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Casualty Actuarial Society

Casualty Actuarial Society. Valuation of Insurance and Reinsurance Companies June 16, 2000. James R. Fisher Managing Member Fisher Capital Corp. LLC. Valuation of Insurance and Reinsurance Companies.

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Casualty Actuarial Society

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  1. Casualty Actuarial Society Valuation of Insurance and Reinsurance Companies June 16, 2000 James R. Fisher Managing Member Fisher Capital Corp. LLC

  2. Valuation of Insurance and Reinsurance Companies • In June of 1996 General Re acquired National Re for $1.2B, representing 2.5X GAAP book value, 19X trailing and 15.8X forward earnings • In August of 1996, Munich Re acquired American Re for $3.8B, representing 3.8X GAAP book value, 19X trailing and 15.3X forward earnings • In June of 1999 Trenwick Re acquired Chartwell Re for $367M, representing 0.8X GAAP book value, 10.1X trailing and 9.3X forward earnings

  3. Valuation of Insurance and Reinsurance Companies • In December of 1999 Swiss Re acquired Underwriters Re for $725M, representing 1.6X GAAP book value and 18.0X forward earnings • In December of 1999 Trenwick Re acquired LaSalle Re for $457M, representing 0.9X GAAP book value and 7.2X forward earnings

  4. Valuation of Insurance and Reinsurance Companies 1 with Munich & Swiss Re 2 without Munich & Swiss Re

  5. Valuation of Insurance and Reinsurance Companies 1 with Munich & Swiss Re 2 without Munich & Swiss Re

  6. Valuation of Insurance and Reinsurance Companies So why have valuations fallen? • The combined ratio* for the industry has continually worsened 1996 103.5% 1997 102.3% 1998 104.4% 1999 113.8% * Source: Reinsurance Association of America

  7. Valuation of Insurance and Reinsurance Companies • Valuation models have not changed -- investor’s patience has been exhausted. • How can the industry improve its perception on Wall Street? • Get some earnings • So why insurance/reinsurance?

  8. Valuation of Insurance and Reinsurance Companies So why reinsurance? • Reinsurance continues to be a relationship business • Reinsurance is a very talent-intensive business • Capital adequacy is critical • The market continues to consolidate • It feels like 1984 though we are not yet there • Need a long term view • Must be able to withstand surprises

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