Munich Re Expands Presence in U.S. SMB Market
Munich Re has finalized a definitive agreement to acquire NEXT Insurance, integrating it into ERGO, Munich Re’s primary insurance division. This acquisition marks a significant step in expanding their reach within the U.S. small and medium-sized business (SMB) sector.
The United States is home to over 30 million small businesses spanning more than 1,000 professions, contributing 44% to the nation’s Gross Domestic Product (GDP) and representing 99% of all U.S. companies. Despite their substantial economic impact, many of these businesses remain inadequately insured, with 75% classified as underinsured. The small business insurance market, valued at approximately $175 billion, offers considerable growth opportunities due to its fragmented nature.
Strategic Move to Leverage Technology
Munich Re’s acquisition of NEXT Insurance is a strategic initiative aimed at capitalizing on NEXT’s advanced technology and digital-first approach to fill this insurance gap. The acquisition involves 100% of NEXT Insurance’s shares, valued at $2.6 billion.
Markus Rieß, CEO of ERGO Group, emphasized the importance of this acquisition: “This transaction marks the beginning of a new era for ERGO. In collaboration with NEXT Insurance, we will explore an appealing market overseas, unlocking significant growth potential while diversifying our existing business portfolio. We will also collaborate with NEXT Insurance to leverage their cutting-edge technology alongside our technical excellence, reinforcing our commitment to sustainable and profitable growth.”
About NEXT Insurance
Founded in 2016 and headquartered in Palo Alto, California, NEXT Insurance is a technology-first Property & Casualty insurer focusing on the unique needs of U.S. small business owners. The company utilizes its proprietary technology stack and digital underwriting/pricing platform to offer straightforward, digital insurance coverage, including General Liability and Workers’ Compensation.
Since its inception, NEXT Insurance has experienced notable growth, generating $548 million in revenue by 2024. Currently, it serves over 600,000 clients and employs around 700 individuals. ERGO and Munich Re have backed NEXT Insurance since 2017, with ERGO Group AG holding approximately 29% of the company’s outstanding share capital.
NEXT Insurance is expected to contribute mid-triple-digit million-dollar earnings to ERGO Group’s net results in the medium term, highlighting its substantial earnings potential as part of the Group. The acquisition is anticipated to conclude in the third quarter of 2025, pending regulatory approvals.
CEO’s Vision for the Future
Guy Goldstein, CEO of NEXT Insurance, commented on the acquisition: “Today marks a pivotal moment for NEXT Insurance, our customers, agents, and partners. Over recent years, we’ve revolutionized the U.S. small business insurance market by offering a simple, seamless, and tailored experience for business owners. This transaction will propel us forward, enabling us to scale our technology-driven approach and empower more small business owners with innovative insurance solutions. With the expertise of ERGO and Munich Re, we are well-positioned to reimagine small business insurance in the USA.”
Advisory roles for the acquisition were fulfilled by Ardea Partners LP as the lead financial advisor and Latham & Watkins LLP as the legal advisor for NEXT Insurance. Financial advisory services for NEXT Insurance were provided by Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC. Additionally, Kirkland & Ellis LLP, Barnea Jaffa Lande & Co., Bain & Company, Inc., and Morgan Stanley & Co. LLC served as advisors for ERGO and Munich Re.
