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in addition to several other business across the company: LifeLine Asia: Asian-based life insurance business. As a result of economic downturn. What are some of the other key factors that InsureCo should consider when assessing which units to divest? 1 Insurance Business Restructuring Copyright © 2011 Deloitte Development LLC. with revenues of over $25B in 2009. Problem statement InsureCo has approached Deloitte to assess candidates for divestiture and to develop a game plan for executing the divestiture of selected business units 1. as well as assist in the operational separation of the business units¶ operations from InsureCo.-based life insurance business. the tightening of the credit markets and downturn in the economy has caused their profitability to drop significantly from 10% to 5% in the most recent year. It is considering divesting one of the following business units. our client has decided to evaluate their business portfolio and divest portions of their business to raise capital and refocus on their core general insurance business. multi-national insurance provider.S. All rights reserved. 2. Their goal is to raise over $3B in capital through the sale of various business units.Insurance business restructuring Business Situation Our client. is a large. However. . with $250MM in annual revenues All-World Life: A U. with $100MM in annual revenues Deloitte Consulting LLP (³Deloitte´) has been engaged to identify and recommend the most viable business unit candidates for divestiture. InsureCo. Which company would you advise InsureCo to divest? Please use available data to support your argument. The management team has already identified two potential candidates for divestiture from its life insurance division.
InsureCo could cross-sell property and casualty products to existing customers.5 times the size in terms of revenue and 2. Which company would you advise InsureCo to divest? Which company would you advise InsureCo to divest? Please use available data to support your argument. Industry outlook is poor in life insurance. The client should consider divesting bigger companies. but also synthesize findings across tables.2 times in terms of profit so would run a higher valuation The large number of customers may indicate that there is significant room to penetrate each customer and grow those accounts Asia seems to be more profitable overall for InsureCo A great answer will include the items above. . conclusions could be: For All-World Life LifeLine Asia topline is growing but less profitably and would therefore be more difficult to sell All-World profit margin continues to improve year over year Large customers will help acquirer be laser focused on retaining the book of business for each one For Life Line Asia LifeLine is 2. Since property and casualty has the highest growth rate and largest market size overall. (Note to interviewer: Please provide candidate with data sheet) A good answer will draw the following conclusions from the data provided: Both companies revenues are increasing but the profitability of LifeLine Asia is deteriorating while All-World Life is improving Both companies appear to be gaining more customers but All-World Life¶s customers are significantly larger than LifeLine Asia InsureCo is more profitable in Europe and Asia than North America InsureCo has been losing its high-grossing customers. All rights reserved.Insurance business restructuring Prompt Questions and Responses (For interviewer reference ONLY) 1. drawn from the data makes sense. this will decrease the complexity of managing all the individual transactions The candidate may suggest that this is not the best time to sell the life insurance companies and InsureCo may want to divest a company in property and casualty or long-term disability. At a high level. 2 Insurance Business Restructuring Copyright © 2011 Deloitte Development LLC. the interviewer should grade the candidate on whether the conclusion. in terms of revenue and profit Industry trends indicate that InsureCo focus on long-term disability and property and casualty going forward InsureCo concentrates on life and long-term disability insurance but not in property and casualty insurance After this analysis the candidate should make an argument for either of the two companies. The companies in this case are a very small part of InsureCo. so InsureCo¶s life insurance companies may be undervalued at this time. Some findings includes: InsureCo is more profitable in Europe and Asia although LifeLine Asia is not displaying those characteristics InsureCo should consider getting out of the life insurance area and increase the size of their long-term disability Although not a huge part of their business today.
000 InsureCo 200 20 900 100 10 250 95 8 225 90 5 200 InsureCo geographies (2009) 2007 Revenue North America Europe Asia 2009 Revenue ($B) Net Income ($B) Customers (thousands)(K) 2008 Net Income Customers 25 1. .25 750 30 3 800 28 2.100 225 21 1. All rights reserved.Insurance business restructuring ² data sheet LifeLine Asia 2009 Revenue ($MM) Net income ($MM) Customers (thousands) All-World Life 2007 2009 Revenue ($MM) Net income ($MM) Customers (thousands) 2008 2008 2007 250 22 1.4 700 80% 15% 5% 70% 20% 10% 60% 30% 10% Industry segment overview 2009 Life Property and casualty Long-term disability InsuranceCo segment overview 2009 Life Property and casualty Long-term disability 3-yr Projected Growth (CAGR 15% 70% 15% -3% 6% 2% 50% 10% 40% 3 Insurance Business Restructuring Copyright © 2011 Deloitte Development LLC.
For example. measures need to be taken to retain these individuals. the company needs to assess the potential loss in revenue. What are some of the other key factors that InsureCo should consider when assessing which units to divest? A good answer will be logically structured to address various business considerations including: Overall culture/people impact : Selling off the highest quality assets can disrupt the employee base and change the overall image of the company and cultural underpinnings. Many business units are dependent upon corporate IT systems for support and running the business. Geographic reach/overlap: Considerations should be made to determine where the company has overlap in various geographies and product mixes. but also explore the impact of information technology (IT) and key technology systems and infrastructure. A great answer will include the items above. 4 Insurance Business Restructuring Copyright © 2011 Deloitte Development LLC. All rights reserved. Impact to remaining revenue streams: Candidates should explore the impact to that a divested business unit will have on the portions of the business that remain. as well as if the divesting business own key systems that will be required by the parent post-divestiture. The corporate parent will need to consider the level of effort to fully separate these business units. . Considerations should also be made around how to retain key talent at the remaining company. If certain employees in the divested business are being groomed for executive positions at the corporate parent. legal and regulatory considerations must be made. Potential buyers: Who are the prospective buyers for the business and what are the potential issues with making a deal with each one? If any of these business are being spun out into separate companies (via initial public offering).Insurance Business Restructuring Prompt Questions and Responses (For interviewer reference ONLY) 2. if other insurance and investment products are cross-sold at a life insurance business unit that is being sold.
accelerated divestiture of a number of business units. The Deloitte team assisted the client by: Creating a robust divestiture process Expediting and aligning the planning process with separation blueprints. . but divestitures can also be an effective tool to help businesses sharpen their focus and use proceeds to invest in high-growth areas. day one readiness plans. All rights reserved. In this situation.Insurance business restructuring Wrap Up Companies frequently look to merger and acquisition activity as a way to accelerate their growth. and exit plans Execution of issue-free day one for numerous divested business units and successful day two Deloitte is viewed as a trusted advisor to the client and has conducted numerous project to help the client transform their business operations 5 Insurance Business Restructuring Copyright © 2011 Deloitte Development LLC. Deloitte was brought in to help the client with an efficient.
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