"Carrier Mergers & Acquisitions: Major Transaction Value
Analysis" provides an in-depth review of insurance trends and
strategies that support success
NEW
YORK, May 2, 2024 /PRNewswire/ -- ACORD, the
standards-setting body for the global insurance industry, today
released the first-of-its-kind study Carrier Mergers &
Acquisitions: Major Transaction Value Analysis. The study,
which examined the largest M&A transactions over the last
decade by insurers in Property & Casualty, Life, and
Reinsurance, sought to answer key questions about motivations
behind M&A activity, long-term value creation, and barriers and
enablers in achieving success.
The study, presented in London
today by Bill Pieroni, President and
CEO of ACORD, screened nearly 15,000 transactions, focusing on
publicly disclosed transactions valued at $1
billion or greater. The deals analyzed in-depth represented
a total value of nearly $290 billion,
accounting for more than one-third of the value of all carrier
M&A transactions worldwide.
Transaction size
Among other factors, ACORD assessed the M&A transactions by
deal size and shareholder value at risk (SVAR) to understand how
these contributed to long-term outcomes.
Dividing the transactions into quartiles by deal size revealed a
"Goldilocks principle" at work — in the long run, mid-sized deals
performed better than the largest or smallest transactions studied.
The second-smallest quartile — comprised of transactions averaging
about $1.4 billion — was the only
cohort that outperformed the relevant index over the period
studied. The larger and smaller quartiles both underperformed the
market.
"While the largest deals may garner headlines and high hopes,
they typically are not the most likely ones to create value in the
long term. A transaction that is too large may simply be too big
for the acquirer to successfully digest," said Pieroni. "One that
is too small, on the other hand, may not draw sufficient attention
and oversight. Insurers must carefully consider their ability to
manage existing operations without disruption, while effectively
integrating the benefits they hoped to achieve by the
transaction."
Segmenting the M&A transactions by SVAR showed similar
results, revealing a "sweet spot" for long-term value creation when
moderate amounts of shareholder value were at risk.
Buyer motivations
ACORD analysis also supported the identification four major
buyer motivations for carriers:
- Scale and Scope: Amortize fixed costs and improve
resource access by increasing absolute size, and/or expanding scope
across strategic and tactical dimensions.
- Core Expansion: Increase share across areas in which the
insurer already executes, such as products, geographies, channels,
and customer segments.
- Capability Acquisition: Optimize the risk, cost, and
time associated with developing new or enhanced internal
capabilities.
- Diversification: Expand portfolio by acquiring new
revenue and earning sources.
"The variations in long-term performance were interesting, and
sometimes surprising," Pieroni continued. "The outcomes of these
deals differed widely across lines of business, even when motivated
by the same rationales."
In total, P&C carriers experienced higher-than-average
returns after M&A transactions in all four motivation
categories, with 70% of the P&C deals creating value throughout
the analysis period. Diversification was by far the most successful
motivation among P&C insurers — driving average TSR
appreciation roughly twice as high as other motivations— but was
less successful in other lines of business.
Life insurers faced difficulties regardless of the rationale
behind the deal, with just 36% of all life M&A transactions
creating value. Reinsurers experienced mixed results, creating
value in just half of acquisitions overall, with high performance
limited mostly to deals motivated by core expansion.
ACORD's Carrier Mergers & Acquisitions study will be
presented at ACORD Industry First on May
21st. To register for this virtual event, please
visit www.acord.org/industryfirst.
Details of the study are also free to download for ACORD
members. For more information or to download the report, please
visit www.acord.org/research.
About ACORD
ACORD (Association for Cooperative Operations Research and
Development) is the global standards-setting body for the insurance
and related financial services industries. ACORD facilitates fast,
accurate data exchange and efficient workflows through the
development of electronic standards, standardized forms, and tools
to support their use. ACORD engages thousands of insurance and
reinsurance companies, agents and brokers, software providers,
financial services organizations and industry associations in more
than 100 countries. ACORD maintains offices in New York and London. Learn more at www.acord.org.
CONTACT:
Beth Jarecki, Omnia Paratus
beth@omniaparatus.com
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SOURCE ACORD