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  #41  
Old 12-19-2017, 03:31 PM
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I do quite a bit of Health work (reserving) and P&C M&A is most likely the same.

On a more serious note, love the thread. Very interesting on a personal level.
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  #42  
Old 12-19-2017, 03:48 PM
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Quote:
Originally Posted by WillTreaty View Post
I do quite a bit of Health work (reserving) and P&C M&A is most likely the same.

On a more serious note, love the thread. Very interesting on a personal level.
I have learned a lot from this thread.

When I went to work at my last employer (life reinsurance) everyone was very careful about disclosure, making sure I realized that this was a company in run-off. That was not a problem for me because I was approaching the end of my actuarial career, and long-range potential was not an issue for me. I stayed almost ten years before I finally made the move into retirement. Of course, that was not a case of acquiring a block in runoff, and so a lot different than the topic here.
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  #43  
Old 12-19-2017, 03:52 PM
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There are others here that have added way more than I will.

But i will add there are tons of entities out there that are in runoff and none of their advisers have explained that they could liquidate. A company in runoff might have an auditor and an accountant and a manager and an actuary and an adviser all making a tidy sum on a renewable basis. So they are all happy for this thing to squalor for a decade and pay anyone. I may be guilty of this.

For things like asbestos you run into time value of money issues. Reserves are undiscounted but the price is discounted. Can you somehow get an immediate cash payout if you make the deal?

Otherwise claims handling and TPAs and overhead all come into play.


Otherwise you need to convince your investors that reserves are overstated.
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  #44  
Old 12-19-2017, 04:49 PM
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Hello,

I work in the business development side of my company and we're currently interested in acquiring a company that specializes in acquiring run-off businesses.

The problem is I don't have any idea where to start.

Does anyone have any experience working in this industry? Would you be able to share any industry papers on how it works? Why it's profitable? Etc.

Much help appreciated.

Cheers,
FastCount
Contact one of your favorite broker contacts as their firm may have a M&A department that could help you with targets.
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  #45  
Old 12-19-2017, 11:49 PM
Arlie_Proctor Arlie_Proctor is offline
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This is the next question in the sequence, agreed. Assuming the business case is sound, finding a motivated seller is the next quandary. Determining the motivation to sell is often eye-opening in the due diligence process.

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These are all good questions attacking the critical topic of "why do we want to do this?", but that's not the first question I personally would ask.

In any potential acquisition (be it company, underwriting team, book of business, etc being acquired), the very first question I would ask is "why is this [thing] available for acquisition?"

The answer to that question, run by a sensitive BS-detecting nose, will either quickly kill an acquisition without need of further work, or it will illuminate other questions that need to be asked.

Runoff business is a very specialized business, and it takes a particular set of knowledge/skills to do well. It would not surprise me at all to learn that Uncle Warren has hired most, if not all, of the folks in North America who have that set of knowledge/skills.

And to get back to the OP's original question...if you're looking at this from a business development angle, and if the questions suggested above haven't been sufficient to illuminate an answer, then I would suggest finding and retaining a consultant who's had more exposure to the runoff marketplace, and picking their brains for a day for insight.
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  #46  
Old 12-20-2017, 08:35 AM
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i've looked at a number of these opportunities. most don't work out because of things learned in due diligence, but every once in a while it makes good sense to both parties
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Old 12-20-2017, 01:55 PM
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every once in a while it makes good sense to both parties


Post above called it "zero sum" and I didn't disagree because it wasn't clear if it was referring to all runoff transactions or just those associated with a particular ignorance. There are plenty of transactions that are positive-sum, especially when one party lacks the claims expertise or some of the other value drivers - tax (mentioned above) regulatory expertise or relationships, etc.
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  #48  
Old 12-20-2017, 08:05 PM
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You could always call Riverstone, Enstar, Catalina or Premia and ask if they’re for sale.
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  #49  
Old 12-21-2017, 09:07 PM
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All I can say is wow! I never thought this thread would pick up the way it did. I have learned ton by reading all your replies, a few of you were generous enough to send me personal messages, and I greatly appreciate that.

I am not a frequent reader/poster on this forum, but after this experience I'm definitely going to start partaking more, given how much knowledge is floating on these forums.


I cannot get into the details of why I'm doing what I'm doing, I apologize.


PAC
My question is understanding their business model, how they value the run-off books they acquire.


PeppermintPatty
You said that moving to a jurisdiction with more favorable tax treatment can be financially feasible. Is this why most of the big players in this market have offices in Bermuda?


A lot of you have brought up due diligence. Could you provide some example of:
What are some things learnt in due diligence that prevent the deal from happening?
How often does a deal happen? Yoyo mentioned every once in a while. What I'm trying to determine is how often will days of hard work go to waste?
I am assuming the deal occurs when the financial interests of the buyer and seller overlap kind of like in a venn-diagram, would anyone be able to provide a few bullet points of what those are for both the seller and the buyer?

Cheers,
fastcount
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  #50  
Old 12-21-2017, 09:16 PM
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Its not just tax treatment, it is also less onerous regulation so you don't need high statutory capital requirements. This is another advantage.
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