance M&A firms, and private equity networks. (Sources)

The results of our study are shown in the EBITDA and revenue tables below. We have subdivided the data by insurance industry vertical and EBITDA/revenue value range. 

EBITDA Multiples for Private Insurance Companies, Q4 2023

Revenue Multiples for Private Insurance Companies, Q4 2023

The following sections discuss current trends and challenges in the insurance M&A market as of Q4  2023. Our reserarch team also included predictions of where we see the market going next.

The State of Insurance Company M&A in Q4 2023

The insurance M&A sector saw slowdowns for larger companies from Q4 2022 to Q4 2023, with deal volume dropping as much as 34% due to macroeconomic turbulence stemming from rising interest rates. While there were fewer “megadeals,” smaller companies saw relatively modest impact in deal volume, suggesting that acquirers are more hesitant to pick up larger ($25M+) companies. 

Despite declines in deal volume, we saw a consistent YoY increase in multiples. Of all the subsectors analyzed, professional liability and insurtech were the highest performers. Our team attributes the performance of these verticals to reliable recurring revenues over the past 5 years associated with them being mostly business-facing. However, these verticals still saw an ~18% drop in deal volume between Q4 2022 and Q4 2023 because of the economic downturn. 

The graph below plots EBITDA multiples for private insurance companies from 2020-2023.

EBITDA Multiples for Private Insurance Companies, H1 2020-H2 2023

By contrast, the consumer-facing verticals (auto, home, life, renter) saw more severe peaks and valleys, with drops in deal volume exceeding 27% from 2022-2023, which our team attributes to rising claims costs as a result of tighter regulatory and transparency requirements, as well as increased fraudulent activity over the last year. 

Based on the current M&A environment, our team has the following predictions: 

• Activity will remain slower until interest rates decline. While smaller insurance companies aren’t feeling the slowdown as much as larger ones are, the overall trend for most insurance M&A advisors is lower deal volume, which runs concurrently with rising interest rates. We expect volume to increase as interest rates decrease, which we believe will occur in H2 2024.
• Underperforming sectors may see M&A opportunities as add-on deals. Acquirers are likely to begin roll-ups of smaller insurance companies in various consumer-facing verticals (e.g., life, auto, health) in the coming 2-3 quarters. Some larger PE firms are attempting to emulate the “bundling” business model of larger insurers like Allstate or Progressive. In this scenario, best-in-class smaller companies may see considerably higher multiples than usual given their strategic value.
• 2024 will present opportunities for those who are prepared. Financial and strategic buyers are currently sitting on a record-high amount of “dry powder,” waiting until the interest rates ease. Serious company owners will want to begin a relationship with an M&A advisor 6-12 months before they hope to sell in order to ensure a smooth deal process.

Selling Your Insurance Company

I hope this report adds some transparency to the opaque process of preparing your company for an M&A process. I’ve sold several businesses to both financial and strategic buyers, and wasn’t able to find much reliable data during the initial information-gathering stages.  

If you have any other questions, I’m happy to provide a third-party opinion. You can reach me at the link below or through the contact page on this site.