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Mergers and Acquisitions in the Global Insurance Industry: Valuation Effects

John Cummins (), Paul Klumpes () and Mary Weiss
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Paul Klumpes: Nottingham Trent University, Burton Street, Nottingham NG1 4BU, U.K.

The Geneva Papers on Risk and Insurance - Issues and Practice, 2015, vol. 40, issue 3, 444-473

Abstract: This paper examines whether global insurance mergers and acquisitions (M&As) create value for shareholders by conducting an event study of M&A transactions for the period 1990–2006. In the overall sample, insurance acquirers realised small positive cumulative average abnormal returns (CAARs), whereas targets realised substantial positive CAARs. Both cross-border and within-border transactions led to substantial value creation for targets. Market value gains for acquirers are centred in the U.S. and Europe; acquirer CAARs for Asian M&As are mostly insignificant. Targets realise significant market value gains in the U.S., Europe and Asia, with the largest gains for U.S. transactions. Acquirers from the insurance industry realise small market value gains from within-industry transactions, but cross-industry M&As are value-neutral. Targets realise significant market value gains in both cross- and within-industry transactions, but the within-industry gains are significantly larger. The results suggest that insurers should concentrate on focusing rather than diversifying transactions.

Date: 2015
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