Life insurance is a rather technical sector with specific additional voluntary disclosure called embedded value which should provide a better basis to assess performance. This course demystifies the embedded value concept and uses it as a basis to value a life insurance company. The course concludes with a review of insurance trading multiples and sum-of-the-parts valuation for multi-line businesses.

Learning Outcomes

• Features of the life insurance business
• Key life insurance products: traditional vs. unit linked business
• Forecasting income statement, reserves and cash flows of a traditional life policy: calculation of new business value
• Limitations of IFRS accounting for insurance
• Embedded value: key concept, calculation and disclosure
• Embedded value earnings: new business value and return on existing business
• European embedded value and market consistent embedded value
• What is EEV? A DDM produced by actuaries on part of the business
• Using embedded value to complete an appraisal valuation of the life business
• Can you use someone else’s DDM as a basis for your own valuation?
• Sensitivity analysis of EEV to key value drivers
• Analysis and valuation of multi-line insurance companies combining life and non-life
• Insurance solvency requirements under solvency I v solvency II
• Sum-of-the-parts valuation of multi-line insurance companies
• Trading multiples for insurance companies: P/E vs. P/EV earnings and P/EV
• Summary and conclusions