NU Online News Service, Dec. 15, 3:39 p.m. EST

Investment bank Keefe, Bruyette & Woods (KBW) said mergers and acquisitions accelerated during the 2010 second half, indicating that larger companies with abundant capital are looking for "opportunistic growth."

In its outlook for 2011, KBW said it expects more deals next year and highlighted American Safety Insurance, Eastern Insurance Holdings, Navigators Group Inc. and SeaBright Insurance as candidates to be targeted.

Also on the list of targets are notables such as The Hanover Insurance Group, Argo Group, Kingsway Financial Services, OneBeacon Insurance and Chubb Corp.

Cliff Gallant, managing director of KBW, said it has been speculated that Berkshire Hathaway--on KBW's list of potential buyers for 2011--would acquire Chubb.

A spokesman for Chubb said the company does not comment on speculation.

Though Mr. Gallant admitted it may be "ambitious" to place some companies as possible targets, KBW looked at current book value and business plans to come up with its list.

"We have a talented team of analysts and we make our guesses," he said. "Last year if you bought our targets, you had a return of 25 percent."

KBW added that it predicts "the most likely targets are still small- to mid-cap specialty and commercial lines players with niche-market expertise."

Also on the list of buyers assembled by KBW: Travelers Companies, Ace Ltd., Flagtsone Reinsurance, Harleysville, Markel Corp., State Auto Financial, Tower Group and Validus Holdings.

"These companies have a lot of cash," Mr. Gallant noted.

He said some companies have the attributes to be on both lists, like Hallmark Financial Services, HCC Insurance Holdings and RLI Corp.

In its look ahead, KBW said the industry is "teetering" on the cusp of the next hard market. Though it is hard to predict what would set off such a turn. Mr. Gallant and the analysts involved in the report pinpoint a "pop in loss cost inflation, another round of investment portfolio losses or a major loss event" as possible triggers.

But don't count on the next hard market in 2011, said KBW. When it does happen, it "may be disappointing in magnitude" if the overall economy remains relatively stagnant, thereby halting real growth.

Special Reports /

More M&As Expected In 2011; Big Names On List Of Potential Targets

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