CONNING: BIGGER BUCKS, FEWER M&As:

Mergers and acquisitions in 2003 and 2004 in the insurance industry reached the highest level since 1998 in dollar terms, even while the total number of transactions continued its long decline since the same year, according to a study by Hartford, Conn.-based Conning Research & Consulting Inc.

The study, Mergers & Acquisitions and Public Equity Offerings, 2004 Edition, found that total transactions declined by almost 7 percent, while transaction value increased by more than 600 percent due to a late-year flurry of insurance-related deals that ranked among the ten largest mergers in the world, totaling $43.6 billion. There was one mega-merger from each of the three major insurance sectors. The $59.9 billion industry total in 2003 was six times the total in 2002 and the second-largest value behind $165.4 billion in 1998. Conning found that P/C and life insurers focused on seller-motivated sales of business units. Consolidation drove the health and distribution sectors, and the services sector continued in a relatively depressed state since the technology bubble burst. As industry performance improves, acquisitions will move from being defensive toward being growth-seeking, according to a Conning analyst.