Milliman Report on Europe, Japan, Asia Insurers Sees Increased Embedded Value

December 21, 2015

Global consulting and actuarial firm Milliman, Inc. has announced the availability of two new reports detailing embedded value (EV) results for 32 major insurance companies in Europe and Japan and 14 major insurance companies operating in Asia. The reports examine trends among those companies that reported EVs as of mid-year 2015.

“In Europe, embedded value results in the first part of 2015 exceeded gains from the first six months of 2014,” said Milliman Principal and Consulting Actuary Philip Simpson. “Japanese companies reported strong results for the fiscal year ending in March, 2015. Nonetheless, insurers remain cautious given the volatile markets and persistently low interest rates.”

Key details from the European report include the following:
• Approximately half the companies saw their embedded value fall.
• Insurers’ market capitalizations have broadly mirrored embedded values in the first half of 2015, with both rising around 5 percent.
• Japanese life insurers have seen significant increases in value through new sales and investment gains, with EV growth often accompanying growth in market valuation.
• Insurers continue preparation for Solvency II regulations that come into force on 1 January 2016.

Milliman Principal and Consulting Actuary Paul Sinnott commented: “The big story in Asia is the breakout growth of value of new business (VNB) in the first half of 2015 compared to the same period in 2014. This growth has been mainly new business volume driven (rather than by major margin enhancement efforts) primarily as a result of the burgeoning middle class in many Asian countries.”

The Asian report cited the following key insights:
• Chinese companies experienced major growth in VNB compared to the same period in 2014, reflecting increased new business volumes and better profitability margins which are typically heavily supported by optimistic increasing investment return assumptions.
• The low interest rate environment, especially for longer-dated bonds, remains a challenge for insurers in China, South Korea, and Taiwan in particular.

Interested parties may obtain a copy of the Milliman studies at: http://www.milliman.com/ev

Source: Milliman, Inc.

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