NU Online News Service, Oct. 26, 3:53 p.m. EDT
Program administrators and managing general agents (PA/MGA) said they view merger and acquisition moves as the way to accelerate top-line growth and capture market share, according to a recent survey.
In Guy Carpenter & Company, LLC's Fifth Annual Specialty Insurance Program Issuing Carrier Survey, 72 percent of PAs and MGAs said they are interested in growing through acquisition, up from 70 percent in a similar survey from a year ago.
Out of the organizations that responded to the survey, 59 percent expressed interest in acquiring other PAs/MGAs, and 44 percent said they would prefer to acquire carriers. Both figures represented a 5 percent increase from last year's survey, Guy Carpenter said.
Interest in acquiring wholesalers decreased 10 percent, with 13 percent of respondents indicating interest, and 5 percent said they are considering acquiring third-party administrators.
The survey showed that 56 percent of respondents plan to use company funds to make acquisitions, and 23 percent plan to use company stock.
The financial crisis has caused a sharp decline in the planned use of institutions as a funding source, with 3 percent listing private equity partners as a funding source and 5 percent listing banks. Last year, those figures were 27 percent and 8 percent, respectively.
John Barrows, program manager, solutions specialty practice, Guy Carpenter, said, "Because this is a relatively mature segment of the insurance industry, growth through acquisition or merger remains one of the key methods for achieving growth and building a larger book of business.
"This trend has been further spurred by the downward pricing trends we have witnessed, coupled with the general lack of significant top- and bottom-line growth. In what is currently a buyer's market for insurance, M&A activity among PAs and MGAs merits close attention for the remainder of the year as we move into 2010."
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