2013 Embedded Value Results Generating Value

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By Richard See Toh, Philip Simpson, Stuart Reynolds, Tatiana Egoshina | 03 July 2014

In November 2013, with the passing of the Omnibus II Directive, the effective timetable and transitional arrangements for the implementation of Solvency II became much more certain. Other regulatory changes, such as International Financial Reporting Standards (IFRS) 4 Phase II for insurance contracts reporting, are on the horizon for insurers, as well.

Based on our review of 32 companies, around 40% continue to use the European Embedded Value Principles (EEV Principles) rather than the European Insurance CFO Forum Market Consistent Embedded Value Principles© (the MCEV Principles). However, there is still a trend toward reporting on a market consistent basis such that over 95% now use some form of market consistent valuation in their embedded value reporting, based on our sample of companies.

This paper provides an overview of embedded value (EV) calculation, a summary of EV results and methodologies for the companies included in Milliman’s study, and a discussion of current EV-related hot topics.