Mergers and Acquisitions in the Global Insurance Industry: Valuation Effects

37 Pages Posted: 4 Feb 2015 Last revised: 8 Aug 2018

See all articles by J David Cummins

J David Cummins

Temple University - Risk Management & Insurance & Actuarial Science

Paul J. M. Klumpes

Nottingham Trent University

Mary A. Weiss

Temple University

Date Written: December 16, 2014

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. Insurance acquirers realized small positive cumulative average abnormal returns (CAARs), whereas targets realized substantial positive CAARs. Both cross-border and within-border transactions led to substantial value-creation. Market value gains for acquirers are centered in the U.S. and Europe; acquirer CAARs for Asian M&As are mostly insignificant. Targets realize significant market value gains in the U.S., Europe, and Asia. Acquirers from the insurance industry realize small market value gains from within-industry transactions, but cross-industry M&As are value-neutral. Targets realize 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, insurance industry, event study

JEL Classification: G14, G20, G22, G34

Suggested Citation

Cummins, J. David and Klumpes, Paul J.M. and Weiss, Mary A., Mergers and Acquisitions in the Global Insurance Industry: Valuation Effects (December 16, 2014). Fox School of Business Research Paper No. 15-064. Available at SSRN: https://ssrn.com/abstract=2559934 or http://dx.doi.org/10.2139/ssrn.2559934

J. David Cummins (Contact Author)

Temple University - Risk Management & Insurance & Actuarial Science ( email )

Fox School of Business and Management
1801 Liacouras Walk.
Philadelphia, PA 19122
United States
215-204-8468 (Phone)
215-204-4712 (Fax)

Paul J.M. Klumpes

Nottingham Trent University ( email )

Burton Street
Nottingham NG1 4BU, NG1 4LN
United Kingdom

Mary A. Weiss

Temple University ( email )

Fox School of Business and Management
1801 Liacouras Walk
Philadelphia, PA 19122
United States
215-204-1916 (Phone)

HOME PAGE: http://www.sbm.temple.edu/~rmidept/weiss.html

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