M&A opportunities are of great interest to many insurers. Slow, organic growth in traditional markets and products as well as increased cost pressure and competition are accelerating M&A deals. The level of M&A activity remained strong in 2020 despite the pandemic, and this trend is expected to continue. As we approach the second of year of the pandemic, we may even see more inorganic growth of insurers as some property/casualty and life/annuity insurers face increased pressure to improve efficiency, raise capital, and change operating models.
M&A can appear attractive, but it is also challenging. These transactions can help insurers expand distribution, add products, increase market share, and achieve economies of scale. Insurers are also looking into InsureTechs to acquire new expertise or gain access to new technologies, data, and analytics.
Although acquisitions and divestitures are a normal and expected part of any evolving industry, insurers should understand the complexity and planning required for transactions to achieve the desired benefits. Different operations, risk tolerances, technologies, and cultures can often challenge a smooth M&A experience. It is critical for insurers to avoid the temptation to treat M&A-related activities as a part-time venture; doing so minimizes the dedication of resources and time needed to support careful planning and execution of specific transactions.
Successful M&A efforts are highly dependent on technology. CIOs may not be the nominal leaders of the transactions, but they should be “leading from behind” throughout the entire process. As M&A has significant technical implications, CIOs’ leadership, engagement, and direction are crucial in planning and executing acquisition strategies. CIOs should look to leverage assets in their networks to ensure that the plans they frame are well conceived, flexible, and opportunistic. The operations, resources, and communication needed for an M&A project all work best when developed with a clear sense of the end state in mind.
Acquisition often calls for decisiveness once the process is started. Novarica’s M&A checklist framework breaks the process down into three phases—pre-merger planning, effective due diligence, and post-merger execution—to help carriers ensure that the right people are involved at the right time and that they are focused on the right issues. The checklist also provides CIOs with a roadmap for setting expectations, developing appropriate communication and management strategies, and evaluating alignment.
To learn more about how CIOs can prepare for M&A transactions, read Novarica’s CIO Checklist, M&A Planning and Execution Guide.
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