EX-99.(C)(VI) 10 tm2420342d8_ex99-cvi.htm EXHIBIT 99.(C)(VI)

 

Exhibit (c)(vi)

 

STRICTLY PRIVATE & 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

 

 

 

 

Presentation to the Board of Directors

 

Goldman Sachs & Co. LLC

 

 

July 28, 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.

 

 

 

 

STRICTLY PRIVATE & 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|

 

 

 

STRICTLY PRIVATE & CONFIDENTIAL

 

 

Table of Contents

INVESTMENT

BANKING

 

 

  I. Transaction Overview and Recent Trading
   
   
   
  II. Financial Projections
   
   
   
  III. Elk Financial Analysis

 

 

 

  Appendix A: Additional Materials 

 

 

 

 

 

 

 

 

 

3|

 

 

 

STRICTLY PRIVATE & CONFIDENTIAL

 

INVESTMENT

BANKING

 

 

 

 

 

 

 

 

  I. Transaction Overview and Recent Trading

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4|

 

 

 

STRICTLY PRIVATE & CONFIDENTIAL

 

 

Elk Transaction Multiples

($ in millions)

INVESTMENT

BANKING

 

 

Aggregate Total Cash Consideration¹     $ 5,137          
Total Cash Consideration     $ 338.00   Reference Valuation  
             
          Peer Trading Comparables    
          Traditional      
      Total Cash   Bermuda Other Bermuda Precedent  
Metric   Value Consideration   Reinsurers² Reinsurers³ Transactions  
Implied Purchase Premiums                
Day Before Stork Letter (22-Mar-2024)   $ 292.50 15.6 %          
Day Before Revised Elk Offer (08-Apr-2024)   292.80 15.4          
Current Stock Price (26-Jul-2024)   348.31 (3.0)          
Undisturbed Share Price (28-Jun-2024)   305.70 10.6          
All-Time-High (30-May-2024)4   314.83 7.4          
52-Week-High (30-May-2024)4   314.83 7.4          
52-Week-Low (20-Oct-2023)4   232.05 45.7          
30-Day VWAP4   307.32 10.0          
60-Day VWAP4   302.24 11.8          
90-Day VWAP4   301.26 12.2          
  Standalone              
Implied Price / Book Value Multiples Per Share6              
Q2 2024 Book Value (incl. AOCI) $ 351 $ 5,261 0.98 x     1.09 x  
Q2 2024 Book Value (excl. AOCI) 375 5,618 0.91       1.18  
Q2 2024 Book Value (Management Adjusted)5 381 5,713 0.90       -  
Q1 2024 Book Value (incl. AOCI) 342 5,122 1.00   1.25 x 0.90 x    
Q1 2024 Book Value (excl. AOCI) 366 5,486 0.94   1.17 0.90    
Q1 2024 Book Value (Management Adjusted)5 370 5,551 0.93   - -    
Implied Price / Mangement Projected Earnings Multiples                
2024E Earnings - Per Management   $ 659 7.8 x 6.2 x 7.1 x -  
2025E Earnings - Per Management   572 9.0   6.1 8.0 -  

 

 

Source: Elk Management projections, FactSet, Company filings. Market data as of 26-Jul-2024 unless otherwise stated. Q2 2024 Elk figures as provided by Elk Management. ¹ Based on Elk computed diluted shares outstanding inclusive of ordinary shares, non-voting ordinary shares, RSUs, PSUs and JSOP shares as of 25-Jul-2024 as provided by Elk Management. 2 Traditional Bermuda Reinsurers include Everest Re, RenaissanceRe, Axis Capital, and Fidelis. 3 Other Bermuda Reinsurers include Hamilton, Greenlight Re and SiriusPoint. 4 Relative to Elk’s undisturbed date (28-Jun-2024). 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. 6 BVPS metrics when applying fully diluted shares outstanding per total cash consideration inclusive of ordinary shares, non-voting ordinary shares, RSUs, PSUs and JSOP shares as of 25-Jul-2024 as provided by Elk Management result in Q2 BVPS incl. AOCI of $346, Q2 BVPS excl. AOCI of $370, and Q2 Management Adjusted BVPS of $376.

Transaction Overview and Recent Trading5|

 

 

 

STRICTLY PRIVATE & CONFIDENTIAL

 

 

Recent Elk Trading Activity

INVESTMENT

BANKING

 

 

 

  Elk Daily Trading Volume (Thousands of Shares)
   
   
 

Source: Bloomberg; market data as of 26-Jul-2024 

Note: Stork Letter received on 23-Mar-2024.

Transaction Overview and Recent Trading6|

 

 

 

STRICTLY PRIVATE & CONFIDENTIAL

 

Elk’s Price to Book Value Multiple Over Time

 

INVESTMENT
 BANKING
     
     

 

 

 

Source: Company filings, FactSet. Note: Multiples chart as of 26-Jul-2024 for reference. Tables depicted as of Elk undisturbed date (28-Jun-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.

 

Transaction Overview and Recent Trading7|

 

 

 

STRICTLY PRIVATE & CONFIDENTIAL

 

 

INVESTMENT
 BANKING
     
     

 

 

 

 

 

 

II.   Financial Projections

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STRICTLY PRIVATE & CONFIDENTIAL

 

Overview of Elk Management Projections

 

($ in millions, except per share data)

 

INVESTMENT

BANKING
     
     

 

Financial Projections9|

 

 

 

STRICTLY PRIVATE & CONFIDENTIAL

 

 

INVESTMENT
 BANKING
     
     

 

 

 

 

 

 

III.   Elk Financial Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STRICTLY PRIVATE & CONFIDENTIAL

 

Summary of Financial Analyses

 

($ per share, unless otherwise indicated)

 

INVESTMENT

BANKING
     
     

 

Source: Elk Management projections, Company filings, FactSet. Market data as of 26-Jul-2024 unless otherwise stated. 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 25-Jul-2024 as provided by Elk Management; Q2 2024 Elk figures as provided by Elk Management. 1 Traditional Bermuda Reinsurers include RenaissanceRe, Everest Re, Axis Capital and Fidelis; Other Bermuda Reinsurers include Hamilton, Greenlight Re and SiriusPoint; RenaissanceRe data as of Q2 2024, all other peers as of Q1 2024 based on latest public filings. 2 As of Elk undisturbed date (28-Jun-2024).

 

Elk Financial Analysis11|

 

 

 

  STRICTLY PRIVATE & CONFIDENTIAL

 

Summary Dividend Discount Model

 

($ in millions, unless otherwise noted)

 

INVESTMENT

BANKING

 

   

 

Summary of Book Value Generation and Cash Flow Distributions

  H1'24A H2'24E 2025E 2026E 2027E 2028E
BoP Book Value   $ 5,261  $ 5,547  $ 6,110  $ 6,800  $ 7,537 
(+) Earnings   414  572  708  818  1,010 
(-) Share Repurchases   (250) (100) (100) (100) (100)
(+) OCI Change   122  92  82  18  14 
EoP Book Value (incl. AOCI) $ 5,261  $ 5,547  $ 6,110  $ 6,800  $ 7,537  $ 8,461 
+ / (-) AOCI 357  $ 223  $ 131  $ 49  $ 31  $ 17 
EoP Book Value (excl. AOCI) $ 5,618  $ 5,769  $ 6,241  $ 6,849  $ 7,568  $ 8,478 
EoP Book Value (incl. AOCI) $ 5,261  $ 5,547  $ 6,110  $ 6,800  $ 7,537  $ 8,461 
(+) Net URL / (G) on AFS/HFT/Funds Held Securities 803  517  352  204  172  146 
(-) Fair Value of Insurance Contracts (253) (211) (180) (152) (126) (102)
(-) Fair Value Adjustment (98) (99) (89) (81) (73) (66)
Management Adj. Book Value $ 5,713  $ 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 % 8.06 % 8.63 % 9.19 % 9.75 %
  0.70 x $ 323       $ 316        $ 310        $ 303       $ 297      
  0.75 x 344       336        329        322       315      
  0.80 x 364   356        349        341       334      
  0.85 x 384 376        368        360       352      
  0.90 x 405      396        387        379       371      

 

Source: Elk Management projections, FactSet, Company filings. Note: Market Data as of 26-Jul-2024; Q2 2024 Elk figures as provided by Elk Management; Per share metrics based on Elk reported diluted shares outstanding inclusive of ordinary shares, non-voting ordinary shares, RSUs, PSUs and JSOP shares as of 30-Jun-2024 as provided by Elk Management. 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 Financial Analysis12|

 

 

 

  STRICTLY PRIVATE & CONFIDENTIAL

 

Present Value of Future Share Price Analysis 

INVESTMENT

BANKING

 

 

  Future Share Price (at Respective Year-Ends)   Present Value of Future Share Price + Dividends (at
Respective Year-Ends) Discounted at 8.63%2

 

 

 

Source: Elk Management projections, Company filings, FactSet. Note: Market data as of Elk undisturbed date (28-Jun-2024); per share metrics consistent with Elk Management projections, inclusive of any incremental annual dilution from share-based compensation effects 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 Represents midpoint of discount rate as shown on page 12.

Elk Financial Analysis13|

 

 

 

  STRICTLY PRIVATE & CONFIDENTIAL

 

Selected Precedent P&C Reinsurance M&A Transactions 

($ in millions)

INVESTMENT

BANKING

 

 

 

 

Ann. Date Acquiror Target Equity Value % Cash P/BV incl. AOCI1
Oct-21 Covea PartnerRe 9,000 100 1.25 x
Oct-18 RenaissanceRe Tokio Millenium Re 1,469 83 1.01
Aug-15 Exor PartnerRe 6,875 100 1.10
Mar-15 Endurance Montpelier Re 1,831 25 1.22
Nov-14 RenaissanceRe Platinum 1,925 60 1.13
Dec-12 Markel Alterra 3,130 32 1.07
Aug-12 Validus Flagstone 623 24 0.74
Nov-11 Alleghany Transatlantic 3,431 24 0.80
           
Low         0.74 x
           
25th Percentile       0.96
           
Median         1.09
           
75th Percentile       1.16
           
High         1.25
           

 

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.

Elk Financial Analysis14|

 

 

 

  STRICTLY PRIVATE & 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

 

 

1-Week Prior 30.1 % 24.4 % 22.7 % 18.6 % 17.8 % 20.5 % 34.0 % 21.3 % 33.0 % 30.5 % 23.1 % 23.8 % 27.0 %
Number of Transactions 43 60 70 57 69 53 40 75 58 49 55 607
(10Y Total)		 303
(5Y Total)

 

Source: Dealogic, FactSet as of 26-Jul-2024.

Elk Financial Analysis15|

 

 

 

  STRICTLY PRIVATE & CONFIDENTIAL For Reference Only

 

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

 

 

 

Number of
Transactions		 43 60 70 57 69 53 40 75 58 49 55 607
(10Y Total)		 303
(5Y Total)

 

Source: Dealogic, FactSet as of 26-Jul-2024.

 

Elk Financial Analysis16|

 

 

 

  STRICTLY PRIVATE & CONFIDENTIAL For Reference Only

 

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 26-Jul-24 Cap Wk. High 2024E 2025E (in. AOCI) (ex. AOCI) (in. AOCI) (ex. AOCI) 2024E 2025E Yield
                         
Elk $ 348.31 $ 5,224 100.0 % 9.4 x 8.7 x 1.02 x 0.95 x 1.03 x 0.96 x NA    NA     0.0 %
Memo: Elk Undisturbed (28-Jun-2024) 305.70 4,585 97.1     8.3    7.6    0.90    0.84    0.91    0.85    NA     NA     0.0    
Traditional Bermuda Reinsurers                        
Everest Re $ 382.93 $ 16,838 92.4 % 6.3 x 5.7 x 1.24 x 1.14 x 1.24 x 1.14 x 17.2 % 16.4 % 1.9 %
RenaissanceRe 224.50 11,956 94.4     6.0    6.4    1.27    1.27    1.38    1.37    21.1     17.0     0.7    
Axis 73.66 6,386 99.7     7.3    6.9    1.29    1.19    1.37    1.26    15.9     14.8     2.4    
Fidelis 17.48 2,073 87.3     5.6    4.9    0.82    0.81    0.82    0.81    13.2     13.1     1.1    
Median - Traditional Bermuda Reinsurers     93.4 % 6.2 x 6.1 x 1.25 x 1.17 x 1.30 x 1.20 x 16.5 % 15.6 % 1.5 %
Other Bermuda Reinsurers                        
SiriusPoint $ 14.38 $ 2,547 100.0 % 9.0 x 8.0 x 1.06 x 1.05 x 1.13 x 1.12 x NA     NA     0.0 %
Hamilton 17.13 1,998 97.0     5.0    4.8    0.90    0.90    0.94    0.94    14.7    13.2     0.0    
Greenlight Re 13.52 501 100.0     7.1    8.4    0.80    0.80    0.80    0.80    NA    NA     0.0    
Median - Other Bermuda Reinsurers     100.0 % 7.1 x 8.0 x 0.90 x 0.90 x 0.94 x 0.94 x 14.7 % 13.2 % 0.0 %
                         
Overall Low     87.3 % 5.0 x 4.8 x 0.80 x 0.80 x 0.80 x 0.80 x 13.2 % 13.1 % 0.0 %
Overall Median     97.0     6.3    6.4    1.06    1.05    1.13    1.12    15.9     14.8     0.7    
Overall Mean     95.8     6.6    6.5    1.05    1.02    1.10    1.06    16.4     14.9     0.9    
Overall High     100.0     9.0    8.4    1.29    1.27    1.38    1.37    21.1     17.0     2.4    

 

 

Source: Company filings, FactSet; market data as of 26-Jul-2024, excluding the Elk Undisturbed row (as of 28-Jun-2024). Note: Earnings projections used for computation of P/E multiples based on median of equity research analyst projections. RenaissanceRe data as of Q2 2024, all other peers as of Q1 2024 based on latest public filings.

 

Elk Financial Analysis17|

 

 

 

  STRICTLY PRIVATE & CONFIDENTIAL For Reference Only

 

Elk Historical Valuation Compared to Peers

 

P/BV (incl. AOCI) Multiples | Last 3 Years

INVESTMENT
 BANKING
   
   

 

Price / Book Value (incl. AOCI)

 

 

Source: Public company filings, FactSet. Note: Multiples chart as of 26-Jul-2024 for reference. Tables depicted as of Elk undisturbed date (28-Jun-2024).

Note: RenaissanceRe data as of Q2 2024, all other peers as of Q1 2024 based on latest public filings.

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 Financial Analysis18|

 

 

 

  STRICTLY PRIVATE & CONFIDENTIAL For Reference Only

 

Elk Historical Valuation Compared to Peers

 

P/BV (excl. AOCI) Multiples | Last 3 Years

INVESTMENT
 BANKING
   
   

 

Price / Book Value (excl. AOCI)

 

 

Source: Public company filings, FactSet. Note: Multiples chart as of 26-Jul-2024 for reference. Tables depicted as of Elk undisturbed date (28-Jun-2024).

Note: RenaissanceRe data as of Q2 2024, all other peers as of Q1 2024 based on latest public filings.

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 Financial Analysis19|

 

 

 

STRICTLY PRIVATE & CONFIDENTIAL

 

 

INVESTMENT
 BANKING
   
   

 

    For Reference Only

 

 

 

 

 

Appendix A:     Additional Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  STRICTLY PRIVATE & CONFIDENTIAL  

 

Overview of Elk Management Projections (1/2)

Income Statement | ($ in millions)

INVESTMENT
 BANKING
   
   

 

                2022A - 2028E
  2022A 2023A 2024E 2025E 2026E 2027E 2028E CAGR
Technical Result $ 373 $ 157 $ 213 $ 159 $ 169 $ 160 $ 210 (9.1)%
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 0 0 0 0 0 NM
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 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 Materials21|

 

 

 

STRICTLY PRIVATE & CONFIDENTIAL

 

Overview of Elk Management Projections (2/2)

Balance Sheet | ($ in millions)

INVESTMENT
 BANKING
   

 

                        2022A - 2028E
  2022A 2023A     2024E 2025E 2026E 2027E 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 $ 19,956     $ 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 $ 5,397     $ 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 projections                        
Note: Other Assets composed of Deferred Charge Assets, Insurance Recoverables and Other Assets.  

 

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STRICTLY PRIVATE & CONFIDENTIAL

 

Elk Beta and Cost of Equity Analysis

Comparison of Historical Peer Equity Betas | Last 10 Years

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Source: Axioma, Duff and Phelps; Beta data for Elk and peers as of Elk undisturbed date (28-Jun-2024); Risk Free Rate and Equity Risk Premium as of 26-Jul-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). 3 As of Elk undisturbed date (28-Jun-2024).

 

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Detailed Equity Capitalization and Share Count Table

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  Per Elk Management As Computed Based on
Security Type (Q2 2024) Total Cash Consideration
Voting Ordinary Shares1 14.665 14.664
Restricted Stock Units1   0.169   0.171
Performance Stock Units   0.166  0.142
Joint Share Ownership Plan (Treasury Stock Method)     0.221
         
Fully Diluted Shares Outstanding 15.000 15.198
         

 

Source: Elk management as of 30-Jun-2024; Total cash consideration share count as of 25-Jul-2024.

Note: Total cash consideration figures based on Stork’s stated offer price of $338 per share. Total cash consideration assumes 30-Jun-2025 closing.

1 Delta in Voting Ordinary Shares between two columns based on presentation of Director Restricted Shares.

 

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STRICTLY PRIVATE & CONFIDENTIAL

 

Elk Shareholder Registry

INVESTMENT
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        Cost Basis & Returns Most Recent
  Refinitiv AUM          
Institution Style ($bn) Last Report Date Cost Basis¹ Unrealized Gain² % OS Shares (mm)
Stone Point Capital LLC Strategic $ 1.0 31-Mar-2024 $ 157.42 121.3 % 9.5 % 1.5
Vanguard Index 6,040.8 31-Mar-2024 155.25 124.4 8.1 1.2
BlackRock Institutional Trust Co. Index 3,555.3 31-Mar-2024 139.58 149.5 5.4 0.8
Dimensional Fund Advisors Quantitative 540.9 31-Mar-2024 169.30 105.7 5.0 0.8
Sixth Street Partners, LLC Other 0.9 31-Mar-2024 265.42 31.2 4.7 0.7
Beck, Mack & Oliver GARP 4.9 31-Mar-2024 101.32 243.8 4.6 0.7
Silvester (Dominic Francis Michael) Strategic 0.2 08-Apr-2024 137.09 154.1 4.3 0.7
CPP Investment Board Pension 109.3 31-Mar-2024 151.16 130.4 4.3 0.6
Fidelity Management & Research Company LLC GARP 1,633.4 31-Mar-2024 181.73 91.7 3.7 0.6
Fuller & Thaler Asset Management Inc. GARP 22.0 31-Mar-2024 198.48 75.5 2.8 0.4
Allspring Global Investments, LLC Value 72.0 31-Mar-2024 185.34 87.9 2.7 0.4
Wellington Value 643.5 31-Mar-2024 156.94 121.9 2.4 0.4
Hotchkis and Wiley Capital Management, LLC Value 29.5 31-Mar-2024 187.20 86.1 2.3 0.3
State Street Global Advisors (US) Index 2,353.9 31-Mar-2024 153.91 126.3 2.2 0.3
Geode Capital Management, L.L.C. Index 1,286.2 31-Mar-2024 187.39 85.9 1.9 0.3
O'Shea (Paul James) Strategic 0.1 08-Apr-2024 122.18 185.1 1.6 0.2
Harspring Capital Management, LLC Hedge Fund 0.4 31-Mar-2024 242.56 43.6 1.2 0.2
Crow's Nest Holdings LP Hedge Fund 0.6 31-Mar-2024 269.50 29.2 1.1 0.2
Campbell (Robert Johnson) Strategic 0.0 08-Apr-2024 100.10 248.0 1.1 0.2
American Century IM Growth 189.1 31-Mar-2024 263.55 32.2 1.0 0.1
Charles Schwab Investment Management, Inc. Index 527.3 31-Mar-2024 177.60 96.1 0.9 0.1
Norges Bank Investment Management (NBIM) Pension 1,204.4 31-Dec-2023 169.16 105.9 0.9 0.1
Barrow Hanley Global Investors Income 32.6 31-May-2024 240.09 45.1 0.9 0.1
WCM Investment Management Growth 61.3 31-Mar-2024 189.22 84.1 0.8 0.1
Diamond Hill Capital Management Inc. Value 23.8 31-Mar-2024 128.93 170.1 0.8 0.1
Total           74.1 % 11.3
Median       $ 169.30 105.7 %    
Weighted Average³       $ 168.20 118.7 %    

 

Source: Public Investor Filings. 1 Calculated as the weighted average cost of current shares held based on quarterly VWAPs and all share purchases from Q1 '05 - Q3 ‘24. 2 Based on share price at market close on 26-Jul-2024 ($348.31). 3 Weighted by number of shares held in Q3 '24.

 

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Elk Trading Activity Over The Last 3 Years

INVESTMENT
 BANKING

 

        Period Post-Elk Disturbance Date (6/28)  

 

Source: Bloomberg; market data as of 26-Jul-2024. 1 1M average daily trading volume shown as of 28-Jun-2024 (undisturbed date) for dates post-28-Jun-2024. 2 Reflects an S&P index rebalancing date. 3 Reflects a Russell Reconstitution date.

 

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STRICTLY PRIVATE & CONFIDENTIAL

 

 

Elk Daily Trading Volume Relative to Peers (1/2)

(Shares in 000s)

INVESTMENT
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  ADTV     % of Float
                     
        01-Jul to           01-Jul to
  1M 3M 6M 26-Jul   Free Float1 1M 3M 6M 26-Jul
Elk 60.3 51.0 51.8 105.2   12,670.7 0.48 % 0.40 % 0.41 % 0.83 %
                     
                     
Traditional Bermuda Reinsurers                    
Everest Re 226.2 270.6 327.1 318.8   42,798.6 0.53 % 0.63 % 0.76 % 0.74 %
                     
RenaissanceRe 287.0 303.9 338.5 363.5   50,314.5 0.57 % 0.60 % 0.67 % 0.72 %
                     
Axis 497.2 599.7 611.9 549.2   77,477.0 0.64 % 0.77 % 0.79 % 0.71 %
                     
Fidelis 653.6 682.0 643.9 465.0   37,358.7 1.75 % 1.83 % 1.72 % 1.24 %
                     
                     
Other Bermuda Reinsurers                    
Hamilton Re 388.8 341.5 297.7 404.6   47,047.7 0.83 % 0.73 % 0.63 % 0.86 %
                     
SiriusPoint 848.0 672.3 648.8 457.1   93,079.1 0.91 % 0.72 % 0.70 % 0.49 %
                     
Greenlight Capital Re 72.7 67.6 74.1 79.9   25,851.2 0.28 % 0.26 % 0.29 % 0.31 %
                     
                     
Median - Traditional Bermuda Reinsurers 392.1 451.8 475.2 414.3   46,556.6 0.61 % 0.70 % 0.78 % 0.73 %
Median - Other Bermuda Reinsurers 388.8 341.5 297.7 404.6   47,047.7 0.83 % 0.72 % 0.63 % 0.49 %
                     

 

Source: Bloomberg, FactSet 

1 Free float as of 26-Jul-2024, defined as shares of Elk that can be publicly traded and are not restricted.

 

 

 

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Elk Daily Trading Volume Relative to Peers (2/2)

(Shares in 000s)

INVESTMENT
 BANKING

 

 

 

            Daily Trading Volume                     % of Float            
                          15-Jul -                         15-Jul -  
  1M                       26-Jul   1M                     26-Jul  
  ADTV   28-Jun   01-Jul  02-Jul 03-Jul 05-Jul  08-Jul 09-Jul 10-Jul  11-Jul 12-Jul ADTV   ADTV 28-Jun 01-Jul 02-Jul 03-Jul   05-Jul    08-Jul   09-Jul   10-Jul   11-Jul 12-Jul ADTV  
Elk 60.3   209.9 197.3 179.8 102.4 174.2 166.8 112.7 73.9 83.3 104.1 80.4   0.48 % 1.66 % 1.56 % 1.42 % 0.81 % 1.37 % 1.32 % 0.89 % 0.58 % 0.66 % 0.82 % 0.63 %  
                                                       
Memo: % of 1M ADTV     348.2 % 327.3 % 298.3 % 169.8 % 288.9 % 276.7 % 187.0 % 122.7 % 138.1 % 172.7 % 133.4 %                            
Traditional Bermuda Reinsurers                                                      
                                                       
Everest Re 226.2   511.2 250.0 318.0 262.6 495.2 274.7 268.9 231.7 185.0 176.1 359.6   0.53 % 1.19 % 0.58 % 0.74 % 0.61 % 1.16 % 0.64 % 0.63 %  0.54 %  0.43 % 0.41 % 0.84 %  
                                           
RenaissanceRe 287.0   819.9 252.1 540.6 309.5 731.5 386.6 241.2 223.5 320.5 241.3 366.0   0.57 % 1.63 % 0.50 %  1.07 % 0.62 % 1.45 % 0.77 % 0.48 %   0.44 %  0.64 % 0.48 % 0.73 %  
                                           
Axis 497.2   796.1 526.8 947.2 255.4 746.3 584.1 438.8 310.6 323.3 303.4 599.9   0.64 % 1.03 % 0.68 % 1.22 % 0.33 %  0.96 % 0.75 % 0.57 %   0.40 %  0.42 % 0.39 % 0.77 %  
                                                       
Fidelis 653.6   1,911.7 377.1 786.3 407.3 491.3 550.1 528.8 563.3 569.1 411.2 415.1   1.75 % 5.12 % 1.01 % 2.10 % 1.09 % 1.32 % 1.47 % 1.42 % 1.51 % 1.52 % 1.10 % 1.11 %  
                                                       
Other Bermuda Reinsurers                                                      
                                                       
Hamilton Re 388.8   2,114.6 343.4 302.2 71.0 278.1 201.5 346.6 477.4 273.8 197.2 519.6   0.83 % 4.49 % 0.73 %  0.64 %  0.15 %  0.59 %  0.43 % 0.74 %  1.01 %  0.58 % 0.42 % 1.10 %  
                                           
SiriusPoint 848.0   5,850.1 559.3 347.0 214.2 339.4 396.2 287.6 246.9 386.8 378.8 552.9   0.91 % 6.29 % 0.60 %  0.37 %  0.23 %  0.36 % 0.43 % 0.31 % 0.27 %  0.42 % 0.41 % 0.59 %  
                                           
Greenlight Capital Re 72.7   582.5 89.6 30.1 45.9 9.0 83.5 47.5 52.8 148.6 88.4 84.0   0.28 % 2.25 % 0.35 % 0.12 % 0.18 % 0.03 % 0.32 % 0.18 % 0.20 %  0.57 % 0.34 % 0.32 %  
                                                       
                                                       
Median - Traditional Bermuda Reinsurers 392.1   808.0 314.6 663.4 286.1 613.4 468.4 353.8 271.2 321.9 272.3 390.5   0.61 % 1.41 % 0.63 % 1.15 % 0.61 % 1.24 % 0.76 % 0.60 % 0.49 % 0.53 % 0.45 % 0.81 %  
                                                       
Memo: % of 1M ADTV     255.9 % 96.9 % 164.5 % 85.1 % 184.5 % 119.5 % 86.2 % 82.0 % 84.4 % 70.4 % 124.1 %                            
                                                       
Median - Other Bermuda Reinsurers 388.8   2,114.6 343.4 302.2 71.0 278.1 201.5 287.6 246.9 273.8 197.2 519.6   0.83 % 4.49 % 0.60 % 0.37 % 0.18 % 0.36 % 0.43 % 0.31 % 0.27 % 0.57 % 0.41 % 0.59 %  
                                                       
Memo: % of 1M ADTV     689.8 % 88.3 % 41.4 % 25.3 % 40.0 % 51.8 % 65.4 % 72.7 % 70.4 % 50.7 % 115.5 %                            
                                                       

 

Source: Bloomberg, FactSet 

Note: 1M ADTV relative to undisturbed pricing date (28-Jun-2024). 

1 Free float as of 26-Jul-2024, defined as shares of Elk that can be publicly traded and are not restricted.

 

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Potential Go-Shop Outreach Candidates

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Glossary of Key Terms

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Key Terms   Definitions
Adjusted Book Value   ■    Elk ordinary shareholders' equity, less fair value changes on fixed maturities and funds held-directly managed, fair value of insurance contracts for which Elk has elected the fair value option, fair value adjustments, and net assets of held for sale or disposed subsidiaries classified as discontinued operations (if any)
     
Adjusted Operating Income   ■    Net income (loss) attributable to Elk ordinary shareholders, adjusted for fair value changes and net realized (gains) losses on fixed maturities and funds held directly managed, change in fair value of insurance contracts for which Elk has elected the fair value option, amortization of fair value adjustments, net gain / loss on purchase and sales of subsidiaries (if any), net income from discontinued operations (if any), tax effects of adjustments and adjustments attributable to noncontrolling interests
     
Adjusted Return on Equity   ■    Adjusted Operating Income attributable to Elk ordinary shareholders divided by Elk Adjusted Book Value
     
Undisturbed Date   ■    Defined as 28-June-2024, based on observed disturbances in daily trading volume of Elk’s stock relative to historical activity and peer activity

 

Source: Elk Management

    

 

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