NU Online News Service, March 15, 11:01 a.m.EST

Merger and acquisition activityfor property and casualty insurers, agents, and brokers heated upin 2010 as insurers sought to improve their strategic standingwithin the industry, according to a report from Conning Research& Consulting.

The Conning report, “Global Insurance Mergers & Acquisitionsin 2010, Moving From Defense to Offense,” said global insuranceM&A activity picked up steam in 2010 as improved valuations andthe continued soft market, now in its seventh year, increased theactivity in the United States.

“M&A was a direct response to the challenge of growth in asoft market,” the report said.

Eager to grow, but realizing how difficult that is in a marketdownturn, M&A transactions proceeded with caution for fear theywould not produce the “desired result.”

“Buyers looked long and hard at many prospects before inking adeal,” the report said.

Related: Can Privately Held Buyers Win The Agency AcquisitionGame?

In 2010 there were 721 transactions at a reported value of morethan $79 billion. By comparison, in 2009 there were 601transactions at a reported value of $52 billion.

In the U.S. alone, there were 436 transactions with a totalvalue of less than $47 billion, compared to 320 transactions valuedat more than $14 billion in 2009. That translates into anincrease of 36 percent in the number of transactions.

Conning said the principal drivers for this activity were a“more vibrant economy, more buoyant equity markets, strongercapital positions at insurers, soft market insurance conditions,and the release of pent-up demand to pursue acquisitions after low2009 levels.”

Deals were fueled by increased valuations in companies thatencouraged many stock-for-stock deals, the report said.

One of the consequences of the soft market ishigher combined ratio as underwriting does not adequatelycover the cost of claims. To combat this, some carriers seekout specialty insurers with “more attractive margins” in an effortto improve their overall combined ratio, the report noted.

The report notes that few U.S. insurers pursued acquisitionsoutside of the U.S. Globally, those insurers that did pursueforeign acquisitions turned to Asia and Latin America, consideredfast-growing emerging markets.

Among agents and brokers in the U.S., the number of announcedtransactions rose 38 percent from 176 in 2009 to 243 in 2010. Thevalue of these transactions jumped from $615 million in 2009 to$1.7 billion in 2010.

The report notes that the value for some of the largesttransactions during the year were not announced, such as AmWINSacquisition of Colemont and Swett & Crawford's merger withCooper Gay.

The major acquirers in 2010 were Brown & Brown, Arthur J.Gallagher, Hub, and Marsh & McLennan Agencies.

While private equity firms and brokers backed by private equitywere more active, banks decreased their involvement in theinsurance space, with many shedding operations, the report said.The same was true outside of the U.S., Conning noted.