Deal activity involving North American insurance underwriters bounced higher year over year in the first half of 2023, but the aggregate value of those transactions was fairly flat.

There were 69 underwriter M&A transactions in North America in the first half of the year, according to an S&P Global Market Intelligence analysis, compared to 55 in the prior-year period. Deal activity increased as the year went on, with 39 transactions in the second quarter and 30 in the first quarter.

Despite the solid increase in the total number of deals, the aggregate transaction value of those deals only ticked up to $12.53 billion from $12.51 billion in the first half of 2022.

Much of the underwriter M&A in the first half of the year was driven by sellers that wanted to hone their portfolios to focus on their core businesses, according to Piper Sandler analyst Paul Newsome.

"You saw folks take businesses that weren't necessarily a natural home in their current portfolio and push them to the buyer who felt that they were better," Newsome said in an interview. "The theme recently has been more of companies trying to do more of what they already do."

Brookfield leads the way

Brookfield Reinsurance Ltd. accounted for two of the largest deals announced in the first half of the year. Its bid for American Equity Investment Life Holding Co. boasted the highest transaction value for the period at $3.59 billion.

Brookfield Reinsurance's offer to buy the life insurer looks to be the last in a slew of attempts to snap up American Equity, which rejected a number of buyout attempts over the past few years. As part of the agreement, American Equity shareholders will receive $55 per share. The acquirer already owned 20% of American Equity's shares.

The reinsurer also announced in February that it would acquire Argo Group International Holdings Ltd. in a deal valued at $1.06 billion.

Elevance Health Inc.'s agreement to buy Louisiana Health Service & Indemnity Co. for $3.5 billion had the second-highest transaction value in the first half of 2023.

AIG's surprise move

American International Group Inc.'s move to sell Validus Reinsurance Ltd. to RenaissanceRe Holdings Ltd. for $2.99 billion came as a surprise to some industry observers.

The transaction, which was announced in May, includes AlphaCat and the Talbot Treaty reinsurance business. AIG is expected to make substantial investments in RenaissanceRe's DaVinci Reinsurance and Fontana Re-managed funds when the deal closes.

Newsome found the Validus Re deal to be an interesting move for AIG since it reverses one of the company's larger transactions of the past half-decade. AIG originally acquired Validus Re in mid-2018.

"It goes to the company's desire to have a less volatile business portfolio, less catastrophe risk as part of their profile and [to have] more pure commercial specialty," the Piper Sandler analyst said.

Keefe Bruyette & Woods analyst Meyer Shields was "surprised" to see the Validus Re deal announced because catastrophe reinsurance is seeing "phenomenal" rate increases.

"It was a little unusual to see a major player in a very positive rate environment announce a significant deal," Shields said in an interview.

The transaction is expected to close in the fourth quarter of 2023.

– Read about life insurers' mortgage acquisitions in the first quarter.  – Read about May's life and annuity block reinsurance transactions.