Magazine article American Banker

Slow Year-Except in Mergers-Seen for Property/Casualty

Magazine article American Banker

Slow Year-Except in Mergers-Seen for Property/Casualty

Article excerpt

By O'D.-MOORE, MICHAEL

Property/casualty agencies and underwriters can expect their troubles to carry over into the new year, says an economist with the New York-based Insurance Information Institute.

Robert P. Hartwig says the softness of the market, which dates to the late 1980s, will not change soon. Because premiums are not growing, consolidation and cost cutting will continue in 1999, he added.

Merging or being acquired are the only ways that "any company is going to show any revenue growth" this year, Mr. Hartwig said. Last year set a record for such deals, with more than 400 of them, valued at about $150 billion. Mr. Hartwig expects as many deals this year, with the total approaching $175 billion.

Though attention was riveted on the Citicorp-Travelers merger in 1998, Mr. Hartwig says he expects 1999 to be a year of global insurance mergers.

Asian companies, looking for deep-pocketed Western companies to smooth out domestic economic troubles, will seek U.S. insurers as partners, he said. And European and U.S. companies will announce mergers as well.

Low interest rates contributed to 1998 difficulties. Insurers' investment returns dropped about 5.1% because of interest rates and the lack of new premium dollars to invest, Mr. Hartwig said. He said that trend will also probably continue in 1999.

The weather did not help the industry either. U.S. property/casualty insurers took a $9 billion hit for insurance payments to victims of Hurricane Georges and El Nino-related storms. …

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