Objective

To build a detailed financial model and IPO report for the initial public offering of a Dutch insurance company for the client, the IPO’s lead manager.

Challenges

• The insurance company had multiple segments (life insurance, non-life insurance and asset management) in the Netherlands, Europe and Japan. This diversity and geographic spread required consideration of specific drivers for each segment. Additionally, free cash flow valuation had to be validated by the sum-of-the-parts (SOTP) method.
  
• As an IPO, the project demanded high quality and accuracy within strict deadlines.
  

CRISIL's Solution

CRISIL deployed a small team of associates with deep knowledge and extensive experience in the insurance sector. The team:

• Created a financial model with five years of projections for all businesses and geographies through market and peer analysis, and detailed analysis of segmental drivers (such as premiums, fees, claims, investment and technical margins, assets under management etc.) as well as ratio analysis (capital position and solvency I).
  
• Cross-validated the fair value from the DCF valuation with the SOTP approach (using P/B multiples) due to the diversified nature of the business.
  
• Conducted sensitivity analysis to assess the impact of changes in investment margins, fee margins, premium growth and claims ratio on operating metrics and valuation.
  
• Based the investment thesis on the valuation of the insurance company and the metrics driving it, the risk profile, and its track record of capital allocation. The report also included an overview of business segments, an analysis of capitalisation and solvency, and key risks.
  

Client Impact

• Report delivered on schedule to meet tight IPO deal timeline
• Report met or exceeded client expectations for analytical thoroughness. Use of the SOTP valuation to validate the FCF approach and the presentation of the sensitivity analysis were especially appreciated
  
• CRISIL support freed up client time and resources during a critical phase of the live deal
  

Questions

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