Consolidation in the European Insurance Industry: Do Mergers and Acquisitions Create Value for Shareholders?

52 Pages Posted: 1 Jul 2004

See all articles by J David Cummins

J David Cummins

Temple University - Risk Management & Insurance & Actuarial Science

Mary A. Weiss

Temple University

Date Written: February 18, 2004

Abstract

Deregulation of the European financial services market during the 1990s led to an unprecedented wave of mergers and acquisitions (M&As) in the insurance industry. From 1990-2002 there were 2,595 M&As involving European insurers of which 1,669 resulted in a change in control. This paper investigates whether M&As in the European insurance market create value for shareholders by studying the stock price impact of M&A transactions on target and acquiring firms. The analysis shows that European M&As created small negative cumulative average abnormal returns CAARs) for acquirers (generally less than 1%) and substantial positive CAARs for targets (in the range of 12% to 15%). Cross-border transactions were value-neutral for acquirers, whereas within-border transactions led to significant value loss (approximately 2%) for acquirers. For targets, both cross-border and within-border transactions led to substantial value-creation.

Keywords: Insurance, European insurance industry, mergers, event study

JEL Classification: G14, G22, G34

Suggested Citation

Cummins, J. David and Weiss, Mary A., Consolidation in the European Insurance Industry: Do Mergers and Acquisitions Create Value for Shareholders? (February 18, 2004). Available at SSRN: https://ssrn.com/abstract=558044 or http://dx.doi.org/10.2139/ssrn.558044

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)

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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