Exhibit (c)(iii)
| STRICTLY PRIVATE & CONFIDENTIAL | DRAFT - CONFIDENTIAL | |
|
[***] indicates information has been omitted on the basis of a confidential treatment request pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. This information has been filed separately with the Securities and Exchange Commission. |
INVESTMENT BANKING |
Project Elk
Board Discussion Materials
Goldman Sachs & Co. LLC
April 4, 2024
Goldman Sachs does not provide accounting, tax, or legal advice. Notwithstanding anything in this document to the contrary, and except as required to enable compliance with applicable securities law, you (and each of your employees, representatives, and other agents) may disclose to any and all persons the US federal income and state tax treatment and tax structure of the transaction and all materials of any kind (including tax opinions and other tax analyses) that are provided to you relating to such tax treatment and tax structure, without Goldman Sachs imposing any limitation of any kind.
| DRAFT - CONFIDENTIAL |
 | Disclaimer | INVESTMENT |
These materials have been prepared and are provided by Goldman Sachs on a confidential basis solely for the information and assistance of the Board of Directors and senior management of Elk (the "Company") in connection with their consideration of the matters referred to herein. These materials and Goldman Sachs’ presentation relating to these materials (the “Confidential Information”) may not be disclosed to any third party or circulated or referred to publicly or used for or relied upon for any other purpose without the prior written consent of Goldman Sachs. The Confidential Information was not prepared with a view to public disclosure or to conform to any disclosure standards under any state, federal or international securities laws or other laws, rules or regulations, and Goldman Sachs does not take any responsibility for the use of the Confidential Information by persons other than those set forth above. Notwithstanding anything in this Confidential Information to the contrary, the Company may disclose to any person the US federal income and state income tax treatment and tax structure of any transaction described herein and all materials of any kind (including tax opinions and other tax analyses) that are provided to the Company relating to such tax treatment and tax structure, without Goldman Sachs imposing any limitation of any kind. The Confidential Information has been prepared by the Investment Banking Division of Goldman Sachs and is not a product of its research department.
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The Confidential Information has been prepared based on historical financial information, forecasts and other information obtained by Goldman Sachs from publicly available sources, the management of the Company or other sources (approved for our use by the Company in the case of information from management and non-public information). In preparing the Confidential Information, Goldman Sachs has relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by us, and Goldman Sachs does not assume any liability for any such information. Goldman Sachs does not provide accounting, tax, legal or regulatory advice.
Goldman Sachs has not made an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance sheet assets and liabilities) of the Company or any other party to any transaction or any of their respective affiliates and has no obligation to evaluate the solvency of the Company or any other party to any transaction under any state or federal laws relating to bankruptcy, insolvency or similar matters. The analyses contained in the Confidential Information do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold or purchased. Goldman Sachs’ role in any due diligence review is limited solely to performing such a review as it shall deem necessary to support its own advice and analysis and shall not be on behalf of the Company. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses, and Goldman Sachs does not assume responsibility if future results are materially different from those forecast.
The Confidential Information does not address the underlying business decision of the Company to engage in any transaction, or the relative merits of any transaction or strategic alternative referred to herein as compared to any other transaction or alternative that may be available to the Company. The Confidential Information is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Goldman Sachs as of, the date of such Confidential Information and Goldman Sachs assumes no responsibility for updating or revising the Confidential Information based on circumstances, developments or events occurring after such date. The Confidential Information does not constitute any opinion, nor does the Confidential Information constitute a recommendation to the Board, any security holder of the Company or any other person as to how to vote or act with respect to any transaction or any other matter. The Confidential Information, including this disclaimer, is subject to, and governed by, any written agreement between the Company, the Board and/or any committee thereof, on the one hand, and Goldman Sachs, on the other hand. The Confidential Information does not address, nor does Goldman Sachs express any view as to, the potential effects of volatility in the credit, financial and stock markets on the Company, any other party to any transaction or any transaction.
| 2 | | |
| DRAFT - CONFIDENTIAL |
| INVESTMENT |
I. Process Overview
| 3 | | |
| DRAFT - CONFIDENTIAL |
| Overview
of Stork Proposal | INVESTMENT |
| Headline Offer Value / Consideration |
■ Aggregate consideration of $4.948bn, comprised of $4.198bn fully diluted equity value and $750mm pre-closing dividend to acquire all outstanding ordinary shares of Elk1
■ Stork stated per share offer price of $3272
■ Assumes Elk pays pre-closing dividend(s) of $750mm ahead of transaction closing, less any share repurchases that have been completed since the last public reported balance sheet (31-Dec-2023)
— Offer price reduced dollar for dollar for the pre-closing dividend amount — Assumes all equity awards issued by Elk will become vested and cashed out based on the stated offer price — Assumes all preferred shares in the Company remain outstanding — Dividend to be paid pro-rata to current shareholders, inclusive of Stork |
| Acquiring Entity / Source of Financing | ■ Contemplating a newly formed entity directly or indirectly controlled by one or more private investment funds affiliated with Stork
■ Expect to finance transaction via combination of cash from one or more of Stork’s investment vehicles or affiliated funds, as well as potentially bringing in certain co-investors
— Will also consider raising bank financing to finance a portion of the transaction |
| Areas of Focus in Due Diligence | ■ Confirmatory in nature only given significant due diligence completed when making initial investment in Elk
■ Key areas include refresh of reserve adequacy analysis, review of latest asset tape, marks of illiquid and semi-liquid assets, reinsurance trust investment guidelines, quality of earnings review, and customary financial / operational / accounting / tax / legal / regulatory due diligence
■ Expect to be able to complete outstanding diligence by the end of April 2024, assuming appropriate access to Elk management and information |
| Anticipated Approvals Required | ■ Approval from Stork Investment Committee before entering into binding proposal (initial non-binding proposal has been reviewed by relevant Investment Committee based on feedback conveyed by Stork)
■ Applicable anti-trust, foreign direct investment and regulatory approvals |
| Transaction Advisors | ■ Hired Simpson Thatcher (M&A), Willkie Farr & Gallagher (regulatory), Cleary Gottlieb Steen & Hamilton (funds) as legal advisors, Oliver Wyman as actuarial advisor, and EY and KPMG as accounting / tax advisors
■ Yet to finalize financial advisor(s) |
Source: Stork IOI submitted on 24-Mar-2023. 1 Based on Elk computed diluted shares outstanding inclusive of ordinary shares, non-voting ordinary shares, RSUs, PSUs and JSOP shares as of 31-Dec-2023. Elk has not repurchased any shares since the last reported balance sheet date (31-Dec-2023). 2 $327 per share value based on Stork written proposal, inclusive of $750mm dividend. See page 6 for computed per share calculation based on Elk diluted shares outstanding inclusive of ordinary shares, non-voting ordinary shares, RSUs, PSUs and JSOP shares as of 31-Dec-2023.
| Process Overview | 4 | | |
| DRAFT - CONFIDENTIAL |
| INVESTMENT |
II. Elk Summary Preliminary Valuation Assessment
| Process Overview | 5 | | |
| DRAFT - CONFIDENTIAL |
|
Summary of Key Economic Terms
Stork Mar-2024 Proposal | ($ in millions)
|
INVESTMENT |
| Analysis at Various Prices | |||||||||||||||
| Consideration Paid by Stork | $ 4,198 | $ 4,219 | $ 4,296 | $ 4,373 | $ 4,450 | $ 4,527 | Elk Standalone < Preliminary Q1 2024E BVPS (incl. AOCI): $340
< Preliminary Q1 2024E BVPS (excl. AOCI): $364 | ||||||||
| Pre-Closing Dividend | 750 | 750 | 750 | 750 | 750 | 750 | |||||||||
| Total Equity Purchase Price | $ 4,948 | $ 4,969 | $ 5,046 | $ 5,123 | $ 5,200 | $ 5,277 | |||||||||
| Implied Purchase Price Per Share¹ | $ 328.67 | $ 330.00 | $ 335.00 | $ 340.00 | $ 345.00 | $ 350.00 | |||||||||
| Reference Valuation | |||||||||||||||
| Multiple | Peer Trading Comparables | ||||||||||||||
| Traditional | Other | ||||||||||||||
| Bermuda | Bermuda | Precedent | |||||||||||||
| Metric | Value | Current | Bid Price | Illustrative Bid Price Sensitivity | Reinsurers² | Reinsurers³ | Transactions | ||||||||
| Implied Purchase Premiums | |||||||||||||||
| Day Before Stork Letter (22-Mar-2024) | $ 292.50 | - | 12.4 % | 12.8 % | 14.5 % | 16.2 % | 17.9 % | 19.7 % | |||||||
| Current Share Price | 310.76 | - | 5.8 | 6.2 | 7.8 | 9.4 | 11.0 | 12.6 | |||||||
| All-Time-High (28-Mar-2024) | 310.76 | 5.8 | 6.2 | 7.8 | 9.4 | 11.0 | 12.6 | ||||||||
| 52-Week-High (28-Mar-2024) | 310.76 | - | 5.8 | 6.2 | 7.8 | 9.4 | 11.0 | 12.6 | |||||||
| 52-Week-Low (29-Mar-2023) | 229.09 | - | 43.5 | 44.0 | 46.2 | 48.4 | 50.6 | 52.8 | |||||||
| 30-Day VWAP | 299.51 | - | 9.7 | 10.2 | 11.8 | 13.5 | 15.2 | 16.9 | |||||||
| 60-Day VWAP | 290.24 | - | 13.2 | 13.7 | 15.4 | 17.1 | 18.9 | 20.6 | |||||||
| 90-Day VWAP | 285.50 | - | 15.1 | 15.6 | 17.3 | 19.1 | 20.8 | 22.6 | |||||||
| VWAP Since Stork Investment (08-Nov-2023) | 283.42 | - | 16.0 | 16.4 | 18.2 | 20.0 | 21.7 | 23.5 | |||||||
| Standalone | |||||||||||||||
| Implied Price / Book Value Multiples | Per Share 4 | ||||||||||||||
| YE 2023 Book Value (incl. AOCI) | $ 337 | $ 5,025 | 0.92 x | 0.98 x | 0.99 x | 1.00 x | 1.02 x | 1.03 x | 1.05 x | 1.25 x | 0.79 x | 1.09 x | |||
| YE 2023 Book Value (excl. AOCI) | 359 | 5,361 | 0.86 | 0.92 | 0.93 | 0.94 | 0.96 | 0.97 | 0.98 | 1.17 | 0.79 | 1.18 x | |||
| YE 2023 Book Value (Management Adjusted)5 | 361 | 5,391 | 0.86 | 0.92 | 0.92 | 0.94 | 0.95 | 0.96 | 0.98 | - | |||||
| Implied Price / Tangible Book Value Multiples | |||||||||||||||
| YE 2023 Tangible Book Value (incl. AOCI) | $ 333 | $ 4,962 | 0.93 x | 1.00 x | 1.00 x | 1.02 x | 1.03 x | 1.05 x | 1.06 x | 1.29 x | 0.83 x | 1.11 x | |||
| YE 2023 Tangible Book Value (excl. AOCI) | 355 | 5,298 | 0.87 | 0.93 | 0.94 | 0.95 | 0.97 | 0.98 | 1.00 | 1.20 | 0.83 | - | |||
| YE 2023 Tangible Book Value (Management Adjusted)5 | 357 | 5,328 | 0.87 | 0.93 | 0.93 | 0.95 | 0.96 | 0.98 | 0.99 | - | |||||
| Implied Price / Mangement Projected Earnings Multiples | |||||||||||||||
| 2024E Earnings - Per Management | $ 659 | 7.0 x | 7.5 x | 7.5 x | 7.7 x | 7.8 x | 7.9 x | 8.0 x | 6.4 x | 7.8 x | - | ||||
| 2025E Earnings - Per Management | 572 | 8.1 | 8.7 | 8.7 | 8.8 | 9.0 | 9.1 | 9.2 | 6.0 | 7.1 | - | ||||
Source: Elk Management preliminary projections, FactSet as of 28-Mar-2024, Company filings. ¹ Based on Elk computed diluted shares outstanding inclusive of ordinary shares, non-voting ordinary shares, RSUs, PSUs and JSOP shares as of 31-Dec-2023. Analysis accounts for share count dilution applied to valuation range. 2 Traditional Bermuda Reinsurers include Everest Re, RenaissanceRe, Axis Capital, and Fidelis. 3 Other Bermuda Reinsurers include Hamilton, Greenlight Re and SiriusPoint. 4 Based on Elk management standalone fully diluted shares outstanding as of 31-Dec-2023. 5 Adjusted for net realized and unrealized gains / (losses) on fixed maturities available for sale, fixed maturities trading, and funds held, change in fair value of insurance contracts, and amortization of fair value adjustments.
| Elk Summary Preliminary Valuation Assessment | 6 | | |
| DRAFT - CONFIDENTIAL |
|
Elk’s Price to Book Value Multiple Over Time
|
INVESTMENT |
Source: Company filings, FactSet as of 28-Mar-2024. 1 Adjusted for net realized and unrealized gains / (losses) on fixed maturities available for sale, fixed maturities trading, and funds held, change in fair value of insurance contracts, and amortization of fair value adjustments.
| Elk Summary Preliminary Valuation Assessment | 7 | | |
| DRAFT - CONFIDENTIAL |
|
Overview of Elk Historical Financials
($ in millions, except per share data)
|
INVESTMENT |
Source: Elk Management and public company reported financials. Note: ROE calculated based on average Common Equity. 1 Other income includes Defendant A&E PPD, Premium / Acquisition costs / CY Losses, Change in Policy Holder Benefits, Ceding Commissions Expense, Policy Holder Investment Income, and Other income – cash. 2 Net income (loss) attributable to Elk ordinary shareholders as reported on company’s annual statements. 3 Based on Elk computed diluted shares outstanding inclusive of ordinary shares, non-voting ordinary shares, RSUs, PSUs and JSOP shares as of respective year ends. 4YE 2021 book value presented at time of public reporting (31-Dec-2021), without adjusting for retrospective ASU 2018-12 accounting adjustments. 5 Calculation refers to page 30, Elk Historical Management Adjusted Book Value Reconciliation.
| Elk Summary Preliminary Valuation Assessment | 8 | | |
| DRAFT - CONFIDENTIAL |
|
Overview of Elk Management Preliminary Projections
($ in millions, except per share data)
|
INVESTMENT |
| Elk Summary Preliminary Valuation Assessment | 9 | | |
| DRAFT - CONFIDENTIAL |
|
Elk Investment Portfolio Evolution
($ in billions, unless stated otherwise)
|
INVESTMENT |
| YE 2020 | YE 2022 | YE 2023 | YE 2028 | ||||
Management Projected Annual Risk Asset Return:
2024: 9.2 %
2025: 9.8 %
2026: 10.9 %
2027: 11.4 %
2028: 11.4 %
|
 |
 |
 |
 | |||
| Risk
Assets as % of Book Value1 |
83% | 100% | 90% | 75% | |||
| Total
Investable Assets2 |
$15.8 | $15.1 | $14.9 | $23.7 | |||
Source: Company filings, investor presentations and Elk Management preliminary projections.
1
Risk assets defined as private credit funds, fixed income funds, public equities, privately held equities, private equity funds,
hedge funds, equity funds, CLO equities, CLO equity funds and real estate.
2 Excludes management and custody fees.
| Elk Summary Preliminary Valuation Assessment | 10 | | |
| DRAFT - CONFIDENTIAL |
 |
Summary of Preliminary Financial Analyses ($ in millions, except per share data) |
INVESTMENT |
Source: Elk Management projections, Company filings, FactSet. Market data as of 28-Mar-2024. Note: Per share metrics based on Elk computed diluted shares outstanding inclusive of ordinary shares, non-voting ordinary shares, RSUs, PSUs and JSOP shares as of 31-Dec-2023. Analysis accounts for share count dilution applied to valuation range. 1 Traditional Bermuda Reinsurers include RenaissanceRe, Everest Re, Axis Capital and Fidelis; Other Bermuda Reinsurers include Hamilton, Greenlight Re and SiriusPoint.
| Elk Summary Preliminary Valuation Assessment | 11 | | |
| DRAFT - CONFIDENTIAL |
|
 |
Elk Summary Dividend Discount Model ($ in millions, unless otherwise noted) |
INVESTMENT |
| Summary of Book Value Generation and Cash Flow Distributions |
| 2023A | 2024E | 2025E | 2026E | 2027E | 2028E | |
| BoP Book Value | $ 5,025 | $ 5,547 | $ 6,110 | $ 6,800 | $ 7,537 | |
| (+) Earnings | 659 | 572 | 708 | 818 | 1,010 | |
| (-) Share Repurchases | (250) | (100) | (100) | (100) | (100) | |
| (+) OCI Change | 113 | 92 | 82 | 18 | 14 | |
| EoP Book Value (incl. AOCI) | $ 5,025 | $ 5,547 | $ 6,110 | $ 6,800 | $ 7,537 | $ 8,461 |
| + / (-) AOCI | 336 | $ 223 | $ 131 | $ 49 | $ 31 | $ 17 |
| EoP Book Value (excl. AOCI) | $ 5,361 | $ 5,769 | $ 6,241 | $ 6,849 | $ 7,568 | $ 8,478 |
| EoP Book Value (incl. AOCI) | $ 5,025 | $ 5,547 | $ 6,110 | $ 6,800 | $ 7,537 | $ 8,461 |
| (+) Net URL / (G) on AFS/HFT/Funds Held Securities | 721 | 517 | 352 | 204 | 172 | 146 |
| (-) Change in Fair Value of Insurance Contracts | (246) | (211) | (180) | (152) | (126) | (102) |
| (-) Fair Value Adjustment | (108) | (99) | (89) | (81) | (73) | (66) |
| Management Adj. Book Value | $ 5,391 | $ 5,754 | $ 6,192 | $ 6,771 | $ 7,509 | $ 8,439 |
| Distributable Cash Flows | $ 250 | $ 100 | $ 100 | $ 100 | $ 100 |
Sensitivity Analysis
| Elk Implied Share Price | ||||||||
| Discount Rate | ||||||||
| 7.50 % | 7.95 % | 8.40 % | 8.85 % | 9.30 % | 9.75 % | |||
 |
0.70 x | $ 315 | $ 309 | $ 304 | $ 298 | $ 292 | $ 287 | |
| 0.75 x | 330 | 324 | 318 | 316 | 310 | 305 | ||
| 0.80 x | 350 | 343 | 337 | 330 | 324 | 318 | ||
| 0.85 x | 369 | 362 | 355 | 348 | 342 | 335 | ||
| 0.90 x | 388 | 380 | 373 | 366 | 359 | 353 | ||
Source: Elk Management preliminary projections, FactSet, Company filings. Note: Market Data as of 28-Mar-2024; Per share metrics based on Elk computed diluted shares outstanding inclusive of ordinary shares, non-voting ordinary shares, RSUs, PSUs and JSOP shares as of 31-Dec -2023. Analysis accounts for share count dilution applied to valuation range. Adjusted Book Value adjusts for net realized and unrealized gains / (losses) on fixed maturities available for sale, fixed maturities trading, and funds held, change in fair value of insurance contracts, and amortization of fair value adjustments.
| Elk Summary Preliminary Valuation Assessment | 12 | | |
| DRAFT - CONFIDENTIAL |
|
|
Elk Beta and Cost of Equity Analysis Comparison of Historical Peer Equity Betas | Last 10 Years |
INVESTMENT |
Source: Axioma, Duff and Phelps; market data as of 28-Mar-2024
¹ Traditional Bermuda Reinsurers include RenaissanceRe, Everest Re, Axis Capital, and Fidelis (Since 03-Jul-2023 IPO, the earliest date for available data). ² Other Bermuda Reinsurers include Hamilton (Since 13-Nov-2023 IPO, the earliest date for available data), Greenlight Re and SiriusPoint (Since 19-Aug-2014, the earliest date for available data).
| Elk Summary Preliminary Valuation Assessment | 13 | | |
| DRAFT - CONFIDENTIAL |
|
 |
Present Value of Future Share Price Analysis |
INVESTMENT |
Source: Elk Management preliminary projections, Company filings, FactSet. Note: Market data as of 28-Mar-2024; Per share metrics based on Elk computed diluted shares outstanding inclusive of ordinary shares, non-voting ordinary shares, RSUs, PSUs and JSOP shares as of respective year ends. Analysis accounts for share count dilution applied to valuation range. Assumes number of shares repurchased in each year consistent with Elk Management Projections. 1 Adjusted for net realized and unrealized gains / (losses) on fixed maturities available for sale, fixed maturities trading, and funds held, change in fair value of insurance contracts, and amortization of fair value adjustments. 2 Based on computed diluted shares outstanding at current P / Management Adjusted BV range (0.86x). 3 Represents median of range used for Dividend Discount Model.
| Elk Summary Preliminary Valuation Assessment | 14 | | |
| DRAFT - CONFIDENTIAL |
|
 |
Selected Precedent P&C (Re)insurance M&A ($ in millions) |
INVESTMENT |
| Ann. Date | Acquiror | Target | Equity Value | % Cash | P/BV incl. AOCI1 | P/TBV incl. AOCI1 | P/BV excl. AOCI1 |
| Oct-21 | Covea | PartnerRe 2 | 9,000 | 100 | 1.25 | 1.35 | 1.24 |
| Oct-18 | RenaissanceRe | Tokio Millenium Re | 1,469 | 83 | 1.01 | 1.02 | NA |
| Aug-15 | Exor | PartnerRe | 6,875 | 100 | 1.10 | 1.21 | 1.10 |
| Mar-15 | Endurance | Montpelier Re | 1,831 | 25 | 1.22 | 1.22 | 1.22 |
| Nov-14 | RenaissanceRe | Platinum | 1,925 | 60 | 1.13 | 1.13 | 1.20 |
| Dec-12 | Markel | Alterra | 3,130 | 32 | 1.07 | 1.09 | 1.18 |
| Aug-12 | Validus | Flagstone | 623 | 24 | 0.74 | 0.74 | 0.73 |
| Nov-11 | Alleghany | Transatlantic | 3,431 | 24 | 0.80 | 0.80 | 0.85 |
| Low | 0.74 x | 0.74 x | 0.73 x | ||||
| 25th Percentile | 0.96 | 0.96 | 0.98 | ||||
| Median | 1.09 | 1.11 | 1.18 | ||||
| 75th Percentile | 1.16 | 1.21 | 1.21 | ||||
| High | 1.25 | 1.35 | 1.24 | ||||
Source: Public filings and press releases, CapIQ, SNL, Thomson Reuters.
| 1 | Based on reported aggregate purchase price and book value multiples (including AOCI) where available. |
| 2 | Excludes future capital synergies and prospective future cash dividends from excess capital, as well as any value attributed to strategic partnership between AIG and RNR Capital Partners |
| Elk Summary Preliminary Valuation Assessment | 15 | | |
| DRAFT - CONFIDENTIAL | ||
 | Premia Paid in Precedent U.S. Public M&A
All-Cash
Acquisitions | Since 01-Jan-2014 between $1.0bn and $10.0bn | INVESTMENT BANKING |
Source: Dealogic, CapIQ as of 28-Mar-2024.
| Elk Summary Preliminary Valuation Assessment | 16 | | |
| DRAFT - CONFIDENTIAL | ||
 | Premia Paid in Precedent U.S. Public M&A
All-Cash
Acquisitions | Since 01-Jan-2014 between $1.0bn and $10.0bn | INVESTMENT |
Source: Dealogic, CapIQ as of 28-Mar-2024.
| Elk Summary Preliminary Valuation Assessment | 17 | | |
| DRAFT - CONFIDENTIAL | ||
| Selected Peer Common Stock Comparison
($ in millions, except per share amounts)
| INVESTMENT |
| Closing | Equity | Calendarized | LTM | |||||||||||
| Price | Market | % of 52 | P/E | P/B | P/B | P / TBV | P / TBV | ROE | Dividend | |||||
| Company | 28-Mar-24 | Cap | Wk. High | 2024E | 2025E | (in. AOCI) | (ex. AOCI) | (in. AOCI) | (ex. AOCI) | 2024E | 2025E | Yield | ||
| Elk | $ 310.76 | $ 4,613 | 100.0 % | 8.4 x | 7.8 x | 0.92 x | 0.86 x | 0.93 x | 0.87 x | NA | NA | 0.0 % | ||
| Traditional Bermuda Reinsurers | ||||||||||||||
| Everest Re | $ 397.50 | $ 17,303 | 95.9 % | 6.4 x | 5.8 x | 1.31 x | 1.22 x | 1.31 x | 1.22 x | 17.1 % | 16.2 % | 1.7 % | ||
| RenaissanceRe | 235.03 | 12,644 | 98.8 | 6.7 | 6.7 | 1.45 | 1.45 | 1.59 | 1.59 | 20.5 | 18.8 | 0.7 | ||
| Axis | 65.02 | 5,621 | 100.0 | 6.4 | 6.3 | 1.19 | 1.11 | 1.27 | 1.17 | 17.4 | 15.4 | 2.7 | ||
| Fidelis | 19.48 | 2,317 | 100.0 | 6.1 | 5.4 | 0.95 | 0.94 | 0.95 | 0.94 | 13.3 | 12.9 | 0.5 | ||
| Median - Traditional Bermuda Reinsurers | 99.4 % | 6.4 x | 6.0 x | 1.25 x | 1.17 x | 1.29 x | 1.20 x | 17.3 % | 15.8 % | 1.2 % | ||||
| Other Bermuda Reinsurers | ||||||||||||||
| SiriusPoint | $ 12.71 | $ 2,234 | 100.0 % | 7.9 x | 7.1 x | 0.97 x | 0.97 x | 1.03 x | 1.04 x | NA | NA | 0.0 % | ||
| Hamilton | 13.93 | 1,621 | 88.4 | 5.1 | 4.0 | 0.79 | 0.79 | 0.83 | 0.83 | 12.7 | 13.7 | 0.0 | ||
| Greenlight Re | 12.47 | 462 | 98.7 | 7.8 | 7.8 | 0.78 | 0.78 | 0.78 | 0.78 | NA | NA | 0.0 | ||
| Median - Other Bermuda Reinsurers | 98.7 % | 7.8 x | 7.1 x | 0.79 x | 0.79 x | 0.83 x | 0.83 x | 12.7 % | 13.7 % | 0.0 % | ||||
| Overall Low | 88.4 % | 5.1 x | 4.0 x | 0.78 x | 0.78 x | 0.78 x | 0.78 x | 12.7 % | 12.9 % | 0.0 % | ||||
| Overall Median | 98.8 | 6.4 | 6.3 | 0.97 | 0.97 | 1.03 | 1.04 | 17.1 | 15.4 | 0.5 | ||||
| Overall Mean | 97.4 | 6.6 | 6.2 | 1.06 | 1.04 | 1.11 | 1.08 | 16.2 | 15.4 | 0.8 | ||||
| Overall High | 100.0 | 7.9 | 7.8 | 1.45 | 1.45 | 1.59 | 1.59 | 20.5 | 18.8 | 2.7 | ||||
Source: Company filings, FactSet; market data as of 28-Mar-2024. Note: Earnings projections used for computation of P/E multiples based on median of equity research analyst projections.
| Elk Summary Preliminary Valuation Assessment | 18 | | |
| DRAFT - CONFIDENTIAL | ||
| Elk Historical Valuation Compared to Peers
P/BV Multiples | Last 3 Years
|
INVESTMENT |
Source: Elk Management, public company filings, FactSet as of 28-Mar-2024
¹ Traditional Bermuda Reinsurers include Renaissance Re, Everest Re, Axis Capital, and Fidelis (Since 03-Jul-2023 IPO, the earliest date for available data). ² Other Bermuda Reinsurers include Hamilton (Since 13-Nov-2023 IPO, the earliest date for available data), Greenlight Re and SiriusPoint.
| Elk Summary Preliminary Valuation Assessment | 19 | | |
| DRAFT - CONFIDENTIAL | ||
| Elk Historical Valuation Compared to Peers
P/BV Multiples | Last 3 Years
|
INVESTMENT |
Source: FactSet as of 28-Mar-2024
¹ Traditional Bermuda Reinsurers include Renaissance Re, Everest Re, Axis Capital, and Fidelis (Since 03-Jul-2023 IPO, the earliest date for available data). ² Other Bermuda Reinsurers include Hamilton (Since 13-Nov-2023 IPO, the earliest date for available data), Greenlight Re and SiriusPoint.
| Elk Summary Preliminary Valuation Assessment | 20 | | |
| DRAFT - CONFIDENTIAL | ||
|
Detailed Equity Capitalization and Share Count Table |
INVESTMENT |
Security Type |
As
of Latest Public Filings |
As
Computed Per Stork |
||
Voting Ordinary Shares
|
14.631 |
14.631 |
||
Restricted Stock Units
|
0.131 |
|||
Performance Stock Units
|
0.083 |
0.292 |
||
Joint Share Ownership Plan (Treasury Stock Method)
|
0.211 |
0.209 |
||
Fully Diluted Shares Outstanding
|
15.056 |
15.133 |
||
(-) Current Stork Ownership Shares
|
(0.714) |
- |
||
Fully Diluted Shares Outstanding (excl. Current Stork Ownership)
|
14.342 |
- |
Source: Elk management, company filings as of YE 2023, Refinitiv, Stork IOI submitted on 24-Mar-2023
Note: Based on Stork’s stated offer price of $4.948bn. Assumes PSUs granted Mar 1st in each respective year for purposes of change of control pro-rata vesting.
| Elk Summary Preliminary Valuation Assessment | 21 | | |
| DRAFT - CONFIDENTIAL | ||
|
INVESTMENT |
|
III. Potential Next Steps
| DRAFT - CONFIDENTIAL | ||
|
Potential Next Steps | INVESTMENT |
| ■ | Discussion on how to engage with Stork |
| ■ | If willing to engage, discuss potential responses to seek to optimize valuation outcome / other key commercial terms |
| ■ | If ultimately reach an agreement on valuation / other key commercial terms: |
— Due diligence
— Contracts
— Financing syndication
| ■ | Agree on plan to engage with other potential interested parties (process, market check, go shop, fiduciary out, etc.) |
| Potential Next Steps | 23 | | |
| DRAFT - CONFIDENTIAL | ||
|
INVESTMENT |
|
Appendix A: Additional Financial Materials
| DRAFT - CONFIDENTIAL | ||
|
Overview of Elk Management Preliminary Projections (1/2) Income Statement | ($ in millions) |
INVESTMENT |
| 2022A | 2023A | 2024E | 2025E | 2026E | 2027E | 2028E | 2022A
- 2028E CAGR | |
| Technical Result | $ 373 | $ 157 | $ 203 | $ 143 | $ 153 | $ 144 | $ 196 | (10.1)% |
| Net Investment Income (Core Fixed Income Return) | (728) | 713 | 646 | 670 | 712 | 746 | 838 | NM |
| Risk Asset Return | (431) | 397 | 411 | 451 | 551 | 635 | 692 | NM |
| Other Income | 35 | 279 | 10 | 16 | 16 | 16 | 14 | (14.4) |
| Total Revenue | $(751) | $ 1,546 | $ 1,271 | $ 1,280 | $ 1,432 | $ 1,541 | $ 1,740 | NM |
| G&A Expenses | (331) | (369) | (395) | (405) | (405) | (395) | (384) | 2.5 % |
| FVO / FVA / ULAE | 353 | (26) | 39 | 34 | 44 | 58 | 74 | (22.8) |
| Deferred Charge Amortization | (80) | (106) | (133) | (137) | (136) | (138) | (137) | 9.3 |
| Interest, Pref Dividends & FX | (110) | (126) | (131) | (134) | (137) | (140) | (143) | 4.4 |
| Income Tax Benefit / (Expense) | 12 | 250 | (4) | (92) | (115) | (133) | (166) | NM |
| Net Income Before Strategic Investments | $(907) | $ 1,169 | $ 648 | $ 547 | $ 683 | $ 793 | $ 985 | NM |
| Earnings from Disc. Ops and NCI | 75 | (100) | (0) | 0 | 0 | 0 | 0 | NM |
| Earnings from Strategic Investments | (74) | 13 | 12 | 25 | 25 | 25 | 25 | NM |
| Net Income | $(906) | $ 1,082 | $ 659 | $ 572 | $ 708 | $ 818 | $ 1,010 | NM |
Source: Elk Management preliminary projections
Note: Deferred Charge Amortization reflects amount by which estimated ultimate losses payable exceed consideration received at the inception of a retroactive reinsurance agreement.
| Additional Financial Materials | 25 | | |
| DRAFT - CONFIDENTIAL | ||
| Overview of Elk Management Preliminary Projections (2/2) Balance Sheet | ($ in millions) | INVESTMENT |
|
2022A |
2023A |
2024E |
2025E |
2026E |
2027E |
2028E |
2022A - 2028E CAGR | |
| Cash and Investments | $ 15,053 | $ 14,893 | $ 15,656 | $ 17,181 | $ 19,365 | $ 21,512 | $ 23,658 | 7.8 % |
| Restricted Cash | 508 | 266 | 266 | 266 | 266 | 266 | 266 | (10.2) |
| Equity Method Investments | 397 | 334 | 346 | 371 | 396 | 421 | 446 | 1.9 |
| Funds Held by Reinsured Companies | 3,582 | 2,750 | 2,750 | 2,750 | 2,750 | 2,750 | 2,750 | (4.3) |
| Other Assets | 1,483 | 1,712 | 1,760 | 1,734 | 1,728 | 1,716 | 1,708 | 2.4 |
| Total Assets | $ 21,023 | $ 19,955 | $ 20,777 | $ 22,302 | $ 24,504 | $ 26,665 | $ 28,828 | 5.4 % |
|
Loss and LAE Reserves, Net |
$ 11,876 |
$ 11,402 |
$ 11,786 |
$ 12,821 |
$ 14,414 |
$ 15,932 |
$ 17,277 |
6.4 % |
| Life Insurance Reserves | 821 | - | - | - | - | - | - | NM |
| Defendant A&E Liabilities, Net | 607 | 567 | 522 | 482 | 445 | 411 | 378 | (7.6) |
| Debt | 1,829 | 1,831 | 1,831 | 1,831 | 1,831 | 1,831 | 1,831 | 0.0 |
| Other Liabilities | 562 | 508 | 469 | 435 | 390 | 332 | 258 | (12.2) |
| Total Liabilities | $ 15,695 | $ 14,308 | $ 14,607 | $ 15,568 | $ 17,081 | $ 18,506 | $ 19,744 | 3.9 % |
|
Preferred Equity |
$ 510 |
$ 510 |
$ 510 |
$ 510 |
$ 510 |
$ 510 |
$ 510 |
0.0 % |
| Common Equity | 4,464 | 5,025 | 5,547 | 6,110 | 6,800 | 7,537 | 8,461 | 11.2 |
| Total Shareholders Equity (excl. NCI) | $ 4,974 | $ 5,535 | $ 6,057 | $ 6,620 | $ 7,310 | $ 8,047 | $ 8,971 | 10.3 % |
| Memo: Management Adjusted Common Equity | $ 5,873 | $ 5,391 | $ 5,754 | $ 6,192 | $ 6,771 | $ 7,509 | $ 8,439 | 6.2 % |
| Memo: (Redeemable) Non-Controlling Interest | $ 354 | $ 113 | $ 113 | $ 113 | $ 113 | $ 113 | $ 113 | (17.3)% |
| Memo: URG / (L) from AFS Securities in AOCI | $(579) | $ 222 | $ 113 | $ 92 | $ 82 | $ 18 | $ 14 | NM |
| Memo: URG / (L) from HFT Securities in P&L | $(1,181) | $ 66 | $ 91 | $ 73 | $ 66 | $ 15 | $ 11 | NM |
Source:
Elk Management preliminary projections
Note: Other Assets composed of Deferred Charge Assets, Insurance Recoverables and Other Assets.
| Additional Financial Materials | 26 | | |
| DRAFT - CONFIDENTIAL | ||
| Elk Historical Management Adjusted Book Value Reconciliation | INVESTMENT |
| YE 2021 | YE 2022 | YE 2023 | ||
| Total Equity | $ 6,096 | $ 5,160 | $ 5,648 | |
| (Non-Controlling Interest) | - | (186) | (113) | |
| (Preferred Shares) | (510) | (510) | (510) | |
| AOCI | 16 | 302 | 336 | |
| Common Equity excl. AOCI | $ 5,602 | $ 4,766 | $ 5,361 | |
| Common Equity incl. AOCI | 5,586 | 4,464 | 5,025 | |
| Net URL / (G) on AFS Securities | (89) | 647 |  |
|
| Net URL / (G) on HFT Securities | (107) | 400 | 721 | |
| Net URL / (G) on Funds Held - Directly Managed Securities | (106) | 780 | ||
| Change in Fair Value of Insurance Contracts | - | (294) | (246) | |
| Fair Value Adjustments (Amortization) | - | (124) | (108) | |
| Adjusted Common Equity- Management View | $ 5,284 | $ 5,873 | $ 5,391 | |
| Memo: Reported ROE | 7.4 % | (18.0)% | 22.8 % | |
| Memo: Management Adjusted ROE | 10.5 % | (1.1)% | 19.6 % |
Source: Company public filings
Note: Reported ROE and Management Adjusted ROE computed based on average equity. Management publicly reports ROE and Adjusted ROE based off opening equity and opening adjusted equity. Figures depicted at time of public filing.
| Additional Financial Materials | 27 | | |
| DRAFT - CONFIDENTIAL | ||
| Comparison of Elk Management Preliminary Projections Key Value Drivers | ($ in millions, except for per share metrics) | INVESTMENT |
| January 2024 Preliminary Projections | April 2024 Preliminary Projections | Value ∆ (April vs. January) | |||||||||||||||
| 2024E | 2025E | 2026E | 2027E | 2028E | 2024E-2028E CAGR% |
2024E | 2025E | 2026E | 2027E | 2028E | 2024E-2028E CAGR% |
2024E | 2025E | 2026E | 2027E | 2028E | |
| Common BV incl. AOCI | $ 5,555 | $ 5,979 | $ 6,561 | $ 7,296 | $ 8,236 | 10.3 % | $ 5,547 | $ 6,110 | $ 6,800 | $ 7,537 | $ 8,461 | 11.1 % | $(8) | $ 131 | $ 239 | $ 241 | $ 225 |
| BVPS incl. AOCI | $ 412 | $ 462 | $ 526 | $ 605 | $ 704 | 14.3 % | $ 391 | $ 439 | $ 496 | $ 559 | $ 635 | 12.9 % | $(22) | $(23) | $(30) | $(46) | $(68) |
| Management Adj. BV | $ 5,519 | $ 5,918 | $ 6,483 | $ 7,209 | $ 8,143 | 10.2 % | $ 5,754 | $ 6,192 | $ 6,771 | $ 7,509 | $ 8,439 | 10.0 % | $ 235 | $ 274 | $ 289 | $ 300 | $ 296 |
| Net Income | $ 783 | $ 588 | $ 753 | $ 911 | $ 1,120 | 9.4 % | $ 659 | $ 572 | $ 708 | $ 818 | $ 1,010 | 11.2 % | $(123) | $(16) | $(44) | $(92) | $(110) |
| Annual New M&A | $ 3,500 | $ 3,500 | $ 4,000 | $ 4,000 | $ 4,000 | 3.4 % | $ 3,000 | $ 3,000 | $ 3,500 | $ 3,500 | $ 3,500 | 3.9 % | $(500) | $(500) | $(500) | $(500) | $(500) |
| Annual Repurchases | $ 500 | $ 200 | $ 200 | $ 200 | $ 200 | (20.5)% | $ 250 | $ 100 | $ 100 | $ 100 | $ 100 | (20.5)% | $(250) | $(100) | $(100) | $(100) | $(100) |
| URG - P&L | $ 199 | $ 29 | $ 24 | $ 19 | $ 17 | (46.3)% | $ 91 | $ 73 | $ 66 | $ 15 | $ 11 | (40.5)% | $(108) | $ 44 | $ 42 | $(4) | $(5) |
| URG - AOCI | $ 248 | $ 36 | $ 30 | $ 23 | $ 21 | (46.3)% | $ 113 | $ 92 | $ 82 | $ 18 | $ 14 | (40.5)% | $(135) | $ 55 | $ 52 | $(5) | $(6) |
| ROE incl. AOCI | 14.8 % | 10.2 % | 12.0 % | 13.1 % | 14.4 % | (37)bps | 12.5 % | 9.8 % | 11.0 % | 11.4 % | 12.6 % | 15bps | (232)bps | (39)bps | (103)bps | (173)bps | (179)bps |
| Management Adj. ROE | 11.5 % | 10.5 % | 12.4 % | 13.5 % | 14.8 % | 327bps | 11.1 % | 9.1 % | 10.5 % | 11.8 % | 12.9 % | 184bps | (42)bps | (138)bps | (186)bps | (175)bps | (186)bps |
Source: Elk Management preliminary projections
Note: Per share figures based on Elk management preliminary forecasted standalone fully diluted shares outstanding as of respective year ends.
| Additional Financial Materials | 28 | | |
| DRAFT - CONFIDENTIAL | ||
| INVESTMENT |
Appendix B: Additional Stork Materials
| DRAFT - CONFIDENTIAL | ||
| Stork Company Overview | INVESTMENT |
| Stork Company Overview | ||
| ■ | Founded in 2009, Stork is a global investment firm with over $75bn in assets under management and committed capital | |
| — | Created originally as TPG’s dedicated global credit and credit-related investing platform |
| — | Became an independent business in May-2020 and announced the acquisition of Tiger in Jan-2021 |
| — | Stork has over 200 investment professionals globally |
| ■ | Stork has built an internal team dedicated to its insurance capabilities and, in addition to Tiger, has existing insurance investments in Europe and Bermuda |
| — | $130bn insurance assets under management, 600+ insurance portfolio company employees, and 25+ dedicated insurance professionals |
| — | Stork pursues investments in the insurance sector primarily through the Stork TAO platform |
| — | Solutions include block reinsurance, flow reinsurance, legal entity acquisitions and portfolio transfers |
| — | Additional capabilities in Europe via pension risk transfer platforms in the Netherlands and UK |
| Key Stork Insurance Solutions Personnel | ||
 |
 | |
| Michael Muscolino | Rohan Singhal | |
| Partner Stork |
Partner Stork | |
Source: Stork Website, Stork Financials, SNL Financial
Key Metrics
| Stork |
| $75bn+ AUM and Committed Capital |
| 600+ Insurance Portfolio Company Team Members |
| 25+ Stork Dedicated Insurance Professionals |
Recent Developments and Relevant Transactions
| ■ | Oct-2023: Announced the appointment of Imran Siddiqui as the Chief Executive Officer of Tiger |
| ■ | Jul-2023: Announced the appointment of Michael Smith as Executive Chairman of Tiger |
| ■ | Oct-2022: Reinsurance from Guardian Life of $7bn VA reserves |
| ■ | Jan-2022: Reinsurance from Principal Financial of $25bn in FA / ULSG reserves |
| ■ | Dec-2021: Partner with Resolution Life to reinsure of $35bn of FA reserves from Allianz |
| ■ | Jan-2021: Acquisition by Stork of Tiger platform from consortium led by Cornell Capital, Atlas Merchant Capital and TRB Advisors |
| ■ | Jan-2021: $500mm preferred equity capital commitment to specialty insurance / reinsurance platform, Convex |
| Additional Stork Materials | 30 | | |
| DRAFT - CONFIDENTIAL |
 |
Summary of Stork Due Diligence Areas of Focus
| INVESTMENT |
| Actuarial | ■ Refresh of reserve adequacy analysis, with a focus on the recent large portfolios (QBE 2, Aspen, AXA ADC) as well as the general casualty portfolios where Elk undertook reserve strengthening during its annual reserve deep dive process in Q4 2023 | |
| Asset / ALM | ■ Review CUSIP tape and validation of management investment income projections on the inforce asset portfolio ■ Review of marks of illiquid and semi-liquid asset classes (ABS, CLOs, below IG corporates, alternatives) ■ Review of existing reinsurance trust investment guidelines, including opportunities to optimize strategic asset allocation further | |
| Financial
/ Accounting / Tax / HR/ IT |
■ Customary confirmatory due diligence, including quality of earnings review ■ Detailed review of operating expense base of Elk, as well as better understanding Elk’s strategic forward plan on expense management | |
| Legal / Regulatory | ■ Together with the Elk, seek to determine required antitrust, FDI and regulatory approvals / regulatory compliance ■ Review of reinsurance agreements, strategic partnership agreements and other key contracts for any implications or required consents upon a change of control ■ Compliance matters, including insurance regulatory compliance, and understanding of any material litigation | |
Source: Stork IOI submitted on 24-Mar-2023
| Additional Stork Materials | 31 | | |
| DRAFT - CONFIDENTIAL |
| INVESTMENT |
Appendix C: Additional Process Materials
| Additional Process Materials | 33 | | |
| DRAFT - CONFIDENTIAL |
|
Overview of Elk Historical Counterparty Interactions | INVESTMENT |
| Counterparties | Discussion Summaries |
| Stork | ■ Discussions historically have included introductions to Elk's business model and management team, prospective capital diversification benefits / accessibility, dividend capacity, historical financial performance, new business returns and investment portfolio allocation and repositioning opportunities ■ In November 2023, Stork agreed to purchase a minority common equity interest in Elk from CPPIB, who had been evaluating opportunities to monetize a portion of their stake in Elk, for an aggregate price of $182.5mm |
|
■ Discussions have included introductions to Elk's business model and management team, prospective capital diversification benefits / accessibility, dividend capacity, investment portfolio allocation and repositioning opportunities and joint business planning ■ Initially attracted to potential capital diversification benefits from a combination, Elk's sourcing capabilities and asset portfolio deployment opportunities ■ After submitting an initial, non-binding proposal to acquire the Company, elected not to submit a binding proposal and halted pursuit of a transaction given liquidity concerns, impact of inflation and ability to reposition the investment portfolio into desired strategies at scale |
 |
■ Discussions included introductions to Elk's business model and management team, understanding current investment portfolio al locations / investment guidelines and Elk liability characteristics ■ Elected not to pursue a transaction; conveyed interest in potentially pursuing either a minority investment in Elk or investment management opportunities — Preferred structure was for Elk to acquire [***] , alongside minority investment into Elk, providing immediately liquidity for [***] shareholders |
 |
■ Discussions included introductions to Elk's business model and management team, understanding Elk's approach to transaction pricing, understanding current investment portfolio allocations / investment guidelines ■ Elected not to pursue a transaction given overall size of the transaction (interested in pursuing smaller joint venture opportunities) |
 |
■ Discussions included introductions to Elk's business model, understanding Elk's addressable market opportunity, M&A pipeline, dividend capacity and overview of recent financial / investment portfolio performance |
 |
■ Discussions included introductions to Elk's business model, understanding Elk's addressable market opportunity, M&A pipeline, dividend capacity and overview of recent financial / investment portfolio performance |
| Additional Process Materials | 34 | | |
| DRAFT - CONFIDENTIAL |
|
Sale Process Alternative Approaches | INVESTMENT |
 |
| |||
| Full Auction Process | “Market Check” Pre-Signing | “Go-Shop” Provision | Fiduciary Out | |
 |
■ Contact broad list of credible potential buyers prior to signing of transaction |
■ Contact a focused number of potential buyers prior to signing of a definitive agreement ■ Contact typically made in the 2-4 week period prior to targeted signing ■ Process may be extended if any buyers express legitimate interest |
■ Will allow Elk to actively solicit other buyers for a period of time after signing definitive merger agreement ■ During the go-shop period, the level of deal protection may be reduced ■ Typically includes a reduced termination fee during the go-shop period |
■ Standard in M&A purchase agreements for public company targets ■ Allows Board to terminate the deal to accept a superior offer from another company - typically subject to termination fee |
 |
ü Increases probability of maximizing valuation / terms ü Provides greatest protection to Board ü Buyers more likely to engage in full auction process relative to post-announcement alternatives |
ü Provides opportunity for Board to check other buyers’ potential interest prior to signing ü Potential buyers may be more willing to engage pre-signing vs. post-announcement — No break fee, private vs. public forum, not “breaking-up” signed deal, etc. ü As a public company, Elk is well known to most potential buyers, allowing them to move quickly if interested ü May be undertaken as long as not limited by an exclusivity agreement with the bidder |
ü Provides structured opportunity to proactively / openly pursue other potential buyers ü Easier for buyer to engage under “go-shop” provision relative to only including fiduciary out provision |
ü Common / routine provision ü Likely no objection from the bidder |
 |
û Limited number of motivated, credible buyers at high premium levels û Requires longer time period to execute û Higher degree of leak risk; difficult for a public company to manage û Some bidders may not participate in auction process |
û Depending on timing, may have shorter period for parties to complete due diligence, which may modestly discourage some potential buyers from participation û Significant leak risk û Typically contact “focused” list of potential buyers rather than exhaustive list û Reaction from the initial bidder? Potential to lose interest |
û Rare feature, particularly in non-private equity transactions — However, have seen feature in several insurance M&A deals over number of years û Some potential buyers may still be reluctant to engage / “break-up” public deal û Other buyers may be reluctant to pay break-up fee, even if at a lower level |
û Some buyers may be reluctant to “break-up” a publicly announced deal û Requires payment of termination / break-up fee |
| Additional Process Materials | 35 | | |
| DRAFT - CONFIDENTIAL |
| INVESTMENT |
Appendix D: Elk Additional Reference Materials
| DRAFT - CONFIDENTIAL |
 |
Evolution of Elk’s Shareholder Base Top 20 Institutional & Individual Holders |
INVESTMENT |
| Q1 '24 | Historical Positions (% OS) | |||||||||||||||
| Position | ||||||||||||||||
| Refinitiv | AUM | Entry | Cost | Unrealized | Shares | |||||||||||
| Institution | Style | ($bn) | Date1 | Basis2 | Gain3 | % OS | (mm) | Q4 '23 | Q3 '23 | Q2 '23 | Q1 '23 | Q4 '22 | Q3 '22 | Q2 '22 | ||
| Stone Point Capital LLC | Strategic | $ 1.1 | Q4 '15 | $ 157.42 | 97.4 % | 9.5 % | 1.5 | 9.5 % | 9.6 % | 9.6 % | 9.7 % | 9.7 % | 8.8 % | 8.8 % | ||
| Vanguard | Index | 5,414.5 | Q4 '04 | 158.94 | 95.5 | 8.4 | 1.3 | 8.4 | 8.0 | 8.1 | 6.9 | 6.9 | 6.2 | 6.1 | ||
| BlackRock Institutional Trust Co. | Index | 3,215.7 | Q2 '07 | 142.29 | 118.4 | 5.6 | 0.9 | 5.6 | 4.9 | 4.9 | 4.7 | 4.6 | 4.1 | 4.2 | ||
| Dimensional Fund Advisors | Quantitative | 513.8 | Q1 '09 | 163.51 | 90.1 | 4.8 | 0.7 | 4.8 | 4.3 | 4.1 | 4.1 | 4.2 | 3.8 | 3.8 | ||
| Stork | Other | 1.3 | Q4 '23 | 265.42 | 17.1 | 4.7 | 0.7 | 4.7 | ||||||||
| Beck, Mack & Oliver | GARP | 4.3 | Q2 '05 | 94.04 | 230.5 | 4.4 | 0.7 | 4.4 | 4.2 | 4.3 | 4.3 | 4.3 | 3.8 | 3.9 | ||
| CPP Investment Board | Pension | 140.1 | Q2 '15 | 151.16 | 105.6 | 4.3 | 0.6 | 4.3 | 9.4 | 9.4 | 9.4 | 9.4 | 8.5 | 8.5 | ||
| Silvester (Dominic Francis Michael) | Strategic | 0.2 | Q2 '07 | 124.30 | 150.0 | 4.0 | 0.6 | 4.0 | 3.8 | 3.8 | 3.7 | 3.7 | 3.3 | 3.3 | ||
| Fidelity Management & Research Company LLC | GARP | 1,367.0 | Q2 '13 | 181.72 | 71.0 | 3.7 | 0.6 | 3.7 | 4.6 | 4.7 | 4.7 | 4.6 | 4.2 | 4.5 | ||
| Fuller & Thaler Asset Management Inc. | GARP | 19.8 | Q1 '19 | 202.98 | 53.1 | 3.2 | 0.5 | 3.2 | 3.2 | 3.3 | 3.3 | 3.3 | 2.7 | 1.9 | ||
| Wellington | Value | 607.1 | Q3 '15 | 171.29 | 81.4 | 3.1 | 0.5 | 3.1 | 3.5 | 4.7 | 6.5 | 6.3 | 5.1 | 5.9 | ||
| Allspring Global Investments, LLC | Value | 69.7 | Q4 '18 | 184.06 | 68.8 | 2.6 | 0.4 | 2.6 | 2.5 | 2.5 | 2.5 | 2.5 | 2.2 | 2.1 | ||
| Hotchkis and Wiley Capital Management, LLC | Value | 28.2 | Q4 '13 | 186.95 | 66.2 | 2.2 | 0.3 | 2.2 | 2.1 | 1.6 | 2.0 | 2.1 | 1.8 | 1.5 | ||
| State Street Global Advisors (US) | Index | 2,113.4 | Q2 '03 | 141.19 | 120.1 | 2.0 | 0.3 | 2.0 | 1.8 | 1.7 | 1.8 | 1.7 | 1.5 | 1.5 | ||
| Geode Capital Management, L.L.C. | Index | 1,113.9 | Q1 '06 | 182.80 | 70.0 | 1.9 | 0.3 | 1.9 | 1.7 | 1.6 | 1.6 | 1.5 | 1.3 | 1.3 | ||
| O'Shea (Paul James) | Strategic | 0.1 | Q2 '07 | 121.88 | 155.0 | 1.6 | 0.2 | 1.6 | 1.5 | 1.5 | 1.5 | 1.5 | 1.4 | 1.4 | ||
| Campbell (Robert Johnson) | Strategic | 0.1 | Q2 '08 | 119.37 | 160.3 | 1.2 | 0.2 | 1.2 | 1.2 | 1.2 | 1.0 | 1.0 | 0.9 | 0.9 | ||
| Harspring Capital Management, LLC | Hedge Fund | 0.4 | Q4 '22 | 238.93 | 30.1 | 1.1 | 0.2 | 1.1 | 1.1 | 0.8 | 0.6 | 0.1 | ||||
| Capital Research | Growth | 774.1 | Q1 '22 | 244.00 | 27.4 | 1.1 | 0.2 | 1.1 | 1.0 | 1.0 | 1.0 | 1.0 | 0.8 | 0.6 | ||
| Charles Schwab Investment Management, Inc. | Index | 473.6 | Q3 '07 | 177.62 | 75.0 | 0.9 | 0.1 | 0.9 | 0.9 | 0.9 | 0.9 | 0.9 | 0.8 | 0.7 | ||
| Total | 70.5 % | 10.7 | 70.5 % | 69.3 % | 69.7 % | 70.2 % | 69.2 % | 61.4 % | 60.9 % | |||||||
| Median | $ 167.40 | 85.7 % | ||||||||||||||
Source: Refinitiv
1 Quarter of the investors most recent position initiation in the security. Resets whenever the investor sells out completely. ² Calculated as the weighted average cost of current shares held based on quarterly VWAPs and all share purchases from Q1 '05 – Q1 ‘24. ³ Based on share price at market close on 28-Mar-2024.
| Elk Additional Reference Materials | 37 | | |
| DRAFT - CONFIDENTIAL |
|
Elk is Thinly Covered by Analysts, Making the Business Difficult to Model Externally Selected Peer Research Coverage |
INVESTMENT |
| Company | Number of Analysts Covering | Earnings Calls | Research Coverage |
| Elk | 1 |  |
 |
 |
1 |  |
|
 |
1 | |
|
 |
13 | |
 |
 |
14 | |
|
 |
8 | |
 |
 |
8 | |
|
 |
7 | |
|
Source: FactSet, Company websites
| Elk Additional Reference Materials | 38 | | |
| DRAFT - CONFIDENTIAL |
|
Elk ADTV Relative to Peers |
INVESTMENT |
| ADTV | % of Float | ||||||
| 1M | 3M | 6M | Free Float | 1M | 3M | 6M | |
| Elk | 54,210 | 52,775 | 44,143 | 12,670,707 | 0.43 % | 0.42 % | 0.35 % |
| Traditional Bermuda Reinsurers | |||||||
| EG | 359,214 | 383,083 | 392,296 | 33,075,574 | 1.09 % | 1.16 % | 1.19 % |
| RNR | 288,498 | 371,537 | 434,937 | 51,676,368 | 0.56 % | 0.72 % | 0.84 % |
| AXS | 542,492 | 627,523 | 571,207 | 77,477,043 | 0.70 % | 0.81 % | 0.74 % |
| FIHL | 963,950 | 613,087 | 440,700 | 37,358,696 | 2.58 % | 1.64 % | 1.18 % |
| Other Bermuda Reinsurers | |||||||
| HG | 489,431 | 256,849 | 309,058 | 47,047,714 | 1.04 % | 0.55 % | 0.66 % |
| SPNT | 623,606 | 624,437 | 596,704 | 93,079,146 | 0.67 % | 0.67 % | 0.64 % |
| GLRE | 87,898 | 82,511 | 86,035 | 25,851,187 | 0.34 % | 0.32 % | 0.33 % |
| Median - Traditional Bermuda Reinsurers | 450,853 | 498,085 | 437,819 | 44,517,532 | 0.89 % | 0.98 % | 1.01 % |
| Median - Other Bermuda Reinsurers | 489,431 | 256,849 | 309,058 | 47,047,714 | 0.67 % | 0.55 % | 0.64 % |
Source: Bloomberg, CapIQ, Market data as of 28-Mar-2024
| Elk Additional Reference Materials | 39 | | |
| STRICTLY PRIVATE & CONFIDENTIAL | DRAFT - CONFIDENTIAL |
 | INVESTMENT BANKING |
Project Elk
Board Follow Up
Goldman Sachs & Co. LLC
April 4, 2024
Goldman Sachs does not provide accounting, tax, or legal advice. Notwithstanding anything in this document to the contrary, and except as required to enable compliance with applicable securities law, you (and each of your employees, representatives, and other agents) may disclose to any and all persons the US federal income and state tax treatment and tax structure of the transaction and all materials of any kind (including tax opinions and other tax analyses) that are provided to you relating to such tax treatment and tax structure, without Goldman Sachs imposing any limitation of any kind.
| DRAFT - CONFIDENTIAL |
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Elk’s Price to Book Value Multiple Over Time
Last 5 Years | INVESTMENT BANKING |
Source: Company filings, FactSet as of 28-Mar-2024. 1Adjusted for net realized and unrealized gains / (losses) on fixed maturities available for sale, fixed maturities trading, and funds held, change in fair value of insurance contracts, and amortization of fair value adjustments.
| Elk Summary Preliminary Valuation Assessment | 2 | | |
| DRAFT - CONFIDENTIAL |
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Elk Summary Dividend Discount Model (1/2)
Base Case | ($ in millions, unless otherwise noted) | INVESTMENT BANKING |
Summary of Book Value Generation and Cash Flow Distributions
| 2023A | 2024E | 2025E | 2026E | 2027E | 2028E | |
| BoP Book Value | $ 5,025 | $ 5,547 | $ 6,110 | $ 6,800 | $ 7,537 | |
| (+) Earnings | 659 | 572 | 708 | 818 | 1,010 | |
| (-) Share Repurchases | (250) | (100) | (100) | (100) | (100) | |
| (+) OCI Change | 113 | 92 | 82 | 18 | 14 | |
| EoP Book Value (incl. AOCI) | $ 5,025 | $ 5,547 | $ 6,110 | $ 6,800 | $ 7,537 | $ 8,461 |
| + / (-) AOCI | 336 | $ 223 | $ 131 | $ 49 | $ 31 | $ 17 |
| EoP Book Value (excl. AOCI) | $ 5,361 | $ 5,769 | $ 6,241 | $ 6,849 | $ 7,568 | $ 8,478 |
| EoP Book Value (incl. AOCI) | $ 5,025 | $ 5,547 | $ 6,110 | $ 6,800 | $ 7,537 | $ 8,461 |
| (+) Net URL / (G) on AFS/HFT/Funds Held Securities | 721 | 517 | 352 | 204 | 172 | 146 |
| (-) Change in Fair Value of Insurance Contracts | (246) | (211) | (180) | (152) | (126) | (102) |
| (-) Fair Value Adjustment | (108) | (99) | (89) | (81) | (73) | (66) |
| Management Adj. Book Value | $ 5,391 | $ 5,754 | $ 6,192 | $ 6,771 | $ 7,509 | $ 8,439 |
| Distributable Cash Flows | $ 250 | $ 100 | $ 100 | $ 100 | $ 100 |
Sensitivity Analysis
| Elk Implied Share Price | ||||||||
| Discount Rate | ||||||||
| 7.50 % | 7.95 % | 8.40 % | 8.85 % | 9.30 % | 9.75 % | |||
 |
0.70 x | $ 315 | $ 309 | $ 304 | $ 298 | $ 292 | $ 287 | |
| 0.75 x | 330 | 324 | 318 | 316 | 310 | 305 | ||
| 0.80 x | 350 | 343 | 337 | 330 | 324 | 318 | ||
| 0.85 x | 369 | 362 | 355 | 348 | 342 | 335 | ||
| 0.90 x | 388 | 380 | 373 | 366 | 359 | 353 | ||
Source: Elk Management preliminary projections, FactSet, Company filings. Note: Market Data as of 28-Mar-2024; Per share metrics based on Elk computed diluted shares outstanding inclusive of ordinary shares, non-voting ordinary shares, RSUs, PSUs and JSOP shares as of 31-Dec-2023. Analysis accounts for share count dilution applied to valuation range. Adjusted Book Value adjusts for net realized and unrealized gains / (losses) on fixed maturities available for sale, fixed maturities trading, and funds held, change in fair value of insurance contracts, and amortization of fair value adjustments.
| Elk Summary Preliminary Valuation Assessment | 3 | | |
| DRAFT - CONFIDENTIAL |
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Elk Summary Dividend Discount Model (2/2)
2x Capital Return Case | ($ in millions, unless otherwise noted) | INVESTMENT BANKING |
| Highly Illustrative |
Summary of Book Value Generation and Cash Flow Distributions
| 2023A | 2024E | 2025E | 2026E | 2027E | 2028E | |
| BoP Book Value | $ 5,025 | $ 5,297 | $ 5,760 | $ 6,350 | $ 6,987 | |
| (+) Earnings | 659 | 572 | 708 | 818 | 1,010 | |
| (-) Share Repurchases | (500) | (200) | (200) | (200) | (200) | |
| (+) OCI Change | 113 | 92 | 82 | 18 | 14 | |
| EoP Book Value (incl. AOCI) | $ 5,025 | $ 5,297 | $ 5,760 | $ 6,350 | $ 6,987 | $ 7,811 |
| + / (-) AOCI | 336 | $ 223 | $ 131 | $ 49 | $ 31 | $ 17 |
| EoP Book Value (excl. AOCI) | $ 5,361 | $ 5,519 | $ 5,891 | $ 6,399 | $ 7,018 | $ 7,828 |
| EoP Book Value (incl. AOCI) | $ 5,025 | $ 5,297 | $ 5,760 | $ 6,350 | $ 6,987 | $ 7,811 |
| (+) Net URL / (G) on AFS/HFT/Funds Held Securities | 721 | 517 | 352 | 204 | 172 | 146 |
| (-) Change in Fair Value of Insurance Contracts | (246) | (211) | (180) | (152) | (126) | (102) |
| (-) Fair Value Adjustment | (108) | (99) | (89) | (81) | (73) | (66) |
| Management Adj. Book Value | $ 5,391 | $ 5,504 | $ 5,842 | $ 6,321 | $ 6,959 | $ 7,789 |
| Distributable Cash Flows | $ 500 | $ 200 | $ 200 | $ 200 | $ 200 |
Sensitivity Analysis
| Elk Implied Share Price | ||||||||
| Discount Rate | ||||||||
| 7.50 % | 7.95 % | 8.40 % | 8.85 % | 9.30 % | 9.75 % | |||
| |
0.70 x | $ 328 | $ 322 | $ 317 | $ 315 | $ 310 | $ 304 | |
| 0.75 x | 345 | 339 | 333 | 328 | 322 | 317 | ||
| 0.80 x | 363 | 357 | 350 | 344 | 338 | 333 | ||
| 0.85 x | 381 | 374 | 367 | 361 | 355 | 348 | ||
| 0.90 x | 398 | 391 | 384 | 377 | 371 | 364 | ||
Source: Elk Management preliminary projections, FactSet, Company filings. Note: Market Data as of 28-Mar-2024; Per share metrics based on Elk computed diluted shares outstanding inclusive of ordinary shares, non-voting ordinary shares, RSUs, PSUs and JSOP shares as of 31-Dec-2023. Analysis accounts for share count dilution applied to valuation range. Adjusted Book Value adjusts for net realized and unrealized gains / (losses) on fixed maturities available for sale, fixed maturities trading, and funds held, change in fair value of insurance contracts, and amortization of fair value adjustments.
| Elk Summary Preliminary Valuation Assessment | 4 | | |
