Traditional M&A Loses Favor as Insurers Take “Capability-Based”
Approach to Restructuring
LONDON and NEW YORK; July 29, 2002 — In a
departure from traditional corporate restructuring
strategies, insurers are choosing ventures,
alliances and outsourcing over mergers and
acquisitions as their preferred vehicles for
corporate restructuring, according to new research from
Accenture (NYSE: ACN).
Accenture surveyed executive decision-makers
at 68 major property & casualty (P&C) and life
insurance institutions in 16 countries
regarding their plans for restructuring their business models
in response to current economic and industry
challenges.
Asked to rate the “most likely”
restructuring vehicles insurers will use, 36 percent of respondents
rated joint ventures, strategic alliances or
co-sourcing most likely, followed by 33 percent who
rated outsourcing, in-sourcing, or
net-sourcing most likely. That compared with only 18 percent
who rated mergers and acquisitions highest
and 13 percent who rated divestments highest.
“Based on our conversations with survey
respondents, insurers are realizing that traditional M&A
has not produced the results they’re looking
for, particularly during the current global economic
slowdown,” said Dee Lehane, global managing
partner of Accenture’s Insurance industry group.
“Insurers have caught up with their
financial services peers and are now undertaking what we refer
to as “Capability-Based Restructuring” in
which they grow their businesses by leveraging a
variety of vehicles, beyond M&A,
transforming their business models into networks of both
internally and externally sourced
capabilities.
Among other findings of the survey, 97
percent of respondents said they believe that restructuring
will continue in the insurance industry.
Nearly 90 percent of respondents said they are specifically
planning to undertake Capability-Based
Restructuring (CBR)* initiatives within the next five years.
Asked to evaluate the objectives of CBR from
five options, 40 percent of respondents rated
“reducing costs” as most important, followed
by 26 percent who rated “increasing growth and
market share” highest and 21 percent who
rated “allocating capital to maximize returns” highest. In
aggregate, only 13 percent of respondents
rated the remaining options, “altering risk” and “reducing
capital investments,” as their most
important objectives. When asked to rate the environmental
factors driving CBR, 20 percent of
respondents scored traditional “competition” highest, followed by
19 percent who scored “more sophisticated
customers” and 15 percent who scored “increased
shareholder demands for improved returns,”
as their top three out of 10 options.
“Our experience indicates that insurers are
using CBR to identify the distinctive capabilities they
require to grow their businesses and add
value to their customers,” said Lehane. “They are
evaluating the sourcing options available to
deliver their distinctive capabilities, internally or
externally through alliances with
third-parties. For those remaining capabilities that do not need to
be truly distinctive, insurers are engaging
in outsourcing, spin-offs and divestments with other
organizations that may do a better job.”
Methodology
The survey was completed in July 2002, and
the findings are founded on structured
questionnaire-based interviews conducted by
Accenture with CEOs, CFOs, COOs and senior
executives from 68 major insurance
institutions in 16 countries, eliciting both qualitative and
quantitative data. Thirty-seven percent of
survey respondents were from the United States, the
United Kingdom and Australia, 54 percent
were from continental Europe, and the remainder were
from Asia. Forty-six percent of the
respondents were from life insurance companies and 54 percent
were from P&C/general insurance companies.
*CBR is a patent-pending term developed by Accenture.
About Accenture
Accenture is the world’s leading management
consulting and technology services organization.
Through its network of businesses approach
— in which the company enhances its consulting and
outsourcing expertise through alliances,
affiliated companies and other capabilities — Accenture
delivers innovations that help clients
across all industries quickly realize their visions. With
approximately 75,000 people in 47 countries,
the company generated net revenues of US $11.44
billion for the fiscal year ended August 31,
2001. Its home page is www.accenture.com.
