M&A expected to increase: S&P survey

The mega-mergers of St Pauls/Travelers and John Hancock/Manulife are a signal the industry should expect increased consolidation, say insurance executives and analysts.
Two-thirds of those responding to the survey, which was taken as part of Standard & Poor’s annual insurance conference in New York this week, say consolidation will continue, while 71% say debt and equity markets reward stock insurance companies for their ability to acquire other companies. “It is clear the financial flexibility enjoyed by stock companies to purchase another company far outweighs the vulnerability to be acquired,” says S&P managing director Steven Dreyer.
The majority of respondents also seem leery of the financial management of smaller mutual companies, with 59% saying mutuals should be subject to a “mirror Sarbanes-Oxley Act” currently being considered by U.S. regulators.
Overwhelmingly on insurers’ minds is the issue of price competition, cited by 35% as the most pressing issue facing the industry. This was followed by excessive jury awards (22%), rapidly rising interest rates (18%), increasing regulatory risks (18%) and terrorism (11%). Dreyer notes that price competition has emerged as an issue, having been of much less concern a year ago.