The Perfect Storm – Part 0

The world of financial reporting for insurers has never been this close to the edge. There is more change brewing now even than when Europe adopted “European Embedded Values” and later “Market Consistent Embedded Values”. The irony is that Embedded Values may well fall away as a result of the latest change. So what is […]

New thoughts on renewal rates for Embedded Values

Embedded Values (EVs) are widely used to measure value for life insurers. In the context of long-term contracts such as individual life, it reflects the value embedded in prudent regulatory provisions (or “actuarial reserves”). For short-term business (group risk, health insurance, health administration, general insurance etc.) it is something different since these lines don’t have […]

New Business Margin on Revenue

A new measure of life insurance new business profitability is required. What is New Business Margin? Many life insurers currently calculate a measure of the profitability of new business sold over a period called “new business margin”. As defined by the CFO Forum’s MCEV Principles and confirmed in South Africa’s PGN107 covering embedded values, this […]

Your ERP estimate is still too high

I recently had a conversation with a colleague who had been told that “Credit Suisse recommended an Equity Risk Premium of 7%”.  I’m curious to know whether they truly view that as an appropriate ERP.  If your ERP is 7%, it’s still too high. The authors of Triumph of the Optimists have joined forces with […]

You can’t eat that

I was in a meeting today with a great company and with great people. We were discussing financial measures for a life insurer, including Embedded Value, when one of the well respected actuaries asks what the Return on Equity is (rather than Return on Embedded Value). Now there are many people who don’t like Embedded […]