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Travelers Corp. did it. So did General Re Corp., Munich Reinsurance Co. and ACE Ltd.

What they did was participate in a merger in 1996, the most active year of M&A activity on record in the insurance industry.

According to a newly released study, 382 mergers or acquisitions were completed in 1996, totaling $41 billion, breaking the previous record set in 1995.

"Spurred on by a robust economy, a rising stock market and relatively low interest rates coupled with available credit, M&A activity again reached new heights in 1996 in the broader markets, as well in the insurance industry," the study by Hartford, Conn.-based insurance research firm Conning & Co. states.

"Not only is deal activity at an all-time high, but the average transaction size increased dramatically in 1996, as reflected in the insurance industry, where the total reported deals jumped from 349 in 1995 to 382 in 1996, while aggregate dollar volume rose from $27 billion in 1995 to $41 billion in 1996," the study states. "In fact, many companies now treat M&A as a business line rather than a strategic option."

Insurers' desire to grow is the driving force behind the mergers. With premiums relatively flat, companies have looked to other avenues for growth.

"Without organic growth, the next alternative is to purchase companies and to grow that way," said Gerard Vecchio, a partner in Conning's Private Equity Group and an author of the study.

Also, Mr. Vecchio added, many insurers are shedding peripheral lines of insurance and focusing on their core business, contributing to the number of deals. Aetna Inc., for example, sold its property/casualty business to Travelers and then bought U.S. Healthcare Inc., he noted.

Some of the largest mergers, along with sheer volume of deals, have involved reinsurers, he said.

"The forces affecting primary property/casualty companies have been compounded in the reinsurance industry," the study states. "Primary companies had at their disposal the option of increasing retentions to achieve growth, to the detriment of reinsurers' top line. At the same time, achieving global scale has become more important. As a result, the direct writing reinsurers in the U.S. are now all global organizations."

"If you're a reinsurer, you're buying or being bought," Mr. Vecchio added.

In addition to mergers, 1996 set a record for initial public offerings and secondary stock offerings. These 49 transactions in 1996 raised $6.6 billion compared with 42 transactions and $4.6 billion in 1995.

But rather than plow this money into the company, the companies are using much of it to liquefy shareholders, the study states.

One third of the money raised in IPOs in 1996 went to liquefy shareholders, while half of the money from secondary offerings was used to liquefy shareholders.

Also, a large chunk of the money raised has gone to repay debts.

Of the money raised from IPOs, 37% went to repay debts in 1996, up from 12% in 1995.

"Of $6.6 billion, only $1.3 billion went to insurance companies to support additional writing," Mr. Vecchio said. "That's a small number compared to what is raised."

The bulk of the stock offerings involved specialty property/casualty insurers, which generally are growing faster than the industry as a whole.

One effect of returning the money to shareholders, Mr. Vecchio pointed out, is that because little of the money is used for writing policies, it won't add capacity to the already soft market.

The study is available from Conning & Co. for $495 by calling 860-527-1131 or writing Tina Tierney at CityPlace II, 185 Asylum St., Hartford, Conn. 06103.