EX-99.(C)(III) 7 tm2420342d8_ex99-ciii.htm EXHIBIT 99.(C)(III)

 

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
 BANKING

 

 

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.

 

Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities they manage or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of the Company, any other party to any transaction and any of their respective affiliates or any currency or commodity that may be involved in any transaction. Goldman Sachs’ investment banking division maintains regular, ordinary course client service dialogues with clients and potential clients to review events, opportunities, and conditions in particular sectors and industries and, in that connection, Goldman Sachs may make reference to the Company, but Goldman Sachs will not disclose any confidential information received from the Company.

 

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
 BANKING

 

 

 

 

 

 

 

 

I.       Process Overview

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 3  |

 

 

  DRAFT - CONFIDENTIAL

   

Overview of Stork Proposal
Summary of Key Terms

INVESTMENT
 BANKING

 

  
 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 Overview4|

 

 

  DRAFT - CONFIDENTIAL
   

INVESTMENT
 BANKING

 

 

 

 

 

 

 

 

II.       Elk Summary Preliminary Valuation Assessment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Process Overview5|

 

 

    DRAFT - CONFIDENTIAL

 

Summary of Key Economic Terms

 

Stork Mar-2024 Proposal | ($ in millions)

 

INVESTMENT
 BANKING
     
     

 

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 Assessment6|

 

 

    DRAFT - CONFIDENTIAL

 

Elk’s Price to Book Value Multiple Over Time

 

INVESTMENT
 BANKING
     
     

 

 

  

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 Assessment7|

 

 

    DRAFT - CONFIDENTIAL

 

Overview of Elk Historical Financials

 

($ in millions, except per share data)

 

INVESTMENT
 BANKING
     
     

 

 

 

 

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 Assessment8|

 

 

    DRAFT - CONFIDENTIAL

 

Overview of Elk Management Preliminary Projections

 

($ in millions, except per share data)

 

INVESTMENT
 BANKING
     
     

 

 

 

Elk Summary Preliminary Valuation Assessment9|

 

 

    DRAFT - CONFIDENTIAL

 

Elk Investment Portfolio Evolution

 

($ in billions, unless stated otherwise)

 

INVESTMENT
 BANKING
     
     

 

 

  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 Assessment10|

 

 

  DRAFT - CONFIDENTIAL

 

Summary of Preliminary Financial Analyses

($ in millions, except per share data)

INVESTMENT
 BANKING

     
   

 

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 Assessment11|

 

 

  DRAFT - CONFIDENTIAL

 

 

Elk Summary Dividend Discount Model

($ 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 Assessment12|

 

 

  DRAFT - CONFIDENTIAL

 

 

Elk Beta and Cost of Equity Analysis

Comparison of Historical Peer Equity Betas | Last 10 Years

INVESTMENT
 BANKING

     
   

 

 

 

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 Assessment13|

 

 

  DRAFT - CONFIDENTIAL

 

 

Present Value of Future Share Price Analysis

INVESTMENT
 BANKING

     
   

 

 

 

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 Assessment14|

 

 

  DRAFT - CONFIDENTIAL

 

 

Selected Precedent P&C (Re)insurance M&A
Transactions

($ in millions)

INVESTMENT
 BANKING

   

 

 

 

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.

1Based on reported aggregate purchase price and book value multiples (including AOCI) where available.
2Excludes 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 Assessment15|

 

 

     
    DRAFT - CONFIDENTIAL
     

 

Premia Paid in Precedent U.S. Public M&A

 

All-Cash Acquisitions | Since 01-Jan-2014 between $1.0bn and $10.0bn
% Premia to 1-day Prior to Announcement (Median)

INVESTMENT

BANKING

 

Source: Dealogic, CapIQ as of 28-Mar-2024.

 

Elk Summary Preliminary Valuation Assessment16|

 

 

     
    DRAFT - CONFIDENTIAL
     

 

Premia Paid in Precedent U.S. Public M&A

 

All-Cash Acquisitions | Since 01-Jan-2014 between $1.0bn and $10.0bn
% Premia to 52 Week High (Median)

INVESTMENT
 BANKING

 

 

Source: Dealogic, CapIQ as of 28-Mar-2024.

 

Elk Summary Preliminary Valuation Assessment17|

 

 

     
    DRAFT - CONFIDENTIAL
     

 

Selected Peer Common Stock Comparison

 

($ in millions, except per share amounts)

 

INVESTMENT
 BANKING

 

  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 Assessment18|

 

 

     
    DRAFT - CONFIDENTIAL
     

 

 

Elk Historical Valuation Compared to Peers

 

P/BV Multiples | Last 3 Years

 

 

INVESTMENT
 BANKING

 

 

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 Assessment19|

 

 

     
    DRAFT - CONFIDENTIAL
     

 

 

Elk Historical Valuation Compared to Peers

 

P/BV Multiples | Last 3 Years

 

 

INVESTMENT
 BANKING

 

 

 

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 Assessment20|

 

 

     
    DRAFT - CONFIDENTIAL
     
     

Detailed Equity Capitalization and Share Count Table 

INVESTMENT
 BANKING
     

 

 

 

Security Type

 

As of Latest Public Filings
(YE 2023)

As Computed Per Stork
Proposal (YE 2023)

  
 

 

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 Assessment21|

 

 

     
    DRAFT - CONFIDENTIAL
     
     

INVESTMENT
 BANKING
     

 

 

 

 

 

 

III.    Potential Next Steps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     
    DRAFT - CONFIDENTIAL
     
     

 Potential Next Steps

INVESTMENT
 BANKING
     

 

■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 Steps23|

 

 

     
    DRAFT - CONFIDENTIAL
     
     

INVESTMENT
 BANKING
     

 

 

 

 

 

Appendix A:     Additional Financial Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     
    DRAFT - CONFIDENTIAL
     
     

Overview of Elk Management Preliminary Projections (1/2)

Income Statement | ($ in millions)

INVESTMENT
 BANKING
     

 

 

  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 Materials25|

 

 

     
    DRAFT - CONFIDENTIAL
     

   

Overview of Elk Management Preliminary Projections (2/2)

Balance Sheet | ($ in millions)

INVESTMENT
 BANKING

 

 

 

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 Materials26|

 

 

     
    DRAFT - CONFIDENTIAL
     

   

Elk Historical Management Adjusted Book Value Reconciliation

INVESTMENT
 BANKING

 

 

  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 Materials27|

 

 

     
    DRAFT - CONFIDENTIAL
     

   

Comparison of Elk Management Preliminary Projections

Key Value Drivers | ($ in millions, except for per share metrics)

INVESTMENT
 BANKING

 

 

  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 Materials28|

 

 

     
    DRAFT - CONFIDENTIAL
     

 

INVESTMENT
 BANKING

 

 

 

 

 

 

 

 

Appendix B: Additional Stork Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     
    DRAFT - CONFIDENTIAL
     

   

Stork Company Overview

INVESTMENT
 BANKING

 

 

 

 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 Materials30|

 

 

    DRAFT - CONFIDENTIAL

 

Summary of Stork Due Diligence Areas of Focus

 

INVESTMENT
 BANKING

 

 

 

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 Materials31|

 

 

    DRAFT - CONFIDENTIAL

 

 

INVESTMENT
 BANKING

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix C:      Additional Process Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional Process Materials33|

 

 

    DRAFT - CONFIDENTIAL

 

Overview of Elk Historical Counterparty Interactions

INVESTMENT
 BANKING

 

 

 

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 Materials34|

 

 

    DRAFT - CONFIDENTIAL

 

Sale Process Alternative Approaches

INVESTMENT
 BANKING

 

 

 

 

  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 Materials35|

 

 

    DRAFT - CONFIDENTIAL

 

 

INVESTMENT
 BANKING

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix D:     Elk Additional Reference Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  DRAFT - CONFIDENTIAL

 

Evolution of Elk’s Shareholder Base

Top 20 Institutional & Individual Holders

INVESTMENT
 BANKING

 

 

 

        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 Materials37|

 

 

  DRAFT - CONFIDENTIAL

 

Elk is Thinly Covered by Analysts, Making the Business Difficult to Model Externally

Selected Peer Research Coverage

INVESTMENT
 BANKING

 

 

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 Materials38|

 

 

  DRAFT - CONFIDENTIAL

 

Elk ADTV Relative to Peers

INVESTMENT
 BANKING

 

 

 

  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 Materials39|

 

 

 

  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

 

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 Assessment2|

 

 

 

    DRAFT - CONFIDENTIAL

 

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 Assessment3|

 

 

 

    DRAFT - CONFIDENTIAL

 

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 Assessment4|