UAP Insurance Uganda is an insurance company making its income through insurance premiums and investment portfolios. The company has been in operation in Uganda since 2005.
Objectives
- To determine the current value of UAP’s equity.
- To prepare a valuation report.
Approach
The value of UAP was determined based on how listed Kenyan insurance companies are being valued by the market. This method uses the value of the listed companies (based on stock price or enterprise value) relative to business fundamentals such as book value, earnings, and sales to determine a standardized ratio or valuation multiple. This ratio is then applied to the company being valued. The multiples used were price-to-book value and price-to-earnings ratio. The methodology was as follows:
- Collected data on book value, earnings, and stock prices of the 6 insurance companies listed on the Nairobi Stock Exchange. Valuation multiples were obtained by evaluating the ratio of their stock price to earnings and book value of these insurance companies.
- These multiples were applied to the earnings and book value of UAP in order to determine the company’s value.
- Liquidity and risk discounts were applied in order to account for the illiquid nature of a private company’s stock and the risk associated with the Ugandan market.
Outcome
Comprehensive valuation report detailing the methodology and resultant valuation.
