Summary
A significant number of carriers, analysts and consultants speak broadly about the importance of scale and scope economies in the insurance industry. However, a more detailed, thoughtful analysis indicates that value creation from scale and scope economies is elusive at best. An analysis of the 60 largest life transactions over the past six years found that insurers pursuing mergers and acquisitions for the purpose of scale economies achieved the highest immediate share returns within 10 days of the M&A announcement, more than 2% relative to other objectives. However, over the long-term, these same insurers destroyed value: -15% relative to the other carriers in the study. The analysis also strongly suggests that size doesn't lead to superior performance along any metric - total shareholder returns, premium growth or policies-in-force growth, total loss or underwriting expense.
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Scale and Scope
A significant number of carriers, analysts and consultants speak broadly about the importance of scale and scope economies in the insurance industry. However, a more detailed, thoughtful analysis indicates that value creation fr...
See the full content of this document
