No M&A malaise for MGAs

By Dale A. Myer, senior vice president, Gill and Roeser Holdings, Inc.

Merger and acquisition activity began heating up in the managing general agency (MGA) and managing general underwriting (MGU) sector during 2010. The continuing soft market, the long and steady decline in insurance rates plus the effects of the recent recession have led to reduced exposures, smaller books of business and lowering premium prices for many property and casualty insurers. The combination of these factors is forcing insurance company executives to explore new ways to improve top-line growth, while maintaining underwriting discipline, generating adequate profits, and putting underutilized surplus to work effectively and efficiently. MGAs and MGUs are increasingly being viewed as targets for mergers and acquisitions because of their perception as “virtual insurance companies” and their ability to generate underwriting profits.