Milliman has announced the availability of a new report detailing Embedded Value results for 29 major insurance companies in Europe.
The report examines trends among European companies reporting embedded values as of year end 2012, covering a year of further challenging economic conditions around the world. The report compares practices followed by major European companies and discusses embedded value reporting issues in the broader context of Solvency II and International Financial Reporting Standards.
Despite this challenging economic climate, many regions experienced the strengthening of equity markets and the narrowing of credit spreads. Key insights include:
-The gap between market capitalisation and embedded value narrowed, with average market capitalisation, as a percentage of total embedded value, rising from 77% at end 2011 to 90% at end 2012.
-CFO Forum members, on average, experienced a robust and solid performance–with the combined embedded value increasing to £222bn at the end of 2012 compared to £200bn at the end of 2011.
-Some companies reflected the latest Solvency II developments through changes to extrapolation methodology.
-The size of the liquidity premium applied by companies fell, which was in line with the narrowing of credit spreads.
Overall, companies continued to show signs of convergence in approaches and in the information reported, with the majority of the companies surveyed applying a form of market consistent methodology to determining their embedded value.
A copy of the Milliman study is available at: http://bit.ly/embeddedvalue
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