Mergers and Acquisitions in the Global Insurance Industry: Valuation Effects
37 Pages Posted: 4 Feb 2015 Last revised: 8 Aug 2018
Date Written: December 16, 2014
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: Suggested Citation