Insurance M&A transactions in the United States increased by 36 Percent in 2011, and deal value increased by 18 percent, according to a new study from Conning Research & Consulting.

While the pace of insurance M&A outside the United States was relatively consistent, U.S. transactions increased in every market segment, including property/casualty, life/annuity, health, distribution and service firms. The reported value of U.S. insurance M&A rose from $46.5 billion in 2010 to $54.7 billion in 2011.

The Conning Research study, “Global Insurance Mergers & Acquisitions in 2011: A Shift to Strategic Transactions” tracks and analyzes both U.S. and non-U.S. insurance industry M&A activity across all sectors.
“Strategic plays dominated the insurance mergers and acquisitions market in 2011,” said Stephan Christiansen, director of research at Conning. “Transactions involving mutual insurers more than doubled in 2011, as they sought merger or affiliation solutions to the damaging impact of heavy natural catastrophe losses and other challenges. We also saw a sharp increase in vertical integration driven transactions, where insurers acquired managing general agents and other distribution solutions to support growing specialty lines of business. At the same time, private equity-backed transactions rose dramatically, with particular focus on distribution and services sectors.”
2011 saw 592 U.S. insurance M&A transactions announced, the most ever recorded in a year. Property/casualty transactions increased from 60 to 77; life/annuity from 20 to 34; health/managed care from 15 to 25; insurance distribution transactions increased from 243 to 352; insurance service transactions increased from 98 to 105; insurance service transactions increased from 98 to 105.

A confluence of external drivers contributed to the record-setting numbers: “In a low interest rate environment, the combination of continuing post-financial crisis economic growth, increased pressure for more regulatory capital, rising company valuations and soft market conditions all favored increased mergers and acquisitions activity. Many companies actively sought strategic M&A solutions, bolt-on additions, or lines of business that could provide a growth solution. Bolstered by rising company valuations, sellers were also increasingly motivated to sell, as the bid-ask spread narrowed,” said Jerry Theodorou, analyst at Conning Research & Consulting.

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