The total number of mergers and acquisitions (M&A) in the insurance industry increased over the prior year for the first time since 2001, according to a report by Conning Research and Consulting Inc.
The 2004 increase was driven by the health and managed care distribution sectors, but a lack of mega-merger deals of $10 billion or more in any sector left the total transaction values under $15 billion, which is the second lowest in 10 years.
“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, analyst at Conning Research and Consulting. “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.”
“Our analysis of insurance industry M&A spans many years, and 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, research director at Conning Research & Consulting. “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.”