Actuarial Due Diligence in Insurance Mergers and Acquisitions in Nigeria

This study investigates the scope, methodology, and importance of actuarial due diligence in insurance mergers and acquisitions in Nigeria. The Nigerian insurance industry has experienced several rounds of consolidation driven by regulatory recapitalization requirements, market competition, and strategic portfolio rationalization. Actuarial due diligence, which involves independent assessment of target company reserves, liabilities, and risk exposures, is a critical component of M and A transactions in the insurance sector globally. This study uses a case study design, examining five completed insurance M and A transactions in Nigeria between 2016 and 2023. Transaction documents, due diligence reports, and post-acquisition financial performance data are analyzed to assess the quality and impact of actuarial input in each transaction. Interviews with 20 transaction actuaries, M and A advisers, and NAICOM officials are conducted. Findings reveal that actuarial due diligence was formally conducted in three of the five transactions, and these transactions demonstrated significantly better post-acquisition financial integration outcomes. The two transactions without formal actuarial assessment experienced material reserve development surprises within 18 months of completion, requiring significant post-acquisition capital injections. The study concludes that actuarial due diligence is a critical success factor in Nigerian insurance M and A transactions. It recommends that NAICOM mandate independent actuarial due diligence reports as a condition of regulatory approval for all insurance sector mergers and acquisitions.

Keywords: actuarial due diligence, mergers and acquisitions, insurance sector, Nigeria, reserve adequacy.