Mergers and acquisitions could increase in the insurance distribution and service sectors over the next 18 months.
M&A experts at Conning Research and Consulting, Hartford, make that prediction in a new insurance M&A report.
The dollar value of life sector deals plummeted to $5 billion in 2006, from $22 billion in 2005, according to Clint Harris, a Conning vice president.
But the drop was due to the fact that Conning counts the MetLife-Travelers Life and the Lincoln National-Jefferson-Pilot deals in the total for the year in which they were announced, in 2005, rather than the total for the year in which they were completed, Harris says.
The number of life segment deals rose to 23 in 2006, from 21 in 2005.
For the insurance industry as a whole, the number of deals increased to about 400 in 2006 from 300 in 2005, Conning says.
The number of distribution M&A deals increased to 246 in 2006, from 180.
The number of bank deals fell, but the number of deals involving agency purchases of other agencies increased, Conning says.
Buyers have been attributing many deals to the need to build scale and build on core competencies, but in the future more insurers may make deals to diversify their business lines, Harris says.
Although private equity firms have participated in some recent insurance deals, rating agency scrutiny of insurer debt levels appears to limit the role debt-powered private equity firms can play in insurance M&A deals, Harris says.