merger and acquisition activity in the insurance industry. But, in fact, the total dollar value of merger transactions fell by almost 75 percent compared to the previous year, according to a new Conning & Company report. Also, the total number of merger transactions in 1999 decreased by more than 15 percent compared to 1998. The less than anticipated M&A pace has continued int the first quarter of 2000.

The Conning study, "Mergers & Acquisitions and Public Equity Offerings: 2000 Edition,'' reports that even though the economic climate was seemingly propitious for M&A activity in 1999, companies were more likely to acquire insurers' individual business units to refine their position in specific markets, than to purchase entire companies for the sake of scale. This is a reversal of the trend of 1998 and before in which much of the M&A activity was characterised by companies seeking to add to their businesses by acquiring size and /or scale.

"Few companies involved in big mergers in 1997 and 1998 were able to make their investments pay off for them as quickly as they had hoped,'' said Clint Harris, CPCU, assistant vice president, insurance research and publications at Conning & Company. "Perhaps they were unrealistic in their expectations. But clearly insurers in 1999 were much more wary of this kind of quick fix.'' In 1999, the number of total M&A transactions in the insurance industry dropped from 565 in 1998 to 471 in 1999. Aggregate transaction value dropped even more sharply, from $165 billion in 1998 to just under $42 billion in 1999.

While 23 of the 1998 transactions in Conning's M&A database exceeded a billion dollars, there were just 14 such transactions in 1999. Only in the distribution centre was there an increase, where the number of transactions grew from 183 in 1998 to 202 in 1999.

Among the top ten insurance-related transactions, six were in the property- casualty sector and two (including the largest) were in the life sector. None of the top ten deals in 1999 involved a health/managed care company, although many industry analysts speculate that a number of potential transactions in this ctor are imminent.

In 1999, foreign companies continued to acquire US insurers while US purchases of foreign companies declined. Three of the top ten transactions involved European buyers of US firms, and a fourth involved the purchase of a US firm by a Bermuda based company. Only one of the top ten transactions involved the purchase of a foreign insurer by a US buyer.