Plenty of M&A activity in the insurance underwriting sector happening at the moment!
Tysers is being acquired by ASX:AUB on ~12x EV/EBITDA and ~25% p/GWP. AUB will likely get a solid deal there. That's earnings accretive for them, as AUB are trading on more like 40% p/GWP. In saying that, their (Tysers) revenue has been declining ($363m in CY19 to $322m in CY21) as has EBITDA ($81m in CY19 to $64m in CY21), which explains why the acquisition multiple is lower than other recent M&A comparables in the sector.
For all stocks in my portfolio, I've been contemplating how a rising interest rate environment and an inflationary environment will play out for the stock and the sector in which it resides in. It will be negative for many/most industries, but I believe insurance is an exception to that.
From what I understand, ENA's lines of insurance (speaking about Australia primarily) are 'long tail' and typically reflective of the state of an economy, so where the cost of living increase alongside interest rates & fraud increases, people become more litigious etc so the loss ratios tend to increase which means insurers offering long tail products will increase their premiums.
On the flip side of this, the biggest negative of a rising interest rate and inflationary environment for ENA is hiring talent, it becomes very costly in this part of the economic cycle and the wholesale nature of ENA's business means they are reliant on people's brains and relationships to scale this business.
Net-net, I think ENA is a beneficiary of the current macro environment (rising interest rates & inflation).
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