What A Difference Six Years Has Made To The U.S. Life Re Market

Speaking as someone who was a loser in the bidding wars against these companies, Atkinson said they “had to accept a high single-digit rate of return” since something in the area of 15% was not likely.

The acquisitions also assumed a significant expense reduction through consolidation, he said, and the acquirers “have been very effective at reducing expenses.”

Additionally, the acquisitions assumed that market shares could be added together with no loss of new business, and indeed, the acquirers “have held onto market share or increased it.”

Swiss Res acquisition of Lincoln Re “may prove harder in this respect due to the large market shares of each,” he said.

As for the future, he said he expects more acquisitions to come for both Swiss Re and Munich Re and also that their market shares will continue to increase. For both of these companies, he added, something that could change their outlook is the question of what their shareholders will demand, since they have been relatively reticent until now.

Regarding ERC, he wondered whether it “is more likely to sell than buy?” He said the companys losses from the World Trade Center tragedy could have an effect on its parent, GE, which also has strict standards about subsidiaries being first or second in their markets.

Regarding Transamerica Re, RGA and ING Re, Atkinson said they are “noticeable but non-core units of much larger companies.” This, he said, “may have contributed to their pricing discipline.”

These three companies all “enjoy economies of scale, good reputations and client relationships.” But, he added, “everything has its price,” although in the case of these companies “the right price may be too high.”

He said that looking ahead, he felt these three should maintain market share, but “one or two may be acquired.”

Looking to 2005, Atkinson braved some predictions. At that point, he said he thought the U.S. re market would be down to eight players with market share of 3% or more. Little if any consolidation would come after this, he continued, and the future would be “more stable.”

Also, new entrants at that point would be “unlikely due to the strength and quality of the surviving players.”

But he did add that things could turn out differently than he foresaw for a number of reasons and “we could have more survivors, which would be a good thing all around.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, November 19, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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