Farm

Case Analysis

General Information |

Subject | Analysis of Business Problems |

Case | Semesa |

Team | A3 |

Prepared By | |

Date | 19 Oct 2012 |

Steps 1-3: Problem definition / criteria selection / alternative developments |

* Key facts for problem definition * Family own business * Salaries based on bonus (premiums-claims-Reserve-IBNR) * Well-divided responsibilities between employees. * Long-standing relationship with Bodegas Barquero. * Clients involved in more than one service line (BB related with automobile, home and industrial divisions) * Difference between service lines calculation of the reserves * Strong relationship, 20 years and possibility of increase the premiums. | 1. Criteria selection * Cost can we afford it? * Risk Loss an important customer and reputation in the area * Internal issues: Difference of opinion in claims acceptance can derive in internal problems between employees. * Legality: What’s in the contract? 2. Alternative developments * Pay Bodegas Barquero * Not pay Bodegas Barquero * Arrange an agreement to pay a smaller quantity (i.e. 25%-50%-75%) * Share bonus between the 2 managers involved in the decision |

Step 4: Analysis |

Criteria | Cost |

* Annual Bodegas Barquero Premium: 9.1 millions * Claim payment: 28 millions * Annual loss: 18,9 millions * Breakeven: 3 años * Alicante’s branch will loose a considerable premium (it’s suppose to increase it by 34 millions) * This claim represents 75% of 1991 Semesa’s net profit * Related with the three business lines (automobile, home and industrial) |

Criteria | Risk |

* Possibility of losing a long-standing client. * Reputation damage. * Could be used by other clients in their claims against us. * Possible trial |

Criteria | Internal Issues |

* Bonuses are calculated in different ways depending of business units and without taking into accounts estimations of the manager. This causes...