Twenty Third Floor

Figuring out the future and the now

Category: Embedded Value

Actuarial and Risk, costofcapital, Embedded Value, Equity Risk Premium, financial reporting, IFRS17, market risk, measurement, Solvency Assessment and Management, Solvency II, valuation

Frictional cost and tax

15 May 2024

David Kirk

There are many reasons to doubt the perfect applicability of the 6% cost of capital rate used in South Africa for the solvency Risk Margin calculation. Not least of which is the decrease to the rate in Europe and in the UK. However, if we borrow ideas from Embedded Value (TEV/EEV or MCEV) and look…
Read more: Frictional cost and tax
costofcapital, creating value, Embedded Value, Featured, financial reporting, IFRS17, life insurance, measurement

IFRS17 may not kill off EV

11 May 2024

David Kirk

Will IFRS17 kill off Embedded Value (EV) reporting in Africa? Or will it finally bring Market Consistent Embedded Value (MCEV) to life? I gave a presentation at the Life Assurance Seminar 15 years ago on MCEV. It took off in the UK but didn’t become popular in South Africa. That might be changing. Some insurers…
Read more: IFRS17 may not kill off EV
Actuarial and Risk, Embedded Value, financial reporting, insight, insurance, life insurance, measurement, Solvency Assessment and Management, Solvency II

The Perfect Storm – Part 0

6 February 2013

David Kirk

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…
Read more: The Perfect Storm – Part 0
Actuarial and Risk, customer value, Embedded Value, insight, insurance, life insurance, measurement, New Business Margin on Revenue

New thoughts on renewal rates for Embedded Values

15 July 2011

David Kirk

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…
Read more: New thoughts on renewal rates for Embedded Values
Actuarial and Risk, creating value, Embedded Value, insight, insurance, life insurance, measurement, New Business Margin on Revenue

New Business Margin on Revenue

28 May 2011

David Kirk

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…
Read more: New Business Margin on Revenue
alternative investments, Embedded Value, Equity Risk Premium

Your ERP estimate is still too high

8 February 2011

David Kirk

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…
Read more: Your ERP estimate is still too high
Actuarial and Risk, Embedded Value, financial risk, insight, insurance, life insurance, measurement

You can’t eat that

23 November 2010

David Kirk

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…
Read more: You can’t eat that

About David Kirk

Featured Posts

Value at Risk – not always a monster, but normally it is.
by David Kirk
Nassim Taleb is not a fan of Value At Risk (VaR) “You’re worse off relying on misleading information than on not having any information at… Read more: Value at Risk – not always a monster, but normally it is.
One answer could be pet insurance
by David Kirk
I firmly believe major demographics shifts are going to have massive social, political, economic, financial market and commercial impacts in the coming decades. The balance… Read more: One answer could be pet insurance
A piece of the failure puzzle – decreasing insurer failure rates through Skilled Person Reviews
by David Kirk
Every failure hits policyholders’ savings or cover, impact their lives and their livelihoods. They destroys shareholder value and decrease confidence in the entire financial sector.… Read more: A piece of the failure puzzle – decreasing insurer failure rates through Skilled Person Reviews
How and why insurers fail
by David Kirk
I’ve been updating my presentation from 2021 on “How and Why Insurers Fail”. I now estimate the annual failure rate (or at least getting into… Read more: How and why insurers fail
The hidden dangers of opinion shopping and trusting good news.
by David Kirk
I had a recent discussion on the value of getting a second opinion. There’s the old line that “if you want five opinions, ask three… Read more: The hidden dangers of opinion shopping and trusting good news.
40,000
by David Kirk
40,000. That’s the ballpark figure I usually work with as the minimum number of micro insurance policies required for scale. The expenses of running even… Read more: 40,000
IFRS17 may not kill off EV
by David Kirk
Will IFRS17 kill off Embedded Value (EV) reporting in Africa? Or will it finally bring Market Consistent Embedded Value (MCEV) to life? I gave a… Read more: IFRS17 may not kill off EV

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