| dc.description.abstract | Mergers and acquisitions continue to enjoy importance as strategies among insurance
companies for achieving growth. However, their success in creating shareholder value
remains contested. The objective of this research project is to establish the effect of
mergers and acquisitions on the financial performance of insurance firms in Kenya. This
study took on a causal research design. Causal research design is consistent with the
study’s objective which is to determine the effect of mergers and acquisition on financial
performance of insurance companies in Kenya. The study was limited to a sample of pair
that merged/acquired between the years 2002-2012. The data required was drawn from
Association of Kenya Insurers database, public disclosures and annual reports of the
respective companies. Comparisons were made between the mean of 3-years premerger/acquisition
and 3-years post-merger/acquisition financial ratios. Excluded from
the sample is M&A deals that were pending or non-binding, vertical mergers that have no
competitive effects, as well as acquisitions of a minority interest. Using financial ratio
analysis and paired t- test, the study reveals that mergers/acquisitions have significant
effect on the overall financial performance of insurance firms in Kenya. Also, there is
improvement in the firms’ performance after the merging/acquisition takes place.
Overall, the research found mergers and acquisitions on profitability and financial
performance in general. The study recommends that insurance companies seeking growth
should seek to consolidate their establishments through M&A’s. Mergers and
acquisitions enable insurers to expand their pool of policyholders and reduce
underwriting risk more rapidly than other growth strategies hence creating value. | en_US |
