Supporting M&A Due Diligence on a UK Life Insurer

Summary 

We supported a European private equity sponsor in executing buy-side due diligence for the acquisition of a UK life insurer. The engagement focused on actuarial reserve validation, Solvency II capital adequacy, and embedded value assessment. By integrating insurance liability modeling with transaction analytics, we enabled accurate valuation, risk identification, and capital structure optimization ensuring alignment with regulatory frameworks and investment committee expectations in a complex Insurance and Financial Services transaction.

Identifying Challenges

• Limited transparency in actuarial assumptions, including mortality, lapse rates, and discount curves, impacting reliability of best estimate liabilities and valuation.
• Complexity in Solvency II capital calculations and SCR sensitivities created challenges in assessing regulatory capital buffers and dividend distribution capacity.
• Mismatch between asset portfolio duration and long-term insurance liabilities introduced reinvestment risk and ALM inefficiencies under volatile interest rate scenarios.
• Embedded value reporting inconsistencies across historical periods reduced comparability, affecting transaction valuation benchmarks and investor return expectations.

Our Solution

• Conducted independent actuarial review of liability assumptions, including mortality tables, lapse behavior, and discount rate construction, recalibrating best estimate liabilities and risk margins to align with current UK insurance market benchmarks and regulatory expectations.
• Built a detailed liability cash flow model projecting policy-level inflows and outflows across annuity and protection books, enabling granular analysis of runoff profiles, duration gaps, and sensitivity to interest rate and longevity shocks.
• Reconstructed Solvency II balance sheet and SCR calculations, incorporating market, credit, and underwriting risks, and developed sensitivity frameworks to evaluate capital adequacy under stressed economic scenarios and regulatory constraints.
• Performed asset-liability management (ALM) analysis, assessing duration matching, reinvestment yields, and credit risk exposure across fixed income portfolios, ensuring alignment between corporate bond holdings and long-duration insurance liabilities.
• Delivered embedded value (EV) and value of in-force (VIF) analysis, normalizing historical inconsistencies and aligning projections with updated actuarial assumptions, providing a robust valuation framework for investment committee decision-making.
• Supported transaction structuring by evaluating dividend capacity, capital release potential, and optimal leverage strategies, integrating private credit considerations within regulatory constraints to enhance equity returns without compromising solvency thresholds.

Highlights

• Actuarial liability validation with regulatory precision
• Solvency II capital modeling and sensitivity analysis
• Embedded value reconstruction for valuation clarity
• Asset-liability management optimization across fixed income
• Private equity underwriting aligned with insurance risk
• Transaction-ready diligence outputs for IC approval

Highlights Overview:

This engagement showcased deep integration of actuarial science, fixed income analytics, and private equity underwriting. By aligning liability modeling with Solvency II capital frameworks, we enabled transparent valuation and risk assessment. The result was a fully diligence-ready analytical framework supporting confident investment decisions in a highly regulated insurance environment.

Marking the Transition 

From opaque actuarial assumptions and regulatory complexity to a fully validated, investor-grade diligence framework, enabling the GP to transition from risk uncertainty to disciplined capital deployment.

• Opaque assumptions to validated outputs
• Regulatory complexity to structured clarity
• Liability risk to quantified exposure
• Valuation gaps to investment conviction

Client Testimonial

Their ability to bridge actuarial complexity with transaction execution was critical. The insights on Solvency II capital and embedded value directly influenced our bid strategy.

Managing Director of an Insurance Investments firm

Business Impact 

For private equity firms and insurance investors, our approach delivers institution-grade diligence by integrating actuarial analytics, fixed income portfolio assessment, and regulatory capital modeling. This ensures accurate valuation of life insurance liabilities, improved visibility into dividend capacity, and stronger alignment with Solvency II requirements. In complex insurance M&A transactions, we enable faster execution, reduced downside risk, and enhanced confidence in long-term capital deployment strategies.