CAS Exam 7 Spring 2014, Question 15
Study guide: Exam 7
A publicly traded insurer writes three product lines: workers compensation, commercial property, and commercial auto. The following table presents financial data ($000) for the insurer for 2013.
| Workers Compensation | Commercial Property | Commercial Auto | |
|---|---|---|---|
| Earnings | 636 | 318 | 297 |
| Book Value | 8,350 | 5,860 | 2,210 |
Three peer companies have been selected for each product line. These peer companies are monoline insurers that operate in the associated product line only.
| Workers Compensation Peer | Price-Earnings Ratio |
|---|---|
| Peer 1 | 21.9 |
| Peer 2 | 18.5 |
| Peer 3 | 19.6 |
| Commercial Property Peer | Price-Earnings Ratio |
|---|---|
| Peer 1 | 16.4 |
| Peer 2 | 19.7 |
| Peer 3 | 17.9 |
| Commercial Auto Peer | Price-Earnings Ratio |
|---|---|
| Peer 1 | 13.9 |
| Peer 2 | 17.2 |
| Peer 3 | 14.8 |
Calculate the Price to Book Value ratio for the insurer based on relative valuation using multiples.
Part a (1.5 points)
No current syllabus covers this question; it is kept for the record.
Answer this question and see the worked solution