Asian life insurers' embedded value surged 19.2% to $480b in 2017

South Korea led the region in terms of highest EV growth.

It’s another good year for Asian life insurers (excluding Japan) as the growth of embedded value (EV) rose by 19.2% to $480b in 2017 from $403b in 2016, according to a study by consulting and actuarial firm Milliman.

Embedded value measures the present value of a firm’s future profits to the net asset value of capital and surplus.

South Korea led the region’s EV expansion after registering 22% growth rate on the back of profitable new businesses, efficiency gains, and change in investment assumptions.

Hong Kong and Mainland China followed closely with 21% EV growth despite an ongoing crackdown on high guaranteed universal life sales.

Value-of-in-force (VIF) business, which refers to future profits expected to gain from a particular life insurance portfolio, also increased across all regional markets.

South Korea booked another strong showing after recording the largest VIF growth at a whopping 103% which Milliman attributes to the increased investment return assumptions reflecting the yield curve rise last year.

Hong Kong also posted strong VIF growth of 20%, largely driven by high volumes of new business from mainland Chinese visitors.

"Overall, those insurers that successfully reoriented their product strategies from savings to protection business seem to have performed best," Milliman principal and consulting actuary Paul Sinnott said in a statement.