The total number of mergers and acquisitions in the insuranceindustry increased in 2004, driven by the health/managed care anddistribution sectors, according to a recent study by ConningResearch and Consulting. Although the merger transaction total roseover the prior year for the first time since 2001, the totaltransaction values were less than $15 billion, the second lowest ina decade.

“More M&A activity is likely to stimulate more and largertransactions, but projecting the when, where, and why requires adeep examination of the conditions in the individual sectors,” saidClint Harris, a Conning analyst. “Certainly, we found consolidationplays in the health/ managed care sector, but we also identifiedthem in the property/casualty and life sectors. They may seem lessdramatic than the mega-mergers in 2003 and 2005, but these smallerdeals are definitely shaping the industry environment.”

The industry is continuing a slow but noteworthy progressiontoward consolidation, the report noted. “While we have seensignificant transactions in the various sectors over time, theindustry remains highly fragmented and still very ripe forconsolidation,” said Stephan Christiansen, Conning's researchdirector. “The 2004 transaction activity did more to reshapeindividual subsegments in the market than to increase industryconcentration, but we anticipate continued consolidation in thecoming years, as companies strive for market position in the faceof accelerating competition.”

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