Observations:
Future growth plans already put pressure on BCAR in year 1 necessitating a change in capital strategy. Options 2 and 3 afford the most long term growth in surplus (less ceded margin over time).
The larger QS cession options have a detrimental impact on profitability.
BCAR
Earnings
Options Current and 4 afford the highest ROE.
Surplus
ROE
In this specif ic case, our client’s current capital level was not suff icient to support their f ive-year strategic plan. Their key objectives were to protect their stressed BCAR and minimize volatility. Options 2 and 3 performed best long term, but 2 came with a larger debt facility than the client was willing to entertain. For this reason, the blended QS/debt option (3) was their selection. Answers Not Output Capital is a critical part of any strategic plan. We provide clients with the intelligence they need to compare all available options and make an informed decision.
Surplus (M) ROE Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5
Current Option 1 Option 2 Option 3 Option 4
$184.1
$217.8
$262.7
$320.4
$387.3
5.5% 16.8% 18.7% 19.8% 18.9%
$169.2
$186.0
$210.3
$244.1
$284.4
-0.5% 9.5% 12.3% 14.9% 15.3%
$236.4
$267.5
$309.6
$364.5
$428.6
2.9% 12.3% 14.6% 16.3% 16.2%
$209.5
$234.9
$269.9
$316.4
$371.0
1.7% 11.4% 13.9% 15.8% 15.9%
$169.2
$186.0
$213.6
$261.7
$325.4
-0.5% 9.5% 13.8% 20.2% 21.7%
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