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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.

MERGERS AND ACQUISITIONS

The number of global insurance-related mergers and acquisitions (M&A) rose from 721 transactions in 2010 to 864 transactions in 2011, largely reflecting improved economic, financial and regulatory conditions in the U.S., according to an analysis by Conning Research. The number of insurance-related deals in which a U.S. firm was either a buyer or a target rose by 36 percent and the value of properties acquired increased by 18 percent in 2011, according to Conning. There were 592 U.S. insurance M&A transactions in 2011, the highest ever recorded, compared with 436 in 2010. The overall value of U.S deals rose from $46.5 billion to $54.7 billion during the same period. Transactions increased in every market segment in the U.S., including property/casualty, life/annuity, health, distribution and service firms. By contrast, the number and aggregate value of non-U.S. insurance M&A transactions (i.e., where a non-U.S. company was both buyer and seller) declined in 2011. The overall reported value on non-U.S. deals dropped from $32.5 billion in 2010 to $20.7 billion in 2011. The number of transactions fell from 285 to 272 during the same period.

 

TOP TEN INSURANCE-RELATED MERGERS AND ACQUISITIONS REPORTED IN 2011 (1)

Rank Buyer Country Target Country Deal value ($ millions) (2)
1 Express Scripts Inc. U.S. Medco Health Solutions Inc. U.S. $28,901.6
2 CIGNA Corp. U.S. HealthSpring Inc. U.S. 3,824.9
3 Alleghany Corp. U.S. Transatlantic Holdings Inc. U.S. 3,534.6
4 Tokio Marine Holdings Inc. Japan Delphi Financial Group Inc. U.S. 2,891.0
5 Allstate Corp. U.S. White Mountains Inc. and
Answer Financial Inc.
U.S. 1,000.0
6 Nationwide Mutual Insurance Co. U.S. Harleysville Group Inc. U.S. 815.8
7 QBE Insurance Group Ltd. Australia Balboa insurance business U.S. 700.0
8 MidOcean Partners U.S. Pre-Paid Legal Services Inc. U.S. 651.0
9 Hannover Life Reassurance Co.
of America (3)
Germany Reinsurance portfolio
of Scottish Re
U.S. 565.0
10 Berkshire Hathaway Inc. U.S. Wesco Financial Corp. U.S. 547.6

(1) Target is a U.S.-domiciled insurance underwriter or broker. List does not include terminated deals.
(2) At announcement.
(3) Hannover Life Reassurance (U.S.) is a division of Germany-based Haftpflichtverband der Deutschen Industrie V.a.G; Scottish Re (U.S.) is owned by Bermuda-based Scottish Re Group Ltd.

Source: SNL Financial LC.

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PROFITABILITY 

 

ANNUAL RATE OF RETURN, GAAP ACCOUNTING, PROPERTY/CASUALTY, LIFE/HEALTH AND HEALTHCARE INSURANCE, 2007-2011 (1)

  Property/casualty Life/health Healthcare insurance (2)
Year Stock Mutual Stock Mutual  
2007 14.0% 9.0% 11.0% 10.0% 19.0%
2008 3.0 1.5 9.0 -8.0 11.0
2009 7.0 3.5 7.0 0.0 14.0
2010 9.0 3.5 8.0 5.0 12.0
2011 6.0 NA 8.0 8.0 15.0

(1) Based on return on shareholders equity of insurance companies in the Fortune 500.
(2) Healthcare insurance and managed care.

NA=Data not available.

Source: Fortune.

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NET PREMIUMS WRITTEN, PROPERTY/CASUALTY AND LIFE/HEALTH

 

PROPERTY/CASUALTY AND LIFE/HEALTH INSURANCE NET PREMIUMS WRITTEN, 2004-2013

($000)

Year Property/casualty (1) Life/health (2) Total
2004 $425,465,344 $507,250,884 $932,716,228
2005 422,448,786 520,220,499 942,669,285
2006 447,803,479 574,660,770 1,022,464,249
2007 446,179,922 608,878,377 1,055,058,299
2008 440,318,983 607,469,969 1,047,788,952
2009 423,528,077 491,845,993 915,374,070
2010 425,878,773 560,737,868 986,616,641
2011 441,562,154 602,522,189 1,044,084,343
2012 460,486,285 623,563,597 1,084,049,882
2013 481,237,455 560,279,427 1,041,516,882
Percent change,
2004-2013
13.1% 10.5% 11.7%

(1) Net premiums written after reinsurance transactions, excludes state funds.
(2) Premiums, annuity considerations (fees for annuity contracts) and deposit-type funds for life/health insurance companies.

Source: SNL Financial LC.

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GROWTH IN U.S. PREMIUMS, PROPERTY/CASUALTY AND LIFE/HEALTH INSURANCE, 2004-2013

(Percent change from prior year)

(1) Net premiums written after reinsurance transactions, excludes state funds.
(2) Premiums, annuity considerations (fees for annuity contracts) and deposit-type funds for life/health insurance companies.

Source: SNL Financial LC.

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U.S. PROPERTY/CASUALTY AND LIFE/HEALTH INSURANCE PREMIUMS, 2013 (1)

(1) Property/casualty: net premiums written after reinsurance transactions, excludes state funds; life/health: premiums, annuity considerations (fees for annuity contracts) and deposit-type funds.

Source: SNL Financial LC.

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EMPLOYMENT IN INSURANCE, 2003-2012

(000)

  Insurance companies (1)      
Year Life, health
and medical
Property/
casualty
Reinsurers Insurance agencies,
brokerages and
related services (2)
Total
industry
2003 789.0 710.0 31.0 837.4 2,367.4
2004 764.4 678.5 29.8 860.1 2,332.8
2005 761.9 639.0 28.8 873.6 2,303.3
2006 787.4 635.4 28.0 890.8 2,341.7
2007 784.0 633.2 27.0 909.8 2,353.9
2008 797.6 632.7 27.9 908.5 2,366.7
2009 799.7 619.1 27.5 886.7 2,333.0
2010 801.0 600.9 26.8 875.2 2,303.8
2011 785.9 598.3 25.6 890.2 2,299.9
2012 807.9 591.3 25.6 912.3 2,337.1

(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.

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  • Over the last 10 years, employment in the insurance industry (all sectors) has averaged 2.1 percent of the total U.S. employment in private industry.
  • Insurance industry employment rose by 1.6 percent in 2012. Employment in the property/casualty industry decreased 1.2 percent and agency/brokerage jobs rose 2.5 percent. Employment in the life, health and medical sector rose 2.8 percent, and employment for reinsurers was unchanged.

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.

DOMESTIC INSURANCE COMPANIES BY STATE, PROPERTY/CASUALTY AND LIFE/ANNUITIES, 2013

State Property/casualty Life/annuities State Property/casualty Life/annuities
Alabama 19 7 Montana 3 1
Alaska 5 0 Nebraska 33 28
Arizona 40 30 Nevada 11 3
Arkansas 12 29 New Hampshire 51 2
California 109 16 New Jersey 70 2
Colorado 12 9 New Mexico 13 2
Connecticut 71 29 New York 205 81
Delaware 98 29 North Carolina 68 5
D.C. 6 1 North Dakota 13 4
Florida 120 11 Ohio 133 37
Georgia 34 15 Oklahoma 31 27
Hawaii 17 3 Oregon 15 4
Idaho 7 1 Pennsylvania 179 27
Illinois 193 58 Rhode Island 22 2
Indiana 75 27 South Carolina 24 9
Iowa 69 33 South Dakota 16 3
Kansas 26 12 Tennessee 16 14
Kentucky 9 7 Texas 208 125
Louisiana 32 38 Utah 10 16
Maine 11 3 Vermont 13 2
Maryland 35 5 Virginia 18 5
Massachusetts 54 17 Washington 12 9
Michigan 72 25 West Virginia 19 0
Minnesota 39 12 Wisconsin 173 20
Mississippi 14 15 Wyoming 1 1
Missouri 47 27 United States (1) 2,583 888

(1) Excludes territories. Excludes health insurers, risk retention groups, fraternals, title and other insurers.

Source: Insurance Department Resources Report, 2014, published by the National Association of Insurance Commissioners (NAIC). Reprinted with permission. Further reprint or redistribution strictly prohibited without written permission of NAIC.

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  • According to the National Association of Insurance Commissioners, in the U.S. (including territories) there were 6,115 insurance companies in 2012, including property/casualty (2,660), life/annuities (913), health (806), fraternal (88), title (58), risk retention groups (272) and other companies (1,318).
  • Many insurance companies are part of larger organizations. According to A.M. Best, in 2011 the P/C insurance industry contained about 1,326 organizations (as opposed to about 2,800 companies), including 828 stock (or public) organizations, 403 mutual organizations (firms owned by their policyholders) and 73 reciprocals (a type of self-insurance). The remainder consisted of Lloyd’s organizations and state funds.

WORLD INSURANCE MARKET

Outside the United States, the insurance industry is divided into life and nonlife, or general insurance, rather than life/health and property/casualty. World insurance premiums rose by 6 percent from $4.3 trillion in 2010 to $4.6 trillion in 2011, according to Swiss Re’s latest study of world insurance. However, when adjusted for inflation, premiums declined slightly (0.8 percent). Nonlife premiums expanded by 8.2 percent in 2011, or by 1.8 percent when adjusted for inflation, reflecting economic growth in emerging markets and rate increases in some advanced markets. By contrast, global life insurance premiums rose by 4.4 percent in 2011 but fell by 2.7 percent when adjusted for inflation. 

 

WORLD LIFE AND NONLIFE INSURANCE DIRECT PREMIUMS WRITTEN, 2011-2013 (1)

(Direct premiums written, U.S. $ millions)

Year Life Nonlife (2) Total
2011 $2,611,718 $1,954,445 $4,566,163
2012 2,630,274 1,968,677 4,598,951
2013 2,608,091 2,032,850 4,640,941

(1) Before reinsurance transactions.
(2) Includes accident and health insurance.

Source: Swiss Re, sigma, No. 3/2014.

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  • Nonlife premiums accounted for 43 percent of world premiums. Life insurance accounted for 57 percent.