01/06/1998

M&A Activity and Consolidation in the U.S. Insurance Industry

Insurance Research Department  Chief analyst Hiroshi Matsuoka 

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Introduction

Mergers and acquisitions have been rampant in the insurance industries of both Europe and the U.S. These activities are reshaping the industry landscape not only locally but globally. Whilethis paper's aim is to report on M&A activity in the U.S. insurance industry, we begin with abrief discussion of major M&A developments in Europe last year.

January 1997 saw the merger of AXA and UAP, two of France's largest insurance groups, forming the world's largest private insurance group in assets under management. More specifically,AXA had acquired UAP. UAP was France's leading insurance firm and until recently had beenwholly owned by the national government. AXA, on the other hand, was growing rapidly throughacquisitions both at home and abroad. Its acquisition of UAP, a much larger entity, demonstrates the changing power structure in the insurance market as smaller newcomers overpower largerand older industry leaders. From October 1997 to early 1998, Italy's largest insurance group, Generali, and Germany's largest, Allianz, fought to acquire AGF, France's second largest insurer.Ultimately, AGF's core business was acquired by Allianz, while its German subsidiary and other businesses were acquired by Generali. Allianz does not rank as high globally as AXA, who has a vast presence throughout Europe, North America, and Asia. However, Allianz regained its top ranking in Europe through the recent acquisition. Other major companies in Switzerland, Holland, and the U.K. have also been active.

These developments are occurring against the backdrop of EU market integration and emergence of the single currency. Since market integration will allow insurers to sell insurance products throughout the region, all major players are jockeying for position in the integrated European market.

Meanwhile, smaller companies are not waiting around to be devoured. They too are implementing survival strategies by entering into mergers and alliances, and seeking out niche markets.

M&A activities, along with structural changes in the market, are pressuring insurers to formulate clear strategies. Despite differences in degree, the same conditions exist in the U.S. Below we look more closely at M&A trends in the U.S. insurance industry.

Insurance Research Department    Chief analyst

Hiroshi Matsuoka

Research field

03-3512-1782

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