Why Appraisal Value Anchors Pricing Discussions – But Is Not the Transaction Price

A common misconception is that actuarial appraisal value directly determines the transaction price of an insurance business. In practice, the relationship is more nuanced.

The transaction price is the price a buyer is willing to pay and a seller is willing to accept. It is influenced by:

• Negotiation dynamics

• Market demand and supply

• Strategic considerations

• Comparable transactions or valuation multiples

Actuarial appraisal valuation plays a different but critical role. It provides a structured and transparent foundation for pricing discussions, helping stakeholders understand:

• What level of value is supported by expected performance

• Which assumptions drive value most materially

• How sensitive value is to changes in key drivers

In many transactions, a natural tension or dilemma exists:

• Buyers may be optimistic about future performance but seek to pay a conservative price

• Sellers may be cautious about forecasts but aim to sell at an optimistic valuation

Actuarial appraisal valuation does not remove this tension. Instead, it anchors discussions by clarifying what assumptions must hold true for a given price to be economically justified.

In this way, appraisal value supports informed negotiation, even though it does not, by itself, dictate the final agreed price.

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