Ronald Frank, Smith Barney

I think that EVA® and MVA bring a number of potential benefits to management and analysis of insurance companies. First, this approach systematically and consistently introduces the cost of capital into the analysis. This is especially relevant in the current operating environment, where capital management is perhaps the main discretionary value creation tool available to insurance companies. Second, and related to the first point, EVA® and MVA provide a framework for analyzing the value implications of differing capital structures and acquisitions, which can then be weighed against such factors as rating consequences. Third, it provides a direct (if theoretical) link between economic performance and stock performance.