Last week, our editor-at-large, Adam McNestrie, broke the story that Chubb had made an informal approach to AIG’s leadership for a potential takeout deal. A follow-up piece also discussed the potential upside and downsides of the deal for both parties.
While both parties sought to distance themselves from the discussion, it illustrates how major carriers are thinking about changing pricing and market conditions.
The latest CIAB Q3 market survey, which we discussed last month, indicates that commercial lines pricing is up 1.6% vs. 2.5% in Q2 25 and 3.5% in Q3 24. It is clear that the market is softening, and it seems to be a matter of if, not when, we will reach the point of a truly soft market.
The past few years for this industry have been focused on the “build” side of franchise development.
This included writing more business in existing portfolios, bringing teams in to write additional classes, and developing relationships with MGAs and fronting companies to tap new areas of growth.
As we move to the next stage of the insurance cycle, capital utilization becomes a bigger theme.
Do carriers return capital via buyback or dividends (if they are publicly traded)? Do they do strategic or financial acquisitions?
Our analysis over the next few pages aims to identify the critical factors that we believe will drive the next round of consolidation.
Our first exhibit focuses on a large subset of potential buyers, with a particular emphasis on those who might be underweight in US E&S. This list includes major North American players such as Travelers, Berkshire Hathaway, and State Farm, as well as foreign companies such as Allianz, Sompo, and Tokio Marine.
Though E&S premium growth has slowed, it remains one of the more lucrative segments in the industry. With multiples for publicly traded E&S companies falling from previously stratospheric highs at the same time, we would expect those same carriers to be attractive targets in the next round of consolidation.
A company’s desire to acquire needs to be tempered by the flexibility and availability of capital at the potential acquirer. Limiting factors include the acquirer's shareholders’ equity (statutory surplus) and, if publicly traded, market capitalization and trading multiples, as any deal must consider accretion/dilution to earnings on a short-term basis.
Connecting the dots, we see a wide range of potential buyers for this upcoming consolidation period, and we expect companies underexposed to US E&S to pursue deals with smaller specialty firms as their valuations drop amid softer market conditions. No one wants to be the last one standing on the dance floor.
The pool of potential acquirers is vast
The table below shows North American, Bermudian, European, and East Asian insurers, along with their current E&S footprints.
North American buyers: Close on the news of Chubb/AIG, some of the names to feature in the next round could include Berkshire Hathaway, Liberty Mutual, or State Farm. The Hartford, which is also relatively underweight in E&S, could continue to explore other companies.
AIG is already in the process of digesting the deals it previously made to acquire Convex and Everest Re’s renewal book.
Hypothetically, it could also go on to acquire a medium-sized franchise if it wanted to make itself unattractive to suitors. A potential acquirer will typically want to avoid buying a franchise that is itself in the middle of a material integration of several recent deals.
European buyers: Allianz, Zurich and Talanx/HDI appear to be underweight based on our analysis above and could look to acquire US-based specialty carriers.
Japanese buyers: Over the past few weeks, potential Japanese buyers have continued to be discussed following the ramp-up of MS&AD’s stake in WR Berkley. This also follows Sompo’s acquisition of Aspen earlier in the year.
These moves by Japanese companies, following the unwinding of cross-holdings, created excess capital at several carriers, and we expect them to make moves in the short term.
Korean buyers: In September of this year, we saw DB Group purchase Fortegra insurance, opening the door to cross-border deals. Apart from DB, Samsung and Hyundai do not have a meaningful US E&S presence, and we would not be surprised if they played a role as well.
It should also be noted that Samsung has acquired a 40% stake in UK-based Canopius, as our sister publication covered earlier this year. This could be a signal that Korean insurers are looking to expand into foreign markets, such as the US.
Bermudian/Hybrid buyers: We anticipate RenaissanceRe and Arch to be the main Bermudian players in any upcoming M&A activity.
While Renaissance Re remains focused on a reinsurance-only model, primary E&S would be a natural direction to expand into if management decides to pursue a more diverse book of business.
Arch has already demonstrated an ability to integrate several franchises and will continue to be on the lookout for franchise building.
On the other hand, Everest, given its recent challenges, would be limited in the near term in considering acquiring other franchises.
Stock multiples' decline makes takeout valuations attractive
With pricing up double digits for successive years since 2020, insurance stock multiples have also improved over time. However, as the rate of positive change has continued to decline over 2025, so have stock multiples, as shown in the chart below.
Our appendix shows historical deals; on average, the deal value was $3.3bn, with a 1.6x deal price-to-book multiple.
The chart below presents the same list of potential acquirers’ market caps, shareholders' equity (or statutory surplus), estimated future ROE, and current stock multiples.
In our view, this allows us to filter out smaller names or those with lower stock multiples, as it limits their ability to do deals.
Using that criterion and applying a control premium limits the number of companies that could potentially make a play for AIG other than Chubb.
In our view, this shortlist includes names such as Berkshire Hathaway or Allianz. Other European buyers with shareholders' equity greater than $10bn include Allianz, Zurich, AXA, Munich Re, Generali, Swiss Re, and Talanx.
Beyond AIG and Chubb, Asian buyers are frequently mentioned as the most active. However, one can see a clear difference in size between Japanese and Korean franchises.
This might imply that Koreans could target much smaller franchises than Japanese buyers, who have larger market caps and shareholders' equity.
On the Bermudian side, one can see Everest’s valuation and recent challenges, which will hinder deal-making to some extent. Renaissance Re’s persistent valuation underperformance limits the size of deals it can do, since using stock would likely result in additional valuation pressures.
On the other hand, Arch’s market size and multiple allow it to remain an important consolidator.
Connecting the dots with the AIG/Chubb news, we anticipate several management teams to start actively evaluating potential candidates since no one wants to be the last one on the dance floor.
Appendix
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