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3. A small life insurance company, XYZ, currently sells only the life insurance line of business. The company's strategic plan is to grow rapidly by acquiring other insurance companies. The company has identified a target company, and now wish to determine an offer price for the target. The target company is a small health insurance group consists of a main company that writes 70% of the business and a smaller subsidiary with the other 30%. Both entities meet regulatory capital requirements. (i) Outline the requirements of an actuarial model to place a value on the target company. [6] (ii) Discuss why the XYZ Board may offer a different price to that suggested by the model. [4] (iii) Discuss why the company may be able to operate more efficiently after completing the acquisition. [2] 3. A small life insurance company, XYZ, currently sells only the life insurance line of business. The company's strategic plan is to grow rapidly by acquiring other insurance companies. The company has identified a target company, and now wish to determine an offer price for the target. The target company is a small health insurance group consists of a main company that writes 70% of the business and a smaller subsidiary with the other 30%. Both entities meet regulatory capital requirements. (i) Outline the requirements of an actuarial model to place a value on the target company. [6] (ii) Discuss why the XYZ Board may offer a different price to that suggested by the model. [4] (iii) Discuss why the company may be able to operate more efficiently after completing the acquisition. [2]

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