Hartford, Conn. — A soft dollar caused U.S. insurers to concentrate their merger and acquisition activities domestically in 2007, especially in the property-casualty and health insurance sectors, according to a new study by Conning Research and Consulting.

“Global insurance industry acquisitions in 2007 were driven by non-U.S. insurers—primarily Western European firms—who clearly see value in this market,” says Sherry Manetta, director at Conning Research & Consulting. “In fact, only 20% of primary and reinsurer transactions involved a U.S. entity at all. Those few U.S. insurers who were active internationally made acquisitions to build share in existing markets rather than entering new countries.”

The Conning Research study, “Global Insurance Mergers & Acquisitions: U.S. Insurers on the Sidelines” analyzes Conning’s proprietary database of transactions and presents trends across industry segments and regions. Coverage includes property/casualty, life-annuity and health insurance transactions.

For 2008, Conning expects much of the same. The volatility of the space was reinforced on a grand scale in April when Boston’s Liberty Mutual Group plunked down $6.2 billion to acquire Seattle’s Safeco Corp.

“We expect that U.S. firms will continue to be domestically focused in their acquisitions, and will be attractive acquisition targets in 2008, due in part to the soft dollar and, in the property-casualty sector, to the softening underwriting market,” says Stephan Christiansen, director of research at Conning. “In addition to these factors, U.S. insurance company stock prices are substantially off their highs of a year ago, which makes it economical for an acquirer to pay a premium over a stock’s market price.”

Insurance companies are not the only ones prey to consolidation as vendors continue to consolidate.  Earlier this month, Chester, Pa.-based policy administration solutions provider AdminServer became the newest business unit of the colossus of Redwood Shores, Calif., known as Oracle Corp. Elsewhere, Palo Alto, Calif.-based hardware heavyweight Hewlett-Packard secured a deal to buy Plano, Texas information technology services provider Electronic Data Systems for between $12 billion and $13 billion.

Sources: Conning Research & Consulting, INN archives

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