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