Conning & Company Study Says Enron Heightens M&A Concerns, Re-emphasizes Due Diligence.

Business & Insurance Editors

HARTFORD, Conn.--(BUSINESS WIRE)--April 11, 2002

-- Insurance-related IPOs raised more than $9.1 billion in 2001, versus $5
billion in 2000.

-- The last of the life insurer demutualizations in the current wave,
Principal, Phoenix and Prudential, accounted for over $6 billion of this total.


-- Secondary equity offerings increased from only two in 2000 to 18 in 2002,
raising roughly $5.5 billion - 10 times the total raised in 2000. As expected
most of these were Property-Casualty sector transactions - many being announced
after the September 11 tragedy.

The expected late-'90's wave of mergers and acquisitions in the insurance sector never materialized, and future M&A appears to have jumped off the fast track.

Since Dynegy's due diligence exposed Enron as the big engine that couldn't, future M&A will require even more rigorous due diligence. According to a new study by Conning & Company, concerns about uncovering "smoking guns" similar to Enron's questionable financial reports - while obviously not affecting 2001 M&A activity - may slow future M&A in the insurance sector.

The Conning study, "Mergers & Acquisitions and Public Equity Offerings: 2002 Edition," found that 2001 insurance-related transactions were up slightly from the prior year - 300 from 295 -- but the overall value of the deals declined from $55.7 billion in 2000 to $41.5 billion in 2001. (The 2000 total was arguably inflated by the inclusion of Citigroup's purchase of Associates First Capital, for roughly $31 billion, as a Property-Casualty sector transaction.)

After the 1998 Travelers/Citicorp merger and the 1999 passage of the Gramm-Leach-Bliley Act, many analysts forecast an era of unprecedented M&A, one that would extend beyond sector boundaries and create insurance/financial services behemoths. Instead, insurance-related M&A activity declined.

The Conning study, which is the result of research and conversations with industry leaders and analysts, concluded that insurance-related M&A must be examined sector-by-sector. Accordingly, Conning's analysis of 2001 transactions and its near-term and longer-term M&A projections are largely sector-focused:

-- Insurance-related IPOs raised more than $9.1 billion in 2001, versus $5
billion in 2000.

-- The last of the life insurer demutualizations in the current wave,
Principal, Phoenix and Prudential, accounted for over $6 billion of this total.


-- Secondary equity offerings increased from only two in 2000 to 18 in 2002,
raising roughly $5.5 billion - 10 times the total raised in 2000. As expected
most of these were Property-Casualty sector transactions - many being announced
after the September 11 tragedy.

"Insurance-related public equity offerings increased from three in 2000 to nine in 2001," said Jack Gohsler, Senior Vice President at Conning & Company and author of the study. "Investors sought value after being burned by losses in tech-sector IPOs. Based on pricing and aftermarket performance of their stock prices, insurance-related IPOs provided value."

-- Insurance-related IPOs raised more than $9.1 billion in 2001, versus $5
billion in 2000.

-- The last of the life insurer demutualizations in the current wave,
Principal, Phoenix and Prudential, accounted for over $6 billion of this total.


-- Secondary equity offerings increased from only two in 2000 to 18 in 2002,
raising roughly $5.5 billion - 10 times the total raised in 2000. As expected
most of these were Property-Casualty sector transactions - many being announced
after the September 11 tragedy.

The Conning study also speculates that Enron's collapse may impact future M&A in another way. "Post-Enron, all companies including insurers are likely to try to be more "transparent" - providing more financial information and clarity about their business operations and goals," said Gohsler. "Clearly, many recent M&A transactions point to a refocus on core businesses. Some companies may also worry that the complexity of their businesses will confuse analysts and scare off potential acquirers. As a result, they may spin off non-core operations. In this way, Enron's collapse may serve to spur future M&A. The uncertain impact of Enron's collapse alludes to the difficulty in projecting future M&A trends."

The Conning study, "Mergers & Acquisitions and Public Equity Offerings: 2002 Edition" is available from Conning & Company for $1,250 by calling toll free [phone] or [phone]. A complete listing of all Conning Strategic Studies can also be found by visiting the company's web site at www.conning.com.

About Conning

Conning is one of the largest asset managers specializing in insurance company investments in the United States, a leading source of private equity capital to financial services companies and a nationally respected provider of research publications on the insurance industry. Conning is located at CityPlace II, 185 Asylum Street, Hartford, CT 06103.