This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Reinsurance Sector Set for Mergers

Stocks in this article: TRH AWH AIG ENH ESGR PTP MRH

Article updated with further commentary from AM Best.

NEW YORK ( TheStreet) -- The $3.2 billion merger of Transatlantic Holdings (TRH) and Allied World Assurance (AWH) might reignite deals in the reinsurance sector as companies seek to enhance balance sheets and diversify the earnings base, according to industry analysts.

On Sunday Transatlantic Holdings, a specialty reinsurer once majority owned by AIG (AIG), announced its merger with Swiss-based Allied World Assurance in an all-stock deal. The merger would create an entity that will have total assets of $21 billion and a total capital of $8.5 billion.

The combination could leave reinsurers with a smaller capital base -- $3 billion or less -- hungry for scale, some analysts say.

"The reinsurance business has become more differentiated on size because of this most recent deal," said Kevin Lee, analyst at Moody's (MCO), commenting on the Transatlantic deal. "On one hand, you have a group of companies with more than $5 billion in capital, some others with $2.5 billion to $5 billion in capital and then you have a group of companies below $2.5 billion. For companies in the lower end of the range, and given the extent of losses from first quarter, there is possibly more interest in M&A."

Companies with a total capital of less than $3 billion include Endurance Specialty (ENH), Enstar group (ESGR), Platinum Underwriters (PTP) and Montpelier (MRH), according to data available on Bloomberg.

"Over the past decade, there has been a drive for size," says Laline Carvalho, director and reinsurance analyst at Standard and Poor's. "There have been a lot of management teams that have pushed to become bigger."

Tracy Dolin, also an analyst at S&P points out that size might be more relevant for property catastrophe reinsurers where they can get better pricing terms for their size.

But other factors besides size also may drive more consolidation. According to Carvalho, reinsurers are also looking to diversify their earnings stream. "It has been a significant year of catastrophes for reinsurance companies," she says, noting the disasters in New Zealand, Australia and the U.S. "There is a desire for some management teams to become more relevant to their brokers, reduce exposure to catastrophic events and if they are more diversified they can choose to play those opportunities where they see the best returns for their capital."

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs