Goh Ze Liang
Member
Hi guys !
I have a few clarifications to make, pertaining M&A and Demutualization:
1. When determining the M&A price, there is usually 2 approach either via the EV approach or the Solvency ll technical provision approach.
However, the EV method will be the purchasing company paying the selling company while the Sol ll method is the selling company need to transfer the asset to the purchasing company? If i assume that under Solvency ll regime, MCEV is used, both should be equivalent, eg:
Asset 100
SCR = 20
RM= 10
BEL=50
*ignoring any adjustment to be made to assumptions, synergies and any profit arising beyond contract boundaries
if using EV approach : EV = Solvency ll Onw Funds = Free Surplus + Capital requirement= 40 (Purchasing Com paid 40 to Selling Com)
if using the Solvency ll technical provision = 60 (Selling Comm transfer 60 to purchasing com)
however, this is on existing business, the total purchase price should also be take into account future new business which could be valued on New Business Embedded Value or PV(Income) - PV (outgo) for NB? together they will form the appraisal value.
is my understanding correct?
2. Additionally notice there is not any material or past questions covering process of demutualisation and the price determination if any. Kindly let me know if this is out of scope. Thanks !
I have a few clarifications to make, pertaining M&A and Demutualization:
1. When determining the M&A price, there is usually 2 approach either via the EV approach or the Solvency ll technical provision approach.
However, the EV method will be the purchasing company paying the selling company while the Sol ll method is the selling company need to transfer the asset to the purchasing company? If i assume that under Solvency ll regime, MCEV is used, both should be equivalent, eg:
Asset 100
SCR = 20
RM= 10
BEL=50
*ignoring any adjustment to be made to assumptions, synergies and any profit arising beyond contract boundaries
if using EV approach : EV = Solvency ll Onw Funds = Free Surplus + Capital requirement= 40 (Purchasing Com paid 40 to Selling Com)
if using the Solvency ll technical provision = 60 (Selling Comm transfer 60 to purchasing com)
however, this is on existing business, the total purchase price should also be take into account future new business which could be valued on New Business Embedded Value or PV(Income) - PV (outgo) for NB? together they will form the appraisal value.
is my understanding correct?
2. Additionally notice there is not any material or past questions covering process of demutualisation and the price determination if any. Kindly let me know if this is out of scope. Thanks !