Identifying Merger Targets in the Property and Liability Insurance Industry

Abstract

THE rapid pace at which property and liability insurance companies were pursued and acquired by conglomerates during 1968 has temporarily abated as conglomerates have lost some of their investor appeal. During this lull, analysts have been assessing the reasons for the large number of mergers and the probability that the remaining companies can escape in the next round of merger activity. The purpose of this article is to examine the 1968 merger movement with respect to property and liability insurance companies to determine characteristics which distinguish acquired from non-acquired companies. The objective of the research is to provide a means for evaluating the vulnerability of companies which are still independent. Although there are many stock property and liability insurance companies, the large companies received most of the attention of the conglomerates during 1968. Of the top 20 companies, seven owning 21 % of the entire industry's assets were acquired during that year by noninsurance companies. If companies which were actively pursued are included, then mergers affected 10 of the top 20 companies, owning 39% of the industry's assets. (Table 2 includes a list of the top 20 companies ranked according to asset size.) Little wonder that the merger activities of the conglomerates causeid great consternation in the industry. What were the factors which made the insurance companies almost irresistible targets for conglomerates?