2004 Sees More, but Less Expensive, Mergers

The total number of mergers and acquisitions in the insurance industry increased in 2004, driven by the health/managed care and distribution sectors, according to a recent study by Conning Research and Consulting. Although the merger transaction total rose over the prior year for the first time since 2001, the total transaction values were less than $15 billion, the second lowest in a decade.

“More M&A activity is likely to stimulate more and larger transactions, but projecting the when, where, and why requires a deep examination of the conditions in the individual sectors,” said Clint Harris, a Conning analyst. “Certainly, we found consolidation plays in the health/ managed care sector, but we also identified them in the property/casualty and life sectors. They may seem less dramatic than the mega-mergers in 2003 and 2005, but these smaller deals are definitely shaping the industry environment.”

The industry is continuing a slow but noteworthy progression toward consolidation, the report noted. “While we have seen significant transactions in the various sectors over time, the industry remains highly fragmented and still very ripe for consolidation,” said Stephan Christiansen, Conning's research director. “The 2004 transaction activity did more to reshape individual subsegments in the market than to increase industry concentration, but we anticipate continued consolidation in the coming years, as companies strive for market position in the face of accelerating competition.”