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Valuation and corporate management in a non-life insurance company

Published online by Cambridge University Press:  20 April 2012

M. Bride  and
M. W. Lomax
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Abstract

This paper explores the benefits and limitations of a valuation framework as a management tool within a general insurance operation. Two models are presented, one a model of the firm and the other an option valuation model, which together create a robust framework that enables management to analyse how different decisions would affect both the overall firm value and its distribution amongst investors. The model of the firm assists in understanding how key factors such as the momentum of a general insurance portfolio and the allocation of scarce resources affect the value of the firm. The second model, an option framework for corporate liabilities, highlights the critical distinction between the value of the firm and the value of investors' claims on the firm.

Keywords

Appraised ValueCorporate StrategyFinanceGeneral Insurance
Type
Research Article
Information
Journal of the Institute of Actuaries , Volume 121 , Issue 2 , 1994 , pp. 363 - 440
Copyright
Copyright © Institute and Faculty of Actuaries 1994

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