Some life insurance companies that have not seen themselves as being candidates for acquisitions may now be open to the idea, an industry consultant says.

Thanks to the beating insurers have taken during the recession, potential targets are looking at the idea of making a deal in a different light, says John Nigh, a managing principal in the New York office of Towers Perrin Forster & Crosby Inc.

But potential acquirers, and especially potential acquirers that have been seeking federal bailout funds, have been sitting on their money, Nigh says.

Still, Nigh expects to see the pace of mergers and acquisition pick up, perhaps as early as the fourth quarter of 2009.

The reason: The stock prices of publicly owned companies are depressed, often below statutory book value. That makes them more attractive to other companies, and companies that have shunned M&A suitors in the past are likely to see purchase offers as being more attractive, Nigh says.

As the economy improves, there will be more companies in a position to make acquisitions, and they will be under pressure to show top- and bottom-line growth, both organically and through acquisitions, Nigh says.

For now, the recession is keeping life industry M&A activity in check. When Towers Perrin researchers surveyed 24 life industry chief financial officers, they found that only 30% said their companies had acquired other companies during the previous 12 months, but that 50% said their companies may be interested in acquiring companies in the next 12 months.

Only 8% of the CFOs said their companies had acquired blocks of business in the past 12 months, but 71% are interested in acquiring blocks sometime in the next 12 months.

In the fourth quarter, Nigh predicts, two or three of the 50 largest life insurers will be acquired by other top-50 companies.

The price of those deals “will dwarf all others” in the period, Nigh says.

Potential acquisition targets will see that “there’s no sense in prolonging the inevitable, and will themselves seek to be acquired,” rather than wait for a suitor to step forward, he says.

Nigh believes there will continue to be consolidation in the life insurance industry beyond what his company reports in its survey.

“Consolidation in effect was interrupted by what’s happening in the stock market and also due to the recession,” he observes. “Sales in the U.S. of insurance in 2008 showed its largest decline since 1951. How do you make that up? With acquisitions.”