Insurance Company Valuation: Useful Resources

Primeape's picture
Rank: Baboon | 115

I currently work in the insurance industry and am trying to break into banking. While I am trying to network with as many industry professionals as possible, in my mind it makes sense to try and network with FIG bankers, FIG focused shops (e.g. KBW, Sandler + O'Neil) and FIG/Insurance/Reinsurance banking teams at BB's.

In the hopes of eventually landing an interview, I want to be as well prepared as possible. I think I have the fit portion down, and I know the general technicals (various sources: WSP Modeling, WSO Technical Guide and Pearl and Rosenbaum). However, I have found that there is not a whole lot of information on how to value insurance companies. I know FIG modeling is supposed to be quite different from modeling any other company and that it tends to be highly nuanced and specialized. However, I'm sure if any of you monkeys ever land an interview exclusively for a FIG group, you will need to know the basics of how to value an insurance company. So here's a list of a few places you can find some excellent information on the sector and valuation. Hope it helps.

Free Resources

  • P&C Insurance Valuation: Richard Goldfarb: This is a great document to start with (I have attached a PDF copy as well) and introduces the main ways to model a P&C insurer. It also goes into some detail on the Dividend Discount Model
  • Damodran's Dividend Discount Model Spreadsheet: Another very useful resource (I have attached this below as well) as you can tie in what you learn above into an actual model and see how the numbers and assumptions flow through
  • Free Publications: Look for industry publications on the industry and specifically trends in M&A and insurance banking. Deloitte, PWM, most reinsurance brokers and others publish periodic reports worth reading. I have attached a 2012 insurance industry M&A outlook report by Deloitte.
  • Paid Resources

  • Breaking Into Wall Street - Financial Institutions Modeling: While I am sure that WSPs FIG modeling package is just as good, I chose BIWS because it was cheaper ($247 vs $399) and makes direct reference to modeling insurance companies in the product description. I found the videos thorough, easy to watch and very informative. Plus if you follow along on the spreadsheets you really learn a lot. Definitely worth springing for if you're serious about killing a FIG interview.
  • SNL: If you have access to this at work or feel inclined to drop money on a subscription (I wouldn't), they have an excellent video ("Introduction to Insurance Valuation" that covers a lot of the important valuation basics. It's also great to learn the appropriate valuation metrics (Price/Tangible Book) and about individual companies.
  • Good luck!

    Comments (4)

    Aug 5, 2012

    You should try looking up this group as well.
    They have a small team but looking to grow:
    http://www.aon.com/reinsurance/investment-banking.jsp

      • 1
    Aug 5, 2012
    Human:

    You should try looking up this group as well.
    They have a small team but looking to grow:
    http://www.aon.com/reinsurance/investment-banking.jsp

    Much appreciated Human, +1 SB. I'm curious though, given your experience in PE, any information on what the buyside exit-opps coming from an boutique IB attached to a reinsurance broker are? Perhaps into FIG focused funds (JCF comes to mind) In fact, any information on any exit-opps/deal experience would be very helpful. Also, any information/conjecture on what comp at such firms would be?

    Sorry for all the questions, but the star next to your name, the banana points and excellent SB:MS ratio lead me to believe you might have a lot of excellent insight into the above questions). And I'm sure all the aspiring young WSO monkeys would be interested in the answers.

    Thanks!

    Mar 26, 2014

    thanks! v. helpful

    Apr 5, 2017
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