After a five-year regression, the insurance industry picked up the pace in its mergers and acquisitions (M&A) activities. Explaining sharp increases within the insurance service provider and distribution areas as an indicator of market shift,
The research study, “Global Insurance Mergers & Acquisitions in 2010: Moving from Defense to Offense,” describes a theme underlying the increase in insurance company transactions: The selectively targeted, bolt-on acquisitions of specialized units.
“Mergers and acquisitions in the U.S. insurance market increased significantly in 2010, with a 35% increase in transactions and a 224% increase in deal values,” said Jerry Theodorou, analyst at Conning Research & Consulting. A more vibrant economy, more buoyant equity markets and stronger capital positions at insurers were heralded as the origins for the change, notes the report.
“Despite the pickup in M&A in 2010, insurers were generally cautious in their plays,” said Stephan Christiansen, director of research at Conning. “Target properties were largely midsized companies offering accretive bolt-on opportunities, in contrast to the large consolidations seen in earlier periods of strong insurance M&A activity.”
According to Christiansen, specialty underwriting units were a strong focus for activity, as were specialty distribution groups. Insurers in 2010 also actively pursued alternatives to outright M&A of risk bearing entities in order to minimize reserve risk and the complexities of integration following a merger.
“Marquee underwriters or underwriting teams were sought out and hired, and managing general agents were acquisition targets as well,” said Christiansen.
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