Value and Capital Management - A Handbook for Finance Risk Functions of Financial Institutions

A value management framework designed specifically for banking and insurance
 
The Value Management Handbook is a comprehensive, practical reference written specifically for bank and insurance valuation and value management. Spelling out how the finance and risk functions add value in their respective spheres, this book presents a framework for measuring - and more importantly, influencing - the value of the firm from the position of the CFO and CRO. Case studies illustrating value-enhancing initiatives are designed to help Heads of Strategy offer CEOs concrete ideas toward creating more value, and discussion of "hard" and "soft" skills put CFOs and CROs in a position to better influence strategy and operations. The challenge of financial services valuation is addressed in terms of the roles of risk and capital, and business-specific "value trees" demonstrate the source of successful value enhancement initiatives.
 
While most value management resources fail to adequately address the unique role of risk and capital in banks, insurance, and asset management, this book fills the gap by providing concrete, business-specific information that connects management actions and value creation, helping readers to:
* Measure value accurately for more productive value-based management initiatives and evaluation of growth opportunities
* Apply a quantitative, risk-adjusted value management framework reconciled with the way financial services shares are valued by the market
* Develop a value set specific to the industry to inspire initiatives that increase the firm's value
* Study the quantitative and qualitative management frameworks that move CFOs and CROs from measurement to management
 
The roles of CFO and CRO in financial firms have changed dramatically over the past decade, requiring business savvy and the ability to challenge the CEO. The Value Management Handbook provides the expert guidance that leads CFOs and CROs toward better information, better insight, and better decisions.

List of contents

List of Abbreviations xiii
 
Preface xvii
 
Acknowledgments xix
 
About the Author xxiii
 
PART ONE Introduction 1
 
CHAPTER 1 Why is Value Management Important? 3
 
Better Information 3
 
Better Insights 6
 
Better Decisions 8
 
Why Shareholder Value? 12
 
CHAPTER 2 How do CFOs and CROs Add Value? 15
 
The Evolution of the Corporate Center as "Shareholder Surrogate" 15
 
The Implications for the CFO 20
 
The Implications for the CRO 24
 
PART TWO Better Information - Measuring Value 29
 
CHAPTER 3 RAPMs - The Industry Standard 31
 
What Makes Financial Services Unique? 31
 
What do RAPMs do and How? 34
 
The RAPM (R)evolution 37
 
Three RAPMs for Three Distinct Purposes . . . 41
 
. . . Linking Directly to Shareholder Value 46
 
Insurance Example 49
 
Banking Example 50
 
CHAPTER 4 Two Challenges in Using RAPMs 51
 
Do RAPMs Influence Strategy? 51
 
Do RAPMs Give the Right Signals? 55
 
CHAPTER 5 Valuing Financial Services - The Theory 71
 
What Determines Share Value? Market Multiples, RoE and Growth . . . 71
 
. . . But What Determines Market Multiples? 73
 
Why a Market-Consistent Approach? 77
 
Value: Where it Comes from and How to Create More of it 80
 
CHAPTER 6 Valuing Financial Services - The Evidence 85
 
Evidence from the Insurance Industry 85
 
Evidence from Banking 96
 
Is it Just me or are Others Thinking the Same Thing? 98
 
CHAPTER 7 Market-Consistent Valuation for Insurers 101
 
Introduction to Fair Valuation for Insurers 101
 
Calculating Traditional Embedded Value 104
 
European Embedded Value 106
 
Market Consistent Embedded Value (MCEV) 109
 
How is MCEV Calculated in Practice? 115
 
From MCEV to MVBS 120
 
Final Comments: Whither MCEV? 122
 
PART THREE Better Insights - Managing Value 125
 
CHAPTER 8 Property and Casualty Insurance 127
 
History and Economic Rationale 127
 
From Principles to Rules of the Game 133
 
From Rules to the Valuation of PC Businesses 135
 
PC KPIs: Understanding and Managing Value 140
 
CHAPTER 9 Life and Health Insurance 151
 
History and Economic Rationale 151
 
From Principles to "Rules of the Game" 163
 
LH Valuation 167
 
Understanding Value Creation: Capital Intensity and Financial Risk Taking 171
 
CHAPTER 10 Banking 189
 
History 189
 
Products 195
 
Economic Rationale 197
 
From Principles to "Rules of the Game" 199
 
From "Rules" to Value 201
 
CHAPTER 11 Achieving Profitable Growth 211
 
Rules of the Game and KPIs 211
 
Management Actions - Three Horizons of Growth 217
 
Horizon 1 - Increasing Sales Productivity 218
 
Horizon 1 - Going Multi-channel 221
 
Horizon 1 - Getting More out of Existing Customers; cross sell, big data and customer loyalty 224
 
Horizon 1 - Managing the Customer Portfolio Skew 228
 
Horizon 2 - Anticipating Mega-trends 230
 
Horizon 2 - Exploiting Adjacencies 232
 
Horizon 2 - Transformational and Bolt-on Acquisitions 234
 
Horizon 3 - Creative Disruptions 238
 
CHAPTER 12 Achieving Operating Efficiency 241
 
The Importance of Operating Efficiency 242
 
Rules of the Game 248
 
Pay Less: Optimize Procurement 249
 
Pay Less: From Business Process Redesign to Outsourcing 250
 
Use Less, But More Effectively: Digitize and Autom

About the author

THOMAS C. WILSON is the chief risk officer for Allianz Group, where he is responsible for global risk controlling and risk management policies and guidelines. He has spent nearly 30 years working in finance and risk for such companies as UBS, McKinsey & Company, Swiss Reinsurance, Oliver Wyman & Company, and ING.

Summary

A value management framework designed specifically for banking and insurance The Value Management Handbook is a comprehensive, practical reference written specifically for bank and insurance valuation and value management.

Product details

• Authors: Tc Wilson, Thomas C Wilson, Thomas C. Wilson, Thomas D Wilson, Thomas D. Wilson, Wilson Thomas C.
• Publisher: Wiley, John and Sons Ltd
• Languages: English
• Product format: Hardback
• Released: 31.07.2015
• EAN: 9781118774632
• ISBN: 978-1-118-77463-2
• No. of pages: 720
• Series: Wiley Finance; The Wiley Finance Series; Wiley Finance; The Wiley Finance Series
• Subjects: Social sciences, law, business > Business > Business administration; Kapitalanlage, Finanzwesen, Wertmanagement, Allg. Finanz- u. Anlagewesen, Finance & Investments, Finanz- u. Anlagewesen