M&A activity set to pick up in 2004: Conning

With 2003 ending in a flurry of high-profile insurance mergers, the stage is set for further m&a activity in 2004, says a new report by Conning & Co.
2003 had been expected to follow the two-year trend of low activity both in size and number of transactions. However, three transactions which ranked among the top ten worldwide mergers for 2003 capped off the year: the St. Paul/Travelers merger in the p&c segment; the Manulife/John Hancock life insurance deal; and the Anthem/Well Point transaction in the health & managed care sector.
These three mergers accounted for US$43.6 billion of the US$59.9 billion in total transactions the industry produced last year. This represents 600% growth over 2002, and the highest level of activity since 1998.
At the same time, however, the number of transactions continues the slump seen since 1998, down 7% from 2002.
“While m&a hyperactivity of the late 1990s did not spur substantive consolidation in the p&c and life industries, the current environment appears more conducive to growth through acquisitions,” says Clint Harris, analyst with Conning Research.
Among the factors influencing growth in 2004 is the move away from seller-motivated sales of business units in light of stronger industry performance. Companies will seek to growth through acquisition moving forward, as organic growth remains a challenge.
The report also looks at initial and secondary public offering trends, noting that capital markets increased net proceeds into the insurance industry through these transactions in 2003. P&c insurers had the move activity, representing about 60% of the total value of offerings. At the same time, the industry was also able to add to surplus from operations for the first time in three years.