Mergers & Acquisitions in the U.S. Property-Liability Insurance Industry
Author | : J David Cummins |
Publisher | : |
Total Pages | : 52 |
Release | : 2012 |
ISBN-10 | : OCLC:1290239926 |
ISBN-13 | : |
Rating | : 4/5 (26 Downloads) |
Book excerpt: This paper analyzes the productivity and efficiency effects of mergers and acquisitions (Mamp;As) in the U.S. property-liability insurance industry during the period 1994-2003 using data envelopment analysis (DEA) and Malmquist productivity indices. We seek to determine whether Mamp;As are value-enhancing, value-neutral, or value-reducing. The analysis examines efficiency and productivity change for acquirers, acquisition targets, and non-Mamp;A firms. We also examine the firm characteristics associated with becoming an acquirer or target through probit analysis. The results provide evidence that Mamp;As in property-liability insurance were value-enhancing. Acquiring firms achieved more revenue efficiency gains than non-acquiring firms, and target firms experienced greater cost and allocative efficiency growth than non-targets. Factors other than efficiency enhancement are important factors in property-liability insurer Mamp;As. Financially vulnerable insurers are significantly more likely to become acquisition targets, consistent with corporate control theory, and we also find evidence that Mamp;As are motivated to achieve diversification. However, there is no evidence that scale economies played an important role in the insurance Mamp;A wave.