Insurers are far more likely to recognise the need to start integration planning very early on in the deal-making timetable than they were two years ago. According to a new global survey from EY, 96% of insurance senior executives now say they start the integration planning process before signing a deal - a significant increase from the 2015 result of just 64%.
This rise in pre-planning has also coincided with more value being created from cost synergies; 75% of insurance executives say they now generate cost synergies of more than 30% of the target’s cost base, compared with only 22% in 2015.
EY Asia-Pacific Financial Services Transactions Leader, Charlie Alexander, says the survey findings show that integration planning pre-signing is no longer just best practice within the sector, it has become a minimum requirement.
“Extensive and early planning is the key to a successful M&A integration, whether the objective is simply a smooth transition or to push ahead with securing the potential benefits of the deal as quickly as possible,” Mr Alexander said.
“The good news is that insurance executives are acutely conscious of the need to generate synergies as quickly as possible while not undermining the operational stability of the company, and the majority now say they have well-developed integration plans and target operating models in place in time for deal completion.”
“Nevertheless, there is still further work to be done with many insurers starting to turn their attention to issues such as how to retain key talent and manage the customer experience during the integration phase.”
The study also found some insurers are embracing the M&A integration process as a vehicle for broader business model transformation, with 37% of insurers creating new best of-breed operating models instead of simply absorbing the target.
“This can be an effective way to deliver the transformation required to remain competitive in a rapidly evolving marketplace, particularly as insurers seek to realise the opportunities of digitalisation and other emerging technologies,” Mr Alexander said.