1、Valuation of a P 34% debt/capital ratio $1,325 new equity issued; equity of Sell Co. eliminated 2% EPS accretive after new shares issued, cost of debt and synergies,Simplified Acquisition Model Example,Source: Company reports and Bloomberg IBES estimates.,Capital Structure,Buy Co.,Sell Co.,Adjust,Pr

2、o Forma,Cash,$75,$100,-$175,$0,Total Assets,$5,400,$3,700,$0,$9,100,Debt,$400,$200,$1,150,$1,750,Other Liabilities,$3,000,$2,000,$0,$5,000,Equity,$2,000,$1,500,-$175,$3,325,Total Assets & Liab.,$5,400,$3,700,$10,075,Debt/Capital,17%,12%,34%,11,Sensitivity analysis highlights the impact on accretion

3、of key deal assumptions Additional equity reduces accretion as additional shares are issued Cost of equity is greater than the cost of debt Sell Co. acquired at a P/E ratio greater than Buy Co.,Simplified Acquisition Model - Example,Source: Company reports and Bloomberg IBES estimates.,12,Excess cap

4、ital of Buyer and Seller can be used to fund transaction The optimally capitalized portion of the Sell Co. business is valued at a full acquisition multiple Excess Capital may not be valued at a full price/book multiple,Simplified Acquisition Model - Example,Source: Company reports and Bloomberg IBE

5、S estimates.,13,Actuaries are an integral part of a P&C valuation process by providing forecasts for loss ratios, payout patterns, reserve development, and premium growth The valuation of a P&C company is often an iterative process where the forecasts provided by actuaries can reflect the biases of

6、the acquiring company for example, a purchaser may have a pessimistic view on projected loss ratios Actuaries can provide value to all aspects of a transaction when they are aware of the strategic objectives of their client (while maintaining an objective viewpoint) It is important for all deal team members to have an understanding of the financial model and how their analysis is being inputted into the model Not all members of a deal team will be experts in P&C insurance. Actuaries are often invaluable teachers who are able to provide simplified