Stephen CATLIN: There must be a strategic reason behind the consolidation process

19 October 2015 — Vlad BOLDIJAR, Olesea ADONEV
"The merger between CATLIN and XL was planned three years ago, when after a discussion with Mike McGavick - the Chef Executive of XL Group, we have agreed that the consolidation is inevitable", Stephen CATLIN said  on the occasion of Guy Carpenter 2015 Baden-Baden Symposium.

Stephen CATLIN pointed out that an M&A deal is not an easy process: "Things probably look better from the outside than they do from inside".

The XL CATLIN Executive Deputy Chairman pointed out that "researches across all industries shows that more than two-thirds of acquisitions do not deliver value to shareholders in the long term. There are two reasons: The first one is that the price is wrong. In case of re/insurers usually means the reserves are short. The second reasons are that the companies are not integrated quickly enough".

Stephen CATLIN mentioned that the companies involved in M&A processes "should integrate about 75% of operations in the first year and the rest in the second".

"When we bought WELLINGTON in 2006, we aimed to do 75% within six months, to give ourselves room for maneuver. In fact we did 85% in half year, but the last 15% was tough to achieve".

Increasing in size should not be the only reason behind M&A decisions. "The consolidation will continue in the industry for several years, but is not right for everyone. There must be a strategic reason behind it".

For example, the scale can matter in the current environment: "In the CATLIN-XL merger one of the things that became clear to us was actually scale matters if you are running a global business. The cost of offices around the world is expensive, and the cost of managing regulatory relationships around the world is very time consuming".

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