Does anyone have experience with buying insurance companies

October 20, 2022

by a searcher from New York University - Leonard N. Stern School of Business in New York, NY, USA

Does anyone have any insight on insurance companies, size, EBITDA, that make for great investments? What are some of the best deal sourcing platforms for middle market deals? Is there an appetite among PE firms?

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Reply by a searcher
from The University of Chicago in Chicago, IL, USA

I assume you mean brokerage, not carriers. Carriers are very complex, capital intensive, and not a great fit for the search model. Brokerage has some good characteristics depending on the line (e.g. recurring revenue). However, PE has been rolling these up for the last 10+ years, so multiples are high and tough for a searcher. As you research the space, I'd also look to understand the managing general agent (MGA) structure, which effectively creates a broker/marketing org that has underwriting authority, while risk is held by a separate entity. That is how many of the VC backed insurance companies are setup.

Reply by a searcher
from University of Pennsylvania in Bronxville, NY, USA

Insurtech is mostly dead. The VCs have or will shortly lose most of their capital. Most of the business models don’t work and are built more on hype than substance. Agencies are terrific investments. While there are 40+ PE roll ups, there are thousands of agencies, most of which are local businesses. Because they are such good businesses and PE is aggressive, the prices are high (double digit Ebitda multiples), so you need a solid growth plan to make this work. MGAs are very different businesses that are much higher risk.

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