APN 109-Company Takeovers Flashcards

1
Q

Describe the conflicts of interest involved in takeovers? (4)

A
  • Takeover regulations make it clear the board of directors and advisers have to act in the best interest of shareholders
  • In this context the statutory actuary who is also a director must consider carefully conflict bearing in mind their duties to the policyholder
  • The financial advisory needs to be mindful of the conflicts of interests. This may require a independent actuary to provide a formal independent valuation of the company.
  • Should there be a conflict of interest the actuary should seek advice from a professional body
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2
Q

Describe Requirements if an actuary involved in a takeover lacks experience? (3)

A
  • If an actuary has a lack of experience with takeovers they should seek co-operation and guidance of actuaries that do have
  • Firms that wish to provide advice regarding takeovers needs to ensure that there is at least one person with good takeover regulation knowledge
  • A takeover may involve policyholder reasonable expectations which are of an unusual nature. In this case an external actuarial advisor would be required to assist the HAF
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3
Q

Outline the discloure requirement of a takeover? (7)

A
  • In accordance with takeover regulation actuaries can be identified as a source of advice
  • Report on information in terms of methods and data such that shareholders can see the extent to which value can be sensitive to various assumptions
  • Legal advisors are asked to verify sources of information to ensure quality
  • Disclose of profit forecast requirements in accordance with takeover regulation
  • The impact on SCR will also be an important consideration
  • Shareholder needs to be given enough information such that they are aware of the vulnerabilities to which the valuation is subject
  • In dealing with an agreed merger it may be necessary to produce actuarial valuation which is disclosed to shareholders (using assumptions which should be consistent)
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4
Q

List the information required in a formal opinion regarding the takeover? (9)

A
  • Name of party instructing the actuary
  • Terms of reference
  • Statement of data used
  • Statement that valuation has been made assuming the continuation of current management
  • Statement of principle bases assumptions
  • Statement indicating that actuary believes that assumptions are reasonable
  • Statement describing allowance for tax and solvency capital
  • A statement of resulting value i.e. three components of appraisal value
  • A statement concerning key assumptions, variations in which would result in a significant change in value
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