Insurance Life Developed Value

---
name: insurance-life-developed-value
description: >
  Valuation criteria for developed market life insurance using Embedded Value (EV)
  methodology. EV Multiple 0.6-1.0x, PVFP + ANAV calculation, and
  why P/E is unreliable for life insurers.
metadata:
  sector: insurance
  sub_sector: life
  scope: exclusive
  market: developed
  stock_type: value
---

# Life Insurance — Developed Markets Value Strategy

**Primary Method:** Embedded Value (EV) Multiple + New Business Value

## Key Metrics

| Metric | Formula/Target | Interpretation |
|--------|------------------|-----------------|
| **Embedded Value (EV)** | PVFP + ANAV | PVFP = Present Value Future Profits; ANAV = Adjusted Net Asset Value |
| **EV Multiple** | Price/EVPS | 0.6-1.0x typical for mature insurers (conservative) |
| **PVFP (Value in Force)** | NPV of profits from current policies | Declining as in-force book runs off |
| **Adjusted Net Asset Value** | Capital + Surplus adjusted to market | Balance sheet valuation |
| **New Business Contribution** | Annual profit from new policies written | Sustainability of EV growth |

## Why Embedded Value for Life Insurance

- EPS/P/E ratio highly distorted by: accounting depreciation, one-time gains, policy surrenders
- MCEV (Market Consistent Embedded Value) provides clearer picture of shareholder value creation
- Common in Europe and Asia; less used in North America

## Valuation Process

1. Calculate EV (PVFP + ANAV)
2. Compare P/EV multiple to peers and historical average
3. Assess sustainability: Is EV growing or declining?
4. Examine new business profitability (profitable growth = multiple expansion potential)