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INSURANCE |
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DISTRIBUTION
Property/casualty and life insurance policies were once sold almost exclusively by agents—either by captive agents, representing one insurance company, or by independent agents, representing several companies. Insurance companies selling through captive agents and/or by mail, telephone or via the Internet are called “direct writers.” However, the distinctions between direct writers and independent agency companies have been blurring since the 1990s, when insurers began to use multiple channels to reach potential customers. In addition, in the 1980s banks began to explore the possibility of selling insurance through independent agents, usually buying agencies for that purpose. (See Chapter 4: Convergence, page__.) Other distribution channels include sales through professional organizations and through workplaces.
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MERGERS AND ACQUISITIONS
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THE TOP TEN INSURANCE-RELATED MERGERS AND ACQUISITIONS REPORTED IN 2007 (1)
Rank |
Buyer |
Target |
Deal value (2) |
| 1 | Berkshire Hathaway Inc. | Marmon Group, LLC. | $4,500.0 |
| 2 | Loews Corporation | Onshore Gas and Oil E&P operations from Dominion Resources, Inc. | 4,025.0 |
| 3 | Liberty Mutual Holding Company Inc. | Ohio Casualty Corporation | 2,744.0 |
| 4 | UnitedHealth Group Incorporated | Sierra Health Services, Inc. | 2,533.5 |
| 5 | ACE Limited | Combined Insurance Company of America | 2,400.0 |
| 6 | Fundación Mapfre | Commerce Group, Inc. | 2,274.1 |
| 7 | Maple Tree Acquisition Corp. | Hub International Limited | 1,757.8 |
| 8 | CIGNA Corporation | Great-West Healthcare Holdings Inc. | 1,500.0 |
| 9 | American International Group, Inc. | Bulgarian Telecommunications Company AD | 1,472.6 |
| 10 | Muenchener Rueckversicherungs-Gesellschaft AG | Midland Company | 1,330.4 |
(1) At least one of the companies involved is a U.S.-domiciled insurance-related company. List does not include terminated deals.
(2) At announcement.
Source: SNL Financial LC. |
| - The number of insurance mergers from 2003 to 2007 fluctuated from a low of 282 in 2003 to a high of 358 in 2007. During the same period, the value of deals fluctuated from a high of $55.5 billion in 2003 to a low of $13.7 billion in 2006.
- Insurance deal value rose from $13.7 billion in 2006 to $34.7 billion in 2007 while the number of deals rose from 330 in 2006 to 358 in 2007.
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PROFITABILITY
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ANNUAL RATE OF RETURN, GAAP ACCOUNTING,
PROPERTY/CASUALTY AND LIFE/HEALTH INSURANCE, 1998-2007
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PREMIUMS BY TYPE OF INSURER, 2007 (1)
(1) Gross direct premiums. Total premiums for 2007 were $1,580 billion.
(2) Blue Cross/Blue Shield, HMOs and hospital, medical and dental indemnity.
Source: National Association of Insurance Commissioners. Reprinted with permission. Further reprint or distribution strictly prohibited without written permission of NAIC.
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GROWTH IN U.S. PREMIUMS, PROPERTY/CASUALTY AND LIFE/HEALTH INSURANCE, 1998-2007
(Percent change from prior year)
(1) Net premiums written, excluding state funds.
(2) Premiums and annuity considerations for life/health insurance companies. Includes deposit-type funds beginning in 2001.
Source: National Association of Insurance Commissioners (NAIC) Annual Statement Database, via Highline Data, LLC. Copyrighted information. No portion of this work may be copied or redistributed without the express written permission of Highline Data, LLC.
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U.S. PROPERTY/CASUALTY AND LIFE/HEALTH INSURANCE PREMIUMS, 2007 (1)
(1) Excluding state funds.
Source: National Association of Insurance Commissioners (NAIC) Annual Statement Database, via Highline Data, LLC. Copyrighted information. No portion of this work may be copied or redistributed without the express written permission of Highline Data, LLC.
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EMPLOYMENT IN INSURANCE, 1998-2007
(000)
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Insurance companies (1) |
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Year |
Life, health and medical |
Property/ casualty |
Reinsurers |
Insurance agencies, brokerages and related services (2) |
Total industry |
| 1998 | 816.8 | 592.0 | 34.3 | 766.3 | 2,209.4 |
| 1999 | 815.3 | 603.9 | 33.5 | 783.4 | 2,236.1 |
| 2000 | 808.8 | 591.6 | 32.3 | 787.8 | 2,220.6 |
| 2001 | 807.7 | 591.3 | 31.4 | 803.2 | 2,233.7 |
| 2002 | 791.1 | 590.0 | 31.7 | 820.4 | 2,233.2 |
| 2003 | 789.0 | 608.6 | 31.0 | 837.4 | 2,266.0 |
| 2004 | 764.4 | 604.4 | 29.8 | 860.1 | 2,258.6 |
| 2005 | 761.9 | 595.0 | 28.8 | 873.6 | 2,259.3 |
| 2006 | 787.4 | 597.4 | 28.0 | 890.8 | 2,303.7 |
| 2007 | 782.3 | 588.6 | 27.7 | 909.5 | 2,308.1 |
(1) Described by the Bureau of Labor Statistics as “direct insurers.”
(2) Includes claims adjusters, third-party administrators of insurance funds and other service personnel such as advisory and insurance ratemaking services.
Source: U.S. Department of Labor, Bureau of Labor Statistics. |
| - Over the last 10 years, employment in the insurance industry (all sectors) has averaged 2.0 percent of the total U.S. employment in private industry.
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U.S. INSURANCE COMPANIES
An insurance company is said to be “domiciled” in the state that issued its primary license; it is “domestic” in that state. Once licensed in one state, it may seek licenses in other states as a “foreign” insurer. An insurer incorporated in a foreign country is called an “alien” insurer in the U.S. states in which it is licensed.
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WORLD INSURANCE MARKET
Outside the United States, the insurance industry is usually classified as life and nonlife, or general insurance. The latter includes every form of insurance except life. Reinsurance, insurance for insurance companies, is purchased by both life and nonlife insurers.
In 2007 world insurance premium volume, including the life and nonlife sectors combined, totaled $4.06 trillion, up 10.5 percent from 2006, according to a survey of world insurance premiums conducted by Swiss Re. The United States, with $1.23 trillion in premiums, was the largest insurance market in 2007, followed by the United Kingdom and Japan with $464 billion and $424 billion in premiums, respectively.
From 2005 to 2007 total world insurance premiums grew 17.8 percent. Nonlife premiums grew 15.6 percent. Life business grew 19.4 percent.
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WORLD LIFE AND NONLIFE
INSURANCE PREMIUMS, 2005-2007 (1)
(Direct premiums written, U.S. $ millions)
Year |
Nonlife (2) |
Life |
Total |
| 2005 | $1,442,258 | $2,003,557 | $3,445,816 |
| 2006 | 1,549,100 | 2,125,791 | 3,674,892 |
| 2007 | 1,667,780 | 2,393,089 | 4,060,870 |
(1) Before reinsurance transactions.
(2) Includes accident and health insurance.
Source: Swiss Re, sigma database. |
| - The inflation-adjusted growth rate from 2006 to 2007 was 3.3 percent for the total world insurance market, compared with 4.0 percent from 2005 to 2006. These growth rates were calculated using local currencies.
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