Merger and acquisition activity for property and casualty insurers, agents and brokers heated up in 2010, as insurers sought to improve their strategic standing within the industry, according to a report from Conning Research & Consulting.
The Conning report, "Global Insurance Mergers & Acquisitions in 2010, Moving From Defense to Offense," said improving valuations and the continued soft market, now in its seventh year, drove the increase in deals.
While eager to grow, those pursuing M&A transactions proceeded with caution for fear the deals would not produce the "desired result" during this difficult market downturn.
"Buyers looked long and hard at many prospects before inking a deal," the report states.
In 2010 there were 721 transactions at a reported value of more than $79 billion. In 2009, by comparison, there were 601 transactions at a reported value in excess of $52 billion.
In the United States alone there were 436 transactions with a total value of about $47 billion compared to 320 transactions valued at more than $14 billion in 2009, an increase of 36 percent in the number of transactions—and almost 250 percent in dollar value.
Conning noted that the increase in value in 2010 transactions over 2009 was due to only three U.S. P&C acquisitions "in the middle-tier value range" of $100 million to $1 billion in 2009. In 2010, that number jumped to 16.
Conning said factors influencing the increased M&A activity overall were a "more vibrant economy, more buoyant equity markets, stronger capital positions at insurers, soft market insurance conditions, and the release of pent-up demand to pursue acquisitions after low 2009 levels."
The report notes that few U.S. insurers pursued acquisitions outside of the United States. Globally, those insurers that did pursue foreign acquisitions turned to Asia and Latin America, considered fast-growing emerging markets.
Among agents and brokers in the United States, the number of announced transactions rose 38 percent from 176 in 2009 to 243 in 2010. The value of these transactions almost tripled, jumping from $615 million in 2009 to $1.7 billion in 2010.
The report notes that the value for some of the largest transactions during the year were not announced, such as AmWINS' acquisition of Colemont; and Swett & Crawford's merger with Cooper 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 equity were more active, banks decreased their involvement in the insurance space, with many shedding operations, the report states. The same was true outside of the United States, Conning noted.
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