Embedded Value

Hello

Yes

There might be situations where the split of any net assets between shareholders and with-profits policyholders needed to be agreed, which is why the EV definition makes the point that it's just the s'h share of any net assets in the EV. For example, if the net assets were in a with-profits fund, the split would need to be agreed.

Sometimes, net assets are clearly all attributable to shareholders - for example if the net assets are in a shareholder fund.

Happily, ST2 doesn't worry about the question of how you decide the split between policyholders and shareholders - that's more an SA2 question.

Hope this helps
Lynn

 

Hi again

1. The profits that are included in the VIF/PVFP are purely those belonging to the shareholders.

So, if we're considering without-profit business where shareholders were entitled to 100% of the profit they'd all be inlcuded. If we're considering some with-profits business where shareholders get a payment triggered by a bonus declaration, we'd include in the VIF/PVFP just those shareholder transfers.

2. EV is trying to establish the value of a company to the shareholders. So, EV doesn't exist for mutuals.

Best regards
Lynn