U.S. companies kept their mergers and acquisition activities at home during 2007, while Western European companies played an increased role on the global M&A stage, according to a new report from Conning Research.

"The U.S. was mostly on the sidelines in 2007," the company noted in the report, titled "Global Insurance Mergers & Acquisitions: U.S. Insurers on the Sidelines."

According to Conning, "U.S. companies will continue to stay focused closer to home, and we expect more domestic consolidation in the U.S. as companies seek market share and critical mass to achieve operating efficiencies."

The Conning Research study was based on an analysis of the research firm's database of transactions and trends in different lines around the globe.

Internationally, Conning researchers found that the major players in M&A last year came from across the pond.

"Global insurance industry acquisitions in 2007 were driven by non-U.S. insurers, primarily Western European firms who clearly see value in this market," said Sherry Manetta, director at Conning Research & Consulting. "In fact, only 20 percent of primary and reinsurer transactions involved a U.S. entity at all."

U.S. companies involved in the global M&A marketplace, Ms. Manetta said, focused largely on building what they already had, rather than exploring new ground. "Those few U.S. insurers who were active internationally made acquisitions to build share in existing markets rather than entering new countries," she said.

But even though they played a lesser role on the world stage, Conning found that M&A activity was increasing among U.S. companies. In looking at the property and casualty market, Conning said there were more transactions involving U.S. companies as either the target or the purchaser during 2007 than during 2006, but that the overall value of the deals was significantly less.

According to Conning, U.S. P&C companies were involved in 67 deals in 2007, compared with only 48 in 2006. The total value of the 2006 transactions, however, was more than $35 billion, compared with deals valued at less than $14 billion in 2007.

"Although the number of transactions in the property-casualty sector increased in 2007, the combined value of acquisitions in our database declined significantly, even when accounting for the fact that 2006 included the $14 billion private equity buyout of General Motors Acceptance Corp.," Conning noted in the report.

One additional aspect that Conning found was that "what constitutes a U.S. company has become an increasingly blurred definition."

As an example, they noted acquisitions by Australia's QBE that put the company into the top 20 U.S. property-casualty insurance operations.

Looking forward, Conning expects U.S. firms to continue focusing on local acquisitions. "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," said Stephan Christiansen, director of research at Conning.

He noted that in addition, 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."

Special Reports /

U.S. Companies Keeping M&A's At Home, Conning Says

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