Abstract
In May 2004 the CFO forum published European Embedded Value Principles. The “CFO Forum” is a high-level discussion group composed and attended by the Chief Financial Officers of 19 leading European insurers. These principles are intended to increase the quality, comparability and transparency of embedded value disclosures. Embedded Value is a measure of the economic value of a life insurance company, a component of the market (enterprise) value. It corresponds to the Sum of Adjusted Net Asset Value (ANAV) and Net Present Value of Future Profits (NPVFP) for in-force business, less cost of holding capital (CoC). It has been very successful in the last years but some limitations appeared (for instance the difficulty in reflecting the costs of financial options and guarantees (‘FOGs') in a deterministic approach). Moreover, there is no standard for the use of this method and that led to a variety of methodology and disclosure practices.
