Insurance M&A necessitates communication


The insurance industry is seeing an uptick lately in mergers and acquisitions, especially in global reinsurance, and that got me thinking about some of the challenges that arise in integrating businesses and cultures.

Whether it’s a broker acquiring a new subsidiary or team of producers to expand its capabilities or geographic footprint, or insurance companies that are seeking economies of scale, combining two different cultures is challenging. It’s no exaggeration to say that no merger or acquisition – in any industry — can be truly successful without good communication. This is such a big topic that I’m going to explore it in a three-part series. In this first installment, I’ll talk about the reasons insurance organizations need strong communication programs anytime they’re engaging in M&A.

In the year to date, reinsurers have been making some big moves to consolidate. To name just a few, XL Group announced plans to merge with Catlin Group; RenaissanceRe bought Platinum Underwriters; PartnerRe is facing offers from both AXIS Capital and an Italian investment firm; Fairfax Financial announced plans to buy Brit; and Endurance Specialty announced a definitive merger agreement with Montpelier Re. Andit’s only April; there’s plenty left of 2015 for additional deals.

Some of the industry’s most astute observers have noted reasons for the increased activity. Aon Benfield Group, the reinsurance intermediary and capital advisory unit of Aon plc, noted this month in its 2015 Reinsurance Market Outlook that global reinsurance capital is at an all-time high, and demand for reinsurance is increasing. Moody’s Investors Service said reinsurance consolidation is happening as companies look to diversify and achieve scale. Those are solid reasons to pair up, and they make sense for companies in many industries. While we’re not yet seeing a similar level of activity among primary insurers, the table is set. A Deloitte report in 2014 forecast more insurance industry M&A, and the firm’s 2015 forecast bears that out. Carrier deals aside, consolidation is a long-term trend in the brokerage space. As Deloitte points out, “Serial acquisitions have been the core driver of brokerage growth for many years and that dynamic remained firmly in place in 2014.”

With integrations, communicating well is paramount. To use a football analogy, X’s and O’s go easily onto paper in forming a game plan – or business plan. The tricky part is making sure that the players – the people those letters represent — know where to be and what to do, so they can execute that game plan. Preparation and practice are key. Missed signals and assignments mean incompletions or, worse, turnovers. Businesses can’t succeed by letting things in a deal happen by chance. That’s no way to achieve the full value of a merger or acquisition.

What to do instead? Communicate like you’d have voted in old-time Chicago politics – early and often. All your stakeholders need to know what’s going on with a business integration – employees from both organizations, as well as customers, suppliers and investors. You can’t take for granted that new employees, talented though they are, will intuitively understand your organization and what it takes for it to be successful. Customers can be confused as to what a consolidation can mean for them, and believe me, that fact is not lost on your competitors. Suppliers can’t be kept guessing about their relationship with the combined entity, either. Investors have a role to play in approving M&A, and they have expectations about the value a deal will generate. If you want to ensure everybody stays on board, keeping all your stakeholders informed is vitally important.

In my next post, I’ll discuss what insurance organizations should communicate during a merger or acquisition. To learn more, please follow me on LinkedIn and check out my other posts on business communication. Thanks for reading!