Merger agreements, such the one planned by Manulife Financial Corp. (Toronto, Ontario) and John Hancock Financial Services (Boston)-as well as AXA Financial, Inc.'s (New York) intended acquisition of The MONY Group (New York)-result from an increasing need for carriers to beef up competitive offerings.
And the deals will continue, says Jack Tyniec, managing director, TCi Consulting & Research (Cresskill, N.J.). "There are lots of players in the field who do not have the scale, product mix or distribution channels needed to compete in an increasingly global market."
Although "technology is rarely among the primary issues driving an acquisition, it may be a consideration.," Tyniec reports. Such could be the case in Manulife's acquisition of John Hancock. Hancock signed a large on-demand contract with IBM earlier this year. The deal, estimated to save the carrier about $90 million, is designed to shift the management of mainframes and desktops to IBM. "I can imagine that the experience may be something that Manulife will want to look at and think about doing also," says Tyniec. However, "I would not think of that as a pure motivator [for acquisition]."
Technological assessments, however, are sometimes made in the due diligence process. Also, "the insurance industry is not a very large space," observes Tyniec. "Most CIOs know each other; they collaborate at the same forums, so they know quite a bit about other companies. Most of them have the same systems, problems and characteristics at the back end."