Platinum Underwriters Holdings Beneish M-Score Calculation
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Altman Z-Score) or business trend (Piotroski F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Platinum Underwriters Holdings for today is based on a combination of the following eight different indices:
| M | = | -4.84 | + | 0.92 * DSRI | + | 0.528 * GMI | + | 0.404 * AQI | + | 0.892 * SGI | + | 0.115 * DEPI |
| = | -4.84 | + | 0.92 * 1 | + | 0.528 * 1 | + | 0.404 * 1 | + | 0.892 * 0.9044 | + | 0.115 * 1 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.7731 | + | 4.679 * 0.036524 | - | 0.327 * 1.0642 |
| = | -2.38 |
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
| This Year (Dec14) TTM: | Last Year (Dec13) TTM: |
Total Receivables was €0.0 Mil.
Revenue was 116.108 + 116.54 + 105.198 + 104.748 = €442.6 Mil.
Gross Profit was 116.108 + 116.54 + 105.198 + 104.748 = €442.6 Mil.
Total Current Assets was €0.0 Mil.
Total Assets was €2,990.2 Mil.
Property, Plant and Equipment(Net PPE) was €0.0 Mil.
Depreciation, Depletion and Amortization(DDA) was €7.9 Mil.
Selling, General, & Admin. Expense(SGA) was €43.4 Mil.
Total Current Liabilities was €0.0 Mil.
Long-Term Debt & Capital Lease Obligation was €202.8 Mil.
Net Income was 28.975 + 22.601 + 26.628 + 46.08 = €124.3 Mil.
Non Operating Income was 0.311 + 0.067 + 0.879 + 1.097 = €2.4 Mil.
Cash Flow from Operations was 24.051 + -12.298 + -3.567 + 4.53 = €12.7 Mil.
|
Total Receivables was €0.0 Mil.
Revenue was 121.449 + 115.321 + 129.312 + 123.278 = €489.4 Mil.
Gross Profit was 121.449 + 115.321 + 129.312 + 123.278 = €489.4 Mil.
Total Current Assets was €0.0 Mil.
Total Assets was €2,864.4 Mil.
Property, Plant and Equipment(Net PPE) was €0.0 Mil.
Depreciation, Depletion and Amortization(DDA) was €6.6 Mil.
Selling, General, & Admin. Expense(SGA) was €62.1 Mil.
Total Current Liabilities was €0.0 Mil.
Long-Term Debt & Capital Lease Obligation was €182.5 Mil.
|
1. DSRI = Days Sales in Receivables Index
Measured as the ratio of Revenue in Total Receivables in year t to year t-1.
A large increase in DSR could be indicative of revenue inflation.
| DSRI | = | (Receivables_t / Revenue_t) | / | (Receivables_t-1 / Revenue_t-1) |
| = | (0 / 442.594) | / | (0 / 489.36) |
| = | 0 | / | 0 |
| | = | 1 |
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
| GMI | = | GrossMargin_t-1 | / | GrossMargin_t |
| = | (GrossProfit_t-1 / Revenue_t-1) | / | (GrossProfit_t / Revenue_t) |
| = | (489.36 / 489.36) | / | (442.594 / 442.594) |
| = | 1 | / | 1 |
| | = | 1 |
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
Asset quality is measured as the ratio of non-current assets other than Property, Plant and Equipment to Total Assets.
| AQI | = | (1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) | / | (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1) |
| = | (1 - (0 + 0) / 2990.229) | / | (1 - (0 + 0) / 2864.436) |
| = | 1 | / | 1 |
| | = | 1 |
4. SGI = Sales Growth Index
Ratio of Revenue in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
| SGI | = | Sales_t | / | Sales_t-1 |
| = | Revenue_t | / | Revenue_t-1 |
| = | 442.594 | / | 489.36 |
| | = | 0.9044 |
5. DEPI = Depreciation Index
Measured as the ratio of the rate of Depreciation, Depletion and Amortization in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
| DEPI | = | (Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1)) | / | (Depreciation_t / (Depreciaton_t + PPE_t)) |
| = | (6.595 / (6.595 + 0)) | / | (7.874 / (7.874 + 0)) |
| = | 1 | / | 1 |
| | = | 1 |
Note: If the Depreciation, Depletion and Amortization data is not available, we assume that the depreciation rate is constant and set the Depreciation Index to 1.
6. SGAI = Sales, General and Administrative expenses Index
The ratio of Selling, General, & Admin. Expense(SGA) to Sales in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
| SGAI | = | (SGA_t / Sales_t) | / | (SGA_t-1 /Sales_t-1) |
| = | (43.433 / 442.594) | / | (62.116 / 489.36) |
| = | 0.098133 | / | 0.126933 |
| | = | 0.7731 |
7. LVGI = Leverage Index
The ratio of total debt to Total Assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase in leverage
| LVGI | = | ((LTD_t + CurrentLiabilities_t) / TotalAssets_t) | / | ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1) |
| = | ((202.75 + 0) / 2990.229) | / | ((182.5 + 0) / 2864.436) |
| = | 0.067804 | / | 0.063712 |
| | = | 1.0642 |
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
| TATA | = | (IncomefromContinuingOperations_t | - | CashFlowsfromOperations_t) | / | TotalAssets_t |
| = | (NetIncome_t - NonOperatingIncome_t | - | CashFlowsfromOperations_t) | / | TotalAssets_t |
| = | (124.284 - 2.354 | - | 12.716) | / | 2990.229 |
| | = | 0.036524 |
An M-Score of equal or less than -1.78 suggests that the company is unlikely to be a manipulator. An M-Score of greater than -1.78 signals that the company is likely to be a manipulator.
Platinum Underwriters Holdings has a M-score of -2.38 suggests that the company is unlikely to be a manipulator.
Platinum Underwriters Holdings (FRA:PMU) Business Description
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Platinum Underwriters Holdings, Ltd. was incorporated on April 19, 2002. It operates as a holding company domiciled in Bermuda. Through its operating subsidiaries, it provides property and marine, casualty and finite risk reinsurance coverages, through reinsurance intermediaries, to a diverse clientele of commercial and personal lines insurers and select reinsurers on a basis. The Company operates through two licensed reinsurance subsidiaries, Platinum Underwriters Bermuda, Ltd., a Bermuda reinsurance company and wholly owned subsidiary of Platinum Holdings, and Platinum Underwriters Reinsurance, Inc., a U.S. reinsurance company and a wholly owned subsidiary of Platinum Underwriters Finance, Inc. The Company operates in Property and Marine, Casualty and Finite Risk segments. It provides reinsurance coverage for damage to property and crops. It provides reinsurance coverage for marine and offshore energy insurance programs. Coverages reinsured include hull damage, protection and indemnity, cargo damage, satellite damage and general marine liability. Within Marine, it also writes commercial and general aviation reinsurance. Casualty reinsurance protects a ceding company against financial loss arising out of the obligation to others for loss or damage to persons or property. The Company's Casualty operating segment mainly includes reinsurance contracts that cover umbrella liability, general and product liability, professional liability, workers' compensation, casualty clash, automobile liability, surety, trade credit, political risk and accident and health. Finite reinsurance includes mainly structured reinsurance contracts with ceding companies whose needs might not be met efficiently through traditional reinsurance products. Reinsurance contracts classified as finite are typically structured to include loss limitation or loss mitigation features. It markets its reinsurance products mainly through non-exclusive relationships with reinsurance brokers. The property and casualty reinsurance industry is competitive. It competes with Arch Capital Group Ltd., Axis Capital Holdings Limited, Endurance Specialty Holdings Ltd., Everest Re Group, Ltd., Montpelier Re Holdings Ltd., PartnerRe Ltd., RenaissanceRe Holdings Ltd. and Transatlantic Holdings, Inc. The business of reinsurance is regulated in several countries, although the degree and type of regulation. Reinsurers are generally subject to less direct regulation than main insurers.
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