Bermuda resident and the president of AIG subsidiary AIRCO Ltd. has co-authored the first definitive book on mergers and acquisitions within the insurance industry.

The book, “Insurance Industry Mergers & Acquisitions”, was just published by the Society of Actuaries. It brings together for the first time in a single publication the various points of view necessary to execute an insurance company merger and acquisition. It is designed as a practical text to help readers in understanding the sales process and covers topics ranging from financing to due diligence to tax and accounting issues and post-acquisition integration.

Michael Gabon, who joined AIRCO at the end of 2003 after four years with Scottish Re, is among the book's ten authors. Prior to writing the finance chapter and contributing to others, Mr. Gabon said that his only other writing was study notes for his actuarial exams years ago. However, the editors asked him to contribute after he reviewed a draft chapter outline and noticed a number of omissions that fell within his area of expertise.

“No one person has all areas of expertise and no one has ever bothered up until now to gather different people with different areas of expertise to create a a package like this,” said Mr. Gabon.

Omissions at key stages in the M&A process are generally behind the fact that most mergers have either a neutral or negative impact on profitability and that 70 percent of acquisitions fail to meet the expectations of their architects and one-third to one-half of acquisitions are subsequently divested.

Mr. Gabon said that while persons at a company being acquired or persons at companies acquiring would take advice from consulting firms and the investment banks, the reality is that investment banks look at acquisition in a different way from insurance companies and actuaries. “This is trying to meld the way they look at it together. It also includes the accounting considerations and the legal implications,” he said adding that the book will help people understand what all is involved in M&A and recognise whether they are missing steps.

“There is chapter on due diligence and it covers anything from pension plans. You have heard of UAL and US Airways all these plans that are under-funded. In doing an acquisition one might think just to look at the insurance business but look at the pension plan too and there are a lot of different elements involved.

“This is meant to provide a comprehensive guide in a practical manner.”

While the group has approached some colleges to use the book as a text, it actually is meant to cater to investment bankers, lawyers, actuaries, accountants involved in mergers and acquisitions and was seen as necessary by the group on the basis