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Mergers and Acquisitions in the Global Insurance Industry: Valuation Effects

Author

Listed:
  • J David Cummins

    (Department of Risk, Insurance & Healthcare Management, Temple University, 1801 Liacouras Walk, Philadelphia, PA 19010, U.S.A. E-mails: cummins@temple.edu; mweiss@temple.edu)

  • Paul Klumpes

    (Nottingham Trent University, Burton Street, Nottingham NG1 4BU, U.K.)

  • Mary A Weiss

    (Department of Risk, Insurance & Healthcare Management, Temple University, 1801 Liacouras Walk, Philadelphia, PA 19010, U.S.A. E-mails: cummins@temple.edu; mweiss@temple.edu)

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.

Suggested Citation

  • J David Cummins & Paul Klumpes & Mary A Weiss, 2015. "Mergers and Acquisitions in the Global Insurance Industry: Valuation Effects," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 40(3), pages 444-473, July.
    • Handle: RePEc:pal:gpprii:v:40:y:2015:i:3:p:444-473
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    Citations

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    Cited by:

    1. Thomas Url, 2015. "Surge in Single Premium Payments Secured Stable Revenues for Private Insurance Business in 2014," WIFO Bulletin, WIFO, vol. 20(25), pages 282-291, December.
    2. Thomas Url, 2015. "Einmalerläge sichern der Privatversicherungswirtschaft 2014 stabiles Prämienaufkommen," WIFO Monatsberichte (monthly reports), WIFO, vol. 88(9), pages 695-705, September.
    3. Jin Lung Peng & Lih Ru Chen & Jennifer L. Wang & Larry Y. Tzeng, 2017. "Diversification Versus Strategic Focus: Evidence from Insurance Intermediaries in Taiwan," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(3), pages 530-555, July.
    4. Dionne, Georges & Fenou, Akouété & Mnasri, Mohamed, 2023. "Consolidation of the US property and casualty insurance industry: Is climate risk a causal factor for mergers and acquisitions?," Working Papers 23-1, HEC Montreal, Canada Research Chair in Risk Management.
    5. Cummins, J. David & Rubio-Misas, María & Vencappa, Dev, 2017. "Competition, efficiency and soundness in European life insurance markets," Journal of Financial Stability, Elsevier, vol. 28(C), pages 66-78.
    6. Chiaramonte, Laura & Dreassi, Alberto & Piserà, Stefano & Khan, Ashraf, 2023. "Mergers and acquisitions in the financial industry: A bibliometric review and future research directions," Research in International Business and Finance, Elsevier, vol. 64(C).

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