An empirical investigation of the determinants of life insurance company merger and acquisition premiums

This study conducts an empirical investigation of the determinants of US life insurance company merger and acquisition premiums. The purpose of this research is to answer the question: Which financial measurements or ratios contribute to an explanation of the premium paid in the merger and acquisition transactions of US life insurance companies during the study period? Simple and multiple linear regression analysis are used to determine if significant relationships exist between the dependent variable, merger premium, and selected independent explanatory variables.; Results from the univariate regression indicate the importance of the size of the acquirer and the target, the proportion of separate account assets, profitability, return on investment assets, and growth A multivariate model indicates the importance of profitability, growth, fee income and efficiency in explaining merger premiums in life insurance companies. These finding add support to the value-maximization hypothesis, the risk diversification hypothesis and the inefficient manager hypothesis.