But what does the future hold for this activity? Digital Insurance spoke with executives from the venture investment arms of large insurance companies: Oshri Kaplan, Investment Director, Munich Re Ventures; Brian Anderson, Senior Investment Professional, Nationwide; and Eric Emmons, Managing Director at MassMutual Ventures. The executives expect an equally challenging market next year, but did point to some bright spots and underlying strengths.
1. Brian Anderson
Sr. investment professional, Nationwide
DI: What’s the overall health of the insurtech market?
BA: For international and some emerging markets like South America and pieces of Asia, it’s still doing really well. When you start dropping down into North America and Europe, there’s still a lot of excitement, but there are questions which have yet to be answered. Will the direct consumer-oriented companies thrive in a rising interest rate environment being scrutinized by capital markets? Insurtechs have to answer that question.
The amount of money that’s gone into insurtech over the last five years has driven up acquisition costs dramatically. That may change a little bit. But for folks who are direct consumer acquiring business at scale, the scrutiny’s gone way up. Insurtech has slowed down in the US and in Europe because of some of those elements. There are still fantastic businesses that are in direct to consumer that continue to grow really well both here and abroad, and those businesses continue to track capital. It’s hard to judge the cohort, but is the excitement coming down for some of these strategies? Absolutely.
2. Eric Emmons
Managing director, MassMutual Ventures
DI: Why has insurtech M&A cooled and will it stay that way?
EE: The implicit bid/ask spread is still quite wide for certain insurtech company assets. The would-be buyers are encouraged by lower revenue multiples and may, in fact, be underbidding these for certain companies that don’t have a clear alternative to a sale. The sellers, on the other hand, may be reluctant to accept a lower valuation than that set in the last financing transaction. As a result, a lot of investor syndicates are bridging to a future in which either revenue or multiples will permit a better outcome. I expect we will see a wave of M&A in 2023, as boards either capitulate or as companies successfully grow into an acceptable exit valuation.
