A Financial Case Study on Insurance Companies
A Financial Case Study on Insurance Companies ay bindings Prelims Report Finance Case Study BY: STAPLE CENTRE Case: GLIB Insurance Corporation decides to divest one of its business units.
Considering the given case, we have decided to divest the All-World GLIB business unit to Aviva Life Insurance Company.
Aviva is a leading insurance company in Asia Inch has million customers across 21 countries and operates in only savings, general and health insurance, and fund management products and services. Aviva focuses on growing their business profitably and improving their operational efficiency so that they can benefit as major markets return to economic growth, I. E. , by also segmenting to the life insurance sector.
Our main objective is to identify a potential partner for a profit, providing the owners Ninth growth potential and an eventual exit strategy and in turn mainly to raise capital of $billion. Our Process: Led by a senior advisor, Acquisition Services undertook the following initiatives: * Worked with the owners to understand their rationale for selling the business unit and structure an appropriate exit strategy * Assisted in writing a Confidential
Informational Memorandum (JIM) including an operating model to be used by prospective buyers * Utilized our firm’s industry contacts and proprietary database to create a marketing process designed to maximize value for the client which Included highlighting the property in both our email and hard copy newsletter on a confidential basis * Identified potential buyers and presented them to the company for review * Led due diligence meetings for the client with a select group of prospective buyers * Worked wit n boot the client and prospective buyers in evolving valuation models, return on equity scenarios and due diligence * Analyzed the proposals with the client to assist them in assessing the best offer from multiple perspectives * Assisted in negotiating the final terms of the transaction resulting in a near doubling of the initial offers Reasons for GLIB to divest: 1. Divest to Obtain Funds/ Raise capital 2. Focusing on Primary Business 3. Availability of Other Investment Opportunities 4. Inability to Achieve Synergy or Strategic Fit 5.
Social or Political Reasons NH AVIVA? En have advised GLIB, AVIVA as the most suitable company to divest All-World GLIB because of certain factors of AVIVA in relation with its strategic plan. In 2010, they assessed their strategic direction against the backdrop of the changes and came away with three principal conclusions: * Increasing geographic focus They will focus on markets where they have strength and scale.
In determining their focus, they will Judge markets on their potential to generate both IIS$OHIO million of adjusted operating profits and a 12% return on capital employed, or IIS$I billion of ranches value for younger businesses. * Benefiting from the combination of life and general insurance Their life and general insurance operations are excellent businesses in their own right, but in addition to their inherent strengths there are significant advantages to running these businesses under one brand and in one group, supported by Aviva Investors. * Building on their core strengths or be the best in both life and general insurance, we will focus on our four core strengths of marketing and distribution, financial discipline, technical excellence and operational effectiveness, benefiting from a powerful brand and growing customer franchise.
Considering these given aims and strategy of Aviva insurance company, it would be profitable and favorable for GLIB to divest All-World GLIB to Aviva Insurance company of the Asian sector.
Why Aviva of the Asian sector? En nave chosen the Asian sector to Aviva insurance company instead to the European sector because of the ongoing Euro-Crisis which poses as a major threat for its growth due to the economic downturn. As the insurance sector of Aviva works though their multi-distribution insurance franchise, then again the insurance business of Aviva will be affected by the Euro crisis, as Aviva uses the bank sales channel in order to sell their insurance products.
And many banks in Europe are already under debt due to the “hole economic downturn happening in Europe moreover most of the European countries are witnessing European credit crisis and are yet to bring about solutions for it and also it would take a long time for them to get over their current crisis. Therefore Asian sector of Aviva insurance company is all the more favorable to vest in. Avis’s Asia Pacific business operates in ten countries across the region through associates, Joint ventures and wholly owned operations. They have a balanced portfolio, comprising businesses in key strategic markets such as China and India, Inch have large populations and relatively high economic growth.
Products Avis’s Asian insurance businesses offer a range of protection, bonds and savings and pension products, including universal life, participating and non-participating endowments, unit-linked single and regular premium life insurance, other savings ND pensions products and a range of accident and health insurance products. Due to the internationalization and appreciation of China’s currency the Reminds IRMA), they launched ARM insurance savings products in Hong Kong and Singapore, thereby tapping into the growing demand for ARM insurance products in this market. Distribution They operate a multi-distribution strategy in Asia, with particular strength in evanescence. They aim to continue to harness the benefits of multi-distribution in all of their markets so that they can expand their presence to a wider range of refutable customer segments.
Aviva Singapore has a multi-channel distribution strategy building on a core evanescence relationship with DB’S Bank, expanding the network of Ifs and Aviva Advisors and online general insurance platform. In China and South Korea, we distribute the majority of our products through evanescence and Ifs.
In Hong Kong, India and Malaysia, evanescence is the main distribution channel. En are investing in other channels such as direct marketing to diversify our sources of revenue Hence it is suitable for GLIB to divest All-World GLIB to the Asian sector of AVIVA even though they might be our further competitor we will have to face it, as we are doing it right from Colic’s incorporation. Moreover GLIB has no other choice but to divest any one of its business unit in order to raise a capital of $6 billion.