It's unlikely that large mergers and acquisitions will be done by U.S. insurers this year, as there are not enough sellers looking to divest at this time, PricewaterhouseCoopers L.L.P. said in a Thursday report.

In its report, “U.S. Financial Services M&A—Analysis and Trends,” PwC said that while “behind-the-scenes” discussions were taking place, there were few natural disasters or “market-changing” events in 2009. That allowed property/casualty insurers to rebuild their balance sheets and strengthen their market position.

Further, PwC said improved investment income moved some insurers from being undercapitalized to overcapitalized, which means fewer sellers need to divest.

“Those in a more distressed position who have survived so far are now in better position to divest in a timely manner and avoid a fire sale situation,” New York-based PwC analysts said in the report.

There could be some consolidation among property/casualty insurers and brokers, however, due to excess capacity and residual soft pricing, PwC said. Underwriters, mainly those in Bermuda, may increase interest “in vertical acquisitions along the value chain, through the acquisition of managing general agents, managing general underwriters or captive agents,” the accounting firm and consultant said in the report.

Federal regulation, health care changes and international tax reform also are factors that have slowed M&A activity. The impact of such reforms is difficult to predict and some companies may wait and see how those will impact business before doing a deal, PwC said.

The report is available at www.pwc.com.