Market Consistent Embedded Value
At a turning point
Market Consistent Embedded Valued (MCEV) reporting has not enjoyed a smooth ride since its birth in 2008. It was unfortunate timing that MCEV came into force during one of the most severe financial crises in more than 60 years. The volatile MCEV numbers reported by insurers over the last few years, coupled with the very slow progress towards applying a consistent methodology and the seemingly complex nature of this reporting metric, resulted in analysts and investors questioning the merit of MCEV.
With the new world, post Solvency II and IFRS 4 Phase II, quickly approaching, what did the 2010 reporting season show, and what is the future of embedded value?
This special edition of the Insurance Market Update analyses the results published by 19 major European insurers, although our focus is principally on those companies with UK operations.
In this article, we draw out some of the key themes that have emerged over the last couple of years, by comparing embedded values across the industry. We also analyse the disclosures and their merits, and the relationship between embedded value and share price. Finally, we discuss what the future of embedded might look like.