Euromoney Audit Training

This Euromoney Training course uses a mixture of presentations and many practical examples to ensure you are able to understand and analyse a set of accounts to value an insurance company. Brief overviews will be given on how property-casualty and life & health companies work, but the emphasis throughout the programme will be heavily on valuation techniques.

Frequent references will be made to current valuations in the stockmarket and prices paid for insurers in M&A transactions. Many worked examples will be provided to illustrate the valuation techniques being described and you will be given the opportunity to conduct valuations, with the results compared with actual market values.

How will this course assist you?

On completion of this 3-Day course you will be able to:

• Unravel the mysteries of the insurance sector.
• Understand a range of first-hand valuation techniques for insurance companies.
• Understand the strengths and limitations of different valuation methods.
• Appreciate the implications of different accounting systems.
• Acquire the necessary skills to understand, analyse and value insurance companies.

Who should attend?

• Stockmarket analysts
• Fund managers
• Investment bankers
• M&A specialists
• Insurance executives
• Rating agency officers
• Regulators

 

Day 1

Registration commences at 8:30
Programme runs from 9:00 - 5:00 daily

Introduction: Why the topic is important

• Structure of course.
• Size of industry.
• Geographical spread.
• Stockmarket volatility.
• A misunderstood sector.
• A mis-priced sector.
• Much M&A activity.

How a Property-casualty (P-C) company works

• Products sold.
• How profits are earned.
• Profit analysis - complicating factors.

Analysing a P-C company’s balance sheet

• Key ratios.
• Capital requirements.

Case study: a simple analysis of a P-C company.

Analysing claims reserves

• What data are available?
• Reserve-development tables.
• Calendar year / accident year / underwriting year.
• Triangular table of loss development.
• Key ratios.

Two Case studies: analysing claims reserves.

Day 2

Valuation methods for a P-C company

• Price/Earnings ratios.
• Yield, pay-out ratios.
• Return on Equity vs Cost of Capital.
• Dividend discount model.

Case study: valuing a P-C company.

Products of a life company

• Overview of main products.
• Profit signatures.
• Different accounting treatments.
• Financial options and guarantees.
• New business measures.

IFRS accounting

• Overview.
• Main principles.
• Using IFRS accounts to value a life company.
• Case study.

Embedded value accounting

• Profit recognition.
• Tying up the P&L account and the balance sheet.
• Cash profits.
• Problems.

Day 3

Different types of embedded values

• Traditional.
• Market-consistent.
• Setting the discount rate.
• Inconsistencies in assumptions.
• Case studies.

Using embedded value information to value a life company

• Price / embedded value ratios.
• Appraisal values.
• Return on Embedded Value vs Cost of Capital.
• Case study.

Other key factors

• Capital requirements.
• Orphan assets.
• Run-off life companies.
• Asset management operations.

Case studies: valuing a life company.

Sum-of-the-parts approach

• Methodology.
• Capital allocation.
• Leverage.
• Cost of Equity or Cost of Capital.

Case studies: modelling a multi-line insurance company.

 

• David Nisbet

  Recently Managing Director and joint head of pan-European insurance research at Merrill Lynch David Nisbet has extensive experience in valuing insurance companies in the three areas of stockmarket analysis, the pricing of IPO transactions and M&A deals. His most recent position has been Managing Director and joint head of pan-European insurance research at Merrill Lynch (2001-2007) – top-three ranking from 2003 onwards.
  
  Prior to Merrill Lynch David worked for three years in a UK insurance company Scottish Widows’ Life Assurance Society, where he qualified as an actuary. In 1980 he joined a stockbroker, Wood Mackenzie (ultimately part of Deutsche Bank), where he spent the next 21 years, analysing financial stocks, developing his career from lead analyst of UK life assurance companies to a position in charge of global insurance research.
  
  Throughout his 27-year career as an insurance analyst, he was consistently ranked as one of the leading analysts in the sector and, in particular, built up a formidable reputation for “making a complicated sector appear simple”. He has been involved in over a dozen IPO’s and also advised on the pricing of several corporate transactions. David co-authored an actuarial paper, “Analysing the financial strength of life companies”, and has served on examination and accounting committees. Having retired from the city in 2007, David now undertakes consultancy work and lecturing.

Valuing Insurance Companies

Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.

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