Embedded Value
A valuation framework for life insurance companies that separates the value of in-force policies (already sold and being earned out over policy life) from the value of new business (writing new policies). Embedded value = net asset value + present value of future profits from existing policies. Used as a primary cost-of-equity anchor for life insurers because traditional GAAP net-income-based metrics mis-time the multi-decade tails of policyholder cash flows. European insurers use Solvency II "own funds" as a related but distinct embedded-value proxy; US insurers report a non-GAAP embedded value voluntarily in some cases.
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Related terms
Ambiguity Aversion · Anchored Assumption · Asset Beta · Bank ROE Spread · Banker Pitch Deck · Beta
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