mercer capital's value focus: insurance industry | q4 2015

VALUE FOCUSInsurance Industry

www.mercercapital.com

Sector Overview & Commentary Property & Casualty 1Reinsurance 2Life & Health 2Managed Care 3Brokers 3InsurTech, Claims & Services 4

Insurance M&A Highlights Insurance Underwriters 5Insurance Brokers 6

Publicly Traded Insurance Companies Reinsurance 10Multiline 10Life & Health 11Managed Care 12Brokers 13InsurTech, Claims & Services 13

About Mercer Capital 14

Fourth Quarter 2015

http://mercercapital.com/insights/newsletters/value-focus-industry-publications/medical-technology-industry-newsletter/

http://www.mercercapital.com

http://mercercapital.com/insights/newsletters/value-focus-industry-publications/medical-technology-industry-newsletter/

© 2015 Mercer Capital // www.mercercapital.com 1

Mercer Capital’s Value Focus: Insurance Industry Fourth Quarter 2015

Sector Overview & CommentaryProperty & Casualty

• P&C stocks gained 4.9% for the quarter and have risen 8.5%

over the last twelve months, led by strong quarters from both

the commercial and personal lines segments. For reference,

the S&P 500 returned a 6.5% for the quarter, but -0.7% Y/Y.

• Per MarketScout, aggregate commercial lines renewal pricing

dropped significantly in Q4, falling 2% in October, 3% in November

and 4% in December. For personal lines, rates renewal pricing

also tumbled, remaining flat in October but dropping by 1% in

both November and December. The shift in price level movement

from positive to negative over the most recent quarters is a

confirmation that the market is indeed softening.

• In a December report, Fitch Ratings maintained their stable rating

of the U.S P&C sector due to strong capitalization from lighter-

than-average catastrophe events. On the whole, underwriting

profitability improved for the quarter with the industry’s median

combined ratio falling to 93.8% from 95.6% in Q3.

• However, looking forward to 2016, Fitch views declining

investment yields as a considerable operating challenge for

U.S P&C insurers. Total investment returns are not likely to be

boosted in the short term by interest rate hikes because such

movement reduces the values of their fixed-income holdings.

The Federal Reserve’s recent increase of the Fed funds target

rate is promising, but expectations of further rate increases in

2016 need be fulfilled for the long term outlook on investment

yields to increase.

Sector Pricing and Valuation Summary

Share Price Δ Price / Earnings Price / Book

LTM Return

on EquitySegment %YoY %4Q15 LTM FY15E FY16E P/B P/TB

Property & Casualty (all) 8.5% 4.9% 13.7x 14.8x 14.1x 1.30x 1.42x 9.9%

P&C - Commercial Lines 14.0% 9.0% 12.7x 13.3x 12.7x 1.22x 1.30x 10.0%

P&C - Personal Lines 0.0% 4.1% 12.6x 14.8x 11.5x 1.62x 1.57x 11.7%

P&C - Specialty 6.9% 2.8% 17.5x 16.2x 15.5x 1.17x 1.24x 7.1%

P&C - Workers' Comp 9.5% -1.1% 15.1x 14.7x 14.3x 1.98x 1.98x 13.9%

Reinsurance 10.2% 4.3% 9.5x 10.2x 10.1x 1.04x 1.06x 10.7%

Multi-line 3.2% 1.9% 12.2x 11.6x 11.5x 0.98x 1.12x 7.1%

Life & Health -6.4% 3.0% 11.0x 10.2x 9.5x 0.90x 0.91x 8.1%

Managed Care 14.4% 0.6% 18.7x 19.6x 16.9x 2.30x 3.06x 12.8%

Source: S&P Global Market Intelligence, Mercer Capital analysis. Median measures shown for segments.

Share Price Δ Enterprise Value / EBITDAEV /

LTM RevLTM Rev GrowthSegment %YoY %4Q15 LTM FY15E FY16E

Insurance Brokers -2.8% 4.1% 12.9x 11.3x 10.3x 2.64x 2.6%

Claims, Tech, & Services 14.4% 1.9% 15.6x 5.1x 3.9x 1.65x 15.7%

Source: S&P Global Market Intelligence, Mercer Capital analysis. Median measures shown for segments.


http://mercercapital.com/insights/newsletters/value-focus-industry-publications/insurance-industry-newsletter/

https://www.marketscout.com/

https://www.fitchratings.com/site/home



Sector Overview & Commentary

Reinsurance

• Reinsurance stock performance was strong in Q4, with a median increase of

4.3%. The sector has experienced similarly positive results over the last twelve

months, growing 10.2%.

• Price/book for the SNL Reinsurance Index was 1.04x, in line with the previous

quarter. The ratio had been trending downwards over recent quarters and was

threatening to dip below 1.0x for the first time since 2012.

• Aon Securities Inc.’s CEO Paul Schultz stated that he expects U.S. property

peak peril risks, such as Florida hurricane and California earthquake threats, to

continue to dominate both the catastrophe bond and global reinsurance market in

2016. With renewal season approaching, Aon revised its expectations of property

cat reinsurance rates to a decline of just 2.5-7.5%, up from earlier warnings of

decreases of up to 10%.

• Residual market sponsors such as government-affiliated pools and trusts have

increased their participation in alternative market risk transfer mechanisms, like

cat bonds. These risk solutions are gaining in popularity and are placing compet-

itive pricing pressures on the reinsurance sector.

Life & Health

• Life and health stocks bucked their negative trend over recent quarters with a

median increase of 3.0% in Q4. Still, the sector’s overall median return stands at

-6.4% over the past year.

• It is no coincidence that a positive quarter for L&H stocks coincided with the target

Fed funds rate be raised. Yet, the effect of the policy shift is likely to be negligible

in the near term.

• Though most emphasis is placed on interest rate movements, life insurers’ per-

formance in 2016 is also going to be largely affected by strengthening U.S. dollar

headwinds, possible regulatory changes, increasingly favorable demographics,

and the potential for an acceleration in deal making in the space.

• Median price/book for the L&H sector remained challenged at 0.90x for the second

consecutive quarter, which could spur M&A opportunities for certain players.



http://www.aon.com/default.jsp




Managed Care

• Managed care stocks rose a meager 0.6% on the quarter, though the sector’s

returns over the last twelve months are significantly more impressive at 14.4%.

• A weak flu season has muted cost trends providing a cushion for the managed

care space against losses related to the public exchanges business. Industry

analysts believe that limited exposure to the volatility associated with ACA regu-

lations is also likely to aid managed care companies’ performance going forward.

• According to research conducted by Mizuho Securities analysts, health care

stocks have historically performed better than the broader market in periods

preceding and following federal elections, provided there is a balance of power

between the White House and at least one chamber of Congress, as is the case

heading into the 2016 election.

• Another matter of importance in the managed care sector moving into 2016 is

the outcome of the extended government review of 2015’s announced mega-

deals between Aetna/Humana and Anthem/Cigna. The opinion of certain UBS

analysts is that the stocks of all managed care companies are being penalized

by the lengthy inspections and positive results could produce favorable returns

in the aftermath.

Brokers

• Broker stocks’ returns were positive for the quarter at 4.1%, though the sector’s

Y/Y returns remain negative, down -2.8%.

• According to The Council of Insurance Agents & Brokers, a moderate decline

in commercial P&C rates across all account sizes and most lines continued

through the quarter. The trend has persisted since the start of 2013 and con-

tinues to pressure brokers’ bottom lines. Large accounts once again suffered

the biggest decline at 3.7%, with the average decrease across all account sizes

a more modest 2.8%. The largest decreases were in commercial property and

general liability lines.

• The soft pricing market is already problematic for brokers, but looking forward

into 2016, there are several other issues worth monitoring. Chief among them are

increasing industry consolidation, carrier innovation in modeling, and underwriting

and the threat of technology-driven distribution channels.

• The robust M&A activity in the sector is due to heightened interest by private

equity firms who view the agency model as a business that can be highly levered.

Two of the most active acquirers of U.S.-based brokers over the past year were

private equity-backed companies: AssuredPartners (backed by Apax Partners)

and Hub International (backed by Hellman & Friedman).

• Among brokers, EV/EBITDA multiples seem to have plateaued after having

jumped to historic highs in 2013. Since then, multiples have been between 12.0x

and 12.9x, remaining steady during the last half of 2015 at approximately 12.5x.



http://www.mizuho-sc.com/english/index.html

https://www.ciab.com/

http://www.assuredptr.com/

http://www.apax.com/

http://www.hubinternational.com/

http://hf.com/




InsurTech, Claims & Services

• Ancillary service providers, such as TPAs and insurance software/technology

firms, reported extremely mixed performance in the fourth quarter. The median

return for the sector was 4.1% on the quarter, with returns ranging from positive

36.0% (CorVel) to negative 57.6% (Patriot National).

• CorVel’s (CRVL) impressive performance could be attributed to several factors:

its November share repurchase announcement, its profitable Q3 earnings report,

and its amplified interest in the stock on the part of hedge funds which prompted

investor intrigue. CorVel is a provider of healthcare management services and

solutions for workers’ compensation, auto & liability, group health and disability

insurance markets.

• Patriot National (PN) was challenged by a three day period in which its stock

fell over 50% when the firm announced a sale of shares in a private placement to

certain institutional investors that threatened to have a dilutive effect on existing

shareholders. Patriot National is a national provider of comprehensive technology

and outsourcing solutions within the P&C marketplace.

• As buzz over insurance technology “InsurTech” companies builds, developments

in this sector seem increasingly likely to have a significant impact on the insurance

industry as a whole. The nature and extent of the impact will largely hinge on whether

or not incumbent insurance players are willing and able to leverage the innovations

to their benefit, rather than allowing them to disrupt their existing business dynamics.



http://www.corvel.com/

http://www.patnat.com/

© 2015 Mercer Capital // www.mercercapital.com // Source: S&P Global Market Intelligence 5


Insurance M&A Highlights

Insurance Underwriters

23 deals were announced in 4Q15, down from 29 in 4Q14. Year-

to-date, transaction activity is up 13% however, from 72 deals to 81.

The largest deals announced in 4Q15 include:

• The acquisition of Seattle’s Group Health Cooperative by

Kaiser Permanente, a California-based healthcare giant.

○ To purchase Group Health, with membership of

600,000 and annual revenue of $3.5 billion, Kaiser Per-

manente is exchanging $1.8 billion in cash which will go

towards establishing a new Group Health Community

Foundation.

• Anbang Insurance Group Co.’s purchase of HRG Group

Inc.’s Fidelity & Guaranty Life for approximately $1.6 billion

in cash to expand the Chinese company’s footprint in the U.S.

○ The announced deal value represents 1.01x reported

book value and 12.4x LTM earnings. The announced

acquisition price of $26.80 per share implied a 29% pre-

mium to FG&L’s closing price on April 6, the day that

HRG said it would explore a sale of the life insurer.

Q1! Q2! Q3! Q4! YTD at 12/31!2012! 19 ! 26 ! 27 ! 21 ! 93 !2013! 24 ! 19 ! 25 ! 15 ! 83 !2014! 17 ! 15 ! 11 ! 29 ! 72 !2015! 12 ! 20 ! 26 ! 23 ! 81 !

0 !

20 !

40 !

60 !

80 !

100 !

Num

ber o

f Tra

nsac

tions!

M&A Activity Recap: Insurance Underwriters





Insurance M&A Highlights

Insurance Brokers

107 broker transactions were announced in 4Q15, up from 91 the

year prior. Year-to-date, deal activity is up 39%. Key deal happenings

of 4Q15 include:

• Zurich Insurance Group AG agreed to buy Rural Community

Insurance Services (RCIS), a Wells Fargo & Co. crop-

insurance business.

○ Zurich will pay Wells Fargo $675 million plus the amount

of excess capital in the unit pushing the total deal value to

$1.05 billion. The acquisition is intended to increase the

risk diversity of Zurich’s general insurance business by

leveraging the crop exposure.

• Towers Watson & Co. won approval from its shareholders

for its $8.9 billion merger with insurance broker Willis Group

Holdings Plc.

○ Under terms of the agreement, Towers Watson investors

will receive 2.6 Willis shares for each Towers Watson share

they own, plus a one-time cash dividend of $10 per share.

Towers Watson stock closed 2015 at $128.46, compared

to $137.98 the day before the deal was announced in June.

Willis stock narrowly rose from $45.40 to $46.42 over the

same period.

M&A Activity Recap: Insurance Brokers

Q1! Q2! Q3! Q4! YTD at 12/31!2012! 61 ! 72 ! 64 ! 141 ! 338 !2013! 45 ! 42 ! 57 ! 79 ! 223 !2014! 81 ! 66 ! 93 ! 91 ! 331 !2015! 121 ! 122 ! 109 ! 107 ! 459 !

0 !50 !

100 !150 !200 !250 !300 !350 !400 !450 !500 !

Num

ber o

f Tra

nsac

tions!





Publicly Traded Companies

Property & Casualty

12/31/15Price

Market Cap ($M)

Share Price %YOY

Share Price %Qtr

Price / Earnings Price / Book

Div. Yield

Underwriting Ratios

Invest Yield

LTM ROETicker Name LTM FY15E FY16E P/B P/TB Loss Expense Comb.

Commercial Lines

AIG American International Group, Inc. 61.97 77,264 10.6% 9.1% 18.3x 14.4x 12.0x 0.78x NA 1.97% 67.4% 35.0% 102.4% 4.52% 4.4%

CB Chubb Limited 116.85 37,867 1.7% 13.0% 14.3x 12.1x 12.2x 1.30x 1.62x 2.55% 58.9% 29.0% 87.9% 2.98% 9.1%

TRV Travelers Companies, Inc. 112.86 34,332 6.6% 13.4% 10.1x 10.7x 11.5x 1.43x 1.70x 2.45% 56.1% 31.8% 88.0% 3.47% 14.7%

CINF Cincinnati Financial Corporation 59.17 9,692 14.2% 10.0% 15.2x 17.7x 21.5x 1.53x 1.53x 3.42% 61.2% 30.8% 92.0% 4.70% 9.9%

CNA CNA Financial Corporation 35.15 9,500 -9.2% 0.6% 12.7x 11.5x 10.4x 0.77x 0.78x 2.86% 60.2% 33.5% 93.6% 4.07% 6.0%

AFG American Financial Group, Inc. 72.08 6,295 18.7% 4.6% 18.5x 13.3x 12.7x 1.33x 1.41x 1.63% 64.4% 30.8% 95.1% 4.32% 7.2%

ORI Old Republic International Corporation 18.63 4,871 27.3% 19.1% 13.4x 14.9x 15.3x 1.26x NA 4.73% 48.9% 47.9% 96.8% 4.14% 10.0%

THG Hanover Insurance Group, Inc. 81.34 3,514 14.0% 4.7% 10.6x 13.7x 12.9x 1.22x 1.30x 2.11% 61.2% 34.4% 95.6% 3.84% 12.0%

SIGI Selective Insurance Group, Inc. 33.58 1,920 23.6% 8.1% 12.0x 13.0x 12.9x 1.41x 1.42x 1.80% 58.2% 34.7% 92.9% 2.83% 12.4%

UFCS United Fire Group, Inc. 38.31 960 28.9% 9.3% 10.4x 13.3x 16.3x 1.14x 1.17x 2.51% 61.0% 30.4% 91.4% 3.26% 11.2%

EIG Employers Holdings, Inc. 27.30 876 16.1% 22.5% 9.1x 14.0x 14.5x 1.21x 1.29x 1.08% 63.7% 31.1% 94.8% 3.06% 13.8%

EMCI EMC Insurance Group Inc. 25.30 524 7.0% 9.0% 9.2x 12.0x 14.1x 1.01x 1.01x 2.93% 64.6% 31.4% 95.9% 4.21% 11.0%

DGICA Donegal Group Inc. 14.08 395 -11.9% 0.1% 16.7x 13.4x 9.4x 0.89x 0.91x 3.84% 67.0% 32.6% 99.6% 2.62% 5.5%

AFH Atlas Financial Holdings, Inc. 19.90 238 21.9% 7.6% 12.7x 16.7x 11.1x 2.01x 2.12x 0.00% 59.2% 28.0% 87.2% 2.03% 17.0%

HALL Hallmark Financial Services, Inc. 11.69 224 -3.3% 1.7% 10.2x 10.9x 11.7x 0.86x 1.12x 0.00% 65.2% 28.8% 94.0% 2.59% 8.6%

Median 3,514 14.0% 9.0% 12.7x 13.3x 12.7x 1.22x 1.30x 2.45% 61.2% 31.4% 94.0% 3.47% 10.0%






Property & Casualty

12/31/15Price

Market Cap ($M)

Share Price %YOY

Share Price %Qtr


Div. Yield

Underwriting Ratios

Invest Yield


Personal Lines

ALL Allstate Corporation 62.09 24,215 -11.6% 6.6% 10.9x 12.5x 11.3x 1.29x 1.39x 2.06% 68.3% 26.1% 94.4% 4.46% 11.5%

PGR Progressive Corporation 31.80 18,589 17.8% 3.8% 14.3x 16.2x 16.1x 2.49x 2.86x 2.24% 72.0% 20.2% 92.2% 2.69% 18.2%

MCY Mercury General Corporation 46.57 2,569 -17.8% -7.8% 86.2x 20.3x 17.5x 1.40x 1.46x 4.89% 72.7% 27.8% 100.5% 0.79% 1.6%

NGHC National General Holdings Corporation 21.86 2,305 17.5% 13.3% 17.1x 14.5x 11.5x 1.77x 2.53x 0.41% 62.9% 30.3% 93.2% 3.06% 11.2%

HMN Horace Mann Educators Corporation 33.18 1,352 0.0% -0.1% 13.7x 15.5x 13.8x 1.03x 1.07x 3.01% 68.7% 26.6% 95.4% 4.56% 7.7%

IPCCInfinity Property and Casualty Corpo-

ration82.23 929 6.4% 2.1% 15.3x 17.9x 16.5x 1.33x 1.49x 2.14% 75.7% 18.7% 94.4% 2.40% 8.8%

UVE Universal Insurance Holdings, Inc. 23.18 826 13.3% -21.5% 8.5x 8.1x 7.7x 2.92x NA 1.62% 36.1% NA NA 0.76% 42.1%

SAFT Safety Insurance Group, Inc. 56.38 851 -11.9% 4.1% NM NM 14.6x 1.32x 1.32x 5.17% 83.4% 29.2% 112.6% 3.41% -2.0%

STFC State Auto Financial Corporation 20.59 846 -7.3% -9.7% 7.5x 15.0x 13.2x 0.97x 0.97x 1.75% 69.9% 33.1% 103.0% 3.84% 12.9%

HRTG Heritage Insurance Holdings, Inc. 21.82 661 12.3% 10.6% 7.1x 7.3x 6.8x 1.99x 1.99x 0.00% 36.1% 28.0% 64.1% 1.72% 32.3%

SNC State National Companies, Inc. 9.81 436 -18.1% 4.9% 11.5x 10.8x 9.8x 1.62x 1.66x 2.57% NA NA NA 2.32% 15.0%

FNHC Federated National Holding Company 29.56 407 22.4% 23.1% 9.9x 10.5x 10.5x 1.82x 1.82x 0.83% 48.7% NA NA 2.61% 20.5%

UIHC United Insurance Holdings Corp. 17.10 368 -22.1% 30.0% 14.4x 17.1x 10.4x 1.62x 1.65x 1.52% 53.7% 40.2% 93.8% 1.81% 11.7%

Median 851 0.0% 4.1% 12.6x 14.8x 11.5x 1.62x 1.57x 2.06% 68.5% 27.9% 94.4% 2.61% 11.7%






Property & Casualty

12/31/15Price

Market Cap ($M)

Share Price %YOY

Share Price %Qtr


Div. Yield

Underwriting Ratios

Invest Yield


Specialty Lines

MKL Markel Corporation 883.35 12,323 29.4% 10.2% 24.8x 25.5x 34.1x 1.60x 2.05x 0.00% 50.7% 38.4% 89.2% 2.04% 6.6%

ACGL Arch Capital Group Ltd. 69.75 8,540 18.0% -5.1% 13.3x 16.1x 17.0x 1.46x 1.49x 0.00% 55.0% 34.3% 89.3% 1.88% 11.3%

WRB W. R. Berkley Corporation 54.75 6,749 6.8% 0.7% 14.2x 16.3x 15.6x 1.47x 1.52x 0.88% 60.9% 33.0% 93.9% 3.77% 11.0%

ENH Endurance Specialty Holdings Ltd. 63.99 4,262 6.9% 4.9% 10.1x 9.4x 9.7x 0.98x 1.12x 2.28% 49.0% 35.9% 85.0% 2.08% 9.6%

WTM White Mountains Insurance Group, Ltd. 726.81 4,176 15.3% -2.7% 44.2x 76.3x 92.0x 1.11x 1.24x 0.13% 69.1% 34.3% 103.4% 0.04% 2.5%

AWHAllied World Assurance Company Hold-

ings, AG37.19 3,381 -1.9% -2.6% 17.5x 15.7x 15.0x 0.95x 1.10x 2.54% 59.2% 31.7% 90.9% 0.89% 5.7%

ESGR Enstar Group Limited 150.04 2,889 -1.9% 0.0% 13.4x 13.6x 12.0x 1.19x 1.29x 0.00% NA NA NA 1.86% 9.2%

RLI RLI Corp. 61.75 2,679 25.0% 15.4% 19.3x 23.7x 26.6x 3.03x 3.30x 1.42% 42.1% 41.7% 83.8% 5.08% 16.2%

AGII Argo Group International Holdings, Ltd. 54.40 1,668 18.7% 5.7% 9.4x 16.1x 15.6x 1.02x 1.18x 1.35% 55.8% 39.6% 95.4% 3.88% 11.0%

NAVG Navigators Group, Inc. 85.79 1,237 17.0% 10.0% 15.3x 15.6x 15.4x 1.15x 1.16x 0.00% 57.3% 35.8% 93.1% 2.67% 7.9%

OB OneBeacon Insurance Group, Ltd. 12.41 1,182 -23.4% -11.6% NM 22.2x 14.9x 1.18x NA 5.98% 68.9% 34.1% 103.0% 1.09% -2.2%

JRVR James River Group Holdings, Ltd. 33.54 965 47.4% 24.7% 19.7x 16.1x 14.9x 1.36x 1.99x 1.79% 60.2% 33.3% 93.5% 3.18% 7.2%

GBLI Global Indemnity plc 29.02 747 2.3% 10.9% 29.6x 26.3x 24.2x 0.81x 0.84x 0.00% 56.0% 39.9% 95.9% 1.22% 2.7%

NATL National Interstate Corporation 26.70 531 -10.4% 0.1% 22.3x 18.9x 16.3x 1.45x 1.48x 1.95% 80.0% 20.0% 99.9% 2.52% 6.5%

BWINB Baldwin & Lyons, Inc. 24.03 361 -6.8% 10.7% 12.9x 12.3x 14.2x 0.92x 0.93x 4.61% 58.3% 31.9% 90.1% 1.86% 7.0%

CNFR Conifer Holdings, Inc. 9.27 71 NA -4.9% 29.0x 18.9x 8.6x 0.88x 0.90x 0.00% 57.3% 41.5% 98.8% NA 4.8%

Median 2,173 6.9% 2.8% 17.5x 16.2x 15.5x 1.17x 1.24x 1.12% 57.3% 34.3% 93.5% 2.04% 7.1%

Workers’ Compensation Focus

AFSI AmTrust Financial Services, Inc. 30.79 5,105 9.5% -2.2% 10.7x 10.3x 10.1x 2.39x 4.00x 1.91% 65.8% 24.9% 90.8% 3.42% 21.9%

PRA ProAssurance Corporation 48.53 2,579 7.5% -1.1% 18.8x 18.3x 18.9x 1.29x 1.52x 2.53% 55.9% 29.8% 85.7% 2.22% 6.9%

AMSF AMERISAFE, Inc. 50.90 972 20.2% 2.4% 15.1x 14.7x 14.3x 1.98x 1.98x 1.21% 59.7% 23.1% 82.8% 2.29% 13.9%

Median 2,579 9.5% -1.1% 15.1x 14.7x 14.3x 1.98x 1.98x 1.91% 59.7% 24.9% 85.7% 2.29% 13.9%

Median All Sub-Groups 1,668 8.5% 4.9% 13.7x 14.8x 14.1x 1.30x 1.42x 1.91% 60.2% 31.8% 93.8% 2.68% 9.9%






Reinsurance

12/31/15Price

Market Cap ($M)

Share Price %YOY

Share Price %Qtr


Div. Yield

Underwriting Ratios

Invest Yield


XL XL Group Ltd 39.18 11,727 14.0% 7.9% 10.1x 15.9x 11.5x 0.98x 1.21x 1.87% 57.3% 33.1% 90.4% 2.81% 10.3%

RE Everest Re Group, Ltd. 183.09 7,888 7.5% 5.6% 8.6x 8.4x 10.0x 1.05x 1.06x 2.19% 57.5% 27.0% 84.4% 1.67% 12.7%

AXS AXIS Capital Holdings Limited 56.22 5,400 10.0% 4.7% 9.0x 14.5x 12.6x 1.04x 1.06x 2.16% 58.5% 36.2% 94.6% 1.28% 11.4%

RNR RenaissanceRe Holdings Ltd. 113.19 4,994 16.4% 6.5% 9.6x 10.9x 12.1x 1.16x 1.24x 1.12% 25.7% 33.5% 59.2% 1.84% 11.5%

VR Validus Holdings, Ltd. 46.29 3,796 11.4% 2.7% 9.5x 9.7x 10.1x 1.04x 1.14x 2.80% 43.6% 35.3% 78.9% 1.78% 11.8%

AHL Aspen Insurance Holdings Limited 48.30 2,936 10.3% 3.9% 13.1x 10.7x 10.8x 1.05x 1.05x 1.76% 55.9% 36.6% 92.5% 1.86% 7.9%

TPRE Third Point Reinsurance Ltd. 13.41 1,414 -7.5% -0.3% NM NM 6.3x 1.06x 1.06x 0.00% 69.1% 33.9% 103.0% -3.80% -9.8%

MHLD Maiden Holdings, Ltd. 14.91 1,099 16.6% 7.4% 11.1x 9.7x 7.5x 1.21x 1.34x 3.75% 66.2% 32.7% 99.0% 3.20% 10.3%

GLRE Greenlight Capital Re, Ltd. 18.71 693 -42.7% -16.0% NM NM 4.5x 0.80x 0.80x 0.00% 81.2% 35.6% 116.8% -5.67% -20.3%

BCRH Blue Capital Reinsurance Holdings Ltd. 17.15 150 -3.4% -0.4% 7.6x 7.7x 9.4x 0.82x NA 6.97% 14.9% 35.8% 50.7% 0.00% 11.1%

Median 3,366 10.2% 4.3% 9.5x 10.2x 10.1x 1.04x 1.06x 2.02% 57.4% 34.6% 91.5% 1.72% 10.7%

Multiline

12/31/15Price

Market Cap ($M)

Share Price %YOY

Share Price %Qtr


Div. Yield

Underwriting Ratios

Invest Yield


AMP Ameriprise Financial, Inc. 106.42 18,626 -19.5% -2.5% 12.2x 11.6x 10.3x 2.44x 3.30x 2.46% 96.9% 15.5% 112.4% 3.39% 20.3%

HIG Hartford Financial Services Group, Inc. 43.46 17,876 4.2% -5.1% 11.4x 11.5x 10.9x 0.98x 1.01x 1.83% 66.7% 30.6% 97.3% 4.00% 8.8%

AIZ Assurant, Inc. 80.54 5,376 17.7% 1.9% 45.5x 11.6x 12.1x 1.15x 1.52x 2.53% NA NA NA 4.36% 2.5%

ANAT American National Insurance Company 102.27 2,750 -10.5% 4.7% 11.1x NA NA 0.62x 0.62x 3.28% 67.7% 31.2% 98.9% 4.45% 5.6%

KMPR Kemper Corporation 37.25 1,912 3.2% 5.3% 13.3x 20.0x 16.7x 0.94x 1.12x 2.71% 72.4% 26.7% 99.0% 5.52% 7.1%

Median 5,376 3.2% 1.9% 12.2x 11.6x 11.5x 0.98x 1.12x 2.53% 70.0% 28.7% 99.0% 4.36% 7.1%






Life & Health

12/31/15Price

Market Cap ($M)

Share Price %YOY

Share Price %Qtr


Div.YieldInvest. Yield

ROE

Ticker Name LTM FY15E FY16E P/B P/TB LTM FY15E FY16E

MET MetLife, Inc. 48.21 53,743 -10.9% 2.2% 9.4x 9.6x 8.2x 0.79x 0.91x 3.18% 4.64% 8.4% 9.9% 8.0%

PRU Prudential Financial, Inc. 81.41 36,589 -10.0% 6.8% 11.0x 7.8x 8.0x 0.86x 0.87x 3.04% 4.39% 8.1% 15.7% 10.7%

AFL Aflac Incorporated 59.90 25,611 -1.9% 3.0% 10.5x 9.9x 9.5x 1.48x NA 2.68% 3.18% 14.0% 16.7% 15.2%

PFG Principal Financial Group, Inc. 44.98 13,202 -13.4% -5.0% 10.9x 10.5x 10.3x 1.37x 1.83x 3.21% 4.60% 12.5% 13.6% 12.7%

LNC Lincoln National Corporation 50.26 12,438 -12.8% 5.9% 10.7x 9.2x 7.7x 0.86x 1.03x 1.69% 4.61% 7.9% 10.8% 9.7%

UNM Unum Group 33.29 8,104 -4.6% 3.8% 23.0x 9.2x 8.7x 0.94x 0.97x 2.31% 4.77% 4.1% 10.7% 10.5%

VOYA Voya Financial, Inc. 36.91 7,948 -12.9% -4.8% 4.7x 13.0x 11.0x 0.56x 0.57x 0.10% 4.48% 12.3% 6.2% 7.7%

TMK Torchmark Corporation 57.16 7,072 5.5% 1.3% 13.5x 13.5x 12.9x 1.65x 1.84x 0.96% 5.18% 11.8% 12.7% 12.5%

RGA Reinsurance Group of America, Inc. 85.55 5,625 -2.4% -5.6% 11.0x 10.6x 9.5x 0.90x 0.90x 1.63% 5.01% 7.8% 10.4% 10.6%

CNO CNO Financial Group, Inc. 19.09 3,565 10.9% 1.5% 17.5x 15.0x 12.6x 0.85x 0.85x 1.49% 5.49% 4.8% 7.7% 7.7%

PRI Primerica, Inc. 47.23 2,294 -13.0% 4.8% 13.2x 12.8x 11.3x 2.00x 2.11x 1.42% 4.00% 15.3% 16.3% 17.7%

AELAmerican Equity Investment Life Holding

Company24.03 1,951 -17.7% 3.1% 8.9x 9.7x 8.9x 0.91x 0.91x 0.86% 4.40% 10.3% 10.7% 8.8%

GNW Genworth Financial, Inc. 3.73 1,856 -56.1% -19.3% NM 4.2x 3.8x 0.14x 0.14x 0.00% 4.13% -7.4% 3.8% 3.2%

FFG FBL Financial Group, Inc. 63.64 1,577 9.7% 3.4% 14.4x 15.1x 14.3x 1.35x 1.37x 2.60% 5.13% 9.1% NA NA

FGL Fidelity & Guaranty Life 25.37 1,494 4.5% 3.4% 12.6x NA 11.5x 0.99x NA 1.06% 5.08% 7.2% 6.4% 9.6%

NWLI National Western Life Group, Inc. 251.94 916 -6.4% 13.1% 9.3x NA NA 0.57x 0.57x 0.16% 5.04% 6.0% NA NA

KCLI Kansas City Life Insurance Company 38.29 406 -20.3% -18.5% 13.3x NA NA 0.56x 0.56x 2.30% 4.59% 4.1% NA NA

CIA Citizens, Inc. 7.43 372 -2.2% 0.1% NM NA NA 1.49x 1.61x 0.00% 3.89% -4.9% NA NA

IHC Independence Holding Company 13.85 239 -0.7% 6.9% 8.3x NA NA 0.76x 0.98x 0.69% 4.44% 9.8% NA NA

Median 3,565 -6.4% 3.0% 11.0x 10.2x 9.5x 0.90x 0.91x 1.49% 4.60% 8.1% 10.7% 10.1%






Managed Care

12/31/15Price

Market Cap ($M)

Share Price %YOY

Share Price %Qtr


Div.YieldInvest. Yield

ROE

Ticker Name LTM FY15E FY16E P/B P/TB LTM FY15E FY16E

UNH UnitedHealth Group Incorporated 117.64 112,111 16.4% 1.4% 18.7x 19.6x 16.4x 3.39x NA 1.72% 2.59% 18.8% 17.8% 17.7%

AET Aetna Inc. 108.12 37,701 21.7% -1.2% 16.6x 14.3x 13.4x 2.38x NA 0.91% 3.81% 15.3% 16.4% 14.2%

CI Cigna Corporation 146.33 37,693 42.2% 8.4% 17.9x 17.1x 15.7x 3.20x 6.57x 0.03% 5.22% 19.2% 18.4% 14.4%

ANTM Anthem, Inc. 139.44 36,398 11.0% -0.4% 13.3x 13.7x 12.8x 1.57x NA 1.79% 3.47% 12.1% 11.0% 11.5%

HUM Humana Inc. 178.51 26,459 24.3% -0.3% 20.5x 23.0x 20.2x 2.56x 3.94x 0.65% 3.25% 13.2% 13.4% 11.6%

CNC Centene Corporation 65.81 7,845 26.7% 21.4% 22.9x 22.7x 17.6x 3.82x 7.54x 0.00% 1.12% 19.1% 16.9% 11.4%

WCG WellCare Health Plans, Inc. 78.21 3,449 -4.7% -9.2% 30.6x 22.8x 17.2x 2.02x 2.53x 0.00% 1.97% 6.9% 24.3% NA

MOH Molina Healthcare, Inc. 60.13 3,372 12.3% -12.7% 21.9x 22.3x 16.5x 2.22x 3.06x 0.00% 0.40% 12.4% 11.4% 8.3%

GTS Triple-S Management Corporation 23.91 606 0.0% 34.3% 9.8x 18.1x 17.3x 0.73x 0.75x 0.00% 4.95% 7.6% NA NA

UAM Universal American Corp. 7.00 588 -24.6% 2.3% NM NM 34.7x 0.96x 1.10x 0.00% 1.79% -2.4% NA NA

Median 17,152 14.4% 0.6% 18.7x 19.6x 16.9x 2.30x 3.06x 0.01% 2.92% 12.8% 16.7% 11.6%






Brokers

12/31/15Price

Market Cap ($M)

Share Price %YOY

Share Price %Qtr

EV ($M)

EV / EBITDA

EV / LTM Rev. Div.Yield

LTM EBITDA Margin

LTM Rev.

Growth

Organic Rev Growth

Ticker Name LTM FY15E FY16E 15Q3 15Q2

MMC Marsh & McLennan Companies, Inc. 55.45 28,962 -3.1% 6.2% 32,116 11.9x 11.3x 10.5x 2.5x 2.37% 20.9% -0.3% 2.0% 3.0%

AON Aon plc 92.21 25,256 -2.8% 4.1% 30,984 12.9x 11.9x 11.1x 2.6x 1.24% 20.4% -2.2% 2.0% 3.0%

WLTWWillis Towers Watson Public Limited

Company128.66 8,740 8.4% 18.6% 10,845 14.1x 12.7x 10.3x 2.8x 3.00% 19.9% 2.6% 3.3% 1.6%

AJG Arthur J. Gallagher & Co. 40.94 7,234 -13.0% -0.8% 9,257 13.0x 10.9x 9.7x 2.3x 3.59% 17.9% 18.8% 4.1% 5.8%

BRO Brown & Brown, Inc. 32.10 4,525 -2.5% 3.6% 5,236 10.6x 9.5x 9.0x 3.2x 1.42% 30.0% 8.1% 1.6% 2.1%

Median 8,740 -2.8% 4.1% 10,845 12.9x 11.3x 10.3x 2.6x 2.37% 20.4% 2.6% 2.0% 3.0%

InsurTech, Claims & Services

To12/31/15

Price

Market Cap ($M)

Share Price %YOY

Share Price %Qtr

Total EV ($M)

EV / EBITDA

EV / LTM Rev. Div.Yield

LTM EBITDA Margin

LTM Rev. Growth

LTM Rev. ($M)Ticker Name LTM FY15E FY16E

GWRE Guidewire Software, Inc. 60.16 4,272 18.8% 1.9% 4,059 184.7x NA 54.6x 10.7x 0.00% 5.8% 8.6% 381

EBIX Ebix, Inc. 32.79 1,108 93.0% 31.4% 1,262 13.1x NA NA 4.9x 1.20% 37.7% 25.1% 256

BNFT Benefitfocus, Inc. 36.39 1,055 10.8% 16.4% 1,063 NM NM NM 6.2x 0.00% -26.3% 34.1% 171

CRVL CorVel Corporation 43.92 869 18.0% 36.0% 819 13.0x NA NA 1.7x 0.00% 12.8% 1.3% 496

CRD.B Crawford & Company 5.31 292 -48.3% -5.3% 493 5.9x 4.9x 3.9x 0.4x 3.57% 6.7% 2.3% 1,247

PN Patriot National, Inc. 6.71 182 NA -57.6% 288 18.1x 5.3x 3.6x 1.5x 0.00% 13.6% 108.0% 189

CNXR Connecture, Inc. 3.61 79 -59.9% -20.8% 121 28.9x NA NA 1.3x 0.00% 4.4% 15.7% 95

Median 869 14.4% 1.9% 819 15.6x 5.1x 3.9x 1.7x 0.00% 6.7% 15.7% 256



Mercer CapitalInsurance Industry Services

Contact Us

Copyright © 2015 Mercer Capital Management, Inc. All rights reserved. It is illegal under Federal law to reproduce this publication or any portion of its contents without the publisher’s permission. Media quotations with source attribution are encouraged. Reporters

requesting additional information or editorial comment should contact Barbara Walters Price at 901.685.2120. Mercer Capital’s Industry Focus is published quarterly and does not constitute legal or financial consulting advice. It is offered as an information service to

our clients and friends. Those interested in specific guidance for legal or accounting matters should seek competent professional advice. Inquiries to discuss specific valuation matters are welcomed. To add your name to our mailing list to receive this complimentary

publication, visit our web site at www.mercercapital.com.

Mercer Capital provides the insurance industry with corporate valuation, financial reporting, transaction advisory, and related services.

Industry Segments

Mercer Capital serves the following industry segments:

Agencies

• Independent insurance brokers and agents

• Bank-owned agencies

• Retail, wholesale, and MGAs

Ancillary

• Third-party administrators

• Claims adjusters and other service providers

Mercer Capital Experience

• Nationwide client base

• Agency clients range from single office agencies to top-10 public brokers

• Underwriter clients range from monoline privates to publicly traded multi-line carriers

Contact a Mercer Capital professional to discuss your needs in confidence.

Lucas M. Parris, CFA, [email protected]

Don Erickson, ASA [email protected]

Bryce Erickson, ASA, [email protected]

Travis W. Harms, CFA, CPA/[email protected]

MERCER CAPITAL

Memphis5100 Poplar Avenue, Suite 2600Memphis, Tennessee 38137901.685.2120

Dallas12201 Merit Drive, Suite 480Dallas, Texas 75251214.468.8400

Nashville102 Woodmont Blvd., Suite 231Nashville, Tennessee 37205615.345.0350

www.mercercapital.com

Underwriters

• P&C, life & health, and managed care

• Reinsurance

• Captives and risk retention groups

http://mercercapital.com/industries/financial-institutions/insurance/



mailto:parrisl%40mercercapital.com?subject=

mailto:ericksond%40mercercapital.com?subject=

mailto:ericksonb%40mercercapital.com?subject=


mercer capital's value focus: insurance industry | q4 2015

Economy & Finance