Franchise Value Advisory

image for Strategic Advisory Franchise Value section showing hot air balloons over the desert

JLT Re helps you evaluate the relative costs, benefits and suitability of debt, equity and reinsurance solutions to build and reinforce an efficient capital base, and allocate that capital more effectively to build firm value. We identify drivers of cost of capital and arrange targeted solutions to manage risk and support valuations.

Our Franchise Value framework provides the objective information you need to assess the value of reinsurance structures relative to other forms of capital—and other strategic initiatives—with the goal of supporting the value of both quoted and private insurers.

  • Use of reinsurance and other strategies to protect and enhance franchise value
  • Implementation of risk management to reduce cost of capital
  • Alternative structures and stress testing
  • Relative value of reinsurance compared with other capital and strategic initiatives, in terms of franchise value growth and protection

Franchise value is framed in terms of the insurer’s book value or tangible book value. The markets provide us with important valuation metrics for publicly-traded companies, or companies that have debt that is traded in the secondary market. For non-public entities, including mutually-owned insurers, we apply finance theory to historical and projected results to establish a fundamental baseline value

Using market data for a group of peer companies, we build a model that captures the relationships between various factors and current or fundamental franchise value. While acknowledging that these factors make up only a part of the valuation story—and that the relationships between these factors change over time—this model provides a framework through which we can evaluate the relative value of different strategies, including changes to the reinsurance program. 

This framework, applied in conjunction with traditional earnings protection analysis, focuses attention on the fundamentals of risk and return that create and sustain value, including:

  • Risk-adjusted earnings growth
  • Volatility management
  • Capital efficiency (using less-expensive forms of capital to reduce costs and improve stakeholders’ returns)

Contacts:

Mark Shumway, Global Head of Strategic Advisory | T: +1 215 309 4535 | E: mark.shumway@jltre.com

Nicholas Dranchak, Vice President Strategic Advisory |T: +1 215-309-4583 | E: nick.dranchak@jltre.com

Ernest Eng, Head of Analytics & Strategic Advisory Asia | T: +65 6411 9314 | E: ernest.eng@jltre.com