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Mergers and Acquisitions in the Global Insurance Industry: Valuation Effects

  • J David Cummins
  • Paul Klumpes
  • Mary A Weiss
Original Article

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 19902006. 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.

Keywords

mergers acquisitions event study insurance; M&As 

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Copyright information

© The International Association for the Study of Insurance Economics 2015

Authors and Affiliations

  • J David Cummins
    • 1
  • Paul Klumpes
    • 2
  • Mary A Weiss
    • 1
  1. 1.Department of RiskInsurance & Healthcare Management, Temple UniversityPhiladelphiaU.S.A.
  2. 2.Nottingham Trent UniversityNottinghamU.K.

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