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October 24, 2010 at 08:00 PM
In the agency world, recent M&A activity is suggesting that the economy might be picking up, slowly but surely.
In July, National Underwriter covered a report that the analysts at the Mergermarket Group, New York, prepared. It was a health care M&A review based on interviews with some 75 U.S. healthcare investors. The results showed 80% of the respondents predicted healthcare sector M&A activity will increase in the coming 12 months and 16% predicted activity will “increase significantly.”
This is in complete contrast to what Conning analyst Jerry Theodorou reported in 2009, when U.S. insurance M&As were at their lowest level since 2002, with health insurance dipping below $1 billion.
Since then, M&A activity has been on the rise from larger companies (such as the $4.9 billion acquisition of Hewitt Associates Inc., Lincolnshire, Ill. by Aon Corp., Chicago) to smaller companies (like Blue Cross Blue Shield of Delaware, Wilmington, Del., signing an affiliation agreement with Highmark Inc., Pittsburgh) have some wondering if this is an economic phase or a promising economic rise.
“Our industry is fundamentally realigning itself in response to healthcare reform, which is why alignment is so important now,” says Mike Sullivan, executive vice president and chief marketing officer of Digital Insurance Inc., an Atlanta-based employee benefits agency, specializing in small and mid-size companies. “Carriers, providers, agents, and brokers, as well as most other industry participants are trying to understand the future economics of the healthcare and benefit business.”
As the implementation phase of The Patient Protection and Affordable Care Act (PPACA), gets into high gear in January 2011, some large insurance agencies are looking to expand their market share by acquiring smaller independently owned insurance agencies, which can benefit from the larger agencies’ greater capital, technologies and operational efficiencies.
