There's perhaps no riskier business move than the decision to acquire or merge with another business. Clients trust Milliman to provide insightful guidance as they enter this complex arena.
Our global team of independent experts has served as key advisors in many of the insurance industry's recent major M&A transactions. As a result, we understand every step of the process, from identifying possible opportunities through to managing integration challenges.
We have unique experience working on many facets of mergers and acquisitions in insurance and healthcare. We can assist either party in estimating a likely range of prices for a proposed transaction and perform in-depth technical actuarial modelling as part of the due diligence process.
Key actuarial considerations
- Appraisal Report
- A well written report leads to an efficient sale process and achievable price
- Must bring clarity to technical issues and mitigate investor uncertainty
- Economic assumptions
- On investment returns (to the extent that fee revenue and expenses are fund-based)
- On inflation (influencing any expenses of a fixed nature)
- Persistency rates
- Fully justified appraisal assumptions are important to avoid conservatism in bids
- Expense assumptions
- Provide supporting information
- Maintain transparency around shared services, third-party outsourcing agreements and allocation of costs to the various entities serviced
- Clarify any current and future business relationships
- Provide transparency on compliance costs
- Valuation methodology
- Influenced by the current reported embedded value basis
- Aim to present the business in a favourable light while using an approach based on recognised market practice
- Actuarial model
- Important to show this is materially representative of reality
- Output and sensitivities which have been subject to scrutiny reinforces confidence in appraisal results
- Capital and solvency
- Must explain any opportunities for capital release and any restrictions on capital flows
- Potential impact of mis-selling, tax regulation and compliance costs
- Detailed appraisal valuation report (i.e., existing and future new business)
- Detailed assumption-setting process (economic and non-economic)
- Analysis of redundant reserve financing
- Financial pro formas
- Cash-flow projections
- Business plans
- Meet with interested parties to provide support for appraisal and projections
- Respond to buyer requests for due diligence support and sensitivities
- Assist as appropriate in negotiations and contract review
- Market intelligence and insight into potential opportunities
- Indicative valuation based on publically available information
- Cash-flow projection build
- Economic assumption review
- Lapse, mortality and expense review
- Strategic advice
- Identify deal breakers
- Quantitative and qualitative benchmarking
- Detailed valuations and analysis
- Negotiation support
- Assist in restructuring optimisation including Part VII transfers, actuarial and finance transformations, and reinsurance or sale of non-core operations
- Actuarial reporting services
- Risk framework integration
The Milliman difference
Our consultants are pre-eminent in addressing the challenges facing multinational insurers and investment banks looking to engage in cross-border M&A transactions. From navigating cultural and language differences, regulatory variance and complexity, and local market considerations to the importance of an unbiased, experienced actuarial valuation, Milliman is a trusted and valued advisor in the market.
Below is a snapshot of why Milliman is your first choice when it comes to selecting a trusted advisor for your M&A requirements:
- Milliman is recognized as the market leader in actuarial advisory services for M&A transactions.
- We participate in the process as part of a team—working with our client and other advisors to achieve a successful transaction.
- We hand pick consultants with the necessary competencies and involve Milliman experts in the relevant products, markets and territories.
- We assign resources to the projects we undertake in a manner that is cost-effective and meets the required timeframes for the assignment and the due diligence process.
- A bespoke report is created to optimise the results of a sales process for a seller—tailored format and content.