Could the Trump admin resurrect the IPO market?

The incoming Trump administration could potentially revitalize the U.S. initial public offering (IPO) market, Mark Friedman, insurance deals leader, PwC US, suggested.

The U.S. IPO market has lagged in recent years, hitting a record low in 2023.

“I think if there’s one area — and this is not unique to the insurance sector, I would say this is more broadly — but I think we could see IPO activity really rebound,” Friedman said.

He spoke with InsuranceNewsNet on the heels of PwC’s Insurance U.S. Deals Outlook report being released, noting that the volume of deals picked up sharply in the second half of the year. That trend is expected to continue into 2025, potentially lifting IPO activity as well.

While Friedman does not believe a change in government will throw those projections far off course, he noted that it could indirectly drive further activity depending on how the economy fares. Additionally, it could have other effects.

“We may see an acceleration and an influx of IPOs if the market, the equity markets and the regulation around the SEC and the like, open up a bit and become more appealing,” he said.

Insurance deals on the rebound

The insurance M&A market is poised to end 2024 on a strong note with transactions more than doubling over the prior period and several billion-dollar megadeals recorded over the last few months, according to PwC’s Insurance US Deals 2025 Outlook.

Between May and November 2024, there were 307 announced transactions in the insurance sector, valued at more than $20 billion. In comparison, between November 2023 and April 2024, there were just 145 transactions recorded.

September and October 2024 also saw two significant megadeals, as Marsh McLennan acquired McGriff Insurance Services for $7.8 billion and Enstar acquired Sixth Street for $5.1 billion.

Friedman also disclosed that there have been two additional megadeals worth more than $5 billion each — and, with a few weeks left in the year, “there’s still a possibility we could see, based on market activity, more mega deals announced in this space.”

Alternative capital vehicles catching on

Friedman also revealed that alternative capital vehicles have “become very popular.” While this trend has cropped up in the life and annuity space over the last few years or more, he said it’s now begun to “pop up a bit” in P&C.

Reasons vary from brokers or wholesalers seeking to guarantee capacity for the wholesale business, to investors seeking more diversification.

“We are definitely seeing more capital flow into both the P&C and life space by way of alternative capital vehicles. We’re spending a lot of time with all sorts of companies from life and annuity, underwriters to reinsurers, to P&C underwriters, to brokers and MGAs, MGUs, really focused on how to get investors’ exposure in the right structure to insurance liabilities and assets,” Friedman said.

Positive projections for 2025

With strong activity closing out the year and profitability up, PwC is optimistic about insurance activity performance leading into the new year.

“We are very bullish on the M&A market for the insurance sector going into 2025. The fundamentals are improving,” Friedman said.

Insurance M&As had “dipped” due to an increased cost and availability of debt. However, Friedman noted that the market has been “largely resilient” during this period and a higher yield environment will increase profitability going forward.

“We’ve seen really robust profits in the insurance sector. Going into 2025 — with interest rates having come down 75 basis points in 2024, no significant expectations of further reductions, [and] very few actually believing rates are going to go up in 2025 — it gives investors the confidence to go and continue to invest in the sector,” he explained.

A “hard market” in P&C, with infamously high premiums, is increasing profitability and driving investor interest, Friedman said. Meanwhile, consolidation on the life and annuity side is expected to continue.

“Overall, across the insurance industry, we see and expect to see further robust deal activity in the space,” Friedman noted.

What to expect under new administration?

With the insurance sector regulated primarily at the state level, the change of administration is not expected to have a direct impact on activity heading into 2025.

Rather, Friedman explained that the U.S. insurance industry may experience “secondary effects.” For instance, a labor force shortage resulting from “mass deportations” or a sharp increase in employment as manufacturing jobs are brought onshore could affect policy sales.

Likewise, a rapid increase or decrease in interest rates or economic shock as a result of proposed tariffs could “impact profitability, which would drive activity in the deal market as well.”

“To the extent tariffs impact the economy, and that drives a significant change in the interest rate environment, that could have knock-on effects in the insurance sector in a disproportionate way than other sectors,” Friedman said.

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