Tag Archives: embedded value

Insurers in Asia report steady embedded value growth amid COVID-19 pandemic

Milliman today released its annual ‘2020 mid-year embedded value results: Asia’ report. This update supplements the ‘2019 embedded value results: Asia’ report released in September 2020, and includes 2020 mid-year embedded value (EV) and value of new business (VNB) results posted by major multinational and domestic life insurers across Asia.

“Most companies in the region recorded steady EV growth in the first half of 2020 despite the economic impact of the COVID-19 pandemic,” said Milliman Principal and Consulting Actuary Paul Sinnott. “The growth in VNB was mixed across Asian markets, with new business sales in some markets severely affected by government restrictions in response to the coronavirus.”

A complimentary copy of the report is available for download here.

A few key insights from the report include:

  • The China and Japan markets led EV growth in the Asia region with most insurers recording double-digit growth in EV.
  • When compared with the first half of 2019, changes in VNB and new business margins in the first half of 2020 were varied. China, which entered and exited lockdown earlier than other Asian markets, was less affected than most VNB, growth-wise. In Hong Kong, the continuing social unrest, restrictions on travel from mainland China, virus-related lockdowns and lower interest rates all contributed to a significant decline in VNB.  
  • All multinationals disclosing results reported a decline in VNB, which they commonly attributed to lower new business sales, unfavourable economic changes and changes to operating assumptions in key markets.
  • The COVID-19 pandemic led to a greater focus on product innovation and digital transformation across the region. Insurers and regulators have taken steps to facilitate digital sales in response to lockdowns and social distancing measures adopted by most governments. This helped insurers in some markets mitigate reductions in sales to an extent.
  • The pandemic has also typically increased demand for protection products across Asia.

For more details, please contact Paul Sinnott in Hong Kong at paul.sinnott@milliman.com.

Insurers across Asia report double-digit embedded value growth through 2019

Milliman today announced the findings of its annual study on reported year-end 2019 embedded value (EV) and value of new business (VNB) results for 53 major multinational and domestic life insurers across Asia. The Milliman 2019 Embedded Value Results: Asia report highlights trends in published EV results, including a total growth in reported EV in 2019 of 11.1% to USD 816 billion but a VNB fall of 3.6% to USD 51.1 billion. The report also provides an in-depth analysis of the EV methodologies and assumptions adopted, as well as the impact of key regulations and other market developments in the region.

“All of Asia’s markets, apart from Japan, reported positive growth in EV results for the year.” said Milliman Principal and Consulting Actuary Paul Sinnott. “VNB results were more mixed, with some markets being adversely affected by record low interest rates and reduced sales volumes. It is important to recognise that the effects of the COVID-19 pandemic are yet to be felt in these results, however, as most Asian markets have a 31 December financial year-end.”

A complimentary copy of the report is available for download here.

A few key insights from the report include:

  • The China and Hong Kong markets led EV growth, posting increases of 20% and 19% respectively. Several other markets also reported double-digit growth in EV.
  • China Life continues to report the largest EV among insurers across Asia. Among multinationals, AIA continues to be the largest insurer in Asia, both by EV and VNB.   
  • Strategic shifts towards selling more protection business continue, as interest rates fall throughout the region, making traditional savings-oriented business less profitable.
  • Risk Based Capital regulations continue to evolve across Asia and will have an impact on EV and VNB in the longer term.
  • Traditional Embedded Value methodologies continue to be most popular in the region, with Market Consistent EV/VNB reporting being prevalent in Japan and India, as well as in European insurers’ Asian subsidiaries.
  • The 2019 EV results act as a useful starting point for analysing the effects of the COVID-19 pandemic, which will be partially reflected in insurers’ H1 2020 EV disclosures and are expected to show up to a greater extent in the 2020 year-end EV results.

Will IFRS 17 replace embedded value?

International Financial Reporting Standard (IFRS) 17 embraces a marketing value accounting concept under which insurance contract liabilities are constantly updated to reflect environments at the reporting date. It also has a deferral accounting aspect. These features are anticipated to replace the roles that embedded value (EV) disclosure has been taking. However, as the insurance contract valuation by IFRS 17 is very complex, simpler market value accounting approaches like EV disclosure will be still more useful in some situations. This paper by Milliman consultant Takanori Hoshino compares the valuation approaches between IFRS 17 and EV and infers a potential future of EV disclosure.




New business helps drive 19% embedded value (EV) growth for life insurers in Asia

Milliman today announced the findings of its study on reported year-end 2017 embedded value (EV)/value of new business (VNB) results for 31 major insurance companies operating in Asia, excluding Japan. The report highlights trends in published EV results, including a total growth in reported EV in 2017 of 19.2%, and similarly a 19.1% growth in value of new business (VNB).

Beyond EV results, the Milliman 2017 Embedded Value Results: Asia (excl. Japan) report analyses and discusses the EV methodologies and assumptions and the impact of regulations, as well as recent developments with International Financial Reporting Standard (IFRS) 17 as it gains momentum in the region.

‘China’s clampdown on high guarantee universal life sales reduced premium volumes but had little effect on EV and VNB results due to profitability of this line of business typically being very low or even negative,’ said Milliman principal and consulting actuary Paul Sinnott. ‘Overall, those insurers that successfully reoriented their product strategies from savings to protection business seem to have performed best.’

A few key insights from the Asian report include:

• EV growth across Asia ranged from 10% to 28%, with 2017’s total reported Asian EV increasing by 19.2% on a comparable basis to USD 480 billion, up from USD 403 billion in 2016.
• South Korea, citing profitable new business, efficiencies gains, and a change in investment assumptions, reported the highest comparable EV growth, at 22%, with Hong Kong and China reporting the next-highest total EV growth, at 21%.
• Life insurance sales decreased slightly overall, with gross written premium (GWP) estimated to have reduced by 4%. This was largely due to China’s USD 32 million decrease in GWP, mainly as a result of the restrictions imposed on the sales of universal life business.
• The value of in-force (VIF) increased for all markets. South Korea recorded the largest VIF growth of 103%, mainly as a result of increased investment return assumptions reflecting the yield curve rise last year. Hong Kong also posted a strong VIF growth of 20%, largely driven by high volumes of new business from mainland Chinese visitors.

A copy of the report detailing these and other pertinent trends is available for download at Milliman.com.




Asian life insurance growth story continues boosting embedded value and new business values

Milliman has released its latest report, 2017 Mid-Year Embedded Value Results (excl. Japan), which summarises mid-year 2017 embedded value (EV) results disclosed by Asian insurers in eight key countries. The report examines the results at a company and country level and supplements the 2016 Embedded Value Results: Asia (excl. Japan) report released in August 2017. It also includes an update of the India 2016 full-year results, not available earlier due to the market’s March financial year-end. The findings highlight an overall increase in growth of EV, increase in value of new business (VNB) and improvement in new business margins.

‘As expected, positive performances by Asian equity markets and improving yields have led to an increase in the EV of life insurers within the region,’ said Milliman principal and consulting actuary Paul Sinnott. ‘These favourable economic conditions, combined with refined product strategies and improved distribution channel productivity, continue to drive growth in life insurance premiums, margins and the overall business in Asia.’

Key findings from the report include:

• Overall, insurers have reported positive gains in their 2017 mid-year embedded values over their 2016 mid-year values, with many companies showing single-digit EV growth but some posting larger gains in Hong Kong and mainland China.
• Hong Kong and mainland China insurers continued to report significant increases in VNB in the first half of 2017 compared to the first half of 2016, with over 50% increases in VNB for several companies, primarily driven by strong new business sales.
• Nearly all operating entities reported an increase in their new business margins between the first half of 2016 and the first half of 2017, with single- or double-digit increases in new business margins for many.
• As initial public offering (IPO) activity among insurers continues in India, companies are adopting the market-consistent Indian Embedded Value methodology (which is prescribed for IPO disclosures).

A copy of the report is available for download here.




New business surge leads to double-digit embedded value growth in Asia

Milliman has announced the findings of its study on reported year-end 2016 embedded value (EV) results for 34 major insurance companies operating in Asia, excluding Japan. The report highlights trends among companies reporting EVs and reveals a growth in reported 2016 EV of 15.3% by Asian insurance companies. This was primarily driven by a 40% growth over 2015 in value of new business (VNB) across the region in 2016.

The Milliman 2016 Embedded Value Results: Asia (excl. Japan) report analyses and discusses the EV methodologies and assumptions with the impact of regulations, as well as recent developments in the long-awaited International Financial Reporting Standard (IFRS) 17 reporting regime.

‘The China and Hong Kong markets were the main drivers of the VNB explosion in the region; both having mainland consumers to thank for these results,’ said Milliman principal and consulting actuary Paul Sinnott. ‘Although we have some longer-term concerns about the sustainability of profit margins in the region, recent yield curve rises are relieving some margin pressure in the short term.’

A few key insights from the Asian report include:

• In 2016, total reported Asian EV grew by 15.3%, on a comparable basis, to USD 339 billion from USD 294 billion.
• While some European multinationals reduced their Asian EV reporting last year, there were three companies disclosing EV results for the first time in India, along with the first comprehensive Indian Embedded Value (IEV) disclosure associated with ICICI Prudential’s initial public offering (IPO) in September 2016.
• Life insurance sales continued to rise strongly in the region during 2016. Gross written premium (GWP) is estimated to have increased by 28%, with China’s 43% growth being a major contributor.
• Value of in-force (VIF) increased for all markets. South Korea recorded the largest VIF growth of 31%, mainly from margin-driven growth in VNB across all companies; Hong Kong also posted strong VIF growth of 20%, driven by large volumes of business sold to mainland Chinese visitors.

To download the report, click here.