Day 1 – Non-life Insurance: Forecasting and Valuation

Participants familiarize with the insurance business, starting with the property and casualty sector. Participants complete a fully integrated forecasting and valuation model for a non-life insurance company.

Key topics

• How do insurance companies make money?
• Key non-life insurance products
• Reinsurance and risk-transfer
• Accounting for non-life insurance: deferral and matching principle
• Unearned premium reserves and claims reserves
• Building loss reserve triangles
• Key performance ratios
• Building a non-life insurance forecasting model
• Forecasting premium and claims development: non-life insurance cycles
• Building non-life reserves
• Forecasting operating expenses and impact of reinsurance
• Completing underwriting result
• Allocated capital, investments and financial returns
• Completing the forecasting model
• Using solvency requirements to establish capital surplus/deficit
• Completing a dividend discount valuation for the case company

Day 2 – Life Insurance: Embedded Value and Valuation

Life insurance is a rather technical sector with specific additional voluntary disclosure called embedded value which should provide a better basis to assess performance. Day 2 demystifies the embedded value concept and uses it as a basis to value a life insurance company. The course concludes with a review of insurance trading multiples and sum-of-the-parts valuation for multi-line businesses

Key topics

• Features of the life insurance business
• Key life insurance products: traditional vs. unit-linked business
• Forecasting income statement, reserves and cash flows of a traditional life policy: calculation of new business value
• Limitations of IFRS accounting for insurance
• Embedded value: key concept, calculation and disclosure
• Embedded value earnings: new business value and return on existing business
• European embedded value and market consistent embedded value
• What is EEV? A DDM produced by actuaries on part of the business
• Using embedded value to complete an appraisal valuation of the life business
• Can you use someone else’s DDM as a basis for your own valuation?
• Sensitivity analysis of EEV to key value drivers
• Analysis and valuation of multi-line insurance companies combining life and non-life
• Insurance solvency requirements under solvency I v solvency II
• Sum-of-the-parts valuation of multi-line insurance companies
• Trading multiples for insurance companies: P/E v P/EV earnings, P/EV
• Summary and conclusions