Merger and Acquisition (M&A) and the Performance of Insurance Industry in Nigeria

Abstract

The study examines merger and acquisition and the performance of insurance industry in Nigeria (pre-M&A 2011- 2015) and (post-M&A 2016-2020) five years each. The study adopts a sample of three (3) conveniently selected insurance firms in Nigeria. The study used profitability (PRF) as the dependent variable while investment income (IVI), underwriting profit, total asset (TA0 and shareholders wealth (SHE) as the independent variables. Panel data was used, Ordinary Least Squares estimation technique was also tested with the aid of E-views 9. The study found that the p-value for investment income in pre-M&A era is 0.3178 while post-M&A era is 0.000, this shows that investment income (IVI) has a significant effect on performance of insurance firms in post-M&A era in Nigeria because the p-value is less than 5% level of significance at the post M&A era. For underwriting profit there is a positive effect on profitability of insurance companies in Nigeria in the post-M&A era, the preM&A era was negative, furthermore, the p-value for pre-M&A era is 0.3636 while post-M&A era is 0.000, this shows that underwriting profit (UP) has a significant effect on performance of insurance firms in post-M&A era in Nigeria because the pvalue is less than 5% level of significance at the post M&A era. Total asset (TA) has a positive effect on profitability of insurance companies in Nigeria in the post-M&A era, the pre-M&A era was negative, furthermore, the p-value for pre-M&A era is 0.5147 while post-M&A era is 0.04. This shows that total asset (TA) has a significant effect on performance of insurance firms in postM&A era in Nigeria because the p-value is less than 5% level of significance at the post M&A era. Finally shareholders equity has a positive effect on profitability of insurance companies in Nigeria in both pre and post-M&A era. Furthermore, the p-value for pre-M&A era is 0.3748 while post-M&A era is 0.000. This shows that shareholders equity (SHE) has a significant effect on performance of insurance firms in post-M&A era in Nigeria because the p-value is less than 5% level of significance at the post M&A era. The study concludes that merger and acquisition have significant effect on the performance of insurance industry during the post merger and acquisition era. The study further recommended that government should encourage declining or distressed insurance companies to engage in merger/acquisition by providing incentives such as tax holiday, loss relief and capital allowance. Government should constantly provide the enabling and conducive environment for mergers and acquisitions.